KFL – February 2018 monthly update

1
Monthly Update
February 2018
KFL NAV
$
1.47
SHARE PRICE
$
1.34
DISCOUNT
9.1
%
as at 31 January 2018
A word from the Manager
Welcome to our first monthly update for 2018
The summer break saw markets continue to shine in January albeit the start of February saw some less rosy stock market
performances globally. The US market had its best start to the year since 1987 with the S&P 500 up 5.6%; the MSCI World Index
was up 3.7%; and emerging markets were the standout, up 6.7%. The New Zealand S&P/NZX50, while more subdued than its
international peers, did still put in a positive performance, up 0.5%. Equities enthusiasm has commentators hinting at a melt up
– performance of an asset class driven partly by a stampede of investors who don’t want to miss out on the rise.
Going back to fundamentals, while the outlook does continue to remain positive there are some slight nuances creeping in.
Investors are getting increasingly concerned about the inflationary impact of the strong and accelerating economic growth
rates we are seeing globally. In January we saw local interest rates rise over the month by around 20 basis points, which while a
large move, was not as the large as the rises we saw in US and European bond yields for the month.
The New Zealand dollar moved sharply upwards during the month which has the effect of somewhat blunting the revenue
generated offshore by Kingfish portfolio companies. Furthermore, the strengthening dollar and rising interest rates flowed into
a fairly sharp tightening of financial conditions in New Zealand, which was in contrast to the financial conditions in the United
States. We suspect this may have been one of the reasons why the New Zealand equities market was a bit slower than the
majority of global equity markets over January.
Portfolio Developments
It was a busy month for Kingfish portfolio companies, with a number of
portfolio companies announcing big ticket news items.
On 24 January, Michael Hill announced the exit of its US operations (closure of
9 stores) and the strategic repositioning of its Emma & Roe brand in Australia
(30 stores). This announcement is positive as it narrows management’s focus to
the Emma & Roe brand, which has attractive potential in the growing ‘demi-
fine’ fashion jewellery category, but has lacked strong execution so far. While
it is a little disappointing to leave the potentially lucrative US market (for
now), the company had a sub-scale presence and never turned a profit since
entering the market in 2008, so the exit sensibly prevents further losses. Emma
& Roe will enter a test and trial phase where the company will revamp and
refine the offering, under a smaller network of stores. We are confident these
are sound decisions by management, although the success of Emma & Roe
will depend on execution of the concept moving forwards.
Auckland International Airport announced the sale of its 25% stake in North
Queensland Airports for A$370m. The potential for a sale had been well
signalled, and the cash proceeds are welcomed given the company’s capital
expenditure requirements over the next 5 years.
Infratil, which specialises in owning energy, transport, data and social
infrastructure businesses announced it has a potential blip on the horizon
from one of its assets, Trustpower. Since 1993, Trustpower has benefitted
Xero
Late last year Kingfish portfolio
company, Xero, announced its
intention to transition to a sole
listing on the ASX. In the recent
Kingfish interim report, it was
indicated that the Company
was working through the
implications of what the Xero
transition would mean for the
Kingfish portfolio. The Company
has decided that given
Kingfish’s mandate to invest in
New Zealand quality, growth
companies and Xero’s decision
to move to a sole listing on
the ASX, it is appropriate that
Kingfish exits its Xero position in
a timely manner.

2
Sector Split
as at 31 January 2018
Key Details
as at 31 January 2018
FUND TYPE
Listed Investment Company
INVESTS IN
Growing New Zealand companies
LISTING DATE
31 March 2004
FINANCIAL YEAR END
31 March
TYPICAL PORTFOLIO SIZE
15-25 stocks
INVESTMENT CRITERIA
Long term growth
PERFORMANCE
OBJECTIVE
Long term growth of capital and
dividends
TAX STATUS
Portfolio Investment Entity (PIE)
MANAGER
Fisher Funds Management
Limited
MANAGEMENT
FEE RATE
1.25% of gross asset value
(reduced by 0.10% for every 1% of
underperformance relative to the
change in the NZ 90 Day Bank Bill
Index with a floor of 0.75%)
PERFORMANCE
FEE HURDLE
Changes in the NZ 90 Day Bank
Bill Index + 7%
PERFORMANCE FEE
15% of returns in excess of
benchmark and high water mark
HIGH WATER MARK
$1.27
SHARES ON ISSUE
190m
MARKET CAPITALISATION
254m
GEARING
None (maximum permitted 20%
of gross asset value)
3
%
ENERGY
30
%
HEALTHCARE
14
%

UTILITIES
2
%
CONSUMER
STAPLES
30
%
INDUSTRIALS
4
%
INFORMATION
TECHNOLOGY
10
%
CONSUMER
DISCRETIONARY
The Kingfish portfolio also holds cash.
from one of its shareholders - the Tauranga Energy Consumer
Trust (TECT) – arrangement to distribute dividends from the
shareholder for the benefit of consumers. TECT has proposed
to stop making payments to Trustpower’s Tauranga consumers
after 2022, in return for an upfront payment to consumers of
$2,500 and five subsequent annual payments of around $360
each. This proposal requires 50% consumer approval, so it is
not certain to go ahead. However, if the proposal is approved,
it suggests a possible 10% hit to Trustpower’s operating
earnings overtime, which will by inference impact Infratil (given
Trustpower represents approximately 28% of Infratil’s value).
The recent share price reaction in both Trustpower and Infratil
largely bakes in this outcome despite the decision remaining
conditional on consumer approval.
Recently, Vista Group announced that its founder and
longtime CEO Murray Holdaway will transition into the role of
Chief Product Officer in April 2018, with Kimbal Riley stepping
into the CEO role. Kimbal is currently the head of Vista
Entertainment Solutions, Vista’s largest operating division,
and a logical candidate to replace Murray. We think it is a
positive that Murray remains involved with the company in an
executive role and the transition has been well managed with
an experienced internal candidate assuming the CEO role.
Portfolio Changes
In January, we added The a2 Milk Company, to the Kingfish
portfolio. While we have been following a2 for some time,
we are now more comfortable about the company’s outlook
given its strengthening brand in China and the quality of
management. We have seen a2 make significant progress
on diversifying its distribution channels in China, growing
a direct business through internet channels and rolling out
product to thousands of mother and baby stores. Both of
these strategies have achieved real cut through and the a2
of today looks to have a more balanced distribution network
and its brand is increasingly recognised by consumers
based on independent survey data. We consider a2 is
a quality, growth company worthy of a small spot in the
Kingfish portfolio.
Sam Dickie
Senior Portfolio
Manager, Kingfish

5 Largest Portfolio Positions as at 31 January 2018
3
1 Month3 Months1 Year3 Years
(annualised)
5 Years
(annualised)
Corporate Performance
Total Shareholder Return+0.0%+5.3%+8.4%+7.7%+12.6%
Adjusted NAV Return+0.6%+6.4%+17.8%+12.3%+13.3%
Manager Performance
Gross Performance+0.8%+7.3%+21.4%+15.2%+16.4%
S&P/NZX50G Index+0.5%+3.6%+19.7%+13.7%+14.7%
Non-GAAP Financial Information
Kingfish uses non-GAAP measures, including adjusted net asset value, gross performance return and total shareholder return. The rationale for using such non-GAAP measures is as follows:
»adjusted net asset value – the underlying value of the investment portfolio adjusted for capital allocation decisions,
»gross performance return – the Manager’s portfolio performance in terms of stock selection, and
»total shareholder return – the return to an investor who reinvests their dividends, and if in the money, exercises their warrants at warrant maturity date for additional shares.
All references to adjusted net asset value, gross performance return and total shareholder return in this monthly update are to such non-GAAP measures. The calculations applied to non-GAAP measures are
described in the Kingfish Global Non-GAAP Financial Information Policy. A copy of the policy is available at http://kingfish.co.nz/about-kingfish/kingfish-policies/
Performance to 31 January 2018
Mar
2004
Mar
2005
Mar
2006
Mar
2007
Mar
2008
Mar
2009
Mar
2010
Mar
2011
Mar
2012
Mar
2014
Mar
2015
Mar
2013
Mar
2016
Share Price/Total Shareholder Return
$
2.50
$
3.00
$
2.0 0
$
1.50
$
1.00
Share PriceTotal Shareholder Return
$
4.00
$
0.50
$
0.00
Mar
2017
$
3.50
Total Shareholder Return to 31 January 2018
January’s Biggest Movers
Typically the Kingfish portfolio will be invested 90% or more in equities.
XERO
+8
%
SUMMERSET GROUP
+5
%
FREIGHTWAYS
+4
%
FISHER & PAYKEL
HEALTHCARE
-7
%
TRADEME
-7
%
The remaining portfolio is made up of another 14 stocks and cash.
MAINFREIGHT
13
%
FISHER & PAYKEL
HEALTHCARE
11
%
INFRATIL
9
%
FREIGHTWAYS
8
%
RYMAN
HEALTHCARE
7
%

Disclaimer: The information in this update has been prepared as at the date noted on the front page. The information has been prepared as a general summary of the matters covered only, and it is
by necessity brief. The information and opinions are based upon sources which are believed to be reliable, but Kingfish Limited and its officers and directors make no representation as to its accuracy
or completeness. The update is not intended to constitute professional or investment advice and should not be relied upon in making any investment decisions. Professional financial advice from an
authorised financial adviser should be taken before making an investment. To the extent that the update contains data relating to the historical performance of Kingfish Limited or its portfolio companies,
please note that fund performance can and will vary and that future results may have no correlation with results historically achieved.
Kingfish Limited
Private Bag 93502, Takapuna, Auckland 0740
Phone: +64 9 489 7094 | Fax: +64 9 489 7139
Email: enquire@kingfish.co.nz | www.kingfish.co.nz
4
Computershare Investor Services Limited
Private Bag 92119, Auckland 1142
Phone: +64 9 488 8777 | Fax: +64 9 488 8787
Email: enquiry@computershare.co.nz | www.computershare.com/nz
About Kingfish
Kingfish is an investment company
listed on the New Zealand Stock
Exchange. The company gives
shareholders an opportunity to
invest in a diversified portfolio
of between 15 and 25 quality
growing New Zealand companies
through a single, professionally
managed investment. The aim
of Kingfish is to offer investors
competitive returns through
capital growth and dividends.
Capital Management Strategies
Regular Dividends
»Quarterly distribution policy introduced in
June 2009
»Under this policy, 2% of average NAV is targeted
to be paid to shareholders quarterly
»Dividends paid by Kingfish may include dividends
received, interest income, investment gains
and/or return of capital
»Shareholders who prefer to have increased
capital rather than a regular income stream have
the opportunity to participate in the company’s
dividend reinvestment plan (DRP)
»Shares issued to DRP participants are at a 3%
discount to market price
»Kingfish became a portfolio investment entity on
1 October 2007. As a result, dividends paid to
New Zealand tax resident shareholders have not
been subject to further tax
Share Buyback Programme
»Kingfish has a buyback programme in place allowing
it (if it elects to do so) to acquire up to 9.4m of its
shares on market in the year to 31 October 2018
»Shares bought back by the company are held as
treasury stock
» Shares held as treasury stock are available to be
re-issued for the dividend reinvestment plan and to
pay performance fees
Warrants
»Warrants put Kingfish in a better position to
grow further, improve liquidity, operate efficiently
and pursue other capital structure initiatives as
appropriate
»A warrant is the right, not the obligation, to purchase
an ordinary share in Kingfish at a fixed price on a
fixed date
»There are currently no warrants on issue
Management
Kingfish’s portfolio is managed
by Fisher Funds Management
Limited. Sam Dickie (Senior
Portfolio Manager), Zoie Regan
(Senior Investment Analyst) and
Matt Peek (Investment Analyst)
have prime responsibility for
managing the Kingfish portfolio.
Together they have over 40 years
combined experience and are
very capable of researching and
investing in the quality New
Zealand companies that Kingfish
targets. Fisher Funds is based in
Takapuna, Auckland.
Board
The Manager has authority
delegated to it from the
Board to invest according to
the Management Agreement
and other written policies.
The Board of Kingfish
comprises independent
directors Alistair Ryan (Chair),
Carol Campbell and Andy
Coupe; and non-independent
director Carmel Fisher.