BRM – October 2018 monthly update

1
Monthly Update
October 2018
BRM NAV
$
0.71
SHARE PRICE
$
0.64
DISCOUNT
10.3
%
as at 30 September 2018
A word from the Manager
Market Overview
The ASX200 Index returned -1.2% (A$) during the month.
Healthcare was the largest drag on the index as the Prime
Minister called for a Royal Commission into Australia’s aged
care sector. This caused sharp falls for a number of aged
care operators. Energy and materials enjoyed strong gains
during the month as commodity prices rallied, led by coking
coal prices which rose 9.2% in September.
For September, the Barramundi portfolio fell -2.0% on a
gross performance basis. After a strong performance in
the prior few months a number of holdings such as CSL
(-10.6% for the month), NXT (-8.2%) and SEK (-5.7%) fell in
September contributing to the softer Barramundi result. In
the main, we remain comfortable with our holdings in these
companies.
Shaking off cyclical pressures
Brambles (BXB), one of our portfolio holdings for a
number of years, pleasingly returned +23% (A$) across
the September quarter. BXB is the leading player in the
global pooled pallet market with a strong market position
in reusable plastic containers (RPC) through its subsidiary
IFCO. Through these divisions, BXB is embedded across the
supply chains of many major companies across a wide range
of industries.
BXB had a tough first six months of the year, significantly
underperforming the ASX200. It’s near-term profit margins in
the US had come under pressure from sharply rising lumber
prices and transport costs. There was market uncertainty
regarding the range of potential outcomes from an ongoing
management review of the business by BXB’s CEO Graham
Chipchase (who took up his position in 2017). In addition to
this there is an ongoing market debate as to whether or not
the rise of e-commerce will structurally alter supply chains
in a fashion that will diminish BXB’s role and/or significantly
worsen its pricing power.
We used this share price weakness to add to our
position in the June quarter. In our view, the input
cost inflation while negatively impacting near-term
margins, ultimately will be passed on to customers (with
a lag). In addition, as a large scale, low cost provider,
BXB can wear the cost squeeze better than many
peers and we do not believe that cyclical cost input
squeezes necessarily destroy the longer-term economic
proposition of Brambles.
At Brambles results announcement in August, there
were early signs that the company’s initiatives to
mitigate US cost pressures were starting to bear fruit. In
addition, the market was encouraged by the outcome
of the business review which importantly has seen BXB
explore a demerger of the IFCO RPC business from the
pooled pallet operations as a means of trying to shine
a light on the value inherent in the IFCO business. The
combination of these events helped spark the strong
rebound in the share price performance through the
second half of the quarter.
We continue to like BXB’s market position and outlook.
The growth and evolution of e-commerce will have
implications for global supply chains. It remains to
be seen if and how those supply chains will evolve.
Ultimately goods will still need to be moved from the
source of their production to centralised distribution
centres from where they can be dispatched to their end
customers. BXB remains in a strong position to adapt
to these changes and facilitate this flow of goods. We’ll
watch this space with interest.
Portfolio Changes
During the month after initially responding positively
to NEXTDC Limited’s (NXT) result (delivered on the
last day of August), the market proceeded to knock
18% off the company’s market cap during September
before the share price recovered in the latter part of

Sector Split
as at 30 September 2018
Key Details
as at 30 September 2018
FUND TYPE
Listed Investment Company
INVESTS IN
Growing Australian companies
LISTING DATE
26 October 2006
FINANCIAL YEAR END
30 June
TYPICAL PORTFOLIO SIZE
25-35 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
BENCHMARK
Changes in the NZ 90 Day Bank
Bill Index + 7%
PERFORMANCE
FEE HURDLE
15% of returns in excess of
benchmark and high water mark
HIGH WATER MARK
$0.69
SHARES ON ISSUE
168m
MARKET CAPITALISATION
$108m
GEARING
None (maximum permitted 20%
of gross asset value)
11
%

HEALTH CARE
19
%
11
%

INDUSTRIALS
18
%
COMMUNICATION
SERVICES
INFORMATION
TECHNOLOGY
20
%
FINANCIALS
9
%

CASH
6
%
CONSUMER
DISCRETIONARY
the month. There was nothing onerous in NXT’s result, although the lack of progress in contracting more of its recently
constructed data centre capacity disappointed the market. Management put this down to timing delays rather than a lack
of demand and in fact have brought forward the expansion of its second data centre in Sydney because of the strength of
the underlying demand for capacity. We consequently topped up our position on this pullback.
Outside of topping up NXT, we had a number of minor changes to portfolio position sizes in the
month following a comprehensive review of our individual portfolio company STEEPP scores.
1
%

REAL ESTATE
2
Robbie Urquhart
Senior Portfolio Manager
Fisher Funds Management Limited
5
%

MATERIALS

3
September’s Biggest Movers in Australian dollar terms
Typically the Barramundi portfolio will be invested 90% or more in equities.
RIO TINTO
+9
%
BHP BILLITON
+7
%
SEEK
-6
%
CSL
-11
%
NEXTDC
-8
%
5 Largest Portfolio Positions as at 30 September 2018
CSL
7
%
SEEK
7
%
CARSALES.COM
7
%
COMMONWEALTH
BANK OF AUSTRALIA
5
%
LINK ADMINISTRATION
HOLDINGS
5
%
The remaining portfolio is made up of another 21 stocks and cash.
Oct
2006
Oct
2007
Oct
2008
Oct
2009
Oct
2010
Oct
2011
Oct
2012
Oct
2013
Oct
2015
Oct
2016
Oct
2014
Share Price/Total Shareholder Return
$
1.00
$
1.20
$
0.8 0
$
0.60
$
0.40
Share PriceTotal Shareholder Return
$
1.60
$
0.20
$
0.00
$
1.40
Oct
2017
Total Shareholder Return to 30 September 2018
1 Month3 Months1 Year3 Years
(annualised)
Since Inception
(annualised)
Company Performance
Total Shareholder Return+2.3%+9.1%+21.8%+9.7%+4.0%
Adjusted NAV Return(2.2%)+2.9%+22.6%+12.6%+4.5%
Portfolio Performance
Gross Performance Return(2.0%)+4.5%+26.0%+16.1%+7.9%
Benchmark Index^(1.2%)+1.6%+14.6%+12.6%+3.2%
Performance to 30 September 2018
^Benchmark Index: S&P/ASX Small Ords Industrial Gross Index until 30 September 2015 & S&P/ASX 200 Index (hedged 70% to NZD) from 1 October 2015
Non-GAAP Financial Information
Barramundi 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,
»adjusted NAV return – the return to an investor after fees and tax,
»gross performance return – the Manager’s portfolio performance in terms of stock selection and currency hedging before fees and tax, 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 Barramundi Non-GAAP Financial Information Policy. A copy of the policy is available at http://barramundi.co.nz/about-barramundi/barramundi-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 Barramundi 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 Barramundi 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.
Barramundi Limited
Private Bag 93502, Takapuna, Auckland 0740
Phone: +64 9 489 7074 | Fax: +64 9 489 7139
Email: enquire@barramundi.co.nz | www.barramundi.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 Barramundi
Barramundi 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 25 and 35 quality
growing Australian companies
through a single, professionally
managed investment. The aim of
Barramundi is to offer investors
competitive returns through
capital growth and dividends.
Capital Management Strategies
Regular Dividends
»Quarterly distribution policy introduced in
August 2009
»Under this policy, 2% of average NAV is targeted
to be paid to shareholders quarterly
»Dividends paid by Barramundi 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
»Barramundi 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
»Barramundi has a buyback programme in place
allowing it (if it elects to do so) to acquire up to 7.4m 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 Barramundi 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 Barramundi at a fixed price on a
fixed date
»There are currently no warrants on issue
Management
Barramundi’s portfolio is managed
by Fisher Funds Management
Limited. Robbie Urquhart
(Senior Portfolio Manager),
Terry Tolich (Senior Investment
Analyst) and Delano Gallagher
(Investment Analyst) have prime
responsibility for managing the
Barramundi portfolio. Together
they have significant combined
experience and are very capable
of researching and investing in the
quality Australian companies that
Barramundi 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 Barramundi
comprises independent
directors Alistair Ryan (Chair),
Carol Campbell and Andy
Coupe; and non-independent
director Carmel Fisher.