Kingfish Limited — Net Asset Value 2018

Oct 18, 2018

Quarter Update Newsletter

30 June 2018 – 30 September 2018

NAV SHARE PRICE $1.54 $1.39

WARRANT PRICE DISCOUNT[1] $0.07 9.0[%] as»at»30»September»2018

• » The»September»quarter»was»another»positive»one»for»the» Kingfish»portfolio»(seventh»in»a»row),»with»almost»all»of»the» return»coming»in»August.

• » The»portfolio»delivered»+4.4%»gross»performance»return» for»the»quarter»as»13»of»17»positions»delivered»positive» contribution,»with»the»strongest»performers»being»Ryman,» Mainfreight»and»Delegat.

• » We»initiated»a»small»position»in»Pushpay»during»the»quarter.

Market price performance during earnings season more spectacular than the earnings themselves

On the whole, our portfolio scorecard for the results season was solid. More of the portfolio companies beat consensus earnings expectations than missed (5 beats, 2 inline and 4 misses so 64% of results were inline or beats). This compares favourably to the market that had 16 misses, 14 beats and 7 inline, so 56% of results were inline or beats.

Despite that solid yet not spectacular earnings season from the broad market, the stock market price performance was the best during an earnings reporting season in 18 years.

The broad stock market price performance during the key August reporting month was more heavily influenced by key twin drivers - interest rates and currency.

In the key August month, US 10 year bonds rallied to see yields close near 5 month lows. This more than translated to NZ bonds which saw a sharp rally with yields breaking to fresh two year lows. This saw the ratio of NZ 10 year bond yields vs US 10 year bond yields breaking new multi decade lows – in short, interest rates fell globally but they fell much more sharply in New Zealand.

On top of this, the NZD continued its fairly rapid depreciation, falling two cents (0.68 to 0.66) during the month.

The combination of these two factors makes NZ a more attractive destination to invest for offshore investors and we saw heavy offshore inflows into the equity market during the August month.

Mainfreight (+10%) also held its ASM during the quarter, with generally positive outlook comments including “a growing confidence due to improved trading results” and that “April to June has seen strong revenue growth; profit has improved accordingly”. Other comments indicate that this is likely to translate to a strong first half result (on a weak prior period) with the company “quietly positive” that results will sustain through FY19. This is relatively positive language from a company that tends to set a high bar and

Notable Returns in the Quarter

DELEGAT RYMAN MAINFREIGHT MERIDIAN AUCKLAND GROUP HEALTHCARE ENERGY AIRPORT +20[%] +17[%] +10[%] +9[%] +8[%]

under-promise. All geographies appear to be performing well, with particular emphasis that Mainfreight “expects to see Asia and the Americas improve markedly” after having been below expectations recently. The ASM and associated annual report was another reminder of the strong and extremely hard to replicate culture MOAT Mainfreight has built around its business.

Pushpay added to the portfolio

We added Pushpay to the portfolio during the quarter.

Pushpay is a leading mobile payments and engagement provider to the US faith sector. In the space of five years it has gone from nowhere to become the fastest growing and preferred provider. It delivers best in class product and service, and its domain expertise combined with superior resources (both sales & research and development) gives us comfort that Pushpay will retain this edge over competitors.

We attended the investor day in the US during the September month and were impressed by the depth of strength below senior management levels and have been especially impressed by the exceptionally strong customer feedback we have received from our independent checks with various large churches in the US.

Pushpay is on track to reach breakeven on a monthly cash flow basis prior to the end of calendar 2018, with FY2019 on the cusp of EBITDA breakeven. It is not unreasonable to expect revenue growth over the next three to five years to continue to compound at ~30%+ p.a.

Pushpay remains a relatively early stage investment and we have initiated a minimum position.

==> picture [166 x 118] intentionally omitted <==

==> picture [49 x 34] intentionally omitted <==

Sam»Dickie» Senior Portfolio Manager 11 October 2018

1

¹ Share price discount/(premium) to NAV (including warrant price on a pro-rated basis)

Performance

as at 30 September 2018

Portfolio Holdings Summary as at 30 September 2018

==> picture [539 x 441] intentionally omitted <==

----- Start of picture text ----- 3 Months 3 Years Five Years LISTED»COMPANIES %»Holding(annualised) (annualised)Abano Healthcare 1.7%Company PerformanceAuckland Int Airport 5.3%Total Shareholder Return +3.4% +14.9% +11.7%Delegat Group 3.8%Adjusted NAV Return +3.7% +17.5% +13.0%Fisher & Paykel Healthcare 11.8%Portfolio PerformanceFletcher Building 3.1%Gross Performance Return +4.4% +20.3% +15.8%Freightways 9.2%S&P/NZX50G Index +4.6% +18.7% +14.6% Infratil 7.2%Non-GAAP Financial Information Mainfreight 11.4%Kingfish uses non-GAAP measures, including adjusted net asset value, adjusted NAV return, gross performancereturn 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 Meridian Energy 3.0%decisions after fees and tax,» adjusted NAV return – the net return to an investor after fees and tax, Michael Hill International 3.4%» gross performance return – the Manager’s portfolio performance in terms of stock selection, before feesand tax, and» total shareholder return – the return to an investor who reinvests their dividends, and if in the money, Port of Tauranga 3.3%exercises their warrants at warrant maturity date for additional shares.All references to adjusted net asset value, adjusted NAV return, gross performance return and total shareholder Pushpay Holdings 2.0%return in this newsletter are to such non-GAAP measures. The calculations applied to non-GAAP measures aredescribed in the Kingfish Non-GAAP Financial Information Policy. A copy of the policy is available athttp://kingfsh.co.nz/about-kingfsh/kingfsh-policies/ Restaurant Brands NZ 4.1%Ryman Healthcare 7.3%Company News Summerset 6.3%Dividend Paid 28 September 2018The A2 Milk Company 10.0%A dividend of 3.00 cents per share was paid to Kingfish shareholderson 28 September 2018 under the quarterly distribution policy. Vista Group International 4.0%Interest in Kingfish’s dividend reinvestment plan (DRP) remains highwith 45% of shareholders participating in the plan. Shares issued to Equity»Total 96.9%DRP participants are at a 3% discount to market price. If you wouldlike to participate in the DRP, please contact our share registrar, New Zealand dollar cash 3.1%Computershare on (09) 488 8777.TOTAL 100.0%----- End of picture text -----

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 authorised 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.

==> picture [77 x 51] intentionally omitted <==

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@kingfsh.co.nz

2