BRM – June 2021 monthly update

1
A WORD FROM THE MANAGER
In May Barramundi returned gross performance of +0.2% and an
adjusted NAV return of (0.0%). This compares to the ASX200 Index
which returned +2.0% (70% hedged into NZ$).
Driven by strong trading updates for the banks, Financials (+4.4%)
led the market higher in the month. Market bellwether CSL
(+7.0%) helped lift the Healthcare (+3.5%) sector higher as well.
May saw a continuation of the share market rotation out of
high growth companies into ‘value’ companies with Information
Technology (-9.9%) the worst performing sector in the month. In
a sign that investors remain focussed on the potential for inflation
to rise during the year, the interest sensitive Utilities (-7.0%) sector
also lagged the market returns.
Countering these concerns, the Australian 10yr Government bond
yield fell slightly from 1.75% to 1.71% in the month.
Portfolio News
Led by CBA (+12.0% in A$), the share prices of all our major
banks including ANZ (2.5%), NAB (+3.4%) and Westpac
(+8.2%) rose in the month. All four provided earnings updates
for the market. Themes common to these updates included lower
credit impairments as the Australian economy continues to grow
robustly. This has resulted in earnings upgrades across the sector.
The banks are also focussed on reducing costs and improving
their operating efficiency. Westpac in particular has set out some
clear goals in improving its cost base which the market liked. Bank
management teams and regulators have become increasingly
comfortable with the state of the underlying economy. In line with
this, the banks have increased their dividends which was welcomed
by shareholders.
CSL (+7.0%) continues to benefit from the rebound in the
volume of plasma collections in the US. Falling new COVID-19
case numbers and the easing of COVID-19 related restrictions has
seen plasma donors return to plasma collection centres. As noted
previously, we expect plasma collections to continue to recover
throughout 2021. This reduces the extent to which CSL’s earnings
growth in 2022 will be impeded by a lack of plasma supply which
has been a key concern in the market.
Woolworths (+5.9%) provided details of the demerger of
Endeavour Group, its hotels and drinks business. If approved
by shareholders at the general meeting in June, the demerger
will create two, focussed independent ASX-listed companies,
Endeavour Group and Woolworths Group (“WOW”). Shareholders
will receive 1 share in Endeavour for every share owned in
Woolworths at the date of the demerger. WOW will continue
to operate the #1 supermarket in Australia, Countdown in New
Zealand, and big box retailer Big W.
SEEK (-0.7%) reported record high job ad volumes for a second
month running. April 2021 job ads rose +264%, highlighting
the impact of COVID-19 on the labour market last year. More
meaningfully, job ads were up +31% on April 2019. Many of the
jobs being advertised currently are for roles that were displaced in
2020, with the Hospitality & Tourism sector showing the largest
growth month-on-month (+22%).
Carsales (-1.4%) acquired a 49% shareholding in Trader
Interactive (“TI”) for circa A$800m during May with an option
to buy the other 51% in the future. TI owns a number of
online classified advertising websites for recreational vehicles
(campervans), commercial trucks, powersports (jet skis and
snowmobiles) and industrial equipment.
Carsales has paid a relatively full price for the business. There is
also some scepticism in the market about the extent to which
TI’s websites have benefitted from a COVID-related boost to
advertising which could prove to be temporary.
While we share some of these concerns, we think this is a positive,
measured step for the company. This acquisition opens up the US
as a new market for Carsales. It offers a new avenue for future
growth. Carsales has successfully expanded into the South Korean
and Brazillian markets with this same ‘playbook’ and arguably have
earned the right to enter the US in the same way.
Importantly, TI’s websites are the clear #1 / #2 leader in market
share for the respective classified advertising categories. In our
experience from investing in online advertising platforms, there
is a strong competitive advantage to being the category leader.
A virtuous circle develops whereby consumers looking to buy a
campervan for example will visit the site because they know that’s
where most of the sellers advertise their campervans so they’ll
get to view the biggest range of models on the site. This in turn
entices new sellers to advertise campervans on the site because
they know that’s where most of the buyers look for campervans.
This characteristic acts as a strong competitive advantage for the
advertising portal. So, we can understand why TI managed to
extract a full price from Carsales. There is no substitute for being a
leader in the online classified advertising industry.
1
Share Price Premium to NAV (including warrant price on a pro-rated basis and using NAV to four decimal places).
MONTHLY UPDATE
June 2021
BRM NAV
$
0.84
$
1.07
Share Price
Warrant PricePREMIUM
1
$
0.30 36.6
%

as at 31 May 2021

SECTOR SPLIT
as at 31 May 2021
KEY DETAILS
as at 31 May 2021
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
$0.64
PERFORMANCE FEE CAP
1.25%
SHARES ON ISSUE
213m
MARKET CAPITALISATION
$227m
GEARING
None (maximum permitted 20%
of gross asset value)
4
%
INFORMATION
TECHNOLOGY
19
%
21
%

INDUSTRIALS
19
%
COMMUNICATION
SERVICES

HEALTH CARE
26
%
4
%

FINANCIALS
CONSUMER
STAPLES
5
%
CONSUMER
DISCRETIONARY
Speaking with the Carsales management team it was clear that
TI’s websites could also benefit from Carsales technology and its
international experience in running advertising portals. This should
boost TI’s profitability in due course.
To fund the acquisition, Carsales raised approx. $600m from the
share market. We participated in the equity raising.
AUB Group’s share price fell by -5.0% in May. This was despite
providing an upbeat March quarter trading update early in the
month. Possibly there was some disappointment that guidance
for an 18-22% increase in underlying earnings for the June
2021 year was only reaffirmed and not raised. The key period for
insurance renewals in Australia is the month of June. Thus, we can
understand AUB’s reluctance to prematurely upgrade, particularly
as the impact on small businesses of the withdrawal of Jobkeeper
support at the end of March is still unclear.
Xero (-6.3%) reported financial results in the month. Xero reined
in marketing costs in the 1H FY21 as COVID descended on the
world. As telegraphed by management, the company reversed
course and increased marketing expenditure in the 2H FY21 as
COVID restrictions eased and companies adapted to the post-
Robbie Urquhart
Senior Portfolio Manager
Fisher Funds Management Limited
COVID working environment. This drove an outstanding 6 months
of subscriber growth particularly in key international markets for
Xero. However it came at the short-term cost of supressing near-
term profitability which received a mixed reception by investors.
From our perspective, Xero is doing the right thing. We are pleased
to see that when the company steps up marketing, it visibly
translates into strong subscriber growth. The long-term economics
and hence shareholder value creation of acquiring customers is
compelling for Xero. We think the company should be ‘reinvesting’
its cash flow in marketing to attract new subscribers.
Portfolio Changes
We had no significant portfolio changes in the month.
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The Barramundi portfolio also holds cash.

MAY’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.
CBA
+12
%
WESTPAC BANK
+8
%
CSL
+7
%
WISETECH
-10%
NANOSONICS
-8
%
5 LARGEST PORTFOLIO POSITIONS as at 31 May 2021
CARSALES.COM
7
%
CSL LIMITED
9
%
CBA
6
%
SEEK
6
%
XERO
5
%
The remaining portfolio is made up of another 20 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
$
3.00
$
3.50
Oct
2017
Oct
2018
Oct
2019
Oct
2020
TOTAL SHAREHOLDER RETURN to 31 May 2021
1 Month3 Months1 Year3 Years
(annualised)
5 Years
(annualised)
Company Performance
Total Shareholder Return(0.9%)+12.7%+79.9%+35.0%+23.1%
Adjusted NAV Return(0.0%)+8.6%+35.2%+16.6%+12.8%
Portfolio Performance
Gross Performance Return+0.2%+9.2%+39.6%+20.4%+16.1%
Benchmark Index^+2.0%+8.5%+28.1%+10.0%+10.4%
PERFORMANCE to 31 May 2021
^Benchmark index: S&P/ASX Small Ords Industrial Gross Index until 30 September 2015 & S&P/ASX200 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, 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 a 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
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
MANAGEMENT
The Manager has authority delegated
to it from the Board to invest according
to the Management Agreement and
other written policies. 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 Board of Barramundi
comprises independent
directors Alistair Ryan (Chair),
Carol Campbell, Andy Coupe
and Carmel Fisher.
Warrants
»On 26 August 2020 a new issue of warrants (BRMWF)
was announced
»The warrants were issued at no cost to eligible
shareholders in the ratio of one warrant for every four
Barramundi shares held
»The warrants were allotted to shareholders in October
2020 and the warrants listed on the NZX Main Board
from early October 2020. (Information pertaining to
the warrants was mailed/emailed to shareholders in
September 2020)
»The Exercise Price of each warrant is $0.70, adjusted
down for the aggregate amount per Share of any cash
dividends declared on the Shares with a record date
during the period commencing on the date of allotment
of the Warrants and ending on the last Business
Day before the final Exercise Price is announced by
Barramundi. Dividends totalling 4.66 cents per share have
been declared to date and there is one more dividend
expected to be declared in the remaining period up to the
announcement of the 29 October 2021 exercise price.
»The Exercise Date for the new warrants (BRMWF) is
29 October 2021
»The final Exercise Price will be announced and an Exercise
Form sent to warrant holders in September 2021