Information  X 
Enter a valid email address

City of London IT (CTY)

  Print      Mail a friend       Annual reports

Thursday 18 September, 2014

City of London IT

Final Results

RNS Number : 9751R
City of London Investment Trust PLC
18 September 2014
 



 

 

This announcement contains regulated information

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Report for the year ended 30 June 2014

 

 

●       Net asset value total return of 14.7%

●       Dividend per share up 3.2%.  The 48th consecutive annual increase

●       Ongoing Charges of 0.43%

 


30 June 2014

30 June 2013

Dividends per ordinary share ('DPS')

+3.2%

+4.1%

Revenue return per ordinary share ('EPS')

+0.4%

+8.7%




Total Returns:



Net Asset Value per ordinary share ('NAV')

Ordinary Share Price

+14.7%

           +15.1%

+23.8%

         +21.5%

AIC UK Equity Income sector average (benchmark)

+15.7%

+26.0%

FTSE All-Share Index

+13.1%

+17.9%

UK Equity Income OEIC sector average

+14.3%

+21.4%




Sources: Morningstar for the AIC, Henderson, Datastream.

 

Chairman's Statement

I am pleased to report on another satisfactory year. City of London's net asset value total return was 14.7% for the year to 30 June 2014 and follows on from a return of 23.8% for the previous financial year. Although this was behind the average for the AIC UK Equity Income sector, it was ahead of the FTSE All-Share Index and the average for the UK Equity Income OEIC sector. The dividend was increased for the 48th consecutive year, by 3.2%, and our ongoing charges fell slightly to 0.43% which remains the lowest in the AIC UK Equity Income sector.

 

The Markets

There was a marked difference in equity market returns between the first and second halves of the financial year. In the six months to 31 December 2013, the UK equity market returned 11.3% (as

measured by the FTSE All-Share Index) while the return was only 1.6% in the six months to 30 June 2014. The rise of sterling together with weakness in some overseas economies led to downgrades in analysts' profit expectations for many companies in the first half of 2014. In addition, the strength of the UK economy, with the housing market buoyant, led investors to bring forward expectations of a rise in UK interest rates.

 

Performance

Earnings and Dividends

Earnings per share rose by 0.4% with the £4.4 million increase in investment income largely offset by the 25.0 million increase in shares in issue (weighted average). In addition, special dividends taken to income fell by £427,000 to £1,293,000 after an exceptional year in 2013 when they more than doubled.

 

Our results were significantly impacted by the strength of sterling as the UK economy recovered. Over the year, the pound appreciated by 12.4% against the US dollar. Some 22% of the dividends which City of London receives (from its holdings in UK companies such as HSBC and BP) are declared in dollars. As a result, the dividends actually received from those companies did not fairly reflect the underlying dividend growth at those companies whose profits too have suffered when translated into sterling. Despite this, City of London increased its own dividend by 3.2% over the previous year, ahead of the rate of inflation, and after accounting for the final dividend still added £729,000 to revenue reserves to underpin future dividends. This is the 48th consecutive year of unbroken dividend growth, a record unrivalled by any other investment trust.

 

 

- 2 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Report for the year ended 30 June 2014

 

 

Chairman's Statement (continued)

 

The quarterly dividend will next be considered by the Board when the third interim is declared in April 2015.

 

Net Asset Value Total Return

City of London's total return was 14.7% which was 1.0% behind the size weighted average total for the AIC UK Equity Income sector but 1.6% ahead of the FTSE All-Share Index and 0.4% ahead of the average for the UK Equity Income OEIC sector.

 

We can best satisfy shareholders' income objectives by investing principally in large companies because it is those companies which tend to pay the higher dividends and carry the greater yield; on average, small and medium-sized stocks yield about 1% less than City of London's current yield. Our relative performance during the year against some of our peers has suffered from the continuing outperformance of small and medium-sized companies: they beat their FTSE 100 counterparts by 6.8% and 4.5% respectively. There was evidence in the second half of the year, however, of better relative strength of large companies and City of London's returns benefitted accordingly.

 

Expenses

Given that City of London's net assets now exceed £1 billion, our expenses are spread over a broader capital base, reducing costs to individual shareholders and increasing the attractiveness of our offering. The ongoing charge, which is the investment management fee and other non-interest recurring expenses as a percentage of equity shareholders' funds, fell from 0.44% last year to 0.43% which is extremely competitive compared with the OEIC market, with most other investment trusts and with other actively managed funds.

 

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. 26.8 million shares were issued, at a premium to net asset value, for proceeds of £99.2 million and enhancing the net asset value by 0.19%. In the past four years, City of London has issued 76.2 million new shares increasing its share capital by 36.5%.

 

Borrowing and Gearing

On 21 January 2014 City of London issued £35 million of fixed rate 15 year private placement notes (the "Notes") at an annualised coupon of 4.53%. The Notes are repayable on 22 January 2029 and are secured by a first floating charge over the Company's assets, ranking pari passu with our existing debentures. Our £6 million 11½% Debenture Stock is due for repayment on 31 December 2014.

 

An important factor in taking out this additional loan was to secure attractive long term fixed funding at rates which are low by historical standards. At a time when the Company continues to grow, both through investment performance and share issuance, the Notes provide City of London with a better balance between its short and long-term debt, and are expected to enhance long-term performance.

 

At the year end, gearing was 7.1% (2013: 7.9%) and over the year contributed 0.66% to our outperformance against the FTSE All-Share Index.

 

 

 

- 3 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Report for the year ended 30 June 2014

 

 

Chairman's Statement (continued)

 

Benchmark

Following the removal of the performance fee element of the management fee arrangements with effect from 1 July 2013, the Board has considered whether it is still appropriate to use the yardstick for calculating that performance fee, the AIC UK Equity Income sector, as the Company's official benchmark. Virtually all of our peers in that sector have as their benchmark the FTSE All-Share Index, and indeed City of London also uses this index to measure its comparative performance.

 

In practice, the Board measures the Company's performance against not only the AIC UK Equity Income sector and the FTSE All-Share Index but increasingly also, given the more level playing field created by the Retail Distribution Review between investment trusts and open-ended products, against the broader UK Equity Income OEIC sector. Shareholders will now see performance statistics presented on this basis too.

 

Given the several yardsticks of comparison and the difficulty of selecting any one as a more relevant single benchmark, the Board has decided to leave unchanged the Company's existing benchmark.

 

Alternative Investment Fund Managers Directive ("AIFMD")

I reported last year on our progress towards complying with the AIFMD, a new piece of EU legislation which captures City of London within its scope. We are required to appoint an AIFM and a Depositary which is responsible for overseeing the Company's custody and cash management operations. The Board has appointed its Manager, Henderson, as AIFM and HSBC as Depositary. The Board has had to spend a significant amount of time on behalf of shareholders in considering the implications of the directive and in approving the resultant documentation and processes, to little discernible benefit to shareholders. The new arrangements will add modestly to the Company's cost base.

 

Annual General Meeting

The Annual General Meeting will be held at the offices of Henderson Global Investors, 201 Bishopsgate, London EC2M 3AE on Monday, 27 October 2014 at 2.30pm. All shareholders are most welcome to attend. As usual, Job Curtis, our Fund Manager, will be making a presentation.

 

Outlook

Economic growth has become established in the UK and US, and the debate has moved on as to when interest rates will be increased from the emergency level introduced during the financial crisis. In Europe, hopes of an improvement in growth are battling against the deflationary forces resulting from the continuing weakness of many European banks. Emerging markets continue to hold much long term potential despite current difficulties in some countries.

 

City of London's portfolio is predominantly invested in large international companies well placed to benefit from global growth. Share prices tend to discount the future and an element of derating is occurring during 2014 after the strong rise in share prices during 2013 and 2012, and ahead of a likely rise in interest rates. Given low UK inflation and the weakness in wage increases, any upward move in interest rates is likely to be gradual. As a result, equities are set to remain attractive on a dividend yield and growth basis relative to fixed interest and bank deposits. It is an environment which should play well to City of London's strengths.

 

Philip Remnant CBE

Chairman


- 4 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Report for the year ended 30 June 2014

 

 

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 13.1%. The vast majority of this return was achieved in the first six months which produced a total return of 11.3%. The UK economy performed well with the UK having the strongest growth out of the leading G7 developed countries. Notable features were the strength of the housing market and the growth in employment of some 820,000 which is one of the largest 12 month increases on record leading to the unemployment rate falling from 7.8% to 6.4%. Wage increases were subdued and inflation fell below the UK Government's 2% target.

 

As a result of the strength of the economy, expectations of a rise in interest rates were brought forward and this was one important factor behind the sideways move in UK equity prices in the first six months of 2014. A second negative factor was sterling, which rose from 1.52 to 1.71 against the US dollar and from 1.17 to 1.25 against the euro, and had an adverse effect on the some 70% of UK stock market profits that are earned overseas as well as reduced competitiveness for exporters.

 

Overseas, the US economy was fundamentally strong but their severe winter had a negative impact on growth. In Europe, business surveys were markedly more optimistic and government bond yields fell sharply. This partly reflected greater confidence in the Euro's survival but also low inflation in the Eurozone with some observers concerned about deflation. Emerging markets were mixed but China still managed to grow above 7% despite much investor scepticism.

 

Throughout the twelve months, the UK equity dividend yield remained significantly in excess of both the yield of ten year gilt and base rates. Companies in City of London's portfolio on average increased their dividends by 6.1% (excluding special dividends). Given the equity market's combination of attractive dividend yield and growth, gearing was maintained in a range of 7% to 9% throughout the twelve months. As shown in the table, gearing contributed 0.66% to performance against the FTSE All-Share Index and stock selection contributed 1.14%.

 

Estimated Performance Attribution Analysis

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

 


2014

2013

Stock selection

+1.14%

+4.05%

Gearing

+0.66%

+2.11%

Expenses

-0.43%

-0.44%

Share Issues

+0.19%

+0.23%

 

Total

_______

 +1.56%

 

_______

 +5.95%

 

Source: Henderson

 

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.

  

 

 

- 5 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Report for the year ended 30 June 2014

 

 

FUND MANAGER'S REPORT (continued)

 

Portfolio Review

In the selection of investments for City of London's portfolio, prime importance is given to the extent to which the share price valuation of a company reflects its prospects. The main measure used to value shares is dividend yield but a range of other factors are considered. The sustainability of the dividend and the capacity for dividend growth are carefully assessed as are the macro economic conditions that affect a company's prospects. Overall, the approach is conservative with cash generative companies favoured and downside risks reviewed as carefully as upside potential.

 

In the past City of London's exposure to the mining sector has been relatively low because share price valuations seemed to be based on excessively optimistic assumptions for metal prices. In addition, mining companies did not seem to be focussed on shareholder value and were poor dividend payers. Having made dismal returns on past capital expenditure leading to poor share price performances, there were changes in the Chief Executives at BHP Billiton, Rio Tinto and Anglo American. Going forward there appears to be a greater focus on dividends for shareholders and a more disciplined approach to capital expenditure. In addition, investors' excessive optimism about

mining shares dissipated and valuations were more reasonable. Given dividend yields better than the average for the market, the holding in Rio Tinto was increased and a new holding was bought in Anglo American.

 

The oil price traded in a tight range for most of the twelve months until geopolitical tension led to it rising in the second quarter of 2014.

 

Royal Dutch Shell was a notable underperformer in the second half of 2013 with the oil price flat and as investor discontent grew at the lacklustre returns from their substantial capital expenditure. With a

dividend yield of over 5% (and a dividend that has not been cut since the Second World War) as well as latent potential in its large asset base, Royal Dutch Shell appeared attractive. Additions were made to Royal Dutch Shell which became the Company's largest holding from fourth largest. In the first half of 2014, its share price recovered as its quarterly results improved and the oil price started to rise. Additions were also made to BP which rose from seventh to fifth largest holding. Elsewhere in the oil sector, the small holding in Gulf Keystone was sold after a disappointing independent appraisal of its main oilfield.

 

The biggest corporate event of the year in the UK stock market was the sale by Vodafone of its 45% stake in its joint venture, Verizon Wireless, the leading mobile telecommunications operator in the US, to its partner Verizon Communications of the US. The shares in Verizon Communications received by the Company were retained given their attractive valuation, including a dividend yield of

4.6%, and the strength of the business. Verizon Communications ended the year as the Company's twelfth largest holding. Also in the telecommunications sector, a holding was purchased in Manx

Telecom, the Isle of Man's operator, which was floated on a 7.0% dividend yield.

 

A takeover of AstraZeneca by Pfizer of the US would have been the biggest transaction of the year if it had happened. Although AstraZeneca has some excellent prospects in its pipeline of drugs under development, there is no guarantee that they will reach the market. After the significant rise in AstraZeneca's share price and bearing in mind that its dividend is not expected to grow, it was felt

prudent to take profits on 20% of the Company's holding. The value of the remaining 80% of the original holding is still large and ended the year as the Company's tenth largest holding.

 

It was a busy year for initial public offerings (IPOs) and there were some good opportunities. The UK government sold a 70% stake in Royal Mail which appeared very good value given its dividend and

free cash flow yield, scope for cost cutting and growth in its parcels business. An investment was made and the shares performed very well initially although later gave back some of their gains.

 

- 6 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Report for the year ended 30 June 2014

 

 

FUND MANAGER'S REPORT (continued)

 

In order to augment its core capital to satisfy regulatory requirements, the Nationwide Building Society issued some Core Capital Deferred Shares with a yield of 10.25%. Although these shares have limited voting rights, the yield was highly attractive and they have performed well.

 

An investment was also made in the IPO of Cembra Money Bank, which was sold by General Electric of the US, and is the leader in Switzerland in personal loans. Cembra has very strong capital ratios and offered an attractive dividend yield of 5.1%.

 

A less successful IPO investment was made in Card Factory, which fell by 8%, but is a rapidly growing value retailer in greetings cards. It benefits from cheap High Street rents and short leases. It is very price competitive partly because it manufactures the cards that it sells.

 

A new investment was made in the IPO of Foresight Solar, which is a closed-end investment company that owns solar power plants. Foresight benefits from the existing favourable regulatory regime for solar electricity and is expected to have a dividend yield of 6% from its issue price and to grow its dividend in line with inflation.

 

In the life assurance sector, a new holding was purchased in Old Mutual, which is London listed but has some 70% of its revenues from life assurance and banking in South Africa. It also has fund

management and life assurance subsidiaries in the US, UK and Europe. The shares were bought on a substantial discount to the sum of its parts which included a 52% stake in one of South Africa's

largest banks. The holding in Aviva, which had cut its dividend, was sold and replaced by additions to Legal & General and Standard Life.

 

Given the shortage of homes in the UK as well as low interest rates and rising employment, housebuilders were well placed. Additions were made to the existing holding in Persimmon, and a new holding was bought in Berkeley Group which has an exceptionally good track record and a large land bank. The holding in commercial contractor Balfour Beatty was sold after a series of profits warnings.

 

The Company has scope to invest up to 20% of the portfolio in overseas listed stocks which enables participation in some sectors not found in the UK market. Over the year, the percentage of the portfolio invested in overseas listed stocks increased from 8% to 11%. Three new holdings were bought overseas. First, Swire Pacific, the Hong Kong conglomerate was bought on a discount of some 35% to its asset value which is around 60% in Hong Kong property but also owns 44% of Cathay Pacific airline and has industrial and trading interests across the Pacific. Secondly, Siemens, the giant industrial conglomerate based in Germany was attractive partly as a way to participate in improving markets for industrial goods (including one-third of sales to emerging markets) and partly for its scope to improve the profit margins of many of its divisions to industry averages. The third new overseas listed holding purchased was Syngenta, the globally leading crop protection and seeds company. There is no real equivalent of this stock listed in London in what must be a secular growth area given the need to improve agricultural productivity.

 

The portion of the portfolio invested in large UK listed companies declined over the year from 76% to 69%. Of this decline 3% are accounted for by the increase from 8% to 11% in overseas listed companies which are also large in terms of capitalisation.

 

The increase from 16% to 20% in the medium-sized and small UK listed company weighting partly reflects their outperformance but also the greater opportunities for new investment in this area over the year. In addition, the strength of sterling adversely affected large companies given their greater overseas exposure.

 

 

                                                                           - 7 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Report for the year ended 30 June 2014

 

 

FUND MANAGER'S REPORT (continued)

 

Outlook

City of London's largest holdings are all large companies and the portfolio is predominantly invested in this area of the market. Large companies, as measured by the FTSE 100 Index, appear to be much cheaper than medium-sized or small companies based on dividend yields or price earnings ratios. At 10 September 2014, based on the previous twelve months' dividends per share (DPS) and earnings per share (EPS), the FTSE 100 Index's dividend yield was 3.4% and price earnings ratio (PE) was 13.8x compared with 2.6% and 18.3x for the FTSE mid 250 Index and 2.4% and 23.5x for the FTSE Small Cap Index.

 

The potential for large companies to outperform and realise some of their latent potential is well illustrated over the last year by the takeover approach for AstraZeneca and Vodafone's disposal of its

stake in Verizon Wireless. The largest companies also tend to be more global. Within the top ten holdings, British American Tobacco, HSBC, Diageo and Unilever all have significant exposure to

emerging markets which continue to offer great potential given the likely long-term growth in prosperity of their emerging and sizeable middle classes.

 

In the short term, UK domestic companies should continue to benefit from economic growth fuelled by low interest rates and rising employment. However, there is a danger of the share prices of

domestic cyclicals derating in anticipation of rising interest rates as the UK economic cycle matures. UK domestic sectors favoured in the portfolio for strong trading fundamentals include Real Estate

Investment Trusts and Travel & Leisure companies.

 

The general election of May 2015 is already casting a shadow over some of the UK utility companies. However, future governments will have to work with the utility companies to provide the private capital

needed for further investment in the UK's infrastructure. The Company maintains an exposure to the UK utility sector given the steady returns that are likely to be achieved over the medium term.

 

Overall, a balanced approach is appropriate. The largest exposure is towards large capitalisation multi-national companies but there are also significant investments in domestic shares.

 

 

Job Curtis

Fund Manager



- 8 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Report for the year ended 30 June 2014

 

 

Top 40 Investments

at 30 June 2014

 

The 40 largest investments, representing 69.12% 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.

 

 


Market Value

2014



Market Value

2014

Company

£'000


Company

£'000

Royal Dutch Shell

67,637


BT

14,049

British American Tobacco

52,170


Pearson

13,848

HSBC

50,693


Reckitt Benckiser

13,587

GlaxoSmithKline

46,920


Imperial Tobacco

13,150

BP

45,311


IMI

12,361

Diageo

35,920


Provident Financial

11,991

Unilever

28,610


British Sky Broadcasting

11,978

Vodafone

27,761


BAE Systems

11,472

National Grid(1)

21,840


United Utilities

11,025

AstraZeneca(1)

21,702


Croda International

11,005

Scottish & Southern Energy(2)

21,155


Amlin

11,000

Verizon Communications

18,842


Britvic

10,185

Reed Elsevier

18,786


Standard Life

10,101

Prudential

17,433


Whitbread

9,920

Rio Tinto

17,097


Munich Re

9,735

Land Securities

17,094


Barclays Bank

9,576

BHP Billiton

17,005


Phoenix

9,416

Legal & General

16,905


Marks & Spencer

9,320

Centrica(2)

16,568


Greene King

9,278

British Land

14,683


Hiscox

8,784

 

 

(1) Not in the top 10 last year.

(2) In the top 10 in 2013.

 

 

- 9 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Report for the year ended 30 June 2014

 

 

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 listed 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 equity shareholders' funds.  The Board reviews the portfolio at the seven Board meetings held each year. The Fund 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, Henderson's or its administrator's (BNP Paribas Securities Services) accounting, dealing or payment systems 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 considers the loss of the Fund Manager as a risk but this is mitigated by the experience of the team at Henderson as detailed in the Annual Report.

 

Henderson has contracted to provide investment, company secretarial, administration and accounting services through qualified professionals. The Board receives internal control reports produced by Henderson on a quarterly basis, which confirm regulatory compliance.

 

Details of how the Board monitors the services provided by Henderson 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.

 

 

- 10 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Report for the year ended 30 June 2014

 

 

MANAGEMENT ARRANGEMENTS AND RELATED PARTY TRANSACTIONS

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 and the provision of marketing services, 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 Company's financial statements, which have been prepared in accordance with UK  Accounting Standards on a going concern basis, give a true and fair view of the assets, liabilities , financial position and profit of the Company; and

 

●          the Strategic Report and financial statements include 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.

 

For and on behalf of the Board of Directors

 

 

 

Philip Remnant CBE

Chairman

 

- 11 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Report for the year ended 30 June 2014

 

 

Audited Income Statement

for the year ended 30 June

 


30 June 2014

30 June 2013


Revenue Return £'000

Capital Return £'000

 

Total

£'000

Revenue

Return

£'000

Capital Return £'000

 

Total

£'000

Gains on investments held at fair value through profit or loss

-

93,811

93,811

-

126,310

126,310

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

44,972

-

44,972

40,572

-

40,572

Other interest receivable and similar income (note 3)

605

-

605

503

-

503


---------

----------

-----------

---------

----------

-----------

Gross revenue and capital gains

45,577

93,811

139,388

41,075

126,310

167,385








Management and performance fees

(1,115)

(2,602)

(3,717)

(857)

(2,000)

(2,857)

Other administrative expenses

(601)

-

(601)

(629)

-

(629)


---------

----------

-----------

---------

----------

-----------

Net return on ordinary activities before finance charges and taxation

43,861

91,209

135,070

39,589

124,310

163,899








Finance charges

(1,735)

(3,681)

(5,416)

(1,549)

(3,247)

(4,796)


---------

----------

-----------

---------

----------

-----------

Net return on ordinary activities before taxation

42,126

87,528

129,654

38,040

121,063

159,103








Taxation on net return on ordinary activities

(428)

-

(428)

(331)

-

(331)


---------

----------

-----------

---------

----------

-----------

Net return on ordinary activities after taxation

41,698

87,528

129,226

37,709

121,063

158,772


======

======

======

======

======

======

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

15.33p

32.19p

47.52p

15.27p

49.02p

64.29p


======

======

======

======

======

======

 

 

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.   

 

 

                                                                       - 12 -

 THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Report for the year ended 30 June 2014

 

 

Audited Reconciliation of Movements in Shareholders' Funds

for the year ended 30 June  

 

Year ended 30 June 2014

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 2013

64,496

172,471

2,707

615,689

31,034

886,397

Net return on ordinary activities after taxation

-

-

-

87,528

41,698

129,226

Issue of 26,825,000 new ordinary shares

6,706

92,533

-

-

-

99,239

Dividends paid (note 6)

-

-

-

-

(39,612)

(39,612)


----------

-----------

---------

-----------

----------

----------

At 30 June 2014

71,202

265,004

2,707

703,217

33,120

1,075,250


======

======

=====

======

=====

======






















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


======

======

=====

=======

======

======

 

  

 

- 13 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Report for the year ended 30 June 2014

 

 

Audited Balance Sheet

at 30 June

2014

£'000

Investments held at fair value through profit or loss


Listed at market value in the United Kingdom

1,026,603

Listed at market value overseas

124,874

Investment in subsidiary undertakings

347



1,151,824


Current assets


Debtors

7,073

Cash at bank

2,929



10,002


Creditors: amounts falling due within one year

(10,639)


Net current liabilities

(637)




Total assets less current liabilities

1,151,187



Creditors: amounts falling due after more than one year

(75,937)


Net assets

1,075,250




Capital and reserves


Called up share capital

71,202

Share premium account

265,004

Capital redemption reserve

2,707

Other capital reserves

703,217

Revenue reserve

33,120


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

----------

Total shareholders' funds

1,075,250

886,397


=======

======




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

377.53p


======

======

 



- 14 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Report for the year ended 30 June 2014

 

 

Audited Cash Flow Statement

for the year ended 30 June

 

    2014

    2013

£'000

£'000

Net cash inflow from operating activities


41,303




Servicing of finance



Debenture interest paid

(4,265)


Bank and loan interest paid

(289)


(383)


Dividends paid on preference and preferred ordinary stocks

(157)


(157)



----------


----------


Net cash outflow from servicing of finance


(4,711)




Taxation



Withholding tax recovered

215




----------


----------


Net tax recovered


215


103




Financial investment



Purchases of investments

(162,184)


Sales of investments

57,765


69,154



----------


----------


Net cash outflow from financial investment


(104,419)






Equity dividends paid


(39,612)



----------


----------

Net cash outflow before financing


(107,224)


(63,202)




Financing



Proceeds from issue of ordinary shares

100,013


Issue of 4.53% secured notes

35,000


Issue costs paid in respect of the 4.53% secured notes

(449)




Net cash inflow from financing


134,564







Increase/(decrease) in net debt


27,340



=====


=====

 

 

- 15 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Report for the year ended 30 June 2014

 

 

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 immaterial and therefore 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



2014

2013



£'000

£'000


Franked UK dividends:




  Listed

35,800

33,222


  Listed - special dividends

1,293

1,720



---------

---------



37,093

34,942



---------

---------


Unfranked - listed investments:




  Dividend income - overseas investments

6,036

4,547


  Dividend income - UK REIT

1,285

949


  Scrip dividends

125

68


  Fixed interest income

433

66



---------

---------



7,879

5,630



---------

---------



44,972

40,572



=====

=====





3.

Other interest receivable and similar income


2014

2013



£'000

£'000


Bank interest

5

1


Underwriting commission (allocated to revenue)*

215

64


Stock lending revenue

254

87


Option premium income †

131

351



-------

-------


605

503



====

====


* During the year the Company was not required to take up shares in respect of its underwriting commitments (2013: 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.

 



- 16 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Report for the year ended 30 June 2014

 

 

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 £77,000 (2013: £405,000) from this activity during the year of which £77,000 was recognised as revenue in the year ended 30 June 2014 (2013: £351,000). The revenue not recognised in 2013 of £54,000 was recognised in 2014 giving a total income of £131,000 (2013: £351,000).

 

Call options outstanding at 30 June 2014 are recognised at their fair value and at 30 June 2014 the fair value of the written call options was a liability of £nil (2013: £43,000) representing the notional cost of repurchasing the call options at 30 June 2014 market prices. The premiums recognised in respect of these outstanding options amounted to £nil (2013: £83,000) meaning that the total change in fair value recognised during the year ended 30 June 2014 in respect of these outstanding options amount to a gain of £nil (2013: £40,000).

 


 

At 30 June 2014 the total value of securities on loan by the Company for stock lending purposes was £13,947,000 (2013: £5,459,000). The maximum aggregate value of securities on loan at any one time during the year ended 30 June 2014 was £102,980,000 (2013: £72,129,000). The Company's agent holds collateral at 30 June 2014, with a value of £14,645,000 (2013: £5,732,000) in respect of securities on loan, 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% (2013: 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 £129,226,000 (2013: £158,772,000) and on 271,915,690 (2013: 246,953,500) ordinary shares, 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:



2014

2013



£'000

£'000


Net revenue return

41,698

37,709


Net capital return

87,528

121,063



----------

----------


Net total return

129,226

158,772



======

======


Weighted average number of ordinary shares in issue during the year

271,915,690

246,953,500






Revenue return per ordinary share

15.33p

15.27p


Capital return per ordinary share

32.19p

49.02p



----------

----------


Total return per ordinary share

47.52p

64.29p



======

======


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

 

 


- 17 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Report for the year ended 30 June 2014

 

 

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 £1,075,250,000 (2013: £886,397,000) and on 284,809,868 (2013: 257,984,868) shares in issue on 30 June 2014.

 

6.

Dividends paid on the ordinary shares

Record date

Payment date

2014

£'000

2013

£'000


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


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

2 Aug 2013

30 Aug 2013

9,423

-


First interim dividend (3.63p) for the year

ended 30 June 2014

25 Oct 2013

29 Nov 2013

9,713

-


Second interim dividend (3.63p) for the year ended 30 June 2014

24 Jan 2014

28 Feb 2014

9,942

-


Third interim dividend (3.75p) for the year ended 30 June 2014

2 May 2014

30 May 2014

10,551

-


Unclaimed dividends over 12 years old



(17)

(138)





--------

--------





39,612

34,833





=====

=====

 

7.   Issued share capital

During the year the Company issued 26,825,000 (2013: 19,125,000) ordinary shares for total proceeds of £99,239,000 (2013:  £62,912,000) after deduction of issue costs of £62,000 (2013: £62,000). The average price of the shares that were issued was 369.9p (2013: 329.0p).

 

8.   Dividends paid

A fourth interim dividend of 3.75p (2013: 3.63p) per ordinary share in respect of the year ended 30 June 2014 was paid on 29 August 2014 to shareholders for a total consideration of £10,763,000.

 

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.

 

  

 

- 18 -

 

THE CITY OF LONDON INVESTMENT TRUST PLC

 

Annual Report for the year ended 30 June 2014

 

 

Notes to the financial statements (continued)

 

10.   2014 Financial information

The figures and financial information for the year ended 30 June 2014 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 2014 have been audited but have not yet been delivered to the Registrar of Companies. The Independent Auditors' Report on the 2014 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.   2013 Financial information

The figures and financial information for the year ended 30 June 2013 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 Annual General Meeting

The Annual Report will be posted to shareholders in late September 2014 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 27 October 2014 at 2.30pm. The Notice of Meeting will be sent to shareholders with the Annual Report.

 

 

- ENDS -

 

 

For further information please contact:

 

Job Curtis

Fund 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
 
 
FR LRMBTMBTBTTI

a d v e r t i s e m e n t