MLN – September 2020 Quarterly Newsletter

1
SIGNIFICANT RETURNS IMPACTING
THE PORTFOLIO DURING THE
QUARTER IN LOCAL CURRENCY
Marlin gained 8.6% (gross performance) for the quarter and the Adjusted
NAV was up 7.4% for the period, while the global benchmark gained
5.7% for the same period.
Global share markets continued to show strong momentum in the third
quarter, with a number of markets hitting new all-time highs during the
period. The flagship US S&P 500 Index climbed 8.5% for the quarter, the
MSCI China Index gained 11.7%, while the MSCI Europe Index was flat –
held back by a spike in Covid-19 cases in certain countries.
The quarter started strongly on the back of continued monetary stimulus
and improving economic data as economies continued to reopen.
However, markets pulled back in September, driven by uncertainty
surrounding further US fiscal stimulus and the US election outcome,
combined with rising Covid-19 case numbers as summer ends in the
Northern hemisphere.
Portfolio performance was helped by the new portfolio additions we
talked about in our last quarterly Newsletter, Starbucks, Floor and Décor,
Stoneco, Gartner, Hilton and Heico. We added these businesses to the
portfolio in the depths of the market sell-off and they accounted for over
half of the portfolio outperformance this quarter.
Adapting to a post-covid world
Covid-19 has impacted all businesses. Some have been hit hard, while
others have benefited from lockdowns and work from home trends. For
us it was a chance to see how the management teams of our portfolio
companies operated under pressure, how they adapted and made the
most of a difficult situation.
In our last quarterly update we talked about our technology holdings
Amazon and PayPal - who both benefited from the lockdown driven
surge in ecommerce activity. But we have been equally impressed by
the way that some of our more traditional companies, like Adidas, have
adapted to what have been significant headwinds in its industry.
Adidas is a company that could have suffered a really protracted impact
from Covid-19. With sporting goods stores closed around much of the
globe, sales slumped and inventory built up. In retail this typically results
in heavy discounts to clear excess stock – and given the global scale
and economic impact of the lockdowns – this had the potential to drag
on pricing for well over a year. Excessive discounting by brands also
poses the risk of long-term brand damage. Adidas have dealt with these
difficulties admirably and used the turbulence to further pivot their model
towards high margin online sales.
By adding flexibility into their supply chain in recent years they were able
to quickly scale down inventory purchases. Adidas’s outlet stores also
provided a very effective way of clearing excess stock without impacting
the brand and discounting excessively in their flagship stores. The
company was also able to hold onto its most popular products (like its
Ultra Boost running shoes) and sell these at full price on its own website
– allowing them to keep more of the profit margin on these highly sought
after products.
Adidas’s pivot to direct-to-consumer sales has also been helped by
Covid-19. Adidas has progressively been moving sales away from
wholesalers, such as Foot Locker, towards their direct-to-consumer
STONECO
+36
%
ALIBABA GROUP
+36
%
FLOOR & DÉCOR
HOLDINGS
+30
%
SIGNATURE
BANK
-22
%
HEXCEL CORP
-26
%
offering, of which ecommerce is a significant contributor. Covid-19 has
accelerated this shift with wholesalers having to shut their doors. Direct-
to-consumer sales are more profitable for Adidas compared to selling
shoes in bulk to the wholesale channel. The shift also allows Adidas
to own the consumer relationship and thereby drive deeper customer
connection and loyalty.
¹
Share price premium to NAV (including the warrant price on a pro-rated basis & using NAV to four decimal places)
as at 30 September 2020
1 July 2020 – 30 September 2020
MLN NAVWarrant Price
$
1. 0 8
$
0 .1 9
$
1.1 0
Share Price
PREMIUM
1
5.8
%

QUARTERLY NEWSLETTER
Adidas’s ecommerce sales have increased
6-fold since 2015
Overall we are impressed by the actions management have taken in
response to the difficult environment. We believe the company is well
position for the future.
We have seen similar decisive actions at many of our other portfolio
companies. Starbucks pivoted to digital ordering, pick-up only stores
and drive thrus. Heico has used the disruption in the aerospace industry
to acquire smaller competitors. And Abbott Labs rapidly developed
a $5, 15 minute, Covid-19 test – and will very shortly be shipping 50
million units a month.
Stock performance and news
There were no major surprises during reporting season that materially
impacted our portfolio companies in the quarter. Alibaba (+36%),
Stoneco (+36%) and Adidas (+18%) were some of the biggest positive
contributors to performance, while Signature Bank (-22%) and Hexcel
(-26%) were the biggest detractors.
Alibaba gained during the quarter following strong financial results that
showed its ecommerce business has returned to pre-covid growth rates.
Excitement around the upcoming IPO of Ant Group (which it owns 33%
of) also supported the stock. Ant Group is the largest digital payments
and financial technology company in China and is rumoured to be listing
at a valuation north of US$200 billion. Alibaba was also buoyed by its
annual investor day – which highlighted the significant growth opportunity
remaining for its ecommerce and cloud businesses.

Hexcel makes carbon fibre composites for aircraft and has unsurprisingly
been a poor performer of late. With air-travel grinding to a halt and
airlines struggling financially, orders for new aircraft are being deferred or
cancelled. In response, Airbus and Boeing have cut aircraft production
rates by up to half, resulting in lower demand for Hexcel’s products. We
still see long-term drivers for both increased air travel and higher carbon
fibre content, but recognise it will take a number of years for travel and
new plane demand to get back to prior levels. In the meantime, Hexcel is
carefully managing its cost base to reflect this lower demand. We believe
the company is attractively priced following the sharp decline in its share
price and the company will be in a strong position when growth eventually
returns to the aerospace industry.
PERFORMANCE
as at 30 September 2020
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 Marlin Global 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 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, New Zealand
Phone: +64 9 484 0365 | Fax: +64 9 489 7139
Email: enquire@marlin.co.nz | www.marlin.co.nz
Headquarters Company%
Holding
Canada
Descartes Systems 0.5%
China
Alibaba Group7.9%
Tencent Holdings5.0%
France
EssilorLuxottica3.0%
Germany
Adidas4.4%
Ireland
Icon3.8%
United States
Abbott Laboratories4.3%

Alphabet6.7%
Amazon.Com4.6%

Dollar General3.7%
Dollar Tree3.6%

Edwards Lifesciences Corp.4.0%
Facebook7.4%
Floor & Décor Holdings1.7%
Gartner Inc3.4%
HEICO Corporation2.2%
Hexcel Corporation2.4%
Hilton Worldwide Holdings3.8%
Mastercard5.3%
PayPal Holdings5.3%
Signature Bank4.3%
Starbucks Corp1.8%
StoneCo4.1%
TJX Companies Inc3.6%
Tyler Technologies Inc 1.2%
Equity Total98.0%
New Zealand dollar cash1.2%
Total foreign cash1.4%
Cash Total2.6%
Forward Foreign Exchange(0.6%)

TOTAL100.0%
PORTFOLIO HOLDINGS
SUMMARY
as at 30 September 2020
COMPANY NEWS
Stoneco benefited from solid financial results during the quarter, emerging
markets strength, and the announcement of its intention to acquire
Brazilian software company Linx. The payment services provider reported
strong growth in payment volumes in the second quarter, despite covid-
related store closures in Brazil and a weak retail environment. Stoneco’s
ecommerce capabilities and market share gains from the bank-owned
incumbents helped offset the market weakness. Linx is the leading retail
ERP and PoS software provider in Brazil and the acquisition will allow
Stoneco to cross-sell its payments and banking solutions to Linx’s clients.
Signature Bank fell with the broader regional banking sector in the US,
with the KBW Regional Banking Index down 11% during the quarter. The
reasons for the underperformance of banking stocks include Covid-19
related credit losses and a difficult operating environment due to the
recent drop in interest rates. Signature Bank’s concentration in the New
York region also weighed on the company, with the New York economy
reopening more slowly than most states. We expect Signature Bank can
continue to grow despite the tough operating environment as the bank
captures market share by hiring banking teams away from other banks and
expands on the West Coast of the US.
Ashley Gardyne
Senior Portfolio Manager
Fisher Funds Management Ltd
16 October 2020
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at enquire@marlin.co.nz
Dividend Paid 25 September 2020
A dividend of 2.06 cents per share was paid to Marlin
shareholders on 25 September 2020, under the quarterly
distribution policy. Interest in Marlin’s dividend reinvestment plan
(DRP) remains high with 40% 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.
3 Months
3 Years
(annualised)
5 Years
(annualised)
Company Performance
Total Shareholder Return+16.1%+25.1%+16.8%
Adjusted NAV Return +7.4%+15.7%+12.7%
Portfolio Performance
Gross Performance Return+8.6%+19.2%+16.7%
Benchmark Index¹+5.7%+6.0%+8.7%
1
Benchmark index: World Small Cap Gross Index until 30 September 2015 & S&P Large Mid Cap/S&P Small
Cap Index (hedged 50% 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 expenses, fees and tax,
»adjusted NAV return – the net 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 newsletter 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/