KFL – November 2018 monthly update

1
Monthly Update
November 2018
A word from the Manager
Market Environment
New Zealand equities as measured by the S&P/NZX50
fell sharply in October, down 6.4%. This was the second
largest monthly fall in NZ equities since the depths of the
GFC in early 2009, (the largest was in May 2010).
New Zealand was one of the more insulated markets
globally, with global equities down approximately 7.5%
and emerging markets equities down approximately
9.0%. While it’s always hard to pin down the precise
causes for a sharp correction like we have experienced
- no doubt excessive optimism, low volatility and
overbought conditions were factors - the expected pace
of economic growth lurks in the background as the main
fear driving market participants. We remain cautious of
the overall global economic environment, rather than
pessimistic.
Unsurprisingly, defensive sectors (telecommunications,
utilities and real estate) were the better performing
sectors, down circa 3% for the month. The worst
performing sectors were energy and healthcare, as crude
oil fell in price and growth stocks were sold off sharply
globally.
Portfolio Changes
During the month we exited our position in Abano
Healthcare. Ongoing disappointing same store sales
growth from its Australian dental business (Maven) and
limited margin improvement has meant Abano has been
on watch over the last year and we have been decreasing
our investment. Two of the key attractions of a roll-up
2

story are the ability to take organic market share and
the delivery of operating leverage via scale, and Abano
continues to struggle to deliver on both of these. As
always, capital is precious and we have better uses for our
capital currently.
We took the opportunity to add cautiously to our
positions in The a2 Milk Company, Fisher & Paykel
Healthcare, and Auckland International Airport
following the volatility in share prices during the month.
We slightly reduced our position in Mainfreight as the
company is definitely not immune to the downshift in
global growth we expect into 2019, coupled with the
fact that its valuation was elevated on multiple counts.
Other Portfolio News
The a2 Milk Company released a presentation at
a broker conference with updates on several KPIs.
There was no financial update other than commenting
that revenue for first quarter 2019 is “consistent with
company expectations, reflecting strong growth in
infant formula and milk products”. The lift in market
share quoted was in line with our expectations and we
expect a solid trading update at the Annual Meeting in
November.
Freightways gave its first quarter 2019 update at its
AGM, which was mixed. Positively, the courier business
has delivered good growth and the various initiatives
new CEO Mark Troughear has launched appear to be
gaining traction and will accelerate into second half 2019
and beyond. Restructuring driver rates per package has
improved last-mile efficiency and reduced driver top-
ups. The “pricing effort” campaign is gaining traction
and in addition geo-mapping is nearly complete which
will enable surcharges for higher cost B2C deliveries.
Michael Hill announced first quarter 2019 sales, which
revealed a sharp -11% decline in same store sales
growth, as it cut back its practice of allowing store staff
the autonomy to discount to close sales. This move was
part of its change in strategy to move away from price-
1
Share Price Discount to NAV (including warrant price on a pro-rated basis)
2
Being a business that buys lots of other similar small businesses.
KFL NAV
$
1.44
SHARE PRICE
$
1.34
DISCOUNT
1
6.0
%
as at 31 October 2018
WARRANT PRICE
$
0.05

2
Key Details
as at 31 October 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
$1.37
SHARES ON ISSUE
195m
MARKET CAPITALISATION
261m
GEARING
None (maximum permitted 20%
of gross asset value)
Sector Split
as at 31 October 2018
3
%
26
%
HEALTH CARE
16
%

UTILITIES

MATERIALS
29
%
INDUSTRIALS
6
%
INFORMATION
TECHNOLOGY
10
%
CONSUMER
STAPLES
3
%

CASH
7
%
CONSUMER
DISCRETIONARY
Sam Dickie
Senior Portfolio Manager
Fisher Funds Management Limited
based competition on generic product and towards more
unique collections. We were very disappointed by the worse-
than-expected decline, which suggested a loss of share to
competitors and loss of volume and margin dollars. The
company has flagged a greater promotional pipeline in the
important December quarter, which is expected to improve
results. We have engaged with the company to better
understand the merit of the strategy and how it expects to
achieve improved performance moving forward.

October’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 31 October 2018
RESTAURANT BRANDS
+10
%
PUSHPAY HOLDINGS
-13
%
RYMAN HEALTHCARE
-14
%
SUMMERSET GROUP
-15
%
MICHAEL HILL
-28
%
FISHER & PAYKEL
HEALTHCARE
13
%
THE A2 MILK COMPANY
12
%
FREIGHTWAYS
10
%
MAINFREIGHT
9
%
INFRATIL
7
%
3
Performance to 31 October 2018
1 Month3 Months1 Year3 Years
(annualised)
5 Years
(annualised)
Company Performance
Total Shareholder Return(3.9%)(2.4%)+13.5%+12.8%+10.3%
Adjusted NAV Return(7.0%)(3.8%)+10.1%+12.6%+10.8%
Portfolio Performance
Gross Performance Return(7.2%)(3.4%)+11.8%+15.2%+13.4%
S&P/NZX50G Index(6.4%)(1.9%)+7.4%+13.5%+12.3%
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, 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 Kingfish Non-GAAP Financial Information Policy. A copy of the policy is available at http://kingfish.co.nz/about-kingfish/kingfish-policies/
Total Shareholder Return to 31 October 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

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
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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 9.7m of its
shares on market in the year to 31 October 2019
»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
»The warrants were issued at no cost to eligible
shareholders and in the ratio of one warrant for
every four Kingfish shares held
»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.