Manchester&lon. Regulatory News (MNL)

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 sixmonths 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, anunderperformance of 9.6 per cent relative to the performance of our benchmarkindex; - The Directors have declared an interim dividend of 5.5p per share to be paidon 30 April 2014, to all shareholders on the Register at the close of businesson 11 April 2014. Chairman's Statement Performance Our benchmark dropped 0.6 per cent during the period. However, wedropped further, leading to an underperformance of 9.6 per cent. The Company'snet 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 halfyear ended 31 January 2013. We are aware of how important dividends are to ourshareholders but our Net Asset Value is nearly twenty five per cent lower thanlast year. Outlook and Strategy QE continues to drive the US market higher but other markets have started toslow down. Whether this is simply a pause in a continuing bull market or thestart of a period of lower returns remains to be seen. Once again exposure todeveloped markets has been rewarded and stocks exposed to developing marketshave been punished. This investment performance differential has not seen anychange since 2011 and once again that has not helped our performance. Thesimple response is often to simply suggest we switch to increase our UKdomestic exposure, but this could be a dangerous strategy. It is clear thatthe domestically focused Mid-Caps are trading at stretched valuationmultiples. We are disappointed with the performance in this period but we havebeen very clear that we wished to invest in companies based in the developedmarkets with operational exposure to developing markets. This investment themeworked well for a decade up to 2011, but since then continues to perform verypoorly. The Investment Manager detailed to shareholders at our AGM that hefelt that performance would remain weak until there was more certainty thatChina's planned deceleration was controllable. This may well take some timeand there is no certainty that the outturn will be as we hoped for. In themeantime, we do not see the logic of selling shares that optically lookrelatively inexpensive, to buy shares that are trading at multi-year valuationmultiple 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 largelyexplained 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 contributionsfrom both Glencore Xstrata plc and Rio Tinto plc. We attended the Indabaconference in Cape Town in February 2014 and had a number of in depthconversations with these companies and other sector commentators. The state ofthe Chinese economy is a clear worry, but the philosophy of the sector haschanged and the focus is now on cost cutting, reducing debt, improvingefficiencies and shareholder returns. In the last few years, the Consumer Goods sector has performed verywell. However, over the last nine months the sector has been weaker due toconcerns about the slow down in emerging markets coupled with the increasedfocus on price competition in the developed markets. Standard Chartered plc has seen a compression in its wholesale netinterest margins as its market places have seen a wave of competitive pressurefrom banks looking to offload excess funds provided at discount rates fromcentral banks. We expect this situation to reverse in time but StandardChartered plc needs to take a more measured approach to growth, wherebyearnings growth exceeds the growth in its risk weighted assets. In themeantime, 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 ongoingissues in Egypt and delays across the portfolio. However, whilst thesesuccessive guidance cuts have damaged near term profitability, the core valueof their assets remains largely intact. As such, we believe the near termdelivery risk is more than compensated by the stock's material discount toNAV. Whilst waiting for this value to be unlocked will require patience, theassets are of great enough value that further failures by the incumbentmanagement could draw attention from competitors or shareholder activists. Inthe meantime, we also look towards the prospect of a positive FCF in 2015 andthe potential for greater future shareholder returns. Syngenta AG has seen a decline in earnings due to bumper crops inNorth America which have suppressed grain prices, alongside some issues withthe regulatory approval of its traits in China which have led to exportingfarmers being less willing to use its seeds. If you are selling an integratedoffering, the sales proposition often starts with the seed. A cost base set inSwiss Franc whilst emerging market currencies are falling is also a painfulsituation to be in. Once again, we see these issues as reversible but we hopeSyngenta AG can launch future technology with more advanced tactics. We have remained less than fully invested in the market, which hasbeen a reasonable strategy considering that our benchmark has fallen duringthe period. We also continue to believe that the S&P is one of the moreexpensively valued global indices and hence, coupled with its liquidity andtight spreads, is attractive as a tool for reducing our Net Long to Net Assetposition. However, during the period the S&P 500 outperformed our benchmark by6.1 per cent. We would suggest that the main reason for this outperformancehas been because the Dollar weakened against Sterling by 8.7 per cent duringthe period. This was not the consensus trade so we are not alone in gettingthis element of our position incorrect. During the period the recovery of theUK has startled most, including Ed Balls, Mark Carney and George Osborne. Inaddition, those consensus dollar bulls who saw a lower dependence on oilimports for the USA and a commencement of tapering as a prelude to dollarstrengthening have been proven wrong. It is important to note that we enteredthe period with an S&P 500 short position valued at £48m and this position hasbeen 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 thesecompanies who have all performed well, but we decided to reduce our grossholdings so we sold these positions and reduced the market hedge we hadagainst them. We were concerned regarding: - the valuation of Weir Group plc when Rolls Royce plc was tradingat a less expensive multiple and the mining sector is likely to continue toslash capex; - Burberry Group plc's ability to weather a cooling of China'sconsumption growth and the required replacement of their Japanese licenserevenue; - the valuation multiples Smith & Nephew plc were paying for newacquisitions; and - whether Vodafone Group plc was pricing in too much certainty of abid from A T & T Inc. Gearing By the interim period end, the portfolio's net long over net assetposition had been reduced to a level of 93.5 per cent. There has not been amaterial change since the period end. Conclusion In conclusion, we remain focused on investing in developed marketequities which are liquid and are participating in global growth via thedeveloping markets. We prefer companies with short working capital cycles,strong market positions with an understandable business model, openinformation flow, long development cycles and attractive returns on capital. For enquiries: Manchester and London Investment Trust plcMichael Kurt CampCompany SecretaryTel: 0161 228 2389 Midas Investment Management LimitedMark SheppardInvestment ManagerTel: 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 2014Record date 11 April 2014Payment date 30 April 2014 The price and net asset value is published in the Investment Companies Sector of TheFinancial Times. Investment Portfolio As at 31 January 2014 Company Sector Value £'000 % of Net Assets PZ Cussons plc Personal Goods 16,296 24.2Diageo plc Beverages 8,142 12.1Glencore Xstrata plc Mining 7,663 11.4Rio Tinto plc Mining 6,612 9.8Standard Chartered plc Banking 5,216 7.7Afren plc Oil & Gas Producers 5,212 7.7Syngenta AG Chemicals 5,137 7.6Unilever plc Food Producers 4,995 7.4BG Group plc Oil & Gas Producers 4,584 6.8Jardine Matheson Holdings Ltd General Industrial 3,950 5.9BP plc Oil & Gas Producers 3,503 5.2bio Merieux SA Medical Technology 2,833 4.2The Interpublic Group of Media Communications 2,693 4.0Companies IncWeir Group plc Industrial Engineering 2,506 3.7KWS SAAT AG Agrisciences 2,366 3.5Remy Cointreau SA Beverages 2,272 3.4Trinity Exploration & Production Oil & Gas Producers 1,827 2.7plcVedanta Resources plc Mining 1,611 2.4Etablissements Maurel et Prom SA Oil & Gas Producers 1,574 2.3Echo Entertainment Group Ltd Travel & Leisure 1,450 2.2Parmalat SpA Food Producers 891 1.3Northern Petroleum plc Oil & Gas Producers 653 1.0Cairn Energy plc Oil & Gas Producers 474 0.7Tullow Oil plc Oil & Gas Producers 332 0.5Heritage Oil plc Oil & Gas Producers 314 0.5Other listed investments (under Various 412 0.60.5%) Listed Investments 93,518 138.8 Other Investments 181 0.3Cash 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 appreciationtogether with a reasonable level of income. Investment Policy Asset allocation The Company's investment objective is sought to be achieved through a policyof actively investing in a diversified portfolio, comprising UK and overseasequities and fixed interest securities. The Company seeks to invest incompanies whose shares are admitted to trading on a regulated market. However,it may invest in a small number of equities and fixed interest securities ofcompanies whose capital is not admitted to trading on a regulated market.Investment in overseas equities is utilised by the Company to increase therisk diversification of the Company's portfolio and to reduce dependence onthe UK economy in addressing the growth and income elements of the Company'sinvestment objective. The Company may invest in derivatives, money market instruments, currencyinstruments, contracts for differences ("CFDs"), futures, forwards and optionsfor the purposes of (i) holding investments and (ii) hedging positions againstmovements in, for example, equity markets, currencies and interest rates. There are no maximum exposure limits to any one particular classification ofequity or fixed interest security. The Company's investments are not limitedto any one industry sector and its current investment portfolio is spreadacross a range of sectors. The Company has no specific criteria regardingmarket capitalisation or credit ratings in respect of investee companies. Risk diversification The Company intends to maintain a relatively focused portfolio, seekingcapital growth by investing in approximately 20 to 40 securities. The Companywill not invest more than 15 per cent of the gross assets of the Company atthe time of investment in any one security. However, the Company may invest upto 50 per cent of the gross assets of the Company at the time of investment inan investment company subsidiary, subject always to other restrictions set outin this investment policy and the Listing Rules. The Company intends to be fully invested whenever possible. However, duringperiods in which changes in economic conditions or other factors so warrant,the Investment Manager may reduce the Company's exposure to one or more assetclasses and increase the Company's position in cash and/or money marketinstruments. Gearing The Company may borrow to gear the Company's returns when the InvestmentManager believes it is in shareholders' interests to do so. The Company'sinvestment policy and the Articles permit the Company to incur borrowing up toa sum equal to two times the adjusted total of capital and reserves. Anychange to the Company's borrowing policy will only be made with the approvalof shareholders by special resolution. The effect of gearing may be achieved without borrowing byinvesting in a range of different types of investments including derivatives.The Company will not enter into any investments which have the effect ofincreasing the Company's net gearing beyond the above limit. General In addition to the above, the Company will observe the investment restrictionsimposed from time to time by the Listing Rules which are applicable toinvestment companies with shares listed on the Official List of the UKLA underChapter 15. In accordance with the Listing Rules, the Company will manage and invest itsassets in accordance with the Company's investment policy. Any materialchanges in the principal investment policies and restrictions (as set outabove) of the Company will only be made with the approval of shareholders byordinary resolution. In the event of any breach of the investment restrictions applicable to theCompany, shareholders will be informed of the remedial actions to be taken bythe Board and the Investment Manager by an announcement issued through aRegulatory Information Service approved by the FCA. Benchmark Index Performance is measured against the Dow Jones UK Total Stock MarketIndex. The Company sources index and price data from FactSet Research SystemsInc. 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)/gainson investmentsat fair value - (7,569) (7,569) - 14,354 14,354 - (240) (240) Trading income 1,050 - 1,050 572 - 572 627 - 627 Investmentincome 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)Transactioncosts (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)attributableto equityshareholders 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 ofComprehensive Income, prepared in accordance with IFRS. The supplementaryrevenue and capital return columns are both prepared under guidance publishedby 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 August2013 5,614 35,132 (79) 5,596 24,899 3,888 75,050 Total comprehensiveloss - - - - - (5,837) (5,837) Transfer of profitealized on previoustransfers - - - 3,165 (3,165) - - Transfer of capitallosses - - - (3,240) (4,512) 7,752 - Ordinary dividendpaid - - - - - (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 August2012 5,614 35,132 (79) 8,146 22,916 3,786 75,515 Total comprehensive - - - - - 15,648 15,648income Transfer of capitalprofits - - - 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 August2012 5,614 35,132 (79) 8,146 22,916 3,786 75,515 Total comprehensive - - - - - 2,522 2,522income Transfer of capitallosses - - - (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 throughprofit 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 55,673shorts 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 £'000Cash 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 cashequivalents (7,185) (127) 10,370 Cash and cash equivalents at the beginningof the period 21,802 11,432 11,432 Cash and cash equivalents at the end of theperiod 14,617 11,305 21,802 Notes to the Group Results 1. Accounting policies The interim report and condensed consolidated financial statementshave been prepared in accordance with IAS 34 "Interim Financial Reporting".They do not include all disclosures that would otherwise be required in acomplete set of financial statements and should be read in conjunction withthe consolidated financial statements for the year ended 31 July 2013. Theaccounting policies are consistent with the preceding annual accounts. The results are based on unaudited Group consolidated accountsprepared under the historical cost basis except where International FinancialReporting Standards ("IFRS") require an alternative treatment. 2. Comparative information The financial information contained in this interim report does notconstitute statutory accounts and, in addition, those relating to the sixmonth periods to 31 January 2013 and 31 January 2014 have not been audited. The financial information for the year ended 31 July 2013 has beenextracted from the latest published audited accounts which have been filedwith the Registrar of Companies and prepared under IFRS. The report of theauditors on those accounts contained no qualification or statement under theprovisions of the Companies Act 2006. 3. Significant accounting policies Investments held at fair value through profit or loss are initiallyrecognised at fair value. As the entity's business is investing in financialassets with a view to profiting from their total return in the form ofinterest, dividends, or increases in fair value, listed equities and fixedincome securities are designated as at fair value through profit or loss oninitial recognition. The entity manages and evaluates the performance of theseinvestments on a fair value basis in accordance with its investment strategy,and information about the Group is provided internally on this basis to theentity's key management personnel. After initial recognition, investments which are classified as fairvalue through profit and loss are measured at fair value. Gains or losses oninvestments designated as fair value through profit or loss are included innet profit or loss as a capital item, and material transaction costs onacquisition and disposal of investments are expensed and included in therevenue column of the income statement. For investments that are activelytraded in organised financial markets, fair value is determined by referenceto the Stock Exchange quoted market bid prices or last traded prices,depending upon the convention of the exchange on which the investment isquoted, at the close of business at the end of the reporting period. In respect of unquoted investments, or where the market for afinancial investment is not active, fair value is established by using anappropriate valuation technique. Where a reliable fair value cannot beestimated for such unquoted equity instruments, they are carried at cost,subject to any provision for impairment. All purchases and sales ofinvestments are recognised on the trade date i.e. the date that the Groupcommits to purchase or sell an asset. Dividend income from investments is recognised as income when theshareholders' rights to receive payment has been established, normally theex-dividend date. When special dividends are received, the underlyingcircumstances are reviewed on a case by case basis in determining whether theamount is capital, or income, or a mixture of both, in nature. Amountsrecognised 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 businessfall into the following categories: financial risk; strategic risk; andaccounting, legal and regulatory risk. A detailed explanation of the risks anduncertainties in each of these categories can be found in the Company'spublished 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 arenon-executive) are of the opinion that it is appropriate to continue to adoptthe going concern basis in accordance with the FRCs "Going Concern andLiquidity Risk: Guidance for Directors of UK Companies 2009" in thepreparation of the accounts as the assets of the Company consist predominantlyof securities that are readily realisable and, accordingly, the Company hasadequate financial resources to continue in operational existence for theforeseeable future. The Directors confirm that, to the best of their knowledge, this set ofcondensed financial statements has been prepared in accordance with IAS 34"Interim Financial Reporting". Where presentational guidance, set out in the Statement ofRecommended Practice ("SORP") for investment trusts revised by the Associationof Investment Companies ("AIC"), is inconsistent with the requirements ofIFRS, the Directors have sought to prepare the financial statements on a basiscompliant with the recommendations of the SORP. The Interim Management Report, in the form of the Chairman's Statement andInvestment Manager's Review, includes a fair review of the informationrequired by DTR 4.2.7 and 4.2.8 of the FCA's Disclosure and TransparencyRules. 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 feearrangements are given in note 7. Mr. M. Sheppard is also a director of theparent company of Manchester and London Investment Trust plc. 7. Related party transactions The management fee charged by Midas is payable quarterly in arrearsand is equal to 0.5 per cent of the Net Asset Value of the Group on anannualised basis. Investment management fees are charged to revenue. Additional fees charged by Midas include a monthly financial advisory fee andcommissions on the purchase and sale of investments. Monthly company secretarial and office administration costsincurred by the parent company, Manchester and Metropolitan InvestmentLimited, on behalf of the Company were also recharged to the Company in theperiod. 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 auditorspursuant to the Auditing Practices Board (APB) guidance on Review of InterimFinancial Information, but has been reviewed by the auditors pursuant to theAPB's guidance on Review of Interim Financial Information. Copies of the Half-Yearly Financial Report for the six months ended 31 January2014 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'swebsite at www.manchesterandlondon.co.uk.