Annual Financial Report

RNS Number : 9971W

Mid Wynd Inter Inv Trust PLC

25 August 2015

 

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

Annual Financial Report for the year ended 30 June 2015

This announcement contains regulated information

Financial Highlights

Returns for the year ended 30 June 2015

Total returns	Year ended 30 June 2015		Year ended 30 June 2014
Net asset value per share (borrowings at fair value)	17.2%		11.7%
Net asset value per share (borrowings at par)	17.1%		11.6%
Share price	21.7%		8.4%
MSCI All Country World Index	9.5%		9.1%
Revenue and dividends
Revenue earnings per share	4.13p		4.08p
Dividends per share*	4.00p		3.80p
Ongoing charges	0.8%		0.8%

Capital	As at 30 June 2015		As at 30 June 2014
Net asset value per share (borrowings at fair value)	322.87p		279.17p
Net asset value per share (borrowings at par)	322.87p		279.29p
Share price	329.75p		274.50p
Gearing	0.0%		5.8%

Total returns to 30 June 2015	Since 1 May 2014**		3 years		5 years
Net asset value per share (borrowings at fair value)	19.6%		46.1%		71.2%
Net asset value per share (borrowings at par)	19.6%		45.9%		71.1%
Share price	23.7%		48.7%		88.7%
MSCI All Country World Index	12.5%		44.0%		67.1%

*        The final dividend for the year to 30 June 2015 of 2.65 pence will, if approved by shareholders, be paid on 6 November 2015 to shareholders on the register at the close of business on 16 October 2015. The Company's Registrar provides a Dividend Reinvestment Plan and the final date for receipt of elections for this dividend is 19 October 2015.

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

Strategic Report

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

Chairman's Statement

Performance

The year which ended on 30 June 2015 was the Company's first full year under the management of Artemis. I am very pleased to report that Mid Wynd's net asset value has increased by 15.7 per cent, from 279.17 pence per share to 322.87 pence. This compares with a 7.4 per cent return from the MSCI All Country World Index. On a total return basis, with dividends assumed to be reinvested, the return was 17.2 per cent - well ahead of the 9.5 per cent total return from the index. Since Artemis' appointment on 1 May 2014, the net asset value of the Company has produced a total return of 19.6 per cent against the index's 12.5 per cent. Over this period, the net asset value per share has grown by 18.1 per cent against 9.8 per cent growth in the index.

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

Last year I commented on the £4 million decline in Mid Wynd's shareholders' funds and said that the Board and our Investment Manager were giving serious attention as to how this decline could be reversed. I am pleased to report that the Company's net assets have increased by more than 28 per cent to stand at £80.8 million at 30 June 2015. This has been achieved by a combination of investment performance and the issue of 3.1 million shares from treasury, following Artemis' efforts to broaden the appeal of the Company to investors. Our strategic aim continues to be to increase the size of the Company so that liquidity in the market for our shares can be increased and the per share cost of running the Company can be reduced.

Dividend

The return for the year ended 30 June 2015 was 45.08 pence per share, comprising net revenue of 4.13 pence per share and a capital increase of 40.95 pence per share. The Board proposes a final dividend of 2.65 pence per share. Subject to approval by shareholders at the Annual General Meeting ('AGM'), it will be paid on 6 November 2015 to those shareholders on the register at the close of business on 16 October 2015. An interim dividend of 1.35 pence per share was paid during the year.

The payment of dividends totalling 4.00 pence per share represents an increase of 5.3 per cent on the 3.80 pence paid in respect of the year ending 30 June 2014. The Board is committed to a progressive dividend policy and as noted in the Investment Manager's review, the nature of the companies the Company is invested in should, over time, be supportive in achieving this objective. In addition, the Company has revenue reserves, assuming shareholders approve the proposed final dividend for 2015, equivalent to approximately 4.08 pence per share. This provides further support for the delivery of a progressive dividend to shareholders.

Share capital

During the year the Company purchased a total of 577,440 shares into treasury. The majority of these were in July and August 2014 as the remaining holders in Baillie Gifford's savings plans and ISA sold their holdings. These shares were purchased at a cost of £1.6 million, with an average discount of 2.7 per cent, and their purchase added 0.16 pence per share to the net asset value for continuing shareholders.

Since taking on management of the Company, Artemis has met a number of existing and potential investors in an attempt to broaden awareness of the Company and how it is being managed. These efforts have generated buying interest: during the year 3.1 million shares were issued from treasury, raising £10.0 million of new money. These shares were priced at the prevailing net asset value on the date of their issue. Artemis will continue to meet both existing and prospective shareholders and promote the Company with the aim of generating further demand for the Company's shares.

The Company will continue to support the liquidity of its shares by issuing and repurchasing them where necessary to maintain the share price within a 2 per cent band relative to the net asset value. The Board believes this policy will best serve shareholders' long-term interests.

Borrowings

As noted in the half-yearly report in February 2015, the Company agreed a new, three-year, US$16 million revolving credit facility with Scotiabank. This replaced two fixed rate loans from the same lender which matured. A credit facility gives the Company greater flexibility in how borrowings are used: the level can be increased or decreased to reflect the Investment Manager's view on markets and investment opportunities. The terms of the new facility are also more favourable for the Company than the fixed rate loans, with the interest rate more closely reflecting the current interest rate environment.

AGM and investment update

The AGM is to be held on 2 November 2015 at 12 noon at 42 Melville Street, Edinburgh EH3 7HA. Artemis will make a short presentation at the meeting. The Board would welcome your attendance as it provides shareholders with an opportunity to ask questions of the Board and the Investment Manager. For those shareholders who are unable to attend, I would encourage you to make use of your proxy votes by completing and returning the form enclosed with this report.

As the AGM will be held in Edinburgh, the Board intends to offer shareholders an opportunity to attend a presentation by the Investment Manager in London. Further details of this will be announced with the half-yearly results in February 2016.

Outlook

In recent months, markets around the world have been volatile, predominantly due to events in Greece and China. It is clear that there is much still to be done to get the global economy growing independently from monetary stimulus and record low interest rates.

The Company's investment portfolio is focussed on businesses with strong market positions and balance sheets, operating in sectors with attractive, long-term growth prospects, and as a result they are less directly affected by the global economy. This should provide a degree of protection in more testing economic times, while still generating capital and income growth for shareholders over the longer-term. That said, many of these more stable, higher quality companies are at or near all-time relative highs in terms of valuation. So it is only right to observe that their short-term performance could suffer in a downturn.

Even so, it is to be hoped that growth in shareholders' funds will continue and that I will be able to report another satisfactory result to you next year.

Contact us

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

Richard Burns

Chairman

24 August 2015

Investment Manager's Review

Performance

Artemis has been managing the Company for a little over a year. Whilst a year is only a short measurement period and past returns are no guarantee of those to come, the investment process (see below) outlined in last year's report has delivered satisfying returns, summarised in the table below.

Index return		9.5%
Contributors:
Active return		7.5%
Currency		0.9%
Gearing		0.1%
Other expenses		(0.3)%
Management fees		(0.5)%
Net asset value total return		17.2%
Movement in discount/premium to net asset value		4.5%
Share price total return		21.7%

The year saw steady economic conditions, especially in the US. Ben Bernanke, the then Chairman of the US central bank, the Federal Reserve Board, first raised the prospect of higher interest rates over two years ago, but global economic conditions have delayed this. The last year has seen very little (sometimes negative) inflation in developed countries, reflecting lower oil prices which have halved year-on-year. Towards the Company's year end, concerns about Greece and slowing growth in emerging markets combined to weaken investment returns. Fortunately we had positioned the Company more defensively in anticipation of these events.

The Artemis investment process

Our aim is to identify reliable commercial themes around the world, avoiding industries which require healthy economic conditions to prosper. Within each theme, there may be many quoted equities which could be attractive investments. Our preference is to select those we consider to be high quality companies with records of profitability and high cash generation. We prefer companies with strong balance sheets and established barriers to entry to their industry. Such companies can lag equity markets in a vigorous recovery, but they can also protect capital when economic conditions become more testing. Over time we have found this investment approach provides a stable framework to deliver consistent returns to investors.

Current investment themes:

Healthcare Costs (19.7 per cent of investments)

We invest in companies which help to moderate rising costs in the healthcare system. This theme has been the outstanding contributor to investment returns over the year (see attribution analysis below). Our focus on generic drug manufacturers and over-the-counter drug companies led us to invest in Hospira and Perrigo; both attracted takeovers from traditional drug companies wanting to increase their exposure to these growing segments. We see this theme continuing for many years and have made few changes to our core holdings.

Key holdings: AmerisourceBergen is America's largest pharmaceutical wholesaler. It has allied with Walgreens Boots Alliance to source generic drugs more efficiently. The Company holds both stocks and we expect the benefits of this alliance to be seen over the next few years. We also saw strong returns from Boston Scientific, a world leader in stents. These can now be used to open smaller arteries, further from the heart, improving circulation in limbs for patients with hardened arteries.

Asset Growth (14.7 per cent of investments)

We hold a variety of stocks for their ability to improve the value of their assets over time, rather than for the current earnings power of those assets.

Key holdings: We reduced our property exposure over the early part of 2015 as these companies tend not to perform well when interest rates rise. Our larger holdings now include Capital One Financial and J.P. Morgan Chase & Co., which should both benefit from rising US rates. The latter is also enjoying a boom in takeover and IPO activity in equity markets.

Retiree Spending Power (13.0 per cent of investments)

This theme contains companies we have identified as benefitting from the spending power of wealthy, older consumers in developed markets. This theme performed well last year, despite broader consumer spending recovering slowly in the US.

Key holdings: Shimano, the world leader in bicycle brakes and gears, has performed very well over the last year. It seems to benefit from customers trading up, as well as from greater participation in cycling. We have also seen good returns from Carnival, the world's leading cruise line, which has seen growing repeat bookings from its loyal 'senior' customers, as well as lower fuel costs.

Emerging Market Consumer (11.8 per cent of investments) and Frontier Investments (2.5 per cent of investments)

As growth has slowed in the latter part of the year, we have reduced the Company's exposure to emerging and frontier markets somewhat. Specifically, we enjoyed very strong returns from holdings in Chinese banks but took profits when it became apparent that some of the Shanghai stock market boom was based on borrowed money.

These trends continue, but at a more modest pace than that driving the last two decades. Meanwhile, the social costs of an ageing population are now being seen in countries such as China, as are the costs of managing the pollution which comes from industrial expansion.

Key holdings: Our main holdings are LVMH and Essilor International, a world leader in eyeglasses. Both have strong records of long-term growth and benefit from growing middle-class wealth. Emerging market investing has been driven by demographics: youthful populations making the working population larger, healthier and better educated.

Mobile Data and e-Commerce (10.8 per cent of investments)

Our investments focus on companies benefitting from the growth in e-commerce, especially through smartphones and from growing emerging market access to the internet. Returns have been mixed, but positive overall.

Key holdings: Google, the Company's largest investment, has had a dull year, beset by a regulatory argument in Europe. Yet underlying growth and profitability continue to be excellent and we see few challengers to its business. We have invested in Facebook, which dominates targeted online advertising. We find its current offer patchy and poorly focussed, but this makes us wonder how much money it will make if it improves its advertising capability.

Infrastructure and Environment (9.2 per cent of investments)

Cheap US domestic gas is an attractive fuel for electricity production, sometimes challenging coal-fired power plants which face rising environmental costs. In the US 'sun belt', regulators are asking electrical utilities to invest in a distribution system able to manage more renewable energy supplies, such as solar and wind. Improving technology may be making modern solar panels competitive with traditional power sources, without the need for subsidies.

Key holdings: Edison International is California's main electrical utility, as Dominion Resources is for Virginia.

Media Content (7.9 per cent of investments)

We invest in producers of high-quality television programmes and films benefitting from increasing affiliate fees and growing overseas sales. We have been concerned about falling viewing figures for free-to-air content in the US and, to a lesser extent, Europe: younger viewers spend more time on YouTube and streaming services. All the same, the best content from the strongest companies still wins vast audiences, including a growing viewership in emerging markets.

Key holdings: Time Warner and Grupo Televisa - a Mexican company which is the world leader in Spanish language content, especially telenovellas (soap operas).

Distribution (6.4 per cent of investments)

Our investments are in companies building the infrastructure to supply western consumer goods into emerging markets. Some of these are also building automated warehouses designed to facilitate e-commerce.

Key holdings: China Merchants Holdings (International), the country's main port operator, performed well. We have sold our holding in Mapletree Logistics, a warehouse operator in Singapore, as the recent slowdown in trade statistics suggests that there may have been excessive capacity installed recently.

Scientific Equipment (4.0 per cent of investments)

We have recently introduced this theme and invest in manufacturers specialising in mass spectrometry, spectroscopy and chromatography. Looking for growth, companies around the world are raising their research budgets in order to launch innovative products. So Thermo Fisher Scientific, Waters and Agilent Technologies and others have seen consistent sales growth. The largest customers are drug research companies which have faced greater scrutiny of the pricing of new drugs. But the scientific equipment companies also see growth from materials science and food and water testing.

Key holding: Thermo Fisher is one of the leading companies in the generic testing and the precision laboratory equipment markets.

Energy in a Gas Glut 

This time last year the Company had around 13 per cent of its portfolio in oil fracking companies. It became apparent to us that fracking was working too well. Gas fracking had caused an oversupply which saw the Henry Hub gas price fall from US$12 per British Thermal Unit ('BTU') in the mid-2000s to just over US$2.75. Similarly, US domestic oil production was growing rapidly just as demand for commodities from emerging markets, such as China, was growing more modestly. So we sold the bulk of our holdings in this theme, allowing us to increase holdings in our Healthcare Costs and Infrastructure and Environment themes.

Set out below are attribution tables showing both the performance of the themes and the individual stocks over the year to 30 June 2015.

Five largest stock contributors

Company		Theme		Contribution %
AmerisourceBergen		Healthcare Costs		1.2
Bank of China		Emerging Market Consumer		1.1
Japan Airport Terminal		Asset Growth		1.0
China Merchant Holdings (International)		Distribution		1.0
Time Warner		Media Content		1.0

Five largest stock detractors

Company		Theme		Contribution %
Laredo Petroleum		Energy in a Gas Glut		(0.5)
EOG Resources		Asset Growth		(0.5)
St Joe		Asset Growth		(0.5)
Continental Resources		Energy in a Gas Glut		(0.3)
Ebara		Energy in a Gas Glut		(0.3)

Thematic attribution

Theme		Contribution %
Healthcare Costs		6.7
Asset Growth		2.1
Emerging Market Consumer		2.1
Mobile Data and e-Commerce		1.8
Retiree Spending Power		1.8
Media Content		1.6
Frontier Investments		1.5
Distribution		1.0
Infrastructure and Environment		0.2
Scientific Equipment		(0.1)
Energy in a Gas Glut		(1.7)

Gearing

As noted in the Chairman's Statement a US$16 million loan facility was set up in February. We can use this as and when we feel it appropriate (subject to any limits set by the Board). The facility has been agreed during a period when interest rates seem very modest, in a historic context. We will use gearing tactically and expect the level to fluctuate over time, reflecting both the number of investment opportunities we are seeing and our changing views on equity markets generally.

Portfolio yield/dividend

Our investment approach means that many of the companies in the portfolio are dividend-payers. They are also profitable and growing, which gives us optimism that the level of dividends will increase too. This should support the Company's progressive dividend policy, as highlighted in the Chairman's Statement. The current dividend for the year of 4.00 pence per share gives a yield of 1.2 per cent and scope for the Company's dividend to grow over time as our investments grow their underlying cashflows.

Outlook

The Company has enjoyed steady economic conditions over the last year. That seems to be changing. It may suit the US economy to raise interest rates at a time when this would not suit many emerging markets. Lower commodity prices are making conditions quite difficult in those emerging markets reliant on commodity exports, such as Brazil, South Africa, Russia and Indonesia. This does not seem to be offset by the benefit of cheaper fuel to Chinese or Indian consumers. As world growth slows, it may prove difficult to justify the valuations of many equities.

We believe that our themes support our investments, even when global growth slows. We have focussed the portfolio towards the themes and sectors less affected by the health of the world economy, substantially cutting our exposure to oil and property. Our defensive positioning should protect the portfolio as interest rates rise. Meanwhile, we believe over the longer term that the portfolio's high-quality, profitable, well-managed companies will be able to continue growing the value of their businesses whatever the economic conditions.

Simon Edelsten, Alex Illingworth and

Rosanna Burcheri

Fund Managers

Strategy and Business Review

Corporate strategy and operating environment

The Company is incorporated in Scotland and operates as an investment trust company and is an investment company within the meaning of Section 833 of the Companies Act 2006 (the 'Act'). Its business as an investment trust is to buy and sell investments with the aim of achieving the investment objective and policy outlined below. The Company has been approved as an investment trust in accordance with the requirements of Section 1158 of the Corporation Taxes Act 2010 which remains subject to the Company continuing to meet the eligibility conditions and ongoing requirements of the regulations. The Board will manage the Company so as to continue to meet these conditions.

The Company has no employees and delegates most of its operational functions to a number of service providers.

Objective and investment policy

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

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

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

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

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

Current and future developments

A summary of the Company's developments during the year ended 30 June 2015, together with its prospects for the future, is set out in the Chairman's Statement and Investment Manager's Review above. The Board's principal focus is the delivery of positive long-term returns for shareholders. This will be dependent on the success of the investment strategy, in the context of both economic and stock market conditions. The investment strategy, and factors that may have an influence on it, are discussed regularly by the Board and the Investment Manager. The Board regularly considers the ongoing development and strategic direction of the Company, including its promotion and the effectiveness of communication with shareholders.

Key Performance Indicators ('KPIs')

The performance of the Company is reviewed regularly by the Board which 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

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

-        Share price performance

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

Discrete annual total returns

Year ended 30 June		Net asset value (at fair value)		Share price		MSCI All Country World Index
2011		26.4%		37.8%		21.3%
2012		(7.3)%		(7.9)%		(4.3)%
2013		11.7%		12.8%		20.5%
2014		11.7%		8.4%		9.1%
2015		17.2%		21.7%		9.5%

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

The Board recognises that it is in the interests of shareholders to maintain a share price as close as possible to the net asset value per share. In October 2012 the Board confirmed its intention to limit the discount to a maximum of 2 per cent in normal circumstances. The Company may issue shares at such times as demand is not being met by natural liquidity in the market and buy back shares when there is excess supply. Further details of the shares issued and bought back during the year are set out in the Share Capital section below.

-     The ongoing charges ratio

The Board is mindful of the ongoing costs to shareholders of running the Company and monitors operating expenses on a regular basis. The Company's current ongoing charges ratio is 0.8 per cent (2014: 0.8 per cent).

-     The dividend per share

The Board is committed to growing the dividends paid to shareholders, in addition to capital growth. It monitors the revenue returns generated by the Company during the year and against this determines the dividends to be paid to shareholders. Subject to approval of the final dividend by shareholders, total dividends of 4.00 pence per share (2014: 3.80 pence per share) will be paid in respect of the year ended 30 June 2015.

Other matters

Principal risks and risk management

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

A summary of the key areas of risk and uncertainties are set out below.

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

-     Investment: the management of the portfolio of the Company to achieve its investment objective and policy. The Company's investments are selected on their individual merits and the performance of the portfolio is not likely to track the wider market (represented by the MSCI All Country World Index). The Board believes this approach will continue to generate good long-term returns for shareholders. Risk will be diversified through a broad range of investments being held. The Board discusses the investment portfolio and its performance with the Investment Manager at each Board meeting. The Company may borrow money for investment purposes. If the investments fall in value, any borrowings will magnify the extent of the losses. If borrowing facilities are not renewed, the Company may have to sell investments to repay borrowings. All borrowing arrangements entered into require the prior approval of the Board and gearing levels are discussed by the Board and Investment Manager at every meeting.

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

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

Share capital

During the year the Company bought back 577,440 (2014: 3,863,369) ordinary shares representing 2.6 per cent of the issued share capital as at 1 July 2014. All of the shares purchased are held in treasury.

The Company issued 3,115,488 (2014: nil) ordinary shares from treasury during the year representing 13.8 per cent of the issued share capital as at 1 July 2014. All of the shares were issued at the prevailing net asset value on the date of issue.

Resolutions to continue to be authorised to issue and buy back shares will be put to shareholders at the AGM on 2 November 2015. Approval of these resolutions by shareholders will allow the Directors to continue to manage the liquidity of the Company's shares by buying back or issuing shares either side of a 2 per cent band relative to the net asset value.

Directors

Each of the Directors held office throughout the year under review. No Director has a contract of service with the Company.

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

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

Social and environmental matters

The Company has delegated the management of the Company's investments to Artemis which, in its capacity as Investment Manager, has a Corporate Governance and Shareholder Engagement policy which sets out a number of principles that are intended to be considered in the context of its responsibility to manage investments in the financial interests of shareholders. Artemis undertakes extensive evaluation and engagement with company managements on a variety of matters such as strategy, performance, risk, dividend policy, governance and remuneration. All risks and opportunities are considered as part of the investment process in the context of enhancing the long-term value of shareholders' investments. This will include matters relating to material environmental, human rights and social considerations that may, ultimately, impact the profitability of a company or its stock market rating and hence these matters are an integral part of Artemis' thinking as institutional investors.

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

Borrowings

The Company may use borrowings to support its investment strategy and its Articles of Association (the 'Articles') allow the Company to borrow up to 30 per cent of its net assets. The Company had two 3-year fixed rate loans with Scotiabank of €3 million and £2.5 million which expired on 20 February 2015. These loans were replaced with a US$16 million revolving credit facility which will be available to the Company until 19 February 2018. As at 30 June 2015, US$7.3 million was drawn down from this facility, however, at this date the Company had a cash balance of £5.5 million, therefore the Company had no gearing.

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

Leverage

Leverage is defined in the Alternative Investment Fund Managers Directive ('AIFMD') as any method by which the Company can increase its exposure by borrowing cash or securities, or from leverage that is embedded in derivative positions. The Company is permitted by its Articles to borrow up to 30 per cent of its net assets (determined as 130 per cent under the Commitment and Gross ratios). The Company is permitted to have additional leverage of up to 100 per cent of its net assets, which results in permitted total leverage of 230 per cent 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 since the adoption of the requirements of the AIFMD. At 30 June 2015, the Company's leverage was 121.7 per cent as determined using the Commitment method and 116.2 per cent using the Gross method.

The Investment Manager is not able to enter into any stocklending agreements; to borrow money against the security of the Company's investments; nor create any charges over any of the Company's investments, unless prior approval has been received from the Board.

For and on behalf of the Board

Richard Burns

Chairman

24 August 2015

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

Management Report

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

Statement of Directors' Responsibilities

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

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

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

-     select suitable accounting policies and then apply them consistently;

-     make judgements and estimates that are reasonable and prudent;

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

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

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

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

The financial statements are published on a website, midwynd.co.uk, maintained by the Company's Investment Manager, Artemis Fund Managers Limited. The maintenance and integrity of the corporate and financial information relating to the Company is the responsibility of the Investment Manager. 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 2015 and of the profit for the year then ended; and

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

For and on behalf of the Board

Richard Burns

Chairman

24 August 2015

 

Income Statement

For the year ended 30 June

	2015		2015		2015		2014		2014		2014
	Revenue		Capital		Total		Revenue		Capital		Total
	£'000		£'000		£'000		£'000		£'000		£'000
Gains on investments	-		9,645		9,645		-		6,601		6,601
Currency gains/(losses)	-		270		270		-		(5)		(5)
Income	1,405		-		1,405		1,603		-		1,603
Investment management fee	(91)		(273)		(364)		(178)		(178)		(356)
Other administrative expenses	(216)		(39)		(255)		(230)		(120)		(350)
Net return before finance costs and taxation	1,098		9,603		10,701		1,195		6,298		7,493
Finance costs of borrowings	(27)		(79)		(106)		(65)		(65)		(130)
Net return on ordinary activities before taxation	1,071		9,524		10,595		1,130		6,233		7,363
Tax on ordinary activities	(111)		-		(111)		(82)		-		(82)
Net return on ordinary activities after taxation	960		9,524		10,484		1,048		6,233		7,281
Net return per ordinary share	4.13p		40.95p		45.08p		4.08p		24.27p		28.35p

The total column of this statement is the profit and loss account of the Company.

All revenue and capital items in this statement derive from continuing operations. No operations were acquired or discontinued during the year. A Statement of Total Recognised Gains and Losses is not required as all gains and losses of the Company have been reflected in the above statement.

 

Balance Sheet

As at 30 June

	2015		2015		2014		2014
	£'000		£'000		£'000		£'000
Non-current assets
Investments held at fair value through profit or loss			79,135				66,328
Current assets
Debtors	1,992				643
Cash and cash equivalents	5,460				1,288
	7,452				1,931
Creditors
Amounts falling due within one year	(5,746)				(5,417)
Net current assets/(liabilities)			1,706				(3,486)
Total net assets			80,841				62,842
Capital and reserves
Called up share capital			1,343				1,343
Capital redemption reserve			16				16
Share premium			6,650				4,983
Capital reserve			71,146				54,904
Revenue reserve			1,686				1,596
Shareholders' funds			80,841				62,842
Net asset value per ordinary share			322.87p				279.29p

The financial statements of Mid Wynd International Investment Trust PLC (company registration number SC042651) were approved and authorised for issue by the Board and were signed on 24 August 2015.

Richard Burns

Chairman

 

Reconciliation of Movements in Shareholders' Funds

For the year ended 30 June 2015

	Share		Capital redemption		Share		Capital		Revenue		Shareholders'
	capital		reserve		premium		reserve		reserve		funds
	£'000		£'000		£'000		£'000		£'000		£'000
Shareholders' funds at 1 July 2014	1,343		16		4,983		54,904		1,596		62,842
Net return on ordinary activities after taxation	-		-		-		9,524		960		10,484
Sale of shares from treasury	-		-		1,667		8,332		-		9,999
Shares purchased and held in treasury	-		-		-		(1,614)		-		(1,614)
Dividends paid	-		-		-		-		(870)		(870)
Shareholders' funds at 30 June 2015	1,343		16		6,650		71,146		1,686		80,841

For the year ended 30 June 2014

	Share		Capital redemption		Share		Capital		Revenue		Shareholders'
	capital		reserve		premium		reserve		reserve		funds
	£'000		£'000		£'000		£'000		£'000		£'000
Shareholders' funds at 1 July 2013	1,343		16		4,983		59,010		1,435		66,787
Net return on ordinary activities after taxation	-		-		-		6,233		1,048		7,281
Shares purchased and held in treasury	-		-		-		(10,339)		-		(10,339)
Dividends paid	-		-		-		-		(887)		(887)
Shareholders' funds at 30 June 2014	1,343		16		4,983		54,904		1,596		62,842

 

Cash Flow Statement

For the year ended 30 June

	2015		2015		2014		2014
	£'000		£'000		£'000		£'000
Net cash inflow from operating activities			692				763
Servicing of finance
Interest paid	(106)				(130)
Net cash outflow from servicing of finance			(106)				(130)
Financial investment
Purchases of investments	(114,199)				(77,153)
Sales of investments	110,287				87,998
Realised currency loss	(10)				(174)
Net cash (outflow)/inflow from financial investment			(3,922)				10,671
Equity dividends paid			(870)				(887)
Net cash (outflow)/inflow before financing			(4,206)				10,417
Financing
Shares purchased and held in treasury	(1,621)				(10,332)
Issue of shares from treasury	(9,999)				-
Net cash inflow/(outflow) from financing			8,378				(10,332)
Increase in cash			4,172				85
Reconciliation of net cash flow to movement in net cash/(debt)
Increase in cash in the year			4,172				85
Currency gains on bank loans			280				169
Movement in net debt in the year			4,452				254
Net debt at 1 July			(3,614)				(3,868)
Net cash/(debt) at 30 June			838				(3,614)

Notes:

1. Accounting policies

The financial statements are prepared on a going concern basis under the historical cost convention modified to include the revaluation of investments.

The financial statements have been prepared in accordance with the Companies Act 2006, applicable United Kingdom accounting standards and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in January 2009 by the Association of Investment Companies (the 'AIC').

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

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

The Directors consider the Company's functional currency to be sterling as the Company's shareholders are predominantly based in the UK and the Company is subject to the UK's regulatory environment.

2. Net return per ordinary share

Revenue return per ordinary share is based on the net revenue on ordinary activities after taxation of £960,000 (2014: £1,048,000), and on 23,254,943 (2014: 25,684,721) ordinary shares, being the weighted average number of ordinary shares in issue (excluding treasury shares) during the year.

Capital return per ordinary share is based on the net capital gain for the financial year of £9,524,000 (2014: £6,233,000), and on 23,254,943 (2014: 25,684,721) ordinary shares, being the weighted average number of ordinary shares in issue (excluding treasury shares) during the year.

There are no dilutive or potentially dilutive shares in issue.

3. Dividend

The Directors are recommending the payment of a final dividend of 2.65 pence per ordinary share. If approved at the AGM the dividend will be paid on 6 November 2015, to shareholders on the register on 16 October 2015.

4. Net asset value per ordinary share

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

	2015		2014
	Net asset value	Net assets £'000	Net asset value	Net assets £'000
Ordinary shares	322.87p	80,841	279.29p	62,842

The movements during the year of the assets attributable to the ordinary shares were as follows:

	2015	2014
	£'000	£'000
Total net assets at 1 July	62,842	66,787
Total recognised gains and losses for the year	10,484	7,281
Shares purchased and held in treasury	(1,614)	(10,339)
Shares issued from treasury	9,999	-
Dividends paid	(870)	(887)
Total net assets at 30 June	80,841	62,842

Net asset value per ordinary share is based on net assets as shown above and on 25,038,509 (2014: 22,500,461) ordinary shares, being the number of ordinary shares in issue (excluding treasury shares) at the year end.

5. Transactions with the Investment Manager and related parties

The existence of an independent Board of Directors demonstrates that the Company is free to pursue its own financial and operating policies and therefore, under FRS 8 'Related Party Disclosures' the Investment Manager is not considered to be a related party.

6. This Annual Financial Report announcement does not constitute the Company's statutory accounts for the years ended 30 June 2015 and 30 June 2014 but is derived from those accounts. Statutory accounts for the year ended 30 June 2014 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 30 June 2014 and the year ended 30 June 2015 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 2015 have not yet been delivered to the Registrar of Companies and will be delivered following the AGM.

The audited Annual Financial Report for the year ended 30 June 2015 will be posted to shareholders shortly. Copies may be obtained from the Company's registered office at 42 Melville Street, Edinburgh EH3 7HA or at the Investment Manager's website, midwynd.co.uk.

The Annual General Meeting of the Company will be held on Monday, 2 November 2015.

For further information, please contact:

Company Secretary

Tel: [phone]

Artemis Fund Managers Limited

24 August 2015

 

END

 

 

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