Interim Results

City of London Investment Trust PLC 09 February 2007 9 February 2007 THE CITY OF LONDON INVESTMENT TRUST PLC Unaudited Interim Results for the Half Year Ended 31 December 2006 Total Returns Six Months to 31 December 2006 Net asset value per ordinary share * +14.8% FTSE All-Share 4% Capped Index # (Benchmark) +11.9% NAV outperformance +2.9% Ordinary share price * +16.3% FTSE All-Share Index # +10.0% Sources: * AIC Services Limited # Thomson Financial, Datastream Extracts from the Chairman's Statement Performance It is pleasing to be able to report on an excellent six months for City of London which produced a net asset value total return of 14.8%. This compares with a total return for our benchmark, the FTSE All-Share 4% Capped Index, of 11.9%. City of London, therefore, outperformed by 2.9 percentage points over the six months. We were also ahead of the average return for our sector, the AIC UK Growth and Income, by 2.4 percentage points. Of our outperformance against the benchmark, 0.4% was due to gearing and the rest due to stock selection. Particularly strong contributors included our holdings in Land Securities, the leading UK real estate stock ahead of its conversion into a Real Estate Investment Trust, and also BT Group, which enjoyed a re-rating as its profits exceeded investor expectations. In addition, we had lower than average exposure to the underperforming pharmaceutical sector. Takeovers continued to be a strong feature for UK equities with purchasers still finding value relative to the cost of finance. City of London benefited with particularly large gains in value in our holdings of Scottish Power and Gallaher. Dividends The Board continues to recognise the importance of dividend income to shareholders. A second interim dividend of 2.53p was declared on 5 December 2006 and will be paid on 28 February 2007. As has already been announced, the minimum dividend increase for the year will be 8.1% and the quarterly rate will next be considered in March. Expenses The outperformance during the period has been in excess of all of last year's underperformance with the result that it is necessary to accrue a performance fee of Â£564,847. This has been charged 88% to capital and 12% to revenue to reflect from where the outperformance has been derived. The expense ratio remains low compared with most other equity savings products, with management and performance fees and other expenses for the six months being equivalent to a full year's rate of approximately 0.5% of net assets. - MORE - Page 2 of 9 THE CITY OF LONDON INVESTMENT TRUST PLC Unaudited Interim Results for the Half Year Ended 31 December 2006 Savings City of London sets out to be an attractive and straightforward long-term savings vehicle and seeks to be one of the leading candidates for regular savings and investments. Investments can be made through the itshenderson products (the Share Plan and ISA) or the Alliance Trust Savings (including pensions). Outlook The recent increases in interest rates will dampen growth in certain sectors in the UK. In addition, interest rates are rising in many overseas markets. The valuation of the UK equity market reflects these concerns. Given the continuing healthy outlook for dividend growth, the yield on the UK equity market is attractive relative to the alternatives, such as fixed interest. In addition, takeovers of UK companies at large premia to previously prevailing prices are likely to continue, given the availability of credit and the UK's open system for corporate control. S M de Zoete 9 February 2007 - MORE - Page 3 of 9 THE CITY OF LONDON INVESTMENT TRUST PLC Unaudited Interim Results for the half year ended 31 December 2006 INCOME STATEMENT for the half year ended 31 December 2006 (Unaudited) (Unaudited) (Audited) Half year ended Half year ended Year ended 31 December 2006 31 December 2005 30 June 2006 Revenue Capital Revenue Capital Revenue Capital Return Return Total Return Return Total Return Return Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Gains on investments held at fair value through profit or loss - 79,689 79,689 - 57,579 57,579 - 81,104 81,104 Income from investments held at fair value through profit or loss 11,158 - 11,158 9,374 - 9,374 23,503 - 23,503 Other interest receivable and similar income 125 - 125 358 - 358 474 - 474 -------- -------- -------- -------- -------- -------- -------- -------- -------- Gross revenue and capital gains 11,283 79,689 90,972 9,732 57,579 67,311 23,977 81,104 105,081 -------- -------- -------- -------- -------- -------- -------- -------- -------- Management fee (333) (777) (1,110) (295) (688) (983) (609) (1,422) (2,031) Performance fee (note 4) (68) (497) (565) - - - - - - Other administrative expenses (247) - (247) (252) - (252) (520) - (520) -------- -------- -------- -------- -------- -------- -------- -------- -------- Net return on ordinary activities before finance costs and taxation 10,635 78,415 89,050 9,185 56,891 66,076 22,848 79,682 102,530 Finance costs (735) (1,507) (2,242) (729) (1,493) (2,222) (1,459) (2,988) (4,447) -------- -------- -------- -------- -------- -------- -------- -------- -------- Net return on ordinary activities before taxation 9,900 76,908 86,808 8,456 55,398 63,854 21,389 76,694 98,083 Taxation on net return on ordinary activities (61) - (61) (28) - (28) (181) (5) (186) -------- -------- -------- -------- -------- -------- -------- -------- -------- Net return on ordinary activities after taxation 9,839 76,908 86,747 8,428 55,398 63,826 21,208 76,689 97,897 ===== ===== ===== ===== ===== ===== ===== ===== ===== Return per ordinary share - basic (note 2) 4.72p 36.90p 41.62p 4.04p 26.58p 30.62p 10.18p 36.79p 46.97p The total columns of this statement represent the income statement of the Company. - MORE - Page 4 of 9 THE CITY OF LONDON INVESTMENT TRUST PLC Unaudited Interim Results for the half year ended 31 December 2006 Reconciliation of Movements in Shareholders' Funds for the half years ended 31 December 2006 and 2005 and year ended 30 June 2006 Called-up Share Other Share Premium Capital Revenue Capital Account Reserves Reserve Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Half year ended 31 December 2006 At 30 June 2006 52,103 35,309 508,695 18,032 614,139 Net return on ordinary activities after taxation - - 76,908 9,839 86,747 Fourth interim dividend (2.40p per share) for year ended 30 June 2006 paid 31 August 2006 - - - (5,002) (5,002) First interim dividend (2.53p per share) for year ended 30 June 2007 paid 30 November 2006 - - - (5,273) (5,273) -------- -------- -------- -------- -------- At 31 December 2006 52,103 35,309 585,603 17,596 690,611 ===== ===== ===== ===== ===== Called-up Share Other Share Premium Capital Revenue Capital Account Reserves Reserve Total Half year ended 31 December 2005 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 At 30 June 2005 52,103 35,309 432,006 16,026 535,444 Net return on ordinary activities after taxation - - 55,398 8,428 63,826 Fourth interim dividend (2.26p per share) for year ended 30 June 2005 paid 31 August 2005 - - - (4,710) (4,710) First interim dividend (2.28p per share) for year ended 30 June 2006 paid 30 November 2005 - - - (4,752) (4,752) -------- -------- -------- -------- -------- At 31 December 2005 52,103 35,309 487,404 14,992 589,808 ===== ===== ===== ===== ===== Called-up Share Other Share Premium Capital Revenue Capital Account Reserves Reserve Total Year ended 30 June 2006 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 At 30 June 2005 52,103 35,309 432,006 16,026 535,444 Net return on ordinary activities after taxation - - 76,689 21,208 97,897 Fourth interim dividend (2.26p per share) for year ended 30 June 2005 paid 31 August 2005 - - - (4,710) (4,710) First and Second interim dividends (2.28p each per share) for year ended 30 June 2006 paid 30 November 2005 and 28 February 2006 - - - (9,504) (9,504) Third interim dividend (2.40p per share) for year ended 30 June 2006 paid 31 May 2006 - - - (5,002) (5,002) Write back of dividends over 12 years old - - - 14 14 -------- -------- -------- -------- ---------- At 30 June 2006 52,103 35,309 508,695 18,032 614,139 ===== ====== ====== ====== ====== - MORE - Page 5 of 9 THE CITY OF LONDON INVESTMENT TRUST PLC Unaudited Interim Results for the half year ended 31 December 2006 Balance Sheet as at 31 December 2006 (Unaudited) (Unaudited) (Audited) 31 December 31 December 30 June 2006 2005 2006 Â£'000 Â£'000 Â£'000 Investments held at fair value through profit or loss Listed at market value in the United Kingdom 702,942 613,327 620,848 AIM quoted investment at market value - - 1,035 Listed at market value overseas 34,447 21,035 30,243 Shares in subsidiary undertakings 377 377 377 ---------- ---------- ---------- 737,766 634,739 652,503 ---------- ---------- ---------- Current assets Debtors 3,816 2,048 8,443 Bank balances and short term deposits 4 4,166 6,415 -------- -------- ---------- 3,820 6,214 14,858 -------- -------- ---------- Creditors: amounts falling due within one year (3,087) (3,257) (5,334) ---------- ---------- ---------- Net current assets 733 2,957 9,524 ---------- ---------- ---------- Total assets less current liabilities 738,499 637,696 662,027 Creditors: amounts falling due after more than one year (47,888) (47,888) (47,888) ---------- ---------- ---------- Total net assets 690,611 589,808 614,139 ====== ====== ====== Capital and reserves Called-up share capital 52,103 52,103 52,103 Share premium account 35,309 35,309 35,309 Other capital reserves 585,603 487,404 508,695 Revenue reserve 17,596 14,992 18,032 ---------- ---------- ---------- Shareholders' funds 690,611 589,808 614,139 ====== ====== ====== Net asset value per ordinary share (note 6) 331.37p 283.00p 294.67p - MORE - Page 6 of 9 THE CITY OF LONDON INVESTMENT TRUST PLC Unaudited Interim Results for the half year ended 31 December 2006 Cash Flow Statement for the half year ended 31 December 2006 (Unaudited) (Unaudited) (Audited) Half year ended Half year ended Year ended 31 December 2006 31 December 2005 30 June 2006 Â£'000 Â£'000 Â£'000 Net cash inflow from operating activities 10,394 8,012 19,622 Net cash outflow from servicing of finance (2,242) (2,222) (4,447) Total tax recovered - - 59 Net cash outflow from financial investment (4,290) (5,656) (3,066) Equity dividends paid (10,275) (9,462) (19,202) Cash withdrawn from deposit 6,301 8,505 5,824 --------- --------- ---------- Decrease in cash (112) (823) (1,210) ===== ===== ====== Reconciliation of operating revenue to net cash inflow from operating activities Total return before finance costs and taxation 89,050 66,076 102,530 Less: capital return before finance costs and taxation (78,415) (56,891) (79,682) ----------- ----------- ----------- Net revenue return before finance costs and taxation 10,635 9,185 22,848 Decrease/(increase) in accrued income 485 587 (297) Increase/(decrease) in other creditors 618 (1,035) (1,279) Management charge and performance fee taken to other capital reserves (1,274) (688) (1,422) Overseas withholding tax (70) (37) (228) -------- -------- ---------- Net cash inflow from operating activities 10,394 8,012 19,622 ===== ===== ====== Reconciliation of net cash outflow to movement in net debt Decrease in cash as above (112) (823) (1,210) Net cash inflow from movement in liquid resources (6,301) (8,505) (5,824) Exchange movements (8) (32) (77) Net debt at the beginning of the period (41,473) (34,362) (34,362) ---------- ---------- ---------- Net debt at the end of the period (47,894) (43,722) (41,473) ====== ====== ====== Represented by: Cash at bank and short term deposits less bank overdrafts (6) 4,166 6,415 Debt falling due after more than one year (47,888) (47,888) (47,888) ---------- ---------- ---------- (47,894) (43,722) (41,473) ====== ====== ====== - MORE - Page 7 of 9 THE CITY OF LONDON INVESTMENT TRUST PLC Unaudited Interim Results for the half year ended 31 December 2006 Notes 1. Accounting policies The accounts have been prepared under the historical cost convention, modified to include the revaluation of investments and in accordance with applicable Accounting Standards and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' ("SORP" dated January 2003, revised December 2005). All of the Company's operations are of a continuing nature. The same accounting policies used for the year ended 30 June 2006 have been applied. 2. Return per ordinary share (Unaudited) (Unaudited) (Audited) Half year Half year Year ended ended ended 31 December 31 December 30 June 2006 2005 2006 Â£'000 Â£'000 Â£'000 The return per ordinary share is based on the following figures: Revenue return 9,839 8,428 21,208 Capital return 76,908 55,398 76,689 ---------- ---------- ---------- Total 86,747 63,826 97,897 ====== ====== ====== Weighted average number of ordinary shares in 208,413,762 208,413,762 208,413,762 issue Revenue return per ordinary share 4.72p 4.04p 10.18p Capital return per ordinary share 36.90p 26.58p 36.79p ---------- ---------- ---------- Total 41.62p 30.62p 46.97p ====== ====== ====== 3. Expenses charged to capital The Company charges 70% of its finance costs (excluding preference and preferred ordinary stock dividends) and base management fee to capital return. Performance fees are allocated between capital return and revenue return based on the outperformance attributable to capital and revenue, respectively. All other expenses are charged wholly to revenue return. Expenses which are incidental to the purchase or sale of an investment are included in the cost or deducted from the proceeds of sale of investment. 4. Performance fee A performance fee has been accrued, based on a full year effect of rewarding the Manager, under the terms of the Management Agreement, for outperformance achieved in the first six months. The actual fee to be paid to the Manager will depend on the actual performance over the full year to 30 June 2007. 5. Transaction costs Purchase transaction costs for the half year ended 31 December 2006 were Â£304,000 (half year ended 31 December 2005: Â£323,000; year ended 30 June 2006: Â£600,000). These comprise mainly stamp duty and commissions. Sale transaction costs for the half year ended 31 December 2006 were Â£69,000 (half year ended 31 December 2005: Â£66,000; year ended 30 June 2006: Â£146,000). 6. 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 Â£690,611,000 (31 December 2005: Â£589,808,000; 30 June 2006: Â£614,139,000) and on 208,413,762 ordinary shares (31 December 2005: 208,413,762; 30 June 2006: 208,413,762) being the number of ordinary shares in issue at the end of each period. - MORE - Page 8 of 9 THE CITY OF LONDON INVESTMENT TRUST PLC Unaudited Interim Results for the half year ended 31 December 2006 7. Interim dividend A first interim dividend of 2.53p was paid on 30 November 2006. The second interim dividend of 2.53p (declared on 5 December 2006) will be paid on 28 February 2007 to shareholders who were on the register on 26 January 2007. 8. Accounts for the year ended 30 June 2006 The figures and financial information for the year ended 30 June 2006 are an extract from the latest published accounts of the Company and do not constitute statutory accounts for that year. These 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 237(3) of the Companies Act 1985. 9. Copies of the Company's interim report for the half year ended 31 December 2006 will be posted to shareholders in February 2007 and will be available thereafter from the Secretary at the Registered Office, 4 Broadgate, London, EC2M 2DA. 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 Market value 31 December 2006 31 December 2006 Â£'000 Â£'000 BP 31,213 BHP Billiton 7,009 HSBC 30,723 Rodamco Europe 6,792 British American Tobacco 27,151 United Utilities 6,630 Diageo 26,566 Britvic 6,174 Barclays 25,550 Imperial Tobacco 6,030 BT 25,025 Pearson 5,786 Lloyds TSB 24,289 Greene King 5,685 Vodafone 24,055 Liberty International 5,584 Land Securities 21,488 Hammerson 5,520 GlaxoSmithKline 20,832 Tomkins 5,161 Royal Bank of Scotland 19,930 Kingfisher 4,770 Royal Dutch Shell 17,900 Alliance Boots 4,744 Scottish & Southern Energy 17,094 Reckitt Benckiser 4,668 HBOS 16,980 Croda 4,388 National Grid Transco 16,583 IMI 4,310 Tesco 16,180 Pennon 4,283 Aviva 15,139 Prudential 4,197 Anglo American 12,455 Severn Trent 4,165 ENI 12,031 Admiral 4,144 Rio Tinto 11,552 Smiths Group 3,966 Cadbury Schweppes 10,930 Persimmon 3,815 Bovis Homes 10,840 Wereldhave 3,399 Unilever 9,996 Kesa Electricals 3,393 Legal & General 8,663 National Express 3,390 Reed Elsevier 8,408 Investec 3,298 Slough Estates 7,855 BBA Aviation 3,216 Scottish & Newcastle 7,478 Hiscox 3,161 Wolseley 7,398 Corio 3,128 Rexam 7,357 Hanson 3,082 BAE Systems 7,238 Premier Foods 3,018 These investments total Â£635,805,000 or 86.2% of the portfolio. - MORE - Page 9 of 9 THE CITY OF LONDON INVESTMENT TRUST PLC Unaudited Interim Results for the half year ended 31 December 2006 Sector Analysis of Portfolio as at 31 December 2006 % Oil & Gas 8.7 Basic Materials 5.4 Industrials 9.3 Consumer Goods 17.5 Healthcare 3.5 Consumer Services 11.8 Telecommunications 6.7 Utilities 7.4 Financials 29.7 -------- Total 100.0 ===== For further information please contact : Job Curtis Portfolio Manager, The City of London Investment Trust plc Telephone: 020 7818 4367 James de Sausmarez 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 - ENDS - This information is provided by RNS The company news service from the London Stock Exchange NBK

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