Half-yearly Report

Manchester and London Investment Trust plc ("MLIT" or the "Company") ANNOUNCEMENT OF THE UNAUDITED INTERIM GROUP RESULTS For the six months ended 31 January 2014 The Directors announce the unaudited interim Company results for the six months ended 31 January 2014. The key results for the period were: - The Net Asset Value per share has decreased by 10.2 per cent to 299.9p, an underperformance of 9.6 per cent relative to the performance of our benchmark index; - The Directors have declared an interim dividend of 5.5p per share to be paid on 30 April 2014, to all shareholders on the Register at the close of business on 11 April 2014. Chairman's Statement Performance Our benchmark dropped 0.6 per cent during the period. However, we dropped further, leading to an underperformance of 9.6 per cent. The Company's net assets per share decreased by 10.2 per cent over the half year. Dividend The Board has declared an interim dividend of 5.5p per share, payable on 30 April 2014, which is the same interim dividend as for the half year ended 31 January 2013. We are aware of how important dividends are to our shareholders but our Net Asset Value is nearly twenty five per cent lower than last year. Outlook and Strategy QE continues to drive the US market higher but other markets have started to slow down. Whether this is simply a pause in a continuing bull market or the start of a period of lower returns remains to be seen. Once again exposure to developed markets has been rewarded and stocks exposed to developing markets have been punished. This investment performance differential has not seen any change since 2011 and once again that has not helped our performance. The simple response is often to simply suggest we switch to increase our UK domestic exposure, but this could be a dangerous strategy. It is clear that the domestically focused Mid-Caps are trading at stretched valuation multiples. We are disappointed with the performance in this period but we have been very clear that we wished to invest in companies based in the developed markets with operational exposure to developing markets. This investment theme worked well for a decade up to 2011, but since then continues to perform very poorly. The Investment Manager detailed to shareholders at our AGM that he felt that performance would remain weak until there was more certainty that China's planned deceleration was controllable. This may well take some time and there is no certainty that the outturn will be as we hoped for. In the meantime, we do not see the logic of selling shares that optically look relatively inexpensive, to buy shares that are trading at multi-year valuation multiple highs. P H A Stanley, Chairman. March 2014. Investment Manager's Report Investment Manager's Review Performance over period Our underperformance has been broad based and can be largely explained by a review of nine of our largest holdings during the period. Holding Performance Glencore Xstrata plc 1.5% Vodafone Group plc 1.3% Unilever plc -0.9% BG Group plc -0.9% Diageo plc -1.0% Syngenta AG -1.3% Standard Chartered plc -1.5% PZ Cussons plc -1.8% S&P 500 Index Shorts -3.9% Other positions -1.1% Total -9.6% The Miners finally went well for us with positive contributions from both Glencore Xstrata plc and Rio Tinto plc. We attended the Indaba conference in Cape Town in February 2014 and had a number of in depth conversations with these companies and other sector commentators. The state of the Chinese economy is a clear worry, but the philosophy of the sector has changed and the focus is now on cost cutting, reducing debt, improving efficiencies and shareholder returns. In the last few years, the Consumer Goods sector has performed very well. However, over the last nine months the sector has been weaker due to concerns about the slow down in emerging markets coupled with the increased focus on price competition in the developed markets. Standard Chartered plc has seen a compression in its wholesale net interest margins as its market places have seen a wave of competitive pressure from banks looking to offload excess funds provided at discount rates from central banks. We expect this situation to reverse in time but Standard Chartered plc needs to take a more measured approach to growth, whereby earnings growth exceeds the growth in its risk weighted assets. In the meantime, the stock is trading only marginally higher than its book value, whilst yielding an attractive dividend of greater than four per cent. BG Group plc has continued to disappoint on delivery, with ongoing issues in Egypt and delays across the portfolio. However, whilst these successive guidance cuts have damaged near term profitability, the core value of their assets remains largely intact. As such, we believe the near term delivery risk is more than compensated by the stock's material discount to NAV. Whilst waiting for this value to be unlocked will require patience, the assets are of great enough value that further failures by the incumbent management could draw attention from competitors or shareholder activists. In the meantime, we also look towards the prospect of a positive FCF in 2015 and the potential for greater future shareholder returns. Syngenta AG has seen a decline in earnings due to bumper crops in North America which have suppressed grain prices, alongside some issues with the regulatory approval of its traits in China which have led to exporting farmers being less willing to use its seeds. If you are selling an integrated offering, the sales proposition often starts with the seed. A cost base set in Swiss Franc whilst emerging market currencies are falling is also a painful situation to be in. Once again, we see these issues as reversible but we hope Syngenta AG can launch future technology with more advanced tactics. We have remained less than fully invested in the market, which has been a reasonable strategy considering that our benchmark has fallen during the period. We also continue to believe that the S&P is one of the more expensively valued global indices and hence, coupled with its liquidity and tight spreads, is attractive as a tool for reducing our Net Long to Net Asset position. However, during the period the S&P 500 outperformed our benchmark by 6.1 per cent. We would suggest that the main reason for this outperformance has been because the Dollar weakened against Sterling by 8.7 per cent during the period. This was not the consensus trade so we are not alone in getting this element of our position incorrect. During the period the recovery of the UK has startled most, including Ed Balls, Mark Carney and George Osborne. In addition, those consensus dollar bulls who saw a lower dependence on oil imports for the USA and a commencement of tapering as a prelude to dollar strengthening have been proven wrong. It is important to note that we entered the period with an S&P 500 short position valued at £48m and this position has been reduced to £26m as at 17 March 2014. During the period we sold our positions in Weir Group plc, Smith & Nephew plc, Burberry Group plc and Vodafone Group plc. We still like all these companies who have all performed well, but we decided to reduce our gross holdings so we sold these positions and reduced the market hedge we had against them. We were concerned regarding: - the valuation of Weir Group plc when Rolls Royce plc was trading at a less expensive multiple and the mining sector is likely to continue to slash capex; - Burberry Group plc's ability to weather a cooling of China's consumption growth and the required replacement of their Japanese license revenue; - the valuation multiples Smith & Nephew plc were paying for new acquisitions; and - whether Vodafone Group plc was pricing in too much certainty of a bid from A T & T Inc. Gearing By the interim period end, the portfolio's net long over net asset position had been reduced to a level of 93.5 per cent. There has not been a material change since the period end. Conclusion In conclusion, we remain focused on investing in developed market equities which are liquid and are participating in global growth via the developing markets. We prefer companies with short working capital cycles, strong market positions with an understandable business model, open information flow, long development cycles and attractive returns on capital. For enquiries: Manchester and London Investment Trust plc Michael Kurt Camp Company Secretary Tel: 0161 228 2389 Midas Investment Management Limited Mark Sheppard Investment Manager Tel: 0161 228 1709 Trust Performance At At Percentage 31 January 2014 31 July 2013 Change Net assets attributable to Equity Shareholders (£'000) 67,360 75,050 (10.2) Net asset value per ordinary Share (p) 299.9 334.2 (10.2) Dow Jones UK Total Stock Market Index 2880.2 2897.3 (0.6) Interim dividend declared per ordinary share 5.5p 5.5p - Ex-dividend date 9 April 2014 Record date 11 April 2014 Payment date 30 April 2014 The price and net asset value is published in the Investment Companies Sector of The Financial Times. Investment Portfolio As at 31 January 2014 Company Sector Value £'000 % of Net Assets PZ Cussons plc Personal Goods 16,296 24.2 Diageo plc Beverages 8,142 12.1 Glencore Xstrata plc Mining 7,663 11.4 Rio Tinto plc Mining 6,612 9.8 Standard Chartered plc Banking 5,216 7.7 Afren plc Oil & Gas Producers 5,212 7.7 Syngenta AG Chemicals 5,137 7.6 Unilever plc Food Producers 4,995 7.4 BG Group plc Oil & Gas Producers 4,584 6.8 Jardine Matheson Holdings Ltd General Industrial 3,950 5.9 BP plc Oil & Gas Producers 3,503 5.2 bio Merieux SA Medical Technology 2,833 4.2 The Interpublic Group of Media Communications 2,693 4.0 Companies Inc Weir Group plc Industrial Engineering 2,506 3.7 KWS SAAT AG Agrisciences 2,366 3.5 Remy Cointreau SA Beverages 2,272 3.4 Trinity Exploration & Production Oil & Gas Producers 1,827 2.7 plc Vedanta Resources plc Mining 1,611 2.4 Etablissements Maurel et Prom SA Oil & Gas Producers 1,574 2.3 Echo Entertainment Group Ltd Travel & Leisure 1,450 2.2 Parmalat SpA Food Producers 891 1.3 Northern Petroleum plc Oil & Gas Producers 653 1.0 Cairn Energy plc Oil & Gas Producers 474 0.7 Tullow Oil plc Oil & Gas Producers 332 0.5 Heritage Oil plc Oil & Gas Producers 314 0.5 Other listed investments (under Various 412 0.6 0.5%) Listed Investments 93,518 138.8 Other Investments 181 0.3 Cash and Net Current Assets (26,339) (39.1) Net Assets 67,360 100.0 Investment Objective The investment objective of the Company is to achieve capital appreciation together with a reasonable level of income. Investment Policy Asset allocation The Company's investment objective is sought to be achieved through a policy of actively investing in a diversified portfolio, comprising UK and overseas equities and fixed interest securities. The Company seeks to invest in companies whose shares are admitted to trading on a regulated market. However, it may invest in a small number of equities and fixed interest securities of companies whose capital is not admitted to trading on a regulated market. Investment in overseas equities is utilised by the Company to increase the risk diversification of the Company's portfolio and to reduce dependence on the UK economy in addressing the growth and income elements of the Company's investment objective. The Company may invest in derivatives, money market instruments, currency instruments, contracts for differences ("CFDs"), futures, forwards and options for the purposes of (i) holding investments and (ii) hedging positions against movements in, for example, equity markets, currencies and interest rates. There are no maximum exposure limits to any one particular classification of equity or fixed interest security. The Company's investments are not limited to any one industry sector and its current investment portfolio is spread across a range of sectors. The Company has no specific criteria regarding market capitalisation or credit ratings in respect of investee companies. Risk diversification The Company intends to maintain a relatively focused portfolio, seeking capital growth by investing in approximately 20 to 40 securities. The Company will not invest more than 15 per cent of the gross assets of the Company at the time of investment in any one security. However, the Company may invest up to 50 per cent of the gross assets of the Company at the time of investment in an investment company subsidiary, subject always to other restrictions set out in this investment policy and the Listing Rules. The Company intends to be fully invested whenever possible. However, during periods in which changes in economic conditions or other factors so warrant, the Investment Manager may reduce the Company's exposure to one or more asset classes and increase the Company's position in cash and/or money market instruments. Gearing The Company may borrow to gear the Company's returns when the Investment Manager believes it is in shareholders' interests to do so. The Company's investment policy and the Articles permit the Company to incur borrowing up to a sum equal to two times the adjusted total of capital and reserves. Any change to the Company's borrowing policy will only be made with the approval of shareholders by special resolution. The effect of gearing may be achieved without borrowing by investing in a range of different types of investments including derivatives. The Company will not enter into any investments which have the effect of increasing the Company's net gearing beyond the above limit. General In addition to the above, the Company will observe the investment restrictions imposed from time to time by the Listing Rules which are applicable to investment companies with shares listed on the Official List of the UKLA under Chapter 15. In accordance with the Listing Rules, the Company will manage and invest its assets in accordance with the Company's investment policy. Any material changes in the principal investment policies and restrictions (as set out above) of the Company will only be made with the approval of shareholders by ordinary resolution. In the event of any breach of the investment restrictions applicable to the Company, shareholders will be informed of the remedial actions to be taken by the Board and the Investment Manager by an announcement issued through a Regulatory Information Service approved by the FCA. Benchmark Index Performance is measured against the Dow Jones UK Total Stock Market Index. The Company sources index and price data from FactSet Research Systems Inc. Consolidated Statement of Comprehensive Income For the six months ended 31 January 2014 (Unaudited) (Unaudited) (Audited) Six months ended Six months ended Year ended 31 January 2014 31 January 2013 31 July 2013 Revenue Capital Total Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 (Losses)/gains on investments at fair value - (7,569) (7,569) - 14,354 14,354 - (240) (240) Trading income 1,050 - 1,050 572 - 572 627 - 627 Investment income 1,216 - 1,216 1,254 - 1,254 3,189 - 3,189 Gross return 2,266 (7,569) (5,303) 1,826 14,354 16,180 3,816 (240) 3,576 Expenses Management fee (185) - (185) (75) (140) (215) (411) - (411) Transaction costs (39) - (39) (9) (36) (45) (82) - (82) Other expenses (127) - (127) (107) (4) (111) (232) - (232) Total expenses (351) - (351) (191) (180) (371) (725) - (725) Finance costs - (183) (183) - (161) (161) (2) (327) (329) Profit/(loss) before tax 1,915 (7,752) (5,837) 1,635 14,013 15,648 3,089 (567) 2,522 Taxation - - - - - - - - - Profit/(loss) attributable to equity shareholders 1,915 (7,752) (5,837) 1,635 14,013 15,648 3,089 (567) 2,522 Earnings/(loss) per share (p) 8.53 (34.52) (25.99) 7.28 62.40 69.68 13.76 (2.53) 11.23 The total column of this statement represents the Group's Statement of Comprehensive Income, prepared in accordance with IFRS. The supplementary revenue and capital return columns are both prepared under guidance published by the Association of Investment Companies. All items in the above statement are derived from continuing operations. Consolidated Statement of Changes in Equity For the six months ended 31 January 2014 Unaudited Six months ended 31 January 2014 Capital Capital Share Share Other Reserve Reserve Retained Capital Premium Reserves Unrealised Realised Earnings Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 August 2013 5,614 35,132 (79) 5,596 24,899 3,888 75,050 Total comprehensive loss - - - - - (5,837) (5,837) Transfer of profit ealized on previous transfers - - - 3,165 (3,165) - - Transfer of capital losses - - - (3,240) (4,512) 7,752 - Ordinary dividend paid - - - - - (1,853) (1,853) 5,614 35,132 (79) 5,521 17,222 3,950 67,360 Unaudited Six months ended 31 January 2013 Capital Capital Share Share Other Reserve Reserve Retained Capital Premium Reserves Unrealised Realised Earnings Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 August 2012 5,614 35,132 (79) 8,146 22,916 3,786 75,515 Total comprehensive - - - - - 15,648 15,648 income Transfer of capital profits - - - 13,444 569 (14,013) - Ordinary dividend paid - - - - - (1,752) (1,752) 5,614 35,132 (79) 21,590 23,485 3,669 89,411 Audited Year ended 31 July 2013 Share Capital Capital Share Other Reserve Reserve Retained Capital Premium Reserves Unrealised Realised Earnings Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 August 2012 5,614 35,132 (79) 8,146 22,916 3,786 75,515 Total comprehensive - - - - - 2,522 2,522 income Transfer of capital losses - - - (2,550) 1,983 567 - Ordinary dividend paid - - - - - (2,987) (2,987) 5,614 35,132 (79) 5,596 24,899 3,888 75,050 Consolidated Statement of Financial Position As at 31 January 2014 (Unaudited) (Unaudited) (Audited) 31 January 31 January 31 July 2014 2013 2013 £'000 £'000 £'000 Non-current assets Investments held at fair value through profit and loss 68,736 91,059 75,689 Derivative financial instruments - longs 24,963 26,887 49,457 93,699 117,946 125,146 Current assets Trade and other receivables 10 29 190 Derivative financial instruments - 30,529 46,257 55,673 shorts Cash and cash equivalents 14,617 11,305 21,802 45,156 57,591 77,665 Gross assets 138,855 175,537 202,811 Current liabilities Borrowings (8,220) (6,631) (10,967) Trade and other payables (649) (3,482) (1,863) Derivative financial instruments (62,626) (76,013) (114,931) (71,495) (86,126) (127,761) Net assets 67,360 89,411 75,050 Equity attributable to equity holders Ordinary share capital 5,614 5,614 5,614 Share premium 35,132 35,132 35,132 Capital reserves 22,743 45,075 30,495 Goodwill reserve (79) (79) (79) Retained earnings 3,950 3,669 3,888 Total equity shareholders' funds 67,360 89,411 75,050 Net asset value per share (p) 299.9 398.1 334.2 Consolidated Statement of Cash Flows For the six months ended 31 January 2014 (Unaudited) (Unaudited) (Audited) 31 January 31 January 31 July 2014 2013 2013 £'000 £'000 £'000 Cash flow from operating activities (Loss)/Profit after tax (5,837) 15,648 2,522 Interest paid 183 161 329 Losses/(Gains) on investments 2,231 (13,787) (9,106) Decrease/(Increase) in receivables 180 52 (109) (Decrease)/Increase in payables (1,214) 1,430 (189) (Decrease)/Increase in derivative financial instruments (2,667) (1,144) 5,788 Net cash (used in)/generated from operating (7,124) 2,360 (765) activities Cash flow from investing activities Purchase of investments (12,457) (6,679) (16,548) Sale of investments 17,179 9,373 29,931 Net cash generated from investing activities 4,722 2,694 13,383 Cash flow from financing activities Equity dividends paid (1,853) (1,752) (2,987) (Repaid to)/drawn from loan facility (2,747) (3,268) 1,068 Interest paid (183) (161) (329) Net cash used in financing activities (4,783) (5,181) (2,248) Net (decrease)/increase in cash and cash equivalents (7,185) (127) 10,370 Cash and cash equivalents at the beginning of the period 21,802 11,432 11,432 Cash and cash equivalents at the end of the period 14,617 11,305 21,802 Notes to the Group Results 1. Accounting policies The interim report and condensed consolidated financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting". They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the consolidated financial statements for the year ended 31 July 2013. The accounting policies are consistent with the preceding annual accounts. The results are based on unaudited Group consolidated accounts prepared under the historical cost basis except where International Financial Reporting Standards ("IFRS") require an alternative treatment. 2. Comparative information The financial information contained in this interim report does not constitute statutory accounts and, in addition, those relating to the six month periods to 31 January 2013 and 31 January 2014 have not been audited. The financial information for the year ended 31 July 2013 has been extracted from the latest published audited accounts which have been filed with the Registrar of Companies and prepared under IFRS. The report of the auditors on those accounts contained no qualification or statement under the provisions of the Companies Act 2006. 3. Significant accounting policies Investments held at fair value through profit or loss are initially recognised at fair value. As the entity's business is investing in financial assets with a view to profiting from their total return in the form of interest, dividends, or increases in fair value, listed equities and fixed income securities are designated as at fair value through profit or loss on initial recognition. The entity manages and evaluates the performance of these investments on a fair value basis in accordance with its investment strategy, and information about the Group is provided internally on this basis to the entity's key management personnel. After initial recognition, investments which are classified as fair value through profit and loss are measured at fair value. Gains or losses on investments designated as fair value through profit or loss are included in net profit or loss as a capital item, and material transaction costs on acquisition and disposal of investments are expensed and included in the revenue column of the income statement. For investments that are actively traded in organised financial markets, fair value is determined by reference to the Stock Exchange quoted market bid prices or last traded prices, depending upon the convention of the exchange on which the investment is quoted, at the close of business at the end of the reporting period. In respect of unquoted investments, or where the market for a financial investment is not active, fair value is established by using an appropriate valuation technique. Where a reliable fair value cannot be estimated for such unquoted equity instruments, they are carried at cost, subject to any provision for impairment. All purchases and sales of investments are recognised on the trade date i.e. the date that the Group commits to purchase or sell an asset. Dividend income from investments is recognised as income when the shareholders' rights to receive payment has been established, normally the ex-dividend date. When special dividends are received, the underlying circumstances are reviewed on a case by case basis in determining whether the amount is capital, or income, or a mixture of both, in nature. Amounts recognised as income will form part of the Company's distribution. 4. Principal risks and uncertainties The principal risks and uncertainties associated with the Company's business fall into the following categories: financial risk; strategic risk; and accounting, legal and regulatory risk. A detailed explanation of the risks and uncertainties in each of these categories can be found in the Company's published Annual Report and Accounts for the year ended 31 July 2013. 5. Directors' responsibilities The Directors (P H A Stanley, D Harris and B Miller, all of whom are non-executive) are of the opinion that it is appropriate to continue to adopt the going concern basis in accordance with the FRCs "Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009" in the preparation of the accounts as the assets of the Company consist predominantly of securities that are readily realisable and, accordingly, the Company has adequate financial resources to continue in operational existence for the foreseeable future. The Directors confirm that, to the best of their knowledge, this set of condensed financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting". Where presentational guidance, set out in the Statement of Recommended Practice ("SORP") for investment trusts revised by the Association of Investment Companies ("AIC"), is inconsistent with the requirements of IFRS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP. The Interim Management Report, in the form of the Chairman's Statement and Investment Manager's Review, includes a fair review of the information required by DTR 4.2.7 and 4.2.8 of the FCA's Disclosure and Transparency Rules. 6. Related party Midas Investment Management Limited (`Midas'), a company controlled by Mr. M. Sheppard, acts as Investment Manager to the Company. Details of the fee arrangements are given in note 7. Mr. M. Sheppard is also a director of the parent company of Manchester and London Investment Trust plc. 7. Related party transactions The management fee charged by Midas is payable quarterly in arrears and is equal to 0.5 per cent of the Net Asset Value of the Group on an annualised basis. Investment management fees are charged to revenue. Additional fees charged by Midas include a monthly financial advisory fee and commissions on the purchase and sale of investments. Monthly company secretarial and office administration costs incurred by the parent company, Manchester and Metropolitan Investment Limited, on behalf of the Company were also recharged to the Company in the period. There are no other related party transactions. This Half Yearly Report was approved by the Board on 26 March 2014. In accordance with DTR 4.2.9(2) of the UK Disclosure and Transparency Rules (DTRs), it is confirmed that this publication has not been audited by auditors pursuant to the Auditing Practices Board (APB) guidance on Review of Interim Financial Information, but has been reviewed by the auditors pursuant to the APB's guidance on Review of Interim Financial Information. Copies of the Half-Yearly Financial Report for the six months ended 31 January 2014 will be available from the Company's registered office at 2nd Floor, Arthur House, Chorlton Street, Manchester, M1 3FH, as well as on the Company's website at www.manchesterandlondon.co.uk.

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