40.00%22.00%18.00%11.00%9.00%

Market UpdateMacro factors were again the dominant drivers of performance through the month. Global equity markets rallied in September mainly in response to improved prospects for the stability of the Eurozone and a third round of quantitative easing (QE3) in the US. We have talked previously about the likelihood of QE3 and much of September’s performance was in anticipation of, rather than in response to it. Although much anticipated, the formal announcement of QE3 was a positive surprise for markets in that Bernanke committed to quantitative easing for as long as it takes, even going so far as to say easing would continue well beyond the first signs of growth in the economy and the employment market. The stimulatory policies and tone from Europe and the US proved particularly supportive for the prices of shares and sectors which had previously been viewed as higher risk.

The positive effect was to a limited extent felt in our portfolio, with stock specific wins in key portfolio companies like China Automation Group. However the lower risk healthcare component of the portfolio did not benefit as much from the broader rally. This part of the portfolio provides important diversification benefits through different market moods, but does tend to underperform during times of market optimism. The portfolio’s cash exposure was similarly a drag on performance.

The New Zealand dollar appreciated significantly through the month, detracting from reported returns.

Our investment team met with or spoke to more than 100 companies during the month and the feedback was universally cautious. Bell weather companies like Nike and Fedex also released negative earnings. One CEO we spoke with summed it up well: “There is a hyper sensitivity to externalities around the world”. Meanwhile global markets continue to move up. The old adage of “don’t fight the Fed, don’t fight the tape and don’t fight your wife” appears to be playing out. We continue to focus our energy and

Sector Spl it as at 30/09/12

GeoGrapHical Spl it as at 30/09/12

30% Industrials 29% Health Care 22% Information Technology 11% Consumer Discretionary 8% Other

40% Europe

22% US

18% Asia

11% Japan

9% Other

perforMance to 30/09/12

Since 1 Month 3 Months 6 Months 12 Months 3 Years Inception

MLN Gross NAV +0.2% -2.9% -7.2% +2.1% -5.9% +3.4%

Relative Performance

MSCI Global Small Cap Gross Index (in NZ dollar terms) +0.1% +3.0% -1.4% +12.7% +16.6% -7.8%

Total Shareholder Return* +2.7% +1.3% -8.0% +5.9% +2.5% -11.7%

* Assumes all dividends are reinvested, but excludes imputation credits.** Accumulated performance since inception.

at a Glance as at 30/09/12

MLN NAV . . . . . . . . . . . . . . . .$0.82

Share Price . . . . . . . . . . . .$0.69

Discount . . . . . . . . . . . . . . . . . . . .16%

SepteMBer’S B iGGeSt MoverS

EnergyIndu 30.00%health Care 29.00%Techology 22.00%Consumer 11.00%Other 8.00%

Energy  

Indu  

health  Care  

Techology  

Consumer  

Other  

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SepteMBer 2012

+17% Raffles Education +14% China Automation Group +8% Gameloft +8% Tom Tailor -12% Genomma Lab

research efforts on analysing companies one-by-one. This is where we have an edge and have conviction to generate returns over the long-term.

portfol io UpdateAs we have commented before, periods of market volatility offer unique opportunities to buy quality companies at attractive prices. During the month we added two new companies to the portfolio – United Internet and Genomma Labs which we discuss overleaf. We look through the short-term macro noise and remain focused on the medium-term returns presented by our portfolio companies.

Zodiac Aerospace announced a strong set of third quarter results. Sales growth was well ahead of expectations on healthy performance across all divisions, continuing a record of positive earnings and operational momentum. However management was more cautious about margin prospects going forward, causing analysts to revise down expectations.

Park 24 reported a strong third quarter result with operating profits 35% up on the prior year, soundly beating expectations. Profitability in the core parking business improved mainly as the company did a superb job of restraining cost growth. Fourth quarter plans to open a further 24,000 parking spaces are a positive indication of the company’s growth prospects in the near term. In the car leasing business, start-up losses contracted faster than anticipated on higher than expected demand, again indicating positive growth prospects.

China Automation Group appears poised to benefit from an improved outlook for railway-related spending. The Chinese Ministry of Railways increased its budgeted railway infrastructure spending to RMB 469b (+8% year-on-year) which saw investor confidence in the sector return after a difficult period following the deadly high speed rail crash in July 2011. Given its specialty in safety and control

a word froM tHe ManaGerThe light at the end of the tunnel shone brightly during September. Unfortunately, renewed European tensions and some mixed economic data caused one of the bulbs to blow in the last week of the month, leaving a dimmer light, but a light nevertheless.

US Federal Reserve Chairman Ben Bernanke flicked the switch early in the month by announcing his third attempt to stimulate economic activity: QE3. Actually, QE3 is not a big enough label for Bernanke’s stimulus policy; it was really QE3,4,5 and 6 all rolled into one. The Fed announced that it will do whatever it takes to create jobs and drive the unemployment rate lower, and it will not stop until there is a significant improvement in the labour market. In fact, even after there are signs of an economic recovery, the Fed intends to keep interest rates low for a considerable time so the recovery can really gather steam. The Fed’s policy comes hot on the heels of the European Central Bank’s (ECB) policy which also undertakes to do whatever is necessary to stimulate growth.

This was without doubt a very positive announcement, however the market reaction was muted because QE3 had largely been anticipated and factored into asset prices. Spirits were also dampened by data out of China that showed a slowing in their economy, weakening commodity prices, and mixed data out of the US and Europe which suggested that if a recovery is in fact underway, it is a slow and shallow one.

Despite the positive policy action, we should prepare ourselves for more of this stop/start activity. Given the Fed’s laser focus on the jobs market, you can imagine how markets are going to anticipate and react to every new employment number (as if it wasn’t bad enough already!).

It was always going to be difficult to predict just when and how the global economic recovery was going to happen. There was always going to be a lag between the policy announcements and improved economic activity and confidence. But the reason we should err towards optimism, at least in the short to medium term, is that both the Federal Reserve and the ECB have committed unequivocally to pursuing economic and employment growth. Economic growth will happen because central banks will make sure it does.

If the US or European economies remain sluggish in a few months, we know that more money will be printed. If growth slows in six months, more money will be printed. Ultimately the money printing, particularly when combined with low, low interest rates, will lift asset values, stimulate businesses to spend and employ people, and encourage consumers to shift from saving to spending. Like the Pantene ad says, it won’t happen overnight, but it will happen.

Marlin Global Limited. PO Box 33 549, Takapuna, Auckland 0740, New Zealand Phone +64 9 484 0365 Fax +64 9 489 7139 Email: enquire@marlin.co.nz www.marlin.co.nz

6%

5%

5%

4%

4%

top 5 portfol io poSit ionS as at 30/09/12

INVESTING 101Diversification can reduce investment risk by combining a wide variety of investments within a portfolio in order to minimise the impact that any one investment can have on the overall performance of the portfolio. Diversification aims to smooth out random movements in a portfolio so that the positive performance of some investments neutralise the negative performance of others.

Although diversification is important, it can be difficult to achieve with small amounts of money. For example, it would be difficult for an individual investor with $5,000, to build a portfolio of shares; they would most likely end up with only two or three different shares in their portfolio. Managed funds like Marlin are ideal in that they instantly offer investors access to a diversified investment portfolio.

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. 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.

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systems, the company is well positioned to grow its earnings as the public spending plan rolls out.

Wasion announced a joint venture agreement with Siemens to develop, manufacture and market Data Management and Metering systems for the Chinese and export markets. In addition to confirming the quality of Wasion’s pedigree in the metering segment, this agreement will give Wasion access to valuable new markets and clients.

United Internet is a leading European internet specialist with over 11 million paying customers and over 31 million accounts. The company has an enviable record of strong profitable growth, and an exceptional history of returning cash to shareholders. United Internet has developed a superior European franchise in mobile data access, having correctly anticipated the growth in smart-phones and tablets, and has an attractive opportunity set in terms of further developing this internet access business. In addition the company has existing

relationships with a third of German small businesses and over 50% of all German email users, positioning it well to commercialise solutions it develops in its significant development platform. The company presents a credible management team, a convincing track-record, a healthy balance sheet and strong underlying earnings.

Genomma Labs is a competitive consumer goods company headquartered in Mexico. The company has a leading position in over-the-counter medicines in Mexico, and a significant position in personal care products where it competes successfully with global leaders like Unilever and Procter & Gamble. Genomma has a portfolio of leading brands, a state of the art distribution system and a powerful consumer advertising capability. The company has delivered impressive growth and returns over time, and faces attractive growth opportunities in the United States, Brazil and the Andean region.

portfol io Update cont inUed

wHy iS d iverS if icat ion iMportant?