Annual Financial Report

RNS Number : 3050Q

Mid Wynd Inter Inv Trust PLC

02 August 2010

 



MID WYND INTERNATIONAL INVESTMENT TRUST PLC

Results for the year to 30 June 2010

In the year to 30 June 2010 net asset value per share rose by 29.8% compared to a 19.9% rise in the comparative index, the FTSE World Index (in sterling terms).  The Company's share price rose by 39.0%.

·	The strong relative and absolute performance was due predominantly to stock selection in Europe and the UK, supported by the Company's bond holdings and an increased exposure to Emerging Markets.
·	Over the year the Bond portfolio has been reduced to 5% of total assets with proceeds reinvested in UK and Emerging Market stocks that should benefit from continuing epochal shifts in economic power or where mispricing presents a specific opportunity.
·	An increased final dividend of 9.0p per share is being proposed giving 15.5p per share for the year, an increase of 3.3% on last year.  Despite the loss of revenue as a consequence of a reduced allocation to bonds, earnings per share rose 3.6% this year, owing primarily to a few individual stocks.
·	The Board and Managers believe that there is a range of attractive unusual, neglected, illiquid or unloved investments that offer opportunities for positive returns.

Past performance is not a guide to future performance. The value of an investment and any income from it is not guaranteed and may go down as well as up and investors may not get back the amount invested. You should view your investment as long term. The Company has borrowed money to make further investment (sometimes known as gearing). The risk is that when this money is repaid by the Company, the value of the investments may not be enough to cover the borrowing and interest costs, and the Company will make a loss. If the Company's investments fall in value, any borrowings will increase the amount of this loss. The Company can buy back and cancel its own shares. The risks from borrowing, referred to above, are increased when the Company buys back and cancels its shares. You can find up to date performance information about Mid Wynd on the Mid Wynd page of the Managers' website www.midwynd.co.uk

The objective of Mid Wynd International Investment Trust PLC is to achieve capital and income growth by investing on a worldwide basis. The Trust has total assets of £55.4m (before deduction of bank loans of £5.3m).

Mid Wynd is managed by Baillie Gifford & Co, the Edinburgh based fund management group with around £60 billion under management and advice at 30 July 2010.

30 July 2010

- ends

For further information please contact:

Michael MacPhee, Manager                                                                                        

Mid Wynd International Investment Trust PLC                                      0131 275 2000

Roland Cross, Director

Broadgate Marketing                                                                            020 7726 6111

Mid Wynd International Investment Trust PLC

Chairman's Statement

Performance

In the year to 30 June 2010, net asset value per share rose by 29.8% to 1,008.2p per share, the share price increased 39.0% to 935.0p and the FTSE World Index in sterling terms rose by 19.9%. The improvement in performance shown in the second half of last year continued as markets rebounded and Mid Wynd did indeed, as we hoped last year, manage to make hay as the sun shone. NAV per share reached a new high of 1,113.8p in mid April. In the final two months of our year it ebbed by 9.5% from its peak as data have unveiled a slowing in the pace of economic growth, a still somewhat jobless West and the levelling out of corporate earnings expectations albeit at impressive levels. All of this is a vast improvement on the drama and shock endured in late 2008 and early 2009. There is relatively little mention today of systemic fears over banking systems and, instead, some focus on a handful of minor sovereigns' solvency problems. Governments have taken the debt burden upon themselves. Some are weighed down more than others in consequence. If this appears novel to our generation, it is scarcely unknown to former ones. Despite the widening of some sovereign and corporate credit spreads, the spectre of inflation remains a pale shadow and most government bond yields have steadily fallen in the face of rapidly rising stocks of debt. This we did not anticipate, and continue to mistrust. We hope that government bonds are not a balloon in search of a pin, for that would have adverse consequences across most asset classes.

Having bemoaned the failure of our bond holdings to cushion us against the downturn in markets last year it seems only symmetrical to point out that our bond portfolio, largely the same bond portfolio, outperformed those same equities this year in a rising market. CQS, Lloyds contingent convertibles and the Athena distressed debt fund are at the root of this phenomenon and are discussed in the Managers' review.

Earnings and dividend

Earnings of 16.85p per share compare with 16.26p per share from the year to June 2009. Despite dismal levels of interest on deposit and generally low cash levels together with a steadily falling bond allocation, revenues were strong. This reflects a few large individual features (Seadrill, Marine Harvest, Kone). Against our expectations of last year, therefore, we find ourselves once more with a rising stream of dividends to report. Given the extent of sales from the bond portfolio, however, this is unlikely to continue.

A final dividend of 9.0p is recommended, taking the full year total to 15.5p per share, an increase of 3.3% on last year.

Discount and share buybacks

The discount narrowed from 13.4% to 7.3% over the course of the year. The Board considers the level of discount on a regular basis and has authorised the repurchase of shares when this will be of benefit to continuing shareholders as well as being in the interest of those shareholders who may need to sell some or all of their shares.

During the year to 30 June 2010 the Company utilised its authority to repurchase its own shares for the first time, buying back 65,000 shares for cancellation at a cost of £616,000. At the Annual General Meeting of the Company to be held on 22 September 2010 the Board will seek to renew the buyback authority and extend it to permit shares bought back to be held in treasury, for reissue or cancellation at a later date.

Outlook

The long run challenges faced by developed economies have changed little over the past year. Massive stimulus and record low interest rates have produced a so far tepid recovery in end demand and a sparkling recovery in asset markets. A surprisingly wide range of possible prognoses jostle for space, with debt deflation at one end and high inflation at the other. The distribution of probabilities seems unusually widely dispersed within this wide range of possible outcomes. Fiscal retrenchment is being flamboyantly deployed to support confidence in public finances and enable monetary policy to remain loose. This is something of a high wire act.

Here is a synopsis of plausible (but not exclusive) scenarios for the indebted West recently provided by HSBC's chief economist:

1.   The 'theological' option: fiscal deficit problems are all cyclical, not structural. Nominal growth will thereby solve everything.

2.   Austerity: people mostly dislike it enough to vote against it, and too much of it is self defeating. Ask the IMF. Or Argentina. Or Greece. The few examples that have historically succeeded - Sweden in the early '90s is routinely run out - have benefitted from one or more of the following co-drivers : devaluation, falling global bond yields, falling inflation, a leveraging up in the private sector, a booming global economy. It is hard to be hopeful that many of these may be with us in combination starting from here.

3.   Japanese-style deflation: tolerable in retaining the stability of real per capita GDP. This path only works for an aged society with a loathing of change where, critically, domestic savings are large enough to support an increasingly bust government. Buys some time but, like debt and inflation, borrows from future generations. Not open to many. Would seem to make the underlying problem worse not better.

4.   Default by stealth: negative real interest rates and rising inflation - baby-boomers liked it when they were in debt; they may well not now they are the savers.

5.   Devaluation: only to be attempted if your debt is largely in your own currency. Not a game for multiple players simultaneously.

6.   Outright default: all that remains after these other possibilities have been exhausted.

Happily for our shareholders, we believe we have more choices than just these available to us. There are many more people in today's world who are experiencing or ought soon to experience vastly improved prospects for themselves and their children than there are those who find themselves under-skilled, over-aged, increasingly without the welfare safety net they expected and mired in debt. That this is so owes in large part to globalisation, industrialisation, education and productivity.

Despite the vicissitudes of short term policy tightening, real strength and potential resides in those such as Chinese, Indian, Indonesian, Turkish and Brazilian consumers.  As yet it is largely untapped. Real interest rates in these countries remain high, though mainly falling across recent cycles, and access to credit is still constrained. Should this change, as seems a reasonable 10 year expectation, we plan to be beneficiaries of such a continued coming of age. Looking through the oddity of where stocks are listed and concentrating more on where our businesses and their customers actually are, the effective exposure to this change is closer to half or 60% of our assets than the one third or so that derives from the listings data. I would confess to wondering at times whether this is yet sufficiently bold.

Separately, given the febrile nature of markets, ongoing private sector de-leveraging and a lingering spirit of trepidation after the events of late 2008 and early 2009, it seems to us there is a range of attractive unusual, neglected, illiquid or unloved investments across a span of end markets. Litigation finance, life settlements and turnaround funds are examples of this. Many face individual challenges or uncertainties that are fairly specific to their own circumstances. Some throw up a wide range of potential outcomes. All would seem to offer exploitable degrees of mispricing of the opportunities each holds for investment returns.

PMS Barron

Chairman

MID WYND INTERNATIONAL INVESTMENT TRUST PLC

 

The following is the unaudited preliminary statement for the year to 30 June 2010 which was approved by the Board on 30 July 2010.  The Directors of Mid Wynd International Investment Trust PLC are recommending to the Annual General Meeting of the Company to be held on 22 September 2010 the payment of a final dividend of 9.0p (8.5p last year) per ordinary share, making a total of 15.5p (15.0p last year) per ordinary share for the year ended 30 June 2010.

INCOME STATEMENT

(unaudited)

	For the year ended 30 June 2010				For the year ended 30 June 2009
	Revenue £'000	Capital £'000	Total £'000		Revenue £'000	Capital £'000	Total £'000
Gains/(losses) on investments	-	11,977	11,977		-	(10,777)	(10,777)
Currency losses	-	(293)	(293)		-	(12)	(12)
Income (note 2)	1,263	-	1,263		1,336	-	1,336
Investment management fee	(126)	(126)	(252)		(97)	(97)	(194)
Other administrative expenses	(168)	-	(168)		(150)	-	(150)
Net return before finance costs and taxation	969	11,558	12,527		1,089	(10,886)	(9,797)
Finance costs of borrowings	(45)	(45)	(90)		(20)	(20)	(40)
Net return on ordinary activities before taxation	924	11,513	12,437		1,069	(10,906)	(9,837)
Tax on ordinary activities	(77)	7	(70)		(251)	34	(217)
Net return on ordinary activities after taxation	847	11,520	12,367		818	(10,872)	(10,054)
Net return per ordinary share (note 3)	16.85p	229.23p	246.08p		16.26p	(216.24p)	(199.98p)
Dividends paid and proposed per ordinary share (note 4)	15.50p				15.00p

The total column of the Income Statement is the profit and loss account of the Company.

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year.

A Statement of Total Recognised Gains and Losses is not required as all gains and losses of the Company have been reflected in the above statement.

MID WYND INTERNATIONAL INVESTMENT TRUST PLC

BALANCE SHEET

 (unaudited)

30 June 2010 £'000		30 June 2009 £'000
Fixed Assets
Investments	54,586		40,776
Current Assets
Debtors	1,378		274
Cash and deposits	402		143
	1,780		417
Creditors Amounts falling due within one year (note 5)	(2,957)		(240)
Net current (liabilities)/assets	(1,177)		177
Total assets less current liabilities	53,409		40,953
Creditors Amounts falling due after more than one year (note 5)	(3,347)		(1,888)
Provisions for liabilities and charges
Deferred taxation	-		-
Total net assets	50,062		39,065
Capital and reserves
Called-up share capital	1,241		1,257
Capital redemption reserve	16		-
Share premium	20		20
Capital reserve	47,295		36,391
Revenue reserve	1,490		1,397
Shareholders' funds	50,062		39,065
Net asset value per ordinary share (after deducting borrowings at fair value)	1,008.2p		776.5p
Net asset value per ordinary share (after deducting borrowings at par)	1,008.7p		777.0p

DISTRIBUTION OF ASSETS

 (unaudited)

			30 June 2010 %		30 June 2009 %
Equities:	United Kingdom		20.8		7.7
	Continental Europe		19.7		22.1
	North America		18.5		19.6
	Asia Pacific including Japan		6.3		11.4
	Emerging Markets		28.5		21.0
Total Equities			93.8		81.8
Fixed interest			4.7		17.8
Net liquid assets			1.5		0.4
Total assets (before deduction of bank loans)			100.0		100.0

MID WYND INTERNATIONAL INVESTMENT TRUST PLC

SUMMARISED CASH FLOW STATEMENT (unaudited)
	For the year ended 30 June 2010			For the year ended 30 June 2009
	£'000	£'000		£'000	£'000
Net cash inflow from operating activities		755			982
Net cash outflow from servicing of finance		(90)			(37)
Taxation
Corporation tax paid	(154)			(198)
Total tax paid		(154)			(198)
Financial investment
Acquisitions of investments	(30,573)			(29,282)
Disposals of investments	28,147			24,795
Realised currency profit	29			336
Net cash outflow from financial investment		(2,397)			(4,151)
Equity dividends paid (note 4)		(754)			(870)
Net cash outflow before use of liquid resources and financing		(2,640)			(4,274)
Liquid resources
Decrease in short term deposits	-			1,771
Net cash inflow from use of liquid resources		-			1,771
Financing
Shares purchased for cancellation	(238)			-
Bank loans drawn down	3,137			-
Net cash inflow from financing		2,899			-
Increase/(decrease) in cash		259			(2,503)
Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash in the year		259			(2,503)
Decrease in short term deposits		-			(1,771)
Net cash inflow from bank loans		(3,137)			-
Exchange movement on short term deposits		-			118
Exchange movement on bank loans		(322)			(466)
Movement in net debt in the year		(3,200)			(4,622)
Net (debt)/funds at 1 July		(1,745)			2,877
Net debt at 30 June		(4,945)			(1,745)
Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
Net return before finance costs and taxation		12,527			(9,797)
(Gains)/losses on investments		(11,977)			10,777
Currency losses		293			12
Amortisation of fixed interest book cost		(70)			(128)
Decrease in accrued income		44			32
Decrease in debtors		10			162
Increase/(decrease) in creditors		9			(11)
Overseas tax suffered		(58)			(43)
Income tax suffered		(23)			(22)
Net cash inflow from operating activities		755			982

MID WYND INTERNATIONAL INVESTMENT TRUST PLC

 

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

(unaudited)

For the year ended 30 June 2010

	Share capital £'000	Capital redemption reserve £'000	Share premium £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 July 2009	1,257	-	20	36,391	1,397	39,065
Net return on ordinary activities after taxation	-	-	-	11,520	847	12,367
Shares purchased for cancellation	(16)	16	-	(616)	-	(616)
Dividends paid during the year (note 4)	-	-	-	-	(754)	(754)
Shareholders' funds at 30 June 2010	1,241	16	20	47,295	1,490	50,062

For the year ended 30 June 2009

	Share capital £'000	Capital redemption reserve £'000	Share premium £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 July 2008	1,257	-	20	47,263	1,449	49,989
Net return on ordinary activities after taxation	-	-	-	(10,872)	818	(10,054)
Dividends paid during the year (note 4)	-	-	-	-	(870)	(870)
Shareholders' funds at 30 June 2009	1,257	-	20	36,391	1,397	39,065

*Capital reserve balance as at 30 June 2010 included an investment holding gain of £8,682,000 (30 June 2009: gain of £1,575,000).

 

 

MID WYND INTERNATIONAL INVESTMENT TRUST PLC

THIRTY LARGEST EQUITY HOLDINGS at 30 June 2010 (unaudited)
Name	Region		Business	2010			2009
				Value £'000	% of total assets		Value £'000
Level E Maya Fund		United Kingdom	Artificial intelligence based trading platform	2,473	4.5	-
OGX Petróleo e Gás    Participacoes		Emerging Markets	Oil and gas exploration and production - Brazil	1,545	2.8	618
Eldorado Gold		North America	Gold mining - Brazil, China, Greece and Turkey	1,343	2.4	-
Kone		Continental Europe	Elevators	1,167	2.1	1,069
Ocean Wilsons Holdings		United Kingdom	Tugboats and port terminals - Brazil	1,145	2.1	553
China Merchants Bank		Emerging Markets	Banking - China	1,137	2.0	707
Baillie Gifford Japanese    Smaller Co's Fund		Asia Pacific including Japan	Investment fund	1,050	1.9	1,688
Vision Opportunity China    Fund		Emerging Markets	Investment fund - China	1,022	1.8	-
Baillie Gifford Developed    Asia Pacific Fund		Asia Pacific including    Japan	Investment fund	1,013	1.8	2,037
Odontoprev		Emerging Markets	Dental health services - Brazil	941	1.7	-
Reinet Investments		Continental Europe	Investment holding company - Luxembourg	835	1.5	692
Seadrill		Continental Europe	Deep water oil rigs	826	1.5	735
Better Capital		United Kingdom	Fund investing in distressed businesses	810	1.5	-
Schindler		Continental Europe	Elevators	796	1.4	528
ASOS		United Kingdom	Online fashion retailer	774	1.4	-
Essilor		Continental Europe	Ophthalmology	702	1.3	753
Falkland Oil and Gas		United Kingdom	Oil and gas exploration and production - Falkland Islands	679	1.2	210
McDonalds		North America	Fast food restaurant chain	678	1.2	279
IG Group Holdings		United Kingdom	Spread betting	666	1.2	252
Healthspring		North America	Medicare	665	1.2	-
Juridica Investments		United Kingdom	Fund of lawsuits	664	1.2	398
Medco Health Solutions		North America	Prescription management and health information	662	1.2	499
Marine Harvest		Continental Europe	Salmon farming	636	1.1	407
Novozymes		Continental Europe	Enzyme producer	622	1.1	427
Atlas Copco		Continental Europe	Industrial compressors and mining equipment	621	1.1	381
Ctrip.com International		Emerging Markets	Travel services - China	603	1.1	337
The Biotech Growth Trust		United Kingdom	Biotechnology investment trust	600	1.1	-
Dragon Oil		Emerging Markets	Oil and gas exploration and production - Turkmenistan	570	1.0	508
Naspers		Emerging Markets	Media company - South Africa and China	563	1.0	398
Cetip		Emerging Markets	Investment services - Brazil	558	1.0	-
				26,366	47.4	13,476

MID WYND INTERNATIONAL INVESTMENT TRUST PLC

NOTES

(unaudited)

1.	The financial information within this preliminary announcement has been extracted from the unaudited financial statements for the year to 30 June 2010 and has been prepared on the basis of the accounting policies set out in the Company's Annual Financial Statements at 30 June 2009. The adoption of the January 2009 Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' had no effect on the financial statements of the Company.
				30 June 2010 £'000					30 June 2009 £'000
2.	Income
	Income from investments and interest receivable			1,257					1,330
	Other income			6					6
				1,263					1,336
				30 June 2010					30 June 2009
3.	Net return per ordinary share
	Revenue return			16.85p					16.26p
	Capital return			229.23p					(216.24p)
	Total return			246.08p					(199.98p)
	Revenue return per ordinary share is based on the net revenue on ordinary activities after taxation of £847,000 (2009 - £818,000) and on 5,025,506 (2009 - 5,027,766) ordinary shares, being the weighted average number of ordinary shares in issue during the year. Capital return per ordinary share is based on the net capital gain for the financial year of £11,520,000 (2009 - net capital loss of £10,872,000) and on 5,025,506 (2009 - 5,027,766) ordinary shares, being the weighted average number of ordinary shares in issue during the year. There are no dilutive or potentially dilutive shares in issue.
4.		Ordinary Dividends	2010			2009		2010 £'000		2009 £'000
		Amounts recognised as distributions in the year:
		Previous year's final (paid 8 October 2009)	8.50p			8.50p		427		427
		Previous year's special	-			2.30p		-		116
		Interim (paid 1 April 2010)	6.50p			6.50p		327		327
			15.00p			17.30p		754		870

MID WYND INTERNATIONAL INVESTMENT TRUST PLC NOTES (CTD) (unaudited)
4.	Ordinary Dividends (Ctd)
	We also set out below the total dividends paid and payable in respect of the financial year, which is the basis on which the requirements of section 1158 of the Corporation Taxes Act 2010 are considered.  The revenue available for distribution by way of dividend for the year is £847,000 (2009 - £818,000).
		2010		2009		2010 £'000		2009 £'000
	Dividends paid and payable in respect of the year:
	Interim dividend per ordinary share (paid 1 April 2010)	6.50p		6.50p		327		327
	Proposed final dividend per ordinary share (payable 7 October 2010)	9.00p		8.50p		447		427
		15.50p		15.00p		774		754
	If approved the recommended final dividend will be paid on 7 October 2010 to all shareholders on the register at the close of business on 10 September 2010. The ex-dividend date is 8 September 2010. The Company's Registrar offers a Dividend Reinvestment Plan and the final date for receipt of elections for this dividend is 16 September 2010.
5.	Creditors falling due within one year include a £2 million bank loan repayable on 27 August 2010 (2009 - nil) and creditors falling due after one year include bank loans of ¥300 million (2009 - ¥300 million) and €1.32 million (2009 - nil) which are repayable on 27 February 2012.
6.	In the year to 30 June 2010 the Company bought back 65,000 ordinary shares with a nominal value of £16,250 at a total cost of £616,000. At 30 June 2010 the Company had authority to buy back a further 688,662 ordinary shares in accordance with the authority granted at the AGM in September 2009.
7.	The Annual Report and Financial Statements will be available on the Managers' website www.bailliegifford.com  on or around 19 August 2010.
8.	The financial information set out above does not constitute the Company's statutory accounts for the year ended 30 June 2010. The financial information for 2009 is derived from the statutory accounts for 2009 which have been delivered to the Registrar of Companies. The Auditors have reported on the 2009 accounts, their report was unqualified and did not contain a statement under sections 495 to 497 of the Companies Act 2006.  The statutory accounts for 2010 will be finalised on the basis of the financial information presented in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.
9.	None of the views expressed in this document should be construed as advice to buy or sell a particular investment.

 

END

 

 

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