MW TOPS Limited Registered in Guernsey No. 45728 Annual Financial Report For the year ended 30 September 2009 CONTENTS Background to the Company 1-4 Financial Highlights 5-7 Chairman's Statement 8 Background to the Investment Manager 9-10 Investment Manager's Report 11-15 Directors 16 Directors' Report 17-22 Management Report 23 Independent Auditor's Report 24-25 Audited Financial Statements 26-57 Company Information 58-59 BACKGROUND TO THE COMPANY MW TOPS Limited (the "Company") is a closed-ended investment company registered and incorporated in Guernsey on 25( )October 2006. A continuation vote for each class of Share will be put to Shareholders of the relevant class at the general meeting of the Company in 2013 and every seven years thereafter. The Company's share capital comprises three classes of shares: Euro shares, Sterling shares and US$ shares. Each of these share classes were initially admitted to listing on the Euronext Amsterdam stock market. On 18 June 2008, these shares were admitted to listing on the Official List of the UK Listing Authority and admitted to trading on the main market of the London Stock Exchange. On 1 July 2009 the shares were de-listed from Euronext Amsterdam. In November 2008, the Company offered its shareholders an option to redeem all or part of their holdings at net asset value per share, less costs. Immediately following the redemption the shares in issue were as follows: Share class Number of issued shares remaining (excluding treasury shares) Euro 5,678,426 Sterling 7,300,798 US$ 1,618,575 At an extraordinary general meeting of shareholders on 8 January 2009, shareholders voted in favour of resolutions amending the Articles to effect the following: 1. to delete the discount management provisions of the Company and to replace such provisions with an annual cash exit facility, under which the Directors may, in their absolute discretion, offer to redeem up to all of the shares in issue, or up to all of the shares in issue in a particular class or classes, once in any 12 month calendar period on or about the time of the annual general meeting commencing in 2010, at the Net Asset Value ("NAV") per share of the relevant class, less the aggregate of a discount of up to 2 per cent of such NAV per share and the costs and expenses of implementing such an offer; and 2. to insert additional provisions empowering the Board to redeem compulsorily shares of any class if the aggregate NAV of the shares in issue of the relevant class, or the number of holders of shares of the relevant class, are such that the continued existence of such class ceases, in the Board's opinion, ceases to be viable. Investment Objective of the Company The investment objective of the Company is to provide consistent absolute returns primarily derived through trading in equities of companies incorporated in or whose principal operations are in Europe (including Eastern Europe). Investment Policy of the Company The investment policy of the Company is to invest its assets primarily in European equity markets both by utilising the TOPS investment process and investing in opportunities chosen by Marshall Wace LLP. TOPS is a framework of proprietary Marshall Wace applications and models which seek to capture, appraise, optimise and act upon securities trading ideas received from Marshall Wace's extensive network of contributors within the brokerage community. BACKGROUND TO THE COMPANY (CONTINUED) The Company will pursue its investment policy indirectly through investment in the sub-trusts of the TOPS Trust (an umbrella unit trust) or in other funds managed by Marshall Wace (the "Underlying Funds"), the assets of which are used to trade systematically on the basis of those ideas of the brokerage community selected by TOPS and to invest in opportunities chosen by Marshall Wace. The investment policy of each of the Underlying Funds is therefore consistent with the Company's investment policy. Marshall Wace may in the future seek to identify opportunities for the Company to invest up to 100 per cent of its assets in other Underlying Funds than those investing in at the year end, while remaining within the Company's investment objective and policy. The Company may also retain amounts in cash or cash equivalents, pending reinvestment, if this is considered appropriate to the objective of seeking consistent absolute returns. The Underlying Funds may invest in a wide range of instruments including listed and unlisted equities, futures, other derivatives and debt securities and will take long and short positions over a variety of time periods. The Company will only enter into derivative transactions for the purposes of efficient portfolio management and not for speculative purposes. The Company may employ direct borrowings up to a maximum of 20 per cent of the NAV at the time of borrowing in order to fund share buy backs and the payment of fees and expenses by the Company. The Company has adopted the following investment restrictions for so long as they remain requirements of the UK Listing Authority: * the Company will avoid cross-financing between business forming part of its investment portfolio; * the Company will avoid the operation of common treasury functions as between the Company and investee companies; * neither the Company nor any subsidiary (other than business forming part of the investment portfolio) will conduct any trading activity which is significant in the context of the group as a whole; and * the Company does not intend to invest in other closed-ended investment funds, and in any case, will not invest more than 10 per cent of the total assets of the Company in other closed-ended investment funds except for those which themselves have stated investment policies to invest no more than 15 per cent of their gross assets in other closed-ended investment funds. The investment policy of the Company may only be amended with the consent of a simple majority of shareholders. Portfolio History The Company originally invested 50% of the net proceeds of the global offering in Euro-denominated units of Sub-Trust C (Opportunistic Hedged) of the TOPS Trust ("Sub-Trust C"), 50% in Euro-denominated units of Sub-Trust D (Fundamental-Hedged) of the TOPS Trust ("Sub-Trust D"), this was realigned on 18 February 2008 to invest 10% of assets of the Company in to Euro-denominated units of Sub-Trust N (Market Neutral) of the TOPS Trust ("Sub-Trust N") and the investments into Sub-Trust C and Sub-Trust D were reduced proportionately. For the period from 1 June 2009 to 31 July 2009 the portfolio was reviewed and reinvested in to the following Euro-denominated Sub-Trusts: BACKGROUND TO THE COMPANY (CONTINUED) Sub-Trust A (Opportunistic) 35% Sub-Trust B (Fundamental) 35% Sub-Trust H (Balanced Europe) 10% Sub-Trust N (Market Neutral) 20% With effect from 1 August 2009 the portfolio was reviewed again and reinvested in the following Euro-denominated Sub Trusts: Sub-Trust H (Balanced Europe) 10% Sub-Trust European TOPS 70% Sub-Trust N (Market Neutral) 20% Following the year end, the Board announced its intention to redeem all, or substantially all, of its holding in the TOPS Trust and to invest all, or substantially all, of its assets in equivalent units of one or more sub-trusts of Marshall Wace Investment Strategies, an umbrella unit trust established under the laws of Ireland. Each Sub-Trust employs Marshall Wace's Trade Optimised Portfolio System ("TOPS"). The TOPS investment process comprises a framework of proprietary applications and models that seeks to capture, analyse, optimise and act upon the investment ideas of contributors from the brokerage community and to aggregate them in a dynamic portfolio construction process. At the end of September 2009, Marshall Wace was polling contributors from 314 firms located in over 50 countries. Marshall Wace believes that investment advice received from the brokerage community, if systematically monitored and analysed, can be combined into a diversified portfolio with attractive risk-reward characteristics. The assets of the Sub-Trusts are used to trade systematically ideas selected by optimisation models developed by Marshall Wace to exploit these opportunities and to effect additional investment opportunities chosen by the relevant investment managers. The investment process of Sub-Trust H (Balanced Europe) is to trade investment ideas driven by valuation and fundamental criteria, prevailing market themes and stock-specific events. The resulting portfolio is expected to be liquid and characterised by medium to long-term holding periods. The Investment Manager expects that Sub-Trust H (Balanced Europe)'s portfolio will exhibit higher levels of volatility than the other sub-trusts with more diversified strategies. The Investment Manager may also pursue a discretionary hedging policy to control market, sector and thematic exposures. Sub-Trust H (Balanced Europe)'s net market exposure will vary but will not normally exceed a range from 20 per cent net short to 80 per cent net long. Where deemed appropriate, Sub-Trust H (Balanced Europe) may employ leverage including, without limitation, through borrowing securities and other investments and by entering into derivatives transactions. The gross exposure of Sub-Trust H (Balanced Europe) will not exceed 500 per cent of its NAV. The investment process of Sub-Trust European TOPS is to trade investment ideas driven by: (a) general factors such as stock and market momentum, and prevailing market themes and events affecting an individual stock in particular (e.g. a merger or takeover, and earnings release, changes to the management of the issuer, or any other commercially significant event); and (b) valuation and fundamental criteria such as earnings growth and outlook for a specific stock. The resulting portfolio is expected to be relatively liquid and diversified and characterised by relatively high turnover. BACKGROUND TO THE COMPANY (CONTINUED) The Investment Manager may pursue a discretionary hedging policy to limit drawdown and preserve investors' capital. Additional hedging positions will be used to control market, sector and thematic exposures. The net market exposure of Sub-Trust European TOPS will vary according to the Investment Manager's view of market prospects and the Investment Manager will have discretion to be net short of markets. However, the overall net market exposure of Sub-Trust European TOPS is not normally expected to exceed a range from 50 per cent net short to 150 per cent net long. Where deemed appropriate, Sub-Trust European TOPS may employ leverage including, without limitation, through borrowing securities and other investments and by entering into derivatives transactions. The gross exposure of Sub-Trust European TOPS will not exceed 300 per cent of its NAV. The Investment Manager may from time to time consider hedging currency exposure, but will not generally enter into contracts involving a speculative position in any currency. The investment process of Sub-Trust N (Market Neutral) is to trade on the basis of investment ideas driven by (a) general factors such as stock and market momentum and prevailing market themes and events affecting an individual stock in particular (e.g. a merger or takeover, an earnings release, changes to the management of the issuer, or any other commercially significant event); and (b) valuation and fundamental criteria such as earnings growth and outlook for a specific stock. The resulting portfolio is expected to be relatively liquid and diversified. The Investment Manager will pursue a discretionary hedging policy to preserve investors' capital in line with its long-term investment strategy. Although the investment objective of Sub-Trust N (Market Neutral) is to provide investors with consistent absolute returns by implementing a long term market neutral investment strategy, the net market exposure of Sub-Trust N (Market Neutral) may temporarily vary according to the Investment Manager's view of market prospects and the Investment Manager will have discretion to be net short of markets. However, the overall net market exposure of Sub-Trust N (Market Neutral) is not normally expected to exceed a range from 15 per cent net short to 15 per cent net long. Where deemed appropriate, Sub-Trust N (Market Neutral) may employ leverage including, without limitation, through borrowing securities and other investments and by entering into derivatives transactions. The gross exposure of Sub-Trust N (Market Neutral) will not exceed 600 per cent of its NAV. FINANCIAL HIGHLIGHTS Net Asset Value Summary * The NAV per share of each share class of MW TOPS Limited has outperformed the MSCI Europe AC TR Index since launch. * The multi-factor risk management framework governing the strategies in which MW TOPS Limited invests has contributed to a limited drawdown during the challenging market conditions of 2008 and Q1 2009. * NAV per share continues to exhibit low volatility as measured against the MSCI Europe AC TR Index. MW TOPS Limited Total Net Assets: EUR153,155,177 30 Sept 2009 30 Sept 2009 30 Sept 2009 Euro shares Sterling shares US$ shares EUR £ $ Net Assets 58,541,593 76,174,104 16,467,763 Net Asset Value per share 10.31 10.43 10.17 Mid market share price (LSE)(1) 9.43 9.53 9.33 Total number of shares in 5,678,426 7,300,798 1,618,575 issue(2) (1) Data source: Bloomberg (2) To the exclusion of those held in treasury FINANCIAL HIGHLIGHTS (CONTINUED) Monthly Track Record MW TOPS % Limited Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep % Perf NAV 2008 2008 2008 2009 2009 2009 2009 2009 2009 2009 2009 2009 YTD Since Performance Inception Euro NAV 8.98 9.02 9.04 9.16 9.03 9.20 9.39 9.60 9.71 9.78 9.97 10.31 Euro Net -5.37% 0.45% 0.22% 1.33% -1.42% 1.88% 2.07% 2.24% 1.15% 0.67% 1.99% 3.41% 8.64% 3.10% Return GBP NAV 9.10 9.15 9.15 9.27 9.14 9.31 9.50 9.71 9.83 9.89 10.09 10.43 GBP Net -5.11% 0.55% 0.00% 1.31% -1.40% 1.86% 2.04% 2.21% 1.24% 0.63% 2.01% 3.37% 8.76% 4.30% Return US$ NAV 8.88 8.91 8.92 9.04 8.92 9.08 9.27 9.47 9.58 9.65 9.84 10.17 US$ Net -5.23% 0.34% 0.11% 1.35% -1.33% 1.79% 2.09% 2.16% 1.16% 0.70% 2.00% 3.35% 8.54% 1.70% Return FINANCIAL HIGHLIGHTS (CONTINUED) Underlying Investment Details Units held by Holdings Unit Price in MW TOPS Limited Value of units held EUR(1) in EUR Sub-Trust H 163.71 95,796.72 15,682,881 (Balanced Europe) Sub-Trust European 126.72 875,556.24 110,950,487 TOPS Sub-Trust N (Market 105.25 287,517.96 30,261,265 Neutral) (1) Unit price to 2 decimal places Note: The above data is confirmed as at 30 September 2009 Data Source: Citi Hedge Fund Services Limited Average Premium/Discount since launch 8 December 2006 MW TOPS Limited - EUR share class -6.04% MW TOPS Limited - US$ share class -5.07% MW TOPS Limited - GBP share class -4.58% Industry Average (Single Manager Hedge Fund) -8.94%* *Data Source: Kepler Partners. Industry average from 1 December 2006 - 30 September 2009 CHAIRMAN'S STATEMENT I am pleased to present to shareholders the Annual Financial Report of the Company in this, its third year of operation. The share price performance of the Company against the continuing difficult economic backdrop and volatile market conditions was satisfactory in absolute terms with the Euro share price increasing from EUR8.70 to EUR 9.43, a rise of +8.33%. This compares favourably to a return of European equity markets as measured by the MSCI AC Daily TR Net Europe Local Index of +1.52%. The Investment Manager's Report on pages 11 to 15 outlines the performance of the Company's portfolio and its risk profile over what has been an exceptionally challenging period. While the absolute return of the Company has been lower than the objective set out in the prospectus it is notable that it has generated positive net returns since inception (the NAV per share of the Euro class rising 3.15%) despite the market falling 19.17%. In November 2008, in response to the torrid market conditions the Board offered investors the opportunity to redeem all or part of their investment in the Company at net asset value per share less costs. Redemption requests totalling approximately 84% of the net assets of the Company were received. The redemption offer provided liquidity for shareholders at a time of market distress and demonstrated the Board's and the Investment Manager's commitment to act in accordance with the interests of shareholders. In addition, the Board instigated a review of the expenses of the Company to ensure that costs were being efficiently managed. The most significant result of this review was the decision to concentrate the Company's trading activity on a single exchange and consequently the Board decided to delist the Company's shares from NYSE Euronext Amsterdam on 1 July 2009 and to maintain its listing on the London Stock Exchange. While the restrictions on short selling have been eased since December 2008 and replaced with reporting requirements, the regulatory environment for hedge funds continues to be in a state of flux. Wide ranging proposals have been put forward by the European Commission and other national governmental bodies. The Investment Manager has advised the Board that it believes that these proposals will not affect its ability to implement the Company's investment strategy. However, the Investment Manager continues to monitor the developments. In February this year, Sir Andrew Large announced his resignation from the Board after serving just over two years as chairman. I was pleased to accept the Board's offer to succeed Sir Andrew and I would like to thank him for his contribution to the Company. The Board maintains an open and constructive relationship with the Investment Manager and continues to have confidence in the ability of the TOPS strategy to deliver both alpha and absolute returns. Dr Cameron McPhail Chairman 28 January 2010 BACKGROUND TO THE INVESTMENT MANAGER Marshall Wace LLP ("Marshall Wace" or "MW") was founded by Paul Marshall and Ian Wace in 1997 and, since the launch of the flagship Eureka Fund in 1998, has established itself as one of Europe's foremost hedge fund managers. At the heart of MW's success is the drive to deliver investment performance of the highest quality for investors. MW is dedicated to building sustainable competitive advantage within the investment management industry and strives continuously to enhance its investment process to achieve this aim. MW's proprietary approach combines both process-driven and manager led ("European Core") strategies. Both approaches draw on an unrivalled information edge, developed through the unique relationships established with those providing investment recommendations. The dynamics of this relationship have aligned the interests of investor, fund manager and service provider in a virtuous circle and have led to the creation of a revolutionary process-driven strategy known as TOPS (Trade Optimised Portfolio System). The TOPS strategies have formed an important platform for the development of MW due to its direct transferability to other liquid capital markets. In July 2004, recognising this potential and in anticipation of the launch of Americas TOPS, Marshall Wace opened its first overseas office in the United States. The roll-out of TOPS continued in 2006 with the expansion of the programme to include Asian markets and the subsequent opening of an office in Hong Kong in October that year. In December 2006, wishing to make the TOPS strategies available to a wider group of investors, Marshall Wace announced the listing of MW TOPS Limited (the "Company") on the NYSE Euronext Exchange. The listing of the Company on the London Stock Exchange followed in June 2008. The launch of the Marshall Wace TOPS UCITS Fund, incorporated as a Luxembourg SICAV in November 2007, was intended to broaden the firm's investor base further, offering an alternative access point to certain MW TOPS strategies for investors unable to allocate to traditional offshore hedge funds. The formation of a joint venture, Marshall Wace GaveKal Asia Limited, in June 2008 reflects the Company's strategic objective to develop a greater presence in Asia. The bringing together of GaveKal's knowledge of the Asia-Pacific region alongside the innovative product design, portfolio construction and discipline risk management of Marshall Wace is expected to have powerful synergies. The offering of a range of funds under the umbrella of the joint venture is intended to allow investors to capitalise on the long-term growth prospects in Asia. Paul Marshall Paul Marshall is a founding partner of Marshall Wace LLP and was responsible for the development of the "Core" investment management process, utilised both within the flagship Eureka (Euro) Fund and also now available as a stand-alone strategy. As CIO for manager-led strategies he has overall responsibility for the development of this part of the firm's business. Within his role as Chairman, Paul has responsibility for business development and corporate governance and, through his chairmanship of the Partnership Management Committee and the Investment Advisory Committee, plays a central role in the strategic direction of the firm. BACKGROUND TO THE INVESTMENT MANAGER (CONTINUED) Paul was formerly a director of Mercury Asset Management, where he was Chief Investment Officer for European Equities. At the time of his departure in 1997 he was responsible for a team of 15 managing US$12 billion in European Equities. Ian Wace Ian Wace is a founding partner of Marshall Wace LLP. As CEO, he has overseen the growth and development of the firm since the launch of the Eureka (Euro) Fund in 1997. Marshall Wace employs over 160 personnel, and operates from offices in London, Greenwich, Connecticut and Hong-Kong. Under his stewardship, the firm pioneered the development of TOPS and is now extending its manager based product offering. The firm is one of Europe's largest privately-owned alternative asset managers, recognised for its robust infrastructure and investment processes. As CEO, Ian is closely involved with all aspects of the management of the firm and is instrumental in driving forward the broad range of initiatives which will take the firm through its next phase of growth. Prior to founding Marshall Wace, Ian was Global Head of Equity and Derivative Trading at Deutsche Morgan Grenfell ("DMG"), where he was responsible for Equity Sales Trading, Programme Trading, Proprietary Trading, Stock Lending and Balance Sheet Management. Prior to joining DMG in 1995, he worked for eleven years at SG Warburg, where in 1988, as the youngest ever director, he was appointed head of European Equity Sales and in 1993, head of Proprietary Trading. Anthony Clake Anthony Clake has been responsible for the evolution of the MW TOPS strategies since their inception in 2001. As the Global Product Manager for MW TOPS, he has overseen the geographic expansion of this investment process across Europe, Asia, North and South America as well as Emerging Markets. In recognition of his contribution to the development of Marshall Wace, Anthony was made a partner of the firm in 2004. Anthony joined Marshall Wace in August 2001 directly from university following consultancy work with the firm during 1999 and 2000. Previously he studied Philosophy, Politics and Economics at Queen's College, Oxford. He was elected to the Gibbs scholarship for obtaining the highest marks awarded in preliminary and final examinations. INVESTMENT MANAGER'S REPORT Financial Year ending 30 September 2009 Within the 12 month period covered by this review the global financial crisis reached its nadir. The severity of the economic contraction in Q4 2008 and level of cross-regional contagion within the international banking system was underscored by the release of numerous statistics in early 2009. The continued fragility of the financial industry together with the efforts of the asset management community to quickly deleverage combined to heighten equity market uncertainty in Q1 2009, resulting in heightened levels of volatility at the single stock, inter- and intra-sector level. However, while the fundamentals of the global economy continued in Q2 2009 to hamper belief in any sustained recovery, equity market participants became more optimistic that the attempts by various governments to inject liquidity into the economy through monetary policy and fiscal stimuli and to recapitalise a number of financial institutions might be sufficient in staving off a deeper global recession. Consequently in Q2 2009 sentiment changed within equity markets, which resulted in a large proportion of equity indices rallying sharply. During the 12 month period under review, European equity markets* returned only +1.52% with a volatility of 27.59%, falling -30.10% from 1 October 2008 to 29 February 2009 and then rallying +45.24% from 1 March 2009 to 30 September 2009. The NAV per share of the Euro, Sterling and US$ classes showed considerable resilience in this volatile market environment, rising +8.69%, +8.78% and +8.48% respectively over the financial year and drawing down only -4.78%, -4.64% and -4.86% during the particularly testing initial 5 months period. With the improvement in market sentiment, the net and gross market exposures of MW TOPS Limited (the "Company") incrementally increased (as detailed below). The steady pace of this portfolio adjustment meant that the Company maintained conservative levels of risk, while capturing a portion of the market upside, with the NAV per share of the Euro, Sterling and US$ classes returning +14.14%, +14.08 and +14.02% respectively from 1 March to 30 September. * As measured by the MSCI AC Daily TR Net Europe Local Index Since Inception to 30 September 2009 Since the launch of the Company on 8 December 2006 to the end of September 2009, the greater proportion of the assets of the Company have delivered a level of capital protection for investors against the background of a rapidly deteriorating global equity market. Despite a market fall of 19.17% with a volatility of 20.94% during this period, the NAV per share of the Euro, Sterling and US$ classes have generated positive net returns of +3.15%, +4.32% and +1.64% with a volatility of 8.84%, 8.80% and 9.19% respectively. This represents the delivery of +7.29%, +8.51% and +5.76% net alpha since inception. Portfolio Composition The Investment Manager's objective is to generate absolute returns and deliver consistent alpha from each of the underlying strategies that comprise the Company within a robust risk framework which seeks to manage volatility and limit downside. Since inception, the majority of the assets within the Company have continued to be invested equally in Sub-trust C and Sub-trust D of the Marshall Wace TOPS Trust. However, from 1 August 2009, a decision was taken to allocate the assets of the Company to the relevant Sub-trusts of the Marshall Wace TOPS Trust according to the following approximate proportions: 70% to Sub-trust European TOPS, 20% to Sub-trust N (Market Neutral) and 10% to Sub-trust H (Balanced Europe). The allocation to Sub-trusts N and H, was made as part of a strategy aimed at ensuring that the Company continues to meet its long-term target risk-return profile, while delivering a more diversified and decorrelated source of alpha. INVESTMENT MANAGER'S REPORT (CONTINUED) As an illustration of diversified nature of the Company, the bar charts below show the average sector and country exposures of the combined strategies during September 2009. While markets moved initially significantly lower and then rebounded sharply over the period covered by this review, the greatest positive contribution to return came from Materials and Banks. The table below sets out the top 5 long and short sectors in terms of P&L attribution from 1 October 2008 to 30 September 2009. INVESTMENT MANAGER'S REPORT (CONTINUED) Top 5 Holdings as at 30 September 2009 Over the Company's financial year, typically no single position has represented more than 3% of NAV and aggregate exposure to mid-cap securities (http://www.frc.org.uk/>. DIRECTORS' REPORT (CONTINUED) The Board meets formally at least four times a year. In addition to these scheduled meetings, the Board has met on an ad hoc basis and has consulted the Investment Manager regularly. The Directors are satisfied that they have been kept fully informed of the investment performance, financial and operational controls, and other matters relevant to the business of the Company. The Directors have, where necessary to the furtherance of their duties, taken independent professional advice at the expense of the Company. The risk management systems in relation to the financial reporting process are incorporated by reference in the Management Report on page 23. The performance of the investments held by the Company over the reporting period and the outlook for the future are described in the Investment Manager's Report. The Company's financial position, its cash flows and liquidity position are set out in the financial statements. Its financial instruments and associated risks, including but not limited to its capital and risk management, and the details of the market, equity price, interest rate, currency, liquidity and credit risks are set out at note 7 to the financial statements. The attendance record of Directors during the year is set out below. Quarterly Ad hoc Treasury Conversion Audit Other Ad Meetings Board Board share Committee Committee hoc attended Meetings Meetings Committee Meetings Meetings Committee Meetings Meetings No. of 4 5 2 11 2 Meetings 3 Held Sir Andrew 1 1 0 0 1 0 Large Nicholas 4 5 1 1 3 2 Falla Duncan 4 2 0 0 1 0 Ford Cameron 3 3 0 0 1 1 McPhail John Le 4 4 1 10 1 0 Prevost The focus at Board meetings is a review of investment performance, marketing/investor relations, risk management, general administration and compliance, peer group information and industry issues. Board papers are circulated in advance, allowing Directors the opportunity to add agenda items they consider appropriate for Board discussion. Each Director is required to inform the Board of any potential or actual conflicts of interest prior to Board discussion. The committees of the Board are described later in this Directors' Report. The Board evaluates its performance and the performance of individual Directors on an annual basis, and believes that the current mix of skills and experience of the Directors are appropriate to the requirements of the Company. Directors' Duties and Responsibilities The Company is a member of the Association of Investment Companies ("AIC") and follows, where applicable, the AIC Code on Corporate Governance. A summary of the Directors' duties according to the AIC Code is set out below: * Statutory obligations and public disclosure; * Strategic matters and financial reporting; * Oversight of management and personnel matters; * Risk assessment and management, including reporting, monitoring, governance and control; and * Other matters having a material effect on the Company. DIRECTORS' REPORT (CONTINUED) Committees of the Board The Board has created the committees disclosed below. The Board has not deemed it necessary to appoint a nomination or remuneration committee as, being comprised wholly of non-executive Directors, the whole Board considers these matters. The Management Engagement Committee At the first meeting held on 29 November 2007, it was resolved that the Company would not have a separate Management Engagement Committee but the activities of the Management Committee will be carried out at the meetings of the full Board. The Directors do pay full regard to Conflicts of Interests and will, where appropriate, absent themselves from discussions and decisions where there is the potential for these to exist. In the opinion of the Directors, no additional benefit could be gained for shareholders by changing the Company's Investment Manager and it is in the interests of shareholders as a whole to retain for the foreseeable future the Investment Manager on the terms agreed. Audit Committee An Audit Committee, with defined terms of reference and duties considers inter-alia: (a) annual accounts, (b) auditors reports, and (c) terms of appointment and remuneration for the auditor (including overseeing the independency of the auditor, particularly as it relates to non-audit services). In addition the Audit Committee ensures that the Company maintains high standards of integrity, financial reporting and internal controls. The Board appointed the following as members: Nicholas Falla (Chairman), Dr Cameron McPhail, John Le Prevost and Duncan Ford. Treasury Share Committee At a Board meeting held on 22 May 2008 the Board resolved that any one Guernsey resident director may form a Treasury Share Committee. The Committee is authorised to cancel shares held in treasury if it believes that shares held in treasury are likely to exceed 10% of the issued share capital of the Company. Conversion Committee At a Board meeting held on 11 August 2008 the Board resolved that any one Guernsey resident director may form a Conversion Committee. The Committee is authorised to approve the monthly conversion ratios between share classes and to authorise applications for admission of new shares to any stock exchange the Company's shares are listed on. Internal Controls The Directors review all controls including operations, compliance and risk management and not just internal financial controls and we report as follows. The Board is ultimately responsible for the Company's system of internal control and for reviewing its effectiveness. The Board has developed a framework that is designed to identify, evaluate and manage the primary operating risks faced by the Company. The framework specifies an on-going review timetable that ensures at least an annual review of the Company's system of internal controls, including financial, operational, compliance and risk management. DIRECTORS' REPORT (CONTINUED) The Board has delegated to third parties the management of the Company's investment portfolio, the provision of custody services, the administration, registration and corporate secretarial functions (including the independent calculation of the Company's Net Asset Value), and the production of the Annual Financial Report which is independently audited. The Board retains accountability for the functions it delegates and is responsible for the systems of internal control. Formal contractual arrangements have been put in place between the Company and the providers of these services. Compliance reports are provided at each quarterly Board meeting by the Secretary, Anson Fund Managers Limited. John Le Prevost has been appointed the Company's Compliance Officer for the purposes of the Netherlands Authority for the Financial Markets. The Company does not have a separate internal audit facility. All the Company's management and administration functions are delegated to independent third parties and in the Board's opinion there is therefore no need for the Company to have an internal audit function. Corporate Responsibility The Company considers with the Investment Manager the ongoing concerns of investors on the basis of open and regular dialogue. The Company keeps abreast of regulatory and statutory changes and responds as appropriate. The Board assesses its performance on an annual basis based on the guidelines set out by the AIC and the Combined Code. Relations with Shareholders The Investment Manager maintains a regular dialogue with institutional shareholders, the feedback from which is reported to the Board. In addition, the Investment Manager conducts continuous marketing, with the objectives of ensuring that shareholders remain fully informed as to the Company's investment process and performance and marketing the Company to potential investors. The Board monitors the Company's trading activity on a regular basis and maintains contact with the Company's principal broker. Shareholder sentiment is gauged in part, by reviewing the relative discounts/premiums experienced by the Company's peer group. The Company reports formally to shareholders four times per year. Additionally, current information is provided to shareholders on an ongoing basis through the Company's website and monthly newsletter. All holders of shares in the Company have the right to attend and vote at the general meetings, during which the Board and the Manager are available to discuss issues affecting the Company. Shareholders may also contact the Directors via the Secretary, DIRECTORS' REPORT (CONTINUED) Substantial Shareholdings As at the financial year end, the Company has not been notified of any significant holdings of shares in the Company. As at the financial year end no director had a substantial interest in the Company's share capital. Audit Information So far as each of the Directors is aware, there is no relevant audit information of which the Company's auditor is unaware, and each has taken all the steps he ought to have taken as a Director to make himself aware of any relevant audit information and to establish that the Company's auditor is aware of that information. Summary of the Investment Management Agreement Pursuant to the Investment Management Agreement dated 10 November 2006 between the Company and Marshall Wace, Marshall Wace has been appointed to manage and invest the investments of the Company in its discretion in pursuit of the Company's investment objective and policy. The Investment Management Agreement contains provisions under which the Company exempts Marshall Wace from all liabilities and indemnifies Marshall Wace against all liabilities suffered by Marshall Wace in its capacity as investment manager except where due to the negligence, wilful default, fraud of or material breach of the Investment Management Agreement by Marshall Wace. Marshall Wace indemnifies the Company against all liabilities suffered by the Company as a result of negligence, wilful default, fraud of, or material breach of the Investment Management Agreement by, Marshall Wace. In respect of its appointment as investment manager to the Company under the Investment Management Agreement, Marshall Wace is entitled to receive an investment management fee and a performance fee. No other fees are payable by the Company to Marshall Wace under the Investment Management Agreement save in circumstances where the Company terminates the Investment Management Agreement on less than 24 months' notice without cause, in which case the Company will pay an amount equal to the aggregate investment management fee which would otherwise have been paid to Marshall Wace during the 24 months following the date of such notice (such amount to be calculated by reference to the Net Asset Value of the Company as at the date of termination). DIRECTORS' REPORT (CONTINUED) Statement of Directors' Responsibility The Directors are responsible for the preparation of financial statements for each financial year which give a true and fair view of the Company's state of affairs as at the end of the year and the results of operations for the year then ended. In preparing those financial statements, the Directors are required to: * select suitable accounting policies and then apply them on a consistent basis; * make judgments and estimates that are reasonable and prudent; and, * prepare the financial statements on the going concern basis unless it is not appropriate to presume that the Company will continue in business. The Directors are responsible for keeping proper accounting records, which 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 (Guernsey) Law, 2008 (as amended). They are also responsible for the system of internal controls for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Auditor Ernst and Young LLP has expressed its willingness to continue in office as auditor. A resolution proposing its reappointment will be submitted at the forthcoming General Meeting to be held pursuant to Section 199 of The Companies (Guernsey) Law, 2008 (as amended). By order of the Board Cameron McPhail Nicholas Falla Chairman Director 28 January 2010 MANAGEMENT REPORT A description of important events which have occurred during the financial year and their impact on the performance of the Company as shown in the financial statements and uncertainties facing the Company is given in the Investment Manager's Report on pages 11 to 15 and is incorporated here by reference. A description of the principal risks and uncertainties facing the Company is given at note 7 to the financial statements. Details of all related party transactions are given in note 10 to the financial statements. Going Concern The Board considers that the Company is a going concern and on the expectation of the Directors that the Company will continue for the foreseeable future, the financial statements have been prepared on a going concern basis. The Board conducts a rigorous and proportionate assessment of the Company's operational and financial risk with particular reference to: * cash flow requirements; * liquidity requirements; * the liquidity of the underlying sub-trusts; * the Company's debt position, which is currently debt free; and * the continuing viability of the Company on a reduced net asset value and cost base. The Company no longer has an automatic cash exit/buy back facility, and a cash exit remains at the discretion of the Directors to make such an offer. The Directors have no immediate plans to make a cash exit offer. The only financial commitments of the Company are its ongoing fees and expenses stated in note 6 to the financial statements. After making enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. The Directors confirm that to the best of their knowledge: a. the financial statements, prepared in accordance with International Financial Reporting Standards,give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and b. the Management Report includes or incorporates by reference a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that they face. John Le Prevost Nicholas Falla Director Director 28 January 2010 INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF MW TOPS LIMITED We have audited the Company's financial statements for the year ended 30 September 2009 which comprise the Balance Sheet, the Income Statement, the Statement of Changes in Net Assets Attributable to Participating shares, the Cash Flow Statement and the related Notes 1 to 12. These financial statements have been prepared under the accounting policies set out therein. This report is made solely to the Company's members, as a body, in accordance with Section 262 of The Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors The Directors are responsible for the preparation of the financial statements in accordance with applicable Guernsey law as set out in the Statement of Directors' Responsibilities. Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with The Companies (Guernsey) Law, 2008. We also report to you if, in our opinion, the Company has not kept proper accounting records, if the financial statements are not in agreement with the accounting records, or if we have not received all the information and explanations we require for our audit. We read other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. The other information comprises only the Background to the Company, Financial Highlights, Chairman's Statement, Background to the Investment Manager, Investment Manager's Report, Directors, Directors' Report, Management Report, and Company Information. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the Directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF MW TOPS LIMITED (CONTINUED) Opinion In our opinion the financial statements give a true and fair view, in accordance with International Financial Reporting Standards, of the state of the Company's affairs as at 30 September 2009 and of its loss for the year then ended and have been properly prepared in accordance with The Companies (Guernsey) Law, 2008. Ernst & Young LLP Guernsey January 2010 MW TOPS Limited (the "Company") BALANCE SHEET As at 30 September 2009 +-----------------------+---------------+----------------------+---------------+ | | Notes| 2009| 2008| +-----------------------+---------------+----------------------+---------------+ | | | EUR| EUR| +-----------------------+---------------+----------------------+---------------+ |Assets | | | | +-----------------------+---------------+----------------------+---------------+ |Cash and cash | | 16,572 | 1,916,196| |equivalents | | | | +-----------------------+---------------+----------------------+---------------+ |Financial assets at | 4| 156,894,633 | 1,063,305,461| |fair value through | | | | |profit or loss | | | | +-----------------------+---------------+----------------------+---------------+ |Trade and other | | 29,523| 136,001| |receivables | | | | +-----------------------+---------------+----------------------+---------------+ +-----------------------+---------------+----------------------+---------------+ |Total assets | | 156,940,728| 1,065,357,658| +-----------------------+---------------+----------------------+---------------+ +-----------------------+---------------+----------------------+---------------+ |Liabilities | | | | +-----------------------+---------------+----------------------+---------------+ |Financial liabilities | 4| 3,372,891| -| |at fair value through | | | | |profit or loss | | | | +-----------------------+---------------+----------------------+---------------+ |Investment management | 6| 255,693| 1,560,590| |fee | | | | +-----------------------+---------------+----------------------+---------------+ |Administration fees | 6| 9,820| 10,240| +-----------------------+---------------+----------------------+---------------+ |Trade and other | | 147,147| 312,461| |payables | | | | +----------
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