Mid
Wynd International Investment Trust plc (the
'Company')
Legal
Entity Identifier: 549300D32517C2M3A561
Annual
Financial Results for the year ended 30 June
2023
Financial
Highlights
Returns
for
the
year
ended
30
June
2023
|
Year
ended 30
June
2023
|
Year
ended 30
June
2022
|
Total
returns
|
|
|
Net
asset
value
per
ordinary
share†
|
5.6%
|
(7.5)%
|
Share
price†
|
1.0%
|
(9.5)%
|
MSCI
All
Country
World
Index
(GBP)
|
11.3%
|
(4.2)%
|
Revenue
and
dividends
|
|
|
Revenue earnings
per
share
|
10.01p
|
11.72p
|
Dividends
per
share*
|
7.80p
|
7.20p
|
Special
dividend
per
share*
|
1.70p
|
3.00p
|
Ongoing
charges†**
|
0.62%
|
0.60%
|
|
As
at 30
June
2023
|
As
at 30
June
2022
|
Capital
|
|
|
Net
asset
value
per
share
|
719.84p
|
692.01p
|
Share
price
|
689.00p
|
693.00p
|
Net
cash†
|
2.7%
|
0.3%
|
(Discount)/Premium†
|
(4.3)%
|
0.1%
|
Source:
Artemis/Datastream.
*
A
final
dividend,
if
approved
by
shareholders,
and
a
special
dividend
for
the
year
to
30
June
2023
of
3.95 pence
and
1.70 pence
respectively
will
be paid
on
10
November
2023
to
shareholders
on
the
register
at
the
close
of
business
on
29
September
2023.
**
Look-through
costs
of
underlying
investment
company
holdings
not
included.
† Alternative
Performance
Measure.
Total
returns
to
30
June
2023
|
3
years
|
5
years
|
Since 1 May 2014*
|
10
years
|
Net
asset
value
per
ordinary
share†
|
21.5%
|
54.6%
|
192.6%
|
220.1%
|
Share
price†
|
16.4%
|
46.4%
|
183.5%
|
202.1%
|
MSCI
All
Country
World
Index
(GBP)
|
32.9%
|
53.3%
|
160.2%
|
176.1%
|
*
The
date
when
Artemis
was
appointed
as
Investment
Manager.
† Alternative
Performance
Measure.
Strategic
Report
Chairman's
Statement
The last
twelve months have seen a rise in global equity markets and a rise
in the net asset value (“NAV”) of our Company. The rise in the NAV
of Mid Wynd has not kept pace with the rise in our comparator
index. With major structural changes impacting economies,
businesses and geo-politics the global equity markets are seeking
to price in what the long-term consequences of these changes are
for corporate earnings and equity valuations. In our current
financial year they concluded that technology stocks are best
placed to profit from these structural changes and there has been
excitement around the prospects for earnings from artificial
intelligence (AI) which, for some, heralds yet another structural
change. Our Company has invested in the technology sector and
benefited from some of this excitement but not to the extent that
the comparator index has benefited. Accurately reflecting all these
major structural changes in the price of equities is something that
is likely to be achieved by financial markets only over many years.
The role of our managers is to see through the short-term
volatility associated with such changes and invest to benefit from
the developing longer- term trends.
As I
mentioned in the Half-Yearly Financial Report, the past twelve
months have seen the announcement of the departure of both our
managers from Artemis Fund Managers. While Simon Edelsten remains at Artemis until October,
his forthcoming departure led the Board to review our management
arrangements. This review has led to the appointment of Lazard
Asset Management as our new manager and they are scheduled to take
over responsibility for managing our assets in October 2023. You will find further details
regarding this appointment later in this Chairman’s
Statement.
Performance
For the
year ended 30 June 2023 the Company’s
share price rose by 1.0% on a total return basis with dividends
assumed to be re-invested. The Company’s net asset value per share,
on a total return basis, with dividends assumed to be reinvested,
rose by 5.6%. This compares with a rise of 11.3% in the Company’s
comparator index, the MSCI All Country World Index
(GBP).
The share
price total return is lower than the NAV return owing to the move
from a premium to NAV at the start of the year to a discount at the
year end. The discount of 4.3 per cent, seems, on the face of it,
to be outside our target range under the Company's discount control
policy. The explanation for this apparent anomaly and details of
the discount control policy can be found later in this Chairman's
Statement. The average NAV discount to share price during the year
was 1.0%.
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
2023 was a gain of 36.87 pence
per share, comprising a revenue gain of 10.01 pence and a capital gain of 26.86 pence. The Board is proposing a final
dividend of 3.95 pence per share
which, subject to approval by shareholders at the Annual General
Meeting (‘AGM’), will be paid together with a special dividend of
1.70 pence per share on 10 November 2023 to those shareholders on the
register at the close of business on 29
September 2023. An interim dividend of 3.85p pence per share
was paid in March 2023, and so
together with the proposed final dividend (but excluding the
special dividend), this gives dividend growth of 8.3% over the
year.
The
dividend is fully covered by the revenue return for the year. The
aim remains to grow the regular dividend progressively.
To
maintain our status as an investment trust we are required by HMRC
to distribute 85% of our earnings in the form of dividends. Last
year we decided to distribute a dividend in two forms. The ‘regular
dividend’, which we believe reflects the underlying earnings of our
investments, and a ‘special dividend’ which I described last year
as reflecting the ‘excess earnings’ of our investments. The aim in
so dividing our dividend is to provide the maximum flexibility for
our manager to pursue the best total return, in the form of capital
gains and dividends, rather than to force the manager to focus on
the pursuit of dividend income. I reported last year that the
earnings of our Company had increased by 72% year on year and this
year they have declined by almost 15%. This is the volatile nature
of earnings that one expects when much of our income is derived in
foreign currencies, particularly in US dollars, the sterling
exchange rate moves materially, and we declare our dividends in
sterling. Changes to our holdings also impact the total income of
the portfolio depending upon the dividend yield of each investment
and a one-off shift to higher yielding stocks materially boosted
our earnings in the prior financial year. In recognition that such
volatility of earnings will likely continue the Board will again
declare a special dividend this year. We can again describe this
special dividend as our assessment of the ‘excess earnings’ of our
Company. Shareholders should look to the level and growth of the
regular dividend for guidance as to the underlying earnings
potential and thus dividend potential of our Company.
The growth
in the regular dividend this year, of 8.3%, has exceeded the annual
rate of inflation. Since the year ended 30
June 2019, before the outbreak of COVID-19 and the surge in
inflation that followed, our regular dividend has increased from
5.83p in 2019 to 8.70p in 2023 an increase of 49%. Over the same
period the UK Consumer Price Index increased by 22%.
Management
changes
In 2014,
on the retirement of our fund manager from Baillie Gifford, the
Board of Mid Wynd conducted a review of management arrangements and
appointed Artemis Fund Managers to manage our assets. The team of
three individuals at Artemis who have successfully managed our
assets have now all left or will soon leave Artemis. The team led
by Simon Edelsten has produced very
good performance for our shareholders in often volatile and
difficult circumstances. Since their appointment in 2014 they have
stewarded our Company’s assets through shocks that include -
Brexit, growing volatility in US politics, a hot war in
Europe, a growing cold war between
the developed world and China and
a global pandemic - to name a few! In successfully navigating
through these difficult waters they provided better returns,
relative to the comparator index, when equity markets were weak
while capturing a significant portion of the gains when the prices
of equities were rising. Such an achievement is not common even
amongst professional investors and the total return of 192.6% from
their appointment to our year end in June
2023, compares very favourably with the total return of
160.2% of our comparator index. This excess performance has been
recognised by the marketplace and as a consequence our shares have
traded at a premium to NAV and we have issued shares and grown the
size of the Company. As Chairman of the Company, and a director and
shareholder throughout Artemis’s term as manager, I would like to
thank Simon and the team for their diligent and very successful
stewardship of our assets since 2014.
With the
departure of our fund managers from Artemis Fund Managers,
announced earlier this year, the Board considered that a full
review of management options was necessary. The Board was informed
of the change in personnel at Artemis in mid-February and
instigated the review of management options in March. A review of
global equity managers was conducted by Barnett Waddingham and their brief from the
Board was to look for managers successfully pursuing a similar
style to our existing managers, whether in managing portfolios for
institutions or retail investors. Throughout the process the option
of continuing with the new team to be appointed by Artemis was also
given due consideration. The Board reviewed a long list of possible
managers in May and a short list of managers in June. At the end of
June we announced that Lazard Asset Management would be our new
investment manager.
Lazard is
a very well-known name in the world of finance. The company traces
its history back to 1848 when the Lazard brothers, immigrants from
France, launched their General
Merchandise/dry goods company in New
Orleans. The roots of the company are thus not dissimilar to
our own as Mid Wynd traces its roots to a textile manufacturer
which opened for business in Dundee in 1797. Lazard has been involved in
banking and finance since the mid-nineteenth century and as of 2023
manages £166bn for clients in over fifty countries. While
well-known to those involved in the institutional fund business,
such as pension fund trustees, the company is less well-known to UK
retail investors. This lack of awareness of Lazard as a manager of
UK retail funds was not a deterrent to the Board in appointing the
company as manager of our assets. The Board specifically sought out
managers who, while producing excellent performance, were
potentially not well known to retail investors. The over-riding
priority for the Board was to find the best manager pursing an
approach to investment not dissimilar to that familiar to investors
in our Company. We have found that in our new team at Lazard Asset
Management and are convinced that as wealth managers and retail
investors come to understand their approach to investment
management that new investors will be attracted to Mid
Wynd.
The team
at Lazard Asset Management, of Louis
Florentin-Lee and Barney
Wilson, have produced impressive long-term returns. Since
inception in February 2011 to the end
of June this year their Lazard Global Quality Growth approach has
produced an outperformance of the comparator index (the MSCI ACW
Index) of 2.4% per annum even having deducted the management fees
the Board has agreed with the company. These returns have been
achieved managing institutional funds and the team will now seek to
replicate these returns for Mid Wynd thus making their expertise
available to all investors. This excess return is a product of a
disciplined approach to assessing the sustainability of high
returns on capital from quality companies and also of calculating
the appropriate price to pay for the shares of such companies.
Economic theory asserts that increased competition will attract
others to compete in such areas and thus the returns on capital
achievable will decline. This ‘fade’ in returns, however, has not
always materialised and there are companies which have consistently
reported high returns despite the threats from increased
competition. One can think of various branded products in the
alcohol and luxury goods business, for instance, which have
attracted premium prices and high returns for their owners -
sometimes for over one hundred years. Our managers are searching
the globe, across a wide range of business sectors, to find similar
high quality businesses with this form of replicable high return
with limited or no ‘fade’ to returns on capital. The Lazard team
has outperformed the comparator index since 2011 by identifying
those companies where the ‘fade’ of returns has not occurred and by
then not paying too much for them. As these companies achieve
particularly high returns on their re-invested capital they tend to
re-invest and pay low levels of dividends. For investors the
compounding effect from re-investing the cash flows from
high-returning businesses to secure higher future returns is
particularly rewarding.
In their
search for such high-quality companies Louis and Barney draw upon
the experience of the more than three hundred investment
professionals who work for Lazard Asset Management, including a
team of approximately 70 analysts. From a wide range of
recommendations from Lazard analysts they construct a portfolio,
usually of around 40 to 50 stocks, that they believe can sustain
high returns on their capital and represent good value for
long-term investors. This approach to investment has produced good
returns when equity markets have been rising and outperformed the
comparator index when equity markets have been falling. The Lazard
team has, since inception in 2011, captured 106% of the upside from
markets when equity markets have been rising while capturing 92% of
the downside while equity markets have been falling and these
returns take into account management fees. The team’s long-term
focus means that portfolio turnover is low.
The new
manager follows a similar approach to stock selection as our
previous managers. Both focus on identifying high quality companies
with strong sustainable profitability which can compound over the
long term. Investors can expect changes in the portfolio but also
some similarities in holdings between our new and old investments.
Like past managers the Lazard team are free to invest across the
globe in pursuit of such investments. In the past I have stressed
the importance, particularly at times of structural change, of
avoiding investment in stock market indices. These indices tend to
be comprised of companies that have benefited from historical
long-term trends. The Lazard team, has an active share, the
difference between the portfolio and the composition of the
comparator index, of almost ninety percent. If we are entering a
period of major structural change, as many of us expect, then this
willingness to allocate capital without reference to the comparator
index is likely to be key to securing good future returns. The
Board very much looks forward to working with the Lazard team in
the pursuit of the high-quality businesses which can both preserve
and grow the purchasing power of our capital, our shareholders’
savings, over the long-term.
The change
in investment manager necessitated other changes of service
providers for our Company. The Board has conducted a review of
other service providers and has selected Juniper Partners and JP
Morgan to provide the services previously provided by Artemis and
Northern Trust.
Share
Capital
Demand for
the Company’s shares continued in the first half of the year with
1,133,200 new shares issued up to 31
December 2022. However, with market volatility and the
announcement of the change in lead fund managers, the Company
entered a period of buybacks. Between 24 February and 30 June 2023, 4,002,662 shares were bought back
at a value of £27.6 million and all these buybacks were at a
discount to NAV and thus accretive to net asset value for
continuing shareholders. After the year end, a further 4,466,418
shares were bought back at a further cost of £31.3
million.
The
Company’s policy, within normal market conditions, is to issue and
re-purchase shares where necessary to maintain the share price
within a band, plus or minus 2%, relative to the net asset value.
Our investment manager assesses the Company’s NAV on a real time
basis when buying or selling the Company’s shares while the price
of purchases or issuance are always reported relative to the NAV
reported at a set time of the day. The result can be that some
purchases or issuances appear to be out-with the 2% band
established by the Board but the practice of utilising a live NAV
is necessary to ensure that all of our issuance and buybacks are
accretive to NAV for continuing shareholders.
Shares
were issued and bought back during the year using the existing
authorities given at the 2022 AGM. The recent months have seen
considerable pressure on investment trust share prices and
discounts generally and Simon Edelsten’s departure and the ensuing
change of investment manager may well have caused some investors to
sell their shares in the Company. The Board believes that it is not
unusual for there to be higher levels of turnover in a company’s
shares during a period of a transition of managers. The Board
convened a general meeting to be held on 8
September 2023 to increase the Company’s flexibility to buy
back shares. We have changed our manager before, in 2014, and
witnessed significant selling of shares at that time which we
bought to ensure that our shares did not trade out-with the band
established by our discount control mechanism. The Board will
continue to operate the discount control mechanism, and this will
include issuing shares at a two percent premium – something we were
doing until fairly recently. This discount control mechanism has
operated to the benefit of our shareholders over many years and the
current small discount to NAV of our share price is in marked
contrast to the large discount to NAV of many other investment
trusts with similar mandates. At the forthcoming AGM, the Board
will seek new authorities to issue and buy back shares to continue
to implement its discount and premium management policy.
Borrowings
At
30 June 2023 the Company had no
amounts drawn down on its US$60m
facility with the Bank of Nova
Scotia (2022: €5m; US$2m). The
Company pays a small fee for the right to access these additional
funds and only when amounts are drawn down is interest expense
incurred. Further information on the Company’s gearing can be found
within the Strategy and Business Review.
The
Company’s revolving credit facility with The Bank of Nova Scotia (UK Branch) needed to be amended
to take account of Lazard’s appointment as our new manager. Taking
account of the current high interest environment, the Board has
resolved to terminate the current facility with The Bank of
Nova Scotia.
Board
Succession
As
discussed in the December 2022
Half-Yearly Report, Hamish Baillie
joined the Board on 1 November 2022.
The process of refreshing the Board continues. As part of this
process I will step down from the Board of the Company at the 2024
AGM. The Board has been very busy assessing management options for
the Company and also arranging the transition in managers. When
that process is completed, we expect in October 2023, we will focus on future Board
composition and the changes necessary in preparation for my
departure from the Board in Q4 2024.
AGM
The AGM
will be held in person on 26 October
2023 at 12.00 noon at the offices of Dickson Minto, 16 Charlotte Square, Edinburgh, EH2 4DF.
As
Simon Edelsten will have retired
before this meeting, it is not intended that he will present at the
forthcoming AGM. However, the new Lazard management team and the
CEO of Lazard Asset Management will present in person or via
video-link after which they and the Board will be available to
answer shareholder questions.
We
encourage those shareholders not attending to e-mail any questions
in advance to cosec@junipartners.com.
As always,
I would encourage you to make use of your proxy votes by completing
and returning the form of proxy enclosed with this
report.
Outlook
The savers
who own the shares of our Company are seeking to both protect and
grow the purchasing power of their wealth. This involves securing
positive nominal returns but also, over the long-term, securing
returns higher than the rate of inflation. Over the very long-term
equities have provided such returns but sometimes it has taken more
than a decade for the initial investment in equity indices to
result in positive real total returns. If, as Mr Buffet famously
said, ‘price is what you pay, value is what you get’, then it is
possible to pay too much even for the highest quality companies.
Assessing the sustainability of corporate returns and the correct
price to pay for future returns is the skill and partially the art
of investment. Our shareholders have benefited from the skills of
our previous managers in selecting high quality companies that can
produce sustainably high returns and in investing in those
companies at what proved to be attractive valuations. Our Company
will continue to pursue such an investment policy under our new
managers.
Investing
in companies that can both produce high returns on capital and also
reinvest their cash flows at similarly high returns is an approach
that is likely to be particularly attractive in an age of higher
inflation. While none of us can forecast the peak level that
inflation might reach in any business cycle, the structural changes
underway in the world do seem to augur a materially higher level of
inflation than we have been used to over the past decades. To
defend savings from the erosion of purchasing power that comes with
higher inflation one approach will be to invest in companies that
can invest and reinvest their cash flows for returns that very
significantly exceed the rate of inflation. Our new manager, Lazard
Asset Management, will invest in such companies. Their skill,
demonstrated since they began this High Quality Growth strategy,
will be in accurately forecasting where corporate returns can
remain sustainably high and of course in not paying too much for
such high returns. It is a skill they have been deploying for over
a decade and since the inception of this approach, in February 2011, that has produced a net
outperformance relative to our comparator index of 2.4% per annum.
The shares of companies that can invest and reinvest at rates of
return well above the rate of inflation are likely to remain in
strong demand in an era of high inflation.
The steep
rise in interest rates since 2020 has not produced the scale of
economic deceleration and perhaps even financial distress that
might have been expected. Such a reaction to higher interest rates
in 2008 caused a contraction in economic activity, bank collapses
and huge losses for equity investors. Despite record high levels of
debt, relative to GDP, both the public and the private sector have,
so far, been able to service their debts and debt defaults have
remained constrained compared to other economic downturns this
millennium. This resilience probably primarily reflects a move by
many debtors to extend the duration of their borrowing and lock in
low interest rates in the period of very low interest rates that
pertained up to 2020. Even so debt is always maturing and as it is
refinanced the higher costs of servicing that debt will lead to
greater strains for those seeking to service their debts. The clock
is thus ticking for debtors as their debts are refinanced at higher
rates of interest. The data on private sector debt service ratios,
which show the proportion of private sector income currently needed
to service debts, indicate that many countries, are at a level
where historically their private sectors have defaulted on their
debt obligations and these ratios will continue to deteriorate as
debt is refinanced. Perhaps surprisingly the private sector debt
service ratios of the United
States, United Kingdom and
Japan are reasonable but for some
large and important countries, such as France and China, a dangerously high level of private
sector income is being diverted to service debts. The impact from
rising interest rates on economic growth, financial stability and
equity prices has been benign but as time ticks on and debts are
refinanced at higher interest rates this is likely to change.
Investing in those corporate cash flows that can remain robust even
in such circumstances can protect investors from the worst effects
of any economic contraction that may come as the impact from higher
interest rates hits the private sector. Companies with high returns
on capital and low debt levels should be better placed to weather
economic contractions when they come.
It is not
easy to discern the major trends that are developing during a
period of rapid short-term changes and general volatility. One
trend though is becoming more apparent. That is that governments
are intervening to create outcomes that they believe should not be
left to market forces. That is a trend that involves both the
socialisation of private sector risk, as we saw with the
significant government support for the private sector during the
COVID-19 crisis, but also in the form of governments co-opting or
cajoling corporations to assist in delivering their political
goals. This is a trend that is very likely to continue as
governments react to what are the growing list of ‘crises’
confronting the electorate - climate change, war in Europe, a cold war with China, higher cost of living etc. While such
intervention may mitigate the extremes of the business cycle it
comes at a price for savers in the form of greater government
interference in the allocation or private capital / savings.
History suggests that such government interference rarely results
in higher returns on capital for the companies so co-opted by
governments. A well-chosen portfolio of equities may be one of the
few places for investors to hide in such a world particularly by
investing in the high-quality companies that can continue to
produce high returns on capital even during such shifts in the
balance between markets and governments.
Savers
face new challenges but rarely are they unique challenges. History
provides some guidance to the future and it suggests that well
managed companies, producing high returns on capital and bought at
good valuations will provide positive real total returns. Our
managers have the freedom to seek out those companies wherever they
may be in the world and we expect this ability to find those
companies to benefit our investors.
Contact
us
Shareholders
can keep up to date with Company performance by visiting
www.midwynd.com where you will find information on the Company, a
monthly factsheet and regular updates from the Investment Manager.
In addition, the Board is always keen to hear from
shareholders.
Should you
wish to, you can e-mail me at
cosec@junipartners.com.
Russell Napier
5 September 2023
Investment
Manager's Review
Introduction
Global
equity indices rose over the past year, driven predominately by US
technology shares. While the Company held a number of investments
in this area, it did not have as high a weighting in such shares as
our comparator index (MSCI ACWI). The Company’s net asset value
rose by 5.6% compared with an 11.3% rise in the comparator index in
sterling terms.
Global
inflation fell over the year as energy prices returned to the
levels pertaining before Russia
invaded Ukraine. However, core
inflation – especially wage inflation – persists and so interest
rates have risen, especially in the UK. The companies we invest in
have handled these pressures very well and most have grown cash
flows significantly through this challenging period.
As
shareholders will have read, this will be my last report as the
fund manager of your Company and so I will provide a short report
on the past year and also some observations on managing the
portfolio over the past nine years.
Regional
Performance
Region
|
Contribution
%
|
Asia
Pacific
ex
Japan
|
(0.3)
|
Emerging
Markets
|
0.3
|
Europe
|
1.6
|
Japan
|
2.7
|
North
America
|
1.9
|
Thematic
performance
Theme
|
Contribution
%
|
Automation
|
2.1
|
Digital
Finance
|
1.8
|
Healthcare
Costs
|
(0.2)
|
Lower
Carbon
World
|
0.8
|
Online
Services
|
2.8
|
Scientific
Equipment
|
(1.1)
|
Screen
Time
|
(0.1)
|
Sustainable
Consumer
|
0.1
|
Performance
over the past year
Online
Services (17% of the portfolio): The investments we hold in this
area performed very well, especially Microsoft, Alphabet, Ansys,
Adobe and Amazon. Having no exposure to just two stocks, Apple and
Nvidia, accounted for nearly half the year’s underperformance
relative to the comparator index. Our view is that this shows the
benchmark has become worryingly concentrated with just a few very
large companies dominating total returns. We prefer to keep the
portfolio more balanced than the comparator index.
Automation
(20% of the portfolio): This theme performed well as China slowly reopened and companies around the
world resumed capital investment.
Digital
Finance (7% of the portfolio): Our small allocation to Japanese
banks performed well. These companies benefit from persistent – and
in Japan’s case, reasonably modest – inflation. Even the modest
rises in long-term interest rates have allowed banks to lend at
higher rates while their average cost of deposits has not been
rising as rapidly. This improvement in banks’ margins on lending is
very positive for profits. This theme, which focuses on more
lowly-valued equities, acts within the portfolio as a good balance
to more expensive portions, such as US technology shares. Avoiding
other developed world bank stocks during the period also boosted
performance relative to the comparator index.
Healthcare
Costs (10% of the portfolio): After a strong year in 2022, this
theme performed poorly. The US medical insurance companies are
seeing a rise in claims from their customers. Few people willingly
went near a hospital during the pandemic, so there seems to be a
backlog of the population who need medical care. The short-term
impact for the companies is that claims from their customers have
risen as the backlog of postponed medical treatment
clears.
Five
largest stock contributors
Company
|
Theme
|
Contribution
%
|
LVMH
Moët
Hennessy Louis
Vuitton
|
Sustainable Consumer
|
1.3
|
Cie
Financière
Richemont
|
Sustainable Consumer
|
0.7
|
Amazon
|
Online
Services
|
0.7
|
Microsoft
|
Online
Services
|
0.7
|
Novo
Nordisk
|
Healthcare
Costs
|
0.7
|
Five
largest
stock
detractors
Company
|
Theme
|
Contribution
%
|
Estée
Lauder
|
Sustainable Consumer
|
(0.7)
|
Olaplex
Holdings
|
Sustainable Consumer
|
(0.6)
|
Pfizer
|
Healthcare
Costs
|
(0.6)
|
Revvity
|
Scientific
Equipment
|
(0.4)
|
Fresenius
Medical
Care
|
Healthcare
Costs
|
(0.4)
|
Transactions
Buying
Japanese banks, buying Rockwell Automation and selling Elevance,
one of the larger holdings in US medical insurance, boosted our
returns over the year.
Observations
on managing the Mid Wynd investment portfolio
In 2014
the Artemis Global Select team was privileged to be appointed to
manage the Mid Wynd portfolio. Alex
Illingworth, Rosanna Burcheri
and I set about managing the investments to benefit from fair
equity market conditions, but also to avoid giving up gains too
easily when conditions worsened. For most of the past nine years
market conditions have been very good indeed and in the one moment
of panic – the Covid outbreak in March
2020 – the portfolio’s resilience became
apparent.
The
Company had assets of £67m in May
2014 and by the end of that year, after some shareholders
had sold, the Company held 13% of its shares in Treasury. As at
30 June 2023, the Company had assets
of £449m, no gearing and a year’s dividends available as
reserves.
Managing
an investment trust is different from managing a unit trust.
Investment trusts tend to have much longer lives and are often used
to pass down wealth through generations. Unit trusts are more often
used to manage savings through an individual’s lifetime. The Mid
Wynd International Investment Trust is, of course, named after the
street in Dundee where the Scott
family made a fortune in jute. Many members of that family remain
shareholders, illustrating how the Company has been effective over
the long term. It has also been a pleasure to have previous
investment managers on the shareholder list.
When we
took over the management markets had recovered from the 2008
banking crisis, most equities were reasonably priced, inflation was
subdued, and interest rates were held down by central banks. The
portfolio we constructed was balanced between companies that
generated strong growth and others that offered cheaper valuations.
The former dominated performance. Over the nine years our best
investments, which should be familiar to shareholders as we will
have talked about them in great detail in previous reports, have
been Louis Vuitton, Boston
Scientific, Mastercard, Freeport McMoRan and Thermo Fisher
Scientific.
The list
of stocks that have reduced the relative performance over the
period has just one dominant constituent: Apple. Owning none of its
shares (most of the time) has cost around 5% of relative
performance during our stewardship of the Company’s
capital.
All in
all, over the last nine years, the Company’s assets have grown
faster than the global equity index. These excess returns have come
principally from stock selection. Allocations to particular
countries have had little effect though being sceptical about
European prospects saved us a little money. By theme, Online
Services and Sustainable Consumer contributed the most, followed by
Healthcare, Scientific Equipment and being sceptical about
banks.
Between
2014 and 2020 economic conditions were reasonably benign and equity
funds made very strong returns. Now that inflation has returned,
many are looking for ways to defend the value of their savings.
With UK inflation currently over 7%, holding cash or UK government
debt guarantees a slow loss of purchasing power. Equities offer a
way to invest one’s savings in the real economy, in businesses that
can adjust to inflation as it ebbs and flows and whose cash flows
should grow in real terms over time. Historically, equities have
proven to be the best performing asset class during times of high
inflation, especially between 1978 and 1983. However, current
valuations are much higher.
With the
current high valuations for equities in mind, the transition from a
low to higher inflation environment means we feel attention must be
paid to the value for money in equities, especially value for money
in companies like technology companies whose growing cash earnings
are sometimes many years in the future.
Over the
past nine years the returns we have enjoyed in Louis Vuitton, Boston Scientific, Mastercard and
others show that healthy investment returns can come from the
steady earnings growth of well-established businesses. The
Company’s returns have not relied on a small number of stocks
making very high returns. They have come from most of our
investments doing quite nicely and thankfully very few proving
troublesome. It may mean that we have fewer ‘elephant-hunter’
tales, but it has worked.
We are
pleased to be able to hand over the Company in rude health and
would like to take the opportunity to thank the management and
marketing team at Artemis, Martin
Stott at Bulletin PR and the Mid Wynd Board for their
support over this time.
We wish
the Company and its shareholders all the best for the
future.
Simon Edelsten
Fund
Manager
Bobby Powar & May
Laghzaoui
Analysts
5 September 2023
Introduction
to the Company’s new Investment Manager
Lazard
Asset Management will be replacing Artemis as Investment Manager in
October 2023. Lazard is one of the
world’s pre-eminent financial institutions, and celebrates its
175th Anniversary this year. Lazard Asset Management manages
approximately £166 billion of assets for a very diverse array of
clients – with 24 offices across 17 countries, and with equity
expertise at its core, the firm is very well positioned to deliver
strong investment outcomes.
Lazard
Asset Management’s global equity managers, Louis Florentin-Lee and Barnaby Wilson will be responsible for managing
the Company, and will do so in accordance with the Lazard Global
Quality Growth strategy, which launched in 2011.
Louis and
Barnaby have worked together at Lazard Asset Management since 2004
and have managed the Lazard Global Quality Growth strategy together
for the last decade – in the 10 years to 30
June 2023 the strategy has generated a gross return of 262%,
compared with the MSCI All Country World Index (GBP) (MSCI ACWI)
return of 176%. Louis and Barnaby began working in the investment
industry in 1996 and 1998, respectively.
The Lazard
Global Quality Growth strategy aims to invest in what the team
considers to be some of the best businesses in the world –
companies with sustainable competitive advantages that are expected
to generate consistently high returns on capital and that can
reinvest in their business to drive future growth. In identifying
and investing in such businesses investors see the cash flows
generated on their behalf re-invested at much higher returns than
available elsewhere. The investment approach is reinforced by 25
years of empirical research and supported by Lazard’s extensive
fundamental research team of global sector analysts.
Given
Lazard’s focus on future financial productivity, the investment
team fully integrates ESG analysis into its fundamental research.
The companies selected for the portfolio tend to be asset light and
well-managed with good governance, so the portfolio tends to have
an attractive ESG profile, with significantly lower carbon
footprint, lower carbon intensity, and lower ESG risk exposure than
the MSCI ACWI. This is an outcome of stock selection, not a target
objective. Details of the approach to stewardship, sustainability
and the investment process will be published in the Company’s ESG
section of the AIC website.
Full
details on the investment approach that Lazard will bring to Mid
Wynd can be accessed via: the Research & Insights/Investment
Research/Quality investing section of the main website:
www.lazardassetmanagement.com
Strategy
and Business Review
This
Strategic Report has been prepared in accordance with the Companies
Act 2006 (Strategic Report and Directors’ Report) Regulations
2013.
Purpose
Our
purpose is to increase the real wealth and prosperity of our
shareholders, thus helping them meet their long-term savings
needs.
Mid Wynd
International Investment Trust plc can trace its heritage back to
1797, when the founder of the Company set up a textiles business in
Dundee. Its origins as an
investment company date from 1949, when the Board began to manage
the financial reserves as a separate entity from the main trading
business. In September 1981, the
shares of Mid Wynd International Investment Trust plc were floated
on the London Stock Exchange. At that time, the Board was entrusted
by shareholders to manage their wealth, with a focus on investing
in global companies with strong growth prospects and sustainable
businesses. This focus remains as true for the Board and its
appointed investment manager today as it did back then.
Through
our investment company structure, we enable shareholders, large or
small, to invest in an actively-managed diversified portfolio of
securities in a cost-effective way, giving them access to the
growth opportunities offered by world markets.
Strategy
As stated
above, the Company’s purpose is to increase the real wealth and
prosperity of our shareholders, thus helping them meet their
long-term savings needs. To achieve this goal, the Company has
adopted a number of policies which are set out
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, the Company
is permitted by its policy to hold between 40 and 140 holdings;
however, the portfolio will generally hold a portfolio of shares at
the lower end of this range. The portfolio will be managed on a
global basis rather than as a series of regional sub-portfolios. As
at 30 June 2023 there were 53
holdings in the portfolio.
The Board
assesses investment performance with reference to the MSCI All
Country World Index (GBP). However, the Directors expect the
appointed investment manager to pay little attention 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 comparator index.
Business
model
The
Company is incorporated in Scotland and operates as an Investment Trust
Company. It is an investment company within the meaning of section
833 of the Companies Act 2006 (the “Act”) and is approved as an
investment trust by HM Revenue and Customs subject to the Company
continuing to comply with the requirements of section 1158 of the
Corporation Tax Act 2010. The Company has a premium listing on the
London Stock Exchange. The Company is also an Alternative
Investment Fund whose investment manager is regulated by the
Financial Conduct Authority.
The
Company has no employees and the Board, which comprises solely of
non-executive Directors, has delegated most of the Company’s
operational functions to a number of key service providers. All key
service providers are appointed under rolling contracts which are
periodically reviewed, at which time the appropriateness of the
continuing appointment of such service providers is considered.
Details of the key service providers are set out later in this
Annual Financial Report.
Dividend
policy
The
Company’s main focus is on growing shareholders’ capital.
Nevertheless, the Company does have a progressive dividend policy
which is not solely determined by the requirements of s1158 of the
Corporation Tax Act 2010 to retain no more than 15% of revenue
earnings in any financial year. The Board intends to grow
dividends, subject to the availability of distributable reserves.
Where appropriate, the Board may declare a special
dividend.
Gearing
and leverage
The
Company may use borrowings to support its investment strategy and
can borrow up to 30% of its net assets. The Company has a
USD60m multicurrency revolving credit
facility with the Bank of Nova
Scotia (London Branch)
which is available to the Company until 19
February 2024. As at 30 June
2023, no amounts were drawn down from this
facility.
The
Company’s gearing is reviewed by the Board and Investment Manager
on an ongoing basis. Given the current environment of high interest
rates and the need for amendments to the current facility to take
account of the new investment management arrangements, the Company
has decided to terminate the facility due to expire in February 2024. The use of gearing will be
reviewed in due course.
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 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 year. At 30 June 2023, the Company’s leverage was 99.95%
as determined using the Commitment method and 100.13% using the
Gross method. Further details can be found in the Glossary within
the Annual Financial Report.
Current
and future developments
A summary
of the Company’s developments during the year ended 30 June 2023 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 furthermore
considers the ongoing development and strategic direction of the
Company, as well as any risks which could impact on the Company’s
ability to achieve its strategic objective.
Culture
and values
Culture
Corporate
culture for an externally-managed investment trust like Mid Wynd
International Investment Trust plc, refers to the beliefs and
behaviours that determine how the Directors interact with one
another and how the Board manages relationships with shareholders
and key service providers, such as the appointed investment
manager. The culture is defined by the values which are set out
below. The s172 report included in this Strategy and Business
Review provides further details of how the Board has operated in
this regard.
Values
The Board
is mindful that it is overseeing the management of a substantial
investment portfolio on behalf of investors. In many cases, the
investment in the Company may represent a large proportion of an
individual’s savings. As all the Directors are invested in the
Company, the Directors’ interests are aligned with those of fellow
shareholders in this regard.
Our
approach to governing the Company is therefore underpinned by our
determination to do the right thing for our shareholders. Key to
this is having a constructive relationship with them, through
monthly updates, half-yearly and annual financial reports, and the
opportunity to meet with them at the Annual General Meeting, when
this is held under normal circumstances. We also believe in having
strong relationships with our key service providers, one based on
mutual trust and respect, with constructive challenge when
required. Below is a summary of the Board’s most important
values:
-
Excellence:
the Directors want the Company to succeed. The Board is focused on
its purpose of delivering long- term value for all its
shareholders, whether they are large or small. Focusing on this
strategic imperative and adopting best practice wherever
appropriate in all the Company’s dealings are key to driving
excellence. We will always put our shareholders first and will
constantly look at how to enhance long term value, for example
through the use of gearing, share issuance, and
buybacks.
-
Integrity:
the Board seeks to be ethical and honest, to comply with all laws
and regulations applicable to investment companies, avoid conflicts
of interest and have zero tolerance to bribery and corruption, tax
evasion or other fraudulent behaviour. It expects the same high
standards to be adopted by all its key service
providers.
-
Accountability:
the Board recognises the need to explain the Company’s performance
to investors, including the upsides, the downsides and the risks in
a clear, straightforward and transparent manner. Accountability
also involves the Board challenging its key service providers to
ensure the Company continues to receive a high standard of service
to drive long term shareholder value. Each of the Directors
recognises their individual responsibility to shareholders and
accordingly each of the Directors will stand for re-election at
each Annual General Meeting.
-
Respect:
the Board is collegiate and recognises the value of the diverse
backgrounds and opinions of its Directors. It also recognises the
importance of treating shareholders and key service providers with
respect. Contact by shareholders via the Chairman’s email address
cosec@junipartners.com is welcomed; the Company adheres to key
service provider terms and conditions such as prompt
payment.
-
Sustainable
investing, Stewardship and Environmental, Social and Governance
(“ESG”) issues: The Board, recognises that sustainability and ESG
matters should be cornerstones to the investment
approach.
Sustainability,
Stewardship and Environmental, Social & Governance Matters
(“ESG”)
The Board
recognises that sustainability and ESG matters are important
cornerstones to responsible investment; the Board is committed to
taking a responsible approach with the Company’s own governance
matters and, more materially, a responsible approach to the impact
the Company has through the investment decisions made by its
appointed investment manager.
The Board
delegates authority to its appointed investment manager to invest
responsibly; engaging actively with investee companies to
understand their management ethos and to seek sustainable
returns.
Given
Lazard’s focus on future financial productivity, the investment
team integrates ESG analysis into its fundamental research. The
companies selected for the portfolio tend to be asset light and
well-managed with good governance, so the portfolio tends to have
an attractive ESG profile, with significantly lower carbon
footprint, lower carbon intensity, and lower ESG risk exposure than
the MSCI ACWI Index. This is an outcome of stock selection, not a
target objective.
Portfolio
carbon emissions
The
challenges around climate change are of increasing concern. The
Board has placed greater importance on considering the issue
separately from other ESG issues.
The
portfolio’s carbon emissions have remained consistently below its
benchmark, the MSCI All Country World Index (GBP).
Company
engagement
The Board
expects its appointed investment manager to influence through
engagement. This is not always feasible given the small percentage
of any company’s stock which the Company generally holds. The Board
favours a policy of engagement over divestment. However, if
attempts to influence companies show little evidence of success and
they are failing to make their businesses more sustainable we
expect our appointed investment manager to sell
holdings.
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.
Further
details of the 2023 returns can be found within the Chairman’s
Statement and Investment Manager’s Review.
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 (“NAV”)
per share. The policy of the Board is to limit the discount or
premium to a maximum of 2 per cent of NAV 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. This policy has proved consistently effective in
generating value within the Company and protecting shareholders’
liquidity requirements. This current year has continued to bring
volatility from geopolitical events in Ukraine/Russia as well as inflationary pressures. The
Company’s shares, which were trading at a premium of 0.1% to NAV at
the start of the year, moved to a discount of 4.3% of NAV at the
year end. At all times the Company sought to manage the discount
and premium within the target parameters and achieved an average
discount of 1% over the year. While the Company declares its NAV
daily, markets are open almost twenty four hours per day and this
accounts for the wider range in premium and discount in 2023 shown
on the following chart. During the year the Company issued
1,133,200 shares raising £8.1m net of costs (representing 1.7% of
the issued share capital at the start of the year) and bought back
4,002,662 shares (representing 6.1% of the issued share capital at
the start of the year) at a cost of £28,729,744. As the Company has
utilised a significant proportion of the authorities granted by
shareholders at the last AGM to undertake buybacks, the Company
convened a special meeting on 8 September
2023 to apply for additional authorities up until the next
AGM. The reason for doing this was to ensure the Company would be
able to continue to operate its discount control programme
efficiently up until the next AGM.
Although
the Company incurs modest costs for operating the policy and when
renewing shareholder authority, issuance at a premium and buying
back at a discount under the policy more than compensates and is
consistently accretive to NAV.
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
decrease in average funds under management during the year and
certain one-off charges have led to an increase in the Company’s
current ongoing charges ratio to 0.62% (2022: 0.60%).
Dividend
per share
The Board,
in addition to capital growth, continues to pursue its policy of
growing dividends. 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.
Revenue earnings during the year decreased by 15% on what was a
very strong 2022 return. Revenue earnings will vary depending on
macro economic factors affecting investee companies and the
composition of the portfolio. As the majority of the Company’s
revenues are earned in foreign currencies changes in exchange rates
can also materially impact the GBP value of the Company’s earnings.
The earnings per share still allow the Board to increase the
interim and final dividends payable to shareholders along with the
addition of a special dividend of 1.70p. Subject to approval of the
final dividend by shareholders, a total regular dividend of
7.80 pence per share (2022:
7.20 pence per share) will be paid in
respect of the year ended 30 June
2023. This represents an increase of 8.3%.
Total
dividends payable for the year ended 30 June
2023, including the special dividend, amount to 9.50 pence per share.
Dividends
payable/paid in respect of the years ended June 2022 and June
2023 were fully covered by their respective current year
earnings.
Principal
risks and risk management
The Board
has carried out a robust assessment of the principal and emerging
risks facing the Company. Following consideration of the principal
risks, the Board has concluded that there are no emerging risks
facing the Company that should be added to the current principal
risks.
The Board,
has developed a risk map which sets out the principal risks faced
by the Company and the controls established to mitigate these
risks. This is an ongoing process and the risk map, including any
emerging risks, is formally reviewed at least every six months. The
Board pays particular attention to those risks that might threaten
the long-term performance or viability of the Company. Further
information on the Company’s risk management process is set out in
the corporate governance section within the Annual Financial
Report.
A summary
of the key areas of risk, their movement during the year and their
mitigation is set out below:
Movement
|
Principal
risk
|
Mitigation/control
|
|
No
change
|
Strategic
risk
The
management
of
the
portfolio
of
the
Company
may not
achieve
its
investment
objective
and
policy.
|
The
investment objective and policy of the Company is set by the Board
and is subject to ongoing review and monitoring in conjunction with
the appointed investment manager.
The
Company’s investments are selected on their individual
merits
and
the
performance
of
the
portfolio
may not track the wider market (represented by the MSCI
All
Country
World
Index).
The
Board
believes
this
approach will continue to generate good long-term returns for
shareholders. Risk is diversified through a broad
range of investments being held. Both the existing
and
future
investment
managers
have
proven
track records; the Board discusses the investment portfolio and its
performance with the appointed investment manager at each Board
meeting.
|
|
|
Increased
Risk
|
Market
risks
The
Company invests in a portfolio of international quoted
equities.
The
prices
of
equity
investments
may
be
volatile
and
are
affected
by
a
wide
variety
of
factors many of
which can be unforeseen and are outwith the control
of
the
investee
company
or
the
appointed
investment manager. These price movements could result in
significant losses for the Company.
Current
events
such
as
inflationary
pressures
and
the
current war
in
Ukraine
may
negatively
affect
investment
values leading
to
the
inability
to
buy,
sell
or
value
assets
at a
competitive
price,
and
have
an
adverse
effect
on
the Company’s
results.
The
market
risk
has
increased
due to these pressures.
The
Company’s
functional
currency
and
that
in
which it
reports its results is sterling. However, the majority of the
Company’s assets, liabilities and income are denominated in
currencies other than sterling. Consequently, movements in exchange
rates will affect the
sterling
value
of
those
items.
The
country
in
which a
portfolio
company
is
listed
is
furthermore
not
necessarily where it earns its profits and movements in
exchange rates
on
overseas
earnings
may
have
a
more
significant impact upon a portfolio company’s valuation than a
simple translation of that company’s share price into
sterling.
The
Company
does
not
generally
hedge its
currency exposures and changes in exchange rates may
lead
to
a
reduction
in
the
Company’s
NAV.
Globally,
climate
change
effects
are
already
emerging in the
form of changing weather patterns. Extreme
weather
events
could
potentially
impair
the
operations of
individual investee companies, potential investee companies, their
supply chains and their customers.
The war in
Ukraine and other geopolitical events have resulted in increasing
levels of inflation directly affecting economic growth and the
underlying investment values.
|
The
Board
considers
that
the
risk
of
market
volatility
is
mitigated by
the
longer-term
nature
of
the
investment
objective and
the
Company’s
closed-ended
structure,
and that such investments should be a source of positive returns
for shareholders over the long term.
Risks are
diversified through having a range of investments in the portfolio
with exposure to various geographies, sectors and
themes.
Both the
existing and future investment managers have proven track records
and are required to report regularly to
the
Board
on
market
developments.
At
each
Board meeting
the
appointed
investment
manager
is asked
to
provide
explanations
for
the
performance
of the portfolio and the rationale for any changes in
equity
investments,
sectors
and
geographies.
Any
use of
derivatives
to
manage
market
risks
requires
Board
approval.
Both
the
existing
and
the
future
investment
managers
take
climate
risks
into
account,
along
with
the
downside risk
to
any
company
(whether
in
the
form
of
its
business prospects
or market valuation or sustainability of
dividends)
that
is
perceived
to
be
making
a
detrimental
contribution
to
climate
change.
The
Company
invests
in
a
broad
portfolio
of
businesses
with
operations
spread
geographically, which should limit the impact of
location-specific
weather
events.
The Board
and its appointed investment manager
have
regular
discussions
to
assess
the
likely
impact
of inflation
rates on the economy, corporate profitability and asset
prices.
|
No
change
|
Legal
and
regulatory
risk
Changes to
the requirements of the framework of regulation and legislation
(including rules relating to listed closed-end investment
companies), within which
the
Company
operates,
could
have
a
material
adverse effect on
the ability of the Company to carry on its business
and
maintain
its
listing.
A
change
to
the
legal
or regulatory
rules
in
the
future
could,
amongst
other
things, lead to the Company being subject to tax on capital
gains.
|
The
Company relies on the services of the company
secretary
and
investment
manager
to
monitor
ongoing compliance
with relevant regulations, accounting standards and legislation.
The company secretary and investment manager also appraise the
Board of any prospective changes to the legal and regulatory
framework so
that
any
requisite
actions
can
be
planned.
The
Board
receives
quarterly
compliance
reports
from the
investment manager and depositary confirming compliance with
regulations. These reports also
highlight
any
matter
that
the
relevant
compliance
team feel
should be brought to the Board’s attention.
|
|
|
|
Operational
risks
|
|
|
|
No
Change
|
Reliance
on
third-party
service
providers
The
Company
has
no
employees
and
all
of
the
Directors
have been appointed on a non-executive basis; all operations are
outsourced to third-party service providers. Failure
by
any
service
provider
to
carry
out
its obligations
to
the
Company
in
accordance
with
the
terms of
its
appointment,
to
protect
against
breaches
of the Company’s legal and regulatory obligations such as data
protection or to perform its obligations to the Company
at
all
as
a
result
of
insolvency,
fraud,
breaches
of cybersecurity,
failures
in
business
continuity
plans
or
other causes,
could
have
a
material
adverse
effect
on the
Company’s operations.
|
Experienced
third-party
service
providers
are
employed
by the Company under appropriate terms and conditions and with
agreed service level specifications. The Board receives regular
reports from its service providers and reviews the performance of
its key service providers at least annually.
|
|
|
No
change
|
Reliance
on
key
personnel
The
Company’s
portfolio
is
managed
by
the
appointed investment
manager and in particular the fund management team which has direct
responsibility for
portfolio
selection.
Any
change
in
relation
to the
investment executives may adversely affect the performance of the
Company.
|
As
reported,
it
was
announced
earlier
in
the
year,
that the
two key individuals responsible for managing the
Company’s
investments,
would
be
leaving
Artemis.
As these
were
key
men,
the
Board
decided
that
it
needed
to
review
the
ongoing
fund
management
of
the
Company and
following
that
review,
appointed
Lazard
Asset
Management to take over the investment management role
in
October
2023.
The
Lazard
team
is
led
by
two
key
individuals, each
of
whom
have
worked
for
Lazard
for
many years
and
have
a
successful
track
record.
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
Viability
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 beyond the twelve months
required by the going concern basis of accounting. The period of
assessment, in line with our Key Information Document, is five
years to 30 June 2028. The Board has
concluded that this period is appropriate, taking into account the
Company’s investment objective and policy and the long-term
investor outlook.
In
reviewing the Company’s viability, the Board considered the
Company’s business model, the principal risks and uncertainties,
including geo-political risks, current high inflation and interest
rates and the ensuing market volatility as well as emerging risks
such as climate change risks. The Company invests in listed
securities and has a liquid portfolio.
Following
the publication of this Annual Financial Report, the Company’s
investment management arrangements will change with Lazard taking
over responsibility for managing the Company’s investments in
October following Simon Edelsten’s retirement from the Artemis
partnership. In considering the Company’s prospects over the next
five years, the Directors have assumed that Lazard will, on behalf
of the Company, continue to follow the Company’s investment
objective, that the Company’s performance will continue to be
attractive to shareholders, and that the Company will continue to
meet the requirements to retain its status as an investment
trust.
The
Company is authorised to trade as an investment company and has the
associated tax benefits. Any change to the Company’s tax
arrangements could affect the Company’s viability as an effective
investment vehicle.
The Board
considered a five year forecast and a number of stress test
scenarios in connection with a sustained fall in markets. The Board
also considered the Company’s ongoing income and expenses and the
liquidity of the Company’s portfolio to ensure that the Company
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 next five
years.
Duty
to Promote the Success of the Company
How
the Directors discharge their duties under s172 of the Companies
Act
Under
section 172 of the Companies Act 2006, the Directors have a duty to
act in good faith and to promote the success of the Company for the
benefit of its shareholders as a whole, and in doing so have regard
to:
a) the
likely consequences of any decision in the long term,
b) the
interests of the company’s employees,
c) the
need to foster the company’s business relationships with suppliers,
customers and others,
d) the
impact of the company’s operations on the community and the
environment,
e) the
desirability of the company maintaining a reputation for high
standards of business conduct, and
f) the
need to act fairly as between members of the company.
As an
externally managed investment trust, the Company has no employees
or physical assets. Our shareholders, our investee companies, our
key external service provider, the investment manager, and other
professional service providers, such as the administrator,
depositary, registrar, auditor, corporate broker, tax adviser and
lenders are all considered to fall within the scope of section
172.
During the
year ended 30 June 2023, Artemis
acted as the Company’s Investment Manager, Fund Administrator and
Company Secretary. JP Morgan Europe Limited was the Company’s
Depositary until 3 March 2023 when
this service was moved to Northern Trust as part of a wider project
initiated by Artemis and approved by the Board. As announced
previously, the Board has appointed Lazard to replace Artemis Fund
Managers as Investment Manager with effect from October 2023. Following this change, the Board
has also appointed Juniper Partners Limited as Company Secretary
and Fund Administrator in place of Artemis Fund Managers; JP Morgan
Europe Limited will additionally resume depositary
services.
Whilst
certain responsibilities are delegated, the Board retains
responsibility for promoting the success of the Company; the
Directors’ responsibilities are set out in the schedule of matters
reserved for the Board and the terms of reference of its
committees, all of which are reviewed regularly by the
Board.
The
Company’s culture and values, as described within the Annual
Financial Report, have been established by the Board to manage its
key business relationships. The Company’s approach on anti-bribery
and prevention of tax evasion can also be found within the Annual
Financial Report and on the Company’s website at
midwynd.com.
Engagement
with
key
stakeholders
Stakeholders
|
Benefits
of
engagement
|
How
the
Company
engages
with
Stakeholders
|
|
Shareholders
and potential
investors
|
The Board
is responsible for promoting the success of
the
Company
for
the
benefit
of the
shareholders, taken as a whole, having regard to the matters listed
above and its
stakeholders.
Communicating
with shareholders is essential to ensure the Board is fully aware
of shareholder requirements so that it can
respond to evolving shareholder needs. It is also important that
the Company communicates its strategy and performance regularly and
effectively to shareholders to
ensure
there
continues
to
be demand
for
the
Company’s
shares.
|
To achieve
its objective of promoting the success of the Company, for the
benefit of the
shareholders,
taken
as
a
whole,
the
Board
approaches engagement from two angles – how the
Board
communicates
its
strategy
and performance
to
shareholders
and
how
it
addresses feedback / communications received from
shareholders.
Engagement
with
shareholders
is
both
by the
Board and the Company’s appointed investment manager. Through the
publication of the Annual Financial Report, the Half-Yearly Report,
monthly factsheets, RNS announcements and Fund Manager updates to
the Company’s website, shareholders are kept informed of
developments in Company strategy as
well
as
Company
performance
and
portfolio activities. The appointed investment manager presents at
conferences and webinars throughout the year. The Annual General
Meeting presents a further opportunity for shareholders
to
meet
the
Board
and
appointed
investment manager in person.
The Board
receives regular feedback on shareholder meetings from the
Company’s broker and, where appropriate the Chairman. Any
communications from shareholders are reviewed and
discussed
by
the
Board
at
Board
meetings to ensure that shareholder views are taken
into consideration as part of any decisions taken.
Shareholders
are
encouraged
to
raise
questions
and communicate with the Chairman and the appointed investment
manager either through the Company’s website or by attending and
asking questions at the AGM.
The Board
considers communication with shareholders an important function and
Directors are always available to respond to shareholder queries.
For further information see ‘Relations with shareholders’ within
the Annual Financial Report.
|
|
|
|
|
Stakeholders
|
Benefits
of
engagement
|
How
the
Company
engages
with
Stakeholders
|
|
Investment
Manager
|
Engagement
with
the
Company’s
appointed
investment manager
is
necessary
to:
■
-
evaluate its
performance
against
the
Company’s stated investment strategy and
to
understand
any
risks
or
opportunities this may present;
■
- ensure
the investment manager operates within
parameters
set
by
the
Board;
■
- ensure
the Board understands key performance issues
to
inform
strategy
and enable
good
communication
with
shareholders;
■
- provide
the Board with assurances
that
the
investment
manager’s
internal controls
are
operating
effectively;
and
■
- ensure
the investment manager’s approach to the management of
environmental,
social
and
governance (“ESG”)
issues
accords
with
the
Board’s values
|
The
Board,
with
the
support
of
its
Management
Engagement Committee, regularly reviews the
performance of the appointed investment manager to ensure that
services provided to the Company are
managed
efficiently
and
effectively
for the
benefit
of
the
Company’s
shareholders.
The Board
meets formally with the investment manager at quarterly Board
meetings. The investment manager presents a review of the quarter
and any pertinent information on the portfolio and its
transactions. Informal calls
and
ad
hoc
meetings
occur
throughout
the
year and
especially at times of heightened market
volatility.
The
Board
reviews
and
discusses
plans
for
the
future marketing,
strategy
and
development
of the
Company with the investment manager.
Reports on
the internal controls operated by the appointed investment manager
to safeguard the Company’s assets and to ensure transactions and
financial reporting are materially correct are received
from
the
investment
manager
and
reviewed by
the
Board
and
Audit
Committee
as
appropriate.
|
|
Other
third-party
service
providers
|
As
an
investment
company,
all
services
are
outsourced
to
third-party
service
providers.
In
addition to investment management, other outsourced services
include the Depositary, the
Fund
Administrator,
the Company Secretary, the Broker, the Registrar,
the
Company’s
Lender,
its
Tax
Adviser and the Auditor.
The
Company has detailed the parameters within which
authority
has
been
delegated
and set service levels to monitor service provider
performance.
Engagement
is
important
to
ensure
that:
■
- all
service providers are delivering services in accordance with their
service level agreements;
■
-
any operational
issues
are
discussed with
the
Board; and
■
- the
Board receives appropriate
assurances
that
the
providers’
internal controls
are
operating
effectively.
|
The
appointed
investment
manager
has
frequent
interaction
with
the
key
service
providers
and
their
performance
is
continually
monitored
throughout the
year.
The
Management Engagement Committee
annually
reviews
the
performance
of
key
service
providers,
along
with
their
fee
levels,
and
provides recommendations
to
the
Board
as
required.
As
and
when
appropriate,
third
party
providers
present
to
the
Board.
Annual
assurance
reports
are
received
to
assist
the
review
of
the
internal
control
environments
of the
Depositary
and
Registrar.
|
|
|
Stakeholders
|
Benefits
of
engagement
|
How
the
Company
engages
with
Stakeholders
|
|
Investee
companies
|
The Company’s success relies on its choice
of
investments
and
the
performance
of
those investments.
Engagement
by
the
appointed
investment
manager
with
the
investee
companies
has two
principal
aims:
- to aid
the appointed investment manager to understand investee
companies
and the
factors which drive their performance so as to make better
investment decisions: and
- to drive
positive change in investee companies through
active
stewardship.
The aim of such engagement is to improve performance and hence
shareholder returns.
|
The Board
sets the investment objective and discusses stock selection, asset
allocation, and the ESG qualities of investee companies with the
appointed investment manager at each Board meeting.
The
investment manager engages with the
investee
companies,
prior
to
investment
and
on an
on-going basis.
The
Board
has
discussed
with
both
Artemis
Fund
Managers
and
Lazard
Asset
Management
how Environmental,
Social
and
Governance
(“ESG”) factors
are taken into account when selecting
and
retaining
investments
for
the
Company.
The Board
recognises
the
importance
of
ESG
both
in the
investment
process
and
the
stewardship
role.
Both
Artemis Fund Managers and Lazard Asset Management endorse the UK
Stewardship
Code.
|
|
|
|
|
|
|
|
Board
discussions
and
decisions
Key
discussions
and
decisions
made
by
the
Board
since
the
last
annual
financial
report:
|
Topic
|
Background
&
discussion
|
Decision
|
|
Change
in
Investment
Manager
|
Following
the announcement of the retirement of fund manager Simon Edelsten
from the Artemis partnership and the departure of Alex Illingworth,
the Board assessed its ongoing investment management arrangements
and, in conjunction with its adviser, Barnett Waddington, undertook
a rigorous assessment of potential management
options.
|
It was
decided that following the retirement of Simon Edelsten from
Artemis and the departure of Alex
Illingworth,
it
was
in
shareholders’
best
interests that Lazard be appointed as the new Investment Manager
with effect from October 2023.
It
is
anticipated
that
Simon
Edelsten
will remain responsible for the Company’s investments until the
Company’s transition to Lazard. During the manager review process,
the Chairman engaged with some of the Company’s largest
shareholders to ensure they were happy with the approach being
taken.
|
|
Share
issuance
and
buyback
|
The
Board
discussed
the
on-going
strategy of
share
issuance
and
buyback
to
assist
in
controlling the
share
premium/discount
to
NAV.
|
It was
decided this strategy was working as required and the Board
continued to give authority as required. The announcement of the
departure from the Artemis partnership of Simon Edelsten
and
Alex
Illingworth
coincided
with a widening of discounts to NAV in the investment trust sector.
The Company has been particularly active,
during
this
period,
to
ensure
that the Company’s shares trade at a narrow discount
to
NAV.
To
ensure
the
Company
has
sufficient shareholder
authority
to
continue
to operate the discount control mechanism (which seeks to maintain
a share price within 2% of
the
Company’s
NAV)
the
Board
resolved
to seek additional authority from shareholders to
continue
to
buy
back
the
Company’s
shares
at a
special
general
meeting
convened
for
8
September 2023.
|
Topic
|
Background
&
discussion
|
Decision
|
|
Third
party
service
providers
|
The
Company moved its depositary services from JP
Morgan
Europe
to
Northern
Trust in
March 2023
as
part
of
a
larger
initiative
by
Artemis
Fund
Managers. Further changes in the wake of the
replacement
of
Artemis
Fund
Managers
as Investment
Manager
have
also
now
been
set in
motion.
|
The
Board
was
satisfied
that
changing
depositary
so that all funds operated by Artemis Fund Managers would be
administered by one party was
in shareholders’ best interests and
accordingly
Northern
Trust
replaced
JP
Morgan
Europe
in
March
2023.
Since
the
announcement of
the
replacement
of
Artemis
Fund
Managers
by Lazard
Asset
Management,
the
Company
has
decided
to
reappoint
JP
Morgan
as
the
Company’s depositary.
Artemis Fund Managers has
additionally
been
responsible
for
the
Company’s Company
Secretary services and this role, alongside the fund administration
services, will be transferred to Juniper Partners
with
effect
from
October
2023. In
selecting new service providers, the Board considered
a
number
of
proposals
tendered
by
recognised industry
providers
and
concluded
that
the
appointment
of
the
providers
selected
was
in shareholders’
best
interests.
|
|
Gearing
|
The
Board
discussed
the
current
policy
and level
of
gearing
utilised.
|
The
Board
has
considered
its
continuing
use
of
gearing
in
light
of
current
high
interest
rates
and the
proposed
change
in
Investment
Manager.
It has
been
decided
that
the
current
bank
facility
should not be retained and accordingly the
facility
will
be
terminated
shortly.
The
future
use of gearing
by the Company will be kept under
review.
|
|
Board
evaluation
|
The
Board
discussed
how
to
conduct
its
annual board
evaluation.
|
It
was
agreed
that
an
external
specialist
should
be appointed
to
lead
the
evaluation.
Following
the evaluation process, a number of changes have been made to the
administration of the Board and its committees.
|
|
|
|
|
|
|
|
|
The
Board’s primary focus is to promote the long-term success of the
Company for the benefit of the Company’s shareholders. In doing so,
the Board has regard to the impact of its actions on other
stakeholders as described above.
Directors
& diversity
The
Directors of the Company and their biographical details are set out
within the Annual Financial Report.
No
Director has a contract of service with the Company.
The Board
supports the recommendations of the Hampton-Alexander Review on
gender diversity and the Parker Review on ethnic representation on
Boards.
The Board
recognises the principles of diversity in the boardroom and
acknowledges the benefits of having greater diversity, including
gender, social and ethnic backgrounds, and cognitive and personal
strengths. When setting a new appointment brief, the Nomination
Committee considers diversity alongside seeking to ensure that the
overall balance of skills and knowledge that the Board has remains
appropriate, so that it can continue to operate effectively. The
Board’s Director selection policy will, first and foremost, seek to
identify the person best qualified to become a Director of the
Company, based on merit and objective criteria.
The Board
is currently comprised of four male Directors and one female
Director.
The
FCA announced a new policy statement on diversity and inclusion on
company boards in April 2022.
Companies are required to comply with the targets or explain the
reasons for non-compliance. Outlined below is an overview of the
targets and the Company’s compliance as at 30 June 2023 in accordance with Listing Rule
9.8.6R(9):
-
40% of the
Board is represented by women: As at 30 June
2023 the Company only has one female Director. The Company
therefore does not meet this diversity target.
-
One woman
in a senior position: during the year to 30
June 2023, Diana Dyer
Bartlett held the position of Chair of the Audit Committee.
In the absence of Executive roles, the Company considers the role
of Chairman of the Audit Committee to qualify as a senior position.
The Board therefore considers that it met this target.
-
One
individual from a minority ethnic background: as at 30 June 2023, no individuals on the Board are
from a minority ethnic background. The Company therefore does not
therefore meet this diversity target.
The Board
does not currently meet the targets described above for the
following reasons:
-
The Board
is small and rotation of Directors does not take place every
year.
-
The
specialist headhunters retained by the Board to seek a new Board
Director in 2023 were asked to seek candidates from a broad range
of diverse backgrounds, especially those who would extend the
Board’s gender and ethnic minority representation. Following
completion of this process, the Board concluded that Hamish Baillie was the best qualified,
notwithstanding that his appointment would not enable the Company
to comply with guidance on gender or ethnic minority
representation.
For future
director appointments, the Board will seek to meet the guidelines
on diversity targets.
The
following tables set out the data on the diversity of the Directors
on the Company’s Board in accordance with Listing Rule 9.8.6R(10)
as at 30 June 2023. This data has
been collected through consultation with the Board. There have been
no changes in the below data since 30 June
2023.
|
Number
of
Board
members
|
Percentage
of
the
Board
|
Number
of senior
positions
on
the
Board
|
Number
in
executive
management3
|
Percentage
of
executive
management3
|
Men
|
4
|
80%
|
11
|
N/A
|
N/A
|
Women
|
1
|
20%
|
02
|
N/A
|
N/A
|
Not
specified/prefer
not
to
say
|
–
|
–
|
–
|
N/A
|
N/A
|
1 Russell
Napier
is
the
Chairman
of
the
Board,
a
senior
position
as
defined
by
the
Listing
Rules.
2
Diana
Dyer
Bartlett
is
the
Chairman
of
the
Audit
Committee.
Although
this
is
not
a
senior
position
as
defined
by
the
Listing
Rules,
in
the absence
of
executive
roles,
the
Company
considers
this
role
to
be
a
senior
position.
3 Not
applicable
as
the
Company
does
not
have
an
executive
management
team.
Number
of
Board
members
|
Percentage
of
the
Board
|
Number
of senior
positions
on
the
Board
|
Number
in
executive
management2
|
Percentage
of
executive
management1
|
White
British
or
other
White
|
5
|
100%
|
11
|
N/A
|
N/A
|
Mixed/Multiple
ethnic
groups
|
0
|
0%
|
0
|
N/A
|
N/A
|
Asian/Asian
British
|
0
|
0%
|
0
|
N/A
|
N/A
|
Black/African/Caribbean/Black
British
|
0
|
0%
|
0
|
N/A
|
N/A
|
Other
ethnic
group,
including
Arab
|
0
|
0%
|
0
|
N/A
|
N/A
|
Not
specified/prefer
not
to
say
|
–
|
–
|
–
|
N/A
|
N/A
|
1 The
Chairman
of
the
Board
is
a
senior
position
as
defined
by
the
Listing
Rules.
In
the
absence
of
executive
roles,
the
Company
also
considers
the Chairman
of
the
Audit
Committee
to
be
a
senior
position.
2 Not
applicable
as
the
Company
does
not
have
an
executive
management
team.
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.
Sustainability
and environmental, social and governance (‘ESG’)
matters
The Board
recognises that the most material way in which the Company can have
an impact on ESG is through responsible ownership of its
investments. The Company’s appointed investment manager is expected
to engage actively with investee companies undertaking extensive
evaluation and engagement 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 includes matters relating to
material environmental, human rights and social considerations that
will ultimately impact the profitability of a company or its stock
market rating.
For and on
behalf of the Board,
Russell Napier
Chairman
5 September 2023
Statement
of Directors' Responsibilities in respect of the Annual Financial
Report and the Financial Statements
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 the
Directors
have
elected
to
prepare
the
financial
statements
in accordance
with
UK
Accounting
Standards,
including
FRS
102
‘The Financial
Reporting
Standard
Applicable
in
the
UK
and
Republic of Ireland’.
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, a Directors’ Report
and Corporate Governance Statement, and a Directors’
Remuneration
Report
that
complies
with
that
law and
those regulations.
The
financial statements are published on a website, midwynd.com,
maintained by the Company’s Investment Manage. 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
2023
and
of
the
profit
for
the year
then ended;
(b)
in
the
opinion
of
the
Directors,
the
Annual
Financial
Report
taken as
a
whole,
is
fair,
balanced
and
understandable
and it
provides
the
information
necessary
to
assess
the
Company’s position and performance, business model and strategy;
and
(c)
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.
Russell
Napier
Chairman
5 September
2023
Statement
of Comprehensive Income for
the year ended 30 June
2023
|
2023
Revenue
£’000
|
2023
Capital
£’000
|
2023
Total
£’000
|
2022
Revenue
£’000
|
2022
Capital
£’000
|
2022
Total
£’000
|
Gains/(losses)
on
investments
|
–
|
19,123
|
19,123
|
–
|
(45,017)
|
(45,017)
|
Currency
gains
|
–
|
636
|
636
|
–
|
446
|
446
|
Income
|
8,725
|
–
|
8,725
|
9,377
|
–
|
9,377
|
Investment
management
fee
|
(575)
|
(1,726)
|
(2,301)
|
(609)
|
(1,828)
|
(2,437)
|
Other
expenses
|
(572)
|
(8)
|
(580)
|
(488)
|
(8)
|
(496)
|
Net
return/(loss)
before
finance
costs
and
taxation
|
7,578
|
18,025
|
25,603
|
8,280
|
(46,407)
|
(38,127)
|
Finance
costs
of
borrowings
|
(167)
|
(506)
|
(673)
|
(83)
|
(252)
|
(335)
|
Net
return/(loss)
on
ordinary
activities
before
taxation
|
7,411
|
17,519
|
24,930
|
8,197
|
(46,659)
|
(38,462)
|
Taxation
on
ordinary
activities
|
(884)
|
–
|
(884)
|
(854)
|
–
|
(854)
|
Net
return/(loss)
on
ordinary
activities
after
taxation
|
6,527
|
17,519
|
24,046
|
7,343
|
(46,659)
|
(39,316)
|
Net
return/(loss)
per
ordinary
share
|
10.01p
|
26.86p
|
36.87p
|
11.72p
|
(74.47p)
|
(62.75p)
|
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.
The
net return/(loss)
for
the year
disclosed
above represents
the
Company’s total
comprehensive
income.
Statement
of Financial Position as at 30 June
2023
|
2023
£’000
|
2022
£’000
|
Non-current
assets
|
|
|
Investments
held
at
fair
value
through
profit
or
loss
|
438,938
|
439,101
|
Current
assets
|
|
|
Debtors
|
675
|
24,969
|
Cash
and
cash
equivalents
|
12,243
|
7,096
|
|
12,918
|
32,065
|
Creditors
|
|
|
Amounts
falling
due
within
one
year
|
(2,830)
|
(18,513)
|
Net
current
assets
|
10,088
|
13,552
|
Total
net
assets
|
449,026
|
452,653
|
Capital
and
reserves
|
|
|
Called
up
share
capital
|
3,320
|
3,271
|
Capital
redemption
reserve
|
16
|
16
|
Share
premium
|
242,115
|
235,110
|
Capital
reserve
|
196,730
|
206,979
|
Revenue
reserve
|
6,845
|
7,277
|
Shareholders’
funds
|
449,026
|
452,653
|
Net
asset
value
per
ordinary
share
|
719.84p
|
692.01p
|
These
financial
statements
were
approved
by
the
Board
of
Directors
and
signed
on
its
behalf
on
5 September
2023.
Russell
Napier
Chairman
Statement
of Changes in Equity
For
the year ended 30 June
2023
|
Share
capital
£’000
|
Capital
redemption
reserve
£’000
|
Share
premium
£’000
|
Capital
reserve1,2
£’000
|
Revenue
reserve2
£’000
|
Shareholders’
funds
£’000
|
Shareholders’
funds at
1 July
2022
|
3,271
|
16
|
235,110
|
206,979
|
7,277
|
452,653
|
Net return on ordinary activities after
taxation
|
–
|
–
|
–
|
17,519
|
6,527
|
24,046
|
Issue
of
new
shares
(net
of
costs)
|
49
|
–
|
6,946
|
–
|
–
|
6,995
|
Issue
of
shares
from
treasury
|
–
|
–
|
59
|
1,116
|
–
|
1,175
|
Repurchase
of
shares
into
treasury
|
–
|
–
|
–
|
(28,884)
|
–
|
(28,884)
|
Dividends
paid
|
–
|
–
|
–
|
–
|
(6,959)
|
(6,959)
|
Shareholders’
funds
at
30
June
2023
|
3,320
|
16
|
242,115
|
196,730
|
6,845
|
449,026
|
For
the year ended 30 June
2022
|
Share
capital
£’000
|
Capital
redemption
reserve
£’000
|
Share
premium
£’000
|
Capital
reserve1,2
£’000
|
Revenue
reserve2
£’000
|
Shareholders’
funds
£’000
|
Shareholders’
funds at
1 July
2021
|
2,997
|
16
|
191,253
|
253,638
|
4,189
|
452,093
|
Net
(loss)/return
on
ordinary
activities
after
taxation
|
–
|
–
|
–
|
(46,659)
|
7,343
|
(39,316)
|
Issue
of
new
shares
(net
of
costs)
|
274
|
–
|
43,857
|
–
|
–
|
44,131
|
Dividends
paid
|
–
|
–
|
–
|
–
|
(4,255)
|
(4,255)
|
Shareholders’
funds
at
30
June
2022
|
3,271
|
16
|
235,110
|
206,979
|
7,277
|
452,653
|
1
Capital
reserve
as
at
30
June
2023
includes
realised
gains
of
£155,914,000
(30
June
2022:
£191,640,000).
2 The
Company
may
pay
dividends
from
both
capital
and
revenue
reserves.
Statement
of Cash Flows for the year ended 30 June
2023
|
2023
£’000
|
2023
£’000
|
2022
£’000
|
2022
£’000
|
Cash
generated
in
operations
|
|
5,486
|
|
4,768
|
Interest
received
|
286
|
|
10
|
|
Interest
paid
|
(704)
|
|
(335)
|
|
|
|
(418)
|
|
(325)
|
Net
cash
inflow
from
operating
activities
|
|
5,068
|
|
4,443
|
Cash
flow
from
investing
activities
|
|
|
|
|
Purchase
of
investments
|
(554,175)
|
|
(689,754)
|
|
Sale
of
investments
|
585,162
|
|
639,527
|
|
Realised
currency
gains
|
28
|
|
1,517
|
|
Net
cash
generated
from/(used
in)
investing
activities
|
|
31,015
|
|
(48,710)
|
Cash
flow
from
financing
activities
|
|
|
|
|
Issue
of
new
shares,
net
of
costs
|
6,995
|
|
44,131
|
|
Issue
of
shares
from
treasury
|
1,175
|
|
–
|
|
Repurchase
of
share
to
treasury,
net
of
costs
|
(26,804)
|
|
–
|
|
Dividends
paid
|
(6,959)
|
|
(4,255)
|
|
Net
repayment
of
credit
facility
|
(5,292)
|
|
(5,064)
|
|
Net
cash
(used
in)/generated
from
financing
activities
|
|
(30,885)
|
|
34,812
|
Net
increase/(decrease)
in
cash
and
cash
equivalents
|
|
5,198
|
|
(9,455)
|
Cash
and
cash
equivalents
at
start
of
the
year
|
|
7,096
|
|
16,556
|
Increase/(decrease)
in
cash
in
the
year
|
|
5,198
|
|
(9,455)
|
Currency
losses
on
cash
and
cash
equivalents
|
|
(51)
|
|
(5)
|
Cash
and
cash
equivalents
at
end
of
the
year
|
|
12,243
|
7,096
|
Notes
to the Financial Statements
-
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 by the Association of
Investment Companies (the ‘AIC’) in July
2022.
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.
-
Income
|
2023
£’000
|
2022
£’000
|
Income
from
investments
|
|
|
Overseas
dividends
|
7,447
|
8,149
|
UK
dividends
|
992
|
1,110
|
Scrip
dividends
|
–
|
108
|
|
8,439
|
9,367
|
Other
income
|
|
|
Bank
interest
|
286
|
10
|
Total
income
|
8,725
|
9,377
|
Total
income
comprises:
|
|
Dividends
and
UK
interest
from
financial
assets
designated
at
fair
value
through
profit
or
loss
|
8,439
|
9,367
|
Other
income
|
286
|
10
|
Total
income
|
8,725
|
9,377
|
-
Dividends
paid
and
proposed
|
2023
|
2022
|
2023
£’000
|
2022
£’000
|
Amounts
recognised
as
distributions
in
the
year:
|
|
|
|
|
Unclaimed
dividends
refunded
to
the
Company
|
–
|
–
|
–
|
(14)
|
Previous
year’s
final
dividend
|
3.70p
|
3.30p
|
2,431
|
2,018
|
Previous
year’s special dividend
|
3.00p
|
nil
|
1,972
|
nil
|
First
interim
dividend
|
3.85p
|
3.50p
|
2,556
|
2,251
|
Total
dividend
|
10.55p
|
6.80p
|
6,959
|
4,255
|
Set out
below are the total dividends paid and payable in respect of the
financial year. The revenue available for distribution by
way of
dividend
for
the
year
is
£6,527,000
(2022:
£7,343,000).
|
2023
|
2022
|
2023
£’000
|
2022
£’000
|
Dividends
paid
and
payable
in
respect
of
the
year:
|
|
|
|
|
First
interim
dividend
|
3.85p
|
3.50p
|
2,556
|
2,251
|
Proposed
final
dividend
|
3.95p
|
3.70p
|
2,463
|
2,431
|
Special
dividend
|
1.70p
|
3.00p
|
667
|
1,972
|
Total
dividend
|
9.50p
|
10.20p
|
5,686
|
6,654
|
-
Net
return/(loss)
per
ordinary
share
|
|
2023
Revenue
|
2023
Capital
|
2023
Total
|
2022
Revenue
|
2022
Capital
|
2022
Total
|
Net
return/(loss)
on
ordinary
activities
after
taxation
|
10.01p
|
26.86p
|
36.87p
|
11.72p
|
(74.47p)
|
(62.75p)
|
|
|
|
|
|
|
|
|
Revenue
return
per
ordinary
share
is
based
on
the
net
revenue
return
on
ordinary
activities
after
taxation
for
the
financial
year of
£6,527,000
(2022:
£7,343,000)
and
on
65,211,820
(2022:
62,652,936)
ordinary
shares,
being
the
weighted
average
number
of
ordinary shares
in
issue
(excluding
treasury
shares)
during
the
year.
Capital
gain per ordinary
share is
based on
the net
capital gain
on ordinary
activities after
taxation for
the financial
year
of
£17,519,000 (2022:
loss
£46,659,000) and
on
65,211,820 (2022:
62,652,936)
ordinary shares,
being
the
weighted average
number
of ordinary
shares
in
issue
during
the
year.
-
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
were
as
follows:
|
2023
Net
asset
value
per
share
|
2023
Net
assets
£’000
|
2022
Net
asset
value
per
share
|
2022
Net
assets
£’000
|
Ordinary
shares
|
719.84p
|
449,026
|
692.01p
|
452,653
|
During
the
year
the
movements
in
the
assets
attributable
to
the
ordinary
shares
were
as
follows:
|
2023
£’000
|
2022
£’000
|
Total
net
assets
at
1
July
|
452,653
|
452,093
|
Total
recognised
gains/(losses)
for
the
year
|
24,046
|
(39,316)
|
Issue
of
new
shares
|
6,995
|
44,131
|
Issue
of
shares
from
treasury
|
1,175
|
–
|
Repurchase
of
shares
into
treasury
|
(28,884)
|
–
|
Dividends
paid
|
(6,959)
|
(4,255)
|
Total
net
assets
at
30
June
|
449,026
|
452,653
|
Net
asset
value
per
ordinary
share
is
based
on
net
assets
as
shown
above
and
on
62,378,452
(2022:
65,411,114)
ordinary
shares,
being the
number
of
ordinary
shares
in
issue
at
the
year
end.
6. Transactions
with the investment manager and related parties
The
investment management fees payable to Artemis are disclosed in the
Statement of Comprehensive Income within the Annual Financial
Report. The amount outstanding at 30 June
2023 was £561,000 (2022: £597,000). 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.
Fees
payable during the year to the Directors and their interests in
shares of the Company are considered to be related party
transactions and are disclosed within the Directors’ Remuneration
Report within the Annual Financial Report.
-
Annual
Financial Report
This
Annual Financial Report announcement does not constitute the
Company's statutory accounts for the years ended 30 June 2023 and 30 June
2022 but is derived from those accounts. Statutory accounts
for the year ended 30 June 2022 have
been delivered to the Registrar of Companies. The statutory
accounts for the year ended 30 June
2023 and the year ended 30 June
2022 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 2023 will be delivered to the
Registrar of Companies shortly.
The
audited Annual Financial Report for the year ended 30 June 2023 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 Thursday,
26 October 2023.
For
further information, please contact:
Company
Secretary
Tel: 0131
225 7300
Artemis
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