MLN – September 2022 Quarterly Newsletter

1
Central bank clouds hang over the market,
but quality will shine through.
It was another volatile quarter for international equity markets, as all eyes were
on central bank interest rate hikes and the risk that there will be a recession.
While global markets fell, the strong US dollar helped our international fund
mitigate these losses in the quarter. Marlin ended the quarter with the gross
performance return down 0.5%, compared with our global benchmark which
was down 1.8%.
Global market backdrop
With inflation remaining persistently high, central banks are driving markets.
The US Federal Reserve has indicated that it will do whatever it takes to bring
inflation down, even if that means increasing unemployment and tipping the
economy into a recession. The Federal Reserve is hiking interest rates faster
than any time in recent history. With unemployment still near historic lows
and no evidence of a material slow-down in inflation, expectations are for
the aggressive rate hikes to continue. And with it an increased probability of
recession. A survey of economists now predicts a 50% chance of recession in
the US, double the level back in April.
Financial markets are at least partially pricing this increased risk. The MSCI
World Index fell 6% in the quarter in USD, after being up 12% at one point.
Defensive stocks outperformed the wider index as investors rushed to safe
havens, with more economically sensitive stocks underperforming. This flight
to safety was also seen in currency markets, with the US dollar dramatically
increasing in value over the quarter (the USD gained almost 12% versus the
NZD over the quarter).
Certainly, economic conditions could deteriorate further and put pressure
on both consumers and corporates. While we are cognisant of these macro
risks, we also recognise the inherent difficulty in making macro forecasts and
instead focus our efforts on picking great companies to invest in. Against this
backdrop of increasing risks, our investment philosophy of owning durable,
well-capitalised, high-quality growth companies should help us weather further
market volatility.
While not immune to the economic cycle, many of our companies have
levers to maintain profitability even as the economy slows. Companies like
Meta, Google, Alibaba and Netflix have all announced plans to cut costs and
increase efficiency. In the good times, these companies reinvested the profits
from their core businesses into new growth opportunities. As the economic
backdrop becomes more uncertain, these companies can scale back
spending in these non-core areas, without impacting investment into their core
businesses.
Most of our portfolio companies are at historically low valuation levels. Google,
for example, is one of the highest quality businesses globally and is currently
trading at a valuation multiple below the wider market - and nearing levels last
seen in the global financial crisis.
At current valuation levels, companies like Google, PayPal, Amazon and
Salesforce are now reaching levels Warren Buffett would describe as a
‘fat pitch’. While these stocks have underperformed year-to-date amidst
increasing macroeconomic uncertainty, we are as optimistic as we have been
on their five-year prospects.
PayPal (+23% in local currency terms) gained significantly as activist fund Elliott
Management took a sizable position in the company and pushed for increased
business discipline. Activist investors are frequently drawn to companies with
good business models and strong financial positions with the flexibility to
deploy additional capital to increase shareholder value. All of which we believe
to be true for PayPal. The company has since announced a renewed focus
on its core business, a large cost savings program and US$15bn of share
repurchases (15% of market capitalisation). These initiatives put PayPal on solid
footing for growing margins and earnings going forward.
Floor and Décor (+12%) posted quarterly results ahead of expectations with
strong same-store-sales growth of 9% and expectations of a high-single-digit
growth rate for the remainder of the year. This helped counter some of the
bearish narrative on the home renovation market that has plagued performance
in the stock during the first half of this year. Saying that, with the spike in
mortgage rates impacting housing transactions and squeezing home-owner
wallets, we have recently trimmed our position slightly.
Netflix (+35%) rallied as the market saw a clearer path to renewed growth
following the companies Q2 earnings result. Netflix expects to return to
subscriber growth in Q3. Subscriber retention in the US and Canada region
is almost back to historical levels, following a period of elevated churn when
Netflix increased prices earlier this year. The company announced that content
spend would remain at current levels for the next few years - allowing the
company to leverage content costs after a year of continued investment.
Further detail around the proposed ad-supported tier suggests a sizeable
revenue opportunity. These initiatives, as well as the company’s focus on right-
sizing its operations and content spend, will contribute to robust free cash flow
growth.
Alibaba (-20%) and Tencent (-25%) fell alongside the wider Chinese market,
reversing strong performance in the prior quarter. As has been the case this
year, performance is largely sentiment driven, with the same confluence of
factors front of mind for investors, including the ongoing COVID lockdowns,
property slowdown and rising geopolitical tensions. Over time we expect the
strong fundamentals to shine through this noise, but we do recognise these
risks and currently hold these at relatively lower weights than our large-cap US
tech holdings to reflect this.
Portfolio activity
Following elevated portfolio activity earlier in the year (with three new names
and one exit), there were no new additions or exits to the portfolio this quarter.
Within the portfolio we have reduced the weight in some of our cyclical and
defensive names to add to some of the attractive high-quality growth names
like Amazon, Gartner and Microsoft. We continue to look for opportunities in
other quality names that have been caught up in the wider market sell-off.
¹
Share price premium to NAV (using the net asset value per share, after expenses, fees and tax, to four decimal places).
as at 30 September 2022
1 July 2022 – 30 September 2022
MLN NAVPREMIUM
1
$
0.8718.3
%$
1.0 3
Share Price
QUARTERLY NEWSLETTER
Sam Dickie
Senior Portfolio Manager
Fisher Funds Management Ltd
14 October 2022

PERFORMANCE
as at 30 September 2022
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 Group5.2%
Tencent Holdings4.7%
Ireland
Icon5.0%
United Kingdom
Greggs Plc3.4%
United States
Alphabet7.3%
Amazon.Com7.8%
Boston Scientific5.0%
Dollar General3.3%

Dollar Tree2.5%
Edwards Lifesciences Corp.2.0%

First Republic Bank San
Francisco
3.5%
Floor & Décor Holdings5.5%
Gartner Inc3.8%
Mastercard3.1%
Meta Platforms Inc7.2%
Microsoft3.6%
Netflix3.2%
NVR Inc3.1%
PayPal Holdings7.3%
salesforce.com4.8%
Signature Bank4.8%
StoneCo2.6%
Equity Total98.7%
New Zealand dollar cash5.6%
Total foreign cash0.3%
Cash Total5.9%
Forward Foreign Exchange(4.6%)

TOTAL100.0%
PORTFOLIO HOLDINGS
SUMMARY
as at 30 September 2022
COMPANY NEWS
If you would like to receive future
newsletters electronically please email us
at enquire@marlin.co.nz
Dividend Paid 23 September 2022
A dividend of 1.85 cents per share was paid to Marlin
shareholders on 23 September 2022, 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(6.4%)+13.7%+16.6%
Adjusted NAV Return +0.1%+4.4%+8.6%
Portfolio Performance
Gross Performance Return(0.5%)+7.1%+11.3%
Benchmark Index¹(1.8%)+4.6%+5.9%
1
Benchmark index : S&P Large Mid Cap/S&P Small Cap Index (hedged 50% to NZD)
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 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 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
NETFLIX
+35
%
STONECO
+24
%
PAYPAL
HOLDINGS
+23
%
ALIBABA
-20
%
TENCENT
-25
%
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 dili-
gence 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.