Friday, September 29, 2006

Supporters Trust North West Regional Meeting On 28.9.06

Colin H and I attended the above at Northwich. Jacqui Forster of SD was there and it was a chance to meet Jacqui and some of the other trusts in the area. The attendees were from Northwich Vics, Runcorn (not FC but a breakaway club), Warrington Wolves Rugby League Club, Macclesfield Town, Bury, Congleton plus a north-west based representative of Cambridge United.

So we were by far the largest of the clubs represented and there was some debate about why we were there. We stated that it was partly a reaction to the distance between the club and the supporters/ shareholders as well as other issues. These appeared to be just as valid for some of the other clubs and Northwich appeared to be at odds with their chairman. Apparently the situation there was that three fans had been banned by the chairman as they had been, in his view, overly aggressive and confrontational towards him at the end-of-season awards. The Trust chairman had tried to mediate on their behalf but had put his own position at risk by doing so, with letters in the press and hostile comments on-line.

There was some discussion about the various problems at the various trusts. It was made clear that the only other comparable groups to us were FCUM and MU Supporters Trust. The latter appear determined that they are going to buy the club back off the Glazers.

JF talked about the SD Conference and it sounds excellent. Richard Caborn & William Gaillard (of UEFA) should be there and they are hoping that Raith Rovers best-known supporter (a certain Mr Brown) might put in an appearance. JF said that UEFA were taking a great interest in the Trust situation and how it develops.

There was material on display from the various trusts and Bristol City had a particularly impressive brochure for their launch. This and other documents will prove invaluable reading/ research towards our launch.

The last formal bit was a round-robin summarising activities at all the trusts. At Runcorn, the supporters now run the club and at most of the others the trust plays a big part in financing the club in various ways. There was an interesting discussion about the line between being a fan and being a director. A few had AGM’s coming up and couldn’t muster enough nominations to fill all the positions. We asked for our round-up not to be formally noted at this stage as we are not yet under way properly.

We are planning to get together with JF toward the end of next week.

Colin Savage

A Letter To The Board of Manchester City Football Club

We realise (as many have pointed out) that we do not need the input or support of Manchester City Football Club’s board to form a Supporter’s Trust. We would, however, prefer to open dialogue with them to discuss this exciting and positive move. Having not received a response to our previous enquiry in August, we have today hand delivered a request that the board contact us. We sincerely hope they want to engage in positive discussions with us and wish to assure them that such a move is in the best interests of the club and most importantly the supporters and shareholders. We will of course inform you of all progress in this respect.

City's Finances (Part Three)

This is the next part in a series of articles written by Colin Savage first published in MCIVTA's newsletter with reference to City's Finances. With the permission of Colin and MCIVTA (thank you Heidi) it is re-published here. I think you'll find this to be another informative, interesting and factual article.

The Stadium & Those Debts

I was originally going to do this as the last article in my series but there are so many important issues surrounding these that affect the articles on the financial statements that I decided to move it up the list.

The Stadium

We've undoubtedly got a stadium that is the envy of many clubs around the world. I still get a thrill when I get anywhere near it. It's sad, I know, and the feeling has usually evaporated 90 minutes later. But how did we come by it, what happened to Maine Road, who actually owns CoMS and what does it cost us?

Our dear friends from Salford call it "the Council House" but that simply betrays their lack of sophistication in financial (and any other) matters. The truth is that the stadium is operated under something called a "finance lease". Accounting standards define this as a lease which, to all intents and purposes, confers the risks and benefits of ownership. So when they talk about "the Council House", refer them to SSAP 21, the accounting standard on the treatment of leases. (You could also tell them that it will be a useful exercise for when Glazer sells the Swamp and leases it back, as he undoubtedly will). We account for the income and are responsible for repairs and for the fittings, although there are restrictions in the lease over what we can and can't do. Hence we have seen all the fuss over signage and general customisation.

The lease can be looked at as Manchester City Council (the lessor) lending us (the lessee) the money to buy the stadium. They haven't actually given us the cash in hand and we haven't actually bought it but we pay it back with interest as though they had. Obviously this is a totally different situation to a council house, where you just pay rent. Maine Road was effectively a down-payment. We handed it over to the council in part exchange for CoMS and they "lent" us the difference. However, we still don't actually own the stadium and, as far as I am aware, never will. We have a 250 year lease on the stadium but its useful life is much shorter than this, maybe about 50 years.

After the Commonwealth Games in 2002 and once the remaining construction work had been done to put in the extra tier and build the North Stand (which was not our responsibility I believe) it needed fitting out with all the offices, bars, turnstiles and executive boxes that make a modern stadium and we had to pay for that. It has been reported that this cost around £20m.
So how do we pay for it? We have agreed a formula with the Council that allows us to keep all the gate receipts up to the capacity of Maine Road, that is, 34,000. After that, we pay them based on attendances over that amount. This includes non-football events as well. I don't know what that formula is so I can't tell you what the split is and whether it applies to the gross income or we are allowed to deduct expenses. But whatever it is the higher our crowds, we more we pay.

There are other financial implications. We have to set up an accounting entry that represents the total money we think we will be paying over the life of the lease and depends on a number of factors such as crowds, the rate of inflation and interest rates. On Page 28 of the 2005 Report is a table that illustrates this. You will see, if you read the notes above it, that we have assumed average attendance of 42,500 in making this calculation, as well as 2.5% inflation. The stadium was independently valued in May 2004 at just under £150m in that year's accounts.

I mentioned that lease is like a loan and includes interest. This is shown as an expense in the Profit & Loss Account whereas the non-interest element goes to reduce our total liability over the life of the lease. Just to illustrate this, suppose we have an outstanding lease at the start of the year of £30m. We pay 5% interest of £1.5m during the year, which will be shown as an expense in the Profit & Loss Account and will increase the total debt to £31.5m. We actually pay £2.5m in total in lease charges during the year, which reduces our total liability to £29m. Therefore we have reduced it by £1m, which is the total payment of £2.5m less the interest of £1.5m.

The interesting thing to come out of all this is the overall effect on our finances. We treat the stadium as though we own it (even though we don't) and show it at its full value in the balance sheet. This is the correct treatment according to the accepted accounting standard. Therefore we have gone from owning a stadium worth about £30m to "owning" a stadium worth £150m and this has improved our balance sheet enormously. However, even though our accounting treatment is strictly correct, the central question remains - what is it really worth to us if we ceased trading? If we owned the stadium then there would be an asset there to sell but we don't. Were we right to give up a £30m asset for one possibly worth nothing in practical terms in that way? I simply can't answer this question but it is, I believe, the key to really understanding our true financial situation.

I'll deal with this is the next article on the Balance Sheet but be warned; the implications may shock you.

The Debts

The one subject above all connected with the finances guaranteed to get us all into a heated debate. So what is the truth - are they as well-structured and manageable as Alistair Mackintosh would have us believe?

First of all, we talk about "our debt" but there are a few different types of debts we have. There are the people we owe money to in the normal course of business - our suppliers of goods and services. We receive an invoice from them and have a certain time to pay it. These are short term debts and as long as we have adequate income coming in then we should be able to pay these. We will also owe tax and national insurance, including VAT. Although these are debts, they are not part of what we refer to as "the debt"

Something else that falls into that category is the debt connected with the lease. As I said above we have to show an estimate of the total payments we would have to make over the life of the lease but this is an accounting entry as we only pay what we owe the council, according to the agreed formula, every three months. However, when you take these away, we have what most of us think of as the debt, which is the money we have borrowed. There are two main types of borrowings, secured and unsecured. The former means that, in return for the loan the lender has first call over an asset in case you cannot pay it back.

The best known form of secured debt is a mortgage, in which your house is security. Unsecured loans mean that the lender has no such security. We have both secured and unsecured borrowings. The secured loans totalled £43.3m in the 2005 accounts and consist of two separate loans. The first was for £30.3m and is repayable over 25 years at 7.27%. The second was originally for £13.7m as is repayable over 15 years at a rate of 7.57%. Of this latter loan, £700,000 was repaid during the year, leaving £13m. My best guess is that these will cost us somewhere around £5m a year to service until the fifteen year loan is repaid, then about £3m a year for the next ten years.

I said that these were secured loans and the next question should be - what are they secured on? Normally it would be our stadium but, as you now know, we don't own that. The answer is that they are secured on our future ticket income. This is an increasingly common financial instrument used by companies than lack the necessary assets for more conventional security. David Bowie did something similar, pledging his future royalties against a cash sum in advance.
Now, in order to agree to this, the financial institutions involved would have to have some confidence that these future income streams can be maintained at a respectable level. This is where the famously loyal City support comes in. Crowds of 28,000, even when we were in what is now League 1 convinced them that we could continue to pull in the cash whatever. Another element of this is that our payments are fixed over the life of the loan so all things being equal and assuming that inflation, ticket prices and TV income will rise over time means that paying £5m in ten years will not have the same impact as paying £5m this year. The down side of all this is that if our income were to fall significantly then we are still committed to paying, before we pay anything else. So if we continue in the Premiership and continue to pull in the crowds then there is no great problem paying out £5m from an income of over £60m. However, that's not to say that we couldn't find better things to spend £5m a year on (such as a striker who can actually score). But if things go disastrously wrong on the field and we lose a large chunk of our income from crowds and TV then spending £5m a year from a much lower income base gives us a potential problem.

So what were these loans spent on? The club is keen to stress that £20m went on the fixtures and fittings for CoMS but is less keen to publicise that the rest probably went on players. The basic rule of finance is borrow long term to buy long term but never borrow long term to buy short term assets. This means that it's OK to borrow money over the long term if you're spending it on an asset that will provide a return over that term. However it's not OK to borrow money long term to buy an asset that only has a short life. So, you shouldn't get a 25 year mortgage just to pay for a holiday, for example. Yet we took a long-term loan to finance player purchases, so we will be paying for these players for 15 or 25 years yet most have them have already gone. So that's not such good business but what's done is done.

The final debt is the one that we really need to look at and these are the unsecured loans from Messrs Wardle and Makin. The club calls these "soft" loans (and that's not a comment on Wardle and Makin for making them). It refers to the fact that, unlike the secured loans that we pay instalments on annually, there is no repayment plan in place for these to be repaid.
(However, I did discover, on examining the 2003 accounts, that we owed Wardle £5.7m at that time and supposedly had a plan in place to pay this back over 12 quarterly instalments. Yet in 2004 this had seemingly been ditched, suggesting we couldn't afford the £2m a year it would take). However the loans are not so soft that they don't attract interest. There's nothing wrong with this, by the way, as the lenders are entitled to some reward for their risk. Interest is at a very reasonable 5% and some or all of it is still owed to them. There are things I could criticise Wardle over but not his generosity. We have really relied on these loans to stay in business, as you will see when I talk about Cash Flow in a later article. Furthermore, if we were to cease trading they might not see some or all of that money again.

In the 2005 Accounts you will find the details of the loans on page 31 in note 17. The loans from Wardle total £14.7m with just under £4.5m from Makin. You will notice that Wardle's loan has increased from £7.7m the year before. Therefore he has pumped a further £7m in during the financial year. (Our bank balance is also just over £7m by the way so the obvious conclusion is that it is the additional £7m sitting in the bank and it went in close to the year end). So that's £19.2m we owe these two. So add the £43.3m to the £19.2m and we have total ongoing debt, excluding trade creditors and the lease, of £62.5m. We also had an outstanding amount of £2.2m, (which wasn't repaid until July 2005) and other loans totalling £1.25m. So, strictly speaking our unsecured lending was £22.65m as at May 2005 (although this would have been down to £20.4m in July, assuming no other debt had been taken on). So when I asked you what you thought our total borrowings were in the last article, you should have come up with a total of £65.95m, as against £62.2 the previous year. But the club did a very effective PR job in convincing people that debt had actually been reduced over the year. In fact, if you look at the Chairman's Report on Page 4 under Financial Performance, the last sentence of the third paragraph says "Total debt…has fallen to £57.7m". So is our chairman telling porkies? Well, not really, but he is being very selective. The £57.7m is "net of cash" which means that he has knocked off the near £7.5m we've got in the bank. At least we had it in the bank on 31 May 2005 - if we spent it the next day our net debt on 1 June could well have been back to nearly £66m. And you would have to be some accountant or PR person to prove that £62m had "fallen" to £66m.

So what was all that in the Chairman's report about net external debt falling from £50m to £38.5m? When Wardle talks about external debt he means that owed to third parties i.e. not to him or Makin as shareholders. Therefore the £50m in 2004 was made up of the £44m secured loans, another loan of £4.4m (which has since been repaid in two instalments) and £1.6m we owed the bank via our overdraft. On that basis the £38.5m is therefore the £43.3m of secured loans (we paid off £700,000), and the £2.2m still outstanding on the other unspecified loan at that time. But, I hear you cry, that's £45.5m and you are not wrong. However, once again he has knocked off the £7m plus in the bank on 31 May 2005. The same question applies; was it still in the bank on 1 June? We will find out shortly.

Now, what do you understand by the word "manageable"? I take it to mean that I can deal with something, it's within my control. Alistair Mackintosh constantly assures us that this unsecured debt in "manageable". So what does he mean by that? He means that it's within our control because Wardle and Makin aren't asking for it back, either all at once or in instalments. Which is just as well as we only had £7m in the bank at the end of May 2005 and this is somewhat less than £19.2m. It did occur to me that perhaps they don't want it back yet because they know we can't pay it. I will try that one with the mortgage company if ever I can't pay; "There's no problem - if you don't ask me for it back it's quite manageable". So if they did want it back all in one go then we would have to find the money from elsewhere. Like, by selling our most valuable player(s), for example. But I'm sure the board wouldn't do that. It will be interesting to see what our unsecured debt is in the forthcoming accounts. So if you are one of those calling for Wardle to resign, could you replace the £14.7m that he would take with him? Because if you couldn't we would probably be in a really serious mess.

So are our debts well structured and manageable - Yes Or No, I'll leave it to you to decide but hopefully you can't now say that you are a "Don't Know". In the next instalment I'll look at the first of the actual Financial Statements, the Profit & Loss Account. We're one of the top twenty European clubs by income but couldn't apparently afford a couple of million for Thomert. So what do we spend it all on?

Colin Savage

Wednesday, September 27, 2006

Who Are We?

There are four City fans behind the group to establish a MCFC Supporter’s Trust. All four are professionals whose areas of expertise include finance, tax, trust and company administration, IT, accountancy and communications. Colin Howell and Colin Savage are based in Manchester. Miles Webber is based in London. Ollie Goddard is based in Guernsey, Channel Islands. All four can be contacted via

Monday, September 25, 2006


All four of us feel passionately about what we are doing and hereby issue a "Mission Statement" setting out our aims. After giving it your careful consideration, please feel free to contact us on

"The supporters of Manchester City appear to be increasingly disillusioned about their club and generally feel remote from it. Crowds are falling as fans see themselves as less important than other external stakeholders. We see a democratically constituted Supporter's Trust as the ideal vehicle to try to reverse this, being independent from the club management but ideally working with them, to ensure that the paying fans are recognised as key stakeholders in Manchester City's future.

We want to create a mass-membership organisation, covering every element of our fantastic support, where everyone has an equal stake and whose actions are democratic and transparent. We see a trust as a channel that is run by the fans, for the fans and with the club's best interest at its heart. We also recognise the excellent work that Manchester City already does in the community and wish to support that and spread it further, wherever possible. We do not see the trust as simply a pressure group but do see it engaging with and challenging management where we feel their actions are not conducive to the best interests of the club and its supporters.

We see a trust as the appropriate umbrella for existing shareholdings and also as a vehicle for potentially acquiring further shares, wherever possible. However membership will not be limited to existing shareholders of Manchester City plc but all members will become shareholders in the trust for an affordable subscription, thereby ensuring it is accessible to the widest possible constituency."

Thank you for your time and we look forward to working together with you towards a better future.

Colin Howell, Colin Savage, Miles Webber & Ollie Goddard

Sunday, September 24, 2006

Offers Of Help

I have received quite a few offers of help from lawyers to accountants to marketing people etc. At this point in time we are not accepting those kind offers. At present we have enough people involved and have some great help from Supporters Direct who are backing us and have helped numerous trusts get formed/ organised up and down the country. By all means drop me a line at if you think you can be of assistance at some stage in the future, it is possible that we may come back to you once the trust is established. At this point in time we are deliberately keeping the people in the group to a minimum as we firmly believe that having a streamlined group of people will ensure that decisions are taken quickly and that the formation of the trust (which is our goal) will happen as soon as possible.

Frequently Asked Questions

I've received many questions and will answer the most common ones here. If I get any more (by the way I welcome them so send them to I will reply to you and list them on here.

1) How do I contribute funds to the trust? First of all, the trust has not been established, until it is we are not accepting any funds or gifts of shares.

2) How much will a subscription cost? Once the trust is formed, the price of membership will be established. At this moment in time, there is no amount in mind but as the trust is being formed so that every fan can have the opportunity to be part of it, the annual subscription has to be affordable to as many fans as possible. For comparison purposes, Spurs' supporter's trust charges £10 a year or £25 for five years. To me that seems like a fair price but as I say, the price of membership will be established once the trust is formed.

3) How do I go about gifting my City shares to the trust? Well, much the same answer as 1) above. Once the trust is established, it will then be able to accept donations of shareholdings in City.

4) What if I don't want to give the trust my City shares? No problem, the trust will not be formed as a vehicle to try and coax shareholders to transfer their shares to it. The choice is yours and yours alone. If you do not want to gift your shares but would still like the trust to benefit from the rights attributed to your shares (voting rights) then it is more than likely that a mechanism will be put in place so that you can pledge your shares to the trust but still retain the shares in your name.

5) I don't own any shares will this stop me from being a member of the trust? Absolutely not, the aim of the trust is that it will be open to every City fan by way of subscription, gifting or pledging City shares would be a bonus for the trust.

Saturday, September 23, 2006

City's Finances (Part Two)

This is the next part in a series of articles written by Colin Savage first published in MCIVTA's newsletter with reference to City's Finances. With the permission of Colin and MCIVTA (thank you Heidi) it is re-published here. I think you'll find this to be another informative, interesting and factual article.

The Annual Report and the AGM

Firstly, thanks to everyone who gave me feedback. It was very positive and has encouraged me to carry on in the same vein. So here's the next instalment, covering what goes into the Annual Report and what happens at the Annual General Meeting.

Like any business, Manchester City plc prepares annual accounts. With them being a public company, these accounts are sent to shareholders and are made generally available to anyone else who is interested. The link for these is as follows:

These follow a fairly standard pattern as required by company law and market regulation. So what's in there and what does it all mean? I'm going to concentrate on the general headings here but I will go into the 2005 figures in more detail in subsequent articles.

Taking the 2005 Report as my template, the first page (2) details the directors and the various advisers - our main bankers, auditors, solicitors, etc. Nothing terribly remarkable here - all our advisers are well known and very reputable companies. Brian Bodek used to be a partner at Kuit, Steinart, Levy, one of the solicitors we use. He left in 1998 but is still listed as a consultant.

The next few pages (3 - 7) contain the Chairman's Statement. This is a report on the past year written by John Wardle and sums up our financial performance, on-field performance and other items of interest. In most company reports, these tend to be pretty formulaic, with little illuminating comment. It should be noted at this point that these accounts cover the year to 31May 2005, which is our financial year-end. However, any significant changes between then and the finalisation of the report have to be reported. One such change was the sale of Shaun Wright-Phillips to Chelsea, for a guaranteed £21m, and Wardle talks of his surprise at SWP's sudden change of heart.

One of the statements that is revealing concerns the uses of the proceeds from that. These include investing in the Academy, reducing outstanding borrowing and paying off all outstanding instalments on players purchased in previous seasons. Oh, and whatever's left might be spent on new players. So, in other words, goodbye to any lingering hopes we might have had that the sale represented a superb opportunity to build a strong squad that could capitalise on our eighth place finish. He makes it clear that he considers it more important to strengthen the balance sheet than the team. He also talks about reducing the debt and backs it up with some figures to show how our debt is reducing. Net external debt, he tells us, is down from £50m in 2004 to £38.5m and total debt down from the oft-quoted £62.2m in 2004 to £57.7m. So that's good isn't it? Well in the next article I'll discuss our debts but in the meantime make a note of what you think our total debt really was in 2005. The answer might surprise you.

The next few pages (8 -15) are the Directors Report and associated statements. There is some detail about each director although it doesn't make it clear whether each director is executive or non-executive (as it should). I talked about the difference between the two in my last article and identified which directors fell into each camp. The Report is in a pre-defined format but there are some interesting bits worth noting. Firstly, each director has to formally retire and offer themselves for re-election every three years and in 2005 it was Brian Bodek's turn. This is usually fairly straightforward but some of you may remember that Magnier and McManus were able to put pressure on the Manchester United board by voting against the re-election of a couple of retiring directors. We can see that, just before the year-end, Ashley Lewis resigned as a director.

The next section on Substantial Interests is really important. It lists any shareholdings known to consist of 3% or more of the total shares. This means we know who the major shareholders are and whether there have been any changes from the previous year. Generally speaking, any significant changes would have to be reported at the time they occurred, rather than waiting until the accounts are published. Therefore we already know that Mark Boler became a member of the Board earlier this year.

The first section on Page 10 (Corporate Governance) is particularly interesting in this report. It details how the company ensures that it is managed correctly at the highest level. They should comply with something called the Combined Code, which sets out best practice in this area, and they should be able to demonstrate how this was achieved during the year in question. So they talk about regular board meetings and scrutiny of the financial results to ensure any problems are identified early.

The Combined Code talks about the establishment of committees to ensure that proper financial controls and suitable accounting policies are in place (the Audit Committee) and one that covers all aspects of directors' and senior management remuneration (the Remuneration Committee). These should both be made up of at least two, non-executive directors, according to the Code. The Audit Committee should ultimately ensure that a Chief Executive and/or Finance Director are looking after the financial side of things properly but look who's one of the two members of the Audit Committee. It's none other than Alistair Mackintosh, who IS our Chief Executive (and therefore an executive director rather than the non-executive suggested by the Combined Code. So effectively he is checking his own work, particularly as he was also our Finance Director previously (and still is to all intents and purposes). Up to 2005, Ashley Lewis had been on the Audit Committee but he was no longer a Director at this point. I wrote to Alistair Mackintosh to query this after the last AGM and he replied that our external auditors were happy with this. However, he did not make it clear how they had indicated this. It could be that he meant that they had not said they were unhappy, which is not quite the same as specifically saying they accept the situation. It will be interesting to see if the position has changed in the next report.

The Remuneration Committee report takes up the next few pages (12 -14) and this is another safeguard designed to ensure that the executives and senior managers don't simply award themselves inflated salary and benefit packages.

There is a section on share options, which are supposedly a device to reward executives for their performance by giving them a stake in the company, potentially at an advantageous price. A share option gives an executive the chance to buy shares within a defined time period at a fixed price. Mackintosh therefore has the ability to buy up to 200,000 shares at any point up to March 2010 at 45p each, regardless of the market price at the time. If the market price were significantly in excess of 45p then this would be a very valuable benefit but it is clearly not in his interest to pay 45p for shares that anyone else can currently buy for 29p. The incentive, from his point of view, is to push the share price up via attracting external investment at a suitable price or superb financial performance.

The final part of this section details the shareholding of each director and their remuneration for the year. Mackintosh received a salary of over £170,000, a bonus of £50,000 plus a £10,603 contribution to his pension fund.

Page 15 is a statement of the directors' legal responsibilities.

Page 16 contains the Auditors Report. The auditors are an external, properly qualified accountancy company (in our case KPMG). They are supposed to ensure that the accounts presented fairly represent the true state of affairs of the company. They will have examined the accounting records and checked that the accounting policies we use to state the figures are appropriate, prudent and take into account all foreseeable circumstances. They will ensure that transactions have been properly recorded and reflected in the accounts. So, for example, they would want to be sure that our attendance figures are recorded accurately and that all the associated revenue from those tickets had found its way into the accounts. As a former auditor myself, I had to do things like count millions of bricks in a brick-maker's yard (as the correct stock figure is critical) and stay in a casino all night until seven in the morning to ensure that the cash and chips were properly counted and balanced. So if you see someone in a suit and tie going round with a clipboard during a game counting heads, you know what they're doing! The auditors will (or should) have questioned the directors on key matters, where required and their answers will be reflected in these accounts. I'll talk about some of the accounting policies in subsequent articles but at this point will say that there can be many different ways to represent the financial situation of a transaction or asset and these can have a material impact on the figures. Therefore it is important that an appropriate policy is used.

Finally the auditors express their opinion that, in this case, the accounts fairly represent our financial situation. This is not an absolute, cast-iron guarantee that things are OK however as a board determined to misrepresent their figures (eg Enron) will do so. KPMG (one of my former employers, I should add) are one of the biggest and most reputable accountancy firms in the world but even they can get things wrong. They signed off the accounts of another former employer in 2001, just weeks before this company collapsed in a big heap! This is still all subject to legal proceedings so I'd better not say any more. If they do uncover material irregularities then they should say so in the auditors report but someone adding up their expenses wrong is not usually going to affect anything to any great degree.

The auditors are engaged by the directors but carry out their work on behalf of the shareholders, who have to formally re-elect them every year at the AGM. They can also be changed by the directors if they feel the situation warrants it. It is most important that the external auditors are seen to be independent of the directors. Therefore it would not be appropriate for a close relative of one of the directors to be responsible for the independent audit. It could be seen as a little surprising that the Manchester office of KPMG is the one which carries out our audit, as this could involve City fans on the auditors' staff having access to details that other fans don't, even though they have a strict duty of confidentiality. However, when I think about it, if we were to use the London office there is the danger that too many Manchester United fans could potentially be poking their noses into our books so, on the whole, it's probably safer using the local office.

The rest of the report contains the real meat and bones, ie the figures. I'm going to cover each section in detail in subsequent articles but there are the accounts themselves, consisting of three financial statements, plus the associated notes. The financial statements follow a prescribed format. The first (Page 17) is the Profit and Loss Account and this shows our total income and expenses during the year under review, together with the equivalent figures for the previous year. (Page 18 is to do with property valuations and their impact on our profit or loss).

The second major financial statement (Page 19) is the Balance Sheet and this shows our assets (ie the things we own or are owed) against our liabilities (the things we owe to others). The third and final statement is the Cash Flow Statement. This reveals how much cash we actually generated or consumed in total in the year. I'll discuss this in more detail later in the series but it is important to be aware that a company can report healthy profits but not actually generate any cash and, for a football club, cash is crucial as we need it to fund transfers. In some ways it is the most important and revealing of the three statements.

If you have a copy of the accounts or are viewing them on-line, you will see a column called "Notes" in all three statements and figures in this column.

These are references to the final section which, not surprisingly, is the Notes to the accounts (Pages 21 - 38). They say the devil is in the detail and this section is the Underworld. There are explanations of the accounting policies adopted and more detailed explanations of some of the figures in the accounts. Therefore you will find in here how our turnover is split between gate receipts, TV income and other income, plus many other items of interest, including details of our debts and how we pay for the stadium.

So that is the Annual Report. When this has been issued and shareholders have had some time to digest it, it forms one of the central parts of the Annual General Meeting. This is a statutory meeting where the shareholders are invited to attend and have the chance to question the board and generally takes place in December at CoMS. Typically there will be a number of formal pieces of business:
- A vote on the adoption of the accounts. This means that the
shareholders get the chance to say whether they agree with the accounts as presented. Any contentious items can be queried with the board at this point.
- A vote to re-appoint the auditors (or appoint different ones)
- A vote on the re-election of directors. Each director has to stand down
and offer himself for re-election on a regular basis and ensuring a couple of directors were not re-elected was how Magnier & McManus signalled their displeasure with the Manchester United board. With close to 50% of the shares in the hands of two directors, there would need to be a serious fall-out between Boler, Wardle & Makin to do the same thing at City.
- A vote on any other resolutions presented by the board. This could be
an increase in the number of shares issued or a change to the rules of the company to allow them to do something they couldn't do before. Sometimes these can be seemingly innocuous but have a sting in the tail. Some will require a simple majority (ie over 50%) in favour but some more far-reaching ones might need two-thirds or three-quarters of the votes in favour.

As far as the voting is concerned, you can (if a shareholder) turn up in person and a few hundred did last year. You can request that your vote is cast a certain way or that someone else has the ability to cast a vote on your behalf as they see fit. As I said, this is the one real chance you get as a shareholder to question the board and hear what they have to say and the City AGM has been the scene of many a verbal bloodbath in the past!

At the last AGM, Stuart Pearce gave a short speech about the playing side and answered some questions but no discussion of individual players and their contracts is allowed. Finally there was an open Q & A session but it only lasted half-an-hour. The questions range from the serious (the SWP transfer) to the banal. The board should come out of this session feeling they've been put through a mangle but have succeeded in justifying their actions to shareholders. They had a very easy ride in 2005 but hopefully, with all this knowledge MCIVTA readers will have, they will have to earn their money at the next AGM.

In the next article I will be discussing the financial situation regarding CoMS and analysing our debts. I think I can assure you of a fascinating read!

City's Finances (Part One)

Colin Savage is one of the group pushing the Supporter's Trust formation forward. He also publishes articles in MCIVTA's newsletter. At the moment he is writing a series of articles about the club's finances. With the kind permission of Colin and MCIVTA (thank you Heidi) the first part of his informative series is published here, fans and shareholders will not only find this article of great interest but may also learn something they did not previously know.

This is the first of a promised series of articles in the lead up to the publication of the annual report and general meeting. In it, I have attempted to clarify the share-holding position, the structure of the club and who does what on the board.

1. The Club's Shares, Ownership and Management

Manchester City is a "publicly quoted" company. This doesn't mean that we're always in the press but that our shares are traded on a recognised stock exchange and can be easily bought and sold. The market involved is called Plus (formerly Ofex) and specialises in smaller to medium size companies. Their website can be found at The Manchester City page can be found at: Other sporting members of Plus are Arsenal, Glasgow Rangers and Northampton Saints Rugby Club.

Anyone can buy the shares, through a stockbroker, and being a shareholder entitles you to
attend the Annual General Meeting, vote on various matters and question the directors. The AGM is a statutory requirement and is usually held in December, following the publication of the annual report and accounts in October. In the past, with the various boardroom upheavals, these have been lively affairs but have been quieter recently. However, the handling of last year's meeting led to some dissatisfaction and, with increased focus on the finances following the sale of SWP, things could start warming up again!

The more shares anyone has then the more they have the capacity to influence events. On the basis of "one share, one vote" then anyone who owns over 50% of the shares controls the company. In the case of our friends in Salford, the Glazer family (bless them) own virtually all the shares and have made their company "private". This means they do not have to issue accounts publicly or hold an AGM. Therefore their supporters don't have a clue. Sorry, that should read …don't have a clue about the financial affairs of the company.

We know who the major Manchester City shareholders are as there is a requirement for public companies to declare any shareholding of 3% and over and these are detailed in the annual report. There are just over 54 million City shares in circulation and the current share price is quoted as 28p. This is what is known as a "mid-price" as the price for buying a share is higher than the price for selling. So currently you can buy shares at 29p each but would only get 27p each if you sold them immediately. The difference is the stockbrokers' profit margin. There is no minimum investment but many brokers will levy a flat dealing charge up to a certain level. So the fewer you buy, the greater the average cost per share.

The share price is a reflection of the financial worth of a company and its perceived prospects. Multiplying the number of shares by the mid-price gives what is known as the market value of the company. Therefore, in theory, MCFC is valued at just over £15m. Compare that to Aston Villa, which has just been sold for about £64m (but there are reasons for the higher valuation). MCFC has over 5,000 shareholders but there are four who matter.

The largest group of shares are held between John Wardle, the Chairman, and his former business partner in JD Sports, David Makin. Some are held in John Wardle's own name and some are held jointly between him and David Makin but the overall holding totals 29.95%. The significance of this level of holding is that anyone who owns 30% of a company's shares is obliged to make an offer to buy the shares of the other shareholders. Therefore unless they plan a full takeover of MCFC then Messrs Wardle and Makin will keep their maximum shareholding at this level. Although they don't own over 50% they clearly have a large say in events at Manchester City.

The next largest shareholder is the Boler family. The late Stephen Boler built up a substantial stake in MCFC some years ago and this currently represents 18.75% of the shares. Sadly, he died in 1998 but his family's interest was represented on the board by Ashley Lewis for a number of years. He stood down last year but Stephen Boler's son, Mark, joined the board earlier this year. Stephen Boler was a friend of Peter Swales and was believed to be very upset about the way Swales was treated at the time of the Francis Lee takeover.

The third largest shareholder is BSkyB, with 9.88%. Sky has held shares in a number of clubs and was blocked from a takeover of Manchester United a few years ago. It is unclear what their motive is in owning shares in football clubs although it may have something to do with being able to influence negotiations on TV rights. They bought their stake when we were running away with the First Division in 1999 and paid £7.5m for it. It is currently worth around £1.5m so they are sitting on a big loss.

The last of the big four is Francis Lee, who of course endured a turbulent period as chairman after an acrimonious battle with Peter Swales. He still owns around 7% of the shares and, like the others, is probably sitting on a big loss currently. Lee is not on the board and it is unclear whether he is just hanging on to his shares until the price increases further or whether he has other plans. However, if the share price carries on towards 50p it will be interesting to see what all the four groups do.

Between them, these four own around two-thirds of the total shares. This leaves one third of the shares in the hands of around 5,000, smaller shareholders. There are many people, like me, that have a few hundred shares and about 300 of us turned up to the last AGM.

Many companies pay a dividend on their shares. This is expressed in pence per share and is a share of the profits given to the investors (i.e. the shareholders). It is akin to interest on your savings except that it might be nothing or could be a very good percentage in any given year. This, as well as the fact that shares can increase in value, is the reason that stocks and shares have become a popular and standard form of investment. MCFC shares have not paid a dividend for many years because the financial performance of the company has meant there is insufficient cash to fund this. Even a dividend of a penny per share would cost us over £500k and just imagine what SP could do with that!

However it is interesting to note that the share price has been rising steadily and has doubled over the last 12 months. There is no obvious reason for this but it may reflect a feeling that the finances are improving, there is a potential investor waiting in the wings or simply a view in the markets that, in view of the takeovers of Manchester United and Aston Villa among others, football club shares could be a worthwhile investment again. They still have some way to go to reach their highest price over the last five years, which is just over 50p. There are a number of clubs where groups of supporters known as Supporters Trusts, own some or all of the shares in their club and there was an article on this in MCIVTA 1251. If we (the supporters) could somehow combine these small holdings into a more significant bloc (say of 10% or more) then we could wield far more clout than we do now.

The club is run by a Board of Directors, who have a number of legal responsibilities (such as preparing accounts). The board at MCFC, in common with many other companies has a Chairman and a Chief Executive, plus a number of other directors. In our case there are three more directors and this is on the low side as other clubs can have seven or eight.
Directors can either be "Executive" or "Non-executive". The former are full-time employees of the company and are paid a salary. Typically, there would be a chief executive and a finance director, and maybe some others (Marketing, Sales, Operations, etc.). Non-executives are not full-time employees, although they are usually paid a fee and expenses. Their role is to guide the executive directors and also act as a check and balance, to ensure that the executives act in the best interests of the shareholders. They may well be executive directors of other companies.

The question is often asked "What do these people do for Manchester City?" The chairman has overall responsibility for setting the direction of the club and, as I have already detailed, our chairman is also the major shareholder. The chief executive has overall responsibility for running the business side of things and most, if not all of you will already know that our chief executive is Alistair Mackintosh. He is a chartered accountant who was originally our finance director. He is not a major shareholder (although he has a few thousand shares) but he is the only executive director. It is only relatively recently that full-time, paid directors were allowed at football clubs. Martin Edwards and Doug Ellis were among the first to take advantage of this change.

The other directors are Brian Bodek, Dennis Tueart and Mark Boler. All of these, as well as John Wardle, are non-executive. Bodek is an executive director of a couple of other companies and is a qualified solicitor.

Tueart needs no introduction as he was one of our finest players of the last 30 years but he has also built up a very successful sports promotion business. At the last AGM, it was stated that Brian Bodek provides valuable (and free) legal advice to the club and Tueart has responsibility for playing affairs. Neither Tueart nor Bodek are significant shareholders although, like Mackintosh, they have a few thousand shares. Mark Boler represents the interests of the Boler family. They have a near 20% stake in the company and it is usual for anyone with this level of shareholding to have a seat on the board if they want one. In that way they can keep a close eye on their investment. It is generally believed that Brian Bodek performs this role for BSkyB.
Therefore not all of the directors are major shareholders. Bernard Halford, as Company Secretary, will also attend Board meetings.

At the beginning I said that MCFC was a publicly quoted company. In fact MCFC consists of a number of companies. The most important of these (and the one in which the shares are publicly traded) is Manchester City PLC (standing for Public Limited Company). You might think the word "limited" refers to our footballing ability but in fact it means that the shareholders are protected against having to pay any outstanding debts of the company if it fails. So their liability, if this were to happen, is limited to the amount they have paid for their shares. Manchester City PLC actually owns three other companies that make up the group.

One is Manchester City Football Club, which is self-explanatory. There are various reasons why the football club is owned by another company and one is that there were various restrictions placed on football clubs by the FA that can be got round by having a so-called holding company (not to be confused with a holding midfield player). This is a company that is set up for the purpose of owning a majority or all the shares in another associated company. Tottenham Hotspur was the first to go down this path in 1983.

The two other subsidiary companies are Manchester City Investments Limited and Manchester City Property Limited. The former "owns" the long term, £44m debt issued a few years ago and the other, I believe, "owns" the lease on the stadium (more of these in a subsequent article). The establishment of these companies may well have been a requirement for these transactions.

I hope this has given you some idea of the structure and ownership of MCFC. If anyone has anything to add to this or I have made any howlers then please feel free to tell me or preferably publish your views in MCIVTA. I would also be grateful for any feedback as to whether the level is right or not. In the next instalment I plan to look at the contents of the Annual Report and talk about the Annual General Meeting.

Supporter's Trust Article Of 17.8.06

On 17.8.06 MCIVTA published an article by one of the guys in our group. His name is Colin Savage and he is based in Manchester. With the kind permission of Colin and MCIVTA (thank you Heidi) here is the article. By the way please take some time to look at MCIVTA's website

Many of you may be aware of the existence of the above at various clubs.

These are formed for a variety of reasons but the aim is to provide a democratic and legally constituted framework for a club's supporters, through which they can, if desired:

1) Represent the views of supporters to the club;
2) Bring the club closer to the community;
3) Own shares in the club, where appropriate;
4) Possibly take some part in the running of the club, often via the election of supporter directors.

The best known example of a supporters' trust is Barcelona, where the supporters own the club, but many English & Scottish league clubs also boast supporters' trusts and these are actively encouraged by the Government, via the Supporters Direct organisation. A few English league clubs are, like Barcelona, also wholly owned by trusts (Brentford, Chesterfield, Rushden & Diamonds and Stockport). Often these have been set up as a response to financial difficulties but Manchester United fans also set up a trust as a reaction to the potential takeover by Sky. It still exists following the Glazer takeover although it has no connection with the club.

Trusts that do have some connection are mainly found in the lower leagues but Spurs, Arsenal and Villa, as well as newly-promoted Reading and Watford all have them. Reading is an interesting example as their chairman, John Madejski, has over 97% of the shares so the trust has no hope of being able to influence events via a significant shareholding. However they have built up such credibility that they now attend part of the regular senior management meeting at the club.

Manchester City is a publicly quoted company on the Ofex market, meaning that its shares can be easily bought (and sold) and many fans, me included, have done so. This entitles you to attend and vote at the AGM and receive copies of the annual report and accounts. There are currently around 55 million shares in circulation and they can be bought for 24p each at today's price.

Any shareholding over 3% has to be declared to the Stock Exchange and shown in the accounts. This means that we know who owns large shareholdings in the club.

The main blocks of shares are held by four groups. John Wardle & David Makin are the major shareholders with 29.95%, followed by the estate of the late Stephen Boler, with 18.75%. The next two large shareholdings are in the hands of Sky and Francis Lee, with 17% between them. This makes up 65.7% and given that there are no other holdings above 3%, it is therefore likely that the largest group of shares, about a third, are in the hands of a few thousand small shareholders.

Clearly, the more shares you hold, the more of a say you potentially have in the club, particularly once you get a significant stake. However the concept of a trust, if set up as a sort of co-operative in the recommended way, means that everyone, regardless of their individual shareholding, has the same stake and standing. That is not to say that individual shareholdings are "re- distributed" but that they can potentially be combined, in various ways, into one voting block of far greater power than a myriad of little holdings. The trust can also buy shares on its own behalf, with funds contributed by members. The rules for the trust should ensure that membership is open as widely as possible via affordable subscriptions and that the trust is a non- profit making, fully accountable body.

The idea of a Supporters Trust at Manchester City has been floated again recently. There is a wide diversity of views about the way our club is being run but I think we all agree that there is less regard for the ordinary supporter these days. This may well be a general trend across the Premiership but we've certainly seen it at City. There is less and less support for the Supporters Club branches. The AGM is a chore to be got over with as soon as possible. The more money that comes into the game from Sky and other corporate sources (hospitality & sponsorship) the less important we individual fans seem to be both financially and as a voice. A Supporters Trust is one way to address this.

The Club has been approached and their response has been resoundingly non- committal so far. This is not helpful but is certainly not a show-stopper. In fact this response says to me that we need this more than ever, rather than the increasingly sanitised communication channels we currently have (Points of Blue and the club-provided spin in the Manchester Evening News) plus the blanket assurances about the finances that never seem to be borne out in reality. When Don Price starts to get cynical and disillusioned then it's time to worry. My own concerns started when I experienced the AGM and realised that the club was not prepared to engage with its supporters and shareholders in any meaningful way.

Please note that this is not intended to be a single-issue pressure group (like Stand Up Sit Down) or breakaway unit (like FC United). We are not going to solve the football-wide problems of diving, the increasing influence of television or an unequal financial playing field. Ideally we would like to work with the board and management in order to ensure that the fans that go to Sunderland or Reading on a Tuesday night are seen as more important to the club than the people who pay their Sky Sports subscription but have no interest in Manchester City (or any other club for that matter).

Friday, September 22, 2006

Supporters Direct

As mentioned previously, we are currently dealing with Supporter's Direct who will help us towards our goal of forming a Supporter's Trust. If you want further information please take some time to look at their website (I have put a link on this blog to their site). We are still at an early stage and Supporter's Direct have been excellent. We have our own representative there and will be meeting with them shortly. In the meantime, we are planning to attend next week's North West Supporter's Trust meeting. We also plan to attend the Supporter's Direct annual conference in London on 13 October. Reports on those will follow.

I Think I Need To Clear Up A Few Things

I've heard from many fans and I've read a number of message boards, I think I need to clear a few things up so that we all know where I stand. I am a mad keen passionate City fan who is also a shareholder. I am not part of or subscribe to any fan's group (official or unofficial), fan's forum, fanzine, supporter's association, shareholder's group whatever, I am simply a fan. I do however, receive the MCIVTA newsletter. I do not post on any messageboard other than Manchesteronline and any views that I post there are my own and not necessarily that of the group I am part of. I do not have any financial backer, I do not have millions (or thousands) stashed away for this project. I am not a stalking horse for somebody else. I am simply a fan who wants the best for City. I consider myself as a catalyst towards every City fan having the opportunity to play a democratic and positive part in the future of our great club. I have no ulterior motives, I have no axe to grind and I will not be bought off. My intentions are honourable. I will give any fan my time whenever I can. I will tell you all that I can. I hope that clears a few things up and look forward to seeing the next rumour or revelation on the message boards of the secretive mysterious multi-millionaire backer with high profile contacts!

David Conn

I would like to thank SoulboyFTR, who posts on Manchesteronline, for telling me to seek out David Conn. I managed to track him down and exchange a few e-mails with him. He's a very busy man and at first I think he was trying to suss out that me & my fellow fans' intentions were honourable! I have now almost finished reading his book The Beautiful Game? Searching For The Soul Of Football and what a book! If you are seriously interested in what a Supporter's Trust is about and can achieve read that book. Recently I have exchanged a few more e-mails with David and informed him what we are trying to achieve and given him a little more insight into what we plan to do in the future. He has been very helpful and a big thank you. David is now happy to say that he is "supportive of our aims". I will continue to speak to David as we drive forward and have been cheeky enough to ask him if he would speak at our open meeting if time allows! Thank you David for inspiring me.

Thursday, September 21, 2006

A Quick Update Re News/ Newsletters

The news of a Supporter's Trust in the offing is spreading like wildfire at the moment. I will continue to send out a newsletter every few weeks, please subscribe via I will of course be posting updates here as well. I am in the process of adding a serious load of information etc over the weekend so please come back soon. Finally, I try and reply to each individual e-mail however, with my inbox getting fuller literally by the minute sometimes I am too busy or forget to reply to one or two! Please accept my apologies, if you want to subscribe and I don't reply, don't worry I will have added you to the list. If you think I've missed you off, please drop me another line. Thank you for your patience. Best wishes and Keep The Faith Ollie

Wednesday, September 20, 2006


Hi I'm Ollie Goddard I am an avid fan and shareholder of Manchester City. This is my blog detailing my and a few fellow fans' efforts to establish a Manchester City Football Club Supporter's Trust. Supporter's Trusts are set up to promote and support the concept of democratic supporter ownership and representation though mutual not for profit structures. They are also set up, to promote football clubs as civic and community institutions and work to preserve the competitive values of league football in the United Kingdom and promoting the health of the game. I, many fans and shareholders feel that such an organisation should be put in place at our great Club. We have raised the possibility of a Supporter's Trust with the Club but it is clear at this present time that the board have no intention of becoming involved with one. On 15 August 2006 I was informed that "there are no current plans to be involved in setting up such a trust" I did ask if the club would ever consider working with a properly constituted Supporter's Trust but as of today I have not received an answer. According to the latest figures available approximately 5,000 individuals and nominees currently own 33% of the club but do not have a representative on the board or a voice. A Supporter's Trust does not require the backing of the Club. Supporters Direct a Government backed agency to promote Supporter's Trusts are currently supporting our bid to set one up.

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