SUMMARY OF RESULTS
| At 31 January 2018 |
At 31 July 2017 |
Change |
|
| Net assets attributable to Shareholders (£’000) | 113,657 | 94,661 | 20.1% |
| Net asset value (“NAV”) per Ordinary Share (pence) | 480.36 | 429.05 | 12.0% |
| Six months to 31 January 2018 |
|
| Total return to Shareholders * | 13.5% |
| Benchmark – MSCI UK Investable Market Index (MXGBIM) * | 4.7% |
* Total return including dividends reinvested, as sourced from Bloomberg.
| Six months to 31 January 2018 |
Six months to 31 January 2017 |
Change |
|
| Interim ordinary dividend per Ordinary Share (pence) | 4.00 | 1.82 | |
| First special dividend per Ordinary Share (pence) | – | 1.18 | |
| Total dividends per Ordinary Share (pence) | 4.00 | 3.00 | 33.3% |
Dates for the interim ordinary dividend
| Dividend declaration date | 3 April 2018 |
| Ex-dividend date | 12 April 2018 |
| Record date | 13 April 2018 |
| Payment date | 8 May 2018 |
CHAIRMAN’S STATEMENT
Results for the half year ended 31 January 2018
During the half year under review, the total return to Shareholders was 13.5%, against an increase in the benchmark of 4.7%. The Manager’s Report sets out the reasons for this outperformance. The Manager has retained its focus on buying stocks with business models that are aligned with key forward-looking trends. The Board notes the Manager’s views that the positive momentum for generalist consumer staple stocks may have seen a shift in trend.
Alternative Investment Fund Managers’ Directive (the “AIFMD”)
The Company has appointed the Manager as its full scope Alternative Investment Fund Manager (“AIFM”) and Indos Financial as its Depositary, in order to meet the increased regulatory requirements of the AIFMD, following the increase in its assets under management.
Dividends
With these results, we have announced an interim ordinary dividend of 4.0 pence per Ordinary Share. This is an increase of over 33% (31 January 2017: 3.0 pence per Ordinary Share).
Outlook
Global events, both political and economic, continue to produce uncertainty and volatility in equity markets worldwide. Within this challenging environment, our performance in the first half of the year has been satisfactory.
P H A Stanley
Chairman
3 April 2018
MANAGER’S REPORT
Portfolio management
The portfolio delivered an 8.8% outperformance against the benchmark, driven by our sector positioning.
The portfolio segments can be broken down in contribution to base currency performance terms over the half year as follows:
| Total return of underlying sector holdings in local currency (excluding costs and foreign exchange) | |
| Technology investments | 14.8% |
| Consumer investments | 5.2% |
| Healthcare investments | 0.7% |
| Other (including costs and foreign exchange) | (7.1%) |
| Total NAV per Share return | 13.5% |
Source: Bloomberg L.P.
Technology investments
Technology (under which we include the Information Technology GICS (Global Industry Classification Standard) sector and technology/disruption orientated funds) delivered over 70% of underlying portfolio total return (in local currency).
The five largest contributors in this sector were Alphabet Inc., Facebook Inc., Microsoft Corporation, Alibaba Group Holding Ltd and Tencent Holdings Ltd, which accounted for around 60% of the sector return.
Other material positive performers included NVIDIA Corporation, salesforce.com, Inc., Polar Capital Technology Trust plc, Scottish Mortgage Investment Trust PLC, PayPal Holdings Inc., Apple Inc. and ROBO Global Robotics and Automation GO UCITS ETF. There were no material negative contributors.
We increased our exposure to the technology sector this year and we focused on the “gorilla” stocks as we become increasingly convinced that scale is generating enhanced returns. The portfolio’s delta-adjusted exposure to the sector is now just over 60% of net assets.
Consumer investments
Consumer (under which we include both the Consumer Staples and the Consumer Discretionary GICS sectors) delivered around 25% of underlying portfolio total return (in local currency). More than 88% of this performance was driven by Amazon.com, Inc.
The only negative performers were Brown Forman Corporation and Mondelez International Inc., which have now been disposed of.
The key shift in our thinking in this sector is that we have repositioned away from generalist consumer goods (think toothpaste) towards niche consumer goods and experience providers (think gaming).
Overall, the portfolio’s delta-adjusted exposure to the sector is just over 20% of net assets.
Healthcare and pharmaceutical investments
Healthcare (under which we include the Healthcare GICS sector and Healthcare-orientated funds) delivered less than 1% of underlying portfolio total return (in local currency).
Material positive contributors included Align Technology Inc., Worldwide Healthcare Trust PLC, Smith & Nephew plc, AstraZeneca PLC and Zoetis Inc. GlaxoSmithKline plc and Allergan plc provided negative contributions so they were cut from the portfolio.
The portfolio’s delta-adjusted exposure to this sector now represents just under 10% of net assets as the sector continues to underperform.
M&L Capital Management Limited
Manager
3 April 2018
EQUITY EXPOSURES
Equity exposures (longs)
As at 31 January 2018
| Company | Sector* | Valuation £’000 |
% of net assets |
| Amazon.com, Inc. | Consumer Discretionary | 18,192 | 16.01 |
| Microsoft Corporation | Information Technology | 10,837 | 9.53 |
| Alphabet Inc. | Information Technology | 10,210 | 8.98 |
| Facebook Inc. | Information Technology | 8,628 | 7.59 |
| Tencent Holdings Ltd ** | Information Technology | 8,420 | 7.41 |
| Alibaba Group Holding Ltd ** | Information Technology | 7,298 | 6.42 |
| Apple Inc. | Information Technology | 5,440 | 4.79 |
| Polar Capital Technology Trust plc | Funds | 4,408 | 3.88 |
| Scottish Mortgage Investment Trust PLC | Funds | 3,864 | 3.40 |
| salesforce.com, Inc. | Information Technology | 3,725 | 3.28 |
| JD.Com, Inc. ** | Consumer Discretionary | 3,562 | 3.13 |
| ROBO Global Robotics and Automation GO UCITS ETF | Funds | 3,451 | 3.04 |
| Worldwide Healthcare Trust PLC | Funds | 3,394 | 2.99 |
| PayPal Holdings Inc. | Information Technology | 2,490 | 2.19 |
| Pernod Ricard SA ** | Consumer Staples | 2,195 | 1.93 |
| Heineken NV ** | Consumer Staples | 2,078 | 1.83 |
| LVMH Moët Hennessy Louis Vuitton SE ** | Consumer Discretionary | 1,978 | 1.74 |
| Zoetis Inc. | Healthcare | 1,978 | 1.74 |
| NVIDIA Corporation | Information Technology | 1,910 | 1.68 |
| AstraZeneca Plc ** | Healthcare | 1,613 | 1.42 |
| Electronic Arts Inc. ** | Information Technology | 1,482 | 1.30 |
| Sage Group plc ** | Information Technology | 1,379 | 1.21 |
| Intuit Inc. | Information Technology | 1,311 | 1.15 |
| Bayer AG ** | Healthcare | 1,237 | 1.09 |
| Activision Blizzard, Inc. | Information Technology | 1,121 | 0.99 |
| Adobe Systems Inc. | Information Technology | 1,117 | 0.98 |
| 113,318 | 99.70 | ||
| Balance held in 12 other positions | 5,992 | 5.27 | |
| Total long equities exposure | 119,310 | 104.97 | |
| Unlisted debentures | 218 | 0.19 | |
| Total long positions | 119,528 | 105.16 | |
| Other net assets | (5,871) | (5.16) | |
| Net assets | 113,657 | 100.00 |
* GICS – Global Industry Classification Standard.
** Including equity swap exposures.
INTERIM MANAGEMENT REPORT
The important events that have occurred during the period under review and the key factors influencing the financial statements are set out in the Chairman’s Statement and the Manager’s Report above.
The principal risks facing the Company are substantially unchanged since the date of the latest Annual Report and Financial Statements and continue to be as set out in the Strategic Report and note 17 of that report. Risks faced by the Company include, but are not limited to, economic and market risk, interest rate risk, gearing risk, liquidity risk, currency rate risk, credit and counterparty risk and other general financial risks. Details of the Company’s management of these risks are set out in the Annual Report and Financial Statements.
M&M Investment Company plc is the controlling Shareholder of the Company. This company was controlled throughout the six months ended 31 January 2018, and continues to be, controlled by Mr M Sheppard, who forms part of the investment management team at M&L Capital Management Limited. Details of related party disclosures are set out in note 8 of this Report.
STATEMENT OF DIRETORS’ RESPONSIBILITIES
The Directors confirm that to the best of their knowledge:
• the condensed set of financial statements has been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union; and gives a true and fair view of the assets, liabilities, financial position and profit/loss of the Company; and
• this Half-Yearly Report includes a fair review of the information required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during that period; and any changes in the related party transactions described in the last Annual Report that could do so.
This Half-Yearly Report was approved by the Board of Directors and the above responsibility statement was signed on its behalf by:
P H A Stanley
Chairman
3 April 2018