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Manchester & London - Half-year Report


31 January
31 July

Net assets attributable to Shareholders (£’000) 134,331 130,388 3.0% 
Net asset value (“NAV”) per Ordinary Share (pence) 486.58 532.81 (8.7)%


  Six months  
to 31 January 2019 
Total return to Shareholders* (7.12)%
Benchmark - MSCI UK Investable Market Index (MXGBIM)* (8.70)%

* Total return including dividends reinvested, as sourced from Bloomberg.

  Six months to
31 January
Six months to
31 January

Interim dividend per Ordinary Share (pence) 6.00 4.00 50.0%

Dates for the interim dividend

Ex-dividend date 4 April 2019
Record date 5 April 2019
Payment date  30 April 2019


This is my first report to you as Chairman of the Company and I would like to start by thanking my predecessor, Peter Stanley, for his long service and contribution to the Board. As disclosed in the 2018 Annual Report, 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.

Results for the half year ended 31 January 2019

During the half year under review, the total NAV per Share return was a negative 7.1%, compared to a decrease in the benchmark of 8.7%. The Manager’s Report sets out the reasons for this slight outperformance against the benchmark but the portfolio has remained focused on stocks with business models that are aligned with key forward-looking trends. The period saw volatile financial markets that resulted in negative returns for nearly all asset classes with many equity indices entering a bear market at their nadir. Within this challenging environment, our performance in the first half of the year has been relatively satisfactory.


With these results, we have announced an interim dividend of 6.0 pence per Ordinary Share. This is an increase of over 50% (31 January 2018: 4.0 pence per Ordinary Share) but the aim of the increase is to maintain more balance between the size of the interim and final dividends.


Further to the statement set out in the Report from the Audit Committee included in the 2018 Annual Report, the Company has revisited its position on the requirement to carry out an audit tender by 1 August 2020. Following discussion with the incumbent Auditor, Deloitte LLP, it has been established that the Company is only required to carry out an audit tender in respect of the 31 July 2027 Annual Report.


Global events, both political and economic, continue to produce uncertainty and volatility in equity markets worldwide. The decisions of Central Banks and the negotiations between US and Chinese government officials will be key to our second half performance. We also watch with caution for any developments in the regulation of the Technology giants.

David Harris


19 March 2019


Portfolio management

The portfolio delivered a pyrrhic 1.6% outperformance against the benchmark.

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

Total return of underlying sector holdings in local currency 
(excluding costs and foreign exchange)
Technology investments (3.8%)
Consumer investments (2.1%)
Other (including costs, carry and foreign exchange) (1.2%)
Total NAV per Share return (7.1%)

Source: Bloomberg L.P.

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 54% of the NAV total return per Share. This half year was more challenging for the Technology sector, with the Nasdaq declining mid-single digits over the period whilst enduring a particularly turbulent Q4 2018. 

Key negative contributors included NVIDIA Corporation, Alphabet Inc., Activision Blizzard Inc., Electronic Arts Inc., Polar Capital Technology Trust plc, Scottish Mortgage Investment Trust PLC, Ubisoft Entertainment SA and Microsoft Corporation. The video gaming sub sector related stocks (developers plus NVIDIA) contributed -3.4% to portfolio performance. We have since reduced exposure to this niche as these stocks were not recovering in line with the rest of the market in February 2019. The issue for the gaming sub sector is that, although growth is forecast to be strong over the medium term, there is also a disruptive shift in pricing models which is increasing structural volatility in earnings. The market does not like such uncertainties, even if it can see the growth of the sub sector, and we have flexed our holdings down in response to the market moves.

Key positive contributors included Match Group Inc., PayPal Holdings Inc., Facebook Inc. and Inc. It is interesting to note that Facebook Inc. was a positive contributor for the fund over the period considering all the media noise regarding the stock.

The portfolio’s delta-adjusted exposure to the sector is currently around 63% of net assets.

Consumer investments

Consumer (under which we include both the Consumer Staples and the Consumer Discretionary GICS sectors) delivered around 30% of the NAV total return per Share.    

Key negative performers were Alibaba Group Holding Ltd and Inc. We remain positive on both stocks, although we concede that recent personal life events that have occurred for Jeff Bezos may act to supress Amazon’s stock further in the short term. We do see a further slowdown in China’s economic growth but this may also result in a further shift towards consumption and especially online consumption that will assist Alibaba.

There were no material positive contributors.

Overall, the portfolio’s delta-adjusted exposure to the sector is around 32% of net assets.

Other investments including Beta Hedge

Align Technology Inc. was the only material negative contributor; this was cut to a zero holding during the period.  This means we no longer have any exposure to the Healthcare sector. This is a sector we are attracted to but, after a short spurt of outperformance, the worries over pricing have renewed relative weakness.

There were no material positive contributors.

During the period, we built short positions further, particularly in Real Estate, Banking and High-Yield Debt.  US Quantitative Tightening (“QT”) has been running for around 15 months now and the result has been soggy equity markets. We estimate that QT could continue for another 15 months and during this period we should not be surprised by further volatility or weakness. We have adopted the same investment selection policy to short positions as long positions, as we have focused on shorting disrupted sectors with low margins, low Return on Invested Capital (“ROIC”), high leverage and/or weak cash flows.

The portfolio’s delta-adjusted exposure to other investments including Beta Hedge at the period end represented around -2% of net assets.

Our general short-term tactical objective during QT is that we would prefer to outperform a falling market even if that means we are at risk of underperforming a rising market. For this six month period, we achieved that marginally.

M&L Capital Management Limited


19 March 2019


As at 31 January 2019

31 January  
31 January 
31 July 
Non-current assets      
Investments held at fair value through profit and loss 96,879  95,529  102,204 
Current assets      
Unrealised derivative assets 3,341  6,658  4,123 
Trade and other receivables 5,465  48  31 
Cash and cash equivalents 35,479  14,910  27,858 
  44,285  21,616  32,012 
Gross assets 141,164  117,145  134,216 
Current liabilities      
Unrealised derivative liabilities (2,785) (3,147) (3,332)
Trade and other payables (4,048) (341) (496)
  (6,833) (3,488) (3,828)
Net assets 134,331  113,657  130,388 
Equity attributable to equity holders      
Ordinary Share capital 6,902  5,915  6,118 
Shares held in treasury -  
Share premium 60,288  41,553  45,606 
Capital reserves 47,546  42,865  56,608 
Retained earnings 19,595  23,324  22,056 
Total equity Shareholders’ funds

134,331  113,657  130,388 
Net asset value per Ordinary Share (pence) 486.58  480.36  532.8