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Independent Inv Tst (IIT)

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Friday 08 July, 2005

Independent Inv Tst

Interim Results

Independent Investment Trust PLC
08 July 2005


                   Results for the six months to 31 May 2005

                                 8 July 2005


                              Chairman's Statement

The six month period ending 31 May 2005 has seen our Company produce a net asset
value total return of 10.0%.  This result is broadly in line with the
performance of the FTSE All Share Index, which produced a return of 7.7% over
the same period.  As in the equivalent period last year, our fortunes peaked in
early spring and then deteriorated thereafter.  Much of the deterioration can be
attributed to a sharp slowdown in consumer spending, which became apparent in
April and which affected the market's attitude to three of our most important
sectors: housebuilding, banking and retailing.  Our enthusiasm for our holdings
in these sectors is based on longer term considerations and it remains to be
seen whether we have been unduly complacent about their immediate prospects.

The total return can be broken down into a gain of 8.9% in our net asset value -
from 157.9p to 172.0p - and an interim dividend of 1.75p (1.5p last year), to be
paid on 2 September 2005 from earnings of 3.04p (2.17p last year).  Despite our
traditional reluctance to make firm predictions about the full year, we can
confide that we expect to recommend a final dividend at least equal to last
year's 2.25p.

The tone of the market for much of the period was one of laboured progress.  The
positive stimulus of good growth in corporate profits and dividends has been
tempered by a number of concerns.  Domestically, these have centred on the
prospects for consumer spending and on the government's ambitious plans for
public expenditure.  Internationally, the persistent strength of the oil price,
further disappointments from the Japanese and European economies and doubts
about the sustainability of the US expansion have all caused anxiety.  None of
these is a new problem, but none seems likely to have an early solution.

This might not be thought a particularly enticing background to equity
investment, but we found enough individually attractive ideas to take us back
into our customary state of indebtedness.  Net borrowings at the end of the
period (including the call paid in June on our United Utilities A shares)
amounted to 11% of shareholders' funds, in contrast to the net cash with which
we started the year.  We retained the hedge (in the form of dollar borrowings)
on essentially all our direct dollar exposure throughout the period, although on
this occasion it was a cost rather than a benefit to us.

Our housebuilding holdings have once again delivered a surprisingly good
performance given the industry's drab operating conditions: an unchanged
housebuilding portfolio rose in value from £29.5m to £34.5m and contributed
disproportionately to our income for the half year.  We recognise the
possibility of a tough housing market in the months ahead, but do not see this
as reason enough to disturb an investment comprising strong companies with
apparently excellent long term prospects.  It is worth remembering that the net
cost to us of this investment was £12.7m and that at current dividend rates it
is generating an annual income of over £1.1m.  So far, so good.

The performance of our bank holdings was marred by a disappointing showing from
our big holding in HSBC, but was nonetheless satisfactory thanks to a further
useful gain from Anglo Irish.  Our only transaction in the bank sector was the
purchase of a holding in HBOS which, even by the standards of the sector, seems
to offer an attractive combination of solid growth prospects and cheap
valuation.  Close students of our activities in this industry over the years
will not be surprised to learn that the holding was showing a modest loss on
book cost by 31 May.

Our retailing exposure has caused us some pain since the start of the year.
Morrison has continued to struggle as it seeks to integrate Safeway (the holding
has been sold since the end of May); Floors 2 Go has wilted under the combined
influence of a departing suitor and a sharp deterioration in trading; a purchase
of Topps Tiles has turned out to be spectacularly mistimed; and more good
fundamental news from Signet was not enough to prevent its share price from
slipping slightly.  At least we have made money in Merchant Retail, although it
was with mixed feelings that we heard of the bid for the company, for which we
had great long term hopes.  If this all seems a bit gloomy we should perhaps
remind ourselves that, even after our latest mishaps, retailing has made a
strongly positive contribution to The Independent's progress over its life to
date.  Moreover, we remain optimistic about the potential of the industry to
produce good long term investment ideas: we are not about to give up on it yet.
We have also extended our consumer exposure with the purchase of Domino's Pizza,
a business whose low average transaction value may provide some insulation from
a harsher environment for consumer spending.

At 7% of shareholders' funds, our insurance stake is no longer a particularly
eye-catching position for us.  It nevertheless made a good contribution to our
progress during the half year as investors put greater emphasis on the cheap
valuations of many insurance companies than on the evolution of the insurance
cycle, which has been disappointing.  We consider the holdings we have left in
the sector soundly based, but their valuations are likely to remain the most
important determinant of our attitude to them in the immediate future.

We have now reached the point in the recruitment cycle at which we are seeing
evidence of the benefits of the high level of operational gearing that is such a
distinctive feature of the industry.  In anticipation of this, we set out to
make significant additions to our holdings in Michael Page and Robert Walters.
We achieved our objective in Page, but were frustrated by the illiquidity of the
market in Walters shares.  If the cycle develops as we hope, we shall consider
other companies in the industry.

Within the technology and telecommunications sector, our holdings in Sage and
Nokia have shown encouraging performance - in each case, it must be said, from a
low base - but the two Herald funds have disappointed.  In the case of Herald
Investment Trust we regard this as a buying opportunity and have added to the

Elsewhere in the portfolio, GlaxoSmithKline, United Utilities, Altria, Suncor
and DTZ have all performed well, while Johnston Press's uncharacteristically
lacklustre performance owed more to unspecified fears about the future than to
any tangible developments within the business.  New holdings in IG Group and
Intermediate Capital arrived too late in the period to have a significant effect
on performance.

With an uncertain global environment and particular short term challenges facing
a number of the industries to which we are heavily exposed, this is not a good
moment to offer guidance on our immediate prospects.  We have, however, given a
great deal of thought to the quality of our holdings and to the relationship of
their valuations to our assessment of their longer term prospects.  From this we
can draw encouragement.


The following is the interim statement for the six months to 31 May 2005 which
has been neither reviewed nor audited by the auditors.  This statement is being
printed and will be sent to all shareholders on 22 July 2005.  Copies will be
available for inspection at the Registered Office of the Company or may be
obtained on request from the Company Secretaries after that date.

                            STATEMENT OF TOTAL RETURN

                (unaudited and incorporating the revenue account*)

                                     For the six months to         For the six months to            For the year to
                                          31 May 2005                   31 May 2004                30 November 2004
                                  Revenue   Capital    Total    Revenue   Capital    Total    Revenue   Capital    Total
                                   £'000     £'000     £'000     £'000     £'000     £'000     £'000     £'000     £'000
Realised gains on investments           -       711      711         -     4,156     4,156         -      4,744    4,744
Unrealised gains on investments         -     7,921    7,921         -       215       215         -      3,608    3,608
Currency (losses)/gains                 -      (315)    (315)        -       665       665         -        853      853
Income                              2,317         -    2,317     1,734         -     1,734     3,641          -    3,641
Administrative expenses              (213)        -    (213)     (199)         -     (199)     (402)         -     (402)
Net return before finance costs     2,104     8,317   10,421     1,535     5,036     6,571     3,239      9,205   12,444
and taxation
Finance costs of borrowings          (112)        -     (112)     (109)        -     (109)     (253)         -     (253)
Return on ordinary activities       1,992     8,317   10,309     1,426     5,036     6,462     2,986      9,205   12,191
before taxation
Tax on ordinary activities            (10)        -       (10)      (9)        -       (9)      (14)         -      (14)
Return on ordinary activities       1,982     8,317    10,299     1,417    5,036     6,453     2,972      9,205   12,177
after taxation
Dividends in respect of equity     (1,142)        -    (1,142)     (978)       -     (978)   (2,446)         -   (2,446)
Transfer to reserves                  840     8,317     9,157       439    5,036     5,475       526      9,205    9,731
Return per ordinary share:
(note 1)
Basic                                3.04p    12.75p    15.79p     2.17p   7.72p     9.89p     4.56p    14.11p    18.67p
Diluted (FRS 14)                     3.03p                         2.15p                       4.52p
Dividends per ordinary share         1.75p                         1.50p                       3.75p
(note 2)

* 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                       At                        At
                                              31 May 2005              31 May 2004          30 November 2004
                                                    £'000                    £'000                     £'000

Fixed asset investments                          124,177                  101,905                    99,315
Net liquid assets                                    631                    9,400                    10,503
Total assets (before deduction of
bank loans)                                      124,808                  111,305                   109,818
Bank loans                                       (12,633)                 (12,544)                   (6,801)
                                                 112,175                   98,761                   103,017

Called-up share capital                           16,307                   16,307                    16,307
Capital reserves                                  93,386                   80,899                    85,068
Revenue reserve                                    2,482                    1,555                     1,642
EQUITY SHAREHOLDERS' FUNDS                       112,175                   98,761                   103,017

(note 3)                                           172.0p                   151.4p                    157.9p


                          SUMMARISED CASH FLOW STATEMENT


                                                                   For the six  For the six         For the
                                                                     months to    months to         year to
                                                                        31 May       31 May     30 November
                                                                          2005         2004            2004
                                                                         £'000        £'000           £'000

Net cash inflow from operating activities                               1,902        1,702           3,390
Net cash outflow from servicing of finance                                (97)        (102)           (251)
Net cash (outflow)/inflow from financial investment                   (15,856)          31           6,453
Equity dividends paid                                                  (1,468)      (1,142)         (2,120)
NET CASH (OUTFLOW)/INFLOW BEFORE FINANCING                            (15,519)         489           7,472

Net cash inflow/(outflow) from bank loans                               5,493        2,149          (3,258)
(DECREASE)/INCREASE IN CASH                                           (10,026)       2,638           4,214


(Decrease)/increase in cash in the period                             (10,026)       2,638           4,214
Net cash (inflow)/outflow from bank loans                              (5,493)      (2,149)          3,258
Exchange movement on bank loans                                          (339)         652             988

MOVEMENT IN NET (DEBT)/FUNDS IN THE PERIOD                            (15,858)       1,141           8,460
Net funds/(debt) at start of the period                                 4,998       (3,462)         (3,462)
NET (DEBT)/FUNDS AT END OF PERIOD                                     (10,860)      (2,321)          4,998


Net revenue before finance costs and taxation                           2,104        1,535           3,239
Changes in debtors and creditors                                         (192)         176             165
Overseas tax                                                              (10)          (9)            (14)
NET CASH INFLOW FROM OPERATING ACTIVITIES                               1,902        1,702           3,390



                                        Six months to 31   Six months to 31           Year to
                                                     May                May   0 November 2004
                                                    2005               2004             £'000
                                                   £'000              £'000
1.   Return per ordinary share
     Revenue return                                1,982              1,417             2,972
     Capital return                                8,317              5,036             9,205

     The returns per share are based on the above returns and on 65,228,895 shares, being the
     weighted average number of shares in issue during each period.

     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 period.  The
     diluted revenue returns per share are based on the above returns and on 65,424,001 shares
     (31 May 2004 - 66,002,533; 30 November 2004 - 65,712,988), being the weighted average
     number of shares in issue during the period plus the notional number of shares that would
     have been issued for no consideration using an average share price of 173.3p (31 May 2004
     - 166.5p; 30 November 2004 - 161.0p) and an average exercise price for the options of
     169.8p (31 May 2004 - 153.3p; 30 November 2004 - 153.0p).

2.    The interim dividend will be paid on 2 September 2005 to shareholders on the register
      at the close of business on 12 August 2005.  The ex dividend date is 10 August 2005.

3.    Net asset value per ordinary share

                                                     At                At                At
                                                 31 May            31 May  30 November 2004
                                                   2005              2004             £'000
                                                  £'000             £'000
      Net asset value attributable to
      ordinary shares                           112,175            98,761           103,017

      Net asset value per share is based on net assets as shown above and on 65,228,895
      shares,  being the number of shares in issue at each period 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 net asset value arises from their

4.    The financial information for the year ended 30 November 2004 has been extracted from
      the full accounts, which have been filed with the Registrar of Companies and which
      contain an unqualified Auditor's Report and do not contain a statement under section
      237 (2) or (3) of the Companies Act 1985.

5.    The accounting policies applied in calculating the interim figures were consistent
      with those used in the Annual Financial Statements.  The Interim Report was approved
      by the board on 7 July 2005.

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

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