KFL – March 2021 Quarterly Newsletter

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SIGNIFICANT RETURNS IMPACTING THE
PORTFOLIO DURING THE QUARTER
Yes, New Zealand needs a trans-Tasman
bubble — but we need more
New Zealand was the poster child in the fight against COVID, and
the reward is a trans-Tasman bubble. Which is great. But we need
more.
New Zealand pulled together and actively responding to COVID.
According to Our World in Data, New Zealand has been 34 times
more successful than the rest of the world in addressing COVID.
The country’s cumulative cases are a mere 2,531 or 0.05% of
the population, well below the 132,420,000 or 1.7% of the
population globally.
As a result, New Zealand’s economy recovered faster. We
stamped out COVID and re-opened quickly. We spent money
locally instead of overseas. And our housing market boomed.

New Zealand’s sugar rush is wearing off
Not only has the pace of the global recovery caught up, it’s
performing better than expected. Other countries are benefiting
from reopening their domestic economies as they vaccinate their
populations.
The share market can’t keep up
New Zealand’s share market was the worst performing
developed market in the first quarter. Partly because the economy
underperformed the global economy. Partly because 10-year
bond rates nearly doubled, and the NZX50 has five times more
defensives (companies sensitive to interest rates) than other global
markets. And partly because of the lack of exposure to cyclical/
reopening plays.
Hospitality is still struggling
Xero’s monthly Small Business Insights tell us that New Zealand
small hospitality businesses’ sales in February are down 14% year-
on-year, despite the domestic economy largely recovering (overall
small business sales were up 1.5%). That’s because tourism is a
big slice of the economy. It contributed $41 billion to the economy
and directly employed 8.4% of the workforce before COVID. With
so much of the economy dependent on international travel, it is
critical to restart international tourism, especially as recovery in
other sectors could fade.
Restaurants, bars, and cinemas are open. Sports games have
played in spectator-filled stadiums. But with international tourism
such an important part of the NZ economy, international travel is
the equivalent of our reopening trade
But Kingfish is outperforming the market
Kingfish has outperformed the local market in the March quarter,
declining 2.0%, (gross performance) which was less than the 4.1%
drop that the S&P/NZX50G index experienced. The Adjusted
VISTA GROUP
+3 1
%
PUSHPAY
HOLDINGS
+1 5
%
CONTACT
ENERGY
-19
%
MERIDIAN
ENERGY
-26
%
A2 MILK
COMPANY
-29
%
NAV was down 2.7% for the quarter.
This was because we have a much lower exposure to low growth
defensives such as utilities and property. Defensives’ valuations
have been negatively impacted by rising interest rates generally.
Contact Energy and Meridian Energy initially benefitted from an
increased weighting in a large offshore clean energy exchange-
traded funds (probably accounting for over 50% of the daily
buying in December and early January). Since then, however,
their weightings have been cut significantly and their shares have
suffered.
In addition, over half our fund’s revenue is generated offshore, so
we are more exposed to the rapidly recovering global economies
than the New Zealand economy.
Included in these largely offshore businesses are some “reopening
trades” such as Vista. Cinema software business Vista is
benefiting as COVID vaccines are rolled out and cinemas around
the world reopen.
a2 Milk was the worst performer in the portfolio — a
disappointing 29% drop. The weak “daigou” channel continued
to impact the business. We originally underestimated the size
of the issue and thought management could better navigate the
problem. But we have adjusted and learnt from new information.
We significantly reduced our target position in November and
December 2020, and again in February and March 2021, as
our channel checks remained persistently weak.
The trans-Tasman bubble is not enough
From 19 April, travellers between New Zealand and Australia
will no longer have to quarantine. This is an important
development as Australia is a large tourism market for New
Zealand, much more so than the other way round. Australian
travel represented about 40% of Auckland Airport’s international
traffic pre-COVID. And since Australians still cannot travel to
many destinations, we may pick up some of their pent-up demand
for international travel.
But — and this a big “but” — how many visitors will the travel
bubble attract? New Zealand has had several COVID relapses,
1
Share price Premium to NAV (using NAV to four decimal places).
QUARTERLY NEWSLETTER
1 January 2021 – 31 March 2021
KFL NAV
$
1.77
$
1.90
Share Price
PREMIUM
1
7.6
%

as at 31 March 2021

2
Disclaimer: The information in this newsletter 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 newsletter 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 financial
adviser should be taken before making an investment. To the extent that the newsletter 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.
3 Months
3 Years
(annualised)
5 Years
(annualised)
Company Performance
Total Shareholder Return(4.7%)+26.2%+19.5%
Adjusted NAV Return(2.7%)+18.5%+16.1%
Portfolio Performance
Gross Performance Return (2.0%)+22.1%+19.2%
S&P/NZX50G Index(4.1%)+14.7%+13.2%

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 expenses, fees and tax,
»adjusted NAV return – the net return to an investor after expenses, fees and tax,
»gross performance return – the Manager’s portfolio performance in terms of stock selection,
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 newsletter 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/
LISTED COMPANIES% Holding
Auckland Intl Airport7.6%
Contact Energy3.4%
Delegat Group3.0%
Fisher & Paykel Healthcare15.4%
Freightways3.6%
Infratil14.0%
Mainfreight17.6%
Meridian Energy0.9%
Port of Tauranga2.5%
Pushpay Holdings1.7%
Ryman Healthcare6.2%
Summerset8.0%
The A2 Milk Company6.3%
Vista Group International4.0%
Equity Total94.2%
New Zealand dollar cash5.8%
TOTAL100.0%
PORTFOLIO HOLDINGS SUMMARY
as at 31 March 2021
COMPANY NEWS
Dividend Paid 26 March 2021
A dividend of 3.71 cents per share was paid to Kingfish shareholders
on 26 March 2021 under the quarterly distribution policy. Interest
in Kingfish’s dividend reinvestment plan (DRP) remains high with
41% of shareholders participating in the plan. Shares issued to
DRP participants are at a 3% discount to market price. If you would
like to participate in the DRP, please contact our share registrar,
Computershare on (09) 488 8777.
PERFORMANCE
as at 31 March 2021
Kingfish Limited
Private Bag 93502, Takapuna, Auckland 0740, New Zealand
Phone: +64 9 489 7094 | Fax: +64 9 489 7139
Email: enquire@kingfish.co.nz | www.kingfish.co.nz
If you would like to receive future
newsletters electronically please email
us at enquire@kingfish.co.nz
and the border could close at short notice. Not everyone will be
willing to take the risk (and without travel insurance). Still, the
bubble is a start. Some Australians may be willing to gamble on
an impromptu trip across the ditch. Our research suggests the
bubble will be most attractive to those who are desperate to see
friends and family, but these visitors are less likely to book high-
value tourism experiences.
The global vaccine roll-out promises a
rosier future
Much of our high-value international tourism has a long gestation,
with visitors planning and booking their travel well in advance.
For this to return, our travel bubble will need to extend beyond
Australia and be able to withstand unexpected COVID outbreaks.
Thankfully, global vaccine programmes are currently progressing
broadly to expectations in many important countries.
Fisher Funds is optimistic that a recovering tourism industry will
boost the New Zealand economy. Our pragmatism tells us that
the trans-Tasman bubble will certainly not be a panacea. A
meaningful recovery will take time. In the meantime, we’ll build
“all weather” portfolios.
There’s plenty to be optimistic about.
Sam Dickie
Senior Portfolio Manager
15 April 2021