Preliminary Announcement of A

RNS Number : 3843C

City of London Investment Trust PLC

29 August 2008

 



29 August 2008

THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Preliminary Results for the Year ended 30 June 2008

	30 June 2008	30 June 2007
Revenue return per ordinary share	+16.7%	+13.9%
Dividends per ordinary share	+12.6%	+10.0%
Total Returns:
Net asset value per ordinary share ('NAV')	-18.3%	+21.0%
FTSE All-Share 4% Capped Index (benchmark)	-14.0%	+20.3%
FTSE All-Share Index	-13.0%	+18.4%
Ordinary share price	-18.0%	+17.2%
UK Growth & Income Sector Average	-20.8%	+20.6%
Minimum dividend forecast increase for year to 30 June 2009	+6.2%

Extracts from the Chairman's Statement

For the year ended 30 June 2008, City of London's revenue return per share increased by 16.7%, the dividend increased by 12.6% and the net asset value total return declined by 18.3%.

Performance for the year to 30 June 2008 

Earnings and dividends

Revenue return per share was 13.53p, an increase of 16.7%.  A fourth interim dividend of 2.96p was paid on 29 August 2008, making a total for the year of 11.60p, an increase of 12.6% over the previous year. This is the forty-second consecutive year that City of London has increased its dividend, the longest record of any investment trust. £4.7 million was added to the revenue reserve.   

The minimum quarterly dividend for the year ahead will be 3.08p, a further minimum increase of 6.2% on an annual basis. The quarterly rate will next be considered when the third interim dividend is declared in March 2009, by which time the Board will be able to assess better the trend in income performance of the portfolio.  

Net asset value total return

Market conditions have created a difficult environment for active fund managers who have an income requirement in their portfolios.  Our Managers could have been better positioned for the credit crunch that I mentioned in last year's report.  Whilst we were underweight in bank shares, we did suffer from their poor share price performance. The stellar share price performance of mining and commodity related shares only partially offset losses in other areas, because our Managers felt that prices were too high and yields were unacceptably low. 

Against this background, I have to report a negative net asset value total return of 18.3%. This is behind our benchmark but I am pleased to say that we have done better than most of our competitor companies.

Our gearing has been low during this credit crunch sell off, but naturally any gearing in a falling market has negatively affected asset value performance. 

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THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Preliminary Results for the Year ended 30 June 2008

Extracts from the Chairman's Statement (continued) 

City of London's net asset value total return was a negative 18.3% which compares with a positive 21.0% in the previous year. The FTSE All-Share 4% Capped Index produced a negative total return of 14.0% and therefore City of London underperformed its benchmark by 4.3%. The average performance of the UK Growth & Income investment trust sector was a negative total return of 20.8% and therefore City of London outperformed the average of its competitors by 2.5%.

City of London's share price discount to net asset value (with debt at market value) slightly increased from 10.9% to 11.5% over the year. However, this was an improvement from the discount of 13.5% at 31 December 2007. At the time of writing, the discount has narrowed to 7.2%.

Performance for the five years to 30 June 2008

Earnings and dividends

The Company's annual dividend has grown by 43.7% over the last five years from 8.07p to 11.60p per share and revenue reserves have increased from 5.2p to 12.5p per share.  

Net asset value total return

Shareholders' net asset value total return has increased by 67.9% over the last five years, which compares with 62.1% for the average of the UK Income and Growth investment trust sector, 77.2% for the FTSE All-Share 4% Capped Index and 71.0% for the FTSE All-Share Index.  

Expenses

The total expense ratio (TER), which is the investment management fee and other non interest expenses as a percentage of shareholders' funds, was 0.37%. The TER has been reduced from 0.42% announced last year by not having to pay VAT on the investment management fee as a result of a decision in the European Court of Justice. The Board is concerned about the delay by HMRC in paying the reclaims submitted by our Managers, and is pressing for payments to be made in the near future. 

Outlook

We are faced with a market where one can argue that much of the bad news is anticipated and discounted.  Even though most banks have raised new capital there is still likely to be a continuing shortage of bank finance available and the effect of the banks' problems will create continuing problems for companies in other sectors. There is bound to be volatility and sector performance disparity and we do face a more uncertain year on the revenue front. On the other hand, markets are lower, commodity prices have started to come off and alternative investment assets, such as bonds, make equities look relatively cheap on a longer term basis.  In addition, our portfolio companies earn more than half of their profits outside the UK and with sterling weakening against the dollar this is a definite plus. Our shares are on a prospective yield of 5% (at the time of writing) and are backed by revenue reserves of £25.9 million.  

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

Simon de Zoete

Chairman

29 August 2008

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THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Preliminary Results for the Year ended 30 June 2008

Income Statement 

for the year ended 30 June 2008

	(Unaudited)			(Audited)
	Year ended 30 June 2008			Year ended 30 June 2007
	Revenue  return	Capital  return	Total	Revenue  return	Capital  return	Total
	£'000	£'000	£'000	£'000	£'000	£'000
(Losses)/gains on investments held at fair value through profit or loss	-	(149,375)	(149,375)	-	107,437	107,437
Income from investments held at fair  value through profit or loss (note 2)	30,162	-	30,162	26,734	-	26,734
Other interest receivable and similar  income (note 3)	265	-	265	249	-	249
	---------	-----------	-----------	---------	---------	---------
Gross revenue and capital (losses)/gains	30,427	(149,375)	(118,948)	26,983	107,437	134,420
Management fee	(577)	(1,346)	(1,923)	(684)	(1,596)	(2,280)
Performance fee	-	-	-	-	-	-
Write-back of VAT	428	1,213	1,641	-	-	-
Other administrative expenses	(484)	-	(484)	(497)	-	(497)
	---------	-----------	-----------	---------	---------	---------
Net return/(loss) on ordinary activities before finance charges and taxation	29,794	(149,508)	(119,714)	25,802	105,841	131,643
Finance charges	(1,547)	(3,217)	(4,764)	(1,465)	(3,002)	(4,467)
	---------	-----------	-----------	---------	---------	---------
Net return/(loss) on ordinary  activities before taxation	28,247	(152,725)	(124,478)	24,337	102,839	127,176
Taxation on net return on ordinary activities	(179)	-	(179)	(190)	-	(190)
	---------	-----------	-----------	---------	---------	---------
Net return/(loss) on ordinary  activities after taxation	28,068	(152,725)	(124,657)	24,147	102,839	126,986
	=====	======	=======	=====	=====	=====
Return/(loss) per ordinary share    - basic (note 4)	13.53p	(73.63)p	(60.10)p	11.59p	49.34p	60.93p
	=====	======	======	=====	=====	=====

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

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THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Preliminary Results for the Year ended 30 June 2008

Reconciliation of Movements in Shareholders' Funds

for the years ended 30 June 2008 and 30 June 2007

	Called up share capital	Share premium account	Other capital reserves	Revenue reserve	Total
Year ended 30 June 2008 (unaudited)	£'000	£'000	£'000	£'000	£'000
At 30 June 2007	51,983	35,309	610,191	21,174	718,657
Net (loss)/return on ordinary activities after taxation	-	-	(152,725)	28,068	(124,657)
Buy-back of 663,262 ordinary shares	(89)	-	(1,828)	-	(1,917)
Fourth interim dividend (2.62p) for the year ended 30 June 2007 paid 31 August 2007	-	-	-	(5,446)	(5,446)
First interim dividend (2.84p) for the year ended 30 June 2008 paid 30 November 2007	-	-	-	(5,895)	(5,895)
Second interim dividend (2.84p) for the year ended 30 June 2008 paid 28 February 2008	-	-	-	(5,887)	(5,887)
Third interim dividend (2.96p) for the year ended 30 June 2008 paid 30 May 2008	-	-	-	(6,135)	(6,135)
	---------	---------	---------	---------	---------
At 30 June 2008	51,894	35,309	455,638	25,879	568,720
	=====	=====	=====	=====	=====
	Called up share capital	Share premium  account	Other capital  reserves	Revenue  reserve	Total
Year ended 30 June 2007 (audited)	£'000	£'000	£'000	£'000	£'000
At 30 June 2006	52,103	35,309	508,695	18,032	614,139
Net return on ordinary activities after taxation	-	-	102,839	24,147	126,986
Buy-back of 483,722 ordinary shares	(120)	-	(1,343)	-	(1,463)
Fourth interim dividend (2.40p) for the year ended 30 June 2006 paid 31 August 2006	-	-	-	(5,002)	(5,002)
First interim dividend (2.53p) for the year ended 30 June 2007 paid 30 November 2006	-	-	-	(5,273)	(5,273)
Second interim dividend (2.53p) for the year ended 30 June 2007 paid 28 February 2007	-	-	-	(5,274)	(5,274)
Third interim dividend (2.62p) for the year ended 30 June 2007 paid 31 May 2007	-	-	-	(5,459)	(5,459)
Write-back of dividends over 12 years old	-	-	-	3	3
	--------	--------	----------	--------	----------
At 30 June 2007	51,983	35,309	610,191	21,174	718,657
	=====	=====	======	=====	======

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THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Preliminary Results for the Year ended 30 June 2008

Balance Sheet

at 30 June 2008

	(Unaudited) 2008 £'000	(Audited) 2007 £'000
Investments held at fair value through profit or loss
Listed at market value in the United Kingdom	593,791	734,390
Listed at market value overseas	32,553	23,899
Investment in subsidiary undertakings	378	378
	----------	----------
	626,722	758,667
	----------	----------
Current assets
Debtors	5,828	3,542
Cash at bank and on short term deposit	350	8,268
	----------	----------
	6,178	11,810
	----------	----------
Creditors: amounts falling due within one year	(16,781)	(3,932)
	----------	----------
Net current (liabilities)/assets	(10,603)	7,878
	----------	----------
Total assets less current liabilities	616,119	766,545
Creditors: amounts falling due after more than one year	(47,399)	(47,888)
	----------	----------
Total net assets	568,720	718,657
	======	======
Capital and reserves
Called up share capital	51,894	51,983
Share premium account	35,309	35,309
Other capital reserves	455,638	610,191
Revenue reserve	25,879	21,174
	----------	----------
Shareholders' funds	568,720	718,657
	======	======
Net asset value per ordinary share (note 5)	274.39p	345.62p
	======	======

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THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Preliminary Results for the Year ended 30 June 2008

Cash Flow Statement

for the year ended 30 June 2008

	(Unaudited)   Year ended   30 June 2008		(Audited)   Year ended   30 June 2007
	£'000	£'000	£'000	£'000
Net cash inflow from operating activities		27,017		23,421
Servicing of finance
Debenture interest paid	(4,265)		(4,265)
Bank and loan interest paid	(317)		(24)
Dividends paid on preference and preferred   ordinary stocks	(178)		(178)
	----------		----------
Net cash outflow from servicing of finance		(4,760)		(4,467)
Taxation
Withholding tax recovered	16		39
	----------		----------
Net tax recovered		16		39
Financial investment
Purchases of investments	(84,242)		(103,157)
Sales of investments	65,848		108,472
	----------		---------
Net cash (outflow)/inflow from   financial investment		(18,394)		5,315
Equity dividends paid		(23,363)		(21,005)
Management of liquid resources
Cash withdrawn from/(placed on) deposit	8,201		(1,900)
	----------		----------
Net cash inflow/(outflow) from liquid resources		8,201		(1,900)
		----------		----------
Net cash (outflow)/inflow before financing		(11,283)		1,403
Financing
Repurchase of preference shares	(455)		-
Increase in loans	13,956		-
Purchases of ordinary shares	(1,920)		(1,460)
	---------		----------
Net cash inflow/(outflow) from financing		11,581		(1,460)
		---------		----------
Increase/(decrease) in cash		298		(57)
		=====		=====

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THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Preliminary Results for the Year ended 30 June 2008

Notes :

1.	Accounting Policies
	Basis of accounting
	The accounts have been prepared on the basis of the accounting policies used for the Company's accounts for the year ended 30 June 2007. The accounts are prepared in accordance with United Kingdom Generally Accepted Accounting Principles and with the Revised Statement of Recommended Practice - 'Financial Statements of Investment Trust Companies' dated December 2005 (the 'Revised SORP'). All of the Company's operations are of a continuing nature.
2.	Income from investments held at fair value through profit or loss
			2008 £'000	2007 £'000
	UK dividends:
	Listed		27,790	24,983
	Listed - special dividends		261	350
			---------	---------
			28,051	25,333
			---------	---------
	Unfranked - listed investments:
	Interest from UK convertibles		-	37
	Dividend income		2,005	1,278
	Special dividends		106	86
			---------	---------
			2,111	1,401
			---------	---------
			30,162	26,734
			======	======
3.	Other interest receivable and similar income
		2008 £'000		2007 £'000
	Bank interest	161		148
	Underwriting commission	70		65
	Stock lending	34		36
		-------		-------
		265		249
		====		====
4.	(Loss)/return per ordinary share - basic
	The loss per ordinary share is based on the net loss attributable to the ordinary shares of £124,657,000 (year ended 30 June 2007: return £126,986,000) and on 207,428,815 ordinary shares (year ended 30 June 2007: 208,399,576) being the weighted average number of ordinary shares in issue during the year.

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THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Preliminary Results for the Year ended 30 June 2008

4.	(Loss)/return per ordinary share - basic (continued)
		The return per ordinary share can be further analysed between revenue and capital, as below.
			Year ended 30 June 2008 £'000		Year ended  30 June 2007 £'000
		Net revenue return	28,068		24,147
		Net capital (loss)/return	(152,725)		102,839
			------------		----------
		Net total (loss)/return	(124,657)		126,986
			=======		======
		Weighted average number of ordinary   shares in issue during the year	207,428,815		208,399,576
		Revenue return per ordinary share	13.53p		11.59p
		Capital (loss)/return per ordinary share	(73.63)p		49.34p
			----------		---------
		Total (loss)/return per ordinary share	(60.10)p		60.93p
			======		=====
		The Company does not have any dilutive securities.
5.		Net asset value per ordinary share
		The net asset value per ordinary share is based on the net assets attributable to the ordinary shares of £568,720,000 (2007: £718,657,000) and on 207,266,778 (2007: 207,930,040) shares in issue on 30 June 2008.
6.		Issued share capital
		There were 207,266,778 ordinary shares of 25p in issue at 30 June 2008 (30 June 2007: 207,930,040) for the purpose of calculating the net asset value per ordinary share. During the year the Company repurchased for cancellation 355,172 ordinary shares at a total cost of £1,043,000 and repurchased a further 308,090 shares, which are being held in treasury, at a total cost of £874,000.
7.		2008 accounts
		The preliminary figures for the year ended 30 June 2008 are compiled from an extract of the latest accounts and do not constitute statutory accounts as defined by section 240 of the Companies Act 1985. These accounts have not yet been delivered to the Registrar of Companies, nor have the auditors yet reported on them.
8.		2007 accounts
		The figures and financial information for the year ended 30 June 2007 are compiled from an extract of the latest published accounts and do not constitute the statutory accounts for that year. Those accounts have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under either section 237(2) or section 237(3) of the Companies Act 1985.
9.		Annual Report
		The full Annual Report and Accounts will be posted to shareholders in September 2008 and copies will be available thereafter from the Secretary at the Company's Registered Office, 4 Broadgate, London, EC2M 2DA. The Annual General Meeting will be held on Thursday 16 October 2008 at 3.00 pm.

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THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Preliminary Results for the Year ended 30 June 2008

Top 40 Investments

as at 30 June 2008

The 40 largest investments, representing 78.78% of the portfolio (convertibles and all classes of equity in any one company being treated as one investment), are listed below. In accordance with the UKLA Listing Rules, the comparative value as at 30 June 2007 is provided for the top ten holdings. The stocks marked * were not in the top ten last year. For additional clarity, the stocks which were in the top ten last year but not this year are marked #. Market values reflect changes in the value of underlying shares and portfolio changes.

	Market Value 2008 £'000	Market Value 2007 £'000			Market Value 2008 £'000
BP	34,412	35,577		Unilever	10,003
British American Tobacco	30,433	32,262		BAE Systems	8,850
Royal Dutch Shell	30,300	29,162		Cadbury Schweppes	8,096
Vodafone	29,830	33,560		Reed Elsevier	7,479
HSBC	27,927	32,025		Britvic	6,080
GlaxoSmithKline	25,043	22,838		United Utilities	5,835
Diageo	24,486	27,481		Legal & General	5,511
Scottish & Southern Energy*	17,538	15,939		Pearson	5,223
National Grid Transco*	17,173	19,188		Weir	5,159
BT	16,592	27,597		Statoil	5,152
Anglo American	16,043			Reckitt Benckiser	5,090
Tesco	14,772			Rexam	4,844
ENI	14,042			Croda	4,800
Rio Tinto	13,821			Pennon	4,785
BHP Billiton	13,440			Severn Trent	4,237
Lloyds TSB#	13,207			IMI	4,147
Land Securities	12,320			HBOS	3,784
Barclays#	11,514			Kazakhmys	3,502
Royal Bank of Scotland	11,084			Liberty	3,448
Aviva	10,020			Bovis Homes	3,400

For further information please contact:

Job Curtis 

Portfolio Manager, The City of London Investment Trust plc

Telephone: [phone]

James de Sausmarez

Head of Investment Trusts, Henderson Global Investors

Telephone: [phone]

Sarah Gibbons-Cook

Investor Relations and PR Manager, Henderson Global Investors

Telephone: [phone]

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