Marlin directors urge caution on delisting

Marlin directors Carmel Fisher and Rob Challinor say that any move to delist the fund could involve forced asset sales if a rush of investors apply to withdraw their money.

Marlin shareholder Gary Cross has been advertising in national media for investors to contact him and join the call for a vote on delisting the fund.

Mr Cross argues that investors would benefit if Marlin delisted and became an open-ended fund, such as a unit trust. Unit trusts are valued at net asset value for investors to buy and sell units.

Marlin, on the other hand, has been trading at a discount to its net asset value since listing in 2007. The current discount is around 24%.

In response to Mr Cross’s proposal, Marlin’s directors have written to investors saying that they are also frustrated with the discount to net asset value but that in the current market many companies are trading below valuation.

Marlin investors chose a closed-ended listed fund, they said. If it became an open-ended unit trust in which the fund managers paid out exiting investors, rather than the investors selling shares on market, a large rush of redemption requests could force the managers to sell investments to find cash.

This could hurt the share price of investee companies and the value left to remaining investors.

Moreover, investors have to sell at net asset value and cannot choose a market price at which they want to sell.

Marlin’s board said the young fund had outperformed competitors during a difficult period. “Marlin has played its part ... now we need to wait for the markets to recognise that,” the directors wrote.

They said they did not think Mr Cross's views were in line with most investors.

But Mr Cross said he was confident of getting the numbers for a vote. "It's only really just getting momentum."

Investors would not rush to redeem their shares if they saw a more positive net asset value under a unit trust structure, he suggested.

Marlin is managed by Fisher Funds, who have recently introduced a new distribution policy at fellow listed fund Kingfish.

The plan is to pay out 8% of net asset value each year to investors who want dividends or access to some of their funds.


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Mr Cross- go and start your own fund and leave this one alone. Stand on your own two feet instead of causing trouble for others

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A better proposal would be for Marlin to keep buying its own shares, and in doing so increase the NTA per share.

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The Marlin Warrant Holders are not likely to agree to delisting because holders of excess Warrants could suffer a 100% loss. Warrants are convertible every quarter until late October 2010.

Increasing the share repurchase volumes from their present low levels would be a tangible sign that Marlin is active and growing. Admittedly, the maximum number of shares that can be repurchased is capped at 5% per annum by the Companies Act 1993 s 65 (1) (b) but that may be sufficient to instil greater confidence.

The managers are aiming to hold investments that have strong growth potential. A lot of the investments are in Asia where the real economic growth of nations like China is likely to be unrestrainable in the medium term.

In addition, there is a discount applied to the share prices of portfolio companies as a result of a depressed sharemarket. Finally there is the Marlin share price discount.

The growth potential of portfolio companies, a moderate sharemarket recovery and elimination of the Marlin discount, all together could make Marlin interesting.

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