fisher & paykel appliances holdings limited annual report · pdf filep2 fisher &...

FISHER & PAYKEL APPLIANCES HOLDINGS LIMITED

ANNUAL REPORT

For the year ended 31 March 2012

Contents

1 Chairman's Review 7

2 Managing Director and CEO’s Review 15

3 Our Brand 26

4 Corporate Responsibilities 42

5 Directors 48

6 Directors' Report and Corporate Governance 54

7 Auditors' Report 66

8 Financial Statements 68

9 Notes to the Financial Statements 73

10 Company Information 165

FISHER & PAYKEL APPLIANCES HOLDINGS LIMITED AND SUBSIDIARIESP2

p

$4Mp

$0.9M

p

37.8MË

TECH

NORTH AMERICAN BUSINESS PROFIT —

THE NORTH AMERICAN DISTRIBUTION

AND SERVICES BUSINESS MADE AN

OPERATING PROFIT BEFORE INTEREST

AND TAX OF $0.9 MILLION

NEW DIRECT DRIVE MOTOR AGREEMENT

— AGREEMENT TO DEVELOP, DESIGN AND

MANUFACTURE DIRECT DRIVE WASHING

MACHINE MOTORS SIGNED IN

AUGUST 2011

IMPROVED CASHFLOW — CASHFLOW FROM

OPERATIONS, EXCLUDING THE MOVEMENT

IN FINANCE LOANS WAS $117 MILLION

COMPARED TO $113 MILLION LAST YEAR

FINANCE BUSINESS PERFORMANCE — THE

FINANCE BUSINESS REPORTED A

NORMALISED OPERATING PROFIT BEFORE

INTEREST AND TAX OF $37.8 MILLION

CHAIRMAN’S REVIEW P3

Ë

RANGE

APPLIANCES’ ENTERED THE MARKET IN

INDIA WITH A FOCUS ON THE SPECIFER,

DESIGNER AND ARCHITECT COMMUNITY

IN THE DELHI REGION

NEW PRODUCTS — NEW PRODUCT

RELEASES INCLUDED THE PHASE 7

DISHDRAWER, GAS ON GLASS COOK TOPS

AND THE DCS UNITED INDOOR COOKING

RANGES AND DCS REFRIGERATION

DEBT REDUCTION — APPLIANCES NET

DEBT AS AT 31 MARCH 2012 WAS

$65 MILLION

q

$65M

Ë

INDIA


Refrigeration Cooking Laundry DishDrawer® Regional/Sales Office

Research And Development

Milton Keynes UK

Ontario Canada

Borso del Grappa Italy

Dublin Ireland

Los Angeles USA

Clyde USA

Reynosa Mexico

P5

A Global Company

Fisher & Paykel Appliances Holdings Limited comprises two operating divisions:

_ Appliances _ Finance (New Zealand

only)

Founded in 1934 as an importer business. Now has over 3,300 employees.

Internationally recog-nised brand.

_ #1 in New Zealand _ #2 in Australia _ Niche high-end

market positions in North America, Europe and China

Marketing and selling in over 50 countries.

Designs, manufactures and sells direct drive washing machine com-ponents and technology to the global appliances industry

Research and Develop-ment centres based in Auckland and Dunedin, New Zealand.

Fisher & Paykel Finance is a leading provider of consumer finance in New Zealand.

Auckland New Zealand

Rayong Thailand

Qingdao China

Dunedin New Zealand

Sydney Australia

Singapore

Marketing and selling in over 50 countries.


Dr Keith Turner, Chairman

RESULTS

Group net profit after tax was $18.4 million for the

financial year ended 31 March 2012. This result com-

pares to $33.5 million for the previous year.

There were three items which affected compa-

rability, namely an onerous lease charge of $2.7 mil-

lion before tax (Appliances business), a fair valuation

adjustment for property held for sale (Appliances

business) of $1.2 million before tax and litigation costs

of $6.8 million before tax (Finance Group). In aggre-

gate these one off items resulted in a charge of $10.7

million before tax compared to a gain of $5.1 million

for the previous year.

Adjusting for items affecting comparability, nor-

malised group net profit after tax was $26.3 million

compared to $30.0 million last year.

Net bank debt as at 31 March 2012 was $65.2

million compared to $100.2 million as at 31 March

2011, excluding operating borrowings for the Finance

business. Group interest charges, excluding Finance

operating interest expense, decreased by 30% from

$15.4 million to $10.9 million on lower debt levels.

Cashflow from operations, before the movement

in loans to Finance business customers, was $117 mil-

lion compared to $113 million for the previous year.

Group capital expenditure for the year was $50.5

million including capital expenditure related to new

motor contracts of $22 million. Capital expenditure in

the previous financial year was $28.3 million.

The Appliances business reported an operating

profit before interest and tax of $7.3 million compared

to $28.8 million last year. After adjusting for items

affecting comparability of $3.9 million before tax,

normalised profit before interest and tax was $11.3

million compared to $23.7 million last year. This result

is ahead of market guidance provided in December

2011 of approximately $10 million.

For the second half the Appliances business re-

ported a normalised operating profit before interest

and tax of $13.7 million, compared to a loss of $2.4

million in the first half.

As foreshadowed in November 2011, the full year

result reflects lower revenue as the business refocuses

on profitable sales, notably in North America. Total

operating revenue for the Appliances business was

down 7.6% to $891 million compared to $965 million

for the previous year. This reflected weaker retail

market conditions, rebalancing for profitable sales and

unfavourable currency translation effects.

Gross margin, as a percentage of sales, increased

by 0.9 percentage points to 31.2%. Appliances’ gross

margin in dollar terms decreased by $13.5 million to

$278.4 million for the year ended 31 March 2012 as

a result of lower sales and higher raw materials and

freight costs. Sales, general & administration costs

reduced by $10.9 million to $215 million on cost sav-

ings, in particular in North America and favourable

currency translation effects.

The full year result was also impacted by trans-

actional hedging losses of $25.6 million, with $5.3

million recorded in the second half following a mid

year change in hedging policy.

On a segment reporting basis the North Ameri-

can distribution business reported an operating profit

before interest and tax of $0.9 million for the year

compared to a $9.8 million loss in the previous year.

The Finance business recorded a solid result

with reported operating earnings before interest and

tax (including operating interest) of $31.0 million,

compared to $34.7 million for the previous year. After

adjusting for litigation costs of $6.8 million before tax,

normalised profit before interest and tax (including

operating interest) was $37.8 million compared to

$34.7 million last year. This result is above the market

guidance provided in December 2011 of around $32

million. Net income remained steady on 2011 levels.

Bad debt expenses were lower than the prior year,

however operating costs were higher due to increased

promotional activity to grow Q Card receivables.

In respect of litigation costs, a case raised by a

U.S. based software company was heard in the High

Court at Auckland, New Zealand in late 2011. A judge-

ment on the issue is now expected this year. There are

complex legal issues and a range of possible outcomes.

Accordingly, the Directors took the prudent decision at

the half year to make a provision given this uncertainty.


CAPITAL STRUCTURE

During 2012 financial year further progress was made

towards reducing bank debt and improving the overall

financial position of the Company. As at 31 March

2012, the Appliances business had total outstand-

ing net bank debt of $65.2 million, a reduction of

$35 million since 31 March 2011. Debt reduction was

primarily achieved by improved operating cashflow.

On 11 November 2011, the Company renewed its

Guaranteeing Group banking facilities on materially

similar terms and conditions as the previous debt

facilities. In March 2012, the Banking Group agreed to

remove the FPAL Interest Coverage Ratio. This ratio

only included earnings before interest, tax, deprecation

and amortisation derived by the Appliances business.

As at 31 March 2012, the Group was in full compliance

with all its banking covenants.

During the year, the Company continued with

property sales at the East Tamaki site in Auckland,

New Zealand. In March 2011, the recycling building

at the East Tamaki site was sold for $2.25 million and

settlement was completed in December 2011. In May

2012, the Company sold the components building at

the East Tamaki site for $5.1 million with settlement

expected by October 2012.

GOVERNANCE

The Board refreshment programme continued during

the year with two director retirements and two new

director appointments.

In September 2011, the Company announced

the appointment of Lynley Marshall as a Director.

Lynley’s extensive commercial, retail and media ex-

perience brings a dimension to the Board at a time

when brand, communication and digital strategy is

increasingly important. Her Australasian experience

and proven track record at delivering business growth

make her a strong addition to the Board. Pursuant to

GROUP FINANCIAL PERFORMANCE YEAR 6 MONTHS

31 March 31 March 31 March 30 Sept

2012 2011 2012 2011

NZ$000 NZ$000 NZ$000 NZ$000

Total Revenue and Other Income

Appliances business 891,449 965,053 450,603 440,846

Finance business 139,719 145,289 69,417 70,302

Other Income 6,790 10,601 3,497 3,293

1,037,958 1,120,943 523,517 514,441

Normalised Operating Profit/(Loss) before Interest and Taxation

Appliances business 11,282 23,675 13,656 (2,374)

Finance business (including Operating Interest) 37,814 34,722 19,447 18,367

49,096 58,397 33,103 15,993

Items affecting comparability

Onerous contracts (2,694) (882) (147) (2,547)

Litigation costs (6,774) - (857) (5,917)

Fair Valuation of Non-Current Assets held for Sale (East Tamaki site) (1,241) (500) (1,241) -

Profit on Sale of Land & Buildings - 6,508 - -

Earnings before Interest & Taxation 38,387 63,523 30,858 7,529

Interest (excluding Finance Business Operating Interest) (10,857) (15,403) (5,414) (5,443)

Operating Profit before Taxation 27,530 48,120 25,444 2,086

Taxation (9,099) (14,575) (7,989) (1,110)

Group Profit after Taxation 18,431 33,545 17,455 976

Normalised Group Profit after Taxation 26,300 30,040 19,408 6,892


the Company’s Constitution, Lynley Marshall will hold

office until the Annual Shareholders Meeting set for

23 August 2012 and being eligible, will offer herself

for election.

In September 2011, the Company also announced

the appointment of Philip Lough as a Director. Philip

filled the vacancy created by the retirement of John

Gilks. Philip is currently the Chairman of Methven

Limited and Quotable Value, Deputy Chairman of Port

Nelson Limited and a director of Livestock Improve-

ment Corporation. Philip is well known in business

circles and brings a wealth of international experi-

ence and strong governance credentials to the Board.

Pursuant to the Company’s Constitution, Philip Lough

will hold office until the Annual Shareholders Meeting

set for 23 August 2012 and being eligible, will offer

himself for election.

The new Directors bring with them a wealth of ex-

perience to complement that of the existing Directors.

As foreshadowed in the 2011 Annual Report,

John Gilks retired from the Board in August 2011. The

Board would like to thank John for his outstanding

contribution during his long service to the Company

as a non-executive Director and Deputy Chairman of

the Board. John has continued as Chairman of the

Finance business board.

In March 2012, Peter Lucas retired from the

Board in accordance with the board refreshment pro-

gramme that commenced in 2010. The Board would

like to thank Peter for his extensive contribution to

the Company as an independent director over his 10

year tenure.

On behalf of the Board I would like to wish both

John and Peter all the best for the future.

The Board refreshment plans will be completed

this year with the previously announced retirement of

Gary Paykel at the 2012 Annual Shareholders Meeting

in August.

The Finance business continues to maintain its

own separate board of directors.

PEOPLE

The Board would like to acknowledge the contin-

ued support and commitment from all employees

during what has been a year of consolidation and

improvement. With over 3,300 employees located

across the globe, the Board recognises the important

contribution that each individual employee makes to

the future development of the Company. The Board

would like to record its thanks to all employees for

their dedicated efforts.

DIVIDENDS

The Directors intend to restore dividend payments

to shareholders as soon as possible. However, with

conditions in our key markets remaining very un-

certain, the Directors believe it is prudent to take a

cautious approach and have resolved not to pay a

dividend at this time.

OUTLOOK

Retail market conditions are expected to remain

soft across all of the Company’s key markets in the

near term due to global economic uncertainty. The

Board remains particularly concerned about retail

market conditions in Australia, which deteriorated

in the second half of the 2012 financial year. While

there was a slight improvement in the U.S. economic

outlook, there are already signs that this might not

be sustained.

In the past two years the Appliances business

has rejuvenated investment in new products and at

the same time has significantly reduced bank debt

and controlled working capital and overheads. The

business has been repositioned for the current eco-

nomic climate and now has the financial flexibility to

pursue market opportunities including growth in the

components and technology business.

In financial year 2013 (FY13), the Appliances busi-

ness will benefit from the commencement of two new

motor contracts signed in 2011. The line for the Haier

motor contract was commissioned in April 2012 with

commercial volumes expected to ramp up in October

2012. A second line for another customer is on track

for production in the second quarter of FY13, with a

ramp up to commercial volumes from October 2012.


In addition, the product development programme

of the past few years will culminate in the release of

new refrigeration, laundry and cooking products dur-

ing the coming year. On the downside, raw material

prices have increased in recent months.

The Finance businesses earnings should remain

resilient in the coming year, despite an expectation

that New Zealand retail trading conditions will remain

soft. Increased promotional activity with the Farmers

Trading Company and a broader merchant base for

Q Card should improve interest income.

Capital expenditure for the Group is expected

to be approximately $42 million in the 2013 financial

year.

An update on trading and market conditions

will be provided at the Annual Shareholders Meeting

in August 2012.

Dr. K S Turner

Chairman

24 May 2012


Stuart Broadhurst

Managing Director & CEO

P15MANAGING DIRECTOR AND CEO’S REVIEW

OVERVIEW

It has been a year of consolidation for the Company

as we continue to build for the future. We have made

further progress on our core strategies in the past

year as demonstrated by:

_ Delivery of new products;

_ Continued improvement in systems and struc-

tures to improve product quality;

_ Maintained strong operating cashflow, reduced

working capital and made further reductions

in net debt;

_ Appliances’ gross margin improved as a per-

centage of sales demonstrating that we are

maintaining our product mix despite difficult

market conditions;

_ The North American sales and customer ser-

vices business returning to profit on a segment

reporting basis;

_ Continued investment in product development,

brand and our people;

_ Signed two new component and technology

supply agreements with major global appliance

manufacturers for development, design and

manufacturing technology;

_ Achieved a record normalised profit for the

Finance business;

_ The Finance business successfully navigated

through the expiry of the Crown Guarantee.

These achievements show that progress has been

made over the year, notwithstanding the difficult

global economic conditions the business has faced

across its key markets. While our financial goals for

Appliances have not been met this year we have

continued to invest for the future.

The Finance business delivered a record nor-

malised result and continues to build on the strength

of Q Card and Farmers Finance Card. There are op-

portunities to continue to grow the business further,

without losing focus on the core business of providing

consumer point of sale solutions.

Overall we remain committed to generating a

healthy yield for shareholders in the future.

Group Results

In New Zealand dollar terms, Total Revenue and Other

Income decreased by $83 million to $1,038 million.

Appliances’ revenue was down 7.6% from $965

million to $891 million on lower volumes and unfa-

vourable foreign exchange translation effects. Sales

in Australia were down 2.4% in local currency terms

compared to the previous year. As foreshadowed in

GROUP REVENUE YEAR 6 MONTHS


2012 2011 2012 2011

NZ$000 NZ$000 NZ$000 NZ$000

Appliances business

New Zealand 159,829 162,429 81,652 78,177

Australia 410,493 419,035 214,505 195,988

North America 165,766 207,883 75,882 89,884

Europe 64,304 81,330 34,997 29,307

Rest of World 74,393 69,505 36,461 37,932

874,785 940,182 443,497 431,288

Appliances business other sales of goods revenue 4,701 12,217 1,295 3,406

Appliances business sales of service 11,963 12,654 5,811 6,152

Total Appliances 891,449 965,053 450,603 440,846


Other Income 6,790 10,601 3,497 3,293

Total Revenue & Other Income 1,037,958 1,120,943 523,517 514,441


the first half, sales in North America declined as that

business focused on profitable sales. European sales

decreased by 17.7% on the last year in local currency

terms.

Finance business revenue was down slightly from

$145 million to $140 million as a result of continued

soft retail market conditions in New Zealand.


The Group recorded three one-off items during the

financial year, which together resulted in a net charge

of $10.7 million before tax compared to a gain of

$5.1 million for the previous year. The three one-off

items were:

_ Onerous lease: A provision was made for the

estimated unavoidable costs associated with a

warehouse lease in Chicago, USA. This resulted

in a charge of $2.7 million before tax.

_ Fair valuation adjustment: The fair value of the

remaining East Tamaki property held for sale has

been reassessed on a vacant possession sale

basis. This resulted in a further charge of $1.2

million before tax. The remaining property titles

at East Tamaki continue to be offered for sale.

_ Litigation costs: In respect of litigation costs, a

case was heard in the High Court at Auckland,

New Zealand in late 2011. A judgement on

this issue is now expected this year. There are

complex legal issues and a range of possible

outcomes. Accordingly, the Directors took the

prudent decision at the half year to make a

provision given this uncertainty. This amount,

together with subsequent further legal costs,

has been reported as litigation costs in the

Financial Statements. Litigation costs for the

current financial year were $6.8 million, with a

$0.9 million increase in the second half.

Depreciation and Amortisation

The charge for depreciation and amortisation was

$40.6 million for the year ended 31 March 2012, com-

pared to $40.9 million for the previous year.

Capital Expenditure

Total capital expenditure for the Group on a cash

flow basis was $50.5 million for the year ended 31

March 2012. Capital expenditure for the Appliances

business at $48.3 million accounted for the majority

ITEMS AFFECTING COMPARABILITY YEAR 6 MONTHS


2012 2011 2012 2011

NZ$000 NZ$000 NZ$000 NZ$000

Fair Valuation of Non-Current Assets held for Sale (East Tamaki site) (1,241) (500) (1,241) -

Onerous contracts (2,694) (882) (147) (2,547)

Profit on Sale of Land & Buildings - 6,508 - -

Litigation costs (6,774) - (857) (5,917)

Total Items Affecting Comparability (10,709) 5,126 (2,245) (8,464)

DEPRECIATION AND AMORTISATION YEAR

31 March 31 March 31 March 31 March

2012 2011 2010 2009

NZ$000 NZ$000 NZ$000 NZ$000



40,626 40,893 46,106 58,489

MANAGING DIRECTOR AND CEO’S REVIEW P17

of the investment which was primarily focused on

new product development and new motor supply

agreements signed in 2011. Of the total spend for

Appliances, $22.2 million relates to the two new mo-

tor contracts signed in 2011. Total capital expenditure

for the Group increased by $22 million compared to

the previous year.

Cash Flow and Group Net debt

Cash flow from operating activities, before the move-

ment in loans to Finance business customers, was $117

million compared to $113 million for the previous year.

Group Net Debt (excluding operating borrowings

for the Finance business) as at 31 March 2012 was $65.2

million, compared to $100.2 million as at 31 March 2011.

Appliances Business

Appliances’ revenue at $891 million was down 7.6%

compared to the previous year. This reflected weaker

retail market conditions, rebalancing volumes for

profitable sales, in particular in North America, and

unfavourable currency translations effects.

Appliances’ gross margin, as a percentage of

sales, increased by 0.9 percentage points to 31.2%.

Gross margin in dollar terms declined by $13.5 million

to $278 million as a result of lower volumes and higher

raw materials and freight costs.

Overheads were also lower as a result of cost

savings, notably in North America, and favourable

currency translation effects. The North American sales

and customer services business reported an operating

CAPITAL EXPENDITURE IN CASH FLOW TERMS YEAR


2012 2011 2010 2009

NZ$000 NZ$000 NZ$000 NZ$000



50,476 28,341 31,774 74,050

APPLIANCES BUSINESS FINANCIAL PERFORMANCE YEAR 6 MONTHS


2012 2011 2012 2011

NZ$000 NZ$000 NZ$000 NZ$000

Operating Revenue 891,449 965,053 450,603 440,846

Normalised Operating Profit/(Loss) before Interest and Taxation

- Appliances business 11,282 23,675 13,656 (2,374)


- Onerous contracts (2,694) (882) (147) (2,547)

- Fair Valuation of Non-Current Assets held for Sale (East Tamaki site) (1,241) (500) (1,241) -

- Profit on Sale of Land & Buildings - 6,508 - -

Reported Operating Profit before interest and Taxation 7,347 28,801 12,268 (4,921)

Gross Margin 31.2% 30.3% 30.7% 31.8%

Operating Margin* 1.3% 2.5% 3.0% -0.5%

Invested Capital 379,104 419,098 379,928 408,806

Return on Invested Capital** 3.0% 5.6% 5.6% 3.6%

*Normalised Operating Profit before Interest and taxation to Operating Revenue**Last 12 months normalised operating Profit before Interest and taxation to Invested Capital


profit before interest and tax of $0.9 million compared

to a loss of $9.8 million for the previous year.

Normalised operating profit before interest and

tax improved in the second half of the year to $13.7

million compared to a loss of $2.4 million in the first

half. As signalled in the Interim Report, the full year

result was negatively impacted by transactional hedg-

ing losses of $25.6 million, of which $5.3 million was

incurred in the second half.

Return on invested capital declined from 5.6%

as at 31 March 2011 to 3.0%, reflecting lower earnings

and capital expenditure that will start generating a

return in financial year 2013 (FY13).

MARKET REVIEWS

Appliances’ revenue, by geographic region and local

currency, has been compared to the previous year in

the table below. Revenues continue to be impacted

by weak retail market conditions, currency translation

effects and intense competition across all markets.

New Zealand

Appliance imports for the industry were down 5.0%

in unit terms compared to the previous year and

market demand for appliances did not recover post

the Rugby World Cup. Record low building consents

in New Zealand were also a contributing factor to

weaker demand conditions. Competition was intense

as suppliers chased sales in soft retail market condi-

tions, via a combination of selected price reductions

and discounting.

Appliances' revenues were down 1.6% on the

previous year, however, second half revenues were up

0.6% on the previous corresponding period. Fisher &

Paykel branded volumes were flat compared to last

year, however, market share increased in unit terms.

The reduction in Fisher & Paykel brand revenues was

due to selected price discounting, however gross

margin increased due to product mix improvements.

De Longhi branded sales through third party distribu-

tors also declined and contributed to lower overall

sales for the year. Spare parts sales were lower due

to improved product quality.

Haier sales continued to grow as additional

products were added to existing distribution channels.

Australia

The Australian home appliances market decreased

by 0.2% in unit terms compared to the previous year.

However, there was a significant slow down in the

second half of the financial year when the market

declined by 2.2%.

Weaker consumer confidence and record low

building consents negatively impacted retail sales. The

2012 financial year was characterised by intense compe-

tition as suppliers passed on the benefits of a high cur-

rency to consumers through selected price reductions.

Australian revenue was down 2.4% in local cur-

APPLIANCES REVENUE ANALYSIS IN LOCAL CURRENCY YEAR 6 MONTHS


2012 2011 2012 2011

NZ$000 NZ$000 NZ$000 NZ$000

Appliances business

New Zealand NZD 159,829 162,429 81,652 78,177

Australia AUD 316,955 324,727 166,486 150,469

North America USD 134,684 152,915 63,049 71,635

Europe EUR 36,733 44,617 19,663 17,070

Rest of World NZD 74,393 69,505 36,462 37,931

-

Appliances business other sales of goods revenue NZD 4,701 12,217 1,295 3,406

Appliances business sales of service NZD 11,963 12,654 5,811 6,152


rency terms, reflecting difficult market conditions.

Fisher & Paykel brand revenue was down on lower

volumes and selected price reductions. Market share

in unit terms increased in the cooking segment, how-

ever, was down slightly across other categories. Haier

brand sales continued to grow at the value end of the

retail appliance market. Sales of spare parts were also

lower due to further product quality improvements.

North America

The U.S. market contracted by 7.5% in unit terms

compared to the previous year, in part due to the

absence of Government stimulus incentives compared

to the first quarter for the financial year 2011 (FY11).

Fears of a U.S. double dip recession and the European

crisis negatively impacted consumer confidence in the

first three quarters of the financial year. Early signs

of economic improvement appeared in January and

February this year, however, it is too early to determine

whether this will be sustained. Notwithstanding the

weaker demand environment, competitors increased

prices in January 2012.

North American revenues were down 11.9% in lo-

cal currency terms, due to a focus on profitable sales.

Pleasingly, second half revenues were only down 1.8%

in tough market conditions. Fisher & Paykel brand

revenues were lower as the focus shifted to profit-

able sales, however gross margin improved due to an

improved product mix. DCS brand sales were higher

following the release of the DCS United indoor cook-

ing range in the first half of the year.

The result also reflected lower component and

technology sales in North America.

The focus on profitable sales and cost reduc-

tion activities resulted in the North American sales

and customer services business reporting a segment

operating profit before interest and tax of $0.9 million

compared to a $9.8 million loss in the previous year.

Pleasingly, gains from the first half were held through

the fourth quarter, which is traditionally the weakest

sales quarter for the business.

Other International markets

European sales were down 17.7% in local currency

terms. Difficult market conditions continued in Ire-

land and the United Kingdom. Revenues were lower

in part due to lower sales by our Italian factory to

third party customers. In January 2012, distribution

of Haier branded products commenced in Ireland.

Rest of World revenues increased by 7.0% in

New Zealand dollar terms compared to the previous

year, however, second half sales declined by 1.8%.

Price increases and higher volumes were more than

offset by unfavourable currency translation effects.

As indicated in the Interim Report, Singaporean sales

were lower compared to the previous year due to

the Company ceasing the distribution of Whirlpool

product on 1 April 2011.

During the year the Company commenced sales

in India following an 18 month market assessment.

The market entry strategy is to target the specifier,

designer and architect community, starting with one

distributor in the Delhi region. The Company views

the Indian market as a long term growth opportunity.

Haier Relationship

The relationship with Haier continues to develop with

further milestones achieved in the past year.

In March 2011, the Company announced a com-

ponent and technology supply agreement with Haier

for the development, design and manufacture of

direct drive washing machine motors for the Chinese

market. The installation and commissioning of the

manufacturing plant has been completed in Thailand

and first commercial volumes were shipped to Haier

in April 2012.

The sale of Haier branded product in Australia

and New Zealand continues to grow as new products

are added to the portfolio. As mentioned previously,

Fisher & Paykel commenced distribution of the Haier

brand in Ireland in January 2012.

Sales of Fisher & Paykel branded products in

China have been slower than expected. The process

for certification of product for the China market has

been frustratingly slow and for many products will not


be completed until the end of the calendar year. As

a result of slower than expected sales, the Company

is boosting support in China to assist Haier to deliver

increased sales of Fisher & Paykel branded products.

The relationship continues to grow and both

companies are working on other mutually beneficial

opportunities.

Appliances Business Strategy

The business has been focused on delivering Five Main

Things to improve the return for our Shareholders.

Our Strategic Plan has two main themes, to improve

the core appliances business and seek to monetise

our technology investment.

The Appliances business is focused on our

customers and we put our customers at the centre

of everything we do. This is across all aspects of our

business to ensure we deliver premium customer

experiences, products and services. As a business

we will continue to drive technology innovation, but

also bring innovation and creativity across all touch

points in the business to improve everyday life for our

customers. We have a clearly focused market strategy

and are delivering our product development plans.

A key aspect of our strategy is to diversify earn-

ings by growing our component and technology busi-

ness and explore the potential to expand our original

equipment manufacturing business. Examples of this

strategy in action include the two new direct drive

motor contracts signed in the last year and our new

compressor technology developed in conjunction

with Embraco. We will seek to explore other options

to monetise our technology investment in a way that

is complementary to building the core appliances

business.

A strong Fisher & Paykel brand is critical to the

future of our components and technology business as

we need to demonstrate to other appliance manufac-

turers our ability to deliver world leading technologies.

We continue to focus on Five Main Things, an

element of which includes Five Key Opportunities for

the business (see pages 22 and 23).

Financial targets for financial year 2016 (FY16)

have been set, including revenue growth 2% – 4% per

annum, earnings before interest and tax margin (EBIT

Margin) of 6% – 8% and a return on invested capital

(ROIC) of 15%. Our investment in product develop-

ment, quality, brand and people in recent times will

start to improve results this year and we will continue

to build towards reaching our financial goals.

STRATEGIC THEMES APPROACH FY16 TARGETS

Improve 'Core'

Appliances

Put the customer at the

centre of everything

we do

Five Main Things

AND

Five Key

Opportunities

Revenue Growth

2-4% pa

Execute our market

strategy and deliver our

Product PlanEBIT Margin

6-8% pa

Monetise Technology

to Diversify Earnings

Grow earnings from

technology and seek

original equipment

manufacture

opportunities

ROIC

15%


Five Main Things

We continue to focus on the Five Main Things in the

business.

We will execute our Marketing and Product

Plans to provide consumers with an experience and

products that exceeds their expectations. To achieve

this goal the business has increased investment in

products, brands and people over the past few years.

We are committed to ensuring that the quality of our

products and services delivers customer satisfaction,

which builds the reputation and value of the Fisher &

Paykel brand. We continue to make improvements in

product quality and have now achieved best in class

across many categories.

Our market strategy is well defined and targeted.

We will protect and grow our home markets of New

Zealand and Australia, whilst seeking profitable growth

in niche market segments in North America and in

other countries. China and India are long term growth

options, as both markets are expected to experience

double digit growth per annum in appliances sales

over the next five years. We are taking a low cost entry

approach to build a niche position in the commercial

segment in selected cities.

We continue to implement the business excel-

lence framework to build best in class processes and

deliver continuous improvement across the business.

We continue to create the right environment

to recruit and retain talented and passionate people

needed to achieve our goals.

Cost reduction is focused on lean thinking as a

key principle across the Group, and we must continue

to optimise costs across all aspects of the business to

remain competitive.

Five Key Opportunities

Fisher & Paykel Appliances has a 100 year heritage in

cooking and is well positioned to leverage both the

Fisher & Paykel and DCS brands to grow earnings.

We have increased our focus in the cooking category,

as evidenced by new products, the “Social Kitchen”

branding, improved product training and online

content like “Our Kitchen” cooking blog. In addition,

our sponsorship of food and cooking events such as

New Zealand Masterchef and the Australian Good

Food & Wine show, has increased. We are leveraging

the cooking opportunity in the context of our wider

kitchen strategy.

FIVE MAIN THINGS

DelIvering Customer

Benefits

Customer focused, differentiated products

Brand experience

Product innovation

Focus on quality

Environmental

Disciplined Market

Growth

New Zealand and Australia — protect and grow home markets

North America — profitable growth

Rest of World — profitable sales

China/India — long term options to access growth markets

Alliances — Haier, Whirlpool and others

Components & Technology — build expertise and diversify earnings

Business ExcellenceOrganisational excellence framework

Structures and systems

Organisational

Capability

People and leadership

Talent management

Cost Reduction

Consolidate manufacturing cost reduction

Ongoing review of manufacturing facilities

"Delivering Profitable Growth" program

Lean thinking — raw materials and overheads


North America is a potential growth market

for the Company. Over the last two years the North

American business has been resized to focus on build-

ing a strong niche market position for both the Fisher

& Paykel and DCS brands. In the next few years, new

product releases and a refocused business model are

expected to deliver earnings growth for the Company.

We have commenced our global manufacturing

review to ensure our manufacturing facilities are op-

erating at the fore-front of advanced manufacturing

technologies and processes. In addition, we are also

reviewing the location of our manufacturing facilities

that remain in high cost labour locations to ensure

that our products remain competitive in the long term.

Growth in components and technology has been

a feature during the past year with the addition of

two new direct drive motor contracts. The business

is targeting revenue of $120 million to $150 million by

financial year 2016. We have three foundation custom-

ers which should deliver between $56 million to $86

million in financial year 2014.

We are also exploring opportunities to com-

mercialise our technology beyond the reach of the

Fisher & Paykel brand and we are actively exploring

partnership opportunities with Haier.

In summary, the Strategic Plan sets out the

roadmap for the business over the next four years.

We have aligned our activity to this Plan to ensure we

achieve our operating and financial goals and deliver

a healthy return for our Shareholders.

FINANCE BUSINESS

The Finance business reported a solid result for the

year ended 31 March 2012. Operating profit before

interest and tax (including operating interest) was

down $3.7 million to $31.0 million after provisioning

$6.8 million for litigation costs. Please refer to Note

8 of the Financial Statements for an explanation of

the litigation costs.

Normalised operating profit before interest and

tax of $37.8 million was up 9% from $34.7 million the

previous year.

The improved result was built on higher net

margins, cost containment and a continued focus on

credit management.

Although operating revenue was lower and operating

costs increased due to promotional expenditure, these

were offset by lower bad debt expenses.

Operating revenue decreased from $145.3 mil-

lion to $139.7 million. Interest expense was margin-

ally down, reflecting lower funding costs and lower

volumes of new lending.

The bad debt expense to gross receivables ratio

decreased from 3.1% to 1.8%. This partly reflected the

full reversal of the $2 million Christchurch earthquake

provision which was established in FY11. As it trans-

pired, this was not required.

Operating costs increased by $5.4 million (exclud-

ing litigation costs) primarily as a result of increased

promotion related to the Q Card product.

Net finance receivables increased by 1% in the

FIVE KEY OPPORTUNITIES

STRATEGIC THEMES KEY OPPORTUNITIES OUTCOME

Improve 'Core' Appliances Earnings

1. Cooking StrategyCategory growth

2. North American DistributionImprove profitability

3. Global Manufacturing ReviewAdvanced manufacturing

Reduce product costs

Monetising Technology To Diversify Earnings

4. Components & TechnologyFY16 Revenue target $120m — $150m

5. Original Equipment Manufacture (OEM)Commercialise "know—how" beyond

Fisher & Paykel brand market reach


second half to $594 million, however, were down 1%

on March 2011 levels. Growth in the second half re-

flected a strengthening promotional program with the

Farmers Trading Company. Q Card receivables were

flat on March 2011 levels, with new receivables growth

offsetting the loss of a major account representing

approximately $50 million in receivables. Farmers

Finance Card receivables declined by 3% on March

2011 levels, however, increased by 1% on September

2011 levels. Farmers fixed instalment business declined

from $13 million last year to $10 million. Bulk funding

receivables were down $2 million to $74 million.

Total external debt funding at 31 March 2012

was $551 million. The Finance business continues to

maintain a diversified funding portfolio represented by

retail debentures (21%), RFS commercial paper (37%)

and term wholesale bank debt (42%). The business

continued to maintain surplus liquidity in the form of

undrawn term and standby committed banking facili-

ties. The Finance business has successfully navigated

the expiry of the Crown Deposit Guarantee Scheme on

31 December 2011. Monthly retail debenture reinvest-

ment rates have increased post 31 December and the

reinvestment rate in March 2012 was 89%. As a result

of increased retail debentures, the Finance business

intends to remove $85 million of wholesale banking

facilities that were principally put in place to cover

any shortfall in debenture funding post the expiry

of the Crown Deposit Guarantee. Net of this reduc-

tion undrawn term and standby committed banking

facilities amounted to $152 million as at 31 March 2012

During the year further steps were taken to

strengthen the funding position of the Finance busi-

ness and the Non Bank Deposit Taker, Fisher & Paykel

Finance Limited. Fisher & Paykel Appliances Holdings

Limited injected a further $8.5 million as capital into

Fisher & Paykel Finance Limited to take the capital

adequacy ratio to 15.27% compared to the minimum

requirements of 8.0%. Fisher & Paykel Finance Limited,

as a Non Bank Deposit Taker, has maintained a long

term issuer credit rating of ‘BB’ (Stable Outlook) from

Standard & Poor’s.

Finance Business Strategic Direction

There are opportunities to continue to grow the

business without losing focus on the core business

of consumer point of sale solutions.

We want to grow Q Card and Farmers Finance

Card receivables and enhance our other offerings in

the market.

Going forward the business is focused on the

following growth opportunities:

_ Fully develop the partnership with Farmers

Trading Company;

_ Broaden merchant reach (target to move from

15% to 20% in the next two years);

_ Target new retail channels, for example, the

health and agriculture sectors;

_ Promote customer loyalty to retailers;

_ White label opportunities for retail stores;

_ Expand gift and cash card offerings;

_ Deliver further technology solutions to custom-

ers including digital and on-line;

_ Consider selective acquisitions of core portfolio

receivables.

FINANCE BUSINESS FINANCIAL PERFORMANCE YEAR 6 MONTHS


2012 2011 2012 2011

NZ$000 NZ$000 NZ$000 NZ$000

Operating Revenue 139,719 145,289 69,417 70,302

Normalised Operating Profit before Interest and Taxation (including Operating Interest) 37,814 34,722 19,447 18,367


- Litigation costs (6,774) - (857) (5,917)

Reported Operating Profit before Interest and Taxation (including Operating Interest) 31,040 34,722 18,590 12,450

Net Finance Receivables 594,532 601,595 594,532 589,337


People

I would like to acknowledge the significant contribution

of our staff over the past year. Their talent, passion,

creativity and dedication have been instrumental in

positioning the Company for the future. I am grateful

for the efforts made by the Fisher & Paykel team across

both Appliances and Finance and believe we have the

momentum to make further advancements this year.

I would also like to thank our suppliers, custom-

ers and business partners for their continued support

during the year.

SUMMARY

In the next financial year our investment in product

development, quality brand and direct drive motors

will start to deliver results. This is an exciting prospect

as we deliver new refrigeration, laundry and cooking

products to the market and the two direct drive mo-

tor contracts commence. While market conditions are

expected to remain difficult, our strategic roadmap

provides clarity and direction for the business and

we are aligned to delivering on the Five Main Things

and Five Key Opportunities.

The Finance business has continued to perform

in difficult retail market conditions and is a world-class

consumer point of sale finance business. We see op-

portunities to further grow this business over the next

few years within its core capabilities.

The business has come a long way in the past three

years and the balance sheet is now in a much stron-

ger position. Going forward I am looking forward to

meeting the challenges of the next few years as we

deliver on our strategic plan and generate a healthy

return for our Shareholders.

S B Broadhurst

Managing Director & Chief Executive Officer

24 May 2012



The aim is to refresh, realign and reposition the brand

globally over a medium-term horizon, in tandem with

other initiatives including our product development

strategy.

When we talk about brand, we mean the sum

of all experiences, large and small, that people have

with Fisher & Paykel. Our brand is our company-wide

reputation, not just our logo.

We have taken our products to the world. Now

we need to support them with the stories that build

our reputation beyond high performance products

to a brand that people aspire to have in their lives.

Real

Our brand has real substance and is delivered with

integrity by ordinary people with extra-ordinary skill

and commitment to build relationships with our cus-

tomers through trust and reputation.

Generous

We care about our customers, our people and our

planet and have a willingness and spirit of openness

throughout our business.

Human

Life is about routine as much as it is about the un-

expected, and we cater for both. Our customers are

people with routines and rituals, expectations and

surprises, busy and quiet times, joys and tragedies.

Curious

We understand the dynamic nature of modern living.

We’re curious about the world and how people live,

wherever they may be. Our outlook is global, but we

understand each local neighbourhood.

REAL

GENEROUS

HUMAN

CURIOUS

2012 SAW THE FURTHER DEVELOPMENT

OF A BRAND AND COMMUNICATIONS

STRUCTURE TO SUPPORT FISHER &

PAYKEL’S BUSINESS OBJECTIVES AND

PROVIDE CLEAR FOCUS FOR A GLOBAL

BRAND PLATFORM.

A GLOBAL BRAND

OUR BRAND VALUES

P27OUR BRAND

OUR POSITIONING IS EVERYDAY PREMIUM.

FOR US, THIS MEANS HIGH QUALITY AT

AFFORDABLE PRICES AND ASPIRATIONAL

DESIGN THAT IS ACHIEVABLE TO OWN.

TO BE THE MOST

HUMAN-CENTRED APPLIANCE

BRAND IN THE WORLD.

EVERYDAY PREMIUM

OUR BRAND VISION

Our Positioning

Everybody deserves product that is well designed,

with real value and substance. We are in the middle

and upper middle positions in the market, over the

best of the conventional offerings and below the

ultra-premium solutions. This is where our heritage

and legacy has brought us and where we can add

real value.

Our Brand Goal

The goal is to create an everyday premium brand

that is very aspirational yet still accessible; a brand

that continues to be human-focused and real. One

that people are proud to be part of, whether they are

consumers, distributors, employees or shareholders.

At the heart of the Fisher & Paykel story are people

looking for the innovation that changes the everyday

into something out of the ordinary. It appeals to our

basic human desire to live life and improve it. Our

brand voice sets the tone for the way we look, sound

and communicate.

All brand communications over the past year

have been executed with this vision in mind. They

have been varied and wide-reaching.

OUR DESIGN PHILOSOPHY:

DESIGN FOR REAL LIFE

We are curious about people. How they live, where

they live, what they do and how they use things. This

is where hidden insights wait to be uncovered. We are

curious not only with the function and performance

of our products but with the emotional role they play

in peoples lives. For us, design is not a self-serving

goal; it is a human endeavour to make life better.

Continuous innovation is part of the Fisher &

Paykel design philosophy. As evident in the release

of the Phase 7 DishDrawer™, we have applied valu-

able research insights to deliver a product that is

considerably more in tune with the way that humans

are living their lives.

We live in a designed world and we believe ev-

erybody deserves good design. who use our products

day in and day out. The ongoing collaboration be-

tween design engineers and customers has changed

the course of appliance design for us as a company

and for those who use our products day in and day

out. Our future will be built on fostering this spirit of

collaboration and curiosity.


DISHDRAWER™

PHASE 7

Released in 2012, the latest DishDrawer™ dishwasher

continues to change the way people wash their dishes.

The Phase 7 DishDrawer™ brings a new level of

performance and quality into the kitchen. Range im-

provements include: pitch adjustable racking that can

also be folded flat for large items and accommodate

plates and deep bowls, improved fit for seamless in-

stallation into kitchen cabinetry, a wireless badge to

provide uninterrupted surfaces on integrated models,

reduced operating sound and an increase in wash and

energy performance.

We have found new ways to improve usability,

increasing the height of the drawer to allow for even

larger plates and platters. No longer limited to one

size of DishDrawer™ dishwasher, a wider version has

been developed to suit smaller families. We all know

every kitchen is different. The DishDrawer™ family is

designed for choice and convenience, offering mul-

tiple configurations, along with a choice of material

finishes to integrate seamlessly into new and existing

kitchen designs.


GAS ON GLASS

COOKTOP

The Gas on Glass cooktop range combines the

cleanability of the highest quality glass surface with

the efficiency of gas cooking. It delivers total cook-

ing precision through the latest burner technology

and elegant stainless steel controls. Gas on Glass is

a modular family of appliances, available in a range

of sizes to suit every home.

Premium quality materials and finish are strong

design cues in the Gas on Glass cooktop range. Trivets

of heavy duty cast iron sit alongside black glass and

a polished stainless trim, a combination that signifies

this range of everyday premium product.


COMPANION

PRODUCTS

The Companion Product range has been designed to

complement any kitchen. The range includes a Coffee

Maker, Steam Oven, Compact Oven and Combina-

tion Microwave Oven, offering a complete modular

family. Whether it’s a fresh coffee in the morning, a

healthy steamed lunch or a quick ready-made meal

in the evening, the companion product range takes

convenience to a new level.

Each product is based on standard dimen-

sions and can be easily configured to suit the kitch-

en — whether it is stacked vertically, placed side by

side in a linear fashion or configured in a Two x Two

Block. Any combination will deliver a unified built-in

solution. Design features including capacitive touch

controls, standard fascia height and brushed handles,

Stopsol glass and chrome trim ensure the Companion

Products sit perfectly alongside the broader Fisher &

Paykel range.


FRENCH DOOR

REFRIGERATOR

The refreshed French Door Refrigerator was launched

late 2011. As the hero product of Fisher & Paykel's

refrigeration range, the French Door Refrigerator is

powered by our latest refrigeration development:

ActiveSmart™ Technology, embodying our sophisti-

cated knowledge of food care.

This technology means that at the heart of

Fisher & Paykel refrigerators is the ability to sense

and respond to daily use in an intelligent way. The

combination of temperature sensors with smart

electronics and variable speed fans creates a

controlled environment and optimum temperature

for better food care.

Combining Ice & Water features with ergonomic

sliding drawers and a large 610 litre capacity, the

French Door Refrigerator provides the ultimate food

care solution.


At the heart of all Fisher & Paykel washing machines

is the ability to sense and respond to each load in

an intelligent way. The combination of a direct drive

motor with smart electronics means greater reliabil-

ity and better performance. We call it SmartDrive™

technology.


At the heart of Fisher & Paykel refrigerators is the abil-

ity to sense and respond to daily use in an intelligent

way. The combination of temperature sensors with

smart electronics and variable speed fans creates a

controlled environment and optimum temperature for

better food care. We call it ActiveSmart™ Technology.


ENVIRONMENTAL RESPONSIBILITY

Fisher & Paykel Appliances Holdings Limited ("Fisher &

Paykel") has long been committed to environmentally

conscious operations as a business, and to creating

new products that increasingly limit the impact on

the environment’s natural resources.

New Zealand’s clean, green reputation has

formed part of our philosophy for decades. Today we

strive to emphasise sustainability in everything we do,

from comprehensive recycling programmes in New

Zealand and abroad, to continual energy and water

consumption reduction efforts both in manufacturing

and new product design.

Efficiency

Fisher & Paykel aims to meet the highest industry

standards with our appliances achieving top ranking

results with Energy Star and WELS water ratings.

Over the past thirty years our appliance energy and

water usage has decreased across all our appliances.

The most dramatic result in energy use is from

the highest-consuming whiteware appliance in the

house, the refrigerator, which has reduced energy

consumption on average by over 60 percent. Water

use by our dishwashers and clothes washers has also

decreased, with these appliances now using around

55 percent and 80 percent less water on average

respectively.

Last year we launched our world-leading, revo-

lutionary refrigerator compressor design that is up to

35 percent more energy efficient than conventional

compressors and further reduces the consumption of

the most energy-hungry appliance in the home. The

compressor is now in trial and will be entering the

market in the next couple of years. We continued our

environmental improvements in 2012, this time in the

laundry with our unique Direct Drive motor technol-

ogy providing eco-friendly engineering and design

innovation behind our new suite of washing machines.

When we developed Direct Drive motor tech-

nology 20 years ago, the focus was on delivering

higher performance and reliability in our washing

machines at a lower cost to the consumer. Today, the

Direct Drive motor technology continues to evolve

and play a powerful role, enabling new efficiencies

across the upgraded SmartDrive™ washing machine

range. Consumers can now select machines based

on their household’s unique needs, be it top water

and energy efficiency or optimal clothes care for a

longer-wearing wardrobe, all due to technology de-

velopments at the core.

Local Product Stewardship

Fisher & Paykel appreciates that the environmental

impact of an appliance continues long after it leaves

the factory gate. Taking responsibility for our products

throughout their life cycle, we opened our appliance

recycling operation in New Zealand nearly two de-

cades ago. Through this initiative, Fisher & Paykel is

able to save around 25,000 appliances from landfill

each year and enable the re-use of bulk materials.

Alongside appliance recycling, we recently

launched a local programme for operational appliances

ten years or older in partnership with the Energy Ef-

ficiency and Conservation Authority (EECA).

Called ‘Take Back’, this initiative offers free col-

lection of working but unwanted refrigerators and

freezers in New Zealand’s main centres. As well as

recycling these products, we report back to EECA,

calculating the amount of energy saved from the

appliance’s decommissioning and replacement with

a more efficient, modern model. ‘Take Back’ has so

far collected more than 650 refrigerators and freez-

ers, delivering a total estimated energy savings of

394MWh/y, or enough energy to power around 200

homes over a year.

Global Initiatives

Across the globe our people are similarly commit-

ted to reducing our environmental footprint through

aggressive waste reduction and energy reduction

targets. We are successfully meeting our own high

targets in each country we are located and comply

with the strict emissions rules specific to each country.

Our goal is to continually reduce our emissions

and apply the principle of reduce, re-use and re-cycle


to all of our process waste in all markets in which we

operate.

OUR COMMUNITIES

Across the globe, Fisher & Paykel’s people share

a drive to help the communities in which we are

located. To do this we forge relationships with key

community organisations who, at a local level help

us identify the people most at need, and the things

they need most to assist them.

Regional Responses

At the heart of our business lie two core areas — our

appliances and our people. Both are integral to the

initiatives through which we can demonstrate support

to our local communities.

From New Zealand to Italy and in between,

Fisher & Paykel acts locally to support projects close

to our people, their families, and our customers. Our

outreach can be through donated appliances, commu-

nity sponsorship, grass roots charity funding, schools

initiatives, or simply, people power.

Our people’s expertise ranges across engineering and

design, to sales and marketing, manufacturing and

customer service, so their guidance can be invaluable

when donated to assist with community projects.

In many of the markets we reside, Fisher & Paykel

taps into the community in areas where we can assist

through local activity. In New Zealand for example, Re-

cycling Days are just one way our people can engage

with the community to make a difference. As part of

our ongoing appliance recycling effort we host these

days where the public is invited to drop off any retired

whiteware appliances to our main centres for free. Not

only are we able to save thousands of tonnes from

landfill as a result, but these events provide an easy

recycling option for the public and an opportunity to

meet our neighbours.

Our Auckland Head Office has also long sup-

ported an initiative to recognise hardworking students

from three local schools in the East Tamaki and Otara

area, The Young Endeavour Award. As part of the pro-

gramme, Fisher & Paykel participates in the judging

alongside the schools, provides trophies and certifi-

cates, an exciting field trip for the winning students

and a donation to assist with school fees and materials.

Further afield in Thailand, our factories have

consultative committees made up of staff represen-

tatives and management who consider the requests

that come in from the community. One example of the

many donations made to schools, orphanages and

underprivileged groups is the annual end of year food

packs donated by staff members and supplemented

by company donations, which are then sourced by

local Monks and distributed to those in need among

the community.

In Mexico the team has multiple initiatives to

support its communities, from donations of native

trees to ecology units for study and redistribution

where needed, to appliances donated to educational

institutions for the students’ investigations into new

technologies. Like so many others in the Fisher &

Paykel family, Mexico is an active supporter of those

communities affected by natural disasters, donating

essential supplies and fundraising to help people get

back on their feet.

Helping Hands in Hard Times

Providing practical responses to communities in need

is an integral part of our culture in every region we

operate. The worldwide Fisher & Paykel family rally

with fundraising to support relief efforts for the com-

munities in which we operate.

In New Zealand for example, the region of Can-

terbury has continued to be rattled by unsettling

aftershocks following the devastating earthquakes

that destroyed communities in 2010 and 2011. As

communities gather in a now-familiar response to

support one another, our people continue to provide

appliances to community service centres when needed

and help relief efforts as required, to get this stoic

region through.

When Australia felt the impact of the Queensland

floods in 2010 our people rallied to respond with relief

efforts in the community and assistance provided to

relief organisations like the Red Cross.

P43

Culinary Coaching

The kitchen has always been the heart of the home

and it is still where families and friends share their

lives, even in today’s busy world. Enjoying a feast with

family and friends is one of life’s simple pleasures

and Fisher & Paykel designs products specifically to

make cooking easier, more enjoyable and more social.

As an extension of this driving product philoso-

phy, our New Zealand, Australian and US markets are

passionate supporters of a range of cooking schools,

community programmes, events and shows. One new

programme we support in New Zealand is called ‘Gar-

den to Table’, where school children are taught how

to eat healthily and create meals from items they’ve

grown themselves.

These are just some examples of our community

“hand up” in action across our global markets. Our

philosophy is to support the communities in which we

live, or where our customers reside, and through our

people, expertise, funding and products we can be

the helping hand that assists these neighbourhoods

where they need it most.

OUR PEOPLE

Fisher & Paykel is renowned for its leading-edge,

human-centred products, and it is ultimately the

human element of our Company – our people – that

drive this innovation and excellence. Their knowledge

and commitment is the foundation on which Fisher

& Paykel builds its reputation. From product design

to point-of-sale, it is our excellent people, working

together, who have set the Fisher & Paykel brand apart.

A Wellness Strategy

The health of our people is critical to the strength of

our business and a focus that transcends divisions

through Company-wide involvement and leadership.

Wellness programmes across the business, such as

Fisher & Paykel Finance’s recently awarded programme

in New Zealand, are delivering marked improvements

in the overall health and wellbeing of our staff. The

programmes are also contributing to health and safety

risk reduction and outcomes, and downward trends

in sick leave and turnover.

Sharing Our Design Stories

There is a story of fresh thinking behind every Fisher

& Paykel appliance – stories of the people who chal-

lenged the norm and those who designed new ways

of doing things. Fisher & Paykel takes great pride in

sharing these design stories with our customers and

regularly seeks opportunities to do so.

Displaying the talents from our flagship design

centres in Auckland and Dunedin, events like Urbis

Design Day are an opportunity for our designers and

engineers to engage directly with our customers.

Through their creation of bespoke design installations

inspired by Fisher & Paykel’s ‘Social Kitchen’ concept,

our people are able to demonstrate the unique think-

ing and stories behind our appliances and discuss the

impact of our designs with the people who use our

products every day.

Globally Grown, Locally Honed

The pioneering spirit of our founders drove the early

development of the business and that focus continues

today as we expand globally. Key to our success in

each market is the quality and consistency of our

staff, all focussed on delivering the best customer

experience possible. This is fostered by the high-

quality leadership we have in each country we oper-

ate, enabling us to grow strong local teams united

by a common purpose and belief in the Company’s

strategic direction.

Our growth internationally means the Fisher &

Paykel of today is a rapidly changing business made up

of a diverse range of people spread around the globe

in Oceania, Asia, Europe and the Americas. While New

Zealand remains the hub for our collective design

and engineering expertise and home to around 44%

of our employee base, our workforce is increasingly

representative of the global nature of our business

and the customers and communities that we serve.

With responsibility for more than 50 international

markets, our New Zealand and Australian Call Centres

act as a central point for both local and global mar-


kets, working to provide consistently high standards

of customer support. As we expand, this service be-

comes intrinsic to the calibre and perception of our

brand internationally.

Career Opportunities

The future of Fisher & Paykel is truly global and we

encourage opportunities for career enhancement for

our people both within their local markets and out-

side their borders as we grow the brand's strengths

world-wide.

By helping to foster individual talent, we grow

our collective expertise, and it is common to find our

people on international assignments within the Com-

pany. From engineers to managers to those within our

sales force, our people regularly head to our centres

overseas and we welcome staff from abroad.

The recent global expansion of our Fisher &

Paykel sales force mirrors our growing presence in

markets like Canada, China and India. As we grow, so

to do the career opportunities within our business. All

the while, we strive to build talent through our product

development pipeline to ensure our engineering capa-

bility remains strong and able to support our increased

investment in research and development. Our global

manufacturing teams are equally committed to quality

and excellence in all they do, ensuring our products

meet the highest standards of production.

Fisher & Paykel people remain united by a com-

mon belief in the Company’s past track record of

entrepreneurship and success, and a commitment

from all markets to being part of its future success.

P45

KEITH TURNER, 61, was appointed Chairman of the Company in February

2011 and has been a Director since November 2010. Dr Turner is a now a

professional director and is the Deputy Chairman of Auckland International

Airport, a Director of Spark Infrastructure (in Australia) and a Director of

Chorus, the newly established NZ telecommunications network operator.

He is also currently Chairman of Solar City Limited. Dr Turner possesses

extensive experience in the New Zealand energy sector. Most recently, he

served for 9 years as Chief Executive Officer of Meridian Energy Limited

from 1999 to 2008. Prior to that, he worked as a private energy expert

advising a range of large corporate clients and Government. He has previ-

ously served in a number of industry reform functions that established the

current New Zealand industry structure and has had many years in senior

industry operations and planning roles. He has a PhD in Engineering and

is a Distinguished Fellow of IPENZ

PHILIP LOUGH, 65, is a professional Director. His current roles include

Chairman of Methven Limited and Quotable Value, Deputy Chairman of

Port Nelson Limited and Director of Livestock Improvement Corporation.

Mr Lough is the former Chairman of New Zealand Trade and Enterprise.

He has had an executive career in building businesses in the dairy and

seafood industries that have succeeded by developing a network of global

distribution channels. His previous roles include the New Zealand Dairy

Board, Mainland Foods, Ernest Adams, Sealord Group and Deputy Chief

Executive of the New Zealand Dairy Board. Mr Lough holds a Bachelor of

Technology and is a Fellow of the Institute of Directors in New Zealand.

STUART BROADHURST, 45, was appointed Managing Director and Chief

Executive Officer on 11 December 2009. Mr Broadhurst has over 24 years

industry experience in every aspect of the Company’s global operations.

Since 1988 he has held a number of senior management positions within

New Zealand and Australia. He has been employed in key leadership roles

for the Fisher & Paykel Appliances Group in the USA, the United Kingdom

and Europe, where he project managed, established and developed major

business units. Mr Broadhurst received a Bachelor of Commerce degree

from the University of Auckland.

LIANG HAISHAN, 45, has been a Director of the Company since April 2011.

Mr Liang has been Executive Vice President of Haier Group and President

of Haier White Goods Group since 2007. Prior to his current roles, Mr

Liang was Vice President of Haier Group and Managing Director of Haier

Refrigeration Division since 2005. Between 2002 and 2005, Mr Liang was

the Vice President of Haier Group and Managing Director of Haier Home

Integration Product Division. Previously he was the Acting Vice President

of Haier Group and Managing Director of Haier Logistics Division since

1999. Mr Liang joined Haier in 1988 and prior to his appointment to the

position of Managing Director of Haier Air Conditioner Division in 1995,

held a variety of positions in the manufacturing, engineering, QC and en-

terprise management departments. Mr Liang received a Bachelor Degree

of Management Science & Engineering from Xi’an Jiaotong University and

has a PhD Business Administration.


TAN LIXIA, 41, has been a Director of the Company since July 2009. Ms

Tan was appointed as Senior Vice President of the Haier Group in 2010 in

addition to her existing role as Chief Financial Officer. Previously, Ms Tan

was Vice President of Haier Group Corporation and Director of the Finance

Division of Haier Group Corporation, responsible for the Group’s financial

management including its risk, investment and financing strategies. Between

2002 and 2006 Ms Tan was the Director of the Haier Overseas Business

Division, where she established Haier as a household name in overseas

markets. Ms Tan has received awards for her outstanding contributions

towards Haier’s globalisation strategy as China’s “Female Business Enterprise

and Creator of the Year, 2006”, China’s “Chief Accountant of the Year, 2006”,

one of China’s Top Ten Businesswomen in 2006, Chief Finance Officer of

the Year, 2009 and Outstanding Entrepreneur in Shandong Province. Ms

Tan is a 1992 graduate of the Central University of Finance and Economics

and has an EMBA from China Europe International Business School in 2009.

LYNLEY MARSHALL, 52, has over 25 years experience in senior executive

roles in the media and consumer product sectors across New Zealand and

Australia. Mrs Marshall has expertise in competitive strategy, consumer

markets, innovation, taking new technology and services to the market

and multi-channel retail. She is Executive Director of the ABC Commercial

Division of the Australian Broadcasting Corporation. Mrs Marshall was ap-

pointed to ABC in 2000 as Director of New Media and Digital Services and

was responsible for the integrated delivery of ABC’s digital content and

multi channel services, development and delivery of Australia’s first free-

to-air digital television and broadband services. Prior to joining ABC she

held a variety of executive positions in radio, television and new media in

New Zealand. Mrs Marshall is a Non Executive Director of the Melbourne

Jazz Festival. She is a member of the Australian Institute of Company

Directors and has an Executive MBA from the University of Auckland.

GARY PAYKEL, 70, was Chairman of the Company from April 2004 until he

stood down from his role in November 2009. Mr Paykel remains a Director

of the Company. Mr Paykel was Executive Chairman of the Company fol-

lowing the separation from Fisher & Paykel Industries Limited. He was a

Director of Fisher & Paykel Industries from August 1979, Managing Director

from April 1987 and Chief Executive Officer from December 1989. He was

appointed Chairman of Fisher & Paykel Healthcare Corporation Limited

(previously Fisher & Paykel Industries Limited) following the separation

in November 2001. Mr Paykel joined Fisher & Paykel Industries Limited

in 1960 and prior to his appointment to the position of Sales Director

in 1985, held a variety of positions in the manufacturing, engineering,

purchasing and sales departments. Mr Paykel is a Companion of the New

Zealand Order of Merit.

BILL ROEST, 64 is the Chief Financial Officer of Fletcher Building Limited,

having been appointed on the separate listing of that company in 2001.

He had several leadership roles in the New Zealand finance sector before

joining Fletcher Challenge Limited upon the acquisition of Group Rentals

in 1986. Since then, he has been Managing Director of Fletcher Residential

and Fletcher Aluminium before taking up his present position. Mr Roest

is an Associate Chartered Accountant and a member of the Institute of

Chartered Accountants of New Zealand and a fellow of the Association

of Certified Corporate Accountants (UK).

From top Left: Keith Turner, Philip Lough, Stuart Broadhurst, Liang Haishan, Tan Lixia, Lynley Marshall, Gary Paykel, Bill Roest.

P49DIRECTORS

STUART BROADHURST, was appointed Managing Director and Chief

Executive Officer on 11 December 2009. Mr Broadhurst has over 24 years

industry experience in every aspect of the Company’s global operations.

Since 1988 he has held a number of senior management positions within

New Zealand and Australia. He has been employed in key leadership roles

for the Fisher & Paykel Appliances Group in the USA, the United Kingdom

and Europe, where he project managed, established and developed major

business units. Mr Broadhurst received a Bachelor of Commerce degree

from the University of Auckland.

BRETT BUTTERWORTH, Vice President, Components & Technology,

Production Machinery, Haier PMO, has extensive international experience

in the Company’s manufacturing and commercial businesses and has held

a variety of senior executive positions within the organisation over the

past 30 years. His current role also includes project management of the

Company’s Haier business relationship, VP of Production Machinery, and

more recently appointment as VP Components & Technology, reflecting

the increasing importance of this business to the Company.

ANDREW COOKE, Vice President, Supply Chain Management and

Information Technology, joined Fisher & Paykel Appliances in 1987 as

a Control Systems Engineer in the East Tamaki Refrigeration Division.

He has held several manufacturing support roles in Australia and New

Zealand before moving to Information Technology in 1997. He was ap-

pointed Vice President of Information Technology in 2002 and in 2009

was appointed to the additional role of Vice President Supply Chain

Management. Andrew has a Bachelor of Engineering with First Class

Honours from the University of Auckland.

ROGER COOPER, Vice President Operations, was appointed to this

role in 2010. He has gained extensive knowledge and experience of our

global operations since he joined our Company in 1973, progressing

from junior supervisory roles in the early stages of his career, to senior

management positions, including an appointment as Site Manager of our

Cleveland, Australia operations prior to his current Role. Roger has a NZ

Certificate of Engineering.

DALE FARRAR, Vice President Human Resources, joined Fisher & Paykel

Appliances in July 2010 on her appointment as Vice President Human

Resources. Prior to that Dale was General Manager Human Resources

at the Ministry of Social Development. Dale has extensive experience

in human resource management in international contexts. Before 2004,

Dale held senior global human resource roles at Fonterra Co-operative

Group, New Zealand Dairy Board and Air New Zealand Ltd. Dale has a

Bachelor of Arts (History) and Bachelor of Laws and Law Professionals

from Victoria University of Wellington. She has been admitted as a Bar-

rister and Solicitor of the High Court of New Zealand.


GARRY MOORE, Vice President Quality and Customer Services, was

appointed Vice President Quality and Customer Services in March 2011.

Prior to that he was General Manager Global Quality. Garry joined Fisher

& Paykel in 1991 as a Quality Engineer in our Cleveland, Australia opera-

tion. He moved to operational management in 1994 and has been Site

Manager for both our Dunedin and Auckland operations, and in 2008,

he was appointed New Zealand Operations Manager.

MATT ORR, Vice President Corporate Planning and Investor Relations,

joined Fisher & Paykel Appliances in 2009 as Vice President Corporate

Planning. In addition to this, he took up the role of Vice President Inves-

tor Relations in early 2010. Prior to joining Fisher & Paykel Appliances he

was Vice President Investment Banking at Deutsche Bank New Zealand.

Before 2003, Matt held roles at ABN Amro, Ernst & Young and Telecom

New Zealand. Matt has a Bachelor of Commerce with Combined Hon-

ours (First Class Accounting and Finance) from the University of Otago.

CRAIG REID, Chief Sales & Marketing Officer, joined Fisher & Paykel

Appliances in 2010, on his appointment as Chief Sales & Marketing Of-

ficer. Craig has extensive international sales and marketing experience,

acquired in a variety of roles within the Fisher & Paykel and Panasonic

organisations. This experience included senior management roles within

Panasonic New Zealand, culminating in his appointment as Managing

Director of that organisation in 2008.

DAVID SULLIVAN, Chief Financial Officer, joined Fisher & Paykel Ap-

pliances in August 2011. David has extensive financial and global com-

mercial experience spanning 28 years. His previous business background

includes Chief Financial Officer roles at SkyCity Entertainment Group and

Vodafone New Zealand. He has also worked in a number of senior finance

executive roles in New Zealand and Internationally. He has a Bachelor of

Commerce degree and is a Chartered Accountant.

DANIEL WITTEN-HANNAH, Vice President Product Development, was

appointed Vice President of Product Development in February 2010. He

has extensive experience in all aspects of the Company’s engineering and

project management operations. In 2008 Daniel was appointed to the

position of Dunedin Site Manager and prior to that held management

positions within our Cooking, Dishwashing and Refrigeration engineer-

ing operations. Daniel has a BE (Hons) of Mechanical Engineering from

Auckland University. Daniel is also leading a working group review of the

Company’s Go to Market opportunities, to ensure the Company provides

an integrated consumer experience and a positive environment for their

decision making process.

From top Left: Stuart Broadhurst, Brett Butterworth, Andrew Cooke, Roger Cooper, Dale Farrar, Garry Moore, Matt

Orr, Craig Reid, David Sullivan, Daniel Witten-Hannah.

P51EXECUTIVES / APPLIANCES

ALASTAIR MACFARLANE, Managing Director of Fisher & Paykel Finance

Group, joined Fisher & Paykel Finance in 1988 in his current role and has

been extensively involved in the development of the Finance business,

as the Finance Group has evolved from a small strategic investment into

the current operation offering retail point of sale finance to customers

through a diversified range of retail merchants and commercial dealers.

Prior to joining Fisher & Paykel, Alastair was with Citibank in New Zealand

and KPMG, London, San Francisco and Auckland in an accountancy role.

Alastair has a Bachelor of Commerce degree from Auckland University

and is a member of the NZ Institute of Chartered Accountants.

IAN MCGREGOR, Chief Financial Officer of Fisher & Paykel Finance

Group, joined Fisher & Paykel Finance in 2010 in his current role. Ian

has extensive experience in top tier investment banks in New Zealand

and overseas. Prior to his current role he was Head of Market Risk for

the BNZ, after a secondment to Tokyo with the NAB. Ian changed from

banking to the corporate sector 10 years ago. While in the UK he es-

tablished a market risk treasury consulting team for SunGard, a global

financial software firm. On returning to New Zealand he joined Fonterra

as a Manager in Group Treasury. Ian has a Bachelor of Business Studies

degree from Massey University and is a registered CPA.

SARAH CARSTENS, General Counsel and Company Secretary, joined

Fisher & Paykel Finance in December 2009. Prior to that, Sarah was a

lawyer with ANZ National Bank Ltd, responsible for legal affairs for its

subsidiary company, UDC Finance Ltd. Sarah has also acquired legal

experience in her previous employment with law firms Buddle Findlay

and Minter Ellison. Prior to that Sarah was with Linklaters London, in their

banking and restructuring team. Sarah has an honours degree in Law

and Bachelor of Science from Canterbury University. She is admitted to

practise as a Barrister and Solicitor of the High Court of New Zealand.

Sarah is currently on parental leave from her General Counsel role, but

remains as Company Secretary.

ADRIAN LICHKUS, Chief Risk Officer, joined Fisher & Paykel Finance in

January 2006 as Chief Credit Risk Officer. Prior to that, Adrian was head

of the Internal Audit function of the Auckland District Health Board. He

has Chaired the Auckland Branch of the Institute of Internal Auditors of

New Zealand and represented Auckland on the National Board of the

Institute. Adrian has over 15 years experience in credit risk manage-

ment decision roles, both consumer and commercial, in the banking

sector. Adrian was with Deloitte for 3 years, completing his professional

development training. Adrian has a Bachelor of Commerce from Natal

University and a Bachelor of Accounting Science (Honours) from the

University of South Africa.

From top Left: Alastair Macfarlane, Ian McGregor, Sarah Carstens, Adrian Lichkus, Sarah O'Connor,

Gregory Shepherd, Colin Smith.


SARAH O’CONNOR, Chief Human Resources Officer, was appointed to

her current role in 2010. Sarah’s experience includes Customer Service

Manager for Retail Financial Services before she moved to Fisher & Paykel

Finance, following the purchase of the Farmers Finance business. She

has been involved in process improvement, procurement and human

resources. Sarah has also held operational management roles with the

ANZ Bank, culminating in a role managing the Mortgage Operations

Team at their Lending Support Centre.

GREGORY SHEPHERD, Chief Operating Officer, was appointed to his

current role in May 2006 and prior to that was Group General Manager

Lending & Business Development. Gregory has extensive financial ser-

vices experience with Westpac Banking Corporation and Bank of New

Zealand and Securities Trading (debt and equity instruments). He has held

a number of senior management roles in regional banking, marketing,

operations and business development. Gregory was a member of strategic

leadership and project management programmes for Westpac and the

Bank of New Zealand on cross Tasman initiatives. He has a Bachelor of

Commerce from Otago University and a NZ Stock Exchange Diploma.

COLIN SMITH, Chief Information Officer, joined Fisher & Paykel Finance

in 2010. Prior to that, Colin was Chief Information Officer of Manukau

City Council. His other experience includes responsibility for group and

business management functions at 3i plc. This included the areas of

business intelligence, financial systems, operations, customer service and

information technology. Colin has a Bachelor of Science (Hons) degree

from the University of East Anglia and a Masters of Business Administra-

tion degree from Aston University.

P53EXECUTIVES / FINANCE

DIRECTORS’ REPORT

Your Directors are pleased to submit to shareholders

their Annual Report, incorporating the financial state-

ments and the auditors’ report, for the year ended

31 March 2012.

Result

Profit for the year was $18.4 million after tax, com-

pared to $33.5 million after tax for the previous year.

Earnings were 2.5 cents per share (2011 earnings

of 4.6 cents per share).

Shareholders’ Equity

Shareholders’ equity as at 31 March 2012 totalled

$605.2 million (2011 $614.9 million).

The Group had 724,235,162 authorised and issued

shares as at 31 March 2012.

During the year no shares were issued.

Dividends

The Directors have not declared a dividend for the

year ended 31 March 2012 (2011 no dividend declared)

due to continued uncertain market conditions. The

Directors are conscious of the importance of dividends

to shareholders and will resume dividends as soon as

financial and operating conditions permit.

Directors

In accordance with the Company’s Constitution, Dr

Keith Turner and Ms Tan Lixia will retire by rotation

and being eligible offer themselves for re-election. Mr

Philip Lough and Mrs Lynley Marshall, being eligible,

offer themselves for election.

As previously announced, Mr Gary Paykel intends

to retire at the Annual Shareholders Meeting set for

23 August 2012.

Disclosure of Interests by Directors

Directors’ certificates to cover entries in the Inter-

ests Register in respect of remuneration, insurance,

indemnities, dealing in the Company’s shares and

other interests have been disclosed as required by

the Companies Act 1993.

NZX Waivers

NZSX Listing Rule 9.2.1

In 2009, the Company conducted an equity capital

raising, a consequence of which was that Haier became

a 20% shareholder in the Company and is accordingly

a Related Party of the Company. At the time of the

equity raising, it was also announced that Haier and

the Company had entered into a Cooperation Agree-

ment to work together on a number of initiatives for

the benefit of both companies. It is possible that, over

time, aspects of the specific agreements entered into

to give effect to the terms of the Cooperation Agree-

ment will exceed the thresholds in NZSX Listing Rule

9.2.1. The rule provides that entry by an Issuer into

a Material Transaction with a Related Party must be

approved by an Ordinary Resolution of the Issuer.

On 22 March 2010, NZX granted the Company

a waiver, subject to certain conditions, from the re-

quirement in NZSX Listing Rule 9.2.1 that would have

required the Company to seek shareholder approval

of the agreements entered into to give effect to the

terms of the Cooperation Agreement.

On 30 November 2011, NZX granted the Com-

pany a waiver from NZSX Listing Rule 9.2.1 such that

the Company need not obtain shareholder approval for

the sale of parts under a Motor Supply Agreement that

the Company entered into with Haier on 21 March 2011.

A condition of each of these waivers was that

the Company includes details in its annual report of

the values of products sold to, and purchased from,

the Haier group under the various agreements in the

relevant financial year. In relation to the financial year

ended 31 March 2012 that information is set out in Note

39 to the Financial Statements.

Remuneration of Directors

The remuneration of the Directors for the year ended

31 March 2012 has been disclosed on page 59 of this

Annual Report.


Outlook

An update on trading and market conditions will be

provided at the Annual Shareholders Meeting set for

23 August 2012.

The Board of Directors of the Company authorised

the financial statements for issue on 24 May 2012.

For and on behalf of the Board

K S Turner S B Broadhurst

Chairman Managing Director &

Chief Executive Officer

24 May 2012

CORPORATE GOVERNANCE

The Board and management of the Company are

committed to ensuring that the Company adheres to

best practice governance principles and maintains the

highest ethical standards. The Board has agreed to

regularly review and assess the Company’s governance

structures to ensure that they are consistent, both in

form and substance, with best practice.

The Company operates under a dual listed com-

pany structure, being listed in both New Zealand and

Australia. Corporate governance requirements apply

in both jurisdictions. These requirements include the

ASX Corporate Governance Council’s Principles and

Recommendations (2nd edition), the New Zealand

Securities Commission’s (now the Financial Markets

Authority) Governance Principles and Guidelines con-

tained in its report entitled “Corporate Governance in

New Zealand - Principles and Guidelines” (together,

the Principles) and the NZX Corporate Governance

Best Practice Code (NZX Code).

The Board has adopted a Governance Manual

for the Company, consisting of various charters and

policies which reflect the Principles.

The Board considers that the Company’s cor-

porate governance practices and procedures are not

materially different to the Principles.

The Company meets all of the best practice

requirements of the Principles and the NZX Code as

at the date of this Annual Report.

Code of Conduct (Ethics)

The Company expects its Directors and employees to

maintain high ethical standards. A Code of Conduct

for the Company and a separate Directors’ Code of

Conduct apply.

Both Codes address, amongst other things:

_ conflicts of interest

_ receipt of gifts

_ corporate opportunities

_ confidentiality

_ expected behaviours

_ delegated authority

_ reporting issues regarding breaches of the Code

P55DIRECTORS' REPORT AND CORPORATE GOVERNANCE

of Conduct, legal obligations or other policies

of the Company

_ obligations for a Director to act in good faith

and in what the Director believes to be the best

interests of the Company

The full content of the Company’s Codes of Conduct

can be found on the Company’s website (www.fish-

erpaykel.co.nz). At the date of this Annual Report, no

serious instances of unethical behaviour have been

reported under the Company’s Code of Conduct.

Responsibilities of the Board and Management

The business and affairs of the Company are managed

under the direction of the Board of Directors. At a

general level, the Board is elected by shareholders to:

_ establish the Company’s objectives

_ develop, in consultation with the Chief Executive

Officer, strategies for achieving the Company’s

objectives

_ identify and manage risks

_ determine and approve the overall policy frame-

work within which the business of the Company

is conducted

_ monitor management’s performance with respect

to these matters

The Board Charter regulates internal board procedure

and describes the Board’s specific role and responsi-

bilities. A copy of the Board Charter is provided on

the Company’s website.

The Board delegates management of the

day-to-day affairs of the Company to the Executive

team under the leadership of the Managing Director &

Chief Executive Officer to deliver the strategic direc-

tion and goals determined by the Board.

The Board

Board Composition

At present there are eight Directors on the Board, of

which seven are non-executive Directors.

The Executive Director is Mr Stuart Broadhurst,

who is the Managing Director & Chief Executive Of-

ficer of the Company. Mr Broadhurst was appointed

to this role on 11 December 2009.

Mr Liang Haishan was appointed to the Board

on 14 April 2011.

Mr Simon Botherway resigned on 30 April 2011.

Mr John Gilks retired on 25 August 2011 but

continues as Chairman of the Finance business board.

Mr Philip Lough and Mrs Lynley Marshall were

appointed to the Board on 12 September 2011.

Mr Peter Lucas retired on 31 March 2012.

A summary of the tenure, skills and experience

of each Director is provided at pages 48 to 49 of this

Annual Report.

Independence of Directors

The factors the Board considers to assess the indepen-

dence of its Directors are set out in its Board Charter.

No materiality thresholds have been adopted, as the

Board’s approach is to determine independence on

a case by case basis.

After consideration of these factors and criteria,

the Board is of the view that:

_ Mr Liang Haishan and Ms Tan Lixia are not

independent directors as they are associated

directly with Haier (Singapore) Management

Holding Co. Pte Ltd, a substantial shareholder of

the Company. No other Director is a substantial

shareholder of the Company or an officer of, or

otherwise associated directly with, a substantial

shareholder of the Company.

_ There is one Director who within the last three

years has been employed in an executive capacity

by the Company or another Group member, or

been a Director after ceasing to hold any such

employment, namely Mr Stuart Broadhurst.

_ No Director is a material supplier or customer

of the Company or other Group member, or an

officer of or otherwise associated directly or

indirectly with a material supplier or customer,

other than Mr Liang Haishan and Ms Tan Lixia.

Mr Liang and Ms Tan are executive officers of

Haier which is both a supplier to and customer

of the Company.


_ No Director other than the Haier representative

Directors has a material contractual relationship

with the Company or another Group member

other than as a Director of the Company.

_ No Director has served on the Board for a period

which could, or could reasonably be perceived

to, materially interfere with the Director’s abil-

ity to act in the best interests of the Company.

_ All Directors are free from any interest or busi-

ness or other relationship, which could or could

reasonably be perceived to, materially interfere

with the Director’s ability to act in the best in-

terests of the Company.

_ Based on the above assessments, the Company

considers that five of the current eight Direc-

tors are independent directors, namely Dr Keith

Turner, Mrs Lynley Marshall and Messrs Philip

Lough, Gary Paykel and Bill Roest.

As Mr Stuart Broadhurst held an executive position

during the financial year he is not, in the Board’s

opinion, independent.

The Company notes it has a minimum of three

independent directors as required by the NZSX List-

ing Rules.

Following his retirement from the Board on 25

August 2011, Mr John Gilks continued as Chairman of

the Finance business board. Mr Gilks is a director and

shareholder of a company which provides debt collec-

tion services to the Finance business in the ordinary

course of business. Mr Gilks does not take part in the

selection of debt collection service providers on behalf

of the Finance business or the day to day running of

the debt collection company.

Board Statement

The Board is committed to ensuring that the mix of

skills and diversity at Board level reflects the nature

and structure of the business and its customer base

in order to maximise the future success of the Com-

pany. The skills that are considered necessary for the

Board include retail markets knowledge, branding and

marketing, international business, financial, strategic

acumen, leadership, communication capabilities, tech-

nology, finance industry and manufacturing industry

experience. In respect of diversity, the Board aims to

have members who have a broad range of experience,

who will bring and express a diversity of thought, can

operate as a team and see a wide range of oppor-

tunities for the Company. The Board recognises that

diversity in a variety of forms, including in particular

gender diversity, contributes to improved Company

performance. Details regarding each Director can be

found at pages 48 to 49.

Having reviewed the position, the Company con-

siders that the Board is composed of an appropriate

mix of skills, expertise and independence.

Committees

Specific responsibilities are delegated to the Audit &

Risk Management Committee, the Human Resources

and Remuneration Committee and the Nomination

Committee. These Board Committees support the

Board by working with management on relevant is-

sues at a suitably detailed level and then reporting

back to the Board. Each of these Committees has

a charter setting out the committee’s objectives,

procedures, composition and responsibilities. These

charters can be viewed on the Company’s website,

www.fisherpaykel.co.nz.

Audit & Risk Management Committee

Under the Audit & Risk Management Committee

Charter, the Committee Chair must be an indepen-

dent Director and not the Chairman of the Board,

the Committee must have at least three members,

the Committee must consist only of non-executive

directors and a majority of the Committee’s members

must be independent. The members of the Committee

are presently Mr Bill Roest, Mrs Lynley Marshall and

Ms Tan Lixia. Mr Roest succeeded Mr John Gilks as

Chairman of the Committee on 27 May 2011.

The Audit & Risk Management Committee

Charter is available on the Company’s website, www.

fisherpaykel.co.nz. The qualifications and expertise of

each member of the Committee is outlined on pages


48 to 49 of the Annual Report.

The Committee’s role is to assist the Board in

its oversight of all matters relating to the financial

accounting and reporting of the Company. The Com-

mittee also monitors risk management, the processes

which are undertaken by management and both

external and internal auditors. External auditors are

monitored in accordance with the External Auditors

Policy, a summary of which appears on the Company’s

website, www.fisherpaykel.co.nz.

Human Resources and Remuneration Committee

The Human Resources and Remuneration Commit-

tee’s role is to assist the Board in establishing co-

herent human resources and remuneration policies

and practices. The current members of the Human

Resources and Remuneration Committee are Messrs

Philip Lough and Gary Paykel and Mrs Lynley Marshall.

The composition of the Committee satisfies the re-

quirement of the Committee Charter that a majority

of the members be independent.

The Human Resources and Remuneration Com-

mittee Charter is available on the Company’s website,

www.fisherpaykel.co.nz. The qualifications and exper-

tise of each member of the Committee is outlined on

pages 48 to 49 of the Annual Report.

Nomination Committee

The procedure for the appointment and removal of

Directors is ultimately governed by the Company’s

Constitution. A Director is appointed by ordinary

resolution of the shareholders, although the Board

may fill a casual vacancy.

The Board has delegated to the Nomination

Committee the responsibility for recommending candi-

dates to be nominated as a Director on the Board and

candidates for the committees. When recommending

candidates to act as a Director, the Committee takes

into account such factors as it deems appropriate,

including the experience and qualifications of the

candidate.

Currently, all of the Directors of the Board serve

on the Nomination Committee. The composition

of the Committee satisfies the requirement of the

Committee Charter that a majority of the members

be independent.

The Nomination Committee Charter is available

on the Company’s website, www.fisherpaykel.co.nz.

The qualifications and expertise of each member of

the Committee is outlined on pages 48 to 49 of the

Annual Report.

Board Processes

The Board held 12 monthly meetings during the

year ended 31 March 2012. The table on the follow-

ing page shows attendance at the Board (including

Board meetings additional to the scheduled monthly

meetings), Finance business board and Committee

meetings. Board meetings are normally held monthly,

with the exception of January and June. There is a

formal procedure agreed by the Board to allow Direc-

tors to take independent professional advice at the

expense of the Company.

There is a separate board for the Finance busi-

ness. This is chaired by Mr John Gilks. The other

directors are Messrs Stuart Broadhurst, Alastair Mac-

farlane, Gary Paykel, Carlos da Silva and Hugh Rennie

QC. Messrs da Silva and Rennie QC are autonomous

directors as required by the Reserve Bank of New

Zealand Act 1989 and the Deposit Takers (Fisher &

Paykel Finance Limited) Exemption Notice 2010. The

Finance business board normally meets monthly, with

the exception of January and June.

Directors’ Remuneration

Shareholders fix the total remuneration available to

non-executive Directors. Shareholders approved the

current annual fee pool limit at the annual meeting

in August 2010 as $1,250,000.

The Company recognises the key role personnel

play in the pursuit of its strategic objectives. The Hu-

man Resources and Remuneration Committee reviews

Director remuneration and is charged with establishing

remuneration policies and guidelines to ensure links

exist between corporate performance and remunera-

tion paid to Directors. The policies are also designed


to enable the Company to attract, retain and motivate

Directors who will create value for shareholders.

The Company takes advice from independent

consultants to benchmark Directors’ fees with fees

paid to directors of comparable companies in New

Zealand and Australia.

The Company’s policy is to pay its non-executive

Directors’ fees in cash. However, the Company encour-

ages the Directors to hold shares in the Company.

Non-executive Directors received the following

Directors’ fees (including a retirement allowance where

applicable) from the Company in the year ended 31

March 2012:

Simon Botherway $9,350 (retired 30 April 2011)

Philip Carmichael $3,185* (retired 14 April 2011)

John Gilks $65,120 (retired 25 August 2011)

Liang Haishan $86,015* (appointed 14 April 2011)

Philip Lough $53,618 (appointed 12 September

2011)

Peter Lucas $87,200 (retired 31 March 2012)

Lynley Marshall $57,480 (appointed 12 September

2011)

Gary Paykel $117,200

Willem (Bill) Roest $110,526

Tan Lixia $104,200*

Keith Turner $178,200

* Paid to Haier (Singapore) Management Holding Co. Pte Ltd

2012 BOARD AND OTHER MEETING ATTENDANCE

MONTHLY BOARD MEETINGS1

OTHER BOARD MEETINGS

BOARD COMMITTEE MEETINGS

ARMC2 HR & REMCOMMITTEE

Eligible Attended Eligible Attended Eligible Attended Eligible Attended Eligible Attended

Directors

Keith Turner 12 12 6 6 8 8 7 7

John Gilks [retired 25.08.11] 5 5 4 4 3 3 3 3

Simon Botherway [retired 30.04.11] 1 1 1 1 1 1

Stuart Broadhurst 12 12 6 6 9 9 8 8

Liang Haishan 12 0 6 0

Philip Lough [appointed 12.09.11] 7 7 1 1 4 4

Peter Lucas 12 12 6 6 7 7

Lynley Marshall [appointed 12.09.11] 7 7 1 1 5 5

Gary Paykel 12 11 6 6 1 1 7 6

Bill Roest 12 12 6 4 6 6 8 8

Tan Lixia 12 0 6 0 8 0

Alternate Directors

Hou Xinlai (alternate for Liang Haishan) 12 11 6 2

Tommy Leung (alternate for Tan Lixia) 12 12 6 3 8 8

FINANCE MTHLY BOARD MTGS

FINANCE OTHER BOARD MTGS

BOARD COMMITTEE MTGS

Eligible Attended Eligible Attended Eligible Attended

Finance business board

Stuart Broadhurst 10 10 13 12

Carlos da Silva 10 10 13 12 6 5

John Gilks 10 9 13 12 6 6

Alastair Macfarlane 10 10 13 13 6 5

Gary Paykel 10 8 13 10

Hugh Rennie 10 8 13 10

1 As all Directors of the Board serve on the Nomination Committee, Committee meetings were held as part of the Board Meetings2 Audit & Risk Management Committee


Mr Stuart Broadhurst does not receive remunera-

tion as a Director of the Company or any subsidiary

company. Mr Broadhurst acting in his capacity as an

employee of the Company and subsidiaries received

total remuneration, inclusive of the value of other

benefits, in respect of the year ended 31 March 2012

of $977,244 (2011 $770,659).

As directors of the Finance business board,

Messrs John Gilks and Gary Paykel received $18,098

and $30,000 respectively (included in the remunera-

tion figures quoted above) in the year ended 31 March

2012. Mr Gilks received a further $26,902 (not included

in the remuneration figures quoted previously) for his

continued services as Chairman of the Finance busi-

ness board following his retirement from the Board,

in the year ended 31 March 2012. Messrs Carlos da

Silva and Hugh Rennie QC received directors’ fees

of $53,268 each for serving on the Finance business

board, in the year ended 31 March 2012. Mr Alastair

Macfarlane did not receive remuneration as a director

of the Finance business board.

Except as stated above, no employee of the

Company or its subsidiaries receives or retains any

remuneration or other benefits in their capacity as

a Director.

Under the Company’s constitution, the Board is

permitted under the NZSX Listing Rules to authorise

the payment of retirement allowances to any Direc-

tor who was in office before 1 May 2004 and has

continued to hold office since that date, where such

payments do not exceed the total remuneration of a

Director in any three years. The Board has resolved,

however, that it will not pay out any future retire-

ment benefits for Directors appointed prior to 1 May

2004, other than at the Board’s discretion, an amount

equivalent to one year’s fees calculated according to

the per annum average of the fees paid to that Direc-

tor in their last three years of office. Subject to Board

approval, any such retirement benefit will be payable

following each Director’s retirement.

Mr Ralph Waters retired from the Board on 28

February 2011 and during the year ended 31 March

2012 the Board approved payment of a retirement

allowance of $120,928 based on the per annum aver-

age of the fees received by Mr Waters in the previous

three years. Except for Mr Waters, no other Director

was paid a retirement benefit by the Company in the

year ended 31 March 2012.

The Company has provisioned for Directors’

retirement allowances, based on the per annum aver-

age of the fees received by the qualifying Directors

in the previous three years. As at 31 March 2012, the

provisioned amount was $384,402 ($528,795 as at

31 March 2011).

Senior Management Remuneration

The Human Resources and Remuneration Committee

is responsible for reviewing the remuneration of the

Company’s senior management in consultation with

the Managing Director & Chief Executive Officer of the

Company. Similar policies and principles that guide

remuneration of Directors apply to the remuneration

of the Company’s senior management, although

remuneration packages consist of a mixture of cash

and other benefits, including Company share based

payments. The expected outcomes of the Company’s

remuneration policies for senior management are

to balance motivating and retaining key employees,

attracting quality management and providing perfor-

mance incentives that allow executives to share the

rewards of the success of the Company. In addition,

an Executive Long Term Incentive Plan was recently

implemented to secure the retention of key execu-

tives and is focused on achieving the objective of

long term shareholder wealth.

ASX recommends that listed companies that

are not required to comply with section 300A of the

Corporations Act (which requires disclosure of the top

five (5) senior management remuneration packages

paid by the Company) should consider the range of

means by which they may achieve the same ends. As

these figures are distorted by the Company having

a number of senior managers who reside outside of

New Zealand, where remuneration market levels differ

widely, senior management remuneration is included

in the wider disclosure made by the Company on


of this Annual Report, where the Company

has included in relevant bandings the number of em-

ployees, whose remuneration, inclusive of the value of

other benefits received by such employees, exceeds

$100,000.

Performance Evaluation and Training

The Board has a range of policies in place relating to

the performance evaluation of the Board, the Board’s

committees, individual Directors and Executives. Dur-

ing the year ended 31 March 2012, the Chairman led a

performance evaluation of the Board, its committees

and Directors in accordance with its policies. The

Chief Executive Officer led a performance evaluation

of the senior Executives in accordance with Company

policies. A summary of the Company’s Performance

Evaluation Policy is available on the Company’s web-

site, www.fisherpaykel.co.nz.

The Board Charter requires the Board to under-

take an annual performance evaluation of itself that:

_ compares the performance of the Board with

the requirements of its Charter

_ reviews the performance of the Board’s

committees

_ sets forth the goals and objectives of the busi-

ness for the upcoming year

_ effects any improvements to the Board Charter

deemed necessary or appropriate

The Company believes that a mix of skills and ex-

perience is important to ensure that the Board per-

forms most effectively. The Nomination Committee

has responsibility for the Board’s appointment and

training processes. The selection criteria and training

policy for directors can be found in the Nomination

Committee Charter.

Risk Management

The Company’s Risk Management Policy Summary

is available on the Company’s website, www.fisher-

paykel.co.nz.

The Company has a number of risk management

policies for the oversight of financial and non-financial

material business risks, as well as related internal

compliance systems that are designed to:

_ optimise the return to and protect the interests

of stakeholders

_ safeguard the Company’s assets and maintain

its reputation

_ improve the Company’s operating performance

_ fulfil the Company’s strategic objectives

The Board, through management, ultimately has

responsibility for internal control and compliance.

Twice yearly, management prepares a detailed re-

view of material business risks for the Audit & Risk

Management Committee. The Committee reports to

the Board on the effectiveness of the Company’s

management of its material business risks. The Board

has received the report of the effectiveness of the

Company’s management of material business risks

for the year ended 31 March 2012.

Whilst s295A of the Corporations Act 2001 (Cth)

does not apply to the Company, the Board monitors

financial reporting risks in relation to the financial

statements and ensures they are founded on an effec-

tive system of risk management and internal control.

Market Disclosure and Shareholder Communication

The Company is dedicated to upholding a high stan-

dard of disclosure, ensuring that all investors have

equal and timely access to material information and

that information is presented in a clear and balanced

way. A summary of the Company’s Market Disclosure

Policy is available on the Company’s website, www.

fisherpaykel.co.nz.

The Company communicates with its sharehold-

ers publicly by posting information on the Company’s

website, www.fisherpaykel.co.nz, by releasing on the

NZX and ASX as well as providing an annual review

and interim review to all shareholders.

Diversity

The Company has a Group wide Diversity Policy

which reflects the Company’s commitment to diversity

and provides a structure for, and complements, the


MEASURABLE OBJECTIVES

FOCUS OBJECTIVE PROGRESS TO 31 MARCH 2012

1 Board Ensure that the director selection process includes a suitable pool of candidates with the aim of achieving diversity on the Board.

2nd female director appointed September 2011.

Female representation increased from 11% to 22% in year ended 31 March 2012.

2 Organisational Analysis Conduct an analysis of the current state of diversity (including gender diversity) in the global organisation that captures:

_ Representation by organisational strata _ Representation by occupational group _ Retention rates _ Attraction and recruitment rates

A comprehensive report for the year ended 31 March 2012 has been prepared. The current state of the Company’s gender and age diversity is now known.

Establishment of data capture for other diversity dimensions (e.g. ethnicity) is a priority.

3 Common View Build knowledge and alignment among the leadership team about the benefits of diversity to the organisation through self-assessment, education and debate.

Three Executive members are on the Steering Group.

The programme objectives and format for achieving a common view have been agreed. Relevant background information has been gathered and Executive sessions scheduled.

4 Systems and Structures Review (and where necessary modify) core recruitment and promotion systems to ensure that processes are designed to support the achievement of diversity at all levels and across all areas of the organisation.

The initial focus towards achieving this objective has been on:

_ Understanding the barriers to diverse representation in leadership

_ Reviewing the Company’s recruitment process and prac-tice globally

_ Establishing a dedicated project team _ Focusing on systemic factors that need to be addressed to

ensure a wider pool of skills and capability are identified

5 Initiatives /

programmes

Establish a Steering Group to assist the Executive with overseeing the development and implementation, and ongoing monitoring of the Company’s diversity strategy and progress towards achievement of objectives.

Achieved. Development of this Steering Group's strategy, actions and milestones are being developed.

6 Reporting Establish a process for measuring and reporting on progress towards achieving diversity.

Six monthly reporting to Executive initiated. The reporting focus for the year ending 31 March 2013 will be on Gender, including in particular:

_ Gender in each Business Unit and Country _ Gender in each Management Tier _ Leadership appointments (attraction and selection rates)

Other dimensions will be added once gaps in the Company’s data are closed.

Company’s diversity related initiatives and policies.

A copy of the Company’s Diversity Policy is available

on the Company’s website www.fisherpaykel.co.nz.

In accordance with the Company’s Diversity

Policy, the Board has established measureable objec-

tives for achieving diversity, including gender diversity.

The table below details the measureable objectives for

achieving diversity set by the Board and the progress

made towards achieving these during the year ended

31 March 2012.


The table above details the proportion of women in

the whole organisation, on the Board and in senior

Executive positions for the entire Fisher & Paykel

Appliances Group, the Appliances business and Fi-

nance business.

Policies

Other than policies referred to earlier in this Corpo-

rate Governance section, the Company has in place

a number of policies related to respecting the rights

of shareholders and other stakeholders, which aim to:

_ ensure the Company communicates effectively

with them

_ provides appropriate access to the Board, man-

agement and external auditors

_ encourage effective shareholder participation

at shareholder meetings

_ prescribe the circumstances where directors,

officers and employees can trade in Company

securities

All policies relating to corporate governance are

available either in full or in summary form on the

Company’s website, www.fisherpaykel.co.nz.

PROPORTION OF FEMALE EMPLOYEES

Fisher & Paykel Appliances Finance

Appliances Group business business

Whole Organisation 35% 33% 71%

Senior Executive Positions 18%* 10% 29%

Fisher & Paykel Fisher & Paykel Finance business

Appliances Holdings Appliances Limited board

Limited

Women on the Board 22%* 0% 0%

As at 31 March 2012*Managing Director included in both Board and Executive numbers


FISHER & PAYKEL APPLIANCES HOLDINGS LIMITED AND SUBSIDIARIES

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2012


68 to 163

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

1

Independent Auditors’ Report to the shareholders of Fisher & Paykel Appliances Holdings Limited

Report on the Financial Statements We have audited the financial statements of Fisher & Paykel Appliances Holdings Limited on pages which comprise the statements of financial position as at 31 March 2012, the income statements, statements of comprehensive income, statements of changes in equity and cash flow statements for the year then ended, and the notes to the financial statements that include a summary of significant accounting policies and other explanatory information for both the Company and the Group. The Group comprises the Company and the entities it controlled at 31 March 2012 or from time to time during the financial year.

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.

Auditors’ 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 auditors’ 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 and Group'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 and Group'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 Fisher & Paykel Appliances Holdings Limited or any of its subsidiaries other than in our capacities as providers of providers of audit, tax compliance and other assurance services. These services have not impaired our independence as auditors of the Company and Group.

P67

2

Independent Auditors’ Report Fisher & Paykel Appliances Holdings Limited

Opinion In our opinion, the financial statements on pages 68 to 163:

(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 and Group as at 31 March 2012, and their 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 2012:

(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 auditors' 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 24 May 2012

AUDITORS' REPORT

For and on behalf of the Board

Date: 24 May 2012

K S Turner S B Broadhurst

Chairman Managing Director & Chief Executive Officer

INCOME STATEMENTFOR THE YEAR ENDED 31 MARCH 2012

CONSOLIDATED PARENT


2012 2011 2012 2011

Notes $’000 $’000 $’000 $’000

Revenue

Operating revenue 7 1,031,168 1,110,342 - -

Other income

Profit on sale of land & buildings - 6,508 - -

Other income 6,790 4,093 - 1

Total other income 7 6,790 10,601 - 1

Total revenue and other income 1,037,958 1,120,943 - 1

Items affecting comparability:

Onerous contracts 8 (2,694) (882) - -

Fair valuation of non-current assets held for sale 8 (1,241) (500) - -

Litigation costs 8 (6,774) - - -

(10,709) (1,382) - -

Other operating expenses (988,862) (1,056,038) 136 111

Total operating expenses 8 (999,571) (1,057,420) 136 111

Operating profit 38,387 63,523 136 112

Finance costs 8 (10,857) (15,403) - -

Profit before income tax 27,530 48,120 136 112

Income tax expense 9 (9,099) (14,575) (82) 35

Profit for the year 18,431 33,545 54 147

Profit per share attributable to the ordinary equity holders of the Company during the year:

Basic and diluted profit per share 27 2.5 4.6

The above Income Statement should be read in conjunction with the accompanying Notes.


STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 MARCH 2012

CONSOLIDATED PARENT


2012 2011 2012 2011

Notes $’000 $’000 $’000 $’000

Profit for the year 18,431 33,545 54 147

Other comprehensive (loss) / income

Cash flow hedges 36 17,073 (15,041) - -

Exchange differences on translation of foreign operations 28 (40,491) (10,352) - -

Income tax relating to components of other comprehensive income 36 (4,780) 5,644 - -

Other comprehensive (loss) / income for the year net of tax (28,198) (19,749) - -

Total comprehensive (loss) / income for the year (9,767) 13,796 54 147

The above Statement of Comprehensive Income should be read in conjunction with the accompanying Notes.

FINANCIAL STATEMENTS P69

STATEMENT OF FINANCIAL POSITIONAS AT 31 MARCH 2012

CONSOLIDATED APPLIANCES BUSINESS*

FINANCE BUSINESS PARENT

31 March 31 March 31 March 31 March 31 March 31 March 31 March 31 March

2012 2011 2012 2011 2012 2011 2012 2011

Notes $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Assets

Current assets

Cash & cash equivalents 10 109,347 113,529 22,273 21,375 87,074 92,154 1 1

Trade receivables & other current assets 11 125,652 150,628 116,354 140,547 9,298 10,081 21 27

Finance business receivables 12 359,662 369,876 - - 359,662 369,876 - -

Inventories 13 151,772 195,108 151,772 195,108 - - - -

Non-current assets classified as held for sale 14 13,843 15,021 13,843 15,021 - - - -

Derivative financial instruments 15 2,365 2,654 2,361 2,654 4 - - -

Tax receivables 2,023 1,162 2,023 1,162 - - 4 -

Intergroup advances 39 - - - - - - 637,620 637,585

Total current assets 764,664 847,978 308,626 375,867 456,038 472,111 637,646 637,613

Non-current assets

Property, plant & equipment 16 200,521 202,155 199,448 200,909 1,073 1,246 - -

Investment in subsidiaries 33 100,263 100,263

Investment in Finance business 207,362 205,383

Intangible assets 17 196,709 210,948 83,252 90,649 113,457 120,299 - -

Finance business receivables 12 234,870 231,719 - - 234,870 231,719 - -

Derivative financial instruments 15 151 4 103 3 48 1 - -

Tax receivables - 7,015 - 7,015 - - 6

Deferred taxation 18 54,783 55,857 71,275 75,385 - - 148 228

Other non-current assets 1,988 2,738 1,432 1,694 556 1,044 - -

Total non-current assets 689,022 710,436 562,872 581,038 350,004 354,309 100,411 100,497

Total assets 1,453,686 1,558,414 871,498 956,905 806,042 826,420 738,057 738,110

Liabilities

Current liabilities

Current borrowings 19 3,205 - 3,205 - - - - -

Finance business borrowings 20 319,865 328,917 - - 319,865 328,917 - -

Trade creditors 21 96,560 99,141 96,560 99,141 - - - -

Current finance leases - 17 - 17 - - - -

Provisions 22 20,485 18,341 20,477 18,333 8 8 - -

Derivative financial instruments 15 2,881 21,000 2,213 20,397 668 603 - -

Tax liabilities 1,515 6,869 1,515 6,869 2,138 3,857 - -

Other current liabilities 23 62,359 73,534 34,457 49,600 27,902 23,934 774 820

Total current liabilities 506,870 547,819 158,427 194,357 350,581 357,319 774 820

Non-current liabilities

Non-current borrowings 19 83,605 121,557 83,605 121,557 - - - -

Finance business borrowings 20 231,101 244,998 - - 231,101 244,998 - -

Non-current finance leases - - - - - - - -

Provisions 22 15,575 14,195 14,979 13,696 596 499 - -

Derivative financial instruments 15 2,782 5,701 734 3,151 2,048 2,550 - -

Deferred taxation 24 5,610 6,871 5,610 6,871 14,354 15,671 - -

Other non-current liabilities 25 2,962 2,325 2,962 2,325 - - - 61

Total non-current liabilities 341,635 395,647 107,890 147,600 248,099 263,718 - 61

Total liabilities 848,505 943,466 266,317 341,957 598,680 621,037 774 881

Shareholders’ equity

Contributed equity 26 841,869 841,869 841,869 841,869 842,381 842,381

Accumulated losses 28 (147,992) (166,423) (147,992) (166,423) (107,068) (107,122)

Reserves 28 (88,696) (60,498) (88,696) (60,498) 1,970 1,970

Investment in Finance business 207,362 205,383

Total shareholders’ equity 605,181 614,948 605,181 614,948 207,362 205,383 737,283 737,229

Total liabilities and shareholders’ equity 1,453,686 1,558,414 871,498 956,905 806,042 826,420 738,057 738,110

*For disclosure purposes, the Appliances business includes both the Parent entity and AF Investments LimitedThe above Statement of Financial Position should be read in conjunction with the accompanying Notes.


STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 MARCH 2012

CONSOLIDATED ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

Share Accumulated Translation Foreign Interest Treasury Share- Total

capital losses of foreign exchange rate stock based equity

operations hedges hedges payments

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Balance at 1 April 2011 841,869 (166,423) (50,370) (11,350) (1,260) 512 1,970 614,948

Changes in equity

Other comprehensive income for the year - - (40,491) 12,363 (70) - - (28,198)

Profit for the period - 18,431 - - - - - 18,431

Balance at 31 March 2012 841,869 (147,992) (90,861) 1,013 (1,330) 512 1,970 605,181

Balance at 1 April 2010 841,869 (199,968) (40,018) (3,213) - 512 1,970 601,152

Changes in equity

Other comprehensive income for the year - - (10,352) (8,137) (1,260) - - (19,749)

Profit for the year - 33,545 - - - - - 33,545

Balance at 31 March 2011 841,869 (166,423) (50,370) (11,350) (1,260) 512 1,970 614,948

PARENT ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

Share Accumulated Translation Foreign Interest Treasury Share- Total

capital losses of foreign exchange rate stock based equity

operations hedges payments

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Balance at 1 April 2011 842,381 (107,122) - - - - 1,970 737,229

Changes in equity

Other comprehensive income for the year - - - - - - - -

Profit for the period - 54 - - - - - 54

Balance at 31 March 2012 842,381 (107,068) - - - - 1,970 737,283

Balance at 1 April 2010 842,381 (107,269) 1,970 737,082

Changes in equity

Other comprehensive income for the year - - - - - - - -

Profit for the year - 147 - - - - - 147

Balance at 31 March 2011 842,381 (107,122) - - - - 1,970 737,229

The above Statement of Changes in Equity should be read in conjunction with the accompanying Notes.

FINANCIAL STATEMENTS P71

CASH FLOW STATEMENTFOR THE YEAR ENDED 31 MARCH 2012

CONSOLIDATED PARENT


2012 2011 2012 2011

Notes $’000 $’000 $’000 $’000

Cash flows from operating activities

Receipts from customers 912,704 985,208 - -

Financing interest and fee receipts 140,941 144,808 - -

Interest received 780 504 - 1

Payments to suppliers and employees (872,796) (958,656) (1,292) (1,785)

Income taxes paid (12,824) (1,896) - -

Interest paid (52,023) (57,066) - -

116,782 112,902 (1,292) (1,784)

Principal on loans repaid by Finance business customers 571,897 579,958 - -

New loans to Finance business customers (577,974) (586,699) - -

Net cash inflow / (outflow) from operating activities 35 110,705 106,161 (1,292) (1,784)

Cash flows from investing activities

Sale of property, plant & equipment 7 2,080 29,335 - -

Purchase of property, plant & equipment 16 (40,023) (17,734) - -

Capitalisation of intangible assets 17 (10,453) (10,607) - -

Acquisition of Mexican operations - instalment (12,812) (12,419) - -

Other investments 500 - - -

Net cash inflow / (outflow) from investing activities (60,708) (11,425) - -

Cash flows from financing activities

New non-current borrowings 19 133,754 50,426 - -

New Finance business borrowings 20 119,080 104,057 - -

Repayment of borrowings 19 (162,502) (140,159) - -

Repayment of Finance business borrowings 20 (142,447) (79,102) - -

Lease liability payments 2 (344) - -

Intercompany borrowings - - 1,292 1,785

Net cash inflow / (outflow) from financing activities (52,113) (65,122) 1,292 1,785

Net increase / (decrease) in cash & cash equivalents (2,116) 29,614 - 1

Cash & cash equivalents at the beginning of the year 113,529 82,650 1 -

Effects of foreign exchange rate changes on cash & cash equivalents (2,066) 1,265 - -

Cash and cash equivalents at the end of the year 10 109,347 113,529 1 1

The above Cash Flow Statement should be read in conjunction with the accompanying Notes.


CONTENTS OF THE NOTESTO THE FINANCIAL STATEMENTS

Page

1 General information 74

2 Summary of significant accounting policies 74

3 Critical accounting estimates and judgements 86

4 Financial risk management - Appliances business & Parent 88

5 Financial risk management - Finance business 96

6 Segment information 106

7 Revenue & other income 110

8 Expenses 111

9 Income tax expense 114

10 Cash & cash equivalents 115

11 Trade receivables & other current assets 116

12 Finance receivables 118

13 Inventories 122

14 Non-current assets classified as held for sale 122

15 Derivative financial instruments 123

16 Property, plant & equipment 126

17 Intangible assets 128

18 Deferred tax assets 132

19 Current and non-current borrowings 133

20 Finance borrowings 135

21 Trade creditors 140

22 Provisions 141

23 Other current liabilities 143

24 Deferred tax liabilities 143

25 Other non-current liabilities 144

26 Contributed equity 144

27 Earnings per share 146

28 Accumulated losses and reserves 146

29 Imputation credits 148

30 Defined benefit obligations 149

31 Contingencies 154

32 Commitments 154

33 Investments in subsidiaries 156

34 Share-based payments 157

35 Reconciliation of profit after income tax to net cash inflow from operating activities 159

36 Disclosure of components of other comprehensive income 160

37 Disclosure of tax effects relating to each component of other comprehensive income 160

38 Government grants 160

39 Related party transactions 161

40 Events occurring after the Statement of Financial Position date 163

41 Foreign currency exchange rates 163

NOTES TO THE FINANCIAL STATEMENTS P73

1. GENERAL INFORMATION

The Group and Company are profit-oriented limited liability entities incorporated and domiciled in New Zealand.

The Company is dual listed on the New Zealand and Australian Stock exchanges and, under dual listing rules, the

Company is required to have registered offices in each country. The addresses are:

_ 78 Springs Road, East Tamaki, Auckland, New Zealand

_ Weippin Street, Cleveland, Queensland 4163, Australia

The financial statements were authorised for issue by the Board of Directors on 24 May 2012.

The Group has two principal areas of business:

_ Appliance manufacturer, distributor and marketer (Appliances business)

_ Financial services in New Zealand (Finance business)

The principal activity of the Appliances business is the design, manufacture and marketing of major household ap-

pliances. Its major markets are New Zealand, Australia, North America and Europe. The Appliances business has

manufacturing operations in New Zealand, United States of America, Mexico, Italy and Thailand.

The Finance business is a leading provider of retail point of sale consumer finance (including the Farmers Finance

Card and Q Card), insurance services and rental & leasing finance.

The Directors do not have the authority to amend the financial statements after issue.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These general purpose financial statements for the year ended 31 March 2012 have been prepared in accordance

with New Zealand Generally Accepted Accounting Practice (NZ GAAP) and comply with New Zealand Equivalents

to International Financial Reporting Standards (NZ IFRS), International Financial Reporting Standards (IFRS) and

any other applicable Financial Reporting Standards.

(a) Basis of preparation

Entities reporting and statutory base

The Parent Company’s financial statements are for Fisher & Paykel Appliances Holdings Limited as a separate legal

entity (“the Company”) and the consolidated financial statements are for the Fisher & Paykel Appliances Holdings

Limited Group (“the Group”), which includes all its subsidiaries. The Group and Company are reporting entities for

the purpose of the Financial Reporting Act 1993 and the financial statements comply with that Act and the Com-

panies Act 1993.

Going concern

The financial statements have been prepared under the going concern convention, which assumes the Group con-

tinues to operate in full compliance with banking covenants.

In the absence of an unanticipated deterioration in the Group’s operating performance, the Directors consider there

is reasonable headroom between the forecast financial performance of the Guaranteeing Group and that required

to meet banking covenants. This is supportive of the financial statements being prepared on a going concern basis.

These financial statements are stated in New Zealand dollars rounded to the nearest thousand unless otherwise indicated.

In accordance with NZ IAS 1 (Revised), Presentation of Financial Statements, items which are relevant to understand-

ing the Group’s financial performance are disclosed on the face of the Income Statement.

Historical cost convention

These financial statements have been prepared under the historical cost convention, as modified by the revaluation

of certain financial assets and liabilities (including derivative instruments) at fair value through profit or loss.


Critical accounting estimates and judgements

The preparation of financial statements in conformity with NZ IFRS requires the use of certain critical accounting

estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting

policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates

are significant to the financial statements, are highlighted in Note 3.

(b) Principles of Consolidation

Subsidiaries are entities that are controlled either directly by the Company or where the substance of the relationship

between the Company and the entity indicates the Company controls it. A list of subsidiaries appears in Note 33. The

results of subsidiaries acquired or disposed of during the year are included in the Consolidated Income Statement

from the date of acquisition or up to the date of disposal.

The Company and subsidiary company accounts (including special purpose entities) applies the acquisition method

to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair

values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests

issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a

contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed

in a business combination are measured initially at their fair values at the acquisition date. The Group recognises

any non-controlling interest in the acquiree on an acquisition- by-acquisition basis, either at fair value or at the

non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets. The

excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is

recorded as goodwill.

All material intercompany transactions, balances and unrealised gains on transactions between Group companies are

eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the

asset transferred. Accounting policies of subsidiaries are consistent with those adopted by the Group.

Acquisition-related costs are expensed as incurred.

Where settlement of any cash consideration is deferred, the amounts payable in the future are discounted to their

present value as at the date of exchange. The discount rate used is the Group’s incremental borrowing rate, being

the rate at which a similar borrowing could be obtained under the Group’s existing funding arrangements.

(c) Segment reporting

An operating segment is presented on the same basis as that used for internal reporting purposes and its results

are regularly reviewed by the chief operating decision maker, which consists of the Board of Directors together with

the Executives of the Appliances and Finance businesses.

All costs are directly allocated to the segment in which they are incurred, otherwise they are presented as unallocated.

(d) Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency that best

reflects the economic substance of the underlying events and circumstances relevant to that entity (‘the functional

currency’), which is currently the country of domicile for each overseas subsidiary. The consolidated and Company

financial statements are presented in New Zealand dollars, which is the Group’s presentation currency and Company’s

functional currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the

dates of the transactions or at the hedged rate if financial instruments have been used to reduce exposure.

At balance date, monetary assets and liabilities in foreign currency are translated at the year-end closing or hedged rates.


Translation differences are recognised in the Income Statement, except when deferred in equity as qualifying cash

flow hedges or net investment hedges.

(iii) Foreign Operations

The financial statements of foreign operations with a different functional currency are translated to the presentation

currency at the following exchange rates:

_ year-end closing exchange rate for assets and liabilities

_ monthly weighted average exchange rates for revenue and expense transactions

Exchange differences arising from the translation of any net investment in foreign operations are taken to share-

holders’ equity.

Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities

of the foreign operation and translated at the closing rate.

(e) Revenue recognition

(i) Sales of goods

Revenue from sales of goods is recognised when the significant risks and rewards of ownership have transferred

to the buyer.

(ii) Sales of services

Revenue from sales of services is recognised when the service, such as installation or repair of products, has been

performed.

(iii) Long-term contracts

Revenue on long-term contracts is recognised over the period of the project, once the outcome can be estimated

reliably. The stage of completion method is used to determine the appropriate amount of revenue to recognise at

balance date. The stage of completion is determined by reference to contract terms agreed with the customer. The

full amount of any expected loss, including that related to future work on the contract, is recognised in the Income

Statement as soon as it becomes probable.

(iv) Income on Finance receivables

Interest income on Finance receivables is recognised in the Income Statement and is measured at amortised cost

using the effective interest method.

Yield related fees for finance receivables are accrued to income over the term of the loan using the effective inter-

est method. Fees not included in the effective interest calculation are recognised on an accruals basis when the

service has been provided.

Fees charged to customer accounts in arrears are recognised as income at the time the fees are charged.

(v) Premium revenue

Premium revenue comprises revenue from direct business and includes amounts charged to the insured but excludes

fire service levies, GST and other amounts collected on behalf of third parties.

Premium revenue is recognised in the Income Statement when it has been earned from the attachment date over the

period of the contract for direct business. The proportion of premium received or receivable not earned in the Income

Statement as at balance date is recognised in the Statement of Financial Position as an unearned premium liability.

(vi) Interest income

Interest income is recognised on a time-proportionate basis using the effective interest method, which takes into

account the effective yield on the financial asset.


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(vii) Royalty income

Royalty income is recognised on an accruals basis in accordance with the substance of the relevant agreements.

(viii) Dividend income

Dividend income from investments is recognised when the shareholder’s right to receive payment is established.

(f) Government grants

Government grants include government assistance relating to specific research activities, amounts received to en-

courage retention of employees and also amounts received to encourage set up of operations in certain regions.

Grants are deducted against the expenses they are intended to compensate.

(g) Income tax

The income tax expense for the period is the total of the tax payable on the current period’s taxable income based

on the income tax rate for each jurisdiction. This is then adjusted for any changes in deferred tax assets and liabilities

attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in

the financial statements and any unused tax losses.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rate expected to apply when the

assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantially enacted for

each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary

differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences

arising from the initial recognition of an asset or liability. No deferred tax asset or liability is recognised in relation

to these temporary differences if they arose in a transaction, other than a business combination, that at the time of

the transaction did not affect either accounting profit or taxable profit or loss.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable

that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax assets and liabilities are not recognised for temporary differences between the carrying amount and

tax bases of investments in foreign operations where the company is able to control the timing of the reversal of

temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly

in equity.

(h) Goods and Services Tax (GST)

The financial statements have been prepared so that all components are stated exclusive of GST except where the

GST is not recoverable from the IRD. In these circumstances the GST component is recognised as part of the under-

lying item. Trade and other receivables and payables are stated GST inclusive. The net amount of GST recoverable

from or payable to the IRD is included within these categories.

(i) Leases

(i) Group as lessee

Leases under which the Group assumes substantially all the risks and rewards of ownership are classified as finance

leases. All other leases are classified as operating leases. Assets acquired under finance leases are stated at an

amount equal to the lower of their fair value and the present value of the minimum lease payments at the inception

of the lease, less accumulated depreciation and any impairment losses.

Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net

of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to

the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining

balance of the liability for each period. Payments made under operating leases (net of any incentives received from

the lessor) are charged to the income statement on a straight-line basis over the period of the lease.


(ii) Group as lessor

Assets leased out to third parties under a finance lease are recognised as a receivable at an amount equal to the

present value of the minimum lease payments. The difference between the gross receivable and the present value

of the receivable is recognised as unearned finance income. Finance lease income is recognised over the term of the

lease using the net investment method, which reflects a constant periodic rate of return.

(j) Insurance expenses (Finance business)

Claims handling costs include costs that can be associated directly with individual claims, such as legal and other

professional fees, and costs that can only be indirectly associated with individual claims, such as claims administra-

tion costs. Discounting is not applied as claims are typically resolved within one year.

Amounts paid to insurers under insurance contracts are recorded as an outwards reinsurance expense and are

recognised in the Income Statement from the attachment date over the period of the indemnity of the reinsurance

contract in accordance with the expected pattern of the incidence of risk ceded.

(k) Cash & cash equivalents

Cash & cash equivalents includes cash on hand, deposits held at call with financial institutions, bank overdrafts and

other short-term, highly liquid investments with original maturities of three months or less that are readily convert-

ible to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts

are shown within current liabilities on the Statement of Financial Position.

The Finance business has determined that certain money market deposits and government stock are held to support

general insurance liabilities. These assets are designated at fair value through profit or loss. Initial recognition is at

fair value in the Statement of Financial Position and subsequent measurement is at fair value with any resultant fair

value gains or losses recognised in the Income Statement. The fair value of these assets is recorded at amounts based

on valuations using rates of interest equivalent to the yields obtainable on comparable investments at balance date.

(l) Trade receivables

Trade receivables are recognised initially at fair value less transaction costs and subsequently measured at amortised

cost less an allowance account for impaired receivables. The amount of any loss is recognised in the Income State-

ment within Administration expenses.

Collectability of trade receivables is reviewed on an ongoing basis. When there is objective evidence the Appliances

business will not be able to collect all amounts due, they are written off against the allowance account for impaired

trade receivables.

(m) Inventories

Inventories are valued at the lower of cost, on a first-in, first-out basis, or net realisable value. Cost includes direct

materials, direct labour, an appropriate proportion of variable and fixed overhead expenditure (the latter being al-

located on the basis of normal operating capacity) but excludes finance, administration, research & development and

selling & distribution overheads. Net realisable value is the estimated selling price in the ordinary course of business

less all estimated costs of completion and the costs incurred in marketing, selling and distribution.

(n) Financial assets

Regular purchases and sales of financial assets are recognised on the trade date, i.e. the date on which the Group

commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from

the investments have expired or the Group has transferred substantially all the risks and rewards of ownership.

Financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or

loss’, ‘held to maturity’ investments, ‘available-for-sale’ financial assets and ‘loans and receivables’. The classifica-

tion depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Financial assets at fair value through profit or loss

This category has two sub-categories: financial assets held for trading and those designated at fair value through



profit or loss at inception. A financial asset is classified in this category if acquired principally for the purpose of

selling in the short term or if so designated by management. Derivatives are also categorised as held for trading

unless they are designated as hedges. Assets in this category are classified as current assets if they are either held

for trading or are expected to be realised within 12 months of the balance date.

Held to maturity investments

Held to maturity investments are non-derivative financial assets with fixed or determinable payments and fixed

maturities that the Group has the positive intention and ability to hold to maturity.

Loans & receivables

Loans & receivables are non-derivative instruments with fixed or determinable payments that are not quoted in an

active market. They are included in current assets, except for maturities greater than 12 months after the balance

date, which are classified as non-current assets. Loans & receivables are reported separately in Trade or Finance

receivables on the Statement of Financial Position.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in

any of the other categories. They are included in non-current assets unless the company intends to dispose of the

investment within 12 months of the balance date.

Available-for-sale financial assets and financial assets at fair value through profit or loss are carried at fair value. Held

to maturity investments and loans & receivables are carried at amortised cost less impairment using the effective

interest method. Realised and unrealised gains and losses arising from changes in the fair value of the financial assets

through profit or loss category are recognised in the Income Statement in the period in which they arise. Unrealised

gains and losses arising from changes in the fair value of non-monetary securities classified as available-for-sale are

recognised in equity. When securities classified as available-for-sale are sold, the accumulated fair value adjustments

are included in the Income Statement as gains and losses from investment securities.

(o) Insurance assets (Finance business)

Assets that back general insurance liabilities are designated at fair value through profit or loss. Initial recognition is at

cost in the Statement of Financial Position and subsequent measurement is at fair value with any resultant fair value

gains or losses recognised in the Income Statement. The fair value of these assets is recorded at amounts based on

valuations using rates of interest equivalent to the yields obtainable on comparable investments at the reporting date.

Acquisition costs incurred in obtaining general insurance contracts are deferred and recognised as assets where they

can be reliably measured and where it is probable they will give rise to premium revenue that will be recognised in

the Income Statement in subsequent reporting periods.

Deferred acquisition costs are amortised systematically in accordance with the expected pattern of the incidence

of risk under the general insurance contracts to which they relate. This pattern of amortisation corresponds to the

earning pattern of the corresponding premium revenue.

(p) Derivatives

The Group enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate

risk and interest rate risk including forward foreign exchange contracts, interest rate swaps and options. Further

details of derivative financial instruments are provided in Note 15.

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently

remeasured to their fair value at each balance date. Recognition of the resulting gain or loss depends on whether

the derivative is designated as a hedging instrument and the nature of the item being hedged. As appropriate, the

Group designates derivatives as either hedges of the fair value of recognised assets or liabilities or firm commitments

(fair value hedges) or hedges of highly probable forecast transactions (cash flow hedges).


(i) Fair value hedge

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the

Income Statement, together with any changes in the fair value of the hedged asset or liability that are attributable

to the hedged risk.

If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged

item for which the effective interest method is used is amortised to profit or loss over the period to maturity.

(ii) Cash flow hedge

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges

is recognised in equity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised im-

mediately in the Income Statement.

Amounts accumulated in equity are recycled in the Income Statement in the periods when the hedged item will

affect profit or loss (for instance when the forecast sale that is hedged takes place). However, when the forecast

transaction that is hedged results in the recognition of a non-financial asset (for example, inventory) or a non-financial

liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial

measurement of the asset or liability.

When a hedging instrument expires, is sold or terminated, or when a hedge no longer meets the hedge account-

ing criteria, any cumulative gain or loss existing in equity at that time remains in equity and is recognised in the

Income Statement when the forecast transaction is ultimately recognised in the Income Statement. When a forecast

transaction is no longer expected to occur, the cumulative gain or loss that was deferred in equity is immediately

transferred to the Income Statement.

(iii) Derivatives that do not qualify for hedge accounting

Changes in the fair value of derivatives that do not qualify for hedge accounting are recognised immediately in the

Income Statement.

(q) Non-current assets held for sale

Non-current assets held for sale are stated at the lower of their carrying amount and fair value less costs to sell.

Non-current assets are not depreciated or amortised while they are classified as held for sale.

(r) Property, plant & equipment

Property, plant & equipment is stated at historical cost less accumulated depreciation and any impairment losses

if applicable. Historical cost includes all expenditure directly attributable to the acquisition or construction of the

item, including interest.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only

when it is probable that future economic benefits associated with the asset will flow to the Group and the cost of

the asset can be measured reliably. All other repairs and maintenance are charged to the Income Statement during

the financial period in which they are incurred.

Property, plant & equipment, other than Freehold Land and Capital Work-in-Progress, is depreciated on a straight-line

basis over its estimated useful life as follows:

Freehold buildings 50 years

Leasehold improvements Life of lease

Plant & equipment 3-15 years

Fixtures & fittings 3-10 years

Motor vehicles 5 years

An asset’s useful life is reviewed and adjusted, if appropriate, at each balance date.

Property, plant & equipment which is temporarily idle (mothballed) is held at historical cost and is depreciated on a



straight-line basis over its estimated useful life as above.

(s) Intangible assets

Acquired intangible assets

(i) Goodwill

Goodwill arises on the acquisition of subsidiaries, and represents the excess of the consideration transferred over

the groups interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree.

Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised but is tested for

impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired,

and is carried at cost less any accumulated impairment losses.

Goodwill is allocated to cash generating units for the purpose of impairment testing. Impairment losses on goodwill

are not reversed.

Goodwill is allocated to those cash generating units that are expected to benefit from the business combination in

which the goodwill arose, identified according to operating segment.

(ii) Patents, trademarks and licences

Patents, trademarks and licences are finite life intangible assets and are recorded at cost less accumulated amor-

tisation and impairment losses. Amortisation is charged on a straight-line basis over their estimated useful lives,

which vary from 10 to 20 years. The estimated useful life and amortisation method is reviewed at each balance date.

(iii) Computer software

External software costs together with payroll and related costs for employees directly associated with the develop-

ment of software are capitalised. Costs associated with upgrades and enhancements are capitalised to the extent

they result in additional functionality. Amortisation is charged on a straight-line basis over the estimated useful life

of the software of 3-15 years. The estimated useful life and amortisation method is reviewed at each balance date.

(iv) Brands

Acquired brands, for which all relevant factors indicate there is no limit to the foreseeable net cash flows, are not

amortised on the basis that they have an indefinite useful life and are carried at fair value acquired less any accumu-

lated impairment losses. The carrying amount of acquired brands is tested annually for impairment.

(v) Customer relationships

Customer relationships are finite life intangible assets and are recorded at fair value acquired less accumulated am-

ortisation and any impairment losses. Amortisation is charged on a straight-line basis over their estimated useful life

of 10 years. The estimated useful life and amortisation method is reviewed at each balance date.

Internally generated intangible assets

(vi) Research & development

Research expenditure is expensed as it is incurred. Development expenditure is expensed as incurred, unless that

expenditure directly relates to new or improved products where the level of certainty of their future economic ben-

efits and useful life is probable, in which case the expenditure is capitalised and amortised on a systematic basis

reflecting the period of consumption of the benefit, which varies from 3-5 years.

(t) Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment.

Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances

indicate the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which

the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair

value less costs to sell and value in use.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately

identifiable cash flows (cash generating units).


(u) Impairment of financial assets (Finance business)

The Finance business classifies its receivables at amortised cost (using the effective interest method) less any im-

pairment adjustment.

An assessment is made at each reporting date whether there is objective evidence that a financial asset or group

of financial assets is impaired. A financial asset or group of financial assets is impaired and impairment losses are

incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred

after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated

future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Objective evidence that a financial asset or group of assets is impaired includes observable data about the follow-

ing loss events:

_ significant financial difficulty of the issuer or obligor

_ breach of contract, such as default or delinquency in interest or principal payments

_ a concession granted to the borrower that the lender would not otherwise consider for economic or legal

reasons relating to the borrowers financial difficulty

_ it becoming probable that the borrower will enter bankruptcy or other financial reorganisation

_ the disappearance of an active market for that financial asset because of financial difficulties

_ observable data indicating that there is a measurable decrease in the estimated future cash flows from a group

of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified

with the individual financial assets in the group including adverse changes in the payment status of borrowers

in the group

Firstly an assessment is made whether objective evidence of impairment exists individually for financial assets that

are individually significant, and individually or collectively for financial assets that are not individually significant.

If it is determined that no objective evidence exists for an individually assessed financial asset, whether significant

or not, the assets are included in a group of financial assets with similar credit risk characteristics and collectively

assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is

or continues to be recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been

incurred, the amount of loss is measured as the difference between the asset’s carrying amount and the present

value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the

financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an

allowance account and the amount of the loss is recognised in the statement of comprehensive income. If a loan

has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate

determined under the contract. As a practical expedient impairment may be measured on the basis of an instrument’s

fair value using an observable market price.

The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the

cashflows that may result from foreclosure less costs for obtaining and selling collateral, whether or not foreclosure

is probable.

For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit

risk characteristics. Those characteristics are relevant to the estimation of future cash flows for groups of such assets

by being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets

being evaluated. Future cash flows in a group of financial assets that are collectively evaluated for impairment are

estimated on the basis of the contractual cash flows of the assets in the Finance business and historical loss experi-

ence for assets with credit characteristics similar to those in the Group. Estimates of changes in future cash flows

for groups of assets should reflect and be directionally consistent with changes in related observable data from

period to period (for example, changes in payment status or other factors indicative of changes in probability of

losses in the group and their magnitude). The methodology and assumptions used for estimating future cash flows

are reviewed regularly to reduce any differences between loss estimates and actual loss experience. When a loan



is uncollectible, it is written off to the statement of comprehensive income. Such loans are written off after all the

necessary procedures have been completed and the amount of the loss has been determined. If, in a subsequent

period, the amount of the impairment loss decreases and the decrease can be related objectively to an event oc-

curring after the impairment was recognised (such as an improvement in the debtors credit rating), the previously

recognised impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognised

in the statement of comprehensive income.

(v) Borrowings and borrowing costs

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently

measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption

amount is recognised in the Income Statement over the period of the borrowings using the effective interest method.

Borrowing costs are expensed, except for costs directly attributable to assets under construction, which are capitalised

during the period of time that is required to complete and prepare the asset for its intended use.

(w) Trade and other payables

Trade and other payables are recognised when the Group becomes obliged to make future payments resulting from

the purchases of goods and services.

Trade and other payables are recognised initially at fair value and, if applicable, subsequently measured at amortised

cost using the effective interest method.

(x) Employee benefits

(i) Wages & salaries, annual leave and sick leave

Liabilities for wages & salaries, including non-monetary benefits, annual leave and accumulating sick leave expected

to be settled within 12 months of the reporting date are recognised in other payables in respect of employees’ ser-

vices up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled.

(ii) Long service leave

Liabilities for long service leave, which are not expected to be settled within 12 months of the balance date are

measured as the present value of estimated future cash outflows from the Group in respect of services provided by

employees up to the balance date. Consideration is given to expected future wage and salary levels, experience of

employee departures, periods of service and age.

(iii) Defined contribution plan

Contributions to the defined contribution superannuation plans are recognised as employee benefit expenses when

incurred. The Group has no further payment obligations once the contributions have been paid.

(iv) Defined benefit plan

The cost of providing benefits is determined using the Projected Unit Credit Method, with independent actuarial

valuations being carried out annually. Actuarial gains and losses arising from experience adjustments and changes

in actuarial assumptions in excess of the greater of 10% of the value of the plan assets or 10% of the defined benefit

obligation are charged or credited to income over the expected average remaining working lives of employees’

participating in the plan. Otherwise, the actuarial gain or loss is not recognised.

Net provision for post-employment benefits in the Statement of Financial Position represents the present value of

the Group’s obligations at year-end less market value of plan assets, together with adjustments for unrecognised

actuarial gains and losses and unrecognised past service costs.

Where the calculation results in a net benefit to the Group, the recognised asset is limited to the net total of any

unrecognised actuarial losses and past service costs and the present value of any future refunds from the plan or

reductions in future contributions to the plan.


(v) Share-based payments

The Group has operated equity-settled share option and share ownership schemes and a cash settled share-based

payment scheme. Currently, only one cash settled scheme is active.

The fair value of share options and shares is expensed on a straight-line basis over the vesting period with a cor-

responding increase in equity. The fair value of options granted is measured using a binomial model taking into

consideration factors such as expected dividends and estimates of the number of options that are expected to be-

come exercisable and shares expected to be distributed. Advances from within the Group fund the initial purchase

of shares in the share ownership scheme, which is taken into consideration in arriving at fair value.

For cash-settled schemes, the Group recognises an employee benefit expense over the life of the scheme and re-

measures the fair value of the associated liability at each reporting date, with any change in fair value recognised

in profit or loss for the period.

(vi) Profit-sharing and bonus plans

The Group recognises a liability and an expense for bonuses and profit-sharing based on a formula that takes into

consideration the profit attributable to the company’s shareholders after certain adjustments. The Group recognises

a provision where contractually obliged or where there is a past practice that has created a constructive obligation.

(y) Insurance liabilities (Finance business)

The liability for outstanding claims is measured as the central estimate of the present value of expected future pay-

ments against claims incurred at the reporting date under general insurance contracts issued by the Finance business,

with an additional risk margin to allow for the inherent uncertainty in the central estimate.

The expected future payments include those in relation to claims reported but not yet paid; claims incurred but not

reported (IBNR), claims incurred but not enough reported (IBNER) and anticipated claims handling costs. Actuarial

calculations were performed to determine the outstanding claims liability. The outstanding claims liability has been

determined using the Bornhuetter-Fergusson (incurred claims) methodology. It has been assumed that future incurred

claims patterns for each group of business will continue to follow observed historic patterns.

(z) Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event

and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate

can be made of the amount of the obligation. Where the effect of the time value of money is material, the amount

recognised is the present value of the estimated expenditures.

(i) Warranty

Provisions for warranty costs are recognised at the date of sale of the relevant products or resultant from specific

issues, at management’s best estimate of the expenditure required to settle the Group’s liability based on historical

warranty trends. Warranty terms vary, but generally are 1-2 years parts & labour (dependent on region) with selected

parts (only) covered for periods up to 10 years.

(ii) Redundancy

A redundancy provision is recognised when as part of a publicly announced restructuring plan a reliable estimate

can be made of the direct costs associated with the plan and where it has raised a valid expectation of its imple-

mentation for those employees affected.

(iii) Onerous contracts

An onerous contract provision is recognised where the unavoidable costs of meeting the contract obligations exceed

the economic benefits expected to be received under the contract.



(aa) Contributed equity

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction,

net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the

acquisition of a business are included in the cost of the acquisition as part of the purchase consideration.

Treasury stock is used to recognise those shares held and controlled by Fisher & Paykel Employee Share Purchase

Trustee Limited.

(ab) Dividends

Provision is made for the amount of any dividend declared on or before the end of the financial year but not dis-

tributed at balance date.

(ac) New and amended accounting Standards adopted by the Group

During the year the Group adopted the following new and amended NZ IFRSs as of 1 April 2011:

NZ IAS 24 (Revised), Related Party Disclosures.

The revised Standard clarifies and simplifies the definition of a related party. The group has disclosed transactions

between its subsidiaries and its associates. However, there has been no impact on any amounts recognised in the

financial statements.

(ad) Standards, interpretations and amendments to published standards that are not yet effective

New standards, amendments and interpretations to existing standards have been published by the International

Accounting Standards Board (IASB) and the External Reporting Board (XRB) that are mandatory for future periods

and which the Group will adopt when they become mandatory. These new standards, amendments and interpreta-

tions include:

_ NZ IAS 1 Amendments Presentation of Items of Other Comprehensive Income (effective 1 July 2012)

The amendment requires entities to separate items presented in other comprehensive income into two groups,

based on whether they may be recycled to profit or loss in the future. This will not affect the measurement of

any of the items recognised in the balance sheet or the profit or loss in the current period. The group intends

to adopt the new standard from 1 April 2012.

_ NZ IFRS 9 Financial Instruments: Classification and Measurement (mandatory for annual periods beginning

on or after 1 January 2015). The major changes under the Standard are:

__ NZ IFRS 9 replaces parts of NZ IAS 39 Financial Instruments: Recognition and Measurement that relate

to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be

classified into two measurement categories: amortised cost and fair value.

__ The classification depends on the entities business model for managing its financial instruments and the

contractual cash flow characteristics of the instrument.

__ For financial liabilities the standard retains most of IAS 39 requirements. The main change is that in cases

where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s

own credit risk is recorded in other comprehensive income rather than in the income statement, unless

this creates an accounting mismatch.

__ The Group will apply NZ IFRS 9 prospectively from 1 April 2015.

_ NZ IFRS 10 Consolidated Financial Statements and NZ IFRS 12 Disclosure of Interests in Other Entities (ef-

fective 1 January 2013) NZ IFRS 10 replaces all of the guidance on control and consolidation in NZ IAS 27

Consolidated and Separate Financial Statements, and NZ IFRIC 12 Consolidation – Special Purpose Entities.

The core principle that a consolidated entity presents a parent and its subsidiaries as if they are a single eco-

nomic entity remains unchanged, as do the mechanics of consolidation. However, the standard introduces a

single definition of control that applies to all entities. It focuses on the need to have both power and rights or

exposure to variable returns before control is present. Power is the current ability to direct the activities that

significantly influence returns. Returns must vary and can be positive, negative or both. There is also new guid-

ance on participating and protective rights and on agent/principal relationships. The group does not expect the


new standard to have a significant impact on its composition.NZ IFRS 12 sets out the required disclosures for

entities reporting under the new standard, NZ IFRS 10. The group does not expect the new standards to have

a significant impact on the Financial Statements.

_ NZ IFRS 13 Fair Value Measurement (effective 1 January 2013) NZ IFRS 13 explains how to measure fair value and

aims to enhance fair value disclosures. The group has yet to determine which, if any, of its current measurement

techniques will have to change as a result of the new guidance. It is therefore not possible to state the impact,

if any, of the new rules on any of the amounts recognised in the financial statements. However, application of

the new standard will impact the type of information disclosed in the notes to the financial statements. The

group does not intend to adopt the new standard before its operative date, which means that it would be first

applied in the annual reporting period ending 31 March 2014.

_ Revised NZ IAS 19 Employee Benefits (effective 1 January 2013) The standard requires the recognition of all

re-measurements of defined benefit liabilities/assets immediately in other comprehensive income (removal of

the so-called ‘corridor’ method) and the calculation of a net interest expense or income by applying the dis-

count rate to the net defined benefit liability or asset. This replaces the expected return on plan assets that is

currently included in profit or loss. The standard also introduces a number of additional disclosures for defined

benefit liabilities/assets and could affect the timing of the recognition of termination benefits. The amendments

will have to be implemented retrospectively. The group does not expect the new standard to have a significant

impact on the Financial Statements.

_ FRS 44 New Zealand Additional Disclosures and Harmonisation Amendments (effective 1 July 2012) FRS 44

sets out New Zealand specific disclosures for entities that apply NZ IFRSs. These disclosures have been relo-

cated from NZ IFRSs to clarify that these disclosures are additional to those required by IFRSs. Adoption of the

new rules will not affect any of the amounts recognised in the financial statements, but may simplify some of

the group’s current disclosures. The Harmonisation Amendments amends various NZ IFRSs for the purpose of

harmonising with the source IFRSs and Australian Accounting Standards. The significant amendments include

introduction of the option to use the indirect method of reporting cash flows that is not currently in NZ IAS 7.

In addition, various disclosure requirements have been deleted. The group intends to adopt FRS 44 and the

Harmonisation Amendments from 1 July 2012.

_ Other interpretations and amendments are unlikely to have an impact on the Group’s accounts and have

therefore not been analysed in detail.

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are continually evaluated and are based on historical experience and other factors, includ-

ing expectations of future events that are believed to be reasonable under the circumstances.

(a) Critical accounting estimates and assumptions

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by defini-

tion, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a

material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(i) Impairment of goodwill and other indefinite life intangible assets

The Group annually tests whether goodwill or brands have suffered any impairment, in accordance with the account-

ing policy stated in Note 2(s). The recoverable amounts of cash generating units for goodwill impairment testing

have been determined based on value-in-use calculations and recoverable amounts for brands have been based on

relief-from-royalty calculations. These calculations require the use of assumptions. Refer Note 17 for details of these

assumptions and the potential impact of changes to these assumptions.



(ii) Impairment of property, plant & equipment

The Group tests for impairment of property, plant & equipment when indicators exist that an impairment may have

occurred. The recoverable amount of property is based on fair market valuation less costs to sell and the recoverable

amount of plant & equipment assets is based on value-in-use calculations requiring the use of assumptions. Refer Note

16 for details of these assumptions and the impact on the performance for the years ended 31 March 2012 and 2011.

(iii) Warranty provision

Provision is made for estimated warranty claims in respect of products sold which are still under warranty at bal-

ance date. The majority of these claims are expected to be settled within the next 24 months but this may extend

to 10 years for certain washer components. Management estimates the present value of the provision based on

historical warranty claim information and any recent specific trends that may suggest future claims could differ

from historical amounts.

While changes in management’s assumptions would result in different valuations, management considers the effect

of any likely changes would be immaterial to the Group’s result or financial position.

As at 31 March 2012, the Group had recognised a warranty provision amounting to $18.3 million (2011 $21.8 million).

(iv) Product support provision

Provision is made for costs to support older products sold in previous years which are outside warranty periods.

The provision recognised is based on estimated costs to address product issues.



As at 31 March 2012 the Group had recognised a product support provision amounting to $4.9 million (2011 nil).

(v) Finance receivables

Allowance is made for losses to Finance receivables where there is objective evidence that impairment has occurred

due to one or more loss events. Management assesses whether these loss events have an impact upon the estimated

future cash flows of the receivables on either an individual (if significant) or collective (if similar characteristics) basis.



As at 31 March 2012, the Group had recognised an allowance for impairment losses amounting to $20.7 million

(2011 $26.7 million).

(vi) Inventories

The cost of inventory is sensitive to currency fluctuations. Management applies a blended exchange rate to account

for purchases covered by forward foreign exchange contracts. As at 31 March 2012, a 10% movement in the blended

rate used is estimated to have a $6.7 million impact on the value of inventory.

The provision for obsolescence has reduced in the year ended 31 March 2012 to $9.5 million (2011 $11.3 million).

Whilst Management are satisfied the provision is fairly stated, this involves significant judgement on forecast usage

of materials.

(vii) Income taxes

The Group is subject to income taxes in New Zealand and jurisdictions where it has foreign operations. Significant

judgement is required in determining the worldwide provision for income taxes. There are certain transactions and

calculations undertaken during the ordinary course of business for which the ultimate tax determination may be

uncertain. Where the final tax outcome of these matters is different from the amounts that were initially recorded,

such differences will impact the current and deferred tax provisions in the period in which such determination is made.


As at 31 March 2012, the Group had recognised $49.2 million net deferred tax assets in excess of deferred tax li-

abilities. The Group has assumed continuity of shareholdings as required by New Zealand and USA tax legislation

and therefore has included all available tax loss carry forwards and other deductible temporary differences in the

computation of deferred tax assets except for $0.6 million of New Zealand operating losses and unrecognized US

tax losses and credits totalling $24.0 million.

(viii) Employment benefits

The Group provides long service leave benefits to employees in certain countries and calculation of the provision for

the unvested component of these obligations is based on assumptions about future salary/wage increases, promo-

tion rates and employee turnover. The discount rates used to calculate the present value of these obligations are

based on 10 year Government bond yields as no deep market is deemed to exist for high quality corporate bonds

in these countries.

While changes in management’s assumptions would result in different liabilities, management considers the effect


As at 31 March 2012, the Group had recognised a provision for unvested long service leave amounting to $9.0 mil-

lion (2011 $8.2 million).

(ix) Restructuring charges

Restructuring charges comprise estimated costs for associated redundancies and relocation costs. These charges

are calculated based on detailed plans that are expected to improve the Group’s cost structure and productivity. The

outcomes of similar historical restructuring plans are used as a guideline to minimise any uncertainties arising. There

were no restructuring plans announced during the year ended 31 March 2012 (2011 $0.9 million).

(x) Litigation costs

Fisher & Paykel Financial Services Limited is currently involved in legal proceedings with a software supplier. The

case was heard in the High Court at Auckland, New Zealand in late 2011 and a judgement on the issue is expected

this year (refer Note 8).

(b) Critical judgements in applying the entity’s accounting policies

Special purpose entity

The activities of Retail Financial Services Limited are funded through a master trust securitisation structure established

on 8 May 2006. This structure allows for the creation of multiple, separate, standalone trusts. The first trust created

under the master trust structure was the RFS Trust 2006-1 (the Trust). Fisher & Paykel Financial Services Limited

is the residual income and capital beneficiary of the Trust and therefore the financial statements of the Trust have

been consolidated in the Group’s financial statements. Refer Note 33.

4. FINANCIAL RISK MANAGEMENT - APPLIANCES BUSINESS & PARENT

The Group’s business activities expose it to a variety of financial risks, namely market risk (including currency risk,

interest rate risk and commodity risk), credit risk and liquidity risk. The overall risk management approach focuses on

the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance

of the business. Derivative financial instruments such as foreign exchange contracts, foreign exchange options and

interest rate swaps are used to hedge certain risk exposures.

The Board of Directors has approved policy guidelines for the Appliances business and Parent that identify, evaluate

and authorise various financial instruments to hedge financial risks.

The principal financial risks and hedging policies for the Appliances business and Parent are shown below.


3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)

(a) Market risk

(i) Foreign exchange risk

The Appliances business operates internationally and is exposed to foreign exchange risk arising from both trans-

acting in foreign currencies and from translation of the net assets of overseas subsidiaries into New Zealand dollars

for consolidation purposes.

The principal currency exposures are the United States dollar cross rates with the Australian dollar and Thai baht.

The Appliances business monitors current and anticipated future foreign currency operating cash flows to determine

net exposures, which are hedged with forward exchange contracts within prescribed bands for up to a maximum

period of 12 months (24 months by exception). Major capital expenditure in foreign currency is hedged with forward

foreign exchange contracts. The Group’s exposure to translation risk of foreign currency denominated net assets

is not hedged.

Notional principal of foreign exchange agreements outstanding at 31 March 2012 were as follows:

_ Purchase commitments forward exchange contracts $127.7 million (2011 $280.0 million)

_ Sale commitments forward exchange contracts $40.4 million (2011 $122.9 million)

(ii) Interest rate risk

Debt funding for the Appliances business is subject to floating interest rates which can impact on the segment’s

financial result. When considered appropriate, in accordance with the policy guidelines, the Appliances business

enters into interest rate swaps and caps to manage its exposure to such fluctuations. These financial instruments

are subject to the risk that interest rates may change subsequent to implementation.

Notional principal or contract amounts outstanding on interest rate swaps and caps at 31 March 2012 were $65.7

million (2011 $80.7 million). The interest rate contracts in place at the time of the debt restructuring in March 2009,

were deemed to be ineffective and are fair valued through profit or loss. Interest rate contracts entered into subse-

quent to the restructuring are deemed effective and fair valued through the cash flow hedge reserve.

(iii) Commodity risk

Pricing for some of the Appliances business’ raw material purchases is subject to fluctuations in commodity indices for

base metals and crude oil. This is routinely managed through agreements with suppliers however, when considered

appropriate and in accordance with the policy guidelines, the Appliances business enters into commodity derivatives

to manage its exposure to such fluctuations.

Appliances has commodity derivatives as at 31 March 2012 these were less than $1,000 (2011 $Nil).

(iv) Summarised sensitivity analysis

The following table summarises the sensitivity of the Appliances business’ financial assets and financial liabilities (with

all other variables held constant) to interest rate risk and foreign exchange risk. The sensitivity analyses represent

the range of movements for each type of risk that are considered reasonably possible as at balance date. The risk

profile will vary throughout the financial year.

Figures disclosed within profit in the sensitivity analyses represent the after tax impact of the variable movements.


4. FINANCIAL RISK MANAGEMENT - APPLIANCES BUSINESS & PARENT (CONTINUED)

APPLIANCES BUSINESS INTEREST RATE RISK FOREIGN EXCHANGE RISK

-1% +2% -15% +15%

Carrying Profit Equity Profit Equity Profit Equity Profit Equity

amount

31 March 2012 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Financial assets

Cash & cash equivalents 22,273 (137) (137) 275 275 3,624 3,624 (2,679) (2,679)

Trade receivables 108,456 - - - - 9,344 9,344 (6,906) (6,906)

Foreign exchange derivatives 2,361 - - - - 2,897 8,417 (2,141) (6,221)

Interest rate derivatives 103 - (4) 30 38 (9) (9) 7 7

Financial liabilities

Borrowings (86,810) 707 707 (1,414) (1,414) (7,322) (7,322) 5,412 5,412

Trade creditors (96,560) - - - - (9,685) (9,685) 7,159 7,159

Foreign exchange derivatives (1,736) - - - - 7,761 8,844 (5,736) (6,537)

Interest rate derivatives (1,211) (183) (183) 353 353 178 178 (132) (132)

Total increase/ (decrease) 387 383 (756) (748) 6,788 13,391 (5,016) (9,897)

APPLIANCES BUSINESS INTEREST RATE RISK FOREIGN EXCHANGE RISK

-1% +2% -15% +15%


amount

31 March 2011 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Financial assets

Cash & cash equivalents 21,375 (135) (135) 270 270 3,678 3,678 (2,719) (2,719)

Trade receivables 128,117 - - - - 11,902 11,902 (8,797) (8,797)

Foreign exchange derivatives 2,657 - - - - (1,887) (1,635) 1,394 1,208


Borrowings (121,557) 910 910 (1,819) (1,819) (11,051) (11,051) 8,168 8,168

Trade creditors (99,141) - - - - (9,057) (9,057) 6,694 6,694

Other creditors (10,934) - - - - (1,343) (1,343) 993 993

Foreign exchange derivatives (20,213) - - - - 3,000 22,529 (886) (12,663)

Interest rate derivatives (3,334) (196) (196) 371 371 412 412 (305) (305)

Total increase/ (decrease) 579 579 (1,178) (1,178) (4,346) 15,435 4,542 (7,421)


(b) Credit risk

The Appliances business incurs credit risk with trade receivables and has a credit policy which is used to manage

exposure to this credit risk. As part of this policy, limits are reviewed on a regular basis. In addition, risk is selectively

mitigated through trade indemnity policies and letters of credit where an unacceptably high credit risk is perceived

to exist.

Foreign currency forward exchange contracts and interest rate swaps have been entered into with trading banks.

The Appliances business’ exposure to credit risk from these financial instruments is limited because it does not

expect non-performance of the obligations contained therein due to the credit rating of the financial institutions

concerned. The Appliances business does not require collateral or other security to support financial instruments.

Further disclosure on Trade receivables is reported in Note 11.

(i) Concentrations of credit exposure

As at 31 March 2012, the Appliances business had trade receivables from certain major customers of $29.4 million

(2011 $25.0 million). However, this largely comprises Australian receivables and all Australian receivables balances

are covered by trade indemnity insurance, the main terms of which include:

_ maximum sum insured of A$30 million

_ insured percentage of 90% subject to A$5,000 excess

_ discretionary credit limit up to A$300,000

_ maximum payment terms of 60 days from the end of the month following delivery of goods

_ Excluding the major customers above, the Appliances business had no other significant concentration of credit

exposure.

(ii) Geographic concentrations of trade receivables

The Appliances business’ maximum exposure to credit risk for trade receivables by geographic region is as follows:

PARENT INTEREST RATE RISK FOREIGN EXCHANGE RISK

-1% +2% -15% +15%


amount

31 March 2012 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Financial assets

Cash & cash equivalents 1 - - - - - - - -

Other current assets 27 - - - - - - - -

Intergroup advances 637,585 - - - - - - - -

Total increase/ (decrease) - - - - - - - -

PARENT INTEREST RATE RISK FOREIGN EXCHANGE RISK

-1% +2% -15% +15%


amount

31 March 2011 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Financial assets

Cash & cash equivalents 1 - - - - - - - -

Other current assets 21 - - - - - - - -

Intergroup advances 637,620 - - - - - - - -

Total increase/ (decrease) - - - - - - - -



(c) Liquidity risk

Prudent liquidity risk management requires maintaining sufficient cash to meet contractual obligations, the availability

of funding through an adequate amount of committed credit facilities and the ability to close-out market positions.

Pursuant to its banking facilities, Management is required to maintain sufficient headroom to meet facility requirements.

The Board of Directors approves all new loans and funding facilities and is updated regularly on liquidity risk.

The table below analyses the Appliances business’ financial liabilities into relevant maturity groupings based on the

remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the

contractual undiscounted cash flows, except for interest rate swaps.

31 March 31 March

2012 2011

$’000 $’000

New Zealand 20,510 17,456

Australia 40,774 51,699

North America 16,817 31,144

Europe 23,532 18,167

Rest of World 6,823 9,651

108,456 128,117

On Call Less than Between Between

1 year 1 and 2 2 and 5

years years

31 March 2012 $’000 $’000 $’000 $’000

Borrowings - 10,103 13,764 79,440

Trade creditors - 96,560 - -

Finance lease liabilities - - - -

Interest rate swaps * - 477 734 -

31 March 2011

Borrowings - - 128,151 -

Trade creditors - 99,141 - -

Finance lease liabilities - 17 - -

Interest rate swaps * - 2,353 933 49

* The amounts expected to be payable in relation to the interest rate swaps have been estimated using forward interest rates applicable at the reporting date.


The table below analyses the Appliances business’ derivative financial instruments that will be settled on a gross

basis into relevant maturity groupings based on the remaining period to the contractual maturity date at balance

date. The amounts disclosed in the table are the contractual undiscounted cash flows. They are expected to occur

and affect profit or loss at various dates between balance date and the following 24 months.

(d) Fair value estimation

The fair value of financial instruments are estimated using discounted cash flows. Fair value of interest rate swaps

is calculated as the present value of the estimated future cash flows. The fair value of forward exchange contracts

is determined using forward exchange market rates at balance date.

The carrying value less impairment provision of trade receivables and payables is a reasonable approximation of

their fair values due to the short-term nature of trade receivables. The fair value of financial liabilities for disclosure

purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is

available to the Appliances business for similar financial instruments.

Unless otherwise stated, all other carrying amounts are assumed to equal or approximate fair value.

Financial instruments are measured in the Statement of Financial Position at fair value, which requires disclosure of

fair value measurements by level of the following fair value measurement hierarchy:

_ Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).

_ Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly

(that is, as prices) or indirectly (that is, derived from prices) (Level 2).

_ Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).

Less than Between

1 year 1 and 2

years

31 March 2012 $’000 $’000

Forward foreign exchange contracts - cash flow hedges

- inflow 168,719 -

- outflow 168,094 -

Forward foreign exchange contracts - cash flow hedges

- inflow 378,718 6,155

- outflow 399,171 6,557



There are no financial instruments carried at fair value in the Parent entity.

The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting

date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer,

broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly oc-

curring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the

Group is the current bid price. These instruments are included in Level 1.

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter de-

rivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable

market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs

required to fair value an instrument are observable, the instrument is included in Level 2.

If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.

Specific valuation techniques used to value financial instruments include:

_ Quoted market prices or dealer quotes for similar instruments.

_ The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based

on observable yield curves.

_ The fair value of forward foreign exchange contracts is determined using forward exchange rates at balance

date, with the resulting value discounted back to present value

_ Other techniques, such as discounted cash flow analysis, are used to determine fair value for other financial

instruments.

Note that all of the resulting fair value estimates for the Appliances business are included in Level 2.

Level 1 Level 2 Level 3 Total

balance

31 March 2012 $’000 $’000 $’000 $’000

Assets

Derivative financial instruments - held for trading - 934 - 934

Derivative financial instruments - cash flow hedges - 1,530 - 1,530

Total assets - 2,464 - 2,464

Liabilities

Derivative financial instruments - held for trading - 2,823 - 2,823

Derivative financial instruments - cash flow hedges - 124 - 124

Total liabilities - 2,947 - 2,947


balance

31 March 2011 $’000 $’000 $’000 $’000

Assets



Total assets - 2,657 - 2,657

Liabilities





(e) Financial instruments by category

ASSETS AS PER STATEMENT OF FINANCIAL POSITION Fair value Derivatives Loans and Total

through used for receivables

profit or hedging

loss—held

for trading

$’000 $’000 $’000 $’000

Appliances business

31 March 2012

Cash & cash equivalents - - 22,273 22,273

Trade receivables - - 108,456 108,456

Derivative financial instruments 934 1,530 - 2,464

934 1,530 130,729 133,193

31 March 2011

Cash & cash equivalents - - 21,375 21,375

Trade receivables - - 128,117 128,117

Derivative financial instruments 1,205 1,452 - 2,657

1,205 1,452 149,492 152,149

Parent

31 March 2012

Cash & cash equivalents - - 1 1

Intergroup advances - - 637,620 637,620

- - 637,621 637,621

31 March 2011

Cash & cash equivalents - - 1 1

Intergroup advances - - 637,585 637,585

- - 637,586 637,586

LIABILITIES AS PER STATEMENT OF FINANCIAL POSITION Fair value Derivatives Measured at Total

through used for amortised

profit or hedging cost

loss—held

for trading

$’000 $’000 $’000 $’000

Appliances business

31 March 2012

Borrowings - - 86,810 86,810

Trade creditors 96,560 96,560

Derivative financial instruments 2,823 124 - 2,947

Finance leases - - - -

2,823 124 183,370 186,317

31 March 2011

Borrowings - - 121,557 121,557

Trade creditors 99,141 99,141

Derivative financial instruments 6,193 17,355 - 23,548

Finance leases - - 17 17

6,193 17,355 220,715 224,263


5. FINANCIAL RISK MANAGEMENT - FINANCE BUSINESS

The Finance business’ activities expose it to a variety of financial risks including credit risk, liquidity risk and interest

rate risk. The Finance business has a separate Board of Directors, which has appointed the following committees and

other specialists to manage these risks and report key outcomes to the Board in accordance with approved policy:

Asset & Liability Committee

Comprises the Managing Director, Chief Operating Officer, Chief Financial Officer (Chair) and Treasury & Funding

Manager. The Committee is responsible for managing interest rate risk, liquidity risk and Statement of Financial

Position and capital structure. The Committee’s activities are governed by a formal charter to ensure all treasury

risk management policies are followed.

Pricing, Marketing & Operations Committee

Comprises the Managing Director, Chief Operating Officer (Chair) and Chief Financial Officer. Its principal responsi-

bility is to establish and review interest rates on money advanced to customers and productivity, performance and

compliance of Finance business operations.

Credit Committee

Comprises the Managing Director, Chief Operating Officer, Chief Financial Officer and Chief Risk Officer (Chair). The

committee’s principal responsibility is to oversee all aspects of credit risk assessment and management and operates

within formal credit policies and guidelines that ensure any credit risk incurred falls within acceptable parameters.

Insurance Committee

Comprises the Managing Director, Chief Operating Officer (Chair), Chief Financial Officer and Marketing Manager.

The committee’s principal responsibility is to oversee all aspects of the insurance business; including approving

and recommending strategies, monthly review of risks and returns and the delivery of and compliance to current

prudential and regulatory requirements for the insurance sector.

Information & Support Services Steering Committee

Comprises the Management Director, the Chief Operating Officer, Chief Financial Officer and Chief Information &

Support Services Officer (Chair). The committee is responsible for approving strategy, setting policy, monitoring risk

and reviewing work in progress across information services, human resources, process improvement and procurement.

Treasury

The Treasury function’s principal responsibility is the day-to-day management of the liability side of the statement

of financial position, especially focusing on maintaining the appropriate level and mix of funding sources and ensur-

ing that the Finance business has sufficient liquidity for its requirements. In addition, Treasury is responsible for:

_ execution of interest rate risk management strategies including the use of derivative financial instruments in

accordance with formal treasury risk management policies

_ ensuring compliance with all internal and external measures, covenants and ratios.


(a) Interest rate risk

Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of

changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will

fluctuate because of changes in market interest rates.

The Finance business is exposed to fluctuations in the prevailing levels of market interest rates on both fair value

and cash flow risks relating to its financial instruments. Interest margins may increase or decrease, as the case may

be, as a result of changes in market interest rates.

(i) Interest rate risk management process

The Asset & Liability Committee is responsible for managing interest rate risk in accordance with its Charter and

treasury risk management policy. A Pricing Committee is responsible for establishing and reviewing interest rates

on money lent.

The Finance business manages interest rate risk through:

_ monitoring the maturity profile of assets and liabilities and seeking, where appropriate, to match the date at

which these mature and reprice

_ monitoring market interest rates and reviewing the impact of these on interest rate risk exposure

_ economically hedging a portion of any residual risk exposure using financial derivative instruments. This activity

is undertaken in accordance with treasury risk management policies approved by the Finance business Board

of Directors

_ reviewing lending rates from time to time

(ii) Concentrations of interest rate exposure

The Finance business’ borrowings are generally short term in nature to match the profile of the maturing assets.

Borrowings issued at variable rates expose the Finance business to cash flow interest rate risk. Borrowings issued

at fixed rates expose the Finance business to fair value interest rate risk.

(iii) Repricing schedule

The Finance business has a policy which establishes risk control limits for the net repricing gap. Interest rate exposure

is monitored on a regular basis and reported to and reviewed monthly by the Asset and Liability Committee and the

Finance business Board of Directors.

The table below summarises the Finance business exposure to interest rate risks. It includes the Finance business

financial instruments at carrying amounts, categorised by the earlier of their contractual repricing or expected

maturity dates.


5. FINANCIAL RISK MANAGEMENT - FINANCE BUSINESS (CONTINUED)

Weighted 0 to 6 7 to 12 13 to 24 25 to 60 Over 60 Non Total

average months months months months months interest

effective bearing

interest

rate

31 March 2012 % $’000 $’000 $’000 $’000 $’000 $’000 $’000

Financial assets

Cash & cash equivalents 2.5 87,074 - - - - - 87,074

Derivative financial instruments 2.8 4 - 48 - - - 52

Finance receivables 18.1 495,111 51,342 37,972 10,095 12 - 594,532

Other financial assets 0.5 - - - 556 - 2,817 3,373

582,189 51,342 38,020 10,651 12 2,817 685,031


Finance borrowings

Bank loans 4.0 245,507 - - - - - 245,507

Debentures 7.4 50,331 39,930 18,361 2,740 - - 111,362

Notes 3.5 194,097 - - - - - 194,097

Derivative financial instruments 3.9 213 455 949 1,099 - - 2,716

Other financial liabilities - - - - - - 10,972 10,972

490,148 40,385 19,310 3,839 - 10,972 564,654

Net effective interest rate gap 92,041 10,957 18,710 6,812 12 (8,155) 120,377

Weighted 0 to 6 7 to 12 13 to 24 25 to 60 Over 60 Non Total

average months months months months months interest

effective bearing

interest

rate

31 March 2011 % $’000 $’000 $’000 $’000 $’000 $’000 $’000

Financial assets

Cash & cash equivalents 3.6 92,154 - - - - - 92,154

Derivative financial instruments 2.8 - - 1 - - - 1

Finance receivables 18.0 466,733 43,229 74,400 17,164 69 - 601,595

Other financial assets 0.7 - 1,044 - - - 2,682 3,726

558,887 44,273 74,401 17,164 69 2,682 697,476


Finance borrowings

Bank loans 4.2 224,837 - - - - - 224,837

Debentures 7.0 79,422 39,568 17,232 4,190 - - 140,412

Notes 4.1 134,805 - - - - - 134,805

Committed liquidity facilities 4.0 73,861 - - - - - 73,861

Derivative financial instruments 4.0 170 432 1,325 1,225 - - 3,152

Other financial liabilities - - - - - - 5,143 5,143

513,095 40,000 18,557 5,415 - 5,143 582,210

Net effective interest rate gap 45,792 4,273 55,844 11,749 69 (2,461) 115,266


(iv) Summarised sensitivity analysis

The following table summarises the sensitivity of the Finance business’ financial assets and financial liabilities to

interest rate risk in terms of the effect on post-tax profit and equity. The analysis is based on the assumption that all

other variables remain constant and incorporates the effect a -/+ 100 basis point movement in interest rates has on

the financial assets and financial liabilities held at balance date. The sensitivity analyses below represent the range

of movements for each type of risk that are considered reasonably possible as at balance date. The risk profile will

vary throughout the financial year.

(b) Credit risk

The Finance business is exposed to credit risk, which is the risk that a counterparty will cause a financial loss for the

Finance Business by failing to discharge an obligation. Credit risk arises principally on advances made to customers

and deposits held with other entities and also in off-statement of financial position items such as loan commitments.

(i) Credit risk management process

A Credit Committee oversees all aspects of credit risk assessment and management and operates within credit poli-

cies and guidelines approved by the Finance business Board of Directors. These policies ensure that any credit risk

incurred falls within acceptable parameters.

INTEREST RATE RISK

-1% +1%

Carrying Profit Equity Profit Equity

amount

31 March 2012 $’000 $’000 $’000 $’000 $’000

Financial assets

Cash & cash equivalents 87,074 (628) (628) 628 628

Finance receivables 594,532 (4,282) (4,282) 4,282 4,282

Derivative financial instruments 52 (243) (285) 239 279

Other financial assets 3,373 (4) (4) 4 4


Finance borrowings (550,966) 3,958 3,958 (3,958) (3,958)

Derivative financial instruments (2,716) (527) (1,548) 517 1,508

Other financial liabilities (10,972) - - - -

Total increase/ (decrease) (1,726) (2,789) 1,712 2,743

INTEREST RATE RISK

-1% +1%

Carrying Profit Equity Profit Equity

amount

31 March 2011 $’000 $’000 $’000 $’000 $’000

Financial assets

Cash & cash equivalents 92,154 (648) (648) 648 648

Finance receivables 601,595 (4,211) (4,211) 4,211 4,211

Derivative financial instruments 1 - - - -

Other financial assets 3,726 - - - -


Finance borrowings (573,915) 4,010 4,010 (4,010) (4,010)

Derivative financial instruments (3,153) (778) (2,254) 763 2,807

Other financial liabilities (5,143) - - - -

Total increase/ (decrease) (1,627) (3,103) 1,612 3,656



The Finance business manages credit risk in a number of ways:

_ In consumer lending, robust credit processes are employed to originate new loans to customers. These processes

incorporate credit scorecards, credit checks, fraud detection software, business rules and review of customer

credit history to assess a customer’s credit worthiness. Wherever appropriate, a charge will be taken by way of

reservation of title over the asset financed, except for personal loans, where advances are generally unsecured.

The personal loans business ceased originating new loans in January 2006. Additionally where appropriate the

Finance business registers a Purchase Money Security Interest (PMSI) charge over each customer and all details

of the asset used as security on the Personal Property Securities Register.

_ In commercial lending, the integrity and financial standing of approved borrowers is relied upon. All equipment

finance and rental & leasing contracts are assessed in accordance with a range of credit criteria and the amount

of each advance. Criteria include credit checks, trade references and financial account analysis. These contracts

are secured over the goods financed and guarantees are requested from business proprietors in certain circum-

stances. Assets financed include machinery and plant & equipment but do not include residential or commercial

property. Additionally where appropriate the Finance business registers a PMSI charge over each customer and

all equipment used as security on the Personal Property Securities Register.

_ In bulk funding, security is a general security interest charging all present and after acquired personal property

and a specific security interest (first mortgage) over the Finance receivables sold to Smithcorp Finance Limited.

In addition, several factors are taken into account in determining the amount of money advanced, including

average yield and arrears levels. A general security reserve is also maintained to ensure a margin exists between

the amounts advanced and the value of the underlying Finance receivables.

_ Interest rate instruments have been entered into with trading banks. The Finance business’ exposure to credit

risk from these financial instruments is limited because it does not expect non-performance of the obligations

contained therein due to the credit rating of the financial institutions concerned. The Finance business does

not require collateral or other security to support these financial instruments.

(ii) Concentrations of Credit Exposure

As at 31 March 2012, the Finance business had advanced $74.5 million to Smithcorp Finance Limited, a bulk finance

merchant (2011 $75.4 million). Security is a general security interest charging all present and after acquired property

and a specific interest over finance receivables. These receivables, taken as individual finance receivable agreements,

are largely low value advances to retail customers.

Excluding Smithcorp Finance Limited, the Finance business had no exposure to retailers, commercial accounts or

individual receivable agreements that exceeded 10% of Finance business equity (2011 Nil).

Maximum exposure to credit risk before collateral held or other credit enhancements is shown in the table below:

The above table represents a maximum credit risk exposure at 31 March 2012, without taking into account any col-

lateral, other credit enhancements attached or the cancellation of undrawn lending commitments. For on-statement

of financial position assets, the exposures set out above are based on net carrying amounts as reported in the

31 March 31 March

2012 2011

$’000 $’000

Credit exposures relating to on-statement of financial position assets:

Cash & cash equivalents 87,074 92,154

Derivative financial instruments 52 1

Finance receivables 594,532 601,595

Other financial assets 3,373 3,726

Credit exposures relating to off-statement of financial position items:

Undrawn lending commitments* 1,819,864 1,775,323

2,504,895 2,472,799

*Undrawn lending commitments include unutilised Q Card, Farmers Finance Card and fixed instalment limits, which can be unconditionally cancelled at any time.


Statement of Financial Position.

Further details on Finance receivables and impairment are disclosed in Note 12.

(iii) Geographic Concentrations of Finance Receivables

The table below details the geographic split of Finance receivables:

Upper North Island comprises the Auckland and Northland regions. Lower North Island comprises the Wellington

and Manawatu regions.

(c) Liquidity risk

Liquidity risk is the risk that the Finance business is unable to meet its payment obligations associated with its

financial liabilities when they fall due. It includes the risk that the Finance business may have insufficient liquid

funds or may not be able to raise sufficient funds at short notice to meet its payment obligations associated with

financial liabilities when they fall due. This situation can arise if there is a significant mismatch of its financial assets

and financial liabilities.

(i) Liquidity risk management process

The Finance business operates an Asset & Liability Committee that oversees all aspects of statement of financial

position risk. This Committee has a formal charter, which outlines its role and responsibilities. All treasury related

activity must comply with treasury risk management policies approved by the Finance business Board of Directors.

Liquidity risk is managed through:

_ day to day funding requirements and future cash flows are monitored to ensure requirements can be met. This

includes replenishment of funds as they mature or are borrowed by customers. The Finance business maintains

an active presence in local money markets to enable this to happen

_ regularly forecasting future cash flows to assess maturity mismatches between financial assets and financial

liabilities in advance

_ not relying on one funding source, but maintaining a diverse and stable funding base

_ maintaining strong bank relationships and committed bank credit balances

_ monitoring statement of financial position liquidity ratios against internal and external requirements

The Asset & Liability Committee also monitors the level and type of undrawn lending commitments against commit-

ted credit facilities to ensure there is sufficient capacity.

The table below analyses the Finance business’ financial assets and financial liabilities and net settled derivative

financial instruments into relevant maturity groupings based on the remaining period at the reporting date to the

contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows, except

for derivative financial instruments.

31 March 31 March

2012 2011

$’000 $’000

Upper North Island 208,904 212,691

Central North Island 138,832 138,386

Lower North Island 75,969 77,049

South Island 170,827 173,469

594,532 601,595



(d) Fair value estimation

The fair value of financial instruments that are not traded in an active market is determined using generally accepted

valuation techniques. The Finance business uses a variety of methods and makes assumptions that are based on

market conditions existing at each balance date. Quoted market prices or dealer quotes for similar instruments are

used for long-term debt instruments held. Other techniques, such as estimated discounted cash flows, are used to

determine fair value for the remaining financial instruments. The fair value of interest rate swaps is calculated as the

present value of the estimated future cash flows.

The fair value of financial liabilities and financial assets for disclosure purposes is estimated by discounting the future

contractual cash flows at the current market interest rate that is available to the Finance business for similar financial

instruments. For short-term financial assets and liabilities, their carrying amount is a reasonable approximation of

their fair values.

Call 0 to 6 7 to 12 13 to 24 25 to 60 Over 60 Total

months months months months months

31 March 2012 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Financial assets

Cash & cash equivalents 87,074 - - - - - 87,074

Derivative financial instruments* - 8 25 60 17 - 110

Finance receivables - 223,979 148,718 171,624 201,225 40,920 786,466

Other financial assets - 2,830 15 30 545 - 3,420

87,074 226,817 148,758 171,714 201,787 40,920 877,070


Finance borrowings

Bank loans - 4,931 142,016 4,205 105,115 - 256,267

Debentures 5,478 47,894 41,440 20,706 3,043 - 118,561

Notes - 195,000 - - - - 195,000

Derivative financial instruments* - 1,145 728 644 174 - 2,691

Other financial liabilities - 10,972 - - - - 10,972

5,478 259,942 184,184 25,555 108,332 - 583,491

Call 0 to 6 7 to 12 13 to 24 25 to 60 Over 60 Total

months months months months months

31 March 2011 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Financial assets

Cash & cash equivalents 23,653 68,758 - - - - 92,411

Derivative financial instruments* - (1) - 1 - - -

Finance receivables - 225,663 151,043 174,366 205,551 53,344 809,967

Other financial assets - 2,537 1,030 - - - 3,567

23,653 296,957 152,073 174,367 205,551 53,344 905,945


Finance borrowings

Bank loans - 4,761 4,735 112,310 124,645 - 246,451

Debentures 8,288 74,478 41,012 19,516 4,630 - 147,924

Notes - 135,500 - - - - 135,500

Committed liquidity facilities - 1,840 73,728 - - - 75,568

Derivative financial instruments* - 1,491 1,242 708 (172) - 3,269

Other financial liabilities - 4,968 - - - - 4,968

8,288 223,038 120,717 132,534 129,103 - 613,680

* The amounts expected to be receivable/payable in relation to the derivative financial instruments have been estimated using forward interest rates applicable at the reporting date.


Where present value techniques are used to value future cash flows deriving from interest rate derivative contracts, the Finance

business uses an MS Excel based valuation model licensed from a reputable third party vendor. Market data used for valuation

purposes (i.e. interest rate yield curves) are provided by independent third party data providers where possible. In addition,

month-end derivative portfolio valuations are obtained from all derivative counterparties for comparison with internal valuations.

Financial instruments which are measured in the Statement of Financial Position at fair value, require disclosure of fair value

measurements by level of the following fair value measurement hierarchy:

_ Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).

_ Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is,

as prices) or indirectly (that is, derived from prices) (Level 2)

_ Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).

The following table presents the Group’s assets and liabilities that are measured at fair value.

The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting date. A mar-

ket is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group,

pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s

length basis. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are

included in Level 1. Government stock has been included in Level 1.

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is

determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is

available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are

observable, the instrument is included in Level 2.


balance

31 March 2012 $’000 $’000 $’000 $’000

Assets

Deposits - 16,950 - 16,950

Derivative financial instruments - cash flow hedges - 7 - 7


Derivative financial instruments - fair value hedges - 12 - 12

Government stock 556 - - 556

Total assets 556 17,002 - 17,558

Liabilities






balance

31 March 2011 $’000 $’000 $’000 $’000

Assets

Deposits - 20,123 - 20,123


Government stock 1,044 - - 1,044

Total assets 1,044 20,124 - 21,168

Liabilities







If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.

Specific valuation techniques used to value financial instruments include:

_ Quoted market prices or dealer quotes for similar instruments.

_ The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based

on observable yield curves.

_ Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining

financial instruments.

The following table presents the changes in Level 3 instruments.

As at 31 March 2012, all bulk finance receivables were measured at amortised cost.

Total loss for the year ended 31 March 2012 included in the Income Statement (included within Finance business

revenue) for assets held at 31 March 2012 was $nil (2011 $nil).

Bulk

finance

receivables

31 March 2012 $’000

Balance at the beginning of the year -

Gains & losses recognised in the Income Statement -

Interest & similar charges -

Repayments -

Balance at the end of the year -

Bulk

finance

receivables

31 March 2011 $’000

Balance at the beginning of the year 11,292

Gains & losses recognised in the Income Statement (17)

Interest & similar charges 148

Repayments (11,423)

Balance at the end of the year -


(e) Financial instruments by category

ASSETS AS PER STATEMENT OF FINANCIAL POSITION Fair value Fair value Loans and Derivatives Total

through through receivables used for

profit or profit or hedging

loss — loss — held

designated for trading

$’000 $’000 $’000 $’000 $’000

31 March 2012

Cash and cash equivalents 16,950 - 70,124 - 87,074

Derivative financial instruments - 33 - 19 52

Finance receivables - - 594,532 - 594,532

Other financial assets 556 - 2,816 - 3,372

17,506 33 667,472 19 685,030

31 March 2011

Cash and cash equivalents 20,123 - 72,031 - 92,154

Derivative financial instruments - - - 1 1

Finance receivables - - 601,595 - 601,595

Other financial assets 1,044 - 2,682 - 3,726

21,167 - 676,308 1 697,476

LIABILITIES AS PER STATEMENT OF FINANCIAL POSITION Fair value Derivatives Measured at Total

through used for amortised

profit or hedging cost

loss - held

for trading

$’000 $’000 $’000 $’000

31 March 2012

Borrowings - - 550,966 550,966


Other financial liabilities - - 10,972 10,972

641 2,075 561,938 564,654

31 March 2011

Borrowings - - 573,915 573,915


Other financial liabilities - - 5,143 5,143

991 2,162 579,058 582,211


6 SEGMENT INFORMATION

Chief Operating Decision Maker

The ‘Chief Operating Decision Maker’ has been identified as the Board of Directors together with the Executives of

the Appliances and Finance businesses, who review the Group’s internal reporting in order to assess performance

and allocate resources. Management has determined the operating segments based on these reports.

Reportable segments

The Appliances business’ reportable segments are based primarily on the nature of activities undertaken (factory

operations and sales/customer service companies) and are then split by geographic location. Factory operations

include sites that manufacture goods for both the Group and external customers. Sales & service includes sales &

distribution operations and also customer service operations.

The Finance business is considered as one reportable segment.

Other segment information

Performance of operating segments is assessed based on a measure of earnings before interest and taxation (op-

erating profit or loss). This excludes interest costs associated with core funding and other overheads that are held

at Group level and cannot be allocated.

Intersegment revenue is recognised on the basis of arm’s length transactions and reflects returns required for taxa-

tion transfer pricing purposes where applicable.

Other information provided, except as noted below, is measured in a manner consistent with that in the financial

statements.

Significant one-off costs have been excluded from the segment disclosures to reflect underlying segment operating

performance.

Segment total assets exclude certain elements of deferred tax that are associated with adjustments held for consoli-

dation purposes, derivative financial instruments and non-current assets held for sale that are managed on a central

basis and fair value adjustments held on consolidation. These form part of the reconciliation to total assets in the

Statement of Financial Position.


SEGMENT REVENUE & PROFIT ANALYSIS

31 MARCH 2012 31 MARCH 2011

Revenue Inter- Total Operating Revenue Inter- Total Operating

from segment segment profit from segment segment profit

external revenue revenue external revenue revenue

customers customers

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Factory operations

New Zealand 4,701 114,287 118,988 3,173 12,220 135,550 147,770 19,736

Australia - - - - 0 - - (1,629)

North America 28,855 83,546 112,401 (12,838) 33,071 105,614 138,685 (7,758)

Thailand - 224,219 224,219 36,738 0 225,338 225,338 43,173

Europe 97,044 34,625 131,669 8,833 106,283 44,687 150,970 4,484

130,600 456,677 587,277 35,906 151,574 511,189 662,763 58,006

Sales & customer service

New Zealand 162,295 7,343 169,638 13,655 162,825 7,801 170,626 8,462

Australia 412,143 2,121 414,264 49,622 423,263 3,145 426,408 40,086

North America 135,653 - 135,653 916 172,863 - 172,863 (9,802)

Europe 17,966 - 17,966 307 18,270 - 18,270 118

Rest of World 32,792 - 32,792 1,637 36,258 - 36,258 112

760,849 9,464 770,313 66,137 813,479 10,946 824,425 38,976

Unallocated overheads (65,150) (59,122)

Currency Fluctuations (25,611) (14,185)

One-off expenses* (3,935) (1,382)

One-off income* - 6,508

Appliances business 891,449 466,141 1,357,590 7,347 965,053 522,135 1,487,188 28,801

Finance business 139,719 - 139,719 31,040 145,289 - 145,289 34,722

Total 1,031,168 466,141 1,497,309 38,387 1,110,342 522,135 1,632,477 63,523

SEGMENT REVENUE RECONCILIATION TO THE INCOME STATEMENT

$’000 $’000

Total segment revenue 1,497,309 1,632,477

Inter-segment revenue elimination (466,141) (522,135)

Interest income 2,408 1,484

Other miscellaneous income 4,382 9,117

Total revenue & other income as per the Income Statement 1,037,958 1,120,943

* Refer Notes 8 & 14


6 SEGMENT INFORMATION (CONTINUED)

SEGMENT TOTAL ASSETS

31 March 31 March

2012 2011

$’000 $’000

Factory operations


Australia - -


Thailand 114,474 101,177

Europe 78,778 92,157

321,826 342,887



Australia 103,930 130,667


Europe 7,638 8,072

Rest of World 7,623 8,835

198,922 245,147

Inter-segment eliminations (15,945) (16,799)

Unallocated assets 159,333 180,287

Appliances business 664,136 751,522

Finance business 806,042 826,420

Intersegment Eliminations (16,492) (19,528)

Total assets as per the Statement of Financial Position 1,453,686 1,558,414


OTHER SEGMENT DEPRECIATION AMORTISATION INTEREST INTEREST CAPITAL WORKING

DISCLOSURES EXPENSE* INCOME** EXPENDITURE CAPITAL

31 March 31 March 31 March 31 March 31 March 31 March 31 March 31 March 31 March 31 March 31 March 31 March

2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Factory operations

New Zealand 2,772 3,806 3 4 - 1 (9) (51)

Australia - - - - - - - -

North America 7,455 7,976 579 165 (365) 1,418 - -

Thailand 6,893 7,669 20 19 1,683 1,614 (2) (2)

Europe 2,223 2,102 4,277 4,556 554 964 (33) (46)

19,343 21,553 4,879 4,744 1,872 3,996 (44) (99)


New Zealand 320 73 94 93 - - - -

Australia 1,038 766 10 35 - - (398) (366)

North America 811 843 9 9 - - - -

Europe 81 116 - - - - (2) (2)

Rest of World 31 117 - - - 17 - -

2,281 1,915 113 137 - 17 (400) (368)

Unallocated 360 283 4,691 3,918 8,985 11,389 (335) (15)

Appliances business 21,984 23,751 9,683 8,799 10,857 15,403 (779) (482) 48,313 24,263 163,668 224,084

Finance business 493 483 8,466 7,860 - - (1,629) (1,002) 2,163 4,078 - -

Total 22,477 24,234 18,149 16,659 10,857 15,403 (2,408) (1,484) 50,476 28,341 163,668 224,084

Refer also Note 8* Excludes Finance business operating interest** Excludes interest on Finance business receivables, which forms part of revenue from external customers


7. REVENUE & OTHER INCOME

(a) Sales revenue

Revenue figures reported above are disclosed by location of customer and therefore do not agree directly to Seg-

ment disclosures at Note 6, where revenue is reported by country or region of operation.

(b) Net gains on disposal of property, plant & equipment

Net gains on disposal of property, plant & equipment for the period ending 31 March 2011 included a gain on sale

of land & buildings of $6.5 million.

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Appliances business sales of goods revenue

New Zealand 159,829 162,429 - -

Australia 410,493 419,035 - -

North America 165,766 207,883 - -

Europe 64,304 81,330 - -

Rest of World 74,393 69,505 - -

Appliances business other sales of goods revenue 4,701 12,217

Appliances business sales of services revenue 11,963 12,654 - -

Finance business revenue 139,719 145,289 - -

Total operating revenue 1,031,168 1,110,342 - -

Other income

Interest 2,408 1,484 - 1

Net gains on disposal of property, plant & equipment - 6,300 - -

Appliances business fee income 1,412 1,250 - -

Appliances business miscellaneous income 2,665 2,341 - -

Finance business fair valuation adjustments 305 (774) - -

Total other income 6,790 10,601 - 1

Total revenue & other income 1,037,958 1,120,943 - 1


8. EXPENSES

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Net gains and expenses

Profit before income tax includes the following specific expenses:

Appliances business

Cost of goods sold (“COGS”) 613,017 673,118 - -

Onerous contracts 2,694 882 - -

Fair valuation of non-current assets held for sale (refer note (i)) 1,241 500 - -

Net foreign exchange losses 25,611 14,185 - -

Other administration expenses 133,729 134,834 - -

Administration expenses 163,275 150,401 - -

Selling, marketing & distribution expenses 112,666 123,106 - -

Total operating expenses 888,958 946,625 - -

The above expenses include:

Movement of inventory within COGS 531,905 573,312 - -

Employee benefits 187,512 189,718 - -

Depreciation 21,984 23,751 - -

Amortisation 9,683 8,799 - -

Rental expense relating to operating leases 22,946 25,383 - -

Defined contribution superannuation expense 12,874 12,500 - -

Research & development 17,153 15,668 - -

Donations 16 352 - -

Appliance business finance costs

External interest expense 10,857 15,403 - -

Finance costs expensed 10,857 15,403 - -


8. EXPENSES (CONTINUED)

(i) Asset Impairments

In the year ended 31 March 2012 on fair valuing the remaining East Tamaki, Auckland land & buildings held for sale,

an impairment of $1.2 million (2011 $0.5 million) was recognised - refer also Note 14.

(ii) Christchurch earthquake adjustment

In the year ended 31 March 2011, the impairment charge for credit losses includes a provision overlay of $2.0 million

in relation to the Christchurch earthquake that occurred in February 2011. This provision overlay was fully released

in the current year.

(iii) Litigation costs

Previously a contingency has been reported for litigation which alleged that software developed by Fisher & Paykel

Financial Services Limited (FPFS) breaches intellectual property rights of a USA software company. No specific provi-

sion was previously made for this, as the known basis of claim was considered to have little or no prospect of success.

The case was heard in the High Court at Auckland, New Zealand in late 2011 and a judgement on the issue is ex-

pected this year.

At trial, the USA software company modified its previous stance that FPFS copied software and instead focussed on

its alleged intellectual property rights in the logic that underpins certain software functionality.

While the Directors believe on the information available to them that the claim is novel and lacks commercial merit,

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Finance business

Receivables written off during the year 18,762 19,545 - -

Recovery of amounts previously written off (1,670) (1,509) - -

Movement in allowance for impairment (5,980) 1,312 - -

Impairment charge for credit losses (refer sub-note (ii)) 11,112 19,348 - -

Interest expense & similar charges 40,818 41,360 - -

Litigation costs (refer sub-note (iii)) 6,774 - - -

Other Finance business expenses before unearned premium movements 53,599 47,548 - -

Movement in unearned insurance & warranty premiums (1,690) 2,539 - -

Other Finance business expenses 51,909 50,087 - -

Total operating expenses 110,613 110,795 - -

Other Finance business expenses include:


Depreciation 493 483 - -

Amortisation 8,466 7,860 - -

Marketing & promotion 7,396 5,529 - -

Insurance and warranty commissions & claims 3,648 3,392 - -

Rental expense relating to operating leases 1,471 1,988 - -

Defined contribution superannuation expense 718 686 - -

Donations 3 - - -


there are complex legal issues and a range of possible outcomes. Accordingly, the Directors consider it is now pru-

dent to make a provision given this uncertainty.

This amount, together with legal costs incurred by FPFS through to 31 March 2012, has been reported as Litigation

Costs in the Income Statement. The amount of the provision recorded by FPFS has not been disclosed separately

as this may prejudice FPFS’s position in this matter.

Auditors’ fees

During the year the following fees were paid or payable for services provided by the Auditor of the Company and

the Group, its related practices and non-related audit firms:

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

(a) Assurance services

Audit services

PricewaterhouseCoopers

Statutory audit - current year 1,137 1,181 - -

Statutory audit - prior year - - - -

Compliance audits - Appliances Thailand 35 31 - -

Share register audit 2 2 - -

Fisher & Paykel Finance Limited Debenture Prospectus audit 10 10 - -

Farmers Finance securitisation compliance audit 33 30 - -

Other audit firm

Statutory audit - current year 24 23 - -

Total remuneration for audit services 1,241 1,277 - -

Other assurance services


Review of Group Interim Financial Statements 84 106 - -

Accounting advice 35 28 - -

Tax compliance services 97 65 - -

Other assurance services 254 61 - -

Total remuneration for other assurance services 470 260 - -

Total remuneration for assurance services 1,711 1,537 - -

(b) Other services


Statutory reporting software 25 28 - -

Total remuneration for advisory services 25 28 - -

Total remuneration 1,736 1,565 - -


9. INCOME TAX EXPENSE

Tax legislation passed in 2010 reduced the New Zealand company tax rate from 30% to 28%, effective

1 April 2011.

The weighted average applicable effective tax rate was 33.1% (2011 30.3%).

The Group has estimated New Zealand tax losses available to carry forward of $21.7 million (2011 $15.9

million), subject to shareholder continuity being maintained as required by New Zealand tax legislation.

In addition, the Group has unrecognized New Zealand tax losses of $0.6 million.

The Group has estimated North American tax losses available to carry forward of $14.6 million (2011

$14.8 million) and tax credits of $2.8 million. These are subject shareholder continuity being maintained

as required by US tax legislation. In addition, the Group has unrecognized US tax losses and credits

totalling $24.0 million.

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

(a) Income tax expense

Current tax 14,068 23,259 - 66

Deferred tax (4,969) (8,684) 82 (101)

9,099 14,575 82 (35)

Deferred income tax (credit)/expense included in income tax expense comprises:

Decrease/(increase) in deferred tax assets (Note 18) (3,707) (8,313) 82 (101)

(Decrease)/increase in deferred tax liabilities (Note 24) (1,262) (371) - -

(4,969) (8,684) 82 (101)

(b) Numerical reconciliation of income tax expense to prima facie tax payable

Profit from continuing operations before income tax expense 27,530 48,120 136 112

Tax at the New Zealand tax rate of 28% (2011: 30%) 7,708 14,436 38 34

Tax effect of a change in New Zealand tax rate to 28% - 1,116 - 16

Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:

Other non-assessable income (490) (2,541) - -

Forfeited NRWT 298 823 - -

Unrealised losses on New Zealand FC1 debenture 391 182 - -

Net (Recognition) / Derecognition of deferred tax (524) (1,680) - -

Credits provided to/from Group companies - - 44 (151)

Other non-deductible amounts 1,442 3,144 - -

8,825 15,480 82 (101)

Difference in overseas tax rates (62) (126) - -

Under/(over) provision in prior years 336 (779) - 66

274 (905) - 66

Income tax expense 9,099 14,575 82 (35)


10. CASH & CASH EQUIVALENTS

(a) Reconciliation to cash at the end of the year

The above figures are reconciled to cash at the end of the financial year as shown in the Cash Flow Statement as follows:

(b) Cash at bank and on hand

This consists of both interest and non-interest bearing balances denominated in various currencies. The weighted

average interest rate as at 31 March 2012 was 2.0% (2011 1.8%).

(c) Deposits

These are Finance business call and term deposits. The call deposits bear a weighted average interest rate of 2.5%

(2011 2.5%). There were no fixed term deposits during the year to 31 March 2012 (2011 weighted average interest

rate ranged from 3.3% to 4.3%). During the year to 31 March 2011 the average maturity period was 39 days.

(d) Fair value

The carrying amount for cash & cash equivalents equals the fair value.

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Cash at bank and on hand 35,497 40,654 1 1

Deposits 73,850 72,875 - -

109,347 113,529 1 1

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Balance as above 109,347 113,529 1 1


11. TRADE RECEIVABLES & OTHER CURRENT ASSETS

(a) Impaired receivables

As at 31 March 2012 current trade receivables of the Group with a nominal value of $0.6 million (2011 $1.1 million),

which relate to a number of customers, were fully impaired and provisioned. There were no impaired trade receiv-

ables in the Parent in 2012 or 2011.

The ageing of these impaired receivables is as follows:

As of 31 March 2012, trade receivables of $3.0 million (2011 $5.1 million) were past due but not impaired. These

relate to a number of customers who pay outside terms (but consistent with custom & practice for their sector) and

for whom there is no recent history of default. The ageing analysis of these past due but not impaired receivables

is as follows:

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Net trade receivables

Trade receivables 109,079 129,222 - -

Allowance account for impairment of trade receivables (623) (1,105) - -

108,456 128,117 - -

Other debtors & prepayments 17,196 22,511 21 27

125,652 150,628 21 27

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

0 to 60 days 67 390 - -

61 to 120 days 72 66 - -

Over 120 days 484 649 - -

623 1,105 - -

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

0 to 60 days 3,544 3,638 - -

61 to 120 days (156) 888 - -

Over 120 days (423) 584 - -

2,965 5,110 - -


Movements in the provision for impairment of receivables are as follows:

The creation and release of the provision for impaired receivables has been included in Administration expenses in

the Income Statement. Trade Receivables are provisioned when there is no expectation of collection.

The other classes within trade and other current assets do not contain impaired assets and are not past due. Based

on the credit history of these other classes, it is expected that these amounts will be received when due.

(b) Bad and doubtful trade receivables

The Group has recognised a net gain of $203,000 in respect of bad and doubtful trade receivables during the year

ended 31 March 2012 (2011 net loss $373,000). This gain / expense has been included in Administration expenses.

(c) Other debtors & prepayments

These amounts generally arise from transactions outside the usual operating activities of the Group.

Other debtors & prepayments as at 31 March 2011 included $2.0 million deferred sale proceeds from the sale of

land & buildings in East Tamaki, Auckland. These proceeds were received on 19 December 2011, refer also Note 14.

(d) Foreign exchange and interest rate risk

A summarised analysis of the sensitivity of trade and other receivables to foreign exchange and interest rate risk

can be found in Note 4.

(e) Fair value and credit risk

Due to the short term nature of these trade receivables, carrying value is assumed to approximate their fair value.

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Carrying amount at the start of the year 1,105 1,568 - -

Exchange rate variance on opening balance (126) (46) - -

Additional provision recognised 263 749 - -

Utilised during the year (619) (1,166) - -

623 1,105 - -


12. FINANCE RECEIVABLES

The Finance business recognised an impairment charge for credit losses of $11.1 million in respect of impaired

receivables for the year ended 31 March 2012 (2011 $19.3 million). Refer to Note 8.

(a) Finance business leases

Included within finance receivables are finance leases which the Finance business provides to customers for purchase

of office and other equipment.

31 March 31 March

2012 2011

$’000 $’000

Current


Provision for unearned interest (3,889) (5,186)

Allowance for impairment (12,532) (16,413)

Total current Finance receivables 359,662 369,876

Non-current


Provision for unearned interest (2,540) (3,249)

Allowance for impairment (8,183) (10,282)

Total non-current Finance receivables 234,870 231,719

Total Finance receivables 594,532 601,595

31 March 31 March

2012 2011

$’000 $’000

Finance lease receivables

Gross receivables from finance leases:

Not later than 1 year 20,435 21,624

Later than 1 year and not later than 5 years 20,544 21,626

Later than 5 years 13 83

40,992 43,333

Unearned finance income (2,160) (2,511)

Allowance for uncollectible minimum lease payments receivable (1,143) (1,914)

(3,303) (4,425)

Net investment in finance leases 37,689 38,908


The net investment in finance leases is analysed as follows

(b) Impaired receivables

Net Finance receivables are summarised as follows:

The past due but not impaired category includes those Finance receivables for which the customer has failed to make

a payment when contractually due and for which the receivable has not been individually assessed for impairment.

The gross figures disclosed include the customers’ entire balance rather than the overdue portion.

The carrying amount of Finance receivables that would otherwise be past due whose terms have been renegotiated

at 31 March 2012 was $46.6 million (2011 $44.5 million). These receivables are included in the neither past due nor

impaired category and are considered by Management to be fully performing.

The table below shows a reconciliation of the movement in gross Finance receivables (after provision for unearned

interest) that are individually determined to be impaired.

31 March 31 March

2012 2011

$’000 $’000

Not later than 1 year 18,540 19,151

Later than 1 year and not later than 5 years 19,137 19,689

Later than 5 years 12 68

37,689 38,908

31 March 31 March

2012 2011

$’000 $’000

Neither past due nor impaired 559,287 562,002

Past due but not impaired 26,376 32,252

Impaired - individually assessed 29,584 34,036

Gross 615,247 628,290

Less:

Allowance for impairment - collectively assessed 2,928 5,690

Allowance for impairment - individually assessed 17,787 21,005

Net Finance receivables 594,532 601,595

31 March 31 March

2012 2011

$’000 $’000

Balance at 1 April 34,036 37,009

Net additions to class 12,187 14,300

Receivables written off during the year (16,639) (17,273)

Balance at 31 March 29,584 34,036


12. FINANCE RECEIVABLES (CONTINUED)

The ageing of other gross Finance receivables past due but not impaired is as follows:

Collateral held for Finance receivables individually determined to be impaired and Finance receivables past due but

not impaired is as follows:

_ Q Card advances are generally secured by way of reservation of title over the asset financed. Personal Loans

are generally unsecured

_ Farmers credit card receivables are unsecured. Farmers fixed instalment receivables are generally secured over

the goods financed

_ It is impracticable to estimate the fair value of collateral held because of the average size of each advance

outstanding, the number of advances outstanding, the term to maturity of each advance and the wide

variety and condition of each asset financed. The Finance business will, in the first instance, attempt to

collect the outstanding debt without recourse to the secured asset. In many instances third party collec-

tion agencies are utilised. Repossession of secured assets occurs only in limited circumstances and where

it is economic to do so. The carrying amount of these collateralised assets at balance date was immaterial

Movements in the “allowance for impairment - collectively assessed” is as follows:

Movements in the “allowance for impairment - individually assessed” is as follows:

The creation and release of the allowances for impaired Finance receivables has been included in the ‘Impairment

charge for credit losses’ in Note 8. Amounts charged to the allowance account are generally written off when there

is no expectation of recovering additional cash.

31 March 31 March

2012 2011

$’000 $’000

Up to 30 days 17,819 22,324

31-60 days 6,197 7,312

61-90 days 2,285 2,546

Over 90 days 75 70

26,376 32,252

31 March 31 March

2012 2011

$’000 $’000


Movement in allowance for impairment during the year (2,762) 2,402

Balance at 31 March 2,928 5,690

31 March 31 March

2012 2011

$’000 $’000


Movement in allowance for impairment during the year (3,218) (1,090)

Balance as at 31 March 17,787 21,005


(c) Fair values

The fair values and carrying values of Finance receivables are as follows:

The fair values of Finance receivables other than bulk finance receivables are based on cash flows discounted using

current lending rates ranging between 13.7% to 14.8% (2011 15.4% to 15.7%).

The fair value of Finance lease receivables are based on cash flows discounted using a current lending rate of 13.3%

(2011 14.8%).

The fair values of bulk Finance receivables are based on cash flows discounted using current lending rates ranging

between 2.7% to 2.9% (2011 2.5% to 2.9%).

The fair value of other Finance receivables equals their carrying amount as the effect of discounting was immaterial.

(d) Interest rate risk

For an analysis of the sensitivity of Finance receivables to interest rate risk, refer to Note 5.

(e) Credit risk

Refer to Note 5 for more information on credit risk from Finance receivables including objectives, policies and pro-

cesses for managing credit risk.

31 MARCH 31 MARCH

2012 2011

Carrying Fair value Carrying Fair value

amount amount value

$’000 $’000 $’000 $’000

Finance receivables 594,532 594,409 601,595 598,640


13. INVENTORIES

Inventory expense

Raw materials, consumables and changes in finished goods and work-in-progress recognised as cost of goods sold

in the year ending 31 March 2012 was $531.9 million (2011 $573.3 million).

Write-downs of inventories to net realisable value recognised as an expense during the year ended 31 March 2012

amounted to $1.4 million (2011 $2.1 million). This expense is included in cost of goods sold in the Income Statement.

The carrying value of inventories carried at fair value less costs to sell as at 31 March 2012 was $9.5 million (2011

$11.3 million).

14. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE

Surplus land & buildings at East Tamaki, New Zealand are currently for sale under 3 separate titles. These have been

recorded at the lower of cost or fair value less anticipated costs to sell. There is currently a signed conditional agreement

on one of the properties. If all conditions are met then the property sale will settle on or before 30 September 2012.

An impairment charge of $1.2 million (2011 $0.5 million) was recognised in the year ended 31 March 2012 relating

to fair value adjustments for the land & buildings at the East Tamaki site. These assets are classified as unallocated

assets in the Segment Note — refer Note 6.

In March 2011, subdivided land & buildings at the East Tamaki site were sold for $2.25 million and the final instalment

of sale proceeds amounting to $2 million was received on 19th December 2011.

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Raw materials 43,678 54,355 - -

Spare parts 12,953 15,909 - -

Work-in-progress 12,407 13,605 - -

Finished goods 82,734 111,239 - -

151,772 195,108 - -

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Land 7,757 9,501 - -

Buildings 6,086 5,520 - -

13,843 15,021 - -


15. DERIVATIVE FINANCIAL INSTRUMENTS

Derivative financial assets and liabilities are classified as current or non-current according to the underlying hedge rela-

tionship. Where an effective hedged item has a remaining maturity of more than 12 months it is classified as non-current.

(a) Instruments used by the Group

The Group is party to derivative financial instruments in the normal course of business in order to hedge exposure

to fluctuations in interest and foreign exchange rates in accordance with the Group’s financial risk management

policies(Refer Notes 4 & 5).

(i) Forward foreign exchange contracts

The Appliances business hedges net receipts of US dollars from related parties for products manufactured in Thailand.

The Appliances business hedges net payments in US dollars for imported raw materials and appliances from third

parties and finished products manufactured in Thailand and Mexico into New Zealand, Australia, Canada, Singapore

and the United Kingdom.

These contracts are hedging highly probable forecasted purchases and receipts for up to 12 months (24 months by

exception) and the contracts are timed to mature when payments are scheduled to be made or when sales have

been recognised.

The Appliances business also hedges significant capital expenditure transactions with a policy de minimis of NZ$500,000.

The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised

directly in equity. When the cash flows occur, the Appliances business adjusts the initial measurement of the com-

ponent recognised in the Statement of Financial Position by the related amount deferred in equity.

During the year ended 31 March 2012 a loss of $19.4 million (2011 loss of $11.6 million) was reclassified from equity

and included in gross margin. There was no hedge ineffectiveness in the current or prior year.

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Current assets

Forward foreign exchange contracts ((a)(i)) 2,361 2,654 - -

Interest rate swaps ((a)(ii)) 4 - - -

Total current derivative financial instrument assets 2,365 2,654 - -

Non-current assets

Forward foreign exchange contracts ((a)(i)) - 3 - -

Interest rate swaps ((a)(ii)) 151 1 - -

Total non-current derivative financial instrument assets 151 4 - -

Total derivative financial instrument assets 2,516 2,658 - -

Current liabilities

Forward foreign exchange contracts ((a)(i)) 1,736 20,029 - -

Interest rate swaps ((a)(ii)) 1,145 971 - -

Total current derivative financial instrument liabilities 2,881 21,000 - -

Non-current liabilities

Forward foreign exchange contracts ((a)(i)) - 183 - -

Interest rate swaps ((a)(ii)) 2,782 5,518 - -

Total non-current derivative financial instrument liabilities 2,782 5,701 - -

Total derivative financial instrument liabilities 5,663 26,701 - -

Total derivative financial instruments (3,147) (24,043) - -


15. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)

(ii) Interest rate derivatives

Appliances business

The Appliances business has loans totalling €6million and THB800million that form part of the core borrowings rather

than operational floats. The Group Treasury Policy states between 30 and 70 percent of these loans should be fixed

via interest rate derivatives to protect the Group from exposure to fluctuations in interest rates. Accordingly, the

Group has entered into interest rate swap and cap contracts under which it is obliged to receive interest at variable

rates and to pay interest at fixed rates.

The interest rate contracts in place at the time of the debt restructuring in March 2009 were deemed to be ineffec-

tive and are fair valued through profit or loss. Interest rate contracts entered into subsequent to the restructuring

are deemed effective and fair valued through the cash flow hedge reserve.

The Appliances business has interest rate swaps with a notional value of USD 24million; there is no USD loan out-

standing as at 31 March 2012. There are swaps and caps currently in place to cover approximately 208% (2011 78%)

of the Euro loan principal amount. The swap cover on the US dollar and Euro loans are outside policy limits (with

Board consent), due to the reduction of foreign currency denominated loans as total debt levels have fallen.

There is an interest rate swap with a notional value of NZD $5 million that hedges NZD floating rate risk. The remain-

ing floating rate risk is offset by a floating rate receivable from the Finance business. There are Caps in place to

cover approximately 35% of the Thai Baht loan principal outstanding (2011 44% coverage with interest rate swaps).

The fixed interest rates average 4.25% for the Euro loan (2011 4.25%) and 3.52% for NZD loan. On the THB debt

Caps have been bought that protect at an average rate of 4.75%. The variable rates are set at the LIBOR 90 day

settlement rates for the Euro loans and NZD BBR Bid for NZD, and THBFIX 180 day for THB, at balance date were

0.89% (2011 1.18%) for the Euro and 2.80% (2011 2.70%) for the NZD. For the THB the rate of 3.08% was under the

Cap rate (2011 1.88%).

The contracts require settlement of net interest receivable or payable each 90/180 days as appropriate. The contracts

are settled on a net basis.

Finance business

The Finance business only applies fair value hedge accounting for hedging fixed interest on its bulk Finance receiv-

ables and uses fair value hedges to protect against movements in the fair value of its fixed rate receivables due to

movements in market interest rates. Changes in the fair value of derivative financial instruments that are designated

and qualify as fair value hedges are recorded in the statement of comprehensive income (within “Finance business

fair value adjustments” in Other Income - refer Note 7), together with any changes in the fair value of the hedged

item that are attributable to the hedged risk.

The Finance business has designated certain interest rate swaps as hedging instruments against loans and advances

made to Smithcorp Finance Limited (bulk Finance receivables). The notional principal outstanding at 31 March 2012

for these interest rate swaps was $73.3 million (2011 $74.0 million).

The fair value movement on the hedging instrument (interest rate swaps) for the year ended 31 March 2012 was

a gain of $242,000 (2011 loss of $201,000). The fair value movement on the hedged item (attributable risk of bulk

Finance receivables) for the year ended 31 March 2012 was a loss of $242,000 (2011 gain of 201,000).

The Finance business only applies cash flow hedge accounting for hedging the variability in cash flows arising from

the rollover of its bank loans and uses cash flow hedges to protect against variability in future cash flows due to

movements in market interest rates. Changes in the fair value of derivative financial instruments that are designated

and qualify as cash flow hedges are recorded in equity (Interest rate hedge reserve).


The Finance business has designated a portion of certain interest rate swaps as hedging instruments against the vari-

ability in the cash outflows arising on the rollover of bank loans after 1 April 2010. The notional principal outstanding

at 31 March 2012 for these interest rate swaps was $117 million (2011 $99 million).

The fair value movement on the hedging instrument for the year ended 31 March 2012 recognised in equity was a

loss of $70,000 (2011 $1.26 million). For the year ended 31 March 2012 there was no ineffectiveness recognised in

the Income Statement arising from these cash flow hedges.

The Finance business uses interest rate swaps to economically hedge a portion of its asset/liability gap. The no-

tional principal outstanding at 31 March 2012 for these interest rate swaps was $102.0 million (2011 $104.0 million).

Refer also to ‘Financial risk management - Finance business’ Note 5(d) & (e) for further details on Finance business

derivatives.

(b) Credit risk exposures

Credit risk arises from the potential failure of counterparties to meet their obligations under the respective contracts

at maturity. At balance date $2.4 million is receivable (New Zealand dollar equivalents) for the Appliances business

from forward foreign exchange contracts (2011 $2.7 million).

The Appliances business undertakes 100% of its transactions in foreign exchange, interest rate and commodity price

contracts with financial institutions. Management spreads this risk across several counterparties, all of which are

required to hold a minimum Standard & Poor’s long-term credit rating of “BBB+”. Credit risk control limits are then

applied to Board approved counterparties dependent on the rating.

The Finance business enters into interest rate derivatives with Board approved financial institutions. All approved

counterparties have a minimum Standard & Poor’s long-term credit rating of “AA-” and the Finance business does

not require collateral or other security to support these financial instruments. At balance date $52,000 (2011 $1,000)

is receivable in respect of these financial instruments.

(c) Interest rate risk exposures

For an analysis of the sensitivity of derivatives to interest rate risk refer to Notes 4 and 5.


16. PROPERTY, PLANT & EQUIPMENT

Freehold Freehold Leasehold Plant & Fixtures Motor Capital Total

land buildings improve- equipment & fittings vehicles Work-in-

ments Progress

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

1 April 2010

Cost 19,215 61,387 6,317 529,132 11,131 1,984 4,743 633,909

Accumulated depreciation & impairment - (4,650) (3,934) (398,065) (6,960) (1,926) - (415,535)

Net book amount 19,215 56,737 2,383 131,067 4,171 58 4,743 218,374

Year ended 31 March 2011

Opening net book amount 19,215 56,737 2,383 131,067 4,171 58 4,743 218,374

Additions - 42 1,660 13,011 633 72 3,906 19,324

Disposals - - (19) (5,185) (102) (1) -- (5,307)

Reclassification* - (2,738) - 2,738 - - - -

Depreciation charge - (997) (933) (21,305) (952) (47) - (24,234)

Exchange differences (343) (1,174) (56) (4,241) 56 (1) (243) (6,002)

Closing net book amount 18,872 51,870 3,035 116,085 3,806 81 8,406 202,155

31 March 2011

Cost 18,872 57,490 7,437 511,501 11,552 1,953 8,406 617,211


Net book amount 18,872 51,870 3,035 116,085 3,806 81 8,406 202,155

* Assets incorrectly classified as “Buildings” in prior periods were reclassified in the current period to “Plant & equipment”. Depreciation rates were unaffected and remain valid for these assets, which are infrastructure related items located in Thailand.


(a) Leased assets

Plant & equipment includes the following amounts where the Group is a lessee under a finance lease:

(b) Impairment charges

Total impairment charges for property, plant & equipment in the year ended 31 March 2012 were $nil (2011 $nil).

Refer also Note 17 for details of impairment charges relating to associated intangible assets.

Freehold Freehold Leasehold Plant & Fixtures Motor Capital Total

land buildings improve- equipment & fittings vehicles Work-in-

ments Progress

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000


Opening net book amount 18,872 51,870 3,035 116,085 3,806 81 8,406 202,155

Additions - 75 145 25,514 462 15 13,618 39,829

Disposals - (2) - (129) (13) - - (144)

Depreciation charge - (1,049) (704) (19,739) (959) (26) - (22,477)

Exchange differences (2,164) (5,732) (123) (10,217) (258) (6) (342) (18,842)

Closing net book amount 16,708 45,162 2,353 111,514 3,038 64 21,682 200,521

31 March 2012

Cost 16,708 51,123 7,164 505,773 10,737 1,832 21,682 615,019


Net book amount 16,708 45,162 2,353 111,514 3,038 64 21,682 200,521

31 March 31 March

2012 2011

$’000 $’000

Cost - 131

Accumulated depreciation - (54)

Net book amount - 77


17. INTANGIBLE ASSETS

Develop- Goodwill Patents & Computer Brands Licences Customer Total

ment trademarks software Relation-

costs ships

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

1 April 2010

Cost 23,820 117,422 6,579 34,844 22,101 147,430 35,853 388,049

Accumulated amortisation & impairment (13,589) (56,438) (3,457) (24,183) - (58,407) (13,744) (169,818)

Net book amount 10,231 60,984 3,122 10,661 22,101 89,023 22,109 218,231


Opening net book amount 10,231 60,984 3,122 10,661 22,101 89,023 22,109 218,231

Additions 7,588 - 497 4,618 - 4 - 12,707

Subsidiary sold - - (157) - - - - (157)

Amortisation charge (3,228) - (614) (2,836) - (6,555) (3,426) (16,659)

Impairment charge - - - - - - - -

Exchange differences (476) (765) 36 (228) (1,241) (89) (411) (3,174)

Closing net book amount 14,115 60,219 2,884 12,215 20,860 82,383 18,272 210,948

31 March 2011

Cost 32,609 115,890 6,104 39,899 20,860 147,091 35,366 397,819


Net book amount 14,115 60,219 2,884 12,215 20,860 82,383 18,272 210,948

Develop- Goodwill Patents & Computer Brands Licences Customer Total

ment trademarks software Relation-

costs ships

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000


Opening net book amount 14,115 60,219 2,884 12,215 20,860 82,383 18,272 210,948

Additions 9,019 - 327 2,347 - - - 11,693

Disposals - - (10) (220) - - - (230)

Amortisation charge (4,531) - (426) (3,408) - (6,540) (3,244) (18,149)

Exchange differences (530) (2,462) (37) 11 (1,734) (665) (2,136) (7,553)

Closing net book amount 18,073 57,757 2,738 10,945 19,126 75,178 12,892 196,709

31 March 2012

Cost 40,326 106,461 6,165 41,131 19,126 143,978 30,940 388,127


Net book amount 18,073 57,757 2,738 10,945 19,126 75,178 12,892 196,709


(a) Goodwill

(i) Impairment tests for goodwill

Goodwill is allocated to the Group’s cash-generating units (CGUs) according to the operations expected to benefit

from the synergies of the business combination.

A summary of the goodwill allocation is shown below:

(ii) Key assumptions used for value in use calculations

The recoverable amount of a CGU is determined based on value in use calculations. These calculations use cash flow

projections based on financial budgets prepared by management and approved by the Board covering a five year

period. Cashflow projections are derived using past experience, expectations for the future and external sources of

financial and economic data where appropriate.

In arriving at the projected cashflows, management has made assumptions about sales revenue growth, key raw

material prices and foreign currency average exchange rates based on industry and economic indicators.

The following EBITDA (operating earnings before interest, taxation, depreciation & amortisation) growth rates

(Finance business uses NPBT or net profit before taxation) have been applied by management in the budgeted

cashflow projections:

_ EBITDA growth rate applied to sales & customer services goodwill: Nil

_ EBITDA growth rate applied to North America factory operations goodwill: between 11 - 27% (3 years based on

Management 5 year forecast including new products and refreshed United Range, 2% growth applied thereafter)

_ NPBT growth rate applied to Consumer Finance goodwill: 9.5% (on average; ranges from 4.8% 12.6%)

The terminal growth rates used to extrapolate cash flows beyond the budget period were:

_ North American factory operations goodwill: 2.0%

_ Sales & customer services goodwill: 2.0%

_ Consumer Finance goodwill: 2.1%

Sales & Factory Consumer Other Total

customer operations finance

services

2012 $’000 $’000 $’000 $’000 $’000

Appliances New Zealand 7,427 - - - 7,427

Appliances North America 2,478 7,765 - - 10,243

Appliances Australia 3,645 - - - 3,645

Appliances Rest of World 2,718 - - - 2,718

Finance business - - 32,118 1,606 33,724

16,268 7,765 32,118 1,606 57,757

Sales & Factory Consumer Other Total

customer operations finance

services

2011 $’000 $’000 $’000 $’000 $’000

Appliances New Zealand 7,921 - - - 7,921

Appliances North America 2,833 8,467 - - 11,300

Appliances Australia 4,167 - - - 4,167

Appliances Rest of World 3,107 - - - 3,107

Finance business - - 32,118 1,606 33,724

18,028 8,467 32,118 1,606 60,219


17. INTANGIBLE ASSETS (CONTINUED)

The following pre-tax discount rates have been applied to the cash flow projections:

_ Goodwill allocated to North American factory operations: 11.88%

_ Goodwill allocated to sales & customer services: ranges between 10.9% and 11.2%

_ Goodwill allocated to Consumer Finance: 15.28%

(iii) Impact of possible changes in key assumptions

The recoverable amount of the North American factory operations CGU was $40.2 million, which exceeded the car-

rying amount by $12.6 million. If the EBITA was 70% of the forecast then the recoverable amount of the CGU would

approximately equal the carrying value.

Management does not consider any reasonably possible change in other key assumptions applied to other goodwill

balances would reduce the recoverable amounts below their carrying amounts.

(b) Brands

(i) Impairment tests for brands

Acquired brands are allocated to the Group’s CGUs identified according to country of operation.

(ii) Key assumptions used for relief-from-royalty calculations

The recoverable amount for brands is determined based on relief-from-royalty calculations. These calculations use

cash flow projections based on financial budgets prepared by management and approved by the Board covering a

five-year period. Cashflow projections are derived using past experience, expectations for the future and external

sources of financial and economic data where appropriate.

In arriving at the projected cashflows, management has made assumptions about sales revenue growth and foreign

currency average exchange rates based on industry and economic indicators.

The following growth rates have been applied to brand sales revenue by management in the cash flow projections:

_ “DCS”: between 2 - 16% (3 years based on Management 5 year forecast including new products and refreshed

United Range, 2% growth applied thereafter)

_ “Elba”: Nil

The royalty rates used in the relief-from-royalty calculations were as follows:

_ “DCS”: 3.0%

_ “Elba”: 2.0%

The terminal growth rates used to extrapolate cash flows beyond the budget period were:

_ “DCS”: 2%

_ “Elba”: Nil

“DCS” “Elba” Total

2012 $’000 $’000 $’000

Sales & customer services North America 15,867 - 15,867

Sales & customer services New Zealand - 3,259 3,259

15,867 3,259 19,126

“DCS” “Elba” Total

2011 $’000 $’000 $’000

Sales & customer services North America 17,135 17,135

Sales & customer services New Zealand - 3,725 3,725

17,135 3,725 20,860


The following pre-tax discount rates have been applied to the cash flow projections:

_ “DCS”: 11.88%

_ “Elba”: 12.62%

(iii) Impact of possible changes in key assumptions

DCS brand

The recoverable amount of the DCS brand at 31 March 2012 is estimated to be $28.1 million, which exceeds the

carrying amount by $12.2 million.

Detailed sales figures for the DCS brand are considered commercially sensitive and therefore are not disclosed.

Management have used budgeted sales revenues for 2012/13, and Management have performed a detailed 5 year

forecast, which has been used for 2013/14 - 2015/16 and results in a growth rate of up to 16%. Thereafter a growth

rate of 2% and a terminal growth rate of 2% have been used.

Management does not consider any reasonably possible change in other key assumptions would reduce the recover-

able amount below the carrying amount.

Elba brand

The recoverable amount of the Elba brand at 31 March 2012 is estimated to be $4.7 million, which is $1.4 million above

the carrying amount. The recoverable amount is based on nil sales growth over the next 5 years and nil terminal growth.

Detailed sales figures for the Elba brand are considered commercially sensitive and therefore are not disclosed.

The recoverable amount is sensitive to changes in the assumed royalty rate. If the royalty rate decreased from 2.0%

to 1.4%, the recoverable amount is equal to the carrying amount.

Management does not consider any reasonably possible change in other key assumptions would reduce the recover-

able amount below the carrying amount.

(d) Other material intangible assets

The Finance business has a license with a net book value of $70.4 million as at 31 March 2012 (2011 $76.5 million).

This is an exclusive license to provide financial services to the Farmers Trading Company for a period of 20 years.

The license has a remaining amortisation period of 11.6 years.

There were no indicators of impairment in the year ended 31 March 2012.


18. DEFERRED TAX ASSETS

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

The balance comprises temporary differences attributable to:

Receivables provisions 6,329 8,216 - -

Employee benefits 6,012 5,633 40 228

Inventories 1,702 2,429 - -

Warranty provisions 3,963 4,130 - -

Property, plant & equipment 4,956 9,969 - -

Intangibles (excl DCS brand) (17,049) (21,425) - -

DCS brand 814 2,841 - -

Impairment of barter credits 3,907 4,230 - -

Derivative financial instruments 305 2,005 - -

USA energy tax credit* 2,813 4,260 - -

Tax losses to carry forward* 36,368 30,605 - -

Other temporary differences 4,663 2,964 108 -

Net deferred tax assets 54,783 55,857 148 228

Movements:

Opening balance at 1 April 55,857 76,206 228 127

Effect of a change in New Zealand tax rate to 28% - 800 - (16)

Credited/(charged) to the Income Statement (Note 9) 3,898 8,313 (39) 101

Credited /(charged) to equity (4,780) (5,646) - -

Prior period adjustment (726) (5,140) (41) 6

Transfer from Deferred tax liabilities (1) (19,487) - -

Foreign exchange differences (2,645) 2,406 - -

Other movements 3,180 (1,595) - 10

Closing balance at 31 March 54,783 55,857 148 228

Expected settlement

Within 12 months 15,830 17,167 59 204

In excess of 12 months 38,953 38,690 89 24

54,783 55,857 148 228

* The utilisation of these deferred tax assets is dependent on future taxable profits in excess of the profits arising from the reversal of existing taxable temporary differences and shareholder continuity being maintained in accordance with New Zealand and USA tax legislation. The recognition of these deferred tax assets is evidenced by forecasts of taxable income arising in the next ten years.


19. CURRENT AND NON-CURRENT BORROWINGS

(a) Assets pledged as security

The Appliances business borrowings are secured through the Guaranteeing Group by a Security Trust Deed with

the Group’s banking syndicate. The Guaranteeing Group comprises Fisher & Paykel Appliances Holdings Limited

and subsidiary companies except for the New Zealand Finance business entities. All borrowings are drawn down at

interest rates current at draw down date.

The Security Trust Deed, as amended and restated from time to time, limits any other security over the Guaranteeing

Group’s assets and imposes the following financial covenants:

_ (i) Total Leverage ratio of the Guaranteeing Group each quarter < 3.0 times

_ (ii) Total Interest Cover ratio of the Guaranteeing Group each quarter > 3.0 times

_ (iii) FPAL Interest Cover Ratio of the Guaranteeing Group each quarter > 2 times. This covenant was removed

effective 26 March 2012

_ (iv) Total tangible assets of the Guaranteeing Group shall constitute no less than 95% of the total tangible assets

of the Consolidated Group, excluding the Finance business entities, for each quarter

_ (v) Total EBITDA of the Guaranteeing Group shall constitute no less than 95% of the EBITDA for the Consoli-

dated Group, excluding the Finance business entities, for each quarter.

For the purposes of the financial covenants above:

“Total Leverage Ratio” is the ratio of Total Bank Debt to Normalised EBITDA.

“Total Interest Cover” means the ratio of Normalised EBITDA to Total Interest

“FPAL Interest Cover Ratio” is the ratio of FPAL Normalised EBITDA to Total Interest.

“Total Interest” means, interest and financing costs of the Guaranteeing Group for the last 12 months, less any interest

received on cash held at the bank (for the avoidance of doubt, interest received on loans to the Finance business

shall not reduce Total Interest).

"Normalised EBITDA” means operating earnings before interest, tax, depreciation and amortisation for the last 12

months for the Guaranteeing Group, adjusted to exclude certain non-recurring items. Normalised EBITDA includes

the Appliances business earnings plus any dividends or interest paid by the Finance business to its parent, AF Invest-

ments Limited, a subsidiary of the ultimate parent Fisher & Paykel Appliances Holdings Limited.

“FPAL Normalised EBITDA” means operating earnings before interest, tax, depreciation and amortisation for the last

12 months for the Guaranteeing Group adjusted to exclude certain non-recurring items and any dividends or interest

paid by the Finance business to its parent AF Investments Limited.

“Total Bank Debt” means Guaranteeing Group indebtedness to the Group’s banking syndicate less cash deposited with

the banking syndicate or other approved banks. As at 31 March 2012 Total Bank Debt was approximately $65.2 million.

The current debt facilities expire on 30 September 2014, except for repayments under a $27 million Amortising Facil-

ity which funds capital expenditure associated with the recently announced motor supply contracts. The Amortising

facility is subject to the following minimum repayments:

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Current borrowings 3,205 - - -

Non-current borrowings 83,605 121,557 - -

Total current and non-current borrowings 86,810 121,557 - -


19. CURRENT AND NON-CURRENT BORROWINGS (CONTINUED)

Repayment date Repayment amount

$000’s

30 September 2012 $1,470

31 March 2013 $2,000

30 September 2013 $3,610

31 March 2014 $3,610

Further repayments are required under the Amortising Facility to the extent of 50% of Free Cash Flow attributable to

the new motor supply contracts. Free Cash Flow is defined as free cash flow attributable to the new motor supply

contracts less the repayments above for a 6 month period.

(b) Financing arrangements

The Appliances business had unrestricted access at balance date to the following lines of credit, except for $27 million

which can only be used to finance capital expenditure associated with motor supply contracts:

(c) Fair value

The carrying amounts of borrowings at 31 March 2012 were equal to their fair values (2011 equal).

(d) Risk exposures

The exposure of the Appliances business’ borrowings to interest rate changes and the contractual repricing dates

at balance date were as follows:

The borrowings were aged in accordance with the facility’s terms.

31 March 31 March

2012 2011

$’000 $’000

Total facilities

Working capital 47,000 50,000

Borrowings 202,000 183,649

249,000 233,649

Used at balance date

Working capital* - 9,221

Borrowings 86,810 121,557

86,810 130,778

Unused at balance date

Working capital 47,000 40,779

Borrowings 115,190 62,092

162,190 102,871

*The March 2011 amount of $9.2 million utilisation in the table above relates to Letters of Credit issued in favour of selected suppliers and balance of payment guarantees.

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Less than 12 months 3,205 - - -

One to two years 7,220 121,557 - -Two to three years 76,385 - - -

86,810 121,557 - -


The carrying amounts of the Appliances business’ borrowings were denominated in the following currencies:

(e) Interest rate risk

For an analysis of the sensitivity of the Appliance business borrowings to interest rate risk refer to Note 4.

20. FINANCE BORROWINGS

There were no unsecured Finance borrowings as at 31 March 2012 (2011 Nil).

(a) Assets pledged as security

(i) Bank loans and debentures

Bank loans and debentures are secured by a first ranking general security interest in favour of the Trustee over the

undertaking and assets of the Fisher & Paykel Finance Limited Charging Group. Bank overdrafts and bank borrowings

are secured by Security Stock issued under the terms of the Trust Deed. The Fisher & Paykel Finance Limited Charging

Group includes Fisher & Paykel Finance Limited and all of its subsidiaries except Consumer Insurance Services Limited.

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

New Zealand dollars 45,387 45,740 - -

US dollars - 11,203 - -

Euros 9,777 29,801 - -

Thai baht 31,646 34,813 - -

86,810 121,557 - -

31 March 31 March

2012 2011

$’000 $’000

Current secured

Bank loans 35,507 1,260

Debentures 90,261 118,991

Notes 194,097 134,805

Committed liquidity facilities - 73,861

Total current Finance borrowings 319,865 328,917

Non-current secured

Bank loans 210,000 223,577

Debentures 21,101 21,421

Total non current interest bearing Finance borrowings 231,101 244,998

Total non current Finance borrowings 231,101 244,998

Total Finance borrowings 550,966 573,915


20. FINANCE BORROWINGS (CONTINUED)

The carrying amounts of Charging Group assets pledged as security for Charging Group bank loans and debentures are:

(ii) Notes and Committed liquidity facilities

Notes issued and Committed liquidity facilities utilised under the securitisation programme are secured by a first ranking

general security interest over Finance receivables plus cash & cash equivalents in the special purpose entity RFS Trust

2006-1 (the Trust). The book value of these assets as at 31 March 2012 totalled $211.1 million (2011 $223.7 million).

The carrying amounts of assets pledged as security by the Trust for secured interest bearing liabilities were:

(b) Bank loans

The bank loans are a combination of call and short-term loans (with fixed interest rates for periods of approximately

90 days) and bear interest at a weighted average interest rate (excluding line fees, establishment fees and extension

fees) of 4.0% (2011 4.2%).

Fisher & Paykel Finance Limited has a $385 million ( refer note 20 (e)) syndicated banking facility with a maturity

profile as follows:

_ Tranche A ($20 million) matures 10 April 2015

_ Tranche B ($105 million) matures 10 October 2013

_ Tranche C ($105 million) matures 10 October 2012

_ Tranche D ($105 million) matures 10 April 2014

_ Tranche E ($50 million) matures 10 October 2012

The syndicated banking facility imposes a number of financial covenants with which the Charging Group must comply

and requires a formal compliance certificate to be provided to the facility agent and the lending banks on a monthly

basis. The financial covenants comprise:

_ a liquidity ratio

_ an interest cover ratio

31 March 31 March

2012 2011

$’000 $’000

Current

Cash and cash equivalents 56,290 46,761


Other assets 8,895 9,187

Total current assets pledged as security 284,281 279,148

Non-current

Property, plant & equipment 1,074 1,247

Intangible assets 9,295 10,056


Derivative financial instruments 19 1

Total non-current assets pledged as security 186,609 182,436

Total assets pledged as security 470,890 461,584

31 March 31 March

2012 2011

$’000 $’000

Cash & cash equivalents 11,240 15,292


Non-current liability 211,144 223,651


_ a minimum capitalisation covenant

_ a limit on lending concentration

_ two impaired asset tests, one relating to asset net write-off levels and one relating to the level of greater than

three month impaired assets compared to total receivables

_ a prior charges limit

If a covenant breach occurs and depending on its nature, the Charging Group is generally able to remedy the breach

by procuring additional capital from its immediate parent (Fisher & Paykel Finance Holdings Limited) in the form

of equity or subordinated debt. Under the facility agreement, the Charging Group is only permitted one remedy in

any twelve month period.

The facility documentation also includes a “Change in Market Conditions” clause, which defines a “Market Disrup-

tion Event” as:

_ (i) Circumstances, such as adverse funding conditions or market liquidity constraints, which result in a lender

becoming unable to participate in an advance requested under the facility, or

_ (ii) Notification to the facility agent by a lender that it’s cost of obtaining matching deposits in the interbank

market would be in excess of the base rate for an advance

In the event of a market disruption event occurring, and depending on the exact circumstances, then the parties to

the agreement will enter into negotiations either to agree a substitute basis for maintaining advances, or to agree

the rate of interest applicable to further advances.

During the year ended 31 March 2012 and up to the date these financial statements were signed, no market disrup-

tion event occurred.

(c) Debentures

Debenture stock which is issued on the basis that it is repayable on demand, may be repaid by the Finance busi-

ness at any time. Other debenture stock is issued on terms ranging from 3 months to 5 years and is repayable on

the maturity date. For the majority of debentures, interest is payable quarterly in arrears on the last day of March,

June, September and December. On other debentures, interest is paid on the last working day of each month. The

weighted average interest rate of the debenture stock (excluding brokerage and New Zealand Deposit Guarantee

fees) at 31 March 2012 was 7.4% (2011 7.0%).


20. FINANCE BORROWINGS (CONTINUED)

(d) Notes and Committed liquidity facilities

Each Note issued has a minimum subscription price of $500,000 and must be a multiple of $100,000. The term of

Notes cannot exceed 364 days or the maturity of the Committed liquidity facility, whichever is earlier. Notes are

normally issued on the basis that they bear no interest but are issued at a discount to their principal amount. The

weighted average interest rate of Notes at 31 March 2012 was 3.5% (2011 4.1%).

Liquidity support for the Notes is provided under a Committed liquidity facility. The committed liquidity facility

was undrawn as at 31 March 2012. The weighted average interest rate of the liquidity facility (excluding line fees,

establishment fees and extension fees) at 31 March 2011 was 4.0%.

(e) Financing arrangements

Unrestricted access was available at each balance date to the following lines of credit:

The figures in the above tables for financing arrangements are principal amounts only.

The bank loan facilities were $385 million at 31 March 2012 and had maturity dates in October 2012 ($155 million),

October 2013 ($105 million) and April 2014 ($105 million) and April 2015 ($20 million). However, this has been

reported as $335 million due to the expectation that the Finance business will elect, post balance date, to reduce

surplus facilities by $50 million which are maturing in October 2012.

The committed liquidity facilities were $285 million as at 31 March 2012 and mature on 26 October 2012. However,

this has been reported as $250 million due to the expectation that the Finance business will elect, post balance date,

to reduce surplus facilities by $35 million. On 23 April 2012, the maturity date of the committed liquidity facility was

extended from 26 October 2012 to 29 April 2013.

31 March 31 March

2012 2011

$’000 $’000

Credit standby arrangements

Total facilities

Bank loans 335,000 385,000

Bank overdrafts 5,100 5,100

Notes/Committed liquidity facilities 250,000 285,000

590,100 675,100

Used at balance date

Bank loans 245,000 225,000

Bank overdrafts - -


438,325 432,626

Unused at balance date

Bank loans 90,000 160,000

Bank overdrafts 5,100 5,100


151,775 242,474


(f) Fair value

The fair values of Finance business borrowings are:

(i) On-balance sheet

The fair value of Bank loans for the year ended 31 March 2012 was based on cash flows discounted using a bor-

rowing rate of 3.9% (2011 4.0%).

The fair value of Notes is based on cash flows discounted using borrowing rates averaging 3.4% based on the maturity

date of those Notes (2011 averaging 3.7%).

The fair value of the Committed liquidity facility for 31 March 2011 was based on cash flows discounted using a

borrowing rate of 3.7%.

The fair values of Debentures are based on cash flows discounted using borrowing rates varying from 5.8% to 7.7%,

depending on the maturity date of those debentures (2011 5.0% to 7.8%).

(ii) Contingent liabilities

There were no interest bearing contingent liabilities as at 31 March 2012 (2011 Nil).

(g) Priority of claims

In the event the Finance business was liquidated or ceased trading, bank loans and debentures rank equally as to

the priority of claims over the assets of the Charging Group. The Notes and the liquidity facility are secured over the

Finance receivables and cash & cash equivalents held by the special purpose entity RFS Trust 2006-1.

(h) Interest rate risk

For an analysis of the sensitivity of Finance business borrowings to interest rate risk refer to Note 5.

31 MARCH 2012 31 MARCH 2011

Carrying Fair value Carrying Fair value

amount amount

$’000 $’000 $’000 $’000

On-balance sheet

Bank loans 245,507 245,531 224,837 224,870

Notes 194,097 194,112 134,805 134,861

Committed liquidity facilities - - 73,861 73,883

Debentures 111,362 111,937 140,412 141,320

550,966 551,580 573,915 574,934


21 TRADE CREDITORS

(a) Foreign currency risk

The carrying amounts of the Group’s trade creditors are denominated in the following currencies

For an analysis of the sensitivity of trade creditors to foreign currency risk refer to Note 4.

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Trade creditors 96,560 99,141 - -

96,560 99,141 - -

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

New Zealand dollars 10,656 17,001 - -

Australian dollars 5,642 8,569 - -

United States dollars 27,703 21,423 - -

Euros 26,154 31,118 - -

Thai baht 25,385 19,737 - -

Canadian dollars 58 622 - -

British pounds 851 554 - -

Other 111 117 - -

96,560 99,141 - -


22. PROVISIONS

(a) Employee benefits

Current

In certain jurisdictions, the Group is required to accrue for accumulating short-term benefits such as sick leave.

Non-current

Provision is made for both vested and unvested long service leave accruing to employees. Vested long service leave

is calculated on unused entitlements according to Group policy and unvested long service leave is calculated on an

actuarial basis taking into account future entitlements under Group policy. Key assumptions in the actuarial model

include:

_ Discount rate: 4.09% (2011 5.71%)

_ Exit rate: Variable (2011 Variable)

_ Promotion rate: 0.50% (2011 0.50%)

_ Wage/salary inflation rate: 3.00% (2011 3.50%)

The method for calculating the exit rate assumed in the actuarial model uses exit rate patterns which vary according

to length of service and a mix of exponential decay formulae in addition to straight-line assumptions and excludes

the extreme values in the historical data.

(b) Warranty

Provision is made for estimated warranty claims in respect of products sold which are still under warranty at bal-

ance date. The majority of these claims are expected to be settled within the next 24 months but this may extend

to 10 years for washing machine motor components. Management estimates the present value of the provision

based on historical warranty claim information and any recent trends that may suggest future claims could differ

from historical amounts.

The warranty provision has been discounted using an interest rate of 3.61% (2011 4.25%).

(c) Product support

Provision is made for costs to support older products sold in previous years which are outside warranty periods.

The provision recognised is based on estimated costs to address product issues.

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Current

Employee benefits 76 76 - -

Warranty 14,577 17,028 - -

Redundancy - 284 - -

Product support 4,866 - - -

Onerous contracts 699 544 - -

Other 267 409 - -

Total current provisions 20,485 18,341 - -

Non-current


Warranty 3,694 4,751 - -

Onerous contracts 2,302 776 - -

Other provisions 592 502 - -

Total non-current provisions 15,575 14,195 - -

Total provisions 36,060 32,536 - -


22. PROVISIONS (CONTINUED)

(d) Onerous contracts

In the year ended 31 March 2012, additional provision was made for the estimated unavoidable costs associated with

a warehouse lease in Chicago, USA. This is expected to be paid out in the years ending 31 March 2013 through 2016.

(e) Other

Other non-current provisions as at 31 March 2012 includes a $0.5 million (2011 $0.4 million) dilapidations provision

associated with the onerous warehouse lease adjustment referred to in (d) above.

(f) Movements in provisions

Movements in each class of provision during the financial year are set out below:

Employee Warranty Redundancy Product Onerous Other Total

benefits support contracts provisions

$’000 $’000 $’000 $’000 $’000 $’000 $’000

2012

Carrying amount at start of year 8,242 21,779 284 - 1,320 911 32,536

Exchange rate variance on opening balance (150) (1,200) (88) (38) (1,476)

Additional provision recognised 2,046 19,808 - 4,866 2,585 10 29,315

Utilised during the year (997) (22,147) (284) - (774) (17) (24,219)

Change in discounted amount arising from passage of time

and effect of any change in the discount rate

(78) 31 - - (42) (7) (96)

Carrying amount at end of year 9,063 18,271 - 4,866 3,001 859 36,060

Employee Warranty Redundancy Product Onerous Other Total

benefits support contracts provisions

$’000 $’000 $’000 $’000 $’000 $’000 $’000

2011

Carrying amount at start of year 8,440 23,703 1,410 - 350 428 34,331

Exchange rate variance on opening balance 119 381 40 - 8 2 550

Additional provision recognised 861 19,802 461 - 1,279 484 22,887

Utilised during the year (917) (22,076) (1,627) - (317) (3) (24,940)

Change in discounted amount arising from passage of time

and effect of any change in the discount rate

(261) (31) - - - - (292)

Carrying amount at end of year 8,242 21,779 284 - 1,320 911 32,536


23. OTHER LIABILITIES

Employee entitlements include a statutory termination indemnity obligation (TFR) for employees of the Group’s

Italian operating subsidiary – refer Note 30(2). Also included within employee entitlement are liabilities for employee

leave entitlements, wage & salary withholdings and wages & salaries payable.

24. DEFERRED TAX LIABILITIES

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Employee entitlements 24,051 25,119 144 280

Other creditors 37,924 48,092 246 217

Directors’ retirement allowances 384 323 384 323

62,359 73,534 774 820

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

The balance comprises temporary differences attributable to:

Provisions (1,259) (876) - -

Property, plant & equipment 4,925 5,629 - -

Intangible assets 2,940 4,008 - -

Tax credits (1,028) (1,203) - -

Derivative financial instruments (43) (532) - -

Other temporary differences 75 (155) - -

Net deferred tax liabilities 5,610 6,871 - -

Movements:

Opening balance at 1 April 6,871 27,730 - -

Charged/(credited) to the Income Statement (Note 9) 80 (371) - -

Transfer to Deferred tax assets 1 (19,487) - -

Prior period adjustment 329 (426) - -

Foreign exchange differences (864) (129) - -

Other movements (807) (446) - -

Closing balance at 31 March 5,610 6,871 - -

Expected settlement

Within 12 months (295) (109) - -

in excess of 12 months 5,905 6,980 - -

5,610 6,871 - -


25. OTHER NON-CURRENT LIABILITIES

(a) Accrued rent expense

In certain jurisdictions where the Group operates, operating lease agreements for land & buildings contain periodic

fixed rental increases. The associated lease payments are recognised on a straight-line basis resulting in an accrued

rent expense.

(b) Retirement benefit obligation

Further details of the Group’s retirement benefit obligation are provided at Note 30.

26. CONTRIBUTED EQUITY

(a) Movements in ordinary share capital:

(b) Ordinary shares

All shares issued are fully paid and have no par value. All ordinary shares rank equally with one vote attached to

each fully paid ordinary share.

(c) Capital risk management - Appliances business & Parent

The Company’s objective when managing capital is to safeguard its ability to continue as a going concern, so that

it can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal

capital structure to reduce the cost of capital after taking into consideration the cyclical nature of the industry.

In order to maintain or adjust the capital structure, the Company’s options include adjusting the amount of dividends

paid to shareholders, returning capital to shareholders, issuing new shares or selling assets to reduce debt.

The Appliances business manages capital risk by ensuring there is an adequate amount of headroom above the

minimum requirements of the banking covenants. The principal indicator used is the Total Leverage Ratio, which is

calculated as Net Debt divided by Normalised operating earnings before Interest, Tax, Depreciation and Amortisation

of the Guaranteeing Group (refer Note 19). Net Debt is calculated as total borrowings less cash & cash equivalents

(excluding the Finance business).

The capital risk management policy for the Appliances business is to maintain the Total Leverage Ratio below 2.5 times

compared to the current maximum permitted level under the Guaranteeing Group’s banking facilities of 3.0 times.

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Accrued rent expense 2,436 1,919 - -

Retirement benefit obligation 526 345 - -

Directors’ retirement allowances - 61 - 61

2,962 2,325 - 61


2012 2011 2012 2011

Shares Shares $’000 $’000

Opening balance of ordinary shares authorised and issued 724,235,162 724,235,162 841,869 841,869

Issue of ordinary shares during the year - - - -

Closing balance of ordinary shares issued 724,235,162 724,235,162 841,869 841,869


(d) Capital risk management - Finance business

The Finance business’ objective when managing capital is to safeguard its ability to continue as a going concern,

so that it can continue to provide returns to its shareholder and to maintain a strong capital base to support the

development of its business.

Fisher & Paykel Finance Limited

The level and mix of capital in Fisher & Paykel Finance Limited (the Charging Group) is determined by the Finance

business Board taking into account the requirements of the Debenture Trust Deed (under which the Charging Group

issues debentures) and financial covenants contained in the syndicated banking facility documentation.

The syndicated banking facility documentation contains a minimum capitalisation covenant, under which:

_ (i) the ratio of net tangible assets to total tangible assets must not be less than 12.0%.

The Charging Group has fully complied with this covenant during all periods reported.

During the reporting period the Charging Group’s Debenture Trust Deed was amended to incorporate a new capital

adequacy covenant in compliance with the Part 5D of the Reserve Bank of New Zealand Act 1989 and the Deposit

Takers (Credit Ratings, Capital Ratios, and Related Party Exposures) Regulations 2010.

Under the terms of this covenant the Charging Group’s minimum capital ratio should not be less than:

_ (a) 8%, for as long as Fisher & Paykel Finance Limited has a credit rating, or

_ (b) 10% at all other times

The Charging Group has complied with this minimum capital ratio covenant since it came into force on 1 December

2010. As at 31 March 2012, the capital ratio was 15.3%.

During the year ended 31 March 2012, Fisher & Paykel Finance Limited increased its share capital by $13.5 million

to $86.3 million.

Fisher & Paykel Financial Services Limited

Fisher & Paykel Financial Services Limited is the company that owns and operates the Famers Finance business,

which is funded under a master trust securitisation programme.

The securitisation programme requires a minimum level of credit enhancement that is provided by way of a sub-

ordinated loan from Fisher & Paykel Financial Services Limited. The minimum level of credit enhancement is the

greater of 7.5% (2011 7.5%) of receivables or the amount established by applying a dynamic credit enhancement

calculation. 31 March 2012 was 8.7%.

Fisher & Paykel Finance Holdings Limited

Whilst there are no minimum levels of capital required in Fisher & Paykel Finance Holdings Limited, capital is main-

tained at a level to ensure compliance with the Finance business capital management objectives outlined above.


27. EARNINGS PER SHARE

(a) Reconciliations of earnings used in calculating earnings per share

(b) Weighted average number of shares used as the denominator

28. ACCUMULATED LOSSES AND RESERVES

In the Parent Company financial statements, amounts showing as Treasury Stock in the Group financial statements

are recorded as share capital. This increases share capital in the Parent Company by $512,000 at balance date (2011

$512,000).

31 March 31 March

2012 2011

Basic and diluted earnings per share (cents) 2.5 4.6

31 March 31 March

2012 2011

$’000 $’000

Basic earnings per share

Profit attributable to the ordinary equity holders of the Company used in calculating basic and diluted earnings per share 18,431 33,545

31 March 31 March

2012 2011

Number Number

Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share 724,235,162 724,235,162

Adjustments for calculation of diluted earnings per share - -

Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share 724,235,162 724,235,162

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

(a) Reserves

Treasury stock 512 512 - -

Foreign exchange cash flow hedge reserve 1,013 (11,350) - -

Share-based payments reserve 1,970 1,970 1,970 1,970

Foreign currency translation reserve (90,861) (50,370) - -

Interest rate cash flow hedge reserve (1,330) (1,260) - -

(88,696) (60,498) 1,970 1,970

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Movements:

Treasury Stock

Opening balance 512 512 - -

Balance 31 March 512 512 - -


CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Movements:

Hedging reserve - cash flow hedges

Opening balance (11,350) (3,213) - -

Recognised income & expense 12,363 (8,137) - -

Balance 31 March 1,013 (11,350) - -

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Movements:

Share-based payments reserve

Opening balance 1,970 1,970 1,970 1,970

Balance 31 March 1,970 1,970 1,970 1,970

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Movements:

Foreign currency translation reserve

Opening balance (50,370) (40,018) - -

Translation differences arising during the year (40,491) (10,352) - -

Balance 31 March (90,861) (50,370) - -

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Movements:

Interest rate cash flow hedge reserve

Opening balance (1,260) - - -

Recognised income & expense (70) (1,260) - -

Balance 31 March (1,330) (1,260) - -


28. ACCUMULATED LOSSES AND RESERVES (CONTINUED)

(b) Nature and purpose of reserves

(i) Treasury Stock

Treasury stock is used to recognise those shares held and controlled by Fisher & Paykel Appliances Employee Share

Purchase Trustee Limited.

(ii) Foreign exchange hedge reserve

The cash flow hedge reserve is used to record gains or losses on a hedging instrument in a forward foreign currency

cash flow hedge that are recognised directly in equity. Amounts are recognised in profit and loss when the associ-

ated hedged transaction affects profit and loss.

(iii) Share-based payments reserve

The share-based payments reserve is used to recognise the fair value of options granted but not exercised and

discounted employee share scheme entitlements.

(iv) Foreign currency translation reserve

Exchange differences arising on translation of foreign operations are taken to the foreign currency translation reserve.

When any net investment is disposed of, the related component of the reserve is recognised in profit and loss.

(v) Interest rate hedge reserve

The interest rate hedge reserve is used to record gains or losses on a hedging instrument in an interest rate hedge

that are recognised directly in equity. Amounts are recognised in profit and loss when the associated hedged trans-

action affects profit and loss.

When a forecast transaction is no longer expected to occur or becomes ineffective, the cumulative gain or loss that

was deferred in equity is immediately transferred to the Income Statement.

(c) Accumulated losses

29. IMPUTATION CREDITS

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Opening balance (166,423) (199,968) (107,122) (107,269)

Net profit for the year 18,431 33,545 54 147

Closing balance (147,992) (166,423) (107,068) (107,122)

31 March 31 March

2012 2011

$’000 $’000

Balance at beginning of year 1,746 1,635

Tax payments, net of refunds (1,009) 69

Other adjustments - 42

Balance at end of year 737 1,746

Imputation credits are available to shareholders as follows:

Direct - Fisher & Paykel Appliances Holdings Limited Imputation Group 737 1,746

Balance at end of year 737 1,746


30. DEFINED BENEFIT OBLIGATIONS

The Group has two defined benefit schemes, one in New Zealand and one in Italy. These are presented separately below.

(1) Superannuation Scheme - New Zealand

All New Zealand employees of the Group are entitled to benefits from the Group’s superannuation scheme on re-

tirement, disability or death. Previously, the New Zealand scheme consisted of a defined benefit plan and a defined

contribution plan.

The defined benefit plan provided lump sum benefits based on years of service and final average salary and has

been closed to new members for several years. On 1 October 2006, all except 30 members transferred from the

defined benefit plan to a new defined contribution master trust plan. There are 14 members remaining in the plan

as at 31 March 2012.

The remaining obligation is largely in respect of certain defined benefit guarantees provided to members who

transferred from the defined benefit plan to the new defined contribution master trust plan and is fully provided

for as at 31 March 2012.

The defined contribution plan receives fixed contributions from Group companies and the Group’s legal or construc-

tive obligation is limited to these contributions.

The following tables set out details in respect of the defined benefit liabilities only.

(a) Statement of Financial Position amounts

The amounts recognised in the Statement of Financial Position are determined as follows:

(b) Categories of plan assets

The major categories of plan assets are as follows:

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Present value of the defined benefit obligation 830 767 - -

Fair value of defined benefit plan assets (519) (536) - -

Present value of unfunded obligations 311 231 - -

Adjustment for ESCT* 153 114 - -

Net liability in the Statement of Financial Position 464 345 - -

*ESCT - Employer Superannuation Contribution Tax

CONSOLIDATED PARENT


2012 2011 2012 2011

% % % %

Cash 81 78 - -

Equity instruments 8 10 - -

Debt instruments 9 10 - -

Property 2 2 - -

100 100 - -


30. DEFINED BENEFIT OBLIGATIONS (CONTINUED)

(c) Reconciliations

(d) Amounts recognised in Income Statement

The amounts recognised in the Income Statement are as follows:

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Reconciliation of the present value of the defined benefit obligation, which is partly funded:

Balance at the beginning of the year 767 662 - -

Current service cost 33 27 - -

Interest cost 26 24 - -

Actuarial gains & losses 264 250 - -

Benefits paid (260) (196) - -

Balance at the end of the year 830 767 - -

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Reconciliation of the fair value of plan assets:

Balance at the beginning of the year 536 371 - -

Expected return on plan assets 27 22 - -

Actuarial gains & losses (19) (2) - -

Contributions by Group companies 83 180 - -

Contributions by plan participants 152 161 - -


Balance at the end of the year 519 536 - -

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Current service cost 33 27 - -


Expected return on plan assets (27) (22) - -

Net actuarial losses (gains) recognised in year 283 252 - -

Total included in employee benefits expense 315 281 - -

Actual return on plan assets 12 23 - -


(e) Principal actuarial assumptions

The principal actuarial assumptions used (expressed as weighted averages) were as follows:

The expected rate of return on assets has been based on historical and future expectations of returns for each of the

major categories of asset classes as well as the expected and actual allocation of plan assets to these major categories.

(f) Historic summary

(2) Termination Indemnity (TFR) - Italy

TFR is a mandatory severance pay plan for employees of Italian entities. A lump sum payment is provided in any

case of employment termination (e.g. dismissal, voluntary resignation, disability, death).

Every year, the employee accrues 6.91% of his/her salary. The accrual is fully employer sponsored. The amount ac-

crued at the beginning of the year is revalued at the end of the year by an index stated as follows: 1.5% plus 75% of

the actual inflation rate. The revaluation is reduced net of an 11% tax rate.

Advance payments can be made for house purchase and medical expenses, subject to certain conditions.

Pursuant to legislation enacted on 1 January 2007, the future annual accrual for companies with over 50 employees

was transferred either to an external pension fund or to the State fund held by INPS (Instituto Nazionale Previdenza

Sociale) and meets the definition of a defined contribution plan. However, the TFR liability accrued prior to 1 Janu-

ary 2007 remains in the Statement of Financial Position of the Group’s Italian operating subsidiary (Fisher & Paykel

Appliances Italy S.p.A.) and meets the definition of a defined benefit plan.

CONSOLIDATED PARENT


2012 2011 2012 2011

Discount rate 2.94% 4.11% -% -%

Expected return on plan assets 5.00% 5.00% -% -%

Future salary increases 3.00% 4.00% -% -%

31 March 31 March

2012 2011

$’000 $’000

Defined benefit plan obligation 830 767

Plan assets (519) (536)

311 231

ESCT 153 114

Deficit 464 345

Experience adjustments arising on plan liabilities 264 250

Experience adjustments arising on plan assets (19) (2)


30. DEFINED BENEFIT OBLIGATIONS (CONTINUED)

The following tables set out details in respect of the defined benefit liabilities:

(a) Statement of Financial Position amounts

The amounts recognised in the Statement of Financial Position are determined as follows:

(b) Reconciliations

(c) Amounts recognised in Income Statement

The amounts recognised in the Income Statement are as follows:

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Present value of the defined benefit obligation 3,686 3,912 - -

Net liability in the Statement of Financial Position 3,686 3,912 - -

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Reconciliation of the present value of the defined benefit obligation, which is partly funded:

Balance at the beginning of the year 3,912 4,218 - -


Actuarial gains & losses 397 (315) - -


Foreign currency exchange rate changes (504) (68) - -

Balance at the end of the year 3,686 3,912 - -

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000


Total included in employee benefits expense 187 182 - -


(d) Principal actuarial assumptions

The principal actuarial assumptions used (expressed as weighted averages) were as follows:

(e) Employer contributions

Employer contributions to the TFR defined benefit plan ceased on 31 December 2006.

(f) Historic summary

CONSOLIDATED PARENT


2012 2011 2012 2011

Discount rate 4.00% 5.50% -% -%

Expected return on plan assets 2.00% 2.00% -% -%

Future salary increases 2.00% 2.00% -% -%

31 March 31 March

2012 2011

$’000 $’000

Defined benefit plan obligation 3,686 3,912

Deficit 3,686 3,912


31. CONTINGENCIES

Periodically, the Group is party to litigation including product liability claims. To date, such claims have been settled

for relatively small amounts, which have either been expensed or covered by insurance.

32. COMMITMENTS

(a) Capital commitments

Capital expenditure contracted for at balance date but not recognised as liabilities is as follows:

The above balances have been committed in relation to future expenditure on capital projects. Amounts already

spent have been included as work in progress in the current year results.

(b) Lease commitments

(i) Operating leases

These relate mainly to building occupancy leases under non-cancellable operating leases expiring within 15 years. The

leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated.

(ii) Finance leases

The Appliances business has no finance leases as at 31 March 2012 (2011 carrying value of plant & equipment under

finance lease of $0.1 million).

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Property, plant and equipment 5,153 4,719 - -

5,153 4,719 - -

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:

Within one year 22,073 24,947 - -

Between one and two years 18,969 22,962 - -

Between two and three years 15,648 18,286 - -

Between three and four years 12,336 15,197 - -

Between four and five years 9,448 11,595 - -

Over five years 49,496 58,971 - -

127,970 151,958 - -

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Within one year - 17 - -

Minimum lease payments - 17 - -


The weighted average interest rate implicit in the finance leases is N/A (2011 4.5%).

(c) Undrawn lending commitments (Finance business)

Undrawn lending commitments include unutilised Q Card, Farmers Finance Card and fixed instalment limits, which

can be unconditionally cancelled by the Finance business at any time.

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Undrawn lending commitments 1,819,864 1,775,323 - -


33. INVESTMENTS IN SUBSIDIARIES

The Parent Company’s investment in subsidiaries comprises shares at cost plus share-based payments expensed by

the Finance business. The assets and liabilities attributed to Fisher & Paykel Appliances Holdings Limited are owned

by the following subsidiaries:

All subsidiaries have a balance date of 31 March, except for Fisher & Paykel Appliances Mexico, S. de R.L. de C.V.,

which has a balance date of 31 December to comply with local regulations.

The activities of Retail Financial Services Limited are funded through a master trust securitisation structure estab-

lished on 8 May 2006. This structure allows for the creation of multiple, separate, standalone trusts. The first trust

created under the master trust structure was the RFS Trust 2006-1 (the Trust). Fisher & Paykel Financial Services

Limited is the residual income and capital beneficiary of the Trust. The financial statements of the Trust have been

consolidated in the Group’s financial statements.

NAME OF ENTITY COUNTRY OF INCORPORATION PRINCIPAL ACTIVITY EQUITY HOLDING

2012 2011

% %

AF Investments Limited* New Zealand Non-trading holding company 100 100

Fisher & Paykel Appliances Employee Share Purchase New Zealand Employee share purchase scheme 100 100

Trustee Limited

Appliances business

Fisher & Paykel Appliances Limited* New Zealand Manufacture & distribution of appliances 100 100

Fisher & Paykel Production Machinery Limited* New Zealand Machinery manufacturer 100 100

New Zealand Export Corporation Limited* New Zealand Contract manufacture of appliances 100 100

Allied Industries Limited* New Zealand Non-trading holding company 100 100

Fisher & Paykel Australia Holdings Limited* Australia Non-trading holding company 100 100

Fisher & Paykel Australia Pty Limited* Australia Distribution of appliances 100 100

Fisher & Paykel Manufacturing Pty Limited* Australia Manufacture of appliances 100 100

Fisher & Paykel Customer Services Pty Limited* Australia Servicing of appliances 100 100

Fisher & Paykel Appliances (USA) Holdings Inc* USA Non-trading holding company 100 100

Fisher & Paykel Appliances Inc* USA Distribution of appliances 100 100

Dynamic Cooking Systems Inc* USA Manufacture of appliances 100 100

Fisher & Paykel Laundry Manufacturing Inc* USA Manufacture of appliances 100 100

Fisher & Paykel Appliances Canada Inc* Canada Distribution of appliances 100 100

Fisher & Paykel Appliances Mexico, S. de R.L. de C.V.* Mexico Contract manufacture of appliances 100 100

Fisher & Paykel Appliances Limited* UK Distribution of appliances 100 100

Fisher & Paykel Appliances Italy Holdings S.r.l.* Italy Non-trading holding company 100 100

Fisher & Paykel Appliances Italy S.p.A.* Italy Manufacture & distribution of appliances 100 100

Fisher & Paykel (Singapore) Pte Limited* Singapore Distribution of appliances 100 100

Fisher & Paykel Appliances (Thailand) Co. Ltd* Thailand Manufacture of appliances 100 100

Finance business

Fisher & Paykel Finance Holdings Limited New Zealand Non-trading holding company 100 100

Fisher & Paykel Finance Limited New Zealand Consumer & bulk finance 100 100

Fisher & Paykel Financial Services Limited New Zealand Securitisation services 100 100

Consumer Finance Limited New Zealand Consumer finance 100 100

Consumer Insurance Services Limited New Zealand Consumer insurance & extended warranty 100 100

Equipment Finance Limited New Zealand Commercial finance 100 100

Retail Financial Services Limited New Zealand Consumer finance 100 100

*Fisher & Paykel Appliances Holdings Limited together with the companies above marked with an asterisk are the companies in the Security Trust Deed (refer note 19).


Fisher & Paykel Appliances (Thailand) Co. Ltd’s immediate parent is Fisher & Paykel (Singapore) Pte Limited (486,198

ordinary shares). Thai law requires a minimum of three shareholders, therefore in accordance with normal practice,

two ordinary shares are also held individually by Company executives.

34. SHARE-BASED PAYMENTS

(a) Executive Long Term Incentive Plan

The Board approved a new Long Term Incentive Plan (the Plan) for selected executive managers, effective 1 October

2011. The Plan is designed to secure the retention of key executives and is focused on achieving the objective of

long term shareholder wealth creation.

Under the Plan, phantom options are granted to participants from time to time. The phantom options are not securi-

ties issued by the Company and should a phantom option become exercisable, it will be settled in cash.

The phantom options become exercisable three years after the grant date provided Total Shareholder Returns per

annum for Fisher & Paykel Appliances Holdings Limited are equal to or greater than a compound annual post-tax

rate of 13.8% for the preceding three year period. The Total Shareholder Return of 13.8% per annum includes a 1

percentage point stretch component above the Company’s assessed cost of equity.

Phantom options remain exercisable for a period of two years from the date that they become exercisable.

The maximum amount payable to a participant on the exercise of phantom options shall not exceed an amount equal

to five times the aggregate grant value of those phantom options.

The phantom options will lapse if a participate ceases to be an employee of the Company. However should that occur

by reason of injury, ill health, permanent disability, death or redundancy the Board may at its discretion determine

that the phantom options will not lapse.

Set out below is a summary of phantom options granted under the Plan:

The assessed fair value of the Plan was $848,000 as at grant date and $865,000 as at 31 March 2012. The fair value

was derived using a 250-period binomial options pricing model and the following inputs:

_ (a) Grant date: 1 October 2011

_ (b) Issue price : $0.463 (based on the volume weighted average share price over the 20 days immediately

preceding the grant date)

_ (c) Share price on grant date: $0.45

_ (d) The Phantom options were granted for no consideration

_ (e) Exercisable date: 30 September 2014

_ (f) Lapse date: 30 September 2016

_ (g) Assumed cost of equity: 12.8%

_ (h) Assumed stretched cost of equity:13.8%

_ (i) Volatility: 31.9% annualised

_ (j) Expected dividends: market consensus

_ (k) Risk-free interest rate: 3.57% continuous compounding

31 MARCH 2012

Expiry date Balance Granted Vested Lapsed Balance

at start during during /forfeited at end

of the year the year the year during of the year

the year

Number Number Number Number Number

GRANT DATE

01/10/11 30/09/16 - 10,473,192 - - 10,473,192


34. SHARE-BASED PAYMENTS (CONTINUED)

(b) Executive Long Term Performance Incentive

The Board has an executive long-term performance incentive scheme (the Scheme) for selected senior managers

to link their remuneration with shareholder returns and encourage those employees to hold and retain shares in the

Company. Payment of any benefit is dependent on remaining employed during the vesting period and also on the

Group’s total shareholder return exceeding the 75th percentile of the total shareholder return (including imputation

credits) of a comparative group of companies over a three year vesting period.

Entitlements are granted under the Scheme for no consideration. At the end of the vesting period, the Group will pay

a cash bonus to the participating employees equivalent to half their allocated entitlement, which should be used to

buy shares in the Company on-market (subject to Insider Trading rules) unless the employee’s personal shareholding

(calculated at current market values) is greater than 50% of their annual fixed remuneration. To the extent performance

targets have been met, up to half of the allocated entitlement will also be paid as a cash bonus to the participating

employee and this should be used to buy shares on-market (subject to Insider Trading rules) unless the employee’s

personal shareholding (calculated at current market values) is greater than 50% of their annual fixed remuneration.

If employment ceases prior to the vesting date due to death, serious illness, accident, permanent disablement or redun-

dancy, the Board will make a pro rata payment or other such payment as may be determined at their sole discretion.

Set out below is a summary of movements in the number of shares attached to cash benefits granted under the Scheme:

Entitlements associated with the Scheme implemented effective 1 October 2008 matured on 30 September 2011 resulting

in a cash payment of approximately $226,000 for the retention component and $Nil for the performance component.

(c) Employee Share Scheme

No employee share offers were in operation during the years ended 31 March 2012 or 2011.

As at 31 March 2012 203,316 shares (2011 203,316) were held by the Trustee, being 0.03% (2011 0.03%) of the Group’s

issued and paid up capital. No shares are allocated to employees (2011 Nil) as there is no current offer under the

Scheme. All shares are allocated to employees at the time of issue, on the condition that should they leave the

Company before the qualifying period ends, their shares will be repurchased by the Trustees at the lesser of market

price and the price at which the shares were originally allocated to the employee, subject to the repayment of the

original loan. Any such repurchased shares are held by the Trustees for allocation to future issues under the Scheme.

31 MARCH 2012

Grant Date Expiry date Balance Granted Vested Lapsed Balance

at start of during the during the /forfeited at end of

the year year year during the the year


01/10/08 30/09/11 635,000 - (605,000) (30,000) -

31 MARCH 2011

Grant Date Expiry date Balance Granted Exercised Lapsed Balance

at start of during the during /forfeited at end of

the year year the year during the the year


01/10/08 30/09/11 720,000 - (40,000) (45,000) 635,000

01/07/07 30/06/10 319,000 - (319,000) - -

Total 1,039,000 - (359,000) (45,000) 635,000


(d) Expenses arising from share-based payment transactions

Total expenses arising from share-based payment transactions recognised during the period as part of employee

benefit expense were as follows:

35. RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH INFLOW

FROM OPERATING ACTIVITIES

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Expenses in relation to Executive Long-Term Incentive Plan 144 - 144 -

Expenses in relation to Executive Long-Term Performance Incentive (250) 25 (280) 25

(106) 25 (136) 25

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Profit for the year after income tax 18,431 33,545 54 147

Add/(deduct) non-cash items:

Depreciation of property, plant & equipment to recoverable amount 22,477 24,234 - -

Amortisation of intangible assets 18,149 16,659 - -

Impairment loss on property, plant & equipment - - - -

Impairment loss on intangible assets - - - -

Fair valuation adjustments 1,241 500 - -

Loss/(gain) on sale of non-current assets 76 (6,300) - -

Finance business bad debts written off 12,782 20,983 - -

Movement in accrued interest 275 (558) - -

Net (increase) in loans and advances to customers (6,077) (6,741) - -

Movement in provisions 3,427 (1,675) - -

Movement in tax 640 6,435 (82) 104

Movement in payables and accruals 408 (17,568) (106) (361)

Movement in debtors and other current assets 22,920 29,986 - -

Movement in inventories 43,336 10,533 - -

Fair value adjustment/reclassification to derivative financial instruments (647) 2,288 - -

Fair value adjustments to other financial assets 275 774 - -

Non-cash share-based payments expense (136) 25 (136) 25

Internal cash flow from financing activities - - (1,022) (1,699)

Foreign currency exchange translation (26,872) (6,959) - -

Net cash inflow / (outflow) from operating activities 110,705 106,161 (1,292) (1,784)


36. DISCLOSURE OF COMPONENTS OF OTHER COMPREHENSIVE INCOME

Exchange differences

The Appliances business has substantial foreign operations with assets and liabilities denominated in functional cur-

rencies other than the New Zealand dollar (NZD). The value of these investments, when translated to NZD, fluctuates

with exchange rate movements. Due to the appreciation of the NZD during the year ended 31 March 2012 (refer

Note 41) a $40.5 million adverse translation difference has arisen (2011 loss of $10.4 million).

37. DISCLOSURE OF TAX EFFECTS RELATING TO EACH COMPONENT

OF OTHER COMPREHENSIVE INCOME

38. GOVERNMENT GRANTS

The Appliances business has received funding for selected research & development activities from the Foundation

for Research, Science & Technology (FRST - now merged into the Ministry of Science & Innovation), a Crown Agent

that invested in such activities on behalf of the New Zealand government. The detailed nature and extent of this

funding is commercially sensitive. FRST grant funding of $0.3 million was recognised in the financial statements for

the year ended 31 March 2012 (2011 $Nil).

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Other comprehensive income:

Exchange differences on translating foreign operations (40,491) (10,352) - -

Cash flow hedges:

(Gains) arising during the year (2,211) (27,519) - -

Reclassification adjustments for losses included in profit or loss 19,284 12,478 - -

17,073 (15,041) - -

Income tax relating to components of other comprehensive income (4,780) 5,644 - -

Other comprehensive income for the year (28,198) (19,749) - -

Before tax Tax Net-of-tax

amount (expense)/ amount

benefit

$’000 $’000 $’000

Consolidated

31 March 2012

Exchange differences on translating foreign operations (40,491) - (40,491)

Cash flow hedges 17,073 (4,780) 12,293

Other comprehensive income (23,418) (4,780) (28,198)

31 March 2011

Exchange differences on translating foreign operations (10,352) - (10,352)

Cash flow hedges (15,041) 5,644 (9,397)

Other comprehensive income (25,393) 5,644 (19,749)


39. RELATED PARTY TRANSACTIONS

(a) Key management personnel compensation

The key management personnel are the Directors of the Company, the Directors of the Finance business and the

Executive teams of both the Appliances and Finance businesses.

Compensation of key management personnel for the years ended 31 March 2012 and 31 March 2011 was as follows:

Where there have been changes of key management personnel during the years ended 31 March 2012 and 31 March

2011, remuneration for these employees has been appropriately allocated on a pro-rata basis.

(b) Other transactions with key management personnel or entities related to them

Information on transactions with key management personnel or entities related to them, other than compensation,

are set out below.

(i) Other transactions and balances

Key management personnel invested cash in debenture stock issued by the Finance business during the period.

The debenture stock was acquired on the same terms & conditions that applied to other investors at the time the

investments were made.

During the year the company sold household appliances to key management personnel on the same terms and

conditions as available to all staff.

The Chairman of the Finance business board, Mr John Gilks, is a director and shareholder of Receivables Management

(NZ) Limited, a company which provides debt collection services to the Finance business. The services are provided

on normal commercial terms and conditions.

(c) Subsidiaries

Interests in subsidiaries are set out in Note 33.

(d) Parent Company

As at 31 March 2012, the Parent company had advanced funds to Group companies of $637.6 million (2011 $637.6

million). These intra-Group advances are interest free and repayable on demand.

(e) Transactions with related parties

Haier Group Corporation is a related party owing to its 20% shareholding in the Parent Company.

Short-term Post Other Termination Share-based Total

benefits employment benefits benefits payments

benefits long-term

$’000 $’000 $’000 $’000 $’000 $’000

2012 8,635 418 - 121 49 9,223

2011 7,372 330 57 - (2) 7,757


39. RELATED PARTY TRANSACTIONS (CONTINUED)

The following transactions occurred with Haier Group Corporation (and its associated entities) during the years

ended 31 March 2012 and 2011:

(f) Outstanding balances with related parties

The following balances are outstanding at balance date in relation to transactions with Haier Group Corporation:

Current Receivables (other) reflects the estimated costs of Product Support reported as part of Provisions (refer

Note 22) related to Haier manufactured product and which Haier Group Corporation has agreed to indemnify the

Company for. The indemnity shall not exceed actual costs.

No allowances for impairment have been raised in relation to any outstanding balances and no expense has been

recognised in respect of bad or doubtful debts due from Haier Group Corporation.

(g) Terms & conditions of related party transactions

All transactions were made on normal commercial terms & conditions and at market rates.

Outstanding balances are unsecured and are repayable in cash.

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Sales of goods and services

Sales of goods 5,383 11,598 - -

Sales of services 1,506 1,330 - -

6,889 12,928 - -

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Purchases of goods

Purchases of goods 32,273 33,579 - -

32,273 33,579 - -

Other transactions

Directors fees and travel costs paid to subsidiaries of Haier Group Corporation 287 188 287 188

287 188 287 188

CONSOLIDATED PARENT


2012 2011 2012 2011

$’000 $’000 $’000 $’000

Current receivables (sales of goods and services) 3,751 1,432 - -

Current receivables (other) 1,930 - - -

Current payables (purchases of goods and services) 10,124 2,482 - -


40. EVENTS OCCURRING AFTER THE STATEMENT OF FINANCIAL POSITION DATE

On 23 April 2012, the maturity date of the RFS Trust 2006-1 Committed liquidity facility in the Finance business was

extended from 26 October 2012 to 29 April 2013.

41. FOREIGN CURRENCY EXCHANGE RATES

31 March 31 March

2012 2011

NZ$1.00 =

Australian dollar 0.7879 0.7353

United States dollar 0.8193 0.7587

Euro 0.6137 0.5369

Thai baht 25.28 22.98

Mexican peso 10.4751 9.0597

British pound 0.5129 0.4715


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