15 Feb 2021 15:28
The Independent Investment Trust PLC
Legal Entity Identifier: 213800IYHGJTZJ3MO642
Regulated Information Classification: Annual Financial and Audit Reports
Annual Report and Financial Statements
Further to the preliminary statement of annual results announced to the Stock Exchange on 15 January 2021, The Independent Investment Trust PLC ("the Company") announces that the Company's Annual Report and Financial Statements for the year ended 30 November 2020, including the Notice of Annual General Meeting, has been posted to shareholders and submitted electronically to the National Storage Mechanism where it will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
It is also available on the Company page www.independentinvestmenttrust.co.uk (as is the preliminary statement of annual results announced by the Company on 15 January 2021).
Covid-19 - Important note regarding arrangements for the Annual General Meeting (AGM)
The board of The Independent Investment Trust PLC recognises the public health risk associated with the Covid-19 outbreak arising from public gatherings and notes the Government's measures restricting such gatherings, travel and attendance at workplaces.
At the same time, the board is conscious of the legal requirement for the Company to hold its AGM before the end of May 2021. Given the current uncertainty around when public health concerns will be abated, the board has for the time being decided to convene the Company's AGM to take place at 4.30pm on Thursday 27 May 2021 at the offices of Baillie Gifford & Co, Calton Square, 1 Greenside Row, Edinburgh EH1 3AN. This is a later date than would normally be the case, in order to give more time for the covid restrictions on attendance to clear. The board will however continue to monitor developments and any necessary changes will be advised to shareholders and posted on the Company's website www.independentinvestmenttrust.co.uk.
In the meantime, the board encourages all shareholders to submit proxy voting forms as soon as possible and, in any event, by no later than 4.30pm on 25 May 2021.
We would encourage shareholders to monitor the Company's website at www.independentinvestmenttrust.co.uk. Should shareholders have questions for the Board or the Managers or any queries as to how to vote, they are welcome as always to submit them by email to trustenquiries@bailliegifford.com or call 0800 917 2112. Baillie Gifford may record your call.
Statement of Directors' Responsibilities in respect of the Annual Report and the Financial Statements
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) including FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements and directors' remuneration report comply with the Companies Act 2006. The Directors are also responsible both for safeguarding the assets of the Company and for the maintenance and integrity of the Company's website, and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities (in the case of the safeguarding of assets) and also for the preservation of the website integrity. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Under applicable laws and regulations, the directors are also responsible for preparing a Strategic Report, a Directors' Report, a Directors' Remuneration Report and a Corporate Governance Statement that comply with that law and those regulations.
Each of the directors, whose names and functions are listed within the board of directors' section confirms that, to the best of his knowledge:
• the financial statements, which have been prepared in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) including FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', give a true and fair view of the assets, liabilities, financial position and net return of the Company;
• the annual report and financial statements taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy; and
• the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.
Principal Risks relating to the Company
As explained on pages 22 and 23 of the Annual Report and Financial Statements there is a process for identifying, evaluating and managing the risks faced by the Company on a regular basis. The directors have carried out a robust assessment of the principal and emerging risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. A description of these risks and how they are being managed or mitigated is set out below.
The board considers the coronavirus (Covid-19) pandemic to be a factor which exacerbates existing risks, rather than a new emerging risk. Its impact is considered within the relevant risks.
Financial risk - The Company's assets consist mainly of listed securities and its principal financial risks are therefore market related and include market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk. An explanation of those risks and how they are managed is contained in note 16 to the accounts on pages 46 to 48 of the Annual Report and Financial Statements. The board has, in particular, considered the impact of heightened market volatility since the Covid-19 outbreak. To mitigate this risk, at each board meeting the composition and diversification of the portfolio by geographical and industrial sectors are considered along with sales and purchases of investments. Individual investments are discussed with the managing director together with his general views on the various investment markets and sectors.
Investment strategy risk - pursuing an investment strategy to fulfil the Company's objective which the market perceives to be unattractive or inappropriate, or an ineffective implementation of an attractive or appropriate strategy, may lead to reduced returns for shareholders and, as a result, a decreased demand for the Company's shares. This may lead to the Company's shares trading at a widening discount to their Net Asset Value. To mitigate this risk, the board regularly reviews and monitors: the Company's objective and investment policy and strategy; the investment portfolio and its performance; the level of discount/premium to Net Asset Value at which the shares trade; and movements in the share register.
Regulatory risk - failure to comply with applicable legal and regulatory requirements such as the tax rules for investment trusts, the FCA Listing Rules, the Companies Act and the Alternative Investment Fund Managers Regulations 2013 could lead to suspension of the Company's Stock Exchange listing, financial penalties, a qualified audit report or to the Company being subject to tax on capital gains. To mitigate this risk, the practical measures to ensure compliance with regulations and with company law, and to provide effective and efficient operations as they relate to secretarial and administrative matters, have been delegated to Baillie Gifford & Co. Baillie Gifford's Internal Audit and Compliance departments provide regular reports to the audit committee on Baillie Gifford's monitoring programmes. Major regulatory change could impose disproportionate compliance burdens on the Company or threaten the viability of the investment trust structure. In such circumstances, representation would be made to defend the special circumstances of investment trusts. Shareholder documents and announcements, including the Company's published interim and annual report and financial statements, are subject to stringent review processes and procedures are in place to ensure adherence to the Transparency Directive and the Market Abuse Directive with reference to inside information.
Custody risk - safe custody of the Company's assets may be compromised through control failures by the Company's custodian, including breaches of cyber security. To mitigate this risk, cash and portfolio holdings are regularly reconciled to the custodian's records by Baillie Gifford & Co. The audit committee reviewed Baillie Gifford's Report on Internal Controls which details the controls in place regarding the recording and reconciliation of cash and portfolio holdings to third party data. The custodian's Internal Controls Reports are reviewed by Baillie Gifford & Co and a summary of the key points is provided to the audit committee by Baillie Gifford & Co's Business Risk department. In addition, the existence of assets is subject to annual external audit.
Operational risk - risk of loss resulting from inadequate or failed internal controls, processes and systems, or from external events. To mitigate this risk, Baillie Gifford's Internal Audit and Compliance departments provide regular reports to the audit committee. The board also reviews Baillie Gifford's Report on Internal Controls and the reports by other key service providers are reviewed by Baillie Gifford on behalf of the board. In addition, Baillie Gifford has a comprehensive business continuity plan which facilitates continued operations of the business in the event of a service disruption (including any disruption resulting from the coronavirus outbreak) or major disaster. Since the introduction of the Covid-19 restrictions, almost all Baillie Gifford staff have been working from home and operations have continued very largely as normal.
Discount risk - the discount/premium at which the Company's shares trade relative to its Net Asset Value can change. The risk of a widening discount is that it may undermine investor confidence in the Company. To manage this risk, the board monitors the level of discount/ premium at which the shares trade and the Company has authority to buy back its existing shares when deemed by the board to be in the best interests of the Company and its shareholders.
Political risk - the board is of the view that political change in areas in which the Company invests or may invest may have practical consequences for the Company. To mitigate this risk, developments are closely monitored and considered by the board. Whilst there remains considerable uncertainty at present, the board will continue to monitor developments as they occur and assess the potential consequences for the Company's future activities.
Resource risk - as the Company is self managed and has only two employees (the managing director and full-time portfolio manager of the portfolio, Max Ward, and an office manager) the loss of personnel may adversely impact investment performance. To mitigate this risk, contingency plans are in place to deal with any loss of personnel. Secretarial and accounting functions are contracted out to Baillie Gifford & Co and are not subject to resource risk.
Baillie Gifford & Co Limited
Company Secretaries
15 February 2021