Half Yearly Report

RNS Number : 8234A

Mid Wynd Inter Inv Trust PLC

08 February 2011

 



MID WYND INTERNATIONAL INVESTMENT TRUST PLC

Results for the six months to 31 December 2010

In the six months to 31 December 2010, the Company's net asset value per share (after deducting borrowings at fair value) increased 26.0% to 1,270.4p while the FTSE World Index in sterling terms increased 18.0%.  The share price increased by 40.1%.

·	Stock-picking success and a bias towards faster growing areas of demand helped returns over the period. A few holdings, such as MIPs, Seadrill and Odontoprev made most of the running.
·	Revenues were markedly down year on year owing entirely to our switch away from bonds relative to the corresponding period last year. Fixed income instruments now represent 5% or so of assets.
·	The Company holds sufficient reserves to allow an unchanged interim dividend of 6.50p per share.
·	Investment focus remains on companies, often young companies, with significant potential to grow earnings, cash flow and dividends.
·	We also find interest in unusual situations that have potentially high pay-offs and which sit on the edge of or beyond most institutional investment radars.

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 £71.2m (before deduction of bank loans of £5.5m) as at 31 December 2010.

Mid Wynd is managed by Baillie Gifford & Co, the Edinburgh based fund management group with around £72 billion under management and advice as at 7 February 2011.

7 February 2011

- ends -

For further information please contact:

Michael MacPhee, Manager

Mid Wynd International Investment Trust PLC                          0131 275 2000

Roland Cross, Director,

Broadgate Mainland                                                                 020 7726 6111

The following is the unaudited Half-Yearly Financial Report for the six months to 31 December 2010

 

MID WYND INTERNATIONAL INVESTMENT TRUST PLC

 

Half-Yearly Financial Report 31 December 2010

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

7 February 2011

MID WYND INTERNATIONAL INVESTMENT TRUST PLC

Half-Yearly Management Report

Portfolio

The six months to the end of December 2010 have been a period of continued gains in markets, assisted by plentiful global liquidity. Over the period the FTSE World Index in sterling terms returned 18.0% (capital only). Mid Wynd's NAV rose 26.0% to 1,270.4p per share.

Developed world economies are slowly getting back on their feet despite continued frailty in their financial nervous systems and justifiable trepidation about various things, among them government and monetary policy and the widespread weight of debts. Developing economies are mostly moving forward briskly though with growing signs of inflation and monetary brakes being applied in consequence. The Company has maintained its exposure to equity investments throughout the period and ends it with a small cash balance and roughly 5% of assets in fixed income securities. There were no material changes to borrowings.

We reduced or sold a number of holdings that appeared to have realised much of their current potential. We cut back old favourites such as Atlas Copco, OGX, Eldorado Gold, Healthspring and also more recent purchases such as ASOS, MIPs, Bahamas Petroleum which had shown rapid appreciation. The outright sale of Garanti Bank followed a notable contribution to performance, rising valuation and our own rising concern over Turkish monetary policy. Less successful investments or those diverging from the path we had envisaged for them were also culled: Pride, Kazmunaigas Exploration, GP Investments, First Solar and, compounding a prior bad experience, Allied Irish Banks.

New holdings included Digital Garage (the operator of Japan's Twitter site), Aixtron (a maker of LED production machinery), Deutsche Wohnen (German residential real estate), Nanoco (a pioneer of quantum dot technology), Halosource (inventor of cheap, effective water cleansing technology), Totvs (Brazilian provider of accountancy software), Dart Energy (Asian coal seam methane exploration and production), and Ferro Alloy Resources (an unquoted Kazakh vanadium mining project). Tentative earlier steps to invest in the prospect of a Japanese reflation, discussed in last year's  half yearly report, were expanded with the purchase of December 2011 Nikkei 225 index call options - Japanese companies are often cash rich, cash generative and have weathered well the possibly ebbing tide of an impossibly strong Yen. It is worth noting the modest scale of our re-acquaintance with Japan - from the many stocks there that look cheap we have struggled to find even a few that look long term interesting.

Earnings and dividend

The revenue return for the first half of the current financial year, at 3.69p per share, is 34.1% lower than the 5.60p earned for the same period the previous year. This is consistent with our expectations and is largely the result of the reduced bond portfolio which was flagged in the Chairman's statement for the year to 30 June 2010 Although in recent years the Company's earnings pattern has been to receive the majority of its income in the latter half of its financial year, our current estimated income for the year is

MID WYND INTERNATIONAL INVESTMENT TRUST PLC

 

Half-Yearly Management Report (Ctd)

likely to fall short of the 16.85p per share earned last year. The Company has sufficient reserves to maintain its dividend and consequently a dividend of 6.50p per share will be paid on 1 April 2011 to shareholders on the register on 25 February 2011.

Share Issues

The Company's share price rose 40.1% over the half year, from 935.0p to 1,310.0p, moving from a discount to NAV of 7.3% at 30 June 2010 to a premium of 3.1% at 31 December 2010. This enabled the Company to issue 210,000 shares during November and December 2010 at a premium to NAV, raising £2,607,000. At 31 December 2010 the Company had authority remaining to issue a further 286,276 shares.

Outlook

We have all now become familiar with the precepts of printing money or quantitative easing. As our understanding of this idea has expanded, our grasp of the concept of money itself has suffered in direct proportion. The rising price of gold is one reflection of this and the natural concerns ensuing from it.

The pre-eminence of liquidity in asset markets and a superior strength and growth prognosis for developing markets is giving way to the new news of economic recovery in the depressed West. Germany, in particular, having long eschewed Anglo Saxon economic vices, is enjoying a much anticipated and much needed resurgence. That the new news stems from the old news and that Western recovery has itself everything to do with both plentiful liquidity and developing market strength is well expressed in the encapsulation of US policy as 'extend and pretend'.

Thus, the Chinese locomotive is even more pivotal than before. We must wish China every success in containing domestic inflation and converting it into wages and consumption while insulating the natural casualties of this process. The renminbi adjustment that is needed to assist in global economic rebalancing would appear to be happening through relative domestic inflation rather than the currency itself. The medium term consequences for the world from inflationary pressures building up in developing economies should not be ignored. Taken together with the palpable frailty of developed world government and municipal balance sheets and income statements and the low level of interest rates across the curve today, we remain deeply unattracted to western sovereign debt as an asset class.

As ever, investment success will depend upon the long term growth in profits, cash flows and dividends of our holdings. With this in mind, our focus has been on younger businesses with clear and sizeable opportunities ahead of them and also on unusual situations with potentially high pay-offs that sit on or beyond the periphery of typical institutional investment radars. We may be heading towards a more complex phase in markets, having now harvested the more straightforward investment opportunities provided by the widespread discomfort and disarray surrounding the financial crisis.

MID WYND INTERNATIONAL INVESTMENT TRUST PLC

 

Half-Yearly Management Report (Ctd)

The good news is that the corporate world has adjusted rapidly to changing circumstances and opportunities and appears well placed to cope with both. The Company's holdings bear increasingly little resemblance to the overall universe from which they are drawn.

The principal risks and uncertainties facing the Company are set out at the end of this release.

MID WYND INTERNATIONAL INVESTMENT TRUST PLC

INCOME STATEMENT

(unaudited)

	For the six months ended 31 December 2010			For the six months ended 31 December 2009			For the year ended 30 June 2010
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gains on sales of investments	-	3,520	3,520	-	1,650	1,650	-	4,870	4,870
Changes in investment holding gains/(losses)	-	10,051	10,051	-	9,893	9,893	-	7,107	7,107
Currency losses	-	(141)	(141)	-	(145)	(145)	-	(293)	(293)
Income from investments and interest receivable	399	-	399	483	-	483	1,257	-	1,257
Other income	2	-	2	2	-	2	6	-	6
Investment management fee	(76)	(76)	(152)	(61)	(61)	(122)	(126)	(126)	(252)
Other administrative expenses	(99)	-	(99)	(86)	-	(86)	(168)	-	(168)
Net return before finance costs and taxation	226	13,354	13,580	338	11,337	11,675	969	11,558	12,527
Finance costs of borrowings	(28)	(28)	(56)	(21)	(21)	(42)	(45)	(45)	(90)
Net return on ordinary activities before taxation	198	13,326	13,524	317	11,316	11,633	924	11,513	12,437
Tax on ordinary activities	(13)	-	(13)	(35)	14	(21)	(77)	7	(70)
Net return on ordinary activities after taxation	185	13,326	13,511	282	11,330	11,612	847	11,520	12,367
Net return per ordinary share (note 4)	3.69p	266.69p	270.38p	5.60p	225.34p	230.94p	16.85p	229.23p	246.08p
Note: Dividends paid and payable per ordinary share (note 5)	6.50p			6.50p			15.50p

     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 2010		31 December 2009		30 June 2010
	£'000		£'000		£'000
FIXED ASSETS
Investments	69,949		54,344		54,586
CURRENT ASSETS
Debtors	71		136		1,378
Cash and short term deposits	2,995		1,203		402
	3,066		1,339		1,780
CREDITORS
Amounts falling due within one year (note 6)	(3,788)		(2,265)		(2,957)
NET CURRENT LIABILITIES	(722)		(926)		(1,177)
TOTAL ASSETS LESS CURRENT LIABILITIES	69,227		53,418		53,409
CREDITORS
Amounts falling due after more than one year
Bank loans (note 7)	(3,494)		(3,168)		(3,347)
TOTAL NET ASSETS	65,733		50,250		50,062
CAPITAL AND RESERVES
Called-up share capital	1,293		1,257		1,241
Capital redemption reserve	16		-		16
Share premium	2,575		20		20
Capital reserve	60,621		47,721		47,295
Revenue reserve	1,228		1,252		1,490
SHAREHOLDERS' FUNDS	65,733		50,250		50,062
NET ASSET VALUE PER ORDINARY SHARE (after deducting borrowings at fair value) (note 8)	1,270.4p		998.8p		1,008.2p
NET ASSET VALUE PER ORDINARY SHARE (after deducting borrowings at par)	1,270.8p		999.4p		1,008.7p
Ordinary shares in issue (note 9)	5,172,766		5,027,766		4,962,766

MID WYND INTERNATIONAL INVESTMENT TRUST PLC

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (unaudited)

For the six months ended 31 December 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 2010	1,241	16	20	47,295	1,490	50,062
Net return on ordinary activities after taxation	-	-	-	13,326	185	13,511
Shares issued	52	-	2,555	-	-	2,607
Dividends paid during the period#	-	-	-	-	(447)	(447)
Shareholders' funds at 31 December 2010	1,293	16	2,575	60,621	1,228	65,733

For the six months ended 31 December 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 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 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#	-	-	-	-	(754)	(754)
Shareholders' funds at 30 June 2010	1,241	16	20	47,295	1,490	50,062

^#   See note 5.

* Capital reserve as at 31 December 2010 includes an investment holding gains of £18,733,000 (31 December 2009 - gains of £11,467,000; 30 June 2010 - gains of £8,682,000).

 

MID WYND INTERNATIONAL INVESTMENT TRUST PLC

CONDENSED CASH FLOW STATEMENT (unaudited)
	Six months to 31 December 2010		Six months to 31 December 2009			Year to 30 June 2010
		£'000		£'000	£'000
Net cash inflow from operating activities		291		377	755
Net cash outflow from servicing of finance		(53)		(42)	(90)
Total tax paid		-		-	(154)
Net cash inflow/(outflow) from financial investment		573		(2,021)	(2,397)
Equity dividends paid (note 5)		(447)		(427)	(754)
Net cash inflow/(outflow) before use of liquid resources and financing		364		(2,113)	(2,640)
Financing
Shares purchased for cancellation		(378)		-	(238)
Shares issued		2,607		-	-
Net cash inflow from bank loans		-		3,173	3,137
Net cash inflow from financing		2,229		3,173	2,899
Increase in cash		2,593		1,060	259
Reconciliation of net cash flow to movement in net debt
Increase in cash in the period		2,593		1,060	259
Increase in bank loans		-		(3,173)	(3,137)
Exchange movement on short term deposits and bank loans		(147)		(107)	(322)
Movement in net debt in the period		2,446		(2,220)	(3,200)
Net debt at start of the period		(4,945)		(1,745)	(1,745)
Net debt at end of the period		(2,499)		(3,965)	(4,945)
Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
Net return before finance costs and taxation		13,580		11,675	12,527
Net gains on investments		(13,571)		(11,543)	(11,977)
Currency losses		141		145	293
Amortisation of fixed income book cost		(17)		(56)	(70)
Changes in debtors and creditors		183		198	63
Overseas tax		(25)		(19)	(58)
Income tax		-		(23)	(23)
Net cash inflow from operating activities		291		377	755

MID WYND INTERNATIONAL INVESTMENT TRUST PLC

THIRTY LARGEST HOLDINGS (unaudited) at 31 December 2010
Name	Region	Business	Value  £'000		% of total assets*
Level E Maya Fund	United Kingdom	Artificial intelligence based algorithmic   trading	2,386		3.4
Odontoprev	Emerging Markets	Dental health services - Brazil	1,857		2.6
Ocean Wilsons	United Kingdom	Tugboats, platform supply vessels and   container handling - Brazil	1,762		2.5
Athena Debt Opportunities   Fund	Fixed Interest	Distressed debt	1,594		2.2
Kone	Continental Europe	Elevators	1,554		2.2
OGX Petróleo e Gás   Participacoes	Emerging Markets	Oil and gas exploration and production -   Brazil	1,232		1.7
Seadrill	Continental Europe	Deep water oil rigs	1,227		1.7
Baillie Gifford Japanese   Smaller Companies Fund	Asia Pacific   including Japan	Investment fund	1,211		1.7
Dragon Oil	Emerging Markets	Oil and gas exploration and production -   Turkmenistan	1,155		1.6
ASOS	United Kingdom	Online fashion retailer	1,132		1.6
China Merchants Bank	Emerging Markets	Bank - China	1,128		1.6
Schindler	Continental Europe	Elevators	1,064		1.5
MIPS Technologies	North America	Embedded semiconductors	1,016		1.4
Reinet Investments SCA	Continental Europe	Investment holding company	964		1.4
Cetip	Emerging Markets	Investment services - Brazil	945		1.3
Eldorado Gold	North America	Gold mining - Brazil, China, Greece &   Turkey	934		1.3
Naspers	Emerging Markets	Media company - South Africa and   China	929		1.3
Better Capital	United Kingdom	Fund investing in distressed businesses	855		1.2
Dart Energy	Asia Pacific   including Japan	Coal-bed methane - Australia and Asia	852		1.2
Santos Brasil Participacoes	Emerging Markets	Container handling and logistics services   - Brazil	832		1.2
Healthspring	North America	Medicare	830		1.2
Vision Opportunity China   Fund	Emerging Markets	Investment fund - China	819		1.1
IG Group	United Kingdom	Spread betting	801		1.1
Nanoco	United Kingdom	Quantum dot manufacture, second   generation LEDs	788		1.1
Atlas Copco	Continental Europe	Industrial compressors and mining   equipment	778		1.1
Novozymes	Continental Europe	Enzyme producer	774		1.1
President Petroleum	United Kingdom	Oil and gas exploration and production -   USA and Australia	766		1.1
Digital Garage	Asia Pacific   including Japan	Internet business incubator - Japan	714		1.0
Chunghwa Telecom	Emerging Markets	Fixed line, mobile, broadband and   internet services - Taiwan	714		1.0
Kenmare Resources	Emerging Markets	Natural resource mining - Mozambique	706		1.0
			32,319		45.4

^*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 2010 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 2010 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 sections 498 (s) or (3) of the Companies Act 2006. 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 2010	Six months to 31 December 2009	Year to 30 June  2010
		£'000	£'000	£'000
4.	Net return per ordinary share
	Revenue return on ordinary activities after taxation	185	282	847
	Capital return on ordinary activities after taxation	13,326	11,330	11,520
	Total net return	13,511	11,612	12,367
	Net return per ordinary share is based on the above totals of revenue and capital and on 4,997,331 (31 December 2009 - 5,027,766; 30 June 2010 - 5,025,506) ordinary shares, being the weighted average number of ordinary shares in issue during the period. There are no dilutive or potentially dilutive shares in issue.
		Six months to 31 December 2010	Six months to 31 December 2009	Year to 30 June  2010
		£'000	£'000	£'000
5.	Dividends
	Amounts recognised as distributions in the period:
	Previous year's final dividend of 9.00p (2009 - 8.5p), paid 7 October 2010	447	427	427
	Interim dividend for the year ended 30 June 2010 of 6.50p paid 1 April 2010	-	-	327
		447	427	754
	Amounts paid and payable in respect of the period:
	Interim dividend for the year ending 30 June 2011 of 6.50p (2010 - 6.50p)	336	327	327
	Final dividend for the year ended 30 June 2010	-	-	447
		336	327	774
	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 2011 to shareholders on the register at the close of business on 25 February 2011. The ex-dividend date is 23 February 2011. The Company operates a Dividend Reinvestment Plan and the final date for elections for this dividend is 11 March 2011.
	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 27 August 2011.
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 2009 - ¥300 million and €1.32 million; 30 June 2010 - ¥300 million and €1.32 million).
8.	The fair value of the bank loans at 31 December 2010 was £5,514,000 (31 December 2009 - £5,200,000; 30 June 2010 - £5,347,000).
9.	During the period under review the Company issued 210,000 ordinary shares, with a nominal value of £52,500, for total consideration of £2,607,000. At 31 December 2010 the Company had authority to issue a further 286,276 shares. At 31 December 2010 the Company had authority to buy back 743,918 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 £33,000 (31 December 2009 - £31,000; 30 June 2010 - £69,000) and transaction costs on sales amounted to £14,000 (31 December 2009 - £4,000; 30 June 2010 - £16,000).
11.	At 31 December 2010 the Company had contingent liabilities of £495,000 (31 December 2009 - £1,005,000; 30 June 2010 - £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 £1,005,000 (31 December 2009 and  30 June 2010 - £495,000) held by the Company were valued at £661,000 at 31 December 2010 (31 December 2009 - £300,000; 30 June 2010 - £335,000).
	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 21 February 2011.
	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 21 of the Company's Annual Report and Financial Statements for the year to 30 June 2010. 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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