Mid Wynd International Investment Trust Plc - Annual Results
Legal Entity Identifier: 549300D32517C2M3A561
Annual Financial Results for the year ended
Financial Highlights
Returns for the year ended
Year ended Year ended Nine months ended
30 June 2024 30 June 2023 30 June 20242
Total returns
Net asset value per ordinary share1 13.9% 5.6% 13.8%
Share price1 17.1% 1.0% 13.8%
MSCI All Country World Index (GBP) 20.1% 11.3% 19.3%
Revenue and dividends
Revenue earnings per share 8.00p 10.01p
Dividends per share3 8.00p 7.80p
Special dividend per share - 1.70p
Ongoing charges1 0.60% 0.62%
Capital
Net asset value per share 810.22p 719.84p
Share price 797.00p 689.00p
Net cash1 1.4% 2.7%
Discount1 1.6% 4.3%
Source: Juniper, LSEG Datastream.
1. Alternative Performance Measure.
2. Performance under Lazard who were appointed as Investment Manager with effect from
3. A final dividend, if approved by shareholders, for the year to
Total returns to 30 Since 1 October 20232 1 year 3 years3 5 years3 10 years3 June 2024 Net asset value per 13.8% 13.9% 11.3% 55.2% 226.5% ordinary share1 Share price1 13.8% 17.1% 7.1% 48.8% 226.7%MSCI All Country World 19.3% 20.1% 28.1% 67.8% 204.0% Index (GBP)
Source: LSEG Datastream, total returns with dividends reinvested.
1. Alternative Performance Measure.
2. Performance under Lazard who were appointed as Investment Manager with effect from
3. Total returns over 3, 5 and 10 years covers the period over which
Strategic Report
Chairman's Statement
The last twelve months have seen good returns for global equity investors, and this is reflected in the returns for Mid Wynd's shareholders, as detailed under the Performance section of this statement. The rise in global equity markets over the past twelve months has been dominated by the rise in the price of US equities. In particular, there have been a handful of large companies, sometimes referred to as `the Magnificent Seven', that have seen particularly strong share price rises. The consequence being that most active fund managers have struggled to outperform their comparator indices in such market conditions, even those with a focus on technology investing. As I will discuss in the Outlook section of this statement, and as our Fund Managers explain in their Investment Manager's Review, such a concentration of returns in a handful of stocks is unlikely to be sustained. Our Global Quality Growth stocks have continued to deliver their high returns on invested capital over the period and their more muted share price rises have resulted in a decline in their valuations relative to the comparator index. As at the end of the first quarter the valuations of our portfolio relative to the S&P 500, as measured by the price earnings ratio, had reached a seven-year low. Our portfolio has thus produced good total returns over the period while also witnessing an improvement in valuations relative to the S&P 500. The Company seeks to invest its capital with companies that generate sustainably high returns at valuations that do not reflect the sustainability of those returns. Current valuations for such companies are particularly attractive relative to the S&P 500.
Performance
For the year ended
Our new investment manager,
I joined the Board of our Company in 2009 and will retire at the forthcoming AGM in
Earnings and dividend
The net return for the year ended
The Board is proposing a final dividend of
As highlighted in the last Half-Yearly Financial Report there has been an expected decline in revenue per share hence the absence of a special dividend this year. This decline, due primarily to a decline in dividend income received, reflects the Investment Manager's focus on investing in companies that retain their cash flow to invest at particularly high internal rates of return rather than distributing their cash flow in the form of dividends. This year's revenue per share is distorted by one-off costs associated with the change in service providers, primarily a rise in legal fees, and a one off saving due to a 15 week investment management fee holiday negotiated with our new Investment Manager. Revenue per share is lower than under our former manager but is expected to grow. Since its inception in 2011, the Global Quality Growth strategy implemented by our Investment Manager has produced an annual growth rate of investee company dividends of 7.7%. We should expect revenue growth of a similar level.
Going forward should revenue per share be below the current dividend level the Board intends at least to maintain the dividend, using the revenue reserves and, if required, the capital reserve. The Company has pursued a flexible dividend policy for many years and in the past two years separated our dividend into an ordinary and special dividend. This split was aimed at indicating an element of excess, and likely unsustainable, revenue associated with a particular style of management that the previous manager had adopted.
The Company has, over many years, not fully distributed all of its income but has retained a portion of its earnings, usually at near the maximum 15% level that is compatible with maintaining investment trust status. This flexibility of the investment company structure has allowed us to accumulate revenue reserves to distribute at such time when market conditions or a change in the likely dividend yield of our investments occurs. This revenue reserve will be utilised, if necessary, at least to sustain the Company's ordinary dividend.
Transition and cost allocation
The transition to the Company's new operational state took place during this financial year. This transition involved the appointment of almost an entirely new set of service providers. Operations are continuing to function well, and the Board looks forward to reporting on a full year of results under the `new world' in next year's annual report.
As intimated in the last Half-Yearly Financial Report, owing to the anticipated shift in the weighting of the Company's total return towards capital, the Board took the decision to amend the basis of allocation for management fees, company secretarial and administration fees, the cost of operating the discount control mechanism and any finance costs, should these be incurred. This change took effect from
Share capital and discount management
The sustained period of buybacks experienced by the Company since early 2023 continued throughout the year under review and the Board remains fully committed to its discount control policy. In recent times buybacks have been a familiar story within the investment trust sector as a whole and indeed, earlier this year, the
Our own buybacks have been successful in maintaining a low discount to NAV for our share price. As at
The Company's policy, within normal market conditions, is to issue and repurchase shares where necessary to maintain the share price within a 2% band relative to the NAV. The Company's NAV is assessed on a real time basis when buying or selling the Company's shares using modelling that updates live prices and exchange rates to provide the most accurate valuation. During the year to
As at the year end of
Following the year end up until
Board succession
As previously communicated, I will be stepping down from the Board at this year's AGM having served as a Director since 2009 and for the past four years as Chairman. The other Directors will stand for re-election at the forthcoming AGM and, subject to his re-election, it is intended that
The process for the recruitment of a new Director to the Board commenced earlier this year. I am pleased to report that this process has almost reached a conclusion, and the Board hopes to share further details with shareholders in due course.
Annual General Meeting
The Board looks forward to welcoming shareholders to the AGM which will be held at 12.00 noon on
Outlook
The extreme concentration of returns from global equities has been a feature of the period. Our Investment Manager's Review explains just how unique a period this has been in financial history. In my comments on the outlook, I will focus on why it is unlikely that this particular technology driven boom will end differently than those that have gone before. History suggests that the benefits to corporate profits from the technology boom are likely to be spread more widely and to areas not currently contemplated. History also suggests that the stock market has a very bad record in both finding and accurately valuing the winners in the early days of such periods of profound structural change.
The concentration of share price returns in a handful of US stocks is driven almost entirely by faith that a new technology, Artificial Intelligence (`AI'), will produce high levels of corporate earnings far into the future for this select band of companies. If that is to be true it will be the first time, certainly that I am aware of, when the corporate earnings boost from a breakthrough new technology accrued only to such a limited pool of companies. Technological breakthroughs have played a key role driving investors' returns in equities since the birth of stock markets with a diving bell investment boom, a key new technology for those seeking to salvage treasure from wrecks, playing a key role in the English stock market boom in the mid 1690s. Other technology booms have come and gone and have included canals, gas lighting, railroads and bicycles and that only takes us to the end of the nineteenth century. All these technological breakthroughs brought economic and often social progress and an economic dislocation that created both opportunity and risk for investors.
As our Investment Manager likes to point out, sustainably high returns have been achieved by some businesses - and it is these characteristics that are sought in selecting the portfolio's investee companies. However, only rarely has a technology boom produced identifiable corporate winners in the first flush of speculation. It takes time for those that will become Global Quality Growth companies to become differentiated. This time may be different, but, if so, the extreme power of these large companies, which will become even more powerful if they live up to the profitability expectations of their shareholders, is likely, at some stage, to be challenged by the state.
History suggests that the most likely outcome from the current technological breakthrough will be a spread of profit opportunities far beyond the current elite list of winners that the market has anointed as the beneficiaries of AI. A technological breakthrough of this significance will also produce risks for existing corporations. My own investment career included the so-called `dotcom bubble' which inflated from 1995 to 2000. At its peak it seemed that investors had considered every conceivable investment that could benefit from the internet and a dizzying array of corporations had been brought to the stock market by investment bankers eager to earn fees. What happened next is that most of these companies went bust and even the great winner of the new age, Amazon, saw its share price fall 90% before it showed its colours as the winner in the ecommerce race. It also turned out that not every conceivable idea to benefit from the internet had, in fact, been brought to the market as Airbnb was not founded until 2007 and Uber until 2009. Netflix, a company that began by distributing DVD rentals by post, seemed a sure-fire loser from the new technology, but the flexibility and ingenuity of management allowed a redeployment of capital that created a content streaming business, launched in 2007, that produced outsized returns for investors. Blockbuster failed to adjust to the new technology and was bankrupt by 2010. If equity investors have this time successfully found the true winners from a profound structural change resulting from a technological breakthrough, then this will in itself be anomalous. Such a sifting of winners from losers is what markets do but in the first flush of enthusiasm regarding a new technology the mispricing of future returns is the norm and not the exception. Our Global Quality Growth portfolio owns companies that have already delivered high returns, and our Investment Manager will assess whether they will continue to do so. These characteristics are now available at valuations, relative to the comparator index, that are particularly attractive.
I note that in the Chairman's Statement in the Annual Report of 2009, the year in which I joined the Board, the then-Chairman observed that `too much debt was responsible for getting the world into its present difficult situation'. The most recent figures, as at the end of 2023, show the world's total non-financial debt-to-GDP level above that recorded in 2009. Over the period since 2009 we have lived with the attempts, sometimes extreme, by governments and their central banks to mitigate the negative consequences from this extreme debt burden. In
Writing in 2009, or even 2019, which chairman of any listed company could have foreseen a global pandemic, a return of war to
Whether we are professional investors or not, most of us can see that the world is undergoing profound structural change. Forecasting what those changes mean for our lives and our savings is far from easy. Companies, as distinct legal identities, have been around now for over four hundred years. This fixed pool of capital, now with limited liability, has weathered the ups and downs of the business cycle and many profound structural changes - including two world wars. Ultimately it is the flexibility of management to allocate capital which drives total returns for investors over the long - term. Our Investment Manager is constantly seeking out such management and the businesses they create that can continue to generate high returns on investment even as the world changes in ways which none of us can forecast.
As I leave the Board, I would like to thank my many Board colleagues over the years for their input and support. The role of an investment trust director is primarily focused on regulation and the nitty gritty of holding the Investment Manager and other service providers to account. However, at times there is need for much greater activity and I like to think that your Board has made a material positive difference to the total returns of the Company through two changes of manager and also a move to a discount control mechanism. Those changes are a result of considerable collegiate effort and as the current Chairman and also as a shareholder I would like to thank my fellow Directors for what I consider to be their very successful stewardship of our Company's capital.
Contact us
Shareholders can keep up to date with Company performance by visiting midwynd.com where you will find information on the Company and a factsheet which is updated monthly.
In addition, the Board is always keen to hear from shareholders and, should you wish, you can contact me via the Company Secretary at cosec@junipartners.com .
Chairman
Investment Manager's Review for the period
Overview
The Company's NAV rose by 13.8% between
Long-term thinking and portfolio diversification are key to our well-defined investment process. As a result, overall, we are comfortable with the Company's performance in a short-term market environment that is unusually "narrow" - where a small number of stocks have generated a disproportionate amount of the overall market return.
We continue to believe investing in the highest-quality companies will increase investor wealth and deliver outperformance in the long run. We consider our portfolio attractively valued and are confident it will benefit from a more normalised market environment.
Market review
Global stock markets rose sharply during the nine months following Lazard's appointment as the Company's Investment Manager, with investor optimism appearing to shift with each release of inflation data. Yet it is important to note that this rise was not simply a story of markets' strength: it was also a story of their unusual narrowness.
The MSCI ACWI, a broad global index, returned 12% during the first half of 2024 and is up around 30% since the end of 2022. The US market, represented by the S&P 500 Index, gained 16% during the first half of 2024 and is up almost 40% since the end of 2022. Such figures are well worth placing in broader context.
Since 1985, in US dollar terms, the US stock market has returned more than 40% over an 18-month period on only a handful of occasions. All have tended to be clustered around key events in market history, including Black Monday (1987), the dot-com bubble (late 1990s/early 2000s), the recovery that followed the global financial crisis (2010) and the recovery that followed the COVID-19 pandemic (2021).
The extraordinary performance of NVIDIA underlines how the recent boom has been driven largely by stocks related to artificial intelligence (`AI'). The chip designer's weighting in the MSCI ACWI grew from 0.6% at the start of 2023 to 4.2% at the end of Q2 2024.
NVIDIA's stock is up 745% over the past 18 months. This is nearly 20 times the return of the MSCI ACWI and 70 times that of the MSCI ACWI Equal Weighted Index - a disparity that has caused a historically wide spread in returns between the two indices.
Fewer than a quarter of the S&P 500's constituents outperformed the MSCI ACWI in the first half of 2024. This is the lowest figure since at least 1980. This underscores the remarkable narrowness of markets.
Against this backdrop, developed markets, in particular the US, have outperformed Emerging Markets equities. Information Technology and Communication Services have been the best-performing sectors, Real Estate and Materials have underperformed the wider index.
While AI has the potential to transform the way companies operate over the long-term, we are cautious that the exuberance surrounding it may drive valuations in certain stocks to unsustainable levels in the short-term. A broadening out of index participation will present a better environment for quality investing and our portfolio. We also believe that the empirical work by co-lead portfolio manager/analyst
Our investment process
The search for Compounders
We manage the Company's portfolio in accordance with our Global Quality Growth strategy. This aims to invest in businesses we consider to be "Compounders".
We define a Compounder as a company that is capable of generating consistently high returns on capital and reinvesting in its business to drive future growth. This process should create a virtuous "compounding cycle" of wealth creation in which investors can share.
We believe the broader market undervalues Compounders because it adheres to the economic law of competition. This prescribes that high returns on capital attract competition, squeezing market share, driving down prices and resulting in an erosion of profitability. But we see plenty of real-world examples to show the theory does not work in practice.
In our view, Compounders have sustainable advantages that help them keep competitors at bay. The market assumes their profitability will fade but they deliver consistently high financial productivity for longer than expected. So, those who focus more on near-term earnings multiples rather than a company's long-term earnings power are likely to undervalue these exceptional businesses. It means that when these Compounders "beat the fade" they tend to beat the market too.
We prefer to own Compounders for long periods to allow the compounding cycle to drive cash flows and share prices higher. This is reflected in the Global Quality Growth strategy's turnover, which during the past five years has averaged 10-15% annually - an approach that has also helped keep trading costs low.
Our investment process is reinforced by empirical research covering 25 years of markets and supported by Lazard's extensive fundamental research team of 70 global sector specialists. Drawing on this expertise, we look to build a portfolio that is broadly diversified across sectors, regions and competitive advantages and which is capable of generating attractive total returns for investors.
Portfolio activity: our process in practice
Although the average holding period for our Global Quality Growth strategy is between seven and 10 years, we aim to take full advantage whenever the market gives us an opportunity to improve the quality of our portfolio. The following examples illustrate how we have applied this aspect of our investment process since our appointment.
-- Our fundamental research across the semiconductor value chain led us to
VAT Group, a mid-cap Swiss company categorised in the Industrials sector
rather than the Information Technology sector. VAT Group is a leader in
the production of vacuum valves, which are critical components in the
semiconductor manufacturing process.
Vacuum valves create a contaminant-free chamber in which chips can be manufactured. With increasingly complicated chip designs requiring the width of semiconductor circuitry to move towards the atomic level, processes related to lithography ("printing" circuits onto silicon wafers) and deposition (putting conductive material on the wafers) demand such an environment to ensure the necessary degree of accuracy. Over time, as chips become even more complex, we expect ever-greater use of this approach.
Although vacuum valves account for only a small fraction of overall manufacturing costs, they have become crucial to optimum chip production. This creates a barrier to competition - what we call "critical component at low cost". Customers have no price incentive to switch to another provider, given the risk of failure is high. And they can tolerate higher prices in times of inflation. We see a similar advantage in other areas, such as data services and medical supplies, where products are "designed in" and entrenched in customers' workflows.
We sold Texas Instruments, an analogue semiconductor manufacturer, to fund the purchase of VAT Group, for which we had higher conviction regarding the sustainability of returns.
-- We also initiated a position in Salesforce. This business is a leading
supplier of customer relationship management (`CRM') software solutions
that provide visibility across the client lifecycle.
Salesforce's scale allows value-added services to be integrated into the company's platform, fuelling growth. The suite of products and services can be cross-sold across Salesforce's clients to the benefit of margins. Customers typically find more value as they embed additional Salesforce services into their processes, so subscription renewals are high - translating into increasing recurring revenue. This scale is difficult to replicate, and the loyalty of clients creates a lasting barrier to competition.
Although the company generates top-decile financial productivity, Salesforce's share price fell following what the market considered a disappointing set of results. These market fears gave rise to an opportunity to invest in a high - quality business at a more attractive valuation. We sold Computershare, which provides share registry and other services, to fund our purchase.
Exposures by sector and region
In line with our investment process, our sectoral and regional exposures are driven by stock selection. There have been changes in exposures since we were appointed Investment Manager.
The relatively larger changes in exposures took place between 30 September and
In terms of sectors, exposures to Information Technology, Industrials and Financials increased, while Health Care declined and names in Real Estate, Materials and Energy were sold. Typically, the strategy has zero weight in these three sectors and Utilities, as incumbent companies tend not to generate sufficient returns on capital to be considered of high quality.
In terms of regions, there was an increase in exposure to
The magnitude of the changes implemented during the first half of 2024 are more typical of the strategy's long-term portfolio activity pattern.
Performance
NAV, discount and share price
The Company's NAV rose by 13.8% in GBP terms between
As discussed earlier, unusually narrow markets can create a headwind for active managers whose investment process is geared towards portfolio diversification. We would fully expect the portfolio to experience a relative lag when a significant area of the market becomes notably extended or overbought, as has been the case in this instance.
Key stock-level contributors to portfolio performance
The following stocks have been key contributors to the Company's absolute returns during the period covered in this report.
Five principal contributors
Company Contribution to Total Return (%) Taiwan Semiconductor Manufacturing (`TSMC') 1.92 Microsoft 1.81 Alphabet 1.46 Amphenol 1.45 ASML 1.16
Source: Lazard/FactSet.
Data in GBP and for the period from
-- Taiwan Semiconductor Manufacturing (`TSMC') is a global leader in its
field. The company's high capital intensity creates a barrier to
competition, and it has the ability to invest and scale leading-edge
technologies. The increasing complexity of chip designs requires TSMC to
stay at the forefront of advanced manufacturing.
-- Microsoft has seen cloud computing become a significant generator of
returns, with its customers implementing cloud-based processes to
improve marketing and costs. The company has reinvested in AI and gaming
to access emerging technologies and expand its market opportunity.
-- Alphabet, Google 's parent company, generates a high level of financial
productivity through search/digital advertising. This is supported by
its dominant share in search query volumes. Adjacent product areas -
including Android, Chrome, Maps, YouTube and Gmail - create an ecosystem
that drives consumer usage across the Google platform. The business
raised capital expenditure forecasts, based on its AI opportunities, and
also declared a dividend and share buyback.
-- Amphenol, a US-based manufacturer of electronic connectors, has seen its
earnings buoyed by structural growth in AI data-centre components,
electric vehicle automotive market share gains and industrial markets,
where its products are "designed in" and represent a further example of
"critical component at low cost". The company has reinvested its cash
flows to acquire businesses with complementary products.
-- ASML has a virtual monopoly in leading-edge lithography machines that
"print" circuits onto semiconductor silicon wafers. As in the case of
TSMC, the increasing complexity of chip designs is fuelling demand for
its equipment.
Key stock-level detractors from portfolio performance
The following stocks have been key detractors from the Company's absolute returns during the period covered in this report.
Five principal detractors
Company Contribution to Total Return (%) Aon (0.53) BRP (0.34) SMS (0.27) Nike (0.20) Toyota Industries (0.17)
Source: Lazard/FactSet.
Data in GBP and for the period from
-- Aon is a global insurance broker and consultant. Its share price fell
after the company announced plans to acquire NFP, a US-centric risk and
benefits broker, for $14.3 billion in December 2023 . We believe the
price is full, but it may not account for the positives of consolidating
a fragmented market and expanding Aon's database of risk information.
-- BRP is a Canadian manufacturer of power sports equipment, such as jet
skis and snowmobiles. Its share price came under pressure after
management lowered earnings guidance amid weaker retail demand in light
of macroeconomic conditions. The company operates in a duopoly, and we
believe its superior product development and distributor relationships
should position it well as the economy improves.
-- SMS Co., Ltd.is a Japanese provider of healthcare staffing services and
medical practice software. Investors currently appear to prefer
large-cap Japanese value stocks when increasing exposure to Japanese
equities, despite SMS consistently generating high financial
productivity. We believe Japan's ageing population means the company
should benefit from powerful demographic trends over the longer-term.
-- Nike is a global athletic footwear and apparel maker. Although recent
results and earnings guidance have been disappointing, we believe the
company's earnings are near trough, and Nike's efforts to revive its
brand strength should reaccelerate growth.
-- Toyota Industries, a supplier of auto parts, fell with the Japanese
stock market at the beginning of October 2023 . We sold the position when
the portfolio was transitioned to our Global Quality Growth strategy,
which typically does not invest in auto makers or auto parts suppliers.
We generally feel businesses in this arena do not generate the level of
return on capital we seek.
Key sectoral and regional contributors to portfolio performance
As discussed above, our sectoral and regional exposures are driven by stock selection.
At the sectoral level, over half of the portfolio gain during the period covered in this report was due to holdings in Information Technology. Industrials, Communication Services and Financials also contributed.
Sector contributors
Sector Contribution to Total Return (%) Information Technology 7.97 Industrials 2.18 Communication Services 2.01 Financials 1.32 Health Care 0.57
Source: Lazard/FactSet.
Data in GBP and for the period from
At the regional level, half of the portfolio gain during the period covered in this report was due to holdings in
Regional contributors
Region Contribution to Total Return (%)North America 7.84Europe exUK 2.83 Emerging Markets 2.46United Kingdom 0.70Asia exJapan 0.12Japan 0.09
Source: Lazard/FactSet.
Based on country of listing. Data in GBP and for the period from
Outlook
We firmly believe investing in the highest-quality companies is the best way to increase investor wealth and outperform over the long-term. We have high conviction in the fundamentals of our holdings and believe the value and share prices of these businesses should increase as cash flows are compounded over time. We consider our portfolio to be attractively valued at present.
We expect continued market volatility as the US Federal Reserve and other central banks seek to balance the goals of maintaining financial stability and controlling inflation. We believe Compounders have fundamental advantages that can provide resilience across different economic scenarios and help navigate potential uncertainties in equity markets.
Should inflation persist, for example, our holdings' competitive advantages should offer pricing power, allowing these companies to pass through higher costs and maintain their margins. Should interest rates fall the valuations of our holdings should benefit too. This is because when interest rates drop the market usually reduces the rate at which it discounts the value of future earnings. When that happens the net present value of those earnings increases. This should be reflected in higher valuations for companies sustaining high returns on capital.
AI has the potential to transform businesses over the long-term, and we certainly do not underestimate its power. However, we feel the exuberance surrounding it could drive valuations in certain stocks to unsustainable levels in the short-term. We believe the market is ascribing most of AI's value to NVIDIA alone rather than to the many companies poised to benefit from this transformative technology.
We believe equity markets will broaden as the likely impact of AI beyond a handful of businesses earns wider recognition. A strategy such as ours, which is focused on financial productivity, should benefit in a more normalised market environment.
Fund Managers
Portfolio of Investments as at
Investment Country Market value % of total net MSCI Sector
£'000 assets
Alphabet United States 24,942 6.2 Communication
Services
Microsoft United States 23,033 5.7 Information
Technology
Taiwan Information
Semiconductor Taiwan 16,059 4.0 Technology
Manufacturing
S&P Global United States 15,765 3.9 Financials
Intuit United States 12,927 3.2 Information
Technology
Aon United States 12,798 3.2 Financials
Visa United States 12,625 3.1 Financials
Accenture United States 12,497 3.1 Information
Technology
RELX United Kingdom 12,092 3.0 Industrials
Amphenol United States 12,072 3.0 Information
Technology
Dollarama Canada 11,915 2.9 Consumer
Discretionary
Thermo Fisher United States 11,070 2.7 Health Care
Scientific
Verisk Analytics United States 11,030 2.7 Industrials
IQVIA United States 10,963 2.7 Health Care
Adobe United States 10,514 2.6 Information
Technology
Zoetis United States 10,305 2.6 Health Care
Booz Allen United States 9,845 2.4 Industrials
Hamilton
ASML Netherlands 9,684 2.4 Information
Technology
Ametek United States 9,586 2.4 Industrials
Danaher United States 9,049 2.2 Health Care
VAT Group Switzerland 8,985 2.2 Industrials
HDFC Bank India 8,977 2.2 Financials
Salesforce United States 8,972 2.2 Information
Technology
Intercontinental United States 8,777 2.2 Financials
Exchange
Wolters Kluwer Netherlands 8,640 2.1 Industrials
Clicks Group South Africa 7,944 2.0 Consumer Staples
Keyence Japan 7,867 1.9 Information
Technology
Nordson United States 7,842 1.9 Industrials
Partners Group Switzerland 7,401 1.8 Financials
Hexagon Sweden 6,850 1.7 Information
Technology
Coca-Cola United States 6,804 1.7 Consumer Staples
HOYA Japan 6,386 1.6 Health Care
Universal Music Netherlands 6,354 1.6 Communication
Group Services
Estee Lauder United States 6,279 1.6 Consumer Staples
Rockwell United States 5,852 1.5 Industrials
Automation
Shimano Japan 5,664 1.4 Consumer
Discretionary
BRP Canada 4,903 1.2 Consumer
Discretionary
Tencent Hong Kong 4,297 1.1 Communication
Services
Toei Animation Japan 3,908 1.0 Communication
Services
SMS Japan 3,672 0.9 Industrials
Nike United States 2,949 0.7 Consumer
Discretionary
Total equity 398,094 98.5
investments (41)
Net current 6,000 1.5
assets
Total net assets 404,094 100.0
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.
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
The number of individual holdings will vary over time. To ensure diversification of opportunity and management of risk, the Company is permitted by its policy to hold between 40 and 140 holdings; however, the portfolio will generally hold a portfolio of shares at the lower end of this range. The portfolio will be managed on a global basis rather than as a series of regional sub-portfolios. As at
The Board assesses investment performance with reference to the MSCI All Country World Index (GBP). However, the Directors expect the Investment Manager to pay little attention to the composition of this index when constructing the portfolio and the composition of the portfolio is likely to vary substantially from that of the index. A long-term view is taken and there may be periods when the net asset value per share declines in absolute terms and relative to the comparator index.
Business model
The Company is incorporated in
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 in the Annual Financial Report.
Dividend policy
The Company's main focus is on growing shareholders' capital. It pursues a flexible 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. As previously communicated in the last Half-Yearly Financial Report, the Company's revenue returns are expected to be lower in the short-term as a result of Lazard's investment strategy. This is focused on capital appreciation rather than income generation, driven by the investment portfolio typically reinvesting a significant portion of earnings in order to maximise growth. Revenue returns have been distorted this year by various costs and also savings associated with the change in service providers. This year the Company will not need to utilise reserves to pay its dividend. Going forward the Board intends to at least maintain the dividend, using the revenue reserve and, if required, the capital reserve, for a short period of time if necessary.
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 had a
Although no borrowing facility is currently in place, the Company's gearing is regularly reviewed by the Board following consultation with the Investment Manager.
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.
Current and future developments
A summary of the Company's developments during the year ended
Culture and values
Culture
Corporate culture for an externally-managed investment trust like
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. We also believe in having strong relationships with our key service providers, one based on mutual trust and respect, with constructive challenge when required. Below is a summary of the Board's most important values:
-- Excellence: the Board is focused on its purpose of delivering long-term
value for all its shareholders, whether they are large or small.
Focusing on this strategic imperative and adopting best practice
wherever appropriate in all the Company's dealings are key to driving
excellence. We will always put our shareholders first and will
constantly look at how to enhance long-term value, for example through
the use of gearing, share issuance, and buybacks.
-- Integrity: the Board seeks to be ethical and honest, to comply with all
laws and regulations applicable to investment companies, to avoid
conflicts of interest and to 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 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,
other than in instances where a Director has signalled their intention
to retire.
-- Respect:the Board is collegiate and recognises the value of the diverse
backgrounds and opinions of its Directors. It also recognises the
importance of treating shareholders and key service providers with
respect. Contact by shareholders via the Chairman's email address
cosec@junipartners.com is welcomed; the Company adheres to key service
provider terms and conditions such as prompt payment.
-- Sustainable investing, Stewardship and Environmental, Social and
Governance (`ESG') issues: the Board, recognises that sustainability and
ESG matters should be cornerstones to the investment approach.
Sustainability, Stewardship and Environmental, Social & Governance (`ESG') Matters
The Board recognises that sustainability and ESG matters are an essential part of the investment strategy and stock selection process of the Company. The Board is committed to taking a responsible approach with the Company's own governance matters and, more materially, a responsible approach to the impact the Company has through the investment decisions made by its appointed investment manager, Lazard.
The Board expects Lazard to invest in companies which can provide long-term value for the Company's shareholders, without damaging either society or the environment. The Board reviews how an assessment of financially material ESG opportunities and risks is integrated into Lazard's fundamental research, ensuring sustainability considerations are considered in Lazard's stock selection as well as reviewing Lazard's approach to stewardship and receiving reporting on how Lazard undertakes its stewardship responsibilities.
Lazard integrates ESG considerations into the fundamental analysis conducted on every potential investee company. When evaluating potential `Compounder' companies in which to invest, Lazard is focused on how ESG opportunities and risks may affect a company's competitive advantages, the sustainability of its financial productivity, its reinvestment opportunities, and its valuation. Lazard also has access to third party data sources to augment this proprietary fundamental research.
Lazard's research suggests that Compounders tend to have attractive environmental and/or governance attributes. This has generally resulted in the portfolio having a positive sustainability profile i.e., significantly lower carbon emissions, lower carbon intensity, and lower ESG risk versus its reference comparator index, the MSCI All Country World Index. This is an outcome of stock selection, not a target objective.
Portfolio carbon emissions
The challenges around climate change are of increasing importance. The portfolio's carbon emissions have remained consistently below the comparator index, the MSCI All Country World Index.
Stewardship and investee company engagement
The Board delegates authority to Lazard to invest responsibly; engaging actively with investee companies to understand their management ethos and to seek sustainable returns. The Board furthermore gives discretion to Lazard to exercise the Company's voting rights. Lazard exercises the Company's voting rights in respect of investee companies with the aim of maximising sustainable shareholder value as a long-term investor and voting in the best interests of the Company's shareholders. Lazard undertakes regular due diligence with investee company managements on matters such as strategy, operational performance, capital allocation, and material sustainability considerations. Lazard is a signatory to the
The proxy voting instructions given by Lazard on behalf of the Company between
Lazard voting on behalf of Mid Wynd 1
______________________ |Instruction|Percentage| |___________|__________| |For |92% | |___________|__________| |Against |8% | |___________|__________|
1 This excludes votes abstained.
Details of votes Against
______________________________________________________________________________ |Instruction|Percentage|Reason | |___________|__________|_______________________________________________________| |Against |47% |Oppose director re-elections and other director related| | | |reasons | |___________|__________|_______________________________________________________| |Against |34% |Environmental and social reasons | |___________|__________|_______________________________________________________| |Against |19% |Other - including capitalisation, routine business and | | | |takeover related | |___________|__________|_______________________________________________________|
Industry and social responsibility initiatives
Further information on the industry-wide collaborations Lazard participates in and the social responsibility initiatives it engages with can be found on the
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
Net asset value Share price MSCI All Country World Index (GBP)
30 June
2020 12.2% 9.1% 5.2%
2021 24.3% 27.3% 24.6%
2022 (7.5)% (9.5)% (4.2)%
2023 5.6% 1.0% 11.3%
2024 13.9% 17.1% 20.1%
Source: LSEG Datastream.
Further details of the 2024 returns can be found within the Chairman's Statement and Investment Manager's Review contained in the Annual Financial Report for year ended
-- Share price (discount)/premium to net asset value
The Board recognises that it is in the interests of shareholders to maintain a share price as close as possible to the net asset value (`NAV') per share. The policy of the Board is to limit the discount or premium to a maximum of 2 per cent of NAV in normal circumstances. The Company may issue shares at such times as demand is not being met by liquidity in the market and buy back shares when there is excess supply. This policy has proved consistently effective in generating value within the Company and helping to manage market liquidity. The year under review continued to bring volatility from geopolitical events in
Although the Company incurs modest costs for operating the policy and when renewing shareholder authority, issuance at a premium and buying back at a discount under the policy more than compensates and is consistently accretive to NAV.
-- Ongoing charges
The Board is mindful of the ongoing costs to shareholders of running the Company and monitors operating expenses on a regular basis. The Company's ongoing charges ratio as at
-- Dividend per share
The Board, in addition to capital growth, continues to pursue its flexible dividend policy. It monitors the revenue returns generated by the Company during the year, its revenue reserves and expected future revenue and then determines the dividends to be paid. Revenue earnings during the year decreased by 20.1% on the 2023 return. As explained in the Chairman's Statement, the appointment of Lazard has led to a change in investment approach and lower dividend income from investee companies, resulting in lower revenue returns for the Company compared with the previous year. Furthermore, as the majority of the Company's revenues are earned in foreign currencies changes in exchange rates can also materially impact the GBP value of the Company's earnings. Subject to approval of the final dividend by shareholders, a total regular dividend of
Dividends payable/paid in respect of the years ended
Principal Risks and Risk Management
The Board has carried out a robust assessment of the principal and emerging risks facing the Company. Following consideration of the principal risks, the Board has concluded that there are no emerging risks facing the Company that should be added to the principal risks set out below.
The Board, has developed a risk map which sets out the principal risks faced by the Company and the controls established to mitigate these risks. This is an ongoing process and the risk map, including any emerging risks, is formally reviewed at least every six months. The Board pays particular attention to those risks that might threaten the long-term performance or viability of the Company. Further information on the Company's risk management process is set out in the corporate governance section within the Annual Financial Report.
A summary of the key areas of risk, their movement during the year and their mitigation is set out below:
Movement Principal risk Mitigation/control
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
Strategic risk wider market (represented by the
MSCI All Country World Index).
The management of the portfolio The Board believes this approach
No change of the Company may not achieve will continue to generate good
its investment objective and long-term returns for
policy. shareholders. Risk is
diversified through a broad
range of investments being held.
The Investment Manager has a
proven track record of managing
the Global Quality Growth
strategy which the Company's
portfolio is managed in
accordance with. The Board
discusses the investment
portfolio and its performance
with the Investment Manager at
each Board meeting.
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 The Board considers that the
significant losses for the risk of market volatility is
Company. mitigated by the longer-term
nature of the investment
Current events such as the objective and the Company's
ongoing wars in Ukraine and the closed-ended structure, and that
Middle East have negatively such investments should be a
impacted economic growth and may source of positive returns for
negatively affect investment shareholders over the long-term.
values leading to the inability
to buy, sell or value assets at Risks are diversified through
a competitive price, thus having having a range of investments in
an adverse effect on the the portfolio with exposure to
Company's results. The market various geographies and sectors.
risk has increased due to these
pressures. The Investment Manager has a
proven track record and reports
The Company's functional regularly to the Board on market
currency and that in which it developments. At each Board
reports its results is Sterling. meeting the Investment Manager
However, the majority of the is asked to provide explanations
Company's assets, liabilities for the performance of the
and income are denominated in portfolio and the rationale for
Increased risk currencies other than Sterling. any changes in equity
Consequently, movements in investments, sectors and
exchange rates will affect the geographies. Any use of
Sterling value of those assets. derivatives to manage market
The country in which a portfolio risks requires Board approval.
company is listed is furthermore
not necessarily where it earns The Investment Manager takes
its profits and movements in material ESG risks into account
exchange rates on overseas when making investment
earnings may have a more decisions, as such risks can
significant impact upon a affect the prospects of a
portfolio company's valuation business. The Company invests in
than a simple translation of a broad portfolio of businesses
that company's share price into with operations spread
Sterling. The Company does not geographically, which should
generally hedge its currency limit the impact of climate
exposures and changes in change events.
exchange rates may lead to a
reduction in the Company's NAV. The Board and its Investment
The uncertainty of the global Manager have regular discussions
political landscape in a year of to assess the likely impact of
significant worldwide elections inflation rates on the economy,
has impacted exchange rates and corporate profitability and
therefore resulted in a further asset prices.
increase to the Company's market
risk.
Globally, climate change effects
and the risks of these are
receiving increased focus. The
extent of the impact of these
risks is not yet fully
understood and as a result these
may not be correctly reflected
in the share prices of investee
companies
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
Legal and regulatory risk and regulatory framework so that
any requisite actions can be
Changes to the requirements of planned.
the framework of regulation and
legislation (including rules The Board receives quarterly
relating to listed closed-end compliance reports from the
investment companies), within Investment Manager, the
which the Company operates, Alternative Investment Fund
could have a material adverse Manager (`AIFM'), Company
No change effect on the ability of the Secretary and Administrator, and
Company to carry on its business the Depositary confirming
and maintain its listing. A compliance with regulations.
change in the tax rules These reports also highlight any
applicable to investment trusts, matter that the relevant
such as the introduction of compliance team feel should be
capital gains tax, could affect brought to the Board's
the viability of investment attention.
trusts.
The Company is a member of the
Association of Investment
Companies (the `AIC'). The AIC
monitors regulatory change on
behalf of its members and keeps
the investment trust sector
informed on this. Furthermore,
the AIC promotes investment
trust interests in any
consultations on proposed
regulatory change.
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 Experienced third-party service
service providers. Failure by providers are employed by the
any service provider to carry Company under appropriate terms
out its obligations to the and conditions and with agreed
Company in accordance with the service level specifications.
No change terms of its appointment, to The Board receives regular
protect against breaches of the reports from its service
Company's legal and regulatory providers and reviews the
obligations such as data performance of its key service
protection or to perform its providers at least annually.
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.
Reliance on key personnel
The Lazard investment team is
The Company's portfolio is led by two key individuals, the
managed by the Investment global equity fund managers,
Manager and in particular the each of whom has worked for
No change fund management team which has Lazard for many years and have a
direct responsibility for successful track record. The
portfolio selection. Any change fund managers are supported by a
in relation to the investment wider investment team.
executives may adversely affect
the performance of the Company.
Long-term Viability
Viability statement
In accordance with the
In reviewing the Company's viability, the Board considered the Company's business model, the principal risks and uncertainties, including geopolitical risks, volatility of inflation and interest rates and the ensuing market volatility as well as emerging risks such as climate change risks. The Company invests in listed securities and has a liquid portfolio.
The Board further considered the continued operation of the Company's buyback programme, as a discount control mechanism, in its viability assessment. It is assumed by the Board that the liquid nature of the portfolio means that investments can be sold as necessary to fund share buybacks.
In considering the Company's prospects over the next five years, the Directors have assumed that Lazard will, on behalf of the Company, continue to follow the Company's investment objective, that the Company's performance will continue to be attractive to shareholders, and that the Company will continue to meet the requirements to retain its status as an investment trust.
The Company is authorised to trade as an investment company and has the associated tax benefits. Any change to the Company's tax arrangements could affect the Company's viability as an effective investment vehicle.
The Board considered a five year forecast and a number of stress test scenarios in connection with a sustained fall in markets. The Board also considered the Company's ongoing income and expenses, the buyback programme and the liquidity of the Company's portfolio to ensure that the Company will be able to meet its liabilities as they fall due.
The conclusion of this review is that the Board has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five years.
Duty to Promote the Success of the Company
How the Directors discharge their duties under s172 of the Companies Act
Under section 172 of the Companies Act 2006, the Directors have a duty to act in good faith and to promote the success of the Company for the benefit of its shareholders as a whole, and in doing so have regard to:
a) the likely consequences of any decision in the long-term,
b) the interests of the company's employees,
c) the need to foster the company's business relationships with suppliers, customers and others,
d) the impact of the company's operations on the community and the environment,
e) the desirability of the company maintaining a reputation for high standards of business conduct, and
f) the need to act fairly as between members of the company.
As an externally managed investment trust, the Company has no employees or physical assets. Our shareholders, our investee companies, our key external service provider, the Investment Manager, and other professional service providers, such as the AIFM, Company Secretary and Administrator, Depositary, Registrar, Auditor, Corporate Broker, Tax Adviser and any lenders are all considered to fall within the scope of section 172.
During the year ended
Whilst certain responsibilities are delegated, the Board retains responsibility for promoting the success of the Company; the Directors' responsibilities are set out in the schedule of matters reserved for the Board and the terms of reference of its committees, all of which are reviewed regularly by the Board.
The Company's culture and values, as described in the Annual Financial Report, have been established by the Board to manage its key business relationships. The Company's approach on anti-bribery and prevention of tax evasion can be found in the Annual Financial Report and on the Company's website at midwynd.com.
Engagement with key stakeholders
Stakeholders Benefits of engagement How the Company engages
with Stakeholders
To achieve its objective
of promoting the success
of the Company, for the
benefit of the
shareholders, taken as a
whole, the Board
approaches engagement from
two angles - how the Board
communicates its strategy
and performance to
shareholders and potential
investors and how it
addresses feedback /
communications received
from shareholders and
potential investors.
Engagement with
shareholders and potential
investors is both by the
Board and the Company's
Investment Manager.
Through the publication of
the annual financial
reports, the half-yearly
reports, monthly
factsheets, RNS
announcements and updates
to the Company's website,
The Board is responsible shareholders are kept
for promoting the success informed of developments
of the Company for the in Company strategy as
benefit of the well as Company
shareholders, taken as a performance and portfolio
whole, having regard to activities. The Investment
the matters listed above Manager presents at
and its stakeholders. conferences and webinars
throughout the year. The
Communicating with Annual General Meeting
shareholders and potential presents a further
Shareholders and potential investors is essential to opportunity for
investors ensure the Board is fully shareholders to meet the
aware of shareholder Board and Investment
requirements so that it Manager in person.
can respond to evolving
shareholder needs. It is The Board receives regular
also important that the feedback on shareholder
Company communicates its meetings from the
strategy and performance Company's broker and,
regularly and effectively where appropriate the
to shareholders to ensure Chairman. Any
there continues to be communications from
demand for the Company's shareholders and potential
shares. investors are reviewed and
discussed by the Board at
Board meetings to ensure
that shareholder views are
taken into consideration
as part of any decisions
taken.
Shareholders and potential
investors are encouraged
to raise questions and
communicate with the
Chairman and the
Investment Manager either
through the Company's
website or by attending
and asking questions at
the AGM.
The Board considers
communication with
shareholders and potential
investors an important
function and Directors are
always available to
respond to shareholder
queries. For further
information see `Relations
with shareholders' in the
Annual Financial Report.
Engagement with the The Board, with the
Company's Investment support of its Management
Manager is necessary to: Engagement Committee,
regularly reviews the
-- evaluate its performance of the
performance Investment Manager to
against the ensure that services
Company's stated provided to the Company
investment are managed efficiently
objective and to and effectively for the
understand any benefit of the Company's
risks or shareholders. The Board
opportunities this meets formally with the
may present; Investment Manager at
-- ensure the quarterly Board meetings.
Investment Manager The Investment Manager
operates within presents a review of the
parameters set by quarter and any pertinent
the Board; information on the
-- ensure the Board portfolio and its
understands key transactions. Informal
Investment Manager performance issues calls and ad hoc meetings
to inform strategy occur throughout the year
and enable good and especially at times of
communication with heightened market
shareholders; volatility. The Board
-- provide the Board reviews and discusses
with assurances plans for the future
that the marketing, strategy and
Investment development of the Company
Manager's internal with the Investment
controls are Manager. Reports on the
operating internal controls operated
effectively; and by the Investment Manager
-- ensure the to safeguard the Company's
Investment assets and to ensure
Manager's approach transactions are
to the management materially correct are
of environmental, received from the
social and Investment Manager and
governance (`ESG') reviewed by the Board and
issues accords Audit Committee as
with the Board's appropriate.
values.
As an investment company,
all services are
outsourced to third-party
service providers.
In addition to investment
management, other
outsourced services The AIFM, Company
include the AIFM, Company Secretary and
Secretary and Administrator has frequent
Administrator, the interaction with the key
Depositary, the Broker, service providers and
the Registrar, the their performance is
Company's Tax Adviser, the continually monitored
Auditor and any lender throughout the year.
when applicable.
The Management Engagement
The Company has detailed Committee annually reviews
the parameters within the performance of key
which authority has been service providers, along
delegated and set service with their fee levels, and
Other third-party service levels to monitor service provides recommendations
providers provider performance. to the Board as required.
Engagement is important to As and when appropriate,
ensure that: third party providers
present to the Board.
-- all service
providers are Annual assurance reports
delivering are received to assist the
services in review of the internal
accordance with control environments of
their service the AIFM, Company
level agreements; Secretary and
-- any operational Administrator and the
issues are Depositary and Registrar.
discussed with the
Board; and
-- the Board receives
appropriate
assurances that
the providers'
internal controls
are operating
effectively.
The Company's success
relies on its choice of
investments and the
performance of those
investments. The Board sets the
investment objective and
Engagement by the discusses stock selection
Investment Manager with and asset allocation with
the investee companies has the Investment Manager at
two principal aims: each Board meeting.
-- to aid the The Investment Manager
Investment Manager engages with the investee
to understand companies, prior to
investee investment and on an
companies, the on-going basis.
risks and
Investee companies opportunities The Board discusses with
associated with Lazard Asset Management
them and the how Environmental, Social
factors which and Governance (`ESG')
drive their factors are taken into
performance so as account when selecting and
to make better retaining investments for
investment the Company. The Board
decisions: and recognises the importance
-- to drive positive of ESG in the investment
change in investee process.
companies through
active Lazard Asset Management
stewardship. The endorses the UK
aim of such Stewardship Code.
engagement is to
improve
performance and
hence shareholder
returns.
Board discussions and decisions
Key discussions and decisions made by the Board since the last annual financial
report:
Topic Background & discussion Decision
It was decided this
strategy was working as
required and the Board
continued to give
authority as required. The
Company has been
particularly active,
during this period, to
ensure that the Company's
shares trade at a narrow
discount to NAV,
benefiting existing
shareholders. To ensure
the Company had sufficient
The Board discussed the shareholder authority to
on-going strategy of share continue to operate the
issuance and buyback to discount control mechanism
Share issuance and buyback assist in controlling the (which seeks to maintain a
share premium/discount to share price within 2% of
NAV for the benefit of the Company's NAV), and
existing shareholders. reduce discount
volatility, the Board
resolved to seek
additional authority from
shareholders to continue
to buy back the Company's
shares. Shares bought back
are held in Treasury and
can be reissued in future
at a cost lower to that
incurred when issuing new
share capital. This
resolution was approved by
92.3% of shareholders at a
general meeting convened
on 29 July 2024.
Having considered Lazard's
investment style and the
higher proportion of
returns expected to come
The Board discussed the from capital appreciation
cost allocation policy as a result, the Board
Cost allocation policy following the change of decided to amend the
Investment Manager. Company's cost allocation
from 25% to revenue and
75% to capital to 10% to
revenue and 90% to capital
with effect from 1 July
2023.
The Board holds regular
discussions with the
Following the change of Marketing and Distribution
Investment Manager, the teams at Lazard and has
Board discussed the requested regular updates
marketing and distribution from the Company's Broker
Marketing and Distribution of the Company to ensure on the activities being
that this aligns with the undertaken. Various
management strategy initiatives are underway
adopted and appeals to a in respect of these areas,
wider shareholder base. including the development
of a new website and
branding for the Company.
Having considered the
option to use gearing the
Board decided that there
was no requirement in the
The Board discussed the short-term. The future use
Gearing current policy and whether of gearing by the Company
gearing should be employed will be kept under review
by the Company. by the Board, recognising
that the benefit to
shareholders needs to
outweigh the associated
costs.
The Board has decided to
appoint David Kidd as
successor to Russell
Napier, to assume the role
of Chairman at the
forthcoming AGM and for a
term of three years. The
Board recognises the
benefits to the long-term
success of the Company
from appointing a Chairman
from the existing Board
members. The appointment
will result in David
The Board discussed serving on the Board for a
succession of Directors total of eleven years at
being cognisant of the the point of his intended
Director succession intended retirement of the retirement in 2027.
Chairman, as well as the However, continuity of
FCA's diversity targets experience and skillset
introduced in 2022. retention are key to the
successful operation of
the Board.
A specialist headhunter
was engaged during the
year with the remit of
seeking candidates from a
broad range of diverse
backgrounds whose skillset
would complement existing
Board members. The process
is nearing completion and
the Board expects to
appoint a new Director in
due course.
The Board's primary focus is to promote the long-term success of the Company for the benefit of the Company's shareholders. In doing so, the Board has regard to the impact of its actions on other stakeholders as described above.
Directors & diversity
The Directors of the Company and their biographical details are set out in the Annual Financial Report.
No Director has a contract of service with the Company.
The Board supports the recommendations of the Hampton-Alexander Review on gender diversity and the Parker Review on ethnic representation on Boards.
The Board recognises the principles of diversity in the boardroom and acknowledges the benefits of having greater diversity, including gender, social and ethnic backgrounds, and cognitive and personal strengths. When setting a new appointment brief, the Nomination Committee considers diversity alongside seeking to ensure that the overall balance of skills and knowledge that the Board has remains appropriate, so that it can continue to operate effectively.
The Board is currently comprised of four male Directors and one female Director.
The
-- 40% of the Board is represented by women:as at 30 June 2024 the Company
only has one female Director. The Company therefore does not meet this
diversity target but expects to rectify this position in the latest
Director recruitment process which is almost complete.
-- One woman in a senior position: during the year to 30 June 2024 , Diana
Dyer Bartlett held the position of Chair of the Audit Committee. In the
absence of Executive roles, the Company considers the role of Chairman
of the Audit Committee to qualify as a senior position. The Board
therefore considers that it met this target.
-- One individual from a minority ethnic background:as at 30 June 2024 , no
individuals on the Board are from a minority ethnic background. The
Company therefore does not meet this diversity target but expects to
rectify this position in the latest Director recruitment process which
is almost complete.
The following tables set out the data on the diversity of the Directors on the Company's Board in accordance with Listing Rule 9.8.6R(10) as at
Number of Number of Number in Percentage of
Board Percentage of senior executive executive
members the Board positions on management3 management3
the Board
Men 4 80% 21 N/A N/A
Women 1 20% 12 N/A N/A
Not
specified/prefer - - - N/A N/A
not to say
1
2
3 Not applicable as the Company does not have an executive management team.
Number Number of Percentage
of Percentage senior Number in of
Board of the positions executive executive
members Board on the management2 management2
Board
White British or other White 5 100% 31 N/A N/A
Mixed/Multiple ethnic groups 0 0% 0 N/A N/A
Asian/Asian British 0 0% 0 N/A N/A
Black/African/Caribbean/Black 0 0% 0 N/A N/A
British
Not specified/prefer not to - - - N/A N/A
say
1 The Chairman of the Board and Senior Independent Director are senior positions as defined by the Listing Rules. In the absence of executive roles, the Company also considers the Chairman of the Audit Committee to be a senior position.
2 Not applicable as the Company does not have an executive management team.
The Board does not currently meet the targets set by the
A specialist headhunter has been retained by the Board to seek a new Board Director in 2024. The remit given was to seek a diverse candidate pool, especially those who would extend the Board's gender and ethnic minority representation. This process is nearing completion at which point the Board envisages meeting the
Modern Slavery Act 2015
The Company does not fall within the scope of the Modern Slavery Act 2015 as its turnover is less than £36m. Therefore, no slavery and human trafficking statement is included in the Annual Financial Report.
For and on behalf of the Board,
Chairman
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
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. 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
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
(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,
Chairman
Financial Statements
Statement of Comprehensive Income
For the year ended 30 June
2024 2024 2024 2023 2023 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains on investments - 49,019 49,019 - 19,123 19,123
Currency gains - 61 61 - 636 636
Income 5,650 110 5,760 8,725 - 8,725
Investment management fee (134) (1,207) (1,341) (575) (1,726) (2,301)
Other expenses (665) (218) (883) (572) (8) (580)
Net return before finance costs 4,851 47,765 52,616 7,578 18,025 25,603
and taxation
Finance costs of borrowings (2) (21) (23) (167) (506) (673)
Net return on ordinary 4,849 47,744 52,593 7,411 17,519 24,930
activities before taxation
Taxation on ordinary activities (448) (71) (519) (884) - (884)
Net return on ordinary 4,401 47,673 52,074 6,527 17,519 24,046
activities after taxation
Net return per ordinary share 8.00p 86.66p 94.66p 10.01p 26.86p 36.87p
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 for the year disclosed above represents the Company's total comprehensive income.
Statement of Financial Position
As at 30 June
2024 2023
£'000 £'000
Non-current assets
Investments held at fair value through profits or loss 398,094 438,938
Current assets
Debtors 1,950 675
Cash and cash equivalents 5,742 12,243
7,692 12,918
Creditors
Amounts falling due within one year (1,692) (2,830)
Net current assets 6,000 10,088
Total net assets 404,094 449,026
Capital and reserves
Called up share capital 3,320 3,320
Capital redemption reserve 16 16
Share premium 242,115 242,115
Capital reserve 152,673 196,730
Revenue reserve 5,970 6,845
Shareholders' funds 404,094 449,026
Net asset value per ordinary share 810.22p 719.84p
These financial statements were approved by the Board of Directors and signed on its behalf on
Chairman
Statement of Changes in Equity
For the year ended30 June 2024 Share Capital Share Capital redemption Revenue Shareholders' capital premium reserve1,2 reserve2 funds reserve £'000 £'000 £'000 £'000 £'000 £'000 Shareholders' funds at 1 July 3,320 16 242,115 196,730 6,845 449,026 2023 Net return on ordinary - - - 47,673 4,401 52,074 activities after taxation Repurchase of shares into - - - (91,730) - (91,730) Treasury Dividends paid - - - - (5,276) (5,276) Shareholders' funds at 30 3,320 16 242,115 152,673 5,970 404,094 June 2024 For the year ended 30 June 2023 Share Capital Share Capital redemption Revenue Shareholders' capital premium reserve1,2 reserve2 funds reserve £'000 £'000 £'000 £'000 £'000 £'000 Shareholders' funds at 1 July 3,271 16 235,110 206,979 7,277 452,653 2022 Net return on ordinary - - - 17,519 6,527 24,046 activities after taxation Issue of new shares (net of 49 - 6,946 - - 6,995 costs) Issue of shares - - 59 1,116 - 1,175 from Treasury Repurchase of shares into - - - (28,884) - (28,884) Treasury Dividends paid - - - - (6,959) (6,959) Shareholders' funds at 30 3,320 16 242,115 196,730 6,845 449,026 June 2023
1 Capital reserve as at
2 The Company may pay dividends from both the capital reserve and the revenue reserve.
Statement of Cash Flows
For the year ended 30 June
2024 2024 2023 2023
£'000 £'000 £'000 £'000
Net cash outflow from operations before (2,649) (3,770)
dividends and interest
Dividends received from investments 5,672 9,256
Interest received 133 286
Interest paid (23) (704)
5,782 8,838
Net cash inflow from operating activities 3,133 5,068
Cash flow from investment activities
Purchase of investments (375,073) (554,175)
Sale of investments 463,853 585,162
Realised currency gains 65 28
Net cash generated from investing 88,845 31,015
activities
Cash flow from financing activities
Issue of new shares, net of costs - 6,995
Issue of shares from Treasury - 1,175
Repurchase of shares to Treasury, net of (93,200) (26,804)
costs
Dividends paid (5,276) (6,959)
Net repayment of credit facility - (5,292)
Net cash outflow from financing activities (98,476) (30,885)
Net (decrease)/increase in cash and cash (6,498) 5,198
equivalents
Cash and cash equivalents at start of the 12,243 7,096
year
(Decrease)/increase in cash in the year (6,498) 5,198
Currency losses on cash and cash (3) (51)
equivalents
Cash and cash equivalents at end of the 5,742 12,243
year
Notes to the Financial Statements
1. Accounting policies
The financial statements are prepared on a going concern basis under the historical cost convention modified to include the revaluation of investments.
The financial statements have been prepared in accordance with the Companies Act 2006, applicable
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
1. Income
2024 2023
£'000 £'000
Income from investments
Overseas dividends 5,030 7,447
UK dividends 597 992
5,627 8,439
Other income
Bank interest 133 286
Total income 5,760 8,725
Total income comprises:
Dividends and UK interest from financial assets designated at fair 5,627 8,439
value through profit or loss
Other income 133 286
Total income 5,760 8,725
1. Dividends paid and proposed
2024 2023
2024 2023
£'000 £'000
Amounts recognised as distributions in the year:
Previous year's final dividend 3.95p 3.70p 2,253 2,431
Previous year's special dividend 1.70p 3.00p 969 1,972
First interim dividend 3.85p 3.85p 2,054 2,556
Total dividend 9.50p 10.55p 5,276 6,959
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 £4,401,000 (2023: £6,527,000).
2024 2023
2024 2023
£'000 £'000
Dividends paid and payable in respect of the year:
First interim dividend 3.85p 3.85p 2,054 2,556
Proposed final dividend 4.15p 3.95p 1,998 2,463
Special dividend - 1.70p - 667
Total dividend 8.00p 9.50p 4,052 5,686
1. Net return per ordinary share
2024 2024 2024 2023 2023 2023
Revenue Capital Total Revenue Capital Total
Net return on ordinary activities 8.00p 86.66p 94.66p 10.01p 26.86p 36.87p
after taxation
Revenue return per ordinary share is based on the net revenue return on ordinary activities after taxation for the financial year of £4,401,000 (2023: £6,527,000) and on 55,010,567 (2023: 65,211,820) ordinary shares, being the weighted average number of ordinary shares in issue (excluding
Capital gain per ordinary share is based on the net capital gain on ordinary activities after taxation for the financial year of £47,673,000 (2023: gain £17,519,000) and on 55,010,567 (2023: 65,211,820) ordinary shares, being the weighted average number of ordinary shares in issue during the year.
1. 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:
2024 2024 2023 2023
Net asset value per Net assets Net asset value per Net assets
share share
£'000 £'000
Ordinary shares 810.22p 404,094 719.84p 449,026
During the year the movements in the assets attributable to the ordinary
shares were as follows:
2024 2023
£'000 £'000
Total net assets as 1 July 449,026 452,653
Total recognised gains for the year 52,074 24,046
Issue of new shares - 6,995
Issue of shares from Treasury - 1,175
Repurchase of shares into Treasury (91,730) (28,884)
Dividends paid (5,276) (6,959)
Total net assets at 30 June 404,094 449,026
Net asset value per ordinary share is based on net assets as shown above and on 49,874,356 (2023: 62,378,452) ordinary shares, being the number of ordinary shares in issue at the year end.
1. Transactions with the Investment Manager and related parties
The investment management fees payable to Artemis and Lazard are disclosed in the Statement of Comprehensive Income within the Annual Financial Report. The amount outstanding to Lazard at
Fees payable during the year to the Directors and their interests in shares of the Company are considered to be related party transactions and are disclosed within the Directors' Remuneration Report within the Annual Financial Report.
1. Annual Financial Report
This Annual Financial Report announcement does not constitute the Company's statutory accounts for the years ended
The audited Annual Financial Report for the year ended
The Annual General Meeting of the Company will be held on Wednesday,
For further information, please contact:
Company Secretary
Email: cosec@junipartners.com
Enquiries: 0131 378 0500
