BRM – August 2021 monthly update

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A WORD FROM THE MANAGER
In July Barramundi returned gross performance of -0.6% and an
adjusted NAV return of -1.0%. This compares to the ASX200 Index
which returned +0.5% (70% hedged into NZ$).
Bolstered by strong commodity prices, the Materials sector (+7.1%
in the month) led the market higher along with Industrials (+4.3%)
and Consumer Staples (+1.4%). Information Technology (-6.9%),
weighed down by the buy-now-pay-later bellwether Afterpay
(-18.2% in the month) lagged the market.
Heightened takeover activity, which we wrote about last month,
continues to be a feature in Australia. In early August, Afterpay
received a A$39bn takeover offer (supported by its board and
founders) at a significant premium to its share price. The takeover
offer is structured as a share swap. Afterpay shareholders will
receive shares in Square, a US listed company. However, we
expect a number of shareholders with Australian mandates will
sell their shares should the takeover offer be completed. We
also note that big dividends have been announced by the large
mining companies. The Australian banks have begun announcing
share buybacks (see below) and are also expected to increase the
dividends paid to shareholders.
This will all result in a lot of money flowing back to Australian
shareholders over the next few months. A good portion of this will
be reinvested back into the Australian market and this will likely
remain supportive for Australian share prices in the near-term.
Portfolio News
July was a quiet month in terms of portfolio company news. Most
of our management teams are in a black-out period for news as
they prepare financial results which will be released to the market
in August.
Audinate (+22.5% in A$) provided an upbeat trading update to
the market in July. Demand for its networked audio products has
been strong as audio equipment manufacturers continue to benefit
from customer demand driven by the re-opening of the global
economy. Due to COVID related disruption in global supply chains,
customers have been placing orders for delivery over the next year.
Normally orders are only placed a month or two in advance. This
has given Audinate better insight into next year’s strong revenue
growth, which the market liked. Audinate has also recently
released its first audio-visual products to its customer base. The
strong initial uptake of this new line of products bodes well for its
future growth in the networked audio-visual market.
NEXTDC (+7.5%) announced it had secured land for a new data
centre in Sydney. The data centre will be NEXTDC’s fourth site
in Sydney and twelfth in Australia. The facility will be the largest
in Australia and reflects the robust long-term demand for cloud
services and data centre capacity.
Sonic Healthcare returned +4.2% in July. The spread of the Delta
variant led to accelerated COVID testing in Australia where Sonic’s
laboratories are one of the leading providers of COVID testing. In
the US, two of Sonic’s key competitors announced their quarterly
results in the month. They both saw a strong recovery in their core
pathology testing businesses supplemented by continued, albeit
declining, COVID testing volumes.
ANZ (-1.6%) and National Australia Bank (-1.1%) announced
share buybacks of A$1.5bn and A$2.5bn respectively in the
month. The major Australian banks have ample capital and
liquidity. The Australian economy is now on a stable footing.
Notwithstanding the NSW lockdown, we expect to see an increase
in buybacks and dividends as banks return this surplus capital
to shareholders. This is likely to be supportive for bank share
prices. In line with this, we expect CBA (-0.2%) to follow suit and
announce a share buyback when it reports its full year results in
August.
Fineos (-5.1%) announced its quarterly result during the month.
While it encouragingly signed two new clients in North America,
the market instead focused on its cash balance which had
fallen over the quarter. The cash balance had been impacted by
an acquisition Fineos made in the period, increased spend on
research and development, and the timing of payments from
customers that were subsequently collected in early July. We
view the acquisition and the increased investment in research
and development favourably as Fineos continues to build out its
industry leading insurance software suite. We see the winning
of the two large North American customers as further evidence
that Fineos is the leading provider of core systems to the North
American and Australian insurance industry.
Outdoor advertiser oOH!Media’s share price slipped by -6.6%
over July. This was no great surprise given the extension of the
Sydney lockdown that had begun in late June, along with briefer
snap lockdowns in Melbourne, Adelaide and Brisbane at various
points over the month. These will all have affected out of home
audiences and therefore spending on out of home advertising.
This is a near-term issue. As Australia’s COVID vaccine programme
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Share Price Premium to NAV (including warrant price on a pro-rated basis and using NAV to four decimal places).
MONTHLY UPDATE
August 2021
BRM NAV
$
0.86
$
1.03
Share Price
Warrant PricePREMIUM
1
$
0.33 29.5
%

as at 31 July 2021

SECTOR SPLIT
as at 31 July 2021
KEY DETAILS
as at 31 July 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
$0.62
PERFORMANCE FEE CAP
1.25%
SHARES ON ISSUE
214m
MARKET CAPITALISATION
$220m
GEARING
None (maximum permitted 20%
of gross asset value)
4
%
INFORMATION
TECHNOLOGY
20
%
22
%

INDUSTRIALS
19
%
COMMUNICATION
SERVICES

HEALTH CARE
25
%
4
%

FINANCIALS
CONSUMER
STAPLES
5
%
CONSUMER
DISCRETIONARY
continues and lockdowns are eased, we expect out of home
audience levels, and oOH!Media’s revenue and earnings to recover.
There was no obvious news to explain the -9.8% drop in glove
and protective equipment manufacturer, Ansell’s share price over
the month. We suspect the risk of raw material and freight cost
inflation potentially pressuring Ansell’s margins could have been
a factor, albeit we believe Ansell is currently strongly positioned
to pass-on higher costs. Supply of protective equipment is
going to rise as manufacturers’ (including Ansell) planned
capacity expansions are completed in the next year. This may
impact pricing and Ansell’s profitability. That said, Ansell’s glove
production is not targeted at the commodity end of the market so
should be less susceptible to the risk of oversupply.
Having risen strongly over the prior few months, SEEK’s (-11.7%)
share price fell during July. The employment advertising market
remains strong, and there was no material information released
by the company during the month. However, COVID related
lockdowns were imposed in NSW, and these lockdowns have
Robbie Urquhart
Senior Portfolio Manager
Fisher Funds Management Limited
since been extended and broadened into other jurisdictions. We
suspect the share price move reflects investor caution over what
that means for the domestic employment market in Australia. We
think that any negative impact on employment will be relatively
short lived. The government has been willing to tide the economy
over with stimulus during previous lockdowns and will do so again
if needed.
Portfolio Changes
We had no significant portfolio changes in the month.
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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.
AUDINATE
+23
%
CARSALES.COM
+11
%
RESMED
+10
%
SEEK
-12%
ANSELL
-10
%
5 LARGEST PORTFOLIO POSITIONS as at 31 July 2021
CARSALES.COM
8
%
CSL LIMITED
9
%
CBA
6
%
WISETECH
5
%
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 July 2021
1 Month3 Months1 Year3 Years
(annualised)
5 Years
(annualised)
Company Performance
Total Shareholder Return(6.3%)(2.2%)+66.9%+33.4%+21.9%
Adjusted NAV Return(1.0%)+4.4%+34.7%+16.8%+13.3%
Portfolio Performance
Gross Performance Return(0.6%)+5.2%+39.2%+20.3%+16.6%
Benchmark Index^+0.5%+5.1%+27.9%+9.3%+10.4%
PERFORMANCE to 31 July 2021
^BBenchmark 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 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 David McClatchy.
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, before
the final Exercise Price is announced by Barramundi.
»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