Chairman's Statement
Net Asset Value Total Return
City of London's net asset value total return was 2.1% which was ahead of the averages for the UK Equity Income Investment Trust sector (1.2%) and OEIC sector (1.6%) and also ahead of the FTSE All Share Index (-0.4%). The key contributors to performance were the below average exposure to the oil and mining sectors which were adversely affected by the weakness of oil and other commodity prices. Among the biggest stock contributors held in the portfolio were Phoenix (in the life assurance sector), Croda (in chemicals) and Land Securities (in Real Estate Investment Trusts).
During the second half of 2014, the UK equity market produced a negative total return of 0.4%, as measured by the FTSE All-Share Index, similar to the sideways move of the first half of the year. The news from the domestic economy was good with growth back to trend and inflation falling to below 1% helped by a 47% fall in the oil price. Overseas, growth in the US was robust but Europe disappointed and Emerging Markets remained mixed. The lacklustre returns from UK equities in 2014 should be considered in the context of the previous two years when returns were more than 25% and share prices had risen further than earnings per share.
Earnings and Dividends
City of London's earnings per share increased by 13.6%, partly reflecting the underlying dividend growth from investments but also the rise in the US dollar compared with sterling of 9.7% over the six months, enhancing the sterling value of dividend payments from those UK companies that declare their dividends in US dollars. In addition, special dividends rose from £90,000 to £459,000 compared with the same period last year. So far this financial year, City of London has declared two interim dividends of 3.75p each. The quarterly rate will be reviewed by the Board before the third interim is declared in April 2015.
