MLN – September 2018 monthly update

1
Monthly Update
September 2018
MLN NAV
$
1.07
SHARE PRICE
$
0.95
DISCOUNT
1
8.5
%
as at 31 August 2018
A word from the Manager
Market Overview
For the first time in a number of months there was
significant dispersion between the performance of
equities in the US, Europe and emerging markets in
August. The US market (S&P 500 Index +3.0%) was
supported by a strong end to earning season, while the
European market was hit by weak economic data (Stoxx
600 Index -2.4%). While the MSCI Emerging Markets
Index closed the month down just 0.7%, it had been
down 7% mid-month as the Turkish Lira plunged (on
concerns around external debt levels and high inflation)
and took the Indonesian, Mexican and South African
currencies with it.
The 5% dispersion between the US and European
markets broadly reflects the diverging economic
fundamentals we are seeing in these markets. In the US
we continue to see evidence of a strong consumer, which
has been reflected in recent confidence surveys and
consumer spending data. This strength was also seen
during US reporting season, with stronger than expected
results at US retailers like Walmart, Target, Best Buy,
Dollar General and Lululemon. On the other hand, recent
European data shows that growth in the Eurozone slowed
to a two-year low in the June quarter. The deterioration in
growth and falling European business confidence seem at
least partially due to rising trade tensions with the US.
In August Marlin Global’s gross performance return was
up 4.5%, compared with our global benchmark which was
up 2.9%.
Portfolio Developments
Two of the top contributors to performance in August
were TJX Companies and adidas. TJX (+14%) produced
a great set of quarterly results, with sales growing 12%
on the prior year. This was driven by same store sales
growth of 7% at the company’s TJ Maxx and Marshalls
stores, combined with new store openings. Customer
traffic was strong in store and customer basket sizes
ticked higher on strong apparel demand. While wage and
freight inflation continue to be a headwind for TJX (and
US retailers generally), strong sales growth and share
buybacks allowed TJX to grow underlying earnings per
share by 16%.
adidas (+14%) reported solid second quarter results,
with double digit revenue growth on the back of
strong performances in the Chinese and US markets.
While growth in Europe was lower than we would have
liked, a strong pricing environment and recent cost
saving initiatives saw operating profit margins expand
and earnings per share grow 20% on the same period
last year.
The two biggest drags on performance were Alibaba
and Pandora. While Alibaba (-7%) was a drag on
performance in August we attribute this largely to
weak Chinese equity markets, with many Chinese
technology companies down 5-10% during the month.
Alibaba reported second quarter results during the
month that showed 33% revenue growth in its core
e-commerce business. Despite Alibaba’s scale they
are still growing customers rapidly, with 24% growth
in customers over the last year. Alibaba’s cloud
computing business (the largest in China) grew 93%
year-on-year and its video streaming business grew
revenues 46%, supported by its live streaming of the
FIFA World Cup in China. After significant investment
these cloud and video streaming businesses are
gaining scale and showing some long-term potential.
Pandora (-15%) is a company we added to the portfolio
early this year and needless to say it has not performed
as we expected. Pandora is one of the leading jewellery
brands globally, both in terms of brand recognition and
sales. When we first invested we thought the recent
slowdown in Pandora’s growth would prove transitory,
and an increased cadence of new product launches
(including its new rose gold and gold plated charms)
would support sales. However, recent results have
1
Share Price Discount to NAV (including warrant price on a pro-rated basis)
WARRANT PRICE
$
0.13

2
Ashley Gardyne
Senior Portfolio Manager
Fisher Funds Management Limited
been dragged down by slowing growth in China and
weak like-for-like sales elsewhere in the globe. Its new
collections seem to be having limited impact and it is
now more apparent to us that despite management’s
best efforts, Pandora’s profitability is unlikely to return to
previous levels. As a result we have decided to exit our
position in Pandora and we have taken some valuable
lessons from this investment.
Sector Split
as at 31 August 2018
Key Details
as at 31 August 2018
FUND TYPE
Listed Investment Company
INVESTS IN
Growing international companies
LISTING DATE
1 November 2007
FINANCIAL YEAR END
30 June
TYPICAL PORTFOLIO SIZE
25-35 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 + 5%
PERFORMANCE FEE
15% of returns in excess of
benchmark and high water mark
HIGH WATER MARK
$1.02
SHARES ON ISSUE
119m
MARKET CAPITALISATION
$113m
GEARING
None (maximum permitted 20%
of gross asset value)
34
%

TECHNOLOGY
10
%
INDUSTRIALS
21
%

CONSUMER
22
%

HEALTHCARE
Geographical Split
as at 31 August 2018
17
%
WEST EUROPE
76
%
NORTH AMERICA
9
%
FINANCIALS
5
%

ASIA
The Marlin portfolio also holds cash.
2
%

ENERGY
The Marlin portfolio also holds cash.

August’s Biggest Movers in local currency terms
Typically the Marlin portfolio will be invested 90% or more in equities.
ADIDAS
+14
%
TJX COMPANIES
+14
%
PAYPAL
+12
%
ALIBABA GROUP
-7
%
5 Largest Portfolio Positions as at 31 August 2018
ALPHABET
8
%
PAYPAL
6
%
TJX COMPANIES
6
%
MASTERCARD
5
%
ALIBABA
5
%
The remaining portfolio is made up of another 19 stocks and cash.
Nov
2007
Nov
2008
Nov
2009
Nov
2010
Nov
2011
Nov
2012
Nov
2014
Nov
2013
Share Price/Total Shareholder Return
Share PriceTotal Shareholder Return
Nov
2015
$
1.00
$
0.50
$
0.00
$
1.50
Nov
2016
Nov
2017
$
2.50
$
2.00
Total Shareholder Return to 31 August 2018
Performance to 31 August 2018
1 Month3 Months1 Year3 Years
(annualised)
Since Inception
(annualised)
Company Performance
Total Shareholder Return+7.8%+13.8%+36.2%+14.2%+7.2%
Adjusted NAV Return+4.6%+7.9%+23.0%+11.8%+7.4%
Portfolio Performance
Gross Performance Return +4.5%+8.5%+26.4%+15.8%+11.1%
Benchmark Index^+2.9%+6.1%+18.4%+11.8%+8.2%
3
^Benchmark index: World Small Cap Gross Index until 30 September 2015 & S&P Large Mid Cap/S&P Small Cap Index (50% hedged to NZD) from 1 October 2015
Non-GAAP Financial Information
Marlin 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 fees and tax,
»adjusted NAV return – the net return to an investor after fees and tax,
»gross performance return – the Manager’s portfolio performance in terms of stock selection and currency hedging before fees and tax, and
»total shareholder return – the return to an investor who reinvests their dividends, and if in the money, 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 return in this monthly update are to such non-GAAP measures. The calculations applied to non-GAAP
measures are described in the Marlin Non-GAAP Financial Information Policy. A copy of the policy is available at http://marlin.co.nz/about-marlin/marlin-policies/
PANDORA
-15
%

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 Marlin Global 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 an
authorised financial adviser should be taken before making an investment. To the extent that the update contains data relating to the historical performance of Marlin Global 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.
Marlin Global Limited
Private Bag 93502, Takapuna, Auckland 0740
Phone: +64 9 484 0365 | Fax: +64 9 489 7139
Email: enquire@marlin.co.nz | www.marlin.co.nz
4
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
Marlin Global
Marlin 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 25 and 35 quality growing
international companies (excluding
New Zealand and Australia)
through a single, professionally
managed investment. The aim
of Marlin is to offer investors
competitive returns through capital
growth and dividends.
Capital Management Strategies
Regular Dividends
»Quarterly distribution policy introduced in
August 2010
»Under this policy, 2% of average NAV is targeted
to be paid to shareholders quarterly
»Dividends paid by Marlin 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
»Marlin 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
»Marlin has a buyback programme in place allowing
it (if it elects to do so) to acquire up to 5.9m of its
shares on market in the year to 31 October 2018
»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
Warrants
»On 16 April 2018, a new issue of warrants (MLNWC)
was announced
» The warrants were issued at no cost to eligible
shareholders and in the ratio of one warrant for
every four Marlin shares held
»Exercise Price = $0.83 per warrant, to be adjusted
down for dividends declared during the period up
to the Exercise Date
»Exercise Date = 12 April 2019
»The final Exercise Price will be announced and an
Exercise Form will be posted to warrant holders in
March 2019

Management
Marlin’s portfolio is managed
by Fisher Funds Management
Limited. Ashley Gardyne (Senior
Portfolio Manager), Chris
Waters and Harry Smith (Senior
Investment Analysts) have prime
responsibility for managing
the Marlin portfolio. Together
they have significant combined
experience and are very capable
of researching and investing in
the quality global companies that
Marlin targets. Fisher Funds is
based in Takapuna, Auckland.

Board
The Manager has authority
delegated to it from the
Board to invest according to
the Management Agreement
and other written policies.
The Board of Marlin
comprises independent
directors Alistair Ryan (Chair),
Carol Campbell and Andy
Coupe; and non-independent
director Carmel Fisher.