KFL – May 2018 monthly update

1
Monthly Update
May 2018
KFL NAV
$
1.43
SHARE PRICE
$
1.33
DISCOUNT
7.1
%
as at 30 April 2018
A word from the Manager
The New Zealand market rebounded in April closing up
1.5% while the Kingfish portfolio was down 0.5%. Market
performance was broadly in line with global equity markets.
Unlike previous months where consumer stocks like The
a2 Milk Company had largely driven market performance,
this month building materials and telecommunications
sector stocks like Fletcher Building and Spark led market
performance.
During April, New Zealand interest rates remained low
and our dollar weakened which is helpful for New Zealand
equity investors. New Zealand financial conditions remain
loose. This is an important safety valve to help ensure New
Zealand’s economic growth doesn’t get too weak relative to
the rest of the world.
Fletcher Building – a new investment
for Kingfish
Fletcher Building’s woes over the past couple of years have
been widely reported. The company has made too many
newspaper headlines with delays on major construction
projects and the significant losses reported by its building
and interiors unit. It is fair to say this has been a company
with a chequered track record facing a number of
challenges. We believe the headlines, and the fallout from
some of Fletcher’s poor strategic decisions, are hiding a
business that has healthy prospects. New management is
the catalyst for change.
During April we made the decision to add Fletcher Building
to the portfolio. Fletcher Building is a company we know
well and have followed for many years. I began covering it
as a sell-side research analyst back in 2000 and at the time
liked the fact it had 5-6 simple divisions, most of which
dominated the market. Now, after watching the company
closely from the side lines for the past 12-18 months as it
endured significant challenges, we believe a rare attractive
opportunity is emerging which justifies an investment.
Despite its challenges, Fletcher Building’s key New
Zealand operations; Golden Bay Cement, Winstone
Wallboards and PlaceMakers dominate their respective
markets. These core businesses have, in my view, clear
moats and help the company to deliver solid cash flow.
This fact hasn’t changed in all the years that I have
followed the company. What changed was a number
of poorly considered acquisitions and forays into other
business lines that clearly did not work.
What’s attracted our attention to the Fletcher Building of
today is the strategic review that has been undertaken
guided by the new management team. Fletcher’s has
committed to a “back to the future” strategy - selling its
overseas business and re-focusing on the strong New
Zealand and Australian core. Fletcher’s is getting back to
what it does best.
I am particularly encouraged by Fletcher’s new
management team and have met with new CEO, Ross
Taylor, several times over the past few months. Ross has a
straightforward demeanour, a clear vision and a keen sense
of Fletcher’s strengths as a business. He is also committed
to seeing the company return to its former glory. Based on
these conversations and feedback from former Fletcher’s
executives and industry experts I believe the strategy
makes real sense.
There are two key planks to the new Fletcher’s strategy –
refocusing the business on areas of strength and taking
out cost and complexity.
After years of distracting international acquisitions and
diversification away from key operations, the company’s
decision to sell its overseas businesses (Formica and Roof
Tiles are currently up for sale) makes sense. This is likely to
generate in excess of $1bn for the company and may result
in it being able to return capital to shareholders.

2
Sector Split
as at 30 April 2018
Key Details
as at 30 April 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
$1.44
SHARES ON ISSUE
192m
MARKET CAPITALISATION
255m
GEARING
None (maximum permitted 20%
of gross asset value)
The Kingfish portfolio also holds cash.
4
%
27
%
HEALTHCARE
12
%

UTILITIES
INFORMATION
TECHNOLOGY
30
%
INDUSTRIALS
10
%
CONSUMER
DISCRETIONARY
10
%
CONSUMER
STAPLES
Fletcher Building also announced a comprehensive
restructure of its business. This presents both cost savings
and potential revenue growth opportunities. All up we think
these initiatives could add $30-$50m to its core earnings.
This is a different flavour of investment but one that we
believe offers very real potential. We will be watching
very closely (as always) to ensure our investment thesis is
playing out, but for the first time in Kingfish’s history we are
encouraged by what we see at Fletcher Building.
Sam Dickie
Senior Portfolio Manager,
Fisher Funds
3
%

MATERIALS

1 Month3 Months1 Year3 Years
(annualised)
5 Years
(annualised)
Corporate Performance
Total Shareholder Return+1.5%+1.5%+18.1%+8.3%+12.1%
Adjusted NAV Return(1.0%)(0.8%)+13.9%+12.4%+12.0%
Manager Performance
Gross Performance Return(0.5%)(1.1%)+15.9%+14.9%+14.8%
S&P/NZX50G Index+1.5%+0.0%+14.4%+13.4%+12.8%
3
April’s Biggest Movers
Typically the Kingfish portfolio will be invested 90% or more in equities.
VISTA GROUP
+5
%
AUCKLAND
INTERNATIONAL AIRPORT
+4
%
FISHER & PAYKEL
HEALTHCARE
-3
%
ABANO HEALTHCARE
-5
%
MICHAEL HILL
-10
%
5 Largest Portfolio Positions as at 30 April 2018
FISHER & PAYKEL
HEALTHCARE
12
%
MAINFREIGHT
12
%
FREIGHTWAYS
9
%
THE A2 MILK COMPANY
9
%
RYMAN HEALTHCARE
7
%
The remaining portfolio is made up of another 11 stocks and cash.
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
Mar
2018
Total Shareholder Return to 30 April 2018
Performance to 30 April 2018
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/

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, 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.