Half Yearly Report

RNS Number : 8509G

Mid Wynd Inter Inv Trust PLC

09 February 2010

 



MID WYND INTERNATIONAL INVESTMENT TRUST PLC

Results for the six months to 31 December 2009

In the six months to 31 December 2009, the Company's net asset value per share (after deducting borrowings at fair value) increased 28.6% to 998.8p while the FTSE World Index in sterling terms increased 24.7%.  The share price increased by 23.0%.

·	Many share prices of companies that performed poorly in the first half of 2009 rebounded in the second half of the year.  Oil related companies and those with exposure to emerging markets were amongst the strongest performers.
·	Bond holdings were reduced during the period and the proceeds reinvested in equities.
·	Additional borrowings of £3.2 million were taken.  Potential gearing is now 110% of shareholders' funds having been 105% as at 30 June 2009.  The equivalent figures for equity gearing are 102% and 87%.
·	As a result of the sales in the bond portfolio and a reduction in cash balances, earnings were 5.60p per share compared to 6.70p per share this time last year.  An unchanged interim dividend of 6.50p will be paid.
·	While progress in the developed world may be constrained in the wake of the 2008 financial crisis and associated debt burdens, economic power and the hope of revived growth has passed from established traditional western economies to those in the developing world.

The objective of Mid Wynd International Investment Trust PLC is to achieve capital and income growth by investing on a worldwide basis.

Mid Wynd seeks to meet its objective of achieving capital and income growth through investment principally in a portfolio of international quoted equities. The proportion of the portfolio invested in UK companies will not normally exceed 25%. Further details of the Company's investment policy are given in the Directors' Report in the Annual Report and Financial Statements.

The Company had total assets of £55.4m (before deduction of bank loans of £5.2m) as at 31 December 2009.

Mid Wynd is managed by Baillie Gifford & Co, the Edinburgh based fund management group with around £55 billion under management and advice as at 8 February 2010.

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. This is because the share price is determined by the changing conditions in the relevant stockmarkets in which the Company invests and by the supply and demand for the Company's shares. You can find up to date performance information about Mid Wynd at www.midwynd.co.uk

8 February 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

The following is the unaudited Half-Yearly Financial Report for the six months to 31 December 2009

 

MID WYND INTERNATIONAL INVESTMENT TRUST PLC

 

Half-Yearly Financial Report 31 December 2009

Responsibility Statement

 

We confirm that to the best of our knowledge:

a)   the condensed set of financial statements has been prepared in accordance with the Accounting Standards Board's statement 'Half-Yearly Financial Reports';

b)   the Half-Yearly Management Report includes a fair review of the information required by Disclosure and Transparency Rules 4.2.7R (indication of important events during the first six months, and their impact on the financial statements, and a description of principal risks and uncertainties for the remaining six months of the year); and

c)   the Half-Yearly Financial Report includes a fair review of the information required by Disclosure and Transparency Rules 4.2.8R (disclosure of related party transactions and changes therein).

By order of the Board

PMS Barron

Chairman

8 February 2010

MID WYND INTERNATIONAL INVESTMENT TRUST PLC

Half-Yearly Management Report

Portfolio

The past six months has been a remarkable time in markets. The FTSE World Index in sterling terms has risen by 24.7% from the end of June. Mid Wynd's NAV has put on 28.6% to just under £10 per share. We have further reduced our bond holdings as yields have fallen and spreads shrunk and reinvested the proceeds in equities, so that the Company's level of exposure to the equity market is now above 100% for the first time in some years. Equities had become cheap, fear had become extreme and remedial policy measures were comparably radical.

During the six months ended 31 December 2009, the Company drew down additional borrowings in the form of €1.32 million under the existing US$5 million facility expiring 2012 plus £2 million under a new 365 day facility expiring September 2010. New investments have come in litigation finance, biotechnology, companies benefitting from stronger developing world consumers and financial systems, oil and gas exploration and gold mining to name some of the more prominent themes.

Biotechnology deserves a particular mention, since related companies account for over 6% of assets and because it is a theme unrelated to others in the portfolio. Concerns over US healthcare reform have depressed valuations of nearly all healthcare related undertakings. Some of this may well be justified. However, biotech companies find themselves trading very often near or below market multiples just as the industry is starting to confirm some of the hopes that were first expressed over a decade ago about the opening up of genomics and proteomics. Long term growth and return prospects appear rosy and unrecognised.

Sales of equities have come from holdings where short term opportunity has been fulfilled, such as Trinity Trikona, our Indian property developer, or where long term prospects have either withered or now appear to be properly discounted by markets. Neopost is a well run business in what appears increasingly to be a structurally overwhelmed postal industry. Pepsi, Walgreen and Nestlé are well appreciated steady growers where it has become challenging to describe what it is that we see that others may be missing. There is a lower than usual share of disappointments. This owes simply to the extent by which markets have risen over the period. One significant sadness was the takeover of Marvel Entertainment by Disney - we had hoped to enjoy some years of rapidly growing earnings as the group exploited its priceless back catalogue in film. Among large scale ongoing disappointments is the relapse of Japan into deflation to which the portfolio is somewhat exposed. Limited attempts to invest the other way have so far come to nothing. Kenedix and Mid Reit, commercial real estate landlords, continue to face difficult current trading after 20 years of preceding difficulties.

Earnings and dividend

The revenue return for the first half of the current financial year, at 5.60p per share, is 16.4% lower than the 6.70p per share earned in the six months to 31 December 2008, largely owing to sales in the bond portfolio and a reduction in cash balances. This shift in asset allocation was led by changing investment prospects. However, the Company has sufficient reserves to maintain its dividend and consequently a dividend of 6.50p will be paid on 1 April 2010 to shareholders on the register on 5 March 2010.

MID WYND INTERNATIONAL INVESTMENT TRUST PLC

 

Half-Yearly Management Report (Ctd)

Outlook

It is again impossible to avoid macro-economics when discussing the outlook for markets. Western economies have become a Japanese-style cartoon featuring two gigantic drunks, banks and governments, each desperately propping up the other. Neither is presently capable of standing up independently and both are flailing around doing significant and largely unintended damage to the economic structures around them. For business and anyone else who can, the sensible response is to stay as far out of their path as possible.

The strong black coffee has so far come in the innovative form of printing money and using it to buy government debt. No one knows how a withdrawal from this 'quantitative easing' may play out in practice since we have never seen this scale of experimentation in money printing before. However, smaller versions in the distant past have nearly all ended badly. More enduring support for western economies requires taking a knife to the bloated public sector to make room for productive private sector investment and job creation.

It seems likely that we will see some back up in the remarkable corporate margin improvement and free cash generation we have just experienced. A pick up in inventories is already underway - supply chain efficiencies have been tested to breaking point. This much is nearly inevitable given the extreme nature of the starting point. Yet the hangover from two decades of excess will be with us for some time just as the debt that fuelled the party will not evaporate quickly and is indeed still growing rapidly. Private sector confidence is unsurprisingly fragile and taxes are rising.  Low government bond yields are being artificially held down by banks' buying, and direct or indirect support from Central Banks. The scope for the latter to keep expanding their balance sheets without undermining their own credibility is diminishing. Fiscal constraints may well become severe in this context. Markets are about to impose discipline on our politicians. We may not need to fear this time that unprecedented stimulus will lead western consumers to lose control of their spending.

The longer term lesson to be observed by those developing countries that have not yet had the opportunity to become addicted to this cocktail of debt and monetary illusion is not that markets don't work. It's that they are not invulnerable to being distorted temporarily for short term gain. The good news is that the baton of growth has clearly passed to those in the developing world better able to carry it. High savings rates, high levels of capital investment, rapidly improving productivity, high and falling real interest rates, underlying continued improvement in fiscal positions and low levels of public and private debt: all these support rising domestic growth rates and rising consumption in populous nations like China, Brazil, Turkey, Indonesia and Poland. Appreciating currencies there, were it allowed to happen, would mean cheaper imports and some brake on local inflation. A stronger and more reliable future for developing world consumption will lead a shift in the focus of enterprises there towards their home markets. Critical in this evolution will be some gradual relaxation in the pegging of the renmimbi. Successful developing economies need to wean themselves off the cheap currency, export-driven economic path which typically also features reinvestment of revenues in western government debt. That change will in turn lead to necessary changes in western lifestyles.

 MID WYND INTERNATIONAL INVESTMENT TRUST PLC

INCOME STATEMENT

(unaudited)

	For the six months ended 31 December 2009			For the six months ended 31 December 2008			For the year ended 30 June 2009
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gains/(losses) on sales of investments	-	1,650	1,650	-	(3,420)	(3,420)	-	(4,210)	(4,210)
Changes in investment holding gains/(losses)	-	9,893	9,893	-	(7,548)	(7,548)	-	(6,567)	(6,567)
Currency losses	-	(145)	(145)	-	(187)	(187)	-	(12)	(12)
Income from investments and interest receivable	483	-	483	549	-	549	1,330	-	1,330
Other income	2	-	2	4	-	4	6	-	6
Investment management fee	(61)	(61)	(122)	(50)	(50)	(100)	(97)	(97)	(194)
Other administrative expenses	(86)	-	(86)	(82)	-	(82)	(150)	-	(150)
Net return before finance costs and taxation	338	11,337	11,675	421	(11,205)	(10,784)	1,089	(10,886)	(9,797)
Finance costs of borrowings	(21)	(21)	(42)	(9)	(9)	(18)	(20)	(20)	(40)
Net return on ordinary activities before taxation	317	11,316	11,633	412	(11,214)	(10,802)	1,069	(10,906)	(9,837)
Tax on ordinary activities	(35)	14	(21)	(75)	13	(62)	(251)	34	(217)
Net return on ordinary activities after taxation	282	11,330	11,612	337	(11,201)	(10,864)	818	(10,872)	(10,054)
Net return per ordinary share (note 4)	5.60p	225.34p	230.94p	6.70p	(222.78p)	(216.08p)	16.26p	(216.24p)	(199.98p)
Note: Dividends paid and payable per ordinary share (note 5)	6.50p			6.50p			15.00p

     The total column of this 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 period.

    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)

	31 December 2009		31 December 2008		30 June 2009
	£'000		£'000		£'000
FIXED ASSETS
Investments	54,344		38,996		40,776
CURRENT ASSETS
Debtors	136		178		274
Cash and short term deposits	1,203		2,034		143
	1,339		2,212		417
CREDITORS
Amounts falling due within one year (note 6)	(2,265)		(318)		(240)
NET CURRENT (LIABILITIES)/ASSETS	(926)		1,894		177
TOTAL ASSETS LESS CURRENT LIABILITIES	53,418		40,890		40,953
CREDITORS
Amounts falling due after more than one year
Bank loans (note 7)	(3,168)		(2,302)		(1,888)
	(3,168)		(2,302)		(1,888)
PROVISIONS FOR LIABILITIES AND CHARGES
Deferred taxation	-		(6)		-
	50,250		38,582		39,065
CAPITAL AND RESERVES
Called-up share capital	1,257		1,257		1,257
Share premium	20		20		20
Capital reserve	47,721		36,062		36,391
Revenue reserve	1,252		1,243		1,397
SHAREHOLDERS' FUNDS	50,250		38,582		39,065
NET ASSET VALUE PER ORDINARY SHARE (after deducting borrowings at fair value) (note 8)	998.8p		766.8p		776.5p
NET ASSET VALUE PER ORDINARY SHARE (after deducting borrowings at par)	999.4p		767.4p		777.0p
Ordinary shares in issue (note 9)	5,027,766		5,027,766		5,027,766

MID WYND INTERNATIONAL INVESTMENT TRUST PLC

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (unaudited)

For the six months ended 31 December 2009

	Share capital £'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	-	-	11,330	282	11,612
Dividends paid during the period#	-	-	-	(427)	(427)
Shareholders' funds at 31 December 2009	1,257	20	47,721	1,252	50,250

For the six months ended 31 December 2008

	Share capital £'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	-	-	(11,201)	337	(10,864)
Dividends paid during the period#	-	-	-	(543)	(543)
Shareholders' funds at 31 December 2008	1,257	20	36,062	1,243	38,582

For the year ended 30 June 2009

	Share capital £'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#	-	-	-	(870)	(870)
Shareholders' funds at 30 June 2009	1,257	20	36,391	1,397	39,065

^#   See note 5.

* Capital reserve as at 31 December 2009 includes an investment holding gain of £11,467,000 (31 December 2008 - gain of £594,000; 30 June 2009 - gain of £1,575,000).

 

MID WYND INTERNATIONAL INVESTMENT TRUST PLC

CONDENSED CASH FLOW STATEMENT (unaudited)
	Six months to 31 December 2009		Six months to 31 December 2008			Year to 30 June 2009
		£'000		£'000	£'000
Net cash inflow from operating activities		377		570	982
Net cash outflow from servicing of finance		(42)		(17)	(37)
Total tax paid		-		-	(198)
Net cash outflow from financial investment		(2,021)		(2,393)	(4,151)
Equity dividends paid (note 5)		(427)		(543)	(870)
Net cash outflow before use of liquid resources and financing		(2,113)		(2,383)	(4,274)
Liquid Resources
Decrease in short term deposits		-		1,771	1,771
Net cash inflow from use of liquid resources		-		1,771	1,771
Financing
Net cash inflow from bank loans		3,173		-	-
Net cash inflow from financing		3,173		-	-
Increase/(decrease) in cash		1,060		(612)	(2,503)
Reconciliation of net cash flow to movement in net (debt)/funds
Increase/(decrease) in cash in the period		1,060		(612)	(2,503)
Decrease in short term deposits		-		(1,771)	(1,771)
Increase in bank loans		(3,173)		-	-
Exchange movement on short term deposits and bank loans		(107)		(762)	(348)
Movement in net (debt)/funds in the period		(2,220)		(3,145)	(4,622)
Net (debt)/funds at start of the period		(1,745)		2,877	2,877
Net debt at end of the period		(3,965)		(268)	(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		11,675		(10,784)	(9,797)
Net (gains)/losses on investments		(11,543)		10,968	10,777
Currency losses		145		187	12
Amortisation of fixed income book cost		(56)		(59)	(128)
Changes in debtors and creditors		198		294	183
Overseas tax		(19)		(15)	(43)
Income tax		(23)		(21)	(22)
Net cash inflow from operating activities		377		570	982

MID WYND INTERNATIONAL INVESTMENT TRUST PLC

THIRTY LARGEST HOLDINGS (unaudited) at 31 December 2009
Name	Region	Business	Value  £'000		% of total assets*
Baillie Gifford Developed   Asia Pacific Fund	Asia Pacific   including Japan	Investment fund	1,853		3.3
Kone	Continental Europe	Elevators	1,530		2.8
OGX Petróleo e Gás   Participacoes	Emerging Markets	Oil and gas exploration and production -   Brazil	1,208		2.2
Baillie Gifford Japanese    Smaller Companies Fund	Asia Pacific   including Japan	Investment fund	1,198		2.2
Baillie Gifford Greater   China Fund	Emerging Markets	Investment fund	1,157		2.1
Ocean Wilsons Holdings	United Kingdom	Tugboats, platform supply vessels and   container handling - Brazil	1,093		2.0
Seadrill	Continental Europe	Deep water oil rigs	1,072		1.9
Athena Debt Opportunities   Fund	Fixed Interest	Distressed debt	1,048		1.9
Reinet Investments SCA	Continental Europe	Investment holding company	1,007		1.8
China Merchants Bank	Emerging Markets	Banking - China	1,003		1.8
Essilor	Continental Europe	Ophthalmology	962		1.7
Medco Health Solutions	North America	Prescription management and health   information	712		1.3
Juridica Investments	United Kingdom	Fund of lawsuits	711		1.3
Healthspring	North America	Medicare	697		1.3
Schindler	Continental Europe	Elevators	670		1.2
Marine Harvest	Continental Europe	Salmon farming	646		1.2
Naspers	Emerging Markets	Media company - South Africa & China	631		1.1
Eldorado Gold	Asia Pacific    including Japan	Gold mining - Brazil, China, Greece &   Turkey	624		1.1
Petrobras	Emerging Markets	Integrated oil - Brazil	620		1.1
Vision Opportunity China   Fund	Emerging Markets	Investment fund - China	597		1.1
McDonalds	North America	Fast food restaurant chain	595		1.1
Better Capital	United Kingdom	Fund investing in distressed businesses	594		1.1
Falkland Oil and Gas	United Kingdom	Oil and gas exploration	583		1.1
Geberit	Continental Europe	Plumbing systems - Europe	582		1.1
Atlas Copco	Continental Europe	Industrial compressors and mining   equipment	564		1.0
Novozymes	Continental Europe	Enzyme producer	558		1.0
The Biotech Growth Trust	United Kingdom	Biotechnology investment trust	554		1.0
Pride International	North America	Offshore drilling contractor	545		1.0
Dragon Oil	Emerging Markets	Oil and gas exploration and production -   Turkmenistan	544		1.0
Ctrip.com International	Emerging Markets	Travel services - China	533		1.0
			24,691		44.8

^*Total assets before deduction of bank loans

MID WYND INTERNATIONAL INVESTMENT TRUST PLC

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (unaudited)

1. 2. 3.	The condensed financial statements have been prepared on the basis of the same accounting policies as set out in the Company's Annual Financial Statements at 30 June 2009 and in accordance with the ASB's Statement 'Half-Yearly Financial Reports' and have not been audited or reviewed by the Auditors pursuant to the Auditing Practices Board Guidance on 'Review of Interim Financial Information'.  They have been prepared on the going concern basis as it is the Directors' opinion that the Company will continue in operational existence for the foreseeable future. The financial information contained within this half-yearly financial report does not constitute statutory accounts as defined in sections 434 to 436 of the Companies Act 2006. The financial information for the year ended 30 June 2009 has been extracted from the statutory accounts which have been filed with the Registrar of Companies. The Auditors' Report on those accounts was not qualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. The management agreement is terminable on not less than 12 months' notice, or on shorter notice in certain circumstances. The fee in respect of each quarter is 0.125% of the net assets of the Company attributable to its shareholders on the last day of that quarter.
		Six months to 31 December 2009	Six months to 31 December 2008	Year to 30 June  2009
		£'000	£'000	£'000
4.	Net return per ordinary share
	Revenue return on ordinary activities after taxation	282	337	818
	Capital return on ordinary activities after taxation	11,330	(11,201)	(10,872)
	Total net return	11,612	(10,864)	(10,054)
	Net return per ordinary share is based on the above totals of revenue and capital and on 5,027,766 ordinary shares, being the weighted average number of ordinary shares in issue during each period. There are no dilutive or potentially dilutive shares in issue.
		Six months to 31 December 2009	Six months to 31 December 2008	Year to 30 June  2009
		£'000	£'000	£'000
5.	Dividends
	Amounts recognised as distributions in the period:
	Previous year's final dividend of 8.50p (2008 - 8.50p), paid 8 October 2009	427	427	427
	2008 special dividend of 2.30p paid 16 October 2008	-	116	116
	Interim dividend for the year ended 30 June 2009 of 6.50p paid 7 April 2009	-	-	327
		427	543	870
	Amounts paid and payable in respect of the period:
	Interim dividend for the year ending 30 June 2010 of 6.50p (2009 - 6.50p)	327	327	327
	Final dividend for the year ended 30 June 2009	-	-	427
		327	327	754
	The interim dividend was declared after the period end date and has therefore not been included as a liability in the balance sheet.  It is payable on 1 April 2010 to shareholders on the register at the close of business on 5 March 2010. The ex-dividend date is 3 March 2010. The Company operates a Dividend Reinvestment Plan and the final date for elections for this dividend is 11 March 2010.
	MID WYND INTERNATIONAL INVESTMENT TRUST PLC NOTES TO THE CONDENSED FINANCIAL STATEMENTS (unaudited)
6.	Creditors include £2 million in respect of a short term loan facility expiring on 2 September 2010.
7.	The bank loan falling due in more than one year comprises a ¥300 million and a €1.32 million loan drawn down under a US$5 million facility expiring on 27 February 2012 (31 December 2008 - ¥300 million; 30 June 2009 - ¥300 million).
8.	The fair value of the bank loans at 31 December 2009 was £5,200,000 (31 December 2008 - £2,331,000; 30 June 2009 - £1,913,000).
9.	At 31 December 2009 the Company had authority to buy back 753,662 of its own shares. No shares were bought back during the period under review.
10.	Transaction costs incurred on the purchase and sale of the investments are added to the purchase cost or deducted from the sale proceeds, as appropriate. During the period, transaction costs on purchases amounted to £31,000 (31 December 2008 - £12,000; 30 June 2009 - £33,000) and transaction costs on sales amounted to £4,000 (31 December 2008 - £5,000; 30 June 2009 - £10,000).
11.	At 31 December 2009 the Company had contingent liabilities of £1,005,000 (31 December 2008 - £1,005,000; 30 June 2009 - £1,005,000) in respect of a subscription agreement, relating to participating unsecured loan notes in Pantheon International Participations plc ('PIP'). The PIP loan notes of par value £495,000 held by the Company were valued at £300,000 at 31 December 2009 (31 December 2008 - £495,000; 30 June 2009 - £396,000).
	None of the views expressed in this document should be construed as advice to buy or sell a particular investment. The half-yearly financial report is available on www.midwynd.co.uk and will be posted to shareholders on or around 19 February 2010.
	Principal Risks and Uncertainties The principal risks facing the Company relate to the Company's investment activities. These risks are market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk.  An explanation of these risks and how they are managed is contained in note 22 of the Company's Annual Report and Financial Statements for the year to 30 June 2009. The principal risks and uncertainties have not changed since the publication of the Annual Report which can be obtained free of charge from Baillie Gifford & Co and is available on the Mid Wynd page of the Managers' website: www.midwynd.co.uk. Other risks facing the Company include the following: gearing risk (the use of borrowing can magnify the impact of falling markets), the risk that the discount can widen and regulatory risk (that the loss of investment trust status or a breach of the UKLA Listing Rules could have adverse financial consequences and cause reputational damage).

 

END

 

 

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