MLN – September 2021 Quarterly Newsletter

1
Global markets pause after a strong first half
Global markets were broadly flat in Q3, due to volatility in emerging
markets, concern around the delta variant and a slight slowing in economic
momentum. Markets have also started to focus on the potential for the
US Federal Reserve to start tapering its quantitative easing – which has
supported markets over the last 18 months. The gross performance of
Marlin dipped (1.5%), slightly behind our global benchmark which was
down (0.5%).
After a very strong first half to the year when global markets (MSCI World
Index) gained 12.2%, performance in the third quarter was far more muted.
The MSCI World Index was down 0.4%, emerging markets fell 8.8%,
European markets were flat, and the US market only edged out a 0.2%
gain. The weakness in emerging market equities was largely due to a
regulatory crackdown in China, which dragged the Chinese market 18.4%
lower for the quarter.
The slight pickup in market volatility in the quarter was driven in part by
questions about the economic outlook. While the global economy has
rebounded strongly, government stimulus is starting to roll off, the delta
variant has impacted consumer sentiment, and when combined with
elevated market valuations this has all given investors pause for thought.
All eyes will be on the US Federal Reserve in the coming months. In recent
weeks the Fed has indicated that its quantitative easing programme will
start to be wound down later this year, paving the way for interest rate hikes
at some point in 2022. While the Fed has announced its plans to remove
the punch bowl, its monetary policy settings are still very accommodative,
and the market has so far taken this greater clarity on tapering in its stride.
Portfolio performance
Marlin’s gross performance ended the quarter down (1.5%), compared with
our global benchmark which was down (0.5%). This underperformance
was largely driven by regulatory pressures impacting our two Chinese
technology companies, Alibaba and Tencent, which we talk about below.
Offsetting the significant decline in our Chinese holdings, we had strong
results from some of our smaller capitalisation holdings – including Floor
and Décor, Gartner and Icon Plc.
Icon (+27% in local currency) delivered another excellent quarterly result,
with revenue and bookings both growing above expectations. Icon is
a contract research organisation (CRO), which helps pharmaceutical
companies design and run clinical drug trials. It continues to benefit from
growing spend on drug research and the increased outsourcing of clinical
research to trusted service providers like Icon. Outsourcing clinical trials
allows biotech and pharmaceutical companies to get drugs to market
faster and allows them to focus on higher value areas like research and
new drug development. Earlier this year, Icon announced a merger
with competitor PRA Health Sciences to create the world’s third largest
CRO. While the market was initially sceptical of the merger, positive early
commentary from management about the integration, combined with solid
quarterly results has contributed to Icon’s strong recent performance.
China’s regulatory crackdown
Our two Chinese stocks Alibaba (-35%) and Tencent (-21%) were both
caught up in the China tech sector sell-off. Having benefited from years
of light-touch regulation, the Chinese tech industry is now experiencing a
period of increasing regulatory focus.
This heightened regulatory intervention began last year when regulators
forced Ant Group to scrap its planned initial public offering (IPO) - after
Jack Ma (Alibaba’s founder) publicly criticized the management of financial
sector State Owned Enterprises. The crackdown has since extended to
other companies, including ride-hailing firm Didi (which has since fallen
over 40% below its IPO price after a cybersecurity probe).
Looking at the specifics of the regulations being targeted at Alibaba and
Tencent helps get a sense for how far the government may want to take
this. New antitrust regulations effectively update China’s antitrust laws
for the internet-era. As an example, they are banning anti-competitive
practices such as large tech companies abusing their monopoly positions
by prohibiting merchants selling on competitors’ marketplaces. This
would not be acceptable in developed markets, but China had turned a
blind eye until recently.
The government has recently limited under-18s from playing online video
games for more than an hour a day. While this will impact Tencent’s
gaming business, under-18s only account for approximately 6% of their
gaming revenue. Regulators want to reduce the impact of addictive
games on students, but the financial impact for the private sector will be
limited.
Regulations have also been created to strengthen data security rules (for
example limitations around moving data between countries/jurisdictions
or for foreign companies operating in China). This should have little impact
on the more domestic focussed Alibaba and Tencent. These regulations
also give consumers more control over how their data is used. This is
not dissimilar to the GDPR regulations implemented in Europe in 2018.
Despite concerns at the time, not only did GDPR not hurt Google and
Facebook, but it helped them as smaller advertisers struggled to adapt
their business models.
We accept there are probably more regulations to come, but what we
have seen to date suggests these regulations are relatively measured - as
opposed to a draconian appropriation by the government.
While these developments will have an impact on Alibaba and Tencent,
we believe the market is overreacting as it has done in the past. We
suspect the ultimate impact on these businesses will be nowhere near
the declines seen in their share prices. Investors in China have been
here before. The year after Alibaba’s IPO, its stock plummeted 49% due
to a range of concerns including regulatory action regarding counterfeit
products being sold on its marketplaces. The stock has gone on to gain
150% since then. In 2018 Tencent’s share price fell over 45% following
a temporary government suspension of video game approvals. Its share
price went on to increase over 190% to its recent peak (and is still up
75% despite the recent selloff).
Despite the recent regulatory crackdown, we still believe both Tencent
and Alibaba are great businesses and have years of growth ahead in
sectors with secular tail winds - like ecommerce, online advertising, digital
payments and cloud computing.
¹
Share price premium to NAV (including warrant price on a pro-rated basis and using NAV to four decimal places)
as at 30 September 2021
1 July 2021 – 30 September 2021
MLN NAVPREMIUM
1
$
1. 2 425.0
%$
1.4 9
Share Price
QUARTERLY NEWSLETTER
Ashley Gardyne
Senior Portfolio Manager
Fisher Funds Management Ltd
15 October 2021
Warrant Price
$
0.22

PERFORMANCE
as at 30 September 2021
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 a 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
China
Alibaba Group6.5%
Tencent Holdings6.8%
Germany
Adidas1.9%
Ireland
Icon5.1%
United Kingdom
Greggs Plc3.0%
United States
Alphabet7.1%
Amazon.Com4.6%

Boston Scientific Co4.8%
Dollar General4.9%

Dollar Tree5.0%
Edwards Lifesciences Corp.3.0%
Facebook9.9%
First Republic Bank San
Francisco
2.6%
Floor & Décor Holdings4.4%
Gartner Inc5.2%
Hexcel Corporation3.0%
Hilton Worldwide Holdings1.6%
Mastercard4.5%
NVR Inc3.3%
PayPal Holdings4.1%
Signature Bank6.9%
StoneCo1.3%
Equity Total99.5%
New Zealand dollar cash1.1%
Total foreign cash0.7%
Cash Total1.8%
Forward Foreign Exchange(1.3%)

TOTAL100.0%
PORTFOLIO HOLDINGS
SUMMARY
as at 30 September 2021
COMPANY NEWS
If you would like to receive future
newsletters electronically please email us
at enquire@marlin.co.nz
Dividend Paid 24 September 2021
A dividend of 2.52 cents per share was paid to Marlin
shareholders on 24 September 2021, 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(5.7%)+30.3%+26.8%
Adjusted NAV Return (2.0%)+17.7%+18.5%
Portfolio Performance
Gross Performance Return(1.5%)+21.8%+22.6%
Benchmark Index¹(0.5%)+10.3%+13.2%
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/
SIGNIFICANT RETURNS IMPACTING
THE PORTFOLIO DURING THE
QUARTER IN LOCAL CURRENCY
ICON PLC
+27
%
GARTNER INC
+25
%
TENCENT
HOLDINGS
-21
%
ALIBABA
GROUP
-35
%
STONECO
-48
%
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. All shareholders will have received 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.