BRM – August 2020 monthly update

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A WORD FROM THE MANAGER
In July Barramundi returned gross performance of +1.1%
and an Adjusted NAV return of +1.1%. This compares to our
benchmark, the ASX200 Index (70% hedged into NZ$), which
returned +0.7%.
The Australian share market edged higher in July in the face
of a sharp uptick in COVID-19 cases in Victoria. This has led
to the imposition of stringent lockdown measures across the
state. Victoria contributes approximately 23% to Australia’s
GDP. While material, if the lockdown is successful in curbing
the spread of the virus, this could prove to be a short-lived
economic setback. Conversely, if it spreads further, especially
across New South Wales, this setback might be more
protracted.
None of the Barramundi portfolio companies are solely
focussed on the Victorian market. We do have some portfolio
companies with a domestic, nationwide focus including our
bank shareholdings and online classified advertising businesses.
Near-term earnings of these companies will be impacted to
varying degrees by this lockdown. However, we’d note that the
earnings from a number of our Australian facing companies
are relatively defensive in nature such as Woolworths
(supermarkets), Next DC (data centres) or AUB Group (insurance
brokers). Demand for their goods and services is unlikely
to be hampered much in this environment. In addition, we
have a meaningful proportion of portfolio company earnings
derived from international markets that are also not likely to be
impacted by the Victorian lockdown. This includes the likes of
CSL, Resmed, Ansell, Brambles, Sonic Healthcare, and Wisetech.
We expect the government (state and federal) and the reserve
bank (RBA) are likely to add to the significant COVID-19 related
fiscal and monetary policy stimulus measures. This should offset
some of the worst effects of this economic setback.
Drawing this together, we think our portfolio is well placed to
weather this next COVID-19 challenge. We look forward to
engaging with our portfolio companies on this topic through
the August reporting season. And we will continue to focus
on capitalising on investment opportunities that arise in this
environment as we have done by adding Audinate to the
portfolio in July (see below).
Portfolio News
Credit Corp (+21.8% in A$) rebounded strongly in the month
as its financial results were well received by the market. Credit
Corp’s precautionary provisions for the expected impact of
COVID-19 on future collections from its existing purchased debt
ledger and consumer lending books saw reported earnings fall
78% in the period. However underlying earnings were a lot
stronger, rising +13% ahead of the prior year. The company is
also debt free and has substantial financial capacity available.
It should now be able to deploy this profitably as the supply
of defaulted debt from its clients (banks, utilities) is likely to
increase due to the economic fallout from COVID-19.
Next DC (+15.3%) rose after announcing further large
customer contract wins in the month. Demand for data
centre capacity continues to rise as the COVID-19 pandemic
accelerates the business transition to the digital economy.
Although there was no company specific news of note,
oOH!Media (-17.6%) continued its price slide in July. The
COVID-19 outbreak in Melbourne and related impacts will likely
extend the time it takes for advertising markets to recover. This
increases the near-term earnings uncertainty for oOH!Media.
Longer-term, once the economy does recover, we think
oOH!Media’s earnings potential remains sound.
After rising strongly in June, AUB Group (-11.3%) slid in July.
Healthcare provider Nanosonics (-9.2%) similarly was one of
our worst performing companies in the month. In both cases
there was no material company specific information of note.
Portfolio Changes
Audinate was added as a new position to the portfolio in
July. Audinate’s proprietary technology (known as Dante)
has been established as the technology standard for digital
professional audio networking systems globally. Sound system
products (speakers, amplifiers, mixers) that are enabled by
Dante technology can distribute digital audio signals across
networks of audio equipment in many different settings. These
include, corporate offices, places of worship, transport systems
such as Sydney trains, and other venues such as the Boston
Convention and Exhibition Centre, and sports stadiums such as
the Minneapolis baseball stadium, Target Field.
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Share Price Premium to NAV (using NAV to four decimal places).
MONTHLY UPDATE
August 2020
BRM NAV
$
0.69
$
0.71
Share Price
PREMIUM
1
3.6
%

as at 31 July 2020

SECTOR SPLIT
as at 31 July 2020
KEY DETAILS
as at 31 July 2020
FUND TYPE
Listed Investment Company
INVESTS IN
Growing Australian companies
LISTING DATE
26 October 2006
FINANCIAL YEAR END
30 June
TYPICAL PORTFOLIO SIZE
20-35 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
$0.68
PERFORMANCE FEE CAP
1.25%
SHARES ON ISSUE
209m
MARKET CAPITALISATION
$148m
GEARING
None (maximum permitted 20%
of gross asset value)
4
%
INFORMATION
TECHNOLOGY
20
%
20
%

INDUSTRIALS
18
%
COMMUNICATION
SERVICES

HEALTHCARE
27
%
3
%

FINANCIALS
CONSUMER
STAPLES
8
%
CONSUMER
DISCRETIONARY
Audinate’s technology is underpinning a global structural shift
from expensive analogue to far cheaper digital audio networked
systems. This analogue to digital shift is at an early stage,
thereby offering Audinate many years of growth in front of it.
Audinate has expanded the reach of its technology globally over
the last decade. In doing so, manufacturers have increasingly
found they need to include this technology in their products
to enable them to be networked with audio products from
other manufacturers. So for example, if speakers from one
manufacturer were to be linked up digitally with microphones
made by another, they both need the Dante technology. This
has created a virtuous circle of increasing the demand for
Dante technology and making it even more entrenched in
audio equipment product cycles. This ‘network effect’ acts as
a significant barrier to entry against competition and is a key
source of Audinate’s competitive advantage.
Audinate has also helped cement its position in the audio
world by investing in educating sound technicians about its
technology. There are now 120,000 Dante certified sound
technicians globally, 40,000 of whom were certified during the
recent COVID-19 related economic shutdowns. Audinate used
Robbie Urquhart
Senior Portfolio Manager
Fisher Funds Management Limited
their time wisely during the global lockdown. This adds to its
advantage over potential competition.
The COVID-19 global slowdown in activity has provided a
short-term cyclical headwind to Audinate’s revenue growth,
which has led to share price weakness in the past few months.
However, the long-term structural growth potential remains
undiminished.
We have therefore used this as an opportunity to add Audinate
to our portfolio in July. This included participating in Audinate’s
$28m capital raising in the month. The capital raised adds to
Audinate’s cash balance and strengthens its balance sheet.
This enables it to keep investing in innovation and growth
throughout the global economic slowdown. Ultimately this
should reward patient investors.
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The Barramundi portfolio also holds cash.

JULY’S SIGNIFICANT RETURNS IMPACTING
THE PORTFOLIO
during the month in Australian dollar terms
Typically the Barramundi portfolio will be invested 90% or more in equities.
CREDIT CORP GROUP
+22
%
NEXT DC LTD
+15
%
NANOSONICS LTD
-9
%
OOHMEDIA LTD
-18%
AUB GROUP
-11
%
5 LARGEST PORTFOLIO POSITIONS as at 31 July 2020
CSL LIMITED
7
%
CARSALES.COM
7
%
SEEK
7
%
COMMONWEALTH
BANK
7
%
XERO LIMITED
6
%
The remaining portfolio is made up of another 22 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
Share PriceTotal Shareholder Return
$
0.00
$
0.50
$
1.00
$
1.50
$
2.00
$
2.50
Oct
2017
Oct
2018
Oct
2019
TOTAL SHAREHOLDER RETURN to 31 Ju l y 2020
1 Month3 Months1 Year3 Years
(annualised)
5 Years
(annualised)
Company Performance
Total Shareholder Return+2.9%+18.6%+24.6%+16.8%+11.1%
Adjusted NAV Return+1.1%+12.6%+7.2%+13.3%+8.9%
Portfolio Performance
Gross Performance Return+1.1%+13.0%+9.8%+16.4%+12.2%
Benchmark Index^+0.7%+8.2%(8.6%)+5.8%+7.0%
PERFORMANCE to 31 Ju l y 2020
^Benchmark Index: S&P/ASX Small Ords Industrial Gross Index until 31 January 2015 & S&P/ASX 200 Index (hedged 70% to NZD)
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, after expenses, fees and tax,
»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 combines the share price performance, the warrant price performance, the net value of converting any warrants into shares, and the dividends paid to shareholders. It assumes
all dividends are reinvested in the company’s dividend reinvestment plan, and that shareholders exercise their warrants, (if they were in the money), at warrant expiry date
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 20 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
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,
Andy Coupe and Carmel Fisher.
Share Buyback Programme
»Barramundi has a buyback programme in place allowing
it (if it elects to do so) to acquire its shares on market
»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
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