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City of London IT (CTY)

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Tuesday 14 September, 2010

City of London IT

Final Results

RNS Number : 6881S
City of London Investment Trust PLC
14 September 2010
 



 

14 September 2010

 

This announcement contains regulated information

 

THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2010

 


30 June 2010

30 June 2009

Dividends per ordinary share

+2.8%

+6.2%

Revenue return per ordinary share

-9.3%

-2.8%

Total Returns:

Net asset value per ordinary share ("NAV") #

+26.5%

-20.9%

AIC UK Growth & Income sector NAV

   (size weighted average) (benchmark) #

+25.8%

-20.7%

FTSE All-Share 4% Capped Index †

+23.3%

-20.1%

FTSE All-Share Index #

+21.1%

-20.5%

Ordinary share price #

+27.6%

-11.6%

 

Sources:  # AIC Information Services Limited; † Datastream

 

 

CHAIRMAN'S STATEMENT

 

The year ended 30 June 2010 clearly demonstrates City of London's strengths. Net asset value total return was 26.5%, our strong revenue reserves enabled us to increase the dividend for the forty-fourth consecutive year, and our total expense ratio remained amongst the lowest in the sector.

 

Performance for the year to 30 June 2010 

Earnings and Dividends

Earnings per share fell by 9%. This fall was caused partly by a reduction in the investment income in our portfolio investments and partly by the effect of VAT rebates in the previous year which did not re-occur.

 

A fourth interim dividend of 3.25p was paid on 31 August 2010 making a total for the year of 12.66p, an increase of 2.8% over the previous year.  The revenue reserve has declined by £1.2m which compares with its increase of £9.9m over the previous three years.  Following this decline, the Company's revenue reserve remains robust at £26.7m, which equates to approximately the cost of a full year's dividend.

 

With the exception of BP, companies in the portfolio have, in general, made an encouraging start to our current financial year with satisfactory dividend declarations in the recent reporting season. The quarterly rate will next be considered when the third interim is declared in March 2011, by which time the Board will be able to assess better the trend in income of the portfolio.

 

Net Asset Value Total Return

It was a good year with a net asset value total return of 26.5%, but all of the gains were made in the first six months, while in the second six months there was a negative return of 3.8%.   Gearing and stock selection both contributed positively to our performance over the year. 

 

 

 

 

 

 

 

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THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2010

 

Chairman's Statement (continued)

 

On stock selection, the most important positive contributors to performance were our overweight holdings in the industrial engineering and chemicals sectors.  Some 42% of the holding in BP was sold after the Macondo Gulf oil spill at an average price of 455p, which compares with BP's price of 319p at the end of our financial year.  The problems of BP illustrate the risks in investing in any company, however large.  The Board has for many years been concerned about the high concentration in the FTSE All-Share Index of certain large UK listed companies and their sectors.  In order to increase the Manager's flexibility, we have increased the limit on investments in overseas listed companies to 20%, which is the maximum permitted within our sector - the AIC UK Growth & Income sector. 

 

City of London outperformed the average of the AIC UK Growth & Income sector by 0.7% over the year.

 

City of London's share price did better than its net asset value, as its discount to net asset value (with debt at par value) narrowed over the year from 3.2% to 1.7%.

 

Performance for five years to 30 June 2010

 

Earnings and Dividends

The Company's annual dividend has grown by 46.9% over the last five years from 8.62p to 12.66p and revenue reserves have increased from 7.69p to 12.79p per share.

 

Net Asset Value Total Return

Shareholders' net asset value total return has increased by 17.2% over the last five years, which compares with 11.4% for the average of the AIC UK Growth & Income sector.  Reflecting the outperformance of lower yielding shares over this period, the return of the FTSE All-Share 4% Capped Index was 24.4%.

 

Expenses 

A performance fee of £75,000 was paid to the Manager reflecting net asset value total return outperformance of 3.2 percentage points over three years compared to the average of the UK Growth & Income sector for investment trusts.

 

The total expense ratio (TER), which is the investment management fee and other non-interest expenses as a percentage of shareholder funds, was under 0.5%, which is very competitive compared with the OEIC market, most other investment trusts and with other actively managed equity funds.

 

This is important because expenses are a shareholder tax on performance and we have to compete for investment and savings in a market that may well change as a consequence of the FSA's Retail Distribution Review.

 

Outlook

Government bond yields are at exceptionally low levels, with ten year British Gilts under 3%. This reflects fears of deflation, concern over the possibility of a double dip recession and a strong expectation that base rates will remain at 0.5% for a long time. What happens from hereon is a matter of much debate but I think shareholders should take comfort that equities currently give investors relatively better income returns than gilts or bank deposits.  City of London's shares currently yield 4.8% based upon our current quarterly dividend rate.

 

 

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THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2010

 

Chairman's Statement (continued)

 

There are many shares listed in London that are not suitable for inclusion in our portfolio by virtue of their low or zero dividend yields. But City of London does have a portfolio which is well-diversified and includes many global companies where our Managers feel there are good prospects of earnings and dividend growth. Approximately two-thirds of the profits made by our investee companies come from overseas and in some areas of the world, such as Asia Pacific and emerging markets, there is strong growth momentum.

 

Whilst equity markets have become less volatile there are still considerable doubts as to where the massive credit crunch and now sovereign indebtedness will lead financial markets, but many companies have responded well to the economic circumstances, for example by reducing indebtedness and cutting costs.   Indeed, some companies will prosper in this difficult and uncertain environment and I am confident that our portfolio of high quality income producing investments will deliver over the medium term.

 

The Board

I am delighted that Simon Barratt will be joining the Board on 1 October 2010.  Simon is General Counsel and Company Secretary at Whitbread PLC and will bring highly valuable commercial knowledge and experience to the Board. Sir Keith Stuart will be retiring from the Board on 31 March 2011. On behalf of the Board and the shareholders I want to thank Keith for his excellent contribution and wise counsel over the past 11 years. I will not be seeking re-election at the 2011 AGM.  My successor will be announced in due course.

 

Annual General Meeting

Shareholders are invited to the annual general meeting on Thursday 21 October at 201 Bishopsgate, London EC2M 3AE.  The meeting will start at 3pm and will include a presentation from the portfolio manager.

 

 

Simon de Zoete

14 September 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2010

 

 

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 price

         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, gearing 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.  The Board monitors investment performance at each Board meeting and regularly reviews the level of its gearing.  

 

●       Tax and regulatory

A breach of section 1158 of the Corporation Tax Act 2010 (formerly section 842 of the Income and Corporation Taxes Act 1988) would 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 Act 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. 

 

          ●       Operational

         Disruption to, or failure of, the Manager's accounting, dealing or payment systems or custody 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.

 

Further details of the Company's exposure to market risk (including market price risk, currency risk and interest rate risk), liquidity risk, and credit and counterparty risk and how they are managed are contained in the notes to the financial statements in the annual report.

 

 

 

 

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THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2010

 

 

RELATED PARTY TRANSACTIONS

 

The provision of investment management, accounting, company secretarial and administration services has been outsourced to Henderson Global Investors Limited ("Henderson" or the "Manager").  This is the only related party arrangement currently in place.  Other than fees payable by the Company in the ordinary course of business, there have been no material transactions with the related party affecting the financial position or performance of the Company during the year under review. 

 

 

 

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

 

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

 

●          the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), give a true and fair view of the assets, liabilities, financial position and profit of the Company; and

 

●          the Report of the Directors in the Annual Report 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

 

 

Simon de Zoete

Chairman

14 September 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2010

 

 

PORTFOLIO MANAGER'S REPORT

 

Investment Background

 

During the twelve month period under review, the UK equity market produced a return of 23.3%, as measured by the FTSE All-Share 4% Capped Index, but it was a year of two halves.  All of the gains were made in the second half of 2009 when the UK equity market produced a return of 28.5% against the background of the rapid recovery in economic growth of emerging economies, such as China.  The leading Western economies were slower to recover but did so helped by accommodative monetary and fiscal policies.  The UK economy was a notable laggard but the stock market benefited from the global recovery, given that some two-thirds of profits from UK listed companies come from overseas.

 

In the first half of 2010, the UK equity market produced a negative return of 4.1%.  The growth rate of the Chinese economy slowed down from a very high level. Fears grew that the world economy would fall back into recession.  Closer to home, concern grew about the ability of Greece and some other countries in the Eurozone to repay their sovereign debt.  Indeed, some commentators questioned the sustainability of the UK's fiscal deficit and sterling fell to an exchange rate of 1.43 against the US dollar in May 2010.  Some 33% of the Company's expected dividend income for the year to 30 June 2011 from Royal Dutch Shell, HSBC and BHP Billiton, which declare dividends in US dollars, was hedged at this time at an exchange rate of 1.44.  The emergency budget from the new coalition government seemed to reassure the markets and sterling recovered a bit to end the period at an exchange rate of 1.50 to the US dollar.  In addition, UK economic growth accelerated to 1.2% in the second quarter of 2010 led by manufacturing output growth of 1.6%. 

 

Throughout the year, gearing was maintained in a range of between 7.4% and 10.4%.  Overall, this was a positive contributor of 2.4 percentage points to the outperformance relative to the FTSE All-Share 4% Capped Index.

 

The dividend yields available seemed attractive relative to the alternatives.  The Bank of England's base rate stayed at the historic low of 0.5% throughout the year.  The yield on British Government bonds with a ten year maturity started the period at 3.7%, peaked at 4.27% in February on fears about the UK fiscal position and ended June at 3.3% after the emergency budget.

 

There was an average decrease of 5% in dividends from companies held in the portfolio over the year.  Towards the end of the period, there were signs of improving prospects for dividends with better corporate profits being forecast by analysts.

 

Performance of higher yielding shares compared with lower yielding shares

Lower yielding shares outperformed with the large mining sector a particularly important contributor.  On the other hand, Oil and Gas (due to BP) and Utilities held back the FTSE 350 Higher Yield Index.

 

 

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THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2010

 

PORTFOLIO MANAGER'S REPORT (continued)

 

City of London outperformed the FTSE 4% Capped Index as a result of both its gearing and its stock selection (see Portfolio Review below).

 

Portfolio Review

The biggest event to hit the portfolio over the year was BP's oil spill in the Gulf of Mexico.  As the extent of BP's liabilities grew, 42% of the Trust's holding was sold at an average price of 455p which compares with its price at 30 June of 319p.  In addition, out-of-the-money call options on about half of the remaining holding in BP were sold for attractive prices reflecting the sharp increase in the volatility of BP's share price.  The premium income from the options will help replace some of the income lost through the suspension of BP's dividend.  Although there is recovery potential, BP faces considerable uncertainty about the size of its liabilities and a long process to rebuild its reputation.

 

The holding in Royal Dutch Shell was added to because it is set to grow significantly its oil and gas production and cash flow over the next three years as a result of long-term investment in new projects.  Royal Dutch Shell's dividend seems secure given its strong balance sheet and the outlook for the oil price, which has stayed above $70 a barrel and is supported by the growth in demand for oil from China and other emerging economies.

 

Elsewhere in the Oil sector a new holding was purchased in US listed Diamond Offshore Drilling which drills offshore oil and gas wells on a contract basis.  Although Diamond has been adversely affected by the six months' moratorium on drilling in the Gulf of Mexico, it has global operations and over the medium term should benefit from healthy demand for the hiring of rigs.  The holding in Statoil was sold after some disappointments in its production growth and given better relative value in Royal Dutch Shell.

 

A particularly powerful theme in the portfolio over the year was the strong performance of exporting companies which benefited from the competitive level of sterling and the rebound in global demand for industrial products.  The two biggest positive contributors to performance were the Industrial Engineering and Chemicals sectors.  It is worth highlighting the share price returns of the Company's holdings in Weir Group (130%) and IMI (129%) in Industrial Engineering and Croda (94%) in Chemicals.

 

By contrast, the Pharmaceutical sector was a relatively disappointing performer with a return of 20%.  The holding in AstraZeneca was added to given its attractive dividend yield, cash flow and growth in emerging markets.  In addition, it seemed that the potential for its new medicines under development was being underestimated.

 

The Utilities sector also was a relative underperformer with a return of 17%.  Significant additions were made to the holdings in Centrica, which owns the British Gas electricity and gas supply business.  The weak gas price improved the competitiveness of British Gas and helped its market share.  Centrica's share price valuation also seemed to undervalue its growth prospects from its services business.

 

 

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THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2010

 

PORTFOLIO MANAGER'S REPORT (continued)

The Media sector was a strong performer over the year with a particularly strong return from the Company's holding in Pearson (52%), which is predominantly involved in educational publishing.  In addition, the holding in BSkyB performed well after a bid approach from News Corporation for the 62% of BSkyB that it does not own.  Thomson Reuters moved its main listing to Canada and profits were taken on the Company's holding. 

 

Over the years, takeover activity has been a recurrent theme in the portfolio.  The UK has a particularly open system of corporate control and is a popular hunting ground for overseas companies which want to make acquisitions.  During the period under review, there were two other takeovers in the portfolio at prices significantly above those that had previously been prevailing.  Cadbury was acquired by Kraft of the USA and Arriva, in the Transport sector, by Deutschebahn.  A new holding was purchased in bus and rail group Go-Ahead to replace Arriva.

 

In the Banks sector, profits were taken in around half the holding in Barclays after a strong rally in its share price.  A new holding was purchased in Lloyds, which now has good prospects for a recovery in its profits.  At the same time out-of-the-money calls were sold in Lloyds to generate some income.

 

Elsewhere among financial companies, exposure was increased to the Nonlife Insurance sector given attractive share price valuations and dividend yields.  Additions were made to the holdings in Amlin and Hiscox.  A new holding was purchased in RSA which has businesses in Canada and Scandinavia as well as its core operations in the UK.  In the Financial Services sector, a new holding was purchased in ICAP, which is the world's premier interdealer broker in interest rates, credit and foreign exchange.  The holding in Investec, the Anglo/South African investment bank, was sold.

 

Opportunities to invest in companies with attractive dividend yields, sound balance sheets and high visibility of profits growth continue to be found.  A new holding was purchased in Imperial Tobacco, which is very cash generative and is rapidly paying down the debt from the Altadis acquisition.  Cineworld, the leading UK cinema operator, was also bought.  It has good growth potential in 3D films.  Playtech, which is the main supplier of software for the rapidly growing online gaming industry, was also bought.  In Telecommunications, a new holding was purchased in Cable & Wireless Communications whose main operations are in Panama, the Caribbean and Macau.  It offered a high dividend yield and growth potential in many of the 38 markets in which it operates around the world.

 

By contrast, holdings which appeared over valued and where prospects appeared to be uncertain were sold.  These stocks included Hays, Kesa, Ladbroke and D S Smith.

 

Distribution of the Portfolio

The distribution of the portfolio at 30 June 2010 was large cap companies: 76%; medium-sized companies: 20%; and overseas listed companies: 4%.  At 30 June 2009 the distribution was large cap companies: 78%; medium-sized companies: 15%; and overseas listed companies: 7%.   The growth in the proportion of the portfolio invested in medium-sized companies was as a result of their outperformance and also some re-allocation to them from large companies and overseas listed companies.

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THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2010

 

PORTFOLIO MANAGER'S REPORT (continued)

 

Outlook

The UK economy probably faces a period of subdued growth in the year ahead with a significant fiscal tightening and cuts in government spending.  In addition, VAT will rise to 20% and consumers are likely to continue to reduce indebtedness and rebuild savings which should lead to muted UK consumer demand.

 

In contrast, the momentum of growth in Asia Pacific and many other emerging markets appears to be strong.  There remains substantial scope for living standards to improve in these countries.

 

The Company's portfolio is deliberately biased towards companies that are not dependent on UK growth.  The largest seven investments, which make up 36% of the portfolio, are all multinational companies.  Some, such as British American Tobacco and Diageo, already have large businesses in the Pacific and emerging markets.  Others, such as GlaxoSmithKline and AstraZeneca, are growing their emerging markets businesses rapidly from a relatively small base level.

 

In terms of UK orientated businesses, the largest holdings have good visibility of demand for their products and services.  They include the Utilities, National Grid and Scottish & Southern Energy, as well as leading supermarket group Tesco and soft drinks company Britvic.

 

Two mining companies - BHP Billiton and Rio Tinto - offer good value and are in the top twenty holdings.  However, the portfolio is significantly underweight in the sector and no other mining stocks are held given their lack of dividend yield and their high volatility.

 

Overall, equities appear to offer good value relative to the alternatives.  The coalition government's tough fiscal policy will allow the Bank of England to keep interest rates at current ultra low levels for longer than previously expected.  Yields from bank deposit accounts and Government bonds are very low.  On the other hand, equity dividend yields are relatively attractive with the prospect of rising dividends as profits and revenues of companies grow.

 

Job Curtis

 

 

 

 

 

 

 

 

 

 

 

 

 

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THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2010

 

Top 40 Investments

as at 30 June 2010

 

The 40 largest investments, representing 79.30% of the portfolio (convertibles, all classes of equity and any written call option positions in any one company being treated as one investment), are listed below.  The stock marked * was not in the top ten last year. The stock which was in the top ten last year but not this year was BP.

 

 


Market Value

2010



Market Value

2010

£'000



£'000



British American Tobacco

36,321


Aviva

6,596

Royal Dutch Shell

31,805


IMI

6,531

Vodafone

28,772


Reed Elsevier

6,480

GlaxoSmithKline

28,575


BAE Systems

6,270

Diageo

28,090


Amlin

5,817

HSBC

24,608


Weir

5,704

AstraZeneca *

21,232


Smith News

5,015

National Grid

17,185


United Utilities

4,992

Scottish & Southern Energy

16,785


Severn Trent

4,924

Tesco

15,202


Barclays

4,735

BHP Billiton

14,036


Pennon

4,701

Unilever

12,607


Rolls-Royce

4,500

BP

12,206


Hiscox

4,383

Britvic

9,983


Halfords

3,918

Land Securities

8,936


France Telecom

3,858

Pearson

8,880


Provident Financial

3,780

Rio Tinto

8,285


Spirax-Sarco Engineering

3,768

Centrica

7,863


Greene King

3,766

Croda

7,056


Imperial Tobacco

3,758

Reckitt Benckiser

7,047


Standard Chartered

3,692

 

 

 

 

 

 

 

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THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2010

 

 

Audited Income Statement

for the year ended 30 June 2010

 


Year ended 30 June 2010

Year ended 30 June 2009


Revenue Return £'000

Capital Return £'000

 

Total

£'000

Revenue

Return

£'000

Capital Return £'000

 

Total

£'000

Gains/(losses) on investments held at fair value through profit or loss

-

87,484

87,484

-

(140,426)

(140,426)

Income from investments held at fair value through profit or loss (note 2)

25,809

-

25,809

28,374

-

28,374

Other interest receivable and similar income (note 3)

1,833

-

1,833

977

-

977

---------

-----------

-----------

---------

-----------

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

Gross revenue and capital gains/(losses)

27,642

87,484

115,126

29,351

(140,426)

(111,075)






Management and performance fees

(561)

(1,385)

(1,946)

(436)

(1,018)

(1,454)

Write-back of VAT

-

-

-

538

410

948

Other administrative expenses

(612)

-

(612)

(535)

-

(535)

---------

-----------

-----------

---------

-----------

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

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

26,469

86,099

112,568

28,918

(141,034)

(112,116)







Finance charges

(1,440)

(2,993)

(4,433)

(1,510)

(3,157)

(4,667)

---------

-----------

-----------

---------

-----------

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

Net return/(loss) on ordinary activities before taxation

25,029

83,106

108,135

27,408

(144,191)

(116,783)








Taxation on net return/(loss) on

ordinary activities

(148)

-

(148)

(126)

-

(126)

---------

-----------

-----------

---------

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

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

Net return/(loss) on ordinary activities after taxation

24,881

83,106

107,987

27,282

(144,191)

(116,909)

=====

=======

======

=====

=======

=======

 







Return/(loss) per ordinary share - basic (note 4)

11.93p

39.83p

51.76p

13.15p

(69.49)p

(56.34)p

=====

======

======

=====

======

======

 

 

The total columns of this statement represent the Income Statement of the Company.  The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.  All revenue and capital items in the above statement 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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THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2010

 

Audited Reconciliation of Movements in Shareholders' Funds

for the years ended 30 June 2010 and 30 June 2009

 

 

Year ended 30 June 2010

Called up share capital £'000

Share premium account £'000

Capital redemption reserve £'000

Other capital reserves £'000

Revenue reserve £'000

Total

£'000

At 30 June 2009

52,130

36,893

2,707

309,300

27,852

428,882

Net return on ordinary activities after taxation

-

-

-

83,106

24,881

107,987

Issue of 100,000 new ordinary shares

25

186

-

-

-

211

Dividends paid (note 6)

-

-

-

-

(26,054)

(26,054)

--------

----------

---------

---------

---------

----------

At 30 June 2010

52,155

37,079

2,707

392,406

26,679

511,026

=====

=====

=====

=====

=====

=====






















Year ended 30 June 2009

Called up share capital

£'000

Share premium account £'000

Capital redemption reserve £'000

Other capital reserves £'000

Revenue reserve £'000

Total

£'000

At 30 June 2008

51,894

35,309

2,707

452,931

25,879

568,720

Net (loss)/return on ordinary activities after taxation

-

-

-

(144,191)

27,282

(116,909)

Buyback of 50,000 ordinary shares

-

-

-

(110)

-

(110)

Sale of 358,090 shares out of treasury

-

-

-

670

-

670

Issue of 945,000 new ordinary shares

236

1,621

-

-

-

1,857

Issue expenses incurred

-

(37)

-

-

-

(37)

Dividends paid (note 6)

-

-

-

-

(25,309)

(25,309)

--------

----------

----------

----------

----------

----------

At 30 June 2009

52,130

36,893

2,707

309,300

27,852

428,882

=====

=====

=====

=====

=====

=====

 

 

 

 

 

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THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2010

 

Audited Balance Sheet

at 30 June 2010





2010

2009


£'000

£'000

Investments held at fair value through profit or loss



Listed at market value in the United Kingdom

535,443

439,741

Listed at market value overseas

23,024

32,552

Investment in subsidiary undertakings

347

378

----------

----------


558,814

472,671

----------

----------

Current assets



Debtors

4,577

7,167

Cash at bank

1,475

750

----------

----------


6,052

7,917

----------

----------

Creditors: amounts falling due within one year

(6,441)

(4,307)

----------

----------

Net current (liabilities)/assets

(389)

3,610

----------

----------



Total assets less current liabilities

558,425

476,281




Creditors: amounts falling due after more than one year

(47,399)

(47,399)

----------

----------

Total net assets

511,026

428,882

======

======




Capital and reserves



Called up share capital

52,155

52,130

Share premium account

37,079

36,893

Capital redemption reserve

2,707

2,707

Other capital reserves

392,406

309,300

Revenue reserve

26,679

27,852

----------

----------

Shareholders' funds

511,026

428,882

======

======




Net asset value per ordinary share (note 5)

244.96p

205.68p

======

======

 

 

 

 

- MORE -



- 14 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2010

 

Audited Cash Flow Statement

for the year ended 30 June 2010

 


        Year ended

          30 June 2010

        Year ended

         30 June 2009


£'000

£'000

£'000

£'000

Net cash inflow from operating activities


25,465


28,416





Servicing of finance





Debenture interest paid

(4,265)


(4,265)


Bank and loan interest paid

(11)


(259)


Dividends paid on preference and preferred ordinary stocks

(157)


(157)


----------

----------

Net cash outflow from servicing of finance


(4,433)


(4,681)

Taxation





Withholding tax recovered

331


2


----------

----------

Net tax recovered


331


2






Financial investment





Purchases of investments

(82,535)


(68,380)


Sales of investments

86,667


79,913


----------

---------

Net cash inflow from financial investment


4,132


11,533






Equity dividends paid


(26,054)


(25,309)

----------

----------

Net cash (outflow)/inflow before financing


(559)


9,961






Financing





Proceeds from issue of ordinary shares

211


2,527


Expenses paid in respect of issue of shares

-


(37)


Repayment of loans

(2,000)


(11,956)


Repurchase of ordinary shares

-


(110)


---------

----------

Net cash outflow from financing


(1,789)


(9,576)

---------

----------






(Decrease)/increase in cash


(2,348)


385

=====

=====

 

 

- MORE -


- 15 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2010

 

Notes to the financial statements

 

1.

Accounting policies

Basis of accounting


The financial statements have been prepared on the basis of the accounting policies used for the Company's accounts for the previous year.

 

The financial statements are prepared in accordance with United Kingdom Generally Accepted Accounting Practice and with the Statement of Recommended Practice ("the SORP") for investment trusts issued by the Association of Investment Companies in January 2009.  All of the Company's operations are of a continuing nature.



2.

Income from investments held at fair value through profit or loss


2010

2009


£'000

£'000


Franked UK dividends:




  Listed

23,409

24,806


  Listed - special dividends

95

70


  Income from subsidiary

31

-


---------

---------



23,535

24,876


---------

---------


Unfranked - listed investments:




  Interest from UK convertibles

-

426


  Dividend income - overseas investments

1,590

1,973


  Dividend income - UK REIT

527

766


  Special dividends

157

77


  Stock dividends

-

256



---------

---------



2,274

3,498


---------

---------



25,809

28,374



=====

=====





3.

Other interest receivable and similar income


2010

2009



£'000

£'000


Bank interest

3

7


Underwriting commission (allocated to revenue)*

526

106


Stock lending

-

36


Interest on VAT refund

-

828


Option premium income †

1,304

-


------

------


1,833

977


====

====


* During the year the Company was required to take up some shares in respect of its underwriting commitments in respect of which £17,000 of commission was received (2009: £nil).


†  Options were mainly written against low or zero dividend yielding holdings, which would not normally form part of the portfolio.  These transactions had no material impact on the capital account of the Company.

 

- MORE -



- 16 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2010

 

Notes to the financial statements (continued)

4.

Return/(loss) per ordinary share - basic


The return per ordinary share is based on the net return attributable to the ordinary shares of £107,987,000 (2009: loss of £116,909,000) and on 208,613,841 ordinary shares (2009: 207,522,950), being the weighted average number of ordinary shares in issue during the year.




The return/(loss) per ordinary share can be further analysed between revenue and capital, as below:







2010

2009



£'000

£'000


Net revenue return

24,881

27,282


Net capital return/(loss)

83,106

(144,191)


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

----------


Net total return/(loss)

107,987

(116,909)



=======

======


Weighted average number of ordinary shares in issue during the year

208,613,841

207,522,950






Revenue return per ordinary share

11.93p

13.15p


Capital return/(loss) per ordinary share

39.83p

(69.49)p



----------

---------


Total return/(loss) per ordinary share

51.76p

(56.34)p



======

=====


The Company does not have any dilutive securities. Therefore the basic and diluted returns per share are the same.



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 £511,026,000 (2009: £428,882,000) and on 208,619,868 (2009: 208,519,868) shares in issue on 30 June 2010.



6.

Dividends paid on the ordinary shares

Record date

Payment date

2010

£'000

2009

£'000


Fourth interim dividend (2.96p) for the year ended 30 June 2008

25 Jul 2008

29 Aug 2008

-

6,134


First interim dividend (3.08p) for the year ended 30 June 2009

24 Oct 2008

28 Nov 2008

-

6,382


Second interim dividend (3.08p) for the year ended 30 June 2009

23 Jan 2009

27 Feb 2009

-

6,382


Third interim dividend (3.08p) for the year ended 30 June 2009

24 Apr 2009

29 May 2009

-

6,411


Fourth interim dividend (3.08p) for the year ended 30 June 2009

24 Jul 2009

28 Aug 2009

6,422

-


First interim dividend (3.08p) for the year ended 30 June 2010

23 Oct 2009

30 Nov 2009

6,426

-


Second interim dividend (3.08p) for the year ended 30 June 2010

22 Jan 2010

26 Feb 2010

6,426

-


Third interim dividend (3.25p) for the year ended 30 June 2010

30 Apr 2010

28 May 2010

6,780

-





--------

--------





26,054

25,309





=====

=====

- MORE -



- 17 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

Annual Financial Report for the year ended 30 June 2010

 

Notes to the financial statements (continued)

 

7.   Issued share capital

During the year the Company issued 100,000 ordinary shares for total proceeds of £211,000.  At 30 June 2010 there were 208,619,868 ordinary shares of 25p in issue (2009: 208,519,868).

 

8.   Dividends paid

A fourth interim dividend of 3.25p per ordinary share of 25p (2009: 3.08p) in respect of the year ended 30 June 2010 was paid on 31 August 2010 to shareholders on the register on 30 July 2010 for a total consideration of £6,863,000.

 

9.   Going concern statement

The directors believe it is appropriate to continue to adopt the going concern basis in preparing the financial statements as the assets of the Company consist mainly of securities which are readily realisable and, accordingly, the Company has adequate financial resources to continue in operational existence for the foreseeable future.  In reviewing the position as at the date of this statement, the Board has considered the guidance issued by the Financial Reporting Council in October 2009.

 

10.   2010 Annual financial statements

The figures and financial information for the year ended 30 June 2010 are extracted from the Company's annual financial statements for that period and do not constitute statutory accounts.  The Company's annual financial statements for the year to 30 June 2010 have been audited but have not yet been delivered to the Registrar of Companies. The auditors' report on the 2010 annual financial statements was unqualified, did not include a reference to any matter to which the auditors drew attention without qualifying the report, and did not contain any statements under sections 498(2) or 498(3) of the Companies Act 2006.

 

11.   2009 Financial information

The figures and financial information for the year ended 30 June 2009 are compiled from an extract of the published accounts for that year and do not constitute statutory accounts.  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 sections 498(2) or 498(3) of the Companies Act 2006.

 

12.   Annual report and financial statements and annual general meeting

The annual report and financial statements will be posted to shareholders on 22 September 2010 and will be available on the Company's website (www.cityinvestmenttrust.com) or in hard copy format from the Company's registered office, 201 Bishopsgate, London, EC2M 3AE.

 

The annual general meeting will be held at the registered office on Thursday 21 October 2010 at 3.00pm. The notice of the annual general meeting will be sent to shareholders with the annual report.

 

- ENDS -

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

 


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