BRM – October 2019 monthly update

1
A word from the Manager
Market Overview
After a weak August, the ASX 200 Index rebounded in
September, returning +1.9% (in A$) for the month. At a
sector level, Energy led the way, rising +4.7% after an
attack on Saudi Arabian oil facilities led to a spike in the
crude oil price.
After the Australian 10yr government bond yield hit all-time
lows of 0.88% in August, bond yields rebounded modestly
and then stabilised in September. This was enough to see an
equity market rotation out of higher growth and defensive
companies, into cyclical businesses and those companies
trading on lower multiples.
In Australia this dynamic saw the Financials (+4.3%), Materials
(+3.1%) and Consumer Discretionary (+3.0%) sectors
outperforming the market.
Conversely, this also contributed to the negative returns for
the Communication Services (-3.0%), Healthcare (-2.5%), Real
Estate (-2.3%) and Information Technology (-0.6%) sectors
Portfolio News
With a portfolio that includes a number of higher growth
businesses and companies with defensive earnings streams,
Barramundi returned +1.4% gross (in A$) in September. This
is less than the ASX200. That said, September rounded out a
strong quarter overall for Barramundi which returned +6.7%
in A$ vs the ASX200 which returned +2.3%.
Following the August reporting season, September was
relatively light from a news flow perspective. Our team spent
time in Australia, meeting up with management teams of our
portfolio companies and researching new investment ideas.
Dominos’ (+8.6% in A$) share price strengthened as the
market became more optimistic that management initiatives
to accelerate growth (particularly in Europe) would bear
fruit for the company. In line with this, a number of brokers
upgraded their valuations in the month.
Seek (+6.7%) was one of the companies we met with in
Australia during the month. A point of contention for the
market is the lack of after tax earnings growth in Seek relative
to continued, strong revenue growth from its core online
recruitment businesses. A key factor contributing to earnings
growth lagging revenue growth is that Seek continues to
invest heavily in a range of early stage businesses. Together
these are still loss-making. This detracts from what would
otherwise be stronger after tax earnings growth.
These early stage investments are focussed on three major
categories: (1) online education, (2) online contingent /
temporary labour hire businesses and (3) Human Resources
management software (targeting small and medium sized
businesses). In our meeting with management we discussed
Seek’s investment strategy and learnt more about these
businesses. Management have a successful track record in
incubating early stage businesses and creating value for
shareholders. We’re happy to back their judgement in this
regard.
NAB (+8.6%) and our other bank holdings of WBC (+5.0%)
and CBA (+2.3%) benefitted as the market rewarded
companies with lower earnings multiples and attractive
dividend yields in September.
At the other end of the spectrum, a number of companies
trading on higher earnings multiples underperformed the
market. This dynamic contributed to the negative returns of
Wisetech (-5.9%), Nanosonics (-5.4%), Technology One
(-5.3%) and Resmed (-3.7%). All these businesses have
delivered strong returns for our portfolio year to date. There
was no material negative news related to them in the month,
and we remain confident about their longer term earnings
outlooks.
Xero (-1.9%) was also impacted by this market rotation.
Specific to the company, we attended Xerocon Brisbane
2019. This is the showcase event for Xero’s accountant,
bookkeeper, and app ecosystem partners. Xerocon
reinforced for us that Xero is differentiated by: (1) it’s
simplicity and usability; (2) its ecosystem, which means the
combination of these features is greater than the sum of
the parts; (3) the community aspect where Xero benefits
key stakeholders who aren’t the customer (such as the
accountants), creating strong word of mouth referrals and
advocacy for the product; and (4) its culture and purpose.
1
Share Price Discount to NAV (including warrant price on a pro-rated basis)
Monthly Update
October 2019
BRM NAV
$
0.73
SHARE PRICE
$
0.63
WARRANT PRICE
$
0.03
as at 30 September 2019
DISCOUNT
1
12.2
%

Sector Split
as at 30 September 2019
Key Details
as at 30 September 2019
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
FEE HURDLE
Changes in the NZ 90 Day Bank
Bill Index + 7%
PERFORMANCE FEE
10% of returns in excess of
benchmark and high water mark
HIGH WATER MARK
$0.63
PERFORMANCE FEE CAP
1.25%
SHARES ON ISSUE
173m
MARKET
CAPITALISATION
$109m
GEARING
None (maximum permitted 20%
of gross asset value)
11
%

HEALTHCARE
20
%
13
%
COMMUNICATION
SERVICES
19
%
CONSUMER
DISCRETIONARY
INFORMATION
TECHNOLOGY
22
%

FINANCIALS
11
%

INDUSTRIALS
The value proposition to Xero’s partners is compelling.
Xero’s products generate time and workflow savings, which
is personal to them and builds strong product advocacy. The
key messages from the two days were that the continuous
development of customer-facing features (such as payments,
and improved reconciliations) help to increase the width of the
‘economic moat’ surrounding Xero.
The management team continued to reiterate the message
that they are in the “early innings” of a long and lucrative
growth trajectory. Cloud accounting adoption by customers
is still in the early stages in key markets, “like the internet 15
years ago”.
oOH! Media (-6.8%) had a tough month in September as the
slow recovery of the advertising market continued to weigh
on the share price. The slowdown that led to the company’s
earnings downgrade in August (written about in last month’s
update) seems to be cyclical in nature. Our channel checks
2
%

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

MATERIALS
thus far suggest that the December quarter continues
to improve, albeit at a modest rate. Structurally, outdoor
advertising as a category continues to receive an increasing
proportion of advertising spend compared to traditional
advertising channels. So longer term, the business is well
positioned to benefit from a pick-up in advertising spending.
Portfolio Changes
There were no substantive portfolio position changes during
the month.
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The Barramundi portfolio also holds cash.

September’s Biggest Movers in Australian dollar terms
Typically the Barramundi portfolio will be invested 90% or more in equities.
DOMINO’S
+9
%
NATIONAL
AUSTRALIA BANK
+9
%
AUB GROUP
+8
%
OOH! MEDIA
-7
%
SEEK
+7
%
5 Largest Portfolio Positions as at 30 September 2019
CARSALES.COM
7
%
SEEK
8
%
CSL LIMITED
7
%
XERO LIMITED
5
%
COMMONWEALTH
BANK
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
$
1.80
$
0.20
$
0.00
$
1.40
Oct
2017
Oct
2018
$
1.60
Total Shareholder Return to 30 September 2019
1 Month3 Months1 Year3 Years
(annualised)
5 Years
(annualised)
Company Performance
Total Shareholder Return+0.8%+2.7%+8.7%+10.1%+9.9%
Adjusted NAV Return+1.4%+7.6%+10.5%+11.3%+10.2%
Portfolio Performance
Gross Performance Return+1.6%+7.9%+13.5%+14.4%+13.6%
Benchmark Index^+2.1%+3.3%+12.1%+12.5%+10.0%
Performance to 30 September 2019
^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 expenses, fees and tax,
»gross performance return – the Manager’s portfolio performance in terms of stock selection and currency hedging before expenses, 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/
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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
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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 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 8.4m 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 16 October 2018, a new issue of warrants (BRMWE)
was announced
»The warrants were issued 1 November 2018 at no cost
to eligible shareholders and in the ratio of one warrant
for every four Barramundi shares held
»Exercise Price = $0.59
»Exercise Date = 25 October 2019
»Exercise details were posted and emailed to warrant
holders in late September 2019
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.