Final Results

City of London Investment Trust PLC 11 September 2000 THE CITY OF LONDON INVESTMENT TRUST PLC Unaudited Preliminary Results for the year ended 30 June 2000 Extracts from the Chairman's Statement: Performance The year under review can be divided into two distinct periods. For the first eight months, unprecedented rises occurred in the Technology, Media and Telecommunications sectors. Shares in other sectors retreated against a background of interest rates rising from 5% to 6% and a strengthening exchange rate for sterling against the euro. In addition, small companies outperformed. This was a difficult period for the Company, given the bias in its portfolio towards large capitalisation companies with an above average dividend yield, and capital performance was poor. For the final four months there was a correction in Technology, Media and Telecommunications shares and recovery in the rest of the market. Overall, our gains in the final period failed to make up for our underperformance in the first eight months. Our net asset value total return for the year was -1.3% which compares with +5.2% for the FTSE All- Share Index, a disappointing year coming after three successive years of outperformance. During this year of underperformance, the share price discount to net asset value per share increased from 1.4% to 10.2% and the opportunity has been taken to buy back a total of 3,918,285 shares, including 1,213,285 since the year end, at discounts of over 10%, so enhancing the net asset value. THE CITY OF LONDON INVESTMENT TRUST PLC UNAUDITED PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2000 Dividends A fourth interim dividend of 1.84p was paid on 31 August 2000, making a total net dividend for the year of 7.18p. This increase of 3.5% over the previous year continued the Company's unbroken record of annual dividend increases since 1966. For the year to 30 June 2001 the Board is forecasting a 2.5% increase in the Company's total net dividend to 7.36p, payable at the new quarterly rate of 1.84p. Expenses Expenses remained under tight control. In the year to 30 June 2000, excluding interest but including the portion of the management fee which is charged to capital, total expenses amounted to less than 0.45% of assets under management. The Board decides upon a split of expenses and finance costs between revenue and capital according to expected future returns from the portfolio. Since 1 July 1993, City of London has charged to capital 50% of finance costs and 50% of the proportion of the management fee that related to the maintenance or enhancement of the value of the investments. The board has reviewed this arrangement, in the context of the returns of recent years and the change in corporate dividend policy following the abolition of the ACT tax credit for pension funds in 1997, and has decided that charging 70% of the management fee and finance costs to capital and 30% to revenue is appropriate to reflect expected future returns from the portfolio. This change is being made with effect from 1 July 2000. THE CITY OF LONDON INVESTMENT TRUST PLC UNAUDITED PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2000 Prospects The economic outlook appears to be sound with the UK enjoying a combination of low inflation and steady growth. The strength of sterling and the action taken so far to increase interest rates have helped to restrain growth and lessen the pressure from inflation, although the recent loosening of fiscal policy will have the opposite effect and the current trend in oil prices provides a further element of uncertainty. The valuation of the UK equity market is high by historical standards but reasonable when compared with other international equity markets. This performance of the market largely reflects the high value still being accorded to TMT stocks and the portfolio is being managed to allow us to participate in these and other growth areas as opportunities arise, without sacrificing our objective of providing above average income to our shareholders. S J Titcomb 8 September 2000 THE CITY OF LONDON INVESTMENT TRUST PLC Unaudited Preliminary Results for the year ended 30 June 2000 Statement of Total Return (incorporating the revenue account) Year ended 30 June 2000 Year ended 30 June 1999 (restated*) RevenueCapital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Total capital - (20,709)(20,709) - 43,426 43,426 (losses)/gains from investments Income from fixed asset 17,892 - 17,892 19,121 - 19,121 investments Other interest receivable 180 - 180 330 - 330 and similar income Gross revenue and capital 18,072 (20,709)(2,637) 19,451 43,426 62,877 (losses)/gains Management fee (1,499) (750) (2,249) (1,313) (656) (1,969) Other administrative (385) - (385) (325) - (325) expenses ------- ------- ------- ------- ------- ------- Net return/(loss) on ordinary activities before interest 16,188 (21,459) (5,271) 17,813 42,770 60,583 payable and taxation Interest payable (2,161) (2,161) (4,322) (2,142) (2,142) (4,284) ------- ------- --- ------- ------- --- Net return/(loss) on ordinary activities before taxation 14,027 (23,620) (9,593) 15,671 40,628 56,299 Taxation on net return/(loss) on ordinary (67) 67 - (110) 110 - activities ------- ------- ------- ------- ------- ------- Net return/(loss) on ordinary activities after taxation 13,960 (23,553) (9,593) 15,561 40,738 56,299 Dividends : Preference and preferred (190) - (190) (168) - (168) ordinary stocks ------- ------- ------- ------- ------- ------- Net return/(loss) attributable to the 13,770 (23,553) (9,783) 15,393 40,738 56,131 ordinary shares ------- ------- ------- ------- ------- ------- Dividends: Ordinary shares Three interim payments of (11,248) - (11,248)(10,855) - (10,855) 1.78p (1999: 1.72p) Fourth interim payment of (3,834) - (3,834) (3,748) - (3,748) 1.84p (1999: 1.78p) ------- ------- ------- ------- ------- ------- (15,082) - (15,082)(14,603) - (14,603) ------- ------- ------- ------- ------- ------- Transfer (from)/to (1,312)(23,553)(24,865) 790 40,738 41,528 reserves ====== ====== ====== ====== ====== ====== Return/(loss) per 6.54p (11.19p) (4.65p) 7.32p 19.36p 26.68p ordinary share (note 1) ====== ====== ====== ====== ====== ====== The revenue columns of this statement represent the revenue accounts of the Company. * Restated for the change in accounting policy (see note 3). THE CITY OF LONDON INVESTMENT TRUST PLC Unaudited Preliminary Results for the year ended 30 June 2000 Balance Sheet 30 June 30 June 2000 1999 £'000 £'000 Fixed asset investments Listed at market value in the United 607,910 610,051 Kingdom Shares in subsidiary undertakings 347 347 ---------- ---------- 608,257 610,398 ---------- ---------- Current Assets Debtors 2,050 27,080 Bank balances and short term 347 3,001 deposits ---------- ---------- 2,397 30,081 Creditors: amounts falling due 5,867 6,051 within one year ---------- ---------- Net current (liabilities)/assets (3,470) 24,030 ---------- ---------- Total assets less current 604,787 634,428 liabilities Creditors: amounts falling due after more than one 46,000 46,000 year ---------- ---------- Total net assets 558,787 588,428 ======= ======= Capital and reserves Issued share capital 54,183 54,724 Share premium account 28,249 26,895 Other capital reserves 465,974 495,116 Revenue reserves 10,381 11,693 ---------- ---------- Shareholders' funds (including non- equity interests 558,787 588,428 of £2,086,000) ======= ======= Net asset value per ordinary share 267.14p 278.48p ======= ======= THE CITY OF LONDON INVESTMENT TRUST PLC Unaudited Preliminary Results for the year ended 30 June 2000 Cash Flow Statement 2000 2000 1999 1999 £'000 £'000 £'000 £'000 Net cash inflow from operating 16,489 18,194 activities Servicing of finance Debenture interest paid (3,412) (3,412) Bank interest paid (57) (19) Dividends paid on preference and preferred (191) (145) ordinary stocks ------ ------ Net cash outflow from servicing (3,660) (3,576) of finance Taxation UK tax paid (including ACT) - (72) UK income tax paid (793) (743) ------ ------ Net tax paid (793) (815) Capital expenditure and financial investment Purchase of investments (83,599) (57,990) Sale of investments 87,772 55,925 Net cash received/(paid) on 909 (664) futures contracts ------ ------ Net cash inflow/(outflow) from 5,082 (2,729) capital expenditure and financial investment Equity dividends paid (14,996) (14,466) Management of liquid resources Cash withdrawn from short term - 3,000 deposit ------ ------ - 3,000 ------ ------ Net cash inflow/(outflow) before 2,122 (392) financing Financing Proceeds from issues of ordinary 1,489 2,098 shares Costs of repurchases of ordinary (6,265) - shares ------ ------ Net cash (outflow)/inflow from (4,776) 2,098 financing ------ ------ (Decrease)/increase in cash (2,654) 1,706 ------ ------ THE CITY OF LONDON INVESTMENT TRUST PLC Unaudited Preliminary Results for the year ended 30 June 2000 Notes : 1. Return per Ordinary Share Revenue return per ordinary share is based on earnings attributable to the ordinary shares of £13,770,000 (1999: £15,393,000) and on the weighted average number of ordinary shares in issue during the year of 210,454,674 (1999: 210,350,386). Capital return per ordinary share is based on net capital losses for the year of £23,553,000 (1999: gains of £40,738,000) and on the weighted average number of ordinary shares in issue during the year of 210,454,674 (1999: 210,350,386). 2. Issued Share Capital There were 208,389,303 ordinary shares of 25p in issue at 30 June 2000 (30 June 1999: 210,553,142) for the purpose of calculating the net asset value per ordinary share. 3. Change in Accounting Policy The Company has adopted Financial Reporting Standard (FRS) 16 Current Tax under which UK franked dividend income should be accounted for net of the attributable tax credits. The comparative figures for the year ended 30 June 1999 have been restated accordingly. The effect of this change is that both income and taxation are reduced by £1,928,000 (1999: £2,363,000). However, there is no effect on the revenue or capital returns per share, nor on the net asset value per share. 4. Investment Company Status The Company has been advised that its Articles of Association do not meet the requirements of an investment company within the meaning of section 266 of the Companies Act 1985. However, it has conducted its affairs as an investment trust for taxation purposes under section 842 of the Income and Corporation Taxes Act 1988 and the Company's Articles prohibit capital profits from being distributed by way of dividend. As such, the directors consider it necessary to continue to present the accounts in accordance with the SORP. Under the SORP the financial performance of the Company is presented in a statement of total return in which the revenue column is the profit and loss account of the Company. The revenue column excludes net profits on disposals of investments, calculated by reference to their previous carrying amount of £3,920,000 (1999: £4,486,000), and management expenses and finance costs charged to capital, of £750,000 and £2,161,000 respectively (1999: £656,000 and £2,142,000) less tax relief thereon of £67,000 (1999: £110,000). THE CITY OF LONDON INVESTMENT TRUST PLC Unaudited Preliminary Results for the year ended 30 June 2000 Since the Company has been advised that its Articles of Association do not meet the requirements of an investment company within the meaning of section 266 of the Companies Act 1985, the Companies Act and/or FRS 3 would ordinarily require these items to be including in the profit and loss account. However, in the opinion of the directors the inclusion of these amounts in the profit and loss account would be misleading because it would obscure and distort both the revenue and capital performance of the Company and would not show clearly the revenue profits emerging to be distributable by way of dividend. The directors therefore consider that these departures from the specific provisions of Schedule 4 of the Companies Act, relating to the form and content of accounts for companies other than investment companies, and these departures from accounting standards are necessary to give a true and fair view. The departures have no effect on total return or on the balance sheet. 5. Reconciliation of operating revenue to net cash inflow from operating activities (restated) 2000 1999 £'000 £'000 Net revenue before interest payable 16,188 17,813 and taxation Increase in prepayments and accrued 1,143 1,117 income Decrease in other debtors - 170 Decrease in other creditors and (38) (157) accruals Management expenses charged to other (750) (656) capital reserves UK income tax deducted at source (54) (93) -------- -------- Net cash inflow from operating 16,489 18,194 activities -------- -------- 6. Analysis of net debt 1 July Cash 30 June 1999 Flow 2000 £'000 £'000 £'000 Net cash: cash at bank and 3,001 (2,654) 347 in hand Debt: debts falling due after more than (46,000) - (46,000) one year ---------- ------- --------- Net debt (42,999) (2,654) (45,653) ---------- ------- --------- 7. 2000 Accounts The preliminary figures for the year ended 30 June 2000 are compiled from an extract of the latest accounts and do not constitute statutory accounts as defined by section 240 of the Companies Act 1985. These accounts have not yet been delivered to the Registrar of Companies, nor have the auditors yet reported on them. THE CITY OF LONDON INVESTMENT TRUST PLC Unaudited Preliminary Results for the year ended 30 June 2000 8. 1999 Accounts The figures and financial information for the year ended 30 June 1999 are compiled from an extract of the latest published accounts and do not constitute the statutory accounts for that year. Those accounts have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under either section 237(2) or section 237(3) of the Companies Act 1985. 9. Annual Report The full annual report and accounts will be posted to shareholders in late September 2000 and copies will be available thereafter from the Secretary at the Company's Registered Office, 3 Finsbury Avenue, London EC2M 2PA. The Annual General Meeting will be held on Thursday 2 November 2000 at 3.00pm. THE CITY OF LONDON INVESTMENT TRUST PLC Unaudited Preliminary Results for the year ended 30 June 2000 The 40 largest equity investments (convertibles and all classes of equity in any one company being treated as one investment) were as follows : Valuation Valuation at at 30 June 30 June 2000 2000 £'000 £'000 BP Amoco 34,236 Pearson 7,350 Shell Transport & 32,538 Rio Tinto 6,480 Trading HSBC 26,065 Granada 6,380 Vodafone Airtouch 25,365 Abbey National 6,320 Glaxo Wellcome 25,051 British American 5,953 Tobacco British 23,485 BG 5,693 Telecommunications CGNU 21,367 Bank of Scotland 5,657 Lloyds TSB 16,224 Reuters 5,635 SmithKline Beecham 12,975 Scottish Power 5,600 Royal Bank of 12,081 BAE Systems 5,546 Scotland Marconi 12,040 Bass 5,325 Cable & Wireless 11,190 Cadbury Schweppes 5,208 AstraZeneca 10,798 EMI 5,100 Barclays 10,269 Carlton 5,037 Communications Prudential 9,680 Royal & Sun 4,290 Alliance Diageo 8,895 Thames Water 4,275 GKN 8,430 Railtrack 4,106 Land Securities 7,900 Smith & Nephew 4,026 Legal & General 7,725 National Grid 3,908 Tesco 7,398 WPP 3,860 These investments represent 70.7% of the portfolio. For further information please contact : Job Curtis Portfolio Manager The City of London Investment Trust plc Telephone: 020 7410 4367 Alex Crooke or Vicki Staveacre Deputy Portfolio Manager Henderson Investors The City of London Investment Trust plc The Press Office Telephone: 020 7410 4370 Telephone: 020 7410 4222 Issued by The City of London Investment Trust plc

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