Legal Entity Identifier:
213800F3NOTF47H6AO55
THE CITY OF LONDON INVESTMENT
TRUST PLC
Annual financial results for
the year ended 30 June 2024
This announcement contains regulated
information
CHAIRMAN'S COMMENT
"City of London's total return of
15.6% outperformed the FTSE All-Share Index. The dividend was
increased for the 58th consecutive year and fully
covered by earnings per share."
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.
PERFORMANCE AT 30 JUNE
|
2024
|
2023
|
Total Return Performance:
|
|
|
Net asset value ("NAV") per ordinary
share1,
5
|
15.6%
|
4.5%
|
Share price2, 5
|
11.3%
|
4.1%
|
FTSE All-Share Index
(Benchmark)
|
13.0%
|
7.9%
|
AIC UK Equity Income
sector3
|
12.6%
|
8.1%
|
IA UK Equity Income OEIC
sector
|
14.6%
|
4.0%
|
|
|
|
|
2024
|
2023
|
NAV per ordinary
share5
|
424.3p
|
385.2p
|
NAV per ordinary share (debt at fair
value)5
|
429.6p
|
391.2p
|
Share price
|
420.0p
|
397.0p
|
(Discount)/premium5
|
(1.0)%
|
3.1%
|
(Discount)/premium (debt at fair
value)5
|
(2.2)%
|
1.5%
|
Gearing at year end5
|
7.1%
|
6.2%
|
Revenue earnings per
share
|
20.9p
|
20.1p
|
Dividends per share
|
20.6p
|
20.1p
|
Ongoing charge for the
year4, 5
|
0.37%
|
0.37%
|
Revenue reserve per
share5
|
9.4p
|
8.9p
|
1 Net asset value 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 Calculated using the methodology
prescribed by the Association of Investment Companies
("AIC")
5 Alternative Performance
Measure
Sources: Morningstar Direct, Janus
Henderson, Refinitiv Datastream
DIVIDEND YIELDS AT 30 JUNE
|
2024
|
2023
|
City of London
|
4.9
|
5.1
|
FTSE All-Share Index
(Benchmark)
|
3.7
|
3.7
|
AIC UK Equity Income
sector
|
4.2
|
4.3
|
IA UK Equity Income OEIC
sector
|
4.3
|
4.8
|
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 to benefit from the development of
artificial intelligence ("AI"). The US S&P 500 Index returned
24.5% during the year, with a major 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% with effect 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 £1.7 million to £346.3
million.
NAV Total Return
City of London's NAV total return of
15.6% was 2.6% ahead of the 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 12
months. The second biggest detractor was St. James's Place, which
announced changes in the structure of its customer fees and a
provision for compensation to those who had not had annual reviews.
The third 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 of London'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.
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, City of London's shares traded at a discount to NAV
and 8.3 million 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 price to 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. The Board 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 in the Annual
Report.
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 is unclear 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 UK bank 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. The portfolio'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
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 or zero dividend yields.
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.
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.
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.
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 to some countries, such as China and India.
Saudi Arabia restricted some of its output to prevent excess
supply.
Performance Review
Estimated performance attribution (relative to FTSE All-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. The fourth 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 of its 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.
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.
Higher yielding shares had a good
year, as the chart in the Annual Report 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
|
% of the
portfolio
|
Large UK-listed companies
(constituents of the FTSE 100 Index)
|
78
|
Medium-sized and small UK-listed
companies
|
12
|
Overseas-listed companies
|
10
|
Source: Refinitiv Datastream, as at 30 June
2024
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. In contrast, 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.
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. The proceeds were reinvested in additions to the
holdings in AstraZeneca 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 to be cost
competitive. Inchcape is a motor distributor in 40 countries 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. A small 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. In our view,
Burberry has significant recovery potential as its markets improve
and the new management team develops a better 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.
Portfolio Outlook
Revenue exposure
|
% of the
portfolio
|
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, is the 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, the discount 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 a
high 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 lower
carbon future. In the utilities sectors, National Grid
(15th largest) 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
Fund Manager
David Smith
Deputy Fund Manager
17 September
2024
FORTY LARGEST INVESTMENTS AS AT 30 JUNE 2024
The 40
largest investments, representing
80.68% of the portfolio,
are listed below.
|
|
|
|
|
|
|
Market
value
|
|
Portfolio
|
Position
|
|
Company
|
|
Sector
|
|
£'000
|
|
%
|
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.
|
PRINCIPAL RISKS
The Board, with the assistance of
the Manager, has carried out 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. The Board 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 in the Annual Report. 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 in the Annual
Report.
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, it may 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 UK Equity 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. The Company 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 of asset 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.
|
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 of the
Corporation Tax Act 2010 as amended could lead to a loss of
investment trust status, resulting in capital gains realised within
the portfolio being subject to corporation tax. A breach of the UK
Listing Rules could result in suspension of the Company's shares,
while a breach of the 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 Janus Henderson as detailed in the Annual
Report.
|
BORROWINGS
The Company has a borrowing facility
of £120.0 million (2023: £120.0 million) with HSBC Bank plc, of
which £41.0 million was drawn at the year end (2023: £9.0
million).
The Company has £114.3 million
(2023: £114.2 million) of secured notes in issue (fair value of the
loan notes: £87.1 million (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%).
VIABILITY STATEMENT
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 this assessment:
•
|
The Board seeks to deliver long-term
performance by the Company.
|
•
|
The Company's investment objective,
strategy and policy, which are subject to regular Board monitoring,
mean that the Company is invested mainly in readily realisable,
UK-listed securities and that the level of borrowings is
restricted.
|
•
|
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 the Custodian 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. The value 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 of the
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 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 rate
borrowings, 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 and the 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
long-term impact on the viability of the Company and its 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.
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 in the Annual Report.
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 in the
Annual Report.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
Each of the Directors, who are
listed below, confirms that, to the best of his or her
knowledge:
•
|
the Company's financial statements,
which have been 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
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
|
|
Gains/(losses) on investments held at
fair value through profit or loss
|
-
|
200,864
|
200,864
|
-
|
(27,111)
|
(27,111)
|
2
|
Income from investments held at fair
value through profit or loss
|
109,335
|
-
|
109,335
|
101,747
|
-
|
101,747
|
3
|
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
|
|
|
|
|
|
|
|
|
4
|
Management fee
|
(1,927)
|
(4,497)
|
(6,424)
|
(1,844)
|
(4,304)
|
(6,148)
|
|
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
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
Taxation
|
(533)
|
-
|
(533)
|
(1,406)
|
-
|
(1,406)
|
|
|
|
|
|
|
|
|
|
Net
return/(loss) after taxation
|
104,571
|
192,847
|
297,418
|
96,240
|
(34,831)
|
61,409
|
|
|
|
|
|
|
|
|
5
|
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.
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
|
8
|
Buyback of 8,301,867 ordinary shares
for treasury
|
-
|
-
|
-
|
(34,400)
|
-
|
(34,400)
|
8
|
Issue of 5,310,000 new ordinary
shares
|
1,327
|
19,563
|
-
|
-
|
-
|
20,890
|
7
|
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 after
taxation
|
-
|
-
|
-
|
(34,831)
|
96,240
|
61,409
|
8
|
Issue of 37,715,000 new ordinary
shares
|
9,429
|
143,918
|
-
|
-
|
-
|
153,347
|
7
|
Dividends paid
|
-
|
-
|
-
|
-
|
(95,521)
|
(95,521)
|
|
|
|
|
|
|
|
|
|
At 30 June 2023
|
124,339
|
1,053,061
|
2,707
|
691,463
|
44,322
|
1,915,892
|
STATEMENT OF FINANCIAL POSITION
Notes
|
|
30 June
2024
£'000
|
30 June
2023
£'000
|
|
Fixed assets
|
|
|
|
Investments held at fair value through profit or
loss
|
|
|
|
Listed at market value in the United
Kingdom1
|
1,657,638
|
1,653,748
|
|
Listed at market value
overseas1
|
216,147
|
259,339
|
|
Investments on
loan1
|
372,460
|
121,213
|
|
Investment in subsidiary
undertakings
|
347
|
347
|
|
|
|
|
|
|
2,246,592
|
2,034,647
|
|
|
|
|
|
Current assets
|
|
|
|
Debtors
|
12,911
|
10,823
|
|
|
|
|
|
|
12,911
|
10,823
|
|
|
|
|
|
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
|
|
|
|
|
|
Creditors: amounts falling due
after more than one year
|
(115,668)
|
(115,622)
|
|
|
|
|
|
Net
assets
|
2,097,528
|
1,915,892
|
|
|
|
|
|
Capital and reserves
|
|
|
8
|
Called up share capital
|
125,666
|
124,339
|
|
Share premium account
|
1,072,624
|
1,053,061
|
|
Capital redemption
reserve
|
2,707
|
2,707
|
|
Other capital reserves
|
849,910
|
691,463
|
|
Revenue reserve
|
46,621
|
44,322
|
|
|
|
|
6
|
Total shareholders' funds
|
2,097,528
|
1,915,892
|
|
|
|
|
6
|
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
1
NOTES TO THE FINANCIAL STATEMENTS
1.
|
Accounting policies
|
|
|
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 below.
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 in the Annual Report. 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 a 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.
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 above the 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.
|
|
2.
|
Income from investments held at fair value through profit or
loss
|
|
|
|
2024
|
2023
|
|
|
|
£'000
|
£'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
|
|
|
|
|
|
|
3.
|
Other interest receivable and similar income
|
|
|
2024
|
2023
|
|
|
|
£'000
|
£'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).
|
|
|
|
|
4.
|
Management fee
|
|
|
|
|
|
|
2024
|
2023
|
|
|
|
Revenue
return
|
Capital
return
|
Total
return
|
Revenue
return
|
Capital
return
|
Total
return
|
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'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 in the Annual Report. Details of
apportionment between revenue and capital can be found in the
Annual Report.
|
|
|
|
|
5.
|
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
|
2023
|
|
|
£'000
|
£'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
|
2023
|
|
|
|
Pence
|
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.
|
|
6.
|
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 the Annual Report 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
7.
|
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
|
2023
|
|
|
|
£'000
|
£'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.
|
|
8.
|
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).
|
|
9. 2024 financial
information
The figures and financial
information for the year ended 30 June 2024 are extracted from the
Company's annual financial statements for that period and do not
constitute statutory accounts. The Company's annual financial
statements for the year to 30 June 2024 have been audited but have
not yet been delivered to the Registrar of Companies. The
Independent Auditor's Report on the 2024 annual financial
statements was unqualified, did not include a reference to any
matter to which the Auditor drew attention without qualifying the
report, and did not contain any statements under Sections 498(2) or
498(3) of the Companies Act 2006.
|
|
10. 2023 financial information
The figures and financial
information for the year ended 30 June 2023 are compiled from an
extract of the published financial statements for that year and do
not constitute statutory accounts. Those financial statements have
been delivered to the Registrar of Companies and included the
report of the auditors which was unqualified, did not include a
reference to any matter to which the auditors drew attention
without qualifying the report, and did not contain any statements
under Sections 498(2) or 498(3) of the Companies Act
2006.
|
|
11. Annual Report
The Annual Report will be posted to
shareholders in late September 2024 and will be available on the
Company's website www.cityinvestmenttrust.com.
Copies will be available thereafter in hard copy format from the
Company's registered office, 201 Bishopsgate, London, EC2M
3AE.
|
|
12. Annual General
Meeting
The Annual General Meeting will be
held on Thursday, 31 October 2024 at 2.00pm at the Company's
registered office. The Notice of Meeting will be sent to
shareholders with the Annual Report.
|
|
13. General Information
|
|
Company Status
The City of London Investment Trust
plc is a UK domiciled investment trust company.
|
|
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
|
|
Company Registration Number
|
|
00034871
|
|
Registered Office
|
|
201 Bishopsgate, London EC2M
3AE
|
|
Directors and Secretary
|
|
The Directors of the Company are Sir
Laurie Magnus (Chairman), Samantha Wren (Audit and Risk Committee
Chair), Clare Wardle (Senior Independent Director), Ominder
Dhillon, Robert (Ted) Holmes and Sally Lake.
|
|
The Corporate Secretary is Janus
Henderson Secretarial Services UK Limited, represented by Sally
Porter, ACG.
|
|
Website
Details of the Company's share price
and net asset value, together with general information about the
Company, monthly factsheets and data, copies of announcements,
reports and details of general meetings can be found at
www.cityinvestmenttrust.com.
|
|
|
|
|
|
|
|
|
|
|
|
|
For further information please
contact:
Job Curtis
Fund Manager
The City of London Investment Trust
plc
Telephone: 020 7818 4367
Dan Howe
Head of Investment Trusts
Janus Henderson Investors
Telephone: 020 7818 4458
Harriet Hall
PR Director, Investment
Trusts
Janus Henderson Investors
Telephone: 020 7818
2919
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the Company's website
(or any other website) are incorporated into, or form part of, this
announcement.