Annual Financial Report

RNS Number : 4713I

Mid Wynd Inter Inv Trust PLC

30 August 2016

 

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

Annual Financial Results for the year ended 30 June 2016

This announcement contains regulated information

Financial Highlights

Returns for the year ended 30 June 2016

Total returns	Year ended 30 June 2016	Year ended 30 June 2015
Net asset value per share	16.0%	17.2%
Share price	8.1%	21.7%
MSCI All Country World Index	13.3%	9.5%
Revenue and dividends
Revenue earnings per share	5.78p	4.13p
Dividends per share*	4.50p	4.00p
Ongoing charges	0.7%	0.8%

Capital	As at 30 June 2016	As at 30 June 2015
Net asset value per share	369.70p	322.87p
Share price	352.00p	329.75p
Gearing	0.9%	0.0%

Total returns to 30 June 2016	Since 1 May 2014**	3 years	5 years
Net asset value per share	38.8%	51.8%	57.1%
Share price	33.8%	42.6%	48.1%
MSCI All Country World Index	27.4%	35.3%	56.1%

*             The final dividend for the year to 30 June 2016 of 2.85 pence will, if approved by shareholders, be paid on 11 November 2016 to shareholders on the register at the close of business on 7 October 2016. The Company's Registrar provides a Dividend Reinvestment Plan and the final date for receipt of elections for this dividend is 21 October 2016.

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

Strategic Report

Chairman's Statement

Performance

For the year ended 30 June 2016 the Company's net asset value increased by 14.5%, which compares favourably with a 10.9% rise in the MSCI All Country World Index. On a total return basis, with dividends assumed to be reinvested, the return was 16.0% against the index return of 13.3%. Since Artemis' appointment on 1 May 2014, the net asset value has increased by 38.8%, on a total return basis, against the index's return of 27.4%.

Over the year the share price rose by 6.7% and at 30 June 2016 the shares stood at a 4.8% discount to net asset value having stood at a premium of 2.1% as at 30 June 2015. As shareholders may be aware, the Company aims to have its shares trading within a 2% band relative to the net asset value. Clearly, the position at the year end was outside that band. The Board considered this to be a temporary position, arising from the market's reaction to the outcome of the UK's EU referendum a week before the year end. The widening of the discount was not out of line with the change in discounts across the Company's peer group that followed the referendum result. By the middle of July the Company's share price had returned to trading within the parameters of the Company's target range.

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

In last year's statement, I indicated that the Board's strategic aim was to increase the size of the Company, thereby improving the liquidity in its shares and reducing the 'per share' running cost. It is pleasing to be able to report that the Company's net assets grew from £80.8 million as at 30 June 2015 to £107.6 million as at 30 June 2016. This growth has arisen from a combination of investment returns and the issue of shares (see below).

Earnings and Dividend

The return for the year ended 30 June 2016, calculated using the weighted average number of shares in issue, was a gain of 53.72 pence per share, comprising a revenue gain of 5.78 pence per share and a capital gain of 47.94 pence per share. The Board is proposing a final dividend of 2.85 pence per share which, subject to approval by shareholders at the Annual General Meeting ('AGM'), will be paid on 11 November 2016 to those shareholders on the register at the close of business on 7 October 2016. An interim dividend of 1.65 pence per share was paid during the year.

In accordance with the Board's aim of paying progressive dividends, total dividends for the year of 4.50 pence per share represents an increase of 12.5% on the 4.00 pence per share paid in respect of the year ended 30 June 2015. This year's total dividends have been covered by earnings for the current year and a small amount has been retained in the Company's revenue reserve which stands at £1.3 million, representing 4.4 pence per share, once the final dividend has been taken into account. The ability to retain a certain amount of income each year is a unique and helpful feature of an investment trust and it provides a greater degree of investment flexibility. This reserve will be used as necessary to support the Company's commitment to future dividend growth.

Share capital

With demand for the Company's shares remaining strong, they traded at a small premium to net asset value for most of the year. Against this background, the Company was able to continue to issue shares to new and existing investors. The last of the remaining shares held in treasury were re-issued on 7 December 2015. In aggregate, 1,825,321 shares were sold, raising £6.0 million for the Company. With no further treasury shares available for issue the Company has continued to meet demand by issuing 1,350,000 new shares, raising a further £4.5 million.

In addition, as part of the effort to grow the net assets, on 22 December 2015 the Company announced that it had entered into an agreement to be the rollover option for the reconstruction and winding up of Drumeldrie Investments Limited ('Drumeldrie'), a private investment company which had assets of around £4.1 million. To date, £3.1 million has transferred to the Company resulting in the issue of 898,006 new shares, all of which were issued at the prevailing net asset value. Drumeldrie's remaining assets of approximately £1.0 million will be transferred in a final tranche at the end of September.

Since the year end, a further 665,000 shares have been issued raising £2.6 million for the Company.

AGM

The AGM is to be held on 7 November 2016 at 12 noon at 42 Melville Street, Edinburgh EH3 7HA. Artemis will make a short presentation at the meeting. The Board would welcome your attendance as it provides shareholders with an opportunity to ask questions of the Board and the Investment Manager. For those shareholders who are unable to attend, I would encourage you to make use of your proxy votes by completing and returning the form of proxy.

Board changes

Having served as a Director of the Company since 1981, and more recently as Chairman of the Board, I will retire at this year's AGM. I wish to record my appreciation of my fellow Directors, past and present, for their contribution during my time as a Director and Chairman. I wish the current Board continued success in developing the Company in the future.

I am pleased to hand over the role of Chairman to Malcolm Scott, who is currently the Senior Independent Director.

A search is underway to identify and appoint a new Director to the Board.

Outlook

The prospects for any material growth in the global economy remain low. Many countries are still reliant on fiscal stimuli and record low interest rates in an effort to support their economies.

The Investment Manager's approach of selecting companies with strong market positions and balance sheets, operating in sectors with attractive, long-term growth prospects, should mean that the portfolio is less likely to be directly affected by adverse changes in the prospects for the global economy. While there may be periods of short-term volatility, it is hoped that over the longer term this approach will continue to generate further positive returns for shareholders.

Contact us

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

Richard Burns

Chairman

30 August 2016

Investment Manager's Review

Introduction

The past year has been one of steady returns against a background of very modest global economic growth. Inflation and thus interest rates have remained extremely low, supporting equity markets. However, political developments - Donald Trump gaining the Republican nomination and the UK voting to leave the European Union - have been most unexpected. Such events have produced periods of turbulence in financial markets, but our investment style and risk management have stood up well to these tests.

Performance

Over the year, the Company's share price rose from 329.75 pence to 352.00 pence, an increase of 6.7%. Including the 4.30 pence paid in dividends during the year, the total return was 8.1%. On the same total return basis, the net asset value increased by 16.0% (from 322.87 to 369.70 pence per share). This compares with the MSCI All Country World Index which fell 3.7% in US dollar terms, translating to a rise of 13.3% in Sterling terms.

Five largest stock contributors

Company	Theme	Contribution %
Edison International	Low Carbon World	1.2
Boston Scientific	Healthcare Costs	1.2
Amazon.com	Online Services	1.2
Adidas	Retiree Spending Power	1.0
Facebook	Online Services	1.0

Five largest stock detractors

Company	Theme	Contribution %
AmerisourceBergen	Healthcare Costs	(0.6)
Rakuten	Online Services	(0.6)
Mitsubishi UFJ Financial Group	High Quality Assets	(0.6)
Sumitomo Mitsui Trust Holdings	High Quality Assets	(0.6)
China Merchants Holdings (International)	Emerging Market Consumer	(0.5)

Artemis' investment approach

Our aim is to identify reliable commercial trends around the world such as rising consumer spending in emerging markets, the growth in demand for healthcare in developed markets and technological change on the internet and the energy industry. By focusing the portfolio around companies that benefit from these themes, we believe we can deliver superior returns over time.

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

Once we have identified an investment opportunity, we will only commit capital to it when its share price offers the chance to invest at a reasonable valuation. This valuation discipline is at the heart of all of our investment decisions.

In terms of portfolio construction, we aim to run a diversified portfolio with around 55 to 70 holdings spread across eight to 10 different themes. The size of those positions will reflect the strength of the opportunities that meet our investment criteria and not their benchmark weightings.

Over time, we have found this investment approach gives us the framework to deliver very attractive returns to investors. Further information on that approach can be found on our website at artemis.co.uk.

Current investment themes

Emerging Market Consumer (18.7% of investments) and Frontier Investments (0.3% of investments) - Emerging and frontier markets were out of favour in the first part of the year as investors worried about falling currencies and weakening growth in economies reliant on commodity exports such as Brazil, Russia and South Africa. Our stock selection has focused on growing consumer spending in the economies of South-East Asia and China, where demand has remained buoyant. Among the stocks exposed to this growth we have often found the best value to be from developed markets: the Company's larger holdings, such as L'Oreal and Essilor International (the world leader in ophthalmic lenses), are quoted in France but derive much of their growth in Asia.

Our direct investments in emerging markets have mostly been in Chinese companies. Although we recognise that debt levels in China have increased, we believe much of this to be a symptom of a closed economy with many communist characteristics. The major Chinese banks in which the Company invests have the People's Bank of China standing behind them. This is the world's most solvent central bank, currently holding over $3 trillion of US bonds. Unlike certain European central banks, in the event of a crisis there would be no constraints on its ability to print renminbi.

Online Services (16.1% of investments) - These investments performed particularly well over the year, with Amazon.com and Facebook both showing exceptional growth in revenues. This seems to be continuing. We have recently invested in companies seeing growth in demand for financial data, especially as savers take a more active role in selecting funds and are increasingly using ETFs. We have bought holdings in MSCI (the leading designer of the indices used by ETFs), S&P Global (Standard & Poor's) and Morningstar.

Healthcare Costs (13.2% of investments) - Having been the leading source of our investment returns last year, this theme had a more steady year as investors worried about the prospect of Hillary Clinton in the White House. Her record on healthcare when her husband was President left scars on Wall Street and some of her policies seem rather opposed to the free market. All the same, our focus on companies that help deliver healthcare efficiently and cheaply has allowed us to avoid the stocks that have worried investors most. Moreover, most of our holdings saw very good underlying growth in revenues and cashflows over the year.

Low Carbon World (9.7% of investments) - Over the year we developed a new theme, looking for companies who benefit from efforts to reduce carbon emissions. The Clean Power Plan in the United States and evidence that solar and wind power can be profitable even without state subsidies have significant implications for transmission networks. Compared to old networks designed around a handful of large power plants producing steady, predictable power, managing electricity flows from diverse sources of renewable power requires a more sophisticated grid. Under US regulations, investments in 'smart grids' receive attractive investment returns - so we have invested in transmission companies in California and the north east of the US. These investments performed very well through the year.

Retiree Spending Power (9.4% of investments) - Companies that we have identified as benefiting from the spending power of wealthy, older consumers in developed markets produced decent returns in the year. Henry Schein, one of America's leading suppliers of dental equipment, was the best performer in this theme during the year.

Tourism (9.2% of investments) - Over the decades, tourist numbers worldwide have grown steadily. The ageing population of developed countries take more holidays, especially as air travel has become less expensive. In some emerging markets, meanwhile, passports are now being issued for the first time. This latter factor led us to invest in airports in Australia, China, Japan and Thailand. These investments performed steadily in the year.

Media Content (8.4% of investments) - Because US investors became concerned that viewers were spending more time online and less time watching broadcast television, our media investments had a poor year. Subscriber numbers for some channels, such as ESPN, have fallen a little. However, the producers of media content in which we invest are starting to find ways of being paid when their content is viewed online, through sites such as YouTube. The world's appetite for good quality entertainment still seems to be growing. We are looking to add companies to this theme while valuations remain undemanding.

Scientific Equipment (7.7% of investments) - This theme builds on the success of our long-standing investment in Thermo Fisher Scientific. Growth in research and development, pharmaceutical and materials science research, and increased demand from academic institutions and the food testing industry worldwide have combined to produce strong growth in sales for manufacturers of scientific equipment. This trend played out very consistently during the year.

High Quality Assets (7.3% of investments) - This part of the portfolio contains a number of property companies. These investments would fare poorly were inflation to return as interest costs would probably rise quicker than these companies can increase their rents, so we have taken some profits over the last year. There is little sign of inflation yet, but we prefer to sell early rather than late.

Thematic attribution

Theme	Contribution %
Low Carbon World	3.4
Emerging Market Consumer	3.2
Online Services	2.9
Retiree Spending Power	2.0
Healthcare Costs	2.0
Scientific Equipment	1.8
High Quality Assets	1.4
Tourism	1.2
Media Content	0.2
Frontier Investments	(0.1)

Regional attribution

Region	Contribution %
North America	11.8
Europe	4.9
UK	0.7
Emerging	0.6
Developed Asia	0.2
Japan	(0.2)

Outlook

Global equity markets have continued to deliver satisfactory real returns to our investors. Clearly, a large part of this has been due to the fact that the Company is priced in Sterling while most of its holdings are outside the United Kingdom. This is not accidental: periods of weakness in Sterling have been common over the last 50 years and we have therefore positioned the Company's portfolio with the purpose of enhancing the purchasing power of its shareholders in global - rather than Sterling - terms.

The UK's exit from the European Union will probably do little to enhance the prospects for the global economy, but we have been managing the portfolio on the basis there is little growth in the developed world for some time. The low-growth environment in Europe reminds us somewhat of Japan in the 2000s, where satisfactory investment returns could still be made by good stock selection and valuation discipline. We believe that although we will continue to face tricky economic and political conditions, our approach will allow us to continue to deliver satisfactory investment returns in the years ahead. Markets will, no doubt, be volatile. The companies we have selected have shown they are able to grow despite difficult conditions before and we believe they will be able to do so again.

Simon Edelsten, Alex Illingworth & Rosanna Burcheri

Fund Managers

30 August 2016

Strategy and Business Review

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

Corporate strategy and operating environment

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

Objective and investment policy

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

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

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

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

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

Gearing

The Company may use borrowings to support its investment strategy and the Company's Articles of Association (the 'Articles') allow the Company to borrow up to 30% of its net assets. The Company has a US$16 million revolving credit facility with Scotiabank which is available to the Company until 19 February 2018. As at 30 June 2016, US$7.3 million (£5.4 million) was drawn down from this facility.

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

Operating environment

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

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

Current and future developments

A summary of the Company's developments during the year ended 30 June 2016, together with its prospects for the future, is set out in the Chairman's Statement and the 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 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

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	Share price	MSCI All Country World Index
2012	(7.3)%	(7.9)%	(4.3)%
2013	11.7%	12.8%	20.5%
2014	11.7%	8.4%	9.1%
2015	17.2%	21.7%	9.5%
2016	16.0%	8.1%	13.3%

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

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

·           Ongoing charges

The Board is mindful of the ongoing costs to shareholders of running the Company and monitors operating expenses on a regular basis. The Company's current ongoing charges ratio is 0.7% (2015: 0.8%).

·           Dividends per share

The Board aims to grow the dividends paid to shareholders, in addition to capital growth. It monitors the revenue returns generated by the Company during the year and against this determines the dividends to be paid. Subject to approval of the final dividend by shareholders, total dividends of 4.50 pence per share (2015: 4.00 pence per share) will be paid in respect of the year ended 30 June 2016. This represents an increase of 12.5%.

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 and counterparty risk and liquidity risk.

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

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

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

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

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

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

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

Other matters

Viability statement

In accordance with the AIC Code of Corporate Governance, the Board has considered the longer term prospects for the Company. The period assessed is the five years to 30 June 2021. This has been deemed appropriate for the Company given the nature of its business, its current size and the longer term view taken by the Investment Manager when constructing the portfolio.

As part of its assessment of the viability of the Company, the Board has considered each of the principal risks above and the impact on the Company's portfolio of a significant fall in global markets. The Board has also considered the liquidity of the Company's portfolio to ensure that it will be able to meet its liabilities as they fall due. It has also discussed the result of the recent referendum in the UK to leave the EU, which is referred to in the Chairman's Statement and the Investment Manager's Review.

The conclusion of this review is that the Board has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period to 30 June 2021.

Share capital

1,825,321 of the Company's shares held in treasury at 30 June 2015 were re-sold during the year and a further 2,248,006 new shares were issued to satisfy continued demand for the Company's shares. All of the shares were issued at, or at a premium to, the prevailing net asset value on the date of issue.

In order to continue to be able to meet investor demand and grow the Company a prospectus was issued on 20 April 2016 to allow the issue of up to 15 million new shares. On the same date a circular was issued to shareholders seeking approval to increase the Directors' authority to issue further shares on a non pre-emptive basis. Shareholders approved this at a general meeting held on 16 May 2016.

During the year the Company did not buy back any ordinary shares (2015: 577,440).

Resolutions to continue to be authorised to issue and buy back shares will be put to shareholders at the AGM on 7 November 2016. Approval of these resolutions by shareholders will allow the Directors to continue to manage the liquidity of the Company's shares by buying back or issuing shares either side of a 2% band relative to the net asset value.

Directors

Each of the Directors held office throughout the year under review. An independent executive search firm has been appointed to assist the Board with the identification and review of potential candidates for the role of Director.

No Director has a contract of service with the Company.

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

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

Modern Slavery Act 2015

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

Social and environmental matters

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

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

Leverage

Leverage is defined in the Alternative Investment Fund Managers Directive ('AIFMD') as any method by which the Company can increase its exposure by borrowing cash or securities, or from leverage that is embedded in derivative positions. The Company is permitted by its Articles to borrow up to 30% of its net assets (determined as 130% under the Commitment and Gross ratios). The Company is permitted to have additional leverage of up to 100% of its net assets, which results in permitted total leverage of 230% under both ratios. The Alternative Investment Fund Manager (the 'AIFM') monitors leverage values on a daily basis and reviews the limits annually. No changes have been made to these limits during the period. At 30 June 2016, the Company's leverage was 105.1% as determined using the Commitment method and 104.0% using the Gross method.

For and on behalf of the Board.

Richard Burns

Chairman

30 August 2016

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

Management Report

Listed companies are required by the Financial Conduct Authority's Disclosure 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 Act. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

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

The financial statements are published on a website, midwynd.co.uk, maintained by the Company's Investment Manager, Artemis Fund Managers Limited. 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 2016 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

30 August 2016

Statement of Comprehensive Income
For the year ended 30 June

	2016 Revenue £'000	2016 Capital £'000	2016 Total £'000	2015 Revenue £'000	2015 Capital £'000	2015 Total £'000
Gains on investments	-	13,918	13,918	-	9,645	9,645
Currency (losses)/gains	-	(570)	(570)	-	270	270
Income	2,107	-	2,107	1,405	-	1,405
Investment management fee	(113)	(340)	(453)	(91)	(273)	(364)
Other expenses	(200)	(20)	(220)	(216)	(39)	(255)
Net return before finance costs and taxation	1,794	12,988	14,782	1,098	9,603	10,701
Finance costs of borrowings	(20)	(60)	(80)	(27)	(79)	(106)
Net return on ordinary activities before taxation	1,774	12,928	14,702	1,071	9,524	10,595
Taxation on ordinary activities	(214)	-	(214)	(111)	-	(111)
Net return on ordinary activities after taxation	1,560	12,928	14,488	960	9,524	10,484
Net return per ordinary share	5.78p	47.94p	53.72p	4.13p	40.95p	45.08p

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

All revenue and capital items in this statement derive from continuing operations. No operations were acquired or discontinued during the year.

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

Statement of Financial Position
As at 30 June

	2016 £'000	2016 £'000	2015 £'000	2015 £'000
Non-current assets
Investments held at fair value through profit or loss		108,969		79,135
Current assets
Debtors	1,669		1,992
Cash and cash equivalents	4,427		5,460
	6,096		7,452
Creditors
Amounts falling due within one year	(7,439)		(5,746)
Net current (liabilities)/assets		(1,343)		1,706
Total net assets		107,626		80,841
Capital and reserves
Called up share capital		1,456		1,343
Capital redemption reserve		16		16
Share premium		15,205		6,650
Capital reserve		88,851		71,146
Revenue reserve		2,098		1,686
Shareholders' funds		107,626		80,841
Net asset value per ordinary share		369.70p		322.87p

These financial statements were approved by the Board of Directors and signed on its behalf on 30 August 2016.

Richard Burns

Chairman

Statement of Changes in Equity

For the year ended 30 June 2016

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

For the year ended 30 June 2015

	Share capital £'000	Capital redemption reserve £'000	Share premium £'000	Capital reserve £'000	Revenue reserve £'000	Shareholders' funds £'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
Issue of shares from treasury	-	-	1,667	8,332	-	9,999
Repurchase of shares into 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

Statement of Cash Flows
For the year ended 30 June

	2016 £'000	2016 £'000	2015 £'000	2015 £'000
Cash used in operations		916		691
Interest received	15		1
Interest paid	(80)		(106)
Net cash generated from operating activities		(65)		(105)
Cash flow from investing activities
Purchase of investments	(130,162)		(114,199)
Sale of investments	115,732		110,287
Realised currency gains	244		6
Net cash used in investing activities		(14,186)		(3,906)
Cash flow from financing activities
Issue of new shares	7,589		-
Issue of shares from treasury	5,965		9,999
Repurchase of shares into treasury	-		(1,621)
Expenses related to issue of the prospectus	(106)		-
Dividends paid	(1,148)		(870)
Net cash generated from financing activities		12,300		7,508
Net (decrease)/increase in cash and cash equivalents		(1,035)		4,188
Cash and cash equivalents at start of the year		5,460		1,288
(Decrease)/increase in cash in the year		(1,035)		4,188
Unrealised currency gains/(losses) on cash and cash equivalents		2		(16)
Cash and cash equivalents at end of the year		4,427		5,460

Notes to the Financial Statements

1. Accounting policies

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

The SORP reflects the changes arising from the adoption of FRS 102 which is effective for accounting periods beginning on or after 1 January 2015. Aside from the renaming of the primary financial statements and a change to the presentation of the Statement of Cash Flows, no other material changes have arisen from the adoption of the SORP.

In March 2016 an amendment was made to the fair value hierarchy requirements of FRS 102, which is effective for accounting periods beginning on or after 1 January 2017. As permitted the change has been adopted early, for the financial statements for the year ended 30 June 2016, which has resulted in the same fair value hierarchy classifications as those disclosed previously.

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

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

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

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

2. Income

	2016 £'000	2015 £'000
Income from investments
Overseas dividends	1,897	1,270
UK dividends	160	134
Property income distribution	35	-
	2,092	1,404
Other income
Bank interest	15	1
Total income	2,107	1,405
Total income comprises:
Dividends from financial assets designated at fair value through profit or loss	2,092	1,404
Other income	15	1
	2,107	1,405

3. Net return per ordinary share

Revenue return per ordinary share is based on the net revenue on ordinary activities after taxation of £1,560,000 (2015: £960,000), and on 26,969,898 (2015: 23,254,943) 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 £12,928,000 (2015: £9,524,000), and on 26,969,898 (2015: 23,254,943) ordinary shares, being the weighted average number of ordinary shares in issue (excluding treasury shares) during the year.

4. Dividend

The Directors are recommending the payment of a final dividend of 2.85 pence per ordinary share. If approved at the AGM the dividend will be paid on 11 November 2016, to shareholders on the register on 7 October 2016.

5. Net asset value per ordinary share

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

	2016		2015
	Net asset value	Net assets £'000	Net asset value	Net assets £'000
Ordinary shares	369.70p	107,626	322.87p	80,841

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

	2016	2015
	£'000	£'000
Total net assets at 1 July	80,841	62,842
Total recognised gains for the year	14,488	10,484
Issue of new shares	7,589	-
Issue of shares from treasury	5,965	9,999
Repurchase of shares into treasury	-	(1,614)
Expenses related to issue of the prospectus	(109)	-
Dividends paid	(1,148)	(870)
Total net assets at 30 June	107,626	80,841

Net asset value per ordinary share is based on net assets as shown above and on 29,111,836 (2015: 25,038,509) ordinary shares, being the number of ordinary shares (excluding treasury shares) in issue at the year end.

6. Transactions with the Investment Manager and related parties

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

7. This Annual Financial Report announcement does not constitute the Company's statutory accounts for the years ended 30 June 2016 and 30 June 2015 but is derived from those accounts. Statutory accounts for the year ended 30 June 2015 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 30 June 2015 and the year ended 30 June 2016 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 2016 will be delivered to the Registrar of Companies shortly.

The audited Annual Financial Report for the year ended 30 June 2016 will be posted to shareholders shortly. Copies may be obtained from the Company's registered office at 42 Melville Street, Edinburgh EH3 7HA or at midwynd.co.uk.

The Annual General Meeting of the Company will be held on Monday, 7 November 2016.

For further information, please contact:

Company Secretary

Tel: [phone]

Artemis Fund Managers Limited

30 August 2016

 

END

 

 

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