Half-year Report

Legal Entity Identifier: 213800IYHGJTZJ3MO642

Regulated Information Classification: Half Yearly Financial Report.

The following information is disclosed in accordance with DTR 4.2 of the UKLA Listing Rules (half-yearly financial reports).

OBJECTIVE AND POLICY

The Company's objective is to provide good absolute returns over long periods by investing the great majority of its assets in UK and international quoted securities and, if appropriate, index futures. The portfolio is constructed without reference to the composition of any stockmarket index. Although its investment policy allows gearing, including the use of derivatives, the Company is not permitted to employ gearing whilst it continues to be a small registered UK Alternative Investment Fund Manager (AIFM). When appropriate, the directors will sanction a relatively concentrated portfolio structure and, depending on its AIFM status, relatively high levels of gearing.

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks facing the Company, which have not changed since the date of the Company's Annual Report and Financial Statements for the year to 30 November 2021, are financial risk, investment strategy risk, regulatory risk, custody risk, operational risk, discount risk, economic, social and governance (ESG) risk, political risk and resource risk. An explanation of these risks and how they are being managed or mitigated is set out on pages 11 to 12 of that report, which is available on the Company's website: independentinvestmenttrust.co.uk. The Company's policy is designed to allow the Company an unusually high degree of freedom to exploit the directors' judgement. To the extent that the directors' judgement is flawed, future results could be unusually poor.

RESPONSIBILITY STATEMENT

We confirm that to the best of our knowledge:

a) the condensed set of financial statements has been prepared in accordance with FRS 104 'Interim Financial Reporting';

b) the Chairman's Statement includes a fair review of the information required by Disclosure and Transparency Rule 4.2.7R (being an indication of important events that have occurred during the first six months of the financial year, their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year); and

c) the Interim Financial Report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.8R (disclosure of related party transactions and changes therein).

On behalf of the board

Douglas McDougall Chairman

9 August 2022

* For a definition of terms see Glossary of Terms and Alternative Performance Measures at the end of this announcements.

† Source: Baillie Gifford/Refinitiv and relevant underlying data providers. See disclaimer at the end of this announcement.

# Alternative performance measure, see Glossary of Terms and Alternative Performance Measures at the end of this announcement.

Past performance is not a guide to future performance.

The six month period ending 31 May 2022 saw our company produce a net asset value total return of -13.5%. The total returns notionally attributable to the FTSE All-Share Index and the FTSE World Index were 6.2% and -3.8% respectively. Our net asset value per share fell from 617.9p to 528.3p over the period, and the share price from 544p to 440p, causing the discount to net asset value to rise from 12.0% to 16.7%. The share price total return for the period was -18.0%. 

Earnings for the half year amounted to 6.09p (5.17p). The buoyancy of our revenue account has continued, but the myriad uncertainties clouding the outlook led us to declare an unchanged interim dividend of 3p. It will be paid on 19 August with our shares having gone ex dividend on 28 July. In the event of our proposed merger with The Monks Investment Trust (see below), we should pay a pre-liquidation interim dividend required in order to maintain investment trust status.

During the period we were able to buy back 866,819 shares at an average discount of 13.3%.

The economic agenda has been dominated over the period by the deteriorating outlook for inflation and the consequent implications for interest rates and economic activity. Having pinned their hopes on the inflationary forces emerging last year being "transitory", the world's central banks have been caught out as war in the Ukraine has, through its effect on food and energy prices, provoked a further acceleration in inflation. The monetary authorities have, with varying degrees of conviction, accepted that their earlier analysis was unduly sanguine and embarked upon a programme of monetary tightening. It is too early to predict the scale and duration of this programme, but it has already had a notable effect on equity markets in general and on the share prices of companies perceived as having strong growth prospects in particular. Such companies are disproportionately represented in our portfolio and we have suffered accordingly.

It was not a particularly active period for transacting and much of the activity that did take place was aimed at improving the overall liquidity of the portfolio. The two sector weightings most affected by this were Technology and Leisure, both of which underwent significant reductions. Our cash balances rose from 12.5% at 30 November 2021 to 15.6% at 31 May 2022. They have since risen further to 16.6%.

An unexceptional performance by our Business Services holdings saw the sector emerge as our biggest exposure at the end of the period: a position worth £53.8m at 30 November 2021 had fallen in value to £45.9m by 31 May 2022 after net sales of £0.4m. All four of our holdings traded well throughout the period, but only Big Technologies saw its share price rise.

The combined impact of disappointing performance and disposals saw the value of our Technology holdings fall from £70.3m at 30 November 2021 to £44.6m at 31 May 2022. The takeover of Blue Prism and a reduction in the Herald holding accounted for £9m of the fall. Alfa Financial Services, FDM and Seeing Machines all produced encouraging trading results, but the recently acquired Made Tech suffered from the need to extend the length of contracts with a number of customers. The net asset value of Herald performed creditably in the circumstances, but a widening of its discount led to a bigger fall in its share price.

A resilient performance of our traditional Travel and Leisure holdings mitigated the losses suffered in our computer games companies. We made significant reductions in our computer games companies, selling out of Frontier Developments on news of poor trading, reducing Team 17 on grounds of valuation and reducing tinyBuild on grounds of illiquidity. We also sold out of Loungers on grounds of valuation and illiquidity. Our remaining traditional holdings, Jet2 and On the Beach drew encouragement from very strong holiday bookings for the summer of 2022. Overall, our Travel and Leisure stake fell in value from £51.8m at 30 November 2021 to £30.8m at 31 May 2022 after sales of £16.1m.

Our holdings in the Housing sector, one of our great long term favourites, performed very poorly during the period despite excellent trading conditions and strong earnings. A stake worth £33.6m at 30 November 2021 had fallen in value to £30.8m at 31 May 2022 despite purchases amounting to £5.3m. Sector share prices had begun to underperform in the second half of 2021 in anticipation of rising interest rates. This underperformance continued as the interest rate outlook deteriorated and was given extra impetus by government action to hold the quoted companies liable for the remediation of buildings with cladding defects for which they had no legal or moral responsibility. The threat by the government to obstruct planning consent for those defying its will was enough to force leading companies into submission. Owing to the strong financial condition of the sector, these liabilities are manageable, as are any financial pressures resulting from a crash in the housing market, should it happen. Sentiment, however, will take time to recover. In the meantime we consider our holdings to be astonishingly cheap.

Our retail holdings had a grim time as the scale of the reversion of trade from online to offline was greater than expected and the deteriorating interest rate outlook understandably affected investors' confidence in the sector. Fever-Tree also suffered a big share price fall as cost pressures overshadowed a strong sales performance. The fall in the Ashtead share price can be attributed entirely to investors' expectations of a serious deterioration in trading at some point in the future. On the other hand, British American Tobacco was, somewhat surprisingly, the best performing stock in the portfolio as its defensive merits outweighed its poor ESG credentials. We disposed of our two healthcare stocks during the period: Medica on grounds of poor liquidity and Synairgen following a disappointing drug trial.

Among our financial holdings, Polar Capital performed well and the Direct Line dividend compensated for the fall in its share price. Our two new holdings, IG Group and OSB Group both suffered disappointing share price performances despite good trading results.

We have today announced our proposal to merge our company with the Monks Investment Trust. The directors have confidence in the board and managers of Monks and have committed to accept stock in respect their entire personal holdings in The Independent, which amount to 24.3% of the Company's equity. This announcement can be accessed on the Company's website: independentinvestmenttrust.co.uk.

The principal risks facing the Company are set out on the inside front cover of this report. We draw your attention, in particular, to the unusually important role of the directors' judgement in the success or failure of the Company's policy. We should also like to remind shareholders, despite the decision by the Association of Investment Companies to classify us as a UK trust, that we are free to invest in quoted equities wherever they are listed.

Douglas McDougall

9 August 2022

All holdings are in equities domiciled in the UK unless otherwise stated.

The total column of this statement is the profit and loss account of the Company. The supplementary revenue and capital columns are prepared under guidance published by the Association of Investment Companies.

All revenue and capital items in this statement derive from continuing operations.

A Statement of Comprehensive Income is not required as the Company does not have any other comprehensive income and the net return on ordinary activities after taxation is both the profit and comprehensive income for the period.

For the six months ended 31 May 2022

For the six months ended 31 May 2021

* The Capital Reserve balance at 31 May 2022 includes investment holding gains on fixed asset investments of £34,627,000 (31 May 2021 - gains of £122,409,000).

1. The condensed financial statements for the six months to 31 May 2022 comprise the statements set out on pages 6 to 9 together with the related notes on pages 10 and 11. They have been prepared in accordance with FRS 104 'Interim Financial Reporting' and the AIC's Statement of Recommended Practice issued in November 2014 and updated in October 2019 with consequential amendments. They have not been audited or reviewed by the Auditor pursuant to the Auditing Practices Board Guidance on 'Review of Interim Financial Information'. The financial statements for the six months to 31 May 2022 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 November 2021. The Company has elected not to present a Statement of Cash Flows for the current period as a Statement of Changes in Equity has been provided and substantially all of the Company's investments are highly liquid and are carried at market value.

Fair value hierarchy

The fair value hierarchy used to analyse the basis on which the fair values of financial instruments held at fair value through the profit or loss account are measured is described below. Fair value measurements are categorised on the basis of the lowest level input that is significant to the fair value measurement.

Level 1 - using unadjusted quoted prices for identical instruments in an active market;

Level 2 - using inputs, other than quoted prices included within Level 1, that are directly or indirectly observable (based on market data); and

Level 3 - using inputs that are unobservable (for which market data is unavailable).

The Company's investments are financial instruments held at fair value through the profit or loss accounts. At 31 May 2022, all of the Company's investments were categorised as Level 1 within the fair value hierarchy described above. At 30 November 2021, all of the Company's investments were also classified as Level 1. For all other financial assets and liabilities, carrying value approximates to fair value. There have been no transfers between levels of the fair value hierarchy during the period. The fair value of listed investments is either the bid price or last traded price, depending on the convention of the stock exchange on which the investment is listed. Listed investments are categorised as Level 1 if they are valued using unadjusted quoted prices for identical instruments in an active market, as Level 2 if they do not meet all these criteria but are, nonetheless, valued using market data and as Level 3 where market data is unavailable.

Going concern

On 9 August 2022, the Board announced that it had agreed heads of terms with The Monks Investment Trust PLC (Monks) and Monks' manager Baillie Gifford & Co Limited, for a proposed Scheme of reconstruction (the Scheme) under Section 110 of the Insolvency Act 1986 of The Independent Investment Trust plc (IIT or the Company) and an associated transfer of assets to Monks. The Scheme has not yet been approved by the shareholders of the Company or those of Monks but does cast doubt on the Company's ability to continue as a going concern. If the shareholders approve the Scheme the Company will be liquidated and its assets split into three pools in respect of (i) the interest of shareholders wishing to rollover their shareholdings into Monks, (ii) cash exiting shareholders and (iii) the liquidator's retention.

The financial statements do not include the adjustments that would result should the Company be unable to continue as a going concern. In arriving at the decision on the basis of preparation, the Board has considered the financial position of the Company, its liquidity position as well as the uncertainty surrounding the outcome of the Scheme and concluded that, as the Scheme is contingent on shareholder approval and the Company is considered solvent in all other regards, there is no irrevocable path to liquidation and thus going concern remains the most appropriate basis for preparation.

2. The financial information contained within this Interim 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 November 2021 has been extracted from the statutory accounts which have been filed with the Registrar of Companies. The Auditor's Report on those accounts was not qualified, did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying its report, and did not contain statements under sections 498(2) or (3) of the Companies Act 2006.

The returns per share are based on the above returns and on 52,284,141 (31 May 2021 - 53,523,911; 30 November 2021 - 53,274,238) shares being the weighted average number of shares in issue during each period.

There was no dilution of returns during any of the financial periods under review.

5. Dividends

The Interim dividend in respect of the six months to 31 May 2022 was declared after the period end and has therefore not been included as a liability in the balance sheet. It is payable on 19 August 2022 to shareholders on the register at the close of business on 29 July 2022. The ex-dividend date is 28 July 2022.

The net asset value per ordinary share and the net asset value attributable to the ordinary shareholders at the period end calculated in accordance with the articles of association and UK GAAP were as follows:

The net asset value per share is based on net assets as shown above and on 51,906,862 shares (30 November 2021 - 52,773,681), being the number of shares in issue at the period end.

There are no dilutive or potentially dilutive shares in issue.

7. During the period the Company bought back for cancellation 866,819 ordinary shares of 25p each at a cost of £4,464,000. At 31 May 2022, the Company had authority to buy back 7,780,838 ordinary shares and to allot new shares up to an aggregate nominal amount of £1,945,000. In the period from 1 June 2022 to 7 August 2022 the Company has bought back no ordinary shares of 25p each.

8. 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 £237,000 (31 May 2021 - £170,000; 30 November 2021 - £208,000) and transaction costs on sales amounted to £77,000 (31 May 2021 - £95,000; 30 November 2021 - £183,000).

There have been no transactions with related parties during the first six months of the current financial year that have materially affected the financial position or the performance of the Company during that period and there have been no changes in the related party transactions described in the last Annual Report and financial statements that could have had such an effect on the Company during that period.

Third party data provider disclaimer

No third party data provider ('Provider') makes any warranty, express or implied, as to the accuracy, completeness or timeliness of the data contained herewith nor as to the results to be obtained by recipients of the data.

No Provider shall in any way be liable to any recipient of the data for any inaccuracies, errors or omissions in the index data included in this document, regardless of cause, or for any damages (whether direct or indirect) resulting therefrom. No Provider has any obligation to update, modify or amend the data or to otherwise notify a recipient thereof in the event that any matter stated herein changes or subsequently becomes inaccurate.

Without limiting the foregoing, no Provider shall have any liability whatsoever to you, whether in contract (including under an indemnity), in tort (including negligence), under a warranty, under statute or otherwise, in respect of any loss or damage suffered by you as a result of or in connection with any opinions, recommendations, forecasts, judgements, or any other conclusions, or any course of action determined, by you or any third party, whether or not based on the content, information or materials contained herein.

FTSE Index data

London Stock exchange Group plc and its group undertakings (collectively, the 'LSE Group') © LSE Group 2022. FTSE Russell is a trading name of certain of the LSE Group companies. 'FTSE®' 'Russell®', 'FTSE Russell R' is/are a trade mark(s) of the relevant LSE Group Group companies and is/are used by any other LSE Group company under licence. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indices or data and no party may rely on any indexes or data contained in this communication. No further distribution of Data from the :SE Group is permitted without the relevant LSE Group company's express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.

Automatic Exchange of Information

In order to fulfil its obligations under UK Tax Legislation relating to the automatic exchange of information, the Company is required to collect and report certain information about certain shareholders.

The legislation will require investment trust companies to provide personal information to HMRC on certain investors who purchase shares in investment trusts. Accordingly, the Company must provide information annually to the local tax authority on the tax residencies of a number of non-UK based certificated shareholders and corporate entities.

Shareholders, excluding those whose shares are held in CREST, who come on to the share register will be sent a certification form for the purposes of collecting this information.

For further information, please see HMRC's Quick Guide: Automatic Exchange of Information - information for account holders gov.uk/government/publications/exchange-of-information-account-holders.

RISK WARNINGS

Past performance is not a guide to future performance.

The Independent Investment Trust PLC is a listed UK company. As a result, the value of its shares and any income from those shares can fall as well as rise and investors may not get back the amount invested.

As Independent invests in overseas securities, changes in the rates of exchange may also cause the value of investments (and any income it may pay) to go down or up.

Market values for securities which have become difficult to trade may not be readily available, and there can be no assurance the value assigned to such securities will accurately reflect the price the Company might receive upon their sale.

None of the views expressed in this document should be construed as advice to buy or sell a particular investment. The Independent Investment Trust PLC, as a listed company, is subject to the requirements of the Listing Rules of the Financial Conduct Authority (FCA). It is a small registered UK Alternative Investment Fund Manager (AIFM) under the Alternative Investment Fund Managers Regulations 2013. Its employees are not registered with the FCA as authorized persons. If you are in any doubt about the Company's regulatory status, you should consult your stockbroker or financial adviser.

Glossary of Terms and Alternative Performance Measures (APM)

Total Assets

The total value of all assets held less all liabilities (other than liabilities in the form of borrowings).

Net Asset Value

Also described as shareholders' funds. Net Asset Value (NAV) is the value of all assets held less all liabilities. The NAV per share is calculated by dividing this amount by the number of ordinary shares in issue.

(Discount)/Premium (APM)

As stockmarkets and share prices vary, an investment trust's share price is rarely the same as its NAV. When the share price is lower than the NAV per share it is said to be trading at a discount. The size of the discount is calculated by subtracting the share price from the NAV per share and is usually expressed as a percentage of the NAV per share. If the share price is higher than the NAV per share, it is said to be trading at a premium.

Net Liquid Assets

Net liquid assets comprise current assets less current liabilities.

Total Return (APM)

The total return is the return to shareholders after reinvesting the dividend on the date that the share price goes ex-dividend.

\* The dividend adjustment factor is calculated on the assumption that the dividends of 6.00p paid by the Company in the six months to 31 May 2022 (year to 30 November 2021 - 8.00p) were reinvested into shares of the Company at the cum income NAV per share/share price, as appropriate, at the ex-dividend date.

Gearing (APM)

At its simplest, gearing is borrowing. Just like any other public company, an investment trust can borrow money to invest in additional investments for its portfolio. The effect of the borrowing on the shareholders' assets is called 'gearing'. If the Company's assets grow, the shareholders' assets grow proportionately more because the debt remains the same. But if the value of the Company's assets falls, the situation is reversed. Gearing can therefore enhance performance in rising markets but can adversely impact performance in falling markets. The level of gearing can be adjusted through the use of derivatives which affect the sensitivity of the value of the portfolio to changes in the level of markets.

Available Cash

Cash and cash equivalents as adjusted for investment and share buy-back transactions awaiting settlement.

The printed version of the Interim Financial Report will be sent to shareholders and will be available on independentinvestmenttrust.co.uk† on or around 23 August 2022. None of the views expressed in this document should be construed as advice to buy or sell a particular investment.

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

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