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City of London IT (CTY)

  Print      Mail a friend       Annual reports

Monday 08 September, 2008

City of London IT

Final Results

RNS Number : 9903C
City of London Investment Trust PLC
08 September 2008
 




8 September 2008


This announcement contains regulated information



THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report 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%



Sources:

# AIC Information Services Limited

† Thomson Financial, Datastream




MANAGEMENT REPORT



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 6.2% on 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. 



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THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2008



MANAGEMENT REPORT (continued)


Chairman's Statement (continued) 


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. 


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 end of August, the discount had 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 4.9% (at the end of August) and are backed by revenue reserves of £25.9 million.  

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THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2008


MANAGEMENT REPORT (continued)


Chairman's Statement (continued) 


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



Simon de Zoete

Chairman


 


 




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4 -


THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2008


MANAGEMENT REPORT (continued)


Principal Risks and Uncertainties

The Board has drawn up a matrix of risks facing the Company and has put in place a schedule of investment limits and restrictions, appropriate to the Company's investment objective and policy, in order to mitigate these risks as far as practicable.  The principal risks which have been identified and the steps taken by the Board to mitigate these are as follows:


    Portfolio and market

    Although the Company invests almost entirely in securities that are quoted on recognised markets, share prices may move rapidly. The companies in which investments are made may operate unsuccessfully, or fail entirely.  A fall in the market value of the Company's portfolio would have an adverse effect on shareholders' funds. The Board reviews the portfolio each month and mitigates this risk through diversification of investments in the portfolio.


●     Investment activity and performance

    An inappropriate investment strategy (for example, in terms of asset allocation or the level of gearing) may result in underperformance against the Company's benchmark index and the companies in its peer group. The Board monitors investment performance at each Board meeting and regularly reviews the extent of its borrowings.  


    Tax and regulatory risks

A breach of Section 842 of the Income and Corporation Taxes Act 1988 could lead to a loss of investment trust status, resulting in capital gains realised within the portfolio being subject to corporation tax.  A breach of the UKLA Listing Rules could result in suspension of the Company's shares, while a breach of the Companies Acts 1985 and 2006 could lead to criminal proceedings, or financial or reputational damage.  The Company must also ensure compliance with the listing rules of the New Zealand Stock Exchange. The Manager has contracted to provide investment, company secretarial administration and accounting services through qualified professionals.  The Board receives internal control reports produced by the Manager on a quarterly basis, which confirm regulatory compliance.  


    Financial

    By its nature as an investment trust, the Company's business activities are exposed to market risk (including currency risk, interest rate risk and other price risk), liquidity risk, and credit and counterparty risk. Further details of these risks and how they are managed are contained in the notes to the financial statements in the annual report.


    Operational

    Disruption to, or failure of, the Manager's accounting, dealing or payment systems or the Custodian's records could prevent the accurate reporting and monitoring of the Company's financial position. The Company is also exposed to the operational risk that one or more of its suppliers may not provide the required level of service. The Board monitors the services provided by the Manager and its other suppliers. 


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- 5 -


THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2008


MANAGEMENT REPORT (continued)



Related Party Transactions 

The Company has appointed subsidiaries of Henderson Group plc ("Henderson") to provide investment management, accounting, company secretarial and administration services. In addition, Henderson has provided the Company with share plan administration and marketing services. During the year there have not been any material transactions with these related parties affecting the financial position or performance of the Company.



Statement of Directors' Responsibilities

In accordance with Disclosure and Transparency Rule 4.1.12, the directors state, to the best of their knowledge, that: 


●     the financial statementsprepared in accordance with UK Accounting Standards give a true and fair view of the assets, liabilities, financial position and net revenue of the Company; and


●     the Report of the Directors includes a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that it faces


Signed on behalf of the Board of directors


S M de Zoete

Chairman



 





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THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2008


PORTFOLIO MANAGER'S REPORT


Investment Background


UK Equity Market Performance

During the year under review, the UK stockmarket produced a disappointing negative return of 14% as measured by the FTSE All-Share 4% Capped Index. There were two key global economic factors that caused the downward move in share prices.


First, the crisis in the banking system emanating from imprudent lending to US consumers for house purchases. Bad US mortgage debts were spread across the international banks. As a result, banks became reluctant to lend to each other, leading to problems for banks, such as Northern Rock, who relied on borrowing in the wholesale markets to fund their lending to customers. The overall reduction in credit available had significant deflationary implications for the economy that are continuing to be felt. 


The second key negative economic factor was the rise in the oil price from $70 to $141 a barrel. This was caused by the increased demand for oil from the emerging countries, such as China, and the difficulty in finding and extracting oil to meet the increased demand. Given the wide uses of oil, for example in transportation, electricity and plastics, the doubling of the oil price had a marked impact on inflation and put pressure on consumers' expenditure which was also being adversely affected by the rise in food prices.


Gearing at the start of the financial year was 5.5%. As share prices fell, the gearing was increased by buying into companies that, in our opinion, offered potential for medium term share price appreciation. By the end of the financial year the gearing had increased to 10.1%. Overall, gearing had a negative effect on performance after having been a positive factor in the previous four years.


Interest Rate, Fixed Interest and Equity Yields

The combination of the banking crisis and the rise in the price of oil and other commodities was a particularly difficult one for the Bank of England. After a 25 basis point rise in July 2007 to 5.75%, the base rate was cut in three stages to 5.0% by April 2008 to counter the effect of the banking crisis. However, it was not possible to cut further due to the effect on inflation of the oil price. Ten year yields of British Government bonds declined in the first nine months of the period but then rose to 5.13% by the end of June 2008 on concern about inflation.


Equity dividend yields rose due to the fall in share prices and dividend growth from the majority of the companies. The average increase in the dividend rate in companies in which City of London has shares was 12.3% (excluding special dividends) over the twelve months.


Performance of Higher Yielding compared with Lower Yielding Shares

Lower yielding shares did significantly better than higher yielding shares over the year. City of London's portfolio has a bias towards higher yielding shares in order to achieve its income objectives. There was a significantly below average exposure to the low yielding mining sector which was costly in terms of performance relative to the benchmark index. On the other hand, the exposure to the oil sector grew to slightly above the benchmark and the holdings in ENI and Statoil were particularly positive contributors to performance.






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- 7 -


THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2008


PORTFOLIO MANAGER'S REPORT (continued)


Portfolio Review

The problems of the banks and their implications for other companies and the economy in general was the single most important investment theme during the period under review. The worst performers in the sector were those banks dependent on wholesale funding, such as Northern Rock, Alliance & Leicester and Bradford & Bingley. These stocks were not held in City of London's portfolio. In contrast, our largest holding HSBC, which has a very strong deposit base, was an outperformer relative to the sector. In addition, HSBC benefited from having around half of its business in the Far East and Emerging markets.


The second largest bank holding in the portfolio, Lloyds TSB, was also a sector outperformer benefiting from conservative lending in recent years and no exposure to US subprime debt. Barclays, the third largest bank holding in the portfolio, suffered from concerns about the performance of its investment banking subsidiary, Barclays Capital, although its operating performance was good when compared with most of its competitors. The smallest bank holdings in the portfolio, Royal Bank of Scotland and HBOS, were the worst performers and both announced dividend cuts at the same time as they raised new equity. Although a slightly lower than average index weighting was maintained in the banks sector throughout the year, and the portfolio was biased towards the better performing banks, it would have been beneficial to have had less overall exposure to the sector.


The tightening of conditions for credit had a marked effect on companies with a high level of debt. Four companies in the portfolio that had high levels of debt, ENEL (electricity utility), Mitchells & Butlers (pubs group), Johnston Press (regional newspaper publisher) and Wolseley (builders' merchant) were sold. Subsequently their share prices fell significantly from the levels at which they had been sold.


Takeover activity was much reduced due to the difficulty in financing deals. However, the holding in brewer Scottish & Newcastle was taken over at a good price by a consortium of Heineken and Carlsberg. On the other hand, Imperial Tobacco took over Altadis, the Spanish/French tobacco company, at what seemed to be, in our opinion, an expensive price and therefore the holding was sold.


The credit crisis had an adverse effect on the shares of housebuilding companies and retailers which fell sharply as investors anticipated a downturn in their profitability. A holding in Marks & Spencer was purchased after the shares had declined some 40% from their peak. Although trading is currently tough for the company, the shares seem underrated given the strength of its franchise in the UK and the fact that it owns many of the stores from which it operates. In addition, a holding was purchased in William Morrison, which also is a significant owner of its stores, and has been increasing its market share within the UK supermarket sector.


Medium-sized and small companies were notable underperformers over the twelve month period relative to companies in the FTSE 100. Given the portfolio's overall bias towards larger companies, we felt there was an opportunity to buy into the share price weakness of a select number of good quality medium-sized companies. The holdings that were purchased were: BBA Aviation (international airport services), Hays (recruitment agency), Holidaybreak (leisure sector), Inchcape (international motor retailer), Interserve (building services and PFI work), Prosafe (oil services) and Renishaw (specialist manufacturer of high precision measuring equipment).






  • MORE -


- 8 -


THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2008


PORTFOLIO MANAGER'S REPORT (continued)


Another area for new investment was the pharmaceutical sector where shares had been derated to levels which, in our view, more than discounted the problems with defending patents on existing medicines and discovering new drugs. In addition, demand for healthcare products and services should hold up relatively well in an economic downturn. New holdings were purchased in AstraZeneca and Novartis.


Value also emerged, in our opinion, in the technology sector. Two new holdings were purchased. Sage develops accounting software and provides support services for many of its customers. Misys also has a strong installed base of customers for its banking software with growth opportunities in emerging markets.


Although valuations of the mining companies looked reasonable if commodity prices maintained existing levels, there was considerable downside risk if commodity prices fell. This was certainly possible if the downturn in global economic activity led to a reduced demand for commodities. Overall, the strategy in the mining sector was to take some of the significant profits on our holdings. In addition, the return from our holdings was improved through some successful selling of option premia. One new holding was purchased, ENRC, which is the world's largest producer of ferrochrome and is based in Kazakhstan, next to its key markets of China and Russia.


In the electricity sector, profits were taken in British Energy and Fortum which had benefited from the strength of the electricity price. Some of the proceeds were reinvested in RWE which offered, in our view, better relative value.


In the fixed line telecommunications sector, British Telecom was a disappointing holding having been a strong performer the previous year. This was due to a general derating of telecommunications stocks as well as specific concerns about BT's competitive position and pension fund liabilities. We believe that the likely profits progression of BT's global services division was being overlooked and maintained the holding given its attractive dividend. In addition, a new holding was purchased in Deutsche Telekom where there is substantial scope for cost cutting in its fixed line operation in Germany as well as growth opportunities for its international mobile division.


In the media sector, we avoided stocks, such as regional newspaper companies, exposed to the decline in advertising revenue due to the economic downturn and the move by advertisers away from traditional media towards the internet. A new holding was purchased in BSkyB where the revenues are predominantly based on the subscriptions to its services. We believe that BSkyB has a very strong franchise in the UK and Ireland for satellite TV as well as growth opportunities in broadband.


In the real estate sector, exposure was reduced through the sale of Corio, the European shopping centre owner, which had held up relatively well.


Outlook

Given the amount of new equity capital raised by banks in the UK and overseas and the actions taken by central banks in the UK, Europe and the USA to help bank funding, it is hoped that the worst of the crisis for the banking sector is over. However, the downturn in economic activity will lead to an increased level of bad debts for banks. Overall, there is considerable recovery potential in the share prices of the stronger banks which can take market share on improved profit margins.





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- 9 -


THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2008


PORTFOLIO MANAGER'S REPORT (continued)



The wider effects of the credit crisis are still being felt with reduced availability of mortgage finance leading to a significant downturn in the housing market. Consumer spending also faces pressure from the rise in the prices of oil, electricity, gas and food. The portfolio is therefore biased towards companies which have, in our view, sales that will hold up well in an economic downturn, such as those in the electricity, utility and telecoms sectors as well as the beverages, tobacco and food retail sectors.


Large holdings have also been maintained in the oil companies, BP and Royal Dutch Shell. These companies will remain highly profitable and cash generative even after the recent decline in the oil price to $115 a barrel. This reflects market concern about the future reduced demand for oil, especially in developed economies. If the recent decline in the oil price is maintained, it will reduce inflationary pressure and allow the Bank of England to cut interest rates. This could trigger a rally in those cyclical stocks that are already discounting profit downgrades. There is scope going forward to increase exposure to good quality cyclical companies at attractive valuations.



Job S Curtis




 



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10 -


THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report 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 two 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

Market



Market


Value

Value



Value


2008

2007



2008


£'000

 £'000



£'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














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  11 -


THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2008



Audited Income Statement 

for the year ended 30 June 2008





Year ended 30 June 2008

Year ended 30 June 2007


Revenue Return £'000

Capital Return £'000

Total

£'000

Revenue

Return 

£'000

Capital Return £'000


Total £'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/(loss) 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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12 -


THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2008



Audited 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

£'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

£'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


=====

=====

======

=====

======












- MORE -

13 -


THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2008


Audited Balance Sheet

at 30 June 2008





2008

2007


£'000

£'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


======

======











- MORE -

14 -


THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2008


Audited Cash Flow Statement

for the year ended 30 June 2008



Year ended

30 June 2008

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 -


15 -


THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2008


Notes to the Accounts :


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 Practice 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

2007



£'000

£'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

2007



£'000

£'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 of £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 -


  - 16 -


THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2008


Notes to the Accounts (continued) :


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

Year ended



30 June 2008

30 June 2007



£'000

£'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 (excluding shares held in treasury) 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.


2008 Accounts

The figures and financial information for the year ended 30 June 2008 are compiled from an extract of the latest accounts and do not constitute statutory accounts. These accounts 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. The accounts have not yet been delivered to the Register of Companies.


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.




- MORE -

  - 17 -


THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2008




Annual Report

The Annual Report and Accounts will be posted to shareholders on 16 September 2008 and will be available on the Company's website (www.cityinvestmenttrust.com) or in hard copy format from the Company's Registered Office, 4 Broadgate, LondonEC2M 2DA




For further information please contact:


Job Curtis 

Portfolio Manager, The City of London Investment Trust plc

Telephone: 020 7818 4367



James de Sausmarez

Head of Investment Trusts, Henderson Global Investors

Telephone: 020 7818 3349



Sarah Gibbons-Cook
Investor Relations and PR Manager, Henderson Global Investors
Telephone: 020 7818 3198




- ENDS -



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