Interim Results
City of London Investment Trust PLC
09 February 2007
9 February 2007
THE CITY OF LONDON INVESTMENT TRUST PLC
Unaudited Interim Results for the Half Year Ended 31 December 2006
Total Returns Six Months to
31 December 2006
Net asset value per ordinary share * +14.8%
FTSE All-Share 4% Capped Index # (Benchmark) +11.9%
NAV outperformance +2.9%
Ordinary share price * +16.3%
FTSE All-Share Index # +10.0%
Sources: * AIC Services Limited # Thomson Financial, Datastream
Extracts from the Chairman's Statement
Performance
It is pleasing to be able to report on an excellent six months for City of
London which produced a net asset value total return of 14.8%. This compares
with a total return for our benchmark, the FTSE All-Share 4% Capped Index, of
11.9%. City of London, therefore, outperformed by 2.9 percentage points over the
six months. We were also ahead of the average return for our sector, the AIC UK
Growth and Income, by 2.4 percentage points.
Of our outperformance against the benchmark, 0.4% was due to gearing and the
rest due to stock selection. Particularly strong contributors included our
holdings in Land Securities, the leading UK real estate stock ahead of its
conversion into a Real Estate Investment Trust, and also BT Group, which enjoyed
a re-rating as its profits exceeded investor expectations. In addition, we had
lower than average exposure to the underperforming pharmaceutical sector.
Takeovers continued to be a strong feature for UK equities with purchasers still
finding value relative to the cost of finance. City of London benefited with
particularly large gains in value in our holdings of Scottish Power and
Gallaher.
Dividends
The Board continues to recognise the importance of dividend income to
shareholders. A second interim dividend of 2.53p was declared on 5 December 2006
and will be paid on 28 February 2007. As has already been announced, the minimum
dividend increase for the year will be 8.1% and the quarterly rate will next be
considered in March.
Expenses
The outperformance during the period has been in excess of all of last year's
underperformance with the result that it is necessary to accrue a performance
fee of £564,847. This has been charged 88% to capital and 12% to revenue to
reflect from where the outperformance has been derived. The expense ratio
remains low compared with most other equity savings products, with management
and performance fees and other expenses for the six months being equivalent to a
full year's rate of approximately 0.5% of net assets.
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Page 2 of 9
THE CITY OF LONDON INVESTMENT TRUST PLC
Unaudited Interim Results for the Half Year Ended 31 December 2006
Savings
City of London sets out to be an attractive and straightforward long-term
savings vehicle and seeks to be one of the leading candidates for regular
savings and investments. Investments can be made through the itshenderson
products (the Share Plan and ISA) or the Alliance Trust Savings (including
pensions).
Outlook
The recent increases in interest rates will dampen growth in certain sectors in
the UK. In addition, interest rates are rising in many overseas markets.
The valuation of the UK equity market reflects these concerns. Given the
continuing healthy outlook for dividend growth, the yield on the UK equity
market is attractive relative to the alternatives, such as fixed interest. In
addition, takeovers of UK companies at large premia to previously prevailing
prices are likely to continue, given the availability of credit and the UK's
open system for corporate control.
S M de Zoete
9 February 2007
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Page 3 of 9
THE CITY OF LONDON INVESTMENT TRUST PLC
Unaudited Interim Results for the half year ended 31 December 2006
INCOME STATEMENT
for the half year ended 31 December 2006
(Unaudited) (Unaudited) (Audited)
Half year ended Half year ended Year ended
31 December 2006 31 December 2005 30 June 2006
Revenue Capital Revenue Capital Revenue Capital
Return Return Total Return Return Total Return Return Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains on investments
held at fair value
through profit or loss - 79,689 79,689 - 57,579 57,579 - 81,104 81,104
Income from
investments held at
fair value through
profit or loss 11,158 - 11,158 9,374 - 9,374 23,503 - 23,503
Other interest receivable
and similar income 125 - 125 358 - 358 474 - 474
-------- -------- -------- -------- -------- -------- -------- -------- --------
Gross revenue and capital
gains
11,283 79,689 90,972 9,732 57,579 67,311 23,977 81,104 105,081
-------- -------- -------- -------- -------- -------- -------- -------- --------
Management fee (333) (777) (1,110) (295) (688) (983) (609) (1,422) (2,031)
Performance fee
(note 4) (68) (497) (565) - - - - - -
Other administrative
expenses (247) - (247) (252) - (252) (520) - (520)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net return on
ordinary activities
before finance costs
and taxation 10,635 78,415 89,050 9,185 56,891 66,076 22,848 79,682 102,530
Finance costs (735) (1,507) (2,242) (729) (1,493) (2,222) (1,459) (2,988) (4,447)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net return on
ordinary activities
before taxation 9,900 76,908 86,808 8,456 55,398 63,854 21,389 76,694 98,083
Taxation on net return
on ordinary activities (61) - (61) (28) - (28) (181) (5) (186)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net return on
ordinary activities
after taxation 9,839 76,908 86,747 8,428 55,398 63,826 21,208 76,689 97,897
===== ===== ===== ===== ===== ===== ===== ===== =====
Return per ordinary
share - basic (note 2) 4.72p 36.90p 41.62p 4.04p 26.58p 30.62p 10.18p 36.79p 46.97p
The total columns of this statement represent the income statement of the
Company.
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Page 4 of 9
THE CITY OF LONDON INVESTMENT TRUST PLC
Unaudited Interim Results for the half year ended 31 December 2006
Reconciliation of Movements in Shareholders' Funds
for the half years ended 31 December 2006 and 2005 and year ended 30 June 2006
Called-up Share Other
Share Premium Capital Revenue
Capital Account Reserves Reserve Total
£'000 £'000 £'000 £'000 £'000
Half year ended 31 December 2006
At 30 June 2006 52,103 35,309 508,695 18,032 614,139
Net return on ordinary activities after taxation - - 76,908 9,839 86,747
Fourth interim dividend (2.40p per share) for year
ended 30 June 2006 paid 31 August 2006 - - - (5,002) (5,002)
First interim dividend (2.53p per share) for year
ended 30 June 2007 paid 30 November 2006 - - - (5,273) (5,273)
-------- -------- -------- -------- --------
At 31 December 2006 52,103 35,309 585,603 17,596 690,611
===== ===== ===== ===== =====
Called-up Share Other
Share Premium Capital Revenue
Capital Account Reserves Reserve Total
Half year ended 31 December 2005 £'000 £'000 £'000 £'000 £'000
At 30 June 2005 52,103 35,309 432,006 16,026 535,444
Net return on ordinary activities after taxation - - 55,398 8,428 63,826
Fourth interim dividend (2.26p per share) for
year ended 30 June 2005 paid 31 August 2005 - - - (4,710) (4,710)
First interim dividend (2.28p per share) for year
ended 30 June 2006 paid 30 November 2005 - - - (4,752) (4,752)
-------- -------- -------- -------- --------
At 31 December 2005 52,103 35,309 487,404 14,992 589,808
===== ===== ===== ===== =====
Called-up Share Other
Share Premium Capital Revenue
Capital Account Reserves Reserve Total
Year ended 30 June 2006 £'000 £'000 £'000 £'000 £'000
At 30 June 2005 52,103 35,309 432,006 16,026 535,444
Net return on ordinary activities after taxation - - 76,689 21,208 97,897
Fourth interim dividend (2.26p per share) for year
ended 30 June 2005 paid 31 August 2005 - - - (4,710) (4,710)
First and Second interim dividends (2.28p each per
share) for year ended 30 June 2006 paid 30 November
2005 and 28 February 2006 - - - (9,504) (9,504)
Third interim dividend (2.40p per share) for year
ended 30 June 2006 paid 31 May 2006 - - - (5,002) (5,002)
Write back of dividends over 12 years old - - - 14 14
-------- -------- -------- -------- ----------
At 30 June 2006 52,103 35,309 508,695 18,032 614,139
===== ====== ====== ====== ======
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THE CITY OF LONDON INVESTMENT TRUST PLC
Unaudited Interim Results for the half year ended 31 December 2006
Balance Sheet
as at 31 December 2006
(Unaudited) (Unaudited) (Audited)
31 December 31 December 30 June
2006 2005 2006
£'000 £'000 £'000
Investments held at fair value through profit or
loss
Listed at market value in the United Kingdom 702,942 613,327 620,848
AIM quoted investment at market value - - 1,035
Listed at market value overseas 34,447 21,035 30,243
Shares in subsidiary undertakings 377 377 377
---------- ---------- ----------
737,766 634,739 652,503
---------- ---------- ----------
Current assets
Debtors 3,816 2,048 8,443
Bank balances and short term deposits 4 4,166 6,415
-------- -------- ----------
3,820 6,214 14,858
-------- -------- ----------
Creditors: amounts falling due within one year (3,087) (3,257) (5,334)
---------- ---------- ----------
Net current assets 733 2,957 9,524
---------- ---------- ----------
Total assets less current liabilities 738,499 637,696 662,027
Creditors: amounts falling due after more than one
year (47,888) (47,888) (47,888)
---------- ---------- ----------
Total net assets 690,611 589,808 614,139
====== ====== ======
Capital and reserves
Called-up share capital 52,103 52,103 52,103
Share premium account 35,309 35,309 35,309
Other capital reserves 585,603 487,404 508,695
Revenue reserve 17,596 14,992 18,032
---------- ---------- ----------
Shareholders' funds 690,611 589,808 614,139
====== ====== ======
Net asset value per ordinary share (note 6) 331.37p 283.00p 294.67p
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Page 6 of 9
THE CITY OF LONDON INVESTMENT TRUST PLC
Unaudited Interim Results for the half year ended 31 December 2006
Cash Flow Statement
for the half year ended 31 December 2006
(Unaudited) (Unaudited) (Audited)
Half year ended Half year ended Year ended
31 December 2006 31 December 2005 30 June 2006
£'000 £'000 £'000
Net cash inflow from operating activities 10,394 8,012 19,622
Net cash outflow from servicing of finance (2,242) (2,222) (4,447)
Total tax recovered - - 59
Net cash outflow from financial investment (4,290) (5,656) (3,066)
Equity dividends paid (10,275) (9,462) (19,202)
Cash withdrawn from deposit 6,301 8,505 5,824
--------- --------- ----------
Decrease in cash (112) (823) (1,210)
===== ===== ======
Reconciliation of operating revenue to net cash inflow
from operating activities
Total return before finance costs and taxation 89,050 66,076 102,530
Less: capital return before finance costs and taxation (78,415) (56,891) (79,682)
----------- ----------- -----------
Net revenue return before finance costs and taxation 10,635 9,185 22,848
Decrease/(increase) in accrued income 485 587 (297)
Increase/(decrease) in other creditors 618 (1,035) (1,279)
Management charge and performance fee taken to other
capital reserves (1,274) (688) (1,422)
Overseas withholding tax (70) (37) (228)
-------- -------- ----------
Net cash inflow from operating activities 10,394 8,012 19,622
===== ===== ======
Reconciliation of net cash outflow to movement in net
debt
Decrease in cash as above (112) (823) (1,210)
Net cash inflow from movement in liquid resources (6,301) (8,505) (5,824)
Exchange movements (8) (32) (77)
Net debt at the beginning of the period (41,473) (34,362) (34,362)
---------- ---------- ----------
Net debt at the end of the period (47,894) (43,722) (41,473)
====== ====== ======
Represented by:
Cash at bank and short term deposits less bank
overdrafts (6) 4,166 6,415
Debt falling due after more than one year (47,888) (47,888) (47,888)
---------- ---------- ----------
(47,894) (43,722) (41,473)
====== ====== ======
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THE CITY OF LONDON INVESTMENT TRUST PLC
Unaudited Interim Results for the half year ended 31 December 2006
Notes
1. Accounting policies
The accounts have been prepared under the historical cost convention, modified to include the
revaluation of investments and in accordance with applicable Accounting Standards and with the
Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' ("SORP" dated
January 2003, revised December 2005). All of the Company's operations are of a continuing nature.
The same accounting policies used for the year ended 30 June 2006 have been applied.
2. Return per ordinary share
(Unaudited) (Unaudited) (Audited)
Half year Half year Year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
£'000 £'000 £'000
The return per ordinary share is based on the
following figures:
Revenue return 9,839 8,428 21,208
Capital return 76,908 55,398 76,689
---------- ---------- ----------
Total 86,747 63,826 97,897
====== ====== ======
Weighted average number of ordinary shares in 208,413,762 208,413,762 208,413,762
issue
Revenue return per ordinary share 4.72p 4.04p 10.18p
Capital return per ordinary share 36.90p 26.58p 36.79p
---------- ---------- ----------
Total 41.62p 30.62p 46.97p
====== ====== ======
3. Expenses charged to capital
The Company charges 70% of its finance costs (excluding preference and preferred ordinary stock
dividends) and base management fee to capital return. Performance fees are allocated between capital
return and revenue return based on the outperformance attributable to capital and revenue, respectively.
All other expenses are charged wholly to revenue return. Expenses which are incidental to the purchase or
sale of an investment are included in the cost or deducted from the proceeds of sale of investment.
4. Performance fee
A performance fee has been accrued, based on a full year effect of rewarding the Manager, under the terms
of the Management Agreement, for outperformance achieved in the first six months. The actual fee to be
paid to the Manager will depend on the actual performance over the full year to 30 June 2007.
5. Transaction costs
Purchase transaction costs for the half year ended 31 December 2006 were £304,000 (half year ended 31
December 2005: £323,000; year ended 30 June 2006: £600,000). These comprise mainly stamp duty and
commissions. Sale transaction costs for the half year ended 31 December 2006 were £69,000 (half year
ended 31 December 2005: £66,000; year ended 30 June 2006: £146,000).
6. Net asset value per ordinary share
The net asset value per ordinary share is based on the net assets attributable to the ordinary shares of
£690,611,000 (31 December 2005: £589,808,000; 30 June 2006: £614,139,000) and on 208,413,762 ordinary
shares (31 December 2005: 208,413,762; 30 June 2006: 208,413,762) being the number of ordinary shares in
issue at the end of each period.
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Page 8 of 9
THE CITY OF LONDON INVESTMENT TRUST PLC
Unaudited Interim Results for the half year ended 31 December 2006
7. Interim dividend
A first interim dividend of 2.53p was paid on 30 November 2006. The second interim dividend of 2.53p
(declared on 5 December 2006) will be paid on 28 February 2007 to shareholders who were on the register on
26 January 2007.
8. Accounts for the year ended 30 June 2006
The figures and financial information for the year ended 30 June 2006 are an extract from the latest
published accounts of the Company and do not constitute statutory accounts for that year. These 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 237(3) of the Companies Act 1985.
9. Copies of the Company's interim report for the half year ended 31 December 2006 will be posted to
shareholders in February 2007 and will be available thereafter from the Secretary at the Registered Office,
4 Broadgate, London, EC2M 2DA.
Largest Investments
The 60 largest investments, convertibles and all classes of equity in any one
company being treated as one investment, were as follows:
Market value Market value
31 December 2006 31 December 2006
£'000 £'000
BP 31,213 BHP Billiton 7,009
HSBC 30,723 Rodamco Europe 6,792
British American Tobacco 27,151 United Utilities 6,630
Diageo 26,566 Britvic 6,174
Barclays 25,550 Imperial Tobacco 6,030
BT 25,025 Pearson 5,786
Lloyds TSB 24,289 Greene King 5,685
Vodafone 24,055 Liberty International 5,584
Land Securities 21,488 Hammerson 5,520
GlaxoSmithKline 20,832 Tomkins 5,161
Royal Bank of Scotland 19,930 Kingfisher 4,770
Royal Dutch Shell 17,900 Alliance Boots 4,744
Scottish & Southern Energy 17,094 Reckitt Benckiser 4,668
HBOS 16,980 Croda 4,388
National Grid Transco 16,583 IMI 4,310
Tesco 16,180 Pennon 4,283
Aviva 15,139 Prudential 4,197
Anglo American 12,455 Severn Trent 4,165
ENI 12,031 Admiral 4,144
Rio Tinto 11,552 Smiths Group 3,966
Cadbury Schweppes 10,930 Persimmon 3,815
Bovis Homes 10,840 Wereldhave 3,399
Unilever 9,996 Kesa Electricals 3,393
Legal & General 8,663 National Express 3,390
Reed Elsevier 8,408 Investec 3,298
Slough Estates 7,855 BBA Aviation 3,216
Scottish & Newcastle 7,478 Hiscox 3,161
Wolseley 7,398 Corio 3,128
Rexam 7,357 Hanson 3,082
BAE Systems 7,238 Premier Foods 3,018
These investments total £635,805,000 or 86.2% of the portfolio.
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Page 9 of 9
THE CITY OF LONDON INVESTMENT TRUST PLC
Unaudited Interim Results for the half year ended 31 December 2006
Sector Analysis of Portfolio as at 31 December 2006
%
Oil & Gas 8.7
Basic Materials 5.4
Industrials 9.3
Consumer Goods 17.5
Healthcare 3.5
Consumer Services 11.8
Telecommunications 6.7
Utilities 7.4
Financials 29.7
--------
Total 100.0
=====
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 -
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