Interim Results

RNS Number:1734T
Investment Trust of Inv Tst PLC
11 December 2003


The Investment Trust of Investment Trusts PLC - Stock Exchange Announcement

Announcement of unaudited interim results for the half year to 31st October 2003


                              CHAIRMAN'S STATEMENT

The investment trusts sector generally and the split capital trust sector in
particular have been beneficiaries of the improved market situation over the six
month period to 31st October 2003. The inherent gearing levels within split
capital investment trust structures have magnified general market movements at
the net asset value level which has gradually filtered through to benefit share
prices in the sector.

Over the period under review the Company's total assets, adjusted for bank debt
repayments, rose by 38.1% to #13.15 million. This compares with the FTSE
Investment Companies Index (which recorded a 24.3% total return during the
period) and the FDA/AITC Split Capital Index (which showed a rise of 45%). Over
the same period the FTSE All-Share Index rose by 14.2%, with smaller and mid-cap
companies significantly outperforming their larger counterparts. The major
indices covering the U.S., Japan and Europe rose 11.4%, 23.7% and 18.7%
respectively whilst the emerging markets index rose, on average, by 37.3%
fuelled in particular by the growth stories of China and Russia.


The Company's Bank Debt

Your Board reported in July 2002 that the Company had breached the financial
covenants of its loan agreement and following further market weakness in the
second half of 2002 the situation deteriorated to the extent that the Company's
liabilities exceeded its assets in August 2002, and this remains the case today.

Throughout the period we have worked closely with the Company's lending bank,
Bank of Scotland, and the Company's investment manager, Jupiter Asset Management
Limited, to try to resolve the Company's serious financial problems. Bank of
Scotland continues to support the Company as a going concern and I would like to
express the Board's thanks to them for their support through these extremely
difficult times.

The Company's cash flow projections are carefully monitored by your Board and
its advisers and these continue to indicate that there are sufficient revenues
to pay the interest on bank debt and limited operating expenses . In the event
that this is no longer proven to be the case, assets in the Company's portfolio
would need to be realised in order to satisfy such payments. In order to
maximise the Company's free cash flow, both the directors and Jupiter Asset
Management Limited have waived their fees due from the Company since 1st July
2002 and 1st August 2002 respectively and the Board has also agreed with Bank of
Scotland to endeavour to keep the Company's other administrative expenses to an
aggregate of no more than #175,000 per annum.

During the period under review the Company repaid a total of #650,000 to Bank of
Scotland together with associated interest rate breakage costs of #57,000 on the
amounts repaid.

The Board is cautiously optimistic that the Company will continue to be in a
position to repay a proportion of the bank debt owing to Bank of Scotland at
each calendar quarter end out of excess revenues from its investment portfolio.
This, together with recent rises in the value of the Company's investment
portfolio, has reduced the ratio of remaining bank debt to total assets from its
level of 178% on 30th April 2003 to 134% on 31st October 2003. Bank of Scotland
has indicated to the Board that, subject to certain conditions, it will not
demand early repayment of the loan facility.

Entitlements of Shareholders to Capital on Liquidation

The Group had net liabilities of #4.55 million at 31st October 2003 and
therefore is currently unable to meet its obligations to its lenders.
Consequently, no class of share had any assets attributable to it as at that
date.

Dividends

As reported in my statement to the Company's audited accounts to 30th April 2003
, the Company is prohibited under the Companies Act 1985 and the terms of its
loan agreement from paying dividends to the holders of its Preferred Income,
Warrant Income and Ordinary shares. The resumption of dividends is dependent on
a number of factors (including requirements that the Company's portfolio has a
minimum net asset value and distributable reserves) and the Board considers that
the likelihood the Company will be in a position to resume dividend payments in
the foreseeable future is remote.

Cross Holdings in other Investment Companies

In October the Financial Services Authority published their response to the
consultation paper (CP 164) relating to the corporate governance and portfolio
disclosure obligations of investment companies. The Board welcomes the proposals
that have been adopted. A full list of all holdings representing more than 0.5%
of the portfolio can be found on the website of the Association of Investment
Trust Companies (www.aitc.co.uk) which is up-dated on a monthly basis.

Following the enactment of the Investment Entities (Listing Rules and Conduct of
Business) Instrument 2003, the Board has announced that no change would be made
to its investment objectives and that it remained the Board's policy not to
limit investment in other UK listed investment companies to a maximum of 15% of
the total assets of the Company.

Market Outlook

In April 2003 there was considerable stockmarket volatility as geopolitical
tension evolved into full scale war in Iraq. Meanwhile growth across the western
economies and Japan had declined to meagre levels seriously affecting corporate
profitability. In addition corporate accounting scandals emanating from the U.S.
exacerbated declining consumer confidence in stockmarkets just as pressure to
reduce equity exposure within pension fund and life insurance portfolios was
increasing.

The highly-geared split capital investment trust sector was still under
increasing pressure as assets continued to decline in relation to debt levels.
In this environment the split capital trust sector attracted considerable media
comment and investor confidence was poor. Share valuations were extremely low
and affected all trusts irrespective of their portfolio quality and their
dividend and growth potential.

However, following the speedy conclusion of the war in Iraq world economies
began to regain momentum. This improving scenario was fuelled by very low
interest rate levels and the elimination of the SARS virus outbreak which had
previously frozen Asian economies and, in particular, China which has become,
with the USA, one of the main engines of world economic growth. In this more
benign environment world stockmarkets staged a dramatic recovery as investors
returned to equity risk investments which had previously been considerably
devalued.

This very low income scenario may have reached its nadir and 2004 will probably
see incremental rises to more normal levels relative to inflation and GDP
growth. This could mean that stockmarket returns for 2004 will be rather more
muted than those seen for this year so far. For the investment trust sector as a
whole, economic growth from emerging markets coupled with lower growth in the
developed economies, alongside small incremental interest rate rises, should
continue to benefit portfolios. Meanwhile, consolidation and corporate activity
remain core themes and the coming year will see many trusts facing their
continuation votes.

Martin Boase
Chairman

11 December 2003



                     CONSOLIDATED STATEMENT OF TOTAL RETURN
                      (Incorporating the Revenue Account)
                    for the six months to 31st October 2003
                                  (Unaudited)

                                            2003                          2002
                      Revenue   Capital    Total   Revenue   Capital     Total
                        #'000     #'000    #'000     #'000     #'000     #'000
Net realised loss on
investments                 -    (2,364)  (2,364)        -    (7,197)   (7,197)
Unrealised
appreciation/
(depreciation)              -     5,790    5,790         -   (21,392)  (21,392)
of investments
Income                  1,032         -    1,032     2,117         -     2,117
Gain/(loss) on
dealings                   15         -       15       (40)        -       (40)
by subsidiary
Investment management
fee                         -         -        -       (28)      (52)      (80)
Other expenses            (86)        -      (86)      (95)        -       (95)
Net return before
finance costs
and taxation              961     3,426    4,387     1,954   (28,641)  (26,687)
Loan redemption fees      (20)      (37)     (57)     (180)     (334)     (514)
Interest payable         (246)     (458)    (704)     (306)     (568)     (874)
Return on ordinary
activities
before tax                695     2,931    3,626     1,468   (29,543)  (28,075)
Tax on ordinary
activities                (45)       45        -       (96)       96         -

Return on ordinary
activities
after tax                 650     2,976    3,626     1,372   (29,447)  (28,075)
Dividend in respect
of                          -         -        -      (420)        -      (420)
non-equity shares
Other appropriations
in                          -      (812)    (812)        -      (755)     (755)
respect of
non -equity shares

Return attributable
to
equity shareholders       650     2,164    2,814       952   (30,202)  (29,250)

Transfer to/(from)
reserves                  650     2,164    2,814       952   (30,202)  (29,250)

Return/(loss) per
Ordinary share:          0.99p     3.29p    4.28p     1.45p   (45.93)p  (44.48)p


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

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

No operations were discontinued or acquired during the period.

The financial information does not constitute 'accounts' as defined in section
240 of the Companies Act 1985.



                           CONSOLIDATED BALANCE SHEET

                              at 31st October 2003


                                                     31st October  30th April
                                                             2003        2003
                                                     (unaudited)    (audited)
                                                           #'000        #'000
Fixed assets
Investments                                               12,956       10,164

Current assets
Investments                                                  193          177
Debtors                                                      212          220
Cash at bank                                                 413          236
                                                             818          633
Creditors: amounts falling due within
one year                                                    (622)      (1,271)

Net current assets/(liabilities)                             196         (638)

Total assets less current liabilities                     13,152        9,526
Creditors: amounts falling due after
more than one year                                       (17,700)     (17,700)

Net liabilities                                           (4,548)      (8,174)

Capital and reserves
Called up share capital                                    4,767        4,767
Share premium                                             70,791       70,791
Warrant reserve                                            2,885        2,885
Capital reserve - realised                                (4,375)        (749)
Capital reserve - unrealised                             (89,236)     (95,026)
Redemption reserve                                         5,044        4,232
Revenue reserve                                            5,576        4,926

Total shareholders' funds                                 (4,548)      (8,174)

Net asset value per share in accordance with the
Articles of Association
Ordinary 5p shares - undiluted                               0.0p         0.0p
Ordinary 5p shares - fully diluted                           0.0p         0.0p
Zero Dividend Preference shares                              0.0p         0.0p
Preferred Income shares                                      0.0p         0.0p
Warrant Income shares                                        0.0p         0.0p



                        CONSOLIDATED CASH FLOW STATEMENT
                    for the six months to 31st October 2003
                                  (unaudited)

                                                               2003       2002
                                                              #'000      #'000
Operating activities
Net cash inflow from operating activities                       967      1,836

Servicing of finance
Interest paid                                                  (716)      (929)
Loan redemption fees                                            (57)      (514)
Dividends paid on Warrant Income shares                           -       (458)

Net cash outflow from servicing of finance                     (773)    (1,901)

Taxation
Tax received                                                      -        113

Capital expenditure and financial investment
Purchase of fixed asset investments                             (40)         -
Sale of fixed asset investments                                 673      5,394
Net cash inflow from capital expenditure and financial
investment                                                      633      5,394

Net cash inflow before financing                                827      5,442

Financing
Long term loan repaid                                          (650)    (7,100)

Net cash outflow from financing                                (650)    (7,100)

Increase/(decrease) in cash                                     177     (1,658)


                             NOTES TO THE ACCOUNTS

The Company may continue in operational existence past 31st August 2007 if,
prior to that date, the Zero Dividend Preference, Preferred Income, Ordinary and
Warrant Income shareholders each formally vote in favour of a special resolution
to restructure their obligations such that their final entitlement does not
mature on 31st August 2007. However, any such restructuring proposals are
unlikely to be developed by the directors until nearer to August 2007.

Given Bank of Scotland's continuing support for the Company and its current
financial position, the directors have concluded that, while they believe that
it remains appropriate for the financial statements to be prepared on a going
concern basis, there is a fundamental uncertainty regarding the ability of the
Company to continue in operational existence for the foreseeable future.

If the financial statements had not been prepared on a going concern basis it
would have been necessary to value the Company's investments at their net
realisable values which, in the current difficult market conditions, may be
significantly lower than their middle market prices. Furthermore, it would also
have been necessary to accrue for winding up costs including breakage costs that
would be incurred in respect of the early termination of the bank loan. These
have not been quantified because of their uncertainty. The bank loan would also
have had to be reclassified from creditors falling due after one year to
creditors falling due within one year.

The interim report will be sent to all registered shareholders and copies may be
obtained from the registered office of the Company at 1 Grosvenor Place, London,
SW1X 7JJ.

BY ORDER OF THE BOARD
JUPITER ASSET MANAGEMENT LIMITED
SECRETARIES



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