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City of London IT (CTY)

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Friday 29 August, 2008

City of London IT

Preliminary Announcement of A

RNS Number : 3843C
City of London Investment Trust PLC
29 August 2008
 




29 August 2008


THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Preliminary Results for the Year ended 30 June 2008




30 June 2008

30 June 2007

Revenue return per ordinary share

+16.7%

+13.9%




Dividends per ordinary share

+12.6%

+10.0%




Total Returns:



Net asset value per ordinary share ('NAV')

-18.3%

+21.0%

FTSE All-Share 4% Capped Index (benchmark)

-14.0%

+20.3%

FTSE All-Share Index

-13.0%

+18.4%

Ordinary share price

-18.0%

+17.2%

UK Growth & Income Sector Average

-20.8%

+20.6%




Minimum dividend forecast increase for year to 30 June 2009

+6.2%




Extracts from the Chairman's Statement


For the year ended 30 June 2008, City of London's revenue return per share increased by 16.7%, the dividend increased by 12.6% and the net asset value total return declined by 18.3%.


Performance for the year to 30 June 2008 


Earnings and dividends

Revenue return per share was 13.53p, an increase of 16.7%.  A fourth interim dividend of 2.96p was paid on 29 August 2008, making a total for the year of 11.60p, an increase of 12.6% over the previous year. This is the forty-second consecutive year that City of London has increased its dividend, the longest record of any investment trust. £4.7 million was added to the revenue reserve.   


The minimum quarterly dividend for the year ahead will be 3.08p, a further minimum increase of 6.2on an annual basis. The quarterly rate will next be considered when the third interim dividend is declared in March 2009, by which time the Board will be able to assess better the trend in income performance of the portfolio.  


Net asset value total return

Market conditions have created a difficult environment for active fund managers who have an income requirement in their portfolios.  Our Managers could have been better positioned for the credit crunch that I mentioned in last year's report.  Whilst we were underweight in bank shares, we did suffer from their poor share price performance. The stellar share price performance of mining and commodity related shares only partially offset losses in other areas, because our Managers felt that prices were too high and yields were unacceptably low. 


Against this background, I have to report a negative net asset value total return of 18.3%. This is behind our benchmark but I am pleased to say that we have done better than most of our competitor companies.


Our gearing has been low during this credit crunch sell off, but naturally any gearing in a falling market has negatively affected asset value performance. 



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- 2 -


THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Preliminary Results for the Year ended 30 June 2008



Extracts from the Chairman's Statement (continued) 

City of London's net asset value total return was a negative 18.3% which compares with a positive 21.0% in the previous year. The FTSE All-Share 4% Capped Index produced a negative total return of 14.0% and therefore City of London underperformed its benchmark by 4.3%. The average performance of the UK Growth & Income investment trust sector was a negative total return of 20.8% and therefore City of London outperformed the average of its competitors by 2.5%.


City of London's share price discount to net asset value (with debt at market value) slightly increased from 10.9% to 11.5% over the year. However, this was an improvement from the discount of 13.5% at 31 December 2007. At the time of writing, the discount has narrowed to 7.2%.


Performance for the five years to 30 June 2008


Earnings and dividends

The Company's annual dividend has grown by 43.7% over the last five years from 8.07p to 11.60p per share and revenue reserves have increased from 5.2p to 12.5p per share.  


Net asset value total return

Shareholders' net asset value total return has increased by 67.9% over the last five years, which compares with 62.1% for the average of the UK Income and Growth investment trust sector, 77.2% for the FTSE All-Share 4% Capped Index and 71.0% for the FTSE All-Share Index.  


Expenses

The total expense ratio (TER), which is the investment management fee and other non interest expenses as a percentage of shareholders' funds, was 0.37%. The TER has been reduced from 0.42% announced last year by not having to pay VAT on the investment management fee as a result of a decision in the European Court of Justice. The Board is concerned about the delay by HMRC in paying the reclaims submitted by our Managers, and is pressing for payments to be made in the near future. 


Outlook

We are faced with a market where one can argue that much of the bad news is anticipated and discounted.  Even though most banks have raised new capital there is still likely to be a continuing shortage of bank finance available and the effect of the banks' problems will create continuing problems for companies in other sectors. There is bound to be volatility and sector performance disparity and we do face a more uncertain year on the revenue front. On the other hand, markets are lower, commodity prices have started to come off and alternative investment assets, such as bonds, make equities look relatively cheap on a longer term basis.  In addition, our portfolio companies earn more than half of their profits outside the UK and with sterling weakening against the dollar this is a definite plus. Our shares are on a prospective yield of 5% (at the time of writing) and are backed by revenue reserves of £25.9 million.  


Investment opportunities will arise and there are reasons to be more positive in a market that is bound to surprise.



Simon de Zoete

Chairman

29 August 2008



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  - 3 -


THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Preliminary Results for the Year ended 30 June 2008




Income Statement 

for the year ended 30 June 2008


(Unaudited)

(Audited)


Year ended 30 June 2008

Year ended 30 June 2007


Revenue 

return

Capital 

return 


Total

Revenue 

return 

Capital 

return 


Total


£'000

£'000

£'000

£'000

£'000

£'000

(Losses)/gains on investments held at fair value through profit or loss


-


(149,375)


(149,375)


-


107,437


107,437

Income from investments held at fair 

value through profit or loss (note 2)


30,162


-


30,162


26,734


-


26,734

Other interest receivable and similar 

income (note 3)


265


-


265


249


-


249


---------

-----------

-----------

---------

---------

---------

Gross revenue and capital (losses)/gains

30,427

(149,375)

(118,948)

26,983

107,437

134,420








Management fee

(577)

(1,346)

(1,923)

(684)

(1,596)

(2,280)

Performance fee

-

-

-

-

-

-

Write-back of VAT

428

1,213

1,641

-

-

-

Other administrative expenses

(484)

-

(484)

(497)

-

(497)


---------

-----------

-----------

---------

---------

---------

Net return/(loss) on ordinary activities before finance charges and taxation


29,794


(149,508)


(119,714)


25,802


105,841


131,643








Finance charges

(1,547)

(3,217)

(4,764)

(1,465)

(3,002)

(4,467)


---------

-----------

-----------

---------

---------

---------

Net return/(loss) on ordinary 

activities before taxation 


28,247


(152,725)


(124,478)


24,337


102,839


127,176








Taxation on net return on ordinary activities

(179)

-

(179)

(190)

-

(190)


---------

-----------

-----------

---------

---------

---------

Net return/(loss) on ordinary 

activities after taxation


28,068


(152,725)


(124,657)


24,147


102,839


126,986


=====

======

=======

=====

=====

=====















Return/(loss) per ordinary share 

  - basic (note 4)


13.53p


(73.63)p


(60.10)p


11.59p


49.34p


60.93p


=====

======

======

=====

=====

=====


The total columns of this statement represent the income statement of the Company. All revenue and capital items derive from continuing operations. No operations were acquired or discontinued during the year. The Company has no recognised gains or losses other than those recognised in the Income Statement. 











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4 -


THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Preliminary Results for the Year ended 30 June 2008



Reconciliation of Movements in Shareholders' Funds

for the years ended 30 June 2008 and 30 June 2007



Called

up

share

capital


Share

premium

account


Other

capital

reserves



Revenue

reserve




Total

Year ended 30 June 2008 (unaudited)

£'000

£'000

£'000

 £'000

£'000

At 30 June 2007

51,983

35,309

610,191

21,174

718,657

Net (loss)/return on ordinary activities after taxation


-


-


(152,725)


28,068


(124,657)

Buy-back of 663,262 ordinary shares

 

(89)

 

-

 

(1,828)

 

-

 

(1,917)

Fourth interim dividend (2.62p) for the year ended 30 June 2007 paid 31 August 2007


 

-


 

-


 

-


 

(5,446)


 

(5,446)

First interim dividend (2.84p) for the year ended 30 June 2008 paid 30 November 2007


 

-


 

-


 

-


 

(5,895)


 

(5,895)

Second interim dividend (2.84p) for the year ended 30 June 2008 paid 28 February 2008


 

-


 

-


 

-


 

(5,887)


 

(5,887)

Third interim dividend (2.96p) for the year ended 30 June 2008 paid 30 May 2008


 

-


 

-


 

-


 

(6,135)


 

(6,135)


---------

---------

---------

---------

---------

At 30 June 2008

51,894

35,309

455,638

25,879

568,720


=====

=====

=====

=====

=====














Called up share capital

Share

premium 

account

Other capital 

reserves


Revenue 

reserve



Total

Year ended 30 June 2007 (audited)

£'000

£'000

£'000

£'000

£'000

At 30 June 2006

52,103

35,309

508,695

18,032

614,139

Net return on ordinary activities after taxation

 

-

 

-

 

102,839

 

24,147

 

126,986

Buy-back of 483,722 ordinary shares

 

(120)

 

-

 

(1,343)

 

-

 

(1,463)

Fourth interim dividend (2.40p) for the year ended 30 June 2006 paid 31 August 2006


 

-


 

-


 

-


 

(5,002)


 

(5,002)

First interim dividend (2.53p) for the year ended 30 June 2007 paid 30 November 2006


 

-


 

-


 

-


 

(5,273)


 

(5,273)

Second interim dividend (2.53p) for the year ended 30 June 2007 paid 28 February 2007


 

-


 

-


 

-


 

(5,274)


 

(5,274)

Third interim dividend (2.62p) for the year ended 30 June 2007 paid 31 May 2007 


 

-


 

-


 

-


 

(5,459)


 

(5,459)

Write-back of dividends over 12 years old

 

-

 

-

 

-

 

3

 

3


--------

--------

----------

--------

----------

At 30 June 2007

51,983

35,309

610,191

21,174

718,657


=====

=====

======

=====

======











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5 -


THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Preliminary Results for the Year ended 30 June 2008




Balance Sheet

at 30 June 2008


(Unaudited)

2008

£'000

(Audited)

2007

£'000

Investments held at fair value through profit or loss



Listed at market value in the United Kingdom

593,791

734,390

Listed at market value overseas

32,553

23,899

Investment in subsidiary undertakings

378

378


----------

----------


626,722

758,667


----------

----------

Current assets



Debtors

5,828

3,542

Cash at bank and on short term deposit

350

8,268


----------

----------


6,178

11,810


----------

----------

Creditors: amounts falling due within one year

(16,781)

(3,932)


----------

----------

Net current (liabilities)/assets

(10,603)

7,878


----------

----------




Total assets less current liabilities

616,119

766,545




Creditors: amounts falling due after more than one year

(47,399)

(47,888)


----------

----------

Total net assets

568,720

718,657


======

======




Capital and reserves



Called up share capital

51,894

51,983

Share premium account

35,309

35,309

Other capital reserves

455,638

610,191

Revenue reserve

25,879

21,174


----------

----------

Shareholders' funds

568,720

718,657


======

======




Net asset value per ordinary share (note 5)

274.39p

345.62p


======

======








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6 -


THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Preliminary Results for the Year ended 30 June 2008



Cash Flow Statement

for the year ended 30 June 2008



   (Unaudited)

  Year ended

  30 June 2008

   (Audited)

  Year ended

  30 June 2007


£'000

£'000

£'000

£'000






Net cash inflow from operating activities


27,017


23,421






Servicing of finance





Debenture interest paid

(4,265)


(4,265)


Bank and loan interest paid

(317)


(24)


Dividends paid on preference and preferred

  ordinary stocks


(178)



(178)



----------


----------







Net cash outflow from servicing of finance


(4,760)


(4,467)






Taxation





Withholding tax recovered

16


39



----------


----------







Net tax recovered 


16


39






Financial investment





Purchases of investments

(84,242)


(103,157)


Sales of investments

65,848


108,472



----------


---------


Net cash (outflow)/inflow from

  financial investment



(18,394)



5,315






Equity dividends paid


(23,363)


(21,005)






Management of liquid resources





Cash withdrawn from/(placed on) deposit

8,201


(1,900)



----------


----------







Net cash inflow/(outflow) from liquid resources 


8,201


(1,900)



----------


----------

Net cash (outflow)/inflow before financing 


(11,283)


1,403






Financing





Repurchase of preference shares

(455)


-


Increase in loans

13,956


-


Purchases of ordinary shares

(1,920)


(1,460)



---------


----------


Net cash inflow/(outflow) from financing


11,581


(1,460)



---------


----------






Increase/(decrease) in cash


298


(57)



=====


=====




- MORE -


7 -


THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Preliminary Results for the Year ended 30 June 2008


Notes :

1.

Accounting Policies


Basis of accounting


The accounts have been prepared on the basis of the accounting policies used for the Company's accounts for the year ended 30 June 2007.


The accounts are prepared in accordance with United Kingdom Generally Accepted Accounting Principles and with the Revised Statement of Recommended Practice - 'Financial Statements of Investment Trust Companies' dated December 2005 (the 'Revised SORP'). All of the Company's operations are of a continuing nature.



2.

Income from investments held at fair value through profit or loss



 

 



2008

£'000

2007

£'000


UK dividends:




  Listed 

27,790

24,983


  Listed - special dividends

261

350



---------

---------



28,051

25,333



---------

---------


Unfranked - listed investments:




  Interest from UK convertibles

-

37


  Dividend income

2,005

1,278


  Special dividends

106

86



---------

---------



2,111

1,401



---------

---------



30,162

26,734



======

======





3.

Other interest receivable and similar income


 

 



2008

£'000

2007

£'000


Bank interest 

161

148


Underwriting commission

70

65


Stock lending

34

36



-------

-------


265

249


====

====



4.

(Loss)/return per ordinary share - basic


The loss per ordinary share is based on the net loss attributable to the ordinary shares of £124,657,000 (year ended 30 June 2007: return £126,986,000) and on 207,428,815 ordinary shares (year ended 30 June 2007: 208,399,576) being the weighted average number of ordinary shares in issue during the year. 





- MORE -  - 8 -


THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Preliminary Results for the Year ended 30 June 2008



4.

(Loss)/return per ordinary share - basic (continued)


The return per ordinary share can be further analysed between revenue and capital, as below.







Year ended

30 June 2008

£'000

Year ended 

30 June 2007

£'000


Net revenue return

28,068

24,147


Net capital (loss)/return

(152,725)

102,839



------------

----------


Net total (loss)/return

(124,657)

126,986



=======

======


Weighted average number of ordinary

  shares in issue during the year


207,428,815


208,399,576






Revenue return per ordinary share

13.53p

11.59p


Capital (loss)/return per ordinary share

(73.63)p

49.34p



----------

---------


Total (loss)/return per ordinary share

(60.10)p

60.93p



======

=====


The Company does not have any dilutive securities.





5.

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 £568,720,000 (2007: £718,657,000) and on 207,266,778 (2007: 207,930,040) shares in issue on 30 June 2008.



6.

Issued share capital 


There were 207,266,778 ordinary shares of 25p in issue at 30 June 2008 (30 June 2007: 207,930,040) for the purpose of calculating the net asset value per ordinary share. During the year the Company repurchased for cancellation 355,172 ordinary shares at a total cost of £1,043,000 and repurchased a further 308,090 shares, which are being held in treasury, at a total cost of £874,000.


7.

2008 accounts


The preliminary figures for the year ended 30 June 2008 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. 


8.

2007 accounts


The figures and financial information for the year ended 30 June 2007 are compiled from an extract of the latest published accounts and do not constitute the statutory accounts for that year. Those accounts have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under either section 237(2) or section 237(3) of the Companies Act 1985.



9.

Annual Report


The full Annual Report and Accounts will be posted to shareholders in September 2008 and copies will be available thereafter from the Secretary at the Company's Registered Office, 4 Broadgate, LondonEC2M 2DA. The Annual General Meeting will be held on Thursday 16 October 2008 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 2008



Top 40 Investments

as at 30 June 2008


The 40 largest investments, representing 78.78% of the portfolio (convertibles and all classes of equity in any one company being treated as one investment), are listed below. In accordance with the UKLA Listing Rules, the comparative value as at 30 June 2007 is provided for the top ten holdings. The stocks marked were not in the top ten last year. For additional clarity, the stocks which were in the top ten last year but not this year are marked #. Market values reflect changes in the value of underlying shares and portfolio changes.



Market

Value

2008

£'000

Market

Value

2007

£'000



Market

Value

2008

£'000

BP

34,412

35,577


Unilever

10,003

British American Tobacco 

30,433

32,262


BAE Systems 

8,850

Royal Dutch Shell 

30,300

29,162


Cadbury Schweppes

8,096

Vodafone 

29,830

33,560


Reed Elsevier

7,479

HSBC

27,927

32,025


Britvic

6,080

GlaxoSmithKline

25,043

22,838


United Utilities

5,835

Diageo

24,486

27,481


Legal & General

5,511

Scottish & Southern Energy*

17,538

15,939


Pearson

5,223

National Grid Transco*

17,173

19,188


Weir

5,159

BT 

16,592

27,597


Statoil

5,152

Anglo American

16,043



Reckitt Benckiser

5,090

Tesco

14,772



Rexam

4,844

ENI

14,042



Croda

4,800

Rio Tinto

13,821



Pennon

4,785

BHP Billiton

13,440



Severn Trent

4,237

Lloyds TSB#

13,207



IMI

4,147

Land Securities 

12,320



HBOS

3,784

Barclays#

11,514



Kazakhmys

3,502

Royal Bank of Scotland

11,084



Liberty

3,448

Aviva

10,020



Bovis Homes

3,400


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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