Half Yearly Report

RNS Number : 1861Z

Mid Wynd Inter Inv Trust PLC

04 February 2014

RNS Announcement

Mid Wynd International Investment Trust PLC

The following is the unaudited preliminary statement for the six months to 31 December 2013 which was approved by the Board on 3February 2014

Results for the half-year to 31 December 2013

Over the six month period, net asset value total return was 12.5%. Over the same period the FTSE World Index total return was 6.6%.

¾ Rotation from bonds into equities was evident as central bank bond buying waned and world economic growth recovered. Equities were re-rated although overall earnings growth was lukewarm.

¾ Earnings per share were 1.52p (1.27p in the corresponding period last year) and the interim dividend will be 1.30p (1.30p).

¾ Innovation and creative disruption are the key factors in today's business world. Both have been at the heart of what we have got right recently and of what has been driving markets. The Managers are confident that both will remain paramount to successful long term stock-picking.

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. 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 £78.4m (before deduction of bank loans of £5.0m) as at 31 December 2013.

Mid Wynd is managed by Baillie Gifford & Co, the Edinburgh based fund management group with over £100 billion under management and advice as at 3 February 2014.

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.

4 February 2014

For further information please contact:

Michael MacPhee, Manager, Mid Wynd International Investment Trust PLC

Tel: 0131 275 2000

Roland Cross, Director, Broadgate Mainland

Tel: 0207 776 0512

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

3 February 2014

Half-yearly management report

Performance

During the first half of the Company's financial year, NAV total return was a very satisfactory 12.5% as compared to 6.6% for the FTSE World Index total return in sterling terms. This time last year we mentioned that equities looked likely to benefit from the profound lack of attraction of bonds. We have seen strong evidence of the vaunted 'great rotation' from bonds into equities as central bank bond buying has started to wane and world economic growth has shown signs of underlying recovery. This rotation has delivered a 'great re-rating' for equities - earnings growth has been lukewarm but share prices have roared up nevertheless.

The portfolio

Such success as we have enjoyed boils down to a small number of great businesses, as it nearly always does. We have dwelt at length in the past on the extent to which innovation and creative disruption are the key factors in today's business world. This has been at the heart of what we have got right and of what has been driving markets. ASOS has continued to take share away from moribund bricks and mortar clothing retailers. Priceline continues to benefit from a huge shift to online travel bookings. Xero, our New Zealand accounting software holding, offers accountants and their clients a simple and effective way to keep books online that is sweeping all before it. IP Group, our largest holding, is proving itself far more than a play on DNA sequencing via Oxford Nanopore. IP Group spin outs Retroscreen Virology, Tissue Regenix and most recently Applied Graphene Materials have all separately made significant contributions to returns for the Company. Facebook, Twitter and Naspers (owner of Chinese instant messaging website Tencent) have all made further contributions.

Our disappointments are even more evident when viewed through the lens of returns foregone. Level E and the Maya Fund have not, in the four years of our investment, lived up to our hopes. Domestically exposed emerging markets consumption led businesses have struggled lately - Odontoprev, Santos Brasil Participacoes, BIM Birlesik Magazalar, East African Breweries - and our exposure there has been cut back somewhat, mostly belatedly. These remain strong franchises, nevertheless, with intriguing long term prospects built on strong foundations and we anticipate this will be thematically a case of 'reculer pour mieux sauter' when viewed with the benefit of hindsight.

Revenue account

Things are looking up for our income stream even if capital performance has come nearly entirely from companies too young or growing too fast yet to be paying dividends. Kone, the Finnish elevator maker, a mainstay of the portfolio for many years and one of our largest holdings, has paid a special dividend for the third year in a row. Eastern Tobacco, the Egyptian tobacco manufacturer of Cleopatra cigarettes, is a large yielder. Insurers Amlin and Lancashire both pay worthwhile dividends and Marine Harvest, the Norwegian salmon farmer, is in the process of increasing its payout significantly. During the six month period earnings per share amounted to 1.52p compared to 1.27p in the corresponding period. An interim dividend of 1.30p will be paid.

Outlook

The outlook for this year is far less simple to describe. Self-sustaining healthy growth remains elusive. Falling commodity prices are distributing that growth differently: towards commodity consumers and away from commodity producers. Emerging market currencies are showing these strains. Capital flows are shifting. Developing market consumption is feeding off low interest rates. Overall stocks of debt are still high and inflation remains low which means debt is not (yet) falling in real terms. The effects of extreme monetary policy confuse the picture. Companies are unable to feel solid ground under their feet and invest to boost productivity as would typically be expected at this stage in a cycle. Profits are high, wages low. Wealth gaps are expanding as asset prices have gone up but incomes have not.

If the big picture appears complex and somewhat challenging still, we can say again this year that we are optimistic about the scale and breadth of the specific opportunities facing our portfolio of companies with or without an economic or market tailwind to help them. Strong sales growth at worthwhile margins and involving high returns on capital is unlikely to go out of fashion even if share price volatility is a fact of life with equity investment.

The principal risks and uncertainties facing the Company are set out in note 10.

Past performance is not a guide to future performance.

Income statement (unaudited)

	For the six months ended 31 December 2013			For the six months ended 31 December 2012			For the year ended 30 June 2013
								(audited)
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gains on sales of investments	-	2,379	2,379	-	296	296	-	490	490
Changes in investment holding gains and losses	-	5,620	5,620	-	882	882	-	7,235	7,235
Losses on futures	-	-	-	-	(1,058)	(1,058)	-	(1,058)	(1,058)
Currency losses	-	(65)	(65)	-	(136)	(136)	-	(172)	(172)
Income from investments and interest receivable	661	-	661	575	-	575	1,347	-	1,347
Investment management fee	(90)	(90)	(180)	(76)	(76)	(152)	(161)	(161)	(322)
Other administrative expenses	(123)	-	(123)	(116)	-	(116)	(246)	-	(246)
Net return before finance costs and taxation	448	7,844	8,292	383	(92)	291	940	6,334	7,274
Finance costs of borrowings	(33)	(33)	(66)	(32)	(32)	(64)	(64)	(64)	(128)
Net return on ordinary activities before taxation	415	7,811	8,226	351	(124)	227	876	6,270	7,146
Tax on ordinary activities	(18)	-	(18)	(10)	-	(10)	(45)	-	(45)
Net return on ordinary activities after taxation	397	7,811	8,208	341	(124)	217	831	6,270	7,101
Net return per ordinary share (note 4)	1.52p	29.88p	31.40p	1.27p	(0.46p)	0.81p	3.11p	23.43p	26.54p
Dividends paid and payable per ordinary share (note 5)	1.30p			1.30p			3.40p

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 2013 £'000	At 31 December 2012 £'000	At 30 June 2013 (audited) £'000
Fixed assets
Investments held at fair value through profit or loss	76,642	62,177	71,570

Current assets
Debtors	167	113	76
Cash and short term deposits	1,761	4,260	1,203
	1,928	4,373	1,279
Creditors
Amounts falling due within one year	(206)	(101)	(991)
Net current assets	1,722	4,272	288
Total assets less current liabilities	78,364	66,449	71,858
Creditors
Amounts falling due after more than one year
Bank loans (note 6)	(4,996)	(4,933)	(5,071)
Total net assets	73,368	61,516	66,787
Capital and reserves
Called up share capital	1,343	1,343	1,343
Capital redemption reserve	16	16	16
Share premium	4,983	4,983	4,983
Capital reserve	65,745	53,880	59,010
Revenue reserve	1,281	1,294	1,435
Shareholders' funds	73,368	61,516	66,787
Net asset value per ordinary share (after deducting borrowings at fair value) (note 7)	282.5p	228.6p	253.1p
Net asset value per ordinary share (after deducting borrowings at par)	282.6p	229.0p	253.3p
Ordinary shares in issue (note 8)	25,958,830	26,863,830	26,363,830

Reconciliation of movements in shareholders' funds (unaudited)

For the six months ended 31 December 2013

	Share capital £'000	Capital redemption reserve £'000	Share premium £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 July 2013	1,343	16	4,983	59,010	1,435	66,787
Net return on ordinary activities after taxation	-	-	-	7,811	397	8,208
Shares bought back (note 8)	-	-	-	(1,076)	-	(1,076)
Dividends paid during the period (note 5)	-	-	-	-	(551)	(551)
Shareholders' funds at 31 December 2013	1,343	16	4,983	65,745	1,281	73,368

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
Shares bought back (note 8)	-	-	-	-	-	-
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 year ended 30 June 2013 (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 2012	1,343	16	4,983	54,004	1,490	61,836
Net return on ordinary activities after taxation	-	-	-	6,270	831	7,101
Shares bought back (note 8)	-	-	-	(1,264)	-	(1,264)
Dividends paid during the year (note 5)	-	-	-	-	(886)	(886)
Shareholders' funds at 30 June 2013	1,343	16	4,983	59,010	1,435	66,787

* Capital reserve as at 31 December 2013 includes investment holding gains of £24,449,000 (31 December 2012 - gains of £12,476,000; 30 June 2013 - gains of £18,829,000).

Condensed cash flow statement (unaudited)

	Six months to 31 December 2013 £'000	Six months to 31 December 2012 £'000	Year to 30 June 2013 (audited) £'000
Net cash inflow from operating activities	308	291	744
Net cash outflow from servicing of finance	(65)	(64)	(129)
Net cash inflow from financial investment	1,859	3,331	1,499
Equity dividends paid (note 5)	(551)	(537)	(886)
Net cash inflow before use of liquid resources and financing	1,551	3,021	1,228
Financing
Shares bought back (note 9)	(993)	-	(1,264)
Net cash outflow from financing	(993)	-	(1,264)
Increase/(decrease) in cash	558	3,021	(36)

Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash in the period	558	3,021	(36)
Exchange movement bank loans	75	(6)	(144)
Movement in net debt in the period	633	3,015	(180)
Net debt at start of the period	(3,868)	(3,688)	(3,688)
Net debt at end of the period	(3,235)	(673)	(3,868)

Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
Net return before finance costs and taxation	8,292	291	7,274
Net gains on investments	(7,999)	(1,178)	(7,725)
Net losses on futures contracts	-	1,058	1,058
Currency losses	65	136	172
Amortisation of fixed income book cost	(16)	(18)	(39)
Changes in debtors and creditors	(18)	11	52
Overseas tax	(16)	(9)	(48)
Net cash inflow from operating activities	308	291	744

Thirty largest holdings at 31 December 2013 (unaudited)

Name	Region	Business	Value £'000	% of total assets*
IP Group	United Kingdom	Commercialisation of intellectual property	5,248	6.7
Reinet Investments SCA	Continental Europe	Investment holding company	2,545	3.2
Kone	Continental Europe	Elevators	2,379	3.0
Sky Deutschland	Continental Europe	German pay TV provider	2,183	2.8
Level E Maya Fund	United Kingdom	Artificial intelligence based algorithmic trading	2,183	2.8
Ocean Wilsons	United Kingdom	Tugboats, platform supply vessels and container handling - Brazil	2,039	2.6
Schindler	Continental Europe	Elevators	1,999	2.6
Visa	North America	Payments network	1,847	2.4
Fuchs Petrolub	Continental Europe	Specialty lubricant manufacture	1,487	1.9
ASOS.com	United Kingdom	Online fashion retailer	1,413	1.8
Avangardco 10% 2015	Fixed Interest	Leading egg producer bond - Ukraine	1,376	1.8
Nanoco	United Kingdom	Quantum dot manufacture, second generation LEDs	1,322	1.7
Priceline.com	North America	Online travel/hotel reservation service	1,292	1.6
Seadrill	Continental Europe	Deep water oil rigs	1,239	1.6
Zodiac Aerospace	Continental Europe	Aerospace and defence parts	1,231	1.6
Marine Harvest	Continental Europe	Salmon farming	1,220	1.6
Tripadviser	North America	Travel website	1,150	1.5
Better Capital	United Kingdom	Fund investing in distressed businesses	1,136	1.4
Naspers	Emerging Markets	Media company	1,133	1.4
MercadoLibre	Emerging Markets	eBay's Latin American partner	1,126	1.4
East African Breweries	Emerging Markets	East African brewer	1,123	1.4
Seek	Asia Pacific including Japan	Online employment agency	1,015	1.3
Alnylam Pharmaceuticals	North America	Biopharmaceuticals	1,001	1.3
Sarin Technologies	Asia Pacific including Japan	Systems for diamond grading and gemstone production	993	1.3
Ulker Biskuvi Sanayi	Emerging Markets	Food manufacturer - Turkey and surrounding region	962	1.2
Tissue Regenix Group	United Kingdom	Medical products	959	1.2
Stratasys	North America	Manufacturer of 3D printers and production systems	919	1.2
TJX Companies	North America	Discount clothing and homeware stores	908	1.2
Novozymes	Continental Europe	Enzyme producer	896	1.1
Genus	United Kingdom	Livestock farming products	890	1.1
			45,214	57.7

* 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 2013 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 2013 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 2013 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 2013 £'000	Six months to 31 December 2012 £'000	Year to 30 June 2013 (audited) £'000
	Revenue return on ordinary activities after taxation	397	341	831
	Capital return on ordinary activities after taxation	7,811	(124)	6,270
	Total net return	8,208	217	7,101
	Net return per ordinary share is based on the above totals of revenue and capital and on 26,142,498 (31 December 2012 - 26,863,830; 30 June 2013 -26,754,925) 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 2013 £'000	Six months to 31 December 2012 £'000	Year to 30 June 2013 (audited) £'000
	Amounts recognised as distributions in the period:
	Previous year's final dividend of 2.10p (2012 - 2.00p), paid 11 October 2013	551	537	537
	Interim dividend for the year ended 30 June 2013 of 1.30p paid 4 April 2013	-	-	349
		551	537	886

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

5.	Dividends (ctd)	Six months to 31 December 2013 £'000	Six months to 31 December 2012 £'000	Year to 30 June 2013 (audited) £'000
	Amounts paid and payable in respect of the period:
	Interim dividend for the year ending 30 June 2014 of 1.30p (2013 - 1.30p)	337	349	349
	Final dividend for the year ended 30 June 2013 of 2.10p	-	-	554
	Adjustment to provision for previous year's final dividend re shares bought back	(3)	-	-
		334	349	903
	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 3 April 2014 to shareholders on the register at the close of business on 21 February 2014. The ex dividend date is 19 February 2014. The Company operates a Dividend Reinvestment Plan and the final date for elections for this dividend is 13 March 2014.
6.	The bank loans falling due in more than one year as at 31 December 2013, 31 December 2012 and 30 June 2013 comprised a £2.5 million and a €3.0 million loan drawn under facilities expiring on 20 February 2015.
7.	The fair value of the bank loans at 31 December 2013 was £5,038,000 (31 December 2012 - £5,028,000; 30 June 2013 - £5,136,000).
8.		At 31 December 2013 No. of shares	At 31 December 2012 No. of shares	At 30 June 2013 (audited) No. of shares
	Share capital: Ordinary shares of 5p each Alloted, called up and fullay paid	25,958,830	26,863,830	26,363,830
	Treasury shares	905,000	-	500,000
		26,863,830	26,863,830	26,863,830
	At the Annual General Meeting held on 7 October 2013 the Company's authority to buy back and to allot shares was renewed. The Company's authority permits it to hold shares bought back 'in treasury'. Such treasury shares may be subsequently either sold for cash (at, or at a premium to, net asset value per ordinary share) or cancelled. In the six months to 31 December 2013 a total of 405,000 ordinary shares with a nominal value of £20,250 were bought back at a total cost of £1,076,000 and held in treasury (31 December 2012 no shares were bought back; 30 June 2013 - 500,000 ordinary shares with a nominal value of £25,000 at a total cost of £1,264,000). At 31 December the Company had authority to buy back a further 3,784,966 ordinary shares. Under the provisions of the Company's Articles the share buy-backs were funded from capital reserve. The Company did not allot any ordinary shares in the six months to 31 December 2013 or the year to 30 June 2013.
9.	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 £10,000 (31 December 2012 - £25,000; 30 June 2013 - £60,000) and transaction costs on sales amounted to £8,000 (31 December 2012 - £15,000; 30 June 2013 - £85,000).

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

10.

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 2013. 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.

11.

The Half-Yearly Financial Report will be available on or around 17 February 2014 on the Mid Wynd page of the Managers' website www.midwynd.co.uk. ^‡