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City of London IT (CTY)

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Monday 16 September, 2013

City of London IT

Final Results

RNS Number : 1167O
City of London Investment Trust PLC
16 September 2013
 



 

16 September 2013

 

This announcement contains regulated information

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Financial Report for the year ended 30 June 2013

 

 

●       Net asset value total return of 23.8%.

 

●       Dividend per share up 4.1%.  The 47th consecutive annual increase.

 

●       Ongoing charge of 0.44%

 


30 June 2013

30 June 2012

 

Dividends per ordinary share ('DPS')

+4.1%

+4.1%

 

Revenue return per ordinary share ('EPS')

+8.7%

+6.7%

 




 

Total Returns:



 

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

+23.8%

+2.3%

 

UK Growth & Income sector NAV (size weighted average) (benchmark) #

+26.0%

+1.2%

 

FTSE All-Share Index †

+17.9%

           (3.1%)

Ordinary share price #

+21.5%

+2.9%

 

 

Sources:  # Morningstar for the AIC; NAV return is the cum income NAV with debt at fair value; † Datastream

 

Chairman's Statement

 

I am pleased to report another year of positive progress. City of London produced a net asset value total return of 23.8% for the year ended 30 June 2013.  Whilst this slightly lagged the average for the UK Growth & Income investment trust sector, it was well ahead of the FTSE All-Share Index. Indeed, over the longer term we have significantly outperformed the wider market in each of the last three, five and ten year periods.  The dividend was increased for the 47th consecutive year, by 4.1%, and our ongoing charge remains, at 0.44%, the lowest in the sector.

 

The Markets

Equities proved consistently resilient through the year until a correction in June followed positive returns in each of the preceding 11 months. Overall, the FTSE All-Share Index total return rose 17.9% over the 12 months.  In the UK, base rates remained at 0.5% and growth returned to the economy underpinned by a strengthening housing market.  Overseas, growth picked up in the US but Europe and emerging markets were mixed. Equity markets have rerated upwards, with share prices outpacing growth in companies' earnings per share and dividends.

 

Our Investment Approach

Our Portfolio Manager, Job Curtis, has been managing City of London for over 20 years.  He manages the portfolio in a conservative way, focusing on companies with cash generative businesses able to grow their dividends with attractive yields.  The portfolio is well diversified with some 76% invested in well known blue chip UK listed companies but it remains biased towards international companies invested in economies likely to grow faster than the UK.  In times when savers have difficulty in receiving adequate returns on their investments, the portfolio aims to provide shareholders with dividends between 10% and 30% higher than the FTSE All-Share Index.

 

 

 



- 2 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Financial Report for the year ended 30 June 2013

 

 

Chairman's Statement (continued)

 

Performance

Earnings and Dividends

Earnings per share rose by 8.7%, to 15.27p reflecting the increase in dividends received from companies held in the portfolio. It was an exceptional year for special dividends which were paid by seven different companies and more than doubled to a total of £1.7 million.  A fourth interim dividend of 3.63p per share was paid on 30 August 2013 making the total for the year 14.30p, an increase of 4.1% over the previous year and ahead of the rate of inflation.

 

This means that £2.8 million has been added to the revenue reserve to underpin future dividends.  City of London's unsurpassed record of 47 years of unbroken dividend growth has been achieved by retaining income from good years in this revenue reserve and using that reserve to bolster dividends in difficult years.

 

The quarterly dividend will next be considered by the Board when the third interim is declared in March 2014.

 

Net Asset Value Total Return

City of London's total return was 23.8% which was 2.2 percentage points behind the size-weighted average total return for the AIC UK Growth & Income sector but 5.9 percentage points ahead of the FTSE All-Share Index.  Our underweight positions in the oil and mining sectors, allied with our overweight position in industrial engineering, were the most important sector contributors to outperformance of the Index. In addition, gearing contributed 2.1 percentage points to the outperformance.

 

Expenses

There is no performance fee payable for the year.  The ongoing charge, which is the investment management fee and other non-interest expenses as a percentage of equity shareholders' funds, was 0.44%, which is very competitive compared with the OEIC market, with most other investment trusts and with other actively managed funds.

 

Changes to Management Fee Arrangements

On 31 December 2012 the Financial Services Authority (now the Financial Conduct Authority) introduced new rules under the Retail Distribution Review (RDR) on adviser charging, with the objective of making advisers' remuneration more transparent by banning commission-based financial advice.  The Board believes that these new rules could have a significant impact on the demand for City of London shares as it creates a level playing field between investment trusts and the open-ended products which have been traditionally favoured by financial advisers and authorised intermediaries.

 

In view of this, the Board has reviewed the Company's management fee arrangements with a view to simplifying these and making the Company more attractive to a wider audience of retail investors.  Accordingly, with effect from 1 July 2013 the performance fee element of the management fee arrangements has been removed.  The management fee with effect from that date has been 0.365% per annum of net assets, reducing to 0.35% on the balance of net assets above £1 billion.  As a result, the Company will continue to have one of the lowest ongoing charges in the UK Growth and Income sector and is extremely competitive against other equity investment alternatives.

 

 

 

 



- 3 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Financial Report for the year ended 30 June 2013

 

 

Chairman's Statement (continued)

 

Share Issues

During the year under review, City of London's shares have been in strong demand and have continued to trade consistently at a premium.  19.1 million shares were issued, at a premium to net asset value, for proceeds of £62.9 million. In the past three years, City of London has issued 49.4 million new shares, increasing its share capital by 23.7%.

 

City of London's gross assets now exceed £1 billion and its market capitalisation stands at just under that figure. Whilst size is not important in and of itself, it is only those larger trusts with a ready, liquid market in their shares which stand to benefit materially from the consequences flowing from RDR to which I referred above. Our expenses are also spread over a broader capital base, reducing costs to individual shareholders and making our already competitive offering even more so.

 

The Board's approach to share issuance and buy-backs is set out in the Annual Report.

 

Alternative Investment Fund Manager (AIFM) Directive

The UK is currently in the process of implementing the AIFM Directive, a piece of EU legislation which is targeted principally at the regulation of hedge funds but which also catches within its scope other investment vehicles such as investment trusts. This will bring no perceptible benefit to City of London and its shareholders but will add a modest layer of regulatory oversight and additional, unwarranted cost. To comply with the new law, we will need to appoint an AIFM and a Depositary by July 2014. The Board is already well advanced in its preparations to meet this deadline. 

 

Annual General Meeting

The Annual General Meeting will be held at the offices of Henderson Global Investors, 201 Bishopsgate, London EC2M 3AE on Monday, 28 October 2013 at 3.00pm.  All shareholders are most welcome to attend.  As usual, Job Curtis, our Portfolio Manager, will be making a presentation.

 

Outlook

Economic growth appears to be gathering momentum in the UK and most of the major overseas economies but the underlying situation remains fragile given continuing high levels of government and personal debt.  The degree to which growth is self-sustaining or dependent on stimulatory monetary policy is not clear.  In addition, there is concern about how financial assets will respond when central banks reduce their holdings in government bonds from the current unprecedented levels.  In the UK, the Bank of England has introduced an element of forward guidance and it looks as though the base rate will remain at 0.5% for at least the next twelve months.

 

Within this overall economic environment, equity dividend yields remain attractive relative to both short term interest rates and medium and long-dated bond yields. City of London will continue to offer a dividend yield at a premium to the market and we intend to grow this dividend at least in line with inflation; all the time, invested in good quality companies with strong balance sheets and an attractive combination of yield and dividend growth prospects. My expectation is that this proposition will continue to serve shareholders well.

 

Philip Remnant

16 September 2013

 

 



- 4 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Financial Report for the year ended 30 June 2013

 

 

PORTFOLIO MANAGER'S REPORT

 

Investment Background

 

During the twelve month period under review, the UK equity market, as measured by the FTSE All-Share Index, produced a total return of 17.9%.  The market was in an upward trend producing a positive return every month for eleven months until June 2013.  The key factor behind the buoyant equity market was the accommodative monetary policy from the Bank of England and other leading central banks.  In the UK, the base rate remained at the historically low level of 0.5% and the total amount of gilts that has been purchased by the Bank of England rose to £375 billion or some 30% of the outstanding stock of gilts.

 

Economic growth in the UK picked up in 2013 with the housing market being helped by the Government's Funding for Lending Scheme.  Overseas, growth continued in the US but the situation in Europe was mixed with weakness and high unemployment in many of the peripheral Eurozone countries.  In emerging markets, the main feature was the slowdown in the growth of the Chinese economy as a result of government inspired credit tightening.

 

A key development during the year was the expansion of production in the United States of natural gas and oil extracted from shale rock.  As a result, the US was able to reduce significantly its imports of oil and gas.  This helped the oil price to trade within a relatively steady range and provide no inflationary shocks.

 

Throughout the twelve months, the UK equity dividend yield remained significantly in excess of both the yield of ten year gilts and base rates.  In the second quarter of 2013, the yield of ten year gilts rose from a low of 1.7% to 2.4% in response to improving growth and speculation about a possible end to further quantitative easing.

 

Companies in City of London's portfolio on average increased their dividends by 6.2% (excluding special dividends).  Given the equity market's combination of attractive dividend yield and growth as well as other measures of value, gearing was maintained in a range of between 6.8% and 10.5%.  During the year, gearing contributed to performance by 2.1% as shown in the table below. In addition, stock selection contributed 4.1%

 

Estimated Performance Attribution Analysis

(relative to the FTSE All-Share Index total return)

 


2013

2012

Stock selection

+4.05%

+6.64%

Gearing

+2.11%

-0.99%

Expenses

-0.44%

-0.45%

Share Issues

+0.23%

+0.18%

 

Total

_______

 +5.95%

 

_______

 +5.38%

 

Source: Henderson Global Investors

 

Performance of Higher Yielding Shares compared with Lower Yielding Shares

Over the twelve month period, the FTSE 350 Lower Yield Index slightly outperformed the FTSE 350 Higher Yield Index.  Key factors were the outperformance of the lower yielding banks sector and the underperformance of the higher yielding oil and gas sector.  In addition, the lower yielding mining sector underperformed.

- 5 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Financial Report for the year ended 30 June 2013

 

 

PORTFOLIO MANAGER'S REPORT (continued)

 

Portfolio Review

City of London remained significantly under represented in the mining sector throughout the twelve months and this was the biggest single sector contributor to outperformance relative to the FTSE All-Share Index.  Mining companies were adversely affected by the poor performance of commodities, such as iron ore, which experienced reduced demand from China. 

 

In addition, many of the mining companies had committed to expansionary capital expenditure which had to be written down in value.  After share price underperformance, BHP Billiton and Rio Tinto's dividend yields had risen to above the average for the UK market and so additions were made to these two holdings which offered long-term value.

 

The second biggest contributor to outperformance was being underweight the oil and gas sector which suffered from the sideways direction of the oil price and the difficulty that major companies continue to have in replacing their reserves.  The holding in BP was added to on a significant discount to its sum-of-the-parts even after taking into consideration the likely costs of the final Macondo Gulf of Mexico spill claims.  BP appeared to have made an astute deal in swapping its stake in TNK/BP for 20% of Rosneft and showed confidence in the future by increasing its dividend by some 20%.  In addition, a small holding was purchased in the convertible of Gulf Keystone, which has interests in Kurdistan.

 

The biggest detractor to performance was being underweight the banks sector.  It would have been difficult to hold either Lloyds or Royal Bank of Scotland because they did not pay a dividend.  The holding in Standard Chartered was switched into HSBC which was on a lower valuation and offered a greater geographical spread of operations.  Elsewhere in the financial sector, an overweight position was maintained in the life assurance sector where most of our holdings performed well, especially Standard Life which produced a return of some 60% over the twelve months.  The one disappointment in this sector was Aviva, which cut its dividend, and this holding was reduced.  In nonlife insurance, a new holding was purchased in Direct Line, the market leader in UK personal motor and home insurance which has scope to improve its return on equity through reduction in losses on insurance policies in some areas and cost savings.  A holding was also bought in Munich Re, one of the world's leading reinsurers, at a share price valuation which did not reflect its strong track record.  The holding in RSA, the commercial insurer, was sold after its disappointing performance and dividend cut.  In the financial services sector, a new holding was purchased in Tullett Prebon, the inter-deal broker, which has a good record of cash generation.  In real estate investment trusts, significant additions were made to the holding in British Land in view of its attractive dividend yield supported by a portfolio of well let prime London and retail property.  A new holding was purchased in GCP Student Living which owns student accommodation in London where demand is expected to remain strong and supply constrained.

 

Sectors sensitive to economic activity performed well as investors became more confident of economic growth in the UK and overseas.  The overweight positions in industrial engineering contributed positively with IMI notable for a share price return of 54%.  In Travel & Leisure, a particularly well timed purchase was made in Tui Travel, the leading travel group of the UK and Northern Europe, where the share price doubled.  In addition, William Hill, the betting company with a fast growing on-line operation also had a very strong share price return of 73%.  A further cyclical area to outperform were housebuilders where the holding in Persimmon had a share price total return of over 100%.

 

 

 



- 6 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Financial Report for the year ended 30 June 2013

 

 

PORTFOLIO MANAGER'S REPORT (continued)

 

In the media sector, additions were made to the holding in Reed Elsevier which is a significant generator of cash now that some 80% of its revenues are derived from on-line and digital operations.  Also in the media sector, Daily Mail & General was a notable outperformer with a share price total return of 88%.

 

Some defensive sectors underperformed partly due to the switch into cyclicals but also due to the rise in bond yields.  Utilities are considered by some as proxies for bonds and react adversely to falling bond prices.   However, the inflation-linked nature of UK utilities regulated revenues is attractive to long-term investors.  This point was well illustrated by the takeover approach for Severn Trent which is held in the portfolio.  A new holding was purchased in Greencoat UK Wind which owns wind farms where revenues are underpinned by government subsidies.  Its 6% dividend yield is expected to grow with inflation.  Overseas, a new investment was made in Duke Energy, a leading gas and electricity utility in the US.

 

New holdings were also purchased in Nestlé, the multinational food and beverages manufacturer with some 40% of its revenues in emerging markets; and Laird, a technology company that provides components that protect electronic devices from electromagnetic interference and heat and also enable connections through wireless applications.  Disposals were made of the holdings in Daimler and France Telecom. 

 

Over the year there was a four percentage point reduction in the weighting in large companies with medium-sized companies increasing by three percentage points and overseas listed by one percentage point.  There is scope to have up to 20% of the portfolio in overseas listed stocks, but we will only invest overseas when there is, in our view, an advantage over UK listed companies.

 

Distribution of the Portfolio at 30 June 2013

Large companies (constituents of the FTSE 100 Index)

76%

Medium-sized companies

16%

Overseas Listed Companies

8%

 

Outlook

City of London's largest holdings partly reflect our belief in the structural nature of the growth in numbers of the middle class in emerging markets and their increasing prosperity.  HSBC, British American Tobacco, Diageo and Unilever all have significant exposure to emerging markets and will benefit from growing demand for their goods and services.  Elsewhere in the top ten holdings, we believe that after underperformance both Royal Dutch Shell and BP are undervalued and should deliver attractive income and capital returns.  In pharmaceuticals, GlaxoSmithKline has scope to rerate as its earnings growth improves from existing products and those currently under research and development.  Vodafone's key asset remains its 45% stake in Verizon Wireless, the leading US mobile operator which is performing well and which it agreed to sell in September 2013 at a good price.  The UK utilities, SSE, Centrica and National Grid offer an attractive combination of dividend yield and growth.

 

The recovery in the UK economy is gathering momentum and there are bright prospects in many, if not all, overseas economies. From the point of view of stock selection, the aim is to buy into stocks where profits and dividend growth are not already discounted in share price valuation. Despite the rise in the stock market over the last year, we believe there are plenty of stock opportunities to benefit from the improving economy.

 

Job Curtis



- 7 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Financial Report for the year ended 30 June 2013

 

 

Top 40 Investments

at 30 June 2013

 

The 40 largest investments, representing 74.42% of the portfolio (convertibles, all classes of equity and all written call option positions in any one company being treated as one investment), are listed below.  The stocks marked * were not in the top ten last year. The stocks that were in the top ten last year but not this year were AstraZeneca and National Grid.

 


Market Value

2013



Market Value

2013

Company

£'000


Company

£'000

HSBC

54,560


Rio Tinto

11,269

British American Tobacco

50,512


Legal & General

11,141

GlaxoSmithKline

49,110


Imperial Tobacco

10,602

Royal Dutch Shell

48,846


BAE Systems          

10,149

Vodafone

46,962


British Land

9,913

Diageo                           

40,420


Novartis        

9,344

BP*                                 

33,645


BT

8,967

Unilever                        

28,084


United Utilities

8,550

Scottish & Southern Energy

21,322


Greene King                        

8,525

Centrica*                

21,252


Standard Life

8,297

National Grid

19,396


Provident Financial

8,189

AstraZeneca

18,690


Britvic          

7,695

Reed Elsevier                    

15,146


Barclays Bank

7,657

BHP Billiton

15,138


Severn Trent 

7,488

Croda International

14,862


Amlin

7,473

Prudential

13,975


Tesco

7,456

Land Securities                                  

13,702


Hiscox

7,096

Pearson            

12,588


Marks & Spencer                      

6,891

IMI                    

11,780


Whitbread

6,876

Reckitt Benckiser

11,453


Eni

6,762

 

 

 

 

 

 

 

 

 

 

 

 

 



- 8 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Financial Report for the year ended 30 June 2013

 

 

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 at the eight Board meetings each year. The Portfolio Manager closely monitors the portfolio between meetings and mitigates this risk through diversification of investments.

 

●       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 gearing.  

 

●       Tax and regulatory

A breach of Section 1158 of the Corporation Tax Act 2010 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 ("UK Listing Authority") 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. 

 

          ●       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 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, and an annual report which is audited.

 

Details of how the Board monitors the services provided by the Manager and its other suppliers, and the key elements designed to provide effective internal control, are explained further in the internal controls section of the Annual Report.

 

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.

 

 

 

 



- 9 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Financial Report for the year ended 30 June 2013

 

 

MANAGEMENT ARRANGEMENTS AND RELATED PARTY TRANSACTIONS

The provision of investment management, accounting, company secretarial and administration services has been outsourced to subsidiaries of Henderson Global Investors Limited ("Henderson"). Other than the relationship between the Company and its directors, the provision of services by Henderson 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 this 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 for and on behalf of the Board of directors

 

 

 

 

Philip Remnant

Chairman

16 September 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



- 10 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Financial Report for the year ended 30 June 2013

 

 

Audited Income Statement

for the year ended 30 June 2013

 


30 June 2013

30 June 2012


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

-

126,310

126,310

-

(10,617)

(10,617)

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

40,572

-

40,572

34,729

-

34,729

Other interest receivable and similar income (note 3)

503

-

503

759

-

759


---------

----------

-----------

---------

----------

-----------

Gross revenue and capital gains/(losses)

41,075

126,310

167,385

35,488

(10,617)

24,871








Management and performance fees

(857)

(2,000)

(2,857)

(693)

(1,617)

(2,310)

Other administrative expenses

(629)

-

(629)

(589)

-

(589)


---------

----------

-----------

---------

----------

----------

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

39,589

124,310

163,899

34,206

(12,234)

21,972








Finance charges

(1,549)

(3,247)

(4,796)

(1,519)

(3,178)

(4,697)


---------

----------

-----------

---------

---------

----------

Net return/(loss) on ordinary activities before taxation

38,040

121,063

159,103

32,687

(15,412)

17,275








Taxation on net return/(loss) on ordinary activities

(331)

-

(331)

(237)

-

(237)


---------

----------

-----------

---------

---------

----------

Net return/(loss) on ordinary activities after taxation

37,709

121,063

158,772

32,450

(15,412)

17,038


======

======

======

======

======

======

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

15.27p

49.02p

64.29p

14.05p

(6.67p)

7.38p


======

======

======

=====

=====

=====

 

 

The total columns of this statement represent the Profit and Loss Account 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. The Company has no recognised gains or losses other than those recognised in the Income Statement.  There is no material difference between the net return/(loss) on ordinary activities before taxation and the net return/(loss) for the financial year stated above and their historical cost equivalents.   

 

 

 

 

 


 

- 11 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Financial Report for the year ended 30 June 2013

 

 

Audited Reconciliation of Movements in Equity Shareholders' Funds

for the year ended 30 June 2013

 

 

 

Year ended 30 June 2013

Called up share capital £'000

Share premium account £'000

Capital redemption reserve £'000

Other capital reserves £'000

Revenue reserve £'000

Total

£'000

At 1 July 2012

59,715

114,340

2,707

494,626

28,158

699,546

Net return on ordinary activities after taxation

-

-

-

121,063

37,709

158,772

Issue of 19,125,000 new ordinary shares

4,781

58,131

-

-

-

62,912

Dividends paid (note 6)

-

-

-

-

(34,833)

(34,833)


--------

---------

---------

---------

---------

----------

At 30 June 2013

64,496

172,471

2,707

615,689

31,034

886,397


======

======

=====

=======

======

======






















Year ended 30 June 2012

Called up share capital

£'000

Share premium account £'000

Capital redemption reserve £'000

Other capital reserves £'000

Revenue reserve £'000

Total

£'000

At 1 July 2011

56,215

78,590

2,707

510,038

26,927

674,477

Net (loss)/return on ordinary activities after taxation

-

-

-

(15,412)

32,450

17,038

Issue of 14,000,000 new ordinary shares

3,500

35,750

-

-

-

39,250

Dividends paid (note 6)

-

-

-

-

(31,219)

(31,219)


--------

---------

---------

---------

---------

----------

At 30 June 2012

59,715

114,340

2,707

494,626

28,158

699,546


======

======

=====

=======

======

======

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- 12 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Financial Report for the year ended 30 June 2013

 

 

Audited Balance Sheet

at 30 June 2013


2013

£'000

2012

£'000

Investments held at fair value through profit or loss



Listed at market value in the United Kingdom

875,502

714,141

Listed at market value overseas

80,999

52,067

Investment in subsidiary undertakings

347

347


----------

----------


956,848

766,555


----------

----------

Current assets



Debtors

8,260

6,275

Cash at bank

179

-


----------

----------


8,439

6,275


----------

----------

Creditors: amounts falling due within one year

(31,491)

(25,885)


----------

----------

Net current liabilities

(23,052)

(19,610)


----------

----------




Total assets less current liabilities

933,796

746,945




Creditors: amounts falling due after more than one year

(47,399)

(47,399)


----------

----------

Net assets

886,397

699,546


======

======




Capital and reserves



Called up share capital

64,496

59,715

Share premium account

172,471

114,340

Capital redemption reserve

2,707

2,707

Other capital reserves

615,689

494,626

Revenue reserve

31,034

28,158


----------

----------

Equity shareholders' funds

886,397

699,546


======

======




Net asset value per ordinary share - basic and diluted (note 5)

343.58p

292.87p


======

======

 

 

 

 



- 13 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Financial Report for the year ended 30 June 2013

 

 

Audited Cash Flow Statement

for the year ended 30 June 2013

 


    2013

    2012


£'000

£'000

£'000

£'000

Net cash inflow from operating activities


36,042


31,758






Servicing of finance





Debenture interest paid

(4,265)


(4,265)


Bank and loan interest paid

(383)


(271)


Dividends paid on preference and preferred ordinary stocks

(157)


(157)



----------


----------


Net cash outflow from servicing of finance


(4,805)


(4,693)






Taxation





Withholding tax recovered

103


120



----------


----------


Net tax recovered


103


120






Financial investment





Purchases of investments

(128,863)


(95,697)


Sales of investments

69,154


45,576



----------


----------


Net cash outflow from financial investment


(59,709)


(50,121)






Equity dividends paid


(34,833)


(31,219)



----------


----------

Net cash outflow before financing


(63,202)


(54,155)






Financing





Proceeds from issue of ordinary shares

61,631


39,991



----------


---------


Net cash inflow from financing


61,631


39,991



----------


---------






Decrease in net debt


(1,571)


(14,164)



=====


=====

 

 


- 14 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Financial Report for the year ended 30 June 2013

 

Notes to the financial statements

 

1.

Accounting policies

 


Basis of accounting


The financial statements have been prepared in accordance with the Companies Act 2006 on a going concern basis and under the historical cost basis of accounting, as modified to include the revaluation of investments and derivative financial instruments at fair value through profit and loss.  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 ("the AIC") in January 2009. The Company's subsidiaries are dormant and consolidated accounts are not produced. The Company's accounting policies are consistent with the prior year.



2.

Income from investments held at fair value through profit or loss



2013

2012



£'000

£'000


Franked UK dividends:




  Listed

33,222

29,737


  Listed - special dividends

1,720

879



---------

---------



34,942

30,616



---------

---------


Unfranked - listed investments:




  Dividend income - overseas investments

4,681

3,511


  Dividend income - UK REIT

949

602



---------

---------



5,630

4,113



---------

---------



40,572

34,729



=====

=====





3.

Other interest receivable and similar income


2013

2012



£'000

£'000


Bank interest

1

2


Underwriting commission (allocated to revenue)*

64

11


Stock lending revenue

87

67


Option premium income †

351

679



-------

-------


503

759



====

====


* During the year the Company was not required to take up shares in respect of its underwriting commitments (2012: none).

 


† 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.

 



- 15 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Financial Report for the year ended 30 June 2013

 

 

Notes to the financial statements (continued)

 

 

3.

Other interest receivable and similar income (continued)

During the year, the Company sold (or wrote) call options for the purpose of generating revenue income.  In accordance with the SORP, the premiums received are recognised in the revenue return shown in the Income Statement evenly over the life of the option with an appropriate amount taken to the capital account such that the total return reflects the change in fair value of the options.  The Company received total premiums of £405,000 (2012: £660,000) from this activity during the year of which £351,000 was recognised as revenue in the year ended 30 June 2013 (2012: £660,000).

 

Call options outstanding at 30 June 2013 are recognised at their fair value and at 30 June 2013 the fair value of the written call options was a liability of £43,000 (2012: £nil) representing the notional cost of repurchasing the call options at 30 June 2013 market prices. The premiums recognised in respect of these outstanding options amounted to £83,000 (2012: £nil) meaning that the total change in fair value recognised during the year ended 30 June 2013 in respect of these outstanding options amount to a gain of £40,000 (2012: £nil).

 


 

At 30 June 2013 the total value of securities on loan by the Company for stock lending purposes was £5,459,000 (2012: £2,980,000).  The maximum aggregate value of securities on loan at any one time during the year ended 30 June 2013 was £72,129,000 (2012:  £62,621,000).  The Company's agent holds collateral at 30 June 2013, with a value of £5,732,000 in respect of securities on loan (2012: £3,129,000), the value of which is reviewed on a daily basis and comprises CREST Delivery By Value ("DBVs") and Government Bonds with a market value of 105% (2012: 105%) of the market value of any securities on loan.



4.

Return per ordinary share - basic and diluted


The return per ordinary share is based on the net return attributable to the ordinary shares of £158,772,000 (2012: £17,038,000) and on 246,953,500 ordinary shares (2012: 230,996,546), being the weighted average number of ordinary shares in issue during the year.




The return per ordinary share is analysed between revenue and capital below:







2013

2012



£'000

£'000


Net revenue return

37,709

32,450


Net capital return/(loss)

121,063

(15,412)



----------

----------


Net total return

158,772

17,038



======

======


Weighted average number of ordinary shares in issue during the year

246,953,500

230,996,546






Revenue return per ordinary share

15.27p

14.05p


Capital return/(loss) per ordinary share

49.02p

(6.67p)



----------

---------


Total return per ordinary share

64.29p

7.38p



======

=====


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


- 16 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Financial Report for the year ended 30 June 2013

 

 

Notes to the financial statements (continued) 

 

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 £886,397,000 (2012: £699,546,000) and on 257,984,868 (2012: 238,859,868) shares in issue on 30 June 2013.

6.

Dividends paid on the ordinary shares

Record date

Payment date

2013

£'000

2012

£'000


Fourth interim dividend (3.35p) for the year ended 30 June 2011

29 Jul 2011

31 Aug 2011

-

7,533


First interim dividend (3.35p) for the year

ended 30 June 2012

28 Oct 2011

30 Nov 2011

-

7,690


Second interim dividend (3.35p) for the year ended 30 June 2012

27 Jan 2012

28 Feb 2012

-

7,730


Third interim dividend (3.52p) for the year ended 30 June 2012

4 May 2012

31 May 2012

-

8,266


Fourth interim dividend (3.52p) for the year ended 30 June 2012

10 Aug 2012

31 Aug 2012

8,441

-


First interim dividend (3.52p) for the year

ended 30 June 2013

26 Oct 2012

30 Nov 2012

8,586

-


Second interim dividend (3.52p) for the year ended 30 June 2013

25 Jan 2013

28 Feb 2013

8,735

-


Third interim dividend (3.63p) for the year ended 30 June 2013

3 May 2013

31 May 2013

9,209

-


Unclaimed dividends over 12 years old



(138)






--------

--------





34,833

31,219





=====

=====

 

7.   Issued share capital

During the year the Company issued 19,125,000 (2012: 14,000,000) ordinary shares for total proceeds of £62,912,000 (2012:  £39,250,000) after deduction of issue costs of £62,000 (2012: £55,000). The average price of the shares that were issued was 329p (2012: 280p).

 

8.   Dividends paid

A fourth interim dividend of 3.63p per ordinary share (2012: 3.52p) in respect of the year ended 30 June 2013 was paid on 30 August 2013 to shareholders on the register on 2 August 2013 for a total consideration of £9,423,000.

 

9.   Going concern statement

The directors believe that 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 announcement, the Board has considered the "Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009", published by the Financial Reporting Council in October 2009.

 

 

 

 

 

 

- 17 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Financial Report for the year ended 30 June 2013

 

 

Notes to the financial statements (continued)

 

10.   2013 Financial information

The figures and financial information for the year ended 30 June 2013 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 2013 have been audited but have not yet been delivered to the Registrar of Companies. The auditors' report on the 2013 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.   2012 Financial information

The figures and financial information for the year ended 30 June 2012 are compiled from an extract of the published financial statements for that year and do not constitute statutory accounts.  Those financial statements have been delivered to the Registrar of Companies and included the report of the auditors which 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.

 

12.   Annual report and financial statements and Annual General Meeting

The annual report and financial statements will be posted to shareholders on 23 September 2013 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 thereafter.

 

The Annual General Meeting will be held at the registered office on Monday 28 October 2013 at 3.00pm. The notice of the 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

Director, 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

 

 

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

 

 


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