MLN – December 2022 Quarterly Newsletter

1
COVID aftershocks will continue into 2023.
Marlin’s gross performance was down 5.0% for the December quarter, while the
adjusted NAV return was down 6.7%. The benchmark index, S&P Large Mid Cap/S&P
Small Cap Index (hedged 50% to NZD) rose +8.3% in Q4.

Global market backdrop
The December month unfortunately finished out the year in the same fashion that was
seen throughout 2022 – weak overall equity market performance (global equities -4%
for the month, -18% for the year), tech weaker still (Nasdaq -9% for the month, -33%
for the year) and value equities (global value equities -2% for the month, -6% for the
year) outperforming growth equities (global growth equities -6% for the month, -29%
for the year).
As had been the case all year, the Christmas grinch was the Federal Reserve Bank –
the FOMC decision in December was more hawkish than hoped for. Bonds sold off,
interest rates went up and equities fell. De ja vu.
As we think back on the quarter and year that was 2022, there are three key themes.
First, even three years on, COVID is still having big repercussions. But that is perhaps
unsurprising when you think about the economic consequences - the global economy
basically stopped, and then the US Federal Reserve Bank flushed in five - times more
liquidity than it did during the Global Financial Crisis in 2008/2009. It seems clear that
COVID aftershocks are going to be felt for a few years yet.
Second, there was a clear pull forward of demand during the pandemic for many
industries e.g. online shopping - we all became online shopaholics. The market was
aware this was going to unwind. However, the sting in the tail has been that a lot of
companies that saw this abnormally strong demand loaded in costs to service the
strong demand.
Meta was the poster child, hiring 28% more people in a year. As is often the case,
demand can turn on a dime. However, any cost you have loaded into the business is
stickier. So, just as the revenue from the COVID induced demand unwound, costs were
increasing.
The good news is that companies that are further through this journey have performed
strongly out the other side. Netflix for example saw demand for its service unwind
much earlier last year and it quickly cut costs to right size its business. The stock is
now up 100% from its lows. Meta seems to be finally making adjustment too. Mark
Zuckerberg has announced he will cut 11,000 jobs and the stock has bounced over
40% as a result.
The message from the market is crystal – if you are tone deaf on costs, you will be
punished. But, if you listen to the market and reign in spending, you will be rewarded.
Third, 2022 marked the end of a 40-year trend of consistently falling interest rates.
Warren Buffett describes interest rates the best when he calls them gravity for the stock
market - as interest rates fall, they act as a smaller and smaller gravitational drag on
equity valuations, and vice versa. With near zero interest rates, investors had been lead
to believe that we were in a gravity free environment, resulting in an everything bubble
last year. Whether you were trading crypto or even second-hand boats, interest rates
were near zero, money was almost free and everything an investor touched went up.
Well, gravity returned in 2022 and most of these bubbles have now popped.

Portfolio update
Alibaba (+11%) and Tencent (+25%) had a roller coaster ride during the quarter.
The stocks were down 20%+ in October. Although President Xi’s reappointment
at the 20th Party Congress was expected, other changes in party leadership came
as a surprise and fuelled concerns that state objectives will be prioritised to the
detriment of the private sector. Ongoing COVID restrictions, property slowdown and
geopolitical tensions continued to depress market sentiment. However, the China
re-opening thematic that began in earnest in November, continued into December
with the confirmation that China has exited its zero-Covid policy. On 26 December,
China released new guidelines to significantly relax its COVID control policy, effective
8th January 2023. This extends the policy loosening that started with 20 measures on
11 November and continued with 10 measures on 7 December. The economic impact
should suppress growth in the near-term due to surging infections, a temporary labour
shortage and increased supply chain disruptions, but is expected to increase full year
2023 economic growth meaningfully. Alibaba also released earnings during the quarter
that provided a mixed message of slower growth, but better profitability. For both
companies, a resumption in growth on a base of reigned in costs bodes well for stronger
earnings this year.
Meta Platforms (-11%) had a roller coaster quarter. It fell 31% in October as 2023
guidance missed expectations. Despite slower revenue, primarily driven by the impact of
a weaker macro environment on digital ad spend, the company guided to double digit
cost growth and much higher than expected capital expenditure.
The volume of ads served grew strongly but most of this benefit was offset by lower ad
prices due to Apple’s ad-tracking changes and mix shift to lower priced markets and
lower ad load products such as Instagram Reels.
The increase in spend reflects a combination of investments into Meta’s core advertising
business (Reels, AI infrastructure) as well as non-core Reality Labs metaverse spend.
However, the company seemed to get the message from the market and reversed
course on expense growth in November. In a memo to the firm, CEO and founder, Mark
Zuckerberg detailed the layoff of 13% (11k) of Meta’s staff.
The company’s expense growth has been a large concern for the market, so investors
welcomed the expense cuts and acknowledgement by the firm that they need to show
greater cost discipline. The stock is now +47% from its lows in early November.
In general, this cost discipline is a trend we are witnessing across the tech sector and
will see companies in better shape to weather the expected macro driven downturn in
revenue in 2023.
Netflix (+25%) released a strong quarterly update, with revenue and subscriber
numbers beating expectations and better-than-expected subscriber outlook for the next
quarter. Netflix ended the quarter with 223mn paid subscribers.
On an FX-neutral basis, average revenue per subscriber grew strongly across three out
of four regions – North America (+12% year-on-year), EMEA (+7%), and Latin America
(+16%) – regions that together contribute 88% of group revenue.
Netflix continues to be a top streaming provider in the US and UK (where data is
available), with 8% share of TV viewing time, which we see as supportive of the
company’s value proposition. Netflix launched a new ad-supported tier in early
November and continues to roll out paid account sharing.
We expect these options to contribute robust free cash flow growth in the long-term, by
monetising non-paying Netflix users (estimated at 100mn households globally), attracting
new users for whom Netflix may previously have been too expensive, and reducing
subscriber churn.
¹
Share price premium to NAV (including warrant price on a pro-rated basis and using the net asset value per share, after expenses, fees and tax, to four decimal places).
as at 31 December 2022
1 October 2022 – 31 December 2022
MLN NAVPREMIUM
1
$
0.7913.9
%$
0.90
Share Price
QUARTERLY NEWSLETTER
Sam Dickie
Senior Portfolio Manager
Fisher Funds Management Ltd
16 January 2023
Warrant Price
$
0.02

PERFORMANCE
as at 31 December 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 Group3.5%
Tencent Holdings4.2%
Ireland
Icon5.1%
United Kingdom
Greggs Plc4.4%
United States
Alphabet7.4%
Amazon.Com7.4%
Boston Scientific5.0%
Dollar General3.0%

Dollar Tree2.5%
Edwards Lifesciences Corp.3.0%

First Republic Bank San
Francisco
3.1%
Floor & Décor Holdings5.9%
Gartner Inc3.9%
Mastercard3.5%
Meta Platforms Inc6.8%
Microsoft4.5%
Netflix3.6%
NVR Inc3.0%
PayPal Holdings6.2%
salesforce.com4.2%
Signature Bank4.0%
StoneCo2.0%
Equity Total96.2%
New Zealand dollar cash3.2%
Total foreign cash0.2%
Cash Total3.4%
Forward Foreign Exchange0.4%

TOTAL100.0%
PORTFOLIO HOLDINGS
SUMMARY
as at 31 December 2022
COMPANY NEWS
If you would like to receive future
newsletters electronically please email us
at enquire@marlin.co.nz
Dividend Paid 16 December 2022
A dividend of 1.85 cents per share was paid to Marlin
shareholders on 16 December 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(10.4%)+4.9%+11.6%
Adjusted NAV Return (6.7%)+1.5%+6.3%
Portfolio Performance
Gross Performance Return(5.0%)+4.1%+9.2%
Benchmark Index¹+8.3%+5.8%+6.2%
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
GREGGS
+37
%
TENCENT
+25
%
NETFLIX
+25
%
SIGNATURE
BANK
-23
%
AMAZON
-26
%
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.