Final Results

RNS Number : 5256L

Mid Wynd Inter Inv Trust PLC

13 August 2013

 



RNS Announcement: Preliminary Results

Mid Wynd International Investment Trust PLC

The following is the unaudited preliminary statement for the year to 30 June 2013 which was approved by the Board on 12 August 2013.

Results for the year to 30 June 2013

During a period when Mid Wynd was positioned to insure against markets falling, net asset value per share rose by 10.1% while the FTSE World Index (in sterling terms) rose by 18.9%. The share price increased by 11.2%.

¾  The revenue return of 3.1p represents a recovery in earnings compared to the previous year and current earnings forecast for this year suggest a further significant increase. A final dividend of 2.1p will be recommended making a full year total of 3.4p.

¾  The progress of economies and corporate profits was buoyed by central bank action without adverse consequences for the rate of inflation. The question of the long term effect of market-distorting actions sits alongside the equally important issues of how long current exceptional policies will last and how they will eventually end.

¾  Equities are an investment in human ingenuity. Companies are living organisms that adapt to survive and thrive. These attributes can make equities superior ways of preserving and enhancing savings over time and differentiate them from the great majority of competing investment opportunities. Arguably these qualities are most valuable in times of uncertainty and change and during a period when ingenuity appears to be both in the ascendancy and often available in the stock market.

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 £71.9m (before deduction of bank loans of £5.1m) as at 30 June 2013.

Mid Wynd is managed by Baillie Gifford & Co, the Edinburgh based fund management group with around £100 billion under management and advice as at 12 August 2013.

Investment Trusts are UK public limited companies and are not authorised or regulated by the Financial Conduct Authority.

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 on the Mid Wynd page of the Managers' website 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.

13 August 2013

For further information please contact:

Michael MacPhee, Manager, Mid Wynd International Investment Trust PLC  

Tel: [phone] 

Roland Cross, Director, Broadgate Mainland

Tel: [phone]

Chairman's Statement

Performance

The year to 30 June 2013 was a disappointing one for Mid Wynd despite shareholders' funds at 30 June 2013 being at a record year end high. Net asset value (NAV) per share increased by 10.1% and the share price by 11.2% while the FTSE World Index rose by 18.9% in sterling terms. Following 2011/12, when markets fell modestly as did the Company's net asset value, we have encountered a different challenge in 2012/13: a year when markets rose significantly but the Company's position was designed more to insure against their falling. This held us back particularly in the first half of our year when Mr Draghi's statement that the ECB would do 'whatever it takes' to maintain order in the Eurozone and related actions added to the significant stimulus provided by the Federal Reserve in America. Now that similar stimulatory measures have been announced in Japan under Prime Minister Abe, developed world central banks are effectively easing monetary conditions in a concerted way that has not previously been attempted. As Dallas Fed Governor Richard Fisher has said in relation to quantitative easing, these are 'uncharted waters'.

Asset prices have responded vigorously. Animal spirits have been lifted, primarily in stock markets but to some extent also in the real world. Yields on bonds and cash have declined even further from already exceptionally low levels and a global hunt for yield has had a major influence both on and within equity markets. The progress of economies and corporate profits has been buoyed by central bank action without, as yet, any adverse consequences for the rate of inflation. The question of the long term effect of market-distorting actions sits alongside the equally important issues of how long current exceptional policies will last and how they will eventually end.

The Company's derivatives-based insurance policy against falling markets materially affected performance in the six months to December 2012 and unfortunately this coincided with a lacklustre spell for stock-picking; in the six months to December 2012 the NAV per share fell by 0.5% while the FTSE World Index rose by 5.1%. In the second half of the year, after the derivatives policy was discontinued in early December 2012, equity market exposure has been allowed to run at around the level of shareholders' funds and our relative returns have been less bad; in the six months to end June 2013 NAV per share rose by 10.6% while the Index increase was 13.1%. However, although we have had some notable individual successes, as highlighted in the Managers' Portfolio Review in the Annual Report and Financial Statements, we still lagged the Index and the overall outcome for the year, as noted above, was disappointing. 

Mid Wynd makes no attempt to mimic any indices. A geographically diverse portfolio has served us well in most conditions over the years, though badly over the last two years when the largest index constituent, the US stock market, has consistently outpaced everything else and again now comprises well over half of globally quoted equities by market capitalisation.

Earnings and dividend

The revenue return of 3.1p represents a recovery in earnings compared to the previous year and current earnings forecast for this year suggest a further significant increase. A final dividend of 2.1p will be recommended making a full year total of 3.4p. The portfolio combines a substantial cohort of young, fast growing companies with significant opportunities to deploy their cash generation internally with those which are thriving but have better scope to pay out earnings as dividends. In the latter camp, among newer holdings, fall Sarin Technologies, a Singapore based diamond cutting technology company, Eastern Tobacco, the unloved Egyptian tobacco monopoly and Ulker Biskuvi Sanayi, a Turkish confectionery business. East African Breweries has become quite a large holding and offers a healthy dividend yield. Our companies have in many cases significantly increased pay-outs. Seadrill is a case in point, as is Fuchs Petrolub, and Kone has again paid out a special dividend. Marine Harvest, previously a large dividend payer, has just announced a return to regular quarterly dividends. There is also a new holding in short dated dollar bonds issued by Avangardco, a highly profitable and well capitalised egg producer, which partly offsets the reduction in income resulting from the sale of the soon to mature high yielding hurricane bond issued by Everglades Re.

Share buy backs and issuance

Mid Wynd is distinctive in providing liquidity by offering routine buy backs or issuance either side of a 2% band relative to NAV. Some buy backs have occurred over the course of the year since this policy was instigated, although for much of the time our shares have traded at a modest premium to NAV. The Board hopes that this mechanism will come to be appreciated by the market as a way of ensuring that sizeable buyers and sellers can be accommodated in a manner that would not otherwise occur.

AGM

The AGM is to be held in Baillie Gifford's office in Edinburgh on 7 October 2013 at midday. Our Manager, Michael MacPhee, will make a short presentation and the Directors hope that you might be able to attend.

Outlook

Equities are an investment in human ingenuity. Companies are living organisms that adapt to survive and thrive. These attributes make equities superior ways of preserving and enhancing savings over time and differentiate them from the great majority of competing investment opportunities. Arguably these qualities are most valuable in times of uncertainty and change and during a period when ingenuity appears to be both in the ascendancy and often available in the stock market.

At the heart of today's economic uncertainty lies debt. Debt is only a problem when perceptions make it one and behaviour alters accordingly. Levels of developed world debts are excessive and constrictive when viewed through this prism. Those afflicted include governments, banking systems (worse in Europe than elsewhere) and individuals. The quandary with regard to individuals is nuanced. Part of it is that promises relating to future welfare seem unlikely to be met. Living standards are falling in many places and inequality of living standards within our societies has become extreme to a degree that potentially poses a challenge to the fabric of our way of life. Taxation is likely to rise to meet this challenge. Companies are in a relatively strong position. Governments are torn between trying to tax them more while still competing to win their favours and the jobs they generate.

If these arguments are structural and long term in nature it is because it is difficult to offer insights into the shorter term. Fears persist that central banks have moved beyond the business of providing liquidity towards that of turning water into wine. We cannot envisage what sort of hangover, if any, this may ultimately leave. Answers to questions about quantitative easing remain for the moment elusive and tentative. That they are important is not in doubt as recent ructions following discussions of Fed 'tapering' or the possible reduction of support measures demonstrate. The direction of travel for developed economies appears to be positive at the margin, though the developing world is slowing down. The world of currencies has been febrile. Should overall stability persist for a while longer we may see the one large group, companies, with the potential to make a difference start to do so. Will companies become more optimistic? Money is cheap and their free cash flows are plentiful. They are searching for reasons to invest more. Typically, such a search eventually results in action.

Mid Wynd's success over time has come from picking good stocks. The Managers' Portfolio Review, in the Annual Report and Financial Statements focuses on our larger holdings for this reason and provides no shortage of reasons to be hopeful that the future will bring us more of what we have enjoyed in the past - worthwhile real returns achieved in a way that bears little resemblance to any index.

Richard RJ Burns

Chairman

12 August 2013

Past performance is not a guide to future performance.

Income statement (unaudited)

	For the year ended 30 June 2013			For the year ended 30 June 2012 (audited)
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Gains/(losses) on investments	-	7,725	7,725	-	(5,604)	(5,604)
(Losses)/gains on futures contracts	-	(1,058)	(1,058)	-	614	614
Currency losses	-	(172)	(172)	-	(346)	(346)
Income (note 2)	1,347	-	1,347	1,259	-	1,259
Investment management fee	(161)	(161)	(322)	(151)	(151)	(302)
Other administrative expenses	(246)	-	(246)	(233)	-	(233)
Net return before finance costs and  taxation	940	6,334	7,274	875	(5,487)	(4,612)
Finance costs of borrowings	(64)	(64)	(128)	(63)	(63)	(126)
Net return on ordinary activities before taxation	876	6,270	7,146	812	(5,550)	(4,738)
Tax on ordinary activities	(45)	-	(45)	(32)	-	(32)
Net return on ordinary activities after taxation	831	6,270	7,101	780	(5,550)	(4,770)
Net return per ordinary share (note 4)	3.11p	23.43p	26.54p	2.93p	(20.88p)	(17.95p)
Dividends paid and proposed per ordinary share   (note 5)	3.40p			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 year.

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

Balance sheet (unaudited)

	At 30 June 2013 £'000	At 30 June 2012 (audited) £'000
Fixed assets
Investments held at fair value through profit or loss	71,570	65,167
Current assets
Debtors	76	985
Cash and deposits	1,203	1,239
	1,279	2,224
Creditors
Amounts falling due within one year	(991)	(628)
Net current assets	288	1,596
Total assets less current liabilities	71,858	66,763
Creditors
Amounts falling due after more than one year (note 6)	(5,071)	(4,927)
Total net assets	66,787	61,836
Capital and reserves
Called up share capital	1,343	1,343
Capital redemption reserve	16	16
Share premium	4,983	4,983
Capital reserve	59,010	54,004
Revenue reserve	1,435	1,490
Shareholders' funds	66,787	61,836
Net asset value per ordinary share (after deducting borrowings at fair value)	253.1p	229.8p
Net asset value per ordinary share (after deducting borrowings at par)	253.3p	230.2p
Ordinary shares in issue (note 7)	26,363,830	26,863,830

Distribution of assets (unaudited)

		At 30 June 2013 %	At 30 June 2012 %
Equities	United Kingdom	26.7	28.6
	Continental Europe	24.8	19.0
	North America	23.0	20.6
	Asia Pacific including Japan	6.9	5.5
	Emerging Markets	14.5	18.9
Total equities		95.9	92.6
Fixed interest		3.7	5.0
Net liquid assets		0.4	2.4
Total assets (before deduction of loans)		100.0	100.0

Reconciliation of movements in shareholders' funds (unaudited)

For the year ended 30 June 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 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 7)	-	-	-	(1,264)	-	(1,264)
Shares issued (note 7)	-	-	-	-	-	-
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

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 bought back	-	-	-	-	-	-
Shares issued (note 7)	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

†      The Capital Reserve balance at 30 June 2013 includes investment holding gains on fixed asset investments of £18,829,000 (2012 - gains of £11,594,000).

Condensed cash flow statement (unaudited)

	For the year ended 30 June 2013 £'000               £'000		For the year ended 30 June 2012 (audited) £'000               £'000
Net cash inflow from operating activities		744		691
Servicing of finance
Interest paid	(129)		(129)
Net cash outflow from servicing of finance		(129)		(129)
Financial investment
Acquisitions of investments	(24,073)		(29,882)
Disposals of investments	26,243		29,608
Futures	(643)		200
Realised currency loss	(28)		(457)
Net cash inflow/(outflow) from financial investment		1,499		(531)
Equity dividends paid (note 5)		(886)		(873)
Net cash inflow/(outflow) before financing		1,228		(842)
Financing
Shares issued	-		1,190
Shares purchased for cancellation	(1,264)		-
Bank loans repaid	-		(5,465)
Bank loans drawn down	-		4,997
Net cash (outflow)/inflow from financing		(1,264)		722
Decrease in cash		(36)		(120)
Reconciliation of net cash flow to movement in net debt
Decrease in cash in the year		(36)		(120)
Net cash outflow from bank loans		-		468
Exchange movement on bank loans		(144)		111
Movement in net debt in the year		(180)		459
Net debt at 1 July		(3,688)		(4,147)
Net debt at 30 June		(3,868)		(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		7,274		(4,612)
(Gains)/losses on investments		(7,725)		5,604
Losses/(gains) on futures contracts		1,058		(614)
Currency losses		172		346
Amortisation of fixed interest book cost		(39)		(25)
Decrease in accrued income		30		46
Decrease/(increase) in debtors		8		(4)
Increase/(decrease) in creditors		14		(10)
Overseas tax suffered		(48)		(40)
Net cash inflow from operating activities		744		691

Thirty largest holdings (unaudited)

Name	Region	Business	2013 Value £'000	2013 % of total assets	2012 Value £'000
IP Group	United Kingdom	Commercialisation of intellectual property	4,101	5.7	3,791
Reinet Investments SCA	Continental Europe	Investment holding company	2,709	3.8	1,929
Kone	Continental Europe	Elevators	2,281	3.2	1,680
Level E Maya Fund	United Kingdom	Artificial intelligence based algorithmic trading	2,061	2.9	2,129
Schindler	Continental Europe	Elevators	2,058	2.9	999
Ocean Wilsons	United Kingdom	Tugboats, platform supply vessels and container   handling - Brazil	1,824	2.5	1,344
Sky Deutschland	Continental Europe	German pay TV provider	1,770	2.5	-
Visa	North America	Payments network	1,654	2.3	-
Fuchs Petrolub	Continental Europe	Speciality lubricant manufacture	1,545	2.2	1,030
East African Breweries	Emerging Markets	East African brewer	1,415	2.0	-
Seadrill	Continental Europe	Deep water oil rigs	1,332	1.9	541
Priceline.com	North America	Online travel/hotel reservation service	1,193	1.7	623
Naspers	Emerging Markets	Media company	1,189	1.6	846
Nanoco	United Kingdom	Quantum dot manufacture, second generation   LEDs	1,165	1.6	691
Better Capital	United Kingdom	Fund investing in distressed businesses	1,088	1.5	1,114
Ulker Biskuvi Sanayi	Emerging Markets	Food manufacturer - Turkey and surrounding   region	1,077	1.5	-
ASOS.com	United Kingdom	Online fashion retailer	1,059	1.5	761
Odontoprev	Emerging Markets	Dental health services - Brazil	1,055	1.5	2,127
Reynolds Group 9.5% 2017	Fixed Interest	Food and beverage packaging and storage   company bond	1,043	1.4	903
BIM Birlesik Magazalar	Emerging Markets	Discount food stores - Turkey	1,037	1.4	1,193
Genus	United Kingdom	Livestock farming products	939	1.3	602
IMAX	North America	Media technology company	926	1.3	-
Tripadvisor	North America	Travel website	923	1.3	655
Seek	Asia Pacific   including Japan	Online employment agency	910	1.3	684
The Biotech Growth Trust	United Kingdom	Biotechnology investment trust	881	1.2	1,064
Zillow	North America	Internet based property site - US	851	1.2	-
Zodiac Aerospace	Continental Europe	Aerospace and defence parts	839	1.2	-
M3	Asia Pacific   including Japan	Medical-related internet services	834	1.2	572
Santos Brasil Participacoes	Emerging Markets	Container handling and logistics services - Brazil	829	1.2	921
Doric Nimrod Air Two	United Kingdom	Fund to acquire, lease and sell A380 aircraft	828	1.1	792
			41,416	57.9	26,991

Notes to the condensed financial statements (unaudited)

1.	The financial information within this preliminary announcement has been extracted from the unaudited financial statements for the year to 30 June 2013 and has been prepared on the basis of the accounting policies set out in the Company's Annual Report and Financial Statements at 30 June 2012. The Directors consider the Company's functional currency to be sterling as the Company's shareholders are predominantly based in the UK and the Company is subject to the UK's regulatory environment.
2.	Income			Year to 30 June 2013 £'000		Year to 30 June 2012 £'000
	Income from investments and interest receivable			1,347		1,258
	Other income			-		1
				1,347		1,259
3.	Baillie Gifford & Co are employed by the Company as Managers and Secretaries under a management agreement which is terminable on not less than one year's 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			Year to 30 June 2013		Year to 30 June 2012
	Revenue return			3.11p		2.93p
	Capital return			23.43p		(20.88p)
	Total net return			26.54p		(17.95p)
	Revenue return per ordinary share is based on the net revenue on ordinary activities after taxation of £831,000 (2012 - £780,000), and on 26,754,925 (2012 - 26,577,628) ordinary shares, being the weighted average number of ordinary shares in issue (excluding treasury shares) during the year. Capital return per ordinary share is based on the net capital gain for the financial year of £6,270,000 (2012 - net capital loss of £5,550,000), and on 26,754,925 (2012 - 26,577,628) ordinary shares, being the weighted average number of ordinary shares in issue (excluding treasury shares) during the year. There were no dilutive or potentially dilutive shares in issue.
5.	Ordinary Dividends	2013	2012		2013 £'000		2012 £'000
	Amounts recognised as distribution in the year:
	Previous year's final (paid 12 October 2012)	2.00p	2.00p		537		527
	Interim (paid 4 April 2013)	1.30p	1.30p		349		346
		3.30p	3.30p		886		873
	We also set out below the total dividends paid and payable in respect of the financial year, which is the basis on which the requirements of section 1158 of the Corporation Tax Act 2010 are considered. The revenue available for distribution by way of dividend for the year is £831,000 (2012 - £780,000).

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

5.	Ordinary Dividends (Ctd)		2013		2012		2013 £'000		2012 £'000
	Dividends paid and payable in respect of the year:
	Interim dividend per ordinary share (paid 4 April 2013)		1.30p		1.30p		349		346
	Proposed final dividend per ordinary share (payable 11 October 2013)		2.10p		2.00p		554		537
			3.40p		3.30p		903		883
	The final dividend was declared after the year end date and has therefore not been included as a liability in the balance sheet. If approved the final dividend will be paid on 11 October 2013 to shareholders on the register at the close of business on 6 September 2013. The ex-dividend date is 4 September 2013. The Company's Registrars offer a Dividend Reinvestment Plan and the final date for elections for this dividend is 20 September 2013.
6.	Two three-year, fixed rate loan facilities, maturing 20 February 2015, have been arranged with Scotiabank Europe PLC. At 30 June 2013 and 30 June 2012 drawings were as follows:
	Scotiabank Europe	¾    £2.5 million at an interest rate of 2.6530% per annum ¾    €3 million at an interest rate of 2.4780% per annum
	The fair value of borrowings at 30 June 2013 was £5,136,000 (2012 - £5,029,000).
7.	Called up share capital			2013 Number		2013 £'000		2012 Number		2012 £'000
	Allotted, called up and fully paid ordinary shares of 5p each			26,363,830		1,318		26,863,830		1,343
	Treasury shares of 5p each			500,000		25		-		-
	Total			26,863,830		1,343		26,863,830		1,343
	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 year to 30 June 2013 a total of 500,000 ordinary shares with a nominal value of £25,000 were bought back at a total cost of £1,264,000 and held in treasury. (No shares were bought back in the year to 30 June 2012). At 30 June 2013 the Company had authority to buy back a further 3,526,888 ordinary shares. Under the provisions of the Company's Articles the share buy-backs were funded from the capital reserve. In the year to 30 June 2013 the Company did not allot any ordinary shares (2012 - allotted 500,000 ordinary shares with a nominal value of £25,000 for consideration of £1,190,000). At 30 June 2013 the Company had authority to allot 2,686,383 ordinary shares without application of pre-emption rights in accordance with the authorities granted at the AGM in October 2012.
8.	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 year, transaction costs on purchases amounted to £60,000 (2012 - £38,000) and transaction costs on sales amounted to £85,000 (2012 - £30,000), making a total of £145,000 (2012 - £68,000).
9.	The financial information set out above does not constitute the Company's statutory accounts for the year ended 30 June 2013. The financial information for 2012 is derived from the statutory accounts for 2012 which have been delivered to the Registrar of Companies. The Auditors have reported on the 2012 accounts, their report was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.  The statutory accounts for 2013 are unaudited, however it is expected that the Auditors will issue an unqualified opinion. The statutory accounts for 2013 will be finalised on the basis of the financial information presented in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.
10.	The Annual Report and Financial Statements will be available on the Mid Wynd page of the Managers' website www.midwynd.co.uk‡ on or around 27 August 2013.

‡    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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FR UUANROKAWAAR