Half Yearly Report

RNS Number : 0910X

Mid Wynd Inter Inv Trust PLC

05 February 2013

 



RNS Announcement

Mid Wynd International Investment Trust PLC

The following is the unaudited preliminary statement for the six months to 31 December 2012 which was approved by the Board on 4 February 2013         

Results for the half-year to 31 December 2012

¾ Over the six month period net asset value total return per share was 0.4% as compared to a total return of 6.4% for the FTSE World Index in sterling terms.

¾ Corporate profits have held up well and the rating of markets has risen but over the short term Mid Wynd's progress has been disappointing mainly owing to stock selection but also to the cost of insurance against falling markets at a time when markets generally rose.  

¾ Earnings per share were 1.27p (1.28p in the corresponding period last year) and the interim dividend is unchanged at 1.30p per share.

¾ Despite macro-economic headwinds, the Manager is enthusiastic about the scale and breadth of opportunities available to the companies in the portfolio.

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 £66.4m (before deduction of bank loans of £4.9m) as at 31 December 2012.

Mid Wynd is managed by Baillie Gifford & Co, the Edinburgh based fund management group with around £90 billion under management and advice as at 4 February 2013.

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‡

‡    Neither the contents of the Managers' website nor the contents of any website accessible from hyperlinks on the Managers' website (or any other website) is incorporated into, or forms part of, this announcement.

5 February 2013

For further information please contact:

James Budden, Baillie Gifford & Co

Tel: [phone] or 07507 201208

Roland Cross, Director, Broadgate Mainland

Tel: [phone] or 07831 401309

‡   

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

RRJ Burns

Chairman

4 February 2013

Half-yearly management report

During the first half of the Company's financial year, net asset value total return was 0.4% as compared to a total return of 6.4% for the FTSE World Index in sterling terms. Monetary policy makers have spared nothing in their exertions. Politicians are stumbling towards reform, but this will require a good deal more time. Your Manager has meanwhile struggled to make progress: corporate profits have held up very well overall and the rating on markets has drifted upwards. Our longer term record remains worthwhile, but this has been a disappointing spell.

Equities as an asset class benefit from the profound lack of attraction of most alternative asset classes, in particular bonds. Historically, investors have demanded higher returns from equities to compensate for the perception of higher risk and the reality of higher volatility. In a world where government finances are structurally challenged, and where the risks of either deflation or inflation have risen, equities seem to offer the closest thing to safety around. Many companies are thriving, either growing robustly or managing to generate healthy free cash flows; sometimes both. The corporate world continues to benefit from a global customer base and a global cost of labour. It has the opportunity to adapt over time as circumstances change in a way not open to governments or many individuals. As Adam Smith can claim to have spotted early - in 1776 - 'stocks are now the engine of prosperity' (as opposed to land ownership). So they would appear to remain. He observed also that 'the proprietor of stock is properly a citizen of the world, and is not necessarily attached to any particular country'. This is even more valid for companies themselves, which are in many cases indifferent to where they call home. Alluring as this flexibility is for shareholders, it poses something of a taxation problem for national governments, one that is increasingly attracting considerable attention.

We remain concerned about the medium term difficulties of the big economic picture. We are enthused by what we have been able to find to invest in, however, and reassured by the sometimes minimal influence that this challenging big picture is likely to have on the long term success of many of these idiosyncratic businesses. The virtues we argue for our long standing holdings are mostly little changed as are the holdings themselves. Among more recent investments Sky Deutschland is maximising the benefit of exclusive content arrangements by ensuring optimal distribution including among competitors like Deutsche Telekom. It seems increasingly likely that subscriber growth will lift off in Germany as it has in other countries at such junctures. We are enthused by prospects for Victrex's high end polymer, PEEK, and see the potential for accelerating revenue growth. Visa ought to continue to benefit from the growth of electronic forms of payment relative to cash and has a very powerful embedded franchise. East African Breweries is expanding from a strong Kenyan base and into very young populations starting to enjoy both increasing purchasing power and a taste for beer. The discounts on both Reinet Investments and Ocean Wilsons have led us to increase our holdings in companies that both have very different but very clear opportunities ahead of them and a track record of successful delivery.

Sales to fund these purchases have come from a down-sizing and pruning of holdings in the riskier tail of the portfolio. Some of these sales and reductions have been from successful investments: Intuitive Surgical, Odontoprev,Everglades Re, Marine Harvest, TJX Companies,ASOS.com, our biotech holdings or BIM Birlesik Magazalar. Others have involved the recognition that things were not going to plan : Burford Capital, Niko Resources, Chariot Oil & Gas, Falkland Oil and Gas, iRobot and Hambledon Mining for example. Alongside these stock selection developments we have ended our derivatives based 'insurance policy'.

On the wider economic front the 'reflate until it works' policy is having some success, enough to ensure that it will continue, and there is now a shortage of workable alternatives. We are, however, nowhere near nominal growth rates that will allow us to outrun underlying debt problems. This leaves investors still at the mercy of politicians, never a comfortable or predictable place.

Earnings and dividend

During the six month period earning per share amounted to 1.27p, close to the 1.28p produced in the previous corresponding six month period. The interim dividend is unchanged at 1.30p. While earnings growth from companies generally may be less robust this year, it is unlikely that the total dividend for the year will be less than the 3.30p which was paid to shareholders in both preceding years.

Capital management

At the AGM in October the Company confirmed its intention to be active in both issuing shares at a premium when there is demand and buying back shares at a discount when natural supply exceeds demand.  It also announced that it would aim to limit the discount to a maximum of 2% in normal circumstances. During most of the period under review the shares traded at a premium. However, towards the end of the year they moved to a discount. When at a discount, the average, on a daily basis, was 1.4%.

A buy-back of 50,000 ordinary shares at a discount of 2.6% to net asset value was carried out on 4 February 2013 after the close of the period under review.

Outlook

2012 has been a disappointing year for Mid Wynd in investment terms. Nevertheless, looking ahead, and despite challenges - for example the unsustainable polarisation between societies' haves and have-nots - we are optimistic about the scale and breadth of opportunities available to our portfolio companies with or without an economic tailwind.

Past performance is not a guide to future performance.

Income statement (unaudited)

	For the six months ended  31 December 2012			For the six months ended 31 December 2011			For the year ended 30 June 2012
								(audited)
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gains/(losses) on sales of investments	-	296	296	-	(1,392)	(1,392)	-	(947)	(947)
Changes in investment  holding gains and losses	-	882	882	-	(7,933)	(7,933)	-	(4,657)	(4,657)
(Losses)/gains on futures	-	(1,058)	(1,058)	-	1,411	1,411	-	614	614
Currency losses	-	(136)	(136)	-	(432)	(432)	-	(346)	(346)
Income from investments and interest receivable	575	-	575	557	-	557	1,258	-	1,258
Other income	-	-	-	1	-	1	1	-	1
Investment management fee	(76)	(76)	(152)	(72)	(72)	(144)	(151)	(151)	(302)
Other administrative expenses	(116)	-	(116)	(114)	-	(114)	(233)	-	(233)
Net return before finance costs and  taxation	383	(92)	291	372	(8,418)	(8,046)	875	(5,487)	(4,612)
Finance costs of borrowings	(32)	(32)	(64)	(30)	(30)	(60)	(63)	(63)	(126)
Net return on ordinary activities before taxation	351	(124)	227	342	(8,448)	(8,106)	812	(5,550)	(4,738)
Tax on ordinary activities	(10)	-	(10)	(4)	-	(4)	(32)	-	(32)
Net return on ordinary activities after taxation	341	(124)	217	338	(8,448)	(8,110)	780	(5,550)	(4,770)
Net return per ordinary share (note 4)	1.27p	(0.46p)	0.81p	1.28p	(31.92p)	(30.64p)	2.93p	(20.88p)	(17.95p)
Dividends paid and payable per ordinary share (note 5)	1.30p			1.30p			3.30p

The total column of this statement is the profit and loss account of the Company.

All revenue and capital items in this 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.

Balance sheet (unaudited)

	At 31 December 2012 £'000	At 31 December 2011 £'000	At 30 June 2012 (audited) £'000
Fixed assets
Investments	62,177	59,433	65,167
Current assets
Debtors	113	561	985
Cash and short term deposits	4,260	4,046	1,239
	4,373	4,607	2,224
Creditors
Amounts falling due within one year
Bank loans (note 6)	-	(5,612)	-
Other creditors	(101)	(198)	(628)
	(101)	(5,810)	(628)
Net current assets/(liabilities)	4,272	(1,203)	1,596
Total assets less current liabilities	66,449	58,230	66,763
Creditors
Amounts falling due after more than one year
Bank loans (note 7)	(4,933)	-	(4,927)
Total net assets	61,516	58,230	61,836
Capital and reserves
Called up share capital	1,343	1,331	1,343
Capital redemption reserve	16	16	16
Share premium	4,983	4,383	4,983
Capital reserve	53,880	51,106	54,004
Revenue reserve	1,294	1,394	1,490
Shareholders' funds	61,516	58,230	61,836
Net asset value per ordinary share (after deducting borrowings at fair value) (note 8)	228.6p	218.8p	229.8p
Net asset value per ordinary share (after deducting borrowings at par)	229.0p	218.8p	230.2p
Ordinary shares in issue (note 9)	26,863,830	26,613,830	26,863,830

Reconciliation of movements in shareholders' funds (unaudited)

For the six months ended 31 December 2012

	Share capital £'000	Capital redemption reserve £'000	Share premium £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 July 2012	1,343	16	4,983	54,004	1,490	61,836
Net return on ordinary activities after taxation	-	-	-	(124)	341	217
Dividends paid during the period (note 5)	-	-	-	-	(537)	(537)
Shareholders' funds at 31 December 2012	1,343	16	4,983	53,880	1,294	61,516

For the six months ended 31 December 2011

	Share capital £'000	Capital redemption reserve £'000	Share premium £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 July 2011	1,318	16	3,818	59,554	1,583	66,289
Net return on ordinary activities after taxation	-	-	-	(8,448)	338	(8,110)
Shares issued (note 9)	13	-	565	-	-	578
Dividends paid during the period (note 5)	-	-	-	-	(527)	(527)
Shareholders' funds at 31 December 2011	1,331	16	4,383	51,106	1,394	58,230

For the year ended 30 June 2012 (audited)

	Share capital £'000	Capital redemption reserve £'000	Share premium £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 July 2011	1,318	16	3,818	59,554	1,583	66,289
Net return on ordinary activities after taxation	-	-	-	(5,550)	780	(4,770)
Shares issued (note 9)	25	-	1,165	-	-	1,190
Dividends paid during the year (note 5)	-	-	-	-	(873)	(873)
Shareholders' funds at  30 June 2012	1,343	16	4,983	54,004	1,490	61,836

* Capital reserve as at 31 December 2012 includes investment holding gains of £12,476,000 (31 December 2011 - gains of £8,318,000; 30 June 2012 - gains of £11,594,000).

Condensed cash flow statement (unaudited)

	Six months to  31 December 2012 £'000	Six months to  31 December 2011 £'000	Year to  30 June 2012 (audited) £'000
Net cash inflow from operating activities	291	285	691
Net cash outflow from servicing of finance	(64)	(56)	(129)
Net cash inflow/(outflow) from financial investment	3,331	2,407	(531)
Equity dividends paid (note 5)	(537)	(527)	(873)
Net cash inflow/(outflow) before use of liquid resources and financing	3,021	2,109	(842)
Financing
Shares issued (note 9)	-	578	1,190
Bank loans repaid	-	-	(468)
Net cash inflow from financing	-	578	722
Increase/(decrease) in cash	3,021	2,687	(120)
Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash in the period	3,021	2,687	(120)
Bank loans repaid	-	-	468
Exchange movement on short term deposits and  bank loans	(6)	(106)	111
Movement in net debt in the period	3,015	2,581	459
Net debt at start of the period	(3,688)	(4,147)	(4,147)
Net debt at end of the period	(673)	(1,566)	(3,688)
Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
Net return before finance costs and taxation	291	(8,046)	(4,612)
Net (gains)/losses on investments	(1,178)	9,325	5,604
Net losses/(gains) on futures contracts	1,058	(1,411)	(614)
Currency losses	136	432	346
Amortisation of fixed income book cost	(18)	(7)	(25)
Changes in debtors and creditors	11	-	32
Overseas tax	(9)	(8)	(40)
Net cash inflow from operating activities	291	285	691

Thirty largest holdings at 31 December 2012 (unaudited)

Name	Region	Business	Value £'000	% of total assets*
IP Group	United Kingdom	Commercialisation of intellectual property	3,665	5.5
Reinet Investments SCA	Continental Europe	Investment holding company	2,523	3.8
Level E Maya Fund	United Kingdom	Artificial intelligence based algorithmic trading	2,142	3.2
Schindler	Continental Europe	Elevators	1,990	3.0
Kone	Continental Europe	Elevators	1,973	3.0
Ocean Wilsons	United Kingdom	Tugboats, platform supply vessels and   container handling - Brazil	1,873	2.8
Odontoprev	Emerging Markets	Dental health services - Brazil	1,685	2.5
Fuchs Petrolub	Continental Europe	Specialty lubricant manufacture	1,346	2.0
Visa	North America	Payments network	1,281	1.9
Better Capital	United Kingdom	Fund investing in distressed businesses	1,121	1.7
The Biotech Growth Trust	United Kingdom	Biotechnology investment trust	1,105	1.7
BIM Birlesik Magazalar	Emerging Markets	Discount food stores - Turkey	1,095	1.6
Reynolds Group 9.5% 2017	Fixed Interest	Food and beverage packaging and storage   company bond	1,013	1.5
Naspers	Emerging Markets	Media company - South Africa and China	985	1.5
Genus	United Kingdom	Livestock farming products	958	1.4
Athena Debt Opportunities   Fund	Fixed Interest	Distressed debt fund	847	1.3
Priceline.com	North America	Online travel/hotel reservation service	837	1.3
Renishaw	United Kingdom	Robotic probes	836	1.3
Santos Brasil Participacoes	Emerging Markets	Container handling and logistics services   - Brazil	835	1.3
Doric Nimrod Air Two	United Kingdom	Fund to acquire, lease and sell A380 aircraft	824	1.2
IMAX	North America	Media technology company	781	1.2
Nanoco	United Kingdom	Quantum dot manufacture, second generation   LEDs	777	1.2
Novozymes	Continental Europe	Enzyme producer	749	1.1
Seek	Asia Pacific including Japan	Online employment agency - Asia	748	1.1
Dragon Oil	Emerging Markets	Oil and gas exploration and production   - Turkmenistan	747	1.1
Doric Nimrod Air One	United Kingdom	Fund to acquire, lease and sell A380 aircraft	725	1.1
President Energy	United Kingdom	Oil and gas exploration and production   - USA and Australia	720	1.1
East African Breweries	Emerging Markets	East African brewer	716	1.1
Edenred	Continental Europe	Prepaid service vouchers	703	1.1
IHS	North America	Technical databases	696	1.0
			36,296	54.6

*      Total assets before deduction of bank loans

Notes to the condensed financial statements (unaudited)

1.	The condensed financial statements for the six months to 31 December 2012 have been prepared on the basis of the same accounting policies as set out in the Company's Annual Report and Financial Statements at 30 June 2012 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'.  The Company's assets, the majority of which are investments in quoted securities which are readily realisable, exceed its liabilities significantly. All borrowings require the prior approval of the Board. Gearing levels and compliance with borrowing covenants are reviewed by the Board on a regular basis. Accordingly, the Half-Yearly Financial Report has 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.
2.	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 2012 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 (2) or (3) of the Companies Act 2006.
3.	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.
4.	Net return per ordinary share	Six months to  31 December 2012 £'000	Six months to 31 December  2011 £'000	Year to 30 June 2012 (audited) £'000
	Revenue return on ordinary activities after taxation	341	338	780
	Capital return on ordinary activities after taxation	(124)	(8,448)	(5,550)
	Total net return	217	(8,110)	(4,770)
	Net return per ordinary share is based on the above totals of revenue and capital and on 26,863,830 (31 December 2011 - 26,463,015; 30 June 2012 - 26,577,628) 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.
5.	Dividends	Six months to  31 December 2012 £'000	Six months to 31 December  2011 £'000	Year to 30 June 2012 (audited) £'000
	Amounts recognised as distributions in the period:
	Previous year's final dividend of 2.00p (2011 - 2.00p), paid 12 October 2012	537	527	527
	Interim dividend for the year ended 30 June 2012 of 1.30p paid 5 April 2012	-	-	346
		537	527	873

Notes to the condensed financial statements (unaudited) (ctd)

5.    

5.    

5.    

5.    

5.	Dividends (ctd)		Six months to  31 December 2012 £'000	Six months to 31 December  2011 £'000	Year to 30 July 2012 (audited) £'000
	Amounts paid and payable in respect of the period:
	Interim dividend for the year ending 30 June 2013 of 1.30p (2012 - 1.30p)		349	346	346
	Final dividend for the year ended 30 June 2012		-	-	537
			349	346	883
	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 4 April 2013 to shareholders on the register at the close of business on 22 February 2013. The ex dividend date is 20 February 2013. The Company operates a Dividend Reinvestment Plan and the final date for elections for this dividend is 12March 2013.
6.	At 31 December 2011 creditors included £2 million in respect of a short term loan facility expiring on 21 February 2012 together with ¥300 million and €1.32 million drawn under a US$5 million facility. At 31 December 2012 and 30 June 2012 there were no short term loans.
7.	The bank loan falling due in more than one year as at 31 December 2012 and 30 June 2012 comprised a £2.5 million and a €3.0 million loan drawn under facilities expiring on 20 February 2015.
8.	The fair value of the bank loans at 31 December 2012 was £5,028,000 (31 December 2011 - £5,612,000; 30 June 2012 - £5,029,000).
9.	At the Annual General Meeting held on 8 October 2012 the Company's authority to buy back and to allot shares was renewed. In the six months to 31 December 2012 no shares were issued (six months to 31 December 2011 - issued 250,000 ordinary shares, with a nominal value of £12,500 for total consideration of £578,000; year to 30 June 2012 - issued 500,000 ordinary shares, with a nominal value of £25,000 for total consideration of £1,190,000). At 31 December 2012 the Company had authority to issue 2,686,383 shares and authority to buy back 4,026,888 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 £25,000 (31 December 2011 - £26,000; 30 June 2012 - £38,000) and transaction costs on sales amounted to £15,000 (31 December 2011 - £22,000; 30 June 2012 - £30,000).
11.	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 20 of the Company's Annual Report and Financial Statements for the year to 30 June 2012. The principal risks and uncertainties have not changed since the publication of the Annual Report and Financial Statements 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: regulatory risk (that the loss of investment trust status or a breach of the applicable legal and regulatory requirements could have adverse financial consequences and cause reputational damage); operational/financial risk (failure of service providers' accounting systems could lead to inaccurate reporting or financial loss); the risk that the premium/discount can change; and gearing risk (the use of borrowing can magnify the impact of falling markets). Further information can be found on page 20 of the Annual Report and Financial Statements.
12.		The Half-Yearly Financial Report will be available on or around 18 February 2013 on the Mid Wynd page of the Managers' website www.midwynd.co.uk. ‡

‡    Neither the contents of the Managers' website nor the contents of any website accessible from hyperlinks on the Managers' website (or any other website) is incorporated into, or forms part of, this announcement.

None of the views expressed in this document should be construed as advice to buy or sell a particular investment.

- ends -

 

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