Final Results

RNS Number : 0086K

Mid Wynd Inter Inv Trust PLC

14 August 2012

 



Press Release

Mid Wynd International Investment Trust PLC

In the year to 30 June 2012 net asset value per share fell by 8.6% compared to a 6.2% fall in the comparative index, the FTSE World Index (in sterling terms).  The Company's share price fell by 9.2%.

Results for the year to 30 June 2012

¾  Stock selection in aggregate was helpful, in particular IP Group. Asset allocation, despite portfolio insurance, was adverse as the US market did far better than all other major peers over the period. Overall, the year has been slightly disappointing for the Company in both absolute and relative terms.

¾  Corporate profits have held up very well but the outlook has deteriorated lately.

¾  Despite this and persistent macro-economic headwinds, continued commercial innovation and renovation, and ongoing expansion of consumption across large swathes of the world's population are long term causes for optimism.

¾  Owing to lower dividend receipts, earnings of 2.93p were down 14.6% compared to last year.  A final dividend of 2.0p per share is being proposed, making full year dividends of 3.3p, which equates to the 16.5p paid the previous year, prior to the five-for-one share subdivision.

¾  During the year 500,000 shares were issued at a premium to net asset value.

14 August 2012

For further information please contact:

Michael MacPhee, Manager, Mid Wynd International Investment Trust PLC  

Tel: [phone] 

Roland Cross, Director, Broadgate Mainland

Tel: [phone] or 07831 401309

Past performance is not a guide to future performance. The value of an investment and the 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 Company has total assets of £66.7m (before deduction of bank loans of £4.9m).

Mid Wynd is managed by Baillie Gifford & Co, the Edinburgh based fund management group with around £80 billion under management and advice at 14 August 2012.

Chairman's Statement

I am pleased to write to you for the first time as your Company's Chairman, a role I took over at the Company's financial year end.

In the year to 30 June 2012, net asset value declined by 8.6% to 229.8p per share. The share price fell by 9.2% to 230.75p per share. The FTSE World index dropped by 6.2% in sterling terms. This has been a challenging year for markets, reflecting the structural challenges faced by economies which companies cannot permanently insulate themselves against, and the Company's underperformance has been disappointing. Repeated central bank stimuli have managed to contain, for now, what would otherwise have been a combination of Western debt deflation and deep recession. These interventions buy time, but not an indefinite amount. Policy making in the afflicted parts of the Western world appears to be running up against the laws of diminishing returns. Underlying sovereign balance sheets are deteriorating further meantime. What has happened is akin to stripping insulation from the bare economic wire - governments and Central Banks are that insulation. As time goes on, and in the absence of a more potent recovery, the risk of short-circuit increases. Following a partial, tactical withdrawal from our sale of index futures following the European Central Bank intervention in the early part of this calendar year, we have reverted to the strategic position of having significant portfolio insurance. Should markets turn south unexpectedly, we would hope to find ourselves with cash flow from margin payments and to be in a position to exploit any major weakness in asset prices. This remains an unusual situation for the Company but one we believe remains merited by the circumstances.

Earnings and dividend

The revenue return for the year of 2.93p per share represents a 14.6% fall in earnings compared to the previous year. The surprising strength of portfolio dividends enjoyed last year has not been maintained, owing in part to the non-payment of a dividend by Marine Harvest in the current year, historically a generous contributor to our income stream.

The Company can draw upon accumulated revenue reserves to address such an earnings shortfall in order to maintain its dividend and, accordingly, a final dividend of 2.0p will be recommended, taking the full year total to 3.3p, equivalent to the 16.5p paid last year.

Discount and share buybacks/ issuance

The 1.0% premium at which the Company's shares were trading at the previous year end had fallen to 0.4% by 30 June 2012. During the year it rose to over 7%, however, and the Company was able to issue 500,000 new shares, raising £1.19m, to satisfy shareholder demand. To reiterate the intention expressed in the Half-Yearly Management Report, it is hoped that liquidity will be improved by the creation of a band within which issuance and buybacks take place as a matter of routine.

Board

At last year's Annual General Meeting ('AGM') I thanked Pat Barron for his years of service on this Company's Board, and I should like to do so again, following his retirement from the Board on 30 June 2012. After almost ten years as a Director, Pat took over as Chairman in 1989 after the sudden and untimely death of George Scott, and led the Company with calm and good humour through the long boom of the 1990s and the very difficult period since the spring of 2001. I also welcome two new Directors: Harry Morgan and Alan Scott, both appointed with effect from 21 May 2012, who therefore fall to be elected by shareholders at the AGM to be held on 8 October 2012. As can be seen from his description on page 5 of the Annual Report, Harry has wide and lengthy investment experience, particularly with private clients, while Alan, son of the late George, not only represents the next generation of the Scott family, but also has broad financial experience in banking and wealth management. Their experience will be of great value to the Board and I commend their election to you.

Outlook

Most of last year's outlook statement still applies. As is exhaustively rehearsed in the media, the Eurozone political and financial drama appears to be nearing a denouement. Periodic flurries of politicking demonstrate strong intent but also rising north/south strains and questionable effectiveness. There do not appear to be any clear winners in this game in either the short or even perhaps the medium term. Recovering from the prolonged overindulgence of the past, in the case of Europe, which for this purpose includes the UK, is likely to take a long period of adjustment (perhaps alongside fiscal, political and banking integrations). The alternative is a short, sharp shock - some manner of Eurozone break-up and a complex web of accompanying unintended and mostly undesirable consequences. Long term causes for optimism, however, are significant. They fall mainly into two categories - commercial innovation and renovation on the one hand, and a multi-decade long expansion of consumption across large swathes of the world's population on the other. Most of Asia, for instance, continues to grow at a worthwhile pace and has high savings ratios to back up higher spending. It would not be immune in the short term from some dislocation in Western economies, but seems well placed over the next ten or twenty years. This would appear to be a more significant development than the moderate but fragile recovery in the US economy that has preoccupied markets over the past year.

The pace of global growth has mostly been slowing markedly of late. Rising commodity prices, a feature of last year's report, have been reversing in the last few months, as has headline inflation. Industrial production indices and surveys have been slipping back into low growth or even flat to down territory. Inventory levels have not yet fallen, however, indicating a marked weakness in final demand and more weak output to come.

Overall, this is a subdued backdrop for equity investors despite or perhaps because of the recent success of companies and their profits. Outwith equities, where valuations seem from a long term perspective somewhere between moderately attractive to rather expensive, there appear to be few clear attractive asset classes. Some such, in the form of catastrophe bonds, litigation finance and assorted other forms of mispriced equity-like risk, are important and uncorrelated, if modest, elements of Mid Wynd's portfolio. Volatility in asset prices deriving from high profile events may continue to throw up investment opportunities of a short term nature. Taking advantage of such a situation will require tenacity, fortitude and intelligence in equal measure.

Richard RJ Burns

Chairman

14 August 2012

Past performance is not a guide to future performance.

Income statement (unaudited)

The following is the unaudited preliminary statement for the year to 30 June 2012 which was approved by the Board on 14 August 2012.  The Directors of Mid Wynd International Investment Trust PLC are recommending to the Annual General Meeting of the Company to be held on 8 October 2012 the payment of a final dividend of 2.0p (10.0p last year) per ordinary share, making a total of 3.3p (16.5p last year) per ordinary share for the year ended 30 June 2012.

	For the year ended 30 June 2012			For the year ended 30 June 2011
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
(Losses)/gains on investments	-	(5,604)	(5,604)	-	12,589	12,589
Gains on futures contracts	-	614	614	-	-	-
Currency losses	-	(346)	(346)	-	(117)	(117)
Income (note 2)	1,259	-	1,259	1,338	-	1,338
Investment management fee	(151)	(151)	(302)	(159)	(159)	(318)
Other administrative expenses	(233)	-	(233)	(186)	-	(186)
Net return before finance costs and  taxation	875	(5,487)	(4,612)	993	12,313	13,306
Finance costs of borrowings	(63)	(63)	(126)	(54)	(54)	(108)
Net return on ordinary activities before taxation	812	(5,550)	(4,738)	939	12,259	13,198
Tax on ordinary activities	(32)	-	(32)	(63)	-	(63)
Net return on ordinary activities after taxation	780	(5,550)	(4,770)	876	12,259	13,135
Net return per ordinary share (note 3)	2.93p	(20.88p)	(17.95p)	3.43p	48.00p	51.43p
Dividends paid and proposed per ordinary share (note 4)	3.30p			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 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 2012 £'000	At 30 June 2011 £'000
Fixed assets
Investments held at fair value through profit or loss	65,167	70,360
Current assets
Debtors	985	238
Cash and deposits	1,239	1,359
	2,224	1,597
Creditors
Amounts falling due within one year (note 5)	(628)	(5,668)
Net current assets/(liabilities)	1,596	(4,071)
Total assets less current liabilities	66,763	66,289
Creditors
Amounts falling due after more than one year (note 5)	(4,927)	-
Total net assets	61,836	66,289
Capital and reserves
Called up share capital	1,343	1,318
Capital redemption reserve	16	16
Share premium	4,983	3,818
Capital reserve	54,004	59,554
Revenue reserve	1,490	1,583
Shareholders' funds	61,836	66,289
Net asset value per ordinary share (after deducting borrowings at fair value)	229.8p	251.4p
Net asset value per ordinary share (after deducting borrowings at par)	230.2p	251.4p

Distribution of assets (unaudited)

		At 30 June 2012 %	At 30 June 2011 %
Equities	United Kingdom	28.6	24.3
	Continental Europe	19.0	20.3
	North America	20.6	14.6
	Asia Pacific including Japan	5.5	7.8
	Emerging Markets	18.9	25.0
Total equities		92.6	92.0
Fixed interest		5.0	6.0
Net liquid assets		2.4	2.0
Total assets (before deduction of loans)		100.0	100.0

Reconciliation of movements in shareholders' funds (unaudited)

For the year ended 30 June 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 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 6)	25	-	1,165	-	-	1,190
Dividends paid during the year (note 4)	-	-	-	-	(873)	(873)
Shareholders' funds at 30 June 2012	1,343	16	4,983	54,004	1,490	61,836

For the year ended 30 June 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 2010	1,241	16	20	47,295	1,490	50,062
Net return on ordinary activities after taxation	-	-	-	12,259	876	13,135
Shares issued (note 6)	77	-	3,798	-	-	3,875
Dividends paid during the year (note 4)	-	-	-	-	(783)	(783)
Shareholders' funds at  30 June 2011	1,318	16	3,818	59,554	1,583	66,289

†      The Capital Reserve balance at 30 June 2012 includes investment holding gains on fixed asset investments of £11,594,000 (30 June 2011 - gains of £16,251,000)

Condensed cash flow statement (unaudited)

	Year to 30 June 2012 £'000               £'000		Year to 30 June 2011 £'000               £'000
Net cash inflow from operating activities		691		828
Servicing of finance
Interest paid	(129)		(109)
Net cash outflow from servicing of finance		(129)		(109)
Financial investment
Acquisitions of investments	(29,882)		(29,760)
Disposals of investments	29,608		27,242
Futures	200		-
Realised currency (loss)/profit	(457)		42
Net cash outflow from financial investment		(531)		(2,476)
Equity dividends paid (note 4)		(873)		(783)
Net cash outflow before financing		(842)		(2,540)
Financing
Shares issued	1,190		3,875
Shares purchased for cancellation	-		(378)
Bank loans repaid	(5,465)		-
Bank loans drawn down	4,997		-
Net cash inflow from financing		722		3,497
(Decrease)/increase in cash		(120)		957
Reconciliation of net cash flow to movement in net debt
(Decrease)/increase in cash in the year		(120)		957
Net cash outflow from bank loans		468		-
Exchange movement on bank loans		111		(159)
Movement in net debt in the year		459		798
Net debt at 1 July		(4,147)		(4,945)
Net debt at 30 June		(3,688)		(4,147)
Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
Net return before finance costs and taxation		(4,612)		13,306
Losses/(gains) on investments		5,604		(12,589)
Gains on futures contracts		(614)		-
Currency losses		346		117
Amortisation of fixed interest book cost		(25)		(57)
Decrease in accrued income		46		86
(Increase)/decrease in debtors		(4)		2
(Decrease)/increase in creditors		(10)		28
Overseas tax suffered		(40)		(65)
Net cash inflow from operating activities		691		828

Thirty largest holdings (unaudited)

Name	Region	Business	2012 Value £'000	2012 % of total assets	2011 Value £'000
IP Group	United Kingdom	Commercialisation of intellectual property	3,791	5.7	1,254
Level E Maya Fund	United Kingdom	Artificial intelligence based algorithmic trading	2,129	3.2	2,454
Odontoprev	Emerging Markets	Dental health services - Brazil	2,127	3.2	2,286
Reinet Investments SCA	Continental Europe	Investment holding company	1,929	2.9	993
Kone	Continental Europe	Elevators	1,680	2.5	1,704
Ocean Wilsons	United Kingdom	Tugboats, platform supply vessels and container    handling - Brazil	1,344	2.0	1,755
Marine Harvest	Continental Europe	Salmon farming	1,300	1.9	359
BIM Birlesik Magazalar	Emerging Markets	Discount food stores - Turkey	1,193	1.8	588
Better Capital	United Kingdom	Fund investing in distressed businesses	1,114	1.7	885
The Biotech Growth Trust	United Kingdom	Biotechnology investment trust	1,064	1.6	723
MMS Mineracao e Metalicos	Emerging Markets	Port - royalties based on iron ore shipments	1,037	1.6	601
Fuchs Petrolub	Continental Europe	Specialty lubricant manufacturer	1,030	1.5	405
Schindler	Continental Europe	Elevators	999	1.5	1,061
Santos Brasil Participacoes	Emerging Markets	Container handling and logistics services - Brazil	921	1.4	1,064
Reynolds Group 9.5% 2017	Fixed Interest	Food and beverage packaging and storage    company bond	903	1.4	-
TJX Companies	North America	Discount clothing and homeware stores	854	1.3	510
Naspers	Emerging Markets	Media company - South Africa and China	846	1.3	875
Yoox.com	Continental Europe	Online fashion retailer	823	1.2	1,399
Chariot Oil & Gas	Emerging Markets	Oil and gas exploration and production -    Namibia	799	1.2	512
Doric Nimrod Air Two	United Kingdom	Fund to acquire, lease and sell A380 aircraft	792	1.2	-
ASOS.com	United Kingdom	Online fashion retailer	761	1.1	1,710
IG Group	United Kingdom	Spread betting	758	1.1	690
Athena Debt Opportunities    Fund	Fixed Interest	Distressed debt fund	746	1.1	1,622
Curis	North America	Biopharmaceutical drug development	737	1.1	477
Dragon Oil	Emerging Markets	Oil and gas exploration and production -    Turkmenistan	729	1.1	1,126
TOTVS	Emerging Markets	Application software for Latin American markets	719	1.1	481
Doric Nimrod Air One	United Kingdom	Fund to acquire, lease and sell A380 aircraft	716	1.1	637
Novozymes	Continental Europe	Enzyme producer	715	1.1	878
Seattle Genetics	North America	Biopharmaceuticals	712	1.1	467
CATco Reinsurance    Opportunities Fund	United Kingdom	Catastrophe reinsurance fund	701	1.1	685
			33,969	51.1	28,201

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 2012 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 2011. 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 2012 £'000		Year to 30 June 2011 £'000
	Income from investments and interest receivable			1,258		1,335
	Other income			1		3
				1,259		1,338
3.	Net Return per Ordinary Share			Year to 30 June 2012		Year to 30 June 2011
	Revenue return			2.93p		3.43p
	Capital return			(20.88p)		48.00p
	Total net return			(17.95p)		51.43p
	Weighted average number of ordinary shares in issue			26,577,628		25,541,500
	Revenue return per ordinary share is based on the net revenue on ordinary activities after taxation of £780,000 (2011 - £876,000), and on 26,577,628 (2011 - 25,541,500 - being 5,108,300 adjusted for the five for one share split)  ordinary shares, being the weighted average number of ordinary shares in issue during the year. Capital return per ordinary share is based on the net capital loss for the financial year of £5,550,000 (2011 - net capital gain of £12,259,000), and on 26,577,628 (2011 - 25,541,500 - being 5,108,300 adjusted for the five for one share split) ordinary shares, being the weighted average number of ordinary shares in issue during the year. There were no dilutive or potentially dilutive shares in issue.
4.	Ordinary Dividends	2012	2011		2012 £'000		2011 £'000
	Amounts recognised as distribution in the year:
	Previous year's final (paid 14 October 2011)	2.00p	1.80p		527		447
	Interim (paid 5 April 2012)	1.30p	1.30p		346		336
		3.30p	3.10p		873		783
	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 £780,000 (2011 - £876,000).

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

4.	Ordinary Dividends (Ctd)		2012		2011		2012 £'000		2011 £'000
	Dividends paid and payable in respect of the year:
	Interim dividend per ordinary share (paid 5 April 2012)		1.30p		1.30p		346		336
	Proposed final dividend per ordinary share (payable 12 October 2012)		2.00p		2.00p		537		527
			3.30p		3.30p		883		863
	The final dividend was declared after the period end date and has therefore not been included as a liability in the balance sheet. If approved the final dividend will be paid on 12 October 2012 to shareholders on the register at the close of business on 7 September 2012. The ex-dividend date is 5 September 2012. The Company's Registrars offer a Dividend Reinvestment Plan and the final date for elections for this dividend is 21 September 2012.
5.	A US$5 million multi-currency loan facility and a £2 million loan facility with Lloyds TSB Scotland plc expired on 27 February 2012. Two three-year, fixed rate loan facilities, maturing 20 February 2015, were arranged with Scotiabank Europe PLC. At 30 June 2012 drawings were as follows:
	Scotiabank Europe	¾    €3 million at an interest rate of 2.4780% per annum (2011 - €1.32 million at 1.7913% with Lloyds TSB) ¾    £2.5 million at an interest rate of 2.6530% per annum (2011 - £2 million at 2.3048% with Lloyds TSB) ¾    Nil yen borrowings (2011 - ¥300 million at 1.905% with Lloyds TSB)
	The fair value of borrowings at 30 June 2012 was £5,029,000 (2011 - short term borrowings - fair value equal to par).
6.				2012 Number		2012 £'000		2011 Number		2011 £'000
	Called up share capital
	Allotted, called up and fully paid ordinary shares of 5p each			26,863,830		1,343		-		-
	Allotted, called up and fully paid ordinary shares of 25p each			-		-		5,272,766		1,318
	At the Company's Annual General Meeting in October 2011, shareholders approved a five for one share split and subsequently received five ordinary shares of 5p each for every ordinary share of 25p previously held. In the year to 30 June 2012 the Company allotted 500,000 ordinary shares with a nominal value of £25,000 for total consideration of £1,190,000 (2011 - allotted 310,000 ordinary shares with a nominal value of £77,500 for consideration of £3,875,000). At 30 June 2012 the Company had authority to buy back 3,951,938 ordinary shares and to allot a further 2,136,383 ordinary shares without application of pre-emption rights in accordance with the authorities granted at the AGM in October 2011. Under the provisions of the Company's Articles of Association share buybacks are funded from the capital reserve.
7.	The financial information set out above does not constitute the Company's statutory accounts for the year ended 30 June 2012. The financial information for 2011 is derived from the statutory accounts for 2011 which have been delivered to the Registrar of Companies. The Auditors have reported on the 2011 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 2012 are unaudited, however it is expected that the Auditors will issue an unqualified opinion. The statutory accounts for 2012 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.
8.	The Annual Report and Financial Statements will be available on the Managers' website www.midwynd.co.uk‡ on or around 28 August 2012.

‡    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.

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FR USASRUNAWAAR