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Annual Financial Report

Released 07:00 25-Sep-2019

Annual Financial Report

(the “Company”)


The full Annual Report and Financial Statements for the year ended 31 July 2019 can be found on the Company’s website at


Financial Summary

Total Return Year to 
31 July 
Year to  
31 July  

Total return (£’000)




Return per Ordinary Share




Total revenue return per Ordinary Share




Dividend per Ordinary Share





Capital As at
31 July
As at 
31 July 

Net assets attributable to equity Shareholders(i) (£’000)




Net asset value (“NAV”) per Ordinary Share




NAV total return(ii)†



Benchmark performance - total return basis(iii)



Share price




Share price discount to NAV



 (i) NAV as at 31 July 2019 includes £nil in respect of own Shares bought back and resold during the year (2018: £1,601,000 increase) and a net £24,604,000 increase in respect of new Shares issued in the year (2018: £9,628,000 increase).

(ii) Total return including dividends reinvested, as sourced from Bloomberg.

(iii) The Company’s benchmark is the MSCI UK Investable Market Index (“MXGBIM”), as sourced from Bloomberg.

Ongoing Charges Year to
31 July
Year to
31 July
Ongoing charges as a percentage of average net assets*


* Calculated in accordance with the guidelines issued by the Association of Investment Companies (the “AIC”).
** Ongoing charges excludes performance fees of £352,000 (2018: £78,000) in accordance with AIC guidelines.
See Glossary below.


Results for the year ended 31 July 2019

The portfolio remains focused on larger capitalisation, intellectual property rich companies listed in developed markets which are seeking global growth.

The Company’s portfolio performance for the financial year under review has led to a NAV total return per Share of 9.8%* (2018: 26.9%*). The outperformance of the Company against our benchmark for the three years to 31 July 2019 on a total return basis now stands at 50.2%** (2018: 67.3%**).

At the year end, the Shares traded at 5.4% discount to their NAV per share (2018: 1.3%).


The Directors are proposing a final ordinary dividend of 8.0 pence per Share for the financial year 2019. Accordingly, on a per Share basis, the dividends proposed or paid out in respect of the 2019 financial year total 14.0 pence, including the 6.0 pence interim dividend paid in April 2019. These dividends represent a yield of 2.6% on the Share price as at the year end (2018: 2.3%).

The Board

As noted in the 2018 Annual Report, Peter Stanley retired from the Board at the conclusion of the last Annual General Meeting and I would like to thank him again for his long service and contribution to the Board. Daniel Wright was appointed as a non-executive Director of the Company in October 2018 and, following the 2019 Annual General Meeting, he has succeeded me as Chairman of the Audit Committee and Senior Independent Director.

Annual General Meeting

I look forward to welcoming Shareholders to our forty-seventh Annual General Meeting, to be held at the ICAEW, Members Room, Chartered Accountants’ Hall, One Moorgate Place, London EC2R 6EA at 11.45 am on 14 January 2020.

David Harris

24 September 2019

* See Glossary below.
** Source: Bloomberg, calculated as the difference between the Company’s 3 year total return of 78.2% (2018: 97.5%) and the benchmark’s 3-year total return of 28.0% (2018: 30.2%).


Portfolio management

The portfolio delivered a high single-digit outperformance against the benchmark driven by our sector positioning and the decline in the value of Sterling against the US Dollar.

The portfolio segments can be broken down in contribution to base currency performance terms over the year as follows:

Total return of underlying sector holdings in local currency
(excluding costs and foreign exchange)


Technology investments 6.4%  19.5% 
Consumer investments 0.7%  8.4% 
Healthcare investments (0.4%)  0.9% 
Other (including costs, carry and foreign exchange) 3.1%  (1.9%)
Total NAV per Share return 9.8%  26.9% 

Source: Bloomberg.

Technology investments

Technology (under which we include the Information Technology GICS (Global Industry Classification Standard) sector, the Communication Services GICS sector and technology/disruption orientated funds) delivered roughly 65% of NAV total return per Share.

Microsoft Corporation accounted for over half of the sector return and was the biggest single contributor to portfolio performance during the year.

Other material positive performers included PayPal Holdings Inc, Match Group Inc, Visa Inc, Facebook Inc, Tencent Holdings Ltd, Adobe Systems Inc, The Walt Disney Company, Apple Inc and Polar Capital Technology Trust plc.

Video gaming was the key underperforming sub-sector during the year: Activision Blizzard Inc, Nvidia Corp, Electronic Arts Inc, Ubisoft Entertainment Sa, Take Two Interactive Software Inc and Nintendo Co. Ltd together contributed -3.9% to overall portfolio performance. During the year, we reduced exposure to this niche. The gaming sub-sector’s growth is forecast to be strong over the medium term but there is also a disruptive shift in pricing models which is increasing the volatility in earnings.

Alphabet Inc was the only other material negative contributor.

The portfolio’s delta-adjusted exposure to the sector is now around 76% of net assets (2018: 75%).

Consumer investments

Consumer (under which we include both the Consumer Staples and the Consumer Discretionary GICS sectors) delivered around 7% of NAV total return per Share., Inc was once again the dominant driver of this return, although LVMH Moët Hennessy Louis Vuitton SE was also a material positive contributor.

The only material negative performer was Alibaba Group Holding Ltd.

The portfolio’s delta-adjusted exposure to the sector has increased to around 31% of net assets (2018: 20%) though this is largely due to the GICS reclassification of Alibaba in late 2018.

Healthcare and pharmaceutical investments

The only material portfolio holding in the sector was Align Technology Inc, which we disposed of during the year.

Delta-adjusted exposure to the Healthcare sector is currently 0% of net assets (2018: 1%). However, we continue to look for opportunities in the sector, particularly in the medical devices sub-sector.

Other investments

We have employed various sector and thematic index hedges during the year in an attempt to combat market volatility. These hedges currently represent around a negative c.13% of net assets.


The Manager has overall responsibility and oversight on how the Company’s assets are priced and valued. In addition, the Manager consults with the Board of the Company in determining the various methodologies and procedures applied when pricing and valuing the securities of the Company.

The Manager’s valuation policy sets out its approach to the valuation of the Company’s portfolio of assets. Oversight of the policy, and determination of the valuation of assets which are unlisted or for which published prices are not available, is the responsibility of the Manager’s valuation committee, which operates independently of the Manager’s portfolio management function.

The valuation committee meets at least on a monthly basis and reports to the Board on all issues relating to the valuation of the Company’s portfolio assets.

The valuation policy has been prepared to clarify the methodology used in valuing all of the securities that constitute the portfolio of the Company and explains the generic methodology or protocol used for valuing different types of securities, valuation methodologies and procedures for each security that is part of the portfolio of the Company. The values of those securities are an integral part of the Company’s NAV and NAV per Share calculation. The NAV of the Portfolio is calculated by the Administrator to the nearest two decimal places in Sterling, which is the base currency of the portfolio, as at the valuation point. The NAV is calculated weekly.

The vast majority of the portfolio consists of quoted equities, whose prices are published by independent sources.

The valuation policy specifies how the Company’s securities will be priced. It should, however, be noted that financial reporting requirements oblige the Board to ensure that the audited financial statements of the Company are prepared such that all securities are measured at fair value.

Quoted equities are valued daily. The valuation intervals of the Company’s unquoted assets vary according to their nature but all assets are re-valued at least annually.

Professional negligence liability risks

The Manager maintains professional indemnity insurance to cover the potential liability risks arising from professional negligence. The Manager does not hold specific additional own funds against liability arising from its own professional negligence.

M&L Capital Management Limited

24 September 2019

Equity exposures and portfolio sector analysis

Equity exposures (longs)

As at 31 July 2019

Company Sector * Valuation 
% of net 
assets, Inc. Consumer Discretionary 28,784  17.24 
Microsoft Corporation** Information Technology 27,544  16.50 
Alphabet Inc** Information Technology 23,907  14.32 
Alibaba Group Holdings Ltd** Information Technology 17,361  10.40 
VISA Inc. Information Technology 13,127  7.86 
Tencent Holdings Ltd** Information Technology 12,861  7.70 
Facebook Inc. ** Information Technology 12,769  7.65, inc.** Information Technology 12,277  7.35 
Paypal Holdings Inc. ** Information Technology 8,980  5.38 
Adobe Systems Inc.** Information Technology 6,968  4.17 
The Walt Disney Company** Consumer Discretionary 6,505  3.90 
NVIDIA Corporation** Information Technology 5,271  3.16 
Match Group Inc** Information Technology 4,556  2.73 
Scottish Mortgage Investment Trust plc Funds 3,857  2.31 
Expedia Group** Consumer Discretionary 3,767  2.26 
Palo Alto Networks** Information Technology 3,754  2.25 
Booking Holdings** Consumer Discretionary 2,766  1.66 
Arista Networks Information Technology 2,747  1.64 
LVMH Moet Hennessy - Louis Vuitton SE** Consumer Discretionary 2,525  1.51 
IAC** Information Technology 1,757  1.05 
Synopsys** Information Technology 1,659  0.99 
Splunk** Information Technology 1,193  0.71 
VMware Information Technology 385  0.23 
Spotify Technology Information Technology 380  0.22 
Angi Homeservices Information Technology 311  0.18 
ISHARES Expanded Tech Software ETF Funds  42  0.02 
Kingdee International Software Group** Information Technology 32  0.02 
Total long equities exposure 210,337 125.96 
Unlisted debentures 36  0.02 
Total long positions 210,373  125.98 
Short positions > 1%
IS Core FTSE 100 UCITS** Index (3,224) (1.93)
US BBB Downgrade Basket** CFD*** basket (2,985) (1.79)
US Weak Pricing Power Basket** CFD basket (2,819) (1.69)
Vanguard Real Estate** Funds (2,179) (1.30)
EU Weak Balance Sheets Basket** CFD basket (1,720) (1.03)
US Declining Margins Basket** CFD basket (1,703) (1.02)
Total short position > 1% (14,630) (8.76)
Cash and other net assets and liabilities (28,762) (17.22)
Net assets 166,981  100.00 

* GICS – Global Industry Classification Standard.
** Including equity swap exposures as detailed in note 13.
*** CFD - contracts for differences.

Portfolio sector analysis

As at 31 July 2019

% of net 
Information Technology 94.4 
Consumer Discretionary 26.6 
Funds 3.6 
Index (1.9)
CFD basket (5.5)
Cash and other net current assets and liabilities (17.2)
Net assets 100.0 


Amazon is the world’s largest e-commerce platform and remains a disruptive force in the retail market. Amazon also provides other large scale content and services platforms to consumers and businesses such as Amazon Prime, Amazon Web Services and Amazon Logistics.

Alphabet Inc. (“Alphabet”)

Alphabet is a global technology company with products and platforms across a wide range of tech verticals, including online advertising, cloud-based technology, autonomous vehicles, artificial intelligence and smart phones.

Microsoft Corporation (“Microsoft”)

Microsoft is another global tech company and a leader in cloud-based technology, business software, operating systems and gaming.

Alibaba Group Holding Ltd (“Alibaba”)

Alibaba is China’s largest technology company with leading platforms in e-commerce, payments, media, entertainment and cloud computing.

Facebook Inc. (“Facebook”)

Facebook is the largest global social media platform with over 2.4 billion monthly active users and has the second largest global online advertising revenue after Google. Inc. (“Salesforce”)

Salesforce is the global leader in CRM software and a major enterprise cloud platform and software-as-a-service (“SAAS”) provider.

Tencent Holdings Ltd (“Tencent”)

Tencent is a Chinese internet giant, with platforms in online gaming, social media, digital payments and digital entertainment. Through WeChat, Tencent has built one of Asia’s leading SuperApps with over 1 billion monthly active users.

Visa Inc. (“Visa”)

Visa is a financial services company and a key facilitator of electronic funds transfers throughout the world.

PayPal Holdings Inc. (“Paypal”)

PayPal is a global digital payments company and one of the leading online payment gateways and platforms for peer-to-peer transactions.

Adobe Inc. (“Adobe”)

Adobe is a SAAS company that provides cloud-based creative, marketing and analytics tools to businesses, professionals and prosumers. Adobe is perhaps best known for Photoshop – imaging, design and photo-editing software.

Percentage of portfolio by holding at the year end*:

Amazon 17.7%
Alphabet 11.1%
Microsoft 11.1%
Alibaba 8.4%
Facebook 7.9%
Salesforce 7.1%
Tencent 6.0%
Visa 5.5%
Paypal 5.2%
Adobe 3.3%

* Based on net delta-adjusted exposure.

Investment record of the last ten years

Year ended Total 
return (£’000) 
Return per 
Dividend per   
Net assets (£’000) NAV per
31 July 2010 13,151  71.75  11.50  85,203 379.40
31 July 2011 15,691  69.87  12.50  98,267 437.60
31 July 2012 (19,945) (88.81) 13.00  75,515 336.26
31 July 2013 2,522  11.23  13.75  75,050 334.19
31 July 2014 (6,295) (28.08) 13.75  64,361 293.20
31 July 2015 2,483  11.47  6.00  63,074 293.35
31 July 2016 13,424  62.50  13.36  75,546 350.81
31 July 2017 20,055  92.43  9.00  94,661 429.05
31 July 2018 26,792  115.27  12.00  130,388 532.81
31 July 2019 15,900  58.75  14.00  166,981 568.66

* Basic and fully diluted.

Business model

The Company is an investment company as defined by Section 833 of the Companies Act 2006 and operates as an investment trust in accordance with Section 1158 of the Corporation Tax Act 2010.

The Company is also governed by the Listing Rules and Disclosure Guidance and Transparency Rules of the Financial Conduct Authority (the “FCA”) and is listed on the Premium Segment of the Main Market of the London Stock Exchange.

A review of investment activities for the year ended 31 July 2019 is detailed in the Manager’s Review above.

Investment objective

The investment objective of the Company is to achieve capital appreciation together with a reasonable level of income.

Investment policy

Asset allocation

The Company’s investment objective is sought to be achieved through a policy of actively investing in a diversified portfolio, comprising UK and overseas equities and fixed interest securities. The Company seeks to invest in companies whose shares are admitted to trading on a regulated market. However, it may invest in a small number of equities and fixed interest securities of companies whose capital is not admitted to trading on a regulated market. Investment in overseas equities is utilised by the Company to increase the risk diversification of the Company’s portfolio and to reduce dependence on the UK economy in addressing the growth and income elements of the Company’s investment objective.

The Company may invest in derivatives, money market instruments, currency instruments, CFDs, futures, forwards and options for the purposes of (i) holding investments and (ii) hedging positions against movements in, for example, equity markets, currencies and interest rates.

There are no maximum exposure limits to any one particular classification of equity or fixed interest security. The Company’s investments are not limited to any one industry sector and its current investment portfolio is spread across a range of sectors. The Company has no specific criteria regarding market capitalisation or credit ratings in respect of investee companies.

Risk diversification

The Company intends to maintain a relatively focused portfolio, seeking capital growth by investing in approximately 20 to 40 securities. The Company will not invest more than 15% of the gross assets of the Company at the time of investment in any one security. However, the Company may invest up to 50% of the gross assets of the Company at the time of investment in an investment company subsidiary, subject always to other restrictions set out in this investment policy and the Listing Rules.

The Company intends to be fully invested whenever possible. However, during periods in which changes in economic conditions or other factors so warrant, the Manager may reduce the Company’s exposure to one or more asset classes and increase the Company’s position in cash and/or money market instruments.


The Company may borrow to gear the Company’s returns when the Manager believes it is in Shareholders’ interests to do so. The Company’s investment policy and the Articles permit the Company to incur borrowing up to a sum equal to two times the adjusted total of capital and reserves. Any change to the Company’s borrowing policy will only be made with the approval of Shareholders by special resolution.

The effect of gearing may be achieved without borrowing by investing in a range of different types of investments including derivatives. The Company will not enter into any investments which have the effect of increasing the Company’s net gearing beyond the above limit.


In addition to the above, the Company will observe the investment restrictions imposed from time to time by the Listing Rules which are applicable to investment companies with shares listed on the Official List of the FCA under Chapter 15.

In accordance with the Listing Rules, the Company will manage and invest its assets in accordance with the Company’s investment policy. Any material changes in the principal investment policies and restrictions (as set out above) of the Company will only be made with the approval of Shareholders by ordinary resolution.

In the event of any breach of the investment restrictions applicable to the Company, Shareholders will be informed of the remedial actions to be taken by the Board and the Manager by an announcement issued through a regulatory information service approved by the FCA.

Dividend policy

The Company may declare dividends as justified by funds available for distribution. The Company will not retain in respect of any accounting period an amount which is greater than 15% of net revenue in that period.

The dividend payments are split in order to better reflect the sources of the Company’s income. Recurring income from dividends on underlying holdings is paid out as ordinary dividends, whilst non-recurring (other investment) income is paid out as special dividends.

Results and dividends

The results for the year are set out in the Statement of Comprehensive Income and in the Statement of Changes in Equity below.

For the year ended 31 July 2019, the net revenue return attributable to Shareholders was negative £857,000 (2018: negative £465,000) and the net capital return attributable to Shareholders was £16,757,000 (2018: £27,257,000). Total Shareholders’ funds increased by 28.1% to £166,981,000 (2018: £130,388,000).

The dividends paid/proposed by the Board for 2018 and 2019 are set out below:

Year ended 31 July 2019
pence per Share
Year ended 31 July 2018
pence per Share
Interim dividend 6.00 4.00
Proposed final dividend 8.00 8.00
14.00 12.00

Subject to the approval of Shareholders at the forthcoming Annual General Meeting, the proposed final ordinary dividend will be payable on 14 February 2020 to Shareholders on the register at the close of business on 24 January 2020. The ex-dividend date will be 23 January 2020.

Further details of the dividends paid in respect of the years ended 31 July 2019 and 31 July 2018 are set out in note 7 below.

Principal risks and uncertainties

The Board considers that the following are the principal risks and uncertainties facing the Company. The actions taken to manage each of these are set out below. If one or more of these risks materialised, it could potentially have a significant impact upon the Company’s ability to achieve its investment objective. These risks are formalised within the risk matrix maintained by the Company’s Manager.

Risk How the risk is managed
Investment Performance Risk
The performance of the Company may not be in line with its investment objectives.
Investment performance is monitored daily by both the investment and risk functions of the AIFM. This includes a daily performance attribution analysis from the independent risk function (on both an absolute and relative basis) highlighting the return contribution of all investments. The AIFM takes an active risk management approach and regularly cuts or hedges underperforming investments.

Other investment risk metrics monitored on a daily basis include: Delta-Adjusted Exposure, Parametric Value at Risk, Monte Carlo Simulation Value at Risk, Historical Simulation Value at Risk (VaR measures are calculated at 95%, 97.5% and 99% confidence levels), FX exposure, Portfolio Beta, Portfolio Gamma, Net Long Exposure/Net Assets ratio, Active Share, Portfolio Historic Volatility, Portfolio Modelled Volatility and the key drivers of modelled volatility.
Key Man Risk and Reputational Risk
The Company may be unable to fulfil its investment objectives following the departure of key staff of the Manager.
M & L Capital Management Limited (“MLCM”) has a remuneration policy that incentivises key staff to take a long-term view as variable rewards are spread over a five-year period. MLCM also has documented policies and procedures, including a business continuity plan, to ensure continuity of operations in the unlikely event of a departure.

MLCM has a comprehensive compliance framework to ensure strict adherence to relevant governance rules and requirements.
Fund Valuation Risk
The Company’s valuation is not accurately represented to investors.
NAVs are produced independently by the Administrator, based on the Company’s valuation policy.

Valuation is overseen and reviewed by the AIFM’s valuation committee which reconciles and checks NAV reports prior to publication.

It should be noted that the vast majority of the portfolio consists of quoted equities, whose prices are provided by independent market sources; hence material input into the valuation process is rarely required from the valuation committee.
Third-Party Service Providers
Failure of outsourced service providers in performing their contractual duties.
All outsourced relationships are subject to an extensive dual-directional due diligence process and to ongoing monitoring. Where possible, the Company appoints a diversified pool of outsourced providers to ensure continuity of operations should a service provider fail.

The cyber security of third-party service providers is a key risk that is monitored on an ongoing basis. The safe custody of the Company’s assets may be compromised through control failures by the Depositary or Custodian, including cyber security incidents. To mitigate this risk, the AIFM receives monthly reports from the Depositary confirming safe custody of the Company’s assets held by the Custodian.
Regulatory Risk
A breach of regulatory rules/other legislation resulting in the Company not meeting its objectives or investors’ loss.
The AIFM adopts a series of pre-trade and post-trade controls to minimise breaches. MLCM uses a fully integrated order management system, electronic execution system, portfolio management system and risk system developed by Bloomberg. These systems include automated compliance checks, both pre and post execution, in addition to manual checks from the investment team. All trades are reviewed by the Chief Risk and Compliance Officer at MLCM prior to release to the Prime Broker. The AIFM undertakes ongoing compliance monitoring of the portfolio through a system of daily reporting.

Furthermore, there is additional oversight from the Depositary, which ensures that there are three distinct layers of independent monitoring.
Fiduciary Risk
The Company may not be managed to the agreed guidelines.
The Company has a clear documented investment policy and risk profile. A strong system and monitoring culture, with an independent second line function, provide oversight on a daily basis and more formally through various monthly governance committees.
Fraud Risk
Fraudulent actions may cause harm to the Company’s investment activities and objectives.
The AIFM has extensive fraud prevention controls and adopts a zero tolerance approach towards fraudulent behaviour and breaches of protocol surrounding fraud prevention. The transfer of cash or securities involve the use of dual authorisation and two factor authentication to ensure fraud prevention, such that only authorised personnel are able to access the core systems and submit transfers. The second line of defence has access to core systems to ensure complete oversight of all transactions.

In addition to the above, the Board considers the following to be the principal financial risks associated with investing in the Company: market risk, interest rate risk, liquidity risk, currency rate risk and credit and counterparty risk. An explanation of these risks and how they are managed along with the Company’s capital management policies are contained in note 16 of the Financial Statements below.

The Board, through the Audit Committee, has undertaken a robust assessment and review of all the risks stated above and in note 16 of the Financial Statements, together with a review of any new risks which may have arisen during the year, including those that would threaten its business model, future performance, solvency or liquidity.

In accordance with guidance issued to directors of listed companies, the Directors confirm that they have carried out a review of the effectiveness of the systems of internal financial control during the year ended 31 July 2019, as set out in the full Annual Report. There were no matters arising from this review that required further investigation and no significant failings or weaknesses were identified.

Year-end gearing

At the year end, gross long equity exposure represented 125.98% (2018: 107.37%) of net assets.

Key performance indicators

The Board considers the most important key performance indicator to be the comparison with its benchmark index. This is referred to in the Financial Summary above.

The other key measures by which the Board judges the success of the Company are the Share price, the NAV per Share and the ongoing charges measure.

Total net assets at 31 July 2019 amounted to £166,981,000 compared with £130,388,000 at 31 July 2018, an increase of 28.1%, whilst the fully diluted NAV per Ordinary Share increased to 568.66p from 532.81p.

Net revenue return after taxation for the year was a negative £857,000 (2018: negative £465,000), a decrease of 84.30%.

The Share price during the period under review has been quoted at discounts to NAV ranging from 11.03% to a premium of 0.20%.

Ongoing charges set out in the full Annual Report is a measure of the total expenses (including those charged to capital) expressed as a percentage of the average net assets over the year. The Board regularly reviews the ongoing charges measure and monitors Company expenses.

Future development

The Board and the Manager do not currently foresee any material changes to the business of the Company in the near future. As the majority of the Company’s equity investments are denominated in US Dollar, any currency volatility caused by Brexit (or no Brexit) may have an impact (either positive or negative) on the Company’s NAV per Share, which is denominated in Sterling.

Management arrangements

Under the terms of the management agreement, MLCM will manage the Company's portfolio in accordance with the investment policy determined by the Board. The management agreement has a termination period of three months. In line with the management agreement, the Manager receives a variable portfolio management fee. . Details of the revised fee arrangements and the fees paid to the Manager during the year are disclosed in note 3 to the Financial Statements.

The Manager is authorised and regulated by the FCA.

M&M Investment Company Plc (“MMIC”), which is controlled by Mark Sheppard who forms part of the Manager’s investment management team, is the controlling Shareholder of the Company. Further details regarding this are set out in the Directors’ Report in the full Annual Report.

Alternative Investment Fund Managers Directive (the “AIFMD”)

The Company permanently exceeded the sub-threshold limit under the AIFMD in 2017 and MLCM was appointed as the Company’s AIFM with effect from 17 January 2018. Following their appointment as the AIFM, MLCM receives an annual risk management and valuation fee of £59,000 to undertake its duties as the AIFM in addition to the portfolio management fees set out above.

The AIFMD requires certain information to be made available to investors before they invest and requires that material changes to this information be disclosed in the Annual Report.


In the year to 31 July 2019, the total remuneration paid to the employees of the Manager was £402,000 (2018: £380,000), payable to an average employee number throughout the year of three

(2018: three).

The management of MLCM is undertaken by Mark Sheppard and Richard Morgan, to whom a combined total of £284,000 (2018: £263,000) was paid by the Manager during the year.

The remuneration policy of the Manager is to pay fixed annual salaries, with non-guaranteed bonuses, dependent upon performance only. These bonuses are generally paid in the Company’s Shares, released over a three-year period.


Leverage is defined in the Glossary below.

The leverage policy has been approved by the Company and the AIFM. The policy limits the leverage ratio that can be deployed by the Company at any one time to 275% (gross method) and 250% (commitment method). This includes any gearing created by its investment policy. This is a maximum figure as required by regulation and not necessarily the amount of leverage that is actually used. The leverage ratio as at 31 July 2019 measured by the gross method was 176.7% and that measured by the commitment method was 133.3%.

Risk profile

The risk profile of the Company as measured through the Synthetic Risk Reward Indicator (“SRRI”) score is currently at 6 on a scale of 1 to 7 as at 31 July 2019. This score is calculated on the Company’s five-year annualised NAV volatility. Liquidity, counterparty and currency risks are not captured on the scale. The Manager will periodically disclose the current risk profile of the Company to investors. The Company will make this disclosure on its website at the same time as it makes its Annual Report and Financial Statements available to investors or more frequently at its discretion.

Liquidity arrangements

The Company currently holds no assets that are subject to special arrangements arising from their illiquid nature. If applicable, the Company would disclose the percentage of its assets subject to such arrangements, on its website at the same time as it makes its Annual Report and Financial Statements available to investors or more frequently at its discretion.

Continuing appointment of the Manager

The Board keeps the performance of MLCM, in its capacity as the Company’s Manager, under continual review. It has noted the good long-term performance record and commitment, quality and continuity of the team employed by the Manager. As a result, the Board concluded that it was in the best interests of the Shareholders as a whole that the appointment of the Manager on the agreed terms should continue.

Human rights, employee, social and community issues

The Board consists entirely of non-executive Directors. The Company has no employees and day-to-day management of the business is delegated to the Manager and other service providers. As an investment trust, the Company has no direct impact on the community or the environment, and as such has no human rights, social or community policies. In carrying out its investment activities and in relationships with suppliers, the Company aims to conduct itself responsibly, ethically and fairly. Further details of the Environmental, Social and Governance policy can be found in the Statement of Corporate Governance in the full Annual Report. Details of the Company’s Board composition and related diversity considerations can be found in the Statement of Corporate Governance in the full Annual Report.

Gender diversity

At 31 July 2019 and throughout the majority of the year under review, the Board comprised three male Directors. From 29 October 2018 to 15 January 2019, the Board comprised four male Directors. As stated in the Statement of Corporate Governance, the appointment of any new Director is made on the basis of merit.


This Strategic Report has been approved by the Board and signed on its behalf by:

David Harris

24 September 2019


David Harris (Chairman of the Board Committee and member of the Audit Committee)
Brett Miller
Daniel Wright (Chairman of the Audit Committee and Senior Independent Director)

All the Directors are non-executive. Mr Harris and Mr Wright are independent of the Company’s Manager.


Share capital

At 31 July 2019, the Company’s issued Share capital comprised 29,363,930 Ordinary Shares of 25 pence each, of which none were held in Treasury.

At general meetings of the Company, Ordinary Shareholders are entitled to one vote on a show of hands and on a poll, to one vote for every Ordinary Share held. Shares held in Treasury do not carry voting rights.

In circumstances where Chapter 11 of the Listing Rules would require a proposed transaction to be approved by Shareholders, the controlling Shareholder (see the full Annual Report for further details) shall not vote its Shares on that resolution. In addition, any Director of the Company appointed MMIC, the controlling Shareholder, shall not vote on any matter where conflicted and the Directors will act independently from MMIC and have due regard to their fiduciary duties.

Issue of Shares

At the 2019 Annual General Meeting, Shareholders approved the Board’s proposal to authorise the Company to allot Ordinary Shares up to an aggregate nominal amount of £2,095,418. In addition, the Directors were authorised to issue shares up to an aggregate nominal value of £628,625 on a non-pre-emptive basis.

In addition to this authority, at the General Meeting held on 15 January 2019, Shareholders approved the Board’s proposal to authorise the Company to allot further Ordinary Shares up to an aggregate nominal amount of £1,250,964.50.

As detailed in the 2018 Annual Report, the Company announced on 12 September 2018 that MMIC had subscribed for 673,034 new Ordinary Shares of 25 pence each at 542.30 pence per Share (market price on 12 September 2018: 509.00 pence per share). These Shares were admitted to trading on the London Stock Exchange on 18 September 2018.

Purchase of Shares

At the 2019 Annual General Meeting, Shareholders approved the Board’s proposal to authorise the Company to acquire up to 14.99% of its issued Share capital (excluding Treasury Shares) amounting to 3,769,238 Shares.

The Company did not purchase any of its own Shares during the year or since the year end.

Sale of Shares from Treasury

At the 2019 Annual General Meeting, Shareholders approved the Board’s proposal to authorise the Company to waive pre-emption rights in respect of Treasury Shares up to an aggregate amount of £628,625 and to permit the allotment or sale of Shares from Treasury at a discount to NAV.

No shares were held in Treasury and no shares were sold from Treasury during the year. As at the date of this report, no shares were held in Treasury.

Going concern

The Directors consider that it is appropriate to adopt the going concern basis in preparing the Financial Statements. After making enquiries, and bearing in mind the nature of the Company’s business and assets, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. In arriving at this conclusion, the Directors have considered the liquidity of the portfolio and the Company’s ability to meet obligations as they fall due for a period of at least 12 months from the date that these Financial Statements were approved.

Cashflow projections have been reviewed and show that the Company has sufficient funds to meet both its contracted expenditure and its discretionary cash outflows in the form of the dividend policy.

Viability statement

The Directors have assessed the prospects of the Company over a five-year period. The Directors consider five years to be a reasonable time horizon to consider the continuing viability of the Company, however they also consider viability for the longer-term foreseeable future.

In their assessment of the viability of the Company, the Directors have considered each of the Company’s principal risks and uncertainties as set out in the Strategic Report above and in particular, have considered the potential impact of a significant fall in global equity markets on the value of the Company’s investment portfolio overall. The Directors have also considered the Company’s income and expenditure projections and the fact that the Company’s investments mainly comprise readily realisable securities which could be sold to meet funding requirements if necessary. On that basis, the Board considers that five years is an appropriate time period to assess continuing viability of the Company.

In forming their assessment of viability, the Directors have also considered:

• internal processes for monitoring costs;

• expected levels of investment income;

• the performance of the Manager;

• portfolio risk profile;

• liquidity risk;

• gearing limits;

• counterparty exposure; and

• financial controls and procedures operated by the Company.

Based upon these considerations, the Directors have concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the five-year period.


The Directors are responsible for preparing the Company’s Annual Report and Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Financial Statements for each financial period. Under that law, they have elected to prepare the Financial Statements in accordance with International Financial Reporting Standards (“IFRS”). Under Company law, the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing the Financial Statements, the Directors are required to:

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy, at any time, the financial position of the Company and to enable them to ensure that the Financial Statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors’ Remuneration Report and Corporate Governance Statement that comply with that law and those regulations, and ensuring that the Annual Report includes information required by the Listing Rules and Disclosure Guidance and Transparency Rules of the FCA.

The Financial Statements are published on the Company’s website,, which is maintained on behalf of the Company by the Manager. The Manager has agreed to maintain, host, manage and operate the Company’s website and to ensure that it is accurate and up-to-date and operated in accordance with applicable law. The work carried out by the Auditor does not involve consideration of the maintenance and integrity of this website and accordingly, the Auditor accepts no responsibility for any changes that have occurred to the Financial Statements since they were initially presented on the website. Visitors to the website need to be aware that legislation in the United Kingdom covering the preparation and dissemination of the Financial Statements may differ from legislation in their jurisdiction.

We confirm that to the best of our knowledge:

i.   the Financial Statements, prepared in accordance with the IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and return of the Company; and

ii.  the Annual Report includes a fair review of the development and performance of the business and position of the Company, together with a description of the principal risks and uncertainties that it faces.

The Directors consider that the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for Shareholders to assess the Company’s position and performance, strategy and business model and strategy.

On behalf of the Board
David Harris


24 September 2019


The financial information set out below does not constitute the Company’s statutory accounts for the years ended 31 July 2019 and 31 July 2018 but is derived from those accounts. Statutory accounts for the year ended 31 July 2018 have been delivered to the Registrar of Companies and statutory accounts for the year ended 31 July 2019 will be delivered to the Registrar of Companies in due course. The Auditor has reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditor’s report can be found in the Company’s full Annual Report at


For the year ended 31 July 2019

2019 2018

Capital  £’000  Total 
Gains on investments at fair value through profit or loss




Investment income 2 749  749  767  767 
Gross return 749  17,777  18,526 767  27,587  28,354 
Management fee 3 (1,115) (1,115) (695) (695)
Other operating expenses 4 (406) (406) (434) (1) (435)
Total expenses (1,521) - (1,521) (1,129) (1) (1,130)
Return before finance costs and tax





Finance costs 5 (37) (1,020) (1,057) (45) (329) (374)
Return on ordinary activities before tax





Taxation 6 (48) (48) (58) (58)
Return on ordinary activities after tax (857) 16,757   15,900  (465)  27,257  26,792 
pence  pence  pence  pence  pence  pence 
Return per Ordinary Share Basic and fully diluted 8






The total column of this statement is the Income Statement of the Company prepared in accordance with IFRS, as adopted by the European Union. The supplementary revenue and capital columns are presented in accordance with the Statement of Recommended Practice issued by the AIC (“AIC SORP”).

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year.

There is no other comprehensive income, and therefore the return for the year after tax is also the total comprehensive income.

The notes below form part of these Financial Statements.


For the year ended 31 July 2019


Balance at 1 August 2018 6,118 45,606 56,608  22,056  130,388 
Changes in equity for 2019
Total comprehensive income/(loss) - - 16,757  (857) 15,900 
Dividends paid 7 - - (3,911) (3,911)
Shares issued 14 1,223  23,381 24,604 
Balance at 31 July 2019 7,341 68,987 73,365  17,288  166,981 
Balance at 1 August 2017 5,614 35,865 (984) 29,351   24,815  94,661 
Changes in equity for 2018
Total comprehensive income/(loss) - - 27,257  (465)   26,792 
Dividends paid 7 - - (2,294)   (2,294)
Share sales from treasury 14 - 617 984  -    1,601 
Shares issued 14 504 9,124 -    9,628 
Balance at 31 July 2018 6,118 45,606 56,608  22,056    130,388 

* Within the balance of the capital reserve, £13,335,000 relates to realised gains (2018: £8,378,000) and is distributable by way of a dividend. The remaining £60,030,000 relates to unrealised gains and losses on financial instruments (2018: £48,230,000) and is non-distributable.
** Fully distributable by way of a dividend.
The notes below form part of these Financial Statements.


As at 31 July 2019

2019  2018 
Notes £’000  £’000 
Non-current assets
Investments at fair value through profit or loss 9 132,059  102,204 
Current assets
Unrealised derivative assets 13 8,887  4,123 
Trade and other receivables 10 137  31 
Cash and cash equivalents 11 32,880  27,858 
41,904  32,012 
Current liabilities
Unrealised derivative liabilities 13 (6,512) (3,332)
Trade and other payables 12 (470) (496)
(6,982) (3,828)
Net current assets 34,922  28,184 
Net assets 166,981  130,388 
Capital and reserves
Ordinary Share capital 14 7,341  6,118 
Share premium 68,987  45,606 
Capital reserve 73,365  56,608 
Retained earnings 17,288  22,056 
Total equity 166,981  130,388 
Basic and fully diluted net NAV per Ordinary Share 15 568.66p 532.81p

The Financial Statements were approved by the Board of Directors and authorised for issue on 24 September 2019 and are signed on its behalf by:

David Harris

Manchester and London Investment Trust Public Limited Company
Company Number: 01009550

The notes below form part of these Financial Statements.


For the year ended 31 July 2019

Cash flow from operating activities
Return on operating activities before tax 15,948  26,850 
Interest expense 1,057  374 
Gain on investments held at fair value through profit or loss (16,649) (27,240)
(Increase)/decrease in receivables (106) 60 
Increase in payables 34 
Tax paid (48) (54)
Derivative instruments cash flows (2,334) 2,656 
Net cash (used in)/generated from operating activities (2,098) 2,646 

Cash flow from investing activities
Purchases of investments (57,456) (27,702)
Sales of investments 45,000  33,041 
Net cash (outflow)/inflow from investing activities (12,456) 5,339 

Cash flow from financing activities
Equity dividends paid (3,911) (2,294)
Resale of Ordinary Shares 1,483 
Issue of Shares 24,604  9,628 
Interest paid (1,117) (149)
Net cash generated in financing activities 19,576  8,668 

Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year 27,858  11,205 
Cash and cash equivalents at end of year 32,880  27,858 

The notes below form part of these Financial Statements.


For the year ended 31 July 2019

1. General information and accounting policies

Manchester and London Investment Trust plc is a public limited company incorporated in the UK and registered in England and Wales. The principal activity of the Company is that of an investment trust company within the meaning of Sections 1158/1159 of the Corporation Tax Act 2010 and its investment approach is detailed in the Strategic Report.

The Financial Statements of the Company have been prepared in accordance with IFRS as adopted by the European Union, which comprise standards and interpretations approved by the International Accounting Standards Board (“IASB”), and as applied in accordance with the provisions of the Companies Act 2006. The annual Financial Statements have also been prepared in accordance with the AIC SORP for the financial statements of investment trust companies and venture capital trusts, except to any extent where it is not consistent with the requirements of IFRS.

Basis of preparation

In order to better reflect the activities of an investment trust company and in accordance with the AIC SORP, supplementary information which analyses the Statement of Comprehensive Income between items of revenue and capital nature has been prepared alongside the Statement of Comprehensive Income.

The Financial Statements are presented in Sterling, which is the Company’s functional currency as the UK is the primary environment in which it operates, rounded to the nearest £’000s, except where otherwise indicated.

The Financial Statements have been prepared on the historical cost basis, except for the revaluation of certain investments that are measured at revalued amounts or fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.

Going concern

The Financial Statements have been prepared on the going concern basis, being a period of at least 12 months from the date these Financial Statements were approved, and on the basis that approval as an investment trust company will continue to be met.

The Directors have made an assessment of the Company’s ability to continue as a going concern and are satisfied that the Company has adequate resources to continue in operational existence for the foreseeable future. Furthermore, the Directors are not aware of any material uncertainties that may cast significant doubt upon the Company’s ability to continue as a going concern, having taken into account the liquidity of the Company’s investment portfolio and the Company’s financial position in respect of its cash flows, borrowing facilities and investment commitments (of which there are none of significance).

Segmental reporting

The Directors are of the opinion that the Company is engaged in a single segment of business, being investment business. The Company primarily invests in companies listed in the UK and other recognised international exchanges.

Accounting developments

In the current year, the Company has applied a number of amendments to IFRS, issued by the IASB mandatorily effective for an accounting period that begins on or after 1 January 2018. These include annual improvements to IFRS, changes in standards, legislative and regulatory amendments and changes in disclosure and presentation requirements.

The Company has also applied, with associated amendments, for the first time the following standards:

• IFRS 9 Financial Instruments;

• IFRS 15 Revenue from Contracts with Customers.

The assessment of the impact of the adoption of these standards is set out below:

IFRS 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets, and replaces the multiple classification and measurement models in IAS 39. The investments are managed and have their performance evaluated on a fair value basis, in accordance with the risk management and investment strategies of the Company consistent with prior periods. All investments and derivative financial instruments continue to be recognised at fair value through profit and loss.

The other receivables, prepayments and other payables are accounted for at amortised cost meeting the criteria for classification in IFRS 9 hence there has been no change in the accounting for these items and they continue to be measured at amortised cost. The new impairment model requires the recognition of impairment provisions based on expected credit losses rather than incurred credit losses as in the case of IAS 39 applicable to financial assets carried at amortised cost.

IFRS 15 establishes principles for recognising revenue from contracts with customers and enhances disclosures. The principles concern the nature, amount, timing and uncertainty of revenue arising from contracts with customers. Given the nature of the Company’s revenue streams from financial instruments, the provisions of this standard will not have a material impact. There are no changes in the methodology of accounting for investment income and other income is recognised when the amounts fall due, both consistent with prior periods.

The adoption of these standards have not had any material impact on these Financial Statements.

Critical accounting judgements and key sources of estimation uncertainty

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts in the financial statements. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The areas requiring the most significant judgement and estimation in the preparation of the Financial Statements are: valuation of derivatives; recognising and classifying unusual or special dividends received as either revenue or capital in nature; accounting for revenue and expenses in relation to CFD; and setting the level of dividends paid and proposed in satisfaction of both the Company’s long-term objective and its obligations to adhere to investment trust status rules under Section 1158 of the Corporation Tax Act 2010. The policies for these are set out in the notes to the Financial Statements.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future period if the revision affects both current and future periods.

There were no significant accounting estimates or critical accounting judgements in the year.


Investments are measured initially, and at subsequent reporting dates, at fair value, and derecognised at trade date where a purchase or sale is under a contract whose terms require delivery within the time-frame of the relevant market. For listed investments, this is deemed to be bid market prices or closing prices for Stock Exchange Electronic Trading Service – quotes and crosses (“SETSqx”).

Changes in fair value of investments are recognised in the Statement of Comprehensive Income as a capital item. On disposal, realised gains and losses are also recognised in the Statement of Comprehensive Income as capital items.

All investments for which fair value is measured or disclosed in the Financial Statements are categorised within the fair value hierarchy in note 9.

Financial instruments

The Company may use a variety of derivative instruments, including CFD, futures, forwards and options under master agreements with the Company’s derivative counterparties to enable the Company to gain long and short exposure on individual securities.

The Company recognises financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. Listed options and futures contracts are recognised at fair value through profit or loss valued by reference to the underlying market value of the corresponding security, traded prices and/or third party information.

Notional dividend income arising on long positions is recognised in the Statement of Comprehensive Income as revenue. Interest expenses on long positions are allocated to capital.

Unrealised changes to the value of securities in relation to derivatives are recognised in the Statement of Comprehensive Income as capital items.

Foreign currency

Transactions denominated in foreign currencies are converted to Sterling at the actual exchange rate as at the date of the transaction. Monetary assets and liabilities and non-monetary assets held at fair value denominated in foreign currencies at the year end are translated at the Statement of Financial Position date. Any gain or loss arising from a change in exchange rate subsequent to the date of the transaction is included as an exchange gain or loss in the capital reserve or the revenue account depending on whether the gain or loss is capital or revenue in nature.

Cash and cash equivalents

Cash comprises cash in hand, overdrafts and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value.

For the purposes of the Statement of Financial Position and the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts when applicable.

Trade receivables, trade payables and short-term borrowings

Trade receivables, trade payables and short-term borrowings are measured at amortised cost.

Revenue recognition

Revenue is recognised when it is probable that economic benefits associated with a transaction will flow to the Company and the revenue can be reliably measured.

Dividends from overseas companies are shown gross of any non-recoverable withholding taxes which are disclosed separately in the Statement of Comprehensive Income.

Dividends receivable on quoted equity shares are taken to revenue on an ex-dividend basis. Dividends receivable on equity shares where no ex-dividend date is quoted are brought into account when the Company’s right to receive payment is established. Fixed returns on non-equity shares are recognised on a time-apportioned basis using the effective interest method.

Special dividends are taken to revenue or capital account depending on their nature. In deciding whether a dividend should be regarded as a capital or revenue receipt, the Board reviews all relevant information as to the reasons for the sources of the dividend on a case-by-case basis.

When the Company has elected to receive scrip dividends in the form of additional shares rather than in cash, the amount of the cash dividend forgone is recognised as income. Any excess in the value of the cash dividend is recognised in the capital column.

Other investment income includes gains and losses on the trading of shares, equity swaps and futures, net of commissions, interest and other costs.

All other income is accounted for on a time-apportioned basis and recognised in the Statement of Comprehensive Income.


All expenses are accounted for on an accruals basis and are charged to revenue. All other administrative expenses are charged through the revenue column in the Statement of Comprehensive Income.

Expenses incurred in issuing or the buyback of Shares to be held in Treasury are charged to the share premium account.

Finance costs

Finance costs are accounted for on an accruals basis.

Financing charged by the Prime Brokers on open long positions are allocated to capital, with other finance costs being allocated to revenue.


The charge for taxation is based on the net revenue for the year and any deferred tax.

Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amount for financial reporting purposes at the reporting date. Deferred tax assets are only recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of timing differences can be deducted. In line with recommendations of the AIC SORP, the allocation method used to calculate the tax relief on expenses charged to capital is the “marginal” basis. Under this basis, if taxable income is capable of being offset entirely by expenses charged through the revenue account, then no tax relief is transferred to the capital account.

No taxation liability arises on gains from sales of fixed asset investments by the Company by virtue of its investment trust status. However, the net revenue (excluding investment income) accruing to the Company is liable to corporation tax at prevailing rates.

Dividends payable to Shareholders

Dividends to Shareholders are recognised as a liability in the period in which they are approved and are taken to the Statement of Changes in Equity. Dividends declared and approved by the Company after the Statement of Financial Position date have not been recognised as a liability of the Company at the Statement of Financial Position date.

Ordinary Share capital

Nominal value of total Ordinary Shares issued.

Shares held in Treasury

Consideration paid for the purchase of Shares held in Treasury.

Share premium

The Share premium account represents the accumulated premium paid for Shares issued in previous periods above their nominal value less issue expenses. This is a reserve forming part of the non-distributable reserves. The following items are taken to this reserve:

• costs associated with the issue of equity;

• premium on the issue of Shares; and

• premium on the sales of Shares held in Treasury over the market value.

Capital reserve

The following are taken to capital reserve:

• gains and losses on the realisation of investments;

• increases and decreases in the valuation of the investments held at the year end;

• cost of share buy backs;

• exchange differences of a capital nature; and

• expenses, together with the related taxation effect, allocated to this reserve in accordance with the above policies.

Retained earnings

The revenue reserve represents accumulated profits and losses and any surplus profits. The surplus accumulated profits are distributable by way of dividends.

2. Income

Dividends from listed investments 301 639
Interest 448 128
749 767

3. Management fee

2019 2018
£’000 £’000
Base fee 704 585
Performance fee 352 78
Risk management and valuation fee 59 32

                                                                                                           1,115                         695

Prior to the appointment of MLCM as AIFM on 17 January 2018, the annual fee payable to the Manager was 0.5% of the Company’s NAV, payable quarterly in arrears. Subsequent to the appointment as the AIFM, an additional Risk Management and Valuation fee equating to £59,000 on an annualised basis is charged to the Company.

In May 2018, the fee arrangement was revised. Under the new agreement, the fee payable to the Manager is equal to 0.5% per annum of the Company’s NAV (the “Base Fee”), calculated as at the last business day of each calendar month (the “Calculation Date”). An uplift of 0.25% of the NAV will be applied to the fee, should the performance of the Company over the 36-month period to the Calculation Date be above that of the Company’s benchmark. The Manager is also reimbursed any expenses incurred by it on behalf of the Company.

The fee is not subject to VAT. Transactions with the Manager during the year are disclosed in note 17.

The management fee is chargeable to revenue.

4. Other operating expenses

2019 2018
Revenue £’000 Capital £0’00 Revenue
Capital £’000
Directors’ fees 58 - 51 -
Auditors’ remuneration 35 - 35 -
Registrar fees 26 - 41 -
Depositary fees 51 - 31 -
Other expenses 236 - 276 1
406 - 434 1
Fees payable to the Company’s Auditor for the audit of the Company Financial Statements 35 -

35 - 35 -

Other operating expenses include irrecoverable VAT where appropriate.

No non-audit services were provided by Deloitte LLP in the year to 31 July 2019.

5. Finance costs

2019 2018
£’000 £’000
Charged to revenue 37 45
Charged to capital 1,020 329
1,057 374

6. Taxation

2019 2018
Capital  £’000  Total 
Capital £’000  Total 
Current tax
Overseas tax not recoverable 48  48  58  58 
48  48  58  58 
The charge for the year can be reconciled to the profit per the Statement of Comprehensive Income as follows:
Profit/(loss) before tax (809) 16,757  15,948  (407) 27,257  26,850 
Tax at the UK corporation tax rate of 19% (2018: 19%) (154) 3,184  3,030 


Tax effect of non-taxable dividends/unrealised profits (4) (4)

Income not subject to UK corporation tax (69) (69)

Profits on investment appreciation not taxable (3,378) (3,378)


Unrelieved tax losses and other deductions arising in the year 227  194  421 


Overseas tax not recoverable 48  48  58  58 
Total tax charge 48  48  58  58 

At 31 July 2019, there was an unrecognised deferred tax asset of £807,000 (2018: £604,000). This deferred tax asset relates to surplus management expenses. It is unlikely that the Company will generate sufficient taxable profits in the foreseeable future to recover these amounts and therefore the asset has not been recognised in the year, or in prior years.

As at 31 July 2019, the Company had unrelieved capital losses of £10,349,000 (2018: £9,330,000). There is therefore, a related unrecognised deferred tax asset of £1,759,000 (2018: £1,586,000). These capital losses can only be utilised to the extent that the Company does not qualify as an investment trust in the future and, as such, the asset has not been recognised.

7. Dividends

Amounts recognised as distributions to equity holders in the period:
Final ordinary dividend for the year ended 31 July 2018 of 8.0p (2017: 1.76p) per Share 2,209 395
Final special dividend for the year ended 31 July 2018 of 0p (2017: 4.24p) per Share - 952
Interim ordinary dividend for the year ended 31 July 2019 of 6.0p (2018: 4.0p) per Share 1,702 947
3,911 2,294

The Directors are proposing a final ordinary dividend of 8.0p for the financial year 2019. These proposed dividends have been excluded as a liability in these Financial Statements in accordance with IFRS.

We also set out below the total dividend payable in respect of the financial year, which is the basis on which the requirements of Section 1158 of the Corporation Tax Act 2010 are considered.

Interim ordinary dividend for the year ended 31 July 2019 of 6.0p
(2018: 4.0p) per Share
1,702 947
Proposed final ordinary dividend for the year ended 31 July 2019 of 8.0p (2018: 8.0p) per Share* 2,349 2,209
4,051 3,156

*Based on the total Shares eligible to receive dividend as at 13 September 2019.

8. Return per Ordinary Share

2019 2018
Net Return 
Ordinary Shares Total 
Net Return
Ordinary Shares Total 
Basic and fully diluted return:
Net revenue return after taxation (857) 27,061,801 (3.17) (465) 23,242,213 (2.00)
Net capital return after taxation 16,757  27,061,801 61.92  27,257  23,242,213 117.27 
Total 15,900  27,061,801 58.75  26,792  23,242,213 115.27 

Basic revenue, capital and total return per Share is based on the net revenue, capital and total return for the period and on the weighted average number of Ordinary Shares in issue (excluding those Shares held in Treasury per note 14) of 27,061,801 (2018: 23,242,213).

9. Investments at fair value through profit or loss

Listed investments 132,023 101,983
Unlisted investments 36 221
132,059 102,204


2019 2018
Analysis of investment portfolio movements
Opening cost at 1 August 57,033  100  57,133  53,660
Opening unrealised appreciation at
1 August
44,950  121  45,071  22,446
Opening fair value at 1 August 101,983  221  102,204  76,106
Movements in the year
Purchases at cost 57,456  57,456  27,702
Sales proceeds (45,000) (45,000) (28,671)
Realised profit on sales 9,211  9,211  4,442
Increase/(decrease) in unrealised appreciation 8,373  (185) 8,188  22,625
Closing fair value at 31 July 132,023  36  132,059  102,204
Closing cost at 31 July 78,700  100  78,800  57,133
Closing unrealised appreciation at
31 July
53,323  (64) 53,259  45,071
Closing fair value at 31 July 132,023  36  132,059  102,204

Fair value hierarchy

Financial assets of the Company are carried in the Statement of Financial Position at fair value. The fair value is the amount at which the asset could be sold or the liability transferred in an orderly transaction between market participants, at the measurement date, other than a forced or liquidation sale. The Company measures fair values using the following hierarchy that reflects the significance of the inputs used in making the measurements.

Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant assets as follows:

The tables below set out fair value measurements of financial instruments as at the year end, by their category in the fair value hierarchy into which the fair value measurement is categorised.

Financial assets at fair value through profit or loss at 31 July 2019

Level 1 Level 2 Level 3 Total
£’000 £’000 £’000 £’000
Equity investments 132,023 - - 132,023
Debentures - 36 - 36
Derivatives – assets - 8,887 - 8,887
Total 132,023 8,923 - 140,946

Financial assets at fair value through profit or loss at 31 July 2018

Level 1 Level 2 Level 3 Total
£’000 £’000 £’000 £’000
Equity investments 101,983 - - 101,983
Debentures - 221 - 221
Derivatives – assets - 4,123 - 4,123
Total 101,983 4,344 - 106,327

There have been no transfers during the year between Level 1 and 2 fair value measurements and no transfers into or out of Level 3 fair value measurement.

The fair value of the Level 2 debentures is based on the average of the latest available trades using a valuation technique commonly used by market participants making the maximum use of market inputs.

The fair value of Level 2 derivatives are determined by the input of the latest traded price of the related underlying investment.

Financial liabilities at 31 July 2019

Level 1 Level 2 Level 3 Total
£’000 £’000 £’000 £’000
Derivatives - liabilities - 6,512 - 6,512

Financial liabilities at 31 July 2018

Level 1 Level 2 Level 3 Total
£’000 £’000 £’000 £’000
Derivatives - liabilities - 3,332 - 3,332

Transaction costs

During the year, the Company incurred transaction costs of £212,000 (2018: £68,000) on the purchase and disposal of investments.

Analysis of capital gains and losses

2019  2018 
£’000  £’000 
Gains on sales investments 9,211  4,442 
Investment holding gains 8,188  22,625 
Realised (losses)/gains on derivative instruments (4,363) 1,535 
Unrealised gains/(losses) on derivative instruments 3,612  (1,363)
Realised gains on currency balances and trade settlements 1,129  348 
17,777  27,587 

10. Trade and other receivables

Dividend receivables 19 3
Prepayments 118 28
137 31

11. Cash and cash equivalents

Cash and cash equivalents 32,880 27,858
32,880 27,858

Details of what comprises cash and cash equivalents can be found in note 1.

12. Trade and other payables

Trade payables 253 327
Accruals 217 169
470 496

13. Derivatives

The Company may use a variety of derivative contracts, including equity swaps, futures, forwards and options under master agreements with the Company’s derivative counterparties to enable the Company to gain long and short exposure on individual securities. Derivatives are valued by reference to the underlying market value of the corresponding security.

The net fair value of derivatives at 31 July 2019 was a positive £2,375,000 (2018: positive £791,000). The corresponding gross exposure on equity swaps as at 31 July 2019 was £78,314,000 (2018: £38,020,000). The total exposure of negative equity swaps was £21,751,000 (2018: £6,034,000). The net marked to market futures and options total value as at 31 July 2019 was negative £4,491,000 (2018: negative £3,000,000).

Unrealised derivative assets 8,887 4,123
Current liabilities
Unrealised derivative liabilities 6,512 3,332

The above liabilities are secured against assets held with the Prime Brokers.

The levels of collateral as at 31 July 2019 were:

• Morgan Stanley & Co. International plc £69.7m (2018: £50.9m)

• JP Morgan Chase & Co. £97.2m (2018: £79.6m)

The assets listed above are covered by the terms and conditions described by the Prime Brokerage agreements between the Company and the respective Prime Brokers above.

14. Share capital

2019 2018
Ordinary Share capital Number 
£’000 Number 
Ordinary Shares of 25p each issued and fully paid
Balance as at 1 August 24,472 6,118 22,457  5,614
Shares issued 4,892 1,223 2,015  504
Balance as at 31 July 29,364 7,341 24,472  6,118

During the year, the Company issued 4,891,945 Ordinary Shares of 25p each to the market (2018: 2,014,943) for a net consideration (after costs) of £24,604,000 (2018: £9,628,000), generating a share premium of £23,381,000 (2018: £9,124,000). This represented 20.0% of the Shares in issue as at 31 July 2018 (2018: this represented 9.0% of the Shares in issue as at 31 July 2017).

2019 2018
Share held in Treasury Number 
£’000 Number 
Balance as at 1 August - - 394  984 
Shares sold during the year - - (394) (984)
Balance as at 31 July - - - -

The Company did not buy or sell any of its Ordinary Shares during the year.

15. NAV per Share

NAV per Share Net assets
Ordinary Shares: basic and fully diluted 568.66  532.81 166,981 130,388

The basic NAV per Ordinary Share is based on net assets at the year end and 29,363,930 (2018: 24,471,985) Ordinary Shares in issue, adjusted for any Shares held in Treasury.

16. Risks – investments, financial instruments and other risks

Investment objective and policy

The Company’s investment objective and policy are detailed above.

The investing activities in pursuit of its investment objective involve certain inherent risks.

The Company’s financial instruments can comprise:

• shares and debt securities held in accordance with the Company’s investment objective and policy;

• derivative instruments for trading and investment purposes;

• cash, liquid resources and short-term debtors and creditors that arise from its operations; and

• current asset investments and trading.


The risks identified arising from the Company’s financial instruments are market risk (which comprises market price risk and interest rate risk), liquidity risk and credit and counterparty risk. The Company may enter into derivative contracts to manage risk. The Board reviews and agrees policies for managing each of these risks, which are summarised below.

These policies remained unchanged since the beginning of the accounting period.

Market risk

Market risk arises mainly from uncertainty about future prices of financial instruments used in the Company’s business. It represents the potential loss the Company might suffer through holding market positions by way of price movements, interest rate movements and exchange rate movements. The Company assesses the exposure to market risk when making each investment decision and these risks are monitored by the Manager on a regular basis and the Board at quarterly meetings with the Manager.

Details of the long equity exposures held at 31 July 2019 are shown above.

If the price of these investments and equity swaps had increased by 3% at the reporting date with all other variables remaining constant, the capital return in the Statement of Comprehensive Income and the net assets attributable to equity holders of the Company would increase by £6,311,000.

A 3% decrease in share prices would have resulted in an equal and opposite effect of £6,311,000, on the basis that all other variables remain constant. This level of change is considered to be reasonable based on observation of current market conditions.

At the year end, the Company’s direct equity exposure to market risk was as follows:

2019 2018
£’000 £’000
Equity long exposures
Investments held in equity form 132,059 102,204
Long exposure held in equity swaps 78,314 38,020
210,373 140,224

Interest rate risk

Interest rate risk arises from uncertainty over the interest rates charged by financial institutions. It represents the potential increased costs of financing for the Company. The Manager actively monitors interest rates and the Company’s ability to meet its financing requirements throughout the year and reports to the Board.

Liquidity risk

Liquidity risk reflects the risk that the Company will have insufficient funds to meet its financial obligations as they fall due. The Directors have minimised liquidity risk by investing in a portfolio of quoted companies that are readily realisable.

The Company's uninvested funds are held almost entirely with the Prime Brokers or on interest-bearing deposits with UK banking institutions.

As at 31 July 2019, the financial liabilities comprised:

Unrealised derivative liabilities 6,512 3,332
Trade payables and accruals 470 496
6,982 3,828

The above liabilities are stated at amortised cost or approximate fair value.

The Company manages liquidity risk through constant monitoring of the Company’s gearing position to ensure the Company is able to satisfy any and all debts within the agreed credit terms.

Currency rate risk

Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. If Sterling had strengthened by 5% against all other currencies at the reporting date, with all other variables remaining constant, the total return in the Statement of Comprehensive Income and the net assets attributable to equity holders of the Company would have increased by £7,329,000. If the Sterling had weakened by 5% against all currencies, there would have been an equal and opposite effect. This level of change is considered to be reasonable based on observation of current market conditions.

The Company’s material foreign currency exposures are laid out below.

Sterling  US Dollar  Euro  Hong Kong 
Other  Total 
£’000  £’000  £’000  £’000  £’000  £’000 
Equity exposure 8,145  123,914  132,059 
Derivative assets 5,950  673  2,258 8,887 
Derivative liabilities (292) (5,868) (84) (268) (6,512)
Cash* 12,937  21,045  1,251  (2,179) (174) 32,880 
Other net assets (386) 38  14  (333)
20,410  145,079  1,854  (188) (174) 166,981 

* Includes balances held in margin accounts relating to equity swaps.

The Company constantly monitors currency rate risk to ensure balances, wherever possible, are translated at rates favourable to the Company.

Credit and counterparty risk

Credit risk is the risk of financial loss to the Company if the contractual party to a financial instrument fails to meet its contractual obligations.

The maximum exposure to credit risk as at 31 July 2019 was £41,904,000 (2018: £32,012,000). The calculation is based on the Company’s credit risk exposure as at 31 July 2019 and this may not be representative for the whole year.

The Company’s quoted investments are held on its behalf by the Prime Brokers. Bankruptcy or insolvency of the Prime Brokers may cause the Company’s rights with respect to securities held by the Prime Brokers to be delayed. The Manager and the Board monitor the Company’s risk and exposures.

Where the Manager makes an investment in a bond, corporate or otherwise, the credit worthiness of the issuer is taken into account so as to minimise the risk to the Company of default. The credit standing and other associated risks are reviewed by the Manager.

Investment transactions are carried out with a number of brokers where creditworthiness is reviewed by the Manager.

Cash is only held at banks that have been identified by the Board as reputable and of high credit quality. The Manager reviews these on a continual basis with regular updates to the Board.

Capital management policies

The structure of the Company’s capital is noted in the Statement of Changes in Equity and managed in accordance with the investment objective and policy set out in the Strategic Report.

The Company’s capital management objectives are to maximise the return to Shareholders while maintaining a capital base to allow the Company to operate effectively and meet obligations as they fall due.

The Board, with the assistance of the Manager, monitors and reviews the capital on an ongoing basis.

The Company is subject to externally imposed capital requirements:

These requirements are unchanged since last year and the Company has complied with them at all times.

A sensitivity analysis has not been prepared for interest risk, as the Company is not materially exposed to interest rates.

17. Related party transactions

MLCM, a company controlled by Mark Sheppard, is the Manager and AIFM of the Company. Mr Sheppard is also a director of MMIC, which is the controlling Shareholder of the Company.

The Manager receives a monthly management fee for these services which in the year under review amounted to a total of £1,115,000 (2018: £695,000) excluding VAT. The balance owing to the Manager as at 31 July 2019 was £111,447 (2018: £88,000). Also payable to the Manager during the year were expenses incurred on behalf of the Company of £8,000 (2018: £18,000). There was no balance owing to MLCM at the year end for the recharge of expenses (2018: £nil).

Prior to the appointment of the AIFM on 17 January 2018, Midas Investment Management Limited (“Midas”), a company also controlled by Mr Sheppard, provided additional services to the Company. Fees charged by Midas included a monthly financial advisory fee and commissions on the purchase and sale of investments and the provision of the ISA and Savings schemes. No fees were charged by Midas in the current year (2018: £2,000).

During the year, MMIC subscribed for a further 4,891,945 Ordinary Shares of 25 Pence each. Total consideration for the subscriptions amounted to £24,604,000 of which the surplus of £23,381,000 (after associated costs) was recognised in the Share Premium account. A detailed breakdown of the subscriptions can be found in the Directors’ Report in the full Annual Report.

Details relating to the Directors’ emoluments are found in the Directors’ Remuneration Report in the full Annual Report.

20. Ultimate control

The ultimate controlling Shareholder throughout the year and the previous year was MMIC, a company incorporated in the UK and registered in England and Wales. This company was controlled throughout the year and the previous year by Mr M Sheppard and his immediate family.

A copy of the financial statements of MMIC can be obtained by writing to its company secretary at 12a Princess Gate Mews, London SW7 2PS.

21. Post Statement of Financial Position events

There were no other significant events since the end of the reporting period.


Active share

Active share is a measure of the percentage of stock holdings in a manager’s portfolio that differ from the comparative benchmark index. It is calculated by summing the absolute differences between benchmark and portfolio holdings’ weights, then dividing by two (to eliminate double counting). An active share of 100 indicates no overlap with the index and an active share of zero indicates a portfolio that tracks the index (when using leverage, maximum active share levels can exceed 100%).

Custodian and Prime Broker

The custodian is a financial institution that holds securities for safekeeping. Prime brokerage is the bundling of services by investment banks enabling the Company to borrow securities and cash in order to be able to invest on a netted basis and achieve an absolute return. The Prime Broker provides a centralised securities clearing facility for the Company so the Company’s collateral requirements are netted across all deals handled by the Prime Broker.


Gearing refers to the level of the Company’s debt to its equity capital. The Company may borrow money to invest in additional investments for its portfolio. If the Company’s assets grow, the Shareholders’ assets grow proportionately more because the debt remains the same. But if the value of the Company’s assets falls, the situation is reversed. Gearing can therefore enhance performance in rising markets but can adversely impact performance in falling markets.

Gearing represents borrowings at par less cash and cash equivalents (including any outstanding trade or foreign exchange settlements) expressed as a percentage of Shareholders’ funds.

Potential gearing is the Company’s borrowings expressed as a percentage of Shareholders’ funds.

Equity gearing is the Company’s borrowings adjusted for cash and bonds expressed as a percentage of Shareholders’ funds.


For the purposes of the AIFMD, leverage is any method which increases the Company’s exposure, including the borrowing of cash and the use of derivatives. It is expressed as a ratio between the Company’s exposure and its NAV and can be calculated on a gross and a commitment method. Under the gross method, exposure represents the sum of the Company’s positions after the deduction of Sterling cash balances, without taking into account any hedging and netting arrangements. Under the commitment method, exposure is calculated without the deduction of Sterling cash balances and after certain hedging and netting positions are offset against each other.

Net asset value (“NAV”)

The NAV is Shareholders’ funds expressed as an amount per individual Share. Shareholders’ funds are the total value of all the Company’s assets, at a current market value, having deducted all liabilities and prior charges at their par value (or at their asset value). The total NAV per Share is calculated by dividing the NAV by the number of Ordinary Shares in issue excluding Treasury Shares.


If the Share price is lower than the NAV per Share it is said to be trading at a discount. The size of the discount is calculated by subtracting the Share price from the NAV per Share and is usually expressed as a percentage of the NAV per Share. If the Share price is higher than the NAV per Share, this situation is called a premium.

Ongoing charges ratio

As recommended by the AIC in its guidance, ongoing charges are the Company’s annualised expenses (excluding finance costs and certain non-recurring items) of £1,162,000 expressed as a percentage of the average monthly net assets of the Company during the year of £140,840,000.

Total assets

Total assets include investments, cash, current assets and all other assets. An asset is an economic resource, being anything tangible or intangible that can be owned or controlled to produce value and to produce positive economic value. Assets represent the value of ownership that can be converted into cash. The total assets less all liabilities will be equivalent to total Shareholders’ funds.

Total return

Total return statistics enable the investor to make performance comparisons between investment trusts with different dividend policies. The total return measures the combined effect of any dividends paid, together with the rise or fall in the Share price or NAV. This is calculated by the movement in the NAV or Share price plus dividend income reinvested by the Company at the prevailing NAV or Share price.

NAV Total Return 31 July 2019 31 July 2018
Closing NAV per Share (p) 568.66 532.81
Total dividends paid in the year ended 31 July 2019 (2018) (p) 14.00 10.00
Adjusted closing NAV (p) 582.66 542.81 a
Opening NAV per Share (p) 532.81 429.05 b
NAV total return unadjusted (c=((a-b)/b)) (%) 6.73 24.18 c
NAV total return adjusted (%)* 9.80 26.87

* Based on NAV price movements and dividends reinvested at the relevant cum dividend NAV value during the period. Where the dividend is invested and the NAV value falls this will further reduce the return or, if it rises, any increase will be greater. The source is Bloomberg who have calculated the return on an industry comparative basis.


Notice is hereby given that the Annual General Meeting of Manchester and London Investment Trust plc will be held at the ICAEW, Members Room, Chartered Accountants’ Hall, One Moorgate Place, London EC2R 6EA on Tuesday 14 January 2020 at 11.45 am.

The notice of this meeting will be circulated to Shareholders with the full Annual Report and will also be available at


A copy of the Annual Report and Financial Statements and Notice of Annual General Meeting will be submitted shortly to the National Storage Mechanism (“NSM”) and will be available for inspection at the NSM, which is situated at



Neither the contents of the Company’s website nor the contents of any website accessible from hyperlinks on this announcement (or any other website) is incorporated into, or forms part of, this announcement.


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Annual Financial Report - RNS