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City of London IT (CTY)

  Print      Mail a friend       Annual reports

Tuesday 13 September, 2005

City of London IT

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.



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                    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.




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                    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






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                    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.





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                                     - 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
                                                                            =======            =======



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                    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
                                                                           ======                   ======



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                    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.

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                                     - 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.




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                                     - 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.





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                    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 -




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