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City of London IT (CTY)

  Print      Mail a friend       Annual reports

Friday 10 February, 2006

City of London IT

Interim Results

City of London Investment Trust PLC
10 February 2006





                                                              10 February 2006

                    THE CITY OF LONDON INVESTMENT TRUST PLC
               UNAUDITED INTERIM RESULTS FOR THE HALF YEAR ENDED
                                31 DECEMBER 2005


Total Returns                                                               Six Months to
                                                                         31 December 2005
Net asset value per ordinary share *                                               +12.5%
FTSE 4% capped Index # (Benchmark)                                                 +14.4%
NAV underperformance                                                                -1.9%
Ordinary share price*                                                              +11.4%

Sources: * AITC Services Limited    # Thomson Financial, Datastream


Extracts from the Chairman's Statement


Performance


The UK equity market performed strongly during the second six months of 2005.
It produced a total return, as measured by our benchmark, the FTSE All-Share
Index - adjusted for a maximum 4% cap for any single stock, of 14.4%.  This
compares with a total return of 12.8% for the benchmark that we have previously
used, the FTSE All-Share Index.


UK economic growth slowed down with the housing market levelling off and
consumer spending under pressure from higher utility bills and the effect of the
rise in mortgage rates earlier in the year.  With the improvement in the outlook
for inflation, the Bank of England decided to cut its interest rate from 4.75%
to 4.5%.  Yields on long dated British Government bonds fell from 4.2% to 4.0%,
a new low of recent years.


An important market factor has been takeover activity with bids for UK companies
emanating from both overseas companies and also from private equity
organisations.  The low interest rate environment facilitated the debt financing
of these deals.


City of London's net asset value total return of 12.5% over the period was
positive despite being behind our new benchmark.  Our performance relative to
the benchmark suffered from being underweight in lower yielding stocks, not all
of which were deemed suitable for the portfolio given our income objective.
In addition, we did not hold O2, which was bid for by Telefonica of Spain, the
largest takeover situation during the six months.  On the other hand, we did
benefit from bids for our holdings of BPB, P&O and PD Ports.  Overall, our net
asset value total return was better than the average of the AITC Growth & Income
sector of 11.5% and the FTSE 350 High Yield Index of 9.8%.


Dividends


The Board continues to recognise the importance of dividend income to
shareholders.  A second interim dividend of 2.28p was declared on 8 December and
will be paid on 28 February.  As noted in my Chairman's Statement in September,
the third interim dividend will be announced in March.



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                                                                    Page 2 of 10



                    THE CITY OF LONDON INVESTMENT TRUST PLC

       Unaudited Interim Results for the half year ended 31 December 2005


This year will be the fortieth consecutive year that City of London has paid an
increased dividend to shareholders.  This is a record which we believe cannot be
bettered by any other investment trust.


Expenses


The management fee declined significantly compared with the same period last
year.  A performance fee was not accrued because our managers underperformed the
benchmark over the period.  Total expenses, excluding interest payable but
including the management fee and other administrative expenses, were 0.21% of
net assets at 31 December 2005.  This remains a very competitive rate compared
with most other equity savings vehicles.



Savings



City of London sets out to be an attractive and straight forward long-term
savings vehicle and seeks to be one of the leading candidates for regular
savings and investment.  Investments can be made directly and shares can be
purchased through the City of London Alliance Trust Pension, the Henderson
Investment Trust Share Plan and the Henderson ISA.



Outlook



The UK equity market should continue to experience the positive effect of
corporate takeovers given the open system for control of companies compared with
most other countries.  As a result, the UK is an attractive hunting ground for
overseas companies.  In addition, the current low level of bond yields enables
private equity houses to finance takeovers cheaply.



Although the level of consumer debt and the probability of rising taxes in the
UK remain a concern, recent indications of inflation have been encouraging with
wage increases moderating.  It may therefore be possible for interest rates to
be cut, improving the prospects for UK consumer demand.  In addition, many UK
companies will continue to benefit from growth overseas, especially in emerging
markets.



We continue to believe that the UK equity market is relatively attractive on
most valuation criteria given the alternatives now available in overseas
equities, fixed interest, cash or property.  In particular, the dividend yield
for the UK equity market is now 2.9% with high single digit dividend growth
expected.



S M de Zoete
10 February 2006


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                                                                   Page 3 of 10


                    THE CITY OF LONDON INVESTMENT TRUST PLC
    
      Unaudited Interim Results for the half year ended 31 December 2005


    INCOME STATEMENT
    for the half year ended 31 December 2005


                                   (Unaudited)           (Unaudited and restated)+      (Audited and restated)+
                                 Half year ended              Half year ended                  Year ended
                                 31 December 2005             31 December 2004                30 June 2005
                              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                             -   57,579   57,579          -   48,987   48,987          -    83,809    83,809
  value through profit or
loss
Income from investments
held at                          9,374        -    9,374      8,250        -    8,250     20,581         -    20,581
  fair value through
profit or loss
Other interest receivable
and
  similar income                   358        -      358        286        -      286        596         -       596
  
                             -------- -------- --------   -------- -------- --------   --------  --------  --------
Gross revenue and capital
gains                           9,732   57,579   67,311      8,536   48,987   57,523     21,177    83,809   104,986

Management fee (note 4)         (295)    (688)    (983)    (256)      (597)    (853)      (528)   (1,231)   (1,759)
Performance fee (note 5)            -        -        -          -  (1,318)  (1,318)          -   (1,372)   (1,372)
Other administrative            (252)        -    (252)      (271)        -    (271)      (505)         -     (505)
expenses
                             -------- -------- --------   -------- -------- --------   --------  --------  --------
Net return on ordinary
activities before finance
costs and taxation              9,185   56,891   66,076      8,009   47,072   55,081     20,144    81,206   101,350

Finance costs                   (729)  (1,493)  (2,222)      (735)  (1,493)  (2,228)    (1,464)   (2,986)   (4,450)
                             -------- -------- --------   -------- -------- --------   --------  --------  --------
Net return on ordinary
activities before taxation      8,456   55,398   63,854      7,274   45,579   52,853     18,680    78,220    96,900

Taxation on net return on        (28)        -     (28)       (34)        -     (34)      (175)      (19)     (194)
 ordinary activities
                             -------- -------- --------   -------- -------- --------   --------  --------  --------
Net return on ordinary

 activities after taxation      8,428   55,398   63,826      7,240   45,579   52,819     18,505    78,201    96,706
                                =====    =====    =====      =====    =====    =====      =====     =====     =====
Return per ordinary share       4.04p   26.58p   30.62p      3.47p   21.86p   25.33p      8.88p    37.51p    46.39p
 (note 3)



The total columns of this statement represent the Profit and Loss accounts of
the Company.



Dividends per ordinary share paid in each period can be found on the
Reconciliation in Movements in Shareholders' Funds.    The dividends declared in
respect of the half year ended 31 December 2005 can be found in note 7.


+ Restated (see note 2)


                                    - MORE -

                                                                 Page 4 of 10


                    THE CITY OF LONDON INVESTMENT TRUST PLC

           Unaudited Interim Results for the half year ended 31 December 2005

Reconciliation of Movements in Shareholder's funds


                                                          Share       Capital
                                                        Premium    Redemption
                                               Share    Account       Reserve    Capital    Revenue
                                             Capital                             Reserve    Reserve        Total
                                              £000's    £000's        £000's     £000's      £000's       £000's  
                                                                                                                        
                                            --------   --------      --------   --------   --------     --------
At 30 June 2004 (as previously stated)        54,539     35,309         1,461    354,591     10,698      456,598

Add fourth interim dividend (2.12p per
share) for year ended 30 June 2004 paid 31
August 2004                                       -          -             -          -      4,427        4,427

  
Reclassification of preference and
preferred ordinary stock                     (2,086)          -             -          -          -      (2,086)
  
                                            --------   --------      --------   --------   --------     --------
At 30 June 2004 (as restated)                 52,453     35,309         1,461    354,591     15,125      458,939

Shares bought back and cancelled               (350)          -           350    (2,597)          -      (2,597)
Net return on ordinary activities                  -          -             -     78,201     18,505       96,706
Preference stock buyback                           -          -           198      (198)          -            -
Fourth interim dividend (2.12p per share)
for year ended 30 June 2004 paid                   -          -             -          -    (4,427)      (4,427)
   
Three interim dividends (of 2.12p each per
   share) for year ended 30 June 2005 paid         -          -             -          -   (13,255)     (13,255)
Write back of dividends over 12 years old          -          -             -          -         78           78
                                            --------   --------      --------   --------   --------     --------
At 30 June 2005 (as restated)                 52,103     35,309         2,009    429,997     16,026      535,444

Net return on ordinary activities                  -          -             -     55,398      8,428       63,826
Fourth interim dividend (of 2.26p per
share)  for year ended 30 June 2005 paid 31
August2005                                         -          -             -          -    (4,710)      (4,710)

   
First interim dividend for year ended 30
June  2006 (2.28p per share) paid 30 November
 2005                                              -          -             -          -    (4,752)      (4,752)

                                            --------   --------      --------   --------   --------   ----------
At 31 December 2005                           52,103     35,309         2,009    485,395     14,992      589,808
                                               =====     ======        ======     ======     ======       ======



The transaction costs incurred on the acquisition and disposal of investments
are included within the Capital Reserve and amounted to £389,000 for the half
year ended 31 December 2005 (half year ended 31 December 2004: £106,000; year
ended 30 June 2005: £347,000).



                                    - MORE -


                                                                   Page 5 of 10


                    THE CITY OF LONDON INVESTMENT TRUST PLC

       Unaudited Interim Results for the half year ended 31 December 2005



Balance Sheet
as at 31 December 2005


                                                                              (Unaudited and       (Audited and
                                                            (Unaudited)           restated)+         restated)+
                                                            31 December          31 December            30 June         
                                                                   2005                 2004               2005
                                                                  £'000                £'000              £'000
                                                                  
                                                          -------------        -------------      -------------
Investments held at fair value through profit or
loss
Listed at market value in the United Kingdom                    613,327              517,344            549,511
Listed at market value overseas                                  21,035               21,137             21,394
Shares in subsidiary undertakings                                   377                  347                347
                                                             ----------           ----------         ----------
Fixed asset investments                                         634,739              538,828            571,252
                                                             ----------           ----------         ----------
Current assets
Debtors                                                           2,048                1,832              2,653
Bank balances and short term deposits                             4,166               11,553             13,526
                                                               --------             --------         ----------
                                                                  6,214               13,385             16,179

Creditors: amounts falling due within one year                  (3,257)              (3,811)            (4,099)
                                                             ----------           ----------         ----------
Net current assets                                                2,957                9,574             12,080
                                                             ----------           ----------         ----------
Total assets less current liabilities                           637,696              548,402            583,332

Creditors: amounts falling due after more than one
year                                                           (47,888)             (48,086)           (47,888)
                                                             ----------           ----------         ----------
Total net assets                                                589,808              500,316            535,444
                                                             ----------           ----------         ----------
Capital and reserves
Called-up share capital                                          52,103               52,103             52,103
Share premium account                                            35,309               35,309             35,309
Capital redemption reserve                                        2,009                1,811              2,009
Other capital reserves                                          485,395              397,573            429,997
Revenue reserve                                                  14,992               13,520             16,026
                                                             ----------           ----------         ----------
Total shareholders' funds                                       589,808              500,316            535,444

                                                                 ======               ======             ======
Net asset value per ordinary share (note 6)                     283.00p              240.06p            256.91p


+ Restated (see note 2)


                                    - MORE -

                                                                 Page 6 of 10

                    THE CITY OF LONDON INVESTMENT TRUST PLC

        Unaudited Interim Results for the half year ended 31 December 2005


Cash Flow Statement
for the half year ended 31 December 2005

                                                                (Unaudited)         (Unaudited)       (Audited)
                                                            Half year ended     Half year ended      Year ended
                                                           31 December 2005    31 December 2004    30 June 2005
                                                                      £'000               £'000           £'000
                                                                -----------         -----------     -----------
Net cash inflow from operating activities                             7,987               7,470          18,094
Net cash outflow from servicing of finance                          (2,222)             (2,227)         (4,456)
Total tax recovered                                                       -                  40              84
Net cash (outflow)/inflow from financial investment                 (5,631)               9,787          12,325
Equity dividends paid                                               (9,462)             (8,845)        (17,604)
Cash withdrawn from/(placed on) deposit                               8,505            (10,533)        (12,125)
                                                                  ---------           ---------      ----------
Net cash outflow before financing                                  (823)                (4,308)         (3,682)

Net cash outflow from financing                                           -             (2,597)         (2,796)
                                                                  ---------           ---------      ----------
Decrease in cash                                                      (823)             (6,905)         (6,478)
                                                                    =======             =======          ======
Reconciliation of operating revenue to net cash inflow
from operating activities
Net revenue before interest payable and taxation                      9,185               8,009          20,144
Decrease/(increase) in accrued income                                   587                 554           (229)
(Decrease)/increase in other creditors                              (1,035)                 874           1,032
Management charge and performance fee taken to other
   capital reserves                                                   (688)             (1,915)         (2,603)
Overseas withholding tax                                               (37)                (52)           (250)
Scrip dividends included in investment income                          (25)                   -               -
                                                                   --------            --------      ----------
Net cash inflow from operating activities                             7,987               7,470          18,094
                                                                     ======              ======          ======
Reconciliation of net cash flow to movement in net
debt
Decrease in cash as above                                             (823)             (6,905)         (6,478)
Decrease in debt                                                          -                   -             198
Net cash (inflow)/outflow from movement in liquid
resources                                                           (8,505)              10,533          12,125
Exchange movements                                                     (32)                 (3)            (49)
Net debt at the beginning of the period*                           (34,362)            (40,158)        (40,158)
                                                                 ----------          ----------      ----------
Net debt at the end of the period*                                 (43,722)            (36,533)        (34,362)
                                                                     ======              ======          ======
Represented by:
Cash at bank and short term deposits                                  4,166              11,553          13,526
Debt falling due after more than one year*                         (47,888)            (48,086)        (47,888)
                                                                 ----------          ----------      ----------
                                                                   (43,722)            (36,533)        (34,362)
                                                                     ======              ======          ======

* Preference stocks are now classified as debt (see note 1(c))




                                    - MORE -
                                                                   Page 7 of 10


                    THE CITY OF LONDON INVESTMENT TRUST PLC

          Unaudited Interim Results for the half year ended 31 December 2005



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 01Companies' ("SORP"0 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 2005 
            have been applied with the following exceptions:


      (a)   Investments - Prior to 1 July 2005, listed investments were valued
            at middle market prices. Following the introduction of FRS 26 -
            Financial instruments: Recognition and Measurement, listed           
            investments are now valued at fair value deemed to be bid market
            prices.  Unlisted investments continue to be valued by the directors 
            taking into account the information available on the investee 
            company and funds held by the company. The effect of this change is 
            to decrease the value of listed investments at 31 December 2005 and 
            decrease net return on ordinary activities after taxation for the 
            six months ended 31 December 2005 by £10,000. Comparatives have not
            been restated.


      (b)   Under FRS21 - Events after the Balance Sheet Date - ordinary
            dividends should not be accrued in the accounts unless they have 
            been paid before the Balance Sheet date. Ordinary dividends are            
            therefore recognised in the period in which they are paid. As a 
            result of this change the accounts for the half year ended 31 
            December 2004 and year ended 30 June 2005 have been restated            
            as per note 2 below.


      (c)   Under FRS25 - Financial Instruments: Disclosure and Presentation -
            preference and preferred ordinary stocks are now classified as debt
            (previously included within Capital and Reserves as non-equity
            interests). As a result of this reclassification, the dividends 
            associated with the preference and preferred ordinary stocks are 
            charged fully to the Company's Revenue account within finance costs. 
            The accounts for the half year ended 31 December 2004 and year ended 
            30 June 2005 have been restated as per note 2 below.


2.          Restatement in respect of final dividend, preference and preferred 
            ordinary stocks

            Income Statement (formerly Statement of Total Return) The Income 
            Statement no longer reflects payment of ordinary dividends, these 
            are now shown in the Reconciliation of Movements in Shareholders' 
            Funds during the period in which they are paid. Any gain or loss in 
            respect of repurchase of preference stock is included within the 
            Income Statement. The Income Statement for the year ended 30 June 
            2005 and the half year ended 31 December 2004 have been restated 
            accordingly. 

            Balance Sheets
                                                                       31 December 2004          30 June 2005
                                                                                  £'000                 £'000

            Net Assets as previously stated                                     497,984               532,622
            Add back 2nd interim dividend for year ended 30
            June 2005 paid on 28 February 2005 (2.12p per
            share)                                                                4,418                     -
            Add back 4th interim dividend for year ended 30
            June 2005 paid on 31 August 2005 (2.26p per
            share)                                                                    -                 4,710
            Deduct preference and preferred ordinary stock reclassified as     
            debt                                                                (2,086)               (1,888)

            Restated Net Assets                                                 500,316               535,444



                                    - MORE -


                                                                    Page 8 of 10

                    THE CITY OF LONDON INVESTMENT TRUST PLC

       Unaudited Interim Results for the half year ended 31 December 2005


3.       Return per ordinary shares
                                                                  (Unaudited)        (Unaudited)
                                                              Half year ended    Half year ended
                                                                  31 December        31 December          (Audited)
                                                                         2005               2004         Year ended
                                                                                                       30 June 2005   
                                                                        £'000              £'000              £'000
                                                                                                      

                                                                                                              
         The return per ordinary share is based on the
         following figures:
         Revenue return                                                 8,428              7,240             18,505
         Capital return                                                55,398             45,579             78,201
                                                                       63,826             52,819             96,706

         Weighted average number of ordinary shares in issue      208,413,762        208,550,718        208,482,803

         Revenue return per ordinary share                              4.04p              3.47p              8.88p
         Capital return per ordinary share                             26.58p             21.86p             37.51p
                                                                       30.62p             25.33p             46.39p

4.       Expenses Charged to capital
         The Company charges to capital 70% of its finance costs (excluding 
         preference and preferred ordinary stock dividends) and base management 
         fee. Performance fees are allocated between capital and revenue based 
         on the outperformance attributable to capital and revenue respectively. 
         All other expenses are charged wholly to revenue. Expenses which are 
         incidental to the purchase or sale of a fixed asset investment are 
         included in the cost or deducted from the proceeds of sale investment.

5.       Performance Fee
         No performance fee has been accrued for the six months ended 31 
         December 2005.

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 £589,808,000 (31 December 2004: 
         £500,316,000 as restated; 30 June 2005: £535,444,000 as restated) and 
         on 208,413,762 ordinary shares (31 December 2004: 208,413,762; 30 June 
         2005: 208,413,762) being the number of ordinary shares in issue at the 
         end of the period.

7.       Interim Dividend
         A first interim dividend of 2.28p was paid on 30 November 2005. The 
         second interim dividend of 2.28p will be paid on 28 February 2006 to 
         shareholders on the register on 27 January 2006.

8.       Accounts for the year ended 30 June 2005
         The figures and financial information for the year ended 30 June 2005 
         (as restated) 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) of 237(3)  of the Companies
         Act 1985.

9.       Copies of the Company's interim report for the half year ended 31 
         December 2005 will be posted to shareholders in February 2006 and will 
         be available thereafter from the Secretary at the Registered Office, 
         4 Broadgate, London, EC2M 2DA.



                                    - MORE -


                                                                    Page 9 of 10
                    THE CITY OF LONDON INVESTMENT TRUST PLC

        Unaudited Interim Results for the half year ended 31 December 2005



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 2005                                   31 December 2005
                                                  £'000                                              £'000

BP                                               37,140     United Utilities                         5,033
HSBC                                             32,655     +PD Ports                                4,953
GlaxoSmithKline                                  27,911     Johnston Press                           4,888
British American Tobacco                         24,700     Scottish & Newcastle                     4,865
Barclays                                         21,385     Rodamco Europe                           4,830
Diageo                                           21,062     Britvic                                  4,809
Lloyds TSB                                       19,052     ENI                                      4,425
Royal Dutch Shell                                18,580     IMI                                      4,276
BT Group                                         17,820     Tomkins                                  4,197
HBOS                                             15,888     BOC Group                                4,193
Land Securities                                  14,967     Kingfisher                               4,152
Tesco                                            13,260     Cadbury Schweppes                        4,121
Vodafone Group                                   12,550     Gallaher Group                           3,949
Royal Bank of Scotland                           11,846     Liberty International                    3,922
National Grid Transco                            11,370     Prudential                               3,850
Rio Tinto                                        11,284     Reckitt Benckiser                        3,840
Aviva                                            11,280     Severn Trent                             3,794
Scottish & Southern Energy                       10,140     Boots Group                              3,721
Anglo American                                    9,895     Greene King                              3,713
Bovis Homes                                       7,970     Smiths Group                             3,661
Scottish Power                                    7,881     Hammerson                                3,577
Wolseley                                          7,350     Croda International                      3,457
Unilever                                          6,543     Pennon Group                             3,264
BAA                                               6,270     Persimmon                                3,145
Legal & General                                   6,100     GUS                                      3,106
Slough Estates                                    5,985     Rank Group                               3,057
BAE Systems                                       5,726     France Telecom                           2,882
BHP Billiton                                      5,697     AstraZeneca                              2,829
Imperial Tobacco                                  5,645     Next                                     2,763
Reed Elsevier                                     5,460     Wereldhave                               2,736



These investments total £529,420,000 or 83.46% of the portfolio.

+ includes convertibles



Sector Analysis of Portfolio as at 31 December 2005
                                                                            %
Resources                                                                14.4
Basic Industries                                                          6.0
General Industrials                                                       4.2
Cyclical Consumer Goods                                                   0.4
Non-Cyclical Consumer Goods                                              19.4
Cyclical Services                                                        13.9
Non-Cyclical Services                                                     7.6
Utilities                                                                 6.7
Financials                                                               27.4
Total                                                                   100.0

                                    - MORE -


                                                                Page 10 of 10
                                                                              

                    THE CITY OF LONDON INVESTMENT TRUST PLC

         Unaudited Interim Results for the half year ended 31 December 2005


For further information please contact :



Job Curtis
Portfolio Manager, The City of London Investment Trust plc
Telephone: 020 7818 4367


or


James de Sausmarez
Head of Investment Trusts, Henderson Global Investors
Telephone: 020 7818 3349







                                    - ENDS -


                      This information is provided by RNS
            The company news service from the London Stock Exchange