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Independent Inv Tst (IIT)

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Wednesday 19 January, 2005

Independent Inv Tst

Final Results

Independent Investment Trust PLC
19 January 2005


                    Results for the year to 30 November 2004

                                19 January 2005


                             Chairman's Statement

During the year to 30 November 2004, our net asset value per share rose by 10.4%
from 143.0p to 157.9p.  This is slightly ahead of the 9.2% increase in the FTSE
All Share Index over the period but well behind the 15.1% gain in the FTSE Mid
250 Index.

The market moved in an unusually narrow range for the first ten months of our
year as a rapidly rising oil price and fears of higher interest rates acted as a
counterweight to the beneficial influence of strong economic growth and
corporate profits.  In the final two months, however, some moderation of
interest rate concerns combined with relief at the progress, and then the
outcome, of the US presidential election to allow the market to move decisively
into higher territory.  Our own net asset value peaked at 163p in early April
and from then on it was a constant - and not altogether successful - struggle to
avoid slipping down the up escalator.

Our turnover has been lower than in previous years, but we have made significant
changes to the shape of our portfolio.  In particular, banking has emerged as a
major area of exposure for us while retailing and insurance have both been cut
back.  With the benefit of hindsight, we can see that our results for the year
would have been better if we had also reduced our housebuilding exposure in the
spring.  We should confess that the arguments in favour of such a move seem no
more appealing to us now than they did then.  If there has been a fundamental
deterioration in the industry's long term outlook, as opposed to an inevitable
reaction to the buoyancy of recent years, then we have been slow to spot it.

In earlier years, we have made much of the benefits we have reaped from our
freedom to ignore the composition of stockmarket indices when constructing our
portfolio.  Looking back on a year in which that freedom conferred negligible
benefits, we should reiterate that not only is it most unlikely that we shall
beat the index every year, but it is also quite likely that we shall have years
when we do substantially worse than the index.  It is only over periods much
longer than one year that the merits of our approach should be judged.

We made only modest use of our ability to borrow during the year and ended it
with net cash.  As in previous years, we have used dollar borrowings to hedge
our quoted US holdings whilst simultaneously holding sterling cash balances.  On
30 November 2004, we had dollar borrowings of $13m and (predominantly sterling)
cash balances of £12m.

Despite ending the year well down from its peak valuation, our housebuilding
portfolio nevertheless managed to perform slightly better than the FTSE All
Share Index over the year.  Our banking portfolio, boosted by another excellent
showing from Anglo Irish, did better still, but our retailing portfolio
(adjusted for the effect of net transactions) showed only a modest increase in
value and our insurance portfolio (similarly adjusted), was affected by the
weakness of the dollar and declined in value.  It can be argued that our biggest
mistake was not to have had more money invested in energy shares in a year when
the oil price rose dramatically.  Apart from our failure to foresee the rise in
the oil price, the main reason for this is the difficulty we have had in finding
attractive companies in the energy industry and the high valuations of those,
such as Suncor Energy, that we have found.  We shall keep working at it because
we subscribe fully to the notion that oil will become an increasingly scarce
resource and therefore, over time, a much more expensive one.  Further comments
on performance can be found in the Managing Director's report.

Earnings per share were 4.56p (3.95p).  We are proposing a final dividend of
2.25p (1.75p) to make a total for the year of 3.75p (3p).  Once again, our
revenue account has benefited from factors that cannot be depended upon to
recur.  Given the strength of our revenue reserve, we do not expect to have to
cut our dividend in the foreseeable future, but shareholders should not count on
its continuing to grow at the sort of rate seen in recent years.  We are pleased
to report a further fall in our expense ratio during the year - from 0.43% of
year end shareholders' funds to 0.39%.  This further reinforces our position as
one of the great skinflints of our industry.

The terms on which we might have been able to issue new shares were not
sufficiently attractive to compensate for the fact that we are now of a size
where further growth in our asset base may soon begin to impair our dealing
flexibility.  So we did not issue any.  Instead, we have given much thought to
the terms on which we might be prepared to buy our shares in.  We recognize the
attractiveness to many shareholders of having a dependable source of buying
interest when our shares are out of fashion, but have to weigh against this the
fact that our cost base is essentially fixed, which means that a shrinking asset
base is likely to lead to a rising expense ratio.  The best description of our
position is that we remain prepared to buy in our own shares if we can do so on
terms that are beneficial to continuing shareholders.

You will see that we are seeking shareholder approval at the AGM to renew The
Independent's authority to buy back its own shares.  Relatively new regulations
now allow shares which are bought back by The Independent to be held in '
treasury' (within certain limits) and re-issued.  The re-issue of treasury
shares should be a less costly and more flexible way of raising capital than
issuing brand new shares.  We are therefore also seeking shareholder approval
for statutory pre-emption rights to be disapplied in respect of shares re-issued
by the Company out of treasury.  We believe that this is in the best interests
of all shareholders as it facilitates the process of re-issuing such shares.
There is, of course, no question of our re-issuing shares at a price below the
level of net asset value prevailing at the time of issue.

The dependence of the world for its prosperity upon the profligacy of the United
States of America has been a familiar theme in our comments on the outlook for
financial markets.  The profligacy remains very much in evidence but the
benefits stemming from it seem to be diminishing and the strain it imposes upon
the dollar appears to be growing.  It seems to us that there is already a
significant threat to the stability of the world financial system posed by US
imbalances and that this threat will grow unless the imbalances are addressed -
not a development that appears imminent.  These economic problems are compounded
by the political instability of the Middle East, on which we shall become
increasingly dependent for our oil supply.  The apparent prosperity of much of
the world could therefore turn out to be precariously based.  Meanwhile,
stockmarket valuations, although well down from the more absurd levels reached
during the bubble, are still not cheap by the standards of the last hundred
years.  This strikes us as a setting in which it may pay to keep some powder dry
and one in which the emphasis we tend to put on the quality and valuations of
our businesses should stand us in good stead.

Once again, we should like to encourage you to come to the AGM, which is to be
held in the Baillie Gifford offices at Calton Square at 4.45pm on Tuesday, 15
March 2005.  It will help our planning if we know how many shareholders are
likely to attend, and I shall be grateful if you will mark the proxy form
accordingly and return it to us.  I look forward to seeing as many of you as
possible there.


Managing Director's Report

During the year to 30 November 2004, The Independent Investment Trust produced a
NAV total return of 13.1%.  This represents a decent real return, but is little
different from the 12.8% total return produced by a theoretical investment in
the FTSE All Share Index over the period.

Housebuilding remained our biggest position throughout the year and again
produced a pleasing return.  An investment worth £24.8m at 30 November 2003 was
supplemented by a single purchase of more shares in Wilson Bowden at a cost of
£2m and had become worth £29.5m by 30 November 2004.  Market enthusiasm for the
sector reached a new high point following the publication in the spring of the
Barker Review of Housing Supply, which highlighted the need for a greatly
increased level of housebuilding in the UK.  Rapture at the prospect of a
mouth-watering long term demand outlook for the industry quickly gave way,
however, to concern over its shorter term prospects.  The housing market has
clearly slowed since last spring and there is no shortage of pundits willing to
predict an impending slump.  Beyond a belief that conditions are unlikely to be
any worse than they were in the early 1990s, we have no clear view of the
industry's prospects over the next year or two.  But drawing on the experience
of well managed housebuilders in that earlier period, we expect our companies'
earnings to hold comfortably above their current dividends.  We also expect both
their dividends and their balance sheet net asset values to keep growing in real
terms.  Our inference from the current level of share prices in the sector is
that the market is expecting a materially worse outcome.  This is the point at
which you should read the bit in the risk warning inside the front cover about
the consequences of the directors' judgment being flawed.

We still don't seem to have got the hang of investing in UK banks.  In addition
to the customarily dreary performance from Lloyds TSB (at times we seem to be
the only people who believe that the dividend is secure), we have also contrived
to lose a modest amount of money in The Royal Bank of Scotland.  Our purchase of
HSBC was a little better timed, but once again it has been a splendid
performance from Anglo Irish that has saved the day.  Overall, our bank holdings
were worth £8.8m on 30 November 2003 and, after additions totalling £11.9m, had
grown in value to £23.4m by 30 November 2004.  We continue to think that they
represent excellent value.

Looking back at our comments on our retail holdings a year ago, we are reminded
of how easy it is to look silly when reviewing earlier investment opinions.  'We
consider the dull performance of William Morrison a great opportunity and have
both added to it and bought a small holding in Safeway.'  We should own up to
the fact that we even bought some more Morrison after that, making it - briefly
- one of the biggest holdings in the portfolio.  The news that Safeway was in
much worse condition than we or they had realized prompted a reappraisal of the
risks associated with the integration process and a consequent reduction in our
holding on terms that cannot be honestly described as advantageous.  Elsewhere
in our retail portfolio, we made profitable sales of New Look and DFS, both of
which were bid for, and a well timed reduction in our big Signet holding on
fears of dollar weakness.  But we decided to hold onto Merchant Retail, despite
the disruption to its normally buoyant trading pattern caused by the
introduction of a new IT system and we bought a small holding in the specialist
retailer Floors 2 Go towards the end of the year.  Overall, a 30 November 2004
valuation of £12m seems satisfactory to us, given our embarrassment in William
Morrison: the 30 November 2003 valuation was £19m and net sales during the year
amounted to £8.1m.

Perhaps the most disappointing performance of the year has come from our
insurance holdings, which were worth £17.7m on 30 November 2003, but had fallen
in value to £9.1m by 30 November 2004 after net sales of £7.9m.  Our main
difficulties have been in the broking sector, where falling rates have curtailed
revenue growth, the weakness of the dollar has been unhelpful to Benfield and
Jardine Lloyd Thomson, and Mr. Spitzer's investigation of broking practices has
affected the profitability of Willis.  Recognizing that the rating environment
was deteriorating more rapidly than we had expected, we sold all our broking
holdings at an overall loss on book cost.  Our underwriting holdings are
reporting good profits and are cheaply valued in relation to book value, but we
are less optimistic than we once were about the prospects for insurance rates.

Our successful run in the water sector resumed as United Utilities benefited
from a favourable regulatory review, but we sustained significant losses in our
recruitment companies, where trading, although improving rapidly from a low
base, failed to match the expectations of the optimists.  A poor performance
from Nokia held back an otherwise satisfactory showing from our technology and
telecommunications holdings.

A small but highly successful investment in Ashtead gave rise to a
disproportionate profit over a nine month holding period and DTZ made another
big contribution as the commercial property market started to improve.  A new
holding in Suncor Energy, a big producer of oil from the tar sands of
Athabascar, did well for us, but not as well as it would have done had we been
able to invest as much in it as we originally intended.

GlaxoSmithKline disappointed once again, but Altria performed well in dollar
terms and Johnston Press lived up to its reputation for quality and consistency.
  The early promise of holdings in Geest and Vitec was not sustained and we sold
both at acceptable prices.

Results for the Period 1 June 2004 to 30 November 2004

We are bound by the listing requirements to disclose the results for the six
months from 1 June 2004 to 30 November 2004.  During that period the net asset
value per share rose by 4.3% as compared to a rise of 6.5% in the FTSE All-Share


The following is the unaudited preliminary statement for the year to 30 November
2004 which was approved by the Board on 18 January 2005.  The directors of The
Independent Investment Trust PLC are recommending to the Annual General Meeting
of the Company to be held on 15 March 2005 the payment of a final dividend of
2.25p net (1.75p net last year) per ordinary share, making a total of 3.75p net
(3.00p net last year) per ordinary share for the year ended
30 November 2004.

                            STATEMENT OF TOTAL RETURN
               (unaudited and incorporating the revenue account*)

                                          For the year ended                      For the year ended
                                           30 November 2004                        30 November 2003

                                      Revenue     Capital    Total           Revenue      Capital    Total
                                      £'000       £'000      £'000           £'000        £'000      £'000

Gains on investments                       -       8,352       8,352               -      17,534       17,534

Currency gains                             -         853        853                -         939         939

Income                                  3,641          -      3,641            3,208           -       3,208

Administrative expenses                 (402)          -       (402)            (400)          -        (400)

Net return before finance costs
and taxation                           3,239       9,205     12,444            2,808      18,473      21,281

Finance costs of borrowings             (253)          -       (253)            (338)          -        (338)

Return on ordinary activities
before taxation                        2,986       9,205     12,191            2,470      18,473      20,943
Tax on ordinary activities               (14)          -        (14)             (24)          -         (24)

Return on ordinary activities
after taxation                         2,972       9,205     12,177            2,446      18,473      20,919

Dividends in respect of equity
shares                                (2,446)          -     (2,446)          (1,943)          -      (1,943)
Transfer to reserves                     526       9,205      9,731              503      18,473      18,976

Return per ordinary share :
(note 1)

Basic                                   4.56p     14.11p      18.67p            3.95p     29.81p       33.76p

Diluted (FRS14)                         4.52p                                   3.90p

Dividends per ordinary share
(note 2)                                3.75p                                   3.00p

* The revenue column of this statement is the profit and loss account of the

All revenue and capital items in this statement derive from continuing


                            SUMMARISED BALANCE SHEET
                              at 30 November 2004

                                                                    At 30 November 2004     At 30 November 2003
                                                                  £'000       £'000          £'000        £'000


Fixed asset investments                                                       99,315                   97,678


Debtors                                                              232                    1,023

Cash at bank and in hand                                          11,799                    7,585

                                                                  12,031                    8,608


Amounts falling due within one year                               (8,329)                 (13,000)

NET CURRENT ASSETS/(LIABILITIES)                                               3,702                   (4,392)

TOTAL ASSETS LESS CURRENT LIABILITIES                                        103,017                  93,286


Called-up share capital                                                       16,307                   16,307

Share premium                                                                 13,046                   13,046

Special distributable reserve                                                 38,663                   38,663

Capital reserve - realised                                                    15,684                    9,035

Capital reserve - unrealised                                                  17,675                   15,119

Revenue reserve                                                                1,642                    1,116

EQUITY SHAREHOLDERS' FUNDS                                                   103,017                   93,286

NET ASSET VALUE PER ORDINARY SHARE (note 3)                                    157.9p                   143.0p


                                         SUMMARISED CASH FLOW STATEMENT

                                                               For the year ended         For the year ended
                                                               30 November 2004           30 November 2003
                                                           £'000             £'000    £'000           £'000

NET CASH INFLOW FROM OPERATING ACTIVITIES                                   3,390                      2,796

NET CASH OUTFLOW FROM SERVICING OF FINANCE                                   (251)                      (347)


Acquisitions of investments                                   (24,793)                   (38,740)

Disposals of investments                                       31,381                     35,953

Realised currency loss                                           (135)                       (77)

FINANCIAL INVESTMENT                                                        6,453                     (2,864)
EQUITY DIVIDENDS PAID                                                      (2,120)                    (1,692)

NET CASH INFLOW/(OUTFLOW) BEFORE FINANCING                                   7,472                    (2,107)


Issues of shares                                                    -                      7,887

Expenses of share issues                                            -                        (10)

Net bank loans repaid                                          (3,258)                      (577)

NET CASH (OUTFLOW)/INFLOW FROM FINANCING                                   (3,258)                     7,300

Increase in cash                                                            4,214                      5,193


Increase in cash in the year                                                4,214                      5,193

Net bank loans repaid                                                       3,258                        577

Exchange movement on bank loans                                               988                       1,016

MOVEMENT IN NET FUNDS/(DEBT) IN THE YEAR                                    8,460                      6,786

NET DEBT AT START OF YEAR                                                  (3,462)                   (10,248)

NET FUNDS/(DEBT) AT END OF YEAR                                             4,998                     (3,462)



                                                                      Year to                       Year to
                                                             30 November 2004              30 November 2003
                                                                        £'000                         £'000
1.    Return per ordinary share

      Revenue return                                                    2,972                         2,446

      Capital return                                                    9,205                        18,473

      The returns per share are based on the above returns and on 65,228,895 shares (2003 - 61,958,749),
      being the weighted average number of shares in issue during the year.

      Dilution of revenue return is attributable to the difference between the average share price and the
      average exercise price of the outstanding options for the year. The diluted revenue returns per share
      are based on the above returns and on 65,712,988 shares (2003 - 62,705,069), being the weighted
      average number of shares in issue during the year plus the notional number of shares that would have
      been issued for no consideration using an average share price of 161.0p (2003 - 131.0p) and an
      average exercise price for the options of 153.0p  (2003 - 121.2p).

                                                   Year to 30 November 2004        Year to 30 November 2003
                                                        Pence          £'000             Pence        £'000
2.    Dividends per share

      Adjustment to previous year's final                   -              -                 -           15

      Interim dividend paid 3 September 2004             1.50            978              1.25          786

      Proposed final dividend payable 6 April            2.25          1,468              1.75        1,142
                                                         3.75          2,446              3.00        1,943

      If approved, the final dividend will be paid on 6 April 2005 to all shareholders on the register at
      the close of business on 11 March 2005.

                                                               At 30 November                At 30 November
                                                                         2004                          2003

3.    Net asset value per ordinary share

      Net asset value attributable to ordinary shares                 103,017                        93,286

      Net asset value per share is based on net assets (as shown above) and on 65,228,895 shares (2003 -
      65,228,895) being the number of shares in issue at the year end.

      Dilution of revenue return is attributable to the difference between the share price and the
      exercise price of the outstanding options. Because these options are exercisable at net asset
      value, no dilution to the net asset value arises from their exercise.

4.    The financial information set out above does not constitute the Company's statutory accounts for
      the year ended 30 November 2004.  The financial information for 2003 is derived from the statutory
      accounts for 2003 which have been delivered to the Registrar of Companies.  The Auditors have
      reported on the 2003 accounts; their report was unqualified and it did not contain a statement
      under section 237(2) or (3) of the Companies Act 1985.  The statutory accounts for 2004 will be
      finalised on the basis of the financial information presented in this preliminary announcement and
      will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

                      This information is provided by RNS
            The company news service from the London Stock Exchange                                                                                                                                                                                                                           

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