Annual Financial Report

RNS Number : 0303Q

Mid Wynd Inter Inv Trust PLC

06 September 2017

 

Mid Wynd International Investment Trust plc (the 'Company')

Annual Financial Results for the year ended 30 June 2017

This announcement contains regulated information

Financial Highlights

Returns for the year ended 30 June 2017

	Year ended	Year ended
Total returns	30 June 2017	30 June 2016
Net asset value per share	21.0%	16.0%
Share price	27.5%	8.1%
MSCI All Country Index GBP	22.2%	13.3%
Revenue and dividends
Revenue earnings per share	5.41p	5.78p
Dividends per share*	5.00p	4.50p
Ongoing charges	0.7%	0.7%
	As at	As at
Capital	30 June 2017	30 June 2016
Net asset value per share	439.75p	369.70p
Share price	441.00p	352.00p
Gearing	-	0.9%

Total returns to 30 June 2017	Since 1 May 2014**	3 years	5 years
Net asset value per share	68.0%	64.6%	105.2%
Share price	70.6%	67.9%	105.1%
MSCI All Country Index GBP	55.8%	51.6%	99.3%

Source: Artemis/Datastream.

*    The final dividend for the year to 30 June 2017 of 0.38 pence will, if approved by shareholders, be paid on 10 November 2017 to shareholders on the register at the close of business on 6 October 2017. The Company's Registrar provides a Dividend Reinvestment Plan and the final date for receipt of elections for this dividend is 20 October 2017.

**   The date when Artemis was appointed as Investment Manager.

 

Strategic Report

Chairman's Statement

Performance

For the year ended 30 June 2017 the Company's net asset value increased by 18.9%, which compares with a 19.9% rise in the MSCI All Country World Index GBP. On a total return basis, with dividends assumed to be reinvested, the return was 21.0% compared with the index return of 22.2%. Since Artemis' appointment, as investment manager on 1 May 2014, the net asset value has increased by 68.0%, on a total return basis, against the index's 55.8%.

Over the year the share price rose by 25.3% and at 30 June 2017 the shares stood at a 0.3% premium to net asset value having started the year at a discount of 4.8%. This starting position was as a result of the market's reaction to the results of the EU Referendum, held just over a week prior to the Company's 2016 year end, where the UK voted to exit the European Union. From mid-July the Company's shares reverted to trading within the targeted range. As shareholders are aware, the Company aims to have its shares trading within a 2% band relative to the net asset value.

Further details of the performance of the Company for the year are included in the Investment Manager's review.

Earnings and Dividend

The total return for the year ended 30 June 2017 was a gain of 76.97 pence per share, comprising a revenue gain of 5.41 pence per share and a capital gain of 71.56 pence per share. The Board is proposing a final dividend of 0.38 pence per share which, subject to approval by shareholders at the Annual General Meeting ('AGM'), will be paid on 10 November 2017 to those shareholders on the register at the close of business on 6 October 2017. An interim dividend of 1.70 pence per share was paid in April 2017.

In light of the share issues in May, detailed below, the Board elected to split the Company's dividend in respect of the six months to 30 June 2017. A second interim dividend of 2.92p per share was paid to existing shareholders for the period from 1 January 2017 to 31 May 2017., This represented the total earnings for this period., All shareholders, including those participating in the share issues, will be entitled to receive the proposed final dividend which relates to the period from 1 June 2017 to 30 June 2017. It is expected that the Company will revert to the normal timetable of paying an interim dividend in April followed by a final dividend in November.

In accordance with the Board's aim of paying progressive dividends, the total dividend for the year of 5.00 pence per share represents an increase of 11.1% on the 4.50 pence per share paid in respect of the year ended 30 June 2016. This year's total dividend has been covered by earnings for the current year and a small amount has been retained in the Company's revenue reserve which will stand at £1,332,000, representing 4.09 pence per share once the final dividend has been taken into account. Whilst the Board aims to grow the dividend progressively over time, it should not be assumed that this rate of growth will be replicated every year. The ability to retain a certain amount of income each year is a helpful feature of an investment trust and it provides a greater degree of investment flexibility. This reserve will be used as necessary to support the Company's aim of growing its dividend in future years.

Share capital

Since May 2015 the Company's shares have typically traded at a premium to net asset value. The Company will issue and re-purchase shares where necessary to maintain the share price within the 2% band relative to the net asset value. The Board's longer term strategic aim is to continue to increase the capital of the Company, thereby improving the liquidity in the shares and reducing the 'per share' running cost. Demand for the Company's shares continued during the year. In response to this, the Company issued 2,130,116 new shares raising £8.7 million to April 2017.

Shareholders will be aware that in May this year the Company announced a proposed issue of new shares through an Initial Placing, Offer for Subscription, Intermediaries Offer and a Share Issuance Programme to further increase the size of the Company. As a result, 1,289,464 shares were issued in early June raising £5.8 million. The Share Issuance Programme continues for the 12 months to May 2018 and enables the directors to continue to make periodic issues of shares to manage demand for the Company's shares.

In total, for the year to 30 June 2017, the Company issued 3,419,580 new shares raising £14.5 million.

Since the year end, a further 50,000 shares have been issued raising £229,000 for the Company.

Borrowings

In February 2015 the Company agreed a three-year, US$16 million revolving credit facility with Scotiabank. This facility enables the Company to have flexibility in how its borrowings are utilised. The amount drawn, up to the maximum US$16 million, can be increased or decreased depending on the Investment Manager's view on markets and investment opportunities. The Board, along with the Investment Manager, will review the Company's borrowing requirements prior to the current facility maturing in February 2018.

AGM

The AGM is to be held on Monday 6 November 2017 at 12 noon at 42 Melville Street, Edinburgh, EH3 7HA. Artemis will make a short presentation at the meeting. The Board would welcome your attendance as it provides shareholders with an opportunity to ask questions of the Board and the Investment Manager. For those shareholders who are unable to attend, I would encourage you to make use of your proxy votes by completing and returning the form of proxy enclosed with this report.

Board changes

As I noted in my Chairman's Statement in the Half-Yearly Financial Report to 31 December 2016, David Kidd was appointed as a non-executive Director of the Company with effect from 8 November 2016. Upon my appointment as Chairman, in October 2016, Russell Napier took up the position of Senior Independent Director.

Outlook

World markets continued to perform strongly over the second half of the Company's financial year but with few signs of inflation. Looking forward, political and economic factors, especially in Europe and the United States, seem likely to worry markets: these include Brexit, the end of Quantitative Easing, and the future direction of interest rates. However, the companies which make up the portfolio have shown themselves generally able to weather political and economic change. It is expected these will provide, over the longer term, positive returns to shareholders as well as an element of protection should market conditions deteriorate.

Contact us

Shareholders can keep up to date with developments between formal reports by visiting midwynd.co.uk where you will find information on the Company and a factsheet which is updated monthly. In addition, the Board is always keen to hear from shareholders. Should you wish to, you can e-mail the Chairman at [e-mail].

Malcolm Scott

6 September 2017

 

Investment Manager's Review

Performance

The past year has been one of strong returns against a background of political turbulence and rising bond yields. Economic growth has generally been good around the world while inflation has remained very low, supporting equity markets. Despite many suggesting the bull market had run its course, the last year saw most of our core investments continue to grow their underlying cash flows and produce another strong year of real returns to our investors.

Over the year, the Company's share price rose by 25.3% from 352.0 pence to 441.0 pence. The net asset value excluding income rose from 369.70pence to 439.75pence up 18.9%. This compares with the MSCI All Country World Index which rose 18.8% in dollar terms, translating to a rise of 22.2% in sterling terms. The portfolio is managed with a bias towards protecting capital and this sometimes comes at the cost of underperforming strongly rising markets, as happened to a modest extent this year.

Regional performance

Region	Contribution %
North America	14.1
Europe	3.2
Emerging Markets	2.7
United Kingdom	1.4
Developed Asia	0.5
Japan	0.5

Thematic performance

Theme	Contribution %
Online Services	6.8
Emerging Market Consumer	3.0
Tourism	2.8
Healthcare Costs	2.2
Retiree Spending Power	2.1
Scientific Equipment	1.9
Bank Regulation	1.7
Media Content	1.4
High Quality Assets	0.6
Frontier Investments	(0.1)

Current investment themes

Online Services (21.6% of the portfolio) - The very high growth in revenues from internet based businesses continued to drive share prices, especially against a background of decent economic support for traditional businesses. We have a broad spread of modestly sized holdings because each investment in this area has challenges - competitors for the smaller companies, monopoly regulators for the larger. Also, all these investments are challenging to value as the longer term capital expenditure required to keep them competitive is hard to assess accurately. Furthermore, our valuation process identifies some companies in this area as much more attractive than others. Due to our valuation approach, we sold one of the Company's largest investments, Amazon.com, close to year end, in part because we doubt that its acquisition of Whole Foods Market will enhance the company's growth prospects or margins.

Emerging Market Consumer (14.6% of the portfolio) - Our exposure to emerging markets worked well. LVMH had an exceptional year of growth and its shares have risen sharply and it has become one of the Company's largest investments. Our investments in China also continue to prosper and some of those who foretold a collapse in that economy now seem somewhat quiet. We have, however, taken some profits here.

Tourism (15.4% of the portfolio) - Tourism numbers rose strongly, especially in Asia. Dufry, the world's leading duty free company, performed well, as did Samsonite, a travel luggage company.

Media Content (12.8% of the portfolio) - Our media investments had a better year, with Time Warner agreeing to merge with AT&T. Disney, however, saw further subscribers leave its ESPN subscription sports channel. It seems as though new entrants, such as Netflix, are offering such a volume of quality programming at lower prices that traditional media is under pressure - as long as Netflix shareholders are content to fund the company without seeing any profits.

Healthcare Costs (10.7% of the portfolio) - We have positioned our portfolio towards companies which should cope well with changes in American healthcare. Our larger holdings in private health insurers in the USA are well placed to procure high quality care at economic rates and these companies have performed well over the year.

Scientific Equipment (8.0% of the portfolio) - This theme showed steady growth and strong cash generation. The most recent financial statements from this group are very encouraging for the year ahead.

Retiree Spending Power (4.3% of the portfolio) - This theme had a patchy year. Our investments in sports shoes saw high competition and we sold our holding in Asics, which also had to contend with a strong Yen, making exporting difficult.

Bank Regulation (6.2% of the portfolio) - We invested in a number of US banks in the summer of 2016. At that time their valuations appeared very modest, they seemed to be ahead of the capital requirements of regulators and there were prospects of improved lending margins as the US economy improved. The election of Donald Trump led investors to anticipate a reflationary environment and we took some profits in bank holdings which had performed strongly at that time. Since then, President Trump has moved to lighten regulations, but the improvement in borrowing demand has not appeared.

High Quality Assets (6.2% of the portfolio) - This part of the portfolio contains a number of property companies. These performed poorly when markets anticipated interest rates would rise. We look forward to adding to these holdings as attractive dividend yields reappear.

Energy in a Gas Glut (0.0% of the portfolio) - The election of Donald Trump marked a reverse in America's policy towards climate change. Many US states, such as California, will continue to head towards a more fuel efficient environment. However, the US decision to walk away from the Paris climate accord reduces the momentum for this theme so we have sold our holdings.

Five largest stock contributors to performance

Company	Theme	Contribution %
LVMH	Emerging Market Consumer	1.4
Charles Schwab	Online Services	1.1
Amazon.com	Online Services	1.0
Time Warner	Media Content	0.9
Mastercard	Online Services	0.9

Five largest stock detractors to performance

Company	Theme	Contribution %
DeNA	Media Content	(0.5)
China Mobile	Online Services	(0.3)
Publicis Groupe	Media Content	(0.3)
Continental Resources	Energy in a Gas Glut	(0.2)
Capital One Financial	Bank Regulation	(0.2)

Income

Alongside our investment approach is a recognition of the Board's aim to grow the Company's dividend. During the Company's financial year there has been strong revenue and cashflow growth from our investments. We expect this to continue, at least in the near term. Dividends for the year increased from 4.50 pence to 5.00 pence, a rise of 11.1%.

Gearing

During the year we employed a portion of the Company's US$16 million borrowing facility to take advantage of investment opportunities. Ranging from 0.0% to 5.5%, gearing added 0.36% to overall performance.

Outlook

Market commentators seem increasingly gloomy - we do not agree. Stock markets have certainly performed well over the last seven years, but bull markets do not die of old age, nor does the economic cycle. We believe that major market set-backs tend to come from broad over-valuation of equities or unsupportable debt in economic systems. On the former point, the cash flows of our major investments have been reassuringly strong over the last year. On the latter point, the companies that we have selected for the portfolio, in aggregate, have very strong balance sheets. Indeed, more than 35% of the portfolio is represented by companies that have a positive net cash position. Our policy of selecting companies that are financially strong should help the Company perform well compared with the benchmark index, or index trackers, were markets to become more troubled.

Since we assumed management of the Company in May 2014, we have taken a safety first approach. Our recent investments in financials gives the portfolio an element of balance in case inflation rears its head unexpectedly. We have continued to sell holdings when valuations look stretched and looked to reinvest in more modestly rated investment opportunities. It is pleasing once again to be able to say that this approach has led to strong real investment returns. No doubt, at some point, markets will turn more challenging and we will continue to balance the portfolio to address this, but we believe the companies in the portfolio will be able to weather many types of storm.

Artemis' investment approach

Whilst we have described our approach in previous reports, we feel that it is worth reminding shareholders of it again as we see this as being a key feature for investors.

Our aim is to identify reliable commercial trends around the world which are likely to deliver superior growth for our investments. By focusing the portfolio around trends, such as, the growth of consumption from emerging markets, the growth in demand for healthcare in developed markets and technological change in the internet, we believe our thematic based approach can deliver superior returns over time.

Within each chosen investment theme's universe of companies, there may be many quoted equities which could be attractive investments. Our preference is to select high quality companies with records of profitability, high cash generation, strong balance sheets and with significant barriers to entry to their industries. Such companies sometimes lag equity markets when they recover vigorously, but they protect capital well when economic conditions become more testing.

Once an investment opportunity has been identified, we will only commit capital to it when the price offers the chance to invest at a reasonable valuation. This valuation discipline is at the heart of all of our investment decisions. In terms of portfolio construction, this will reflect opportunities that meet our investment criteria and will not be weighted to a benchmark. Within the permitted range of the investment policy we aim to run a diversified portfolio, with around 55-70 holdings spread across 8 to 10 different themes.

Over time we have found this investment approach gives a framework to deliver very attractive returns to investors.

Further information on our investment approach and the Company can be found on our website at midwynd.co.uk.

Simon Edelsten, Alex Illingworth & Rosanna Burcheri

Fund Managers

6 September 2017

 

Strategy and Business Review

This Strategic Report has been prepared in accordance with the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013.

Corporate strategy and operating environment

The Company is incorporated in Scotland and operates as an investment trust company and is an investment company within the meaning of section 833 of the Companies Act 2006 (the 'Act'). Its business as an investment trust is to buy and sell investments with the aim of achieving the objective and investment policy outlined below.

Objective and investment policy

The objective of the Company is to achieve capital and income growth by investing on a worldwide basis.

The Company is prepared to move freely between different markets, sectors, industries, market capitalisations and asset classes as investment opportunities dictate. On acquisition, no holding shall exceed 15% of the portfolio. The Company will not invest more than 15% of its gross assets in UK listed investment companies. Assets other than equities will be purchased from time to time including but not limited to fixed interest holdings, unquoted securities and derivatives. Subject to prior Board approval, the Company may use derivatives for investment purposes or for efficient portfolio management (including reducing, transferring or eliminating investment risk in its investments and protection against currency risk).

The number of individual holdings will vary over time but to ensure diversification there can be between 40 and 140 holdings and the portfolio is managed on a global basis rather than as a series of regional sub-portfolios.

It is an aim of the Company to provide dividend growth over time, although the primary aim is maximising total returns to shareholders.

While there is a comparative index for the purpose of measuring performance, little attention is paid to the composition of this index when constructing the portfolio and the composition of the portfolio is likely to vary substantially from that of the index. A long-term view is taken and there may be periods when the net asset value per share declines in absolute terms and relative to the comparative index.

Gearing

The Company may use borrowings to support its investment strategy and the Company's Articles of Association (the 'Articles') allow the Company to borrow up to 30% of its net assets. The Company has a US$16 million revolving credit facility with Scotiabank which is available to the Company until 19 February 2018. As at 30 June 2017, US$5.0 million (£3.7 million) was drawn down from this facility.

The Company's gearing is reviewed by the Board and Investment Manager on an ongoing basis.

Operating environment

The Company has been approved as an investment trust in accordance with the requirements of section 1158 of the Corporation Taxes Act 2010. This approval remains subject to the Company continuing to meet the eligibility conditions and ongoing requirements of the regulations. The Board will manage the Company so as to continue to meet these conditions.

The Company has no employees and delegates most of its operational functions to a number of service providers, details of which are set out later in the report.

Current and future developments

A summary of the Company's developments during the year ended 30 June 2017, together with its prospects for the future, is set out in the Chairman's Statement and the Investment Manager's Review. The Board's principal focus is the delivery of positive long-term returns for shareholders. This will be dependent on the success of the investment strategy, in the context of both economic and stock market conditions. The investment strategy, and factors that may have an influence on it, are discussed regularly by the Board and the Investment Manager. The Board regularly considers the ongoing development and strategic direction of the Company, including its promotion and the effectiveness of communication with shareholders.

Key Performance Indicators ('KPIs')

The performance of the Company is reviewed regularly by the Board and it uses a number of KPIs to assess the Company's success in meeting its objective. The KPIs which have been established for this purpose are set out below.

■        Net asset value performance compared to the MSCI All Country World Index GBP

The Board monitors the performance of the net asset value per share against that of the MSCI All Country World Index GBP.

■        Share price performance

The Board monitors the performance of the share price of the Company to ensure that it reflects the performance of the net asset value.

Discrete annual total returns              

			MSCI
Year ended	Net asset	Share	All Country
30 June	value	price	World Index
2012	(7.3)%	(7.9)%	(4.3)%
2013	11.7%	12.8%	20.5%
2014	11.7%	8.4%	9.1%
2015	17.2%	21.7%	9.5%
2016	16.0%	8.1%	13.3%
2017	21.0%	27.5%	22.2%

■        Share price (discount)/premium to net asset value

The Board recognises that it is in the interests of shareholders to maintain a share price as close as possible to the net asset value per share. In October 2012 the Board confirmed its intention to limit the discount to a maximum of 2% in normal circumstances. The Company may issue shares at such times as demand is not being met by liquidity in the market and buy back shares when there is excess supply.

■        Ongoing charges

The Board is mindful of the ongoing costs to shareholders of running the Company and monitors operating expenses on a regular basis. The Company's current ongoing charges ratio is 0.7% (2016: 0.7%).

■        Dividends per share

The Board aims to grow the dividends paid to shareholders, in addition to capital growth. It monitors the revenue returns generated by the Company during the year and from this determines the dividends to be paid. Subject to approval of the final dividend by shareholders, total dividends of 5.00 pence per share (2016: 4.50 pence per share) will be paid in respect of the year ended 30 June 2017. This represents an increase of 11.1%.

Principal risks and risk management

The Board, in conjunction with the Investment Manager, has developed a risk map which sets out the principal risks faced by the Company. It is used to monitor these risks and to review the effectiveness of the controls established to mitigate them. Further information on the Company's internal controls is set out in the corporate governance section of the Directors' Report. As an investment company the main risks relate to the nature of the individual investments and the investment activities generally. These include market price risk, foreign currency risk, interest rate risk, credit and counterparty risk and liquidity risk.

A summary of the key areas of risk and uncertainties are set out below along with the controls in place to manage these which are highlighted for each risk.

■        Strategic: the suitability of the Board's strategy for the development of the Company in the current market place and the effectiveness of the Board to deliver it. The Board meets regularly and considers the ongoing suitability of the Company's strategy as part of its review of the Company's performance. The Nomination Committee reviews the effectiveness of the Board annually.

■        Investment: the management of the portfolio of the Company fails to achieve its investment objective and policy. The Company's investments are selected on their individual merits and the performance of the portfolio is not likely to track the wider market (represented by the MSCI All Country World Index GBP). The Board believes this approach will continue to generate good long-term returns for shareholders. Risk will be diversified through a broad range of investments being held. The Board discusses the investment portfolio and its performance with the Investment Manager at each Board meeting.

          The Company may borrow money for investment purposes. If the investments fall in value, any borrowings will magnify the extent of the losses. If borrowing facilities are not renewed, the Company may have to sell investments to repay borrowings. All borrowing arrangements entered into require the prior approval of the Board and gearing levels are discussed by the Board and Investment Manager at each Board meeting.

■        Regulatory: failure to comply with the requirements of a framework of regulation and legislation, within which the Company operates. The Company relies on the services of the Company Secretary and Investment Manager to monitor ongoing compliance with relevant regulations and legislation.

          Failure to comply with appropriate accounting standards could result in a reporting error or breach of regulations or legislation. The Company relies on the services of the Company Secretary and Investment Manager to monitor and report on any changes in accounting standards. The Company's Independent Auditor also provides an annual update on any accounting changes that affect the Company.

■        Operational: failure of the Investment Manager's and/or any third party service providers'    systems which could result in an inability to report accurately and monitor the Company's financial position. The Investment Manager has established a business continuity plan to facilitate continued operation in the event of a major service disruption or disaster and carries out oversight and monitoring of third party service providers.

Other matters

Viability statement

In accordance with the AIC Code of Corporate Governance, the Board has considered the longer term prospects for the Company. The period assessed is the five years to 30 June 2022. This has been deemed appropriate for the Company given the nature of its business, its current size and the longer term view taken by the Investment Manager when constructing the portfolio.

As part of its assessment of the viability of the Company, the Board has considered each of the principal risks above and the impact on the Company's portfolio of a significant fall in global markets. The Board has also considered the liquidity of the Company's portfolio to ensure that it will be able to meet its liabilities as they fall due.

The conclusion of this review is that the Board has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period to 30 June 2022.

Share capital

During the year to 30 June 2017 the Company issued 3,419,580 new shares to satisfy continued demand for the Company's shares. All of the shares were issued at, or at a premium to, the prevailing net asset value on the date of issue.

In order to continue to be able to meet investor demand and grow the Company a prospectus was issued on 10 May 2017 to allow the issue of up to 31.2 million new shares. On the same date a circular was issued to shareholders seeking approval to increase the Directors' authority to issue further shares on a non pre-emptive basis. Shareholders approved this at a general meeting held on 1 June 2017.

During the year the Company did not buy back any ordinary shares (2016: nil).

Resolutions to continue to be authorised to issue and buy back shares will be put to shareholders at the AGM on 6 November 2017. Approval of these resolutions by shareholders will allow the Directors to continue to manage the liquidity of the Company's shares by buying back or issuing shares either side of a 2% band relative to the net asset value.

Directors

Each of the Directors held office throughout the year under review with the exception of Richard Burns, who retired on 7 November 2016, and David Kidd, who was appointed on 8 November 2016.

No Director has a contract of service with the Company.

Appointments to the Board will be made on merit with due regard to the benefits of diversity, including gender. The priority in appointing a new director is to identify the candidate with the best range of skills and experience to complement existing directors.

The Board is currently comprised of five male Directors. The Company does not have any employees.

Modern Slavery Act 2015

The Company does not fall within the scope of the Modern Slavery Act 2015 as its turnover is less than £36 million. Therefore no slavery and human trafficking statement is included in the Annual Financial Report.

Social and environmental matters

The Company has no employees and has delegated the management of the Company's investments to Artemis which, in its capacity as Investment Manager, has a Corporate Governance and Shareholder Engagement policy which sets out a number of principles that are intended to be considered in the context of its responsibility to manage investments in the financial interests of shareholders. Artemis undertakes extensive evaluation and engagement with company managements on a variety of matters such as strategy, performance, risk, dividend policy, governance and remuneration. All risks and opportunities are considered as part of the investment process in the context of enhancing the long-term value of shareholders' investments. This will include matters relating to material environmental, human rights and social considerations that will ultimately impact the profitability of a company or its stock market rating and hence these matters are an integral part of Artemis' thinking as institutional investors.

As the Company has delegated the investment management and administration of the Company to third party service providers, and has no fixed premises, there are no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013, including those within the underlying investment portfolio.

Leverage

Leverage is defined in the Alternative Investment Fund Managers Directive ('AIFMD') as any method by which the Company can increase its exposure by borrowing cash or securities, or from leverage that is embedded in derivative positions. The Company is permitted by its Articles to borrow up to 30% of its net assets (determined as 130% under the Commitment and Gross ratios). The Company is permitted to have additional leverage of up to 100% of its net assets, which results in permitted total leverage of 230% under both ratios. The Alternative Investment Fund Manager (the 'AIFM'), which is Artemis Fund Managers Limited, monitors leverage values on a daily basis and reviews the limits annually. No changes have been made to these limits during the period. At 30 June 2017, the Company's leverage was 107.0% as determined using the Commitment method and 106.7% using the Gross method.

For and on behalf of the Board.

Malcolm Scott

Chairman

6 September 2017

 

Statement of Directors' Responsibilities in respect of the Annual Financial Report and the Financial Statements

Management Report

Listed companies are required by the Financial Conduct Authority's Disclosure Guidance and Transparency Rules (the 'Rules') to include a management report in their annual financial statements. The information required to be in the management report for the purpose of the Rules is included in the Strategic Report.  Therefore no separate management report has been included.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Financial Report and the Company's financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law they are required to prepare the financial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice).

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing each of the financial statements, the Directors are required to:

■        select suitable accounting policies and then apply them consistently;

■        make judgements and estimates that are reasonable and prudent;

■        state whether applicable UK Accounting Standards have been followed, subject to any material departures being disclosed and explained in the financial statements; and

■        prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Act. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement.

The financial statements are published on a website, midwynd.co.uk, maintained by the Company's Investment Manager, Artemis Fund Managers Limited. Responsibility for the maintenance and integrity of the corporate and financial information relating to the Company on this website has been delegated to the Investment Manager by the Directors. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

We confirm that to the best of our knowledge:

(a)      the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities and financial position of the Company as at 30 June 2017 and of the profit for the year then ended; and

(b)      the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

For and on behalf of the Board.

Malcolm Scott

Chairman

6 September 2017

 

Statement of Comprehensive Income                            For the year ended 30 June

		2017	2017	2017	2016	2016	2016
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments		-	22,932	22,932	-	13,918	13,918
Currency losses		-	(496)	(496)	-	(570)	(570)
Income		2,230	-	2,230	2,107	-	2,107
Investment management fee		(160)	(480)	(640)	(113)	(340)	(453)
Other expenses		(195)	(12)	(207)	(200)	(20)	(220)
Net return before finance costs and taxation
		1,875	21,944	23,819	1,794	12,988	14,782
Finance costs of borrowings		(29)	(89)	(118)	(20)	(60)	(80)
Net return on ordinary activities before taxation
		1,846	21,855	23,701	1,774	12,928	14,702
Taxation on ordinary activities		(193)	-	(193)	(214)	-	(214)
Net return on ordinary activities after taxation
		1,653	21,855	23,508	1,560	12,928	14,488
Net return per ordinary share		5.41p	71.56p	76.97p	5.78p	47.94p	53.72p

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.

The net return for the year disclosed above represents the Company's total comprehensive income.

Statement of Financial Position                                                        As at 30 June

		2017	2017	2016	2016
		£'000	£'000	£'000	£'000
Non-current assets
Investments held at fair value through profit or loss			142,655		108,969
Current assets
Debtors		900		1,669
Cash and cash equivalents		3,819		4,427
		4,719		6,096
Creditors
Amounts falling due within one year		(4,316)		(7,439)
Net current assets/(liabilities)			403		(1,343)
Total net assets			143,058		107,626
Capital and reserves
Called up share capital			1,627		1,456
Capital redemption reserve			16		16
Share premium			29,144		15,205
Capital reserve			110,815		88,851
Revenue reserve			1,456		2,098
Shareholders' funds			143,058		107,626
Net asset value per ordinary share			439.75p		369.70p

These financial statements were approved by the Board of Directors and signed on its behalf on 6 September 2017.

Malcolm Scott

Chairman

 

Statement of Changes in Equity

For the year ended 30 June 2017

		Share	Capital redemption	Share	Capital	Revenue	Shareholders'
		capital	reserve	premium	reserve	reserve	funds
		£'000	£'000	£'000	£'000	£'000	£'000
Shareholders' funds at 1 July 2016		1,456	16	15,205	88,851	2,098	107,626
Net return on ordinary activities
after taxation		-	-	-	21,855	1,653	23,508
Issue of new shares		171	-	14,313	-	-	14,484
Transfer of prior year expenses
related to issue of the prospectus		-	-	(109)	109	-	-
Expenses related to listing of shares		-	-	(23)	-	-	(23)
Expenses related to placing and issue of new shares		-	-	(242)	-	-	(242)
Dividends paid		-	-	-	-	(2,295)	(2,295)
Shareholders' funds at 30 June 2017		1,627	16	29,144	110,815	1,456	143,058

For the year ended 30 June 2016

			Capital
		Share	redemption	Share	Capital	Revenue	Shareholders'
		capital	reserve	premium	reserve	reserve	funds
		£'000	£'000	£'000	£'000	£'000	£'000
Shareholders' funds at 1 July 2015		1,343	16	6,650	71,146	1,686	80,841
Net return on ordinary activities
after taxation		-	-	-	12,928	1,560	14,488
Issue of new shares		113	-	7,476	-	-	7,589
Expenses related to issue of
the prospectus		-	-	-	(109)	-	(109)
Issue of shares from treasury		-	-	1,079	4,886	-	5,965
Dividends paid		-	-	-	-	(1,148)	(1,148)
Shareholders' funds at 30 June 2016		1,456	16	15,205	88,851	2,098	107,626

 

Statement of Cash Flows                                                        For the year ended 30 June

		2017	2017	2016	2016
		£'000	£'000	£'000	£'000
Cash used in operations			1,494		916
Interest received		32		15
Interest paid		(118)		(80)
Net cash generated from operating activities			(86)		(65)
Cash flow from investing activities
Purchase of investments		(188,105)		(130,162)
Sale of investments		176,013		115,732
Realised currency (losses)/gains		(250)		244
Net cash used in investing activities			(12,342)		(14,186)
Cash flow from financing activities
Issue of new shares		14,484		7,589
Issue of shares from treasury		-		5,965
Expenses related to issue of the prospectus		(5)		(106)
Expenses related to listing of shares		(23)		-
Dividends paid		(2,295)		(1,148)
Net repayment of credit facility		(1,835)		-
Net cash generated from financing activities			10,326		12,300
Net decrease in cash and cash equivalents			(608)		(1,035)
Cash and cash equivalents at start of the year			4,427		5,460
Decrease in cash in the year			(608)		(1,035)
Unrealised currency gains on cash
and cash equivalents			-		2
Cash and cash equivalents at end of the year			3,819		4,427

 

Notes to the Financial Statements

1. Accounting policies

The financial statements are prepared on a going concern basis under the historical cost convention modified to include the revaluation of investments. The financial statements have been prepared in accordance with the Companies Act 2006, applicable United Kingdom accounting standards, including Financial Reporting Standard ('FRS') 102, and the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the 'SORP') issued in November 2014 and updated in January 2017 by the Association of Investment Companies (the 'AIC').

In order to better reflect the activities of the Company and in accordance with guidance issued by the AIC, supplementary information which analyses the profit and loss account between items of a revenue and capital nature has been presented in the Statement of Comprehensive Income.

Financial assets and financial liabilities are recognised in the Company's Statement of Financial Position when it becomes a party to the contractual provisions of the instrument.

No significant estimates or judgements have been made in the preparation of the financial statements.

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

	2017	2016
	£'000	£'000
Income from investments
Overseas dividends	1,935	1,897
UK dividends	263	160
Property income distribution	-	35
	2,198	2,092
Other income
Bank interest	32	15
Total income	2,230	2,107
Total income comprises:
Dividends from financial assets designated at fair value through profit or loss	2,198	2,092
Other income	32	15
Total income	2,230	2,107

3. Dividends paid and proposed

			2017	2016
	2017	2016	£'000	£'000
Amounts recognised as distributions in the year:
Previous year's final dividend	2.85p	2.65p	857	681
First Interim dividend	1.70p	1.65p	526	467
Second Interim dividend	2.92p	-	912	-
Total dividends	7.47p	4.30p	2,295	1,148

Set out below are the total dividends paid and payable in respect of the financial year, which is the basis on which the requirements of section 1159 of the Corporation Tax Act 2010 are considered. The revenue available for distribution by way of dividend for the year is £1,653,000 (2016: £1,560,000).

			2017	2016
	2017	2016	£'000	£'000
Dividends paid and payable in respect of the year:
First Interim dividend per ordinary share	1.70p	1.65p	526	467
Second Interim dividend per ordinary share	2.92p	-	912	-
Proposed final dividend per ordinary share	0.38p	2.85p	124	830
Total dividends	5.00p	4.50p	1,562	1,297

4. Net return per ordinary share

	2017	2017	2017	2016	2016	2016
	Revenue	Capital	Total	Revenue	Capital	Total
Net return on ordinary activities after taxation	5.41p	71.56p	76.97p	5.78p	47.94p	53.72p

Revenue return per ordinary share is based on the net revenue return on ordinary activities after taxation for the financial year of £1,653,000 (2016: £1,560,000), and on 30,542,647 (2016: 26,969,898) 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 return on ordinary activities after taxation for the financial year of £21,855,000 (2016: £12,928,000), and on 30,542,647 (2016: 26,969,898) ordinary shares, being the weighted average number of ordinary shares in issue (excluding treasury shares) during the year.

5. Net asset value per ordinary share

The net asset value per ordinary share and the net assets attributable to the ordinary shareholders at the year end, calculated in accordance with the Articles of Association, were as follows:

	2017	2017	2016	2016
	Net asset	Net assets	Net asset	Net assets
	value	£'000	value	£'000
Ordinary shares	439.75p	143,058	369.70p	107,626

During the year the movements in the assets attributable to the ordinary shares were as follows:

	2017	2016
	£'000	£'000
Total net assets at 1 July	107,626	80,841
Total recognised gains for the year	23,508	14,488
Issue of new shares	14,484	7,589
Issue of shares from treasury	-	5,965
Expenses related to issue of the prospectus	-	(109)
Expenses related to listing of shares	(23)	-
Expenses related to placing and issue of new shares	(242)	-
Dividends paid	(2,295)	(1,148)
Total net assets at 30 June	143,058	107,626

Net asset value per ordinary share is based on net assets as shown above and on 32,531,416 (2016: 29,111,836) ordinary shares, being the number of ordinary shares in issue at the year end.

6. Transactions with the Investment Manager and related parties

The existence of an independent Board of Directors demonstrates that the Company is free to pursue its own financial and operating policies and therefore the Investment Manager is not considered to be a related party.

7. This Annual Financial Report announcement does not constitute the Company's statutory accounts for the years ended 30 June 2017 and 30 June 2016 but is derived from those accounts. Statutory accounts for the year ended 30 June 2016 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 30 June 2016 and the year ended 30 June 2017 both received an audit report which was unqualified and did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not include statements under Section 498 of the Companies Act 2006 respectively. The statutory accounts for the year ended 30 June 2017 will be delivered to the Registrar of Companies shortly.

The audited Annual Financial Report for the year ended 30 June 2017 will be posted to shareholders shortly. Copies may be obtained from the Company's registered office at 42 Melville Street, Edinburgh EH3 7HA or at midwynd.co.uk.

The Annual General Meeting of the Company will be held on Monday, 6 November 2017.

For further information, please contact:

Company Secretary

Tel: [phone]

Artemis Fund Managers Limited

6 September 2017

 

 

END

 

 

FR UNOVRBNAKRAR