Smithson Investment Trust Half-year Report

INTERIM RESULTS ANNOUNCEMENT

Results for the six months ended 30 June 2022

The full Interim Report for the six months ended 30 June 2022 (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 section 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 APM section.

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 2022.

This is the first reporting period since 2018 for which the Company has reported a fall in its net asset value. While this decline is disappointing, it comes against the backdrop of a steep decline in markets across the globe. In addition, the Company's shares have started to trade at a discount to net asset value. The Company's performance and the Board's efforts to address the discount are summarised below and the Investment Manager's Review explains the Company's performance in greater detail.

Performance

The decline in the Company's net asset value (NAV) per share for the period was 31.7%, underperforming the MSCI World SMID Index by 18 percentage points. Despite this recent underperformance the Company's annualised NAV per share total return since inception is +8.2% compared with the +6.8% return from the index with dividends reinvested.

The Company's shares, which have traded at a premium to its NAV for the vast majority of the period from launch through to the end of 2021, have now been trading at a discount for the last four months. The discount at the end of the period was 11.5%, compared with the premium of 3.0% at the end of December last year. With the negative total return on the Company's NAV, the move from a modest premium to a discount has resulted in the share price total return for the period of -41.3%. The annualised share price total return since inception to 30 June 2022 is +4.7%.

Premium/discount control

The Company was floated on the premium list of the London Stock Exchange (“LSE”) on 19 October 2018, breaking the record for the largest IPO of an investment trust in the history of the LSE with funds raised exceeding £822 million. From inception until March 2022 the Company continuously issued new shares at a premium to NAV (net of all costs). The Company's shares began the year trading at a 3% premium to NAV but in the second quarter the shares started trading at a discount, which widened to over 11% at the end of June. The average discount across the first half of the year was 3.5%, the first period of a sustained discount since the launch of the Trust.

In response to the emergence of the discount, the Board, in consultation with its advisers and the investment manager, has sought to address the situation through the use of share buybacks. The Company started to buy back shares at the end of April, and by the end of June had acquired just under 0.5% of the total shares in issue. A further 0.5% has since been bought back and at the end of July, the discount was 6.3%.

The Company intends to continue with its current programme of regular market purchases whilst the shares trade at a material discount. All shares purchased are held in Treasury and will only be reissued at a premium, net of all costs.

Dividends

The Company generated a revenue return in the first half of £7 million, thanks to an unusually high level of non-regular dividends from its investments; this is not expected to be repeated at the same level in the remainder of the year.

The Company's objective is to focus on capital growth and its accounting policies are not designed to facilitate maximisation of revenue reserves and dividend payments. In accordance with the Company's policy, an interim dividend is not proposed by the Board.

Whilst the position will be kept under review, there is no current intention to change the dividend policy. 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.

Investment approach

In common with all funds managed by Fundsmith, the Company has a focused strategy of investing in high-quality, listed company shares, seeking not to overpay for those shares and then holding them as long-term investments; the Company does not use derivatives and has no borrowings. The Investment Manager also considers Environmental, Social and Governance (“ESG”) and other sustainability issues when implementing the Company's investment strategy.

The composition of the portfolio at 30 June 2022 is shown below, and the Investment Manager's Review explains the investment performance and the evolution of the portfolio during the first half of 2022 in detail.

Investment policy

At the Company's AGM in April, shareholders approved a revision to the investment policy, which clarifies that the investment restriction as to market capitalisation range applies at the time of initial investment in a company and removed the expectation of the average market capitalisation of investee companies. This change, which came into effect on 3 May 2022, has had no effect, in any way, on how the Company's investments are managed.

Governance

I took over as Chair of the Board at the end of February 2022 and Lord St John of Bletso replaced me as Chair of the Audit Committee. Jeremy Attard-Manche joined the Board on 1 March and is Chair of the Management Engagement Committee. As part of our succession planning and to broaden the experience and diversity of the Board, Denise Hadgill was appointed as a Director of the Company with effect from 1 June 2022.

Outlook

Since the start of this year the world's stock markets have experienced significant falls and this period has clearly been a very challenging one for investors. Higher interest rates, the spectre of inflation and recession as well as the continuing war in Ukraine continue to weigh on investor sentiment, particularly in respect of growth companies. This does, however, also provide opportunities for investment and shareholders will note that both the investment manager and I have bought more shares in the Company in the last few months.

Our investment manager focuses on investing in companies which it believes can compound in value over many years. Owning high quality companies capable of sustainable growth is a strategy that has been shown to work well over the long term, through many economic cycles, and the Board has confidence that the investment manager can execute the strategy successfully.

The Company continues to offer investors exposure to some of the best companies available in the global small and mid-cap sector and the Board believes that the long-term investor will be well rewarded.

Diana Dyer Bartlett
Chairman
1 August 2022