Half Yearly Report

RNS Number : 8934W

Mid Wynd Inter Inv Trust PLC

07 February 2012

 



Press Release

Mid Wynd International Investment Trust PLC

In the six months to 31 December 2011, the Company's net asset value per share (after deducting borrowings at fair value) declined 13.0% to 218.8p while the FTSE World Index in sterling terms fell 9.3%.  The share price decreased by 13.0%.

Results for the half-year to 31 December 2011

¾ Evidence of slower global growth has continued to mount, with the notable exception of the US. Markets remain fixated with Europe. Central banks remain accommodating.

¾ During the six months, developing markets, a continuing enthusiasm, endured a torrid period.  Beyond this, the Company's derivative strategy mitigated the impact of some of the declines in markets.

¾ Change and uncertainty provide both specific business and investment opportunities and we continue to favour companies where managements have demonstrated that their interests are aligned with those of shareholders, which have growing cash flows and the scope for rising margins and returns, and which can finance their growth using internally generated resources.

¾ During the period Mid Wynd had a 5-for-1 share subdivision with the aim of improving liquidity in the Company's shares.  In addition, 250,000 new shares have been issued at a premium to net asset value with none being bought back.  It is hoped that liquidity will be improved by the creation of a band within which issuance and buybacks take place as a matter of routine.

¾ The revenue return increased 73% to 1.28p per share (31 December 2010: 0.74p) largely due to the timing of receipts.  An unchanged interim dividend of 1.30p (when adjusted for the 5-for-1 share subdivision) will be paid to shareholders on the register at the close of business on 24 February 2012.

7 February 2012

For further information please contact:

Michael MacPhee, Manager Mid Wynd International Investment Trust PLC       

Tel: [phone]

Roland Cross, Director, Broadgate Mainland Marketing

Tel: [phone] or 07831 401309

The objective of Mid Wynd International Investment Trust PLC is to achieve capital and income growth by investing on a worldwide basis.

Mid Wynd seeks to meet its objective of achieving capital and income growth through investment principally in a portfolio of international quoted equities. The proportion of the portfolio invested in UK companies will not normally exceed 25%. Further details of the Company's investment policy are given in the Directors' Report in the Annual Report and Financial Statements.

The Company had total assets of £63.8m (before deduction of bank loans of £5.6m) as at 31 December 2011.

Mid Wynd is managed by Baillie Gifford & Co, the Edinburgh based fund management group with around £77 billion under management and advice as at 6 February 2012.

Past performance is not a guide to future performance. The value of an investment and any income from it is not guaranteed and may go down as well as up and investors may not get back the amount invested. This is because the share price is determined by the changing conditions in the relevant stockmarkets in which the Company invests and by the supply and demand for the Company's shares. You can find up to date performance information about Mid Wynd at www.midwynd.co.uk

Half-yearly management report

Your portfolio

The Company's net asset value per share at 31 December 2011 was 218.8p, down 13.0% over the six months. The share price also fell 13.0%, from 254.0p (adjusted for the October 2011 share subdivision) at 30 June 2011 to 221.0p at 31 December 2011, with the premium being 1.0% at both dates. The Company's comparative index, the FTSE World Index in sterling terms, fell 9.3% over the same period.

Over the five years to 31 December 2011 the Company has delivered a share price total return of 49.7% and a net asset value total return of 26.7% against the FTSE World Index total return in sterling terms of 17.4%.

We continue to favour companies where managements have demonstrated that their interests are aligned with those of shareholders, which have growing cash flows and the scope for rising margins and returns, and which can finance their growth using internally generated resources. This is because the need of governments to borrow huge sums combined with the need of banks to reduce the size of their balance sheets may reduce further the availability of finance to the private sector. As we had expected, and as is consistent with a fairly idiosyncratic portfolio, there have been a wide range of returns from the investments in the portfolio.

We remain very enthusiastic about the ongoing development of and potential for Oxford Nanopore's strand DNA sequencing technology and continue to view IP Group, our third largest holding, therefore, as significantly undervalued despite a recent surge in its share price. Odontoprev continues to take market share in the growing Brazilian dental plan market and is integrating the acquisition of Bradesco Dental, which should lead to higher group margins in the medium term. Our lift companies are combining healthy new order flow with occasional bolt-on acquisitions in the maintenance sphere and progress at both remains very encouraging. Level E's Maya fund continues to produce very low volatility in a world of high volatility, and underlying business prospects for the Level E companies, over which we have option rights, would appear to be improving. We have sifted the portfolio for those stocks that are not firing on all cylinders. Sales of ITT Education, Ctrip, MIPs and Aixtron have ensued. Failing revenues, stressed funding models and diminishing or questionable structural edge lie behind these sales. Sales within the less mature segment include China Vanke, Jain Irrigation, Vanda Pharmaceuticals, Dart Energy and Blinkx. Pricing power/ bad customers, vendor financing, a failed drug and materially altered business propositions (in the case of the last two) have led us to sell out of these. These latter holdings offered the chance of significant payoffs but an important aspect of running an opportunistic stock picking strategy such as ours is the sell discipline involved when the fundamentals have changed. 

Conversely, we have added to holdings where prospects appear undimmed and prices have fallen. Such logic applies to our gold miners, which are in aggregate growing production nicely, would benefit (through rising gold prices) from future central bank stimulus and remain lowly valued relative to spot gold prices. We added to our position in DNO, as its share price had fallen despite improving news on its assets. Similar thinking was behind the addition to Chariot Oil & Gas which continues to be underappreciated by the market.   Reinet, the Rupert family holding company with an NAV dominated by its holdings in BAT, had fallen to a high discount as BAT's share price rose, and so we added there too. MMX11, where earnings are directly based on iron ore throughput at the Rio de Janeiro Sudeste port, was another addition as the probability of the port being doubled in size appears to be rising.

New holdings include IHS, a still fairly immature commercial data provider, Oracle, old world tech but we believe increasingly well placed in the new world of the cloud and data explosion we believe, and Petroceltic, which has struck an as-yet unheralded licensing deal alongside Hess in Kurdistan and is enjoying great initial production success in its Algerian gas fields. Reynolds Group 2017 bonds were purchased on a yield to maturity of around 17%. We have done a good deal of work on the aseptic packaging industry and are strong believers in the power of the group's SIG franchise to deliver the necessary cash flows to enable de-leveraging at the group level.

Old fashioned geographical asset allocation has been something of a headwind as the US market, in which we are under-represented relative to indices, has continued to fare relatively well and developing markets, an enthusiasm of ours, have endured a torrid time.

Currency effects have been adverse too as the dollar has been the strongest major currency. We can envisage some respite given the greater policy room for manoeuvre that developing markets enjoy relative to their so-called advanced peers. As chaotic as the macro-economic backdrop remains and despite the presently febrile and unhealthy condition of markets, we remain confident in this strategy, our process and your portfolio as a means to long term wealth preservation and accumulation.

Derivatives and gearing

As outlined in the Annual Report and Financial Statements for the year to 30 June 2011, in July 2011 the Company adopted a derivatives strategy intended to mitigate a sudden fall in equity markets, through the sale of equity index futures on the FTSE 100, S&P 500 and Eurostoxx 50 indices and the acquisition of equity index call options on the same indices to benefit from any upside. The net effect of these transactions was to reduce the portfolio's effective exposure to equities by approximately 20%. Over the six months to 31 December 2011 these instruments generated a net gain of £1.3 million. At the start of February, half of the equity index futures were closed out, resulting in an effective equity index exposure through derivative instruments that was more or less neutral.

Earnings and dividend

The revenue return for the first half of the current financial year was 1.28p per share, an increase of 73% on the earnings for the equivalent period last year of 0.74p (3.69p adjusted for the five for one share subdivision discussed below). This should not be taken as an indication that full year earnings are likely to rise similarly, as it has much to do with the timing of receipts within the Company's year, so an interim dividend of 1.30p per share, which equates to the 6.50p interim paid last year, will be paid on 5 April 2012 to shareholders on the register on 24 February 2012.

Capital management

At the Company's Annual General Meeting held on 10 October 2011 shareholders approved a five for one share subdivision that meant the Company's shares in issue changed from 5,272,766 shares of nominal value 25p to 26,383,830 shares of 5p each. As of 11 October 2011 shareholders held five times the number of shares, representing the same proportion of the Company as before. The Net Asset Value ('NAV') per share and the Company's share price reflect this share subdivision and, for comparative purposes, historic per share figures have been adjusted in the financial statements.

With the exception of a few days in July and August, the Company's shares continued to trade at a premium to NAV throughout the six months to 31 December 2011 and this enabled the issue of 250,000 new shares in October, raising £577,500. As at 31 December 2011 the Company had authority remaining to issue a further 2,386,383 shares. The extent of the authority granted by shareholders at the Annual General Meeting to buy back shares amounts to 14.99% of issued share capital (3,951,938 shares).

In May 2010, the Company issued a statement concerning the use of share buybacks.  Since then 325,000 shares (after adjusting for the recent subdivision) have been bought back. The shares subsequently moved to a premium and since November 2010 a total of 1,800,000 shares have been issued.  However, liquidity in the Company's shares remains modest. In order to improve liquidity the Company confirms its intention to be active in both issuing shares at a premium when there is demand and buying back shares at a discount when supply exceeds demand.   It is hoped that liquidity will be improved by the creation of a band within which issuance and buybacks take place as a matter of routine.

Board changes

The Company's Chairman, Mr PMS Barron, has announced his intention to stand down from the Board at the end of the current financial year. Mr RRJ Burns will succeed him as Chairman with effect from 1 July 2012.

Outlook

Evidence of slower global growth has continued to mount with the notable exception of the US where data have lately been more encouraging. The developing world has lower inflationary pressure, reduced net benefit from subdued commodity prices and has been easing policy to re-orientate stimulus towards domestic demand. Markets are fixated with the gyrations of the European drama and increasingly desirous of meaningful European Central Bank (ECB) intervention in bond markets. Politicians have put together something described as a 'compact' - Wikipedia defines this as a term used in the field of cosmetics: 'a case containing a mirror, pressed powder and a powder puff'. Without major surgery to bring about fiscal and competitive convergence, the latest agreement may well come to look like just another cosmetic application designed to disguise an underlying lack of attraction. A real test will come this year as individual nations attempt to ratify this treaty in the face of domestic austerity. Putting the European Commission directly in charge of Eurozone countries' budgets will prove an interesting test for an unelected institution that has failed to satisfy its own internal auditors for over a decade. Domestic sovereign funding has become an enduring major issue. 2012 is a big funding year. Mr Draghi, at the helm of the ECB, perhaps has these quandaries in mind in lending unlimited sums to European banks at 1% fixed for 3 years against a wide range of collateral. The ECB's balance sheet is taking much of the strain of the situation for now.

Monetary policy in the developing world is turning easy, though balance of payments surpluses are ebbing as demand slows and commodity prices subside. It has been quite a while since we have seen this and it will be intriguing to monitor the effect of lower imbalances on both sides of the equation. Reduced currency suppression by creditor nations will be required. This suggests less buying of foreign bonds and less creation of domestic money. Chinese balance of payments surpluses appear to have dwindled or even reversed lately, and recent easing of bank reserve requirements there may be related to this underlying shift. Change and uncertainty provide both specific business and investment opportunities but also a formidable obstacle to general long term confidence. Rational business optimism, where merited, is hamstrung. Funding is hard to come by and flexibility becomes the province of those businesses which are already cash generative. The progressive leverage that fiat currency systems and decades of deregulation have brought adds an unwelcome instability to the rapidly unfolding drama. Negative real interest rates will surely be engineered where possible for some years to come and quantitative easing in various forms and from various sources should be expected to persist, including from the ECB.

Past performance is not a guide to future performance.

Income statement (unaudited)

	For the six months ended  31 December 2011			For the six months ended 31 December 2010			For the year ended 30 June 2011
								(audited)
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
(Losses)/gains on sales of investments	-	(1,392)	(1,392)	-	3,520	3,520	-	5,020	5,020
Changes in investment  holding (losses)/gains	-	(7,933)	(7,933)	-	10,051	10,051	-	7,569	7,569
Gains on futures	-	1,411	1,411
Currency losses	-	(432)	(432)	-	(141)	(141)	-	(117)	(117)
Income from investments and interest receivable	557	-	557	399	-	399	1,335	-	1,335
Other income	1	-	1	2	-	2	3	-	3
Investment management fee	(72)	(72)	(144)	(76)	(76)	(152)	(159)	(159)	(318)
Other administrative expenses	(114)	-	(114)	(99)	-	(99)	(186)	-	(186)
Net return before finance costs and  taxation	372	(8,418)	(8,046)	226	13,354	13,580	993	12,313	13,306
Finance costs of borrowings	(30)	(30)	(60)	(28)	(28)	(56)	(54)	(54)	(108)
Net return on ordinary activities before taxation	342	(8,448)	(8,106)	198	13,326	13,524	939	12,259	13,198
Tax on ordinary activities	(4)	-	(4)	(13)	-	(13)	(63)	-	(63)
Net return on ordinary activities after taxation	338	(8,448)	(8,110)	185	13,326	13,511	876	12,259	13,135
Net return per ordinary share (note 4)	1.28p	(31.92p)	(30.64p)	0.74p†	53.34p†	54.08p†	3.43p†	48.00p†	51.43p†
Dividends paid and proposed per ordinary share (note 5)	1.30p			1.30p†			3.30p†

†Restated for the five for one share split in October 2011

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

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

A Statement of Total Recognised Gains and Losses is not required as all gains and losses of the Company have been reflected in the above statement.

Balance sheet (unaudited)

	At 31 December 2011 £'000	At 31 December 2010 £'000	At 30 June 2011 (audited) £'000
Fixed assets
Investments	59,433	69,949	70,360
Current assets
Debtors	561	71	238
Cash and short term deposits	4,046	2,995	1,359
	4,607	3,066	1,597
Creditors
Amounts falling due within one year: (note 6)	(5,810)	(3,788)	(5,668)
Net current liabilities	(1,203)	(722)	(4,071)
Total assets less current liabilities	58,230	69,227	66,289
Creditors
Amounts falling due after more than one year:
Bank loans (note 7)	-	(3,494)	-
Total net assets	58,230	65,733	66,289
Capital and reserves
Called up share capital	1,331	1,293	1,318
Capital redemption reserve	16	16	16
Share premium	4,383	2,575	3,818
Capital reserve	51,106	60,621	59,554
Revenue reserve	1,394	1,228	1,583
Shareholders' funds	58,230	65,733	66,289
Net asset value per ordinary share (after deducting borrowings at fair value) (note 8)	218.8p	254.1p†	251.4p†
Net asset value per ordinary share (after deducting borrowings at par)	218.8p	254.2p†	251.4p†
Ordinary shares in issue (note 9)	26,613,830	25,863,830†	26,363,830†

†Per share information and shares in issue restated for the five for one share split in October 2011

Reconciliation of movements in shareholders' funds (unaudited)

For the six months ended 31 December 2011

	Share capital £'000	Capital redemption reserve £'000	Share premium £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 July 2011	1,318	16	3,818	59,554	1,583	66,289
Net return on ordinary activities after taxation	-	-	-	(8,448)	338	(8,110)
Shares issue (note 9)	13	-	565	-	-	578
Dividends paid during the period (note 5)	-	-	-	-	(527)	(527)
Shareholders' funds at 31 December 2011	1,331	16	4,383	51,106	1,394	58,230

For the six months ended 31 December 2010

	Share capital £'000	Capital redemption reserve £'000	Share premium £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 July 2010	1,241	16	20	47,295	1,490	50,062
Net return on ordinary activities after taxation	-	-	-	13,326	185	13,511
Shares issued (note 9)	52	-	2,555	-	-	2,607
Dividends paid during the period (note 5)	-	-	-	-	(447)	(447)
Shareholders' funds at 31 December 2010	1,293	16	2,575	60,621	1,228	65,733

For the year ended 30 June 2011 (audited)

	Share capital £'000	Capital redemption reserve £'000	Share premium £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 July 2010	1,241	16	20	47,295	1,490	50,062
Net return on ordinary activities after taxation	-	-	-	12,259	876	13,135
Shares issued (note 9)	77	-	3,798	-	-	3,875
Dividends paid during the year (note 5)	-	-	-	-	(783)	(783)
Shareholders' funds at  30 June 2011	1,318	16	3,818	59,554	1,583	66,289

#   See note 5.

* Capital reserve as at 31 December 2011 includes investment holding gains of £8,318,000 (31 December 2010 - gains of £18,733,000; 30 June 2011 - gains of £16,251,000).

Condensed cash flow statement (unaudited)

	Six months to  31 December 2011 £'000	Six months to  31 December 2010 £'000	Year to  30 June 2011 (audited) £'000
Net cash inflow from operating activities	285	291	828
Net cash outflow from servicing of finance	(56)	(53)	(109)
Net cash inflow/(outflow) from financial investment	2,407	573	(2,476)
Equity dividends paid (note 5)	(527)	(447)	(783)
Net cash inflow/(outflow) before use of liquid resources and financing	2,109	364	(2,540)
Financing
Shares purchased for cancellation	-	(378)	(378)
Shares issued	578	2,607	3,875
Net cash inflow from financing	578	2,229	3,497
Increase in cash	2,687	2,593	957
Reconciliation of net cash flow to movement in net debt
Increase in cash in the period	2,687	2,593	957
Exchange movement on short term deposits and  bank loans	(106)	(147)	(159)
Movement in net debt in the period	2,581	2,446	798
Net debt at start of the period	(4,147)	(4,945)	(4,945)
Net debt at end of the period	(1,566)	(2,499)	(4,147)
Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
Net return before finance costs and taxation	(8,046)	13,580	13,306
Net losses/(gains) on investments	9,325	(13,571)	(12,589)
Net gains on futures contracts	(1,411)	-	-
Currency losses	432	141	117
Amortisation of fixed income book cost	(7)	(17)	(57)
Changes in debtors and creditors	-	183	16
Overseas tax	(8)	(25)	(65)
Net cash inflow from operating activities	285	291	828

Thirty largest holdings (unaudited)

Name	Region	Business	Value £'000	% of total assets*
Level E Maya Fund	United Kingdom	Artificial intelligence based algorithmic trading	2,300	3.6
Odontoprev	Emerging Markets	Dental health services - Brazil	2,023	3.2
IP Group	United Kingdom	Commercialisation of intellectual property	1,982	3.1
Reinet Investments SCA	Continental Europe	Investment holding company	1,841	2.9
Kone	Continental Europe	Lifts	1,452	2.3
Ocean Wilsons	United Kingdom	Tugboats, platform supply vessels and    container handling - Brazil	1,350	2.1
Schindler	Continental Europe	Lifts	1,056	1.7
Seadrill	Continental Europe	Deep water oil rigs	953	1.5
MMX Mineracao e Metalicos	Emerging Markets	Port - royalties based on iron ore shipments	923	1.4
Better Capital	United Kingdom	Fund investing in distressed businesses	907	1.4
Start Today	Asia Pacific including Japan	Online fashion retailer - Japan	892	1.4
Brazil CPI Linked 15/05/2045	Fixed Interest	Brazilian inflation-linked bond	887	1.4
Novozymes	Continental Europe	Enzyme producer	860	1.3
Digital Garage	Asia Pacific including Japan	Internet business incubator - Japan	846	1.3
Yoox.com	Continental Europe	Online fashion retailer	840	1.3
BIM Birlesik Magazalar	Emerging Markets	Discount food stores - Turkey	809	1.3
Santos Brasil Participacoes	Emerging Markets	Container handling and logistics services -    Brazil	808	1.3
Doric Nimrod Air Two	United Kingdom	Fund to acquire, lease and sell A380 aircraft	799	1.3
Marine Harvest	Continental Europe	Salmon farming	798	1.2
Cetip	Emerging Markets	Investment services - Brazil	793	1.2
Reynolds Group 9.5% 2017	Fixed Interest	Aseptic packaging company bond	789	1.2
ASOS.com	United Kingdom	Online fashion retailer	787	1.2
IG Group	United Kingdom	Spread betting	755	1.2
Yingde Gases	Emerging Markets	Production and sale of industrial gases - China	743	1.2
Dragon Oil	Emerging Markets	Oil and gas exploration and production -    Turkmenistan	734	1.2
The Biotech Growth Trust	United Kingdom	Biotechnology investment trust	731	1.1
MercadoLibre	Emerging Markets	eBay's Latin American Partner	721	1.1
Edenred	Continental Europe	Prepaid service vouchers	713	1.1
Naspers	Emerging Markets	Media company - South Africa and China	701	1.1
TOTVS	Emerging Markets	Application software for Latin American    markets	694	1.1
			30,487	47.7

*      Total assets before deduction of bank loans

Source: Baillie Gifford & Co.

Past performance is not a guide to future performance.

Notes to the condensed financial statements (unaudited)

1.	The condensed financial statements have been prepared on the basis of the same accounting policies as set out in the Company's Annual Report and Financial Statements at 30 June 2011 and in accordance with the ASB's Statement 'Half-Yearly Financial Reports' and have not been audited or reviewed by the Auditors pursuant to the Auditing Practices Board Guidance on 'Review of Interim Financial Information'.  The Company's assets, the majority of which are investments in quoted securities which are readily realisable, exceed its liabilities significantly. All borrowings require the prior approval of the Board. Gearing levels and compliance with borrowing covenants are reviewed by the Board on a regular basis. Accordingly, the Half-Yearly Financial Report has been prepared on the going concern basis as it is the Directors' opinion that the Company will continue in operational existence for the foreseeable future.
2.	The financial information contained within this half-yearly financial report does not constitute statutory accounts as defined in sections 434 to 436 of the Companies Act 2006. The financial information for the year ended 30 June 2011 has been extracted from the statutory accounts which have been filed with the Registrar of Companies. The Auditors' Report on those accounts was not qualified and did not contain statements under sections 498 (2) or (3) of the Companies Act 2006.
3.	The management agreement is terminable on not less than 12 months' notice, or on shorter notice in certain circumstances. The fee in respect of each quarter is 0.125% of the net assets of the Company attributable to its shareholders on the last day of that quarter.
4.	Net Return per ordinary share	Six months to  31 December 2011 £'000	Six months to 31 December  2010 £'000	Year to 30 June 2011 (audited) £'000
	Revenue return on ordinary activities after taxation	338	185	876
	Capital return on ordinary activities after taxation	(8,448)	13,326	12,259
	Total net return	(8,110)	13,511	13,135
	Net return per ordinary share is based on the above totals of revenue and capital and on 26,463,015 (31 December 2010 - 24,986,655; 30 June 2011 - 25,541,500) ordinary shares, being the weighted average number of ordinary shares in issue during each period, and restated for the five for one share split in October 2011. There are no dilutive or potentially dilutive shares in issue.
5.	Dividends	Six months to  31 December 2011 £'000	Six months to 31 December  2010 £'000	Year to 30 June 2011 (audited) £'000
	Amounts recognised as distribution in the period:
	Previous year's final dividend of 2.00p (2010 - 1.8p), paid 14 October 2011	527	447	447
	Interim dividend for the year ended 30 June 2011 of 1.30p paid 1 April 2011	-	-	336
		527	447	783

Notes to the condensed financial statements (unaudited) (ctd)

5.	Dividends (ctd)	Six months to  31 December 2011 £'000	Six months to 31 December  2010 £'000	Year to 30 July 2011 (audited) £'000
	Amounts paid and payable in respect of the period:
	Interim dividend for the year ending 30 June 2012 of 1.30p (2011 - 1.30p)	346	336	336
	Final dividend for the year ended 30 June 2011	-	-	527
		346	336	863
	Dividend per share information has been restated for the five for one share split in October 2011. The interim dividend was declared after the period end date and has therefore not been included as a liability in the balance sheet.  It is payable on 5 April 2012 to shareholders on the register at the close of business on 24 February 2012. The ex dividend date is 22 February 2012. The Company operates a Dividend Reinvestment Plan and the final date for elections for this dividend is 12 March 2012.
6.	Creditors include £2 million in respect of a short term loan facility expiring on 21 February 2012 (31 December 2010 - £2 million; 30 June 2011 £2 million) together with ¥300 million and €1.32 million drawn under a US$5 million facility (31 December 2010 - see note 7; 30 June 2011 - ¥300 million and €1.32 million).
7.	The bank loan falling due in more than one year as at 31 December 2010 comprised a ¥300 million and a €1.32 million loan drawn under a US$5 million facility expiring on 21 February 2012.
8.	The fair value of the bank loans at 31 December 2011 was £5,612,000 (31 December 2010 - £5,514,000; 30 June 2011 - £5,506,000).
9.	At the Annual General Meeting held on 10 October 2011 shareholders approved a 5 for 1 subdivision. Accordingly, on 11 October 2011 shareholders received 5 ordinary shares of nominal value 5p for each ordinary share of 25p held on 10 October 2011. During the period under review the Company issued 250,000 ordinary shares, with a nominal value of £12,500, for total consideration of £578,000 (period to 31 December 2010 - issued 210,000 ordinary shares, with a nominal value of £52,500, for total consideration of £2,607,000). At 31 December 2011 the Company had authority to issue a further 2,386,383 shares and authority to buy back 3,951,938 of its own shares. No shares were bought back during the period under review.
10.	Transaction costs incurred on the purchase and sale of the investments are added to the purchase cost or deducted from the sale proceeds, as appropriate. During the period, transaction costs on purchases amounted to £26,000 (31 December 2010 - £33,000; 30 June 2011 - £61,000) and transaction costs on sales amounted to £22,000 (31 December 2010 - £14,000; 30 June 2011 - £28,000).

Notes to the condensed financial statements (unaudited) (ctd)

11.

Principal Risks and Uncertainties The principal risks facing the Company relate to the Company's investment activities. These risks are market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk.  An explanation of these risks and how they are managed is contained in note 20 of the Company's Annual Report and Financial Statements for the year to 30 June 2011. The principal risks and uncertainties have not changed since the publication of the Annual Report which can be obtained free of charge from Baillie Gifford & Co and is available on the Mid Wynd page of the Managers' website: www.midwynd.co.uk‡. Other risks facing the Company include the following: regulatory risk (that the loss of investment trust status or a breach of the applicable legal and regulatory requirements could have adverse financial consequences and cause reputational damage); operational/financial risk (failure of service providers' accounting systems could lead to inaccurate reporting or financial loss); the risk that the premium/discount can change; and gearing risk (the use of borrowing can magnify the impact of falling markets).

‡    Neither the contents of the Managers' website nor the contents of any website accessible from hyperlinks on the Managers' website (or any other website) is incorporated into, or forms part of, this announcement.

None of the views expressed in this document should be construed as advice to buy or sell a particular investment.

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