Manchester & London Investment Trust : Half-Yearly Report for the six months ended 31 January 2024

Manchester and London Investment Trust

Public Limited Company

HALF-YEARLY REPORT

FOR THE SIX MONTHS ENDED

31 JANUARY 2024

Contents

SUMMARY OF RESULTS	3
CHAIRMAN'S STATEMENT	4
MANAGER'S REPORT	6
Portfolio management	6
Information Technology	6
Communication Services	8
Consumer Discretionary	8
Other investments including hedges	8
EQUITY EXPOSURES AND PORTFOLIO SECTOR ANALYSIS……………………………………………………11
INTERIM MANAGEMENT REPORT	12
DIRECTORS' REPORT	12
STATEMENT OF DIRECTORS' RESPONSIBILITIES	13
CONDENSED STATEMENT OF COMPREHENSIVE INCOME	14
CONDENSED STATEMENT OF CHANGES IN EQUITY	15
CONDENSED STATEMENT OF FINANCIAL POSITION	16
CONDENSED STATEMENT OF CASH FLOWS	17
NOTES TO THE CONDENSED FINANCIAL STATEMENTS	18
INVESTMENT OBJECTIVE	23
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INVESTMENT POLICY	23
SHAREHOLDER INFORMATION	26
CORPORATE INFORMATION	27

2

SUMMARY OF RESULTS

	At	At
	31 January	31 July
	2024	2023	Change
Net assets attributable to Shareholders (£'000)	272,871	221,379	23.3%
Net asset value ("NAV") per Ordinary Share (pence)	678.90	550.79	23.3%
		Six months
		to 31 January 2024
Total return to Shareholders*			24.9%
Benchmark - MSCI UK Investable Market Index (MXGBIM)*			1.5%

* Total NAV return including dividends reinvested, as sourced from Bloomberg.

	Six months to	Six months to
	31 January	31 January
	2024	2023	Change
Interim dividend per Ordinary Share (pence)	7.00	7.00	0.0%

Dates for the interim dividend

Ex-dividend date	11 April 2024
Record date	12 April 2024
Payment date	7 May 2024

3

CHAIRMAN'S STATEMENT

Results for the half year ended 31 January 2024

The Global Technology sector has continued to rally on Ai excitement, the hope that inflation is in retreat and the perception the US may pull off a rare soft landing for its economy. It is becoming ever more evident that corporate digitalisation and automation of the labour force command increasing significance, and the Manager's three favourite secular growth themes of Cloud Computing, Artificial Intelligence and Semiconductor Use gather further momentum. The academic studies undertaken by Mark and Richard into Artificial Intelligence over the last three years look prescient in the context of markets today. The Manager's Report sets out the performance of the portfolio in more detail including stock specific contributions to this performance but a total return on Net Asset value per Share of 24.9 per cent is a great result for Shareholders.

In summary, the portfolio remains focused on larger capitalisation, liquid, listed stocks with profitable and cash generative business models that are aligned with some of the most exciting forward-looking themes of the day. The Company exited the period with a Portfolio Net Delta Adjusted Equity Exposure (including Options) of 107 per cent which effectively means the Company had portfolio exposure gearing of around 7 per cent of Net Assets.

The Board

There have been no changes to the Board during the period. Biographical details of all the directors can be found in the latest AGM notice and the latest Annual Report.

Dividends

With these results, we have announced an ordinary interim dividend of 7.0 pence per Ordinary Share. This is the same level as the prior year (31 January 2023: 7.0 pence per Ordinary Share).

Discount & Share Buy-Backs

The Board monitors the discount at which the Company's shares trade in relation to the underlying NAV per Share. The discount has narrowed over the period in line with similar sector invested funds also listed on the London Stock Exchange. The Company does not have a target discount level at which it buys back shares and considers a range of factors before it does so, including the direction of recent market moves, the reasons for any discounts and whether they are short term or long term in nature and the overall benefit to Shareholders of any buy backs considering the onerous reporting requirements of such buy backs and the ongoing cost per Share implications.

It should be noted that the average discount for the Company for the last 5 years sits at ~10.8 per cent (Source: Bloomberg) which, considering the free float of the Company is less than £150m, could be argued as 'in line' with expectations (if not ideal). The number of shares now in treasury is 335,220 representing ~1 per cent of the issued share capital.

4

Auditor

Deloitte LLP were re-appointed as the Company's auditor at the AGM held in 2023.

Outlook & Risks

The world has continued to splinter into Sino and US spheres with a corresponding re-gauging of supply chains, and inflation continues to print above the required Federal Reserve target rate of two per cent. The principal risks and uncertainties faced by the Company for the remaining six months of the financial year, which could have a material impact on performance, remain consistent with those outlined in the Annual Report for the year ended 31 July 2023. A detailed explanation of the Company's principal risks and uncertainties, and how they are managed through mitigation and controls, can be found in the Annual Report for the year ended 31 July 2023. The Company has a risk management framework that provides a structured process for identifying, assessing and managing the risks associated with the Company's business.

The investment portfolio is diversified by geography which reduces risk but is focused on the US technology sector and has a high proportion of US Dollar investments. The concentration of investment in the two largest holdings is material and all shareholders should consider whether they are comfortable with this concentration risk when deciding whether to continue to invest in the Company.

The key variables for our second half performance are likely to be movements in the US sovereign yield curve and inflation expectations, the price of hydrocarbons and energy, how the Federal Reserve and other Central Banks respond to the aforementioned, whether the expectations for the monetisation of Ai meets expectations, the performance of Microsoft Corporation and Nvidia Inc., the pace of growth of our key three themes (as described above), further conflict in the Middle East, further aggressive action by Russia, and the regulation of technology companies globally. We remain optimistic that our investment exposure, focused on software, digitalisation, cloud computing, data management, semiconductors, semiconductor capital equipment and Ai, offers longer-term pricing power to ward off inflationary threats and significant secular growth opportunities.

Please do not forget to consider the fund for this year's ISA allowance.

Daniel Wright

Chairman

13 March 2024

5

MANAGER'S REPORT

Portfolio management

During the half year under review, the NAV per Share total return was 24.9 per cent, compared to an increase in the benchmark of 1.5 per cent. The NASDAQ-100 Technology Sector Index ("NDXT"), to which some of the portfolio is exposed, had a total return of 15.7 per cent in GBP.

The total return of the portfolio by sector holdings in local currency (excluding costs and foreign exchange) is shown below.

Total return of underlying sector holdings in local currency (excluding costs and foreign exchange)	2024
Information Technology	24.6%
Communication Services	0.4%
Consumer Discretionary	0.1%
Other investments (including funds, ETFs and hedges)	(0.5%)
Foreign Exchange, operating costs & financing	0.3%
Total NAV per Share return	24.9%

It should be noted that the data and views in this report are now dated and potentially stale. A more up to date analysis of our portfolio can be found in our Fund Factsheets: https://mlcapman.com/manchester-london-investment-trust-plc/and more current views can be found in our Tweets (https://twitter.com/MLCapMan) & Newsletters (https://mlcapman.com/).

The 1.0 per cent decrease in the value of Sterling against the US Dollar over the period was a small tailwind for performance due to the significant level of US Dollar exposure in the portfolio. Overall, we estimate the increase in portfolio performance from Foreign Exchange movements was roughly +0.9 per cent.

Information Technology

Material positive contributors to the portfolio's performance from this sector were Nvidia Corp, Microsoft

Corp, Advanced Micro Devices Inc, Arista Networks Inc, Cadence Design Systems Inc, ASML Holding NV and

Synopsys Inc. Of these, Nvidia Corp and Microsoft Corp, which are the fund's largest holdings, delivered roughly half of the sector's total return. This performance validates our strategy of shifting from "Soft Technology" to "Hard Technology" as articulated in the Annual Report, factsheets and newsletters over the last 12 months. There will come a time, if interest rates fall more sharply, when short duration assets will be the alpha generator of choice. We would guess that such a shift will not occur in calendar H1 2024.

There were no material negative contributors.

The portfolio's weighting to this sector (including options on a MTM basis) at the period end was 105.2 per cent of net assets, up from 97.3 per cent at the end of the previous financial year.

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Outlook

We see the Cloud Computing market progressing through the ongoing, short-term optimisation and consolidation period towards secular growth. We estimate a doubling in the size of the market over the next decade as "On Premise" cannot compete with the enhanced security, lower costs and deeper functionality offered by the Cloud. Most importantly, it has become clear that in order to extract value from your data using tools such as Ai you need the data managed and on the Cloud.

Longer term, we see Artificial Intelligence ("Ai") being a material positive driver for the Cloud and Semiconductor markets. It is easy to focus on the growth in GPUs from Ai but please note networking, security and compute all benefit too. To be explicit, we are still taking the "picks and shovels" route to capture the gains from the growth of Ai. The semiconductor market will likely be resurgent during 2024 and, longer term, we see the secular growth in Electric Vehicles, Artificial Intelligence, Cloud Computing, IoT, Digitalisation and Automation driving the Semiconductor market to double over the next decade.

High Impact Risk events

The Great Hack: We lose sleep imagining a cyber breach of one of the hyper-scalers causing a loss of faith in the industry and punitive regulation. In such an event, we would suggest looking to the counter-factual of whether the situation would have been even worse if the data had been stored "On Premises".

China: The potentially impending hot conflict in Taiwan initiated by China has been the primary subject of Academy (see https://mlcapman.com/academy/). A large proportion of our portfolio would suffer material falls in value should this event be the outturn, which is why sharp-eyed Factsheet readers see we have intermittently hedged these positions with EWT US. Generally, the "cold war" developing between the US and China has multiple risks for Technology stocks (which is why we have been concerned about investing in AAPL for years) and a progression through further sanctions, closing of markets, IP theft etc. is likely to be a strong headwind for a number of our holdings. We are very keen on the Semi-Cap sector but their high exposure to China has always deterred us from owning more of these names. China is unlikely to accept the US desire to make it a number two player in High Technology and hence it may decide to invest huge amounts into R&D to break down some of the IP moats that the non-Chinese semiconductor, semi-cap and EDA software companies maintain, making competition much tougher in these markets. We are already seeing China dominate the solar energy market and the EV market, and we expect more encroachment in the less advanced semiconductor space. We expect further restrictions on US technology exports and, should we see Trump as President, we could see material reductions in sales for some of our holdings.

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Concentration Risk: The portfolio is now materially concentrated in just 2 holdings; it is also highly concentrated in the Information Technology sector. The fund has a high Active Share Ratio and it is very likely that our performance will vary markedly from all of the better known technology index performances. Should either Nvidia or Microsoft have materially adverse events, or the monetisation of Ai by the sector in general be slower than expected, then the fund will suffer material losses. Humans have a tendency to want everything now! Shareholders should consider if this totality of risk fits with their risk profile. The consensus solution to concentration risk is diversification but so often when one does diversify, one has to diversify into lower quality holdings.

Communication Services

There were no contributors which had an attribution of -/+1% for the portfolio from this sector.

The portfolio's weighting to this sector (including options on a MTM basis) at the period end was 4.5 per cent of net assets, down from 5.1 per cent at the end of the previous financial year.

The only holding in this sector is Alphabet Inc. which we joke is our "Value investment" holding. Like all Value investments, Alphabet has issues (Search being disrupted by LLM Ai, weak management, over-woke corporate ethos, vanity other-Bets projects, inefficient cost structures, ineffectiveness to move R&D to commercial application) that we have written extensively about in Tweets and Newsletters. However, if Alphabet took some simple logical steps forward the valuation has material upside potential.

Consumer Discretionary

There were no contributors which had an attribution of -/+1% for the portfolio from this sector.

The portfolio's weighting to this sector (including options on a MTM basis) at the period end was 0.0 per cent of net assets, down from 0.3 per cent at the end of the previous financial year.

Our single holding in the sector was LVMH SE which we felt had derated too extensively during 2023. We sold our holding in Amazon Inc. which we see as two businesses: one being an excellent cloud computing business that is nonetheless being out-competed by Microsoft; and a low margin e-commerce business that could become highly unionised and out-competed by new Chinese entrants to its market.

Other investments including hedges

There were no contributors which had an attribution of -/+1% for the portfolio from these holdings.

The portfolio's weighting to this sector (including options on a MTM basis) at the period end was 2.6 per cent of net assets (please note this includes 2.2 per cent of net assets held in a US money market ETF which effectively operates as a cash alternative rather than an equity exposure). This sector weighting is down from 7.0 per cent at the end of the previous financial year.

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During the period, we paired traded one semiconductor stock (Long position) against another semiconductor stock (as a Short position) based on valuation differences. You may see our hedge positions increase and similar positions becoming more common if we see the market rise further and faster.

Current Focus of Investment Process

We use a Data Framework to select the stock universe from which we select specific stock candidates for the portfolio.

From this stock universe, we select stocks whilst keeping the following attributes in mind:

1. Exposure to "Hard Technology" (high IP, mission critical, recurring, low churn) rather than "Soft Technology" (social media, easily created apps such as food delivery);
2. Exposure to the Ai revolution within the Information Technology sphere as an Enabler rather than just a Beneficiary (pseudo-Ai exposure);
3. The Management Teams of holdings should be undertaking pragmatic cost cutting or productivity drives;
4. Cash flow per Share and Earnings per Share metrics are considered more important than Sales Growth;
5. Once Cash Flow is earned then it should be invested wisely in one of: high ROIC investment, buy backs or dividends (or divesting non-core, capital hungry activities);
6. Manageable exposure to a China/Taiwan "hot war"; and
7. Realistic Stock Based Compensation schemes.

We have noticed a divergence across the Information Technology sector in the way companies are forecasting their future Ai opportunities. Some companies are offering very optimistic prognostications which is reminiscent of the daft additions of the postfix ".com" in the 2000's. We would suggest that Investors view this as a Red Flag. The true enablers of Ai will be pragmatic and patient and view themselves as Era-long winners from Ai. Many software companies will be disrupted by Ai, making investing in Technology a dangerous landscape to navigate.

Economy, Market & Technology

The US economy remains robust which is unsurprising considering its make-up is driven by consumption and the latter has a high correlation to high employment and wage growth. We have consistently said that US Interest Rates will have to be 'Higher for Longer' and Technology shares hate surprise increases in discount rates. To be specific, our portfolio has a strong negative correlation to surprise increases in 10-year Treasury yields. There are many forecasts for an impending recession in the USA because that is what happened historically each time rates were raised so steeply. We believe that "every time is different". We are not so convinced that the recession outturn is already written but we do worry about escalating global debt levels.

When/if interest rates do come down there may be a wave of funds that exit Money Market Funds and look for a new home in Equities which could drive Equity markets materially higher.

General IT spending is likely to pick up through 2024 as companies focus on optimisation and automation. Spending is being prioritised into Ai, Cloud, Digitalisation and Security and these are the areas we have

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