Interim Results
Mid Wynd Inter Inv Trust PLC
11 February 2003
EMBARGOED UNTIL 7am, Tuesday 11th February, 2003
MID WYND INTERNATIONAL INVESTMENT TRUST PLC
Results for the six months to 31 December 2002
11 February 2003
Salient points
• Continued outperformance in falling markets. NAV per share fell 14.1% to
543.6p compared with a fall of 17.1% in the FTSE World Index (in sterling
terms).
• Roller coaster markets. Whilst the result represents a loss in absolute
terms, strong relative performance has been achieved against a background of
considerable market volatility. This volatility is a consequence of the
conflict between fiscal and monetary stimulus on the one hand and underlying
structural fragility on the other.
• Earnings per share rise to 4.10p compared with 3.42p in the corresponding
period in 2001. This reflects an increase in allocation to fixed income
securities in early 2002 and a fall in the management fee. However, income
for the year as a whole is not expected to be materially different from the
10.18p earned in 2002.
• Interim dividend 3.70p up from 3.60p in the corresponding period in 2001.
• Cautious outlook - but some brighter signs for equities. Despite
continuing concerns over profitability, consumer spending and deteriorating
prospects for UK and continental banks, overall valuations are much more
attractive than for some years. In the short term the outlook remains
uncertain and the Company will focus on equities with the potential for
revenue growth, pricing power and cash flow generation.
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 £29m.
Mid Wynd is managed by Baillie Gifford & Co., the leading Edinburgh based fund
management group with £19 billion under management and advice (at 31.12.02).
- ends -
For further information please contact:
Michael MacPhee, Manager
Mid Wynd International Investment Trust PLC 0131 222 4000
Mike Lord, Director
Broadgate Marketing 020 7726 6111
Baillie Gifford & Co. is regulated by the FSA.
MID WYND INTERNATIONAL INVESTMENT TRUST PLC
Interim Report
Over the six months to 31 December 2002 the Trust's net asset value per share
fell by 14.1% to 543.6p. This is rather better than the fall in the FTSE World
Index (in sterling terms) of 17.1%, although the degree of outperformance is
less than in the previous six months to June. However, although the performance
has been satisfactory in relative terms, in absolute terms it still represents a
further loss. Markets have again endured a roller coaster ride, falling first as
expectations for corporate profits and economic activity declined, then
recovering sharply from early October only to fall back again in December. This
represents the unwelcome continuation of prior patterns. This volatility is the
result of a struggle between the forces of fiscal and monetary stimulus on the
one hand and underlying structural fragility on the other. The fragility stems
from over-investment, over-consumption, excessive debt and the increasingly
unbalanced pattern of global trade and activity which built up during the 1990s
boom. Japanese and European economies remain weak, the US more resilient, helped
in large part by rapidly increasing government spending.
It might be argued that the appropriate treatment for over-investment,
over-leverage and over-supply is a period of sub trend growth during which weak
businesses go to the wall and stronger ones slowly work themselves back into
shape. The problem is the extremes to which over-exuberance was allowed to
develop. The avoidance of deep recession currently requires urgent measures
tantamount to giving a weak patient high doses of adrenaline. This endeavour is
reflected in the rather convulsive and disappointing performance of equity
markets. It is hard to believe that the best cure for excess capacity and
falling returns is a persistent attempt to keep capital cheap, but there is no
alternative viable short term fix.
As we enter the new year, there are some brighter signs for equity investors,
not least that in many cases valuations have become unusually attractive. Plenty
of companies are showing signs of seizing greater control of their own
destinies. Cost cutting, innovation and productivity are the most convincing
investment themes at present. Cash flow management is key, and differentiation
between winners and losers is becoming increasingly apparent. This is most
evident in the beleaguered telecoms sector, where the reduction of competition
and the stress on many balance sheets has restored an orderly and, in the case
of the mobile sector, growing market. Cash flow generation is being transformed.
The news on profits is not all sanguine, however. There are signs that
Anglo-Saxon consumers, hitherto a bulwark of strength, are starting to cool
down. UK retail banks are seeing deterioration in their business prospects, and
continental banks face similarly challenging conditions. It is difficult to
envisage a convincing or rapid recovery in profits and margins across a wide
range of sectors or countries against this background. We maintain a cautious
overall stance, therefore, and a focus within equities on revenue growth,
pricing power and cash flow generation.
Earnings for the first half have risen to 4.10p (3.42p) per share. This reflects
an early 2002 increase in the allocation to higher yielding fixed income
securities at the expense of equities, together with a fall in the management
fee as a consequence of the fall in NAV over the period. In the second half
however, there will be no benefit from the addition to fixed income, and for the
year as a whole income is not expected to be materially different from the
10.18p earned in 2002. The Board has declared an increased interim dividend of
3.70p (3.60p).
By order of the Board
Baillie Gifford & Co.
10 February 2003
The following is an interim statement for the six months ended 31 December 2002
which has been neither reviewed nor audited by the auditors. This statement is
being printed and will be sent to all shareholders on 17 February 2003. Copies
will be available for inspection at the Registered Office of the Company or may
be obtained on request from the Managers and Secretaries after that date.
MID WYND INTERNATIONAL INVESTMENT TRUST PLC
STATEMENT OF TOTAL RETURN
(unaudited and incorporating the revenue account*)
for the six months ended for the six months ended for the year ended
31 December 2002 31 December 2001 30 June 2002
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Realised losses on
investments - (2,154) (2,154) - (620) (620) - (996) (996)
Unrealised losses on - (2,402) (2,402) - (2,773) (2,773) - (4,803) (4,803)
investments
Currency gains (note 3) - 86 86 - 151 151 - 88 88
Income (note 4) 368 - 368 319 - 319 858 - 858
Investment management fee (36) (36) (72) (44) (44) (88) (88) (88) (176)
Other administrative (82) - (82) (69) - (69) (122) - (122)
expenses
Net return before finance
costs and taxation 250 (4,506) (4,256) 206 (3,286) (3,080) 648 (5,799) (5,151)
Finance costs of (2) (2) (4) (4) (4) (8) (7) (7) (14)
borrowings
Return on ordinary
activities before 248 (4,508) (4,260) 202 (3,290) (3,088) 641 (5,806) (5,165)
taxation
Tax on ordinary (42) 11 (31) (30) 13 (17) (129) 29 (100)
activities
Return on ordinary
activities after taxation 206 (4,497) (4,291) 172 (3,277) (3,105) 512 (5,777) (5,265)
Dividends in respect of
equity shares (186) - (186) (181) - (181) (448) - (448)
Transfer to/(from) 20 (4,497) (4,477) (9) (3,277) (3,286) 64 (5,777) (5,713)
reserves
Return per ordinary share 4.10p (89.44p) (85.34p) 3.42p (65.18p) (61.76p) 10.18p (114.91p) (104.73p)
(note 5)
Dividend per ordinary
share (note 6) 3.70p 3.60p 8.90p
* The revenue column of this statement is the profit and loss account of the
Company.
All revenue and capital items in the above statement derive from continuing
operations.
MID WYND INTERNATIONAL INVESTMENT TRUST PLC
SUMMARISED BALANCE SHEET
at 31 December 2002
(unaudited)
31 December 2002 31 December 2001 30 June 2002
£'000 £'000 £'000
NET ASSETS
Fixed asset investments 28,764 35,484 33,167
Net liquid assets 349 535 504
Total assets (before deduction of loan) 29,113 36,019 33,671
Bank loan (note 2) (1,780) (1,782) (1,861)
27,333 34,237 31,810
CAPITAL AND RESERVES
Called-up share capital 1,257 1,257 1,257
Capital reserves 25,447 32,444 29,944
Revenue reserve 629 536 609
EQUITY SHAREHOLDERS' FUNDS 27,333 34,237 31,810
NET ASSET VALUE PER ORDINARY SHARE 543.6p 681.0p 632.7p
Ordinary shares in issue 5,027,766 5,027,766 5,027,766
MID WYND INTERNATIONAL INVESTMENT TRUST PLC
SUMMARISED CASH FLOW STATEMENT
(unaudited)
Six months to Six months to Year to
31 December 2002 31 December 2001 30 June 2002
£'000 £'000 £'000
NET CASH INFLOW FROM OPERATING ACTIVITIES 239 55 381
NET CASH OUTFLOW FROM SERVICING OF FINANCE (7) (8) (12)
TOTAL TAX PAID - - (1)
FINANCIAL INVESTMENT
Acquisitions of investments (7,551) (8,979) (14,716)
Disposals of investments 7,278 8,408 14,204
Realised currency profit/(loss) 5 (6) 10
NET CASH OUTFLOW FROM FINANCIAL INVESTMENT (268) (577) (502)
EQUITY DIVIDENDS PAID (267) (256) (437)
DECREASE IN CASH (303) (786) (571)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN
NET DEBT
Decrease in cash in the period (303) (786) (571)
Exchange movement 81 157 78
MOVEMENT IN NET DEBT IN THE PERIOD (222) (629) (493)
NET DEBT AT 1 JULY (1,154) (661) (661)
NET DEBT AT 31 DECEMBER/30 JUNE (1,376) (1,290) (1,154)
MID WYND INTERNATIONAL INVESTMENT TRUST PLC
TWENTY LARGEST EQUITY HOLDINGS
at 31 December 2002
Name Business Market value % of total
£'000 assets
* Altria Group Tobacco, food and beer 806 2.8
* Freddie Mac Mortgages 759 2.6
* Golden West Financial Savings and loans 714 2.5
Vodafone Mobile telecommunication services 566 2.0
GlaxoSmithKline Pharmaceuticals 546 1.9
* Pfizer Pharmaceuticals 532 1.8
Imperial Tobacco Tobacco 528 1.8
* Sanofi-Synthelabo Pharmaceuticals 364 1.3
BP Integrated oil 352 1.2
* Total Fina Elf Integrated oil 333 1.1
+ MAC Japan Active Shareholder Fund LP Shareholder activist fund 325 1.1
* Marsh & McLennan Insurance broking and fund management 316 1.1
* Eli Lilly Pharmaceuticals 316 1.1
Royal Bank of Scotland Banking 302 1.0
* Suncor Energy Integrated oil 291 1.0
* Walgreen Pharmacy chain 272 0.9
* ENI Oil and gas 270 0.9
* Automatic Data Process Payroll processing 268 0.9
* Wellpoint Managed healthcare 265 0.9
* Brisa Auto Estradas Toll road operator 261 0.9
8,386 28.8
* primary listing outwith the UK
+ unlisted security
DISTRIBUTION OF ASSETS
at 31 December 2002
(unaudited)
31 December 2002 31 December 2001 30 June 2002
% % %
Equities: United Kingdom 16.6 17.1 16.4
Continental Europe 17.1 20.2 19.2
North America 27.3 34.6 28.0
Japan 8.4 7.9 9.4
Asia Pacific 3.6 3.3 3.1
Other Emerging Markets 2.7 2.6 2.3
Total equities 75.7 85.7 78.4
Sterling bonds 6.7 4.9 5.7
Euro bonds 16.4 7.9 8.9
US Dollar bonds - - 5.5
Net liquid assets 1.2 1.5 1.5
Total assets (before deduction of bank 100.0 100.0 100.0
loan)
MID WYND INTERNATIONAL INVESTMENT TRUST PLC
NOTES
1. The financial statements for the six months to 31 December 2002 have been prepared on the basis of the accounting
policies set out in the Company's Annual Financial Statements at 30 June 2002.
The Interim Report was approved by the Board on 10 February 2003.
2. A one year yen loan has been arranged with The Bank of New York. The loan expired on 5 February 2003 but has been
further extended. At 31 December 2002 there were outstanding drawings of Y340 million
(31 December 2001 and 30 June 2002 - Y340 million).
31 December 2002 31 December 2001 30 June
2002
£'000 £'000 £'000
3. Currency gains/(losses)
Realised exchange differences 5 (6) 10
Movement in unrealised exchange differences on Yen loan 81 157 78
86 151 88
4. Income
Income from investments and interest receivable 367 319 857
Other income 1 Nil 1
5. Return per ordinary share
Revenue return 206 172 512
Capital return (4,497) (3,277) (5,777)
Return per ordinary share is based on the above totals of revenue and capital and on 5,027,766 ordinary shares,
being the number of ordinary shares in issue throughout each period.
6. The interim dividend will be paid on 7 April 2003 to shareholders on the register at the close of business on
14 March 2003.
7. The financial information for the year ended 30 June 2002 has been extracted from the full accounts which have
been filed with the Registrar of Companies and which contain an unqualified Auditors' Report.
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