City of London Investment Trust increased its full-year dividend for the 44th year in a row after its net asset value per share increased by more than a quarter in the year to end-June.

Net asset value (NAV) per share total return was 26.5% in the year, compared to a 20.9% decline the year before. Over the same period the Association of Investment Companies (AIC) UK Growth & Income sector's NAV per share return was +25.8% (2009: -20.7%), while the FTSE All-Share returned 21.1% (2009: -20.5%).

The company noted, however, that all the gains in net asset value were made in the first half of the financial year; the second half saw a negative return of 3.8%. On the bright side, the company said that the current financial year has started well, with most of the portfolio's stocks making headway, with the notable exception of BP. The trust shed about 42% of its BP holding after the Macondo oil well spill.

Earnings per share fell by 9% over the year. This fall was caused partly by a reduction in the investment income in the trust's portfolio investments and partly by the effect of VAT rebates in the previous year which did not re-occur.

"Government bond yields are at exceptionally low levels, with ten year British gilts under 3%. This reflects fears of deflation, concern over the possibility of a double dip recession and a strong expectation that base rates will remain at 0.5% for a long time. What happens from hereon is a matter of much debate but I think shareholders should take comfort that equities currently give investors relatively better income returns than gilts or bank deposits. City of London's shares currently yield 4.8% based upon our current quarterly dividend rate," said the trust's chairman Simon de Zoete.

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