Final Results

RNS Number : 1962X

Mid Wynd Inter Inv Trust PLC

11 August 2009

 



MID WYND INTERNATIONAL INVESTMENT TRUST PLC

Results for the year to 30 June 2009

In the year to 30 June 2009 net asset value per share fell by 22% compared to a 16% fall in the comparative index, the FTSE World Index (in sterling terms). The share price fell by 18%.

·	Despite the cushion of sizeable bond and cash positions and no gearing into equities, performance was hurt in the first few months of the Company’s financial year when developed world financial systems collapsed resulting in a precipitous fall off in economic activity nearly everywhere. Second half performance was stronger with NAV rising by 1.3% compared to a 6.8% fall in the index.
·	Earnings were 16.26p (20.29p) as lower dividend receipts and negligible deposit interest were only partly offset by high yields on the enlarged bond portfolio.  Also the previous year benefited from the one off recovery of VAT.  A final dividend of 8.5p is recommended taking the total to 15.0p, an increase of 7% on the previous year ignoring the special 2.3p dividend paid in respect of VAT recovery.
·	We believe the short term outlook for corporate bonds and equities is appealing in contrast to the outlook for conventional government bonds and cash.

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. You should view your investment as long term. The Company has borrowed money to make further investment (sometimes known as gearing). The risk is that when this money is repaid by the Company, the value of the investments may not be enough to cover the borrowing and interest costs, and the Company will make a loss. If the Company's investments fall in value, any borrowings will increase the amount of this loss. The Company can buy back and cancel its own shares. The risks from borrowing, referred to above, are increased when the Company buys back and cancels its shares. You can find up to date performance information about Mid Wynd on the Mid Wynd page of the Managers' website www.midwynd.co.uk

The objective of Mid Wynd International Investment Trust PLC is to achieve capital and income growth by investing on a worldwide basis. The Trust has total assets of £41.0m (before deduction of the bank loan of £1.9m).

Mid Wynd is managed by Baillie Gifford & Co, the Edinburgh based fund management group with around £47 billion under management and advice at 10 August 2009.

10 August 2009

- ends 

For further information please contact:

Michael MacPhee, Manager    

Mid Wynd International Investment Trust PLC    0131 275 2000

Roland Cross, Director

Broadgate Marketing                                           020 7726 6111

Mid Wynd International Investment Trust PLC

Chairman's Statement

Performance

In the year to 30 June 2009, net asset value per share ('NAV') fell by 21.9% to 776.5p per share and the FTSE World Index in sterling terms fell by 16.2%. More than all of the damage to performance was inflicted in the first few months of the year and in the second half NAV rose 1.3% as against a fall of 6.8% in the World Index. The near collapse in the developed world's financial systems late last summer led to a sharp deceleration in real economic activity nearly everywhere. Within the portfolio, too much attention had been paid to the long term opportunities being thrown up by China's strong growth and the prospect of high Eastern savings rates blossoming into rising Eastern consumption. We paid insufficient heed to the shorter term economic risks. 'Slowing Western growth' as envisaged in my statement of last year turned out to be a dramatic collapse in activity all over the world. Even healthy exporting nations with relatively young, debt free populations suffered major shocks as their foreign customers vanished apparently overnight. Food and energy may indeed, as we continue to anticipate, and for the reasons I set out last year, be beneficiaries of long term supply and demand trends. This did little to protect them last autumn, however. Inflationary pressures gave way to deep recession and calendar year 2008 turned out to be the apogee of a very long (and now seemingly extinguished) bull market in government debt.

What was especially disappointing was the failure of our sizeable bond and cash positions to cushion us from the downturn. Aside from our hurricane bonds and government bonds (subsequently sold), both of which did notably better than equities, the balance of our bond holdings did poorly and in one or two individual instances performed dismally. Discussion of specific cases can be found in the Managers' Portfolio Review in the Annual Report.

Extreme conditions in markets have thrown up opportunities and allowed us to redeem ourselves partially over the past few months. Seadrill's 2012 convertible is emblematic of the problem of there having been too many leveraged investors in the convertibles market. Forced sellers and an absence of buyers allowed us to buy this at a near 30% yield to redemption, selling out at a healthy profit as the yield fell back to around 12%. Reinet was an initially unloved spin out from the restructuring of the Richemont group which traded for a while at an unwarranted discount to its underlying assets. Adding significantly to depressed emerging markets related stocks on the basis of a steadily reinforced belief in the strength of their underlying earnings prospects was a major positive contribution in the second half of the year. The geographic asset allocation provided in the Annual Report, based upon where companies' shares are listed, does not fully capture the extent of this shift. For example, it is hard to argue that Ocean Wilsons or Trikona Trinity bear anything beyond a passing resemblance to UK equities, being, respectively, a Brazilian ports and tug boat company and an Indian property fund.

Earnings and dividend

As outlined in my last statement, the earnings for the year to 30 June 2008 benefited from the one-off recovery of £166,000 of VAT from HMRC, together with £59,000 of interest thereon. The 19.9% fall in earnings, from 20.29p to 16.26p, is largely attributable to this, but was also affected by lower dividend receipts and negligible interest on deposits, only partly offset by high yields on the enlarged bond portfolio. These are all also likely to be features of the forthcoming year.

A final dividend of 8.5p is recommended, which will take the total for the year to 15.0p, an increase of 7.1% on last year (ignoring the special dividend of 2.3p paid in respect of the VAT recovery). The slow down in earnings growth anticipated in last year's statement is likely to continue and expectations for the near future should be for a steady, rather than increasing, dividend stream.

The industry standard for calculating the total expense ratio changed during the year, to exclude the effects of tax relief on expenses for investment trusts in a tax payable position. The historic ratios have been recalculated and, at 0.77%, the total expense ratio for the year to 30 June 2009 is still lower than the 0.82% for 2008 on the revised basis.

The Board

The Board and Managers wish formally to record their thanks to Micky Ingall, who passed away earlier in the year. Shareholders have much reason to regret the loss of his wise and friendly counsel and to be grateful for his work on their behalf.

On a positive note, I am delighted to welcome Russell Napier to the Board. Russell has extensive experience of financial markets, in particular in the Asia-Pacific region, is an author on financial markets and runs a course on financial markets at the Edinburgh Business School. The Board looks forward to benefiting from his insight in its future deliberations.

Outlook

Too much debt was responsible for getting the world into its present difficult situation. Taking on even more is, however, nearly universally expected to see us through it. This time governments will decide upon which causes are deserving of support. Let us brace ourselves. Politicians love a quick fix. The novel combination of printing money and socialising credit risks is producing short term stability and improvement in the West but at a price of longer term unintended consequences. No one knows the exit strategy and no one can predict the unhelpful distortions that today's excess money will create. 

For now, improvement is underway in economies and in markets, and we expect most kinds of credit instrument to continue to bounce back from the multi-decade low valuations and high spreads we experienced a few months ago. The corporate world, excluding banks, has generally exhibited strong cash flow discipline and cost control. This stands in contrast to governments which are spending more and more even as their revenues decline.

For stock markets, it seems likely that the effects will be good before they may be bad. The good period may even extend for quite a while given how weak economies and government finances now are. Interest rates will remain low for as long as policy makers can keep them there. We must try to remember, however, since we are likely to be reminded of it again at some point, that this is a 'hair of the dog' strategy along a path still leading towards economic cirrhosis. Savers, not borrowers, are carrying the can. Strong well-run businesses are enduring both rising taxes and the use of those taxes to sustain weaker competitors. New problems relating to economic incentives are springing up to add to those within our financial systems that have already caused untold harm. In the meantime, the sun is shining, cash and government bonds seem unattractive, equities and credit look relatively appealing by contrast and we are in the business of making hay. 

Annual General Meeting

At the Annual General Meeting to be held on 29 September 2009, we are asking shareholders to approve a number of amendments to the Company's memorandum and articles of association. Details of the changes are given in the Appendix to the Notice of Meeting in the Annual Report.

MID WYND INTERNATIONAL INVESTMENT TRUST PLC

The following is the unaudited preliminary statement for the year to 30 June 2009 which was approved by the Board on 10 August 2009. The Directors of Mid Wynd International Investment Trust PLC are recommending to the Annual General Meeting of the Company to be held on 29 September 2009 the payment of a final dividend of 8.5p net (8.5p net last year and a special dividend of 2.3p) per ordinary share, making a total of 15.0p net (14.0p net last year excluding the special) per ordinary share for the year ended 30 June 2009. 

INCOME STATEMENT

(unaudited)

	For the year ended 30 June 2009				For the year ended 30 June 2008
	Revenue £'000	Capital £'000	Total £'000		Revenue £'000	Capital £'000	Total £'000
Losses on investments	-	(10,777)	(10,777)		-	(547)	(547)
Currency (losses)/gains	-	(12)	(12)		-	89	89
Income (note 2)	1,336	-	1,336		1,561	-	1,561
Investment management fee	(97)	(97)	(194)		(129)	(129)	(258)
VAT recovered (note 3)	-	-	-		111	55	166
Other administrative expenses	(150)	-	(150)		(153)	-	(153)
Net return before finance costs and taxation	1,089	(10,886)	(9,797)		1,390	(532)	858
Finance costs of borrowings	(20)	(20)	(40)		(22)	(52)	(74)
Net return on ordinary activities before taxation	1,069	(10,906)	(9,837)		1,368	(584)	784
Tax on ordinary activities	(251)	34	(217)		(348)	39	(309)
Net return on ordinary activities after taxation	818	(10,872)	(10,054)		1,020	(545)	475
Net return per ordinary share (note 4)	16.26p	(216.24p)	(199.98p)		20.29p	(10.85p)	9.44p
Dividends paid and proposed per ordinary share (note 5)	15.00p				14.00p
Special dividend per ordinary share (note 5)	-				2.30p

The total column of the Income Statement is the profit and loss account of the Company.

All revenue and capital items in the above statement derive from continuing operations.

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)

30 June 2009 £'000		30 June 2008 £'000
Fixed Assets
Investments	40,776		46,896
Current Assets
Debtors	274		511
Cash and deposits	143		4,299
	417		4,810
Creditors Amounts falling due within one year	(240)		(291)
Net current assets	177		4,519
Total assets less current liabilities	40,953		51,415
Creditors Amounts falling due after more than one year (note 6)	(1,888)		(1,422)
Provisions for liabilities and charges
Deferred taxation	-		(4)
Total net assets	39,065		49,989
Capital and reserves
Called-up share capital	1,257		1,257
Share premium	20		20
Capital reserve - realised	35,437		39,276
Capital reserve - unrealised	954		7,987
Revenue reserve	1,397		1,449
Shareholders' funds	39,065		49,989
Net asset value per ordinary share (after deducting borrowings at fair value)	776.5p		994.4p
Net asset value per ordinary share (after deducting borrowings at par)	777.0p		994.3p

DISTRIBUTION OF ASSETS

 (unaudited)

			30 June 2009 %		30 June 2008 %
Equities:	United Kingdom		7.7		13.9
	Continental Europe		22.1		29.3
	North America		19.6		17.7
	Asia Pacific including Japan		11.4		9.4
	Emerging Markets		21.0		13.1
Total Equities			81.8		83.4
Fixed interest			17.8		7.8
Net liquid assets			0.4		8.8
Total assets (before deduction of bank loan)			100.0		100.0

  MID WYND INTERNATIONAL INVESTMENT TRUST PLC

SUMMARISED CASH FLOW STATEMENT (unaudited)
	For the year ended 30 June 2009			For the year ended 30 June 2008
	£'000	£'000			£'000	£'000
Net cash inflow from operating activities		982				860
Net cash outflow from servicing of finance		(37)				(76)
Taxation
Corporation tax paid	(198)				(43)
Total tax paid		(198)				(43)
Financial investment
Acquisitions of investments	(29,282)				(18,635)
Disposals of investments	24,795				23,616
Realised currency profit	336				259
Net cash (outflow)/inflow from financial investment		(4,151)				5,240
Equity dividends paid (note 5)		(870)				(654)
Net cash (outflow)/inflow before use of liquid resources and financing		(4,274)				5,327
Liquid resources
Decrease/(increase) in short term deposits	1,771				(1,380)
Net cash inflow/(outflow) from use of liquid resources		1,771				(1,380)
Financing
Bank loans repaid	-				(1,443)
Bank loans drawn down	-				-
Net cash outflow from financing		-				(1,443)
(Decrease)/increase in cash		(2,503)				2,504
Reconciliation of net cash flow to movement in net funds/(debt)
(Decrease)/increase in cash in the year		(2,503)				2,504
(Decrease)/increase in short term deposits		(1,771)				1,380
Net cash outflow from bank loans		-				1,443
Exchange movement on short term deposits		118				273
Exchange movement on bank loans		(466)				(443)
Movement in net funds/(debt) in the year		(4,622)				5,157
Net funds/(debt) at 1 July		2,877				(2,280)
Net (debt)/funds at 30 June		(1,745)				2,877
Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
Net return before finance costs and taxation		(9,797)				858
Losses on investments		10,777				547
Currency losses/(gains)		12				(89)
Amortisation of fixed interest book cost		(128)				(49)
Decrease/(increase) in accrued income		32				(168)
Decrease/(increase) in debtors		162				(147)
(Decrease)/increase in creditors		(11)				5
Overseas tax suffered		(43)				(89)
Income tax suffered		(22)				(8)
Net cash inflow from operating activities		982				860

  MID WYND INTERNATIONAL INVESTMENT TRUST PLC

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

(unaudited)

For the year ended 30 June 2009

	Share capital £'000	Share premium £'000	Capital reserve - realised £'000	Capital reserve - unrealised £'000	Revenue reserve £'000	Total shareholders' funds £'000
Shareholders' funds at   1 July 2008	1,257	20	39,276	7,987	1,449	49,989
Net return on ordinary activities after taxation	-	-	(3,839)	(7,033)	818	(10,054)
Dividends paid during the year (note 5)	-	-	-	-	(870)	(870)
Shareholders' funds at 30 June 2009	1,257	20	35,437	954	1,397	39,065

For the year ended 30 June 2008

	Share capital £'000	Share premium £'000	Capital reserve - realised £'000	Capital reserve - unrealised £'000	Revenue reserve £'000	Total shareholders' funds £'000
Shareholders' funds at   1 July 2007	1,257	20	36,890	10,918	1,083	50,168
Net return on ordinary activities after taxation	-	-	2,386	(2,931)	1,020	475
Dividends paid during the year (note 5)	-	-	-	-	(654)	(654)
Shareholders' funds at 30 June 2008	1,257	20	39,276	7,987	1,449	49,989

MID WYND INTERNATIONAL INVESTMENT TRUST PLC

THIRTY LARGEST EQUITY HOLDINGS  at 30 June 2009 (unaudited)
Name	Region		Business		2009			2008
					Value £'000	% of total assets			Value £'000
Baillie Gifford Developed Asia Pacific Fund		Asia Pacific including Japan		Investment fund	2,037	5.0	3,087
Baillie Gifford Japanese Smaller Companies Fund		Asia Pacific including Japan		Investment fund	1,688	4.1	1,756
Kone		Continental Europe		Elevators	1,069	2.6	880
Baillie Gifford Greater China Fund		Emerging Markets		Investment fund - China	876	2.1	-
Essilor		Continental Europe		Ophthalmology	753	1.8	799
Seadrill		Continental Europe		Deep water oil rigs	735	1.8	1,387
China Merchants Bank		Emerging Markets		Banking - China	707	1.7	343
Reinet Investments SCA		Continental Europe		Investment holding company - Luxembourg	692	1.7	-
Goldman Sachs Group		North America		Investment bank	666	1.6	-
Pride International		North America		Offshore drilling contractor	636	1.6	-
OGX Petróleo e Gás Participacoes		Emerging Markets		Oil and gas exploration and production - Brazil	618	1.5	-
Proshares Ultrashort Lehman 20+ Year Treasury		North America		Exchange traded fund	578	1.4	-
Ocean Wilsons Holdings		United Kingdom		Tugboats and port terminals - Brazil	553	1.3	-
Schindler		Continental Europe		Elevators	528	1.3	528
Petrobras		Emerging Markets		Integrated oil - Brazil	521	1.3	939
Dragon Oil		Emerging Markets		Oil and gas exploration and production - Turkmenistan	508	1.2	-
Medco Health Solutions		North America		Prescription management and health information	499	1.2	-
Walgreen		North America		Pharmacy chain	493	1.2	450
Cameron International		North America		Oilfield equipment manufacturer	474	1.2	768
Novozymes		Continental Europe		Enzyme producer	427	1.0	393
Schlumberger		North America		Oil services	427	1.0	1,674
Monsanto		North America		Agricultural biotechnology	420	1.0	-
Marine Harvest		Continental Europe		Fish farming	407	1.0	307
Juridica Investments		United Kingdom		A fund of lawsuits	398	1.0	-
Naspers		Emerging Markets		Media company - South Africa and China	398	1.0	328
Geberit		Continental Europe		Building materials	394	1.0	393
Pepsico		North America		Soft drink and food	384	0.9	531
Atlas Copco		Continental Europe		Industrial compressors and mining equipment	381	0.9	884
Imperial Tobacco		United Kingdom		Tobacco	380	0.9	299
Walmex		Emerging Markets		General retailer - Mexico	343	0.8	384
					18,990	46.1	16,130

MID WYND INTERNATIONAL INVESTMENT TRUST PLC

NOTES

(unaudited)

1.	The financial information within this preliminary announcement has been extracted from the unaudited financial statements for the year to 30 June 2009 and has been prepared on the basis of the accounting policies set out in the Company's Annual Financial Statements at 30 June 2008.
					30 June 2009 £'000							30 June 2008 £'000
2.	Income
	Income from investments and interest receivable				1,330							1,491
	Interest on VAT recovery				-							59
	Other income				6							11
					1,336							1,561
3.	VAT recovered
	In 2007 the European Court of Justice ruled that investment trust management fees should be exempt from VAT. HMRC accepted the Managers' repayment claims for the periods from 1990 to 1996 and from 2000 to 2007 and repaid £166,000 of VAT together with £59,000 of interest, received by the Managers on behalf of the Company, which was recognised in the year to 30 June 2008, allocated to revenue and capital on the same basis as the VAT expense was originally charged.
					30 June 2009 £'000							30 June 2008 £'000
4.	Net return per ordinary share
	Revenue return				16.26p							20.29p
	Capital return				(216.24p)							(10.85p)
	Total return				(199.98p)							9.44p
	Revenue return per ordinary share is based on the net revenue on ordinary activities after taxation of £818,000 (2008 - £1,020,000) and on 5,027,766 ordinary shares, being the number of ordinary shares in issue throughout each year. Capital return per ordinary share is based on the net capital loss for the financial year of £10,872,000 (2008 - net capital loss of £545,000) and on 5,027,766 ordinary shares, being the number of ordinary shares in issue throughout each year. There are no dilutive or potentially dilutive shares in issue.
				2009				2008			2009 £'000			2008 £'000
5.		Ordinary Dividends
		Amounts recognised as distributions in the period:
		Previous year's final (paid 16 October 2008)		8.50p				7.50p			427			377
		Previous year's special (paid 16 October 2008)		2.30p				-			116			-
		Interim (paid 7 April 2009)		6.50p				5.50p			327			277
				17.30p				13.00p			870			654
MID WYND INTERNATIONAL INVESTMENT TRUST PLC NOTES (CTD) (unaudited)
5.		We also set out below the total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of section 842 of the Income and Corporation Taxes Act 1988 are considered. The revenue available for distribution by way of dividend for the year is £818,000 (2008 - £1,020,000).
			2009					2008			2009 £'000			2008 £'000
		Ordinary Dividends (Ctd)
		Dividends paid and proposed in the period:
		Interim dividend per ordinary share  (paid 7 April 2009)	6.50p					5.50p			327			277
		Proposed final dividend per ordinary share (payable 8 October 2009)	8.50p					8.50p			427			427
			15.00p					14.00p			754			704
		Special dividend per ordinary share (paid 16 October 2008)	-					2.30p			-			116
			15.00p					16.30p			754			820
		If approved the final dividend will be paid on 8 October 2009 to all shareholders on the register at the close of business on 11 September 2009.
6.		Creditors include a bank loan of ¥300 million which is repayable on 27 February 2012  (2008 - ¥300 million).
7.		The Annual Report and Financial Statements will be available on the Managers' website www.bailliegifford.com  on or around 26 August 2009.
8.		The financial information set out above does not constitute the Company's statutory accounts for the year ended 30 June 2009. The financial information for 2008 is derived from the statutory accounts for 2008 which have been delivered to the Registrar of Companies. The Auditors have reported on the 2008 accounts, their report was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The statutory accounts for 2009 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.
9.		None of the views expressed in this document should be construed as advice to buy or sell a particular investment.

 

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