Smithson Investment Trust Plc – Half-year Report

SMITHSON INVESTMENT TRUST PLC

INTERIM RESULTS ANNOUNCEMENT

The full Interim Report for the six months ended 30 June 2021 (the “Interim Report”) can be found on the Company's website at www.smithson.co.uk .

Financial Highlights

Net Asset Value

Performance Summary

Source: Bloomberg.

This report contains terminology that may be unfamiliar to some readers. The Glossary in the Interim Report gives definitions for frequently used terms.

¹ These are Alternative Performance Measures (“APMs”). Definitions of these and other APMs used in this Interim Report, together with how these measures have been calculated, are disclosed in the Interim Report.

² Total returns are stated in GBP sterling.

Chairman's Statement

Introduction

I am pleased to present this Interim Report of Smithson Investment Trust plc (the “Company”) for the six months to 30 June 2021 (the “Period”). I am also pleased to report that the Company has continued to perform well in what have been challenging market conditions during this first six month period of 2021.

Performance

For the six months to 30 June 2021, the net asset value (“NAV”) per share total return was 5.9% compared with our benchmark MSCI World Small and Mid Cap Index (“MSCI World SMID”) which returned 12.4%. The share price total return for the Period was 4.1%. Performance has lagged that of the benchmark over this six month period. Whilst we would like to beat our benchmark over every short-term period, it should be noted that the Smithson portfolio has been constructed for long-term 'growth' rather than short-term 'value'. These dynamics are discussed further in the Investment Manager's Review. It should be noted that, since the original IPO in October 2018, the Company has recorded a very impressive NAV per share total return of 74.7% compared with the MSCI World SMID Index which recorded 41.0% over the same period. This represents an annualised growth rate of 23.0% compared with the benchmark increase of 13.6%.

The Company now holds 32 investments. During the Period two new investments were made with one outright divestment. This accords with the Investment Manager's stated mantra of buying good companies, not overpaying and then doing nothing. Simon Barnard, the portfolio manager, has reported on the performance in detail in the Investment Manager's Review and he also describes the two portfolio additions of Rollins and Wingstop.

During the Period, the Company's dividend income was again lower than its operating expenditure resulting in a revenue loss, which was netted against the capital gains reported in the total returns above. As we have reported previously, a revenue loss will often arise because 100% of the Company's management fees and other operating expenses are charged to revenue, rather than a percentage being allocated to the capital reserve. This accords with the Company's objective of focusing on capital growth which means that its accounting policy is not designed to facilitate maximisation of revenue reserves and dividend payments. There is no current intention to change this policy, even if losses continue to be reported in revenue reserves.

Share issuance and premium to NAV

The Company has consistently traded at a premium to NAV and closed the Period at a premium of 1.9% with an average premium over the Period of 2.3%.

At the Company's Annual General Meeting (“AGM”) on 28 April 2021, shareholders approved resolutions granting the Board authority to issue on a non pre-emptive basis up to 30.1 million new ordinary shares, being 20% of the issued share capital.

During the Period, and in response to strong continuing demand for the Company's shares (as evidenced by the premium to NAV), the Company has used its authorities granted under the Placing Programme (which expired 31 March 2021) and at the AGMs in 2020 and 2021, to raise £311.2 million net of costs through the issue of 18.7 million new ordinary shares. Shares are only issued at a premium to net asset value which creates additional value for shareholders net of all issue costs. The average premium to the prevailing net asset value at which new shares were issued during the Period was 2.7% and the estimated premium net of costs on share issues amounted to £4.2 million.

Since the Period end and up to 5 August 2021, a further 2.6 million shares have been issued, raising £47 million net of costs.

As explained in greater detail in the Investment Manager's Review, the new share proceeds have been predominantly invested in the same securities as were held at the start of the Period.

Dividends

As reported previously, the Company's principal objective is to provide shareholder returns through long-term capital appreciation rather than income. In accordance with the Company's policy, an interim dividend has not been declared by the Board.

This position will be kept under review. It should not be expected that the Company will pay a significant annual dividend and it is likely that no interim dividends will be declared, but the Board intends to declare such annual dividends as are necessary to maintain the Company's UK investment trust status. The Company has not declared any dividends to date.

Environmental, social and governance (“ESG”) matters

The Company recognises the increased interest in reporting on ESG matters and supports the Association of Investment Companies (“AIC”) initiative to provide information on investment companies' ESG practices in a centralised database. We have submitted our own commentary in that regard and shareholders can access the statement on the Company's information page of the AIC website (www.theaic.co.uk) and on the Company's website (www.smithson.co.uk).

Operations

Despite the operational challenges which continue to be posed by COVID-19, including the current issues around self isolation, all our outsourced service providers continue to manage these challenges and deliver a resilient service.

The Management Engagement Committee continues to seek opportunities for cost reductions and during the Period secured a reduction in the brokerage charges relating to new issues of shares. This will increase the net premium arising on all new share issues.

Outlook

The Board remains positive on the outlook for global small and mid-cap equities despite the impact on the global economy and financial markets from the COVID-19 pandemic. Whilst good progress is being made on the rollout of vaccinations globally, across many countries rates of infection remain high and vaccination levels low. New variants of the virus continue to emerge, and the pandemic may continue to have social and economic impacts for some time to come.

The Board intends to continue to issue new shares so as to generate additional value for shareholders net of all issue costs and to enable the Investment Manager to continue to seek attractive investment opportunities for any further capital raised.

Since the Period end, we have continued to see further gains across our portfolio and as at 5 August 2021, the Company NAV had risen a further 6.2% to £18.55 whilst our share price had risen a further 6.3 % to £ 18.92 and the market capitalisation of your Company now exceeds £3 billion, another great milestone achieved.

Finally, I wish all of our shareholders good health and prosperity as we gradually emerge from the current phase of the pandemic.

Mark Pacitti
Chairman
6 August 2021