Mid Wynd
International
Investment Trust PLC
Annual Financial Report
for the year ended 30 June 2022
Company Overview
Net asset value per share Regular dividend per share Net asset value total return
692.01p 7.20p
Growth over 5 years: 44.0%
-7.5%
Growth over 5 years: 64.9%
Percentage total return - five year summary
-2
0
-10
0
10
20
30
MSCI All Country World Index (comparator)Share price total returnNet asset value total return
2018 2019 2020 2021 2022
-7.47
-9.46
-4.17
24.29
27.31
24.56
12.21
9.12
5.18
13.43
15.31
9.69
12.67
13.43
8.94
Our purpose is to increase the real wealth and prosperity of our shareholders, thus helping them meet their long-
term savingsneeds.
Through our investment company structure, we enable shareholders, large or small, to invest in an actively-managed
diversified portfolio of securities in a cost-effective way, giving them access to the growth opportunities offered by
world markets. Although the Company aims to provide dividend growth over time, its primary aim is to maximise
total returns to shareholders.
The Investment Manager’s approach is to identify reliable commercial trends around the world which are likely to
deliver superior growth for our investors. The aim is to run a diversified portfolio of 55-75 holdings spread across
8-10different themes such as automation or healthcare. Where appropriate, the Company will use gearing with a
view to enhancing shareholder returns.
Dividends pence per ordinary share paid/payable
0
1
2
3
4
5
6
7
8
9
10
11
2018 2019 2020 2021 2022
Ordinary dividend Special dividend
6.40
6.12
5.83
5.55
7.20
3.00
The As
sociation of
Investment Companies
1
Contents
Financial Highlights
2
Strategic Report
Chairman’s Statement 5
Investment Manager’s Review 8
Portfolio of Investments as at 30 June 2022 11
Strategy and Business Review 14
ESG & Stewardship at Artemis 16
Key Performance Indicators (“KPIs”) 18
Principal Risks and Risk Management 19
Long-term Viability 23
Duty to Promote the Success of the Company 24
Directors and Corporate Governance
Board of Directors 27
Directors’ Report 28
Corporate Governance Report 30
Directors’ Remuneration Policy and Report 35
Report of the Audit Committee 38
Statement of Directors’ Responsibilities in
respect of the Annual Financial Report 41
Independent Auditor’s Report 42
Financial Statements
Statement of Comprehensive Income 48
Statement of Financial Position 49
Statement of Changes in Equity 50
Statement of Cash Flows 51
Notes to the Financial Statements 52
Shareholder Information
Notice of Annual General Meeting 63
Information for Shareholders 69
Glossary 72
Investment Manager, Company Secretary
andAdvisers 73
2
Financial Highlights
Returns for the year ended 30 June 2022
Year ended
30 June
2022
Year ended
30 June
2021
Total returns
Net asset value per share
†
-7. 5 % 24.3%
Share price
†
-9.5% 27.3%
MSCI All Country World Index (GBP) -4.2% 24.6%
Revenue and dividends
Revenue earnings per share 11.72p 6.81p
Dividend per share* 7.20p 6.40p
Special dividend per share* 3.00p nil
Ongoing charges
†
** 0.60% 0.61%
As at
30 June
2022
As at
30 June
2021
Capital
Net asset value per share 692.01p 754.43p
Share price 693.00p 772.00p
Net cash
†
0.3% 1.5%
Premium
†
0.1% 2.3%
Source: Artemis/Datastream.
* A final dividend, if approved by shareholders, and a special dividend for the year to 30 June 2022 of 3.70 pence and 3.00 pence respectively will
be paid on 4 November 2022 to shareholders on the register at the close of business on 23 September 2022.
** Look-through costs of underlying investment company holdings not included.
†
Alternative Performance Measure (see page71).
Performance for the year ended
30 June 2022
Premium/(discount) during the year ended
30 June 2022
Total return (rebased to 100)
Net asset value
Share price
MSCI All Country World Index (GBP)
June 2021
July 2021
August 2021
September 2021
October 2021
November 2021
December 2021
January 2022
February 2022
March 2022
April 2022
May 2022
June 2022
88
90
92
94
96
98
100
102
104
106
108
110
112
114
88
90
92
94
96
98
100
102
104
106
108
110
112
114
Premium/(discount) to net asset value (%)
June 2021
July 2021
August 2021
September 2021
October 2021
November 2021
December 2021
January 2022
February 2022
March 2022
April 2022
May 2022
June 2022
(2)%
(1)%
0%
1%
2%
3%
4%
(2)%
(1)%
0%
1%
2%
3%
4%
Source: Datastream/Morningstar.
All figures based on a weekly rolling average.
Source: Datastream/Morningstar.
All figures based on a weekly rolling average.
Total returns to 30 June 2022 3 years 5 years
Since 1 May
2014* 10 years
Net asset value per share
†
29.1% 64.9% 177.1% 238.5%
Share price
†
25.8% 64.5% 180.7% 237.4%
MSCI All Country World Index (GBP) 25.6% 50.0% 133.7% 199.0%
Source: Artemis/Datastream/Morningstar.
* The date when Artemis was appointed as Investment Manager.
†
Alternative Performance Measure (see page71).
3
Performance since Artemis was appointed Investment Manager
Share Price
Net Asset Value MSCI All Country World Index
Total Return (Rebased to 100)
0
50
100
150
200
250
300
350
400
2014
2015
2016
2017
2018
2019
2020
2021
2022
0
50
100
150
200
250
300
350
400
Source: Datastream/Morningstar.
Dividends paid/payable to shareholders
Pence per share
Year ended 30 June
2013
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
2014 2015 2016 2017 2018
2019
2020 2021
2022
3.40
3.80
4.00
4.50
5.00
5.55
5.83
6.12
6.40
3.00
7.20
Ordinary dividend Special dividend
4
Ten year summary
At 30 June
Total
net
assets
(£’000)1
Borrowings
(£’000)
Share-
holders’
funds
(£’000)
Net asset
value per
share (at
fair value)
(p)
Share
price
(p)
Premium/
(discount)
(%)
Dividend
per share
(p)
2
Ongoing
charges
(%)
†
Net
cash/
(gearing)
(%)
†
2013 71,858 (5,071) 66,787 253.10 256.63 1.4 3.40 0.90 5.8
2014 67,744 (4,902) 62,842 279.17 274.50 (1.7) 3.80 0.80 5.8
2015 85,463 (4,622) 80,841 322.87 329.75 2.1 4.00 0.79 –
2016 113,064 (5,438) 107,626 369.70 352.00 (4.8) 4.50 0.72 0.9
2017 146,907 (3,849) 143,058 439.75 441.00 0.3 5.00 0.66 0.3
2018 187,979 (4,442) 183,537 493.23 498.00 1.0 5.55 0.67 2.7
2019 231,126 (5,042) 226,084 553.16 568.00 2.7 5.83 0.64 0.2
2020 317,444 (9,401) 308,043 612.61 612.00 (0.1) 6.12 0.68 1.7
2021 462,042 (9,949) 452,093 754.43 772.00 2.3 6.40 0.61 1.5
2022 458,604 (5,951) 452,653 692.01 693.00 0.1 10.20* 0.60 0.3
Source: Artemis.
1 Total net assets comprise net assets before deduction of bank loans.
2 The 2022 dividend includes the proposed final dividend of 3.70 pence per share which is subject to shareholder approval at the Annual General
Meeting.
†
Alternative Performance Measure (see page71).
* Including a special divdend of 3.00 pence per share.
Cumulative ten year performance summary (from 30 June 2012)
At 30 June
Total
dividend
growth
Net asset
value per share
(at fair value)
total return1
Share price
total return1
MSCI All Country
World Index (GBP)
total return1
2013 3.0% 11.7% 12.8% 20.5%
2014 15.2% 24.7% 22.2% 31.5%
2015 21.2% 46.2% 48.7% 44.0%
2016 36.4% 69.6% 60.2% 63.0%
2017 51.5% 105.2% 105.1% 93.3%
2018 68.2% 131.3% 132.6% 117.1%
2019 76.7% 162.3% 168.2% 138.2%
2020 85.5% 194.3% 192.7% 150.5%
2021 93.9% 265.9% 272.6% 212.0%
2022 209.1% 239.0% 237.0% 199.0%
1
Source: Datastream/Morningstar.
5
Strategic Report
Chairman’s Statement
The last twelve months have seen a fall in global equity
markets and a decline in the net asset value (NAV) of our
Company. That the NAV of Mid Wynd has fallen further
than our comparator index is disappointing but at least
this underperformance comes after a prolonged period of
outperformance. It would be unrealistic to expect any equity
portfolio, no matter how good its construction, to outperform
a comparator index over all discrete twelve-month periods.
It is particularly difficult to outperform a comparator index
when rapid periods of structural change occur as they have
this year. Rising inflation has brought challenges that many
companies and investors have not seen before. Rising interest
rates have also brought further dislocation to the equity
market. The role of our Managers, in this period of dislocation
leading to profound structural change, is to build an equity
portfolio fit for this ‘new normal.’ The portfolio changes made
in this financial year should bear fruits for the long-term but in
the shorter-term time horizon of this financial year they have
struggled to do so.
Performance
For the year ended 30 June 2022 the Company’s share price
fell by 9.5% on a total return basis with dividends assumed to
be re-invested. The Company’s net asset value per share, on a
total return basis, with dividends assumed to be reinvested,
declined by 7.5%. This compares with a fall of 4.2% in the
Company’s comparator index, the MSCI All Country World
Index (GBP).
Since Artemis’ appointment as Investment Manager on 1 May
2014, the net asset value per share has increased by 177.1%,
on a total return basis, against the comparator’s increase
of133.8%.
Further details of the performance of the Company during the
year are included in the Investment Manager’s review.
Earnings and dividend
The total return for the year ended 30 June 2022 was a
loss of 62.75 pence per share, comprising a revenue gain of
11.72 pence and a capital loss of 74.47 pence. The Board is
proposing a final dividend of 3.70 pence per share and a special
dividend of 3.00pence per share which, subject to approval by
shareholders at the Annual General Meeting (‘AGM’), will be
paid together on 4 November 2022 to those shareholders on
the register at the close of business on 23 September 2022.
An interim dividend of 3.50p pence per share was paid in April
2022, and so together with the proposed final dividend (but
excluding the special dividend), this gives dividend growth of
12.5% on the 2020-21 outcome.
To maintain our status as an investment trust we are required
by HMRC to distribute 85% of our earnings in the form of
dividends. Our Company’s earnings, comprised almost
entirely of dividends paid by the companies in which we invest,
have jumped by 72% this year. While some of this growth is
due to increased dividends from existing holdings, much of
the increase results from portfolio changes that have seen
investment in equities with higher dividend yields. As most
of our investments are in the US, the decline in the Sterling
exchange rate has also boosted our earnings, but exchange
rate movements can both boost and depress our earnings.
Our Managers are very focused on investing at appropriate
valuations and this can mean investment in companies with a
wide range of dividend yields. The Board recognises that this
can lead to changes in the portfolio that can create significant
changes in earnings. This year these changes have resulted
in a significant increase in earnings. It is important that our
Managers retain the flexibility which is a key element of their
approach to building a portfolio. To support the Managers’
flexibility, the Board has decided that a proportion of the
income we are required to pay as a dividend should, this year, be
distributed as a ‘special dividend.’ Our aim is to show, through
the growth in our regular dividend, the progressive growth
in dividend which we have both targeted and delivered now
over many years. The ‘special dividend’ represents the excess
revenue which we believe the current portfolio positioning of
our Managers has delivered. Shareholders should expect the
Company to continue to target progressive growth in regular
dividends. The move to declare a ‘special dividend’ is aimed at
providing our Managers with the ability to pursue as flexible an
investment approach as possible and not to find themselves
in pursuit of ever higher income, to maintain a total dividend,
at the expense of sound capital allocation.
The total dividend, including the special dividend, for the
current year of 10.20 pence per share represents an increase
of 59.4% on the 6.40 pence per share paid for the year ended
30 June 2021. The dividend is fully covered by the revenue
return for the year. The aim remains to grow the regular
dividend progressively subject to the level of revenue
reservesavailable.
Share capital
Demand for the Company’s shares continued throughout the
year, all be it at a slower pace than the prior year, with 5,486,000
new shares issued compared with 9,641,000 in the year to
June 2021. The share issues added approximately £44m (£66m
to 30 June 2021) of value before issue costs into the balance
sheet. The Company issues shares only at a price in excess of
their net asset value and any issue costs. During the year, the
value created for shareholders through share issuance was
£0.9m. Once more, market volatility affected the Company
and, although it continued trading strongly throughout the
period, it ended the year at a share price premium to net
asset value of 0.1%, down from a premium of 2.3% as at 30
June 2021; the average premium during the year was 2.0%.
6
The Company’s policy, within normal market conditions, is to
issue and re-purchase shares where necessary to maintain the
share price within a band, plus or minus 2%, relative to the net
asset value. Our Company is one of the few investment trusts
that has continued to see demand for its shares at a premium
to NAV and is thus in the fortunate position of being able
to issue shares to the benefit of existing shareholders. That
our company’s shares have continued to trade at a premium
to NAV, as discounts increased across the investment trust
industry, almost certainly relates to the excellent long-term
investment returns from our portfolio.
Shares were issued during the year using the existing
authorities given at the 2021 AGM. To enable the Board to
continue to implement its discount and premium management
policy, shareholders will be asked to renew this authority to
issue up to a further 15% of its issued share capital, on a non-
pre-emptive basis, at the forthcoming AGM.
Borrowings
At 30 June 2022 the Company had drawn down €5m (2021:
€4m) and US$2m (2021: US$9m) from its US$60m facility
with the Bank of Nova Scotia. The Company pays a small
fee for the right to access these additional funds and only
when amounts are drawn down is interest expense incurred.
Further information on the Company’s gearing can be found
on page 14.
Board Succession
As discussed in the 2021 Annual Report, Harry Morgan is
stepping down from the Board at the forthcoming AGM
on 26 October 2022. I would like to thank Harry for his
contribution to the Board since his appointment in 2012. It
has been a period of great volatility in financial markets and
also of great change and growth for our Company. Harry has
played a very important role in steering Mid Wynd through this
turbulence and growth. I have particularly valued his counsel
as Senior Independent Director since my own appointment
as Chairman. As previously announced, a search is underway
for Harry’s successor and an announcement in relation to the
new appointment will be made soon.
Harry’s imminent departure and the resulting search for a
replacement, has prompted the Board to propose an update
to the Articles of Association, removing the requirement for
new Directors to purchase Company shares to the nominal
value of £250 (5,000 shares) within two months of joining the
Board. The rise in the share price of Mid Wynd has raised the
bar for new Directors required investment in our Company.
It is proposed instead to ask new Directors to commit to
purchasing shares in the Company to the value of at least one
year’s remuneration within one year of joining the Board. We
are of the opinion that this is more fitting to market conditions
and will also avoid limiting the pool of potential candidates to
the Board. The update to the Articles is proposed as a special
resolution at this year’s AGM.
AGM
The AGM will be held in person on 26 October 2022 at 12.00
noon at the Edinburgh office of our Investment Manager,
Artemis Fund Managers Limited, at 6th Floor, Exchange Plaza,
50 Lothian Road, Edinburgh, EH3 9BY.
The fund manager will give a presentation to shareholders
after which he and the Board will be available to answer
shareholder questions. We do intend to hold a physical
meeting but, in the event of changes in Government guidance,
we encourage shareholders to check for relevant updates on
the Company’s website or via Company announcements to
the London Stock Exchange.
We encourage those shareholders not attending to e-mail any
questions in advance to midwyndchairman@artemisfunds.com
As always, I would encourage you to make use of your proxy
votes by completing and returning the form of proxy enclosed
with this report.
Outlook
‘There are decades when nothing happens; and there are
weeks where decades happen’. This quotation, attributed
to a range of authors, seems to summarise the way we live
now. The price of financial securities reflect the future and
therefore they are likely to be particularly volatile when
decades are happening in weeks. The return of inflation,
higher interest rates, a hot and bloody war in Europe and a
cold war with China are just some of the major changes that
the price of financial securities are currently trying to digest.
It would be peculiar if investors accurately discounted such
profound shifts in how the world works at their first attempt.
I was a young fund manager in 1989 and remember the initial
reaction to the fall of The Berlin Wall in which investors
proclaimed that the demand for capital to ‘rebuild the east’
would result in higher inflation and higher interest rates. The
profound structural change that followed, in Europe and in
China, unleashed disinflationary forces and, as a result, falling
interest rates. Back then decades also happened in weeks,
but markets took years to discount the consequences.
In such periods investors are even more interested than
usual in what these rapid changes mean for the two powerful
currents; being the future path of corporate profits and also
the likely future level of interest rates, which are both key in
determining equity prices. Rising interest rates tend to be
negative for equity prices but rising corporate profits tend to
be good for equity prices. Forecasting the net impact on share
prices from these competing forces is particularly difficult in a
period of structural change. It is the gap between the interest
rate/discount rate and the growth rate of earnings that is
particularly important in establishing the correct valuation
for equities. When both variables are subject to considerable
volatility the gap between them is even more volatile. This
greater uncertainty brings greater volatility in share prices
and greater opportunities for those focusing on longer-term
trends during this choppy period.
7
The aim of the investor, seeking to preserve and grow the
purchasing power of capital through such turbulence, should
be to focus on the long-term prospects and attempt to create
an equity portfolio suited to the dominant current when it
finally prevails. The cross-currents that prevail until that new
current dominates create opportunities for investors. Our
Managers have made significant changes to our Company’s
equity holdings over the past year in a period when contending
currents have produced choppy waters. A dominant current is
not yet established but the portfolio has been re-positioned
to provide what our Managers believe will be a greater
inflation protection than that available to those who invest
only in equity indices. In last year’s Chairman’s Statement, I
discussed why higher levels of inflation are indeed likely and
this repositioning is a welcome move to prepare for what is
likely to be the dominant current shaping investment returns
over the next decade and possibly evenlonger.
Can an investment in equities alone defend investors from
the ravages of inflation? As ever in the investment field there
is no clear-cut answer to that question but there is evidence
that a well-selected portfolio of equities can provide such
protection. An era of higher inflation has had a dramatic
impact on equity markets before. The valuation of the S&P
500, a broad index of US equities, declined, not of course in
a straight line, from January 1966 to July 1982. However, with
dividends re-invested the total return from large capitalisation
US equities was still positive. The problem was that the total
return of 126%, from 1966 to 1982, was significantly less than
the rise in the inflation index of 206% over the same period.
For those who invested in small capitalisation stocks there
was much better news as they produced a total return of 643%
far outstripping the rise in inflation. There were sectors of the
US equity market that also produced positive real returns
at a time when investors who had bought the stock market
index witnessed a major decline in the purchasing power of
theirsavings.
The point of these reflections is not that the inflationary
winners of that era will be the inflationary winners of our new
era. The point is that it has been possible to find a portfolio of
equities that can produce positive real returns in a prolonged
period of high inflation. That portfolio is unlikely to be biased
towards the stocks in the S&P 500 or other key global equity
indices. The companies now included in these indices, due
entirely to their large market capitalisations, represent the
companies that have prospered and have been awarded
higher valuations in the old regime. To preserve and grow
the purchasing power of savings via equity investment, it is
now important to find the winners of a new and very different
regime. The definition of an index fund is that it operates a
portfolio that is 100% aligned with the composition of the
index. Mid Wynd’s portfolio is less than 20% aligned with
the composition of our comparator index. Our Managers
are actively seeking the new winners in the period of
higher inflation and associated disruptions that higher
inflationentails.
Our Managers have the flexibility to invest our capital in tens
of thousands of different companies that are listed on the
global exchanges. The management of each company has
significant flexibility to adapt their business to change. The
world is changing but so is our portfolio as are the companies
that we invest in. Having started with a somewhat alarming
quotation, let us end with something more upbeat from
Socrates – ‘The secret of change is to focus all of your energy
not on fighting the old, but on building the new’. So, Mid Wynd
will stick to its core purpose of seeking to increase the real
wealth of our shareholders, more inspired by Socrates than
frightened by those ‘weeks when decades happen’.
Contact us
Shareholders can keep up to date with Company performance
by visiting midwynd.com where you will find information on
the Company, a monthly factsheet and regular updates from
the Investment Manager. In addition, the Board is always keen
to hear from shareholders.
Should you wish to, you can e-mail me at midwyndchairman@
artemisfunds.com.
Russell Napier
9 September 2022
8
Investment Manager’s Review
Introduction
After many years of excellent returns, global equities have
fallen throughout the last year. The Company’s net asset value
fell by 7.5% compared with the index down 4.2% in sterling.
An average share price premium of 2% to the net asset value
(NAV) has been maintained through the year.
Inflation returned as economies reopened after the Covid
years. The Russian invasion of Ukraine intensified the
inflationary pressures, especially because of the rise in
European gas prices. However, the companies we have
selected for the portfolio have generally coped well with the
changes in the economic background. Clearly, a number of
stocks have fallen in valuation as markets have readjusted,
but they continue to show revenue growth, healthy margins
and underlying cashflows.
Regional performance
Region Contribution %
Asia Pacific ex Japan 0.4
Emerging Markets (1.3)
Europe (1.6)
United Kingdom (0.9)
Japan (2.5)
North America (1.2)
Thematic performance
Theme Contribution %
Healthcare Costs 3.0
Scientific Equipment 0.1
Low Carbon World (0.1)
Online Services (0.6)
Materials (0.6)
Screen Time (0.7)
Building The Future (0.9)
Sustainable Consumer (1.3)
Digital Banking (1.7)
Automation (4.3)
Current investment themes
Healthcare Costs (15% of the portfolio): This was by far
the best performing part of the portfolio with American
health insurance companies, in particular, enjoying rising
employment (and thus policy sales) in the USA combined
with a lower level of medical claims per person. Our holding
in Pfizer also performed well as its Covid vaccine proved the
mainstay of public healthcare globally in the pandemic.
Scientific Equipment (6% of the portfolio): This theme again
performed quite well, despite the largest holding, Thermo
Fisher, being seen as an ‘expensive growth stock’ at a time
when such stocks were generally out of favour with investors.
The company’s underlying profitability, growth and pricing
power have been able to generate good investment returns
even in recent market conditions.
Automation (13% of the portfolio): This theme has been by far
the worst performing in the portfolio, despite good long-term
prospects and order books continuing to improve. Automation
companies generally have China as their largest market.
Given much of this country has been closed down under the
zero-covid policy, there has been a delay to deliveries. Some
companies have seen cost pressures and found it hard to raise
their own prices. Our Japanese holdings also underperformed
in sterling terms, as the yen declined materially.
However, the persistent inflation we are currently
experiencing encourages businesses to raise productivity
through automation. Also, many companies are planning to
diversify their supply chains, again suggesting that longer-
term investment in automated plant and distribution is a
strong growth theme. We have therefore continued to add to
holdings in this area.
Online Services (15% of the portfolio): About a year ago, we
noted valuations had become stretched and reduced our
exposure by selling a number of holdings. This avoided some
losses, but the remaining holdings have generally seen their
valuations fall over the year. Our remaining holdings, however,
continue to have convincing longer-term potential for growth.
Although share prices in this area have fallen materially, only
a few of the companies with what we believe to have the best
business models have come down to attractive valuations. We
have only bought back holdings in Salesforce.com and Adobe.
Sustainable Consumer (16% of the portfolio) has been
somewhat sluggish in performance terms which is no great
surprise given pressures on consumers’ budgets from the
rising cost of living. Once again the largest holding in this
theme, Louis Vuitton, managed to buck the trend; presumably
fewer of their customers worry about the cost of necessities
such as energy.
Screen Time (6% of the portfolio): We invested in some
telephone stocks over the last year and their ability to cope
with rising inflation helped these holdings perform very well
against the falling market. We have taken profits in some of
the holdings. However, the TV streaming companies in this
theme – Netflix and Disney – continue to wage a spending war
trying to retain customer subscriptions while consumers cut
back on expenditure. We have sold our holdings, (in the case
of Netflix, at a loss) and prefer to be on the side-lines while
these two, Apple, Amazon, Sky and others fight it out.
Low Carbon World (8% of the portfolio): This theme is now
dominated by our holdings in US railroad stocks which
performed well in the earlier part of the year, but have
come back a little more recently as investors worry about a
slowdown in the US economy.
9
Materials (5% of the portfolio): Mining shares have generally
been under pressure as concerns about a global recession
have risen. Longer term we believe China, in particular, will
revive its economy and building sector, which could lead
iron ore and copper prices higher. How long this will take is
a tricky question to answer, but we have modest holdings in
anticipation of that event.
Digital Finance (11% of assets) had an uneventful year with
financials doing well when it seemed lending rates might
rise and then retreating when markets became concerned
about recession. Having sold our investments in financial
technology, such as Paypal, we avoided some of the share
price falls in this area.
Five largest stock contributors
Company Theme Contribution %
Elevance Health Healthcare Costs 1.0
Pfizer Healthcare Costs 0.9
Koninklijke KPN Screen Time 0.6
Thermo Fisher Scientific Scientific Equipment 0.6
UnitedHealth Group Healthcare Costs 0.6
Five largest stock detractors
Company Theme Contribution %
Netflix Screen Time (0.7)
Cognex Automation (0.6)
KION Group Automation (0.5)
Hoya Automation (0.4)
Nabtesco Automation (0.4)
Outlook
The last year has seen global equity markets fall by 15.8% in
US dollar terms, with losses to sterling investors moderated
to 4.2% by sterling’s fall relative to the dollar. Bond yields, the
amount of annual interest paid to investors expressed as a
percentage of the asset’s price, have also risen sharply – UK
10-year gilt yields were 0.7% at the start of the period and 1.9%
at the end. Both of these moves are a result of rising inflation:
bond investors require higher yields to compensate them for
inflation and equity valuations tend to fall when bond yields
rise. A number of our longer-term holdings have seen their
valuations fall over the last year: some through their share
prices falling, others by their cashflows catching up their
share prices.
The rises in interest rates and bond yields to date seem very
small compared with the increase in consumer inflation –
reported at 9.4% in June 2022 for the UK. Markets seem to
expect inflation to fall back to manageable levels fairly easily.
We do not and so we are trying to ensure the stocks we select
for the portfolio sell essential products, have the ability to
pass on cost inflation through raising prices and have only
modest exposure to discretionary consumer spending.
We expect the next year will be a tough one, especially in
Europe, as fuel prices remain high and interest rates need to
rise to contain inflation. The quality of business models will be
tested. We believe the US economy will continue to benefit
from its flexibility, high labour demand, fairly comfortable
household balance sheets and domestic hydrocarbon
production. China will hopefully revive its property sector and
see reduced outbreaks of covid. This should allow the Chinese
economy to recover helping global growth and removing
some supply chain blockages.
The correction in markets has brought a number of our
favoured investments down to attractive valuations. We are
using the market correction as an opportunity to improve the
quality of the stocks in the portfolio – so we are often adding
stocks which have not fallen that much over the last year, but
which have shown their ability to keep cashflows growing even
in tough times. It would not surprise us if investing continues
to be challenging as markets see more of the effects of
stubborn inflation, but we believe companies chosen for their
business quality will continue to cope with these conditions.
Sustainable Investing
In this year’s Report & Accounts we include a section giving
more detail on our approach to sustainable investing,
including the effects of climate change. It has always been
integral to our analysis of suitable investments. Over time
different aspects of environmental, social and governance
can rise or fall in importance and these changes are used,
alongside the changing financial progress of any company, to
assess each investment.
Over the last year, the portfolio has benefited from our
decision not to invest in Russia, because of concerns over
governance. Secondly, while avoiding fossil fuel production
companies has contributed to our underperformance relative
to the benchmark index, the effect has been quite modest
(around 1.4% over the year), but has resulted in the Company
continuing to show low carbon intensity compared with the
index of global equities.
Artemis’ investment approach
Our aim is to identify reliable commercial trends around
the world that are likely to deliver superior growth to the
companies we invest in. By focusing the portfolio around
trends, such as the demand for consumer goods with
sustainable sourcing, the growth in demand for healthcare
and technological change on the internet and in the energy
industry, we believe our thematic-based approach can deliver
superior returns over time.
Within each chosen investment theme’s universe of
companies, there may be many quoted equities which
could be attractive investments. Our preference is to select
high-quality companies with proven records of profitability,
high cash generation and strong balance sheets and which
10
have established barriers to entry to their industries. Such
companies sometimes lag equity markets when they recover
vigorously following a decline, but they can help to protect
capital well when economic conditions become more testing.
Once an investment opportunity has been identified, we will
only commit capital to it when the price offers the chance
to invest at a reasonable valuation. This valuation discipline
is at the heart of all of our investment decisions. In terms of
portfolio construction, this will reflect opportunities that
meet our investment criteria and will not be weighted to a
benchmark. We aim to run a diversified portfolio, with around
55-75 holdings spread across eight to 10 different themes.
Over time we have found this investment approach gives a
framework to deliver very attractive returns to investors.
Further information on our investment approach can be found
on our website at https://www.artemisfunds.com/
Voting & engagement
In the 12 months to 30 June 2022, we voted against
management recommendations 69 times (8.6% of votable
items), as detailed in the chart below.
Voting activity – Mid Wynd (year to 30 June 2022)
Meeting overview
Category Number Percentage
Votable meetings 64
Meetings voted 62 96.9%
Meetings with at least 1 vote against
management, withhold or abstain
30 46.9%
Proposal overview
Category Number Percentage
Votable items 852
Items voted 800 93.9%
Votes against management 69 8.6%
Breakdown of votes against management
Policy/routine business
Director election related
Remuneration related
43%
30%
26%
Simon Edelsten & Alex Illingworth
Fund Managers
Bobby Powar & May Laghzaoui
Analysts
9 September 2022
11
Investments as at 30 June 2022
Investment Region Industry Theme
Market
value
£’000
% of total
net assets
Equities
Thermo Fisher Scientific North America Health Care Scientific Equipment 13,440 3.0
Pfizer North America Health Care Healthcare Costs 13,386 3.0
Microsoft North America Information Technology Online Services 13,293 2.9
Elevance Health North America Health Care Healthcare Costs 13,157 2.9
International Business Machines North America Information Technology Online Services 11,416 2.5
Singapore Telecommunications Developed Asia Communication Services Screen Time 11,328 2.5
Merck North America Health Care Healthcare Costs 11,304 2.5
Nestle Europe Consumer Staples Sustainable Consumer 11,080 2.4
Alphabet North America Communication Services Online Services 10,827 2.4
LVMH Moet Hennessy Louis Vuitton Europe Consumer Discretionary Sustainable Consumer 10,663 2.3
Top 10 investments 119,894 26.4
Avery Dennison North America Materials Sustainable Consumer 10,611 2.3
Union Pacific North America Industrials Low Carbon World 10,353 2.3
Humana North America Health Care Healthcare Costs 10,094 2.2
Norfolk Southern North America Industrials Low Carbon World 10,067 2.2
Mastercard North America Information Technology Digital Finance 10,031 2.2
Procter & Gamble North America Consumer Staples Sustainable Consumer 9,283 2.0
Accenture North America Information Technology Online Services 9,242 2.0
Prologis (REIT)^ North America Real Estate Building the Future 8,998 2.0
Equinix (REIT)^ North America Real Estate Online Services 8,673 1.9
AT&T North America Communication Services Screen Time 8,527 1.9
Top 20 investments 215,773 47.4
PNC Financial Services Group North America Financials Digital Finance 8,395 1.9
Estee Lauder North America Consumer Staples Sustainable Consumer 8,154 1.8
Taiwan Semiconductor Manufacturing Emerging Markets Information Technology Automation 7,871 1.7
KB Financial Group Emerging Markets Financials Digital Finance 7,869 1.8
Keyence Japan Information Technology Automation 7,623 1.7
Tokyo Electron Japan Information Technology Automation 7,153 1.6
Adobe North America Information Technology Online Services 7,137 1.6
PerkinElmer North America Health Care Scientific Equipment 6,847 1.5
Novo Nordisk Europe Health Care Healthcare Costs 6,839 1.5
Trimble North America Information Technology Automation 6,584 1.4
Top 30 investments 290,245 63.9
Segro (REIT)^ UK Real Estate Building the Future 6,341 1.4
adidas Europe Consumer Discretionary Sustainable Consumer 6,281 1.4
China Construction Bank Emerging Markets Financials Digital Finance 6,155 1.4
AIA Group Developed Asia Financials Digital Finance 6,153 1.4
Barrick Gold North America Materials Materials 6,047 1.3
Nutrien North America Materials Materials 5,659 1.3
Halliburton North America Energy Low Carbon World 5,646 1.2
Visa North America Information Technology Digital Finance 5,359 1.2
SMC Japan Industrials Automation 5,336 1.2
Sony Group Japan Consumer Discretionary Screen Time 5,325 1.2
Top 40 investments 348,547 76.9
^ Real Estate Investment Trust
12
Investment Region Industry Theme
Market
value
£’000
% of total
net assets
Freeport-McMoRan North America Materials Materials 5,304 1.2
Salesforce North America Information Technology Online Services 5,290 1.2
Epiroc Europe Industrials Automation 5,290 1.2
UnitedHealth Group North America Health Care Healthcare Costs 5,252 1.2
Fresenius Medical Care Europe Health Care Healthcare Costs 5,066 1.1
GXO Logistics North America Industrials Building the Future 4,970 1.1
Boliden Europe Materials Materials 4,915 1.1
KION Group Europe Industrials Automation 4,867 1.1
Gore Street Energy Storage Fund UK Financials Low Carbon World 4,862 1.1
Thai Beverage Emerging Markets Consumer Staples Sustainable Consumer 4,694 1.0
Top 50 investments 399,057 88.2
Wells Fargo North America Financials Digital Finance 4,429 1.0
Cognex North America Information Technology Automation 4,417 1.0
Ascendas (REIT)^ Developed Asia Real Estate Building the Future 4,416 1.0
Hexagon Europe Information Technology Automation 4,302 0.9
Mettler-Toledo International North America Health Care Scientific Equipment 3,989 0.9
Olaplex Holdings North America Consumer Staples Sustainable Consumer 3,970 0.9
CKD Japan Industrials Automation 3,959 0.8
SK Telecom Emerging Markets Communication Services Sustainable Consumer 3,746 0.8
Keppel DC (REIT)^ Developed Asia Real Estate Building the Future 2,866 0.6
SK Telecom ADR Emerging Markets Communication Services Sustainable Consumer 2,318 0.5
Top 60 investments 437,469 96.6
Aker Carbon Capture Europe Industrials Low Carbon World 1,632 0.4
Total equity investments (61) 439,101 97. 0
Net current assets
(excluding bank loans)
19,503 4.3
Bank loan (5,951) (1.3)
Total net assets 452,653 100.0
^ Real Estate Investment Trust
13
Regional analysis of the portfolio as at 30 June
% of total investments
2022
2021
58.3%
0
10
20
30
40
50
60
70
UKDeveloped
Asia
JapanEmerging
Markets
EuropeNorth
America
63.8%
15.3%
13.9%
10.4%
7.4%
6.6%
7.5%
4.8%
2.5%
3.8%
5.7%
Thematic analysis of the portfolio as at 30 June
2021
2022
0510 15 20
Materials
Scientific Equipment
Screen Time
Building the Future
Low Carbon World
Digital Finance
Automation
Healthcare Costs
Online Services
Sustainable Consumer
% of total investments
16.1%
11.9%
8.1%
15.0%
13.0%
11.0%
8.6%
5.7%
5.7%
14.9%
8.4%
7.8%
16.9%
12.5%
5.0%
11.3%
7.5%
8.8%
6.2%
5.6%
14
Strategy and Business Review
This Strategic Report has been prepared in accordance with
the Companies Act 2006 (Strategic Report and Directors’
Report) Regulations 2013.
Purpose
Our purpose is to increase the real wealth and prosperity of
our shareholders, thus helping them meet their long-term
savings needs.
Mid Wynd International Investment Trust plc can trace its
heritage back to 1797, when the founder of the Company set
up a textiles business in Dundee. Its origins as an investment
company date from 1949, when the Board began to manage
the financial reserves as a separate entity from the main
trading business. In September 1981, the shares of Mid Wynd
International PLC were floated on the London Stock Exchange.
At that time, the Board was entrusted by shareholders to
manage their wealth, with a focus on investing in global
companies with strong growth prospects and sustainable
businesses. This focus remains as true for the Board and
Investment Manager today as it did back then.
Through our investment company structure, we enable
shareholders, large or small, to invest in an actively-managed
diversified portfolio of securities in a cost-effective way, giving
them access to the growth opportunities offered by world
markets.
Strategy
As stated above, the Company’s purpose is to increase the
real wealth and prosperity of our shareholders, thus helping
them meet their long-term savings needs. To achieve this
goal, the Company has adopted a number of policies which
are set out below.
Objective and investment policy
The objective of the Company is to achieve capital and
income growth by investing on a worldwide basis. Although
the Company aims to provide dividend growth over time, its
primary aim is to maximise total returns to shareholders.
The Company is prepared to move freely between different
markets, sectors, industries, market capitalisations and asset
classes as investment opportunities dictate. On acquisition,
no holding shall exceed 15% of the portfolio. The Company
will not invest more than 15% of its gross assets in UK listed
investment companies. Assets other than equities may be
purchased from time to time including but not limited to
fixed interest holdings, unquoted securities and derivatives.
Subject to prior Board approval, the Company may use
derivatives for investment purposes or for efficient portfolio
management (including reducing, transferring or eliminating
investment risk in its investments and protection against
currency risk).
The number of individual holdings will vary over time. To
ensure diversification of opportunity and management of
risk, the Company is permitted by its policy to hold between
40 and 140 holdings; however, the portfolio will generally hold
between 55 and 75 stocks. The portfolio will be managed on a
global basis rather than as a series of regional sub-portfolios.
As at 30 June 2022 there were 61 holdings in the portfolio.
The Board and Investment Manager assess investment
performance with reference to the MSCI All Country
World Index (GBP). However, little attention is paid to the
composition of this index when constructing the portfolio and
the composition of the portfolio is likely to vary substantially
from that of the index. A long-term view is taken and there
may be periods when the net asset value per share declines in
absolute terms and relative to the comparative index.
Business model
The Company is incorporated in Scotland and operates as
an Investment Trust Company. It is an investment company
within the meaning of section 833 of the Companies Act 2006
(the “Act”) and is approved as an investment trust by HM
Revenue and Customs subject to the Company continuing
to comply with the requirements of section 1158 of the
Corporation Tax Act 2010. The Company has a premium listing
on the London Stock Exchange. The Company is also an
Alternative Investment Fund whose investment manager is
regulated by the Financial Conduct Authority.
The Company has no employees and the Board, which
comprises solely of non-executive Directors, has delegated
most of the Company’s operational functions to a number of
key service providers. All key service providers are appointed
under rolling contracts which are periodically reviewed, at
which time the appropriateness of the continuing appointment
of such service providers is considered. Details of the key
service providers are set out later in this Annual Report.
Dividend policy
The Company’s main focus is on growing shareholders’ capital.
Nevertheless, the Company does have a progressive dividend
policy which is not solely determined by the requirements
of s1158 of the Corporation Tax Act 2010 to retain no more
than 15% of revenue earnings in any financial year. The
Board intends to grow dividends, subject to the availability
of distributable reserves. Where appropriate, the Board may
declare a special dividend.
Gearing and leverage
The Company may use borrowings to support its investment
strategy and can borrow up to 30% of its net assets. The
Company has a USD60m multicurrency revolving credit
facility with the Bank of Nova Scotia (London Branch) which is
available to the Company until 19 February 2024. As at 30 June
2022, €5.0m (£4.3m) and US$2.0m (£1.6m) was drawn down
from thisfacility.
The Company’s gearing is reviewed by the Board and
Investment Manager on an ongoing basis.
15
Leverage is defined in the Alternative Investment Fund
Managers Directive (‘AIFMD’) as any method by which
the Company can increase its exposure by borrowing
cash or securities, or from leverage that is embedded in
derivative positions. The Company is permitted to borrow
up to 30% of its net assets (determined as 130% under the
Commitment and Gross ratios). The Company is permitted
to have additional leverage of up to 100% of its net assets,
which results in permitted total leverage of 230% under both
ratios. The Alternative Investment Fund Manager (the ‘AIFM’)
monitors leverage values on a daily basis and reviews the
limits annually. No changes have been made to these limits
during the year. At 30 June 2022, the Company’s leverage was
100.64% as determined using the Commitment method and
105.94% using the Gross method. Further details can be found
in the Glossary on page 72.
Current and future developments
A summary of the Company’s developments during the year
ended 30 June 2022 together with its prospects for the future,
is set out in the Chairman’s Statement on pages 5 to 7 and the
Investment Manager’s Review on pages 8 to 10. The Board’s
principal focus is the delivery of positive long-term returns
for shareholders. This will be dependent on the success of
the investment strategy, in the context of both economic and
stock market conditions. The investment strategy, and factors
that may have an influence on it, are discussed regularly by the
Board and the Investment Manager. The Board furthermore
considers the ongoing development and strategic direction of
the Company, including its promotion and the effectiveness
of communication with shareholders.
Culture and values
Culture
Corporate culture for an externally-managed investment trust
like Mid Wynd International Investment Trust PLC, refers to
the beliefs and behaviours that determine how the Directors
interact with one another and how the Board manages
relationships with shareholders and key service providers,
such as the Investment Manager. The culture is defined by
the values which are set out below. The s172 report included
in this Strategy and Business Review provides further details
of how the Board has operated in this regard.
Values
The Board is mindful that it is overseeing the management of
a substantial investment portfolio on behalf of investors. In
many cases, the investment in the Company may represent a
large proportion of an individual’s savings. As all the Directors
are invested in the Company, the Directors’ interests are
aligned with those of fellow shareholders in this regard.
Our approach to governing the Company is therefore
underpinned by our determination to do the right thing for our
shareholders. Key to this is having a constructive relationship
with them, through monthly updates, half-yearly and Annual
Financial Reports, and the opportunity to meet with them at
the Annual General Meeting, when this is held under normal
circumstances. We also believe in having strong relationships
with our Investment Manager and other service providers,
one based on mutual trust and respect, with constructive
challenge when required. Below is a summary of the Board’s
most important values:
■
Excellence: the Directors want the Company to succeed.
The Board is very focused on its purpose of delivering
long-term value for all its shareholders, whether they are
large or small. Focusing on this strategic imperative and
adopting best practice wherever appropriate in all the
Company’s dealings are key to driving excellence. We will
always put our shareholders first and will constantly look
at how to enhance long term value, for example through
the use of gearing, share issuance, and buybacks.
■
Integrity: the Board seeks to be ethical and honest,
to comply with all laws and regulations applicable to
investment companies, avoid conflicts of interest and
have zero tolerance to bribery and corruption, tax evasion
or other fraudulent behaviour. It expects the same high
standards to be adopted by all its key service providers.
■
Accountability: the Board recognises the need to explain
the Company’s performance to investors, including
the upsides, the downsides and the risks in a clear,
straightforward and transparent manner. Accountability
also involves the Board challenging its key service
providers to ensure the Company continues to receive a
high standard of service to drive long term shareholder
value. Each of the Directors recognises their individual
responsibility to shareholders and accordingly each of
the Directors will stand for re-election at each Annual
General Meeting.
■
Respect: the Board is collegiate and recognises the value
of the diverse backgrounds and opinions of its Directors.
It also recognises the importance of treating shareholders
and key service providers with respect. Contact by
shareholders via the Chairman’s email address is
welcomed; the Company adheres to key service provider
terms and conditions such as prompt payment.
■
Sustainable investing, and Environmental, Social
and Governance (“ESG”) issues: Both the Board and
our Investment Manager, Artemis, recognise that
sustainability and ESG matters should be cornerstones
to the investment approach. Artemis’ own overview
of its stewardship activities during 2021-22, including
a summary of its own values (which align with those of
the Board) can be found on the Company’s website at
midwynd.com.
16
Environmental, Social & Governance Matters (“ESG”) / Stewardship & Sustainability
The Board and Investment Manager, Artemis Fund Managers
Limited (“Artemis”), recognise that sustainability and ESG
matters are important cornerstones to responsible investment;
both parties are committed to taking a responsible approach
with the Company’s own governance matters and, more
materially, a responsible approach to the impact the Company
has through the investment decisions made by its Investment
Manager.
The Board has delegated authority to its Investment Manager
to invest responsibly; engaging actively with investee
companies to understand their management ethos and to
seek sustainable returns.
The below report from the Investment Manager summarises
the integration of ESG within its investment process.
The Mid Wynd portfolio and ESG within the investment process
We have a five-point sustainability process to help identify
risks that might not be uncovered by a purely financial
assessment. It can also help us unearth companies that are
well placed to accrue additional value to investors because of
the work they are doing to become more sustainable.
1. Secular growth focus
Our investment process, which is built around investment
themes, naturally biases our portfolio towards sustainable
sectors. We focus on companies in areas that are enjoying
secular growth rather than those exposed to economic
cycles. This tends to steer us away from companies that
carry the highest environmental risks, which are often within
declining sectors.
2. Sustainability analysis
Gathering Data
We focus on the sustainability metrics that we consider
material to the investment case of stocks in each theme. We
highlight these metrics and incorporate them into our analysis
to understand downside risk, inform the upside, but also to
allow us a better understanding of how the company operates.
Mostly, these raw metrics and scores are only used as
a signpost to further analysis – for instance, alerting us
tocontroversies.
We strive to identify the vital data points (and these can vary
from industry to industry), but the full list includes circa 50
ESG criteria. This approach allows relative focus and works
globally. Ultimately, we are looking to highlight externalities
or issues that are not reflected in today’s share price. Where
possible we will try to quantify this. These data points are
ever evolving because of ongoing improvements in company
reporting and we look forward to further standardisation
by both the Global Sustainability Standards Board and the
International Finance Reporting Standards Foundation on
these issues.
Evaluating Data
We co-mingle sustainability data with financial data through
our Value Model process as both are integral to the eventual
investment decision. The trend and the absolute level of
the metrics inform our decisions. We source data from
Bloomberg, MSCI & Sustainalytics. None of the providers are
a single source of truth so are not a substitute for our own due
diligence and our experience/knowledge of the companies.
Evaluating the material metrics for each investment decision
is a critical step. Overall, we are looking for investments that
create value over the long-term in a sustainable manner.
Portfolio carbon emissions
The challenges around climate change are of increasing
concern. We have recently placed greater importance on
considering the issue separately from other ESG issues. We
have looked at the portfolio through a climate lens to better
understand the areas of strengths and weaknesses. This
was done through activities such as reviewing the portfolio’s
current and projected absolute carbon emissions, emissions
intensity and the implied temperature rise of the portfolio and
individual companies.
The portfolio’s carbon emissions have remained consistently
below its benchmark, the MSCI All Country World Index (GBP),
as detailed in the graph below.
Mid Wynd Carbon Intensity
0
50
100
150
200
250
Tonnes of C02 / £1m of revenue
Mid Wynd MSCI All Country World Index (GBP)
Jun-18
Sep-18
Dec-18
Mar-19
June-19
Sep-19
Dec-19
Mar-20
Jun-20
Sep-20
Dec-20
Mar-21
Jun-21
Sep-21
Dec-21
Mar-22
Jun-22
Other environmental metrics that are a focus are percentage
of renewable energy used and the implementation of
appropriate net zero or science-based targets.
When we are looking at governance issues, we are generally
looking for ethical culture, effective leadership, and controls.
We also monitor political risk in our governance approach.
Political change, affecting property rights for shareholders or
currency markets can cause permanent or significant loss of
value. Our approach is to minimise such risks. Social issues
are the least well reported yet can be critical. The focus here
is on ethical practices towards staff and effective supply
chain management.
17
3. Permanent / hard exclusions
We aim to exclude from the portfolio the following: companies
which receive more than 10% of their revenue from Tobacco,
Gambling, Weapons (including a total exclusion of companies
involved in the production of cluster munitions, landmines,
biological and chemical weapons) and Fossil fuels (companies
which derive more than 10% revenue from mining or sale of
thermal coal; or extraction, production or refining of either
oil or gas). These restrictions reinforce our avoidance of
companies that cause the most harm to the planet and
society. We believe this satisfies the principled needs of
most investors. These exclusions are primarily focused on
environmental and social factors, although we include soft
exclusions around governance risks.
4. Soft exclusions
Our thematic approach of identifying and investing
in companies that can benefit from long-term sector
trends is intrinsically forward looking. Some approaches
to sustainability focus on historic metrics or scores. We
believe issues around sustainability are constantly evolving,
which requires us to apply judgement and make informed
predictions in identifying trends.
Therefore, alongside the ‘hard exclusion’ sectors noted above,
we also have ‘soft exclusions’ where we think that the risks
are currently too great given our capital-protective approach
to Company management. For example, we have excluded
Russian companies since we started managing the Company
in 2014. We do not consider the current governance standards
to be sufficient. We are also increasingly concerned about
governance issues in China and have reduced our positions as
a consequence.
Attitudes change and this is a fast-moving area. Thinking
forward in this way encourages us to engage in new areas
and can uncover potential new themes, such as the Future of
Energy Delivery. Global initiatives (like the UN’s sustainable
development goals) are often useful too, as the alignment of
geopolitical drivers and economic opportunity often gives rise
to themes with exceptional longevity.
Overall, we believe that it is sensible to have a forward-looking
lens on sustainability issues when running a qualitative
approach to stock selection that is built on fundamentals.
For this reason, we have a sustainability approach which is
integrated as part of active, pragmatic fundamental equity
analysis. These conclusions may vary from sustainability
scoring where data is often out of date or leads to conclusions
which the team doubt are in shareholder interests.
5. Company engagement
In order to better inform our engagement process, we conduct
a quarterly ESG review. This involves assessing the MSCI and
Sustainalytics ‘worst rated’ stocks alongside any that have
been flagged to have an orange or red label controversy. The
team reviews the highlighted controversies, conducting further
research where issues are deemed material. This process then
feeds back into our engagement plan of companies to approach.
Where we can influence through engagement we will. This is not
always feasible given the small percentage of any company’s
stock we generally hold. If we feel sustainability issues are
not being addressed, we favour a policy of engagement over
divestment. However, if our attempts to influence companies
show little evidence of success and they are failing to make
their businesses more sustainable we will sell holdings.
In summary, through the five-point sustainability process we
are able to effectively identify risks and analyse companies’
sustainability credentials. This analysis, alongside our
controversy review, guides our engagement approach and
allows us to have informed engagements with companies on
the most material ESG issues.
18
Key performance indicators (‘KPIs’)
The performance of the Company is reviewed regularly by the
Board and it uses a number of KPIs to assess the Company’s
success in meeting its objective. The KPIs which have been
established for this purpose are set out below:
■
Net asset value performance compared to the MSCI All
Country World Index (GBP)
The Board monitors the performance of the net asset value per
share against that of the MSCI All Country World Index (GBP).
■
Share price performance
The Board monitors the performance of the share price of the
Company to ensure that it reflects the performance of the net
asset value.
Discrete annual total returns
Year ended
30 June
Net asset
value
Share
price
MSCI
All Country
World Index
(GBP)
2018 12.7% 13.4% 8.9%
2019 13.3% 15.2% 9.7%
2020 12.2% 9.1% 5.2%
2021 24.3% 27.3% 24.6%
2022 (7.5)% (9.5)% (4.2)%
■
Share price premium/(discount) to net asset value
The Board recognises that it is in the interests of shareholders
to maintain a share price as close as possible to the net asset
value (NAV) per share. The policy of the Board is to limit the
discount or premium to a maximum of 2 per cent in normal
circumstances. The Company may issue shares at such times
as demand is not being met by liquidity in the market and
buy back shares when there is excess supply. This policy has
proved consistently effective in generating value within the
Company and protecting shareholders’ liquidity requirements.
During the COVID-19 emergency the stock markets and thus
the Company’s NAV were particularly volatile. This current
year has brought volatility from geopolitical events in Ukraine/
Russia as well as inflationary pressures. At all times the
Company sought to manage the discount and premium within
the target parameters and achieved an average premium of
2% over the year. No share buybacks were performed over the
year. While the Company declares its NAV daily, markets are
open almost twenty four hours per day and this accounts for
the wider range in premium and discount in 2022 shown on
the following chart. Whilst the Company underperformed its
comparator index this year, it has continued to issue shares
during the challenging market conditions encountered and
as a result, 5,486,000 shares have been issued during the year
to 30June 2022, raising proceeds, net of dealing commission
and stock exchange fees, of £44.2m. At the year end the issued
share capital of the Company had risen by approximately
152% from the time of the Investment Manager’s appointment
in May2014.
Although the Company incurs modest costs for operating the
policy and when renewing shareholder authority, issuance at
a premium and buying back at a discount under the policy
more than compensates and is consistently accretive
to NAV. The Board estimates that since the Investment
Manager was appointed, the NAV has further benefited from
the premium that new shares have been issued at by £5.0m
after all costs, with £0.9m of this gain being generated in the
latest financialyear.
Share price premium/(discount) to net asset value
Source: Datastream/Morningstar.
Premium/(discount) to net asset value (%)
June 2021
July 2021
August 2021
September 2021
October 2021
November 2021
December 2021
January 2022
February 2022
March 2022
April 2022
May 2022
June 2022
(2)%
(1)%
0%
1%
2%
3%
4%
Source: Datastream/Morningstar.
All figures based on rolling weekly average.
■
Ongoing charges
The Board is mindful of the ongoing costs to shareholders of
running the Company and monitors operating expenses on a
regular basis. An increase in funds under management during
the year has led to the reduction in the Company’s current
ongoing charges ratio to 0.60% (2021: 0.61%).
■
Dividend per share
The Board, in addition to capital growth, continues to pursue
its policy of growing dividends. It monitors the revenue
returns generated by the Company during the year, its historic
revenue reserves and expected future revenue and then
determines the dividends to be paid. Earnings during the year
increased by 72% which has allowed the Board to increase
the interim and final dividends payable to shareholders along
with the addition of a special dividend of 3.00p. Subject to
approval of the final dividend by shareholders, a total regular
dividend of 7.20pence per share (2021: 6.40 pence per share)
will be paid in respect of the year ended 30 June 2022. This
represents an increase of 12.5%.
Total dividends payable for the year ended 30 June 2022,
including the special dividend, amount to 10.20 pence per
share and an increase of 59.4% on the prior year.
Dividends payable/paid in respect of the years ended June
2022 and June 2021 were fully covered by their respective
current yearearnings.
19
Principal risks and risk management
As required by the 2018 UK Code of Corporate Governance,
the Board has carried out a robust assessment of the principal
and emerging risks facing the Company.
The Board, in conjunction with the Investment Manager, has
developed a risk map which sets out the principal risks faced
by the Company and the controls established to mitigate these
risks. This is an ongoing process and the risk map, including
any emerging risks, is formally reviewed every six months. The
Board has given particular attention to those risks that might
threaten the long-term viability of the Company. Further
information on the Company’s internal controls is set out in
the corporate governance section on pages 33 and 34. As
an investment company the main risks relate to the nature
of the individual investments and the investment activities
generally; these include strategic risk, market price risk,
borrowing risk, regulatory risk, climate change, and the risk of
reliance on third parties and key personnel.
A summary of the key areas of risk, their movement during the
year and their mitigation is set out below:
Movement during the year:
No change
Decreased risk
Increased risk
H
Emerging / new risk included during the year
Movement Principal risk Mitigation/control
Strategic risk
The management of the portfolio of the Company may
not achieve its investment objective and policy.
The investment objective and policy of the Company
is set by the Board and is subject to ongoing review
and monitoring in conjunction with the Investment
Manager.
The Company’s investments are selected on their
individual merits and the performance of the portfolio
may not track the wider market (represented by the
MSCI All Country World Index (GBP)). The Board
believes this approach will continue to generate good
long-term returns for shareholders. Risk is diversified
through a broad range of investments being held.
The Investment Manager has a proven track record;
the Board discusses the investment portfolio and its
performance with the Investment Manager at each
Board meeting.
20
Movement Principal risk Mitigation/control
Market risks
The Company invests in a portfolio of international
quoted equities. The prices of equity investments may
be volatile and are affected by a wide variety of factors
many of which can be unforeseen and are outwith the
control of the investee company or the Investment
Manager. These price movements could result in
significant losses for the Company.
Current events such as the recent experience of
COVID-19 and the current war in Ukraine may negatively
affect investment values leading to the inability to buy,
sell or value assets at a competitive price, and have an
adverse effect on the Company’s results.
The Company’s functional currency and that in which
it reports its results is Sterling. However, the majority
of the Company’s assets, liabilities and income are
denominated in currencies other than Sterling.
Consequently, movements in exchange rates will
affect the Sterling value of those items. The country in
which a portfolio company is listed is furthermore not
necessarily where it earns its profits and movements in
exchange rates on overseas earnings may have a more
significant impact upon a portfolio company’s valuation
than a simple translation of that company’s share price
into Sterling. The Company does not generally hedge
its currency exposures and changes in exchange rates
may lead to a reduction in the Company’s NAV.
The Company pays interest on amounts drawn down
under its borrowing facility with The Bank of Nova
Scotia. As such, the Company will be exposed to
fluctuations in the prevailing interest and exchange
rates for each currency drawn down under the facility.
Globally, climate change effects are already emerging
in the form of changing weather patterns. Extreme
weather events could potentially impair the operations
of individual investee companies, potential investee
companies, their supply chains and their customers.
Covid-19, including various governments’ responses
to managing the crisis and the war in Ukraine have
resulted in increasing levels of inflation directly
affecting economic growth and the underlying
investment values.
The Board considers that the risk of market volatility is
mitigated by the longer-term nature of the investment
objective and the Company’s closed-ended structure,
and that such investments should be a source of
positive returns for shareholders over the longer period.
Risks are diversified through having a range of
investments in the portfolio with exposure to various
geographies, sectors and themes..
The Investment Manager has a proven track record
and reports regularly to the Board on market
developments. At each Board meeting the Investment
Manager provides explanations for the performance
of the portfolio and the rationale for any changes in
investment themes, sectors and geographies. Any use
of derivatives to manage market risks requires Board
approval.
The Investment Manager takes climate risks into account,
along with the downside risk to any company (whether in
the form of its business prospects or market valuation or
sustainability of dividends) that is perceived to be making a
detrimental contribution to climate change. The Company
invests in a broad portfolio of businesses with operations
spread geographically, which should limit the impact of
location- specific weather events.
The Board and its Investment Manager have regular
discussions to assess the likely impact of inflation
rates on the economy, corporate profitability and
assetprices.
21
Movement Principal risk Mitigation/control
Legal and regulatory risk
Changes to the requirements of the framework of
regulation and legislation (including rules relating to
listed closed-end investment companies), within which
the Company operates, could have a material adverse
effect on the ability of the Company to carry on its
business and maintain its listing. A change to the legal
or regulatory rules in the future could, amongst other
things, lead to the Company being subject to tax on
capital gains.
The Company relies on the services of the Company
Secretary and Investment Manager to monitor ongoing
compliance with relevant regulations, accounting
standards and legislation. The Company Secretary
and Investment Manager also appraise the Board of
any prospective changes to the legal and regulatory
framework so that any requisite actions can be planned.
The Company’s auditor provides an annual update
on accounting standard changes that are deemed
relevant for the Company. The affects of such change
are assessed and implemented by the Investment
Manager.
The Board receives internal control reports from the
Investment Manager confirming compliance with
regulations. These reports also highlight any matter
that the Compliance team feel should be brought to
the Board’s attention along with any items discussed
during internal audit review.
The Board meets each year with the Risk and Compliance
team to discuss the areas of risk appropriate to the
Company and the control environment.
Operational risks
Reliance on third-party service providers
The Company has no employees and all of the Directors
have been appointed on a non-executive basis; all
operations are outsourced to third-party service
providers. Failure by any service provider to carry out
its obligations to the Company in accordance with the
terms of its appointment, to protect against breaches
of the Company’s legal and regulatory obligations such
as data protection or to perform its obligations to the
Company at all as a result of insolvency, fraud, breaches
of cybersecurity, failures in business continuity plans or
other causes, could have a material adverse effect on
the Company’s operations.
Experienced third-party service providers are employed
by the Company under appropriate terms and
conditions and with agreed service level specifications.
The Board receives regular reports from its service
providers and reviews the performance of its key
service providers at least annually.
Reliance on key personnel
The Company’s portfolio is managed by the Investment
Manager and in particular there are two investment
executives within the Artemis fund management team
who have direct responsibility for portfolio selection.
Any change in relation to the investment executives
may adversely affect the performance of the Company.
The engagement of these two individuals in the
management of the portfolio provides continuity.
The Investment Manager additionally has business
continuity plans in the event that they were to leave. The
individuals hold substantial interests in the Company
and the Investment Manager has appropriate incentive
arrangements in place to retain its staff.
Borrowing
The Company has a multicurrency revolving credit
facility with The Bank of Nova Scotia to borrow money
for investment purposes. If the Company’s investments
fall in value, any borrowings will magnify the extent of
the losses and if borrowing facilities are not renewed,
the Company may also 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. The Bank of Nova Scotia requires
the Company to confirm adherence to the agreed
covenants on a monthly basis. There has been no
breach of these covenants during the year or the prior
year. The majority of the Company’s investments are in
quoted companies which are highly liquid.
22
Movement Principal risk Mitigation/control
Emerging / New risks
H
Geopolitical risk
There is an increasing risk to market stability from geo-
political conflicts, such as the war in Ukraine and the
recent tension increase between Taiwan and China.
The Board discusses such risks as they arise and
continues to monitor the impact on the Company and
its investments through discussion with the Investment
Manager as and when required.
The Board is provided with information from the
Investment Manager on the measures it takes to assess
the potential impact of geopolitical events, both on
itself and other service providers, and any action taken.
Further information on risks and the management of them are set out in note 20 of the notes to the financial statements on
pages 58 to 62.
23
Long-term Viability
Viability statement
In accordance with the Association of Investment Companies (the “AIC”) Code of Corporate Governance, the Board has considered
the longer-term prospects for the Company beyond the twelve months required by the going concern basis of accounting. The
period of assessment, in line with our Key Information Document, is five years to 30 June 2027. The Board has concluded that this
period is appropriate, carefully taking into account the inherent risk with equities and the long-term investor outlook.
As part of its assessment of the viability of the Company, the Board has discussed and considered each of the principal risks,
market, operational and legal & regulatory risks, including matters relating to Covid-19 and inflationary pressures, as stated on
page 20, and their impact on the Company. Although the damage to the economy through the total cost of Covid-19 and the
geopolitical effect of the war in Ukraine cannot be known with certainty, the Board has considered these risks and does not
believe they affect the long term viability of the Company and its portfolio. The Company is authorised to trade as an investment
company and has the associated tax benefits. Any change to the Company’s tax arrangements could affect the Company’s
viability as an effective investment vehicle. The Investment Manager carried out stress testing scenarios in connection with
a longer-lasting damage to the economy, of the withdrawal of liquidity by the financial authorities and of a significant and
sustained fall in markets. The Board has also considered the liquidity of the Company’s portfolio to ensure that it will be able to
meet its liabilities, as they fall due. The results demonstrated the impact on the Company’s NAV throughout the five year period
and on its expenses and liabilities. The Board have concluded, given the realisable nature of the majority of the investments, the
level of ongoing expenses and the availability of gearing that the Company will continue to be in a position to cover its liabilities.
The Board also made the below assumptions when considering the viability of the Company:
■
the Company will continue to adopt the same investment objective
■
the Company’s performance will continue to be attractive to shareholders
■
the Company will continue to meet the requirements to maintain its status as an investment trust
In considering the viability, the Directors have taken into account the principal risks and the associated mitigating controls. The
Company’s assets are liquid, its commitments limited, and it intends to continue as an investment trust.
The conclusion of this review is that the Board has a reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the next five years.
24
Duty to Promote the Success of the Company
How the Directors discharge their duties under s172 of the
Companies Act
Under section 172 of the Companies Act 2006, the Directors
have a duty to act in good faith and to promote the success
of the Company for the benefit of its shareholders as a whole,
and in doing so have regard to:
a) the likely consequences of any decision in the long term,
b) the interests of the company’s employees,
c) the need to foster the company’s business relationships
with suppliers, customers and others,
d) the impact of the company’s operations on the community
and the environment,
e) the desirability of the company maintaining a reputation
for high standards of business conduct, and
f) the need to act fairly as between members of the company.
As an externally managed investment trust, the Company
has no employees or physical assets. Our shareholders, our
investee companies, Artemis as our Investment Manager and
other professional service providers, such as the administrator,
depositary, registrar, auditor, corporate broker and lenders are
all considered to fall within the scope of section 172.
The Board is responsible for promoting the long-term
sustainable success and strategic direction of the Company
for the benefit of the Company’s shareholders. Whilst certain
responsibilities are delegated, directors’ responsibilities are
set out in the schedule of matters reserved for the Board
and the terms of reference of its committees, both of which
are reviewed regularly by the Board. The Board has set the
parameters within which the Investment Manager operates
and these are set out in the Investment Management
Agreement and in Board minutes.
The Company’s culture and values, as described on page15
of this Annual Financial Report, have been established by
the Board to manage its key business relationships. The
Company’s approach on anti-bribery and prevention of tax
evasion can be found on page 33 and on the Company’s
website at midwynd.com.
Shareholders
To help the Board in its aim to act fairly as between the Company’s
members, it encourages communications with all shareholders.
The Annual and Half-yearly Financial Reports are issued to
shareholders and are available on the Company’s website
together with other relevant information including monthly
factsheets. The Board regularly reviews and discusses any
shareholder communications received at Board meetings. This
ensures that shareholder views are taken into consideration as
part of any decisions taken by the Board. The Board continued
to authorise the issue and allotment of new ordinary shares.
The Board considers communication with shareholders an
important function and Directors are always available to respond
to shareholder queries. Shareholders are welcome to contact the
Board through use of the midwyndchairman@artemisfunds.com
email address. This year we are inviting shareholders to attend
our AGM where they will be able to ask questions of the Board
and the Investment Manager.
As a means of ensuring good communication with our
shareholders, the Company continues to engage a
communications consultancy firm to assist with its marketing
and future development and the Board and Investment
Manager discuss the topic regularly.
The Investment Managers have presented at a number of
conferences throughout the year, including the Winterflood
Investment Trusts seminar in June. This was in addition to
providing regular investor updates to wealth managers. The
Investment Manager continues to keep the interaction with
all shareholders high and plans to participate in similar events
in the upcoming year.
Additionally, through its membership of the AIC, the Board
believes the Company and shareholders benefit from the
work undertaken by this body with their representation of the
investment trust industry.
Investment Manager
The Board receives regular updates from the Investment
Manager and ensures that information pertaining to its key
parties is provided, as required, as part of the information
presented in regular board meetings.
This enables the Investment Manager to demonstrate the
Company’s strategy through those channels that reach
its key parties, ensuring they are kept updated of the
latest developments. The Investment Manager ensures
communication with the Company’s brokers is maintained
and opportunities for growing the Company’s retail base and
featuring on investment platforms is strengthened.
During the period, the market volatility resulted in additional
discussions being held between the Board and Investment
Manager to discuss the impact on the Company, and
specifically to ensure the protection of shareholders’ interests
and to understand the opportunities presented for investment
in the sometimes volatile equity markets.
Investee companies
The Board has discussed with the Investment Manager how
Environmental, Social and Governance (‘ESG’) factors are
taken into account when selecting and retaining investments
for the Company. The Board recognises the increasing
importance placed on this area. A report from Artemis on ESG
matters / stewardship and sustainability and the Mid Wynd
portfolio has been included on pages 16 and 17.
The Board has given discretion to the Investment Manager
to exercise the Company’s voting rights. The Investment
Manager endorses the UK Stewardship Code and has active
engagement in industry bodies as well as with investee
company boards as set out on pages 9 and 10 of this Annual
Financial Report.
25
Other key service providers
The Board regularly reviews the performance of other service
providers to ensure that services provided to the Company
are managed efficiently and effectively for the benefit
of the Company’s shareholders. The Board monitors the
performance of these other key service providers such as
the administrator, depositary and registrar through regular
reporting at Board meetings or via the Company Secretary.
The Board receives regulatory updates at every Board meeting
and as necessary from the Company Secretary and carefully
assesses the impact of these on the Company.
The Company’s auditor attends two Audit Committee
meetings per year which provides the Board with good
opportunity for engagement and discussion of upcoming
regulatory change and emerging best industry practice. This
also gives the Audit Committee the opportunity to discuss
the approach to the audit, its effectiveness and the level of
professional scepticism applied.
Board discussions and decisions
Key discussions and decisions made by the Board during the year ended 30 June 2022:
Topic Background & discussion Decision
Share issuance The Board discussed the on-going strategy
of share issuance to assist in controlling
the share premium to NAV.
It was decided this strategy was working as
required and the Board continued to give
authority as required.
Environmental, social and
governance matters (‘ESG’)
The Board discussed its responsibilities
for ESG and how Artemis, as Investment
Manager, undertook the required steps to
ensure ESG continued to be incorporated
within the investment process.
The Board made enquiries of the Fund
Manager as to the ESG credentials of the
underlying portfolio. The Fund Manager
confirmed engagement with investee
boards helped gain an understanding of the
governance in place.
The Board received reporting on ESG and
sustainability quarterly. A representative of the
Risk team presents annually, or as required, to
the Board.
It was decided that ESG was appropriately
incorporated within the Artemis investment
process and the Board would continue to
discuss and monitor on an on-going basis.
Marketing and Distribution The Board held a session with the Marketing
and Distribution teams of the Investment
Manager. At this session, details of the
marketing strategy and its effectiveness
were discussed with the Board.
The Board concluded the Company was marketed
efficiently and the Investment Manager was
making good use of available internal and external
resources.
The Board requested an annual review with the
Marketing and Distribution teams.
Administration, Depositary
and Custodian arrangements
The Board considered and discussed the
proposal made by the Investment Manager
to move these services to Northern Trust in
2023.
The Board confirmed agreement with the
proposal.
Gearing The Board discussed the current policy and
level of gearing utilised.
The Board decided that this policy continues to
provide gearing appropriate to the Company’s
requirements.
Internal audit The Audit Committee discussed the
possibility of the Company having its own
internal audit function.
The Audit committee and Board decided the
Company should continue to place reliance on
the internal audit function performed by the
Investment Manager.
Director succession The Board discussed succession of Directors
taking into account the number of years
served and the mix of skills required to
perform the role.
The Board concluded its policies on Director
and Chairman tenure were still appropriate. The
recruitment to replace Harry Morgan is ongoing.
Board evaluation The Board discussed whether an external
board evaluator should be appointed.
The Board requested the Company Secretary
source further detail on external board
evaluation with a view to completing this
during2023.
The Board’s primary focus is to promote the long-term success of the Company for the benefit of the Company’s shareholders. In
doing so, the Board has regard to the impact of its actions on other stakeholders as described above.
26
Directors & Diversity
The Directors of the Company and their biographical details
are set out on page 27.
No Director has a contract of service with the Company.
The Board recognises the principles of diversity in the
boardroom and acknowledges the benefits of having
greater diversity, including gender, age, social and ethnic
backgrounds, and cognitive and personal strengths. The
Nomination Committee considers diversity alongside seeking
to ensure that the overall balance of skills and knowledge that
the Board has remains appropriate, so that it can continue to
operate effectively. Appointments to the Board will be made
on merit with due regard to the benefits of diversity, including
gender. The Board recognises the benefits of diversity and
over time, as suitably qualified candidates emerge, expects
that this will increase. The Board considers its commitment
to greater diversity is not in conflict with a policy on board
tenure in which the Chairman would not ordinarily serve for
more than ten years as Chairman. The Board is of the view
that the shareholders’ best interests are served by retaining
the services of a well-qualified Chairman rather than losing
them for reasons unrelated to ability. This policy on tenure
does not materially restrict the ability of the Board to increase
diversity and the annual appraisal process assesses whether
the Chairman retains the confidence of the Board. The
Board is currently comprised of four male Directors and one
femaleDirector.
Modern Slavery Act 2015
The Company is not within scope of the Modern Slavery
Act 2015 and is not, therefore, obliged to make a human
trafficking statement. The Company has no employees and
its supply chain consists mainly of professional advisers so is
considered to be low risk in relation to this matter.
Greenhouse gas emissions
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. The Company
has no employees and all of its Directors are non-executive,
with all day to day activities being carried out by third parties.
The Company considers itself to be a low energy user as
defined in the Streamlined Energy and Carbon Reporting
Regulations and therefore is not required to disclose energy
and carboninformation.
Employee, Environmental, Social and Human Rights Issues
The Company has no employees as the Board has delegated
the day-to-day management and administrative functions to
the Investment Manager. There are therefore no disclosures to
be made in respect of employees. The Company’s responsible
investment process is detailed on pages 16 and 17.
For and on behalf of the Board,
Russell Napier
Chairman
9 September 2022
27
Directors and Corporate Governance
Directors
Russell A R Napier (Chairman and Nomination Committee
Chairman)
Russell Napier became a Director of the Company in 2009. He
worked for Baillie Gifford from 1989 and for Foreign & Colonial
Emerging Markets from 1994. In 1995 he joined stockbrokers
CLSA in Hong Kong as its Asian equity strategist. Since 1999
he has been a consultant global macro strategist advising
institutional investors. He is the author of ‘Anatomy of a
Bear – Lessons from Wall Street’s Four Great Bottoms’ and
has established and runs a course called ‘A Practical History
of Financial Markets’. He is a limited partner and adviser at
Cerno Capital Partners, an investment adviser to Kennox
Asset Management and a member of the advisory board of
Bay Capital.
Diana Dyer Bartlett (Audit Committee Chairman)
Diana Dyer Bartlett became a Director of the Company
and Chair of the Audit Committee in February 2020. After
qualifying as a chartered accountant with Deloitte Haskins &
Sells, Diana spent five years in investment banking with Hill
Samuel Bank. Since then she has held a number of roles as
finance director of various venture capital and private equity
backed businesses and listed companies involved in software,
financial services, renewable energy and coal mining. She
was also company secretary of Tullett Prebon plc and Collins
Stewart Tullett plc.
Diana is currently chairman of Smithson Investment Trust plc
and a non-executive director and chair of the audit and risk
committee of Schroder British Opportunities Trust plc. She
was previously the audit committee chairman of AIM listed
SmartSpace Software plc.
David P Kidd
David Kidd became a Director of the Company in 2016. He is
a director of The Law Debenture Pension Trust Corporation
PLC, which acts as independent trustee for over 200 pension
schemes including many FTSE 100 companies. He has over
30 years investment management experience, having been
chief investment officer of the Royal Bank of Scotland’s
investment management arm, the charity specialists Chiswell
Associates and the private bank Arbuthnot Latham. He is
chairman of The Baillie Gifford Japan Trust plc and a director
of The Golden Charter Trust and The Law Debenture Pension
Trust Corporation. He was previously a non-executive director
of Martin Currie Global Portfolio Trust plc, Shires Income plc
and The Salvation Army International Trustee Company.
Harry J Morgan (Senior Independent Director)
Harry Morgan became a Director of the Company in 2012. He
retired from his role as Head of Key Clients, Scotland at the
Tilney Group in 2020. He spent his career managing portfolios
for private clients and charities, also serving as head of
investment management at Adam & Company and in senior
roles at Newton Investment Management and Edinburgh
Fund Managers. He is a Fellow of the Chartered Institute for
Securities & Investment, and has an MBA with Distinction
from the Edinburgh Business School. He is a member of the
Investment Committees at the Royal Society of Edinburgh
and the Robertson Trust. In August 2021, he was appointed a
non-executive director of Henderson Opportunities Trust plc.
Alan G Scott
Alan Scott became a Director of the Company in 2012. He
has over 35 years’ experience in banking, currently with
Coutts & Co, having worked at Adam & Company since 2004
most recently as Head of Banking Services. Prior to that he
held various positions within the NatWest Group including
offshore with Adam & Company International and Royal Bank
of Scotland International in Guernsey and onshore within the
Corporate and Personal Banking divisions. He is a Member of
the Chartered Banker Institute and holds Chartered Banker
status.
All Directors are members of the Nomination Committee. In
line with the AIC Code of Corporate Governance 2019 (the
‘AIC Code’), all Directors, barring the Chairman of the Board,
are members of the Audit Committee.
28
Directors’ Report
The Directors have pleasure in presenting their report,
together with the audited financial statements of the
Company for the year ended 30 June 2022.
Results and dividends
The Company’s results for the year are set out in the Statement
of Comprehensive Income on page 48. Further analysis of the
results can be found in the Strategic Report; including the
Chairman’s Statement, Investment Manager Review and the
Business Review.
The Directors are recommending a final dividend, if approved
by shareholders, and a special dividend for the year to 30 June
2022 of 3.70 pence and 3.00 pence respectively. These will be
paid on 4 November 2022 to shareholders on the register at
the close of business on 23 September 2022.
This will result in total dividends for the year of 10.20 pence
(2021: 6.40 pence).
Management and management fees
The Company’s investments are managed by Artemis Fund
Managers Limited (‘Artemis’), following its appointment as
Investment Manager on 1 May 2014, and is subject to the
Investment Management Agreement dated 15 July 2014.
Artemis is entitled to an investment management fee of
0.5% per annum of the net asset value of the Company.
The agreement may be terminated by either party on six
months’notice.
Simon Edelsten and Alex Illingworth are the day-to-day fund
managers.
The Board regularly reviews the Investment Manager’s position,
which includes a review of its management and investment
processes, risk controls, the quality of support provided to the
Board and consideration of investment performance.
Artemis is also the AIFM to the Company. The Investment
Management Agreement sets out Artemis’ duties to the
Company in respect of the AIFMD. No fees are paid to
Artemis in respect of its role as the AIFM to the Company.
Artemis has delegated responsibility for the day-to-day
portfolio management of the Company’s portfolio to Artemis
Investment Management LLP.
Both Artemis entities are authorised and regulated by
the Financial Conduct Authority and at 30 June 2022 had
£25.1billion, in aggregate, of assets under management.
Continued appointment of the Investment Manager and
other key service providers
The Board has reviewed the Investment Manager’s engagement,
including its management processes, risk controls and the
quality of support provided to the Board and believes that its
continuing appointment, on its current terms, remains in the
interests of shareholders at this time. The last review was
undertaken at a Board meeting held on 1 September 2022.
The Board has also reviewed the performance of the other key
service providers such as the fund administrator, depositary
and registrar. Regular reports are received by the Board
through the Company Secretary to aid continuous review and
feedback. As recommended by the Investment Manager, the
Board approved the move of administration, custodial and
depositary services to Northern Trust, as planned for 2023.
Details on the individual functions of these service providers
can be found on page 73.
Election and re-election of Directors
In accordance with the AIC Code, the Board has agreed that
Directors will offer themselves for re-election on an annual
basis. The Board, on recommendation from the Nomination
Committee recommends the re-election of all Directors at
this year’s AGM, barring Harry Morgan who is not seeking re-
election.
Directors’ insurance and indemnification
Directors’ and Officers’ liability insurance cover is maintained
by the Company to cover Directors against certain liabilities
that may arise in conducting their duties.
The Company has entered into deeds of indemnity in favour of
each of its Directors. The deeds cover any liabilities that may
arise to a third party, other than the Company, for negligence,
default or breach of trust or duty. The Directors are not
indemnified in respect of liabilities to the Company, any
regulatory or criminal fines, any costs incurred in connection
with criminal proceedings in which the Director is convicted
or civil proceedings brought by the Company in which
judgement is given against him/her. In addition, the indemnity
does not apply to any liability to the extent that it is recovered
from another person.
Capital structure and voting rights
As at 30 June 2022, the capital structure of the Company was
65,411,114 (2021: 59,925,114) ordinary shares of 5 pence each.
Details of changes to the shares in issue can be found in the
Strategic Report on page 18.
Since the year end a further 395,000 ordinary shares have
been issued and 68,700 shares have been bought back and
held in Treasury. As at 9 September 2022 the Company had
65,806,114 ordinary shares in issue. Therefore the Company’s
total voting rights are 65,737,414.
Rights attaching to ordinary shares
At any general meeting of the Company, every ordinary
shareholder attending in person or by proxy (or by corporate
representative) is entitled to one vote on a show of hands
and, where a poll is called, every ordinary shareholder
attending in person or by proxy is entitled to have one vote
for every ordinary share of which he is the holder. There are
no restrictions concerning the voting rights of the Company’s
ordinary shares or the holding or transfer of the Company’s
29
shares and there are no special rights attached to any of the
ordinary shares. The Company is not aware of any agreements
between shareholders which may result in any restriction on
the transfer of shares or on the voting rights. The Company’s
ordinary shareholders may, by ordinary resolution, declare
dividends provided such dividends are not in excess of any
dividends recommended by the Directors. The Directors may
also pay interim dividends.
As at the date of this Report, the table below sets out those
shareholders who have notified the Company that they hold
more than 3% of the voting rights attaching to the ordinary
shares in issue as at 30 June 2022.
Significant interests
Name
Ordinary
shares
held at
30 June
2022
% of Total
voting rights
at 30 June
2022
Rathbone Investment Management
Limited
6,124,073 9.36
Mr Simon Edelsten 2,384,277 3.65
There have been no other changes notified to the Company
in respect of the above holdings, and no other new holdings
notified, since the year end. Further information on the share
capital of the Company is detailed in note 13 of the notes to
the financial statements.
Additional shareholder information
The provisions relating to the appointment and replacement
of Directors are contained in the Articles of the Company,
a copy of which can be found on the Company’s website at
midwynd.com. The granting of powers to issue or buy back
the Company’s shares require appropriate resolutions to be
passed by shareholders. The current authorities to buy back
and issue shares will expire at the AGM and proposals for their
renewal are set out below.
There are no agreements to which the Company is party
where that agreement would terminate, or otherwise contain
provisions that would come into force, on a change of control.
There are no agreements between the Company and its
Directors concerning compensation for loss of office.
Going concern
The Directors, having considered the risks and likely
operational costs and liabilities of the Company for the 18
months from the year end, are of the opinion that the Company
has adequate financial resources to continue in operational
existence for the foreseeable future. The Company receives
income from its investment portfolio and maintains cash
balances. In the event that there is insufficient income or
cash balance available to meet the Company’s liabilities, the
investments within the portfolio may be realised; there is also
an available revolving credit facility. The Directors review the
estimated time required to realise the portfolio on a regular
basis. The Company has a portfolio comprised of listed
investments, which are highly liquid to meet expected funding
requirements in the period under consideration. The Directors
keep the Principal risks, as disclosed on pages 19 to 22, under
review and are satisfied that they do not affect the ability of
the Company to continue as a going concern. In addition,
the Directors have considered the continuing impact of
COVID-19, the emerging risks of events in Russia/Ukraine and
also the growing inflationary pressures and believe they will
have limited impact on the Company’s resources. For these
reasons they continue to adopt the going concern basis in the
preparation of the financial statements.
AGM
Details of the 2022 AGM are set out in the Chairman’s
Statement on page 6 and the Notice of Meeting on pages63
to 67. An explanation of the resolutions to be put to the AGM
is set out on page 68.
Recommendation
The Directors consider that passing the resolutions to be
proposed at the AGM will be in the best interests of the
Company and shareholders as a whole and unanimously
recommend that shareholders vote in favour of each of these
resolutions as they intend to do in respect of their own holdings.
Audited information
The Directors who held office at the date of approval of this
Directors’ Report confirm that, so far as they are each aware,
there is no relevant audit information of which the Company’s
auditor is unaware and each Director has taken all steps that
they ought to have taken as a Director to make themselves
aware of any relevant audit information and to establish that
the Company’s auditor is aware of that information.
Post balance sheet events
The Directors confirm that there have been no post balance
sheet events up to 9 September 2022 other than those
included in note 21 on page 62.
On behalf of the Board,
Russell Napier
9 September 2022
30
Corporate Governance Report
The Board is committed to high standards of corporate
governance and is pleased to report to shareholders on the
Company’s governance arrangements and the application of
the principles of the codes during the year.
Applicable governance codes
The Board has considered the principles and provisions of the
AIC Code of Corporate Governance 2019 (the “AIC Code”).
The AIC Code addresses the Principles and Provisions set out
in the UK Corporate Governance Code (the “UK Code”), as
well as setting out additional Provisions on issues that are of
specific relevance to the Company.
The Board considers that reporting against the Principles
and Provisions of the AIC Code, which has been endorsed by
the Financial Reporting Council (“the FRC”) provides more
relevant information to shareholders.
The AIC Code is available on the AIC website (theaic.co.uk).
It includes an explanation of how the AIC Code adapts the
Principles and Provisions set out in the UK Code to make
them relevant for investment companies.
Statement of compliance
The Board considers that during the course of the year, and
up to the date of this report, the Company has complied with
the Principles and Provisions of the AIC Code, in so far as they
apply to the Company’s business.
As all of the Company’s day-to-day administrative and
managerial functions are outsourced to third parties, it has
no executive directors, employees or internal operations and
hence has not reported in respect of the following:
■
the role of the executive directors and senior management;
■
executive directors’ and senior management
remuneration; and
■
the workforce.
As stated above, the Company does not have an internal
audit function. However, the Investment Manager does have
an internal audit function providing a review of operations
of the Investment Manager utilised by the Company. The
Board receives quarterly internal control updates from the
Investment Manager which may include reference to internal
audit issues when relevant to the Company. There have been
no issues raised to the Board as at the date of approval of
this Annual Report. The need for the Company to have its
own internal audit function is considered annually by the
AuditCommittee.
Board leadership and purpose
The Board is responsible for promoting the long-term
sustainable success and strategic direction of the Company
and for providing leadership in terms of the Company’s
culture, purpose and values (see pages 14 and 15). The Board
appoints all third-party service providers and monitors their
performance throughout the year; formally evaluating the
quality of the service provided by third parties and considering
their terms of engagement. The Board, assisted by the Audit
Committee, reviews the risks faced by the Company and
assesses the effectiveness of internal controls in place to
mitigate theserisks.
The Board also provides independent oversight of the
operations, particularly those of the Investment Manager, and
challenges investment and operational decisions taken.
The Board meets formally four times a year to review the
performance of the Company’s investments, the financial
position of the Company, its performance in relation to the
investment objective and all other important issues to ensure
that the Company’s affairs are managed within a framework of
prudent and effective controls.
Division of responsibilities
Responsibilities are clearly defined and allocated between
the Chairman, the Board, the Investment Manager and a
number of third-party service providers. The performance of
the Investment Manager and third-party service providers is
reviewed by the Board on a regular basis.
No one individual has unfettered powers of decision. The
Chairman, Russell Napier, was at the time of his appointment,
and remains, independent of the Investment Manager. The
Chairman leads the Board and ensures its effectiveness on all
aspects of its operation ensuring that each Director receives
accurate, timely and clear information enabling them to
perform effectively as a Board.
The Company Secretary liaises with the Chairman prior to
each meeting to agree agenda content and papers to be
submitted to Board and Committee meetings. In addition,
the Chairman is responsible for ensuring there is effective
communication with shareholders.
The Board has set the parameters within which the Investment
Manager operates and these are set out in the Investment
Management Agreement and in Board minutes. The Board
sets the scope of the Investment Manager’s responsibilities,
including principal operating issues such as investment
selection, gearing, and share issuance. The Board regularly
reviews the investment restrictions set out in the Investment
Management Agreement and any other restrictions set
by the Board from time to time to confirm their continuing
appropriateness. The Board retains authority to approve
any changes to investment policy, including such material
changes as may require approval of the shareholders and may
review and amend the investment policy guidelines laid down
for the Investment Manager as it deems appropriate.
Representatives of the Investment Manager attend each
Board meeting enabling the Directors to seek clarification on
its activities in managing the Company.
31
The Board has formalised arrangements under which
Directors, in furtherance of their duties, may take independent
professional advice at the Company’s expense. The Directors
have access to the advice and services of the Company
Secretary, through its appointed representatives, who are
responsible to the Board for ensuring that proper procedures
are followed, and that applicable rules and regulations are
complied with.
The appointment and removal of the Company Secretary is a
matter for the Board as a whole.
Board composition
The Board currently comprises five Directors, comprising four
male and one female member, all of whom are non-executive.
The names of the Directors, together with their biographical
details, are set out on page 27 of this Report.
The Board considers that all the Directors are independent
of the Investment Manager and comply with the criteria for
independence as set out in the AIC Code. The Nomination
Committee meets annually to consider the performance of
the Board and consider matters of independence.
Harry Morgan is the Company’s Senior Independent Director.
David Kidd will assume the role following Harry’s retirement.
The Senior Independent Director provides a sounding board
for the Chairman and serves as an intermediary for other
Directors and shareholders. Led by the Senior Independent
Director, the Directors meet without the Chairman present on
an annual basis to discuss the Chairman’s performance.
Appointments to the Board
Directors are appointed subject to the provisions of the
Act and the Company’s Articles. Any Directors appointed
by the Board are subject to election by shareholders at the
first AGM following their appointment and to annual re-
electionthereafter.
The contribution of each individual Director has been
reviewed and considered by the Board, with the support of
the Nomination Committee, and the re-election of each of
the Directors is recommended on the basis of their industry
knowledge, experience and their individual contributions to
the operation of the Company.
The Directors of the Company have not been appointed
subject to a service contract. The terms and conditions of
their appointments are set out in letters of appointment,
which are available for inspection at the registered office of
the Company and at the AGM.
A special resolution is proposed at this year’s AGM to remove
the requirement for new Directors to purchase Company
shares to the nominal value of £250 within two months of
joining the Board. This will be replaced with the requirement
for new Directors to commit to purchasing shares in the
Company to the value of at least one year’s remuneration
within one year of joining the Board. The Directors are of
the opinion that such a commitment better takes into
consideration prevailing market conditions and, in doing so,
avoids unduly limiting the pool of potential candidates for
further appointments to theBoard.
Board committees
In order to enable the Directors to discharge their duties,
a Nomination Committee and an Audit Committee, each
with written terms of reference, have been established.
Committee membership is set out on page 27 of this Report.
Attendance at meetings of the committees is restricted to
members and persons expressly invited to attend. Copies of
the terms of reference for the Board committees are available
from the Company Secretary or on the Company’s website
midwynd.com. The Chairman of the Board acts as Chairman
for the Nomination committee and the Audit Committee is
chaired by Diana Dyer Bartlett.
The Company Secretary acts as the Secretary to each
committee.
As all the Directors are independent of the Investment
Manager, there is no requirement to establish a separate
Management Engagement Committee. The Board as a
whole reviews the terms of appointment and performance
of the Company’s third-party service providers, including
the Investment Manager but excluding the Auditor, who is
reviewed by the Audit Committee.
The Board, being small in size and composed entirely of
independent non-executive Directors, has not appointed a
Remuneration Committee. Directors’ fees and the appointment
of new Directors are considered by the Board as a whole.
Audit Committee
The responsibilities of the Audit Committee are disclosed
in the Report of the Audit Committee on pages 38 to 40 of
thisReport.
Nomination Committee
The Nomination Committee meets at least annually. It is
responsible for ensuring that the Board has an appropriate
balance of skills and experience to carry out its duties, for
identifying and nominating to the Board new Directors and
for proposing that existing Directors be re-elected. The
Committee is also responsible for reviewing and making
recommendations to the Board with respect to succession
planning, governance policies; including those policies
relevant to the tenure of the chair and diversity and inclusion.
The Committee undertakes an annual performance
evaluation of the Board and individual Directors, led by
the Chairman. On those occasions when the Committee is
reviewing the Chairman, or considering his successor, the
Nomination Committee will normally be chaired by the Senior
Independent Director. The Committee annually considers the
appointment of an external evaluator. An external evaluator
was not engaged during the financial period.
As detailed in the Strategic Report on page 26, the Board
supports the principles of diversity in the boardroom and
considers this when seeking to ensure that the overall balance
of skills and knowledge of the Directors remains appropriate
to enable the Board to operate effectively.
32
Board evaluation and effectiveness review
The Board, led by the Nomination Committee, conducted an
annual review of its performance and that of its Committees,
the Chairman and individual Directors. The review addressed
Board and committee composition including knowledge,
skills, experience, diversity, independence as well as the time
commitment of the Directors to allow them to discharge
their responsibilities effectively. This review was based on a
process of appraisal by interview, with the evaluation of the
performance of the Chairman being undertaken by the other
Directors, led by the Senior Independent Director.
The Board concluded that the Board has effective oversight
of the management of the Company and has the appropriate
diversity of skills and experience to safeguard shareholders’
interests. The review did not identify any areas of concern.
Through discussion earlier in the year, it was noted that a
succession plan for the recruitment of a new non-executive
Director would be required in 2022.
Board succession
Board appointments are subject to a formal and transparent
procedure, The Nomination Committee considers the skill set
needs of the Company and seeks to ensure that any vacancies
are filled with highly qualified individuals that will bring
the required knowledge and experience to the Board. The
Nomination Committee considers diversity of gender, social
and ethnic backgrounds alongside the individual experience
and knowledge.
A plan for the orderly succession over time has been discussed
commencing with the retirement of Harry Morgan at the AGM
in October 2022. The recruitment for this role, facilitated by an
external recruitment consultant, is in progress.
Directors’ tenure
Directors do not serve on the Board for a specified period
of time. Each Director will be subject to the election/re-
election provisions as set out in the Company’s Articles,
which provide that a Director appointed during the year is
required to retire and seek election by shareholders at the
first annual general meeting following their appointment.
Thereafter, Directors are required to submit themselves for re-
election annually. Providing that the Nomination Committee
and the Board remain satisfied that the relevant Director’s
continuing appointment and independence is not impaired
by length of service, the Board does not consider that there
should be a set limit on their length of service. The Board
does not consider that the length of time served by a Director
is as important as their contribution to the running of the
Company, or that it necessarily impairs their independence.
Each situation will be rigorously reviewed on a case-by-case
basis to ensure that a Director’s independence is maintained
and that their continuing appointment is in the best interests
of the Company.
Induction and training
New Directors appointed to the Board are provided with an
induction which is tailored to the particular circumstances
of the appointee. Regular updates are provided on changes
in regulatory requirements that could affect the Company.
The Directors are encouraged to attend industry and other
seminars covering issues and developments relevant to
investment trusts and receive other training as necessary.
Board and Committee Meetings
The following table sets out the Directors’ attendance at the
Board and Committee meetings held during the year.
Board
Audit
Committee
Nomination
Committee
Number of meetings 4 2 1
Russell Napier* 4/4 N/A 1/1
Diana Dyer Bartlett 4/4 2/2 1/1
David Kidd 4/4 2/2 1/1
Harry Morgan 4/4 2/2 1/1
Alan Scott 4/4 2/2 1/1
* In line with best practice, Russell Napier stood down as a member
of the Audit Committee on becoming Chairman. However he
continues to attend the committee’s meetings.
In addition to the above meetings, there were two instances
on which sub-committees of the Board met, the attendance at
which was delegated to certain Directors.
Relations with shareholders
The Board considers communication with shareholders an
important function and Directors are always available to
respond to shareholder queries. The Board aims to ensure
that shareholders are kept fully informed of developments in
the Company’s business through the Annual and Half-Yearly
Financial Reports, as well as the daily announcement of the
net asset values of the Company’s ordinary shares to the
London Stock Exchange. The Investment Manager produces
a monthly factsheet and a detailed quarterly commentary on
the portfolio and Company performance which can be found
on the Company’s website at midwynd.com, along with other
information on the Company. The Investment Manager meets
with the Company’s major shareholders on a periodicbasis.
Under normal circumstances, shareholders are encouraged
to attend and vote at the AGM, during which the Board and
Investment Manager are available to discuss issues affecting
the Company. Details of shareholder voting are declared
at every AGM and are available on the website as soon as
practicable following the close of the meeting. Should 20 per
cent or more of votes be cast against a Board recommendation
for a resolution, an explanation of what actions the Company
intends to take in order to consult shareholders will be provided
when announcing voting results. An update on views received
from shareholders and actions taken will also be published
no later than six months after the AGM together with a final
summary in the next Annual Financial Report.
33
All Directors intend to attend this year’s AGM, details of which
are set out in the Notice of Meeting on pages 63 to 67 of
thisReport.
Engagement with Stakeholders
More information about how the Board fosters the relationships
with its shareholders and other stakeholders, and how the
Board considers the impact that any material decision will
have on relevant stakeholders, can be found in the section 172
statement in the Strategic Report on pages 24 and 25.
UK Stewardship Code
Artemis is a signatory to the UK Stewardship Code on the basis
of its 2020 Stewardship Report. The Artemis 2021 Stewardship
Report has now been submitted to the FRC with the intention
that Artemis will once again be included as a signatory. The
Board has given the Investment Manager discretion to exercise
the Company’s voting rights and therefore does not intend to
apply to become a signatory to the new code itself. A copy of
Artemis’ stewardship policy and report can be found on the
Investment Manager’s website at artemisfunds.com.
Voting policy
The Board has given the Investment Manager discretion to
exercise the Company’s voting rights and the Investment
Manager, so far as is practicable, will exercise them in respect of
resolutions proposed by investee companies. The Investment
Manager’s voting record is summarised on its website at
artemisfunds.com.
Bribery Act 2010
The Company is committed to carrying out business fairly,
honestly and openly and policies and procedures have been
established to prevent bribery.
Criminal Finances Act 2017
The Company has a commitment to zero tolerance towards the
criminal facilitation of tax evasion.
Conflicts of interest
The Board has put in place procedures to deal with conflicts
and potential conflicts of interest and considers that these
have operated effectively throughout the year. The Board
also confirms that its procedures for the approval of conflicts
and potential conflicts of interest have been followed by the
Directors during the year under review.
In November 2018 Russell Napier began the supply of
investment research to the Investment Manager and its peers,
having been given Board confirmation there was no conflict of
interest. The supply of services was monitored as a potential
conflict. The supply of services has now ceased.
Internal controls and management of risk
The Board recognises its responsibility for the implementation,
review and maintenance of effective systems of internal control
to manage the risks to which the Company is exposed as well as
ensuring that a sound system of internal control is maintained
to safeguard the Company’s assets and shareholders’ interests.
As the majority of the Company’s systems are maintained on
behalf of the Company by third party service providers under
contract, the Board fulfils its obligations by requiring these
service providers to report and provide assurances on their
systems of internal control, which are designed to manage,
rather than eliminate, risks. In light of the Board’s reliance
on these systems and the reports thereon, the Board can
only provide reasonable and not absolute assurance against
material misstatement or loss. The Board does, however, ensure
that these service providers are employed subject to clearly
defined contracts and only appoints reputable companies with
extensive expertise in their respective fields.
The Investment Manager, Depositary and the Administrator
have established internal control frameworks and annual
external audits which provide reasonable assurances as to
the effectiveness of the internal control systems operated
on behalf of their clients. The Investment Manager reports to
the Board on a regular basis with regard to the operation of its
internal controls and risk management within its operations in
so far as it impacts the Company. In addition, the Investment
Manager reports quarterly to the Board on compliance with
the terms of its delegated authorities under the Investment
Management Agreement and other restrictions determined by
the Board.
The Administrator and Depositary also report on a quarterly
basis any breaches of law and regulation and any operational
errors. This enables the Board to address any issues with regard
to the management of the Company as and when they arise
and to identify any known internal control failures.
The key procedures which have been established to provide
effective internal controls are as follows:
■
The Board, through the Audit Committee, has carried out
and documented a risk and control assessment, which is
kept under ongoing, and at least a six monthly, review.
■
The Audit Committee receives regular updates of
any internal audit reviews conducted on behalf of
the Investment Manager which may be considered of
relevance to the Company.
■
Investment management, accounting and custody of
assets are segregated. The procedures of the individual
parties carrying out these functions are designed to
complement each other.
34
■
Investment management and company secretarial
services are provided by Artemis. The Board is
responsible for setting the overall investment policy and
monitoring the actions of the Investment Manager. The
Board reviews information produced by the Investment
Manager in detail on a regular basis.
■
Administration services are provided by J.P. Morgan
Europe Limited. The Administrator reports to the Board
on a quarterly basis and ad hoc as appropriate. In
addition, the Board receives the Administrator’s semi-
annual report on its internal controls.
■
The Board is aware of the whistleblowing procedures of
Artemis and the Administrator, which are considered
satisfactory.
■
Safekeeping of the Company’s assets is undertaken by
J.P. Morgan Chase Bank N.A.
■
Oversight of certain administrative and custodial
procedures is undertaken by the Company’s Depositary,
J.P. Morgan Europe Limited. The Board reviews any
exceptional items raised by the Depositary on a quarterly
basis.
■
The Board clearly defines the duties and responsibilities
of the Company’s agents and advisers in the terms of
their contracts. The appointment of agents and advisers
is conducted by the Board after consideration of the
quality of parties involved; their ongoing performance
and contractual arrangements are monitored to ensure
that they remain effective.
■
Mandates for authorisation of investment transactions
and expense payments are approved by the Board.
By the procedures set out above, the Directors have reviewed
the effectiveness of the Company’s internal controls throughout
the year under review and up to the date of this report.
Further information on the risks and the management of them
is set out in the Strategic Report on pages 19 to 22 and note20
of the notes to the financial statements.
The Directors consider that the Annual Financial Report,
taken as a whole, is fair, balanced and understandable and
the information provided to shareholders is sufficient to allow
them to assess the Company’s performance, business model
and strategy.
By order of the Board.
Artemis Fund Managers Limited
Company Secretary
9 September 2022
35
Directors’ Remuneration Policy and Report
Directors’ Remuneration Policy
The Directors are pleased to present their Remuneration
Policy.
The remuneration policy of the Company was approved
by shareholders at the Annual General Meeting (“AGM”)
held on 10 November 2020 when 13,972,266 (99.45%) votes
received were in favour, 77,886 (0.55%) were against and votes
withheld were 30,697. The policy will apply until the 2023 AGM
(being three years from the date of shareholder approval of
thepolicy).
Fees are commensurate with the amount of time Directors are
expected to spend on the Company’s affairs, whilst seeking
to ensure that fees are set at an appropriate level so as to
enable candidates of a sufficient calibre to be recruited. The
Company’s Articles state the maximum aggregate amount of
fees that can be paid to Directors in any year. This is currently
set at £200,000 per annum and shareholder approval is
required for any changes to this.
The Board reviews and sets the level of Directors’ fees annually,
or at the time of the appointment of a new director, as provided
for in the Directors’ letters of appointment. The review
considers a range of external information, including peer
group comparisons, industry surveys, relevant independent
research and any comments received from shareholders.
Each Director is entitled to a base fee. The Chairman of the
Board and the Chairman of the Audit Committee are paid a
higher fee than the other Directors, to reflect the additional
work required to carry out their roles.
No Director is entitled to any benefits in kind, share options,
annual bonuses, long-term incentives, pensions or other
retirement benefits or compensation for loss of office.
Directors are appointed with no fixed notice periods and
are not entitled to any extra payments on resignation. It is
also considered appropriate that no aspect of Directors’
remuneration is performance-related in light of the Directors’
non-executive status.
Directors are able to claim expenses that are incurred
in respect of duties undertaken in connection with the
management of the Company.
New Directors will be remunerated in accordance with
this policy and will not be entitled to any payments from
the Company in respect of remuneration arrangements in
place with any other employers which are terminated upon
appointment as a Director of the Company.
Directors’ Remuneration Report
The Directors are pleased to present the Company’s
Remuneration Report for the year ended 30 June 2022. The
Company’s Auditor is required to audit certain information
contained within this report and, where information set out
below has been audited, it is clearly indicated. The Auditor’s
opinion is included in the Independent Auditor’s Report which
can be found on pages 42 to 47.
The Remuneration Report will be submitted to shareholders for
approval at the AGM to be held on 26 October 2022. A Notice
of the AGM accompanies this Annual Financial Report. In
accordance with the matters reserved for the Board’s decision,
the Board is responsible for:
(i) Determining the remuneration of the Directors, subject
to compliance with the Articles and the Remuneration
Policy, as approved by shareholders.
(ii) Approving the remuneration report and policy for inclusion
in the Annual Financial Report.
(iii) Approving the remuneration policy at least every three
years and monitoring the policy to ensure compliance.
The Board
During the year ended 30 June 2022, the Board consisted solely
of non-executive Directors who determine their remuneration
as a whole. Accordingly, a separate Remuneration Committee
has not been established. Following a review on 10 May 2022
the Board agreed that the fees for each Director, for the year
ending 30 June 2023, should be increased to £37,500 for the
Chairman (2022: £35,000), £32,000 for the Chairman of the
Audit Committee (2022: £30,000) and £26,750 (2022: £25,000)
for the other Directors. Directors’ fees were last increased on
1 July 2021. The review considered the fees paid by trusts in
the Company’s peer group, its position relative to these peers
and the industry as a whole. The Board has not relied upon
the advice or services of any person to assist in making its
remuneration decisions.
Directors’ fees (audited)
The Directors who served during the year to 30 June 2022 and
to 30 June 2021 received the following emoluments.
Director
Year ended
30 June
2022
Year ended
30 June
2021
Russell Napier* £35,000 £26,630
Diana Dyer Bartlett £30,000 £25,500
David Kidd £25,000 £21,500
Harry Morgan £25,000 £21,500
Alan Scott £25,000 £21,500
Malcolm Scott** - £10,662
£140,000 £127,292
* Russell Napier was appointed as Chairman of the Board on
10November 2020.
** Malcolm Scott retired as a Director on 10 November 2020.
36
Annual Percentage Change in Remuneration
This represents the annual percentage change in the total remuneration paid to the Directors over a five year period by position,
together with details of the positions held by the current Board.
Chairman of the Board Chairman of the Audit Committee Director
Year ended £ % increase £ % increase £ % increase
2018 27,500 25.00% 24,000 33.33% 20,000 25.00%
2019 27,500 – 24,000 – 20,000 –
2020 27,500 – 24,000 – 20,000 –
2021 29,500 7.27% 25,500 6.25% 21,500 7.50%
2022 35,000 18.64% 30,000 17.65% 25,000 16.28%
Russell Napier was Chairman of the Audit Committee at the start of the period under review, standing down on 26 February 2020.
He was appointed Chairman of the Board on 10 November 2020.
Diana Dyer Bartlett was appointed as a Director on 1 February 2020 and was appointed as Chairman of the Audit Committee on
26 February 2020.
David Kidd was appointed as a Director on 8 November 2016.
Harry Morgan was appointed as a Director on 21 May 2012.
Alan Scott was appointed as a Director on 21 May 2012.
Expenditure by the Company as remuneration and
distributions to Shareholders
The table below compares the remuneration paid to Directors
with distributions made to shareholders during the year under
review and the prior financial review:
2022 2021
Directors’ fees £140,000 £127,292
Distributions to Shareholders
– dividends £4,255,161 £3,453,425
– net share buybacks £nil £nil
Directors’ interests
The interests of the Directors and their connected persons in
the ordinary shares of the Company at the beginning and end
of the financial year were as follows:
Director
Nature of
Interest
Holding
as at
30 June
2022
Holding
as at
1 July
2021
Russell Napier Beneficial 157,125 157,125
Diana Dyer Bartlett Beneficial 8,073 5,337
David Kidd Beneficial 17,500 17,500
Harry Morgan Beneficial 14,091 13,992
Alan Scott Beneficial 155,675 150,000
Beneficial trustee 138,850 138,850
There have been no changes in the Directors’ interests up to
the date of signing. At no time during the year did any Director
hold a material interest in any contract, arrangement or
transaction with the Company.
Performance graph
Cumulative to 30 June
Share price total return
MSCI All Country World Index (GBP) total return
100
150
200
250
300
350
400
450
500
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
The ten year performance graph above sets out the Company’s
share price total return from 1 July 2012, compared to the total
return of a notional investment in the MSCI All Country World
Index (GBP).
Statement of voting at the last annual general meeting
The following table sets out the votes received at the last
Annual General Meeting of shareholders, held on 9 November
2021, in respect of the approval of the Directors’ Remuneration
Report:
Votes cast for Votes cast against
Total
votes
cast
Number of
votes
withheldNumber % Number %
16,259,684 99.44 91,570 0.56 16,351,254 36,642
37
Statement
On behalf of the Board, I confirm that the Remuneration Policy
and Remuneration Report summarise, as applicable, for the
year to 30 June 2022:
(i) the major decisions on Directors’ remuneration;
(ii) any substantial changes relating to Directors’
remuneration made during the year; and
(iii) the context in which the changes occurred and decisions
have been taken.
The report on Directors’ remuneration was approved by the
Board on 9 September 2022 and signed on its behalf by the
Chairman.
Russell Napier
Chairman
38
Report of the Audit Committee
I am pleased to present the Report of the Audit Committee for
the year ended 30 June 2022. Details of the responsibilities of
the committee and our activities are described below.
Meetings
The Committee meets at least twice each year and
representatives from the Investment Manager and the
Administrator may be invited to attend the meetings of the
Audit Committee to report on issues as required.
The Audit Committee meets with representatives of the
Company’s Auditor at least twice each year to plan for and
discuss any matters arising from the audit.
Roles and responsibilities
The main responsibilities of the Audit Committee include:
■
monitoring the integrity of the financial statements of
the Company and any formal announcements relating
to the Company’s financial performance, and reviewing
significant financial reporting judgements contained
inthem;
■
providing a challenge to areas of judgement;
■
confirming to the Board whether the Annual and
Half-yearly Financial Reports, taken as a whole, are
fair, balanced and understandable, and provide the
information necessary for shareholders to assess the
Company’s position and performance, business model
and strategy;
■
reviewing the appropriateness and consistency of the
Company’s accounting policies;
■
reviewing the effectiveness of the Company’s financial
reporting, risk management systems and internal control
policies and procedures for the identification, assessment
and reporting of risks;
■
reviewing and challenging the Company’s going concern
and viability statements;
■
reviewing the need for an internal audit function;
■
conducting the audit tender process and making
recommendations to the Board, about the appointment,
reappointment and removal of the external auditor, and
approving the remuneration and terms of engagement of
the external auditor;
■
reviewing and monitoring the external auditor’s
independence and objectivity;
■
reviewing the effectiveness and quality of the external
audit process, taking into consideration relevant UK
professional and regulatory requirements;
■
developing and implementing policy on the engagement
of the external auditor to supply non-audit services,
ensuring there is prior approval of non-audit services,
considering the impact this may have on independence,
taking into account the relevant regulations and ethical
guidance in this regard, and reporting to the Board on any
improvement or action required; and
■
reporting to the Board on how it has discharged its
responsibilities.
The Audit Committee provides a forum through which the
Company’s auditor reports to the Board.
Composition
All members of the Board are members of the Audit Committee
other than the Chairman, Russell Napier, who with reference
to guidance from the 2019 AIC Code attends as a guest.
All members of the Audit Committee are considered to have
relevant and recent financial and investment experience as
a result of their employment in financial services and other
industries. The Chairman of the Audit Committee, Diana
Dyer Bartlett is a chartered accountant and chairs the audit
committee of one other listed company.
Activities during the year
The Audit Committee met two times during the year. At these meetings, the Committee considered the Annual Report, the Half-
yearly Financial Report and reviewed the Company’s compliance with s1158 of the Corporation Tax Act 2010. The Committee
considered the following significant matters in respect of this Annual Report:
Significant issue How the issue was addressed
Valuation and ownership of the Company’s
investments
The Company’s investments are valued in accordance with the
accounting policies, and the listed investments are valued by the
Company’s administrator. These prices are reviewed and overseen by
the Company’s Investment Manager. The Investment Manager and
Board also monitor the liquidity of the portfolio. The Depositary is
responsible for holding the Company’s assets in custody and verifying
the ownership of these assets. The Company receives regular reports
from the Depositary, including at the year end.
Allocation of expenses The Committee reviews the allocation of investment management
fees and finance costs between income and capital on an annual basis.
Following this review, no change was recommended to the current
25% income/75% capital split.
Compliance with Section 1158 of the Corporation
TaxAct 2010
The Board and Audit Committee receives regular reporting from the
Investment Manager including as at the year end date.
39
Significant issue How the issue was addressed
Maintaining internal controls As part of the Board’s review of internal controls, the Audit Committee
carries out and documents a risk and control assessment, which is kept
under ongoing, and at least a six monthly, review. The Audit Committee
reports its findings and recommendations to the Board.
Both the Investment Manager and the Administrator have established
internal control frameworks to provide reasonable assurance as to
the effectiveness of the internal controls operated on behalf of their
clients. Both third parties report to the Board, on a quarterly basis, any
operational errors or breaches of law or regulation.
Recognition of investment income The recognition of investment income is undertaken in accordance with
accounting policy note 2(g) to the financial statements on page 52.
The Board and Audit Committee review the revenue forecast at each
meeting.
Going concern & viability The Committee considered the Company’s investment objective, risk
management policies, capital management policies and procedures,
the nature of the portfolio and expenditure and cash flow projections.
As a result, they have determined that the Company has adequate
resources, an appropriate financial structure and suitable management
arrangements in place to continue in operational existence for at least
twelve months from the date of approval of these financial statements.
They also determined the period for review of the Company viability
should be five years. These recommendations were made to the Board.
The Committee also assessed the viability of the Company, reviewing
a series of stress tests on the Company’s net assets and the impact
of negative market movements. Following this assessment, the
Committee recommended the Viability Statement to the Board.
Appointment and remuneration of the external Auditor
Regulations in place require the Company to rotate audit
firms after a period of ten years, which may be extended
where audit tenders are carried out or where more than one
audit firm is appointed to perform the audit. The audit firm is
required to rotate the partner every five years.
Johnston Carmichael LLP was appointed as external auditor in
March 2020. This year is the third year of tenure with MrDavid
Holmes performing the lead role for the same period.
The fees paid to Johnston Carmichael LLP in respect of audit
services are disclosed in note 4 of the notes to the financial
statements.
Audit for the year ended 30 June 2022
As part of the planning for the annual audit, the Audit
Committee met with Johnston Carmichael LLP and reviewed
their audit strategy document, which highlighted the level
of materiality to be applied by the auditor, the key perceived
audit risks, and the scope of the audit.
The key areas of audit focus undertaken by the external
auditor and agreed by the Committee were:
■
Valuation and ownership of quoted investments
■
Revenue recognition, including allocation of special
dividends as revenue or capital returns
The audit work performed in these two areas included
agreement of ownership of all listed investments to the
independent custodian report, a 100% recalculation of
investment valuations using independent third-party
market prices and a 100% recalculation of dividends due to
theCompany.
The auditor also considered the going concern and viability
of the Company, the maintenance of its investment trust
status, share issuances and its compliance with all relevant
regulations.
The Audit Committee met with representatives of the
Company’s auditor at the Audit Committee meeting held
on 1 September 2022 to discuss any matters arising from
the annual audit and to assess the independence and
effectiveness of the external audit process.
40
Effectiveness and independence of the external auditor
The Committee monitors the auditor’s independence through
assurances provided by the auditor on its compliance with
the relevant ethical standards; through approval of, and
compliance with, the non-audit services policy, and by
assessing the appropriateness of the fees paid to the auditor
for work undertaken during the annual external audit.
During the audit planning, Johnston Carmichael LLP
confirmed its independence to the Committee and its
willingness to continue in office as independent auditor.
The effectiveness of the audit was evaluated through
discussion of the services received from the auditor between
the Committee and those at the Investment Manager closely
involved in the audit process. The Committee also assessed
the level and robustness of questioning performed by the
auditor; the timeliness of performing the audit tasks; the
responsiveness of the audit team to queries and the quality
of review of the Annual Financial Report. The Committee also
met privately with the Audit Partner to discuss the efficiency
of response and accuracy of information provided from the
Investment Manager during the audit.
After careful consideration of the services provided since
appointment and the above review of its effectiveness, the
Audit Committee recommended to the Board that Johnston
Carmichael LLP should be re-appointed as auditor for the
Company. Accordingly, resolutions will be proposed at the
forthcoming AGM for the auditor’s appointment and to
authorise the Directors to agree the auditor’s remuneration.
Non-audit services
The Audit Committee has established a policy for the
provision of non-audit services to the Company which
prohibits the provision of certain services by the auditor which
the Audit Committee believes would compromise auditor
independence. Non-audit services are permitted subject to
the Audit Committee being satisfied that the engagement
would not compromise independence, where the total fees
for non-audit services is less than 70 per cent of the average
audit fees for the last three years and where knowledge would
be advantageous in carrying out the service.
There were no non-audit services provided by Johnston
Carmichael LLP during the year ended 30 June 2022.
Internal audit function
Systems and controls are in place to maintain a safe
environment for the Company’s assets and shareholders’
investments; helping to ensure the maintenance of
proper accounting records and the provision of accurate
financialinformation.
The Company is an investment company, has no employees
and delegates all operational and investment activities
to third-party service providers, including the Investment
Manager. The Board places reliance on the Company’s
framework of internal control. The Investment Manager has
an internal audit function and it is concluded therefore that
it is not necessary for the Company to have its own internal
audit function; this conclusion is however reviewed annually.
Audit Committee effectiveness
During the year, the Audit Committee reviewed its
effectiveness and concluded that it had discharged all its
obligations as set out in the Audit Committee’s terms of
reference in an efficient and effective manner. The Audit
Committee concluded that there were no changes required
to its procedures.
Audited information
The Audit Committee considers that the Annual Financial
Report, taken as a whole, is fair, balanced and understandable
and the information provided to shareholders is sufficient to
allow them to assess the Company’s performance, business
model and strategy.
On behalf of the Board
Diana Dyer Bartlett
Chairman of the Audit Committee
9 September 2022
41
Statement of Directors’ Responsibilities in respect of the Annual Financial Report and the Financial Statements
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual
Financial Report and the financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors have elected to prepare the financial statements in
accordance with UK Accounting Standards, including FRS 102
‘The Financial Reporting Standard Applicable in the UK and
Republic of Ireland’.
Under company law the Directors must not approve the
financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Company and of
the profit or loss of the Company for that period. In preparing
each of the financial statements, the Directors are required to:
■
select suitable accounting policies and then apply them
consistently;
■
make judgements and estimates that are reasonable and
prudent;
■
state whether applicable UK Accounting Standards have
been followed, subject to any material departures being
disclosed and explained in the financial statements; and
■
prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Company will continue in business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
and enable them to ensure that its financial statements
comply with the Companies Act 2006. They have general
responsibility for taking such steps as are reasonably open to
them to safeguard the assets of the Company and to prevent
and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, a Directors’
Report and Corporate Governance Statement, and a
Directors’ Remuneration Report that complies with that law
and those regulations.
The financial statements are published on a website,
midwynd.com, maintained by the Company’s Investment
Manager, Artemis Fund Managers Limited. Responsibility
for the maintenance and integrity of the corporate and
financial information relating to the Company on this website
has been delegated to the Investment Manager by the
Directors. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
We confirm that to the best of our knowledge:
(a) the financial statements, prepared in accordance with
the applicable set of accounting standards, give a true
and fair view of the assets, liabilities and financial position
of the Company as at 30 June 2022 and of the loss for the
year then ended;
(b) in the opinion of the Directors, the Annual Financial Report
taken as a whole, is fair, balanced and understandable
and it provides the information necessary to assess the
Company’s position and performance, business model
and strategy; and
(c) the Strategic Report includes a fair review of the
development and performance of the business and the
position of the Company, together with a description of
the principal risks and uncertainties that it faces.
For and on behalf of the Board.
Russell Napier
Chairman
9 September 2022
42
Independent Auditor’s Report to the members of
Mid Wynd International Investment Trust PLC
Opinion
We have audited the financial statements of Mid Wynd
International Investment Trust PLC (“the Company”), for the
year ended 30 June 2022, which comprise the Statement of
Comprehensive Income, the Statement of Financial Position, the
Statement of Changes in Equity, the Statement of Cash Flows
and the related notes, including significant accounting policies.
The financial reporting framework that has been applied in their
preparation is applicable law and United Kingdom Accounting
Standards, including Financial Reporting Standard 102 The
Financial Reporting Standard applicable in the UK and Republic
of Ireland (United Kingdom Generally Accepted Accounting
Practice).
In our opinion the financial statements:
■
Give a true and fair view of the state of the Company’s
affairs as at 30 June 2022 and of its loss for the year then
ended;
■
Have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
■
Have been prepared in accordance with the requirements
of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described
in the Auditor responsibilities for the audit of the financial
statements section of our report. We are independent of the
Company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the
UK, including the FRC’s Ethical Standard, as applied to listed
public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
Our approach to the audit
We planned our audit by first obtaining an understanding of
the Company and its environment, including its key activities
delegated by the Board to relevant approved third-party service
providers and the controls over provision of those services.
We conducted our audit using information maintained and
provided by J.P.Morgan Europe Limited (the “Administrator” and
the “Depositary”) to whom Artemis Fund Managers Limited (“the
Manager”) has, with the consent of the Company’s directors,
delegated the provision of certain administrative services.
We tailored the scope of our audit to reflect our risk assessment,
taking into account such factors as the types of investments
within the Company, the involvement of the Administrator, the
accounting processes and controls, and the industry in which
the Company operates.
The scope of our audit was influenced by our application of
materiality. We set certain quantitative thresholds for materiality.
These together with qualitative considerations, helped us to
determine the scope of our audit and the nature, timing and
extent of our audit procedures on the individual financial
statement line items and disclosures and in the evaluation of the
effect of misstatements, both individually and in aggregate on
the financial statements as a whole.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the
financial statements of the current period and include the most
significant assessed risks of material misstatement (whether
or not due to fraud) that we identified. These matters included
those which had the greatest effect on: the overall audit strategy;
the allocation of resources in the audit; and directing the efforts
of the engagement team. These matters were addressed in the
context of our audit of the financial statements as a whole, and
in forming our opinion thereon, we do not provide a separate
opinion on these matters.
43
We summarise below the key audit matters in arriving at our audit opinion above, together with how our audit addressed these
matters and the results of our audit work in relation to these matters.
Key audit matter How our audit addressed the key audit matter and our conclusions
Valuation and ownership of investments
(as described on page 38 in the Report of the Audit Committee
and as per the accounting policy in Note 2(b) and Note 9 to
the financial statements).
The valuation of the listed, level 1 investments at 30 June 2022
was £439.1m (2021: £445.6m). As this is the largest component
of the Company’s Statement of Financial Position, and a key
driver of the Company’s net assets and total return, this has
been designated as a key audit matter, being one of the most
significant assessed risks of material misstatement due to
fraud or error.
There is a further risk that the investments held at fair value
may not be actively traded and the quoted prices may not be
reflective of their fair value (valuation).
Additionally, there is a risk that the Company does not have
proper legal title to the investments recorded as held at year
end (ownership).
We obtained and assessed the controls reports provided by
J.P.Morgan Chase Bank N.A. (Custodian) and J.P.Morgan
Europe Limited (Administrator) to gain an understanding of
the design of the process and implementation of key controls.
We compared market prices and exchange rates applied to
all listed investments held at 30 June 2022 to an independent
third-party source and recalculated the investment valuations.
We obtained average trading volumes from an independent
third-party source for all listed investments held at 30 June
2022 and assessed their liquidity.
We agreed the ownership, as at 30 June 2022, of all listed
investments to the independently received custodian report.
From our completion of these procedures, we identified
no material misstatements in relation to the valuation and
ownership of investments.
Revenue recognition including the allocation of special
dividends as revenue or capital returns
(as described on page 39 in the Report of the Audit Committee
and as per the accounting policy in Note 2(g) and Note 3 to
the financial statements).
Investment income recognised in the year was £9.4m (2021:
£5.3m) consisting predominantly of dividend income from
listed investments.
Revenue-based performance metrics are often one of the
key performance indicators for stakeholders. The investment
income received by the Company during the year directly
impacts these metrics and the minimum dividend required
to be paid by the Company. There is a risk that revenue is
incomplete or inaccurate through failure to recognise income
entitlements or failure to appropriately account for their
treatment. It has therefore been designated as a key audit
matter being one of the most significant assessed risks of
material misstatement due to fraud or error.
Additionally, as judgement is required in their allocation, there
is a risk that special dividends are incorrectly allocated as
revenue or capital returns in the Statement of Comprehensive
Income.
We obtained and assessed controls reports provided by the
Administrator to gain an understanding of the design of the
process and implementation of key controls.
We confirmed that income was recognised and disclosed in
accordance with the AIC SORP by assessing the accounting
policies.
We recalculated 100% of dividends due to the Company,
based on investment holdings throughout the year and
announcements made by investee companies.
We agreed a sample of dividends received to bank statements.
We assessed the completeness of the special dividend
population and determined whether special dividends
recognised were revenue or capital in nature with reference
to the underlying circumstances of the investee companies’
dividend payments.
From our completion of these procedures, we identified no
material misstatements in relation to revenue recognition,
including the allocation of special dividends as revenue or
capital returns.
44
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in determining the nature
and extent of our work and in evaluating the results of that work.
Materiality measure Value
Materiality for the Financial Statements as a Whole – we have set materiality as 1% of net assets as we
believe that net assets is the primary performance measure used by investors and is the key driver of
shareholder value. It is also the standard industry benchmark for materiality for investment trusts and
we determined the measurement percentage to be commensurate with the risk and complexity of the
audit and the Company’s listed status.
£4.53m
(2021: £4.52m)
Performance Materiality – performance materiality represents amounts set by the auditor at less than
materiality for the financial statements as a whole, to reduce to an appropriately low level the probability
that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial
statements as a whole.
In setting this we consider the Company’s overall control environment, and any experience of the audit
that indicates a lower risk of material misstatements. Based on our judgement of these factors, we have
set performance materiality at 75% of our overall financial statement materiality as we have audited this
Company for a number of years.
£3.40m
(2021: £3.39m)
Specific Materiality – recognising that there are transactions and balances of a lesser amount which
could influence the understanding of users of the financial statements we calculate a lower level of
materiality for testing such areas.
Specifically, given the importance of the distinction between revenue and capital for the Company, we
applied a separate testing threshold for the revenue column of the Statement of Comprehensive Income
set at the higher of 5% of the revenue net return on ordinary activities before taxation and our Audit
Committee Reporting Threshold.
We have also set a separate specific materiality in respect of related party transactions and Directors’
remuneration.
We used our judgement in setting these thresholds and considered our experience and industry
benchmarks for specific materiality.
£0.41m
(2021: £0.23m)
Audit Committee Reporting Threshold – we agreed with the Audit Committee that we would report to
them all differences in excess of 5% of overall materiality in addition to other identified misstatements
that warranted reporting on qualitative grounds, in our view. For example, an immaterial misstatement
as a result of fraud.
£0.23m
(2021: £0.23m)
During the course of the audit, we reassessed initial materiality
and found no reason to alter the basis of calculation used at
year-end.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that
the Directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate.
Our evaluation of the Directors’ assessment of the Company’s
ability to continue to adopt the going concern basis of
accounting included:
■
Evaluating management’s method of assessing going
concern, including consideration of market conditions
and uncertainties such as COVID-19;
■
Assessing and challenging the forecast cashflows and
associated sensitivity modelling including assessment of
the bank loans and covenants, used by the Directors in
support of their going concern assessment;
■
Obtaining and recalculating management’s assessment
of the Company’s ongoing maintenance of investment
trust status;
■
Evaluating management’s assessment of the business
continuity plans of the Company’s main service providers;
and
■
Assessing the adequacy of the Company’s going concern
disclosures included in the Annual Report.
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt
on the Company’s ability to continue as a going concern for
a period of at least twelve months from when the financial
statements are authorised for issue.
In relation to the Company’s reporting on how it has applied the
UK Corporate Governance Code, we have nothing material to
add or draw attention to in relation to the Directors’ statement
in the financial statements about whether the Directors
considered it appropriate to adopt the going concern basis of
accounting.
Our responsibilities and the responsibilities of the Directors
with respect to going concern are described in the relevant
sections of this report.
45
Other information
The other information comprises the information included in
the Annual Report other than the financial statements and
our auditor’s report thereon. The Directors are responsible
for the other information contained within the Annual Report.
Our opinion on the financial statements does not cover
the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the course of the audit, or otherwise appears
to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are
required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If,
based on the work we have performed, we conclude that
there is a material misstatement of this other information, we
are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act
2006
In our opinion, the part of the Directors’ Remuneration Report
to be audited has been properly prepared in accordance with
the Companies Act 2006.
In our opinion, based on the work undertaken in the course
of the audit:
■
The information given in the Strategic Report and the
Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the
financial statements; and
■
The Strategic Report and the Directors’ Report have
been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the
Company and its environment obtained in the course of the
audit, we have not identified material misstatements in the
Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters
in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
■
Adequate accounting records have not been kept by the
Company, or returns adequate for our audit have not been
received from branches not visited by us; or
■
The financial statements and the part of the Directors’
Remuneration Report to be audited are not in agreement
with the accounting records and returns; or
■
Certain disclosures of Directors’ remuneration specified
by law are not made; or
■
We have not received all the information and explanations
we require for our audit; or
■
A corporate governance statement has not been prepared
by the Company.
Corporate governance statement
We have reviewed the Directors’ Statement in relation to going
concern, longer-term viability and that part of the Corporate
Governance Statement relating to the entity’s compliance
with the provisions of the UK Corporate Governance Code
specified for our review by the Listing Rules.
Based on the work undertaken as part of our audit, we
have concluded that each of the following elements of the
Corporate Governance Statement is materially consistent
with the financial statements or our knowledge obtained
during the audit:
■
The Directors’ statement with regards to the
appropriateness of adopting the going concern basis of
accounting and any material uncertainties identified set
out on page 29;
■
The Directors’ explanation as to its assessment of the
Company’s prospects, the period this assessment covers
and why the period is appropriate set out on page 23;
■
The Directors’ statement on whether it has a reasonable
expectation that the Company will be able to continue in
operation and meets its liabilities set out on page 23;
■
The Directors’ statement on fair, balanced and
understandable set out on page 41;
■
The Board’s confirmation that it has carried out a robust
assessment of the emerging and principal risks set out on
page 19;
■
The section of the annual report that describes the review
of the effectiveness of risk management and internal
control systems set out on pages 33 and 34; and
■
The section describing the work of the Audit Committee
set out on pages 38 to 40.
Responsibilities of Directors
As explained more fully in the Statement of Directors’
Responsibilities set out on page 41, the Directors are
responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view,
and for such internal control as the Directors determine is
necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to
fraud or error. In preparing the financial statements, the
Directors are responsible for assessing the Company’s ability
to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern
basis of accounting unless the Directors either intend to
liquidate the Company or to cease operations, or have no
realistic alternative but to do so.
46
Auditor responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not
a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when
it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit
of the financial statements is located on the Financial
Reporting Council’s website at: http://www.frc.org.uk/
auditorsresponsibilities. This description forms part of our
auditor’s report.
Extent the audit was considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-
compliance with laws and regulations. We design procedures
in line with our responsibilities, outlined above, to detect
material misstatements in respect of irregularities, including
fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below.
We assessed whether the engagement team collectively
had the appropriate competence and capabilities to identify
or recognise non-compliance with laws and regulations by
considering their experience, past performance and support
available.
All engagement team members were briefed on relevant
identified laws and regulations and potential fraud risks at the
planning stage of the audit. Engagement team members were
reminded to remain alert to any indications of fraud or non-
compliance with laws and regulations throughout the audit.
We obtained an understanding of the legal and regulatory
frameworks that are applicable to the Company and the
sector in which it operates, focusing on those provisions that
had a direct effect on the determination of material amounts
and disclosures in the financial statements. The most relevant
frameworks we identified include:
■
Companies Act 2006;
■
FCA listing and DTR rules;
■
The principles of the UK Corporate Governance Code
applied by the AIC Code of Corporate Governance (the
“AIC Code”);
■
Industry practice represented by the Statement of
Recommended Practice: Financial Statements of
Investment Trust Companies and Venture Capital Trusts
(“the SORP”) issued in November 2014, and updated in
April 2021 with consequential amendments;
■
Financial Reporting Standard 102; and
■
The Company’s qualification as an investment trust under
section 1158 of the Corporation Tax Act 2010.
We gained an understanding of how the Company is complying
with these laws and regulations by making enquiries of
management and those charged with governance. We
corroborated these enquiries through our review of relevant
correspondence with regulatory bodies and board meeting
minutes.
We assessed the susceptibility of the Company’s financial
statements to material misstatement, including how fraud
might occur, by meeting with management and those charged
with governance to understand where it was considered there
was susceptibility to fraud. This evaluation also considered
how management and those charged with governance
were remunerated and whether this provided an incentive
for fraudulent activity. We considered the overall control
environment and how management and those charged with
governance oversee the implementation and operation of
controls. We identified a heightened fraud risk in relation
to the valuation and ownership of investments and the
allocation of special dividends. Audit procedures performed
in response to these risks are set out in the section on key
audit matters above.
In addition to the above, the following procedures were
performed to provide reasonable assurance that the financial
statements were free of material fraud or error:
■
Completion of appropriate checklists and use of our
experience to assess the Company’s compliance with the
Companies Act 2006 and the Listing Rules;
■
Testing of accounting journals and other adjustments for
appropriateness;
■
Assessing judgements and estimates made by
management for bias; and
■
Agreement of the financial statement disclosures to
supporting documentation.
Our audit procedures were designed to respond to the
risk of material misstatements in the financial statements,
recognising that the risk of not detecting a material
misstatement due to fraud is higher than the risk of not
detecting one resulting from error, as fraud may involve
intentional concealment, forgery, collusion, omission or
misrepresentation. There are inherent limitations in the audit
procedures described above and the further removed non-
compliance with laws and regulations is from the events and
transactions reflected in the financial statements, the less
likely we would become aware of it.
47
Other matters which we are required to address
Following the recommendation of the Audit Committee,
we were appointed by the Board on 25 March 2020 to audit
the financial statements for the year ended 30 June 2020
and subsequent financial periods. The period of our total
uninterrupted engagement is three years, covering the years
ended 30 June 2020 to 30 June 2022.
The non-audit services prohibited by the FRC’s Ethical
Standard were not provided to the Company and we remain
independent of the Company in conducting our audit.
Our audit opinion is consistent with the additional report to
the Audit Committee.
Use of our report
This report is made solely to the Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so
that we might state to the Company’s members those matters
we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law, we
do not accept or assume responsibility to anyone other than
the Company and the Company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
David Holmes (Senior Statutory Auditor)
For and behalf of Johnston Carmichael LLP
Statutory Auditor
Edinburgh, United Kingdom
9 September 2022
48
Financial Statements
Statement of Comprehensive Income
For the year ended 30 June
Notes
2022
Revenue
£’000
2022
Capital
£’000
2022
Total
£’000
2021
Revenue
£’000
2021
Capital
£’000
2021
Total
£’000
(Losses)/gains on investments 9 – (45,017) (45,017) – 78,606 78,606
Currency gains – 446 446 – 428 428
Income 3 9,377 – 9,377 5,294 – 5,294
Investment management fee (609) (1,828) (2,437) (480) (1,440) (1,920)
Other expenses 4 (488) (8) (496) (408) (8) (416)
Net return/(loss) before finance costs and taxation 8,280 (46,407) (38,127) 4,406 77,586 81,992
Finance costs of borrowings 5 (83) (252) (335) (55) (165) (220)
Net return/(loss) on ordinary activities before taxation 8,197 (46,659) (38,462) 4,351 77,421 81,772
Taxation on ordinary activities 6 (854) – (854) (550) – (550)
Net return/(loss) on ordinary activities after taxation 7,343 (46,659) (39,316) 3,801 77,421 81,222
Net return/(loss) per ordinary share 8 11.72p (74.47)p (62.75)p 6.81p 138.63p 145.44p
The total column of this statement is the profit and loss account of the Company.
All revenue and capital items in this statement derive from continuing operations.
The net return/(loss) for the year disclosed above represents the Company’s total comprehensive income.
The accompanying notes on pages52 to 62 are an integral part of the financial statements.
49
Statement of Financial Position
As at 30 June
Notes
2022
£’000
2021
£’000
Non-current assets
Investments held at fair value through profit or loss 9 439,101 445,592
Current assets
Debtors 10 24,969 596
Cash and cash equivalents 11 7,096 16,556
32,065 17,152
Creditors
Amounts falling due within one year 12 (18,513) (10,651)
Net current assets 13,552 6,501
Total net assets 452,653 452,093
Capital and reserves
Called up share capital 13 3,271 2,997
Capital redemption reserve 14 16 16
Share premium 14 235,110 191,253
Capital reserve 14 206,979 253,638
Revenue reserve 14 7,277 4,189
Shareholders' funds 452,653 452,093
Net asset value per ordinary share 15 692.01p 754.43p
These financial statements were approved by the Board of Directors and signed on its behalf on 9 September 2022.
Russell Napier
Chairman
The accompanying notes on pages52 to 62 are an integral part of the financial statements.
Registered in Scotland. Registration number: SC042651
50
Statement of Changes in Equity
For the year ended 30 June 2022
Notes
Share
capital
£’000
Capital
redemption
reserve
£’000
Share
premium
£’000
Capital
reserve
1,2
£’000
Revenue
reserve
2
£’000
Shareholders’
funds
£’000
Shareholders' funds at 1 July 2021 2,997 16 191,253 253,638 4,189 452,093
Net (loss)/return on ordinary activities
after taxation
– – – (46,659) 7,343 (39,316)
Issue of new shares (net of costs) 14 274 – 43,857 – – 44,131
Dividends paid 7 – – – – (4,255) (4,255)
Shareholders' funds at 30 June 2022 14 3,271 16 235,110 206,979 7,277 452,653
For the year ended 30 June 2021
Notes
Share
capital
£’000
Capital
redemption
reserve
£’000
Share
premium
£’000
Capital
reserve
1,2
£’000
Revenue
reserve
2
£’000
Shareholders’
funds
£’000
Shareholders' funds at 1 July 2020 2,515 16 125,454 176,217 3,841 308,043
Net return on ordinary activities after
taxation
– – – 77,421 3,801 81,222
Issue of new shares (net of costs) 14 482 – 65,799 – – 66,281
Dividends paid 7 – – – – (3,453) (3,453)
Shareholders' funds at 30 June 2021 14 2,997 16 191,253 253,638 4,189 452,093
1
Capital reserve as at 30 June 2022 includes distributable gains of £191,640,000 (30 June 2021: £107,092,000).
2
The Company may pay dividends from both capital and revenue reserves.
The accompanying notes on pages52 to 62 are an integral part of the financial statements.
51
Statement of Cash Flows
For the year ended 30 June
Notes
2022
£’000
2022
£’000
2021
£’000
2021
£’000
Cash generated in operations 16 4,768 2,575
Interest received 3 10 17
Interest paid 5 (335) (220)
(325) (203)
Net cash generated from operating activities 4,443 2,372
Cash flow from investing activities
Purchase of investments (689,754) (530,125)
Sale of investments 639,527 465,478
Realised currency gains/(losses) 1,517 (305)
Net cash used in investing activities (48,710) (64,952)
Cash flow from financing activities
Issue of new shares, net of costs 44,131 66,592
Dividends paid 7 (4,255) (3,453)
Net (repayment)/drawdown of credit facility (5,064) 1,176
Net cash generated from financing activities 34,812 64,315
Net (decrease)/increase in cash and cash equivalents (9,455) 1,735
Cash and cash equivalents at start of the year 16,556 14,716
(Decrease)/increase in cash in the year (9,455) 1,735
Currency (losses)/gains on cash and cash equivalents (5) 105
Cash and cash equivalents at end of the year 7,096 16,556
The accompanying notes on pages52 to 62 are an integral part of the financial statements.
52
Notes to the Financial Statements
1. General information
Mid Wynd International Investment Trust PLC is an
investment trust company domiciled in the United Kingdom
and incorporated in Scotland.
The address of its registered office is 6th Floor, Exchange Plaza,
50 Lothian Road Edinburgh, EH3 9BY. The ordinary shares
of the Company are premium listed on the London Stock
Exchange. The Company’s registered number is SC042651.
2. Accounting policies
(a) Basis of accounting
The financial statements are prepared on a going concern
basis under the historical cost convention modified to include
the revaluation of investments.
The financial statements have been prepared in accordance
with the Companies Act 2006, applicable United Kingdom
accounting standards, including Financial Reporting Standard
(‘FRS’) 102, and the Statement of Recommended Practice
‘Financial Statements of Investment Trust Companies and
Venture Capital Trusts’ (the ‘SORP’) issued by the Association
of Investment Companies (the ‘AIC’) in April 2021.
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.
(b) Investments
Purchases and sales of investments are accounted for on a
trade date basis. Investments are designated as held at fair
value through profit or loss on initial recognition and are
measured at subsequent reporting dates at fair value. The fair
value of listed investments is bid value or last traded prices for
holdings on certain recognised overseas exchanges.
Changes in the value of investments held at fair value through
profit or loss and gains and losses on disposal are recognised
in the Statement of Comprehensive Income as gains/
(losses) on investments. Also included within this caption
are transaction costs in relation to the purchase or sale of
investments. Assets are derecognised at the trade date of
thedisposal.
Proceeds are measured at fair value which are regarded as the
proceeds of sale less any transaction costs.
(c) Derivatives
The Company may use derivatives for the purpose of efficient
portfolio management (including reducing, transferring or
eliminating risk in its investments and protection against
currency risk) and to achieve capital growth. No derivatives
were used by the Company during this year or the preceding
year.
(d) Financial instruments
In addition to the investment transactions described above,
the Company enters into basic financial instruments that
result in recognition of other financial assets and liabilities,
such as sales and purchases for subsequent settlement,
investment income due but not received and other debtors
and other creditors. These financial instruments are receivable
and payable and are stated at cost less impairment.
(e) Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits
held at call with banks and other short-term highly liquid
investments with original maturities of three months or less.
(f) Bank borrowings
The Company has a thee year credit facility with The Bank
of Nova Scotia. The amounts borrowed are disclosed as the
amounts received. The arrangement fee in relation to the
facility is amortised over the three year period on a straight
line basis.
(g) Income
Income from equity investments is brought into account on
the date on which the investments are quoted ex-dividend
or, where no ex-dividend date is quoted, when the Company’s
right to receive payment is established. Unfranked investment
income includes the taxes deducted at source. Franked
investment income is stated net of tax credits. If scrip is taken
in lieu of dividends in cash, the net amount of the cash dividend
declared is credited to the revenue account. Any excess in
the value of the shares received over the amount of the cash
dividend foregone is recognised as capital. Special dividends
are reviewed on a case by case basis when determining if a
dividend is to be treated as revenue or capital. It is likely that
where a special dividend results in a significant reduction in
the capital value of a holding, then the dividend will generally
be treated as capital, otherwise this will be recognised as
revenue. Interest from fixed interest securities is recognised
on an effective interest rate basis. Interest receivable on
deposits is recognised on an accruals basis.
53
2. Accounting policies (continued)
(h) Expenses
All expenses are accounted for on an accruals basis.
Expenses are charged through the revenue reserve except
where they relate directly to the acquisition or disposal of an
investment, in which case they are added to the cost of the
investment or deducted from the sale proceeds, and where
they are connected with the maintenance or enhancement of
the value of investments are charged to the capital reserve.
Management fees are accounted for on an accruals basis and
allocated 25% to the revenue reserve and 75% to the capital
reserve. Costs arising from the filing of claims to reclaim
tax on overseas dividends have been deducted from the
revenuereserve.
(i) Finance costs
Loan interest is accounted for on an accruals basis and has
been allocated 25% to the revenue reserve and 75% to the
capital reserve.
(j) Deferred taxation
Deferred taxation is provided on all timing differences which
have originated but not reversed by the date of the Statement
of Financial Position, calculated at the current tax rate
relevant to the benefit or liability. Deferred tax assets are
recognised only to the extent that it is more probable than not
that there will be taxable profits from which underlying timing
differences can be deducted.
(k) Foreign currencies
Transactions involving foreign currencies are converted at the
rate ruling at the time of the transaction. Monetary assets and
liabilities in foreign currencies are translated at the closing
rates of exchange at the date of the Statement of Financial
Position, with the exception of forward currency contracts
which are valued at the forward rate on that date. Any gain or
loss arising from a change in exchange rates subsequent to
the date of the transaction is included as an exchange gain or
loss in the capital reserve or revenue reserve as appropriate.
(l) Reserves
Capital reserve
This reserve reflects any gains or losses on investments
realised in the period along with any increases and decreases
in the fair value of investments held that have been recognised
in the Statement of Comprehensive Income. These include
gains and losses from foreign currency exchange differences
and gains on the return of capital by way of investee
companies paying dividends that are capital in nature.
Expenses may also be charged to this reserve in accordance
with the abovepolicies.
Capital redemption reserve
This reserve includes the nominal value of all shares bought
back and cancelled by the Company.
Revenue reserve
The revenue profit or loss for the year is taken to or from this
reserve.
(m) Segmental reporting
The Company has only one material segment of business
being that of an investment trust company.
3. Income
2022
£’000
2021
£’000
Income from investments
Overseas dividends 8,149 4,849
UK dividends 1,110 428
Scrip dividends 108 –
9,367 5,277
Other income
Bank interest 10 17
Total income 9,377 5,294
Total income comprises:
Dividends and UK interest from financial assets designated at fair value through profit or loss 9,367 5,277
Other income 10 17
Total income 9,377 5,294
54
4. Other expenses
2022
Revenue
£’000
2022
Capital
£’000
2022
Total
£’000
2021
Revenue
£’000
2021
Capital
£’000
2021
Total
£’000
Directors’ remuneration 140 – 140 127 – 127
Depositary fees 73 – 73 57 – 57
Custody fees 57 8 65 39 8 47
Auditor’s remuneration 28 – 28 27 – 27
Stock exchange fees 24 – 24 8 – 8
Printing fees 21 – 21 16 – 16
Registrar fees 20 – 20 27 – 27
Directors’ & officers’ insurance 15 – 15 12 – 12
Other expenses 110 – 110 95 – 95
Total expenses 488 8 496 408 8 416
5. Finance costs of borrowings
2022
Revenue
£’000
2022
Capital
£’000
2022
Total
£’000
2021
Revenue
£’000
2021
Capital
£’000
2021
Total
£’000
Loan interest 47 143 190 28 84 112
Loan non-utilisation fee 33 99 132 22 66 88
Bank overdraft interest 3 10 13 5 15 20
Total finance costs 83 252 335 55 165 220
6. Taxation on ordinary activities
2022
Revenue
£’000
2022
Capital
£’000
2022
Total
£’000
2021
Revenue
£’000
2021
Capital
£’000
2021
Total
£’000
Overseas taxation 854 – 854 550 – 550
Total tax 854 – 854 550 – 550
The tax charge for the year is higher than the average standard rate of corporation tax in the UK (19.00%) as explained below:
2022
£’000
2021
£’000
Net (loss)/return on ordinary activities before taxation (38,462) 81,772
Net (loss)/return on ordinary activities multiplied by the average standard rate of corporation tax in the UK
of19.00% (2021: 19.00%)
(7,308) 15,537
Effects of:
Overseas tax – non offsettable 854 550
Taxable losses in the year not utilised 533 419
Double taxation relief expensed (11) (9)
Non-taxable scrip dividends (20) –
Income not taxable (UK dividends) (211) (82)
Income not taxable (overseas dividends) (1,451) (849)
Capital loss/(returns) not taxable 8,468 (15,016)
Current tax charge for the year 854 550
Factors that may affect future tax charges
At 30 June 2022 the Company had a potential deferred tax asset of £3,039,000 (2021: £1,792,000) based on a prospective
corporation tax rate of 25% (2021: 19%), in respect of taxable losses which are available to be carried forward and offset against
future taxable profits. A deferred tax asset has not been recognised on these losses as it is considered unlikely that the Company
will make suitable taxable revenue profits in excess of deductible expenses in future periods. Due to the Company’s status as an
investment trust, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the
Company has not provided for deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.
55
7. Dividends paid and proposed
2022 2021
2022
£’000
2021
£’000
Amounts recognised as distributions in the year:
Unclaimed dividends refunded to the Company – – (14) –
Previous year’s final dividend 3.30p 3.12p 2,018 1,652
First interim dividend 3.50p 3.10p 2,251 1,801
Total dividend 6.80p 6.22p 4,255 3,453
Set out below are the total dividends paid and payable in respect of the financial year. The revenue available for distribution by
way of dividend for the year is £7,343,000 (2021: £3,801,000).
2022 2021
2022
£’000
2021
£’000
Dividends paid and payable in respect of the year:
First interim dividend 3.50p 3.10p 2,251 1,801
Proposed final dividend 3.70p 3.30p 2,420 1,977
Special dividend 3.00p nil 1,962 nil
Total dividend 10.20p 6.40p 6,633 3,778
8. Net return/(loss) per ordinary share
2022
Revenue
2022
Capital
2022
Total
2021
Revenue
2021
Capital
2021
Total
Net return/(loss) on ordinary activities after taxation 11.72p (74.47)p (62.75)p 6.81p 138.63p 145.44p
Revenue return per ordinary share is based on the net revenue return on ordinary activities after taxation for the financial year
of £7,343,000 (2021: £3,801,000), and on 62,652,936 (2021: 55,845,969) ordinary shares, being the weighted average number of
ordinary shares in issue (excluding treasury shares) during the year.
Capital loss per ordinary share is based on the net capital loss on ordinary activities after taxation for the financial year of
£46,659,000 (2021: gain £77,421,000), and on 62,652,936 (2021: 55,845,969) ordinary shares, being the weighted average number
of ordinary shares in issue (excluding treasury shares) during the year.
9. Non-current assets – investments
Investments in securities are financial assets designated at fair value through profit or loss on initial recognition in accordancen
with FRS 102. The following tables provide an analysis of these investments based on the fair value hierarchy as described belown
which reflects the reliability and significance of the information used to measure their fair value.
The levels are determined by the lowest (that is the least reliable or least independently observable) level of input that is
significant to the fair value measurement for the individual investment in its entirety as follows:
Level 1 – investments using unadjusted quoted prices for identical instruments in an active market;
Level 2 –investments whose fair value is based on inputs other than quoted prices that are either directly or indirectly observable;
Level 3 – investments whose fair value is based on inputs that are unobservable (i.e. for which market data is unavailable).
Year ended
30 June
2022
£’000
Year ended
30 June
2021
£’000
Quoted (Level 1) 439,101 445,592
Total financial asset investments 439,101 445,592
56
9. Non-current assets – investments (continued)
Year ended
30 June 2022
Year ended
30 June 2021
Total
£’000
Total
£’000
Opening book cost 367,405 249,798
Fair value adjustment 78,187 50,659
Opening valuation 445,592 300,457
Purchases at cost 701,579 529,215
Disposals – proceeds (663,053) (462,686)
Losses/(gains) on investments (45,017) 78,606
Closing valuation 439,101 445,592
Closing book cost 423,603 367,405
Fair value adjustment 15,498 78,187
Closing valuation 439,101 445,592
The purchases and sales proceeds figures above include transaction costs of £521,000 on purchases (2021: £485,000) and
£224,000 on sales (2021: £149,000), making a total of £745,000 (2021: £634,000).
The Company received £663,053,000 (2021: £462,686,000) from investments sold in the year. The book cost of these investments
when they were purchased was £645,381,000 (2021: £411,608,000). These investments have been revalued over time and until
they were sold any unrealised gains/losses were included in the fair value of the investments.
All investments are considered level 1. There have been no transfers between levels during the year.
10. Debtors
2022
£’000
2021
£’000
Sales for subsequent settlement 23,526 –
Income accrued (net of irrecoverable overseas withholding tax) 1,097 307
Other debtors and prepayments 346 289
Total debtors 24,969 596
None of the above debtors are financial assets designated at fair value through profit or loss. The carrying amount of the debtors
is a reasonable approximation of fair value.
11. Cash and cash equivalents
2022
£’000
2021
£’000
Amounts held in JPMorgan Liquidity Funds – US Dollar Liquidity Fund (Institutional dist.) 3,228 14,174
Amounts held in JPMorgan Liquidity Funds – Sterling Liquidity Fund (Institutional dist.) – 926
Cash and bank balances (including Spot contracts) 3,868 1,456
Total cash and cash equivalents 7,096 16,556
12. Creditors – amounts falling due within one year
2022
£’000
2021
£’000
Purchases for subsequent settlement 11,825 –
Bank loans 5,951 9,949
Other creditors and accruals 737 702
Total creditors 18,513 10,651
The Company has a three year multi-currency revolving credit facility with The Bank of Nova Scotia for US$60 million (2021:
US$60 million), terminating in February 2024. Further information can be found in note 20.
57
13. Called up share capital
2022
Number
2022
£’000
2021
Number
2021
£’000
Allotted, called up and fully paid ordinary shares of 5 pence each 65,411,114 3,271 59,925,114 2,997
Total 65,411,114 3,271 59,925,114 2,997
The Company alloted 5,486,000 (2021: 9,641,000) new ordinary shares for gross proceeds of £44,197,000 (2021: £66,498,000)
during the year ended 30 June 2022.
There are no ordinary shares held in treasury.
14. Capital and reserves
Share
capital
£’000
Capital
redemption
reserve
£’000
Share
premium
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
Shareholders’
funds
£’000
At 1 July 2021 2,997 16 191,253 253,638 4,189 452,093
Gains on sales of investments – – – 17,672 – 17, 672
Currency loss on bank loans – – – (1,066) – (1,066)
Finance costs charged to capital – – – (252) – (252)
Other currency gains – – – 1,512 – 1,512
Expenses charged to capital – – – (1,836) – (1,836)
Issue of new shares (net of costs) 274 – 43,857 – – 44,131
Changes in unrealised losses – – – (62,689) – (62,689)
Revenue return on ordinary activities after taxation – – – – 7,343 7,343
Dividends paid – – – – (4,255) (4,255)
At 30 June 2022 3,271 16 235,110 206,979 7,277 452,653
The capital reserve includes unrealised gains on non-current asset investments of £15,498,000 (2021: £78,187,000) as disclosed
in note 9.
The capital reserve and the revenue reserve are distributable by way of dividend.
15. Net asset value per ordinary share
The net asset value per ordinary share and the net assets attributable to the ordinary shareholders at the year end were asfollows:
2022
Net asset
value per
share
2022
Net assets
£’000
2021
Net asset
value per
share
2021
Net assets
£’000
Ordinary shares 692.01p 452,653 754.43p 452,093
During the year the movements in the assets attributable to the ordinary shares were as follows:
2022
£’000
2021
£’000
Total net assets at 1 July 452,093 308,043
Total recognised (losses)/gains for the year (39,316) 81,222
Issue of new shares 44,131 66,281
Dividends paid (4,255) (3,453)
Total net assets at 30 June 452,653 452,093
Net asset value per ordinary share is based on net assets as shown above and on 65,411,114 (2021: 59,925,114) ordinary shares,
being the number of ordinary shares in issue at the year end.
58
16. Reconciliation of net (loss)/return before finance costs and taxation to cash used in operations
2022
£’000
2021
£’000
Net (loss)/return before finance costs and taxation (38,127) 81,992
Losses/(gains) on investments 45,017 (78,606)
Currency gains (446) (428)
Increase in accrued income and other debtors (847) (16)
Interest received (10) (17)
Increase in creditors 35 200
Overseas tax suffered (854) (550)
Cash generated from operations 4,768 2,575
17. Analysis of changes in net cash
At 1 July
2021
£'000
Cashflow
£'000
Exchange
movements
£'000
At 30 June
2022
£'000
Cash and cash equivalents 16,556 (9,455) (5) 7,096
Debt due within one year (9,949) 5,064 (1,066) (5,951)
Total 6,607 (4,391) (1,071) 1,145
18. Contingent liabilities, guarantees and financial commitments
At 30 June 2022 and 30 June 2021 the Company had no contingent liabilities, guarantees or financial commitments.
19. Transactions with the Investment Manager and related parties
The investment management fees payable to the Investment Manager are disclosed in the Statement of Comprehensive Income
on page 48. The amount outstanding at 30 June 2022 was £597,000 (2021: £549,000). The existence of an independent Board of
Directors demonstrates that the Company is free to pursue its own financial and operating policies and therefore the Investment
Manager is not considered to be a relatedparty.
Fees payable during the year to the Directors and their interests in shares of the Company are considered to be related party
transactions and are disclosed within the Directors’ Remuneration Report on pages 35 to 37.
20. Financial Instruments
As an investment trust, the Company invests in equities and makes other investments so as to meet its investment objective
of achieving capital and income growth by investing on a worldwide basis. In pursuing its investment objective, the Company is
exposed to various types of risk that are associated with the financial instruments and markets in which it invests.
These risks are categorised here as market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and
credit risk. The Board monitors closely the Company’s exposure to these risks but does so in order to reduce the likelihood of a
permanent loss of capital rather than to minimise the short-term volatility.
The Company may enter into derivative transactions as explained in the investment policy on page 52. In the period under review
the Company did not enter into any forward foreign exchange contracts. At the year end there were no open positions (2021: no
open positions).
Market risk
The fair value or future cash flows of a financial instrument or other investment held by the Company may fluctuate because of
changes in market prices. This market risk comprises three elements – currency risk, interest rate risk and other price risk. The
Board reviews and agrees policies for managing these risks and the Company’s Investment Manager assesses the exposure to
market risk when making individual investment decisions and monitors the overall level of market risk across the investment
portfolio on an ongoing basis. Details of the Company’s investment portfolio are shown in note 9 and on pages 11 and 12.
59
20. Financial Instruments (continued)
(i) Currency risk
Certain of the Company’s assets, liabilities and income are denominated in currencies other than Sterling (the Company’s
functional currency and that in which it reports its results). Consequently, movements in exchange rates may affect the Sterling
value of those items.
The Investment Manager monitors the Company’s exposure to foreign currencies and reports to the Board on a regular basis.
The Investment Manager assesses the risk to the Company of the foreign currency exposure by considering the effect on the
Company’s net asset value and income of a movement in the rates of exchange to which the Company’s assets, liabilities, income
and expenses are exposed. However, the country in which a company is listed is not necessarily where it earns its profits. The
movement in exchange rates on overseas earnings may have a more significant impact upon a company’s valuation than a simple
translation of the currency in which the company is quoted.
Foreign currency borrowings may limit the Company’s exposure to anticipated future changes in exchange rates which might
otherwise adversely affect the value of the portfolio of investments.
At 30 June 2022
Investments
£’000
Cash and
cash
equivalents
£’000
Bank
loan
£’000
Other
debtors and
creditors
£’000
Net
exposure
£’000
US dollar 276,810 1,354 (1,647) 7, 271 283,788
Japanese yen 29,396 2,063 – (889) 30,570
Singapore dollar 23,304 39 – – 23,343
Euro 26,877 215 (4,304) 115 22,903
Swedish Krona 14,507 – – 298 14,805
Hong Kong dollar 12,308 633 – (159) 12,782
Taiwan dollar 7, 871 – – 4,490 12,361
Korean won 11,615 – – 51 11,666
Swiss franc 11,080 – – – 11,080
Danish krone 6,839 – – 25 6,864
Canadian Dollar 5,659 – – 29 5,688
Norwegian krone 1,632 – – – 1,632
Total exposure to currency risk 427,898 4,304 (5,951) 11,231 437,482
Sterling 11,203 2,792 – 1,176 15,171
Total 439,101 7,096 (5,951) 12,407 452,653
At 30 June 2021
Investments
£’000
Cash and
cash
equivalents
£’000
Bank
loan
£’000
Other
debtors and
creditors
£’000
Net
exposure
£’000
US dollar 263,182 14,174 (6,515) (14) 270,827
Japanese yen 51,853 203 – 115 52,171
Euro 35,434 1,219 (3,434) 72 33,291
Swiss franc 15,084 – – – 15,084
Singapore dollar 14,300 52 – – 14,352
Korean won 13,295 – – 20 13,315
Danish krone 8,706 – – 10 8,716
Taiwan dollar 7,680 – – 51 7,731
Swedish Krona 6,088 – – – 6,088
Hong Kong dollar 3,188 – – – 3,188
Norwegian krone 2,734 – – – 2,734
Mexican Peso 2,421 (41) – – 2,380
Chinese Yuan – – – 71 71
Thai Baht – 23 – – 23
Total exposure to currency risk 423,965 15,630 (9,949) 325 429,971
Sterling 21,627 926 – (431) 22,122
Total 445,592 16,556 (9,949) (106) 452,093
60
20. Financial Instruments (continued)
Currency risk sensitivity
At 30 June 2022, if Sterling had strengthened by 5% in relation to all currencies, with all other variables held constant, total net
assets and total return on ordinary activities would have decreased by the amounts shown below.
A 5% weakening of Sterling against all currencies, with all other variables held constant, would have had an equal but opposite
effect on the amounts included in the financial statements. The analysis is performed on the same basis as for 2021.
2022
£’000
2021
£’000
US dollar 14,189 13,541
Japanese yen 1,529 2,609
Singapore dollar 1,167 718
Euro 1,145 1,665
Swedish Krona 740 304
Hong Kong dollar 639 159
Taiwan dollar 618 387
Korean won 583 666
Swiss franc 554 754
Danish krone 343 436
Canadian Dollar 284 –
Norwegian krone 82 137
Mexican Peso – 119
Chinese Yuan – 4
Thai Baht – 1
21,873 21,500
(ii) Interest rate risk
Interest rate movements may affect directly:
■
the fair value of the investments in fixed interest rate securities;
■
the level of income receivable on cash deposits; and
■
the interest payable on the value of the Company’s borrowings.
Interest rate movements may also impact the market value of the Company’s investments outwith fixed income securities.
The effect of interest rate movements upon the earnings of a company may have a significant impact upon the valuation of that
company’s equity. The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are
taken into account when making investment decisions and when entering into borrowing agreements.
Based on the Company’s monetary financial instruments at each balance sheet date, an increase of 2% in interest rates, with all
other variables being held constant, would increase the Company’s total net assets and total return for the year to 30 June 2022
by £23,000 (30 June 2021: £132,000). This is mainly due to the Company’s exposure to interest rates on its variable rate credit
facility draw downs and cash balances held. A decrease of 2% would have an equal but opposite effect.
The Board reviews on a regular basis the amount of investments in cash and fixed income securities and the income receivable
on cash deposits, floating rate notes and other similar investments.
The interest rate risk profile of the Company’s financial assets and liabilities at 30 June 2022 and 30 June 2021 is shown below.
Financial assets
The Company’s cash balances are maintained in US Dollar and Sterling Liquidity Funds. The interest received is determined by
the interest rate in the relevant country of the currency.
61
20. Financial Instruments (continued)
Financial liabilities
The interest rate risk profile of the Company’s bank loan is shown below.
Interest rate exposure
2022
£’000
2021
£’000
Euro 4,304 3,434
US dollar 1,647 6,515
Total exposure 5,951 9,949
The Company has a three year multi-currency revolving credit facility with The Bank of Nova Scotia (UK Branch) for a US$60
million terminating on 19 February 2024.
The Company pays interest separately on each currency drawn down. Interest is charged on each currency at variable rates.
Sterling is calculated with reference to RFR (Risk-free rate); US dollar with reference to SOFR RFR and Japanese yen with
reference to TONAR RFR.
US$2.0 million (£1.6 million) was drawn down at 30 June 2022. The interest rate applied as at 30 June 2022 was 2.36161%.
€5.0 million (£4.3 million) was drawn down at 30 June 2022. The interest rate applied as at 30 June 2022 was 1.30%.
The main covenants relating to the revolving credit facility are:
(i) Total borrowings shall not exceed 33.33% (2021: 33.33%) of the Company’s investment portfolio.
(ii) The Company’s minimum net asset value shall be £170 million (2021: £170 million).
Interest rate risk sensitivity
As the majority of the Company’s financial assets are non-interest bearing and the loan can be repaid within the next 12 months
the exposure to fair value interest rate fluctuations is limited.
(iii) Other price risk
Changes in market prices other than those arising from interest rate risk or currency risk may also affect the value of the
Company’s net assets.
The Board manages the market price risks inherent in the investment portfolio by ensuring full and timely access to relevant
information from the Investment Manager. The Board meets regularly and at each meeting reviews investment performance,
the investment portfolio and the rationale for the current investment positioning to ensure consistency with the Company’s
objectives and investment policies. The portfolio does not seek to reproduce the index. Investments are selected based upon the
merit of individual companies and therefore performance may well diverge from short term fluctuations in the comparativeindex.
Other price risk sensitivity
Investments are valued at bid prices which equate to their fair value. A full list of the Company’s investments is given on pages11
and 12. In addition, an analysis of the investment portfolio by geographical split is given on page 13. A 5% increase in quoted
valuations at 30 June 2022 would have increased total assets, and the total return on ordinary activities after taxation by
£21,955,000 (2021: £22,280,000). A decrease of 5% would have had an equal but opposite effect.
Liquidity risk
This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.
The Alternative Investment Fund Manager (‘AIFM‘) has a liquidity management policy for the Company which is intended to
ensure that the Company’s investment portfolio maintains a level of liquidity which is appropriate to the Company’s expected
outflows, which include share buy backs, dividends and operational expenses. This policy involves an assessment of the prices
or values at which it expects to be able to liquidate its assets over varying hypothetical periods in varying market conditions,
taking into account the sensitivity of particular assets to particular market risks and other relevant factors.
62
20. Financial Instruments (continued)
This requires the AIFM to identify and monitor investment in asset classes which are considered to be relatively illiquid. Illiquid
assets of the Company are likely to include investments in unquoted companies. None of the Company’s investments were
unquoted in the current year or prior year. The quoted companies in the portfolio are generally deemed to be liquid but from time
to time, however, liquidity in these holdings may be affected by wider economic events. The Company’s portfolio is monitored on
an ongoing basis to ensure that it is adequately diversified and liquid. The AIFM’s liquidity management policy is reviewed on at
least an annual basis and updated, as required.
There have been no material changes to the liquidity management systems and procedures during the year. In addition, none of
the Company’s assets are subject to special arrangements arising from their illiquid nature.
The Company has the power to enter into borrowings, which gives it access to additional funding when required.
Credit and counterparty risk
This is the risk that a failure of a counterparty to a transaction to discharge its obligations under that transaction could result in
the Company suffering a loss.
This risk is managed as follows:
■
The Company’s quoted investments and cash are held on its behalf by J.P. Morgan Chase Bank N.A. the Company’s Custodian
and Banker. Bankruptcy or insolvency of the Custodian may cause the Company’s rights with respect to securities held by
the Custodian to be delayed. The Investment Manager monitors the Company’s risk by reviewing the Custodian’s internal
control reports and reporting on their findings to the Board.
■
Investment transactions are carried out with a large number of brokers whose creditworthiness is reviewed by the
Investment Manager. Transactions are ordinarily undertaken on a delivery versus payment basis whereby the Company’s
Custodian ensures that the counterparty to any transaction entered into by the Company has delivered on its obligations
before any transfer of cash or securities away from the Company is completed.
■
Transactions involving derivatives, and other arrangements wherein the creditworthiness of the entity acting as broker or
counterparty to the transaction is likely to be of sustained interest, are subject to rigorous assessment by the Investment
Manager of the creditworthiness of that counterparty.
Fair value of financial assets and financial liabilities
The Directors are of the opinion that the financial assets and liabilities of the Company are stated at fair value in the balancesheet.
Capital management
The capital of the Company is its share capital and reserves as set out in notes 13 and 14 together with its borrowings (see note
12). The objective of the Company is to achieve capital and income growth by investing on a worldwide basis. The Company’s
investment policy is set out in page 14. In pursuit of the Company’s objective, the Board has a responsibility for ensuring the
Company’s ability to continue as a going concern and details of the related risks and how they are managed are set out on
pages19 to 22. The Company has the ability to issue and buy back its shares (see page 18) and changes to the share capital
during the year are set out in note 13. The Company does not have any externally imposed capitalrequirements.
21. Post Balance Sheet Event
As at 9 September 2022, a further 395,000 ordinary shares were issued and 68,700 shares bought back and held in Treasury. Net
proceeds from these transactions amounted to £2,408,000.
63
Shareholder information
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of Mid
Wynd International Investment Trust PLC will be held at 6th
Floor, Exchange Plaza, 50 Lothian Road, Edinburgh, EH3 9BY
on Wednesday, 26 October 2022 at 12.00 noon (the ‘Meeting’)
for the following purposes:
Ordinary Business
To consider and, if thought fit, pass Resolutions 1 to 10
(inclusive) which will be proposed as ordinary resolutions:
1. To receive and adopt the Annual Financial Report of the
Company for the year ended 30 June 2022 together with
the Report of the Directors.
2. To approve the Directors’ Remuneration Report for the
year ended 30 June 2022.
3. To approve a final dividend of 3.70 pence per ordinary
share for the year ended 30 June 2022.
4. To re-elect Russell Napier as a Director of the Company.
5. To re-elect Diana Dyer Bartlett as a Director of the
Company.
6. To re-elect David Kidd as a Director of the Company.
7. To re-elect Alan Scott as a Director of the Company.
8. To re-appoint Johnston Carmichael LLP as Auditor of
the Company to hold office from the conclusion of the
Meeting until the conclusion of the next meeting at which
the financial statements are laid before the Company.
9. To authorise the Directors to determine the remuneration
of the Auditor.
10. That, in substitution for any existing authority, but without
prejudice to the exercise of any such authority prior to the
date hereof, the Directors of the Company be and they
are hereby generally and unconditionally authorised in
accordance with Section 551 of the Companies Act 2006
(the ‘Act’) to exercise all the powers of the Company to
allot new shares in the Company and to grant rights to
subscribe for, or to convert any security into, ordinary
shares in the Company (such shares and rights together
being ‘Securities’) up to an aggregate nominal value of
£1,094,527, being equal to approximately 33.3% of the
Company’s issued share capital (excluding treasury
shares) as at 9 September 2022, to such persons and
on such terms as the Directors may determine, such
authority to expire at the conclusion of the next annual
general meeting of the Company held after the passing
of this resolution, unless previously revoked, varied or
extended by the Company in a general meeting, save that
the Company may at any time prior to the expiry of this
authority make an offer or enter into an agreement which
would or might require Securities to be allotted or granted
after the expiry of such authority and the Directors shall
be entitled to allot or grant Securities in pursuance of
such an offer or agreement as if such authority had
notexpired.
To consider and, if thought fit, to pass Resolution 11,
which will be proposed as a special resolution:
11. That, in substitution for any existing authority but without
prejudice to the exercise of any such authority prior to the
date hereof, the Company be and is hereby generally and
unconditionally authorised pursuant to Section 701 of
the Act to make market purchases (within the meaning
of Section 693(4) of the Act) of any of its ordinary shares
in the capital of the Company in such manner and upon
such terms as the Directors of the Company may from
time to time determine, provided that:
(a) the maximum aggregate number of ordinary shares
hereby authorised to be purchased is 9,854,038, or, if
less, the number representing approximately 14.99%
of the issued ordinary share capital of the Company
(excluding treasury shares) as at the date on which
this resolution is passed;
(b) the minimum price which may be paid for any
ordinary share is the nominal value thereof;
(c) the maximum price which may be paid for any
ordinary share shall not be more than the higher of:
(i) 5% above the average of the middle market
quotations for an ordinary share (as derived
from the Daily Official List of the London
Stock Exchange) over the five business days
immediately preceding the date of purchase; and
(ii) the higher of the price of the last independent
trade in ordinary shares and the highest current
independent bid for such shares on the London
Stock Exchange; and
(d) unless previously varied, revoked or renewed by the
Company in a general meeting, the authority hereby
conferred shall expire at the conclusion of the next
annual general meeting of the Company held after
the passing of this resolution, save that the Company
may, prior to such expiry, enter into a contract to
purchase ordinary shares under such authority
which will or might be completed or executed wholly
or partly after the expiration of such authority and
may make a purchase of ordinary shares pursuant to
any such contract.
64
Special Business
To consider, and if thought fit, pass Resolutions 12-14
(inclusive) which will be proposed as special resolutions:
12. That, subject to the passing of Resolution 10, above (the
‘Section 551 Resolution’), but without prejudice to the
exercise of any such authority prior to the date hereof,
the Directors of the Company be and they are hereby
generally empowered, pursuant to Sections 570 and 573
of the Act, to allot equity securities (as defined in Section
560(1) of the Act), for cash pursuant to the authority
given by the Section 551 Resolution or by way of a sale of
treasury shares (as defined in Section 560(3) of the Act),
in each case as if Section 561(1) of the Act did not apply to
any such allotment of equity securities or sale of treasury
shares, provided that this power:
(a) shall be limited to the allotment of equity securities
or sale of treasury shares in connection with an offer
of such securities to the holders of shares in the
capital of the Company in proportion (as nearly as
may be) to their respective holdings of such shares
but subject to such exclusions, limits or restrictions
or other arrangements as the Directors may deem
necessary or expedient to deal with treasury shares,
fractional entitlements, record dates or any legal,
regulatory or practical problems in or under the laws
of any territory, or the requirements of any regulatory
body or any stock exchange in any territory or
otherwise howsoever; or
(b) shall be limited to the allotment of equity securities
or sale of treasury shares (otherwise than pursuant
to sub-paragraph (a) of this resolution) up to
an aggregate nominal value of £493,030 being
approximately 15% of the nominal value of the issued
share capital of the Company (excluding treasury
shares), as at 9 September 2022; and
(c) expires at the conclusion of the next annual general
meeting of the Company held after the passing of
this resolution, save that the Company may, before
such expiry, make an offer or enter into an agreement
which would or might require equity securities to
be allotted after such expiry and the Directors may
allot equity securities in pursuance of any such offer
or agreement as if the power conferred hereby had
notexpired.
13. That the Articles of Association produced to the
Meeting and signed by the Chairman of the Meeting
for the purposes of identification be approved and
adopted as the Articles of Association of the Company
in substitution for, and to the exclusion of, the existing
Articles of Association with effect from the conclusion of
the Meeting.
14. That a general meeting of the Company other than an
annual general meeting may be called on not less than
14 clear days’ notice provided that this authority shall
expire at the conclusion of the next annual general
meeting of the Company.
By order of the Board
Artemis Fund Managers Limited
Company Secretary
9 September 2022
Registered Office:
6th Floor, Exchange Plaza,
50 Lothian Road
Edinburgh, EH3 9BY
65
Notes
1. Attending the Meeting in person
If you wish to attend the Meeting, please arrive at the venue
for the Meeting in good time to allow your attendance
to be registered. It is advisable to have some form of
identification with you as you may be asked to provide
evidence of your identity prior to being admitted to the
Meeting.
2. Appointment of proxies
Members are entitled to appoint one or more proxies to
exercise all or any of their rights. A proxy need not be a
member of the Company. To be validly appointed a proxy
must be appointed using the procedures set out in these
notes and in the notes to the accompanying proxy form.
Members can only appoint more than one proxy where
each proxy is appointed to exercise rights attached to
different shares. Members cannot appoint more than one
proxy to exercise the rights attached to the same share(s).
If a member wishes to appoint more than one proxy, they
should contact Computershare on 0370 707 1186. Lines are
open from 8.30am to 5.30pm, Monday to Friday).
A member may instruct their proxy to abstain from voting
on any resolution to be considered at the Meeting by
marking the “vote withheld” option when appointing their
proxy. It should be noted that an abstention is not a vote
in law and will not be counted in the calculation of the
proportion of votes “for” or “against” the resolution.
A person who is not a member of the Company but who
has been nominated by a member to enjoy information
rights does not have a right to appoint any proxies under
the procedures set out in these notes and should read
note8 below.
Appointing the Chairman of the Meeting will ensure your
vote will be registered.
3. Appointment of a proxy using a proxy form
A proxy form for use in connection with the Meeting is
enclosed. To be valid any proxy form or other instrument
appointing a proxy, together with any power of attorney
or other authority under which it is signed or a certified
copy thereof, must be received by post or (during
normal business hours only) by hand by the Registrar
at Computershare Investor Services PLC, The Pavilions,
Bristol BS99 6ZY or eproxyappointment.com no later than
48 hours (excluding non-working days) before the time of
the Meeting or any adjournment of that meeting.
If you do not have a proxy form and believe that you should
have one, or you require additional proxy forms, please
contact the Registrar on 0370 707 1186 (Lines are open
from 8.30am to 5.30pm, Monday to Friday).
4. Appointment of a proxy through CREST
CREST members who wish to appoint a proxy or proxies
through the CREST electronic proxy appointment service
may do so by using the procedures described in the
CREST Manual and by logging on to the following website:
euroclear.com/CREST. CREST personal members or other
CREST sponsored members, and those CREST members
who have appointed (a) voting service provider(s), should
refer to their CREST sponsor or voting service provider(s)
who will be able to take the appropriate action on
theirbehalf.
In order for a proxy appointment or instruction made using
the CREST service to be valid, the appropriate CREST
message (a ‘CREST Proxy Instruction’) must be properly
authenticated in accordance with Euroclear UK & Ireland
Limited’s specifications, and must contain the information
required for such instruction, as described in the CREST
Manual. The message, regardless of whether it constitutes
the appointment of a proxy or is an amendment to the
instruction given to a previously appointed proxy, must
in order to be valid be transmitted so as to be received by
the Registrar (ID 3RA50) no later than 48 hours (excluding
non-working days) before the time of the Meeting or any
adjournment of that meeting. For this purpose, the time
of receipt will be taken to be the time (as determined by
the timestamp applied to the message by the CREST
Application Host) from which the Registrar is able to
retrieve the message by enquiry to CREST in the manner
prescribed by CREST. After this time any change of
instructions to proxies appointed through CREST should
be communicated to the appointee through other means.
CREST members and, where applicable, their CREST
sponsors or voting service provider(s) should note that
Euroclear UK & Ireland Limited does not make available
special procedures in CREST for any particular message.
Normal system timings and limitations will, therefore,
apply in relation to the input of CREST Proxy Instructions.
It is the responsibility of the CREST member concerned
to take (or, if the CREST member is a CREST personal
member, or sponsored member, or has appointed (a) voting
service provider(s), to procure that his CREST sponsor
or voting service provider(s) take(s)) such action as shall
be necessary to ensure that a message is transmitted by
means of the CREST system by any particular time. In this
connection, CREST members and, where applicable, their
CREST sponsors or voting system providers are referred,
in particular, to those sections of the CREST Manual
concerning practical limitations of the CREST system
andtimings.
The Company may treat as invalid a CREST Proxy
Instruction in the circumstances set out in Regulation
35(5)(a) of the Uncertificated Securities Regulations 2001.
5. Appointment of proxy by joint holders
In the case of joint holders, where more than one of the
joint holders purports to appoint one or more proxies,
only the purported appointment submitted by the most
senior holder will be accepted. Seniority is determined by
the order in which the names of the joint holders appear in
the Company’s register of members in respect of the joint
holding (the first named being the most senior).
66
6. Corporate representatives
Any corporation which is a member can appoint one
or more corporate representatives. Members can
only appoint more than one corporate representative
where each corporate representative is appointed to
exercise rights attached to different shares. Members
cannot appoint more than one corporate representative
to exercise the rights attached to the same share(s).
Appointing the Chairman of the meeting will ensure your
vote will be registered.
7. Entitlement to attend and vote
To be entitled to attend and vote at the Meeting (and for
the purpose of determining the votes they may cast),
members must be registered in the Company’s register of
members at 6.00 pm on 24 October 2022 (or, if the Meeting
is adjourned, at 6.00 pm two working days prior to the
adjourned meeting).
Changes to the register of members after the relevant
deadline will be disregarded in determining the rights of
any person to attend and vote at the Meeting.
Please see note 1 regarding attendance at this year’s AGM.
8. Nominated persons
Any person to whom this notice is sent who is a person
nominated under Section 146 of the Act to enjoy
information rights (a ‘Nominated Person’) may, under an
agreement between him/her and the member by whom
he/she was nominated, have a right to be appointed (or to
have someone else appointed) as a proxy for the Meeting.
If a Nominated Person has no such proxy appointment
right or does not wish to exercise it, he/she may, under any
such agreement, have a right to give instructions to the
member as to the exercise of voting rights.
9. Forms of proxy
A personalised form of proxy will be sent to each registered
shareholder with the Annual Financial Report and
instructions on how to vote will be contained therein.
10. Website giving information regarding the Meeting
Information regarding the Meeting, including
information required by Section 311A of the Act, and a
copy of this Notice of Meeting is available on the
website:midwynd.com.
11. Voting rights
As at 9 September 2022 (being the latest practicable date
prior to the publication of this notice) the Company’s
issued share capital consisted of 65,806,114 ordinary
shares, carrying one vote each. 68,700 ordinary shares are
held in Treasury. Therefore, the total voting rights in the
Company as at 9 September 2022 were 65,737,414 votes.
12. Notification of shareholdings
Any person holding 3% or more of the total voting rights
of the Company who appoints a person other than the
Chairman of the General Meeting as his proxy will need
to ensure that they both comply with their respective
disclosure obligations under the UK Disclosure Rules and
Transparency Rules.
If the Chairman, as a result of any proxy appointments, is
given discretion as to how the votes of those proxies are
cast, and the voting rights in respect of those discretionary
proxies, when added to the interests in the Company’s
ordinary shares already held by the Chairman, result in the
Chairman holding such number of voting rights that he
has a notifiable obligation under the Disclosure Rules and
Transparency Rules, the Chairman will make the necessary
notifications to the Company and the Financial Conduct
Authority. As a result, any member holding 3% or more of
the voting rights in the Company who grants the Chairman
a discretionary proxy in respect of some or all of those
voting rights and so would otherwise have a notification
obligation under the Disclosure Rules and Transparency
Rules, need not make a separate notification to the
Company and the Financial Conduct Authority.
13. Members’ right to require circulation of resolution to be
proposed at the Meeting
Members meeting the threshold requirements set out in
the Act have the right to: (a) require the Company to give
notice of any resolution which can properly be, and is to be,
moved at the Meeting pursuant to Section 338 of the Act;
and/or (b) include a matter in the business to be dealt with
at the meeting, pursuant to Section 338A of the Act.
14. Further questions and communication
Under Section 319A of the Act, the Company must cause
to be answered any question relating to the business being
dealt with at the Meeting put by a member attending the
Meeting unless answering the question would interfere
unduly with the preparation for the Meeting or involve
the disclosure of confidential information, or the answer
has already been given on a website in the form of an
answer to a question, or it is undesirable in the interests
of the Company or the good order of the meeting that the
question be answered.
Shareholders are invited to submit questions in advance of
the AGM to the Company Secretarial Department by writing
to Artemis Fund Managers Limited, 6th Floor, Exchange
Plaza, 50 Lothian Road, Edinburgh, EH3 9BY. Alternatively,
questions may be sent via email to the Chairman’s email
address midwyndchairman@artemisfunds.com.
Members may not use any electronic address provided
in this notice or in any related documents (including
the accompanying proxy form) to communicate
with the Company for any purpose other than those
expresslystated.
67
15. Documents available for inspection
The following documents will be available for inspection
at the registered office of the Company during normal
business hours on any weekday (Saturdays, Sundays and
English public holidays excepted) from the date of this
notice until the conclusion of the Meeting:
15.1. a statement of all transactions of each Director and
of their family interests in the share capital of the
Company; and
15.2. copies of the Directors’ letters of appointment.
No Director has a service contract with the Company.
16. Directors’ biographies
The biographies of the Directors standing for re-election or
election are set out on page 27 of the Company’s Annual
Financial Report for the year ended 30 June 2022.
17. Announcement of results
As soon as practicable following the Meeting, the results
of the voting at the Meeting will be announced via a
Regulatory Information Service and the number of votes
cast for and against and the number of votes withheld in
respect of each resolution will be placed on the website:
midwynd.com.
18. Audit concerns
Members should note that it is possible that, pursuant to
requests made by members of the Company under Section
527 of the Act, the Company may be required to publish on
a website a statement setting out any matter relating to: (a)
the audit of the Company’s financial statements (including
the auditor’s report and the conduct of the audit) that are
to be laid before the Meeting; or (b) any circumstance
connected with an auditor of the Company ceasing to
hold office since the previous meeting at which annual
financial statements were laid in accordance with Section
437 of the Act. The Company may not require the members
requesting any such website publication to pay its
expenses in complying with Sections 527 or 528 of the Act.
Where the Company is required to place a statement on a
website under Section 527 of the Act, it must forward the
statement to the Company’s auditor not later than the time
when it makes the statement available on the website. The
business which may be dealt with at the Meeting includes
any statement that the Company has been required under
Section 527 of the Act to publish on a website.
68
Appendix to Notice of AGM
The Annual General Meeting (‘AGM’) of the Company will be
held on Wednesday, 26 October 2022 at Noon. The formal
Notice of AGM is set out on pages 63 to 64 which includes
important information on the arrangements for this year’s
AGM. The following information is important and requires
your immediate attention. If you are in any doubt about the
action you should take, you should consult an independent
financial adviser, authorised under the Financial Services
and Markets Act 2000. If you have sold or transferred all of
your ordinary shares in the Company, please forward this
document with its accompanying form of proxy at once to the
purchaser or transferee, or to the stockbroker, bank or other
agent through whom the sale or transfer was effected, for
onward transmission to the purchaser or transferee.
The information set out below is an explanation of the business
to be considered at the 2022 Annual General Meeting. To be
passed, the ordinary resolutions require 50% of the votes cast
to be in their favour and the special resolutions require 75% of
votes cast to be in their favour.
Ordinary business
Resolutions 1 to 10 are all ordinary resolutions. Resolution 1 is
a resolution to adopt the Annual Financial Report. Resolution
2 concerns the Directors’ Remuneration Report, on pages35
to 37. Resolution 3 invites shareholders to approve the final
dividend. Resolutions 4 to 7 invite shareholders to re-elect
each of the existing Directors for another year. The Board,
on recommendation from the Nomination Committee,
recommends the re-election of all Directors at this year’s AGM
(their biographies are set out on page 27). Please note Harry
Morgan is stepping down from the Board and is therefore not
standing for re-election. Resolutions 8 and 9 concern the re-
appointment and remuneration of the Company’s auditor,
discussed in the Report of the Audit Committee on pages38
to 40. Resolution 10 is the proposal to seek authorisation
for the Directors to allot shares up to a maximum aggregate
nominal amount of £1,094,527 (being approximately 33.3%
of the issued share capital (excluding any shares held in
treasury) as at 9 September2022).
Resolution 11: authority to make market purchases of the
Company’s own shares (special resolution)
At the AGM held on 9 November 2021, the Company was
granted authority to make market purchases of up to 9,103,444
ordinary shares of 5p each for cancellation or holding
in treasury. This authority will expire at the forthcoming
AGM. The Directors believe it is in the best interests of the
Company and its shareholders to have a general authority for
the Company to buy back its ordinary shares in the market
as they keep under review the share price discount to NAV. A
special resolution will be proposed at the forthcoming AGM
to give the Company authority to make market purchases of
up to 14.99% of the ordinary shares in issue as at the date on
which the resolution is passed (excluding treasury shares).
If renewed, this authority will lapse at the conclusion of the
AGM in 2023 unless renewed, varied or revoked earlier.
Special business
Resolution 12: power to disapply pre-emption rights (special
resolution)
The Directors are seeking authority to allot a limited
number of unissued ordinary shares for cash without first
offering them to existing shareholders in accordance with
statutory pre-emption procedures. A special resolution will
be proposed to authorise the Directors to allot shares up to
a maximum aggregate nominal amount of £493,030 (being
15% of the issued share capital as at 9 September 2022) on a
non pre-emptive basis. This authority includes shares that the
Company sells or transfers that have been held in treasury. If
approved, this authority will expire at the conclusion of the
AGM in 2023 unless renewed, varied or revoked earlier.
Resolution 13: amendments to Articles of Association
(special resolution)
Set out below is a summary of the principal amendments
which will be made to the Company’s Existing Articles
through the adoption of the New Articles if Resolution 13 to
be proposed at the AGM is approved by shareholders.
This summary is intended only to highlight the principal
amendments which are likely to be of interest to shareholders.
It is not intended to be comprehensive and cannot be relied
upon to identify amendments or issues which may be of
interest to all shareholders. This summary is not a substitute
for reviewing the full terms of the New Articles which will
be available for inspection on the Company’s website,
midwynd.com, from the date of the AGM Notice until the
close of the AGM, and will also be available for inspection
at the venue of the AGM from 15 minutes before and during
theAGM.
It is proposed that Article 77 ‘Share Qualification’ be removed
from the New Articles. As outlined on page 31, as an alternative,
any new Director will instead commit to purchasing shares to
the value of at least one year’s remuneration within one year
of joining the Board. The Directors are of the opinion that
such a commitment better takes into consideration prevailing
market conditions and, in doing so, avoids unduly limiting
the pool of potential candidates for future appointments to
theBoard.
Resolution 14: authority to call a general meeting on fewer
days’ notice (special resolution)
This resolution is seeking authority for the Company to call
a general meeting, other than an annual general meeting, on
not less than 14 clear days’ notice provided that this authority
shall expire at the conclusion of the next annual general
meeting of the Company.
69
Information for Shareholders
Buying shares in the Company
The Company’s ordinary shares are traded on the London
Stock Exchange and can be bought or sold through a
stockbroker, a financial advisor or via an investment platform.
Find out more at midwynd.com.
Company numbers:
London Stock Exchange (SEDOL) number: B6VTTK0
ISIN number: GB00B6VTTK07
Ticker: MWY
Capital Gains Tax
For Capital Gains Tax indexation purposes, the market value
of an ordinary share in the Company as at 31 March 1982 was
52 pence. The equivalent price, adjusted for the five for one
share split in October 2011, is 10.4 pence.
Share register enquiries
Computershare maintains the share register on behalf of the
Company. In the event of queries regarding shares registered
in your own name, please contact the Registrar on 0370 707
1186. This helpline also offers an automated self-service
functionality (available 24 hours a day, 7 days a week) which
allows you to:
■
hear the latest share price;
■
confirm your current share holding balance;
■
confirm your payment history; and
■
order Change of Address forms, Dividend Bank Mandates
and Stock Transfer forms.
By quoting the reference number on your share certificate
you can also check your holding on the Registrar’s website at
investorcentre.co.uk.
It also offers a free, secure share management website service
which allows you to:
■
view your share portfolio and see the latest market price
of your shares;
■
calculate the total market price of each shareholding;
■
view price histories and trading graphs;
■
update bank mandates and change address details;
■
use online dealing services; and
■
pay dividends directly into your overseas bank account in
your chosen local currency.
To take advantage of this service, please log in at investorcentre.
co.uk. You will need your Shareholder Reference Number and
Company Code to do this (this information can be found on
the last dividend confirmation or your share certificate).
Dividend Reinvestment Plan
Computershare provides a Dividend Reinvestment Plan which
can be used to buy additional shares instead of receiving your
dividend via cheque or into your bank account. For further
information log in to investorcentre.co.uk and follow the
instructions or telephone 0370 707 1694.
Electronic proxy voting
If you hold stock in your own name you can choose to vote by
returning proxies electronically at eproxyappointment.com.
If you have any questions about this service please contact
Computershare on 0370 707 1186.
Financial Advisers and retail investors
The Company currently conducts its affairs so that the
shares in issue can be recommended by Financial Advisers
to ordinary retail investors in accordance with the Financial
Conduct Authority’s (‘FCA’s’) rules in relation to non-
mainstream investment products and intends to do so for
the foreseeable future. The shares are excluded from the
FCA’s restrictions which apply to non-mainstream investment
products because they are shares in an investment trust.
Further information on the Company
The Company’s net asset value is calculated daily and
released to the London Stock Exchange. The share prices
are listed in the Financial Times and also on the TrustNet
website (trustnet.com). Up-to-date information can be
found on the Company’s website (midwynd.com), including
a factsheet which is updated monthly. Shareholders can also
contact the Chairman to express any views on the Company
or to raise any questions they have using the email address:
midwyndchairman@artemisfunds.com.
AIFMD disclosures
A number of disclosures are required to be made under the
AIFMD as follows:
■
Information in relation to the leverage of the Company is
provided in the Strategic Report on pages 14 and 15.
■
Details of the Company’s principal risks and their
management are provided in the Strategic Report on
pages 19 to 22.
■
Details of the monitoring undertaken of the liquidity of
the portfolio is provided in note 20 in the notes to the
financial statements.
■
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.
■
Details of the Company’s strategy and policies,
administration arrangements and risk management and
monitoring, required to be made available to investors in the
Company before they invest, are available at midwynd.co.uk.
Any material changes to this information is required to be
reported in the Company’s Annual Financial Report.
There have been no material changes from the prior year to the
information above which requires disclosure to shareholders.
70
As the AIFM to the Company, Artemis is required to make
certain disclosures regarding remuneration which will be
disclosed at the appropriate time.
Remuneration
Artemis operates its remuneration policies and practices
at a group level which includes both Artemis Investment
Management LLP and its subsidiary Artemis Fund Managers
Limited (AFML). Details of the group remuneration policies
are available on Artemis’ website artemisfunds.com.
No staff are employed by AFML directly but are employed and
paid by other entities of Artemis. Artemis has apportioned the
total amount of remuneration paid to all 219 Artemis partners
and staff in respect of AFML’s duties performed based on the
number of funds. It has estimated that the total amount of
remuneration paid in respect of duties for the Company for the
year ended 31 December 2021 is £1,043,991, of which £672,784
is fixed remuneration and £371,207 is variable remuneration.
The aggregate amount of remuneration paid to Identified
Staff that is attributable to duties for the Company for the
year ended 31 December 2021 is £389,871. Identified Staff are
those senior individuals whose managerial responsibilities or
professional activities could influence, and have a material
impact on, the overall risk profile of each regulated entity and
the funds it manages. The AFML Code staff are the members
of Artemis’ Management and Executive Committees, certain
fund managers, and others in specified roles. This includes
certain individuals who are partners in Artemis Investment
Management LLP.
Common Reporting Standard
The Organisation for Economic Co-operation and
Development’s Common Reporting Standard for Automatic
Exchange of Financial Account Information (the ‘Common
Reporting Standard’) requires the Company to provide
information annually to HM Revenue & Customs (“HMRC”) on
the tax residencies of those certificated shareholders that are
tax resident in countries out with the UK that have signed up
to the Common Reporting Standard.
All new shareholders, excluding those whose shares are held
in CREST, will be sent a certification form by the Registrar to
complete. Existing shareholders may also be contacted by the
Registrar should any extra information be needed to correctly
determine their tax residence.
Failure to provide this information may result in the holding
being reported to HMRC.
For further information, please see HMRC’s Quick
Guide: Automatic Exchange of Information – information
for account holders; gov.uk/government/publications/
exchangeofinformationaccount-holders.
Data Protection
The Company is committed to ensuring the protection of any
personal data provided to them.
Further details of the Company’s privacy policy can be found
on the Company’s website at midwynd.com.
Reporting calendar
Year End
30 June
Results announced
Interim: February
Annual: September
Dividends Payable
March and November
Annual General Meeting
October
71
Alternative Performance Measures (‘APM’)
Alternative Performance Measure (‘APM’)
An alternative performance measure is a financial measure of
historical or future financial performance, financial position,
or cash flows, other than a financial measure defined or
specified in the applicable financial reporting framework.
A description and explanation of the APMs used within the
Annual Financial Report can be found below:
Ongoing charges
Total expenses (excluding finance costs and taxation) incurred
by the Company as a percentage of average net asset values.
Due to lack of information, no account has been taken of
the Company’s share of costs of its holdings in investment
companies on a look-through basis.
As at
30 June
2022
£’000
As at
30 June
2021
£’000
Investment management fee 2,437 1,920
Other expenses 496 416
Total expenses 2,933 2,336
Average net assets 485,437 383,574
Ongoing charges 0.60% 0.61%
Total return
The total return on an investment is made up of capital
appreciation (or depreciation) and any income paid out (which
is deemed to be reinvested) by the investment. Measured over
a set period, it is expressed as a percentage of the value of the
investment at the start of the period.
Net asset value total return for the year ended 30 June
2022
pence
2021
pence
Opening net asset value 754.43 612.61
Closing net asset value 692.01 754.43
Dividends paid during financial year 6.80 6.22
-7. 5 % 24.3%
Share price total return for the year ended 30 June
2022
pence
2021
pence
Opening share price 772.00 612.00
Closing share price 693.00 772.00
Dividends paid during financial year 6.80 6.22
-9.5% 27.3%
The total returns percentages assumes that dividends paid
out by the Company are re-invested into shares at the value
on the ex-dividend date and so the figure will be slightly
different to the arithmetic calculation.
Premium/(Discount)
The amount, expressed as a percentage, by which the share
price is more or less than the NAV per ordinary share.
72
Glossary
Administrator
Is an entity that provides certain services to support the
operation of an investment fund or investment company.
These services include, amongst other things, settling
investment transactions, maintaining accounting books
and records and calculating daily net asset values. For the
Company, J.P. Morgan Europe Limited is the administrator.
Alternative Investment Fund Managers Directive (AIFMD)
A European Union directive from 2012 and 2013, now adopted
in to UK law, that applies to certain types of investment funds,
including investment companies.
Alternative Investment Fund Manager (AIFM)
Is an entity that provides certain investment services,
including portfolio and risk management services. For the
Company, Artemis Fund Managers Limited is the AIFM.
Banker and Custodian
Is a bank that is responsible for holding an investment fund’s or
investment company’s assets and securities and maintaining
their bank accounts. For the Company, J.P. Morgan Chase
Bank N.A. is the banker and custodian.
Depositary
Is a financial institution that provides certain fiduciary
services to investment funds or investment companies.
The AIFMD requires that investment funds and investment
companies have a depositary appointed to safe-keep
their assets and oversee their affairs to ensure that they
comply with obligations in relevant laws and constitutional
documents. For the Company, J.P. Morgan Europe Limited is
the depositary.
Discount/Premium
If the share price of an investment trust is lower than the net
asset value per share, the shares are said to be trading at a
discount. The size of the discount is calculated by subtracting
the share price from the net asset value per share and is
usually expressed as a percentage of the net asset value per
share. If the share price is higher than the net asset value per
share, the shares are said to be trading at a premium.
Net Gearing
The net gearing reflects the amount of borrowings (see
Note12) the Company has used to invest in the market less
cash and cash equivalents, divided by net assets.
A negative percentage reflects a net cash position.
The Company’s position is set out below:
As at
30 June
2022
£’000
As at
30 June
2021
£’000
Bank loans 5,951 9,949
Cash and cash equivalents (7,096) (16,556)
Net gearing (1,145) (6,607)
Net assets 452,653 452,093
Net cash -0.30% -1.50%
Further disclosure of the borrowings/debt position of the
Company can be found in note 20.
Leverage
Leverage is defined in the AIFMD as any method by which an
AIFM increases the exposure of an Alternative Investment
Fund it manages, whether through borrowing of cash or
securities, or leverage embedded in derivative positions or by
any other means.
There are two measures of calculating leverage:
■
the gross method, which does not reduce exposure for
hedging; and
■
the commitment method, which reduces exposure for
hedging.
Net asset value
Net asset value represents the total value of the Company’s
assets less the total value of its liabilities, and is normally
expressed on a per share basis.
73
Investment Manager, Company Secretary and Advisers
Registered office
6th Floor, Exchange Plaza
50 Lothian Road, Edinburgh, EH3 9BY
Website: midwynd.com
Investment Manager, Alternative Investment Fund Manager
and Company Secretary
Artemis Fund Managers Limited
Cassini House
57 St James’s Street
London SW1A 1LD
Authorised and regulated by the Financial Conduct Authority,
12 Endeavour Square, London E20 1JN.
Tel: 0800 092 2051
Email: investor.support@artemisfunds.com
Website: artemsfunds.com
Registrar
Computershare Investor Services PLC
The Pavillions
Bridgwater Road
Bristol BS99 6ZZ
Tel: 0370 707 1186
Lines are open from 8.30am to 5.30pm, Monday to Friday.
Website: investorcentre.co.uk
Administrator
J.P. Morgan Europe Limited
25 Bank Street
Canary Wharf
London E14 5JP
Depositary
J.P. Morgan Europe Limited
25 Bank Street
Canary Wharf
London E14 5JP
Banker & Custodian
J.P. Morgan Chase Bank N.A.
25 Bank Street
Canary Wharf
London E14 5JP
Independent Auditor
Johnston Carmichael LLP
7-11 Melville Street
Edinburgh EH3 7PE
Broker
J.P. Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
Artemis Fund Managers Limited
Cassini House, 57 St James’s Street, London SW1A 1LD
6th floor, Exchange Plaza, 50 Lothian Road, Edinburgh EH3 9BY
Sales Support 0800 092 2090
Facsimile 020 7399 6498
Client Services 0800 092 2051
Facsimile 0845 076 2290
Website www.artemisfunds.com