MANCHESTER AND LONDON INVESTMENT TRUST PLC
(the “Company”)
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 JULY 2022
The full Annual Report and Financial Statements for the year ended 31 July 2022 can be found on the Company’s website at www.mlcapman.com/manchester-london-investment-trust-plc.
STRATEGIC REPORT
Financial Summary
| Total Return | Year to 31 July 2022 | Year to 31 July 2021 | Percentage increase/ (decrease) |
Total return (£000) | (61,162) | 22,222 | (375.2%) |
Return per Share | (151.62p) | 57.10p | (365.5%) |
Total revenue return per Share† | (4.13p) | (4.77p) | 13.4% |
Dividend per Share | 21.00p | 14.00p | 50.00% |
| Capital | As at 31 July 2022 | As at 31 July 2021 | Percentage increase |
Net assets attributable to equity Shareholders(i) (£000) | 198,546 | 269,686 | (26.4%) |
Net asset value (“NAV”) per Share | 493.04p | 665.43p | (25.9%) |
NAV total return(ii)† | (23.0%) | 8.7% | • |
Benchmark performance – total return basis(iii) | 7.3% | 26.1% | • |
Share price | 389.00p | 574.00p | (32.2%) |
Share price (discount)/premium to NAV† | (21.1%) | (13.7%) | • |
(i) NAV as at 31 July 2022 includes a net £1,509,000 decrease in respect of share buybacks (2021: £26,946,000 increase in respect of share issues).
(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.
| Ongoing Charges | Year to 31 July 2022 | Year to 31 July 2021 |
| Ongoing charges as a percentage of average net assets*† | 0.67% | 0.78% |
* Based on total expenses, excluding finance costs and certain non-recurring items for the year and average monthly NAV.
† Alternative performance measure. Details provided in the Glossary below.
CHAIRMAN’S STATEMENT
Results for the year ended 31 July 2022
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’s (the “Company”) portfolio performance for the financial year under review has led to a NAV total return per Share of -23.0%* (2021: 8.7%*).
The North American Software sector, whose constituents represent a significant proportion of the Company’s portfolio, had a -16.0% total return in GBP over the period (S&P North American Expanded Technology Software Index). The Company entered the period with 22.7% of its portfolio listed on the Hong Kong market.
Up to 15 March 2022, the date at which the Company sold its remaining Chinese exposure, the Hang Seng Tech Index had a total return of -45.8% in GBP hence the contribution from Chinese Technology positions was -12.3% in GBP (including costs). The contribution in GBP over the financial year from non-Chinese Technology positions was -10.7% in GBP (including costs) which is materially better than the North American Software sector hence our acute disappointment with our Chinese Technology positions. The Manager’s Report sets out in more detail specific contributions to the overall period performance.
The Company’s benchmark had a positive total return of 7.3% over the period, meaning that the Company has now underperformed the benchmark for the three years to 31 July 2022 on a total return basis by 14.5%* (2021: 32.2% outperformance*). It should be noted that in accordance with the variable management fee arrangements, the Manager has received a lower management fee percentage of 0.25% since the beginning of April due to this underperformance.
At the year end, the Shares traded at a 21.1% discount to their NAV per Share, compared to a discount of 13.7% in 2021. A number of the larger technology focused investments trusts listed in the UK also experienced widening discounts over this period.
Outlook
Key variables for our next financial year’s performance are likely to be movements in the US sovereign yield curve and inflation & economic expectations, the movements in energy prices, the functioning of supply chains, how the Federal Reserve and other Central Banks respond to the aforementioned, whether there is any further material events in the break down of relations between the Chinese and US governments, and the regulation of Technology companies globally.
Dividend
The Directors are proposing a final ordinary dividend of 7.0 pence per Share for the financial year 2022 (31 July 2021: 7.0 pence per Ordinary Share). Earlier in the year the Company paid a special dividend of 7.0 pence per Ordinary Share in celebration of the 50th anniversary of the initial admission of the Company to the London Stock Exchange which was in addition to an ordinary interim dividend of 7.0 pence paid in May 2022 (31 January 2021: 7.0 pence per Ordinary Share). Accordingly, on a per Share basis, the dividends proposed or paid out in respect of the 2022 financial year total 21.0 pence (financial year 2021: 14.0 pence per Ordinary Share). Excluding the special dividend, these dividends represent a yield of 3.6% on the Share price as at the year-end (2021: 2.4%).
Share Buybacks
During the period the Company bought back 258,183 shares into Treasury (2021: nil).
Board Succession
It was noted that more than 20% of votes were cast against the resolution to re-elect David Harris as a Director the Company at the last AGM. The UK Corporate Governance Code requires companies to provide an update within six months of an AGM where more than 20% of votes were cast against a resolution. To better understand shareholders’ concerns with a view to identifying how such concerns can be addressed, the Board of the Company reached out to shareholders to gain an understanding of their concerns. No conclusive response was received from shareholders of the Company.
David Harris retired from the Board during the period after over 12 years of service. We are highly appreciative of David’s contribution to the company’s growth from a Net Asset Value of approximately £42.1m when he joined the Board to £285m when he resigned from the Board. Daren Morris joined the Board following his appointment as Audit Committee Chairman on 10 December 2021. Daren is a seasoned financial and PLC practitioner and brings a wealth of knowledge and experience to our Board.
Annual General Meeting
Our fiftieth Annual General Meeting (“AGM”) will be held virtually on 21 November 2022 at 12.00 noon. Please do read further details on this year’s AGM, which are contained within the AGM notice.
Daniel Wright
Chairman
20 October 2022
*Source: Bloomberg. See Glossary below.