BRM – December 2022 Quarterly Newsletter

Barramundi’s gross performance was +4.8% for the December quarter,
while the adjusted NAV return was +3.3%. The benchmark ASX200 index
rose +9.2% in Q4 (70% hedged into NZ$), buoyed by indications that
China is abandoning its zero-COVID policy. This supported commodity
prices which underpinned a 15% rise in the materials sector in Q4.

Slowing global economic growth
weighed on shares in Q4
Globally, central banks continued to increase interest rates to slow
economic growth to help combat high inflation. The effects of higher
interest rates were reflected in commentary by companies that
experienced a slowdown in sales or customer orders during Q4.
This was most visible in James Hardie (-14.4% in A$ in Q4), a
manufacturer of fibre cement siding used in housing construction.
James Hardie’s latest trading update underwhelmed expectations and
it reduced earnings guidance for FY23. This was primarily because of a
rapidly slowing housing construction market in the US (its largest market).
In response to this slowdown, James Hardie reduced its workforce in
December. It is pleasing to see the company move quickly to adjust its cost
base and protect its profitability. However, the job cuts have left investors
wondering how severe the downturn will be. These concerns will linger
for a while, but we do not think it alters the strong, longer term growth
prospects of the company.
Real estate classified advertising business, REA Group (-3.5%) was also
impacted by the cyclical downturn in housing activity induced by the
increase in interest rates. Its share price fell sharply in December following
a pre-Christmas profit warning by Australian competitor, Domain
Holdings. Domain has seen real estate advertising volumes fall faster than
expected into year-end. REA is not immune to this dynamic. However,
with its dominant presence, we think REA is better placed to weather
this downturn. It will continue investing in its growth initiatives and we
suspect will emerge from this downturn in a stronger competitive position.
Xero’s (-4.4%) share price was also weighed down by the sluggish
environment in the UK, a key growth region for the company. It was also
impacted by a 2-year delay (announced in December) in the deadline for
small businesses to digitise their tax filings in the UK. This may slow the
pace of subscriptions growth for Xero’s products. However, we note that
Xero expects some of these headwinds to fade and its growth momentum
to pick up during 2023.
Don’t ‘throw the baby out with the
bathwater
Media headlines during 2022 were dominated by concerns about
inflation, interest rates and the potential for a global economic slowdown.
This has been reflected in the share prices of companies many of which
are lower than they were a year ago.
As long-term shareholders, a key investment consideration for us is where
a company will be in 3,5 or 7 years’ time, rather than what happens in the
next 3-6 months. Where we think a company’s long-term return prospects
are sound, we are careful about how we react to near-term negative
news.
The value of this approach was evident in Q4. We had several portfolio
holdings report adequate, but not spectacular earnings updates. Yet their
share prices rose meaningfully on this news. This highlights how much
pessimism was ‘already in the price’. Had we sold these shares earlier
in the year because we were concerned about the near-term general
economic outlook, we would likely have missed out on these gains.
Domino’s is a case in point. Its share price rebounded +28.6% in Q4.
The company provided a tepid trading update at its Annual General
Meeting (AGM) in November. Yet it reconfirmed that its same store sales
growth and organic store rollout for FY23 are both expected to meet
their medium-term targets (+3-6% and +8-10% pa respectively). It also
raised A$165m of equity to fund the purchase of shares from an option
it had over the residual 33% stake in Domino’s very successful German
business. None of this news was transformative for the company, but it
was sufficient to drive the sharp rebound in its share price.
Our Australian bank shareholdings including Westpac (+16.3%), CBA
(+13.1%), ANZ (+6.9%) and NAB (+7.0%) also rose strongly over Q4.
The results delivered by the banks were in line with market expectations.
However, the banks share prices were buoyed by the Reserve Bank of
Australia’s (“RBA”) perceived slightly dovish decision to raise the cash
rate by 0.25% rather than by the 0.5% expected by the market during
October. In its fight against inflation the RBA still increased interest rates
in both November and December. But the mere tempering of the pace of
increases was sufficient to send the bank share prices higher.
Culture: Difficult to define, but a critical
ingredient in high performing businesses
As travel restrictions eased during 2022, we have enjoyed reconnecting
with companies in person for the first time since the onset of the
pandemic. These meetings have reinforced how much our portfolio
companies have invested in their people and culture. This doesn’t translate
into profit growth immediately. But it is a key factor in a company’s
development and resilience and this ultimately influences the long-term
success and value creation of a company.
Most recently, in December we met executives from Xero, Audinate
(+3.5%), and Fineos (+22%). At Fineos, we were impressed with
the breadth of talent and the collegiality and cohesiveness of team
members who have worked with each other for over 20 years. At Xero
and Audinate we met with executives who are recent additions to both
companies. What stood out for us was how quickly and strongly they
have already been imbued with the culture of both organisations.
A standout for us in Q4 was also spending time with a range of PWR
Holding’s (+27%) management team and board members when we
attended their AGM in November. The company has had a good year, and
their team has done an outstanding job. PWR is having to move to larger
premises to cater for its expanding order book – a nice problem to have.
Underpinning this growth is a strong culture of excellence and ‘can-do’
across the organisation. Touring PWH’s factory the pride across all levels of
organisation is strongly evident.
We believe our portfolio companies are in good hands and well positioned
to handle whatever surprises 2023 has in store for them.

1
¹ Share price premium to NAV (including warrant price on a pro-rated basis and using the net asset value per share, after expenses, fees and tax, to four decimal places).
1 October 2022 – 31 December 2022
$
0.7 1
Share Price
Warrant Price
$
0.0 0
as at 31 December 2022
QUARTERLY NEWSLETTER
BRM NAVPREMIUM
1
$
0.6 58.6
%
Robbie Urquhart
Senior Portfolio Manager
Fisher Funds Management Limited
16 January 2023

PERFORMANCE
as at 31 December 2022
3 Months
3 Years
(annualised)
5 Years
(annualised)
Company Performance
Total Shareholder
Return
+1.4%+10.2%+14.1%
Adjusted NAV Return +3.3%+7.4%+9.2%
Portfolio Performance
Gross Performance
Return
+4.8%+9.6%+12.0%
Benchmark Index¹+9.2%+6.8%+7.6%
1
Benchmark Index: 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 percentage change in the adjusted NAV value,
»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 newsletter 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/
Company% Holdings
Ansell2.5%
ANZ Banking Group2.3%
AUB Group5.6%
Audinate Group1.7%
Brambles3.9%
Carsales5.7%
Cochlear2.0%
Commonwealth Bank5.0%
Credit Corp3.8%
CSL9.4%
Domino's Pizza4.8%
Fineos Corporation Holdings1.7%
James Hardie Industries2.5%
Macquarie Group4.1%
Nanosonics2.5%
National Australia Bank3.3%
NEXTDC3.8%
Ooh! Media3.2%
PWR Holdings2.5%
REA Group4.2%
ResMed3.4%
SEEK4.3%
Westpac2.8%
WiseTech Global6.0%
Woolworths Group2.6%
Xero Limited4.3%
Equity Total97.9%
Australian cash0.7%
New Zealand cash1.3%
Total cash2.0%
Forward foreign exchange contracts 0.1%
Total 100.0%
PORTFOLIO HOLDINGS
SUMMARY
a s a t 31 December 2022
COMPANY NEWS
Dividend Paid 16 December 2022
A dividend of 1.39 cents per share was paid to Barramundi
shareholders on 16 December 2022, under the quarterly
distribution policy. Interest in Barramundi’s dividend
reinvestment plan (DRP) remains high with 36% 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.
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 Barramundi 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 a financial adviser should be taken before making an investment. To the extent that the newsletter 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 93 502, Takapuna, Auckland 0740, New Zealand
Phone: +64 9 489 7074 | Fax: +64 9 489 7139
Email: enquire@barramundi.co.nz | www.barramundi.co.nz
If you would like to receive future
newsletters electronically please email
us at enquire@barramundi.co.nz
FOREIGN TAX COMPLIANCE ACT (FATCA) AND COMMON
REPORTING STANDARD (CRS)
As a result of the New Zealand Government agreeing to participate in the exchange of information with other jurisdictions under
the Foreign Tax Compliance Act (FATCA) and Common Reporting Standard (CRS), Financial Institutions are required to undertake
due diligence to determine the account holders’ jurisdiction of tax residence. If shareholders have not previously self-certified,
they will receive a Tax Residency Self-Certification form from Computershare depending on when they first purchased their
securities. Please ensure you complete and return this important document if you have not already done so. For more information
please visit the IRD website: https://www.ird.govt.nz/international-tax/exchange-of-information/crs/registration-and-reporting or
contact Computershare if you are unsure of whether you have completed your form.
SIGNIFICANT RETURNS IMPACTING
THE PORTFOLIO DURING THE
QUARTER IN AUSTRALIAN DOLLARS
DOMINO’S
+29
%
PWR HOLDINGS
+27
%
NANOSONICS
+24
%
FINEOS
+22
%
AUB GROUP
+19
%