KFL – July 2018 monthly update

1
Monthly Update
July 2018
KFL NAV
$
1.52
SHARE PRICE
$
1.39
DISCOUNT
8.6
%
as at 30 June 2018
A word from the Manager
June was another positive month for the New Zealand share
market. Against a backdrop of high oil prices, growth scares,
escalating tariffs and the threat of a full blown trade war, the
New Zealand market was a relative safe haven rising 3.3% and
outperforming all major global equity markets.
Interestingly, for the six months to 30 June 2018, the New
Zealand market has outperformed emerging equities by
c.15%¹, European equities by c.9%², global equities by c.6%³
and US equities by c.4%
4
. Those are big numbers when you
consider the S&P/NZX50G is only up c.7% for the six months
ending 30 June 2018.
Geopolitical risk, primarily currently caused by Trump and his
crusade on trade is becoming more concerning and is one
of the key reasons we have seen a sharp sell-off in emerging
market equities. A decade ago emerging market gyrations were
not hugely relevant to New Zealand but given these emerging
economies account for 60-80% of global GDP growth and that
New Zealand is a small and open economy, it is important to
keep a watchful eye on these developments.
The Kingfish portfolio was up 4.3% on a gross performance basis.
Know what you own and know why you own it
While macro factors are important, there is no substitute
for meeting industry participants, companies and their
competitors.
Peter Lynch, the renowned former manager of the rockstar
Magellan Fund, famously quoted “There is absolutely no
better investment technique than wearing out shoe leather and
visiting companies.” and “Know what you own and know why
you own it.”
As the manager of the Magellan Fund between 1977 and 1990,
Lynch averaged a 29.2% annual return (consistently more than
doubling the S&P500 and making it the best performing mutual
fund in the world). Decades on, we still agree whole-heartedly
with Lynch’s advice and believe there is no substitute to looking
in the eye of business heads – it accelerates the knowledge
process and gives us confidence that there are layers of quality
management below the “C” suite.
We have previously discussed that over 50% of the revenue
from the Kingfish portfolio is derived offshore. Given this,
we recently visited several of the offshore operations of
Kingfish portfolio companies as well as a number of their key
competitors. This gave us the chance to look into the eyes of a
number of business heads including those at Mainfreight and
Fisher & Paykel Healthcare.
Mainfreight is currently growing revenues rapidly in Australia
and Europe. On revisiting the large Epping site in Melbourne
two years after the 2016 investor day hosted there, it was
pleasing to see the warehouse full and the quality of the
operations at the site have been used to attract a significant
number of new customers. As a result, the company is already
expanding onto an adjacent site. It is also encouraging that
this year’s investor day was hosted in the Netherlands, which
is testament to the progress the team is currently making in
the European business. We are pleased to see the company
continuing to foster its unique culture offshore and intensify its
network both within, and between, regions.
Fisher & Paykel Healthcare (FPH) generates almost 10% of
its revenue from Europe so it was extremely helpful to spend
some time with Patrick McSweeney, FPH’s long standing
head of European operations. Patrick has been in the industry
for 30 years and has been with FPH for 15 years. In business
generally, but especially in the world of medical technology,
where timeframes to get products approved and into
commercial production are measured in decades, not years,
that sort of experience is worth its weight in gold. Patrick
reminded us that the European and global penetration of high
flow oxygen therapies into the hospital is still very low and
FPH remains very well positioned to dominate this significant
opportunity for many years to come.
Sam Dickie
Senior Portfolio Manager
Fisher Funds Management Limited
1
MSCI Emerging Markets Index
2
Stoxx Europe 600 Index
3
MSCI World Index
4
S&P500 Index

2
Sector Split
as at 30 June 2018
Key Details
as at 30 June 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
$1.41
SHARES ON ISSUE
193m
MARKET CAPITALISATION
269m
GEARING
None (maximum permitted 20%
of gross asset value)
Performance
to 30 June 2018
1 Month3 Months1 Year3 Years
(annualised)
5 Years
(annualised)
Corporate Performance
Total Shareholder Return+2.9%+8.4%+17.7%+9.9%+12.4%
Adjusted NAV Return+4.1%+7.2%+19.3%+15.6%+13.4%
Manager Performance
Gross Performance Return+4.3%+8.2%+21.3%+18.3%+16.2%
S&P/NZX50G Index+3.3%+7.5%+17.5%+16.0%+15.0%
Non-GAAP Financial Information
Kingfish uses non-GAAP measures, including adjusted net asset value, adjusted NAV return, 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 after fees and tax,
»adjusted NAV return – the net return to an investor after fees and tax,
»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, adjusted NAV return, 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 Non-GAAP Financial Information Policy. A copy of the policy is available at http://kingfish.co.nz/about-kingfish/kingfish-policies/
The Kingfish portfolio also holds cash.
5
%
28
%
INDUSTRIALS
11
%

UTILITIES
INFORMATION
TECHNOLOGY
28
%
HEALTHCARE
9
%
CONSUMER
DISCRETIONARY
10
%
CONSUMER
STAPLES
3
%

MATERIALS

Total Shareholder Return
to 30 June 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
$
4.50
$
0.50
$
0.00
Mar
2017
$
3.50
Mar
2018
$
4.00
June’s Biggest Movers
Typically the Kingfish portfolio will be invested 90% or more in equities.
The remaining portfolio is made up of another 11 stocks and cash.
5 Largest Portfolio Positions
as at 30 June 2018
FISHER & PAYKEL
HEALTHCARE
+13
%
VISTA GROUP
+9
%
RYMAN HEALTHCARE
+6
%
FLETCHER BUILDING
+5
%
THE A2 MILK COMPANY
+5
%
FISHER & PAYKEL
HEALTHCARE
12
%
MAINFREIGHT
11
%
RYMAN HEALTHCARE
9
%
FREIGHTWAYS
8
%
THE A2 MILK COMPANY
8
%
3

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
»On 2 July 2018, a new issue of warrants (KFLWE) was
announced
»Warrants will be issued at no cost to eligible
shareholders and in the ratio of one warrant for
every four Kingfish shares held on the record date
(18 July 2018)
»Exercise Price = $1.37 per warrant, to be adjusted
down for dividends declared during the period up to
the Exercise Date
»Exercise Date = 12 July 2019
»The final Exercise Price will be announced and an
Exercise Form will be posted to warrant holders in
June 2019
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.