Final Results

City of London Investment Trust PLC 13 September 2005 13 September 2005 THE CITY OF LONDON INVESTMENT TRUST PLC Unaudited Preliminary Results for the year ended 30 June 2005 Total Returns 30 June 2005 30 June 2004 • Net asset value per ordinary share ("NAV") +21.7% +17.8% • FTSE All-Share Index +18.7% +16.9% • Ordinary share price +28.0% +3.2% Dividend (per share) 8.62p 8.33p Extracts from the Chairman's Statement:- Introduction I am pleased to report that City of London has performed well in 2004/2005, with excellent shareholder returns. In addition we have agreed some important changes in our management agreement with Henderson Global Investors, which we believe will be beneficial to shareholders in the future. Performance Despite a slowdown in the rate of growth of the UK economy, equities performed strongly over the year. Many quoted UK companies benefited from the improvement in growth in the US and in developing countries such as China. A series of takeovers of UK companies also helped support the equity market. A further positive factor was the perception in financial markets that UK interest rates had peaked for this cycle at the historically low level of 4.75%. The total return for the UK equity market, including reinvestment of dividends, was 18.7%, as measured by the FTSE All-Share Index. City of London outperformed producing a net asset value total return of 21.7%. Both gearing and stock selection, including four of the Company's holdings being taken over, contributed to this result. The discount of the share price to net asset value reduced over the year leading to an even better share price total return of 28.0%. Earnings and Dividends Revenue return per share was 8.88p, an increase of 7.8% over last year, mainly reflecting the improvement in UK dividend growth. A fourth interim dividend of 2.26p was paid on 31 August 2005, making a total dividend for the year of 8.62p, an increase of 3.5% over the previous year. - MORE - - 2 - THE CITY OF LONDON INVESTMENT TRUST PLC Unaudited Preliminary Results for the year ended 30 June 2005 Chairman's Statement cont/... For many years, the first three interim dividends have been limited to the same level as the previous fourth interim, but the Board believes that this pattern is no longer appropriate. Reflecting the improving trend in income, the minimum quarterly rate for the year ahead will be 2.28p per share, an increase of 5.8% on an annual basis. The Board will review this rate again in March 2006 when the third interim dividend is declared, by which time we will be better able to assess the trend in income performance of the portfolio. Expenses The investment management fee and other non interest expenses were around 0.74% of the Company's average assets for the year. This has risen from 0.61% last year due to greater outperformance from our investment manager Henderson Global Investors resulting in an increased fee for outperformance. This fee rate is still very competitive compared with most other equity savings vehicles. Excluding the performance fee, total expenses amounted to 0.46% of shareholders' funds, down from 0.49% last year. New Benchmark and Management Fee Arrangements During the year the Board decided that it was no longer appropriate to measure performance against the FTSE All-Share Index, given the impact of its high concentration in the top five most heavily weighted stocks. We therefore decided that, as from 1 July 2005, the Company's performance benchmark will be the FTSE All-Share Index - adjusted for a maximum 4% cap for any single stock. In addition we have introduced an adjustment to the performance fee. Up to now this has been linked only to net asset value performance relative to the benchmark. In future, if the Company's share price falls by more than 10%, there will be a reduction in the performance fee. There will be an increase in the performance fee when the share price increases by more than 10%. Further details are contained in appendix A. Finally, as part of the modernisation of our Management Agreement, we have agreed with our Investment Manager a rolling six month contract, which we consider is in line with best practice and is the appropriate length given our size and performance mandate. Savings City of London sets out to be an attractive and straight forward long-term savings vehicle for private investors. As well as investing directly, shares can be purchased through the City of London Alliance Trust Pension, the Henderson Investment Trust Share Plan and the Henderson ISA. - MORE - - 3 - THE CITY OF LONDON INVESTMENT TRUST PLC Unaudited Preliminary Results for the year ended 30 June 2005 Chairman's Statement cont/... Outlook The Company's portfolio of shares is well positioned to achieve growth in capital and income if stock markets continue to progress. There is currently a risk to these markets if the price of oil were to increase significantly but the UK and other leading economies have coped well with the sharp rise that has already been experienced. The level of indebtedness of UK consumers remains a concern but the strain on household income should ease with the improvement in the interest rate outlook. Overall, we feel that the valuation of the UK equity market is reasonably attractive given expected increases in profits and dividends. The Board Helen Weir has decided not to stand for re-election to the Board at the next Annual General Meeting. My fellow Board members and I would like to thank Helen for her excellent contribution since she joined the Board in March 2002. Annual General Meeting Shareholders are invited to the Annual General Meeting which will take place on Wednesday 26 October at 4 Broadgate, London, EC2M 2DA. The meeting will start at 3.00 pm and will include a presentation from the portfolio manager. S M de Zoete 13 September 2005 - MORE - - 4 - THE CITY OF LONDON INVESTMENT TRUST PLC Unaudited Preliminary Results for the year ended 30 June 2005 Statement of Total Return (incorporating the revenue account) for the year ended 30 June 2005 Unaudited Audited Year ended 30 June 2005 Year ended 30 June 2004 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Total capital gains from investments - 83,810 83,810 - 57,718 57,718 Income from fixed asset investments 20,581 - 20,581 20,050 - 20,050 Other interest receivable and similar 596 - 596 212 - 212 income ---------- ---------- ----------- ---------- ------------ ---------- Gross revenue and capital gains 21,177 83,810 104,987 20,262 57,718 77,980 Management fee (528) (1,231) (1,759) (477) (1,112) (1,589) Performance fee - (1,372) (1,372) (419) (108) (527) Other administrative expenses (505) - (505) (489) - (489) ---------- ---------- ----------- ---------- ------------ ---------- Net return on ordinary activities before interest payable and 20,144 81,207 101,351 18,877 56,498 75,375 taxation Interest payable (1,280) (2,986) (4,266) (1,282) (2,991) (4,273) ---------- ----------- ----------- ---------- ------------ ---------- Net return on ordinary activities before taxation 18,864 78,221 97,085 17,595 53,507 71,102 Taxation on net return on ordinary (175) (19) (194) (122) - (122) activities ---------- ----------- ----------- ---------- ------------ ---------- Net return on ordinary activities after taxation 18,689 78,202 96,891 17,473 53,507 70,980 Dividends: Preference and preferred ordinary (184) - (184) (190) - (190) stocks --------- ---------- ----------- ---------- ------------ ---------- Net return attributable to the 18,505 78,202 96,707 17,283 53,507 70,790 ordinary shares ---------- ----------- ----------- ---------- ------------ ---------- Dividends: Ordinary shares Write back of dividends over 12 years 78 - 78 - - - old Three interim payments of 2.12p (13,255) - (13,255) (13,029) - (13,029) (2004: 2.07p) Fourth interim payment of 2.26p (4,710) - (4,710) (4,427) - (4,427) (2004: 2.12p) ----------- ----------- ----------- ---------- ------------ ---------- (17,887) - (17,887) (17,456) - (17,456) ----------- ----------- ------------ ---------- ------------ ---------- Transfer to/(from) reserves 618 78,202 78,820 (173) 53,507 53,334 ======= ======= ======= ====== ======= ====== Return per ordinary share (note 1) 8.88p 37.51p 46.39p 8.24p 25.50p 33.74p ======= ======= ======= ====== ======= ====== The revenue columns of this statement represent the profit and loss accounts of the Company. - MORE - - 5 - THE CITY OF LONDON INVESTMENT TRUST PLC Unaudited Preliminary Results for the year ended 30 June 2005 Balance Sheet at 30 June 2005 Unaudited Audited 30 June 30 June 2005 2004 £'000 £'000 Fixed asset investments Listed at market value in the United Kingdom 549,511 483,901 AIM quoted investment at market value - 2,000 Listed at market value overseas 21,394 14,347 Investment in FTSE 100 Index future - (6,706) Investment in subsidiary undertakings 347 347 ------------ ------------ 571,252 493,889 ------------ ------------ Current assets Debtors 2,653 9,920 Cash at bank and on short term deposit 13,526 7,928 ------------ ------------ 16,179 17,848 ------------ ------------ Creditors: amounts falling due within one year (8,809) (9,139) ------------ ------------ Net current assets 7,370 8,709 ------------ ------------ Total assets less current liabilities 578,622 502,598 Creditors: amounts falling due after more than one year (46,000) (46,000) ------------ ------------ Total net assets 532,622 456,598 ======= ======= Capital and reserves Called up share capital 53,991 54,539 Share premium account 35,309 35,309 Other capital reserves 432,006 356,052 Revenue reserve 11,316 10,698 ------------ ------------ Shareholders' funds (including non-equity interests of £1,888,000 (2004: £2,086,000) 532,622 456,598 ======= ======= Net asset value per ordinary share 254.65p 216.63p ======= ======= - MORE - - 6 - THE CITY OF LONDON INVESTMENT TRUST PLC Unaudited Preliminary Results for the year ended 30 June 2005 Cash Flow Statement for the year ended 30 June 2005 Unaudited Audited 2005 2005 2004 2004 £'000 £'000 £'000 £'000 Net cash inflow from operating activities 18,094 17,775 Servicing of finance Debenture interest paid (4,265) (4,265) Bank and loan interest paid (1) (8) Dividends paid on preference and preferred ordinary stocks (190) (190) ---------- ---------- Net cash outflow from servicing of finance (4,456) (4,463) Taxation Withholding tax recovered 84 51 ---------- ---------- Net tax recovered 84 51 Financial investment Cash paid under future contracts (279) (79) Purchases of investments (51,600) (36,916) Sales of investments 64,204 46,330 ---------- ---------- Net cash inflow from financial investment 12,325 9,335 Equity dividends paid (17,604) (17,372) Management of liquid resources Cash placed on deposit (12,125) - ----------- ----------- Net cash outflow from liquid resources (12,125) - ----------- ---------- Net cash (outflow)/inflow before financing (3,682) 5,326 Financing Purchase of preference shares (199) - Purchase of ordinary shares (2,597) - ---------- ---------- Net cash outflow from financing (2,796) - ---------- ---------- (Decrease)/increase in cash (6,478) 5,326 ====== ====== - MORE - - 7 - THE CITY OF LONDON INVESTMENT TRUST PLC Unaudited Preliminary Results for the year ended 30 June 2005 Notes: 1. Return per Ordinary Share Revenue return per ordinary share is based on earnings attributable to the ordinary shares of £18,505,000 (2004: £17,283,000) and on the weighted average number of ordinary shares in issue during the year of 208,482,803 (2004: 209,813,762). Capital gain per ordinary share is based on net capital gains for the year of £78,202,000 (2004: £53,507,000) and on the weighted average number of ordinary shares in issue during the year of 208,482,803 (2004: 209,813,762). 2. Reconciliation of movement in shareholders' funds 2005 2004 £'000 £'000 Net revenue on ordinary activities after taxation for the year 18,689 17,473 Dividends paid and payable (18,071) (17,646) ---------- ---------- 618 (173) Buy back of ordinary shares (2,597) - Buy back of 4.2% (formerly 6%) Cumulative First Preference Stock (199) - Increase in other capital reserves 78,202 53,507 ---------- --------- Net increase in shareholders' funds 76,024 53,334 Shareholders' funds at 1 July 456,598 403,264 ---------- ---------- Shareholders' funds at 30 June 532,622 456,598 ---------- ---------- 3. Issued Share Capital There were 208,413,762 ordinary shares of 25p in issue at 30 June 2005 (30 June 2004: 209,813,762) for the purpose of calculating the net asset value per ordinary share. 4. Share Buy-Backs During the year the Company repurchased and cancelled 1,400,000 ordinary shares and £198,018 4.2% cumulative first preference stock. As at 13 September 2005 there were 208,413,762 ordinary shares in issue. 5. Share Allotments During the year no ordinary shares were issued by the Company. 6. 2005 Accounts The preliminary figures for the year ended 30 June 2005 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. - MORE- - 8 - THE CITY OF LONDON INVESTMENT TRUST PLC Unaudited Preliminary Results for the year ended 30 June 2005 7. 2004 Accounts The preliminary announcement is prepared on the same basis as set out in the 2004 accounts. The figures and financial information for the year ended 30 June 2004 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. 8. Annual Report The full annual report and accounts will be posted to shareholders in September 2005 and copies will be available thereafter from the Secretary at the Company's Registered Office, 4 Broadgate, London EC2M 2DA. The Annual General Meeting will be held on Wednesday, 26 October 2005 at 3.00 pm. - MORE- - 9 - THE CITY OF LONDON INVESTMENT TRUST PLC Unaudited Preliminary Results for the year ended 30 June 2005 Appendix A Adjustment to the Performance Fee With effect from 1 July 2005, an adjustment to the performance fee will be introduced in order to align it more closely to shareholders' actual returns. Whilst the performance fee will continue to be calculated according to existing practice and, if sufficient performance has been achieved, the cap of 0.5% will be applied, in the event of a significant movement in the share price the performance fee will be decreased or increased in line with a sliding scale. Should the Company's share price decrease over the year in question by between 10.00% and 14.99%, the performance fee element would be decreased by 10%; a fall of between 15.00% and 19.99% in the share price would result in a reduction of 15% of the performance fee; and a decline of 20.00% or more in the share price would create a decrease of 20% in the performance fee. The new arrangement is symmetrical and, should the share price increase over the period, the same thresholds and increases to the performance fee would apply. This could mean that the total fee paid may exceed the 0.5% cap by up to 20% of the performance fee. - MORE- - 10 - THE CITY OF LONDON INVESTMENT TRUST PLC Unaudited Preliminary Results for the year ended 30 June 2005 Appendix B The 40 largest equity investments (convertibles and all classes of equity in any one company being treated as one investment) were as follows : Valuation at Valuation at 30 June 2005 30 June 2005 £'000 £'000 BP 39,217 Rio Tinto 6,405 HSBC 33,820 Unilever 6,112 GlaxoSmithKline 27,020 Legal & General 5,750 Shell Transport & Trading 25,781 Prudential 5,417 British American Tobacco 20,444 Slough Estates 5,215 Barclays 18,332 Johnston Press 5,048 Vodafone 17,680 Scottish Power 4,965 Lloyds TSB 16,555 Imperial Tobacco 4,885 HBOS 15,489 BPB 4,761 Royal Bank of Scotland 14,837 Smith & Nephew 4,684 Diageo 12,756 AstraZeneca 4,622 Land Securities 12,163 Rodamco Europe 4,576 Tesco 11,475 United Utilities 4,547 BT 9,890 BAE Systems 4,305 Scottish & Southern Energy 9,624 Kingfisher 4,305 National Grid Transco 9,197 BHP Billiton 4,272 Aviva 8,708 Gallaher 4,145 Wolseley 7,044 BAA 4,030 Bovis Homes 6,567 ENI 3,950 Anglo American 6,545 Liberty International 3,874 These investments represent 73.39% of the portfolio. For further information please contact : Job Curtis Portfolio Manager, The City of London Investment Trust plc Telephone: 020 7818 4367 James de Sausmarez Head of Investment Trusts, Henderson Global Investors Telephone: 020 7818 3349 Sarah Gibbons-Cook Investor Relations and PR Manager, Henderson Global Investors Telephone: 020 7818 3198 - ENDS - This information is provided by RNS The company news service from the London Stock Exchange

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