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Mid Wynd Inter Inv (MWY)

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Thursday 05 September, 2019

Mid Wynd Inter Inv

Annual Financial Results to 30 June 2019

RNS Number : 4216L
Mid Wynd Intnl Inv Trust PLC
05 September 2019
 

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

Legal Entity Identifier: 549300D32517C2M3A561

 

Annual Financial Results for the year ended 30 June 2019

 

Financial Highlights

Returns for the year ended 30 June 2019

 

Year ended

30 June 2019

 

Year ended

30 June 2018

 

Total returns

 

 

Net asset value per share

13.3%

12.7%

Share price

15.2%

13.4%

MSCI All Country World Index (GBP)

9.7%

8.9%

Revenue and dividends

 

 

Revenue earnings per share

6.79p

7.14p

Dividend per share*

5.83p

5.55p

Ongoing charges

0.7%

0.7%

 

 

As at

30 June 2019

 

As at

30 June 2018

 

Capital

 

 

Net asset value per share

553.16p

493.23p

Share price

568.00p

498.00p

Net cash

0.2%

2.7%

Source: Artemis/Datastream

 

   Alternative Performance Measure.

*   The final dividend for the year to 30 June 2019 of 3.85 pence will, if approved by shareholders, be paid on 29 November 2019 to shareholders on the register at the close of business on 4 October 2019.

Strategic Report

Chairman's Statement

Performance

For the year ended 30 June 2019 the Company's share price rose by 15.2% on a total return basis with dividends assumed to be re-invested. This compares with a rise of 9.7% in the Company's benchmark, the MSCI All Country World Index (GBP).

The Company's net asset value per share increased by 10.8%, in capital terms, and on a total return basis, with dividends assumed to be reinvested, the return was 13.3%. Since Artemis' appointment as Investment Manager on 1 May 2014, the net asset value per share has increased by 114.7%, on a total return basis, against the benchmark's increase of 86.2%.

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

Earnings and Dividend

The total return for the year ended 30 June 2019 was a gain of 66.52 pence per share, comprising a revenue gain of 6.79 pence and a capital gain of 59.73 pence. The Board is proposing a final dividend of 3.85 pence per share which, subject to approval by shareholders at the Annual General Meeting ('AGM'), will be paid on 29 November 2019 to those shareholders on the register at the close of business on 4 October 2019. An interim dividend of 1.98 pence per share was paid in March 2019.

The total dividend for the current year of 5.83 pence per share represents an increase of 5.0% on the 5.55 pence per share paid for the year ended 30 June 2018. Whilst the aim remains to grow the dividend progressively over time the focus will continue to be growing the capital of the Company. It should not be assumed that this rate of growth will be repeated every year.

Share capital

Throughout the year there has been continued demand for the Company's shares. This is reflected in the premium to net asset value at which the shares trade; the shares were trading at a premium to net asset value of 2.7% at the year-end. The Company's policy is to issue and re-purchase shares where necessary to maintain the share price within a 2% band relative to the net asset value.

The Company issued 3,660,000 new shares during the year, raising £18.9m at an average premium to net asset value of 2.2%. This represents 9.8% of the share capital at the start of the year. The Company's net asset value surpassed £200m for the first time on 28 March 2019 and continued to grow to £226m at the year end.

As at 3 September 2019, a further 1,085,000 shares have been issued raising £6.3m for the Company.

The growth has been aided by strong performance and various favourable press articles throughout the year along with the pleasing inclusion of the Company within Winterflood's model portfolio.

Borrowings

In December 2018 the Company drew down €3m and US$3m of its US$30 million multi-currency facility with Scotiabank. This borrowing remains in place, giving the Investment Manager added flexibility to invest and create returns. Further information on the Company's gearing is included in the Annual Financial Report.

Future Board Composition

The Board has discussed its composition and concluded that a number of changes will be made over the next year. The Board intends to appoint a new director in the coming year to chair the Audit Committee. At next year's AGM in 2020, I do not intend to seek re-election as a director. At this point, subject to re-election at the AGMs, it is intended that Mr Russell Napier will become Chairman of the Board.

Given the temporary increase in Board size, a resolution is being proposed at the forthcoming AGM to increase the maximum aggregate amount of fees that can be paid to directors in any one year. Following the AGM in 2020, it is intended that the number of directors will revert to five.

AGM

The AGM will be held on Tuesday 12 November 2019 at 12 noon at our new address of 6th Floor, Exchange Plaza, 50 Lothian Road, Edinburgh, EH3 9BY. The Investment Manager will make a short presentation at the meeting. The Board very much welcomes 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.

Outlook

This year your Company celebrated the seventieth anniversary of its incorporation originally as the Mid Wynd Holding Company Ltd. The Board has noted the progress made over the 70 years from its origins as a jute manufacturing business (which began to trade in 1797), to becoming listed on the London Stock Exchange as an investment trust in 1981, and its continued growth to the present day. Whilst political uncertainties both at home and abroad continue to cause concern, the Board along with the Investment Manager believes that the portfolio is sufficiently diversified, robust and forward-thinking to steer a path through the current times. The favourable winds of historically low interest rates and low inflation can not be expected to continue indefinitely. The Company has invested on a global basis well before it was listed in 1981. The Board continues to believe that this approach has served shareholders well in the past and offers the best opportunity to construct a portfolio for long term growth in the future.

Contact us

Shareholders can keep up to date with developments between formal reports by visiting midwynd.com 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 [email protected]

Malcolm Scott

5 September 2019

 

 

Investment Manager's Review

Performance

Global equities have enjoyed another year of strong returns, despite many disturbances from the political arena and a sharp correction in markets in the last quarter of 2018. Concerns over rising inflation a year ago have given way to concerns about deflation in Europe and economies have slowed markedly from very high levels. However, the companies we select are generally in higher growth areas and tend to invest in new products, which may allow them to continue to grow even when economies slow. The valuations of some such stocks have become rather high on our measures, but the global equity area is broad and we continue to find less well-known, quality investments offering value for money. Of course, selling expensive shares to buy cheaper ones involves turnover, but we believe that this cost is less than the risk of ending up, after many years of rising markets, with a portfolio which lacks solid value.

Over the year, the fund's share price rose from 498p to 568p, up 14.0%, and paid dividends of 5.73p. This compares with the MSCI All Country World Index (GBP) which rose 5.7% in dollar terms, translating to a rise of 9.7% in sterling terms. For the record, the FTSE UK All-Share Index fell by 3.5% over the period.

Regional performance

Region

 

Contribution %

 

North America

9.2

Europe

1.9

Japan

1.5

United Kingdom

1.1

Developed Asia

0.7

Emerging Markets

(0.5)

Thematic performance

Theme

 

Contribution %

 

Emerging Market Consumer

3.9

Online Services

3.0

Scientific Equipment

2.4

Automation

2.3

Healthcare Costs

1.9

High Quality Assets

0.5

Low Carbon World

0.3

Screen Time

0.2

Media Content

0.0

Tourism

(0.2)

Retiree Spending Power

(0.4)

Current investment themes

Online services (16% of the portfolio) - We continued to take profits in the FANGs (Facebook, Amazon, Netflix and Google) and currently hold only a small position in Amazon.com. Apart from valuation, we have become concerned with governance issues in Facebook and Google. However, we have continued to find related companies on much more acceptable valuations and the theme again provided good returns. Leading holdings included Cadence in semiconductor design and Equinix, the world's largest data centre business.

Automation (14% of the portfolio) - These companies saw orders delayed due to continuing trade disputes, especially between the US and China. Meeting the main Japanese robotics businesses a few months ago, it was pleasing to hear how longer term order books continue to build. So we have held on to our smaller exposure to this theme and will wait for politics to subside and confidence to return.

Emerging Market consumer (15% of the portfolio) - Even though many emerging markets saw slowing growth this year, our investments in companies selling into these markets continued to fare well. In some cases they are attracting investors as they offer defensive revenues in the event of an economic downturn. However, we do find some stocks in this area rather expensive now.

Tourism (5% of the portfolio) - We have reduced our exposure to this theme over the year. Beijing airport faces competition from a second airport recently completed by the government. We also think it likely that environmental concerns will raise prices in Europe, slowing unnecessary air travel.

Healthcare costs (17% of the portfolio) - This theme had a solid year despite being the target for electioneering in the US. Our private health investments, in particular, reacted to campaigns for 'Medicaid-for-all' by left-leaning Democrats. The introduction of a US NHS may be laudable, but has also been costed at over $20 trillion, so might not prove a vote-winner. However, we have also diversified within this theme, holding smaller amounts in health insurers and investing in drug companies with leading drugs, specifically in cancer immunotherapies. We are generally wary of expensive new drugs, given the strains on health budgets, but these treatments may save the system costs: side-effects from chemotherapy often lead to significant post-cancer treatment for many patients. The immunotherapies seem to reduce after-care cost as well as leaving patients in much better shape.

Scientific equipment (6% of the portfolio) - This theme enjoyed another year of steady growth and strong cash generation. We saw some concerns related to Chinese demand for US equipment, possibly caught up in the trade war, but much scientific equipment has few manufacturers and is vital to the expansion of research, both industrial and academic. However, we noted that Waters, an investment we had held for many years, announced a share buy-back, suggesting fewer growth opportunities and so we took profits in this holding.

Screen-time (11% of the portfolio) - We continued to invest in companies enjoying regular and defensive growth from our addiction to watching screens. Our investments mainly feature telecom companies which are very lowly valued by the market. While showing very low growth, companies like Nippon Telegraph & Telecom and Singapore Telephone are high yielding and have very defensive earnings in the event of any economic slowdown. When things get tight, your mobile phone bill may be one of the last expenses you cut.

Low carbon world (7% of the portfolio) - We also returned to our 'low carbon world' theme in light of accelerated political ambition here, as well as improving engineering and technology. Our largest investment, Orsted, is the largest offshore wind farm operator in the world and most visible in the North Sea off the UK. Its experience and success in managing very large offshore windfarms is allowing it to win a large share of new projects in Europe and the US.

High quality assets (9% of the portfolio) - Our property holdings performed rather poorly again this year, despite bond yields falling again. Few investors in Europe are confident that the high yields will continue to be paid. We disagree and are prepared to wait for the evidence to appear.

Discontinued themes: we took profits in the last of our investments in the Retiree spending power theme. A number of investments in this theme had served us well over the years, but some became rather well known and the bulk of the demographic ageing in the wealthier west has now happened, leaving the tailwind a little weaker going forward.

Five largest stock contributors to performance

Company

 

Theme

 

Contribution %

 

Thermo Fisher Scientific

Scientific Equipment

0.6

Synopsys

Automation

0.6

Boston Scientific

Healthcare Costs

0.5

Perkinelmer

Scientific Equipment

0.5

Cadence Design Systems

Automation

0.5

Five largest stock detractors from performance

Company

 

Theme

 

Contribution %

 

Unibail-Rodamco-Westfield

High Quality Assets

(0.8)

Apple

Screen Time

(0.8)

IPG Photonics

Automation

(0.5)

Charles Schwab

Online Services

(0.4)

Aeroports de Paris

Tourism

(0.3)

Outlook

This year we reached the fifth anniversary of Artemis being asked to manage your Investment Trust. This coincided with the 70th anniversary of the foundation of the original Mid Wynd holding company. It is therefore worth reflecting on the ability of such a global fund to find investment returns which satisfy its investors.

The last five years have mainly seen strong equity markets, especially abroad. However, our view is that the best growth opportunities will generally be broadly spread and the best value-for-money investments equally widely dispersed. A global equity mandate allows us a full range of choice and the broadest opportunity to diversify.

Yet we do live in unusual times. Current UK 10-year bond yields below 1% seem very poor value for most investors (indeed I never thought I would see such a yield). Savers therefore may have to hold equities even when valuations look historically stretched. With that in mind, we continue to invest in quality growth companies, but we also try to ensure that average valuations across our portfolio have not risen unreasonably. Furthermore, we aim to keep the fund well enough diversified to cope in future scenarios both easily anticipated and unpredictable. With politics, economies, trade, and bond rates all unusual, we maintain a style we believe to be more capital protective than the equity index. High quality companies which have invested for the future and which have reasonable valuations should continue to provide healthy investment returns even in troubled times.

Sustainable investing

Over the year a number of investment houses have made much of the sustainability of their investments or of how their funds score on measures of environmental, social and governance factors. As we aim for longer term investment success, we have always included these factors in our selection process. Our interpretation of the factors is based on common sense and real-life situations, rather than any tick list or 'one-size-fits-all' screen. As an example, we think that air travel may remain essential in large Asian countries while the environmental damage of cheap flights may become unacceptable in Europe.

We are not, however, looking to change the world; and nor do we presume to have an ethical code that all would follow. Our aim is to invest in companies which prosper without damaging society or the environment. We believe that this is an aim that we share with our investors and that this perspective is, and has always been, central to the management of a successful Investment Trust.

Artemis' investment approach

Our aim is to identify reliable and sustainable commercial trends around the world which are likely to deliver superior growth to 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 on the internet and in the energy industry, 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 which have established barriers to entry to their industries. Such companies sometimes lag equity markets when they recover vigorously, but they usually protect capital 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. We aim to run a diversified portfolio, with around 55-70 holdings spread across eight to 10 different themes.

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

Further information on our investment approach can be found on our website at artemisfunds.com.

Simon Edelsten, Alex Illingworth & Rosanna Burcheri

Fund Managers

5 September 2019

 

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. Although the Company aims to provide dividend growth over time, its primary aim is to maximise total returns to shareholders.

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 may 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. To ensure diversification of opportunity and management of risk, there will be between 40 and 140 holdings, and the portfolio will be managed on a global basis rather than as a series of regional sub-portfolios.

The Board and Investment Manager assess investment performance with reference to the MSCI All Country World Index (GBP). However, 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 and leverage

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. During the year, the Company held a multicurrency revolving credit facility with Scotiabank which is available to the Company until 19 February 2021. As at 30 June 2019, €3.0m (£2.7m) and US$3.0m (£2.4m) was drawn down from this facility.

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

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') 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 2019, the Company's leverage was 101.72% as determined using the Commitment method and 102.23% using the Gross method.

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 in the Annual Financial Report.

Current and future developments

A summary of the Company's developments during the year ended 30 June 2019, together with its prospects for the future, is set out in the Chairman's Statement and the Investment Manager's Review in the Annual Financial Report. 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 furthermore 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

Year ended 30 June

 

Net asset value

 

Share price

 

MSCI All Country World Index (GBP)

 

2015

17.2%

21.7%

9.5%

2016

16.0%

8.1%

13.3%

2017

21.0%

27.5%

22.2%

2018

12.7%

13.4%

8.9%

2019

13.3%

15.2%

9.7%

   Alternative Performance Measure.

  •         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. The policy of the Board is to limit the discount or premium 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. Further details of the shares issued and bought back during the year are set out in the Share Capital section in the Annual Financial Report.

  •         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% (2018: 0.7%).

   Alternative Performance Measure.

  •         Dividend 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, its historic revenue reserves and expected future revenue and then determines the dividends to be paid. Subject to approval of the final dividend by shareholders, a total dividend of 5.83 pence per share (2018: 5.55 pence per share) will be paid in respect of the year ended 30 June 2019. This represents an increase of 5.0%.

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 Annual Financial 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 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.

 

In addition to the above risks, at the date of this report the outcome of the UK Government's Brexit negotiations with the European Union remain unclear. The economic risk for the Company is principally in relation to the potential impact of Brexit on the companies within the portfolio. The majority of the portfolio is based overseas, outwith the European Union, which may cause an impact on their operations. The Investment Manager continues to monitor the situation and will respond to any economic fluctuations as required.

Further information on risks and uncertainties and the management of them are set out in the Annual Financial Report.

Other matters

Viability statement

In accordance with the Association of Investment Companies (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 2024. 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 and changes in regulation. 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 Board has concluded, given the realisable nature of the majority of the investments, the level of ongoing expenses and the availability of gearing, that the Company will continue to be in a position to cover its liabilities.

The conclusion of this review is that the Board has a strong 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 2024.

Share capital

During the year to 30 June 2019 the Company issued 3,660,000 new shares (2018: 4,680,000) 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.

During the year the Company did not buy back any ordinary shares (2018: nil).

The Directors' authority to issue and buy back shares on a non-pre-emptive basis will expire at the end of the AGM on 12 November 2019. The Directors intend to seek approval from the shareholders to renew this authority at the 2019 AGM in order to 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 per cent band relative to the net asset value.

Directors

The Directors of the Company and their biographical details are set out in the Annual Financial Report. Each of the Directors held office throughout the year under review.

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 Board recognises the benefits of diversity and over time, as suitably qualified candidates emerge, expects that this will increase. The Board considers its commitment to greater diversity is not in conflict with a policy on board tenure in which the Chairman would not ordinarily serve for more than ten years as Chairman. The Board is of the view that, as a relatively small trust, the shareholders' best interests are served by retaining the services of a well-qualified Chairman rather than losing them for reasons unrelated to ability.  This policy on tenure does not materially restrict the ability of the Board to increase diversity and the annual appraisal process assesses whether the Chairman retains the confidence of the Board.

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 £36m. 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 Fund Managers Limited ('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 management 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.

Environmental, Social and Governance ('ESG') philosophy

The portfolio is made up of stocks selected from the Investment Manager's thematic work. The thematic approach makes sustainable investing integral to the selection of investments. The investment process avoids cyclical sectors and also holds a set of principles around corporate governance. ESG metrics help the Investment Manager to analyse risk but also highlight opportunities for capital gain, in particular on governance issues.

The investment aim is to achieve sustainable longer-term returns. Integral to this is an assessment of the value today of future profits including any 'externalities'. Externalities are costs, usually to society or the environment which may not be captured by market pricing or shown in financial statements. The Investment Manager therefore appraises the sustainability of a company's entire franchise, seeking to understand each company's 'Licence to Operate' including interactions with employees, society and the environment in assessing investment suitability and risk.

The Investment Manager only invests in those companies and countries that exhibit acceptable governance standards. A background of reasonably stable political and legal framework is necessary for business to operate; and fair relations between company management and shareholders is necessary to ensure shareholders benefit from corporate success.

None of the metrics in the investment criteria template used is more important than others and the importance of factors will differ by country and sector. The Investment Manager does not seek to aggregate a score per company but simply sees the sustainability of a business as key to the investment decision. These metrics present a window into how a company invests in, and manages itself, its brand and its people.

The Investment Manager believes that investor returns can be maximised by integrating such issues directly into the investing process. This can throw up risks worth avoiding, but it can equally illustrate opportunities that may not be picked up by the wider market. Furthermore, a pragmatic, common-sense approach to sustainable investment is adopted which is synonymous with strong fund management of a core global equity franchise.

Financial statements

The financial statements of the Company are included in the Annual Financial Report.

On behalf of the Board.

Malcolm Scott

Chairman

5 September 2019

 

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 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 Companies Act 2006. 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 that complies with that law and those regulations.

The financial statements are published on a website, midwynd.com, 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 2019 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

5 September 2019

 

       Statement of Comprehensive Income                                                              For the year ended 30 June

 

 

 

2019

Revenue

£'000

 

2019

Capital

£'000

 

2019

Total

£'000

 

2018

Revenue

£'000

 

2018

Capital

£'000

 

2018

Total

£'000

 

Gains on investments

 

-

24,118

24,118

-

15,885

15,885

Currency gains

 

-

75

75

-

384

384

Income

 

3,592

-

3,592

3,144

-

3,144

Investment management fee

 

(248)

(742)

(990)

(200)

(600)

(800)

Other expenses

 

(281)

 

(9)

 

(290)

 

(254)

 

(14)

 

(268)

 

Net return before finance costs and taxation

 

3,063

23,442

26,505

2,690

15,655

18,345

Finance costs of borrowings

 

(38)

 

(116)

 

(154)

 

(36)

 

(109)

 

(145)

 

Net return on ordinary activities before taxation

 

3,025

23,326

26,351

2,654

15,546

18,200

Taxation on ordinary activities

 

(375)

 

-

 

(375)

 

(253)

 

-

 

( 253)

 

Net return on ordinary activities after taxation

 

2,650

 

23,326

 

25,976

 

2,401

 

15,546

 

17,947

 

Net return per ordinary share

 

6.79p

 

59.73p

 

66.52p

 

7.14p

 

46.20p

 

53.34p

 

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                                                                

 

 

2019

£'000

 

2018

£'000

 

Non-current assets

 

 

 

Investments held at fair value through profit or loss

 

225,249

179,699

Current assets

 

 

 

Debtors

 

1,183

772

Cash and cash equivalents

 

5,529

 

9,350

 

 

 

6,712

10,122

Creditors

 

 

 

Amounts falling due within one year

 

(5,877)

 

(6,284)

 

Net current assets

 

835

 

3,838

 

Total net assets

 

226,084

 

183,537

 

Capital and reserves

 

 

 

Called up share capital

 

2,044

1,861

Capital redemption reserve

 

16

16

Share premium

 

70,782

52,173

Capital reserve

 

149,687

126,361

Revenue reserve

 

3,555

 

3,126

 

Shareholders' funds

 

226,084

 

183,537

 

Net asset value per ordinary share

 

553.16p

 

493.23p

 

These financial statements were approved by the Board of Directors and signed on its behalf on 5 September 2019.

Malcolm Scott

Chairman

 

 

Statement of Changes in Equity                                                  

For the year ended 30 June 2019

 

 

Share

capital

 

£'000

 

Capital redemption

reserve

£'000

 

Share

premium

 

£'000

 

Capital

reserve

 

£'000

 

Revenue

reserve

 

£'000

 

Shareholders'

funds

 

£'000

 

Shareholders' funds at 1 July 2018

1,861

16

52,173

126,361

3,126

183,537

Net return on ordinary activities after taxation

-

-

-

23,326

2,650

25,976

Issue of new shares (net of costs)

183

-

18,609

-

-

18,792

Dividends paid

-

-

-

-

(2,221)

(2,221)

Shareholders' funds at 30 June 2019

2,044

16

70,782

149,687

3,555

226,084

For the year ended 30 June 2018

 

Share

capital

 

£'000

 

Capital redemption

reserve

£'000

 

Share

premium

 

£'000

 

Capital

reserve

 

£'000

 

Revenue

reserve

 

£'000

 

Shareholders'

funds

 

£'000

 

Shareholders' funds at 1 July 2017

1,627

16

29,144

110,815

1,456

143,058

Net return on ordinary activities after taxation

-

-

-

15,546

2,401

17,947

Issue of new shares (net of costs)

234

-

23,029

-

-

23,263

Dividends paid

-

-

-

-

(731)

(731)

Shareholders' funds at 30 June 2018

1,861

16

52,173

126,361

3,126

183,537

 

        Statement of Cash Flows                                                                               For the year ended 30 June

 

 

2019

£'000

 

2019

£'000

 

2018

£'000

 

2018

£'000

 

Cash used in operations

 

 

1,941

 

 

1,610

 

Interest received

 

96

 

39

 

Interest paid

 

(154)

 

 

(144)

 

 

Net cash used from operating activities

 

 

(58)

 

(105)

Cash flow from investing activities

 

 

 

 

 

Purchase of investments

 

(237,157)

 

(192,944)

 

Sale of investments

 

213,826

 

174,063

 

Realised currency gains

 

105

 

 

146

 

 

Net cash used in investing activities

 

 

(23,226)

 

(18,735)

Cash flow from financing activities

 

 

 

 

 

Issue of new shares, net of costs

 

19,167

 

22,668

 

Dividends paid

 

(2,221)

 

(731)

 

Net drawdown of credit facility

 

583

 

808

 

Credit facility renewal fee

 

6

 

 

(7)

 

 

Net cash generated from financing activities

 

 

17,535

 

 

22,738

 

Net (decrease)/increase in cash and cash equivalents

 

 

(3,808)

 

 

5,508

 

Cash and cash equivalents at start of the year

 

 

9,350

 

3,819

(Decrease)/increase in cash in the year

 

 

(3,808)

 

5,508

Unrealised currency (losses)/ gains on cash and cash equivalents

 

 

(13)

 

 

23

 

Cash and cash equivalents at end of the year

 

 

5,529

 

 

9,350

 

             

 

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 February 2018 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

 

2019

2018

 

£'000

 

£'000

 

Income from investments

 

 

Overseas dividends

3,077

2,767

UK dividends

410

290

UK interest

9

-

Property income distribution

-

 

48

 

 

3,496

 

3,105

 

Other income

 

 

Bank interest

96

 

39

 

Total income

3,592

 

3,144

 

Total income comprises:

 

 

Dividends from financial assets designated at fair value through profit or loss

3,496

3,105

Other income

96

 

39

 

Total income

3,592

 

3,144

 

3. Dividends paid and proposed

 

 

 

2019

2018

 

2019

 

2018

 

£'000

 

£'000

 

Amounts recognised as distributions in the year:

 

 

 

 

Previous year's final dividend

3.75p

0.38p

1,436

124

First interim dividend

1.98p

 

1.80p

 

785

 

607

 

Total dividend

5.73p

 

2.18p

 

2,221

 

731

 

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 £2,650,000 (2018: £2,401,000).

 

 

 

2019

2018

 

2019

 

2018

 

£'000

 

£'000

 

Dividends paid and payable in respect of the year:

 

 

 

 

First interim dividend 

1.98p

1.80p

785

607

Proposed final dividend 

3.85p

 

3.75p

 

1,592

 

1,395

 

Total dividend

5.83p

 

5.55p

 

2,377

 

2,002

 

 4. Net return per ordinary share

 

2019

2019

2019

2018

2018

2018

 

Revenue

 

Capital

 

Total

 

Revenue

 

Capital

 

Total

 

Net return on ordinary activities after taxation

6.79p

 

59.73p

 

66.52p

 

7.14p

 

46.20p

 

53.34p

 

Revenue return per ordinary share is based on the net revenue return on ordinary activities after taxation for the financial year of £2,650,000 (2018: £2,401,000), and on 39,052,594 (2018: 33,647,608) 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 £23,326,000 (2018: £15,546,000), and on 39,052,594 (2018: 33,647,608) 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:

 

2019

Net asset

value

 

2019

Net assets

£'000

 

2018

Net asset

value

 

2018

Net assets

£'000

 

Ordinary shares

553.16p

 

226,084

 

493.23p

 

183,537

 

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

 

2019

£'000

 

2018

£'000

 

Total net assets at 1 July

183,537

143,058

Total recognised gains for the year

25,976

17,947

Issue of new shares

18,792

23,263

Dividends paid

(2,221)

 

(731)

 

Total net assets at 30 June

226,084

 

183,537

 

Net asset value per ordinary share is based on net assets as shown above and on 40,871,416 (2018: 37,211,416) ordinary shares, being the number of ordinary shares in issue at the year end.

6. Transactions with the Investment Manager and related parties

The amounts paid to the Investment Manager and amounts outstanding at the year end are disclosed in the Annual Financial Report. 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.

This Annual Financial Report announcement does not constitute the Company's statutory accounts for the years ended 30 June 2019 and 30 June 2018 but is derived from those accounts. Statutory accounts for the year ended 30 June 2018 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 30 June 2018 and the year ended 30 June 2019 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 2019 will be delivered to the Registrar of Companies shortly.

 

The audited Annual Financial Report for the year ended 30 June 2019 will be posted to shareholders shortly. Copies may be obtained from the Company's registered office at 6th Floor, Exchange Plaza, 50 Lothian Road, Edinburgh, EH3 9BY or at midwynd.com.

 

The Annual General Meeting of the Company will be held on Tuesday, 12 November 2019.

 

For further information, please contact:

 

Company Secretary

Tel: 0131 225 7300

Artemis Fund Managers Limited

 

5 September 2019

 

 


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