The City of
London
Investment
Trust plc
Annual Report 2024
JHI9224/2024The City of London Investment Trust plc – Annual Report 2024
The City of London Investment Trust plc
Registered as an investment company in England and Wales
Registration Number: 34871
Registered Office: 201 Bishopsgate, London EC2M 3AE
ISIN number/SEDOL: Ordinary Shares: GB0001990497/0199049
London Stock Exchange (TIDM) Code: CTY
Global Intermediary Identification Number (GIIN): S55HF7.99999.SL.826
Legal Entity Identifier (LEI): 213800F3NOTF47H6AO55
Telephone: 0800 832 832
Email: support@janushenderson.com
www.cityinvestmenttrust.com
JHI9224/2024Designed and typeset by 2112 Communications, London. Printed by Paragon, London.
This report is printed on Revive silk 100% recycled, contains 100% recycled waste and
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58
The City of London Investment Trust plc Annual Report 2021
Strategic Report
Performance 2-3
The City of London Story 4-5
Chairman’s Statement 6-8
Portfolio Snapshot 9-10
Fund Manager’s Report 11-15
Portfolio Information 16-17
Historical Information 18
Business Review 19-35
Governance
Directors and Fund Managers 37-38
Directors’ Report 39-41
Corporate Governance Report 42-48
Audit and Risk Committee Report 49-51
Nominations Committee Report 52-53
Directors’ Remuneration Report 54-57
Statement of Directors’ Responsibilities 58
Financial Statements
Independent Auditor’s Report to the
Members ofThe City of London
Investment Trust plc 60-66
Income Statement 67
Statement of Changes in Equity 68
Statement of Financial Position 69
Notes to the Financial Statements 70-85
Additional Information
Securities Financing Transactions 87-88
Alternative Performance Measures 89-90
Glossary 91
General Shareholder Information 92-93
Dates of Dividend and Interest
Payments 94
Corporate Information 95
Corporate Information
Registered Office
201 Bishopsgate
London EC2M 3AE
Service Providers
Alternative Investment Fund Manager
Janus Henderson Fund Management UK Limited
201 Bishopsgate
London EC2M 3AE
Corporate Secretary
Janus Henderson Secretarial Services UK Limited
201 Bishopsgate
London EC2M 3AE
Telephone: 020 7818 1818
Email: support@janushenderson.com
Depositary and Custodian
HSBC Bank plc
8 Canada Square
London E14 5HQ
Stockbrokers
Cavendish Capital Markets Limited
1 Bartholomew Close
London EC1A 7BL
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Telephone: 0370 889 3296
Email: WebCorres@computershare.co.uk
Investors with share certificates (i.e. not those with
ashareplan or ISA) can check their holding at
www.investorcentre.co.uk
Independent Auditor
Ernst & Young LLP
25 Churchill Place
London E14 5EY
Information Sources
For more information about The City of London Investment
Trustplc, visit the website at www.cityinvestmenttrust.com
This includes factsheets, interviews, current information on
the Company and up-to-date share price and net asset
valuedetails.
To sign up for expert insights about investment trusts,
updates from our fund managers as well as AGMs and
TrustTV episodes, please visit this page:
www.janushenderson.com/en-gb/investor/subscriptions
Follow the Janus Henderson Investment
Trusts on LinkedIn –
Janus Henderson Investment Trusts, UK
Investing
Shares can be purchased in the market via a stockbroker
orthrough share dealing platforms. They can also be held
through share plans, ISAs or pensions and links to various
providers are included on the website.
Potential investors are reminded that the value of investments
and the income from them may go down as well as up and
investors maynot receive back the full amount invested.
Taxbenefits may varyas a result of statutory changes and
their value will depend onindividual circumstances.
The City of London Investment Trust plc Annual Report 2024
95
The City of London Investment Trust plc Annual Report 2021
Strategic
Report
Objective
The Company’s objective is to provide
long-term growth in income and
capital, principally by investment in
equities listed on the London Stock
Exchange. The Board fully recognises
the importance of dividend income
toshareholders.
1
Performance at 30 June
Total Return Performance for year to 30June2024
2024
%
2023
%
NAV
1,6
15.6 4.5
Share price
2,6
11.3 4.1
FTSE All-Share Index (Benchmark) 13.0 7.9
AIC UK Equity Income sector
3
12.6 8.1
IA UK Equity Income OEIC sector 14.6 4.0
Total Return Performance for 10 years to 30June 2024 (rebased to 100)
Share Price
NAV (debt at fair value)
FTSE All-Share Index
AIC UK Equity Income sector
4
IA UK Equity Income OEIC sector
80
100
120
140
160
180
200
2014 2015 2016 2020 2021 202420232022201920182017
Dividend Growth compared with the Retail Price Index (“RPI”) and Consumer Price
Index(“CPI”) for the 10 years to 30 June 2024 (rebased to 100)
100
110
120
130
140
150
160
2014 2015 2016 2020 2021 202420232022201920182017
Dividend Growth
UK Retail Price Index
UK Consumer Price Index
The City of London Investment Trust plc Annual Report 2024
2
Performance at 30June
NAV per share
6
2024 2023
424.3p 385.2p
NAV per share (debt at fair value)
6
2024 2023
429.6p 391.2p
Share price
2024 2023
420.0p 397.0p
Revenue earnings per share
2024 2023
20.9p 20.1p
Ongoing charge for the year
5,6
2024 2023
0.37% 0.37%
(Discount)/premium
6
2024 2023
(1.0)% 3.1%
(Discount)/premium (debt at fair value)
6
2024 2023
(2.2)% 1.5%
Gearing at year end
6
2024 2023
7.1% 6.2%
Dividends per share
2024 2023
20.6p 20.1p
Revenue reserve per share
6
2024 2023
9.4p 8.9p
Dividend Yields
0
1
2
3
4
5
6
%
2024 2023
City of London IA UK Equity
Income OEIC sector
AIC UK Equity
Income sector
FTSE All-Share Index
(Benchmark)
4.9
5.1
3.7
3.7
4.3
4.2
4.8
4.3
1 Net asset value (“NAV”) per ordinary share total return with debt at fair value (including dividends reinvested)
2 Share price total return using mid-market closing price
3 AIC UK Equity Income sector size weighted average NAV total return (shareholders’ funds)
4 AIC UK Equity Income sector NAV total return calculated on a simple average basis
5 Calculated using the methodology prescribed by the Association of Investment Companies (“AIC”)
6 Alternative Performance Measure
Sources: Morningstar Direct, Janus Henderson, Refinitiv Datastream
A glossary of terms is on page 91 and Alternative Performance Measures on pages 89 and 90
The City of London Investment Trust plc Annual Report 2024
3
The City of London Story
Photo credit: Keith Osbourne
In 1932, the name was changed to The City of
London Brewery and Investment Trust Limited, parts
of the business having been sold and the proceeds
invested in securities according to investment trust
principles. In 1968, the remaining part of the brewery
business was sold and the Company concentrated
exclusively on investments in securities.
In 1970, the Company appointed Touche, Remnant &
Co. as Investment Manager and in 1982 the name
was changed to TR City of London Trust PLC. In
1992, Touche, Remnant & Co. was acquired by
Henderson Administration Group plc. The name of
the Company was changed to The City of London
Investment Trust plc in October 1997.
The Company has grown significantly with a strong
performance record. Invested mainly in UK equities
with a bias towards large, multinational companies
and a conservative approach to portfolio
composition, it prioritises sustainable income and
long-term capitalgrowth.
A Brief History
The Company was formed as City of London
Brewery Company in 1860 to acquire Calverts, a
family brewing business at Upper Thames Street
in the City of London, registering as a limited
company in 1891. The brewery had extensive
interests in the licensed premises trade.
The Company has increased its dividend every year since
1966 and this 58 year record is the longest of any
investmenttrust.
In May 2017, Henderson Group plc merged with Janus Capital
Group Inc. to become Janus Henderson Group plc which is
quoted on the New York and Australian Stock Exchanges.
City of London: 58 Years of Dividend Growth
Pence per share
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
2002
2004
1998
2000
2010
2012
2006
2008
2014
2016
2018
2020
2022
2024
0
2
4
6
8
10
12
14
16
18
20
22
Source: Janus Henderson
Photo credit: The Brewery History Society (custodians)
The City of London Investment Trust plc Annual Report 2024
4
History of income growth
The summer of 1966 was significant for English football fans
as it was the first (and most recent) time that England’s mens
team won the World Cup. It was also the start of City of
London’s dividend growth track record which has continued
uninterrupted for 58years.
Over that time, an initial investment of:
£1,000 in CITY OF LONDON has
yielded investors
£50,500 in gross
income, assuming that they had not
reinvested their income.
This compares to just
£3,900 earned
from a SAVINGS ACCOUNT, based on
the Bank of England base rate, or
£34,200 paid out by the UK EQUITY
MARKET, as measured by the FTSE All-Share
Index over the same period.
Cumulative income received from £1,000
initialinvestment
£
City of London
Savings Account
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
55,000
66 69 78 81 84 87 90 93 96 0299 05 2408 11 14 17 20
72 75
Source: Janus Henderson and Refinitiv Datastream
£
City of London
FTSE All-Share
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
55,000
66 69 78 81 84 87 90 93 96 0299 05 2408 11 14 17 20
72 75
Source: Janus Henderson and Refinitiv Datastream
Compounding income and total return
While City of London has provided investors with a growing
source of income, the Company has also delivered strong
long-term capital growth on a total return basis. If investors
had reinvested their dividends back into shares in the
Company over the period since 1966, an initial investment
of£1,000 would be worth £903,400 today. For comparison,
aninvestment of £1,000 in the UK market, as measured by
the Datastream UK Market Index (data for the FTSE All-Share
Index total return only goes back to 1986) over 58 years would
be worth £537,600 on a comparable total return basis. This
comparison demonstrates a significant outperformance by
City of London over the long term.
City of London total return from a £1,000
initialinvestment
£
City of London Share Price Total Return
UK Market Total Return
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
66 69 78 81 84 87 90 93 96 0299 05 2408 11 14 17 20
72 75
£538k
£903k
Source: Janus Henderson and Refinitiv Datastream
Reserves
One of the main advantages of investment trusts is their ability
to retain surplus income and create revenue reserves. These
reserves can be added to in profitable years and paid out in the
leaner years, thereby smoothing the level of dividend payments
to shareholders where appropriate. While the investment
process for City of London aims to avoid companies that
cannot sustain dividend payments and the diversification
oftheportfolio limits the impact of any dividend cuts, the use
ofrevenue reserves and the ability, also, to distribute capital
reserves arising from gains realised from investments sold
provide powerful protection for the dividend in challenging
market conditions.
City of London’s dividend growth track record and strong
reserves position should give investors comfort over the
longterm.
The City of London Investment Trust plc Annual Report 2024
5
Sir Laurie Magnus
Chairman
Chairman’s
Statement
“
City of London’s
totalreturn of 15.6%
outperformed the
FTSEAll-Share Index.
The dividend was
increased for the 58th
consecutive year and
fully covered by earnings
per share.
”
6
Chairman’s
Statement
City of London produced a net asset value (“NAV”) total return
of 15.6% outperforming the FTSE All-Share Index total return
of 13.0%. City of London’s NAV total return has exceeded the
FTSE All-Share Index over 1, 3, 5 and 10 years. The dividend
was increased for the 58th consecutive year and fully covered
by earnings per share.
The Markets
Inflation fell in the main developed economies, but hopes that
interest rates would be cut in the US and UK, in the first half of
2024, were disappointed. Central banks remained cautious
given labour market strength and upward pressure on wages.
The US economy, helped by its fiscal stimulus, showed
stronger growth than the UK and Europe, but the outturn from
China was weaker than expected. Despite the continuing war
in Ukraine and rising tension in the Middle East, the prices of
oil and other important commodities remained relatively stable.
Globally, stock markets were led higher by a small number of
large US technology companies, especially those expected
tobenefit from the development of artificial intelligence (“AI”).
The US S&P 500 Index returned 24.5% during the year, with
amajor element driven by AI considerations. The UK stock
market, which has a relatively low exposure to technology
stocks, produced a total return of 13.0%, as measured by the
FTSE All-Share Index. The perceived low and therefore
attractive valuation of UK equities, together with London’s
relatively open system for corporate control, prompted a
number of takeovers from overseas buyers for UK companies.
Merger and acquisition activity was particularly prevalent
among medium-sized and small companies. The FTSE 250
Index of medium-sized companies, with a return of 13.9%,
and the FTSE Small Cap Index, which returned 14.6%, slightly
outperformed the FTSE 100 Index, comprising the largest
companies, which returned 12.8%.
Performance
Earnings and Dividends
City of London’s earnings per share increased by 3.6% to
20.9p. The growth in dividends from our holdings in bank
shares was the most important positive contributor. Special
dividends, accounted as revenue, amounted to £1.0 million,
down from £1.9 million in the previous year and reflecting the
corporate trend for effecting distributions through share
buybacks rather than dividend payments.
City of London’s annual dividend grew by 2.5% to 20.60p per
share, slightly ahead of UK CPI inflation, and was covered by
earnings per share. Over ten years, City of London’s dividend
has grown by 39.6% compared with a cumulative increase in
UK CPI inflation of 33.8%. The Board fully understands the
importance of growing the dividend in real terms through the
economic cycle.
Expenses remained under tight control, with our ongoing
charge of 0.37% being very competitive compared with other
actively managed funds. The Board agreed with the
Company’s Manager, Janus Henderson, to reduce the
investment management fee rate from 0.325% to 0.300%
witheffect from 1 January 2024. The result of this lower
management fee over 12 months is expected to reduce the
ongoing charge in our current financial year.
The revenue reserve increased by £2.3 million to £46.6 million,
with revenue reserves per share increasing by 5.8% to 9.43p.
The Board considers that maintaining a revenue reserve
surplus is important, particularly given the varied timing of
dividend receipts throughout the year from investee
companies. It is also mindful of the experience during the
Covid pandemic when, in response to sudden dividend cuts
and suspensions, it became necessary to draw on reserves to
cover dividends paid to shareholders. It should be noted that
the capital reserve arising from capital gains on investments
sold, which could help fund dividend payments, rose by
£1.7million to £346.3 million.
NAV Total Return
City of London’s NAV total return of 15.6% was 2.6% ahead
ofthe FTSE All-Share Index. Gearing, which contributed
positively by 0.25%, was financed mainly by our secured debt.
The £30 million 2.67% secured notes (maturing in 2046) and
the £50 million 2.94% secured notes (maturing in 2049)
provide low-cost debt financing over the next quarter of a
century for investment in equities.
Stock selection contributed by 2.6%. The biggest stock
contributor to relative performance compared with the FTSE
All-Share Index was 3i, the investor in private companies,
whose biggest investment is in Action, a fast-growing discount
retailer in Europe. The second biggest contributor was BAE
Systems, the defence company, followed by NatWest, the
bank. Wincanton, the logistics company, and Round Hill Music
Royalties Fund, which were both taken over, were also notable
contributors. The biggest detractor to relative performance was
not owning Rolls Royce, the aero engine manufacturer which
did not pay a dividend during the 12months. The second
biggest detractor was St. James’s Place, which announced
changes in the structure of its customer fees and a provision
forcompensation to those who had not had annual reviews.
Thethird biggest detractor was Shell, where the portfolio was
underweight relative to the Index.
During the year, taking account of the attraction of UK equities
relative to comparable companies in other markets and as
explained in more detail in the Fund Manager’s Report, City
ofLondon’s portfolio weighting in overseas listed stocks was
reduced from 15% to 10%.
As mentioned in the introduction, City of London’s NAV total
return was ahead of the FTSE All-Share Index over 1, 3, 5 and
10 years. Against the AIC UK Equity Income sector average,
City of London was ahead over 1, 3 and 5 years but behind
over 10 years. Against the IA UK Equity Income OEIC average,
City of London was ahead over 1, 3, 5 and 10 years.
Chairman’s Statement
The City of London Investment Trust plc Annual Report 2024
7
Chairman’s Statement (continued)
Share Issues and Buybacks
City of London’s share price traded at a premium to NAV in
the third quarter of 2023 and 5.3 million shares were issued
for proceeds of £20.9 million. During the first half of 2024,
Cityof London’s shares traded at a discount to NAV and
8.3million shares were bought back into treasury at a net cost
of £34.4 million. Issuing shares at a premium and buying back
at a discount enhances NAV. The Board’s aim, subject to
prevailing market conditions, is for the Company’s share
priceto reflect closely its underlying net asset value while
smoothing volatility and encouraging a liquid market in the
shares. Over the past ten years, City of London has issued
218 million shares at a premium to NAV, increasing our share
capital by 76%.
Environmental, Social and Governance
The Fund Manager and Deputy Fund Manager, supported by
specialists at Janus Henderson, give careful consideration to
environmental, social and governance (“ESG”) related risks
and opportunities when selecting stocks for the portfolio.
TheBoard recognises that these risks are highly relevant to
the long-term performance of City of London and of
increasing concern to shareholders. An analysis by MSCI, a
company widely used in the review of ESG factors, shows that
City of London’s portfolio as at 30 June 2024 had a lower
weighted score for ESG risks than the FTSE All-Share Index.
ESG related issues receive careful consideration at each
Board meeting, including how shareholdings have been voted
at investee company meetings. Further details of how ESG
considerations are taken into account in the investment
decision making process are provided on pages 32 to 35.
The Board
Having served nine years on the Board, Samantha Wren will
retire at our Annual General Meeting on 31 October 2024.
Samantha has been an outstanding Chair of the Audit and
Risk Committee and I would like to thank her for her wise
counsel. Sally Lake, who joined the Board on 1 August 2024,
will succeed Samantha in this important role. Sally was Group
Finance Director of Beazley plc, the FTSE 100 specialist
insurance company, from 2019 to 2024.
Annual General Meeting
The 2024 Annual General Meeting (“AGM”) will be held at the
offices of Janus Henderson, 201 Bishopsgate, London EC2M
3AE on Thursday, 31 October 2024 at 2.00pm. The meeting
will include a presentation by our Fund Manager, Job Curtis,
and Deputy Fund Manager, David Smith. Any shareholder
who is unable to travel is encouraged to join virtually by Zoom,
the conference software provider. There will, as usual, be live
voting for those physically present at the AGM, but we cannot
offer live voting via Zoom because of technical restrictions. We
therefore request all shareholders, and particularly those who
cannot attend physically, to submit their votes by proxy to
ensure their vote counts at the AGM.
Outlook
The US has been the engine of world economic growth over
the last year, but there have been recent signs of weakness, for
example in new jobs creation, which have introduced a degree
of volatility into stock market confidence. There is scope for the
US Federal Reserve to cut interest rates, but it isunclear how
far the Federal government can maintain its current high
expenditure funded from borrowings given that the fiscal deficit
is already at record levels relative to GDP. Neither of the two US
Presidential candidates seem likely to focus on cutting the
deficit, but its continuing increase is only feasible if the dollar’s
status as the world’s reserve currency continues.
UK economic growth has picked up during the second half of
2024 following a “technical” recession, with two quarters of
declining GDP, in the second half of 2023. The recent General
Election has ended a period of political uncertainty, delivering
a majority government in contrast to the instability facing
various European countries. The new government is aiming to
increase economic growth, but will need to address major
challenges which include static productivity and significant
underinvestment in infrastructure. Recent public sector pay
awards, which do not appear to be linked to productivity
improvements, may in the short term make it more
challenging to keep inflation at the 2% Bank of England target.
Geopolitical tensions remain heightened. The war in Ukraine
continues and the conflict in the Middle East has the potential
to escalate more widely. Relations between China and the
western developed countries remain adversarial, with China’s
excess manufacturing capacity in areas such as electric
vehicles becoming an increasing source of tension. The
outcome of the US Presidential election in November, which
clearly will have considerable implications for global markets,
is currently very uncertain.
Although there has been some improvement in the performance
of UK equities relative to their overseas equivalents, they
continue to trade at a valuation discount. It is therefore not
unreasonable to expect that the trend of takeover bids for UK
companies by overseas buyers and private equity investors
will continue.
The dividend yield from UK equities remains attractive relative
to the main alternative investment options, particularly with
UKbank deposit savings rates starting to decline. It is also
notable that there have been satisfactory dividend increases
announced during the recent half-year results season.
Investors continue to be “paid to hold on” to UK equities.
City of London’s portfolio is well diversified, with 64% of
investee companies’ revenues earned from overseas.
Theportfolio’s core holdings include good quality and cash
generative companies which can be expected to deliver
reliable and competitive returns.
Sir Laurie Magnus CBE
Chairman
17 September 2024
The City of London Investment Trust plc Annual Report 2024
8
Portfolio Snapshot
Forty Largest Investments as at 30 June 2024
The 40 largest investments, representing 80.68% of the portfolio, are listed below.
Position Company Sector
Market value
£’000
Portfolio
%
1 BAE Systems Aerospace and Defence 96,360 4.29
2 Shell Oil, Gas and Coal 95,233 4.24
3 RELX Media 92,836 4.13
4 HSBC Banks 91,628 4.08
5 Unilever Personal Care, Drug and Grocery Stores 81,451 3.63
6 AstraZeneca Pharmaceuticals and Biotechnology 75,977 3.37
7 3i Investment Banking and Brokerage Services 74,351 3.31
8 British American Tobacco Tobacco 64,395 2.87
9 Tesco Personal Care, Drug and Grocery Stores 60,548 2.70
10 BP Oil, Gas and Coal 59,875 2.67
Top 10 792,654 35.29
11 Imperial Brands Tobacco 58,161 2.59
12 NatWest Banks 55,327 2.46
13 Rio Tinto Industrial Metals and Mining 54,860 2.44
14 Lloyds Banking Banks 51,456 2.29
15 National Grid Gas, Water and Multi-utilities 49,922 2.22
16 M&G Investment Banking and Brokerage Services 48,960 2.18
17 Diageo Beverages 48,783 2.17
18 Phoenix Life Insurance 45,110 2.01
19 SSE Electricity 42,936 1.91
20 GSK Pharmaceuticals and Biotechnology 41,679 1.86
Top 20 1,289,848 57.42
21 Barclays Banks 40,527 1.80
22 Legal & General Life Insurance 38,573 1.72
23 Aviva Life Insurance 35,745 1.59
24 IG Investment Banking and Brokerage Services 35,196 1.57
25 TotalEnergies Oil, Gas and Coal 31,708 1.41
26 Land Securities Real Estate Investment Trusts 28,629 1.28
27 Munich Re Non-life Insurance 28,496 1.27
28 Glencore Industrial Metals and Mining 27,066 1.20
29 Schroders Investment Banking and Brokerage Services 26,906 1.20
30 Nestlé Food Producers 24,218 1.08
Top 30 1,606,912 71.54
31 Merck Pharmaceuticals and Biotechnology 23,983 1.07
32 Severn Trent Gas, Water and Multi-utilities 23,790 1.06
33 Novartis Pharmaceuticals and Biotechnology 22,254 0.99
34 Anglo American Industrial Metals and Mining 21,267 0.94
35 Swire Pacific General Industrials 20,973 0.93
36 British Land Real Estate Investment Trusts 19,336 0.86
37 Persimmon Household Goods and Home Construction 19,325 0.86
38 Sage Software and Computer Services 18,605 0.83
39 Taylor Wimpey Household Goods and Home Construction 18,260 0.81
40 Britvic Beverages 17,716 0.79
Top 40 1,812,421 80.68
All classes of equity in any one company are treated as one investment.
The City of London Investment Trust plc Annual Report 2024
9
Portfolio Snapshot (continued)
Classification of Investments and Portfolio Weighting as at 30 June 2024
Portfolio
%
FTSE All-Share
Index
%
Relative to the FTSE
All-Share Index
percentage points
Energy Oil, Gas and Coal 8.8 11.1 (2.3)
8.8 11.1 (2.3)
Basic Materials Chemicals 0.6 0.5 0.1
Industrial Metals and Mining 4.6 6.3 (1.7)
Precious Metals and Mining – 0.3 (0.3)
5.2 7.1 (1.9)
Industrials Aerospace and Defence 4.3 3.9 0.4
Automobiles and Parts 0.3 0.1 0.2
Construction and Materials 0.9 0.5 0.4
Electronic and Electrical Equipment 1.6 1.1 0.5
General Industrials 2.3 1.6 0.7
Industrial Engineering 0.5 0.6 (0.1)
Industrial Support Services 1.5 3.5 (2.0)
Industrial Transportation – 1.2 (1.2)
11.4 12.5 (1.1)
Consumer Staples Beverages 3.5 2.7 0.8
Food Producers 1.9 0.7 1.2
Personal Care, Drug and Grocery Stores 7.3 7.3 –
Tobacco 5.5 2.8 2.7
18.2 13.5 4.7
Health Care Medical Equipment and Services 0.6 0.5 0.1
Pharmaceuticals and Biotechnology 7.8 11.4 (3.6)
8.4 11.9 (3.5)
Consumer Discretionary Consumer Services – 1.4 (1.4)
Household Goods and Home Construction 1.7 1.2 0.5
Leisure Goods – 0.2 (0.2)
Media 4.1 4.2 (0.1)
Personal Goods – 0.2 (0.2)
Retailers 0.8 1.6 (0.8)
Travel and Leisure 0.1 1.9 (1.8)
6.7 10.7 (4.0)
Telecommunications Telecommunications Service Providers 2.5 1.2 1.3
2.5 1.2 1.3
Utilities Electricity 1.9 0.9 1.0
Gas, Water and Multi-utilities 4.0 2.7 1.3
5.9 3.6 2.3
Financials Banks 11.0 10.0 1.0
Closed End Investments – 6.2 (6.2)
Finance and Credit Services – 2.1 (2.1)
Investment Banking and Brokerage Services 9.4 3.1 6.3
Life Insurance 5.7 2.2 3.5
Non-life Insurance 3.2 0.9 2.3
29.3 24.5 4.8
Real Estate Real Estate Investment Trusts 2.8 2.2 0.6
Real Estate Investment and Services – 0.4 (0.4)
2.8 2.6 0.2
Technology Software and Computer Services 0.8 1.3 (0.5)
0.8 1.3 (0.5)
Total 100.0 100.0 –
10
The City of London Investment Trust plc Annual Report 2024
“
The portfolio is designed to
continue growing City of London’s
dividend and provide a competitive
total return. We are encouraged by
the quality of the companies and
their prospects.
”
Job Curtis
Fund Manager
David Smith
Deputy Fund Manager
Fund
Manager’s
Report
11
Fund Manager’s Report
Investment Background
The UK equity market, as measured by the FTSE All-Share
Index, produced a total return of 13.0% over the 12 months.
The UK economy entered a technical recession in the second
half of 2023, with GDP declining for two quarters. The slowdown
was mild, and the UK economy emerged at the beginning of
2024 to grow in line with Europe, but behind economic growth
experienced in the US. Globally, two of the investment themes
which most excited investors were artificial intelligence and
weight-loss drugs. The narrow range of companies benefiting
tended to be listed overseas with low orzero dividend yields.
FTSE All-Share Index total return (rebased to 100)
Jun
23
Jul
23
Aug
23
Sep
23
Oct
23
Nov
23
Dec
23
Jan
24
Feb
24
Mar
24
Apr
24
May
24
Jun
24
90
95
100
105
110
115
120
Source: Refinitiv Datastream, as at 30 June 2024
The Bank of England increased the base rate to 5.25% in
August 2023 when UK consumer price inflation stood at 6.7%.
The base rate was unchanged for the rest of the 12-month
period under review and inflation fell back to the 2% target in
May 2024. The 10-year gilt yield, which fell to 3.6% at the end
of December on premature hopes for interest rate cuts, ended
the 12 months at 4.2%. The dividend yield of the FTSE
All-Share Index was 3.7% at the end of June 2024, below the
10-year gilt yield and base rate, but with equities offering the
prospect of dividend growth.
FTSE All-Share Index dividend yield, UK 10-year gilt
yield and UK base rate
UK Clearing Banks Base Rate
UK 10-year Gilt Yield
FTSE All-Share – dividend yield
Jun
23
%
Jul
23
Aug
23
Sep
23
Oct
23
Nov
23
Dec
23
Jan
24
Feb
24
Mar
24
Apr
24
May
24
Jun
24
3.0
3.5
4.0
4.5
5.0
5.5
Source: Refinitiv Datastream, as at 30 June 2024
In recent years, during the period of exceptionally low interest
rates, the Company was able to fix cheap rates of borrowing
for long periods using the following secured notes: £35 million
4.53% 2029, £30 million 2.67% 2046 and £50 million 2.94%
2049. These borrowings remained almost completely invested
in equities throughout the year. The HSBC overdraft facility,
which is priced off the base rate, was either unutilised or
drawn down by less than £10 million until February 2024, after
which it was drawn down between £40 million to £45 million
to take advantage of opportunities in equities.
UK £ vs US$ and Euro
GBP to EUR
GBP to USD
Jun
23
Jul
23
Aug
23
Sep
23
Oct
23
Nov
23
Dec
23
Jan
24
Feb
24
Mar
24
Apr
24
May
24
Jun
24
1.05
1.10
1.15
1.20
1.25
1.30
1.35
Source: Refinitiv Datastream, as at 30 June 2024
In contrast to the previous 12 months, when sterling fell to
1.07 against the US dollar during the short period when Liz
Truss was Prime Minister, it was a quiet year on the foreign
exchange market. Sterling’s exchange rate against the US
dollar started the 12 months at 1.27, fell to a low of 1.21 in
October 2023 and recovered back to 1.26 by the end of June
2024. Against the euro, sterling was in a range of 1.14 to 1.19
over the 12 months.
Brent Crude Oil (ICE) US$/bbl
Jun
23
Jul
23
Aug
23
Sep
23
Oct
23
Nov
23
Dec
23
Jan
24
Feb
24
Mar
24
Apr
24
May
24
Jun
24
70
75
80
85
90
95
100
US$
Source: Refinitiv Datastream, as at 30 June 2024
Despite the continuing war in Ukraine and rising tensions in
the Middle East, the oil price was in a range of $73/bbl to
$97/bbl over the 12 months. Russia continued to export oil
tosome countries, such as China and India. Saudi Arabia
restricted some of its output to prevent excess supply.
The City of London Investment Trust plc Annual Report 2024
12
Fund Manager’s Report (continued)
Performance Review
Estimated performance attribution (relative to
FTSEAll-Share Index total return)
2024
%
2023
%
Stock selection +2.64 -4.32
Gearing +0.25 +1.13
Expenses -0.37 -0.37
Share issues/buybacks +0.07 +0.18
Total +2.59 -3.38
Source: Janus Henderson
The Company produced a net asset value total return of 15.57%,
which was 2.59 percentage points (“pp”) better than the FTSE
All-Share Index total return of 12.98%. Gearing contributed to
performance by 0.25pp and stock selection by 2.64pp.
The biggest stock contributor to performance relative to the
FTSE All-Share Index was 3i, the investor in private companies,
which benefited from the outstanding growth of its investment
in Action, a discount retailer in Europe. The second biggest
contributor was BAE Systems, which is experiencing strong
demand from many countries for defence equipment given the
external threats. The third biggest contributor was NatWest,
whose profitability was better than market expectations.
Thefourth and fifth biggest contributors were Wincanton and
Round Hill Music Royalties, which were both taken over.
In contrast, the biggest stock detractor to performance relative
to the FTSE All-Share Index was not holding Rolls Royce, the
aero engine manufacturer, whose share price recovered well but
still did not pay a dividend. The second biggest detractor was
St. James’s Place, which announced changes in the structure
ofits customer fees and a provision for compensation to those
customers who had not had annual reviews. The third biggest
detractor was being underweight in Shell, despite it ending the
year as the second largest holding. The fourth and fifth biggest
detractors were Schroders, the fund management company,
and Nestlé, the food manufacturer.
FTSE 100, 250 and SmallCap Indices total return
(rebased to 100)
FTSE 100 FTSE 250 FTSE SmallCap
Jun
23
Jul
23
Aug
23
Sep
23
Oct
23
Nov
23
Dec
23
Jan
24
Feb
24
Mar
24
Apr
24
May
24
Jun
24
85
90
95
100
105
110
115
120
Source: Refinitiv Datastream, as at 30 June 2024
Large companies, as represented by the FTSE 100 Index,
produced a total return of 12.8% over the 12 months, which
was slightly behind medium-sized companies, with the FTSE
250 returning 13.9%, and small companies, with the FTSE
Small Cap returning 14.6%. A factor behind the outperformance
of medium-sized and small companies was the large number
of takeovers in this area of the market.
FTSE 350 Higher and Lower Yield (rebased to 100)
FTSE 350 Lower Yield FTSE 350 Higher Yield
Jun
23
Jul
23
Aug
23
Sep
23
Oct
23
Nov
23
Dec
23
Jan
24
Feb
24
Mar
24
Apr
24
May
24
Jun
24
90
95
100
105
110
115
120
125
Source: Refinitiv Datastream, as at 30 June 2024
Higher yielding shares had a good year, as the chart above
shows. The FTSE 350 Higher Yield Index (the higher dividend
yielding half of the largest 350 companies listed in the UK)
returned 16.8%. The FTSE 350 Lower Yield Index (the lower
yielding half of the largest 350 shares listed in the UK)
returned 9.2%. Notably outperforming sectors offering above
average dividend yields included banks and oil and gas.
Portfolio Changes
In our view, UK shares were better value than overseas
equivalents, possibly due to lack of demand from domestic
institutional and retail investors. Some market strategists have
estimated the UK valuation discount to have been around
20%. Evidence for this view could be seen in the large number
of takeovers of UK companies from overseas corporates.
Therefore, over the 12 months, the proportion of the portfolio
invested in companies with their prime listing overseas was
reduced from 15% to 10%. The proceeds were reinvested in
UK equities, with the proportion in large UK-listed companies
(included in the FTSE 100 Index) rising by three percentage
points to 78%. The proportion in UK-listed medium-sized and
small companies rose by two percentage points to 12%.
Distribution of the portfolio as at 30 June 2024
Overseas-listed
companies 10%
Medium-sized
and small
UK-listed
companies 12%
Large UK-listed companies
(constituents of the
FTSE 100 Index)
78%
Source: Refinitiv Datastream, as at 30 June 2024
The City of London Investment Trust plc Annual Report 2024
13
Fund Manager’s Report (continued)
Financial companies (banks, insurers and financial services)
remained the largest part of the portfolio and rose from 26.3%
of the total to 29.3% over the 12 months. In the banks sector,
significant additions were made to NatWest, where the share
price valuation did not seem to discount our expectations of
the level of profitability. In particular, structural hedges taken
out when interest rates were low should be reset, when they
mature, at higher interest rates supporting greater profits.
In the life insurance sector, a new holding was bought in
Aviva, which is the largest general insurer and a leading life
and pensions provider in the UK and the second largest
general insurer in Canada. In our view, Aviva has scope to
grow both volumes and margins in UK property and casualty
insurance while its life insurance business provides a strong
source of free cash flow as the required capital backing this
business is released over time.
In the financial services sector (confusingly named in the index
sector breakdown as “Investment Banking and Brokerage
Services”), the holding in St. James’s Place was reduced given
the profit warnings and dividend cut. A smaller holding has
been retained in the company, which is the UK’s largest wealth
manager, because it continues to have net inflows of new
funds and may have significant share price recovery potential.
The portfolio’s exposure to industrial companies was reduced
over the year from 12.3% to 11.4%. The holding in Ferguson,
the US building products distributor, was sold following its
rerating after moving its prime listing from the London Stock
Exchange to New York. We also sold Holcim, the building
materials company listed in Switzerland, which rerated after it
announced its intention to demerge and list its US operations
on the New York Stock Exchange. A complete sale was made
of Siemens, the industrial conglomerate, which in our view
appeared fully valued, especially with the potential for a
slowdown in demand from China. Wincanton, the logistics
company, was sold after the agreed takeover from GXO of the
US, following an earlier bid at a lower price from CME of
France. A new holding was bought in Dowlais, which was
spun out of Melrose, and is the former GKN auto components
and powder metallurgy business. It is the world’s leading
supplier of drive systems, which transmit power to the wheels,
required for both petrol and electric cars. In paper and
packaging, DS Smith was bid for by Mondi before agreeing to
be taken over by International Paper of the US. DS Smith and
Mondi are both held in the portfolio.
In the oil and gas sector, a new holding was bought in ENI,
which is headquartered in Italy, with global operations and, in
our view, particularly good prospects for oil production growth.
Incontrast, the holding in Woodside was sold because of its
focus on liquified natural gas where the market appeared well
supplied, putting downward pressure on prices.
In the mining sector, the main development was a takeover
approach for Anglo American, held in the portfolio, from BHP.
Anglo American decided to focus on its own recovery plan
rather than agree to a takeover from BHP, because it
considered the structure of the bid to be flawed. The iron ore
price, which is dependent on demand from China and a key
factor in profits for our holding in Rio Tinto, traded in a
relatively narrow range over the 12 months.
Iron Ore (US$/metric tonne)
Jun
23
Jul
23
Aug
23
US$
Sep
23
Oct
23
Nov
23
Dec
23
Jan
24
Feb
24
Mar
24
Apr
24
May
24
Jun
24
90
100
110
120
130
140
150
Source: Refinitiv Datastream, as at 30 June 2024
In the telecommunications sector, a new holding was bought
in BT, where strong free cash flow growth is expected as its
fibre network is built up. Orange was sold given the potential
for disruptive competition and price cutting in the French
telecommunications market.
In the pharmaceuticals sector, the holding in Sanofi was sold
after it downgraded profit expectations, possibly indicating
previous underinvestment in research and development.
Theproceeds were reinvested in additions to the holdings
inAstraZeneca and GSK.
Three other new holdings were purchased. Hilton Food
processes, packs and distributes meat and fish for food
retailers. The business was started in the UK and now has
operations in Continental Europe and Australasia. Hilton’s
supply chain expertise and category knowledge enables it
tobe cost competitive. Inchcape is a motor distributor in
40countries with long-standing partnerships with some of the
world’s leading car manufacturers. It provides services such
as logistics from port to showroom and distribution of parts.
Asmall holding was bought in Burberry, the British fashion
company, probably best known for its trench coats. The
market for luxury fashion items has faced recent headwinds,
especially with lower demand from Chinese customers.
Burberry has made mistakes in its strategy of moving to
higher priced products, but the brand has a long history.
Inour view, Burberry has significant recovery potential as its
markets improve and the new management team develops
abetter strategy.
There were three other complete sales of holdings during the
12 months. La Française des Jeux, the French national lottery
operator, was sold after it made a large acquisition of an
online betting operator which, in our view, increased its risk
profile. Cisco was sold on concern about a potential
slowdown in sales to office campus networks. A complete
sale was also made of Round Hill Music Royalties Fund
following its agreed takeover, achieving a capital gain of 61%
on a shareholding which was bought in June 2023.
The City of London Investment Trust plc Annual Report 2024
14
Fund Manager’s Report (continued)
Portfolio Outlook
Revenue exposure (%)
United Kingdom 36%
North America 22%
Europe ex UK 15%
Asia Pacific
(inc Japan) 16%
Emerging Markets 11%
Source: Refinitiv Datastream, as at 30 June 2024
The portfolio remains well diversified with 64% of investee
companies’ revenues coming from overseas. The detailed
split of revenue is UK 36%, North America 22%, Asia Pacific
16%, Europe 15% and Emerging Markets 11%.
Largest sector weightings
Portfolio
%
FTSE
All-Share
Index
%
Relative to
the FTSE
All-Share
Index
%
Banks 11.0 10.0 +1.0
Investment Banking and
Brokerage Services 9.4 3.1 +6.3
Oil, Gas and Coal 8.8 11.1 -2.3
Pharmaceuticals and
Biotechnology 7.8 11.4 -3.6
Personal Care, Drug and
Grocery Stores 7.3 7.3 –
Total 44.3 42.9 +1.4
Banks is the largest sector with a good flow of profits and
dividends expected as they continue to benefit from the higher
level of interest rates compared with most of the period since
the global financial crisis of 2007 to 2009. Banks will always be
vulnerable to economic shocks, but they have strengthened
their capital ratios significantly over the last fifteen years.
HSBC, where the majority of profits comes from Asia Pacific,
isthe largest bank holding and the fourth largest in the
portfolio. In addition, NatWest (12th largest), Lloyds Banking
(14th largest) and Barclays (21st largest) are also held.
The second largest sector is investment banking and
brokerage services, which would be better described as
financial services. The largest holding in this sector is 3i, the
investor in private companies, which is the seventh largest
holding in the portfolio. Its largest investment is in Action,
thediscount retailer in Europe, which has scope to continue
opening new stores as well as lifting sales in existing stores.
Also in this sector is M&G (16th largest), which is valued on
ahigh dividend yield despite the cash generation from its life
insurance business.
The third largest sector is oil and gas where the two largest
holdings are Shell (second largest in the portfolio) and BP
(10th largest). After the savage cuts in their dividends in 2020,
both companies have grown their dividends from the reset
lower bases and also bought back shares. They are also
showing greater discipline in their investment in renewable
energy. Key for both companies is the level and direction of
the oil price. The world will still need oil for many years and
natural gas will be an important transition fuel towards a
lowercarbon future. In the utilities sectors, National Grid
(15thlargest) and SSE (19th largest) are well placed to benefit
from the electrification of energy infrastructure and the growth
of renewable power.
Pharmaceuticals is the fourth largest sector, with AstraZeneca
the sixth largest in the portfolio. AstraZeneca continues to be
very successful in discovering and gaining approval for new
medicines, especially for cancer. Its dividend yield is below
average but has started to grow again. GSK is the 20th
largest holding. It continues to be successful with vaccines
and HIV medicines and has promising new drugs under
development in other areas.
The fifth largest sector is personal care, drug and grocery
stores where the largest holdings are Unilever (fifth largest in
the portfolio) and Tesco (ninth largest). Unilever, the consumer
products and food group, has a substantial presence in both
developed and emerging markets. In recent years, it has
divested some lower growth operations, improving its mix of
businesses. Tesco, the UK’s largest food retailer, is price
competitive and a substantial cash generator.
The largest holding in the portfolio at the end of June 2024
was BAE Systems, the defence company. BAE’s biggest
market is the US followed by the UK and Saudi Arabia. It also
has smaller but fast-growing sales with countries such as
Japan, Australia and in Eastern Europe. Given the rising
external threats, demand for the sophisticated products,
equipment and systems made by BAE is likely to remain
robust. RELX, the third largest holding, also enjoys structural
growth characteristics as the provider of information and
analytics for businesses, professionals and scientists. Both
BAE and RELX are lower dividend yielding shares, which are
balanced by the high yield and strong cash generation of
British American Tobacco, which is pivoting to less harmful
nicotine products.
Overall, the portfolio is designed to continue growing City of
London’s dividend and provide a competitive total return,
including capital appreciation. It has a tilt towards stocks with an
above average dividend yield, but some lower yielders are
included within the mix for their growth potential. The portfolio is
diversified both by geography and by sector. We are encouraged
by the quality of the companies and their prospects.
Job Curtis David Smith
Fund Manager Deputy Fund Manager
17 September 2024
The City of London Investment Trust plc Annual Report 2024
15
Portfolio Information
Valuation
£’000
ENERGY
Oil, Gas and Coal
Shell 95,233
BP 59,875
TotalEnergies
1
31,708
ENI
1
13,337
200,153
Total Energy 200,153
BASIC MATERIALS
Chemicals
Johnson Matthey 8,770
Victrex 3,997
12,767
Industrial Metals and Mining
Rio Tinto 54,860
Glencore 27,066
Anglo American 21,267
103,193
Total Basic Materials 115,960
INDUSTRIALS
Aerospace and Defence
BAE Systems 96,360
96,360
Construction and Materials
Ibstock 12,693
Marshalls 7,312
20,005
Electronic and Electrical Equipment
Morgan 12,824
IMI 12,789
Rotork 5,891
XP Power 3,402
34,906
General Industrials
Swire Pacific
1
20,973
DS Smith 12,420
Smiths 10,224
Mondi 7,592
51,209
Industrial Engineering
Vesuvius 11,538
11,538
Valuation
£’000
Industrial Support Services
PayPoint 12,700
Hays 12,096
Inchcape 8,185
32,981
Total Industrials 246,999
CONSUMER STAPLES
Beverages
Diageo 48,783
Britvic 17,716
Coca-Cola
1
11,076
77,575
Food Producers
Nestlé
1
24,218
Hilton Food 8,970
Tate & Lyle 8,850
42,038
Personal Care, Drug and Grocery Stores
Unilever 81,451
Tesco 60,548
Reckitt Benckiser 17,127
Burberry 3,950
163,076
Automobiles and Parts
Dowlais 7,310
7,310
Tobacco
British American Tobacco 64,395
Imperial Brands 58,161
122,556
Total Consumer Staples 412,555
HEALTH CARE
Medical Equipment and Services
Smith & Nephew 12,451
12,451
Pharmaceuticals and Biotechnology
AstraZeneca 75,977
GSK 41,679
Merck
1
23,983
Novartis
1
22,254
Johnson & Johnson
1
12,020
175,913
Total Health Care 188,364
Sector Breakdown of Investments as at 30 June 2024
1
Overseas listed
All classes of equity in any one company are treated as one investment
The City of London Investment Trust plc Annual Report 2024
16
Valuation
£’000
CONSUMER DISCRETIONARY
Retailers
Kingfisher 11,311
Halfords 4,212
DFS 2,750
18,273
Media
RELX 92,836
92,836
Household Goods and Home Construction
Persimmon 19,325
Taylor Wimpey 18,260
37,585
Travel and Leisure
Young 2,335
2,335
Total Consumer Discretionary 151,029
TELECOMMUNICATIONS
Telecommunications Service Providers
Deutsche Telekom
1
16,424
Vodafone 13,250
Verizon Communications
1
13,056
BT 12,627
55,357
Total Telecommunications 55,357
UTILITIES
Electricity
SSE 42,936
42,936
Gas, Water and Multi-utilities
National Grid 49,922
Severn Trent 23,790
United Utilities 11,791
Pennon 3,726
89,229
Total Utilities 132,165
Valuation
£’000
FINANCIALS
Banks
HSBC 91,628
NatWest 55,327
Lloyds Banking 51,456
Barclays 40,527
Nationwide Building Society 10.25% Var Perp CCDS 8,523
247,461
Investment Banking and Brokerage Services
3i 74,351
M&G 48,960
IG 35,196
Schroders 26,906
Rathbones 15,120
St. James’s Place 12,285
212,818
Life Insurance
Phoenix 45,110
Legal & General 38,573
Aviva 35,745
Prudential 8,618
128,046
Non-life Insurance
Munich Re
1
28,496
Beazley 17,675
Hiscox 9,767
Direct Line Insurance 9,542
Sabre Insurance 7,135
72,615
Total Financials 660,940
REAL ESTATE
Real Estate Investment Trusts
Land Securities 28,629
British Land 19,336
Segro 16,153
64,118
Total Real Estate 64,118
TECHNOLOGY
Software and Computer Services
Sage 18,605
18,605
Total Technology 18,605
TOTAL INVESTMENTS 2,246,245
Portfolio Information (continued)
1
Overseas listed
All classes of equity in any one company are treated as one investment
The City of London Investment Trust plc Annual Report 2024
17
Historical Information
1 Net asset value per share total return with debt at fair value (including dividends reinvested)
2 AIC UK Equity Income sector size weighted average NAV total return (shareholders’ funds)
3 Share price total return using mid-market closing price
4 Net asset value per ordinary share is calculated after deducting all prior charges, including the preference and preferred ordinary stocks, at fair value
5 Rebased to 100 at 30 June 2014
Sources: Morningstar Direct, Janus Henderson, Refinitiv Datastream
A glossary of Alternative Performance Measures is on pages 89 and 90
Total Return Performance to 30 June 2024
1 year
%
3 years
%
5 years
%
10 years
%
NAV per ordinary share
1
15.6 29.9 33.1 83.0
FTSE All-Share Index 13.0 23.9 30.9 77.8
AIC UK Equity Income sector average – NAV
2
12.6 20.2 32.6 84.4
IA UK Equity Income OEIC sector average 14.6 18.5 28.3 66.6
Share Price Performance Total Return to 30 June 2024
Value of £1,000 with net income reinvested
1 year
£
3 years
£
5 years
£
10 years
£
The City of London Investment Trust plc
3
1,113.5 1,248.4 1,268.0 1,741.3
FTSE All-Share Index 1,129.8 1,239.0 1,309.3 1,778.2
AIC UK Equity Income sector average 1,098.7 1,156.1 1,291.6 1,757.9
IA UK Equity Income OEIC sector average 1,146.0 1,185.5 1,282.7 1,666.2
Ten Year Net Asset Value and Dividend Record
Year ended
Net asset value per
ordinary share
(p)
4
Net asset value per
ordinary share
(rebased)
5
Net dividends per
ordinary share
(p)
Net dividends per
ordinary share
(rebased)
5
30 June 2014 373.7 100.0 14.76 100.0
30 June 2015 382.7 102.4 15.30 103.7
30 June 2016 378.6 101.3 15.90 107.7
30 June 2017 416.1 111.3 16.70 113.1
30 June 2018 424.3 113.5 17.70 119.9
30 June 2019 416.3 111.4 18.60 126.0
30 June 2020 338.7 90.6 19.00 128.7
30 June 2021 384.1 102.8 19.10 129.4
30 June 2022 393.5 105.3 19.60 132.8
30 June 2023 391.2 104.7 20.10 136.2
30 June 2024 429.6 115.0 20.60 139.6
Historical dividend
0
2
4
6
8
10
12
14
16
18
20
22
2014 2015 2017 2018 2020 202120192016
pence per share
2022 2023 2024
19.60
20.10
20.60
14.76
15.30
15.90
16.70
17.70
18.60
19.00
19.10
Historical NAV
4
0
50
100
150
200
250
300
350
400
450
2014 2015 2017 2018 2020 202120192016
pence per share
2022 2023 2024
382.7
373.7
378.6
416.1
416.3
338.7
384.1
393.5
391.2
429.6
424.3
The City of London Investment Trust plc Annual Report 2024
18
Business
Review
19
Our Purpose
The Company’s purpose is to deliver growth in income and
capital to shareholders by investing in equities listed on the
London Stock Exchange. We do this by following a disciplined
process of investment, by controlling costs and using
borrowings to enhance returns.
Values and Culture
Good governance is at the heart of any company and is
integral to ensuring its success and sustainability as a
business. The Board aspires to follow high standards of
governance, with a culture based upon openness, mutual
respect, integrity, constructive challenge and trust. The Board
seeks always to act in the best interests of shareholders and
other stakeholders, making themost effective use possible of
the diversity of skills and experience of the Directors. This
culture of openness and constructive challenge extends to the
Board’s interaction with the Manager, being the Company’s
most important service provider. The Board expects the
Manager and all of the Company’s other service providers to
hold values which alignwith the high standards promoted by
the Board.
The Company has a number of policies and procedures in
place to assist with maintaining a culture of good governance
including those relating to Directors’ conflicts of interest,
Directors’ dealings in the Company’s shares, bribery
(including the acceptance of gifts and hospitality) and tax
evasion. The Board assesses and monitors compliance with
these policies regularly through Board meetings and the
annual evaluation process.
Structure
The Company operates as an investment company. Under this
structure, the Board delegates operational matters to specialist
third-party service providers. Their performance ismonitored
and challenged by an independent Board of Directors which
retains oversight of the Company’s operations.
The framework of delegation provides a cost-effective
mechanism for delivering operations whilst allowing the
Company to take advantage of the capital gains treatment
afforded to investment trusts which are approved under
Section 1158/9 of the Corporation Tax Act 2010 as amended
(“Section 1158/9”). The closed-ended nature of the Company
enables the Fund Manager to take a longer-term view on
investments and supports a fully invested portfolio as the
Company has no redemptions to meet. A significant
advantage over other investment fund structures is the
abilityto use leverage to increase returns for shareholders.
The Board is accountable to shareholders, who have the
ability to remove aDirector from office where they deem it to
be in the interests of the Company.
Any material change to the investment policy would require
the prior approval of both shareholders and the FCA.
Business Model
Investment Objective
The Company’s objective is to provide long-term growth in
income and capital, principally by investment in equities listed
on the London Stock Exchange. The Board fully recognises
the importance of dividend income to shareholders.
Investment Policy
Asset allocation
While the Company will mainly invest in equities, there is the
flexibility to invest in debt securities, such as convertibles,
corporate bonds or government debt, if it is deemed that these
will, at a particular time or for a particular period, enhance the
performance of the Company in the pursuit of its objective.
The Company has a portfolio invested predominantly in
larger companies. Typically at least 60% of the portfolio by
value willbe invested in large companies (being companies
with amarket capitalisation greater than £5 billion at the time
of investment). The remainder of the portfolio will be invested
in medium-sized and small companies. No more than 20%
oftheportfolio will be invested in overseas listed stocks.
There are no set limits on sector exposures, although the
Board regularly monitors the Company’s investments and
the Manager’s investment activity. The Manager primarily
employs a bottom-up value-based investment process to
identify suitable opportunities and pays particular regard
tocash generation and dividends.
The portfolio yield will usually be between 10% and 30%
above the average dividend yield for the UK equity market.
There may be some holdings, selected for their above
average growth potential, which have a dividend yield lower
than the market.
Gearing
The Company will at times utilise limited gearing, both
short and long term, in order to enhance performance.
Other than in exceptional market conditions, gearing will
not exceed 20% of net asset value at the time of draw
down of the relevant borrowings. Up to 10% of the net
assets can be held in cash.
Selling traded options where the underlying share is held in
the portfolio can be used to generate income. Buying and
selling FTSE 100 Index Futures can be used to increase or
reduce gearing.
Diversification
The Company achieves an appropriate spread of investment
risk principally through a broadly diversified portfolio.
The Company will not invest more than 15% of its portfolio
inany single investment on acquisition, nor will it invest
more than 15% of the portfolio in any other UK listed
investment trusts or investment companies.
The City of London Investment Trust plc Annual Report 2024
20
Business Model (continued)
The Company’s Status
The Company is registered as a public limited company,
founded in 1891, and is an investment company as defined
inSection 833 of the Companies Act 2006 (“the Act”). The
Company is not a close company. It operates as an investment
trust in accordance with Section 1158/9 and has obtained
approval from HMRC for its status. The Directors are of the
opinion that the Company has conducted its affairs in
compliance with Section 1158/9 since approval was granted
and intends to continue to do so.
The Company is listed on the Main Market of the London
Stock Exchange under the closed ended investment funds
category and is subject to the UK Listing Rules, Prospectus
Rules and Disclosure Guidance and TransparencyRules
published by the Financial Conduct Authority (“FCA”). The
Company was also listed on the NewZealand Stock Exchange
until 21 March 2024, when the New Zealand shareholder
register was transferred to the UK. The Company is a member
of the Association of Investment Companies (“AIC”).
The Company and the Board are governed by its Articles of
Association, amendments to which must be approved by
shareholders by way of a special resolution.
The Board
It is the Company’s aim to have an appropriate level of
diversity in the boardroom. The current Directors have a
diverse range of experience andskills, bringing knowledge of
investment management, financial markets, accounting and
auditing, risk and governance, and marketing and distribution
expertise to discussions on the Company’s business. At the
date of this report, the Board comprises six Directors, of
which three aremale and three are female.
The Nominations Committee considers diversity in its broadest
sense when making recommendations for appointments to the
Board. The Board’s prime responsibility is the strength ofthe
Board and its overriding aim in making any new appointments
must always be to select the best candidate based on
objective criteria and merit. See page 53 for further details of
the Board’s Diversity and Inclusion Policy andcompliance with
recommended diversity targets.
The Company has no employees and, therefore, has nothing
further to report in respect of gender representation within
theCompany. Details of Janus Henderson’s diversity and
inclusion initiatives can be found onits website at
www.janushenderson.com/corporate/who-we-are/
diversity-equity-and-inclusion/.
Benefits
The Company’s business model offers numerous advantages:
●
it provides investors with access to a professionally and
actively managed portfolio of assets;
●
it offers investors exposure to large UK companies;
●
it enables investors to spread the risks of investing;
●
it enhances returns to investors by operating as an
approved investment trust meaning no capital gains tax
ispaid on the realisation of investments;
●
the closed end structure allows the Fund Manager to take a
longer-term view on investments and remain fully invested;
●
the ability to draw on revenue reserves to support the
payment of dividends;
●
the ability to use leverage to increase returns for investors;
and
●
oversight by a Board of Directors wholly independent of
the Manager.
Arrangements with the Manager
The Company is an Alternative Investment Fund (“AIF”) in
accordance with the Alternative Investment Fund Manager
Directive (“AIFMD”). The Board has appointed Janus
Henderson Fund Management UK Limited (“JHFM”) toact as
its Alternative Investment Fund Manager. JHFMdelegates
investment management services to JanusHenderson
Investors UK Limited. Both entities are authorised and
regulated by the FCA, and form part of the Janus Henderson
group of companies. References to “Janus Henderson” or the
“Manager” refer to the services provided to the Company by
the Manager’s group.
The Manager is engaged under the terms of an agreement
effective from 15 February 2024. The previous agreement dated
July 2014 has been amended and restated to reflect current
regulation and industry standards, with no changes toterms
affecting the relationship with the Manager. The agreement
isterminable by JHFM on sixmonths’ notice. TheCompany
mayterminate the agreement on three months’ notice
withoutcompensation.
With effect from 1 January 2024, the management fee was
changed to 0.3% per annum of net assets under management
on the first £3 billion of assets and 0.275% on any excess over
£3 billion of net assets under management. Prior to this, the
management fee was 0.325% per annum of net assets under
management. Fees are payable quarterly in arrears based on
the level of net assets at the relevant quarter end. There is no
performance fee arrangement in place.
Janus Henderson and its subsidiaries also provide
accounting, company secretarial and general administrative
services. Some of the administration and accounting services
are carried out, on behalf of the Manager, by BNP Paribas.
Janus Henderson Secretarial Services UK Limited, a
subsidiary of Janus Henderson Investors, acts as the
Corporate Secretary. It has its own reporting lines and audited
internal controls. There are processes and controls in place to
ensure that there is a clear distinction between the Corporate
Secretary and Janus Henderson, particularly when dealing
with any conflicts or issues between the Company and
JanusHenderson.
The City of London Investment Trust plc Annual Report 2024
21
Investment Approach
Our Fund Manager, Job Curtis, has managed the
Company’sportfolio since 1 July 1991. He is a member of
JanusHenderson’s Global Equity Income team and is
assisted by David Smith, who has been Deputy Fund
Manager since 2021. He manages the portfolio in a
conservative way, focusing on companies with cash-
generative businesses able to grow their dividends with
attractive yields. The portfolio is well diversified. At 30 June
2024, 78% of the portfolio was in FTSE 100 companies
(compared with 75% at 30 June 2023) and it remains biased
towards companies with international exposure invested in
economies likely to grow faster than the UK. In order to
provide a stable and reliable income, the portfolio aims to
provide shareholders with dividends between 10% and 30%
higher than the FTSE All-Share Index.
The Fund Manager is committed to maintaining a diversified
portfolio and has structured the portfolio so that shareholders
stand to gain in the short term through quarterly dividends,
while long-term capital appreciation is central to stock-
pickingdecisions.
Liquidity and Discount Management
Our aim is for the Company’s share price to reflect closely its
underlying net asset value, and also to reduce volatility and
encourage a liquid market in the shares. The ability to
influence thismeaningfully over the longer term is, of course,
limited. However, the Board intends, subject always to the
overall impact on the portfolio, the pricing of other investment
companies and general market conditions, to consider
issuance and buybacks within a narrow band relative to
netasset value. We believe that flexibility is important and
thatit isnot in shareholders’ interests to have a specific
issuance and buyback policy.
Borrowings
The Company has a borrowing facility of £120.0 million
(2023:£120.0 million) with HSBC Bank plc, of which
£41.0million was drawn at the year end (2023: £9.0 million).
The Company has £114.3 million (2023:£114.2 million)
ofsecured notes in issue (fairvalue of the loan notes:
£87.1million (2023: £83.3 million)).
The level of borrowing at 30 June 2024 was 7.5% of net asset
value with debt at par (2023: 6.5%) and 6.2% with debt at fair
value (2023: 4.9%).
Approval
The Strategic Report, set out on pages 1 to 35, has been
approved by the Board.
On behalf of the Board
Sir Laurie Magnus CBE
Chairman
17 September 2024
Business Model (continued)
The City of London Investment Trust plc Annual Report 2024
22
Measuring our Performance
In order to measure the success of the Company in meeting its objective and to evaluate the performance of the Manager,
theDirectors take into account the following Key Performance Indicators (“KPIs”):
KPI Action
Performance against
marketindices
The Board reviews and compares, at each meeting, the performance of the portfolio as well
asthe net asset value and share price for the Company and the FTSE All-Share Index.
During the year under review, the Company’s net asset value outperformed the Index by2.6%
(2023:underperformed by 3.4%) on a total return basis. Over five years, the Company’s net
asset value has outperformed the Index by 2.2%.
Share Price NAV (debt at fair value) FTSE All-Share Index
Jun 19
Sep 19
Dec 19
Jun 20
Sep 20
Dec 20
Mar 20
Mar 21
Jun 21
Sep 21
Dec 21
Mar 22
Jun 22
Sep 22
Dec 22
Mar 23
Jun 23
Sep 23
Dec 23
Mar 24
Jun 24
70
80
90
100
110
120
130
140
Performance against the
Company’s peer group
The Company is included in the AIC UK Equity Income sector. The Board considers the
size-weighted average net asset value total return of its AIC peer group at each Board meeting.
During the year under review, the Company outperformed the peer group by 3.0% (2023:
underperformed by 3.6%). Over five years, the Company has outperformed the peer group by
0.5% (on a size weighted average basis).
NAV (debt at fair value) AIC UK Equity Income sector
1
70
80
90
100
110
120
130
140
Jun 19
Sep 19
Dec 19
Jun 20
Sep 20
Dec 20
Mar 20
Mar 21
Jun 21
Sep 21
Dec 21
Mar 22
Jun 22
Sep 22
Dec 22
Mar 23
Jun 23
Sep 23
Dec 23
Mar 24
Jun 24
Key Performance Indicators
1 AIC UK Equity Income sector NAV total return calculated on a simple average basis (see Glossary on page 91)
The City of London Investment Trust plc Annual Report 2024
23
Key Performance Indicators (continued)
KPI Action
Performance against the
OEIC sector
The Board considers the performance of the portfolio against the IA UK Equity Income OEIC sector.
During the year under review, the Company outperformed the OEIC sector by 1.0% (2023:
outperformed by 0.5%). Over five years, the Company has outperformed the OEIC sector by 4.8%.
NAV (debt at fair value) IA UK Equity Income OEIC sector Share Price
70
80
90
100
110
120
130
140
Jun 19
Sep 19
Dec 19
Jun 20
Sep 20
Dec 20
Mar 20
Mar 21
Jun 21
Sep 21
Dec 21
Mar 22
Jun 22
Sep 22
Dec 22
Mar 23
Jun 23
Sep 23
Dec 23
Mar 24
Jun 24
Premium/discount to net
asset value
The Board’s aim is for the Company’s share price to reflect closely its underlying net asset
value. At each meeting, the Board monitors the level of the Company’s premium/discount to
NAV per share and reviews the average premium/discount for the Company’s AIC sector.
At 30 June 2024, the Company’s shares were trading at a discount of 2.2% to NAV (2023:1.5%
premium) with debt at fair value.
City of London Peer Group Average
-10
-8
-6
-4
-2
0
2
4
6
20202019 20222021 20242023
Ongoing charge The Board regularly reviews the ongoing charge and monitors Company’s expenses.
For the year ended 30 June 2024, the ongoing charge as a percentage of average
shareholders’ fundswas 0.37% (2023:0.37%).
2019
2020
2021
2022
2023
2024
0.0 0.1 0.2 0.3 0.4
0.39
0.36
0.38
0.37
0.37
0.37
The charts and data on pages 2 and 3 also on page 18 show how the Company has performed against these KPIs. A glossary
ofterms and Alternative Performance Measures is included onpages 89 to 91.
The City of London Investment Trust plc Annual Report 2024
24
Promoting the Company’s Success
Section 172 Statement
The Board regards a well-governed business as essential for the successful delivery of its investment proposition. The Directors
carry out their duties under Section 172 of the Act to act in good faith to promote the success of the Company for the benefit of
its members as a whole, and in doing so have regard (amongst other matters) to the likely consequences of any decisions in the
longer term, the need to foster the Company’s wider stakeholders, the impact of the Company’s operations on the community
and the environment and the desirability of the Company maintaining a reputation for high standards of business conduct.
The Company has no employees, premises, assets other than financial assets, or operations. Core activities are conducted
through the Manager (Janus Henderson), with whom the Board maintains a close working relationship, and the Board holds the
Manager to account for the smooth running of the Company’s day-to-day business.
The Board retains responsibility for decisions over corporate strategy, corporate governance, risk and internal control
assessment, investment performance monitoring and setting marketing budgets. It also determines the overall limits and
restrictions for the portfolio, including gearing and asset allocation.
For more information about the responsibilities with which the Board and its Committees are charged, please refer to the
Directors’ Report on pages 39 to 41, the Corporate Governance Report (pages 42 to 48), the Audit and Risk Committee Report
(pages 49 to 51), the Nominations Committee Report (pages 52 and 53) and the Directors’ Remuneration Report (pages 54 to 57)
in addition to the Strategic Report. The schedule of matters reserved for the Board as well as the terms of reference for each of
the Committees of the Board can be found on the Company’s website.
Engagement with Stakeholders
Shareholders’ assets are managed taking account of the Company’s stakeholders and their interests. The Board has mapped
who the stakeholders are to support it in identifying and understanding them and fostering the appropriate level and form of
interaction. Interaction is facilitated through meetings (both face-to-face and via video conferencing and other electronic means),
seminars, presentations, publications and the Company’s website. Set out below are examples of the way theBoard and the
Company engages with its key stakeholders.
Stakeholders How we engage Target outcome
Shareholders and
investors
Shareholders rely on the Company to deliver
sustainable and reliable returns on investment, with
regular, ongoing income. The Board believes that
its primary focus should be on providing an
excellent service to its shareholders and it seeks
toensure that the Company is accessible and
available.
Regular updates on the Company and its activities
are provided through:
●
the Annual and Half Year Reports;
●
the Manager’s monthly factsheets;
●
Company announcements, including daily NAV
announcements;
●
the Company’s website, which includes video
interviews with the Company’s Fund Manager,
regular market commentary and investment
insights and other relevant information to
enhance investors’ understanding of the
Company and its portfolio and prospects;
●
providing regular market commentary;
●
use of social media channels (see page 95); and
●
research notes from Kepler Partners (paid for by
the Company and available to all investors).
Clear communication of the Company’s
strategy and performance against its
objective helps shareholders to make
informed decisions about their investments,
facilitating the retention of existing
shareholders and attracting new ones.
Close interaction with shareholders enables
the Board to run the Company in line with
shareholders’ interests as a whole and for
theCompany’s long-term success.
The Board is committed to maintaining
openchannels of communication with
shareholders. Shareholders can raise
issuesor concerns with the Directors at
anytime bywriting to the Chairman at
theregistered office or by email to
itsecretariat@janushenderson.com.
TheSenior Independent Director is also
available to shareholders if they have
concerns that have not been addressed
through the normal channels. Correspondence
from shareholders is shared with the
Chairman immediately and with the Board
ateach meeting.
The City of London Investment Trust plc Annual Report 2024
25
Promoting the Company’s Success (continued)
Stakeholders How we engage Target outcome
Shareholders and
investors (continued)
Shareholders are encouraged to attend and vote at
the Company’s general meetings, including the
AGM, where they have the opportunity to address
questions directly to the Directors and the Fund
Manager. Shareholders who cannot attend the
AGM in person are invited to attend and raise
questions online.
The Chairman, Senior Independent Director, other
members of the Board and the Fund Manager are
available to meet with shareholders. The Manager’s
sales and marketing team, the Broker and external
marketing research provider (Kepler Partners) also
meet with shareholders and analysts. The Fund
Manager provides presentations to research
analysts following the publication of the Company’s
annual financial results. Feedback from all meetings
is shared with the Board.
The Fund Manager promotes the Company with
the support of the Manager’s dedicated investment
trust sales team and the Board makes additional
spend available to support marketing activities
aimed at raising the profile of the Company.
The Board is pleased to invite shareholders to
attend the 2024 AGM. Further details are on
page 40 and in the Notice of Meeting.
Manager –
Janus Henderson
●
Fund management
●
Sales and marketing
●
Company secretarial
●
Financial reporting
●
Internal controls
functions
●
Investment
accounting and
administration
(outsourced by
JanusHenderson
toBNP Paribas)
●
Oversight of third-
party service
providers
The Board sets and oversees the parameters for
the Manager’s activities, including asset allocation,
gearing and risk management. The Board seeks to
engage with the Manager in a collaborative and
collegiate manner, encouraging open and
constructive discussion and debate, whilst also
ensuring appropriate and regular challenge.
TheBoard receives presentations from the Fund
Manager and Deputy Fund Manager at each Board
meeting and receives timely and accurate
information from the Manager. There is continuous
engagement and dialogue between Board
meetings with the Fund Manager, Deputy Fund
Manager and Corporate Secretary, as well as with
other representatives, as and when necessary, with
communication channels remaining open and
information, ideas and advice flowing freely.
The Board meets with other key representatives
ofthe Manager throughout the year to develop
strategy, assess internal controls and risk
management, and to discuss the sales and
marketing activities to promote the success of
theCompany and raise its profile.
The Board, with the assistance of the Nominations
Committee, formally reviews the performance and
terms of appointment of the Manager at least
annually (see pages 46, 47 and 53 further details).
Successful management of the Company’s
portfolio is essential for the Company to meet
its strategic objectives and enable its long-
term sustainable success, whilst effective
provision of the ancillary services ensure the
efficient running of the Company’s day-to-day
affairs.
The Company is well managed and the Board
places great value on the expertise and
experience of the Fund Manager and Deputy
Fund Manager to execute the investment
objective and deliver returns for shareholders,
and on the Manager’s internal controls and
risk management.
The portfolio activities undertaken by the
Manager and the impact of decisions are set
out in the Fund Manager’s Report on pages
12 to 15.
The City of London Investment Trust plc Annual Report 2024
26
Promoting the Company’s Success (continued)
Stakeholders How we engage Target outcome
Service providers
Including:
●
Depositary and
custodian
●
Fund accountant and
administrator
(outsourced by
Janus Henderson
toBNP Paribas)
●
Broker
●
Registrar
●
Auditor
The Board is conscious of the need to foster good
business relationships with its suppliers. As an
investment company, all services are outsourced
tothird-party service providers. The Manager
maintains the overall day-to-day relationship with
the service providers and reports back to the
Board on performance.
Each service provider has an established track
record and has in place suitable policies and
procedures to ensure it maintains high standards
ofbusiness conduct. The Board regularly considers
the support provided by the service providers,
including quality of service, succession planning,
costs and any potential interruption of service or
other risks to provision.
The Board evaluates the terms of engagement and
the control environments in place at each service
provider and, through the Nominations Committee,
formally assesses their appointment annually.
The Company is supported by experienced
and capable third parties for all the services
required to be a well-functioning company
and the costs are commensurate with the
services provided.
The Board is confident that Janus Henderson
has developed and maintains good working
relationships with all of the Company’s
third-party suppliers.
Investee companies
(listed on pages 16
and17)
The Board sets the investment objective and
discusses stock selection, asset allocation and
engagement with investee companies with the
Fund Manager and Deputy Fund Manager at each
Board meeting.
The fund management team regularly
conducts face-to-face and/or virtual meetings
with portfolio companies’ management teams
to enable them to understand current trading
and prospects for their businesses.
The Manager is a responsible investor
andhas a dedicated Governance and
Responsible Investment Team that the Fund
Manager can utilise when making investment
decisions and voting.
Communities and the
environment
The Board mandates the Manager, supported by
its governance function, to engage with investee
companies at the appropriate time on ESG matters
in line with good stewardship practices.
The Board is also conscious of the importance of
providing an investment product which meets the
needs of its investors, including retail investors
andpensioners.
The Board is conscious of the need to take
appropriate account of broader ESG concerns
and to act as a good corporate citizen.
The Board believes the Company provides an
accessible, affordable and reliable investment
for retail and institutional investors. A reliable
dividend stream from a prudently invested
fund is particularly important in an era of
great uncertainty and an increasing
requirement on individuals to organise their
own pensions and investments.
The City of London Investment Trust plc Annual Report 2024
27
Promoting the Company’s Success (continued)
Examples of stakeholder consideration
The Board is always mindful of the need to act in the best
interests of stakeholders as a whole and to have regard to
other applicable Section 172 factors and this forms part of
theBoard’s decision-making process. Examples of this can
be seen in the year under review as follows.
Marketing and promotion
The Board approved a significant increase in the Company’s
marketing budget in order to promote the Company to a wider
audience, primarily through targeted digital advertising. Using
a clear messaging framework, this was initiated in February
2024 and is intended, in conjunction with a redesign of the
Company’s website, to increase understanding of the
Company among its stakeholders as well as raising
awareness of the Company among potential new investors.
Issuing and buying back the Company’s shares
As set out on page 22, the Board’s aim is for the Company’s
share price to reflect closely its underlying net asset value,
toreduce volatility and encourage a liquid market in its shares.
TheBoard considers that it is in shareholders’ interests for the
Company to be able to issue shares while they are trading at a
premium to NAV and to buy back shares at a discount to NAV,
because by doing so, the NAV is enhanced and, in the case of
share issues, some of the Company’s costs are spread across
a larger asset base. This approach was reconfirmed atthe
annual strategy meeting of the Board. During the year, the
Company has both issued and bought back shares.
Dividends paid to shareholders
As set out in its investment objective, the Board recognises
the importance of dividend income to its shareholders. One
ofthe advantages of an investment trust is the ability to retain
surplus income. The Company is able to draw on the revenue
reserves built up over the years to ensure that there is no
disruption to dividends for shareholders. The capital reserve
arising on investments sold is also available to fund the
dividend, if necessary. As a result, the Board has been able
tomaintain its policy of increasing the total dividend each
year, even in years when the dividend per share has not been
covered by revenue earnings per share. In the year to 30 June
2024, the annual dividend has been increased by 2.5%, the
58th year of continuous dividend growth, with £1.6 million
transferred to the revenue reserve.
Management fee
The management fee was agreed with Janus Henderson in 2019
and since then the Company’s net assets under management
have grown significantly. The Board discussed the fee with
JanusHenderson and agreement was reached to reduce the
fee rate from 0.325% to 0.3% with effect from 1January 2024.
Furthermore, in the event that net assets under management
exceed £3.0 billion, the management fee onany such excess
will be reduced to 0.275%. The Board regularly reviews costs
to ensure that the Company’s ongoing charge remains low
compared with other investment trusts and discretionary
(non-tracker) managed equity investment products.
Delisting from the New Zealand Stock Exchange
During the year, the Board made the decision to de-list the
Company’s shares from the New Zealand Stock Exchange and
the shares on the New Zealand register were transferred to the
UK register. As reported at the half year, shareholdings on the
New Zealand register only represented 1.2% of the Company’s
total shares in issue and the costs of maintaining the listing
had been steadily increasing. The Board considered that
these costs, together with the administrative and compliance
burdens of maintaining the secondary listing in New Zealand,
had become disproportionate to the benefits ofmaintaining
that listing and relative to the percentage of shares involved.
The delisting was effective from 21 March 2024.
The Board ensured that the New Zealand shareholders’ rights
were protected and that any inconvenience was kept to a
minimum. Arrangements were made to provide local advice
and support in New Zealand to shareholders during the
de-listing process. A dividend currency alternative service has
been made available to shareholders to enable them to
receive dividends in New Zealand dollars.
The City of London Investment Trust plc Annual Report 2024
28
Managing Our Risks
The Board, with the assistance of the Manager, has carriedout a robust assessment of the principal and emerging risks and
uncertainties facing the Company, including those that would threaten its business model, future performance, solvency or
liquidity and reputation.
The Board regularly considers the principal and emerging risks facing the Company and has drawn up a register of these risks.
TheBoard has also put in place a schedule of investment limits and restrictions, appropriate to the Company’s investment
objective and policy. The principal risks which have been identified and the steps taken by the Board to mitigate these are set out
in the table below. The principal financial risks are detailed in note 16 to the financial statements. Details of how the Board
monitors the services provided by Janus Henderson and its other suppliers, and the key elements designed to provide effective
internal control, are explained further in the internal controls section of the Corporate Governance Report on pages 47 and 48.
In addition to the principal risks facing the Company, the Board also regularly considers emerging risks, which are defined as
potential trends, sudden events or changing risks which are characterised by a high degree of uncertainty in terms of the
probability of them happening and the possible effects on the Company. Should an emerging risk become sufficiently clear,
itmay be moved to a significant risk.
Principal risks Trend Mitigating measure
Portfolio and market price
Although the Company invests almost entirely in
securities that are listed on recognised markets, share
prices may move rapidly. The companies in which
investments are made may operate unsuccessfully, or
fail entirely. A fall in the market value of the Company’s
portfolio would have an adverse effect on equity
shareholders’ funds.
The Board reviews the portfolio at the seven Board meetings
held each year and receives regular reports from the
Company’s brokers. A detailed liquidity report is considered
on a regular basis.
The Fund Managers closely monitor the portfolio between
meetings and mitigate this risk through diversification of
investments. The Fund Managers periodically present the
Company’s investment strategy in respect of current market
conditions. Performance relative to the FTSE All-Share Index,
other UK equity income trusts and IA UKEquity Income OEICs
is also monitored.
The majority of the Company’s investments are multi-
national companies with operations in local markets.
Dividend income
A reduction in dividend income from investee companies
could adversely affect the Company’s ability to maintain
its record of paying a growing dividend to shareholders
each year.
The Board reviews income forecasts at each meeting.
TheCompany has revenue reserves of £46.6 million (before
payment of the fourth interim dividend) and distributable
capital reserves of £346.3 million.
Investment activity, gearing and performance
An inappropriate investment strategy (for example, in
terms ofasset allocation or the level of gearing) may
result in underperformance against the Company’s
benchmark.
Investment performance could be affected over the
longer term by the impact of sudden potentially
catastrophic events, whether man-made (for example
extreme political tensions, conflict, poor trade relations,
wide scale financial markets disruption), or natural
disasters, whether arising from climate change/adverse
weather events or disease.
At each meeting, the Board reviews investment performance,
the level of gearing, the level of premium/discount, income
forecasts and a schedule of expenses. It also has an annual
meeting focused on strategy at which these matters are
considered in more depth.
The City of London Investment Trust plc Annual Report 2024
29
Managing Our Risks (continued)
Principal risks Trend Mitigating measure
Tax and regulatory
Changes in the tax and regulatory environment, including
the Company failing to identify and implement any
necessary regulatory change, could adversely affect the
Company’s financial performance, including the return
on equity. These may also include government measures
which damage the market appeal of investment trusts
for investors.
A breach of Section 1158/9 could lead to a loss of
investment trust status, resulting in capital gains realised
within the portfolio being subject to corporation tax.
Abreach of the UK Listing Rules could result in
suspension of the Company’s shares, while a breach
ofthe Companies Act 2006 could lead to criminal
proceedings, or financial or reputational damage.
The Manager provides its services, inter alia, through suitably
qualified professionals and the Board receives internal control
reports produced by the Manager on a quarterly basis, which
confirm legal and regulatory compliance. The Fund Managers
also consider tax and regulatory change in their monitoring of
the Company’s underlying investments.
Operational
The disruption or failure of technology systems used by
the Manager or its Administrator (BNP Paribas), whether
through inter alia, cyber attacks, failed software updates
or data breaches, could profoundly impact the accurate
reporting and monitoring of the Company’s financial
position. The Company is also exposed to the
operational risk that one or more of its suppliers may not
provide the required level of service.
The Board monitors the services provided by the Manager
and its other suppliers and receives reports on the key
elements in place to provide effective internal control.
Cyber security is closely monitored and the Audit and Risk
Committee receives regular presentations from Janus
Henderson’s Chief Information Security Officer.
The Board considers the loss of the Fund Manager as a risk
but this is mitigated by the experience of the team at
JanusHenderson as detailed on page 38.
The City of London Investment Trust plc Annual Report 2024
30
The AIC Code of Corporate Governance includes a requirement
for the Board to assess the future prospects for the Company,
and to report on the assessment within the Annual Report.
The Board considers that certain characteristics of the
Company’s business model and strategy are relevant to
thisassessment:
●
The Board seeks to deliver long-term performance by
theCompany.
●
The Company’s investment objective, strategy and policy,
which are subject to regular Board monitoring, mean
thatthe Company is invested mainly in readily realisable,
UK-listed securities and that the level of borrowings
isrestricted.
●
The Company is a closed end investment company and
therefore does not suffer from the liquidity issues arising
from unexpected redemptions.
●
The Company has an ongoing charge of 0.37%, which is
lower than other comparable investment trusts.
Also relevant were a number of aspects of the Company’s
operational agreements:
●
The Company retains title to all assets held by the
Custodian under the terms of formal agreements with
theCustodian and Depositary.
●
Long-term borrowing is in place, being 4.53% secured
notes 2029, 2.94% secured notes 2049 and 2.67%
secured notes 2046 which are subject to formal
agreements, including financial covenants with which the
Company complied in full during the year. Thevalue of
long-term borrowing is relatively small in comparison to
the value of net assets, being 5.5%.
●
Revenue and expenditure forecasts are reviewed by the
Directors at each Board meeting. This includes stress
testing of the forecast under different scenarios.
●
Cash is held with approved banks.
Three model scenarios are considered which evaluate the
impact on revenue reserves. These range from a worst case
scenario which includes low consensus estimates, significant
dividend cuts of up to 50% in specific sectors and specific
investee companies, to a best case scenario with high
consensus estimates, no dividend cuts in any specific sector
and limited dividend cuts in specific investee companies.
Increasing dividend payments to shareholders could continue
under all three scenarios whether through revenue, or
supported by distributable capital reserves. None of the
results from the three scenarios would therefore threaten the
viability of the Company.
Covenant limits are tested to ascertain the level that net
assets would need to fall by to breach any covenant
conditions. Net assets would need to fall by amounts in
excess of £1.7 billion to breach covenants, with all other
factors remaining constant. The Board considers this to be
highly unlikely and therefore does not threaten the viability
ofthe Company.
In addition, the Directors carried out a robust assessment of
the principal risks and uncertainties which could threaten the
Company’s business model, including future performance,
liquidity and solvency, and considered emerging risks that
could have a future impact on the Company.
The principal risks identified as relevant to the viability
assessment were those relating to investment portfolio
performance, including climate change, and its effect on the
net asset value, share price and dividends, and threats to
security over the Company’s assets. The Board took into
account the liquidity of the Company’s portfolio, the existence
of the long-term fixed rateborrowings, the effects of any
significant future falls in investment values and income receipts
on the ability to repay and renegotiate borrowings, grow
dividend payments and retain investors and the potential need
for share buybacks to maintain a narrow share price discount.
The Directors assess viability over five-year rolling periods,
taking account of foreseeable severe but plausible scenarios.
In coming to this conclusion, the Directors have considered
the current geopolitical and macroeconomic uncertainties
andthe potential for sudden catastrophic events such as
pandemics, conflict and climate events, in particular the
impact on income and the Company’s ability to meet its
investment objective. The Directors do not believe that they
will have a terminal impact on the viability of the Company
andits ability to continue in operation, notwithstanding the
short-term uncertainty these events could cause in the
markets and specific short-term issues, such as energy,
supply chain disruption, inflation and labour shortages.
The Directors believe that a rolling five-year period best
balances the Company’s long-term objective, its financial
flexibility and scope with the difficulty in forecasting economic
conditions affecting the Company and its shareholders.
Based on their assessment, and in the context of the
Company’s business model, strategy and operational
arrangements set out above, the Directors have a reasonable
expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the
five-year period.
The Company’s Viability
The City of London Investment Trust plc Annual Report 2024
31
How we integrate Environmental, Social
and Governance considerations in our
investment decisions
The Board believes that integrating ESG into investment
decision-making and ownership practices is an important
factor for delivering the investment outcomes our
shareholders seek. ESG considerations are therefore a fully
embedded component of the investment process employed
by the Fund Manager, and the wider Janus Henderson
investment teams. The Company integrates ESG but does not
pursue a sustainable investment objective or otherwise take
ESG factors into account in a binding manner. ESG integration
is the practice of incorporating material environmental/social
and governance information or insights in a non-binding
manner alongside traditional measures into the investment
decision process to improve long-term financial outcomes
ofportfolios. ESG related research is one of many factors
considered within the investment process.
Defining ESG
Environmental factors include climate change, use of natural
resources, pollution, waste management, water usage and
deforestation.
Social factors include corporate culture, diversity, health and
safety, community relations and supply chain management.
Governance factors include business ethics, board
composition, remuneration and shareholder rights.
Investment considerations
Resilience of business models is crucial to the Company’s
investment strategy. The Company’s investment philosophy is
valuation driven, with a dividend yield considered the most
important measure of value. As such, a considerable amount
of time is spent by the Fund Manager identifying fundamental
factors, including ESG factors which may impact profits, cash
flow and dividends and ensuring that investee companies
have robust policies and processes in place to manage these.
Whilst no company is specifically excluded based on ESG
considerations, the Fund Manager would seek to avoid
companies where ESG risks are not sufficiently considered or
managed. As the Fund Manager strives to understand all
drivers of company performance, healso strives to understand
the risks. An evaluation of ESGfactors is integral to this.
Governance is a key part of fundamental factor analysis with
good corporate governance supportive of long-term decision-
making and investment returns. The significance of
environmental and social factors can vary depending on the
sector and the region in which a company operates.
Nonetheless, each ESG factor, in addition to the quantitative
and qualitative assessments, is an important consideration
when evaluating the opportunity in an equity investment.
Fundamental factors considered vary, but may include:
Financial
Analysis
Dividend sustainability, free cash flow,
operating margin, balance sheet strength,
leverage, profitability, earnings growth.
Qualitative
Evaluation
Competitive position, industry trends,
business volatility, business model, barriers
to entry, exposure to disruption.
Environmental Pollution, carbon emissions, water usage,
waste management, resource use,
sustainable sourcing.
Social Health and safety, employee relations,
diversity and inclusion, employee
development, data privacy, supply chain
management.
Governance Shareholder alignment, board
independence, shareholder rights, business
ethics, voting structure, remuneration, board
experience, accounting standards.
Valuation Dividend yield, free cash flow, price to
earnings ratio (“P/E”), earnings per share
(“EPS”), enterprise value/earnings before
interest, tax, depreciation and amortisation
(“EV/EBITDA”) and dividend cover.
The Manager engages MSCI
1
, a leading firm researching and
rating ESG factors globally, to support investment research.
MSCI can also be used to monitor the holdings within the
Company and analyse its overall ESG risk exposure.
Weighted average ESG score
0 2 4 6 8 10
Benchmark
City of London
8.0
7.7
Source: MSCI, City of London and Index weights as at 30 June 2024
MSCI Risk data as at 30 June 2024
MSCI provides an ESG quality score which measures the
ability of the underlying holdings to manage key medium to
long-term risks and opportunities that arise from ESG factors.
It is based on MSCI ESG ratings and is measured on a scale
of 0 to 10 (0 being worst and 10 being best). For this metric
the Company scores 8.0 and the benchmark 7.7. The risk
ratings are aggregated for the Company’s portfolio and the
benchmark, the FTSE All-Share Index. The Company’s ESG
risk is 3.8% lower than the benchmark, as assessed by MSCI.
ESG
The City of London Investment Trust plc Annual Report 2024
32
Distribution of MSCI ESG Fund Ratings Universe
CCC B BB BBB A AA AAA
City of London
Benchmark
% of portfolio
0
10
20
30
40
50
LAGGARD AVERAGE LEADER
Source: MSCI, City of London and Index weighs as at 30 June 2024
MSCI Risk data as at 30 June 2024
MSCI’s ESG ratings are ranked using a seven-point AAA-CCC
scale. Both the Company and the benchmark score AA
ratings using this analysis. The Company has no exposure to
companies with the lowest CCC scores, with more exposure
to AAA rated stocks than the benchmark.
Carbon emissions
0
1,000,000
500,000 1,500,000 2,000,000 2,500,000
Benchmark
City of London
Tons CO2e
Source: MSCI, City of London and Index weights as at 30 June 2024
MSCI Risk data as at 30 June 2024
The above chart shows the direct and indirect carbon
emissions of the holdings in both the Company and the
benchmark. These emissions are based on the assets under
management of the Company compared to an equivalent
portfolio of assets under management invested in the
benchmark. Scope 1 and 2 emissions are the direct emissions
from a company’s operations and scope 3 emissions are
indirect emissions. The Company’s direct and indirect carbon
emissions are 18.1% lower than the benchmark.
Engagement and stewardship
Stewardship is a fundamental part of the Manager’s long-
term, active approach to investment management. Strong
ownership practices, including engagement with management
and boards, can help protect and enhance long-term
shareholder value. Janus Henderson supports the UK
Stewardship Code and is a founding member of the UN
Principles of Responsible Investment (“UN PRI”). Additionally,
Janus Henderson is a supporter of a number of broader ESG
initiatives such as the Access to Medicine Index which aims to
improve availability of healthcare in developed and emerging
markets and Climate Action 100+, an investor-led initiative to
engage with heavily emitting companies to reduce their
greenhouse gas emissions.
As a part of the research process, portfolio managers and
analysts meet frequently with company management, senior
executives and boards, with Janus Henderson conducting
thousands of meetings per year. These meetings typically
occur prior to initiating a position and throughout the holding
period. The portfolio managers develop long-term
relationships with the management of firms in which they
invest. Should concerns arise over a firm’s practices or
performance, they would seek to leverage these constructive
relationships by engaging with company management or
express their views through voting on management or
shareholder proposals. Escalation of engagement activities
depends upon a company’s individual circumstances.
Engagement Example
The Financial Conduct Authority has introduced Consumer
Duty regulations with the aim of setting higher standards
for retail financial services customers. The Duty came into
force for closed book products (those financial products
still in existence but no longer being sold) in July 2024.
Engagement between Job Curtis (Fund Manager), David
Smith (Deputy Fund Manager), Olivia Jones (Janus
Henderson Responsible Investment & Governance Analyst)
and executives from investee companies with exposure to
closed life insurance products, specifically Phoenix (19 April
2024), Aviva (29 April 2024) and M&G (3 May 2024), were
held ahead of the Duty coming into force. The aim was to
understand how they had been preparing for the deadline
and assessing their products to ensure they aligned with
the regulation. This entailed evaluating products on pricing
as well on the clarity of communications with customers.
From this engagement we gained comfort that the large
insurers were as best prepared as possible and could
articulate clear frameworks for assessing their products
and service levels with sufficient time frame for remediation.
ESG (continued)
The City of London Investment Trust plc Annual Report 2024
33
ESG (continued)
Voting
The Board believes that voting at general meetings is an
important aspect of corporate stewardship, and a means of
signalling shareholder views on board policy, practices and
performance. The Board has delegated responsibility for voting
the rights attached to the shares held in the Company’s portfolio
to the Manager, who actively votes at shareholder meetings
and engages with companies as part of the voting process.
Voting decisions are guided by the best interests of the
investee companies’ shareholders and made in consultation
with the Fund Manager, who has an in-depth understanding
of the respective company’s operations. Voting decisions
aretaken in keeping with the provisions of the Manager’s
Responsible Investment Policy, which set out the Manager’s
approach to corporate governance, corporate responsibility
and compliance with the Stewardship Code, and are
publiclyavailable on the Manager’s website at
www.janushenderson.com. To retain oversight of the
process, the Directors regularly receive reports on how the
Manager has voted the shares held in the Company’s
portfolio, and they review the Responsible Investment Policy
at least annually.
In the period under review, the shares in the Company’s
portfolio were voted in respect of 89 meetings. The level of
governance in leading global companies is generally of a high
standard in terms of best practice, which meant support in
favour of the resolutions proposed by management was
warranted. However, in respect of 10 resolutions (<1% of
theresolutions proposed), support was not warranted
and,following discussion between the Fund Manager and
Janus Henderson’s governance team, the shares were voted
against the investee board recommendation. On occasion,
the Fund Manager takes voting decisions after consultation
with the Chairman on behalf of the Board.
As an active manager, Janus Henderson’s preference is to
engage with management and boards to resolve issues of
concern rather than to vote against shareholder meeting
proposals. This approach is more likely to be effective in
influencing company behaviour. The Fund Manager therefore
actively seeks to engage with companies throughout the year
and in the lead up to the annual shareholder meeting to
discuss any potentially controversial agenda items. However,
where he believes that proposals are not in shareholder
interests or where engagement proves unsuccessful, he will
vote against.
Voting record
82% of meetings where all
resolutions were voted in favour
18% of meetings with at least
one vote against or withheld
In terms of resolutions not supported, these covered two main
areas, director-related and other business*.
Director-related 30%
Other business* 30%
Environmental/social** 20%
Compensation 10%
Shareholder rights 10%
Source: Janus Henderson using Institutional Shareholder Services (“ISS”)
categories
Note: Some meetings had more than one vote against management
* We routinely vote against proposals labelled ‘other business’. Many companies
put forward proposals labelled ‘other business’. This is a request to allow the
board and shareholders to raise other issues and discuss them at the meeting.
It is often a routine request, however as it could potentially lead to subsequent
approval of items without prior disclosure to minority shareholders, we routinely
vote against these items
** Environmental/social voting relates to where an improvement in reporting and
disclosures are needed by companies on environmental and/or social matters
The environment
As an investment company, the Company’s own direct
environmental impact is minimal. The Company has no
greenhouse gas emissions to report from its operations, nor
does it have responsibility for any other emissions producing
sources under the Companies Act 2006 (Strategic Report and
Directors’ Reports) Regulations 2013. For the same reasons,
the Company considers itself to be a low energy user under
the Streamlined Energy & Carbon Reporting (“SECR”)
regulations and therefore is not required to disclose energy
and carbon information.
The Manager recognises the importance of managing its
operational activities in a sustainable way and minimising any
adverse impact on the environment.
In 2021 Janus Henderson reached its three-year target to
reduce its carbon footprint by 15% per full-time employee
(“FTE”) from 2018 levels. In 2022, using guidance from the
Science-Based Target Initiative, Janus Henderson set
ambitious new five-year reduction targets versus a 2019
baseline and per FTE:
The City of London Investment Trust plc Annual Report 2024
34
ESG (continued)
●
reduction target of 29.4% in Scope 1 (fuel) and Scope 2
(electricity) emissions;
●
reduction target of 17.5% in Scope 3 (business travel,
freight, paper, water, waste) emissions; and
●
reduction target of 17.5% on water and waste
consumption by FTEs.
In addition to this, Janus Henderson has maintained a
CarbonNeutral
®
certification since 2007 and offsets all its
operational Scope 1, Scope 2 and Scope 3 emissions each
year. Through this process, Janus Henderson has invested
ina variety of offset projects around the world, delivering
financial support to essential renewable energy, forestry and
resource conservation projects that support reductions in
greenhouse gas emissions. All projects Janus Henderson
supports have been classified as ‘additional’ by an
independent third party, meaning that they would not happen
without the sale of carbon credits.
Janus Henderson discloses its carbon emissions annually
through regulatory and voluntary reporting frameworks,
including SECR and the CDP (formerly the Carbon Disclosure
Project), as well as in its 2023 Responsibility Report, which
provides more information.
Janus Henderson produces product-level Task Force on
Climate-Related Financial Disclosures (“TCFD”) reports.
Thesereports include an overview of the climate-related
governance, strategy, risk management, and metrics and
targets of Janus Henderson and its portfolios. Product-level
metrics include absolute carbon emissions, carbon
footprint,weighted average carbon intensity, implied
temperature rise and climate scenario analysis (Climate
Valueat Risk). JanusHenderson’s TCFD Report specific
toCity of London isavailable on the Company’s website
atwww.cityinvestmenttrust.com.
Business ethics
As the Company’s operations are delegated to third-party
service providers, the Board seeks assurances, at least
annually, from its suppliers that they comply with the
provisions of the UK Modern Slavery Act 2015 and maintain
adequate safeguards in keeping with the provisions of the
Bribery Act 2010, Criminal Finances Act 2017 and the
sanctions element of the Economic Crime Act (Transparency
and Enforcement) 2022.
1 Certain information contained herein (the “Information”) is sourced from/copyright of MSCI Inc, MSCI ESG Research LLC, or their affiliates (“MSCI”), or information
providers (together the “MSCI Parties”) and may have been used to calculate scores, signals, or other indicators. The Information is for internal use only and may
not be reproduced or disseminated in whole or part without prior written permission. The Information may not be used for, nor does it constitute, an offer to buy
or sell, or a promotion or recommendation of, any security, financial instrument or product, trading strategy, or index, nor should it be taken as an indication or
guarantee of any future performance. Some funds may be based on or linked to MSCI indexes, and MSCI may be compensated based on the fund’s assets under
management or other measures. MSCI has established an information barrier between index research and certain Information. None of the Information in and of
itself can be used to determine which securities to buy or sell or when to buy or sell them. The Information is provided “as is” and the user assumes the entire
risk of any use it may make or permit to be made of the Information. No MSCI Party warrants or guarantees the originality, accuracy and/or completeness of the
Information and each expressly disclaims all express or implied warranties. No MSCI Party shall have any liability for any errors or omissions in connection with
any Information herein, or any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the
possibility of such damages
The City of London Investment Trust plc Annual Report 2024
35
Governance
36
Governance
Directors and Fund Managers
All Directors are independent of Janus Henderson.
All Directors are members of the Nominations Committee.
The Audit and Risk Committee consists of Samantha Wren, Ominder Dhillon, Ted Holmes, Sally Lake and Clare Wardle.
Samantha Wren
Position: Chair of the Audit and
RiskCommittee
Date of Appointment:
1 September 2015 (Chair of the Audit
and Risk Committee on 7 July 2016)
Skills and Experience: Samantha has
extensive accounting and auditing
experience. She was formerly Chief
Executive of IPGL Limited, a privately-
owned investment company. Prior to
this, she was the Group Chief Financial
Officer and Group Chief Operating
Officer of NEX Group plc, having
previously held senior finance roles at
its predecessor company, ICAP plc.
Prior to ICAP plc, she held several
senior finance roles at the gaming
group, The Rank Group plc, where
shewas also a Director of the Rank
Pension Plan Trustee Limited. She
qualified as a Chartered Management
Accountant at Rentokil Initial plc.
Current External Appointments:
Non-executive Director and Chair of the
audit and risk committee of Schroder
Japan Trust plc. Non-executive Director
of Chapel Down Group plc, where she
is also chair of the remuneration
committee.
Samantha will be retiring from the
Board at the Annual General Meeting.
Sir Laurie Magnus CBE
Position: Chairman of the Board and
Nominations Committee
Date of Appointment:
1 March 2020 (Chairman on
27 October 2020)
Skills and Experience: Sir Laurie
hasover 45 years of experience in
corporate finance markets and over
20years as a member of investment
supervisory bodies, including as a
director of various investment trusts.
Hewas Chairman of Pantheon
International plc until October 2022.
Hehas held senior positions at financial
institutions including Samuel Montagu,
Phoenix Securities, Donaldson Lufkin
&Jenrette and Lexicon Partners (latterly
as Chairman prior to its merger with
Evercore). He iscurrently a non-
executive adviser toEvercore’s
European business.
Current External Appointments:
Sir Laurie is the Prime Minister’s
Independent Adviser on Ministers’
Interests. In the not for profit sector,
heis Chairman of The Heritage of
London Trust.
Ominder Dhillon
Position: Director
Date of Appointment:
1 September 2021
Skills and Experience: Ominder brings
to the Board strong investment
knowledge across public and private
markets, especially in regard to
sustainable investing, sales and
marketing expertise and a good
understanding of governance and risk
management. He was, until January
2020, Global Head of Institutional
Distribution at M&G plc. Prior to that,
from 2011 to 2015, he was Head of
Distribution at Impax Asset
Management. He was also formerly
Head of UK and Ireland at Fidelity
International, Director of Institutional
Sales at Scottish Widows Investment
Partnership and a trustee of UK charity
Facing History and Ourselves.
Current External Appointments:
Non-executive Director of Fidelity Special
Values PLC, Senior Adviser to The IC
Research Institute and a Director of
Ocris Partners SL.
Directors
The City of London Investment Trust plc Annual Report 2024
37
Fund Manager
Job Curtis has been City of London’s Fund Manager since 1 July 1991. After graduating from Oxford University
in 1983 with a BAHons in Philosophy, Politics and Economics, he joined Grieveson, Grant stockbrokers as
atrainee. In 1985, he joined Cornhill Insurance as an assistant fund manager and then moved to Touche
Remnant in 1987 where he became a fund manager. Touche Remnant was taken over by Henderson Group
plc in 1992 and Job is currently a member of Janus Henderson’s Global Equity Income team.
Deputy Fund Manager
David Smith is a Fund Manager on the Janus Henderson Global Equity Income team, a position he has held
since 2008. David manages Henderson High Income Trust plc, the UK portfolio of The Bankers Investment
Trust PLC and a number of UK equity institutional funds. He joined Janus Henderson in 2002, initially working
in operations and progressing to the UK Equities team, and is now part of the Global Equity Income team.
David graduated with a BSc degree (Hons) in Chemistry from Bristol University. He holds the Investment
Management Certificate and the Chartered Financial Analyst designation.
Directors and Fund Managers (continued)
Sally Lake
Position: Director
Date of Appointment:
1 August 2024
Skills and Experience: Sally is a fellow of
the Institute of Actuaries, and has spent
themajority of her career within non-life
commercial insurance. During her time at
Beazley plc, from 2006 to 2024, she held
avariety of roles, including within both
business units and the actuarial and finance
functions.
In her final five years with Beazley, Sally
served as group CFO during a period of
significant change both within the business,
within the finance and accounting function
as well as the wider macro environment.
Aspart of her role, she also was responsible
for investments, investor relations, actuarial,
corporate governance, compliance, finance
change and modernisation as well as all
aspects of finance. She was a member of
the plc board until May 2024, as well as a
number of subsidiaries.
Sally is a very proud and active DEI
advocate. She was the executive sponsor
for HM Treasury’s Women in Finance
Charter, as well as a supporter of a number
of changes at Beazley to improve inclusion
and representation for women, families and
people of colour.
Current External Appointments:
None.
Robert Holmes (Ted)
Position: Director
Date of Appointment:
1 January 2018
Skills and Experience: Ted has a
strong background in investment
management. Ted joined the Board
following a twenty-year career at
UBS Asset Management. During that
time, he worked as a managing
director in both the Chicago office
(previously Brinson Partners) and
London office (previously Phillips and
Drew) in a variety of positions, from
analyst to European Head of
Equities. Prior to UBS, he worked for
Ernst & Young in Washington, D.C.
He has an MBA from the University
of Chicago Booth School of
Business, is a Chartered Financial
Analyst and is a Certified Public
Accountant.
Current External Appointments:
Non-executive Director and Chair of
the audit committee of River UK
Micro Cap Limited and Director of
Blue Ocean Investment Partners
Limited.
Clare Wardle
Position: Senior Independent Director
Date of Appointment:
1 November 2019
Skills and Experience: Clare brings to
the Board considerable international
experience in risk, governance,
competition and compliance. She has
played a leading role in the growth of
CCEP from a $15 billion market cap
company operating in Europe to a
$33billion market cap company
operating in 30 countries. Previously
she was Group General Counsel and
Company Secretary of Kingfisher,
Europe’s largest home improvement
group, Commercial Director, and before
that General Counsel and Company
Secretary of Tube Lines, had a number
of senior roles in Royal Mail Group and
worked atwhat is now Hogan Lovells.
She is currently chair of a fundraising
committee for Royal British Legion
Industries. She was also formerly a
non-executive Director of ViaCode
Limited, Chair of Basketball England,
Senior Independent Director of Modern
Pentathlon GB and a trustee of the
Friendly Almshouses.
Current External Appointments:
General Counsel and Company
Secretary of Coca-Cola Europacific
Partners plc, which she joined in
May2016.
The City of London Investment Trust plc Annual Report 2024
38
Directors’ Report
The Directors present their report and the audited financial
statements for the year ended 30 June 2024.
The Investment Portfolio on pages 16 and 17, Corporate
Governance Statement, Audit and Risk Committee Report
and Nominations Committee Report on pages 42 to 53,
Statement of Directors’ Responsibilities on page 58 and
Securities Financing Transactions, Alternative Performance
Measures and other information on pages 87 to 95 form part
of the Directors’ Report.
Results and Dividends
The results for the year are set out in the financial statements.
Two interim dividends of 5.05p each and two interim dividends
of 5.25p each, totalling 20.60p per share, have been declared
and paid in respect of the year to 30June 2024, an increase
of2.5% over the previous year. Seenote 10 on page 76 for
more information. No final dividend is being proposed.
A review of the year and the outlook for the forthcoming year
can be found in the Strategic Report.
Directors
The Directors of the Company are listed on pages 37 and 38.
All served throughout the period under review with the
exception of Sally Lake, who was appointed as a non-
executive Director on 1 August 2024.
Samantha Wren will be retiring from the Board at the
forthcoming Annual General Meeting. In accordance with the
recommendations ofthe AIC Code of Corporate Governance,
Sally Lake will stand for election at the forthcoming Annual
General Meeting and the remaining Directors will offer
themselves for re-election.
The beneficial interests of the current Directors and their
connected persons in the securities of the Company as at
30June 2024 are set out in the Directors’ Remuneration
Report on page 56. Details of Directors’ insurance and
indemnification are set out on page 46.
Share Capital
There are no restrictions on the transfer of the Company’s
share capital and there are no shares or stock which carry
specific rights with regards to control of the Company. The
Company is not aware of any agreements or arrangements
between holders of securities which would result in
restrictions on the transfer of securities or voting rights.
The Company’s equity and non-equity share capital comprises:
Ordinary shares of 25p nominal value each
The voting rights of the ordinary shares on a poll are one vote
for every 15 shares held. At the beginning of the year, there
were 497,354,868 ordinary shares in issue. During the year,
5,310,000 new ordinary shares with a nominal value of
£1,327,500 (representing 1.1% of the number of shares in
issue at the beginning of the year) were issued to Cavendish
Capital Markets Limited at a price range of 386.3p to 410.7p
for total proceeds (net of commissions) of £20,890,000.
8,301,867 shares with a nominal value of £2,075,467
(representing 1.7% of the issued share capital at the beginning
of the year) were bought back in the market and placed into
treasury for a total net payment of £34,400,000.
At 30 June 2024, the number of ordinary shares in issue was
502,664,868, of which 8,301,867 shares were held in treasury.
Accordingly, the number of shares in issue with voting rights
was 494,363,001.
No shares have been issued since 30 June 2024 and up to
16September 2024, being the last practicable date prior to
publication of the Annual Report. 28,278 shares have been
bought back since the year end.
Cumulative first preference stock
The voting rights of the first preference stock on a poll are one
vote per £10 of stock held. At 1 July 2023 and at 30 June
2024 there was £301,982 of first preference stock in issue.
Non-cumulative second preference stock
Second preference stockholders have no rights to attend and vote
at general meetings (except on the winding-up of the Company
or if dividends are in arrears). At 1 July 2023 and at 30 June
2024 there was £507,202 of second preference stock in issue.
Non-cumulative preferred ordinary stock
The voting rights of the preferred ordinary stock on a poll are
one vote per £20 of stock held. At 1 July 2023 and at 30 June
2024 there was £589,672 of preferred ordinary stock in issue.
Further details on the first and second preference stock and
the preferred ordinary stock are contained in note 15 on pages
78 and 79.
Total voting rights
At 30 June 2024, the total voting rights in the Company were
33,017,215, comprising 32,957,533 ordinary share voting
rights (99.8%), 30,198 first preference stock voting rights
(0.1%) and 29,484 preferred ordinary stock voting rights (0.1%).
Shareholder authorities
The Directors seek annual authority from the shareholders to
allot new ordinary shares, to dis-apply the pre-emption rights
of existing shareholders and to buy back, for cancellation or to
be held in treasury, the Company’s ordinary shares. In
addition, the Directors seek annual authority to buy back and
cancel the Company’s preferred and preference stocks.
At the AGM held on 31 October 2023, the Directors were
granted authority to allot up to 50,266,484 ordinary shares
(with an aggregate nominal amount of £12,566,621) for cash
The City of London Investment Trust plc Annual Report 2024
39
and to repurchase 75,349,463 ordinary shares (with a nominal
value of £18,837,366) for cancellation or to be held in treasury.
No shares have been issued and 8,330,145 shares have been
bought back under these authorities. During the year and up
to the date of this report, the Directors have not bought back
any preferred or preference stocks.
The Directors will once again be seeking to renew the
authorities to allot and repurchase the ordinary shares at the
upcoming Annual General Meeting, when the existing
authorities will expire.
The Board’s aim is for the Company’s share price to reflect
closely its underlying net asset value and encourage a liquid
market in the ordinary shares. For this reason, the Board has,
when appropriate, sought to utilise the Company’s ability to
issue additional ordinary shares to satisfy investor appetite
and reduce share price volatility by preventing the build-up
ofexcessive demand for the ordinary shares. By issuing the
shares at a premium to NAV, the Board seeks to protect
theinterests of existing shareholders so they benefit from
anenhancement to NAV, to increase liquidity and to spread
the fixed costs of the Company over a larger asset base.
TheBoard also seeks to ensure that the price at which
newordinary shares are issued remains attractive to
potentialinvestors.
The Directors believe that, from time to time and subject to
market conditions, it continues to be in the shareholders’
interests to buy back the Company’s shares when they are
trading at a discount to the underlying net asset value per
share. The Company may utilise the authority to purchase
shares by either a single purchase or a series of purchases
when market conditions allow, with the aim of maximising
thebenefit to shareholders. Authority will also be sought to
renew the current authorities, which expire at the upcoming
Annual General Meeting, to repurchase the preferred and
preference stocks.
Holdings in the Company’s Shares
There are no declarations of interests in the voting rights of
the Company as at 30 June 2024 in accordance with the
Disclosure Guidance and Transparency Rules of the FCA.
No changes have been notified in the period from 1 July 2024
to 16 September 2024.
Fund Manager’s Interests
As at 30 June 2024, Job Curtis, the Fund Manager, has a
beneficial interest in 313,306 shares and a non-beneficial
interest in 21,527 shares.
Related Party Transactions
The Company’s transactions with related parties in the year
were with the Directors and the Manager. There were no
material transactions between the Company and its Directors
during the year and the only amounts paid to them were in
respect of expenses and remuneration for which there were
no outstanding amounts payable at the year end. Directors’
shareholdings are disclosed on page 56.
In relation to the provision of services by the Manager, other
than fees payable by the Company in the ordinary course of
business and the provision of marketing services, there were
no material transactions with the Manager affecting the
financial position of the Company during the year under
review. More details on transactions with the Manager,
including amounts outstanding at the year end, are given
innote 23 on page 85.
Financial Risk Management
The principal risks and uncertainties facing the Company are
set out on pages 29 and 30. The principal financial risks and
the Company’s policies and procedures for managing these
risks are set out in note 16 to the financial statements on
pages 79 to 83.
Greenhouse Gas Emissions
The Company’s environmental statements are set out in the
Strategic Report on pages 32 to 35.
Annual General Meeting
The Annual General Meeting will be held on 31 October 2024
at 2.00pm. The Board invites shareholders to attend the
meeting at the registered office at 201 Bishopsgate, London
EC2M 3AE, or via Zoom webinar connection if shareholders
would prefer not to travel. The Fund Manager will present his
review ofthe year and thoughts on the future.
There will be live voting for those physically present at the
AGM. However, due to technical restrictions, the Company
cannot offer live voting by Zoom, and the Board therefore
requests all shareholders who cannot attend physically
tosubmit their votes by completing a Form of Proxy.
Shareholders with shares held in their own names will receive
a Form of Proxy enabling them to vote; shareholders holding
shares through nominee accounts, such as through ashare
dealing service or platform, should contact their provider
directly and ask them to submit the proxy votes on their
behalf.
Instructions for attending the Meeting and details of
resolutions to be put to the Annual General Meeting are
included in the Notice of Meeting sent with this Annual Report
and are on the Company’s website. If shareholders would like
to submit any questions in advance of the Meeting, they are
welcome to send these to the Corporate Secretary at
itsecretariat@janushenderson.com.
Any change to the format of the Annual General Meeting will
be notified to shareholders via a Regulatory Information
Service announcement and the Company’s website.
Directors’ Report (continued)
The City of London Investment Trust plc Annual Report 2024
40
Directors’ Report (continued)
Directors’ Statement as to Disclosure
ofInformation to Auditor
Each of the Directors who were members of the Board at the
date of approval of this report confirms that, to the best of his
or her knowledge and belief, there is no information relevant to
the preparation of the Annual Report of which the Company’s
Auditor is unaware and he or she has taken all the steps a
Director might reasonably be expected to have taken to be
aware of relevant audit information and to establish that the
Company’s Auditor is aware of that information.
Re-appointment of Auditor
Ernst & Young LLP (“EY”) were appointed as Auditor at
theAnnual General Meeting on 31 October 2023. EY have
indicated their willingness to continue in office as Auditor and
resolutions proposing their re-appointment and authorising
the Audit and Risk Committee to determine their remuneration
forthe ensuing year will be put to shareholders at the
forthcoming Annual General Meeting. Further information
inrelation to their re-appointment can be found in the
Auditand Risk Committee Report on pages 49 to 51.
UK Listing Rule 6.6.4
UK Listing Rule (“UKLR”) 6.6.4 requires the Company to
include certain information in a single identifiable section of
the Annual Report or a cross reference table indicating
where the information is set out. The Directors confirm that
there are nodisclosures to be made in this regard, other
than in accordance with UKLR 6.6.1(6), the information for
which is detailed on page 39 under Share Capital.
Securities Financing Transactions
As the Company undertakes securities lending, it is required
to report on securities financing transactions (as defined in
Article 3 of Regulation (EU) 2015/2365, securities financing
transactions include repurchase transactions, securities or
commodities lending and securities or commodities
borrowing, buy-sell back transactions or sell-buy back
transactions and margin lending transactions). In accordance
with Article 13 of the Regulation, the Company’s involvement
in and exposures related to securities lending for the
accounting period ended 30 June 2024 are detailed on pages
87 and 88.
Approval
The Directors’ Report has been approved by the Board.
By order of the Board
Janus Henderson Secretarial Services UK Limited
Corporate Secretary
17 September 2024
The City of London Investment Trust plc Annual Report 2024
41
The Company has also constituted an Insider Committee
toassist the Board in its obligations under the Market
AbuseRegulations.
Corporate Governance
The Board is accountable to shareholders for the governance
of the Company’s day-to-day affairs and is pleased to report
to shareholders on the Company’s governance arrangements
and how the principles of the applicable codes have been
applied during the year under review.
Applicable Corporate Governance
Codes
By virtue of the Company’s listing on the London Stock
Exchange, the Board is required to report on how the
principles of the 2018 UK Corporate Governance Code (“UK
Code”) have been applied. Being an investment company, a
number of the provisions of the UK Code are notapplicable
as the Company has no executive directors or internal
operations and all day-to-day activities are outsourced to
external service providers. The Board has therefore
considered the principles and recommendations of the Code
of Corporate Governance published by the Association of
Investment Companies in February 2019 (“AIC Code”). The
AIC Code addresses the principles set out in the UK Code as
well as additional principles and recommendations on issues
that are of specific relevance to investment companies.
TheFinancial Reporting Council (“FRC”) has endorsed the
AICCode and confirmed that, by following it, the boards of
investment companies should fully meet their obligations in
relation to the UK Code and UK Listing Rule 6.6.6. TheBoard
Corporate Governance Report
Governance Structure
Ernst & Young
LLP
Auditor
HSBC Bank plc
Depositary and
Custodian
Computershare
Investor Services plc
Registrar
Cavendish Capital
Markets Limited
Corporate Brokers
Nominations Committee
Purpose: Ensure the Board has a balance of skills, experience
and diversity, oversee performance evaluations of the Board
and its committees, and maintain an effective framework for
succession planning, with a formal approach to the
appointment ofDirectors
Ensure that the performance of service providers meets
expectations and their terms of engagement remain appropriate
Chairman: Sir Laurie Magnus
See pages 52 and 53 for the Nominations
Committee Report
Audit and Risk Committee
Purpose: Ensure the integrity of the financial reporting,
evaluate the effectiveness of the systems of internal control
and risk management, and oversee the relationship with the
external auditors
Chair: Samantha Wren
See pages 49 to 51 for the Audit and Risk Committee Report
Third-party service providers appointed by the Board
Janus Henderson Investors
Fund Management: Global Equity Income team with Job Curtis and
DavidSmith as the Company’s appointed Fund Manager and
DeputyFundManager respectively
Sales, Marketing, Corporate Secretary
Alternative Investment Fund Manager: Janus Henderson Fund
Management UK Limited
Board of Directors
Comprises independent non-executive Directors
Chairman: Sir Laurie Magnus
The City of London Investment Trust plc Annual Report 2024
42
Corporate Governance Report (continued)
considers that reporting against the principles and provisions
of the AIC Code provides more relevant information to
shareholders in terms of its governancearrangements.
The AIC Code and the UK Code can be found on the
respective organisations’ websites: www.theaic.co.uk and
www.frc.org.uk. The AIC Code includes an explanation of
how it adapts the principles and provisions set out in the UK
Code to make them relevant for investment companies.
Statement of Compliance
The Company has complied with the principles and provisions
of the 2019 AIC Code throughout the year to 30 June 2024
except as set out below.
The Company has no chief executive or other executive
directors. It therefore has no need to consider the
remuneration of executive directors and has notreported
further in respect of these provisions. In addition, the
Company does not have any internal operations and therefore
does not maintain an internal audit function. However, the
Audit and Risk Committee considers the need for such a
function at least annually (see page 47 for further information).
As the Company has no employees and has a small Board of
solely non-executive Directors, the Board has not established
a separate remuneration committee. The remuneration of
Directors is dealt with by the Board as a whole.
Given the business model operated by the Company and
theimportance of the role of the Manager in ensuring the
success of the Company, the Board believes that it remains
its responsibility to keep under review the level of service
provided by the Manager. It is assisted in this by the
Nominations Committee, as set out in the Nominations
Committee Report on pages 52 and 53. Accordingly, a
separate Management Engagement Committee has not
beenformed.
The AIC Code includes two deviations from the UK Code
permitting the Chairman of the Board to be a member of
theAudit and Risk Committee and for his or her tenure to
exceed nineyears. The Company has not taken advantage of
these provisions and continues to comply with the provisions
of theUK Code in this respect.
Board Leadership and Purpose
The Board has overall responsibility for the Company’s affairs
and for promoting the long-term success of the Company.
TheBoard is collectively responsible for providing leadership,
setting the investment objective and policy, appointing the
Company’s third-party service providers, establishing a robust
internal control and risk management system and monitoring
the performance delivered by service providers within the
established control framework. It is also responsible for setting
the Company’s standards and values and for ensuring that its
obligations to its shareholders and other stakeholders are
understood and met. Information relating to the Company’s
purpose and values can be found on page 20 andto the
Board’s engagement with stakeholders on pages 25 to 28.
Division of Responsibilities
Role Primary responsibilities
Shareholders/
investors
●
Approving material changes to the Company’s investment policy.
●
Making decisions regarding changes to the Company’s constitution.
●
Electing and re-electing Directors to the Board, or removing them from office if deemed appropriate.
●
Determining the overall limit for Directors’ remuneration.
Chairman
●
Leading and managing Board business and ensuring the timely flow of information from service
providers to the Board. He facilitates open, honest and constructive debate among Directors.
●
Leading the Nominations Committee in developing succession planning and the identification of
potential candidates for appointment to the Board (except when considering his own succession).
●
Leading the Board in determining its governance framework, culture and values.
●
Leading the Board’s relationship and engagement with shareholders and other stakeholders.
●
Managing the relationship with the Manager.
The role description for the Chairman is available on the Company’s website.
Senior Independent
Director
●
Fulfilling the role of sounding board for the Chairman and intermediary for the other Directors as
necessary.
●
Leading the performance evaluation of the Chairman.
●
Acting as a channel of communication for shareholders in the event that contact through the
Chairman is inappropriate.
The role description of the Senior Independent Director is available on the Company’s website.
The City of London Investment Trust plc Annual Report 2024
43
Role Primary responsibilities
Independent non-
executive Directors
●
Providing constructive and effective challenge, especially to the decisions of the Manager.
●
Scrutinising and holding to account the performance of the:
– Fund Manager in meeting the investment objective.
– Manager in the promotion of the Company and day-to-day smooth operations of the Company’s
business.
●
Providing strategic guidance and offering specialist advice.
Committee Chairs
●
The leadership and governance of their Committee.
●
Maintaining the relationships with specialist service providers delivering services within the remit of
their Committee.
●
Reporting on the activities of their Committee to the Board.
●
Seeking approval from the Board for the responsibilities set out in their respective terms of
reference.
Manager (AIFM)
●
Promoting the Company’s investment proposition to professional and retail investors.
●
Making the necessary reporting to the FCA regarding the Company’s status as an AIF.
●
Providing accounting, company secretarial and other administrative services to the Company
ensuring compliance with the applicable statutory and regulatory provisions.
●
Coordinating the delivery of services provided by the Company’s other third-party service
providers.
Fund Manager
●
Selecting the stocks held within the portfolio.
●
Diversification and risk management through stock selection and size of investment.
●
Determining the volume and timing of acquisitions and disposals.
●
Determining the frequency and level of gearing within the overall limits set by the Board.
Operation of the Board
The Board meets formally at least seven times a year, with
additional Board or Committee meetings arranged when
required. The Directors have regular contact with the
Manager between meetings. The Board has a formal
schedule of matters specifically reserved for its decision,
which includes setting strategy and oversight of performance,
risk management and internal controls. All matters that are
not delegated to the Manager under the management
agreement are reserved for the Board’s decision. A copy of
the schedule of matters reserved is available on the
Company’s website.
At each meeting the Board reviews with the Manager the
Company’s investment performance and compliance with
theapproved investment policy, and also considers financial
analyses and other reports of an operational nature. TheBoard
monitors compliance with the Company’s objective and
isresponsible for setting asset allocation, investment and
gearing limits within which the Manager has discretion to
act.The Board has responsibility for the approval of any
investments in in-house funds managed or advised by the
Manager. It also has adopted a procedure for Directors, in the
furtherance of their duties, to take independent professional
advice at the expense of the Company.
The Board has engaged third-party service providers to
deliver the operations of the Company. Management of the
investment portfolio has been delegated contractually to
Janus Henderson, which also provides the day-to-day
accounting, company secretarial, administrative, sales
andmarketing activities. The Company has appointed
aDepositary, HSBC Bank plc, which in turn appoints the
Custodian which is responsible for the safe custody of the
Company’s assets. The Company has appointed a Registrar,
Computershare Investor Services plc, to maintain the Register
of Members and assist shareholders with queries about their
holdings. Each of these principal contracts was entered into
after full and proper consideration by the Board of the quality
and cost of the services offered, including the control
systemsin operation in so far as they relate to theaffairs
ofthe Company. The Board and its Committees maintain
oversight of the third-party service providers through regular
and ad hoc reporting. The Board meets annually with
representatives from the Depositary and Custodian to discuss
amongst other matters performance, service levels, their value
for money, information security and business continuity plans.
Full and timely management, financial, regulatory and other
relevant information is provided to all Directors to allow them
to discharge their responsibilities and to enable the Board
(and its Committees) to function effectively. In particular, the
Board receives and considers regular reports from the
Corporate Governance Report (continued)
The City of London Investment Trust plc Annual Report 2024
44
Manager and ad hoc reports and information are supplied to
the Board as required. In addition, the Chairman is able to
attend meetings of all the chairmen of the investment trust
companies managed by Janus Henderson which provide a
forum to discuss industry matters which can then be reported
to the Board.
The Manager takes decisions as to the purchase and sale
ofindividual investments. The Manager also ensures that all
Directors receive, in a timely manner, all relevant management,
regulatory and financial information. Representatives of the
Manager attend each Board meeting enabling the Directors
toprobe further on matters of concern.
The Directors have access to the advice and services of the
Corporate Secretary through its appointed representative
whois responsible to the Board for ensuring that Board and
Committee procedures are followed and that applicable rules
and regulations are complied with. The proceedings at all
Board and Committee meetings are fully minuted, in a
process that allows any Director’s concerns to be recorded
inthe minutes.
The Corporate Secretary, Janus Henderson Secretarial
Services UK Limited, is a subsidiary of Janus Henderson with
its own reporting lines and audited internal controls. There are
processes and controls in place to ensure that there is a clear
distinction between the two entities, particularly when dealing
with any conflicts or issues between the Company and
JanusHenderson.
Any correspondence from shareholders addressed to the
Chairman or the Board received at JanusHenderson’s offices
is forwarded to the Chairman inline with the established
procedures in place. Any correspondence is submitted to
thenext Board meeting.
Janus Henderson and BNP Paribas, which is engaged by
Janus Henderson, have arrangements in place by which their
staff may, in confidence, raise concerns about possible
improprieties in relation to financial reporting or other matters.
These arrangements are reviewed at least annually by the
Audit and Risk Committee.
The Board, the Manager and the Corporate Secretary operate
in a supportive, co-operative and open environment.
The Board
Under the Company’s Articles of Association, the total
number of Directors shall not be less than three nor more than
seven. Asat the date of this report, the Board comprises six
non-executive directors, whose biographies are included
onpages 37 and 38. Thesebiographies demonstrate the
breadth of investment, financial, commercial and professional
experience relevant totheir positions as Directors.
Sir Laurie Magnus was appointed as Chairman of the Board
on 27 October 2020, following the retirement of Philip
Remnant. Sir Laurie was independent on appointment in
accordance with the criteria set out in the AIC Code and has
no relationships that may create a conflict ofinterest between
his interests and those of shareholders. Details of his other
significant commitments can be found on page 37. Following
review by the Nominations Committee as part of the
performance evaluation, the Board is satisfied that Sir Laurie
has sufficient time to devote to the Company.
The independence of the Directors is determined with
reference to the AIC Code. The Nominations Committee
considers the independence of each Director at least annually
by reviewing their other appointments and commitments, as
well as their tenure of service and any connection they may
have with the Manager.
Following evaluation, the Nominations Committee determined
that all Directors continued to be independent in character
and judgement and that their individual skills, broad business
experience and knowledge and understanding of the
Company were of benefit to shareholders. All Directors are
considered by the Board to be independent of the Manager
and free of any relationship which could materially interfere
with the exercise of their independent judgement.
There were no contracts subsisting during or at the end of the
year in which any Director is or was materially interested and
which is or was significant in relation to the Company’s
business. No Director has a contract of service with the
Company and there are no agreements between the
Company and its Directors concerning compensation for loss
of office.
Director Appointment, Tenure
andTraining
Appointment and retirement
The Board may appoint Directors and any Director so
appointed will stand for election by shareholders at the next
annual general meeting following appointment, in accordance
with the Articles of Association and the AIC Code. Each
Director receives a letter of appointment that sets out,
amongst other matters, what is expected of them in terms
oftime commitment.
In keeping with the provisions of the AIC Code, the Board
hasadopted a policy for all Directors to retire and stand for
re-election annually at each annual general meeting.
Under the Articles of Association, shareholders may remove
aDirector before the end of his or her term by passing an
ordinary resolution at a general meeting.
The Board considers a potential candidate’s other
commitments on appointment and then annually through the
performance evaluation process to ensure that Directors have
sufficient time to commit to the Company. A schedule of
Directors’ other commitments is reviewed at each Board
Corporate Governance Report (continued)
The City of London Investment Trust plc Annual Report 2024
45
Meeting and Directors are required to seek the Chairman’s
approval prior to accepting further appointments.
Tenure
The Board’s policy for Directors, including the Chairman, is
that they serve for no more than nine years, other than in
exceptional circumstances. This ensures the regular
refreshment of the Board and its Committees and forms
anintegral part of the Board’s succession planning.
In advance of each annual general meeting, the Nominations
Committee will consider and make recommendations to the
Board about whether it is appropriate for eligible Directors to
be recommended for re-appointment, taking into account the
results of the annual performance evaluation andthe ongoing
requirements of the AIC Code.
Professional development
Newly appointed Directors are offered a bespoke induction
programme which covers the legal and regulatory framework
for investment companies and the operations of the Manager,
including the compliance and risk management frameworks,
accounting, sales and marketing, and other administration
services provided by the Manager.
Directors are also provided on a regular basis with key
information on the Company’s policies, regulatory and
statutory requirements and internal controls. Changes
affecting Directors’ responsibilities are advised to the Board
as they arise. Directors also regularly participate in relevant
training and industry seminars and may do so at the
expense of the Company.
Directors’ individual training requirements are considered
aspart of the annual evaluation process which is led by the
Chairman of the Board.
Directors’ Conflicts of Interest
The Company’s Articles of Association permit the Board to
consider and, if it sees fit, to authorise situations where a
Director has an interest that conflicts, or may possibly conflict,
with the interests of the Company (“situational conflicts”).
TheBoard has a formal system in place for Directors to
declare situational conflicts to be considered for authorisation
by those Directors who have no interest in the matter being
considered. In deciding whether to authorise a situational
conflict, the non-conflicted Directors must act honestly and in
good faith with a view to the best interests of the Company
and they may impose limits or conditions when giving the
authorisation, or subsequently, if they think this is appropriate.
Any situational conflicts considered, and any authorisations
given, are recorded in the relevant meeting’s minutes. The
Board believes that the systems it has in place for reporting
and considering situational conflicts continue to operate
effectively. No situational conflicts of interest were considered
during the year or up to the date of this report.
Directors’ Insurance and Indemnification
Directors’ and officers’ liability insurance cover is in place in
respect of the Directors. Under the Company’s Articles of
Association and subject to the provisions of UK legislation, a
qualifying third-party indemnity may be provided to Directors
in respect of costs which they may incur relating to the
defence of any proceedings brought against them arising out
of their positions as Directors, in which they are acquitted or
judgement is given in their favour by the Court. No indemnity
was given during the year or up to the date of this report.
Committees of the Board
The Board has two principal Committees: the Audit and Risk
Committee and the Nominations Committee. The terms
ofreference for these committees are available on the
Company’s website. The Company has also constituted
anInsider Committee to assist the Board in meeting its
obligations under the Market Abuse Regulation.
Board Attendance
The table below sets out the number of scheduled formal
Board and Committee meetings held during the year under
review andthe number of meetings attended by each
Director. All Directors, except Sally Lake who joined the Board
on 1August 2024, attended the 2023 Annual General
Meeting. Thenumber in brackets denotes the number of
meetings each Director was entitled to attend.
Board
Audit and Risk
Committee
Nominations
Committee
Number of scheduled
meetings 7 3 1
Ominder Dhillon 7 (7) 3 (3) 1 (1)
Ted Holmes 7 (7) 3 (3) 1 (1)
Sir Laurie Magnus 7 (7) n/a 1 (1)
Clare Wardle 7 (7) 3 (3) 1 (1)
Samantha Wren 7 (7) 3 (3) 1 (1)
Notes:
Sir Laurie Magnus attended each of the Audit and Risk Committee meetings by
invitation. Two additional meetings of the Audit and Risk Committee and three
additional meetings of the Nominations Committee were held during the year to
make a recommendation to the Board about the appointment of new auditors
following the tender process, to approve the Auditor’s engagement letter, to
approve the appointment of a new Director and to consider the Board evaluation
process respectively. The Insider Committee did not meet during the year
Continued Appointment of the Manager
The Board monitors investment performance at each meeting,
including information about performance relative to the
benchmark and competitors in the AIC’s UK Equity Income
sector, receives updates in respect of professional sales
andmarketing activities carried out by the Manager for the
Company twice annually and receives a formal
Corporate Governance Report (continued)
The City of London Investment Trust plc Annual Report 2024
46
Corporate Governance Report (continued)
recommendation from the Nominations Committee in
respectof the continued appropriateness of the terms
ofthemanagement agreement at least annually.
The assessment of the Manager by the Nominations
Committee included consideration of the quality of the team
involved in all aspects of servicing the Company, including
company secretarial, administration, sales and marketing,
the Manager’s use of gearing and management of the
portfolio’s risk profile, the stability of the management
group, its business priorities and the adequacy of
succession planning.
Following completion of the review, the Board was satisfied
with the performance of the Manager and the services being
provided and believes that the continued appointment of the
Manager on the terms agreed is in the interests of the
Company’s shareholders as awhole.
Internal Control and Risk Management
The Board has overall responsibility for the Company’s system
of internal control and for reviewing its effectiveness, as set
out in the chart on the following page. The Audit and Risk
Committee supports the Board in the continuous monitoring
of the internal control andrisk management framework.
Details of the principal risks facing the Company, including
emerging risks, and how these are mitigated are set out on
pages 29 and 30.
The Board has established an ongoing process for identifying,
evaluating and managing the principal and emerging risks
faced by the Company. The process accords with the FRC’s
guidance on Risk Management, Internal Control and Related
Business and Financial Reporting published in September
2014. The system was in operation throughout the period and
up to the date of this report. The system is designed tomeet
the specific risks faced by the Company and takes account of
the nature of the Company’s reliance on its service providers
and their internal controls. The system therefore manages
rather than eliminates the risk of failure toachieve the
Company’s business objectives and provides reasonable,
butnot absolute, assurance against material misstatement
orloss.
The key components of the internal control framework
include:
●
clearly defined investment criteria which specify levels of
authority and exposure limits. The Board reviews reports
on compliance with the criteria at each meeting;
●
regular reporting which allows the Board to assess the
Company’s financial position. The management accounts
and forecasts are reviewed by the Board at each meeting;
●
the contractual agreements with the Manager and other
third-party service providers. The Board reviews
performance levels and adherence to relevant provisions
of the agreements on a regular basis. The Nominations
Committee, which consists of all Board members,
conducts a formal evaluation of the overall level of service
provided at least annually (see Nominations Committee
Report on pages 52 and 53);
●
the review of controls (including financial, operational and
compliance) at the Manager and other third-party service
providers. The Board receives quarterly reporting from the
Manager and Depositary, and reviews annual assurance
reports on the effectiveness of the control environments
atthe Company’s key service providers; and
●
the review of additional reporting provided by:
– the Manager’s Operational Risk team on the control
environment in operation at the Manager and their view
of the control environments in place at the third-party
service providers used by the Company; and
– the Manager’s Internal Audit team on areas of operation
which are relevant to the Company.
The Board has carried out a review of the effectiveness of
theCompany’s system of internal controls for the year ended
30June 2024. During the course of its review the Board did
not identify and was not advised of any failings or weaknesses
relating to the Company’s portfolio that have been determined
as material.
Internal Audit Function
Systems are in operation to safeguard the Company’s assets
and shareholders’ investments, to maintain proper accounting
records and to ensure that financial information used within
the business, or published, is reliable.
The Company is an investment company, has no employees
and delegates all executive activities to third-party service
providers, principally among them, the Manager. The Board
places reliance on the Company’s framework of internal
control and the Audit and Risk Committee’s view on reporting
received from specific second and third line of defence teams
at theManager.
The Manager’s Operational Risk team supports the Audit and
Risk Committee in considering the independently audited
reports on the effectiveness of internal controls in place at the
Company’s third-party service providers. The Manager’s
Internal Audit department provides regular reporting to the
Board on the operations at the Manager and presents at least
annually to the Audit and Risk Committee. The Board
considers the need for its own internal audit function annually
and continues to conclude that it is not necessary atthe
present time for the Company to have its own function.
Communication with Shareholders
Please see pages 25 and 26 for information about how the
Company communicates with shareholders.
The City of London Investment Trust plc Annual Report 2024
47
Corporate Governance Report (continued)
Principal third-party service
providers
●
receive regular reporting at
meetings;
●
review the annual assurance
report produced by each
organisation;
●
receive additional reporting on
the control environment from
the Manager’s Operational
Risk team;
●
receive reporting from the
Manager’s Internal Audit team
on areas relevant to
investment trusts; and
●
formally evaluate performance
on an annual basis.
Other third-party service
providers
●
receive regular reporting on
their activities at meetings; and
●
formally evaluate performance
on an annual basis.
Cavendish Capital Markets
(Corporate Broker)
Janus Henderson
(Investment
management, company
secretarial, sales,
marketing, PR and
administration)
Reporting
• Investment
performance update
(at each meeting)
• Compliance with
investment limits and
restrictions (monthly)
• Internal controls report
(quarterly)
• Effectiveness of
control environment
(annually)
HSBC
(Depositary & Custodian)
Reporting
• Depositary report
(quarterly)
• Presentation from the
Depositary and
Custodian (annually)
• Effectiveness of
control environment
(annually)
BNP Paribas
(Accounting services
(engaged by the Manager))
Reporting
• Balance sheet
• Liquidity and gearing
• Revenue forecasts
• Portfolio valuation
• Portfolio transactions
• Effectiveness ofcontrol
environment (annually)
Computershare
(Registrar)
Board of Directors
(comprised of independent non-executive Directors)
System of Internal Control
How the system of internal control operates
The Board delegates contractually to third-party service providers for all of the Company’s operational requirements. It
maintainsoversight of these providers throughout the year by receiving regular reporting on their activities. All are
consideredkeystakeholders.
The Nominations Committee formally evaluates the performance and service delivery of all third-party service providers
atleastannually.
The Audit and Risk Committee evaluates theperformance of the Auditor on completion of each auditcycle.
Ernst & Young LLP have been appointed as the Company’s Auditor.
The City of London Investment Trust plc Annual Report 2024
48
Audit and Risk Committee Report
I am pleased to present the Audit and Risk Committee Report
for the year ended 30 June 2024.
Membership
The members of the Audit and Risk Committee (“Committee”)
during the year were Samantha Wren (Committee Chair),
Ominder Dhillon, Ted Holmes and Clare Wardle. Sally Lake
was appointed as a member of the Committee on her
appointment as a Director. The Committee Chair is considered
by the Board to have recent and relevant financial experience,
and the Committee as a whole has competence relevant to
the sector in which the Company operates and to the
Company as an investment trust. Other Directors may attend
meetings by invitation of theChair.
Meetings
The Committee usually meets at least three times a year, to
review the half-year results, the annual results and to review
the Company’s internal controls. It met five times in the year
under review, with additional meetings held in relation to the
audit tender and the appointment of the new Auditor. The
Company’s Auditor, the Fund Manager and the Manager’s
Financial Reporting Senior Manager for Investment Trusts are
invited to attend meetings of the Committee on aregular
basis. Other representatives of the Manager and BNP Paribas
may also be invited to attend if deemed necessary by the
Committee.
Role and Responsibilities
The primary responsibilities of the Committee are to ensure
the integrity of the Company’s financial reporting, including
oversight of the preparation and audit of the annual financial
statements; to monitor and review the effectiveness of the
systems of internal control and risk management in place at
the Manager and the Company’s other third-party service
providers; and to monitor the effectiveness and objectivity
ofthe external Auditor and make recommendations to
theBoard regarding their appointment, re-appointment
orremoval.
The Audit and Risk Committee reports to the Board after each
meeting and its responsibilities are set out in formal terms of
reference which are reviewed at least annually.
Activities during the Year
In the year under review, the Committee considered the
following matters:
●
The Committee terms of reference, including a change of
name from “Audit Committee” to “Audit and Risk
Committee” to reflect the Committee’s evolving risk
mandate from the Board.
Annual and half-year reports
●
The appropriateness of the Company’s accounting
policies and of the quality and effectiveness of the
accounting records and management information
maintained on behalf of the Company.
●
The disclosures made in the reports in relation to internal
controls and risk management, viability, going concern and
related parties and consideration of whether the report is
fair, balanced and understandable and provides the
information necessary for shareholders to assess the
Company’s position and performance, business model and
strategy in order to make recommendations to the Board.
Auditor
●
The nature, scope and cost of the external audit and
reviewing the Auditor’s findings in this respect.
●
The appointment and evaluation of the independence,
effectiveness and objectivity of the Auditor.
Internal controls and management of risk
●
The principal risks facing the Company, including
consideration of emerging risks, the risk management
systems in place and the Company’s risk map.
●
Reports on the effectiveness of the internal controls in
place at Janus Henderson and the Company’s other
principal third-party service providers.
●
Compliance with the terms of the loan notes in issue.
●
The need for the Company to have its own internal audit
function.
●
The whistleblowing arrangements in place at the Manager
and other key service providers for their staff to raise
concerns, in confidence, about possible improprieties,
including in relation to the Company.
●
The Manager’s policies in relation to information security
and business continuity, meeting with representatives of
Janus Henderson’s internal audit and risk departments
periodically.
●
The Company’s anti-bribery policy, approach to tax
evasion and the confirmations received from third-party
service providers as to whether they have appropriate
procedures in place in these respects.
●
The annual confirmation from the Company’s Depositary
in respect of the safe-keeping of the Company’s assets.
Appointment and Tenure of the Auditor
Regulations currently in force require the Company to rotate
audit firms after a period of ten years, which may be extended
where audit tenders are carried out or where more than one
audit firm is appointed to carry out the audit, subject to a
maximum appointment of 20 years.
As reported last year, an audit tender was carried out in 2023.
The appointment of Ernst & Young LLP (“EY”) as Auditor was
recommended to the Board, and their appointment was
confirmed by shareholders at the 2023 AGM. The financial
statements for the year ended 30 June 2024 will be the first
tobe audited by EY and the first year for the audit partner,
Mike Gaylor.
The City of London Investment Trust plc Annual Report 2024
49
Audit and Risk Committee Report (continued)
The Committee confirms that the Company is in compliance
with the requirements of The Statutory Audit Services for
Large Companies Market Investigation (Mandatory Use of
Competitive Tender Processes and Audit Committee
Responsibilities) Order 2014. This order relates to the
frequency and governance of tenders for the appointment of
the external auditors and the setting of the policy on the
provision of non-audit services.
Auditor’s Independence
The Committee monitors the Auditor’s independence through
three aspects of its work:
●
the approval of a policy regulating the non-audit services
that may be provided by the Auditor to the Company;
●
assessing the appropriateness of the fees paid to the
Auditor for all work undertaken by them; and
●
reviewing the information and assurances provided by the
Auditor on their compliance with the relevant ethical
standards. The Auditor provided no non-audit services
during the year.
For the year ended 30 June 2024, EY confirmed that all of its
partners and staff involved with the audit were independent of
any links to the Company, and that these individuals had
complied with their ethics and independence policies and
procedures, which are fully consistent with the FRC’s Ethical
Standards. Having considered the above-mentioned aspects,
the performance and behaviour of the Auditor during the
auditprocess and the assurances received from EY, the
Committee is satisfied that auditor independence and
objectivity are safeguarded.
Audit Fees
The fees payable to the Auditor for audit services in respect of
the year ended 30 June 2024 were £63,000 (2023: £53,000
payable to PricewaterhouseCoopers LLP) (inclusive of VAT).
Policy on Non-Audit Services
The Committee has approved, and keeps under regular
review, the policy on the provision of non-audit services by the
auditor. The policy sets out that the Company’s auditor will not
be considered for non-audit work where this is prohibited by
the current regulations and where it appears to affect their
independence and objectivity. In addition, the provision of any
non-audit services by the auditor is not permitted to exceed
70% of the average annual statutory audit fee for the three
consecutive financial periods preceding the financial period
towhich the cap applies. Such services require approval
inadvance by the Committee, or Audit and Risk Committee
Chair, following due consideration of the proposedservices.
No non-audit services were provided by EY in the year
underreview.
Audit for the Year ended 30 June 2024
In the year under review, EY challenged both the Manager’s
and the Board’s judgements and exercised professional
scepticism. The audit team required detailed evidence of all
metrics, numbers and disclosures made within the Annual
Report to support a robust assessment and evaluation of the
financial information contained therein. As an example, the
Manager provides the Committee and the Auditor with an
analysis of special dividends and the rationale for whether
these should be treated as income or capital. The Auditor’s
review included challenge to the Manager to provide
additional justification or background to the dividends before
confirming whether they concurred with the proposed
treatment.
As an investment trust investing in listed equities,
management has limited areas of judgement. Areas where
theCommittee would challenge the Manager include the
determination of the fair market value of debt in order to
confirm the appropriate basis for calculation, and stress
testing of the revenue forecast to support the dividend
payment policy and the assumptions in the viability statement.
The Committee did not consider it necessary to request the
Auditor to look at any specific areas in addition to those
already identified in the audit plan in relation to the audit for
the year ended 30 June 2024.
The Committee is satisfied that the Annual Report for the year
ended 30 June 2024, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Company’s position and
performance, business model and strategy.
The City of London Investment Trust plc Annual Report 2024
50
Audit and Risk Committee Report (continued)
In relation to the Annual Report for the year ended 30 June 2024, the following significant issues were considered by
theCommittee:
Significant issue How the issue was addressed
Valuation and ownership of
the Company’s investments
The Directors have appointed the Manager, who outsources some of the administration
and accounting services to BNP Paribas, to perform the valuation of the assets of the
Company in accordance with its responsibilities under the AIFMD rules. As required
under the AIFMD rules, the Manager has adopted a written valuation policy, which may
be modified from time to time. Actively traded investments are valued using stock
exchange prices provided by third-party pricing vendors.
Ownership of listed investments is verified by reconciliation to the Custodian’s records
and the Directors have received quarterly reports from the Depositary, which has
responsibility for overseeing the Company’s operations, including verification of
ownership and valuation.
Recognition of income Income received, including special dividends, is accounted for in line with the Company’s
accounting policy (as set out on page 71). Special dividends, and their treatment as
revenue or capital, have been reviewed by the Committee and the rationale agreed.
The Board reviews revenue forecasts at each Board meeting in support of the
Company’s future dividends.
Maintaining internal controls Information about the internal control and risk management framework adopted by the
Company is set out in the Corporate Governance Statement on pages 47 and 48.
The Committee receives regular reports on internal controls from Janus Henderson,
BNP Paribas, HSBC Bank plc and Computershare Investor Services plc and has access
to the relevant personnel of Janus Henderson who have a responsibility for risk
management and internal audit. The assurance report for one of the Company’s service
providers was qualified by the respective service auditor. The Committee thoroughly
reviewed the instances giving rise to the qualification and received confirmation that the
exceptions identified had no impact on the Company.
The Committee also meets annually with representatives from Janus Henderson and
HSBC Bank plc to discuss and challenge their reports.
Maintenance of investment
truststatus
The Committee has considered regularly the controls in place to ensure that the
regulations for ensuring investment trust status are observed at all times, receiving
supporting documentation from Janus Henderson and BNP Paribas.
Effectiveness of the External Audit
The Committee carried out a post-audit assessment of the
performance of the Auditor. The Committee reviewed and
assessed the robustness of the audit, the level of challenge
offered by the audit team, the quality of the audit team and
the timeliness of delivering the tasks required for the audit
andreporting for the Committee.
The Auditor attended two Committee meetings in the year,
when the Committee was considering the audit plan andthe
annual results. The Committee Chair met with the Auditor to
review the audit results prior to these being presented to the
Committee and also attended the initial audit planning meeting
between EY, the Fund Manager and the Manager’s staff.
The Auditor presented and discussed the findings of the
FRC’s latest Audit Quality Inspection Report on EY to the
Committee and reported on the progress made by the firm in
addressing the areas identified for improvement in the prior
year’s report.
In assessing the effectiveness of the audit process, the
Committee Chair invites views from the Directors, the Fund
Manager and other members of the Manager’s staff in
assessing the robustness of the audit, level of challenge
offered by the audit team, the quality of the audit team and
timeliness of delivering the tasks required for the audit and
reporting to the Committee. The Committee also met privately
with the Audit Partner to discuss how the audit operated from
his perspective.
Overall, the Committee considers that the audit quality for the
year ended 30 June 2024 has been high and that the
Manager and EY have worked together effectively. Following
completion of the assessment, the Committee remained
satisfied with the effectiveness of the audit provided by EY.
EYhave indicated their willingness to continue in office and
resolutions re-appointing them as Auditor to the Company
and authorising the Committee to determine their
remuneration will be proposed at the AGM.
Samantha Wren
Chair of the Audit and Risk Committee
17 September 2024
The City of London Investment Trust plc Annual Report 2024
51
Nominations Committee Report
Membership
All Directors are members of the Committee. The Chairman
ofthe Board is the Chairman of the Committee but would not
chair meetings when the Committee is considering
appointments for his successor.
Meetings
The Committee usually meets at least once a year. Three
additional meetings were held in the year under review in
relation to the appointment of a new Director and to agree
theformat for the annual Board evaluation.
Role and Responsibilities
The Committee advises the Board on the composition of the
Board and its Committees, in making appointments to the
Board and ensuring suitable succession plans are in place
forthe Directors and the Fund Manager. It also reviews and
monitors the engagement and performance of the Manager
and other third-party service providers.
Its principal responsibilities include: reviewing the structure, size
and composition of the Board and its Committees and leading
the search for suitable candidates to fill roles as required, taking
into consideration the balance of skills, knowledge, experience
and diversity on the Board; ensuring annual performance
evaluations are carried out, discussing the outcomes from those
evaluations and making recommendations to the Board;
considering the proposed election and re-election of Directors
ahead of eachannual general meeting; and evaluating the
overall performance and terms of engagement of the Manager
and other third-party service providers.
Succession Planning and Recruitment
When considering succession planning, the Committee bears
in mind the balance of skills, knowledge, experience and
diversity existing on the Board. Once a decision is made to
recruit an additional Director, a formal job description is drawn
up. The Committee will engage external recruitment agencies
to facilitate the search. The Committee will assess candidates
against objective criteria and with due regard for the benefits
ofdiversity on the Board (including gender, social and ethnic
backgrounds, as well as cognitive and personal strengths),
taking care that any candidates recommended for appointment
will be able to allocate sufficient time to the Company to
discharge their responsibilities fully and effectively.
New appointments to the Board are made on a staggered
basis in line with the tenure policy, ensuring ongoing
refreshment combined with the importance of maintaining
continuity and corporate knowledge. As part of the evaluation
process, the Committee reviews the tenure of the Board. At
the date of this report, the Directors have been on the Board
for between 0 and 9years.
The Committee also reviews and recommends to the Board
the Directors seeking re-election. Recommendation is not
automatic and will follow a process of evaluation of each
Director’s performance and consideration of the Director’s
independence. The Committee also takes into account the
mix of skills and experience of the current Board members.
Appointment of Director
Samantha Wren has reached nine years of service as a
Director and, in accordance with the Company’s tenure policy,
will be retiring at the 2024 AGM. A search has therefore taken
place for a new non-executive Director. Following a review of
anumber of specialist recruitment agencies, Nurole Limited
(“Nurole”) was appointed to assist in the search. No open
advertising was used as the Committee believes that targeted
recruitment is the optimal way of recruiting. Nurole does not
undertake any other services for the Company and has no
connection with any of the Directors.
The new Director would succeed Mrs Wren as Chair of the
Audit and Risk Committee. The specification was therefore for
a candidate with strong board-level financial and accounting
acumen, as well as a demonstrable understanding of UK-
listed company governance. The Company’s Diversity and
Inclusion Policy was also considered and the Committee
instructed Nurole to ensure that the long list took this policy
fully into account.
Following discussion of the long list provided by Nurole, the
preferred candidates were invited for interviews with the
Chairman, Samantha Wren and Ominder Dhillon. A shortlist of
two candidates was then put forward for follow up interviews
with all Directors and also a meeting with the Fund Manager.
The candidates’ other commitments were considered as part
of the process. Following the conclusion of the process, the
Committee recommended to the Board the appointment of
Sally Lake as a non-executive Director. Ms Lake was
appointed with effect from 1 August 2024. Ms Lake is
deemedto be independent of the Manager.
Directors’ Performance Evaluation
Each year, the Committee assesses the composition of the
Board and its performance, including that of individual
Directors. An external review is conducted every three years,
with the next external review due to be carried out in 2025.
This year, the evaluation was undertaken internally, with all
Directors completing a questionnaire and then meeting
individually with the Chairman.
The areas considered included Board composition and
dynamics, management of meetings and support from the
Manager in this respect, the appropriateness of the investment
strategy and performance, the quality of the Board’s
understanding of shareholders’ views and the Manager’s sales
and marketing activities, succession planning and priorities for
change. A review of the performance and effectiveness of the
Board Committees was included as part of the evaluation
process. The Committee has reviewed the independence of
each Director and their time commitment. No areas of material
weakness or concern were identified.
The appraisal of the Chairman was led by Clare Wardle as the
Senior Independent Director. Mrs Wardle met with each Director
to discuss the leadership and effectiveness ofthe Chairman.
The City of London Investment Trust plc Annual Report 2024
52
Nominations Committee Report (continued)
Following completion of the review, the Committee concluded
that the Board remained fit for purpose and worked in a
harmonious, effective and collegiate manner. Directors gave
an appropriate level of focus and discussion to the oversight
of strategy and performance. There was a very good range of
skills represented on the Board and a clear understanding of
the risks facing the Company and the Board Committees
were operating effectively. Mrs Wardle also reported that the
Chairman provided effective leadership. The Committee
accordingly recommended to the Board that it should support
those Directors seeking re-election at the 2024 AGM.
Diversity and Inclusion
All Board appointments are subject to a formal, rigorous
andtransparent procedure. The Company seeks to ensure
that any Board vacancies are filled by the most qualified
candidates based on objective criteria and merit and in the
context of the skills, knowledge and experience that are
needed for the Board to be effective.
Whilst the Board does notfeel that it would be appropriate to
use specific diversity targets, given its small size, the Directors
acknowledge thatdiversity is important to ensure that the
Company can draw on a broad range of backgrounds, skills,
knowledge, experience and perspectives to achieve effective
stewardship of the Company. An integral part of the
appointment process includes the consideration of diversity in
its broadest sense and the Nominations Committee ensures
that long lists of potential non-executive Directors include
diverse candidates of appropriate experience and merit.
In all the Nominations Committee’s activities, there will be
nodiscrimination on the grounds of gender, race, ethnicity,
religion, sexual orientation, age or physical ability.
As at 30 June 2024, two out of the five Directors (40%) were
women and the two women Directors both held senior
positions, one being the Senior Independent Director and the
other the Audit and Risk Committee Chair. The Board was also
meeting the recommendation that at least one Director is from
an ethnic minority background.
The following tables set out the gender and ethnic diversity of
the Board at 30 June 2024:
Gender identity
Number of
Board
members
Percentage
of the Board
Number of
senior
positions on
the Board
1
Men 3 60 1
Women 2 40 2
Ethnic background
White British or other
White (including
minority-white groups) 4 80 3
Asian/Asian British 1 20 –
1 Senior positions include Chairman, Senior Independent Director and Audit and
Risk Committee Chair
As an investment trust company with solely independent,
non-executive Directors, the Company does not have a Chief
Executive or a Chief Financial Officer and has no employees.
Accordingly, there are no disclosures about executive
management positions to be included. The role of Audit and
Risk Committee Chair is considered to be a senior position
and has been included in the above tables. The information
inthe tables was provided by individual Directors in response
to a request from the Company.
There have been no changes to the roles of Directors since
30June 2024. A new Director, Sally Lake, was appointed on
1August 2024, resulting in six directors, split 50% male and
50% female, on a temporary basis. Mrs Wren will be retiring
atthe AGM in October 2024 and will be replaced as Audit and
Risk Committee Chair by Ms Lake.
Performance of Third-Party
ServiceProviders
Each year, the Committee carries out an evaluation of
theManager and the Company’s key third-party service
providers and their respective terms of engagement.
The Committee’s evaluation of the Manager includes
assessing whether the contractual arrangements and
remuneration structure in place remain appropriate and
competitive and in theinterests of shareholders as a whole.
The Committee also considers the arrangements in place at
Janus Henderson in terms of a short-term incapacity of the
Fund Manager and succession planning for the Fund Manager
over the longer term. The evaluation includes consideration of
the quality of the team involved in all aspects of servicing the
Company and a review of the stability of the management
group and its business priorities.
Following its review, the Committee concluded that it was in
the interests of shareholders as a whole to recommend to
theBoard that the appointment of the Manager should
continue on the existing terms. The Committee also
recommended the continuation of the appointment of
theother keythird-party service providers.
Sir Laurie Magnus CBE
Nominations Committee Chairman
17 September 2024
The City of London Investment Trust plc Annual Report 2024
53
Directors’ Remuneration Report
Remuneration Policy
The Remuneration Policy (“the Policy”) sets out the
principles applied in the remuneration of the Company’s
Directors. ThePolicy was last approved by shareholders at
the AGM on 31 October 2023. It will continue in force until
the AGM in 2026.
The Board has not established a separate remuneration
committee and matters relating to Directors’ remuneration are
dealt with by the Board as a whole. Individual Directors do not
participate in discussions relating to their own remuneration.
The appropriateness and relevance of the Policy is reviewed
at least annually, particularly in terms of whether the policy
supports the Company’s long-term sustainable success.
Indetermining the Policy,the Board takes into account all
factors which it deemsnecessary, including relevant legal and
regulatory requirements, the provisions and recommendations
of the UKCode and the AIC Code and fees paid to directors
of comparable investment trusts.
The objective of the Policy is to attract, retain and motivate
non-executive Directors of the quality required to manage the
Company successfully. The Company’s approach is that fees
payable to the non-executive Directors should reflect the time
spent on the Company’s affairs, reflect the responsibilities
borne by the Directors, and be sufficient to promote the
long-term success of the Company.
Directors are remunerated in the form of fees payable to the
Director personally quarterly in arrears. Fees are pro-rated
where a change takes place during a financial year. The total
annual aggregate fees payable to Directors shall not
exceed£350,000.
The Chairman of the Board is paid a higher fee in recognition
of his additional responsibilities, as is the Senior Independent
Director and Chair of the Audit and Risk Committee. The
Directors may be reimbursed for all reasonable and properly
documented expenses incurred in the performance of their
duties. The level of fees paid to each Director is reviewed
annually, although such a review may not necessarily result in
any change to therates. The level of fees paid to the directors
of other investment companies of a similar size and nature is
taken into account when carrying out the review in order to
avoid and manage conflicts of interest in determining
remuneration levels. The Board may amend the level of
remuneration paid to individual Directors within the
parameters of the Policy.
No Director is eligible to receive bonuses, pension benefits,
share options or other benefits and no long-term incentive
schemes are in place.
The Policy, irrespective of any changes, is put to shareholders
at intervals of not more than three years with the next approval
due to be sought at the annual general meeting in 2026.
Letters of appointment
All Directors are non-executive and are appointed under a
Letter of Appointment. No Director has a service contract with
the Company. There are no set notice periods and a Director
may resign by notice in writing to the Board at any time.
Nocompensation is payable for loss of office.
Recruitment principles
All Directors, including any new appointments to the Board,
are paid at the same rate. The Chairman of the Board,
SeniorIndependent Director and Chair of the Audit and Risk
Committee are paid higher fees in recognition of their
additional responsibilities.
The Board will not pay any introductory fee or incentive to any
person to encourage them to become a Director, but may pay
the fees of search and selection specialists in connection with
the appointment of any new non-executive Director.
The Company intends to appoint only non-executive Directors
for the foreseeable future.
Views of shareholders
Any views expressed by shareholders on the fees being paid
to Directors would be taken into consideration by the Board
when reviewing levels of remuneration.
Annual Report on Remuneration
This report is submitted in accordance with Schedule 8
ofTheLarge and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 as amended (the
“Regulations”). The report also meets the relevant
requirements of the Companies Act 2006 (the “Act”) and the
UK Listing Rules of the FCA and describes how the Board has
applied the principles relating toDirectors’ remuneration.
As required by the Act, an ordinary resolution to approve the
Directors’ Remuneration Report will be proposed at the
forthcoming AGM.
The City of London Investment Trust plc Annual Report 2024
54
Directors’ Remuneration Report (continued)
The Company’s Auditor is required to report on certain
information contained within this report; where information
setout below has been audited, it is indicated as such.
All Directors are non-executive and the Company has no chief
executive officer or employees; as such some of the reporting
requirements contained in the Regulations are not applicable
and have not been reported on, including the requirement for
a future policy table and an illustrative representation of the
level of remuneration that could be received by each individual
Director. It is believed that all relevant information is disclosed
within this report in an appropriate format.
The Board has not been provided with advice or services by
any person in respect of its consideration of the Directors’
remuneration.
Statement from the Chairman
As the Company has no employees and the Board comprises
entirely non-executive Directors, the Board hasnot
established a separate Remuneration Committee. Directors’
remuneration is reviewed annually and is determined by the
Board as a whole within the parameters approved by
shareholders.
The Board reviewed the fees paid by other investment
companies in the AIC UK Equity Income Sector (the
Company’s peer group), fees paid to directors of other large
investment trusts with assets of over £1 billion (excluding
sector specialists) and those paid by the Janus Henderson
managed investment trusts. The Board also took into
consideration the prevailing rate of inflation, looking at RPI,
CPI and wage inflation, as well as the increasing
responsibilities and time commitment required of Directors.
Following consideration, the Directors’ fees were increased
with effect from 1January 2024 by 5.0% (rounded to the
nearest £100), in line with inflation. The new rates are as set
out in the table below. Theincreases were to ensure that the
Directors are properly remunerated for their services to the
Company and so that the Company can remain competitive
when seeking new Directors. There have been no other major
decisions on Directors’ remuneration or any other changes to
the remuneration paid to each individual Director in the year
underreview.
The Board is satisfied that the changes to the remuneration
of the Directors are compliant with the Directors’
Remuneration Policy approved by shareholders at the 2023
AGM. There will be no significant change in the way that the
Remuneration Policy will be implemented in the course
ofthe next financial year.
Directors’ annual fees
The current fees for specific responsibilities are set out in
thetable below. Other than the Chair of the Audit and Risk
Committee, no fees are payable for membership of the
Board’s Committees.
Role
Rate at
30 June 2024
£
Rate at
30 June 2023
£
Chairman of the Board 55,200 52,600
Chair of the Audit and Risk
Committee 41,500 39,500
Senior Independent Director 38,000 36,200
Other non-executive Directors 34,500 32,900
Performance
The chart below illustrates the total shareholder return for a
holding in the Company’s shares over the ten-year period to
30 June 2024 as compared with the FTSE All-Share Index,
which was adopted as the Company’s benchmark index with
effect from 1 July 2019.
Total return performance over the ten-year period
to 30June 2024
City of London share price total return, assuming the investment
of £1,000 on 30 June 2014 and the reinvestment of all dividends
(excluding dealing expenses)
FTSE All-Share Index total return, assuming the notional investment of
£1,000 on 30 June 2014 and the reinvestment of all income (excluding
dealing expenses)
Sources: Morningstar Direct and Refinitiv Datastream
£
2014 2018 2021 202220202019201720162015 2023 2024
80
100
120
140
160
180
200
The City of London Investment Trust plc Annual Report 2024
55
Directors’ Remuneration Report (continued)
Directors’ remuneration (audited)
The remuneration paid to the Directors who served during the year ended 30 June 2024 and 30 June 2023 was as follows:
Year ended
30 June 2024
Total salary and
fees
£
Year ended
30 June 2023
Total salary and
fees
£
Year ended
30 June 2024
Total expenses
and taxable
benefits
£
Year ended
30 June 2023
Total expenses
and taxable
benefits
£
Year ended
30 June 2024
Total
£
Year ended
30 June 2023
Total
£
Ominder Dhillon 33,700 32,100 815 47 34,515 32,147
Ted Holmes 33,700 32,100 – – 33,700 32,100
Sir Laurie Magnus
1
53,900 51,350 – – 53,900 51,350
Clare Wardle 37,000 35,350 – – 37,000 35,350
Samantha Wren
2
40,500 38,550 – – 40,500 38,550
Total 198,800 189,450 815 47 199,615 189,497
Notes:
The amounts paid by the Company to the Directors were for services as non-executive Directors. The table above omits other columns set out in the relevant regulations
because no payments of other types such as performance-related pay and pension related payments were made. No variable pay was paid to any Director
1 Highest paid Director
2 Chair of the Audit and Risk Committee
No other remuneration or compensation was paid or payable by the Company during the year to any of the current or former
Directors or third parties.
Annual change in Directors’ remuneration
The table below sets out the annual percentage change in
Directors’ fees for the Directors for the last five years in
respect of each Director that has served for a minimum of
twofinancial years.
Director
Year to
30 June
2024
%
Year to
30 June
2023
%
Year to
30 June
2022
%
Year to
30 June
2021
%
Year to
30 June
2020
%
Ominder Dhillon
1
5.0 n/a n/a n/a n/a
Ted Holmes 5.0 4.4 2.5 1.9 2.6
Sir Laurie Magnus
2
5.0 4.4 16.3
3
n/a n/a
Clare Wardle
4
4.7 7.5
5
9.6
5
n/a n/a
Samantha Wren 5.1 4.5 2.6 2.0 2.7
1 Appointed a Director on 1 September 2021
2 Appointed a Director on 1 March 2020
3 Sir Laurie Magnus was appointed Chairman on 27 October 2020. The %
increase reflects his change of role during the course of the year to 30 June
2021 and the additional fee that is associated with this position
4 Appointed a Director on 1 November 2019
5 Clare Wardle was appointed as Senior Independent Director on 28 October
2021. The % increase reflects her change of role during the course of the
year to 30 June 2022
Directors’ interests in shares (audited)
Ordinary shares of 25p
Beneficial interest 30 June 2024 1 July 2023
Ominder Dhillon 5,943 4,443
Ted Holmes 10,000 5,000
Sir Laurie Magnus 110,000 110,000
Clare Wardle 16,447 16,447
Samantha Wren 9,820 9,820
The interests of the Directors and their connected persons in
the ordinary shares of the Company at the beginning and end
of the financial year are shown in the preceding table. There
have been no changes toany of the Directors’ interests in the
period from 1 July 2024to the date of this report. Sally Lake
does not hold any ordinary shares. No Director has any
interests in the preference or preferred stock of theCompany.
The Company does not have a shareholding requirement
forDirectors.
The City of London Investment Trust plc Annual Report 2024
56
Directors’ Remuneration Report (continued)
Relative importance of spend on pay
In order to show the relative importance of spend on pay, the table below sets out the total level of remuneration compared with
the distributions to shareholders by way of dividends. In the year under review, 8,301,867 ordinary shares were bought back by
the Company into Treasury. There were no other significant distributions, payments or other uses of the Company’s net return or
cash flow deemed to assist in the understanding of the relative importance of spend on pay.
2024
£
2023
£
Change
£
Change
%
Total Directors’ remuneration 199,615 189,497 10,118 5.3
Ordinary dividends paid 102,343,736 95,520,287 6,823,449 7.1
Statement of voting at Annual General Meeting
At the AGM held on 31 October 2023, shareholders approved the Directors’ Remuneration Policy and the Directors’
Remuneration Report in respect of the year ended 30 June 2023. The following proxy votes were received onthe resolutions:
Resolution
For (including
discretionary) % of total votes
1
Against % of total votes
1
Withheld
Remuneration Policy 6,622,825 99.2 56,004 0.8 53,908
Remuneration Report 6,635,657 99.3 46,470 0.7 50,611
1 Excluding votes withheld
Approval of the Annual Report on Remuneration
The Annual Report on Remuneration was approved by the Board on 17 September 2024.
On behalf of the Board
Sir Laurie Magnus CBE
Chairman
17 September 2024
The City of London Investment Trust plc Annual Report 2024
57
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual
Report, the Directors’ Remuneration Report and the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors have prepared the financial statements in
accordance with United Kingdom Generally Accepted
Accounting Practice (UK Accounting Standards, comprising
FRS 102 “The Financial Reporting Standard applicable in the
UK and the Republic of Ireland”, and applicable law). Under
company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and
fair view of the state of affairs of the Company and ofthe net
return or loss of the Company for that period. In preparing
thesefinancial statements, the Directors are required to:
●
select suitable accounting policies and then apply them
consistently;
●
make judgements and accounting estimates that are
reasonable and prudent;
●
state whether applicable UK Accounting Standards,
comprising FRS 102, have been followed, subject to any
material departures disclosed and explained in the
financial statements; and
●
prepare the financial statements on a going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain the
Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
and enable them to ensure that thefinancial statements and
the Directors’ Remuneration Report comply with the
Companies Act 2006. They are also responsible
forsafeguarding the assets of the Company and hence for
taking reasonable steps for the prevention and detection of
fraud and otherirregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors’ Report
and Statement of Corporate Governance that comply with that
law and those regulations.
The Directors consider that the Annual Report, taken as a whole,
isfair, balanced and understandable and provides the information
necessary for shareholders to assess the Company’s position
and performance, business model and strategy.
Directors’ Responsibility Statement
Each of the Directors, who are listed on pages 37 and 38,
confirms that, to the best of his or her knowledge:
●
the Company’s financial statements, which havebeen
prepared in accordance with UK Accounting Standards on
a going concern basis, give a true and fair view of the
assets, liabilities, financial position and return of the
Company; and
●
the Strategic Report and financial statements include a
fair review of the development and performance of the
business and the position of the Company, together with
a description of the principal risks and uncertainties that
it faces.
On behalf of the Board
Sir Laurie Magnus CBE
Chairman
17 September 2024
The financial statements are published on the website www.cityinvestmenttrust.com.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
The maintenance and integrity of the website is the responsibility of Janus Henderson; the work carried out by the Auditor
does not involve consideration of these matters and, accordingly, the Auditor accepts no responsibility for any changes
that may have occurred to the Annual Report since it was initially presented on the website.
The City of London Investment Trust plc Annual Report 2024
58
Financial
Statements
59
Independent Auditor’s Report to the Members
ofThe City of London Investment Trust plc
Opinion
We have audited the financial statements of The City of London Investment Trust plc (the “Company”) for the year ended 30 June
2024 which comprise the Income Statement, the Statement of Changes in Equity and the Statement of Financial Position and the
related notes 1 to 23, including a summary of significant accounting policies. The financial reporting framework that has been
applied in their preparation is applicable law and United Kingdom Accounting Standards including FRS 102 “The Financial
Reporting Standard applicable in the UK and Republic of Ireland” (United Kingdom Generally Accepted Accounting Practice).
In our opinion, the financial statements:
●
give a true and fair view of the Company’s affairs as at 30 June 2024 and of its profit for the year then ended;
●
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
●
have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Ourresponsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide
abasis for our opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied to public interest entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Company and we remain independent
of the Company in conducting the audit.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Company’s ability to
continue to adopt the going concern basis of accounting included:
●
Confirming our understanding of the Company’s going concern assessment process by engaging with the Directors and the
Corporate Secretary to determine if all key factors were considered in their assessment.
●
Inspecting the Directors’ assessment of going concern, including the revenue forecast, for the period to 17 September 2025
which is at least 12 months from the date these financial statements are authorised for issue. In preparing the revenue
forecast, the Company has concluded that it is able to continue to meet its ongoing costs as they fall due.
●
Reviewing the factors and assumptions, including the impact of the current economic environment and other significant
events that could give rise to market volatility, as applied to the revenue forecast and the liquidity assessment of the
investments. We considered the appropriateness of the methods used to calculate the revenue forecast and the liquidity
assessment and determined, through testing of the methodology and calculations, that the methods, inputs and assumptions
utilised were appropriate to be able to make an assessment for the Company.
●
Considering the mitigating factors included in the revenue forecast that are within the control of the Company. We reviewed
the Company’s assessment of the liquidity of investments held and evaluated the Company’s ability to sell those investments
to cover the working capital requirements should revenue decline significantly.
●
In relation to the Company’s borrowing arrangements, inspecting the Directors’ assessment of the level of gearing.
Werecalculated the Company’s compliance with debt covenants and performed stress testing to assess the likelihood
oftheCompany breaching the financial covenants as a result of a reduction in the value of the Company’s portfolio.
●
Reviewing the Company’s going concern disclosures included in the Annual Report in order to assess that the disclosures
were appropriate and in conformity with the reporting standards.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Company’s ability to continue as a going concern for the period
assessed by the Directors, being the period to 17 September 2025, which is at least 12 months from the date these financial
statements are authorised for issue.
The City of London Investment Trust plc Annual Report 2024
60
Independent Auditor’s Report to the Members
ofThe City of London Investment Trust plc
(continued)
In relation to the Company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing material
to add or draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors
considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections
of this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the
Company’s ability to continue as a going concern.
Overview of our audit approach
Key audit matters
●
Risk of incomplete or inaccurate revenue recognition, including the classification of special dividends as
revenue or capital items in the Income Statement.
●
Risk of incorrect valuation or ownership of the investment portfolio.
Materiality
●
Overall materiality of £20.98m which represents 1% of shareholders’ funds.
An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit
scope for the Company. This enables us to form an opinion on the financial statements. We take into account size, risk profile,
the organisation of the Company and effectiveness of controls, the potential impact of climate change and changes in the
business environment when assessing the level of work to be performed. All audit work was performed directly by the audit
engagement team.
Climate change
There has been increasing interest from stakeholders as to how climate change will impact companies. The Company has
determined that the impact of climate change could affect the Company’s investments. This is explained in the principal and
emerging risks and uncertainties section on page 29, which forms part of the “Other information”, rather than the audited
financialstatements. Our procedures on these disclosures therefore consisted solely of considering whether they are materially
inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appear to be
materially misstated.
Our audit effort in considering climate change was focused on the adequacy of the Company’s disclosures in the financial
statements as set out in note 1(a) and conclusion that there was no further impact of climate change to be taken into account as
the investments are valued based on market pricing as required by FRS 102. We also challenged the Directors’ considerations of
climate change risks in their assessment of going concern and viability and associated disclosures.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit
of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.
The City of London Investment Trust plc Annual Report 2024
61
Independent Auditor’s Report to the Members
ofThe City of London Investment Trust plc
(continued)
Risk Our response to the risk
Key observations communicated to the Audit
and Risk Committee
Incomplete or inaccurate revenue
recognition, including the
classification of special dividends
as revenue or capital items in the
Income Statement (as described on
page 51 in the Audit and Risk Committee
Report and as per the accounting policy
set out on page 71).
The total revenue for the year to 30 June
2024 is £109.71m (2023: £101.97m),
consisting primarily of dividend income
from listed equity investments.
The Company received seven special
dividends amounting to £6.46m, of
which £1.04m (2023: £2.52m) was
classified as revenue and £5.42m
(2023:£nil) was classified as capital.
There is a risk of incomplete or
inaccurate recognition of revenue
through the failure to recognise proper
income entitlements or to apply an
appropriate accounting treatment.
The Directors may be required to
exercise judgement in determining
whether income receivable in the form
ofspecial dividends should be classified
as ‘revenue’ or ‘capital’ in the
IncomeStatement.
We performed the following
procedures:
We obtained an understanding of the
processes and controls surrounding
revenue recognition, including the
classification of special dividends by
performing walkthrough procedures.
For 100% of dividends received and
accrued, we recalculated the income by
multiplying the investment holdings at
the ex-dividend date, traced from the
accounting records, by the dividend
pershare, which was agreed to an
independent data vendor. We also
agreed all exchange rates to an
independent data vendor and agreed
asample of dividend receipts to
bankstatements.
For 100% of dividends accrued,
wereviewed the investee company
announcement to assess whether the
dividend entitlements arose prior to
30June 2024.
To test completeness of recorded
income, we verified that expected
dividends for each investee company
held during the year had been recorded
as income with reference to investee
company announcements obtained from
an independent data vendor.
For all investments held during the year,
we inspected the type of dividends paid
with reference to an external data
vendor to identify those which were
special dividends. We identified seven
special dividends received during the
year, three classified as capital and four
classified as revenue. For two special
dividends above our testing threshold,
and a sample of special dividends below
our testing threshold, we assessed the
appropriateness of management’s
classification as revenue or capital by
reviewing the underlying rationale for
thedistributions.
The results of our procedures identified
no material misstatement in relation to
the risk of incomplete or inaccurate
revenue recognition, including incorrect
classification of special dividends as
revenue or capital items in the
IncomeStatement.
The City of London Investment Trust plc Annual Report 2024
62
Independent Auditor’s Report to the Members
ofThe City of London Investment Trust plc
(continued)
Risk Our response to the risk
Key observations communicated to the Audit
and Risk Committee
Incorrect valuation or ownership of
the investment portfolio (as described
on page 51 in the Audit and Risk
Committee Report and as per the
accounting policy set out on pages 70
and 71).
The valuation of the investment portfolio
at 30 June 2024 was £2,246.59m (2023:
£2,034.65m) consisting primarily of
listedinvestments.
The valuation of the investments held
bythe Company is the key driver of the
Company’s net asset value and total
return. Incorrect investment pricing, or a
failure to maintain proper legal title of the
assets held by the Company could have
a significant impact on the net asset
value and the return generated
forshareholders.
The fair value of listed investments is
determined using quoted market bid
prices at close of business on the
reporting date.
We performed the following
procedures:
We obtained an understanding of the
processes surrounding investment
pricing and legal title of listed
investments by performing
walkthroughprocedures.
For 100% of investments in the portfolio,
we verified the market prices and
exchange rates applied to an
independent pricing vendor and
recalculated the investment valuations
as at the year end.
For all investments in the portfolio,
weobtained the market prices from an
independent pricing vendor for five
business days pre and post the year
enddate and calculated the day-on-day
movements to identify any stale prices.
We verified that the listed prices are
validfair values through review of
tradingactivity.
We compared the Company’s
investment holdings as at 30 June 2024
to an independent confirmation received
directly from the Company’s Custodian
and Depositary.
The results of our procedures identified
no material misstatement in relation to
the risk of incorrect valuation or
ownership of the investment portfolio.
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on
the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence
the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and
extent of our audit procedures.
We determined materiality for the Company to be £20.98m, which is 1% of shareholders’ funds. We believe that shareholders’
funds provide us with materiality aligned to the key measurement of the Company’s performance.
In the prior year, the predecessor auditors determined materiality for the Company to be £19.16m, which was 1% of net
assetvalue.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low
level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Company’s overall control environment, our
judgement was that performance materiality was 50% of our planning materiality, namely £10.49m. We have set performance
materiality at this percentage due to this being our first year auditing the Company.
In the prior year, the predecessor auditors determined performance materiality for the Company to be £14.37m which was 75%
of materiality.
Given the importance of the distinction between revenue and capital for investment trusts, we also applied a separate testing
threshold for the revenue column of the Income Statement of £5.26m being 5% of the revenue net return before taxation.
The City of London Investment Trust plc Annual Report 2024
63
Independent Auditor’s Report to the Members
ofThe City of London Investment Trust plc
(continued)
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit and Risk Committee that we would report to them all uncorrected audit differences in excess of
£1.05m, which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted
reporting on qualitative grounds.
In the prior year, the predecessor auditors determined the reporting threshold for the Company to be £0.96m which was 5%
ofmateriality.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light
ofother relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report other than the financial statements and our
auditor’s report thereon. The Directors are responsible for the other information contained within the Annual Report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated
in this report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements, or our knowledge obtained in the course of the audit or otherwise appears to be
materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we
have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
●
the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
●
the Strategic Report and Directors’ Report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we
have not identified material misstatements in the Strategic Report or Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report
to you if, in our opinion:
●
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches
not visited by us; or
●
the financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the
accounting records and returns; or
●
certain disclosures of Directors’ remuneration specified by law are not made; or
●
we have not received all the information and explanations we require for our audit.
Corporate governance statement
We have reviewed the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate
Governance Statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code
specified for our review by the UK Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit:
The City of London Investment Trust plc Annual Report 2024
64
Independent Auditor’s Report to the Members
ofThe City of London Investment Trust plc
(continued)
●
the Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any
material uncertainties identified set out on page 70;
●
the Directors’ explanation as to their assessment of the Company’s prospects, the period this assessment covers and why
the period is appropriate set out on page 31;
●
the Director’s statement on whether they have a reasonable expectation that the Company will be able to continue in
operation and meets its liabilities set out on page 31;
●
the Directors’ statement on fair, balanced and understandable set out on page 58;
●
the Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 29;
●
the section of the Annual Report that describes the review of effectiveness of risk management and internal control systems
set out on page 47; and
●
the section describing the work of the Audit and Risk Committee set out on page 49.
Responsibilities of Directors
As explained more fully in the Statement of Directors’ Responsibilities set out on page 58, the Directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as
the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is
a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
Explanation as to what extent the audit was considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to
fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of
the Company and management.
●
We obtained an understanding of the legal and regulatory frameworks that are applicable to the Company and determined
that the most significant are UK GAAP, the Companies Act 2006, the UK Listing Rules, the UK Corporate Governance Code,
the Statement of Recommended Practice for the Financial Statements of Investment Trust Companies as issued by the
Association of Investment Companies, Section 1158 of the Corporation Tax Act 2010 and The Companies (Miscellaneous
Reporting) Regulations 2018.
●
We understood how the Company is complying with those frameworks through discussions with the Audit and Risk
Committee and Corporate Secretary, review of Board and Committee minutes and review of papers provided to the Audit
and Risk Committee.
●
We assessed the susceptibility of the Company’s financial statements to material misstatement, including how fraud might
occur by considering the key risks impacting the financial statements. We identified a fraud risk with respect to the
incomplete or inaccurate revenue recognition through incorrect classification of special dividends as revenue or capital items
in the Income Statement. Further discussion of our approach is set out in the section on key audit matters above.
●
Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations.
Our procedures involved review of the reporting to the Directors with respect to the application of the documented policies and
procedures and review of the financial statements to ensure compliance with the reporting requirements of the Company.
The City of London Investment Trust plc Annual Report 2024
65
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Other matters we are required to address
●
Following the recommendation from the Audit and Risk Committee, we were appointed by the Company on 31 October 2023
to audit the financial statements for the year ending 30 June 2024 and subsequent financial periods.
●
The period of total uninterrupted engagement including previous renewals and reappointments is one year, covering the year
ended 30 June 2024.
●
The audit opinion is consistent with the additional report to the Audit and Risk Committee.
Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or
for the opinions we have formed.
Mike Gaylor
For and on behalf of Ernst & Young LLP
Statutory Auditor
London
17 September 2024
Independent Auditor’s Report to the Members
ofThe City of London Investment Trust plc
(continued)
The City of London Investment Trust plc Annual Report 2024
66
Income Statement
Year ended 30 June 2024 Year ended 30 June 2023
Notes
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
2 Gains/(losses) on investments
held at fair value through profit or
loss – 200,864 200,864 – (27,111) (27,111)
3 Income from investments held at
fair value through profit or loss 109,335 – 109,335 101,747 – 101,747
4 Other interest receivable and
similar income 371 – 371 224 – 224
Gross revenue and capital
gains/(losses) 109,706 200,864 310,570 101,971 (27,111) 74,860
5 Management fee (1,927) (4,497) (6,424) (1,844) (4,304) (6,148)
6 Other administrative expenses (1,009) – (1,009) (860) – (860)
Net return/(loss) before finance
costs and taxation 106,770 196,367 303,137 99,267 (31,415) 67,852
7 Finance costs (1,666) (3,520) (5,186) (1,621) (3,416) (5,037)
Net return/(loss) before taxation 105,104 192,847 297,951 97,646 (34,831) 62,815
8 Taxation (533) – (533) (1,406) – (1,406)
Net return/(loss) after taxation 104,571 192,847 297,418 96,240 (34,831) 61,409
9 Return/(loss) per ordinary
share – basic and diluted 20.87p 38.48p 59.35p 20.14p (7.29p) 12.85p
The total columns of this statement represent the Company’s Income Statement. The revenue return and capital return columns
are supplementary to this and are prepared under guidance published by the Association of Investment Companies. All revenue
and capital items in the above statement derive from continuing operations. The Company has no recognised gains or losses
other than those recognised in the Income Statement.
The notes on pages 70 to 85 form part of these financial statements
67
The City of London Investment Trust plc Annual Report 2024
Statement of Changes in Equity
Notes Year ended 30 June 2024
Called up
share capital
£’000
Share premium
account
£’000
Capital
redemption
reserve
£’000
Other capital
reserves
£’000
Revenue
reserve
£’000
Total
£’000
At 1 July 2023 124,339 1,053,061 2,707 691,463 44,322 1,915,892
Net return after taxation – – – 192,847 104,571 297,418
17, 18 Buyback of 8,301,867
ordinary shares for treasury – – – (34,400) – (34,400)
17, 18 Issue of 5,310,000 new
ordinary shares 1,327 19,563 – – – 20,890
10 Dividends paid – – – – (102,272) (102,272)
At 30 June 2024 125,666 1,072,624 2,707 849,910 46,621 2,097,528
Notes Year ended 30 June 2023
Called up
share capital
£’000
Share premium
account
£’000
Capital
redemption
reserve
£’000
Other capital
reserves
£’000
Revenue
reserve
£’000
Total
£’000
At 1 July 2022 114,910 909,143 2,707 726,294 43,603 1,796,657
Net (loss)/return
aftertaxation – – – (34,831) 96,240 61,409
17, 18 Issue of 37,715,000
newordinary shares 9,429 143,918 – – – 153,347
10 Dividends paid – – – – (95,521) (95,521)
At 30 June 2023 124,339 1,053,061 2,707 691,463 44,322 1,915,892
The notes on pages 70 to 85 form part of these financial statements
68
The City of London Investment Trust plc Annual Report 2024
Statement of Financial Position
Notes
30 June 2024
£’000
30 June 2023
£’000
Fixed assets
11 Investments held at fair value through profit or loss
Listed at market value in the United Kingdom
1
1,657,638 1,653,748
Listed at market value overseas
1
216,147 259,339
Investments on loan
1
372,460 121,213
12 Investment in subsidiary undertakings 347 347
2,246,592 2,034,647
Current assets
13 Debtors 12,911 10,823
12,911 10,823
14 Creditors: amounts falling due within one year (46,307) (13,956)
Net current liabilities (33,396) (3,133)
Total assets less current liabilities 2,213,196 2,031,514
15 Creditors: amounts falling due after more than one year (115,668) (115,622)
Net assets 2,097,528 1,915,892
Capital and reserves
17 Called up share capital 125,666 124,339
18 Share premium account 1,072,624 1,053,061
19 Capital redemption reserve 2,707 2,707
19 Other capital reserves 849,910 691,463
20 Revenue reserve 46,621 44,322
21 Total shareholders’ funds 2,097,528 1,915,892
21 Net asset value per ordinary share - basic and diluted 424.29p 385.22p
1 Prior year comparatives have been restated as explained further in note 1a)
The financial statements on pages 67 to 85 were approved by the Board of Directors on 17 September 2024 and signed on its
behalf by:
Sir Laurie Magnus CBE
Chairman
The notes on pages 70 to 85 form part of these financial statements
Registration number: 34871
69
The City of London Investment Trust plc Annual Report 2024
Notes to the Financial Statements
1 Accounting policies
(a) Basis of accounting
The Company is a registered investment company as defined in Section 833 of the Companies Act 2006 and is
incorporated in the UK. It operates in the UK and is registered at the address on page 95.
The financial statements have been prepared in accordance with the Companies Act 2006, FRS 102, the Financial
Reporting Standard applicable in the UK and Republic of Ireland, and with the Statement of Recommended Practice:
Financial Statements of Investment Trust Companies and Venture Capital Trusts (“the SORP”) issued in July 2022 by the
Association of Investment Companies.
The principal accounting policies applied in the presentation of these financial statements are set out below. These policies
have been consistently applied to all the years presented.
As an investment fund the Company has the option, which it has taken, not to present a cash flow statement. A cash flow
statement is not required when an investment fund meets all the following conditions: substantially all of the entity’s
investments are highly liquid, substantially all of the entity’s investments are carried at market value, and the entity provides
a Statement of Changes in Equity. The Directors have assessed that the Company meets all of these conditions.
The financial statements have been prepared under the historical cost basis except for the measurement at fair value of
investments. In applying FRS 102, financial instruments have been accounted for in accordance with Sections 11 and 12 of
the standard. All of the Company’s operations are of a continuing nature.
The financial statements of the Company’s three subsidiaries have not been consolidated on the basis of immateriality and
dormancy. Consequently, the financial statements present information about the Company as an individual entity. The
Directors consider that the values of the subsidiary undertakings are not less than the amounts at which they are included
in the financial statements.
The preparation of the Company’s financial statements on occasion requires the Directors to make judgements, estimates
and assumptions that affect the reported amounts in the primary financial statements and the accompanying disclosures.
These assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of
assets or liabilities affected in the current and future periods, depending on circumstance.
The decision to allocate special dividends as income or capital is a judgement but not deemed to be material. The
allocation of expenses to income or capital is a judgement as well, but also is not deemed to be material. The Directors do
not believe that any accounting judgements or estimates have been applied to this set of financial statements that have a
significant risk of causing material adjustment to the carrying amount of assets and liabilities within the next financial year.
In line with UK GAAP, investments are valued at fair value which are quoted prices for the investments in active markets
and therefore reflect participants’ views of climate change risk.
The investment disclosures in the Statement of Financial Position previously included the value of investments on loan
within the values of investments listed at market value in the United Kingdom (£80,947,000) and listed at market value
overseas (£40,266,000). In the current year, the value of investments on loan has been disclosed separately and the prior
year comparatives restated on the same basis. These changes in presentation have no impact on the Company’s net
assets or Income Statement.
(b) Going concern
The assets of the Company consist of securities that are readily realisable. As set out in the Viability Statement, the Directors
consider three model scenarios that stress test the revenue reserves. None of the results from these scenarios would
threaten the viability of the Company and its ability to continue as a going concern. The Directors have also considered the
current geopolitical and macroeconomic uncertainties and the potential for sudden catastrophic events such as pandemics,
conflict and climate events, including cash flow forecasting, a review of covenant compliance including the headroom
abovethe most restrictive covenants and an assessment of the liquidity of the portfolio. They have concluded that the
Company is able to meet its financial obligations, including the repayment of the bank overdraft, as they fall due for a period
to 17 September 2025, which is at least 12 months from the date of approval of the financial statements. Having assessed
these factors, the principal risks and other matters discussed in connection with the viability statement, the Board has
determined that it is appropriate for the financial statements to be prepared on a going concern basis.
(c) Valuation of investments held at fair value through profit or loss
Listed investments are valued at fair value, which is deemed to be bid market prices or the last traded price depending on
the convention of the exchange on which the investment is quoted.
The only unquoted investments are the Company’s subsidiaries which are valued at the net asset value according to their
latest financial statements and this is considered to be fair value.
70
The City of London Investment Trust plc Annual Report 2024
Notes to the Financial Statements (continued)
1 Accounting policies (continued)
(c) Valuation of investments held at fair value through profit or loss (continued)
Changes in the fair value of investments held at fair value through profit or loss and gains and losses on disposal are
recognised in the Income Statement as “Gains/(losses) on investments held at fair value through profit or loss”. Transaction
costs incurred on the purchase and disposal of investments are recognised as a capital item in the Income Statement. All
purchases and sales are accounted for on a trade date basis.
(d) Foreign currency
The results and financial position of the Company are expressed in pounds sterling, which is the functional currency and
presentational currency of the Company. Sterling is the functional currency because it is the currency of the primary
economic environment in which the Company operates.
Transactions recorded in overseas currencies during the year are translated into sterling at the appropriate daily exchange
rates. Assets and liabilities denominated in overseas currencies at the Statement of Financial Position date are translated
into sterling at the exchange rates ruling at that date.
Any gains or losses on the translation of foreign currency balances, whether realised or unrealised, are taken to the capital
or to the revenue return of the Income Statement, depending on whether the gain or loss is of a capital or revenue nature.
(e) Income
Dividends receivable from equity shares are taken to the revenue return on an ex-dividend basis except where, in the
opinion of Directors, the dividend is capital in nature in which case it is taken to the capital return. Special dividends are
recognised on an ex-dividend basis and treated as capital or revenue depending on the facts and circumstances of each
dividend. Bank interest and stock lending revenue are accounted for on an accruals basis.
The ordinary element of scrip dividends received in lieu of cash dividends is recognised as revenue. Any enhancement
above the cash dividend is treated as capital.
Where the Company enters into a commitment to underwrite an issue of securities in exchange for the receipt of
commission, this creates a derivative financial instrument. Any such derivatives are recognised initially at fair value and are
subsequently re-measured at fair value, with the related gains and losses being reflected in the Income Statement. Net
losses arising from derivatives, where the actual or expected loss from taking up the securities underwritten exceeds the
commission income, are allocated to the capital return. Net gains are allocated to the revenue return.
Fees earned from stock lending are accounted for on an accruals basis and shown in the revenue return based on
amounts to which the Company is entitled. This is after deduction of amounts withheld by the counterparty arranging the
stock lending facility. The stock lending accounting policy is set out in note 16.3.
(f) Management and other administrative expenses and finance costs
All expenses and finance costs are accounted for on an accruals basis. In accordance with the Board’s expectation, over
the long term, that investment returns will be attributable 70% to capital and 30% to revenue, the Company charges to
capital 70% of the finance costs (excluding dividends payable on the preference and preferred ordinary stocks) and
management fees with the remaining 30% being charged to revenue. Other administrative expenses are charged 100% to
revenue except where they relate directly to a capital transaction.
(g) Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the
Income Statement because it excludes items of income or expense that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using the effective tax
rate of corporation tax for the accounting period.
The tax effect of different items of expenditure is allocated between the capital return and revenue return using the Company’s
effective rate of tax for the year. In line with the recommendations of the SORP, the allocation method used to calculate tax relief
on expenses presented against capital returns in the supplementary information in the Income Statement is the “marginal
basis”. Under this basis, if taxable income is capable of being offset entirely by expenses presented in the revenue return
column of the Income Statement, then no tax relief is transferred to the capital return column.
Deferred taxation is provided on all timing differences that have originated but not reversed by the Statement of Financial
Position date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will
be suitable profits from which the future reversal of timing differences can be deducted. Any liability to deferred tax is provided
at the average rate of tax expected to apply based on tax rates and laws that have been enacted or substantially enacted at the
Statement of Financial Position date. Deferred tax assets and liabilities are not discounted to reflect the time value of money.
71
The City of London Investment Trust plc Annual Report 2024
Notes to the Financial Statements (continued)
1 Accounting policies (continued)
(h) Borrowings
Overdrafts and secured notes are initially recorded at the value of the proceeds received, net of direct issue costs. They are
subsequently measured at amortised cost. Finance costs, including interest payable, premiums payable on settlement or
redemption and direct issue costs, are accounted for on an accruals basis in the Income Statement using the effective
interest rate method and are added to the carrying amount of the instrument to the extent that they are not settled in the
period in which they arise.
(i) Preference stocks
The preference and preferred ordinary stocks have been assessed against the criteria set out in section 22.5 of FRS 102
and are deemed to be debt and are therefore classified as financial liabilities. The dividends associated with the preference
and preferred ordinary stocks are fixed amounts paid in priority to dividends on ordinary shares and on a winding up are
repaid in priority to ordinary shareholders. Dividends in respect of preference and preferred ordinary stocks are charged
fully to the Company’s revenue return within finance costs.
(j) Dividends payable to shareholders
Dividends payable to shareholders are recognised in the financial statements when they are paid, or in the case of final
dividends, when they are approved by shareholders. Dividends are disclosed in the Statement of Changes in Equity.
(k) Issue and repurchase of ordinary shares and associated costs
The proceeds from the share issue of new ordinary shares (including those relating to the sale of shares out of treasury)
and the aggregate cost of repurchasing ordinary shares (including those to be held in treasury) are taken directly to equity
and dealt with in the Statement of Changes in Equity. Issue costs incurred in respect of shares sold out of treasury are
offset against proceeds received and dealt with in other capital reserves. Share issues and repurchase transactions are
accounted for on a trade date basis.
(l) Capital and reserves
Called up share capital represents the nominal value of ordinary shares issued.
The share premium account represents the premium above nominal value received by the Company on issuing shares
net of issue costs.
The revenue reserve represents accumulated revenue profits retained by the Company that have not currently been
distributed to shareholders as a dividend.
The capital redemption reserve represents the nominal value of ordinary shares, preference stock and preferred ordinary
stock that have been repurchased and cancelled.
Other capital reserves are split into two components, the capital reserve arising on investments sold and the capital
reserve arising on revaluation of investments held. The following analyses what is accounted for in each of these
components.
Capital reserve arising on investments sold
The following are accounted for in this reserve: gains and losses on disposals of investments; expenses and finance costs
allocated to capital net of tax relief; realised foreign exchange differences of a capital nature; and cost of repurchasing
ordinary share capital.
Capital reserve arising on revaluation of investments held
The following are accounted for in this reserve: increases and decreases in the valuation of investments held at the year
end; and unrealised foreign exchange differences of a capital nature.
(m) Distributable reserves
The Company’s capital reserve arising on investments sold and revenue reserve may be distributed by way of a dividend.
There may however, be other factors that restrict the value of reserves that can be distributed. In the case of the Company,
there are small priority amounts that are payable to preference stock and preferred stockholders, which amount to less
than 1% of distributable reserves at 30 June 2024. In addition, unrealised fair value losses on investments held would be
deducted from distributable reserves, but at 30 June 2024, the Company had unrealised fair value gains of £503,622,000.
72
The City of London Investment Trust plc Annual Report 2024
Notes to the Financial Statements (continued)
2 Gains/(losses) on investments held at fair value through profit or loss
2024
£’000
2023
£’000
Gains on the sale of investments based on historical cost 44,765 25,651
Revaluation (gains)/losses recognised in previous years (3,835) 1,382
Gains on investments sold in the year based on carrying value at the previous Statement of
Financial Position date 40,930 27,033
Revaluation of investments held at 30 June 160,581 (54,215)
Exchange (losses)/gains (647) 71
Total gains/(losses) on investments held at fair value through profit or loss 200,864 (27,111)
3 Income from investments held at fair value through profit or loss
2024
£’000
2023
£’000
UK dividends:
Listed – ordinary dividends
94,307 82,884
Listed – special dividends
985 1,949
95,292 84,833
Other dividends:
Dividend income – overseas investments 10,678 13,727
Dividend income – overseas special dividends 59 568
Dividend income – UK REIT 3,306 2,619
14,043 16,914
109,335 101,747
4 Other interest receivable and similar income
2024
£’000
2023
£’000
Bank interest
84 –
Underwriting commission (allocated to revenue)
1
45 –
Stock lending revenue
242 224
371 224
1 During the year the Company was not required to take up shares in respect of its underwriting (2023: none)
Stock lending revenue has been shown net of brokerage fees of £61,000 (2023: £56,000).
73
The City of London Investment Trust plc Annual Report 2024
Notes to the Financial Statements (continued)
5 Management fee
2024 2023
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Management fee 1,927 4,497 6,424 1,844 4,304 6,148
A summary of the terms of the Management Agreement is given on page 21 and in note 23 on page 85. Details of
apportionment between revenue and capital can be found in note 1 on page 71.
6 Other administrative expenses
2024
£’000
2023
£’000
Directors’ fees and expenses (see Directors’ Remuneration Report on page 56) 200 189
Auditor’s remuneration – for statutory audit services 63 54
Marketing 172 88
Bank charges (loan facility fees) – 10
Annual and Half Year reports 53 59
Registrar’s fees 93 97
AIC 22 21
Listing fees 219 157
Advisory and consultancy fees 63 30
Depositary fees 58 59
Other expenses 66 96
1,009 860
All transactions with Directors are disclosed in the Directors’ Remuneration Report and are related party transactions.
7 Finance costs
2024 2023
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Interest on secured notes repayable wholly or partly
– after five years (includes amortisation of secured
notes issue costs) 1,171 2,733 3,904 1,171 2,733 3,904
Bank overdraft interest 338 787 1,125 293 683 976
Dividends per share:
– cumulative first preference stock 18 – 18 18 – 18
– non-cumulative second preference stock 21 – 21 21 – 21
– non-cumulative preferred ordinary stock 118 – 118 118 – 118
1,666 3,520 5,186 1,621 3,416 5,037
Details of apportionment between revenue return and capital return can be found in note 1 on page 71.
74
The City of London Investment Trust plc Annual Report 2024
Notes to the Financial Statements (continued)
8 Taxation
Analysis of tax charge for the year
2024 2023
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Analysis of tax charge for the year
Overseas withholding tax 952 – 952 1,837 – 1,837
Less: overseas withholding tax recoverable (419) – (419) (431) – (431)
533 – 533 1,406 – 1,406
The Company’s profit for the accounting year is taxed at 25% (2023: an effective rate of 20.5%). The tax charge for the year
is lower than the corporation tax rate. The differences are explained below:
Factors affecting the tax charge for the year
2024 2023
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Net return/(loss) before taxation 105,104 192,847 297,951 97,646 (34,831) 62,815
Corporation tax at 25% (2023: 20.5%) 26,276 48,212 74,488 20,017 (7,140) 12,877
Effects of:
Non-taxable UK dividends (23,448) – (23,448) (17,487) – (17,487)
Non-taxable overseas dividends (3,060) – (3,060) (2,930) – (2,930)
Overseas tax suffered 533 – 533 1,406 – 1,406
Expenses not deductible for tax purposes 1 – 1 1 – 1
Excess management expenses 192 2,004 2,196 367 1,582 1,949
Preference and preferred ordinary dividends not
allowable for tax 39 – 39 32 – 32
Net capital (gains)/losses not subject to tax – (50,216) (50,216) – 5,558 5,558
533 – 533 1,406 – 1,406
Investment trusts are exempt from corporation tax on capital gains provided that the Company complies with tests under
Section 1158 of the Corporation Tax Act 2010.
Deferred taxation
No provision for deferred taxation has been made in the current or prior accounting year. The Company has not provided
for deferred tax on capital gains or losses arising on the revaluation and disposal of investments as it is exempt from tax on
these items because of its investment trust status.
Factors that may affect future tax charges
The Company can offset management fees, other administrative expenses and interest costs against taxable income to
eliminate any tax charge on such income. The tax legislation refers to these as management expenses (management fees
and other administrative expenses) and non-trade loan relationship deficits (interest costs) and these are captured together
under the heading “Excess management expenses” in the table above. Where these are not fully utilised, they can be
carried forward to future years. As the Company is unlikely to generate future taxable profits to utilise these amounts, the
Company cannot recognise an asset to reflect them, but must still disclose the deferred tax amount carried forward arising
from any unutilised amounts.
Consequently, the Company has not recognised a deferred tax asset totalling £41,397,000 (2023: £39,944,000) arising as a
result of having unutilised management expenses and unutilised non-trade loan relationship deficits totalling £165,588,000
(2023: £159,778,000). These expenses will only be utilised, to any material extent, if changes are made either to the tax
treatment of the capital gains made by investment trusts or to the Company’s investment profile which require them to
beused.
75
The City of London Investment Trust plc Annual Report 2024
Notes to the Financial Statements (continued)
9 Return per ordinary share – basic and diluted
The return per ordinary share is based on the net return attributable to the ordinary shares of £297,418,000 (2023:
£61,409,000) and on 501,134,608 ordinary shares (2023: 477,932,402), being the weighted average number of ordinary
shares in issue during the year.
The return per ordinary share is analysed between revenue and capital as below.
2024
£’000
2023
£’000
Net revenue return 104,571 96,240
Net capital return/(loss) 192,847 (34,831)
Net total return 297,418 61,409
Weighted average number of ordinary shares in issue during the year 501,134,608 477,932,402
2024
Pence
2023
Pence
Revenue return per ordinary share 20.87 20.14
Capital return/(loss) per ordinary share 38.48 (7.29)
Total return per ordinary share 59.35 12.85
The Company does not have any dilutive securities, therefore the basic and diluted returns per share are the same.
10 Dividends paid on ordinary shares
Record date Payment date
2024
£’000
2023
£’000
Fourth interim dividend (5.00p) for the year ended 30 June 2022
04 August 2022 31 August 2022 – 23,140
First interim dividend (5.00p) for the year ended 30 June 2023
27 October 2022 30 November 2022 – 23,518
Second interim dividend (5.00p) for the year ended 30 June 2023
26 January 2023 28 February 2023 – 23,910
Third interim dividend (5.05p) for the year ended 30 June 2023
27 April 2023 31 May 2023 – 24,953
Fourth interim dividend (5.05p) for the year ended 30 June 2023
27 July 2023 31 August 2023 25,374 –
First interim dividend (5.05p) for the year ended 30 June 2024
26 October 2023 30 November 2023 25,385 –
Second interim dividend (5.05p) for the year ended 30 June 2024
25 January 2024 29 February 2024 25,385 –
Third interim dividend (5.25p) for the year ended 30 June 2024
25 April 2024 31 May 2024 26,200 –
Unclaimed dividends over 12 years old
(72) –
102,272 95,521
In accordance with FRS 102, interim dividends payable to equity shareholders are recognised in the Statement of Changes
in Equity when they have been paid to shareholders.
All dividends have been paid or will be paid out of revenue reserves or current year revenue profits and at no point during
the year did the revenue reserve move to a negative position.
The total dividends payable in respect of the financial year which form the basis of the test under Section 1158 of the
Corporation Tax Act 2010 are set out below.
2024
£’000
2023
£’000
Revenue available for distribution by way of dividend for the year 104,571 96,240
First interim dividend of 5.05p (2023: 5.00p) (25,385) (23,518)
Second interim dividend of 5.05p (2023: 5.00p) (25,385) (23,910)
Third interim dividend of 5.25p (2023: 5.05p) (26,200) (24,954)
Fourth interim dividend of 5.25p (2023: 5.05p) paid on 30 August 2024¹ (25,953) (25,374)
Transfer to/(from) revenue reserve² 1,648 (1,516)
1 Based on 494,334,723 ordinary shares in issue at 17 July 2024 (the ex-dividend date) (2023: 502,464,868)
2 The surplus of £1,648,000 (2023: deficit of £1,516,000) has been taken to/(from) the revenue reserve
Since the year end, the Board has announced a first interim dividend of 5.25p per ordinary share, in respect of the year
ending 30 June 2025. This will be paid on 29 November 2024 to holders registered at the close of business on 25 October
2024. The Company’s shares will go ex-dividend on 24 October 2024.
76
The City of London Investment Trust plc Annual Report 2024
Notes to the Financial Statements (continued)
11 Investments held at fair value through profit or loss
2024
Investments in
subsidiaries
£’000
Other investments
£’000
Total
£’000
Valuation at 1 July 2023 347 2,034,300 2,034,647
Investment holding gains at 1 July 2023 – (346,877) (346,877)
Cost at 1 July 2023 347 1,687,423 1,687,770
Additions at cost – 211,630 211,630
Disposals at cost – (156,430) (156,430)
Cost at 30 June 2024 347 1,742,623 1,742,970
Investment holding gains at 30 June 2024 – 503,622 503,622
Valuation at 30 June 2024 347 2,246,245 2,246,592
2023
Investments in
subsidiaries
£’000
Other investments
£’000
Total
£’000
Valuation at 1 July 2022 347 1,923,270 1,923,617
Investment holding gains at 1 July 2022 – (399,710) (399,710)
Cost at 1 July 2022 347 1,523,560 1,523,907
Additions at cost – 253,378 253,378
Disposals at cost – (89,515) (89,515)
Cost at 30 June 2023 347 1,687,423 1,687,770
Investment holding gains at 30 June 2023 – 346,877 346,877
Valuation at 30 June 2023 347 2,034,300 2,034,647
The portfolio valuation at 30 June 2024 of £2,246,245,000 (2023: £2,034,300,000) is shown on the Statement of Financial
Position as investments held at fair value through profit or loss.
At 30 June 2024, the total value of securities on loan by the Company for stock lending purposes was £372,460,000
(2023:£121,213,000). The maximum aggregate value of securities on loan at any one time during the year ended 30 June
2024 was £393,436,000 (2023: £285,320,000). The Company’s agent holds collateral at 30 June 2024, with a value of
£393,377,000 (2023: £133,180,000) in respect of securities on loan, the value of which is reviewed on a daily basis and
comprises CREST Delivery By Value (“DBVs”) and Government Bonds with a market value of 106% (2023: 110%) of the
market value of any securities on loan.
Purchase transaction costs for the year ended 30 June 2024 were £1,141,000 (2023: £1,105,000). These comprise mainly
of stamp duty and commission. Sale transaction costs for the year ended 30 June 2024 were £71,000 (2023: £34,000).
The Company received £201,195,000 (2023: £115,166,000) from investments sold in the year. The book cost of these
investments when they were purchased were £156,430,000 (2023: £89,515,000). These investments have been revalued
over time and until they were sold any unrealised gains/losses were included in the fair value of the investments.
12 Subsidiaries and related undertakings
The Company’s related undertakings are its three wholly-owned subsidiary undertakings, all of which are registered in
England and Wales: The City of London European Trust Limited, City of London Investments Limited and The City of
London Finance Company Limited.
The financial statements of the three companies have not been consolidated on the basis of immateriality and dormancy.
Consequently the financial statements present information about the Company as an individual entity. The Directors
consider that the values of the subsidiary undertakings are not less than the amounts at which they are included in the
financial statements. The subsidiaries are maintained in order to protect the company names.
●
The City of London European Trust Limited was incorporated in 1899 as Patrick & McGregor Limited and is dormant,
not having traded since 1968. Its registered office is 201 Bishopsgate, London, EC2M 3AE. The aggregate amount of
the capital and reserves of The City of London European Trust Limited at 30 June 2024 was £347,000 (2023: £347,000).
This Company has 10,000 issued ordinary shares of £1 each.
●
City of London Investments Limited is a dormant company and has not traded since its incorporation in 1982. Its registered
office is 201 Bishopsgate, London, EC2M 3AE. The aggregate amount of the capital and reserves of City of London
Investments Limited at 30 June 2024 was £2 (2023: £2). This company has two issued ordinary shares of £1 each.
77
The City of London Investment Trust plc Annual Report 2024
Notes to the Financial Statements (continued)
12 Subsidiaries and related undertakings (continued)
●
The City of London Finance Company Limited was incorporated in 1978 as a share dealing company It is a dormant
company, having not traded since 2009. Its registered office is 201 Bishopsgate, London, EC2M 3AE. The aggregate
amount of capital and reserves of The City of London Finance Company Limited at 30 June 2024 was £2 (2023: £2).
Thiscompany has two issued ordinary shares of £1 each.
13 Debtors
2024
£’000
2023
£’000
Withholding and income tax recoverable 2,589 2,775
Sales for future settlement 641 –
Prepayments and accrued income 9,681 8,048
12,911 10,823
14 Creditors: amounts falling due within one year
2024
£’000
2023
£’000
Bank loans and overdraft 41,035 9,048
Amounts owed to subsidiary undertakings 347 347
Purchases for future settlement 1,818 –
Dividends payable on preference and preferred ordinary stocks 79 79
Accruals and deferred income 3,028 4,482
46,307 13,956
The Company has an uncommitted overdraft facility of £120,000,000 at 30 June 2024 (2023: £120,000,000) provided
byits Custodian and has provided a floating charge over its assets in return. The overdraft may be withdrawn by the
Custodian at any time and is repayable on demand. Interest on the overdraft was payable at a rate of HSBC base rate
plus 1.25% at 30 June 2024 (2023: plus 1.25%). Covenants relating inter alia to a maximum level of borrowings apply
tothe Company’s borrowing facility. A breach of these covenants may result in any overdraft drawn down becoming
repayable immediately.
15 Creditors: amounts falling due after more than one year
2024
£’000
2023
£’000
4.53% secured notes 2029 34,816 34,784
2.67% secured notes 2046 29,766 29,759
2.94% secured notes 2049 49,687 49,680
£301,982 cumulative first preference stock 302 302
£507,202 non-cumulative second preference stock 507 507
£589,672 non-cumulative preferred ordinary stock 590 590
115,668 115,622
On 22 January 2014 the Company issued £35,000,000 (nominal) 4.53% secured notes due 2029, net of issue costs
totalling £476,000. The issue costs will be amortised over the life of the secured notes.
On 17 November 2017 the Company issued £50,000,000 (nominal) 2.94% secured notes due 2049, net of issue costs
totalling £360,000. The issue costs will be amortised over the life of the secured notes.
On 19 March 2021 the Company issued £30,000,000 (nominal) 2.67% secured notes due 2046, net of issue costs totalling
£257,000. The issue costs will be amortised over the life of the secured notes.
The repayment terms of the secured notes are as follows:
●
£35,000,000 4.53% secured notes 2029 redeemable at par on 22 January 2029.
●
£30,000,000 2.67% secured notes 2046 redeemable at par on 19 March 2046.
●
£50,000,000 2.94% secured notes 2049 redeemable at par on 17 November 2049.
The notes are secured by a first floating charge over the Company’s assets.
78
The City of London Investment Trust plc Annual Report 2024
Notes to the Financial Statements (continued)
15 Creditors: amounts falling due after more than one year (continued)
A summary of the rights that attach to each of the Preference and Preferred Ordinary Stocks, all of which are non-
redeemable, is given below.
First Preference Stock Second Preference Stock Preferred Ordinary Stock
a) Rights to dividends A fixed cumulative
dividend of 6% per
annum, of which 5.5%
is payable in preference
to the dividend on the
second preference
stock and 0.5% is
payable after it.
A fixed non-cumulative
dividend of 4.2% per
annum, which is
payable after the first
5.5% per annum
entitlement on the first
preference stock.
A fixed non-cumulative
dividend of 20% per
annum, which is
payable after the
entitlements on the
first and second
preference stocks.
b) Priority and amounts
receivable on a winding-up
Repayment of capital in
priority to payment to
the other members of
the Company. Any
arrears of dividend are
payable after the
repayment of the capital
on the second
preference stock.
Repayment of capital
after the repayment
of the capital on the
first preference stock.
Payment of £3.50 in
respect of each £1 of
capital, after the
repayment of the
entitlements on the
first and second
preference stocks.
c) Voting rights at general
meetings
Right to attend and
vote at general
meetings. On a poll,
voting rights are one
vote per £10 of stock
held.
No rights to attend or
vote at general
meetings (except on a
winding-up of the
Company or if
dividends are in
arrears).
Right to attend and
vote at general
meetings. On a poll,
voting rights are one
vote per £20 of stock
held.
Notes:
i) The dividend entitlements of the first preference stock and the preferred ordinary stock reverted on 6 April 1999 to the rates which applied before 6 April 1973
ii) In the event of a winding-up, the preferred ordinary stock would be repaid at £3.50 per £1 of stock. However, its share of equity shareholders’ funds is
included in the financial statements at par because no winding-up is envisaged
16 Risk management policies and procedures
The Directors manage investment risk principally through setting an investment policy (that is approved by shareholders)
which incorporates risk parameters (see page 20), by contracting management of the Company’s investments to an
investment manager (Janus Henderson) under a contract which incorporates appropriate duties and restrictions and by
monitoring performance in relation to these. Internal control and the Board’s approach to risk is on pages 47 and 48.
Therehave been no material changes to the management or nature of the Company’s investment risks from the prior year.
The main risks arising from the Company’s pursuit of its investment objective are market risk (comprising market price risk,
currency risk and interest rate risk), credit risk and liquidity risk. The effects of these can also be increased by gearing.
The Board and Janus Henderson coordinate the Company’s risk management and there are various risk management
systems in place as detailed below.
●
Straight-through processing via a deal order and management system (“OMS”) is utilised for listed securities.
●
Portfolio modelling and investment management functions (including order-raising, dealing and trade execution) are
performed using one of, or a combination of, the following third-party software applications: Charles River
Development OMS and/or Imagine.
●
Fund pricing and accounting services are outsourced to a third-party administrator (currently BNP Paribas) which
utilises HiPortfolio software.
●
The IT tools to which the Janus Henderson risk, compliance and operations teams have access for independent
monitoring and risk measurement purposes include:
– Charles River Compliance module for investment restrictions monitoring;
– SAI360 operational risk database;
– RiskMetrics, UBS Delta, Style Research, Cognity and Barra for market risk measurement;
– Bloomberg for market data and price-checking; and
– HiPortfolio for portfolio holdings and valuations.
79
The City of London Investment Trust plc Annual Report 2024
Notes to the Financial Statements (continued)
16 Risk management policies and procedures (continued)
16.1 Market risk
The fair value of a financial instrument held by the Company may fluctuate due to changes in market prices. This market
risk comprises market price risk (see note 16.1.1), currency risk (see note 16.1.2) and interest rate risk (see note 16.1.3). The
Fund Manager assesses the exposure to market risk when making each investment decision, and monitors the overall level
of market risk on the whole of the investment portfolio on an ongoing basis.
16.1.1 Market price risk
Market price risk (changes in market prices other than those arising from interest rate risk or currency risk) may affect the
value of investments. The Company’s investments are susceptible to market price risk arising from uncertainties about the
future prices of the investments.
Management of the risk
The Board manages the risks inherent in the investment portfolio by ensuring full and timely access to relevant information
from Janus Henderson. The Board meets regularly and at each meeting reviews investment performance. The Board
monitors Janus Henderson’s compliance with the Company’s objectives, including investment strategy and asset allocation.
When appropriate, the Company may buy/sell put or call options or futures on indices and on equity investments in its
portfolio to manage its exposure to price risk or to generate income. At 30 June 2024, the Company had no open positions
(2023: nil).
Concentration of exposure to market price risk
An analysis of the Company’s investment portfolio is shown on pages 16 and 17. This shows that the majority of the
Company’s investments are in UK-listed companies. Accordingly, there is a concentration of exposure to the UK, though it
is recognised that an investment’s country of domicile or of listing does not necessarily equate to its exposure to the
economic conditions in that country.
Market price risk sensitivity
The sensitivity of (a) the return after taxation for the year and (b) the Company’s net assets to an increase or decrease of
10% in the fair values of the Company’s investments at each Statement of Financial Position date is shown below. This level
of change is considered to be reasonably possible, based on observation of current market conditions.
The impact of a 10% increase in the value of the investments on the revenue return as at 30 June 2024 is a decrease of
£202,000 (2023: £198,000) and on the capital return is an increase of £224,153,000 (2023: £202,967,000). The total impact
on equity shareholders’ funds would be an increase of £223,951,000 (2023: £202,769,000).
The impact of a 10% decrease in the value of the investments on the revenue return as at 30 June 2024 is an increase of
£202,000 (2023: £198,000) and on the capital return is a decrease of £224,153,000 (2023: £202,967,000). The total impact
on equity shareholders’ funds would be a decrease of £223,951,000 (2023: £202,769,000).
16.1.2 Currency risk
The Company is not itself materially exposed to currency risk, although some of the investments will be in companies that
have operations that involve currency risk and pay dividends in foreign currencies.
Management of the risk
Investment income denominated in foreign currencies is converted into sterling on receipt. The Company does not use
financial instruments to mitigate the currency exposure in the period between the time that income is included in the
financial statements and its receipt. However, the Company does sometimes hedge foreign currency exposure ahead of
the declaration of dividends from companies in which it invests.
Foreign currency exposure
The fair values of the Company’s monetary items that have foreign currency exposure at 30 June 2024 are £3,209,000
(2023: £3,391,000).
Foreign currency sensitivity
The Company’s sensitivity to movements in exchange rates affecting its investment income, assuming a 10% movement in
the sterling/US dollar rate, will be a loss of £1,577,000 (2023: £1,710,000) if sterling strengthens and a profit of £1,928,000
(2023: £2,090,000) if sterling weakens and, assuming a 10% movement in the sterling/euro rate, will be a loss of £592,000
(2023: £425,000) if sterling strengthens and a profit of £723,000 (2023: £519,000) if sterling weakens. The 10% movement
has been based on average market volatility in exchange rates in the previous 12 months.
80
The City of London Investment Trust plc Annual Report 2024
Notes to the Financial Statements (continued)
16 Risk management policies and procedures (continued)
16.1.3 Interest rate risk
Interest rate movements may affect:
●
the level of income receivable from cash at bank and on deposit; and
●
the interest payable on the Company’s variable rate bank borrowings.
Management of the risk
The Company, generally, does not hold significant cash balances. The Company finances part of its activities through
borrowings at levels approved and monitored by the Board. Derivative contracts have not been used during the year to
hedge against the exposure to interest rate risk. There has been no hedging during the year.
Interest rate exposure
The Company’s exposure at 30 June 2024 of financial liabilities to fixed interest rate risk can be found in note 15. The
exposure to floating interest rates can be found on the Statement of Financial Position under cash at bank and under bank
overdraft in note 14.
Interest receivable and finance costs are at the following rates:
●
interest paid on borrowings under the overdraft facility provided by the Custodian is at a margin of 1.25% above the
HSBC base rate (2023: same).
The table below analyses the Company’s aggregated interest costs and principal amounts due over the life of the liabilities.
2024 2023
Within
1 year
£’000
Between 1
and 5 years
£’000
More than
5 years
£’000
Within
1 year
£’000
Between 1
and 5 years
£’000
More than
5 years
£’000
Secured notes
1
3,857 50,426 123,752 3,857 15,426 161,521
Preference stock and preferred ordinary stock
2
157 628 1,399 157 628 1,399
Bank overdrafts and interest 41,035 – – 9,048 – –
Other creditors and accruals 5,272 – – 4,908 – –
50,321 51,054 125,151 17,970 16,054 162,920
1 The above figures show interest payable over the remaining term of the secured notes. The figure in the “between 1 and 5 years” column also includes the
capital to be repaid on the 2029 secured notes. The figure in the “more than 5 years” column also include the capital to be repaid on the 2046 and 2049
secured notes. Details of repayment are set out on page 78 and interest payment dates on page 94
2 The figures in the “more than 5 years” columns are the repayments at par value of the preference and preferred ordinary stock. They do not include the
ongoing annual finance cost of £157,000
Interest rate risk sensitivity
The Company is not materially exposed to changes in interest rates.
16.2 Liquidity risk
This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.
Management of the risk
Liquidity risk is not significant as the majority of the Company’s assets is in investments in quoted equities that are readily
realisable. For details of the Company’s bank borrowing facility, see note 14.
The Board gives guidance to Janus Henderson as to the maximum amount of the Company’s resources that should be
invested in any one company. The policy is that the Company should remain fully invested in normal market conditions and
that short-term borrowings should be used to fund short-term cash requirements.
Liquidity risk exposure
The remaining contractual maturities of the financial liabilities at 30 June 2024, based on the earliest date on which
payment can be required, is given on page 78.
81
The City of London Investment Trust plc Annual Report 2024
Notes to the Financial Statements (continued)
16 Risk management policies and procedures (continued)
16.3 Credit and counterparty risk
The failure of the counterparty to a transaction to discharge its obligations under that transaction could result in the Company
suffering a loss.
Management of the risk
The risk is not significant and is managed as follows:
●
investment transactions are carried out with a large number of brokers, whose credit standard is reviewed periodically
by the Fund Manager, and limits are set on the amount that may be due from any one broker; and
●
cash at bank and overdrafts is held only with reputable banks with high quality external credit ratings.
Stock lending transactions are carried out with a number of approved counterparties, whose credit rating is reviewed
regularly by Janus Henderson and limits are set on the amount that may be lent to any one counterparty. Stock lending is
the temporary transfer of securities by a lender to a borrower, with an agreement by the borrower to return equivalent
securities to the lender at an agreed future date. Stock lending revenue is received for making the investments available to
the borrower, which increases the returns on the portfolio. Securities lent are disclosed separately in the Statement of
Financial Position. Details of the value of securities on loan at the year end, and the collateral held, can be found in note 11.
In summary, the Company only transacts with counterparties that it considers to be creditworthy. In addition to the stock
lending exposure referred to above, the exposure to credit and counterparty risk at 30 June 2024 was to other debtors of
£12,911,000 (2023: £10,823,000).
None of the Company’s financial assets are past their due date or impaired.
16.4 Fair values of financial assets and financial liabilities
The financial assets and financial liabilities (other than long-term liabilities) are carried in the Statement of Financial Position
at their fair value or at a reasonable approximation of their fair value (creditors falling due within one year). The secured
notes, preference stocks and preferred ordinary stock are carried in the Statement of Financial Position at par.
At 30 June 2024, the fair value of the secured notes was estimated to be £87,069,000 (2023: £83,313,000). At 30 June
2024, the fair value of the preference and preferred ordinary stock was £2,469,000 (2023: £2,348,000). The valuation of the
preference and preferred ordinary stock is from the Daily Official List quotations.
The fair value of the secured notes is calculated using a discount rate which reflects the yield of a UK Gilt of similar maturity
plus a suitable credit spread.
The preference stocks and preferred ordinary stock are categorised as Level 1 in the fair value hierarchy. The secured
notes are categorised as Level 3 in the fair value hierarchy. These are not included in the values in note 16.5.
16.5 Fair value hierarchy disclosures
The table below sets out fair value measurements using FRS 102 fair value hierarchy.
Financial assets at fair value through profit or loss at 30 June 2024
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Equity investments 2,246,245 – 347 2,246,592
Total 2,246,245 – 347 2,246,592
Financial assets at fair value through profit or loss at 30 June 2023
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Equity investments 2,034,300 – 347 2,034,647
Total 2,034,300 – 347 2,034,647
Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair
value measurement of the relevant asset as follows:
Level 1 – the unadjusted quoted prices in an active market for identical assets or liabilities that the entity can access at the
measurement date;
Level 2 – inputs other than quoted prices included within Level 1 that are observable (i.e., developed using market data) for
the asset or liability, either directly or indirectly; and
Level 3 – inputs are unobservable (i.e., for which market data is unavailable) for the asset or liability.
The valuation techniques used by the Company are explained in the accounting policies note on pages 70 and 71.
82
The City of London Investment Trust plc Annual Report 2024
Notes to the Financial Statements (continued)
16 Risk management policies and procedures (continued)
16.6 Capital management policies and procedures
The Company’s capital management objectives are to ensure that it will be able to continue as a going concern, and to
provide long-term growth in income and capital, principally by investment in UK equities.
The Company’s total capital at 30 June 2024 was £2,254,231,000 (2023: £2,040,562,000) comprising £41,035,000 (2023:
£9,048,000) of bank overdrafts, £114,269,000 (2023: £114,223,000) of secured notes, £1,399,000 (2023: £1,399,000) of
preference and preferred ordinary stock and £2,097,528,000 (2023: £1,915,892,000) of equity share capital and reserves.
The Company is subject to several externally imposed capital requirements:
●
borrowings under the overdraft facility are not to exceed the lower of £120,000,000 or 15% of the portfolio;
●
as a public company, the Company has a minimum share capital of £50,000;
●
in order to be able to pay dividends out of profits available for distribution by way of dividends, the Company has to be
able to meet one of the two capital restriction tests imposed on investment companies by company law; and
●
the terms of the secured notes include financial covenants in relation to the level of borrowings.
The Company has complied with these requirements.
Other than in exceptional market conditions, gearing will not exceed 20% of the net asset value at the time of the draw
down of the relevant borrowings.
17 Called up share capital
Number of
shares held
in treasury
Number of
shares entitled
to dividend
Total number
of shares in
issue
Nominal value
of total
shares in issue
£’000
Allotted and issued ordinary shares of 25p each
At 1 July 2023 – 497,354,868 497,354,868 124,339
Buy back of shares for treasury 8,301,867 (8,301,867) – –
Issue of new ordinary shares – 5,310,000 5,310,000 1,327
At 30 June 2024 8,301,867 494,363,001 502,664,868 125,666
Number of
shares held
in treasury
Number of
shares entitled
to dividend
Total number
of shares in issue
Nominal value
of total
shares in issue
£’000
Allotted and issued ordinary shares of 25p each
At 1 July 2022 – 459,639,868 459,639,868 114,910
Issue of new ordinary shares – 37,715,000 37,715,000 9,429
At 30 June 2023 – 497,354,868 497,354,868 124,339
The Company issued 5,310,000 (2023: 37,715,000) ordinary shares with total proceeds of £20,890,000 (2023:£153,347,000)
after deduction of issue costs of £31,000 (2023: £393,000). The average price of the ordinary shares that were issued was
396.5p (2023: 407.7p). During the year 8,301,867 shares were bought back into treasury for a net payment of £34,400,000
(2023: no shares bought back).
83
The City of London Investment Trust plc Annual Report 2024
Notes to the Financial Statements (continued)
18 Share premium account
2024
£’000
2023
£’000
At beginning of year 1,053,061 909,143
Issue of new shares 19,594 144,311
Less: issue costs (31) (393)
At end of year 1,072,624 1,053,061
19 Other capital reserves
Capital
redemption
reserve
£’000
Capital reserve arising
on revaluation of
investments held
£’000
Capital reserve
arising on
investments sold
£’000
Total other
capital
reserves
£’000
At 1 July 2023 2,707 346,876 344,587 691,463
Transfer on disposal of investments – (3,835) 3,835 –
Net gains on investments
1
– 160,581 40,930 201,511
Exchange losses – – (647) (647)
Buyback of shares to treasury – – (34,400) (34,400)
Management fees charged to capital – – (4,497) (4,497)
Finance costs charged to capital – – (3,520) (3,520)
At 30 June 2024 2,707 503,622 346,288 849,910
Capital
redemption
reserve
£’000
Capital reserve arising
on revaluation of
investments held
£’000
Capital reserve
arising on
investments sold
£’000
Total other
capital
reserves
£’000
At 1 July 2022 2,707 399,709 326,585 726,294
Transfer on disposal of investments – 1,382 (1,382) –
Net (losses)/gains on investments
1
– (54,215) 27,033 (27,182)
Exchange gains – – 71 71
Management fees charged to capital – – (4,304) (4,304)
Finance costs charged to capital – – (3,416) (3,416)
At 30 June 2023 2,707 346,876 344,587 691,463
1 During the year the Company received special dividends totalling £5,425,000 (2023: no special dividends) which were deemed to be capital in nature and
were taken to the capital reserve arising on investments sold. These dividends are available to be distributed to shareholders as part of realised capital profits
84
The City of London Investment Trust plc Annual Report 2024
Notes to the Financial Statements (continued)
20 Revenue reserve
£’000
At 1 July 2023 44,322
Net return for the year 104,571
Dividends paid (note 10) (102,272)
At 30 June 2024 46,621
£’000
At 1 July 2022 43,603
Net return for the year 96,240
Dividends paid (note 10) (95,521)
At 30 June 2023 44,322
21 Net asset value per ordinary share – basic and diluted
The net asset value per ordinary share is based on the net assets attributable to the ordinary shares of £2,097,528,000
(2023: £1,915,892,000) and on 494,363,001 (2023: 497,354,868) shares in issue on 30 June 2024.
An alternative net asset value per ordinary share can be calculated by deducting from the total assets less current liabilities
of the Company the preference and preferred ordinary stocks and secured notes at their market (or fair) values rather than
at their par (or book) values. The net asset value per ordinary share at 30 June 2024 calculated on this basis was 429.57p
(2023: 391.24p). See page 89 for further details of the Alternative Performance Measure and how it is calculated.
The movements during the year of the assets attributable to the ordinary shares were as follows: £’000
Total net assets attributable to the ordinary shares at 30 June 2023 1,915,892
Total net return after taxation 297,418
Dividends paid on ordinary shares in the year (102,272)
Buyback of shares (34,400)
Issue of shares 20,890
Total net assets attributable to the ordinary shares at 30 June 2024 2,097,528
The Company does not have any dilutive securities.
22 Capital commitments and contingent liabilities
Capital commitments
There were no capital commitments as at 30 June 2024 (2023: none).
Contingent liabilities
As at 30 June 2024, there were no contingent liabilities (2023: none).
23 Transactions with the Manager and related parties
The Company appointed subsidiaries of Janus Henderson Group plc to provide investment management, accounting,
secretarial and administrative services under an agreement dated 22 July 2014. This agreement was updated and restated
with effect from 15 February 2024. Janus Henderson has contracted BNP Paribas to provide accounting and administration
services.
With effect from 1 January 2024, the management fee was changed to 0.3% per annum of net assets under management
on the first £3 billion of assets and 0.275% thereafter. Prior to this, the management fee was 0.325% per annum of net
assets under management. The total of management fees paid or payable to Janus Henderson under this agreement in
respect of the year ended 30 June 2024 was £6,424,000 (2023: £6,148,000). Theamount outstanding at 30 June 2024 was
£1,561,000 (2023: £3,165,000).
In addition to the above services, Janus Henderson facilitates marketing activities with third parties which are recharged to
the Company. The total fees paid or payable for these services for the year ended 30 June 2024 amounted to £209,000
including VAT (2023: £88,000) of which £30,000 was outstanding at 30 June 2024 (2023: £23,000).
Details of fees paid to Directors are included in the Directors’ Remuneration Report on page 56 and in note 6 on page 74.
85
The City of London Investment Trust plc Annual Report 2024
Additional
Information
86
Securities Financing Transactions
The Company engages in Securities Financing Transactions (as defined in Article 3 of Regulation (EU) 2015-2365, securities
financing transactions include repurchase transactions, securities or commodities lending and securities or commodities
borrowing, buy-sell back transactions and margin lending transactions). In accordance with Article 13 of the Regulation, the
Company’s involvement in and exposures related to securities lending for the year ended 30 June 2024 are detailed below.
Global Data
The amount of securities on loan as a proportion of total lendable assets and the Company’s net assets as at 30 June 2024 are
disclosed below:
Stock lending 2024
Market value of securities on loan £’000 % of lendable assets % of assets under management
372,460 16.58 17.76
Concentration Data
The ten largest collateral issuers across all the securities financing transactions as at 30 June 2024 are disclosed below:
Issuer
Market value of
collateral received
£’000
Government of France 36,438
Nvidia 22,459
Apple 15,357
Exxon Mobile 14,820
WW Grainger 14,738
Goldman Sachs 14,498
Government of Japan 14,159
Freeport McMoran 13,056
AES Corp 10,721
McKesson 8,269
164,515
The top ten counterparties of each type of securities financing transactions as at 30 June 2024 are disclosed below:
Counterparty
Market value of
securities on loan
£’000
Barclays 144,931
Goldman Sachs 75,159
Skandinaviska Enskilda 74,732
Merrill Lynch 34,702
Morgan Stanley 31,602
UBS 5,065
Bank of Nova Scotia 4,584
BNP Paribas 1,001
HSBC 684
372,460
All counterparties are shown.
The City of London Investment Trust plc Annual Report 2024
87
Securities Financing Transactions (continued)
Aggregate Transaction Data
The following table discloses a summary of aggregate transaction data related to the collateral received from securities on loan as at
30 June 2024:
Stock lending
Counterparty
Counterparty
country of
origin Type Quality
Collateral
currency
Settlement
basis Custodian
Market
value of
collateral
received
£’000
Barclays London Equity Main Market Listing GBP Tri-party HSBC 27
Equity Main Market Listing CHF Tri-par ty HSBC 10
Equity Main Market Listing USD Tri-part y HSBC 145,676
Equity Main Market Listing EUR Tri-par ty HSBC 5,435
Government Debt Investment Grade JPY Tri-par ty HSBC 2,457
HSBC Hong Kong UK Gilts Investment Grade GBP Tri-par ty HSBC 1
Government Debt Investment Grade USD Tri-par ty HSBC 362
Equity Main Market Listing GBP Tri-par ty HSBC 218
Equity Main Market Listing EUR Bilateral HSBC 73
Equity Main Market Listing HKD Bilateral HSBC 73
BNP Paribas France Equity Main Market Listing EUR Tri-party HSBC 744
Equity Main Market Listing USD Tri-part y HSBC 318
Morgan Stanley US Government Debt Investment Grade JPY Tri-party HSBC 11,702
Government Debt Investment Grade USD Tri-par ty HSBC 21,481
Merrill Lynch US Government Debt Investment Grade EUR Tri-party HSBC 36,438
Goldman Sachs US Government Debt Investment Grade USD Tri-par ty HSBC 78,917
Bank of Nova Scotia Canada Equity Main Market Listing GBP Tri-party HSBC 2,730
Equity Main Market Listing EUR Tri-par ty HSBC 2,129
UBS Switzerland Equity Main Market Listing USD Tri-part y HSBC 4,832
Equity Main Market Listing GBP Tri-par ty HSBC 537
Skandinaviska Enskilda Sweden Equity Main Market Listing USD Tri-par ty HSBC 48,334
Equity Main Market Listing EUR Tri-par ty HSBC 25,523
Equity Main Market Listing JPY Tri-party HSBC 5,360
393,377
The lending and collateral transactions are on an open basis and can be recalled on demand.
Re-use of collateral
The Company does not engage in re-use of collateral.
Return and cost
The return and cost of engaging in securities lending by the Company and the securities lending agent in absolute terms and as
a percentage of overall returns are disclosed below:
Total gross amount of
securities lending income
Direct and indirect costs
andfees deducted by
securities lending agent
% return of the securities
lending agent
Net securities lending
incomeretained by the
Company % return of the Company
£303,000 £61,000 20 £242,000 80
The City of London Investment Trust plc Annual Report 2024
88
Alternative Performance Measures (unaudited)
The Company uses the following Alternative Performance Measures (“APMs”) throughout the annual report, financial statements
and notes tothe financial statements. The APMs are reconciled to the financial statements through the narrative below. The
Board believes that each of the APMs, which are typically used within the investment trust sector, provide additional useful
information to shareholders to help assess the Company’s performance against its peer group.
Discount or Premium
The amount by which the market price per share of an investment trust is either higher (premium) or lower (discount) than the
NAV per share, expressed as a percentage of the NAV per ordinary share.
NAV with debt at
fair value
Pence
NAV with debt at
par value
Pence
Share price
Pence
(Discount)/
premium
to fair
value NAV
%
(Discount)/
premium
to par
value NAV
%
At 30 June 2024 429.57 424.29 420.00 (2.2) (1.0)
At 30 June 2023 391.24 385.22 397.00 1.5 3.1
Gearing/(Net Cash)
Gearing means borrowing money to buy assets with the expectation that the return on investments bought will exceed the
interest cost of theborrowings. The gearing percentage reflects the amount of borrowings (e.g. bank loans, overdrafts or
secured notes) the Company has used to invest in the market, and is calculated by taking the difference between total
investments (see note 11 on page 77) andtotal shareholders’ funds (see Statement of Financial Position), dividing this by total
shareholders’ funds and multiplying by 100 as indicated below:
2024 2023
Investments held at fair value through profit or loss (page 77) (£’000) (A) 2,246,245 2,034,300
Net assets (page 69) (£’000) (B) 2,097,528 1,915,892
Gearing (C = A/B – 1) (%) (C) 7.1 6.2
The Company can also use synthetic gearing through derivatives and foreign exchange hedging.
NAV with Debt at Par and Fair Value
2024
£’000
2023
£’000
Investments held at fair value through profit or loss (see note 11) 2,246,245 2,034,300
Investment in subsidiary undertakings (see note 12) 347 347
Current assets (see page 69) 12,911 10,823
Creditors: amounts falling due within one year (see note 14) (46,307) (13,956)
Creditors: amounts falling due after one year (see note 15) (115,668) (115,622)
NAV with debt at par (A) 2,097,528 1,915,892
Less: fair value of preference and preferred ordinary stock and secured notes (see note 16.4) (89,538) (85,661)
Add back: par value of preference and preferred ordinary stock and amortised cost of
secured notes 115,668 115,622
NAV with debt at fair value (B) 2,123,658 1,945,853
Ordinary shares in issue (see note 17) (C) (number) 494,363,001 497,354,868
NAV per ordinary share with debt at par (see page 69) (A/C x 100) (pence) 424.29 385.22
NAV per ordinary share with debt at fair value (B/C x 100) (pence) 429.57 391.24
The aggregate NAV is also referred to as total shareholders’ funds in the Statement of Financial Position. The NAV per ordinary
share is published daily and the year end NAV can be found on page 69 and further information is available on page 85 in note 21.
The City of London Investment Trust plc Annual Report 2024
89
Alternative Performance Measures (unaudited) (continued)
Ongoing Charge
The ongoing charge ratio has been calculated in accordance with guidance issued by the AIC. It represents the total investment
management fee and other administrative expenses expressed as a percentage of the average net asset values with debt at fair
value throughout the year.
2024
£’000
2023
£’000
Management fee (see note 5) 6,424 6,148
Other administrative expenses (see note 6) 1,009 860
Less: non-recurring expenses (65) (9)
Ongoing charge 7,368 6,999
Average net assets¹ 2,016,041 1,894,247
Ongoing charge ratio 0.37% 0.37%
1 Calculated using the average daily net asset value with debt at fair value
The ongoing charge calculated above is different from ongoing costs provided in the Company’s Key Information Document
(“KID”) which are calculated in line with the PRIIPs regulations. The ongoing costs in the KID include finance costs, stock lending
fees and costs of holding other investment trusts within the Company’s investment portfolio. The non-recurring expenses include
those relating to Director recruitment, delisting from the New Zealand Stock Exchange, French dividend reclaims and the New
Zealand climate change consultation (2023: external Board evaluation).
Revenue Earnings per Share
The revenue earnings per share is the revenue return for the year (see Income Statement) divided by the weighted average
number of ordinary shares in issue during the year (see note 9 on page 76).
Revenue Reserve per Share
The revenue reserve per share is the revenue reserve (see Statement of Financial Position) at the year end divided by the number
of shares in issue (see note 17 on page 83) at the year end date.
Total Return
The total return is the return on the share price or NAV with debt at fair value taking into account both the rise and fall of NAVs/share
prices and dividends paid to shareholders. Any dividends received by a shareholder are assumed to have been reinvested in either
additional shares (for share price total return) or the Company’s assets (for NAV with debt at fair value total return). Dividends paid
andpayable are set out in note 10on page 75.
NAV per share with
debt at fair value Share price
NAV/Share price per share at 30 June 2023 (pence)
391.24 397.00
NAV/Share price per share at 30 June 2024 (pence)
429.57 420.00
Change in the year (%)
9.8 5.8
Impact of dividends reinvested (%)
5.3 5.3
Total return for the year (%)
15.6 11.3
Yield
The yield is the annual dividend expressed as a percentage of the year end share price.
30 June
2024
30 June
2023
Annual dividend (pence) (A) 20.6 20.1
Share price (pence) (B) 420.0 397.0
Yield (C = A/B) (%) (C) 4.9 5.1
The City of London Investment Trust plc Annual Report 2024
90
Glossary
Alternative Investment Fund Managers
Directive (“AIFMD”)
Agreed by the European Parliament and the Council of the
European Union and transposed into UK legislation, the
AIFMD classifies certain investment vehicles, including
investment companies, as Alternative Investment Funds
(“AIFs”) and requires them to appoint an Alternative
Investment Fund Manager (“AIFM”) and depositary
tomanage and oversee the operations of the investment
vehicle. TheBoard of Directors retains responsibility for
strategy, operations and compliance and the Directors
retaina fiduciary dutyto shareholders.
Alternative Performance Measures
Details of alternative performance measures used by the
Company can be found on pages 89 and 90.
Association of Investment Companies
(“AIC”)
The Company is a member of the AIC which is the trade
body for investment companies and represents the industry
in relation to various matters which impact the regulation of
such entities. The Company is a constituent of the UK Equity
Income sector.
Benchmark
A measure against which performance is compared. For the
Company this is the FTSE All-Share Index.
Custodian
The custodian is responsible for ensuring the safe custody
of the Company’s assets and ensuring that all transactions
in the underlying holdings are transacted in an accurate and
timely manner.
Depositary
As an AIF, the Company is required to appoint a depositary
who has responsibility for overseeing the operations of the
Company including safekeeping, cash monitoring and
verification of ownership and valuation. TheDepositary is
strictly liable for the loss of any investments or other assets in
its custody unless it has notified that ithas discharged its
liability in certain markets. TheDepositary has confirmed that
it has not discharged liability inrelation to any of the
Company’s assets.
The Depositary has further confirmed that, in all material
respects, the Company has been managed in accordance
with the FCA’s Investment Funds Sourcebook, the Company’s
Articles of Association and as required by the AIFMD.
Derivative
A contract between two or more parties in relation to an
underlying security. The value of a derivative will fluctuate in
accordance with the value of the security and is a form of
gearing as the fluctuations in value are usually greater than
thefluctuations in the underlying security’s value. Examples
ofderivatives are put and call options, swap contracts,
futuresand contracts for difference. Foreign exchange,
interest rates and commodities may also be traded using
derivative contracts.
Dividend Dates
When declared or recommended, each dividend will have
three key dates applied to it. The payment date is the date on
which shareholders will receive their dividend, either by BACS
transfer or by receipt of a dividend cheque. The record date
applied to the dividend is used as a cut-off for the Company’s
Registrar to know which shareholders should be paid a
dividend. Only shareholders on the Register of Members at
the close of business on the record date will receive the
dividend. The ex-dividend date is the business day before the
record date and is the date upon which the Company’s net
asset value will be disclosed ex-dividend.
Investment Trusts
Investment trusts are public limited companies, listed on the
London Stock Exchange, which provide shareholders with a
professionally managed portfolio of investments. Investment
trusts are exempt from tax on the capital gains arising on
their investments subject to meeting certain criteria. Income,
net of expenses and tax, is substantially distributed to
shareholders. Investment trusts are also known as
investment companies, although the tax legislation retains
the reference to investment trusts.
Liquidity
In the context of the liquidity of shares in the stock market, this
refers to the availability of buyers in the market for the share in
question. Where the market in a particular share is described as
liquid, that share will be in demand and holders wishing to sell
their shares should find ready buyers. Conversely, where the
market in a share is illiquid the difficulty of finding a buyer will
tend to depress the price that might be negotiated for a sale.
Market Capitalisation
The market value of a company, calculated by multiplying the
mid-market price per share by the number of shares in issue.
Ongoing Charge
The ongoing charge reflects those expenses of a type which
are likely to recur in the foreseeable future, whether charged
to revenue or capital, and which relate to the operation of
theCompany as a collective fund, excluding the costs of
acquisition or disposal of investments, finance costs and
gains or losses arising on investments. Details of the
calculation of the ongoing charge can be found on page 90.
Simple versus weighted average
The simple average ignores the fund size and assigns an equal
weight to all data points. Under the weighted average greater
importance (weight) is assigned to funds of a larger size.
The City of London Investment Trust plc Annual Report 2024
91
General Shareholder Information
AIFMD Disclosures and Remuneration
In accordance with the AIFMD, information in relation to the
Company’s leverage and remuneration of Janus Henderson
Fund Management UK Limited, asthe Company’s AIFM are
required to be made available to investors. These disclosures,
including those on the AIFM’s remuneration policy, are
contained in an AIFMD Disclosure document which can
befound on the Company’s website.
BACS
Dividends and interest can be paid to shareholders and
stockholders by means of BACS (“Bankers’ Automated Clearing
Services”); mandate forms for this purpose are available from
the Registrar. Alternatively, shareholders can write to the
Registrar to give their instructions; these must include thebank
account number, the bank account title and the sort code ofthe
bank to which payments are tobe made.
Common Reporting Standard (“CRS”)
Tax legislation requires the Company toprovide personal
information to HMRC on certain investors who purchase
shares in investment trusts. This information is provided
annually to thelocal tax authority of the tax residencies of
anumber of non-UK based certificated shareholders and
corporate entities.
Equality Act 2010
This report and other documents issued by the Company are
available from the Corporate Secretary. If needed, copies can
be made available in a variety of formats, including Braille or
larger type as appropriate.
A ‘typetalk’ operator (provided by the Royal National Institute
for Deaf People) is available to support speech and hearing-
impaired people to make telephone calls. Please dial 18001
followed by the number you wish to dial.
Foreign Account Tax Compliance
(“FATCA”)
FATCA is a United States federal law whose intent is to
enforce the requirement for United States persons (including
those living outside the US) to file yearly reports on their
non-US financial accounts. Each year, investment trusts need
to monitor the trading volume and frequency of their shares
and securities to assess whether they have financial accounts.
The Company makes an annual assessment to determine if
the shares represent financial accounts and, where they do,
will need to identify and report US reportable accounts to
HMRC, as required.
General Data Protection Regulation
(“GDPR”)
A privacy statement can be found on the website
www.janushenderson.com.
ISA
The Company intends to continue to manage its affairs in
order toqualify as an eligible investment for a stocks and
shares ISA.
Non-Mainstream Pooled Investments
Status
The Company currently conducts its affairs so that its
ordinary shares of 25p each can be recommended by IFAs
to ordinary retail investors in accordance with the FCA’s rules
in relation to non-mainstream investment products and
intends to continue to do so for the foreseeable future.
Theshares are excluded from the FCA’s restrictions which
apply to non-mainstream investment products because
theyare shares in an investment trust.
Packaged Retail and Insurance-based
Investment Products Regulation
(“PRIIPs”)/Key Information Document
(“KID”)
Investors should be aware that PRIIPs requires the Manager,
as the PRIIP manufacturer, to prepare a KID in respect of
the Company. ThisKID must be made available by the
Manager to retail investors prior to them making
anyinvestment decision and is available on the Company’s
website. TheCompany is not responsible for the information
contained in theKID and investors should note that the
procedures for calculating the risks, costs and potential
returns are prescribed bythe law. Thefigures in the KID
may not reflect the expected returns for the Company and
anticipated performance returns cannot be guaranteed.
The City of London Investment Trust plc Annual Report 2024
92
Performance Details/Share Price
Information
Details of the Company’s share price and NAV canbefound
ontheCompany’s website, www.cityinvestmenttrust.com
and in the London Stock Exchange Daily Official List.
TheCompany’s NAV is published daily.
The market price of the Company’s ordinary shares is
published dailyin The Financial Times and other leading
newspapers. TheFinancial Times also shows figures for
theestimated NAV andthe premium/discount.
Shareholder Details
Shareholders who hold their shares in certificated form can
check their shareholding with the Registrar, Computershare
Investor Services PLC, via www.investorcentre.co.uk.
To gain access to your details on the Computersharesite
youwill need the holder reference number shown on your
share certificate.
Taxonomy Regulation
Regulation (EU) 2020/852 establishes the basis for the EU
taxonomy. The EU taxonomy is a classification system,
establishing a list of environmentally sustainable economic
activities to provide companies, investors and policymakers
with appropriate definitions for which economic activities can
be considered environmentally sustainable. In accordance
with the Taxonomy Regulation, the Company confirms that the
investments underlying this financial product do not take into
account the EU criteria for environmentally sustainable
economic activities.
General Shareholder Information (continued)
FCA Share Fraud Warning
Investment and pension scams are
often sophisticated and di�cult to spot
Be a ScamSmart investor and spot the warning signs
Fraudsters will often:
• contact you out of the blue
• apply pressure to invest quickly
• downplay the risks to your money
• promise tempting returns that sound too good to be true
• say that they’re only making the o�er available to you or
even ask you to not tell anyone else about it
How to avoid investment and pension scams
If you’re suspicious, report it
You can report the �rm or scam to us by
contacting our Consumer Helpline on
0800 111 6768 or using our reporting form
using the link below.
If you’ve lost money in a scam, contact
Action Fraud on 0300 123 2040 or
www.actionfraud.police.uk
Reject unexpected o�ers
Scammers usually cold call, but contact
can also come by email, post, word of mouth
or at a seminar. If you’ve been o�ered an
investment out of the blue, chances are it’s
a high risk investment or a scam.
Check the FCA Warning List
Use the FCA Warning List to check the risks
of a potential investment – you can also search
to see if the �rm is known to be operating without
our authorisation.
Get impartial advice
Get impartial advice before investing – don’t use
an adviser from the �rm that contacted you.
Be ScamSmart and visit
www.fca.org.uk/scamsmart
1
2
3
The City of London Investment Trust plc Annual Report 2024
93
Dates of Dividend and Interest Payments
Financial Calendar
Annual results: September
Annual General Meeting: October
Half-year results: February
Dividends
1
Ordinary shares:
●
first interim payable on 30 November
●
second interim payable on 28 February
●
third interim payable on 31 May
●
fourth interim payable on 31 August
Preference and preferred ordinary stocks:
●
payable on 28 February and 31 August
1 Payments are made on the nearest working day prior tothedatesindicated above
Secured Notes Interest
4.53% secured notes 2029:
●
payable on 22 January and 22 July
Redeemable at par on 22 January 2029
2.94% secured notes 2049:
●
payable on 17 May and 17 November
Redeemable at par on 17 November 2049
2.67% secured notes 2046:
●
payable on 19 March and 19 September
Redeemable at par on 19 March 2046
The City of London Investment Trust plc Annual Report 2024
94
The City of London Investment Trust plc Annual Report 2021
Strategic Report
Performance 2-3
The City of London Story 4-5
Chairman’s Statement 6-8
Portfolio Snapshot 9-10
Fund Manager’s Report 11-15
Portfolio Information 16-17
Historical Information 18
Business Review 19-35
Governance
Directors and Fund Managers 37-38
Directors’ Report 39-41
Corporate Governance Report 42-48
Audit and Risk Committee Report 49-51
Nominations Committee Report 52-53
Directors’ Remuneration Report 54-57
Statement of Directors’ Responsibilities 58
Financial Statements
Independent Auditor’s Report to the
Members ofThe City of London
Investment Trust plc 60-66
Income Statement 67
Statement of Changes in Equity 68
Statement of Financial Position 69
Notes to the Financial Statements 70-85
Additional Information
Securities Financing Transactions 87-88
Alternative Performance Measures 89-90
Glossary 91
General Shareholder Information 92-93
Dates of Dividend and Interest
Payments 94
Corporate Information 95
Corporate Information
Registered Office
201 Bishopsgate
London EC2M 3AE
Service Providers
Alternative Investment Fund Manager
Janus Henderson Fund Management UK Limited
201 Bishopsgate
London EC2M 3AE
Corporate Secretary
Janus Henderson Secretarial Services UK Limited
201 Bishopsgate
London EC2M 3AE
Telephone: 020 7818 1818
Email: support@janushenderson.com
Depositary and Custodian
HSBC Bank plc
8 Canada Square
London E14 5HQ
Stockbrokers
Cavendish Capital Markets Limited
1 Bartholomew Close
London EC1A 7BL
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Telephone: 0370 889 3296
Email: WebCorres@computershare.co.uk
Investors with share certificates (i.e. not those with
ashareplan or ISA) can check their holding at
www.investorcentre.co.uk
Independent Auditor
Ernst & Young LLP
25 Churchill Place
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Information Sources
For more information about The City of London Investment
Trustplc, visit the website at www.cityinvestmenttrust.com
This includes factsheets, interviews, current information on
the Company and up-to-date share price and net asset
valuedetails.
To sign up for expert insights about investment trusts,
updates from our fund managers as well as AGMs and
TrustTV episodes, please visit this page:
www.janushenderson.com/en-gb/investor/subscriptions
Follow the Janus Henderson Investment
Trusts on LinkedIn –
Janus Henderson Investment Trusts, UK
Investing
Shares can be purchased in the market via a stockbroker
orthrough share dealing platforms. They can also be held
through share plans, ISAs or pensions and links to various
providers are included on the website.
Potential investors are reminded that the value of investments
and the income from them may go down as well as up and
investors maynot receive back the full amount invested.
Taxbenefits may varyas a result of statutory changes and
their value will depend onindividual circumstances.
The City of London Investment Trust plc Annual Report 2024
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The City of London Investment Trust plc Annual Report 2021
The City of
London
Investment
Trust plc
Annual Report 2024
JHI9224/2024The City of London Investment Trust plc – Annual Report 2024
The City of London Investment Trust plc
Registered as an investment company in England and Wales
Registration Number: 34871
Registered Office: 201 Bishopsgate, London EC2M 3AE
ISIN number/SEDOL: Ordinary Shares: GB0001990497/0199049
London Stock Exchange (TIDM) Code: CTY
Global Intermediary Identification Number (GIIN): S55HF7.99999.SL.826
Legal Entity Identifier (LEI): 213800F3NOTF47H6AO55
Telephone: 0800 832 832
Email: support@janushenderson.com
www.cityinvestmenttrust.com
JHI9224/2024Designed and typeset by 2112 Communications, London. Printed by Paragon, London.
This report is printed on Revive silk 100% recycled, contains 100% recycled waste and
ismanufactured at a mill certified with ISO 14001 environmental management standard.
The pulp used in this product is bleached using an Elemental Chlorine Free process (ECF).
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