Half Yearly Report

RNS Number : 1249X

City of London Investment Trust PLC

09 February 2012

 



9 February 2012

THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Results for the Half Year Ended 31 December 2011

This announcement contains regulated information

Total Returns	Six Months to 31 December 2011
Net asset value per ordinary share ("NAV")*	-3.6%
Average UK Growth & Income Investment Trust NAV * †	-3.9%
Relative NAV performance	0.3%
Ordinary share price *	-3.2%
FTSE All-Share Index #	-6.2%

Dividend Yields	Six Months to 31 December 2011
City of London*	4.7%
Average UK Growth & Income Investment Trust* †	4.6%
FTSE All-Share Index#	3.5%
FTSE 350 Investment Companies Index#	2.1%

	As at 31 December 2011	As at 30 June 2011
Ordinary share price	284.90p	301.30p
NAV per ordinary share	282.94p	299.95p
Premium	0.7%	0.5%
NAV per ordinary share (with debt at market value)	276.87p	294.06p
Premium (with debt at market value)	2.9%	2.5%
Gearing	7.0%	7.9%

      Sources:     * Morningstar for the AIC     # Datastream     † Size weighted average

INTERIM MANAGEMENT REPORT

Chairman's Statement

Net Asset Value Total Return

Forecasts of global economic growth fell sharply in the second half of 2011 after the unexpected drop in US economic activity.  Another blow to sentiment was the Eurozone sovereign debt crisis.  As a result the UK and other major stock markets fell over the period.

City of London's performance was relatively resilient with a negative net asset value total return of 3.6% which was 0.3% better than the size weighted average for the UK Growth & Income investment trust sector.  The UK equity market, as measured by the FTSE All-Share Index, produced a negative total return of 6.2%, which was 2.6 percentage points worse than City of London's return.  We benefited from our below average exposure to low yielding mining and bank sectors which were poor performers.

Within City of London's portfolio, consumer products companies, such as British American Tobacco, Diageo and Unilever, were notable outperformers.  They all benefited from exposure to growing markets outside Europe.  In addition, Royal Dutch Shell had a good six months helped by the oil price staying over $100 a barrel.

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THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Results for the Half Year Ended 31 December 2011

Interim Management Report (continued)

Chairman's Statement (continued)

Earnings and Dividends

Earnings per share for the period increased by 10.6% over the same period last year.  The average increase in the dividend rate of companies in City of London's portfolio, excluding special dividends, was 9.4%.  So far this financial year as forecast, City of London has declared two interim dividends of 3.35p each.  The quarterly rate will be reviewed by the Board before the third interim dividend is declared at the end of March 2012.

Expenses

The Total Expense Ratio ("TER"), which represents the investment management fee and other non-interest expenses as a percentage of shareholders' funds, remains low compared with most other equity savings products.  The TER for the six months indicates a full year rate of 0.43% of net assets.

Gearing

The Trust's gearing started the period at 7.9%.  By early November it had risen to 10.1%, at which point it was decided, given the macro economic risks, to make a reduction of 2% in the gearing.  This was done through the sale of a FTSE 100 future.  The gearing ended the period at 7.0%.    Borrowing from the HSBC facility increased from £9.0 million to £11.7 million. 

Material Events and Transactions During the Period

A total of 5,450,000 new shares were issued at a premium to net asset value, benefiting the income and capital objectives of the Trust.  A further 1,775,000 shares have been issued since the period end.  Investment in some high quality cyclicals which were considered undervalued on a long-term basis was increased.  New holdings were purchased in Balfour Beatty, Daimler and Emerson Electric.  Additions were also made to the Life Assurance sector, with exposure increased to Prudential and Legal & General and a new holding purchased in Phoenix.   Profits were taken in some defensive stocks which had performed well but the portfolio still has a strongly defensive bias.

The Board

Martin Morgan, who is Chief Executive of Daily Mail & General Trust, will join the Board on 1 March 2012.

Principal Risks and Uncertainties

The principal risks and uncertainties associated with the Company's business can be divided into the following main areas:

• Investment activity and performance risk

• Financial risk

• Regulatory risk

• Operational risk

Information on these risks and how they are managed is given in the Annual Report. In the view of the Board these principal risks and uncertainties are as applicable to the remaining six months of the financial year as they were to the six months under review.

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THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Results for the Half Year Ended 31 December 2011

Interim Management Report (continued)

Chairman's Statement (continued)

Outlook for the Six Months to 30 June 2012

City of London's portfolio is invested mainly in UK listed companies with operations across the global economy.  There are signs of improving economic conditions in the United States, with unemployment falling.  Some important emerging markets continue to grow strongly.  The European sovereign debt problems have not been resolved but the European Central Bank has been helping bank funding with a three year facility.  In the UK, growth remains anaemic but inflation is falling. 

Based on consensus forecasts for profits and dividends, equities appear to offer good value and dividend yields are particularly attractive relative to gilts or cash.  However, the portfolio is expected to retain its defensive bias given the continuing macro economic uncertainties.

Philip Remnant

Chairman

Directors' Responsibility Statement

The Directors confirm that, to the best of their knowledge:

a)  the condensed set of financial statements has been prepared in accordance with the Accounting Standards Board's statement "Half-Yearly Financial Reports";

b)  the interim management report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

c)  the interim management report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.8R (disclosure of related party transactions and changes therein).

For and on behalf of the Board

Philip Remnant

Chairman

9 February 2012

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Page 4 of 11

THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Results for the Half Year Ended 31 December 2011

 Income Statement

 for the half year ended 31 December 2011

	(Unaudited) Half year ended 31 December 2011			(Unaudited) Half year ended 31 December 2010			(Audited) Year ended 30 June 2011
	Revenue Return	Capital Return	Total	Revenue Return	Capital Return	Total	Revenue Return	Capital Return	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
(Losses)/gains on investments held at fair value through profit or loss	-	(32,426)	(32,426)	-	95,017	95,017	-	122,350	122,350
Income from investments held at fair value through profit or loss	13,775	-	13,775	11,047	-	11,047	30,179	-	30,179
Other interest receivable and similar income	212	-	212	980	-	980	1,383	-	1,383
	--------	--------	--------	--------	--------	--------	--------	--------	--------
Gross revenue and capital (losses)/gains	13,987	(32,426)	(18,439)	12,027	95,017	107,044	31,562	122,350	153,912
Management fees	(329)	(768)	(1,097)	(316)	(737)	(1,053)	(658)	(1,537)	(2,195)
Other administrative expenses	(315)	-	(315)	(312)	-	(312)	(591)	-	(591)
	--------	--------	--------	--------	--------	--------	--------	--------	--------
Net return/(loss) on ordinary activities before finance charges and taxation	13,343	(33,194)	(19,851)	11,399	94,280	105,679	30,313	120,813	151,126
Finance charges	(756)	(1,579)	(2,335)	(750)	(1,564)	(2,314)	(1,521)	(3,181)	(4,702)
	--------	--------	--------	--------	--------	--------	--------	--------	--------
Net return/(loss) on ordinary activities before taxation	12,587	(34,773)	(22,186)	10,649	92,716	103,365	28,792	117,632	146,424
Taxation on net return on ordinary activities	(27)	-	(27)	(18)	-	(18)	(204)	-	(204)
	--------	--------	--------	--------	--------	--------	--------	--------	--------
Net return/(loss) on ordinary activities after taxation	12,560	(34,773)	(22,213)	10,631	92,716	103,347	28,588	117,632	146,220
	=====	=====	=====	=====	=====	=====	=====	======	======
Return/(loss) per ordinary share - basic (note 2)	5.51p	(15.25p)	(9.74p)	4.98p	43.46p	48.44p	13.17p	54.21p	67.38p
	=====	=====	=====	=====	=====	=====	=====	======	======

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

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THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Results for the Half Year ended 31 December 2011

Reconciliation of Movements in Shareholders' Funds

for the half years ended 31 December 2011 and 2010 and year ended 30 June 2011

Half  year ended 31 December 2011 (unaudited)	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 2011	56,215	78,590	2,707	510,038	26,927	674,477
Net (loss)/return on ordinary activities after taxation	-	-	-	(34,773)	12,560	(22,213)
Issue of  5,450,000 new ordinary shares	1,362	13,294	-	-	-	14,656
Issue expenses paid	-	(55)	-	-	-	(55)
Fourth interim dividend (3.35p per share) for year ended 30 June 2011 paid 31 August 2011	-	-	-	-	(7,533)	(7,533)
First interim dividend (3.35p per share) for year ended 30 June 2012 paid 30 November 2011	-	-	-	-	(7,690)	(7,690)
	--------	---------	---------	----------	--------	----------
At 31 December 2011	57,577	91,829	2,707	475,265	24,264	651,642
	=====	======	======	======	=====	======
Half  year ended 31 December 2010 (unaudited)	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 2010	52,155	37,079	2,707	392,406	26,679	511,026
Net return on ordinary activities after taxation	-	-	-	92,716	10,631	103,347
Issue of 8,965,000 ordinary shares	2,241	22,080	-	-	-	24,321
Fourth interim dividend (3.25p per share) for year ended 30 June 2010 paid 31 August 2010	-	-	-	-	(6,831)	(6,831)
First interim dividend (3.25p per share) for year ended 30 June 2011 paid 30 November 2010	-	-	-	-	(6,974)	(6,974)
	--------	--------	---------	--------	--------	----------
At 31 December 2010	54,396	59,159	2,707	485,122	23,505	624,889
	=====	=====	======	======	=====	======
Year ended 30 June 2011 (Audited)	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 2010	52,155	37,079	2,707	392,406	26,679	511,026
Net return on ordinary activities after taxation	-	-	-	117,632	28,588	146,220
Issue of 16,240,000 new ordinary shares	4,060	41,511	-	-	-	45,571
Fourth interim dividend (3.25p per share) for year ended 30 June 2010 paid 31 August 2010	-	-	-	-	(6,831)	(6,831)
First interim dividend (3.25p each per share) for year ended 30 June 2011 paid 30 November 2010	-	-	-	-	(6,974)	(6,974)
Second interim dividend (3.25p per share) for year ended 30 June 2011 paid 28 February 2011	-	-	-	-	(7,090)	(7,090)
Third interim dividend (3.35p per share) for year ended 30 June 2011 paid 31 May 2011	-	-	-	-	(7,445)	(7,445)
	--------	--------	---------	--------	--------	----------
At 30 June 2011	56,215	78,590	2,707	510,038	26,927	674,477
	=====	======	======	======	======	======

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THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Results for the Half Year ended 31 December 2011

Balance Sheet

at 31 December 2011

	(Unaudited) 31 December 2011 £'000	(Unaudited) 31 December 2010 £'000	(Audited) 30 June 2011 £'000
Investments held at fair value through profit or loss
Listed at market value in the United Kingdom	667,213	649,993	681,202
Listed at market value overseas	42,604	38,969	46,709
Investment in subsidiary undertakings	347	347	347
	----------	----------	----------
	710,164	689,309	728,258
	----------	----------	----------
Current assets
Debtors	3,890	3,095	6,276
Bank balances and short term deposits	1,350	843	480
	--------	--------	----------
	5,240	3,938	6,756
	--------	--------	----------
Creditors: amounts falling due within one year	(16,363)	(20,959)	(13,138)
	---------	----------	----------
Net current liabilities	(11,123)	(17,021)	(6,382)
	---------	----------	----------
Total assets less current liabilities	699,041	672,288	721,876
Creditors: amounts falling due after more than one year	(47,399)	(47,399)	(47,399)
	----------	----------	----------
Total net assets	651,642	624,889	674,477
	======	======	======
Capital and reserves
Called-up share capital (note 3)	57,577	54,396	56,215
Share premium account	91,829	59,159	78,590
Capital redemption reserve	2,707	2,707	2,707
Other capital reserves	475,265	485,122	510,038
Revenue reserve	24,264	23,505	26,927
	----------	----------	----------
Shareholders' funds	651,642	624,889	674,477
	======	======	======
Net asset value per ordinary share (note 4)	282.94p	287.19p	299.95p
	======	======	======

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THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Results for the Half Year ended 31 December 2011

Cash Flow Statement

for the half year ended 31 December 2011

	(Unaudited) Half year ended 31 December 2011 £'000	(Unaudited) Half year ended 31 December 2010 £'000	(Audited) Year ended 30 June 2011 £'000
Net cash inflow from operating activities	13,887	12,145	28,281
Net cash outflow from servicing of finance	(2,333)	(2,314)	(4,684)
Total tax recovered	33	20	138
Net cash outflow from financial investment	(15,302)	(36,155)	(46,624)
Equity dividends paid	(15,223)	(13,805)	(28,340)
Net cash inflow from financing	15,780	24,321	44,392
	---------	---------	----------
Decrease in cash	(3,158)	(15,788)	(6,837)
	=====	=====	======
Reconciliation of operating revenue to net cash inflow from operating activities
Total (loss)/return before finance costs and taxation	(19,851)	105,679	151,126
Add/(Less): capital loss/(return) before finance costs and taxation	33,194	(94,280)	(120,813)
	-----------	-----------	-----------
Net revenue return before finance costs and taxation	13,343	11,399	30,313
Decrease/(increase) in accrued income	1,175	1,488	(587)
Increase in other creditors	165	34	415
Expenses charged to other capital reserves	(768)	(737)	(1,537)
Overseas withholding tax	(28)	(39)	(323)
	--------	--------	----------
Net cash inflow from operating activities	13,887	12,145	28,281
	=====	=====	======
Reconciliation of net cash inflow to movement in net debt
Decrease in cash as above	(3,158)	(15,788)	(6,837)
Exchange movements	(57)	17	(25)
Net debt at beginning of the period	(55,910)	(49,048)	(49,048)
	----------	----------	----------
Net debt at end of the period	(59,125)	(64,819)	(55,910)
	======	======	======
Represented by:
Cash at bank and short term deposits less bank overdrafts	(11,726)	(17,420)	(8,511)
Debt falling due after more than one year	(47,399)	(47,399)	(47,399)
	----------	----------	----------
	(59,125)	(64,819)	(55,910)
	======	======	======

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THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Results for the Half Year ended 31 December 2011

Notes

1.		Accounting policy - Basis of preparation
		The condensed set of financial statements has been prepared using the same accounting policies as are set out in the Company's Annual Report and Financial Statements for the year ended 30 June 2011. The condensed set of financial statements has not been audited or reviewed by the Company's auditors.
2.		(Loss)/return per ordinary share
			(Unaudited) Half year ended 31 December 2011 £'000		(Unaudited) Half year ended 31 December 2010 £'000		(Audited) Year ended 30 June 2011 £'000
		The return per ordinary share is based on the following figures:
		Revenue return	12,560		10,631		28,588
		Capital (loss)/return	(34,773)		92,716		117,632
			----------		----------		----------
		Total	(22,213)		103,347		146,220
			======		======		======
		Weighted average number of ordinary shares in issue for each period	228,002,938		213,359,596		217,008,223
		Revenue return per ordinary share	5.51p		4.98p		13.17p
		Capital (loss)/return per ordinary share	(15.25p)		43.46p		54.21p
			----------		----------		----------
		Total	(9.74p)		48.44p		67.38p
			======		======		======
		The Company does not have any dilutive securities.
3.		Called-up share capital
		During the half year ended 31 December 2011, 5,450,000 ordinary shares were issued for total proceeds of £14,656,000 (half year ended 31 December 2010: 8,965,000 ordinary shares issued for total proceeds of £24,321,000; year ended 30 June 2011: 16,240,000 ordinary shares issued for total proceeds of £45,571,000).  The number of ordinary shares in issue at 31 December 2011 was 230,309,868.
4.		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 £651,642,000 (31 December 2010: £624,889,000; 30 June 2011: £674,477,000) and on 230,309,868 ordinary shares (31 December 2010: 217,584,868; 30 June 2011: 224,859,868) being the number of ordinary shares in issue at the end of the period.

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THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Results for the Half Year ended 31 December 2011

Notes (continued)

5.    Transaction costs

Purchase transaction costs for the half year ended 31 December 2011 were £213,000 (half year ended 31 December 2010: £304,000; year ended 30 June 2011: £453,000). These comprise mainly stamp duty and commissions. Sale transaction costs for the half year ended 31 December 2011 were £40,000 (half year ended 31 December 2010: £33,000; year ended 30 June 2011: £59,000).

6.    Interim dividends

A first interim dividend of 3.35p was paid on 30 November 2011. The second interim dividend of 3.35p (declared on 8 December 2011) will be paid on 28 February 2012 to shareholders on the register on 27 January 2012.

7.    Related party transaction

The only related party arrangement currently in place is with Henderson Global Investors Limited for the provision of investment management, accounting, company secretarial and administration services.  Other than fees payable 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 six months.

8.    Going concern

The directors believe that it is appropriate to adopt the going concern basis in preparing the financial statements.  The assets of the Company consist mainly of securities that are readily realisable and, accordingly, the Company has adequate financial resources to continue in operational existence for the foreseeable future.

9.    Financial information

The financial information contained in this half year report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006.

The figures and financial information for the year ended 30 June 2011 have been extracted from the latest published audited financial statements of the Company. Those financial statements 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 section 498(2) or 498(3) of the Companies Act 2006.

10.  Half year report

An Update extracted from the Company's report for the half year ended 31 December 2011 will be posted to shareholders in February 2012.  Copies of the half year announcement and the half year Update will be available on our website (www.cityinvestmenttrust.com) from 20 February 2012.  Copies can also be requested thereafter from the Secretary at the Registered Office, 201 Bishopsgate, London EC2M 3AE.

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THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Results for the Half Year ended 31 December 2011

Largest Investments

The 60 largest investments, convertibles and all classes of equity in any one company being treated as one investment, were as follows:

Market value 31 December 2011 £'000			Market value 31 December 2011 £'000
Royal Dutch Shell	51,534		Amlin	5,964
British American Tobacco	50,110		Britvic	5,791
GlaxoSmithKline	38,995		Greene King	5,359
Vodafone	37,569		Hiscox	5,229
Diageo	36,569		Spirax-Sarco Engineering	5,151
Unilever	23,360		France Telecom	4,559
AstraZeneca	22,610		Sainsbury (J)	4,544
HSBC	22,097		Statoil	4,471
National Grid	17,813		Provident Financial	4,470
BP	17,384		Standard Life	4,435
Scottish & Southern Energy	17,106		Novartis	4,434
Tesco	16,138		Deutsche Telekom	4,431
BHP Billiton	15,800		Zurich Financial Services	4,214
Pearson	13,008		RSA Insurance	4,208
Rio Tinto	12,718		Next	4,106
Croda	12,177		Smiths News	4,100
Centrica	11,572		Morrison (WM) Supermarkets	4,078
Land Securities	9,850		Tate & Lyle	4,051
Imperial Tobacco	9,740		ENI	3,972
Reed Elsevier	8,304		John Laing Infrastructure Fund	3,798
Weir	8,128		Compass	3,666
BAE Systems	7,555		Swisscom	3,665
Aviva	7,520		British Sky Broadcasting	3,663
Reckitt Benckiser	7,314		Standard Chartered	3,567
IMI	7,220		Barclays	3,521
Prudential	7,024		Whitbread	3,519
Legal & General	6,682		Meggitt	3,175
Pennon	6,069		BBA	3,115
United Utilities	6,060		Cineworld	3,079
Severn Trent	5,984		Schroder	2,951

These investments total £639,296,000 or 90.1% of the portfolio.

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THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Results for the Half Year ended 31 December 2011

Sector Analysis of Portfolio as at 31 December 2011

	%
Oil & Gas	11.3
Basic Materials	6.2
Industrials	9.7
Consumer Goods	19.7
Health Care	9.3
Consumer Services	11.9
Telecommunications	7.1
Utilities	9.1
Financials	15.0
Technology	0.7
	--------
Total	100.0
	=====

For further information please contact:

Job Curtis

Portfolio Manager, The City of London Investment Trust plc

Telephone: [phone]

James de Sausmarez

Director and Head of Investment Trusts, Henderson Global Investors

Telephone: [phone]

Sarah Gibbons-Cook

Investor Relations and PR Manager, Henderson Global Investors

Telephone: [phone]

- ENDS -

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.

 

END

 

 

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