Manchester&lon. Regulatory News (MNL)

Manchester & London Investment Trust Plc - Annual Financial Report

PR Newswire

London, September 28

MANCHESTER AND LONDON INVESTMENT TRUST PLC

(the “Company”)

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 JULY 2020

The full Annual Report and Financial Statements for the year ended 31 July 2020 can be found on the Company’s website at www.mlcapman.com/manchester-london-investment-trust-plc.

STRATEGIC REPORT

Financial Summary

 (i) NAV as at 31 July 2020 includes a net £39,894,000 increase in respect of new Shares issued in the year (2019: £24,604,000 increase).

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

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

* Based on total expenses, excluding finance costs and certain non-recurring items for the year and average monthly NAV.

** Ongoing charges is based on a base fee of £940,000 and a Risk & Valuation fee of £59,000 and excludes the variable fees of £470,000 (2019: £352,000) in accordance with AIC guidelines.

† See Glossary below.

CHAIRMAN’S STATEMENT

Results for the year ended 31 July 2020

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

Manchester and London Investment Trust plc (the “Company”)’s portfolio performance for the financial year under review has led to a NAV total return per Share of 12.8%* (2019: 9.8%*). The outperformance of the Company against our benchmark for the three years to 31 July 2020 on a total return basis now stands at 68.5%* (2019: 50.2%*).

At the year end, the Shares traded at 0.8% premium to their NAV per Share, compared to a discount of 5.4% in 2019.

Dividend

The Directors are proposing a final ordinary dividend of 7.0 pence per Share for the financial year 2020. Accordingly, on a per Share basis, the dividends proposed or paid out in respect of the 2020 financial year total 14.0 pence, including the 7.0 pence interim dividend paid in May 2020. These dividends represent a yield of 2.2% on the Share price as at the year-end (2019: 2.6%).

Board appointment and Annual General Meeting

The Board is delighted with the appointment of Sir James Waterlow as a Director of the Company on 17 August 2020. Our forty-eighth Annual General Meeting (“AGM”) will be held on Monday, 2 November 2020 at 12.00 noon at 12a Princes Gate Mews, London, SW7 2PS. Please do read further details on restrictions on attendance at this year’s AGM, which are contained within the AGM notice.

David Harris

Chairman

29 September 2020

* Source: Bloomberg, See Glossary below.

MANAGER’S REVIEW

Portfolio management

The portfolio delivered a 32.4%* outperformance against the benchmark driven by our sector positioning. This was despite a 7.6% increase in the value of Sterling against the US Dollar which acts as a headwind against performance.

The Total Return of the portfolio broken down by sector holdings in local currency (separating costs and foreign exchange) is shown below:

Source: Bloomberg.

Information Technology

The Information Technology sector delivered 56.3% of the NAV total return per Share.

Microsoft Corporation accounted for over half of this sector’s return. Other material positive performers included Adobe Inc, Salesforce.com Inc, Nvidia Corp, Mastercard Inc and Visa Inc.

Paypal Holdings Inc was the only material negative contributor (due to the timing of the disposal).

The portfolio’s weighting to this sector at the year end was 38.1% of the net assets (2019: 49.6%).

Communication Services

The Communication Services sector delivered roughly 39.3% of the NAV total return per share.

Material positive contributors included Alphabet Inc, Facebook Inc and Tencent Holdings Ltd.

The Walt Disney Co was the only material negative contributor (we sold this in March due to perceived greater COVID-19 risks).

The portfolio’s weighting to this sector at year end was 33.4% of the net assets (2019: 37.0%).

Consumer Discretionary

The Consumer discretionary sector delivered 59.4% of the NAV total return per share.

The material positive contributors in this sector were Alibaba Group Holding Ltd and Amazon.com Inc.

The only material negative contributor was Expedia Group Inc.

The portfolio’s weighting to this sector at year end was 29.8% of the net assets (2019: 33.1%).

Other (including funds, ETFs and beta hedges)

Other holdings delivered 19.6% of the NAV total return per Share.

We employed various sector and thematic index hedges during the year in an attempt to combat market volatility. Most of these market hedges were removed (at a profit) during the Q1 market fall.

Of the long fund and ETF holdings in this segment, the material positive contributors were the Morgan Stanley US SAAS Basket and Polar Capital Technology Trust Plc.

The portfolio’s weighting to this sector at year end was 5.9% of the net assets (2019: -8.2%).

Professional negligence liability risks

M & L Capital Management Limited (“MLCM”), the Manager of the Company, allocates additional own funds against professional liability risks and hence it no longer requires professional liability insurance.

M&L Capital Management Limited

Manager

29 September 2020

*Source: Bloomberg. See Glossary below.

Equity exposures and portfolio sector analysis

Equity exposures (longs)

As at 31 July 2020

* GICS – Global Industry Classification Standard.

** Including equity swap exposures as detailed in note 13.

Portfolio sector analysis

As at 31 July 2020

PRINCIPAL PORTFOLIO HOLDINGS

Amazon.com Inc. (“Amazon”)

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 2.7 billion monthly active users and has the second largest global online advertising revenue after Google.

Salesforce.com 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 company, 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 1.1 billion monthly active users.

Visa Inc. (“Visa”)

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

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.

Mastercard Inc. (“Mastercard”)

Mastercard is a leader in global digital payments. Together, Mastercard and Visa account for a dominant share of card transactions in the US and EU.

 Percentage of portfolio by holding at the year end*:

* Net of market value of options.

Investment record of the last ten years

* 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 2020 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.

Gearing

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.

General

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 line 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.

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 2020, the net revenue return attributable to Shareholders was negative £1,759,000 (2019: negative £857,000) and the net capital return attributable to Shareholders was £25,796,000 (2019: £16,757,000). Total Shareholders’ funds increased by 35% to £225,933,000 (2019: £166,981,000).

The dividends paid/proposed by the Board for 2019 and 2020 are set out below:

Subject to the approval of Shareholders at the forthcoming AGM, the proposed final ordinary dividend will be payable on 6 November 2020 to Shareholders on the register at the close of business on 16 October 2020. The ex-dividend date will be 15 October 2020.

Further details of the dividends paid in respect of the years ended 31 July 2020 and 31 July 2019 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.

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 emerging or new risks which may have arisen during the year, including those that would threaten the Company’s business model, future performance, solvency or liquidity. Whilst reviewing the principal risks and uncertainties, the Board was cognisant of the risks posed by the COVID-19 pandemic.

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 2020, 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 117.86% (2019: 125.98%) 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.

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 2020 amounted to £225,933,000 compared with £166,981,000 at 31 July 2019, an increase of 35%, whilst the fully diluted NAV per Share increased to 625.23p from 568.66p.

Net revenue return after taxation for the year was a negative £1,759,000 (2019: negative £857,000).

The quoted Share price during the period under review has ranged from a discount of 13.2% to a premium of 6.1%.

Ongoing charges, which are set out above, are 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 as well as the US elections 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 manages 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 Mr 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.

Remuneration

In the year to 31 July 2020, the total remuneration paid to the employees of the Manager was £429,000 (2019: £402,000), payable to an average employee number throughout the year of four (2019: three).

The management of MLCM is undertaken by Mr Mark Sheppard and Mr Richard Morgan, to whom a combined total of £347,000 (2019: £284,000) 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

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 2020 measured by the gross method was 187.9% and that measured by the commitment method was 100.8%.

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 2020. 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 is 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 and 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 2020 and throughout the majority of the year under review, the Board comprised three male Directors. Following Sir James Waterlow’s appointment on 17 August 2020 and to date of this report, 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. The appointment process of Sir Waterflow is explained in more detail in the Statement of Corporate Governance in the full Annual Report.

Approval

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

David Harris

Chairman

29 September 2020

DIRECTORS

David Harris (Chairman of the Board)

Brett Miller

Daniel Wright (Chairman of the Audit Committee and Senior Independent Director)

Sir James Waterlow

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

EXTRACTS FROM THE DIRECTORS’ REPORT

Share capital

At 31 July 2020, the Company’s issued Share capital comprised 36,135,738 Shares of 25 pence each, of which none were held in Treasury.

At general meetings of the Company, Shareholders are entitled to one vote on a show of hands and on a poll, to one vote for every 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 Annual General Meeting held on 14 January 2020, Shareholders approved the Board’s proposal to authorise the Company to allot Shares up to an aggregate nominal amount of £2,446,994. In addition, the Directors were authorised to issue shares up to an aggregate nominal value of £734,098 on a non-pre-emptive basis. This authority is due to expire at the Company’s forthcoming AGM on 2 November 2020.

In addition to this authority, at the General Meeting held on 16 July 2020, Shareholders approved the Board’s proposal to authorise the Company to allot further Shares up to an aggregate nominal amount of £2,275,000 on a non-pre-emptive basis. This authority expired on 30 July 2020, being 10 business days from the passing of the resolution.

During the period, MMIC subscribed to Shares on six occasions. The details of all subscriptions by and allotments to MMIC during the period are listed below.

At the placing on 22 July 2020, a further 60,000 Shares were subscribed for by Winterflood Securities Limited and 468,000 Shares by Singer Nominees Limited, both for a price of 646.5 pence per Share. These Shares were admitted to trading on the same date as the Shares allotted to MMIC, being 28 July 2020. All Share issues detailed above were made at a price equal to the latest reported NAV as at the day of the issue.

As at the date of this report, the total voting rights were 36,135,738.

Purchase of Shares

At the Annual General Meeting held on 14 January 2020, 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. This authority is due to expire at the Company’s forthcoming AGM on 2 November 2020.

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 Annual General Meeting held on 14 January 2020, 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 £734,098 and to permit the allotment or sale of Shares from Treasury at a discount to NAV. This authority is due to expire at the Company’s forthcoming AGM on 2 November 2020.

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 are 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 considering 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. In making this assessment, the Directors have considered any likely impact of the current COVID-19 pandemic on the Company, its operations and the investment portfolio.

Cashflow projections have been reviewed provide evidence 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.

The Board has reviewed the influence of the COVID-19 pandemic on its service providers and is satisfied with the ongoing services provided to 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.

By order of the Board

Link Company Matters Limited

Company Secretary

29 September 2020

STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RELATION TO THE ANNUAL REPORT AND FINANCIAL STATEMENTS

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, www.mlcapman.com/manchester-london-investment-trust-plc, 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

Chairman

29 September 2020

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company’s statutory accounts for the years ended 31 July 2020 and 31 July 2019 but is derived from those accounts. Statutory accounts for the year ended 31 July 2019 have been delivered to the Registrar of Companies and statutory accounts for the year ended 31 July 2020 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 on page 50 and further of the Company’s full Annual Report at www.mlcapman.com/manchester-london-investment-trust-plc.

STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 July 2020

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.

STATEMENT OF CHANGES IN EQUITY

For the year ended 31 July 2020

* Within the balance of the capital reserve, £7,138,000 relates to realised gains (2019: £13,335,000) and is distributable by way of a dividend. The remaining £92,023,000 relates to unrealised gains and losses on financial instruments (2019: £60,030,000) and is non-distributable.

** Fully distributable by way of a dividend.

STATEMENT OF FINANCIAL POSITION

As at 31 July 2020

The Financial Statements were approved by the Board of Directors and authorised for issue on 29 September 2020 and are signed on its behalf by:

David Harris

Chairman

Manchester and London Investment Trust Public Limited Company

Company Number: 01009550

The notes below form part of these Financial Statements.

STATEMENT OF CASH FLOWS

For the year ended 31 July 2020

The notes below form part of these Financial Statements.

NOTES FORMING PART OF THE FINANCIAL STATEMENTS

For the year ended 31 July 2020

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 a going concern basis 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 the resources to continue in business for the foreseeable future, being a period of at least 12 months from the date these financial statements were approved. In making the assessment, the Directors have considered the likely impacts of the current COVID-19 pandemic on the Company, its operations and the investment portfolio.

The Directors noted that the cash balance exceeds any short term liabilities, the Company holds a portfolio of liquid listed investments and is able to meet the obligations of the Company as they fall due. The surplus cash enables the Company to meet any funding requirements and finance future additional investments. The Company is a closed end fund, where assets are not required to be liquidated to meet day to day redemptions. The Directors have completed stress tests assessing the impact of changes in market value and income with associated cashflows. Whilst the economic future is uncertain, and it is possible the Company could experience further reductions in income and/or market value the Directors believe that this should not be to a level which would threaten the Company’s ability to continue as a going concern.

The Directors, the Manager and other service providers have put in place contingency plans to minimise disruption. 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). Therefore, the financial statements have been prepared on the going concern basis.

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 amendments to IFRS, issued by the IASB. These include annual improvements to IFRS, legislative and regulatory amendments, changes in disclosure and presentation requirements.

The adoption of the changes to accounting standards has had no material impact on the current or prior years’ financial statements. The Company held no leases during the current or prior years.

There are amendments to IFRS, legislation and regulatory requirements that will apply from 1 August 2020. These will not impact the financial statements other than requiring changes in disclosure and presentation amendments.

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; 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

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 timeframe 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.

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

Expenses

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.

Taxation

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.

Share capital

Nominal value of total 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

3. Management fee

The Management 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”), and is paid monthly in arrears. 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. Should the performance of the Company over the 36-month period to the Calculation Date be below that of the Company’s benchmark, the fee will be reduced to the lower adjusted amount of 0.25% of the NAV. The Manager is also reimbursed any expenses incurred by it on behalf of the Company. In addition, a Risk Management and Valuation fee equating to £59,000 on an annualised basis is charged by the AIFM. The Manager is also reimbursed any expenses incurred by it on behalf of the Company.

The fee is not subject to Value Added Tax (“VAT”). Transactions with the Manager during the year are disclosed in note 17.

The management fee is chargeable to revenue.

4. Other operating expenses

Other operating expenses include irrecoverable VAT where appropriate.

No non-audit services were provided by Deloitte LLP in the year to 31 July 2020.

5. Finance costs

6. Taxation

As at 31 July 2020, the Company had unrelieved capital losses of £9,329,000 (2019: £10,349,000). There is therefore, a related unrecognised deferred tax asset of £1,772,000 (2019: £1,759,000). 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.At 31 July 2020, there was an unrecognised deferred tax asset of £1,603,000 (2019: £807,000). 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.

7. Dividends

The Directors are proposing a final ordinary dividend of 7.0p for the financial year 2020. 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.

8. Return per Share

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 Shares in issue of 32,160,449 (2019: 27,061,801).

9. Investments at fair value through profit or loss

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 2020

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

There have been no transfers during the year between Level 1 and 2 fair value measurements.

Financial liabilities at 31 July 2020

Financial liabilities at 31 July 2019

Transaction costs

During the year, the Company incurred transaction costs of £25,000 (2019: £212,000) on the purchase and disposal of investments.

Analysis of capital gains and losses

10. Trade and other receivables

11. Cash and cash equivalents

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

12. Trade and other payables

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 it 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 2020 was a positive £4,951,000 (2019: positive £2,375,000). The corresponding gross exposure on equity swaps as at 31 July 2020 was £128,951,000 (2019: £78,314,000). The total exposure of negative equity swaps was £24,448,000 (2019: £21,751,000). The net marked to market futures and options total value as at 31 July 2020 was negative £23,538,000 (2019: negative £4,491,000).

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

The levels of collateral as at 31 July 2020 were:

• Morgan Stanley & Co. International plc £116.9m (2019: £69.7m)

• JP Morgan Chase & Co. £111.1m (2019: £97.2m)

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

During the year, the company issued 6,771,808 Shares of 25p each to the market (2019: 4,891,945) for a net consideration (after costs) of £39,938,000 (2019: £24,604,000), generating a Share Premium of £38,201,000 (2019: £23,381,000). This represented 23.0% of the Shares in issue as at 31 July 2019 (2019: this represented 20% of the Shares in issue as at 31 July 2018).

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

15. NAV per Share

The basic NAV per Share is based on net assets at the year end and 36,135,738 (2019: 29,363,930) 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.

Risks

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 2020 are shown above.

If the price of these investments and equity swaps had increased by 5% 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 £13,314,000.

A 5% decrease in share prices would have resulted in an equal and opposite effect of £13,314,000, 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:

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 2020, the financial liabilities comprised:

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 decreased by £9,219,000. 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.

* 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 2020 was £115,424,000 (2019: £41,904,000). The calculation is based on the Company’s credit risk exposure as at 31 July 2020 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 Mr 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 £1,470,000 (2019: £1,115,000) excluding VAT. The balance owing to the Manager as at 31 July 2020 was £148,000 (2019: £111,447). Also payable to the Manager during the year were expenses incurred on behalf of the Company of £Nil (2019: £8,000).

During the year, MMIC subscribed for a further 6,245,808 Shares of 25 pence each. Total consideration for the subscriptions amounted to £36,676,000. A detailed breakdown of the subscriptions can be found in the Directors’ Report above.

Details relating to the Directors’ emoluments are found in the Directors’ Remuneration Report on page 42 of the full Annual Report.

18. 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 Mark Sheppard and his immediate family.

A copy of the financial statements of MMIC can be obtained from the Company’s website: www.mlcapman.com/manchester-london-investment-trust-plc.

19. Post Statement of Financial Position events

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

GLOSSARY

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%).

Discount/premium

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.

Gearing

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.

Leverage

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.

Prime Broker

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 custody and a centralised securities clearing facility for the Company so the Company’s collateral requirements are netted across all deals handled by the Prime Broker.

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 £1,454,000 expressed as a percentage of the average monthly net assets of the Company during the year of 0.77%.

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.

* 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.

ANNUAL GENERAL MEETING

Notice is hereby given that the Annual General Meeting of Manchester and London Investment Trust plc will be held at 12a Princes Gate Mews, London, SW7 2PS on Monday 2 November 2020 at 12.00 noon. However, due to the continuing COVID-19 pandemic and in line with Government restrictions and the Corporate Insolvency and Governance Act 2020, shareholders will not be able to attend this year’s Annual General Meeting in person.

The notice of this meeting, containing details of these restrictions, will be circulated to Shareholders with the full Annual Report and will also be available at www.mlcapman.com/manchester-london-investment-trust-plc.

NATIONAL STORAGE MECHANISM

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 https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

LEI: 213800HMBZXULR2EEO10

ENDS

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.