Final Results
City of London Investment Trust PLC
7 September 2001
7 September 2001
THE CITY OF LONDON INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 30 June 2001
Highlights
* City of London (net asset value total return +0.9%) outperformed the
FTSE All-Share (total return -7.8%).
* Dividends per share +4.5%.
* New performance-related management fee.
* Simon de Zoete to succeed Jim Titcomb as Chairman following the Annual
General Meeting on 1 November 2001.
Performance
During the year under review, the UK equity market was adversely affected by
the poor performance of the Telecommunications, Media and Technology ('TMT')
sectors. Growth from companies in these sectors was significantly below
investors' expectations and the declines in their share prices were
particularly severe as valuations were spectacularly high. Overall, the FTSE
All-Share Index produced a negative total return of 7.8%.
By contrast, City of London benefited from having a low exposure to the TMT
sectors and produced a positive net asset value total return of 0.9%. Over
five years, City of London's net asset value total return is markedly better
than the FTSE All-Share Index total return.
Dividends
A fourth interim dividend of 1.98p was paid on 31 August 2001, making a total
net dividend for the year of 7.50p. This increase of 4.5% over the previous
year continued the Company's unbroken record of annual dividend increases
since 1966.
For the year to 30 June 2002, the Board is forecasting a 5.6% increase in the
Company's total net dividend to 7.92p, payable at the new quarterly rate of
1.98p.
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THE CITY OF LONDON INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 30 June 2001
Management Fee
The Board has agreed with Henderson Global Investors to relate part of the
management fee to the investment performance that has been achieved. The
target is to outperform the Company's long-standing benchmark, the FTSE
All-Share Index, in terms of total return.
The new fee arrangements, which were introduced in January 2001, have had the
effect of reducing the base management fee from 0.35% per annum to an
effective rate of 0.28% per annum for the coming year. An additional fee will
be paid at the rate of 0.1% for each 1% of outperformance, on a three year
rolling average basis, against the FTSE All-Share Index up to a maximum
combined base and performance fee of 0.5%. Until 30 June 2003, interim
arrangements have been put in place. Full details are on page 8.
Expenses
For the year to 30 June 2001, excluding interest but including the proportion
of the management fee which is charged to capital, total expenses amounted to
0.48% of assets under management. A performance fee of £337,000 was earned in
respect of the second half of the period.
Prospects
Over the next year the strength of the consumer sector, underpinned by the low
level of interest rates, should mitigate the impact on the United Kingdom of
the slowdown in world trade. Although the current valuation of the UK equity
market has become less demanding, the prospects for corporate earnings growth,
especially for exporters, are uncertain. An improvement in the United States'
and Continental European economies is necessary for overall stockmarket
progress. As confidence returns, there is the potential for reasonable
progress in share prices from current levels.
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THE CITY OF LONDON INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 30 June 2001
Statement of Total Return (incorporating the revenue account)
for the year ended 30 June 2001
Year ended 30 June 2001 Year ended 30 June 2000
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Total capital losses from - (6,257) (6,257) - (20,709) (20,709)
investments
Income from fixed asset 19,800 - 19,800 17,892 - 17,892
investments
Other interest receivable and 217 - 217 180 - 180
similar income
------- ------- ------ ------- -------- --------
Gross revenue and capital 20,017 (6,257) 13,760 18,072 (20,709) (2,637)
(losses)/gains
Management fee (730) (1,704) (2,434) (1,499) (750) (2,249)
Other administrative expenses (373) - (373) (385) - (385)
------- ------- ------ ------- -------- ---------
Net return/(loss) on ordinary
activities
before interest payable and 18,914 (7,961) 10,953 16,188 (21,459) (5,271)
taxation
Interest payable (1,286) (3,000) (4,286) (2,161) (2,161) (4,322)
------- ------- ------- ------- ------- ---------
Net return/(loss) on ordinary
activities
before taxation 17,628 (10,961) 6,667 14,027 (23,620) (9,593)
Taxation on net return/(loss) (117) 117 - (67) 67 -
on ordinary
activities
------- ------- ------- ------- ------- ---------
Net return/(loss) on ordinary
activities
after taxation 17,511 (10,844) 6,667 13,960 (23,553) (9,593)
Dividends :
Preference and preferred (190) - (190) (190) - (190)
ordinary stocks
------- ------- ------- ------- ------- ---------
Net return/(loss) attributable 17,321 (10,844) 6,477 13,770 (23,553) (9,783)
to the ordinary shares
------- ------- ------- ------- ------- ---------
Dividends:
Ordinary shares
Three interim payments of (11,368) - (11,368)(11,248) - (11,248)
1.84p (2000: 1.78p)
Fourth interim payment of (4,067) - (4,067) (3,834) - (3,834)
1.98p (2000: 1.84p)
------- ------- ------- ------- ------- ---------
(15,435) - (15,435)(15,082) - (15,082)
------- ------- ------- ------- ------- ---------
Transfer to/(from) reserves 1,886 (10,844) (8,958) (1,312)(23,553) (24,865)
====== ====== ====== ====== ====== ======
Return/(loss) per ordinary 8.40p (5.26)p 3.14p 6.54p (11.19)p (4.65)p
share (note 1)
====== ====== ====== ====== ====== ======
The revenue columns of this statement represent the revenue accounts of the
Company.
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THE CITY OF LONDON INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 30 June 2001
Balance Sheet
at 30 June 2001
30 June 2001 30 June 2000
£'000 £'000
Fixed asset investments
Listed at market value in the United Kingdom 592,747 607,910
Shares in subsidiary undertakings 347 347
------------- -------------
593,094 608,257
------------- -------------
Current Assets
Debtors 2,100 2,050
Cash at bank 544 347
------------- -------------
2,644 2,397
Creditors: amounts falling due within one year (7,054) (5,867)
------------- -------------
Net current liabilities (4,410) (3,470)
------------- -------------
Total assets less current liabilities 588,684 604,787
Creditors: amounts falling due after more than one (46,000) (46,000)
year
------------- -------------
Total net assets 542,684 558,787
======= =======
Capital and reserves
Called up share capital 53,436 54,183
Share premium account 28,249 28,249
Other capital reserves 448,732 465,974
Revenue reserve 12,267 10,381
------------- -------------
Shareholders' funds (including non-equity interests 542,684 558,787
of £2,086,000)
======= =======
Net asset value per ordinary share 263.19p 267.14p
======= =======
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THE CITY OF LONDON INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 30 June 2001
Cash Flow Statement
for the year ended 30 June 2001
2001 2001 2000 2000
£'000 £'000 £'000 £'000
Net cash inflow from operating 17,532 16,489
activities
Servicing of finance
Debenture interest paid (3,583) (3,412)
Bank interest paid (21) (57)
Dividends paid on preference and (190) (191)
preferred
ordinary stocks
-------------- --------------
Net cash outflow from servicing of (3,794) (3,660)
finance
Taxation
UK income tax paid (783) (793)
---------- ----------
Net tax paid (783) (793)
Financial investment
Purchases of investments (80,434) (83,599)
Sales of investments 90,023 87,772
Net cash received on futures - 909
contracts
---------- ----------
Net cash inflow from financial 9,589 5,082
investment
Equity dividends paid (15,202) (14,996)
---------- ----------
Net cash inflow before financing 7,342 2,122
Financing
Proceeds from issues of ordinary - 1,489
shares
Costs of repurchases of ordinary (7,145) (6,265)
shares
---------- ----------
Net cash outflow from financing (7,145) (4,776)
---------- ----------
Increase/(decrease) in cash 197 (2,654)
======== ========
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THE CITY OF LONDON INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 30 June 2001
Notes:
1. Return/(loss) per Ordinary Share
Revenue return per ordinary share is based on earnings attributable to
the ordinary shares of £17,321,000 (2000: £13,770,000) and on the
weighted average number of ordinary shares in issue during the year of
206,295,670 (2000: 210,454,674).
Capital loss per ordinary share is based on the net capital losses for
the year of £10,844,000 (2000: loss of £23,553,000) and on the weighted
average number of ordinary shares in issue during the year of 206,295,670
(2000: 210,454,674).
2. Issued Share Capital
There were 205,401,018 ordinary shares of 25p in issue at 30 June 2001
(30 June 2000: 208,389,303) for the purpose of calculating the net asset
value per ordinary share.
3. Investment Company Status
Prior to November 2000, the Company's Articles of Association did not
meet the requirements of an investment company within the meaning of
section 266 of the Companies Act 1985. In November 2000, the Company
amended its Articles and reapplied to become an investment company within
the meaning of section 266 of the Act and it continued to conduct its
affairs as an investment trust for taxation purposes under section 842 of
the Income and Corporation Taxes Act 1988. As such, the directors
consider it necessary to continue to present the accounts in accordance
with the SORP. Under the SORP, the financial performance of the Company
is presented in a statement of total return in which the revenue column
is the profit and loss account of the Company. The revenue column
excludes net losses on disposals of investments, calculated by reference
to their previous carrying amount of £3,929,000 (2000: gain of
£3,920,000) and management expenses and finance costs charged to capital
of £1,704,000 and £3,000,000 respectively (2000: £750,000 and £2,161,000)
less tax relief thereon of £117,000 (2000: £67,000).
Since the Company's Articles of Association did not meet the requirements
of an investment company within the meaning of section 266 of the
Companies Act 1985 until November 2000 the Companies Act and/or FRS 3
would ordinarily require these items to be included in the profit and
loss account. However, in the opinion of the directors the inclusion of
these amounts in the profit and loss account would be misleading because
it would obscure and distort both the revenue and capital performance of
the Company, and would not show clearly the revenue profits emerging to
be distributable by way of dividend. The directors therefore consider
that these departures from the specific provisions of Schedule 4 of the
Companies Act, relating to the form and content of accounts for companies
other than investment companies, and these departures from accounting
standards are necessary to give a true and fair view. The departures have
no effect on total return or on the balance sheet.
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THE CITY OF LONDON INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 30 June 2001
4. Share Buy-Backs
During the year the Company purchased in the market for cancellation
2,988,285 of its own issued ordinary shares, leaving a balance of
205,401,018 ordinary shares for the purpose of the calculation of the net
asset value per ordinary share. Subsequent to the year end, the Company
purchased in the market for cancellation 150,000 of its own issued
ordinary shares, leaving a balance of 205,251,018 at the date of this
announcement.
5. 2001 Accounts
The preliminary figures for the year ended 30 June 2001 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.
6. 2000 Accounts
The figures and financial information for the year ended 30 June 2000 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.
7. Annual Report
The full annual report and accounts will be posted to shareholders in
late September 2001 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 1 November 2001
at 3.00pm.
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THE CITY OF LONDON INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 30 June 2001
New Management Fee Arrangements
The management agreement between the Company and Henderson Global Investors
provides for the payment of an annual management fee. Until 31 December 2000
this was calculated as a percentage of the average value of the assets under
management on the last day of each of the two calendar years preceding the
calendar year in respect of which the calculation was made. The percentage
applicable until 31 December 2000 was 0.35% per annum. This fee was payable
quarterly in advance.
With effect from 1 January 2001 the management fee arrangements were amended
such that a base fee is calculated at the rate of 0.30% on the first £400
million of assets under management and 0.25% on assets under management in
excess of £400 million. Such fees are payable quarterly in arrears and on the
basis of assets under management at 30 June 2001, this would represent an
effective rate of approximately 0.28% for the year to 30 June 2002.
In addition, with effect from 1 January 2001, a performance fee is payable,
equivalent to 0.1% for every 1% outperformance against the Company's
benchmark, the FTSE All-Share Index, subject to an annual limit (including the
base management fee) of 0.5%. From 30 June 2004 this performance fee will be
calculated on the average outperformance over the three accounting years up to
that date.
In the interim period, the following provisions apply: for the year ended 30
June 2001, on the basis of performance from 1 January 2001 to 30 June 2001,
the performance fee was half of 0.1% for each 1% outperformance over that
period. The total fee for the six-month period was subject to a limit of 0.2%.
For the year to 30 June 2002, the performance fee will be 0.1% for each 1% of
annual outperformance over the period from 1 July 2001 to 30 June 2002 and
applied to assets under management in the 2001/2002 accounting year. Fifty per
cent. of any performance fee earned in this period will be retained by the
Company and will only be paid if a performance fee is earned in the period to
30 June 2003. The total fee is limited to 0.5%.
For the year to 30 June 2003, on the basis of performance from 1 July 2001 to
30 June 2003, the performance fee will be 0.1% for each 1% of average annual
outperformance over the period from 1 July 2001 to 30 June 2003. Again, the
total fee is limited to 0.5%.
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THE CITY OF LONDON INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 30 June 2001
The 40 largest equity investments (convertibles and all classes of equity in
any one company being treated as one investment) were as follows :
Valuation Valuation
at at
30 June 30 June
2001 2001
£'000 £'000
GlaxoSmithKline 39,656 Unilever 5,990
BP 35,070 Cadbury Schweppes 5,754
Shell Transport & 34,869 GKN 5,456
Trading
HSBC 29,066 Royal & Sun Alliance 5,350
Vodafone 25,144 Anglo American 5,325
Lloyds TSB 18,499 Six Continents 5,325
AstraZeneca 18,221 BAE Systems 5,243
Royal Bank of Scotland 18,084 Scottish Power 5,230
CGNU 17,448 Compass 5,121
Barclays 13,625 Scottish & Southern 5,025
Energy
Diageo 11,700 National Grid 4,716
Abbey National 9,960 Reuters 4,615
Tesco 9,234 Smith & Nephew 4,529
BT 9,119 BG 4,204
Land Securities 8,740 Cable & Wireless 4,183
British American Tobacco 8,640 Halifax 4,110
Prudential 8,610 Reckitt Benckiser 4,038
Legal & General 8,063 Safeway 4,028
Rio Tinto 7,572 Allied Domecq 3,989
Bank of Scotland 6,826 Great Universal Stores 3,955
These investments represent 73.27% of the portfolio.
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For further information please contact :
Job Curtis
Portfolio Manager
The City of London Investment Trust plc
Telephone: 020 7818 4367
Vicki Staveacre
Henderson Global Investors
The Press Office
Telephone: 020 7818 4222
Issued by The City of London Investment Trust plc
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