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 2011 The Directors announce the unaudited interim group results for the six months ended 31 January 2011. The key highlights for the period were: - The Net Asset Value per share reached an all time high level of 460.3p during the period, representing Net Assets in excess of Â£100m; - The Net Asset Value per share has increased by 15.9 per cent to 439.6p, an overperformance of 3.8 per cent on the performance of our benchmark index; - Rising markets have resulted in a gain on the capital account of 61.2p and revenue earnings per share of 5.6p; - The Directors have declared an interim dividend of 5.2p per share to be paid on 30 April 2011, to all shareholders on the Register at the close of business on 8 April 2011. Chairman's Statement Dear Shareholder, The market continued to rally strongly to the calendar year end followed by a fall back taking place in January. The Company has grown its net assets per share by 15.9 per cent over the half year period, an over-performance to our Benchmark Index of 3.8 per cent. During the period, the Board was pleased to report that the Net Asset Value per share reached an all time high of 460.3p. Gearing During the period, the Company arranged a Flexible Revolving Loan Facility with a limit of Â£11m with Pershing Securities Limited, a subsidiary of The Bank of New York Mellon Corporation. No arrangement fee is payable on this facility and interest is charged at the Bank of England Base Rate plus three per cent per annum on drawdowns. By the half period end the portfolio had been geared, using this facility and CFDs, to a level whereby gross investments represented 112.7 per cent of net assets. In addition, the weighted average percentage of gearing (calculated as net debt divided by market capitalisation) held by the individual companies in the portfolio on their own balance sheets was 21.9 per cent, resulting in a combined see through gearing in the portfolio of 34.4 per cent. We have geared our portfolio temporarily on the basis that we are likely (but not certainly) to find that the next global monetary problem will be inflation and therefore we hope to enjoy some marginal monetary devaluation of this debt through inflation. Outlook and Strategy All commentators seem to agree that equities are inexpensive and will appreciate further in 2011 but we are more inclined to describe the equity markets as reasonably valued. Maybe that's not the point as the cash and bond markets look expensive and therefore an asset allocation switch to equities could drive equity markets higher. We also expect 2011 earnings growth from globally exposed companies to be reasonable so when these factors are combined, we hope that equity returns in 2011 will be better than those for cash and bonds. The key question is, how will the phases of the year progress and what are the key risks/drivers? The Euro debt crisis is a clear risk but we are also concerned with regards to the tightening cycle in Asia, global inflation and the worsening US fiscal position. Many questions are disconcerting such as when will global growth/inflation start to force interest rates up to a point when/where they hurt equities? If the market rallied in anticipation of QE, surely it should weaken in anticipation of rates rising? We continue to believe that inflation will gradually emerge as the number one concern, and our investment policy will continue to be concentrated on substantial global companies with attractive cash generation and growth prospects. P H A Stanley, Chairman. March 2011. Manager's Report Manager's Review Stand out performers over the six month period to the 31 January 2011 have been Aberdeen Asset Management (58.8 per cent), Afren (58.2 per cent) and Weir Group (35.2 per cent). The three worst underperforming stocks were Vedanta Resources, Standard Chartered and Unilever. Standard Chartered has suffered in line with the Asian banking sector that has underperformed the benchmark index by 5.8 per cent over the same period on fears of monetary tightening, cost inflation and a reduction in interest margins. Nonetheless, we are impressed by the growth prospects that Standard Chartered is aiming towards and has historically delivered. We do not believe a price to book ratio of 2.5x will be deemed to be expensive in several years times providing that the company can continue to grow its revenues at the historic five year compound growth rate of 17.9 per cent. The shares of Unilever have suffered due to the increasing concerns that it will not be able to pass on raw material price inflation to its end consumers. The company believes that raw material price rises will be countered by the cessation of the current plethora of "BOGOF" promotions and by the continuing efficiency gains to margins being forced through by management action. We believe that if these two mitigating processes occur then the shares trading at a forecast EV to EBITDA ratio of 8.7x are inexpensive. Vedanta Resources is a London-based FTSE 100 metals, mining and power generation group, with operations located in India, Zambia and Australia and extensive interests in aluminium, copper, zinc and lead. The shares have recently underperformed within the sector due to a delay with its proposed acquisition of Cairn India. However, we are attracted to Vedanta Resources as a direct play on the growth of Asian urbanisation, particularly with its Indian operations and continued infrastructure spend. Currently trading on forecasts of just 6x FY12 EPS, we believe Vedanta Resources shares appear to be inexpensive albeit a high risk investment. The portfolio has remained largely unchanged over the period and we would expect it to remain so over the next half year period. We are not enamoured of churning portfolios when there is no requirement to do so. At the beginning of the period we disposed of some remaining legacy holdings such as Property Recycling, EIH, and Rapid Realisations. However, post the sale of Britvic in November 2010, the group portfolio has remained relatively unchanged. The main acquisitions to the portfolio in the period have been new investments in both Smith & Nephew and Smiths Group and further investments in Tesco, Weir Group and Essar Energy. We believe Smith & Nephew is attractively placed to benefit from the changing demographics and activity levels across the world. The stock is inexpensive and also holds out the prospect of being an event driven situation. We are hopeful that Smiths Group will see growth across all its divisions as the global economy continues to grow. A recent takeover offer for the Group's medical device unit was rejected but this highlights the prospect of further possible M&A activity. Investors will know that we tend to invest using four strategies and, at the period end, the portfolio had the following weightings to each strategy: Affordable Growth 90.6 per cent Value 0.0 per cent Event Driven 15.8 per cent (represented by BSkyB, Smith & Nephew and Smiths Group) Special Situations 6.1 per cent (represented by BP) We would remind shareholders that during the six month period SSL International, which was our second largest holding at the time, received a recommended offer from Reckitt Benckiser. In conclusion, we remain focused on investing in equities which are liquid and are participating in global growth via investment in cash generative enterprises. We prefer companies with short working capital cycles, strong market positions with an understandable business model, open information flow and long development cycles. For enquiries: Manchester and London Investment Trust plc Peter Thomas Company Secretary Tel: 0161 242 8246 Midas Investment Management Limited Mark Sheppard Tel: 0161 228 1709 Trust Performance At At Percentage 31 January 2011 31 July 2010 Increase Net assets attributable to Equity Shareholders (Â£'000) 98,730 85,203 15.9 Net asset value per Ordinary Share (p) 439.6 379.4 15.9 FTSE Actuaries All-Share Index 3,044.3 2,715.4 12.1 Interim Dividend declared per ordinary share 5.2p 5.0p 4.0 Ex-dividend date 6 April 2011 Record date 8 April 2011 Payment date 28 April 2011 The price and net asset value is published daily in the Investment Companies Sector of the Financial Times. Ten Largest Investments As at 31 January 2011 Company Sector Value Â£'000 % of Assets PZ Cussons plc Personal Goods 16,425 16.6 Smith & Nephew plc Healthcare Services 8,384 8.4 Rio Tinto plc Mining 7,994 8.1 Standard Chartered plc Banks 6,403 6.5 Weir Group plc Oil Services 6,214 6.3 BP plc Oil & Gas Producers 6,034 6.1 BG Group plc Oil & Gas Producers 5,970 6.1 British Sky Broadcasting plc Media 5,228 5.3 RSA Insurance Group plc* Non-life Insurance 4,993 5.1 Syngenta AG Pharmaceutical & 4,860 4.9 Biotechnology Consolidated Statement of Comprehensive Income For the six months ended 31 January 2011 (unaudited) (Unaudited) (Audited) Six months ended Six months ended Year ended 31 January 2011 31 January 2010 31 July 2010 Revenue Capital Total Revenue Capital Total Revenue Capital Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Gains on investments at fair value - 13,961 13,961 - 4,075 4,075 - 11,384 11,384 Trading income 598 - 598 442 - 442 706 - 706 Investment income 752 - 752 700 - 700 1,392 - 1,392 Gross Return 1,350 13,961 15,311 1,142 4,075 5,217 2,098 11,384 13,482 Expenses Management Fee (82) (152) (234) (46) (86) (132) (123) (229) (352) Transaction costs - (77) (77) - (141) (141) - (291) (291) Other expenses (12) - (12) (116) - (116) (20) 338 318 Total expenses (94) (229) (323) (162) (227) (389) (143) (182) (325) Finance costs (1) - (1) - - - (6) - (6) Profit before tax 1,255 13,732 14,987 980 3,848 4,828 1,949 11,202 13,151 Taxation - - - - - - - - - Profit attributable to equity shareholders 1,255 13,732 14,987 980 3,848 4,828 1,949 11,202 13,151 Earnings per share (p) 5.59 61.15 66.74 5.60 21.98 27.58 10.63 61.12 71.75 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 derived from continuing operations. Consolidated Statement of Changes in Equity For the six months ended 31 January 2011 Unaudited Six months ended 31 January 2011 Capital Capital Share Share Other Reserve Reserve Retained Capital Premium Reserves Unrealised Realised Earnings Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Balance at 1 August 2010 5,614 35,132 (79) 17,280 23,756 3,500 85,203 Profit for the period - - - - - 14,987 14,987 Transfer of capital profits - - - 9,878 3,854 (13,732) - Ordinary dividend paid - - - - - (1,460) (1,460) 5,614 35,132 (79) 27,158 27,610 3,295 98,730 Unaudited Six months ended 31 January 2010 Capital Capital Share Other Reserve Reserve Retained Share Capital Premium Reserves Unrealised Realised Earnings Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Balance at 1 August 2009 4,376 19,887 (79) 7,638 22,196 3,477 57,495 Profit for the - - - - - 4,828 4,828 period Transfer of capital profits - - - 1,746 2,102 (3,848) - Ordinary dividend paid - - - - - (1,050) (1,050) 4,376 19,887 (79) 9,384 24,298 3,407 61,273 Audited Year ended 31 July 2010 Capital Capital Share Other Reserve Reserve Retained Share Capital Premium Reserves Unrealised Realised Earnings Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Balance at 1 August 2009 4,376 19,887 (79) 7,638 22,196 3,477 57,495 Profit for the - - - - - 13,151 13,151 period Transfer of capital profits - - - 9,642 1,560 (11,202) - Ordinary dividend paid - - - - - (1,926) (1,926) Issue of share capital 1,238 15,245 - - - - 16,483 5,614 35,132 (79) 17,280 23,756 3,500 85,203 Consolidated Statement of Financial Position As at 31 January 2011 (Unaudited) (Unaudited) (Audited) 31 January 31 January 31 July 2011 2010 2010 Â£'000 Â£'000 Â£'000 Non-current Assets Investments held at fair value through profit and loss 95,509 57,476 84,343 Current Assets Trade and other receivables 131 257 340 Derivative financial instruments 15,893 7,137 4,394 Cash and cash equivalents 5,073 3,413 2,029 21,097 10,807 6,763 Gross Assets 116,606 68,283 91,106 Current Liabilities Trade and other payables (2,085) (187) (319) Provisions (645) - (1,416) Derivative financial instruments (15,146) (6,823) (4,168) (17,876) (7,010) (5,903) Net Assets 98,730 61,273 85,203 Capital and Reserves Called-up share capital 5,614 4,376 5,614 Share premium 35,132 19,887 35,132 Capital reserve - realised 27,610 24,298 23,756 Capital reserve - unrealised 27,158 9,384 17,280 Other reserves (79) (79) (79) Retained earnings 3,295 3,407 3,500 Total equity shareholders' funds 98,730 61,273 85,203 Net asset value per share (p) 439.6 350.0 379.4 Consolidated Statement of Cash Flows For the period ended 31 January 2011 (Unaudited) (Unaudited) (Audited) 31 January 31 January 31 July 2011 2010 2010 Â£'000 Â£'000 Â£'000 Operating activities Profit after tax 14,987 4,828 13,151 Gains on investments (13,587) (4,075) (12,453) Decrease in receivables 166 154 201 Decrease in payables (930) (103) (726) (Increase)/decrease in derivative financial instruments (521) 389 477 Net cash inflow from operating activities 115 1,193 650 Investing activities Purchase of investments (15,085) (32,583) (61,830) Sale of investments 17,549 30,893 60,967 Return on covered calls - 213 - Net cash acquired on acquisition of - - 345 subsidiary Subsidiary acquisition costs - - (924) Net cash outflow from investing 2,464 (1,477) (1,442) activities Financing activities Equity dividends paid (1,460) (1,050) (1,926) Net cash outflow from financing (1,460) (1,050) (1,926) activities Net decrease in cash and cash equivalents 1,119 (1,334) (2,718) Cash and cash equivalents at the beginning of the period 2,029 4,747 4,747 Cash and cash equivalents at the end of the period 3,148 3,413 2,029 Bank and other overdrafts (1,925) - - Notes to the Group Results 1. Accounting policies The interim report has been prepared in accordance with International Financial Reporting Standards (IFRS). 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 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 2010 and 31 January 2011 have not been audited. The financial information for the year ended 31 July 2010 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 at fair value through profit and loss are measured at fair value. Gains or losses on investments designated as at 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 capital 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 on 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 can not 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. Principle Risks and Uncertainties The principle 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 2010. 5. Directors' Responsibilities The Directors 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 IFRS issued by the International Accounting Standards Board ("IASB"), as adopted for use in the EU effective at 31st January 2011. Where presentational guidance, set out in the Statement of Recommended Practice ("SORP") for investment trusts revised by the Association of Investment Companies ("AIC"), is consistent 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 DTR4.2.7 and 4.2.8 of the FSA's Disclosure and Transparency Rules. 6. Related Party Transactions Midas Investment Management Limited (`Midas'), a company of which B S Sheppard is a shareholder, acts as Investment Manager to the Company. 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 allocated 35 per cent to revenue and 65 per cent to capital. Additional fees charged by Midas include a monthly financial advisory fee and commissions on the purchase and sale of investments. There are no other related party transactions.

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