TIDMCLIG
RNS Number : 9255Z
City of London Investment Group PLC
20 September 2022
20th September 2022
CITY OF LONDON INVESTMENT GROUP PLC (LSE: CLIG)
("City of London", "the Group" or "the Company")
FINAL RESULTS FOR THE YEAR TO 30TH JUNE 2022
The Company announces that it has today made available on its
website, https://www.clig.com/ , the following documents:
- Annual Report and Financial Statements for the year ended
30th June 2022 (the 2022 Annual Report); and
- Notice of 2022 Annual General Meeting (the Notice of AGM).
The above documents will be uploaded to the National Storage
Mechanism for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism in due
course, in accordance with Listing Rule 9.6.1 R.
The 2022 Annual Report and the Notice of AGM, which will be held
on 31st October 2022, will be posted to shareholders on 23rd
September 2022.
The Appendix to this announcement contains additional
information which has been extracted from the 2022 Annual Report
for the purposes of compliance with DTR 6.3.5 only and should be
read in conjunction with this announcement. Together, these
constitute the material required by DTR 6.3.5 to be communicated to
the media in unedited full text through a Regulatory Information
Service. This announcement should be read in conjunction with, and
is not a substitute for reading, the full 2022 Annual Report.
SUMMARY
- Funds under Management (FuM) of US$9.2 billion (GBP7.6
billion) at 30th June 2022. This compares with US$11.4
billion (GBP8.3 billion) at the beginning of this financial
year on 1st July 2021
- Net fee income was GBP58.2 million (2021: GBP52.5 million)
- Underlying profit before tax* was GBP27.9 million (2021:
GBP26.7 million). Profit before tax was GBP23.2 million
(2021: GBP22.2 million)
- Underlying basic earnings per share* were 44.2p (2021:
48.1p). Basic earnings per share were 36.9p (2021: 39.4p)
after an effective tax charge of 22% (2021: 24%) of profit
before taxation
- Recommended final dividend of 22p per share (2021: 22p)
payable on 4th November 2022 to shareholders on the register
on 30th September 2022, making a total for the year of
46.5p (2021: 33p), including the special dividend of 13.5p
paid on 25th March 2022 (2021: nil)
*This is an Alternative Performance Measure (APM). Please
refer to the Financial Review for more details on APMs.
Tom Griffith said on the results and outlook:
"The past year was a successful one for your Company in the
face of the macroeconomic headwinds. This success resulted
from the combined strength of the merged entity. We enter
the new financial year focused on delivering continued growth
driven by strong investment performance and the high quality
of services supporting our institutional and high net worth
(HNW) clients.
CLIG remains well-positioned in the current market environment.
Our conservative management style will not change, nor will
our investment-led approach with a view to ensuring strong
investment performance for our clients. We will continue to
strengthen the operational and investment capabilities of
the Group by building out the distribution pipeline for institutional
investment and wealth management products. We will also continue
to be selective in identifying potential acquisitions, which
we believe will inevitably appear given the difficult market
conditions of the past year."
For access to the full report, please follow the link below:
http://www.rns-pdf.londonstockexchange.com/rns/9255Z_1-2022-9-19.pdf
This release includes forward-looking statements, which may
differ from actual results. Any forward-looking statements are
based on certain factors and assumptions, which may prove
incorrect, and are subject to risks, uncertainties and assumptions
relating to future events, the Group's operations, results of
operations, growth strategy and liquidity.
For further information, please visit www.citlon.co.uk or
contact:
Tom Griffith, CEO
City of London Investment Group PLC
Tel: 001-610-380-0435
Martin Green
Zeus Capital Limited
Financial Adviser & Broker
Tel: +44 (0)20 3829 5000
CHAIR'S STATEMENT
At the start of 2022, it was already clear that global markets
faced challenges from tightening monetary policy and simmering
tensions in Eastern Europe, as noted in my 17th February 2022
interim statement. However, the Russian invasion of Ukraine just
one week later served to magnify dramatically these headwinds in
terms of both intensity and time-scale. The emergence of open
warfare in Eastern Europe and rising geopolitical tensions
elsewhere is prompting a fundamental re-think of strategic planning
both in terms of security and defence arrangements as well as
supply patterns of strategic materials, including energy and food.
Arguably, it is the monetary and inflationary consequences of
supply disruptions, rather than overt conflict that have most
troubled global markets in 2022, as evidenced by the 20%+ falls in
most developed markets in the first half of the year. Although the
MSCI emerging market index (MXEF) fell by less than 20% in the
period, it has now fallen by more than 30% since its 2021 high,
placing it firmly in bear market territory. A paradigm shift in US
monetary policy in response to the inflation surge has meant that
fixed income markets have provided limited shelter with the US
10-year Treasury benchmark falling 12% and the 30-year Treasury by
no less than 21% in the year to June 2022.
Despite this plethora of negative news, corporate balance sheets
are relatively healthy as evidenced by the rising level of
shareholder distributions and buy-backs. Should supply bottlenecks
ease in the coming months, there are grounds for a degree of
optimism that the surge in price inflation and monetary tightening
will prove to be of limited duration. Once again, the high level of
market volatility has illustrated the benefits gained from the
Karpus merger in 2020 in terms of the diversified revenue base
derived from the transaction and, as always, we view the defensive
qualities of closed-end funds (CEFs) across each of the CLIG
strategies as an effective means to participate in a recovery in
markets in due course.
Assets and performance
Inevitably, the marked falls across all market segments have
reduced CLIG's Funds under Management (FuM) with a 19% fall in the
year as a whole, nearly all of which occurred in the second half of
the year. Within these figures, CLIM's FuM fell 23% to US$5.8
billion while KIM's FuM fell by 12% to US$3.4 billion, underlining
the defensive nature of KIM's higher exposure to fixed income
markets. Shareholders will appreciate that these figures are due in
large part to matters beyond our control and are mirrored across
the asset management industry as a whole. Importantly, it was
pleasing to note that fund flows improved markedly in the second
half of the year as a number of CLIM's institutional clients chose
to increase equity exposure, in contrast to the withdrawals that
occurred during the more buoyant conditions of 2021. Particularly
strong inflows to the International CEF strategy in the second half
of the year mean that this product now accounts for more than 30%
of CLIM's FuM. Across the year as a whole, net Group inflows
totalled US$102 million, compared with net outflows of US$752
million in the previous year and with a resumption of more active
marketing opportunities in the post-pandemic world, we are hopeful
that the healthy pipeline will translate into further inflows in
the months ahead.
Relative performance of the main CLIM strategies was impacted in
the immediate aftermath of the Ukraine invasion following a
mandatory write-down of all Russian exposure and a widening of
discounts in the CEF universe. More recently, however, some
recovery in relative performance has been achieved as market
volatility returns to more typical levels and we expect that, over
time, strict adherence to our investment process will enable a
resumption of the long-term track record of outperformance.
Relative performance at KIM has again been outstanding with strong
outperformance across six of the seven strategies. Reduced
weightings to CEFs at a time of widening discounts, allied to a
shift to the more defensive shorter maturities at a time of rising
interest rates proved key to maintaining KIM's excellent long-term
track record.
Results
Group statutory pre-tax profits rose by 4% in the year ended
30th June 2022 to GBP23.2 million (2021: GBP22.2 million) while
underlying pre-tax profits, which exclude exceptional or
non-recurrent items, also rose by 4% to GBP27.9 million (2021:
GBP26.7 million). Since results for the prior year included only a
nine-month contribution from KIM, a more accurate year-on-year
(YoY) comparison is provided by earnings per share (EPS). On this
basis, fully diluted statutory EPS fell 6% to 36.4p (2021: 38.8p)
and underlying fully-diluted EPS fell by 7% to 43.7p (2021: 47.4p).
Despite the ongoing competitive pressure on fees in the
institutional market-place, the Group's average revenue margin
declined slightly to 73bp (2021: 74bp).
In parallel to the "Ukraine" impact on equity and fixed income
markets, the conflict has also prompted strong capital flows into
US dollars, due to its traditional safe-haven characteristics. The
fact that 100% of CLIG's revenues are earned in US dollars,
therefore, provides a significant cushion to revenues and profits
when translated into sterling and represents a useful hedge against
sterling weakness. The benefit of this "hedge" has been reduced
somewhat by the Karpus acquisition, with non-sterling costs rising
from 56% to 66% of total operating expenses. Nevertheless an 8%
reduction in average monthly US$ revenues between the three-month
period leading up to the conflict and the three-month period
thereafter, was reduced to just a 3% decline when expressed in
sterling terms.
Dividends
Shareholders will have noted from my interim statement a note of
prudence with regard to normal distributions (i.e. excluding
special dividends) notwithstanding a buoyant result for the first
half of the financial year. While a build-up of surplus cash
allowed the payment of a 13.5p special dividend in March, it was
already clear at the interim stage that the second half of the year
would be more challenging and events since have certainly
vindicated the earlier caution. In light of this, the Board has
declared an unchanged final dividend of 22p to be paid on 4th
November 2022 to those shareholders on the register at 30th
September 2022. Taken together with the interim payment of 11p,
total dividends of 33p for the year (excluding the special
dividend) will be covered 1.13 times by this year's post-tax
earnings or 1.22 times on a rolling five-year average basis,
slightly ahead of the Group's five-year dividend cover policy of
1.2 times.
Board
Shareholders were informed at the interim stage that a full
review of Board composition was underway with a view to meeting (as
far as possible) the requirements of the UK Corporate Governance
Code (the Code) in terms of both independence and diversity.
Following this review, led by the Chair of the Nomination
Committee, Jane Stabile, a reorganisation of the Board was agreed,
to take effect from the close of the financial year on 30th June
2022, involving the resignation of three Executive Directors,
Carlos Yuste, Dan Lippincott and Mark Dwyer, who have joined the
new Group Executive Committee (GEC) to oversee the day-to-day
running of both operating companies. CEO Tom Griffith's report in
later pages will provide shareholders with additional detail
regarding the GEC's functions while Jane's Nomination Committee
Report will also address these changes and the ongoing plans for
diversity and inclusion but I am pleased to be able to report to
shareholders this significant progress in our governance
architecture less than two years after the transformative Karpus
merger.
I am very grateful to the three Executive Directors for their
invaluable contributions to the Board's deliberations over a number
of years as well as their agreement to a corporate restructuring,
which will facilitate our compliance with the Code in a timely
fashion. The devolution of operational management to the GEC will
help streamline decision-making on a day-to-day basis, while
providing clearer demarcation between executive management and an
independent Board.
I am sure that all shareholders will wish to join me in offering
a special thank you to Barry Olliff, CLIG's founder and architect
over more than thirty years. As I said in our April announcement,
Barry's laser-like focus on value to both shareholders and clients
lies at the core of CLIG's culture and permeates everything we do
for all stakeholders. Barry's willingness to challenge entrenched
orthodoxy in the investment universe is well recognised and
represents a hugely positive long-term legacy. The issue of founder
succession is fraught with challenges and can often be a disruptive
process but thanks to Barry's support throughout the management
transition, I am pleased to report that it has been seamless. On
behalf of the Board and all our shareholders, I would like to say a
heartfelt thank you to Barry and wish him the very best in his
well-deserved retirement.
ESG
One of the positives arising from the COVID-19 pandemic was the
acceleration in the use of technology to drive reductions in the
environmental impact of business and CLIG has been active in
capitalising on the gains to be realised in this important area.
Inevitably, a network of six offices across three continents meant
that, historically, air travel was a significant component of
CLIG's otherwise low carbon footprint. The decision to streamline
CLIG's office network this year, therefore, with the closure of the
Seattle and Dubai offices, has helped reduce CLIG's carbon
footprint materially. Similarly, an increase in client briefings
via video conferences and additional investment in technology
solutions has enabled greater use of video conferencing for
internal communication and meetings.
A concerted effort to reduce paper usage using web-based
alternatives for the Annual Report, portfolio reports and other
research-based publications is helping reduce the Group's waste
output and the Group remains committed to further reductions in our
environmental impact wherever possible.
Many commercial businesses have had to adjust to new working
practices in the post-COVID world and CLIG is no exception. The
necessity of remote working during the pandemic provided a template
for potential longer term solutions and to that end, a hybrid
"work-from-home" (WFH) policy for all employees has been
implemented. Group-wide policies have also been established on a
range of social issues, including anti-slavery, human trafficking,
anti-corruption, bribery and health and safety, while all employees
will receive two training sessions on diversity, equity and
inclusion (D/E/I) in the course of calendar year 2022. We regard
these initiatives as central to the goal of good corporate
citizenship and will continue to encourage the widest possible
level of employee awareness in the social dimension.
Since the appointment of Prism Cosec Ltd as Corporate Secretary
in 2021 and the formation of the Corporate Governance Working Group
(CGWG), a series of changes have been made to CLIG's working
practices and these are detailed in the Governance section of this
report. Alongside the measures taken for Board-level Code
compliance detailed earlier, a programme of regular engagement with
employees has been established with video conference meetings
across all offices. These meetings provide employees with the
opportunity to raise any issues with Board members but they also
give Independent Non-Executive Directors the ability to gain
greater insight into the organisation at all levels, thereby
assisting them in their oversight role.
Outlook
Over the course of the last two years, we have witnessed extreme
volatility in capital markets and with the threat of long-term
conflict in Europe and double-digit inflation ever present, it
would be foolish to paint too optimistic a picture for the year
ahead. Nevertheless, at the risk of sounding "glass-half-full", I
believe there are some early signs of a more stable market
environment. The economic dislocation created by reduced energy and
food supplies together with supply bottlenecks in industry will
take time to be fully resolved but, just as the pandemic forced
technological change in a condensed time-frame, so economies and
companies will develop alternative trade patterns over time. While
it appears unlikely that we will see the "V-shaped" bounce that
followed the 2020 COVID-19 lockdowns, central bankers and
businesses alike can see that the current constraints are largely
supply-driven and not permanent in nature. Since markets look well
beyond the near horizon, and provided geopolitical friction does
not proliferate beyond the existing conflict, there are grounds to
support the view that the July 2022 "mini-bounce" may not be a
flash in the pan.
Irrespective of the macro-economic outlook, the CLIG business
model, focused on value-orientated CEFs and encompassing a mix of
institutional and wealth management clients, is stronger than in
previous periods of difficult markets. Furthermore, bear markets
also bring opportunities, be it in the investment universe or the
asset management industry more generally and, with this in mind, we
continue to view the future with cautious optimism. Finally and
most importantly, I would like to thank all of our employees for
their continued and sustained efforts in helping us navigate
another challenging year with typical dedication, loyalty and
commitment.
Barry Aling
Chair
15th September 2022
CHIEF EXECUTIVE OFFICER'S STATEMENT
Stronger together
The past year was a successful one for your Company in the face
of the macroeconomic headwinds outlined in Barry Aling's
comprehensive Chair's Statement. This success resulted from the
combined strength of the merged entity for reasons which will be
detailed below. We enter the new financial year focused on
delivering continued growth driven by strong investment performance
and the high quality of services supporting our institutional and
high net worth (HNW) clients.
A number of headwinds confronted us during the past year. In
addition to pandemic-related quarantines, labour shortages and
supply-chain disruptions, the outbreak of war in Ukraine in
February 2022 led to steep declines in global stock and bond
markets while causing the US dollar to soar as a haven asset.
To illustrate the extent of the market falls over the year
ending 30th June 2022, the US bond market, as measured by the
Bloomberg US Aggregate Bond Index, had its worst twelve-month
period since 1976. Further, and for the first time in over 20
years, all eight main asset categories managed at the Group's two
subsidiaries delivered negative annual returns.
As a result of the Karpus Investment Management (KIM) merger
your Company now demonstrates a dramatically more diversified asset
base, with 40% of Funds under Management (FuM) in Emerging Markets
(EM), down from 69% at the point of the merger, along with
significantly reduced volatility in the earnings stream. The
reduction of EM-specific risk to shareholders is a significant
benefit of the merger and supports the dividend policy of the
Company.
Through the merger, our commitment to our Clients and their
Consultants was that the investment teams would not be impacted by
corporate changes in order to safeguard our well-honed investment
processes. This stability of people and process is critical to both
institutional investors and HNW clients.
Equally importantly, our expanded group of colleagues at CLIG
see opportunities for career growth within the Group as new
opportunities arise. We anticipate that more such opportunities
will arise as we continue to conservatively build upon sharing
services across the subsidiary companies.
The past financial year demonstrates why diversification has
been prioritised. Executive management will continue to evaluate
opportunities for consideration by your Board.
FuM & flows
FuM as at 30th June 2022 was US$9.2 billion, which is a 19.4%
decrease over the financial year, reflecting weakness in the
underlying asset classes.
While it is difficult to tout the importance of diversification
after a year when both fixed income and equity markets fell, the
smaller decline in fixed income relative to EM equities is a good
reminder that diversification remains beneficial, and that CLIG
shareholders receive exposure to a broad variety of asset classes.
This broad asset class exposure was achieved after years of organic
growth within City of London Investment Management (CLIM), and
bolstered by the KIM merger in October 2020, as shown in the table
below.
CLIG - FUM by line of business (US$m)
CLIM 30 Jun 30 Jun 30 Jun 2021 30 Jun 2022
2019 2020
---------------- ---------------- ------------------------- ------------------------
US$m % of US$m % of US$m % of % of US$m % of % of
CLIM CLIM CLIM CLIG CLIM CLIG
total* total* total total total total
------ ------ -------- ------- ------- ------- ------ ------- -------
Emerging
Markets 4,221 78% 3,828 69% 5,393 72% 47% 3,703 64% 40%
------ -------- ------ -------- ------- ------- ------- ------ ------- -------
International 729 14% 1,244 23% 1,880 25% 17% 1,812 32% 20%
------ -------- ------ -------- ------- ------- ------- ------ ------- -------
Opportunistic
Value 233 4% 256 5% 231 3% 2% 193 3% 2%
------ -------- ------ -------- ------- ------- ------- ------ ------- -------
Frontier 206 4% 175 3% 13 0% 0% 9 0% 0%
------ -------- ------ -------- ------- ------- ------- ------ ------- -------
Other/REIT 7 0% 9 0% 13 0% 0% 74 1% 1%
------ -------- ------ -------- ------- ------- ------- ------ ------- -------
CLIM total 5,396 100% 5,512 100% 7,530 100% 66% 5,791 100% 63%
------ -------- ------ -------- ------- ------- ------- ------ ------- -------
KIM 30 Jun 30 Jun 30 Jun 2021 30 Jun 2022
2019 2020
---------------- ---------------- ------------------------- ------------------------
US$m % of US$m % of US$m % of % of US$m % of % of
KIM KIM KIM CLIG KIM CLIG
total* total* total total total total
------ -------- ------ -------- ------- ------- ------- ------ ------- -------
Retail 2,291 67% 2,401 69% 2,804 72% 24% 2,419 70% 26%
Institutional 1,105 33% 1,087 31% 1,115 28% 10% 1,014 30% 11%
------ -------- ------ -------- ------- ------- ------- ------ ------- -------
KIM total 3,396 100% 3,488 100% 3,919 100% 34% 3,433 100% 37%
------ -------- ------ -------- ------- ------- ------- ------ ------- -------
CLIG total 11,449 100% 9,224 100%
---------------- ------ -------- ------ -------- ------- ------- ------- ------ ------- -------
*Pre-merger
CLIG had net inflows during the financial year, despite a
challenging market environment. At CLIM, the International (INTL)
strategy has been the main driver of inflows during this financial
year after re-opening to new clients earlier in 2022. The INTL
strategy has now seen net inflows for five of the last six
financial years.
KIM had net outflows for the financial year, as their primarily
HNW client base reduced exposure to markets given the higher
volatility, especially in the second half of the financial
year.
Net outflows at CLIM's flagship EM strategy continued. As the
table below shows, CLIM's EM strategy has now had net outflows for
each of the last four financial years, despite strong relative
performance for the majority of this period. The geopolitical
concerns that have arisen in EM countries, including
Russia/Ukraine, North Korea/South Korea, and China/Taiwan, have
given some investors pause, despite attractive valuations and wide
discounts. The underperformance of EM vs Developed equities over
the past ten years, shown in the chart on the following page, has
also had a negative effect on investor sentiment towards the asset
class. EM equities as shown by the MSCI EM Index have significantly
lagged two widely used proxies of Developed Market equities: 1) The
US market, as shown by the S&P 500 Index, and 2) Non-US
Developed Markets, as shown by the MSCI World Ex-US Index. While
the US market has driven overall Developed market outperformance,
non-US markets have also outperformed their EM peers.
Net investment
flows (US$000's)
CLIM FYE Jun FYE Jun FYE Jun FYE Jun
2019 2020 2021 2022
---------------------- ---------- ---------- ---------- ----------
Emerging Markets (183,521) (279,459) (275,493) (315,770)
International 252,883 551,102 (14,145) 452,554
Opportunistic Value 48,236 45,914 (102,663) 617
Frontier (21,336) 16,178 (168,843) (4,748)
Other/REIT 6,000 4,600 - 79,133
---------------------- ---------- ---------- ---------- ----------
CLIM total 102,262 338,335 (561,144) 211,786
---------------------- ---------- ---------- ---------- ----------
KIM FYE Jun FYE Jun FYE Jun FYE Jun
2019 2020 2021* 2022
---------------------- ---------- ---------- ---------- ----------
Retail 33,701 26,323 (104,222) (106,444)
Institutional 9,050 (67,087) (130,911) (3,302)
---------------------- ---------- ---------- ---------- ----------
KIM total 42,751 (40,764) (235,133) (109,746)
---------------------- ---------- ---------- ---------- ----------
*Includes net investment flows for Retail - (24,407) and
Institutional - (20,264) pertaining to period before 1st October
2020 (pre-merger)
The investment and business development reviews below further
explain factors impacting global equity and fixed income markets
over the period.
Business integration update
Your management team spent the past financial year continuing
the integration of the KIM business via projects in Finance,
Operations, Information Technology, and Marketing. An updated
version of KIM's website was rolled out in October 2021 to improve
the client experience. The Group is benefiting directly from
sharing services across Finance and Information Technology
departments. We intend to continue to develop synergies as
appropriate.
Group's financial results
The Group's average net fee margin for the year was 73bp (2021:
74bp). The Group's net fee income over the period was GBP58.2
million. Coupled with the US dollar strengthening versus sterling
throughout the year from 1.39 to 1.21, Group earnings were buoyed
by a full year of KIM fee income which is 100% US dollar
denominated.
CLIG profitability, cash and dividends
Operating profit before profit-share, EIP, share option
(charge)/credit and investment gains/(losses) grew by 7.7% to
GBP38.4 million (2021: GBP35.6 million) primarily as a result of
full year results for KIM in FY 2022 as against nine months (since
merger) in FY 2021. Profit before tax increased to GBP23.2 million
(2021: GBP22.2 million). Please refer to the Financial Review for
additional financial results.
The Board has recommended a final dividend of 22p per share
(2021: 22p), subject to approval by shareholders at the Company's
Annual General Meeting to be held on 31st October 2022. This would
bring the total dividend payment for the year to 46.5p, including
the special dividend of 13.5p paid in March 2022 (2021: 33p,
special dividend nil). Rolling five-year dividend cover, excluding
the special dividend equates to 1.22 times (2021: 1.29 times) in
line with our target. Please refer to page 22 of the full report
for the dividend cover chart, which provides an overview of our
dividend policy.
Inclusive of our regulatory and statutory capital requirements,
cash in the bank was GBP22.7 million as at 30th June 2022 as
compared to GBP25.5 million at 30th June 2021, in addition to the
seed and other own investments of US$9.1 million (GBP7.4 million)
(2021: US$5.8 million (GBP4.4 million)). Our cash reserves will
allow us to continue managing the business conservatively through
volatile markets while following our dividend policy. The CLIG
Board continues to review the appropriate cash reserves needed to
run the larger, but more diversified business, and assesses
variables such as the impact of future revenue projections in case
of a broad retreat in underlying asset prices.
A review of CLIG's Share Price KPI can be found on page 23 of
the full report. Over the past five years, the average annualised
return to shareholders is 9.2%, within the 7.5% - 12.5% target
range.
EIP
The Employee Incentive Plan (EIP) continues to be an integral
part of our remuneration package in order to align employee and
shareholder interests. This is highlighted by the ongoing take-up
by employees across the Group who continue to benefit from 1) being
part of, and 2) owning, a public company. As at 30th June 2022,
CLIG employees owned 7% (2021: 6.4%) of CLIG's issued share
capital.
Corporate Governance & Stakeholders
As Barry Aling stated in his Chair's statement, on 26th April
2022 our Board announced the restructure of the CLIG Board, and the
creation of the Group Executive Committee (GEC) to provide
executive oversight of the Group's operating businesses, CLIM and
KIM.
The GEC is comprised of myself, as CEO, Carlos Yuste (Head of
Business Development), Mark Dwyer (Chief Investment Officer -
CLIM), Dan Lippincott (Chief Investment Officer - KIM), and
Deepranjan Agrawal (Group Chief Financial Officer). Simply stated,
the GEC is responsible for the management and oversight of Group
operating activities, including the executive management of CLIG's
subsidiary companies. Each member of the GEC is responsible for
reporting directly to the CLIG Board, and may participate in CLIG
Board presentations and discussions as necessary. One of our goals
over the past two financial years was to determine how to best
become compliant with Provision 11 of the UK Corporate Governance
Code, and this restructuring allows us to achieve that
objective.
The CLIG Board was helped directly from the skills, expertise,
and on-the-ground oversight by the Executive Directors during the
pandemic, when travel and in-person engagement was limited. With
pandemic-related restrictions lifting, we have more recently
benefited from opportunities for Board members to meet CLIG
employees in-person in London (October 2021), Coatesville (April
2022), and Rochester (July 2022) at off-site events. You can find
additional details on the Board's engagement with stakeholders in
our Section 172 (1) statement, on page 40 of the full report.
Cybersecurity update
Information Security remains a critical area of concern within
the financial services industry. In the US, the Securities Exchange
Commission (SEC) is increasingly focused on data issues, recently
proposing new regulations governing cybersecurity and data privacy
and protection designed to improve the industry's ability to
respond to threats. Each year, the number of cybersecurity attacks
and breaches increases.
To best position CLIG's defences against potential threats, the
Group undertook an assessment with a leading organisation in the
Information Security industry to gauge our overall cybersecurity
framework. This follows an ongoing multi-year effort to bolster our
internal systems, controls and procedures, inclusive of penetration
testing, employee training, and threat detection.
We received an above average assessment of our programme based
on the size of our organisation within the financial services
industry. We also received several suggestions to further
strengthen our defences mainly based on reporting and incident
response protocols. Efforts are underway to implement changes
designed to further strengthen the Group's programme. We are
focused on constant improvement, and we are committed in our
approach to safeguarding the Group's data and infrastructure from
criminal attacks.
Retirement of CTO
CLIG's Chief Technology Officer, Alan Hoyt, retired on 30th June
2022. Over his tenure at CLIG, Alan guided the development of our
global infrastructure and the related implementation of systems,
applications and data sharing necessary in a continuously evolving
technology environment. Alan's transition includes a six-month
post-retirement consultancy arrangement with CLIG. We wish Alan the
best of luck in his retirement, and extend our gratitude for his
work on CLIG's IT and Cybersecurity efforts over the past 12+
years. Matt Szoke was promoted to the Head of IT role on 1st July
2022.
Environmental reporting update
The Taskforce on Climate-Related Financial Disclosures (TCFD)
developed guidance in relation to consistent climate-related
financial disclosures. CLIG welcomes the TCFD recommendations and
have included our report on page 38 in alignment with them.
Retirement of Barry Olliff, CLIG Founder
Finally, with CLIG Founder Barry Olliff's retirement from the
Board on 31st July 2022, I'd like to extend my thanks and
appreciation for his work on behalf of all stakeholders.
Specifically, Barry's counsel as the Founder and long-time CEO has
been invaluable during the management transition. Barry's passion
for the business, and clear eye towards the future growth
opportunities via diversification, are woven into the culture of
CLIG, and will continue into the future.
CLIG outlook
CLIG remains well-positioned in the current market environment.
Our conservative management style will not change, nor will our
investment-led approach with a view to ensuring strong investment
performance for our clients. We will continue to strengthen the
operational and investment capabilities of the Group by building
out the distribution pipeline for institutional investment and
wealth management products. We will also continue to be selective
in identifying potential acquisitions, which we believe will
inevitably appear given the difficult market conditions of the past
year.
Tom Griffith
Chief Executive Officer
15th September 2022
INVESTMENT REVIEW - CLIM
Our focus on exploiting discount volatility has served clients
well for over thirty years in both bull and bear markets.
Risk assets fell over the twelve-month period ending 30th June
2022 as elevated US valuations met sharply higher interest rates,
reducing the value of future cash flows. Most risk assets declined
in a relatively correlated manner, reducing the benefits of
diversification.
Active equity managers generally struggled to outperform over
the period. In CLIM's case this was noticeable through weaker net
asset value (NAV) performance at the underlying closed-end funds
(CEFs) - and particularly visible in the International (INTL) CEF
Strategy (underperformed by 4.2%) as the funds we own in aggregate
had a bias to smaller, higher growth equities. In the core Emerging
Market (EM) strategy (underperformed by 2.4%) a modest, long held
overweight to Russia was negative as Russian equities were marked
to zero. Discounts generally widened over the period, particularly
for the INTL CEF strategy as retail investors, typically the
marginal CEF buyer, turned cautious after a decade of strong
returns. CLIM's smaller strategies Opportunistic Value (OV) and
Frontier had a mixed year - OV suffered from the same NAV
underperformance trend as the INTL strategy and ended the year 2.6%
behind benchmark. The Frontier strategy outperformed by 8.2% with
good returns from country allocation and NAV performance.
CLIM's REIT team delivered another year of solid relative
performance. The strategy, which incepted in January 2019, ended
the period with a strong three-year track record which bodes well
for asset growth in the medium term. Unfortunately the EM REIT
asset class remains out of favour with allocators given the
long-term absolute performance. Indeed EM REITs, with a total
return of minus 23% over the ten years ending June 2022, have
proved the exception to the "Everything Rally" of the past decade.
Although this weak performance does not imply imminent mean
reversion the value characteristics of the asset class - a dividend
yield of 5.4%, price to book value of 0.7x and P/E ratio of 7.8x -
speak for themselves.
Despite the relative underperformance over the period, over 95%
of CLIM's assets remain ahead of benchmark and peer group over the
five years ended June 2022 (see CLIM Composite Returns chart on
page 12 of the full report).
Net flows were positive over the year following the reopening of
the INTL CEF strategy in December 2020. Outflows continued in the
EM CEF strategy as the ten-year downtrend in relative performance
between developed market and EM equities remained in place. On a
positive note outflows slowed markedly in H2 coincident with a
reversal in this trend.
Robust new CEF issuance increased the universe by over US$30
billion in the twelve months ending June 2022. An enlarged universe
of global CEFs (funds that invest in world markets including the
USA) and US equity focused CEFs encouraged CLIG to seed a Global
CEF strategy. This product invests in global equity markets
including the USA (in contrast to the INTL CEF strategy which
excludes the USA) and fills a niche for US institutions that prefer
a "one stop shop" solution for their global equity exposure. The
INTL, Global, OV and EM REIT strategies have significant capacity
and will remain a focus for marketing.
CLIM continues to develop proprietary solutions to enhance and
refine the investment process; typically this involves further
development of our research database to improve productivity and
client outcomes. The ability to fully look through CLIM's
portfolios to the underlying securities was an important
development in 2020/21. Subsequently we have partnered with
StyleAnalytics to better understand style factors and ESG risks in
CLIM's portfolios.
CEF discounts are the overriding consideration in CLIM's
investment process but our manager due diligence does include a
review of how ESG risk is managed by the underlying managers. We
undertake this work in order to encourage managers to improve their
ESG disclosures and also to keep our clients better informed about
their portfolios. We believe that improved transparency will result
in better management of ESG risks by CEF managers and ultimately in
better returns for our clients. The raw scores for MSCI ACWI
suggest that companies are improving their ESG performance. In
addition, based on Sustainalytics' analysis, CLIM's CEF portfolios
have slightly lower overall ESG risk than their benchmarks on
average, though this is not a targeted outcome. Our detailed annual
stewardship report is available here:
https://www.citlon.com/esg-reports/
AnnualStewardshipReport3_22.pdf
The direction of equity markets is important for fund management
companies. Additionally, for CLIM, higher markets in a bullish
environment typically result in tighter discounts which benefits
performance - the same can also be true in reverse. That said the
factors that have negatively impacted our investment performance
over the last six months - widespread active manager
underperformance and significant geopolitically driven asset
dislocations - are fortunately rare events. Our focus on exploiting
discount volatility has served clients well for over thirty years
in both bull and bear markets. Wide discounts and persistent
discount volatility give us confidence that our CEF strategies will
continue to meet our clients' longer term performance
expectations.
INVESTMENT REVIEW - KIM
The war in Ukraine, global inflationary concerns, and global
economic growth prospects are three major conditions that have
rattled both the stock and bond markets so far this year.
Recap and outlook
On 13th June 2022 the S&P 500 Index close marked a greater
than 20% decline from the recent peak on 3rd January 2022 and the
Bloomberg US Government/ Credit Bond Index and Bloomberg Municipal
Bond Index both continued losses from the first quarter at a
historic pace rarely seen.
Aggregate supply continues to be restricted (largely due to
COVID and global pressures tied to Ukraine) and demand has been
elevated (due to improved personal balance sheets and pent up
demand post-COVID reopening). The US Federal Reserve (Fed) was also
extremely accommodative since the pandemic and heading into this
year, with low borrowing costs aiding both consumers and
businesses.
Coupled with other government aid and borrowing, some fear that
the Fed may have waited too long to steer the US economy toward a
soft landing (i.e. away from a recession). Nevertheless, the Fed
has thus far raised rates by 2.25% and markets expect the Fed funds
rate to peak at 3.5% by year-end. The Fed has also begun to unwind
its balance sheet by allowing some of the proceeds of maturing
bonds to roll-off. In addition to this, balance sheet reductions
were announced to scale up to US$95 billion each month by the end
of September 2022.
Two consecutive quarters of negative GDP in the US coupled with
an inverted yield curve are signalling that a recession is likely
on the horizon. At the forefront for investors is whether the Fed
will continue on its quest to quell inflation or whether it will
pivot at any sign of market stress and turn dovish. Either way, we
foresee returns below historic norms and anticipate continued
volatility.
Performance
KIM's strategies performed well over the past twelve months
driven in large part by our tactical reduction of closed-end funds
(CEFs) and our significant allocation to special purpose
acquisition companies (pre-acquisition) (SPACs) trading at
discounts to trust value.
Our discipline calls for us to lower our exposure to CEFs when
discounts are narrow. This allows us to lock in the added value and
affords us "dry powder" to purchase CEFs when discounts widen. Our
approach worked well as CEF discounts widened significantly year
over year. Additionally, CEF net asset value performance was
generally poor throughout the year.
Where applicable, we opportunistically allocated a significant
portion of our fixed income and balanced accounts to SPACs. Our
conservative approach is based on utilising SPACs as a short-term
fixed income alternative. Among other reasons, we like SPACs
because they can trade at a premium or discount to the cash value
of the trust account (similar to CEFs). By purchasing shares below
the cash value of the trust account, we view our approach as buying
cash at a discount. Moreover, if the SPAC management company finds
what the market perceives to be an attractive acquisition, shares
of the SPAC could trade above cash value.
Clients benefited from our allocation to SPACs as they were one
of the few asset classes that produced positive returns over the
twelve months ended 30th June 2022. With all of this said, we
continue to favour the risk/reward proposition offered by
SPACs.
Despite solid short and long-term performance, flows were net
negative as high net worth clients withdrew funds to pay taxes and
institutional clients sought to rebalance. While markets have been
challenging, we feel that our strategy has held up very well. With
volatility comes opportunity and we feel our strategy is positioned
well to capitalise on market inefficiencies.
BUSINESS DEVELOPMENT REVIEW
CLIG's FuM were US$9.2 billion (GBP7.6 billion) as at 30th June
2022. This compares with US$11.4 billion (GBP8.3 billion) as at
30th June 2021.
Despite volatile asset markets, net investment flows were US$102
million for the Group over the period, with City of London
Investment Management (CLIM) posting net gains, while Karpus
Investment Management (KIM) saw net outflows as clients reduced
exposure to markets in the second half of the year. After a pause
in 2020, recently renewed marketing emphasis for the International
closed-end fund (CEF) strategy was rewarded, in combination with
the excellent long-term track record.
A key reason for the merger was to diversify FuM, with Emerging
Market (EM) CEF strategies now accounting for 40% of Group FuM at
30th June 2022, as compared to 47% at 30th June 2021. KIM provides
balanced mandates for high net worth and wealth management clients
in the US, with both equity and fixed income investments. At 30th
June 2022, KIM strategies comprised 37% of Group FuM, while
International CEF strategies totaled 20% of Group FuM.
With regard to business development, the Group continues to
develop an active pipeline across all of its major CEF
offerings.
Performance
Long-term investment performance across the EM and INTL CEF
strategy, as well as Conservative Balanced mandates, remains
strong, with first or second quartile results versus manager peers
over the three, five and ten-year rolling periods ending 30th June
2022.
For the year ended 30th June 2022, investment performance was
behind relevant benchmarks for the bulk of CLIM's assets due to a
combination of country allocation in the EM strategy and NAV
performance at the underlying CEFs in the INTL and OV strategies.
KIM's equity and fixed-income strategies outperformed their market
indices over the period, while US equity lagged its benchmark.
The Global Emerging Markets Composite net investment returns for
the rolling one year ended 30th June 2022 were -27.9% vs. -25.3%
for the MSCI Emerging Markets Index in USD, and -24.6% for the
S&P Emerging Frontier Super BMI Index in USD.
The KIM Conservative Balanced Composite net investment returns
for the rolling one year ended 30th June 2022 were -9.7% vs. -11.3%
for the Morningstar US Fund Allocation - 30% to 50% Equity Category
in USD.
The International CEF Composite net investment returns for the
rolling one year ended 30th June 2022 were -23.7% vs. -19.4% for
the MSCI ACWI ex US in USD.
The Frontier Markets Composite net investment returns for the
rolling one year ended 30th June 2022 were -8.6% vs. -15.6% for the
S&P Frontier EM 150 benchmark in USD.
The Opportunistic Value Composite net investment returns for the
rolling one year ended 30th June 2022 were -18% vs. -15.2% for the
50/50 MSCI ACWI/Barclays Global Aggregate Bond benchmark in
USD.
Outlook
Marketing efforts will continue to be targeted at investment
consultants, foundations, endowments and pension funds. We will
also continue to introduce our capabilities to family offices,
outsourced CIO firms, and alternative consultants.
Our International CEF, Balanced mandates, Opportunistic Value
capabilities and REIT strategies will be the focus of our product
diversification and business development activities.
FINANCIAL REVIEW
The Group income statement is presented in line with UK-adopted
International Accounting Standards on page 94 of the full report
but the financial information is reviewed by the management and the
Board in a slightly different way, as in the table provided below.
This makes it easier to understand the Group's operating results
and shows the profits to which the Group's profit-share provision
applies.
Consolidated income for financial years
ended 30th June
2022 2021
GBP'000 GBP'000
---------------------------------------------- --------- ---------
Gross fee income 61,294 55,123
Commissions (1,599) (1,101)
Custody fees (1,492) (1,572)
---------------------------------------------- --------- ---------
Net fee income 58,203 52,450
Interest (121) (117)
---------------------------------------------- --------- ---------
Total net income 58,082 52,333
---------------------------------------------- --------- ---------
Employee costs (13,229) (11,126)
Other administrative expenses (5,781) (4,867)
Depreciation and amortisation (696) (719)
---------------------------------------------- --------- ---------
Total overheads (19,706) (16,712)
---------------------------------------------- --------- ---------
Profit before profit-share/EIP/share options
- operating profit 38,376 35,621
Profit-share (9,162) (7,923)
EIP (1,298) (1,008)
Share option (charge)/credit (34) 12
Investment (loss)/gain (659) 540
---------------------------------------------- --------- ---------
Pre-tax profit before exceptional item
and amortisation of intangibles acquired
on acquisition 27,223 27,242
Acquisition - related costs - (1,743)
Amortisation of intangibles (4,051) (3,250)
---------------------------------------------- --------- ---------
Pre-tax profit 23,172 22,249
Tax (5,081) (5,259)
---------------------------------------------- --------- ---------
Post-tax profit 18,091 16,990
---------------------------------------------- --------- ---------
Group income statement and statement of comprehensive income
For the first time the financial results for KIM for the full
twelve-month period have been included in the consolidated income
statement ended 30th June 2022. The merger with KIM was completed
on 1st October 2020 and thus the consolidated income statement for
the year ended 30th June 2021 only included the results for KIM
over the nine-month period.
FuM
FuM at 30th June 2022 were US$9.2 billion compared with US$11.4
billion at the end of the prior financial year. The decrease was
due to a combination of investment flows, market movements and
performance. Refer to the FuM by line of business table within the
CEO statement. Average FuM for the year increased by 9% from US$9.7
billion in FY 2021 to US$10.5 billion in FY 2022.
Revenue
The Group's gross revenue comprises management fees charged as a
percentage of FuM. The Group's gross revenue has increased YoY by
11% to GBP61.3 million (2021: GBP55.1 million). The increase in
revenue is primarily due to a full year of revenue for KIM in FY
2022 (nine months in 2021), higher average FuM during the year and
by a stronger US dollar against sterling, with an average GBP/USD
rate of 1.33 this year compared with 1.35 last year, an increase of
c.2% over last year's average rate.
Commission payable of GBP1.6 million (2021: GBP1.1 million)
relates to fees due to US registered investment advisers for the
introduction of wealth management clients. The increase is
primarily due to a full year of results for KIM being included in
FY 2022.
The Group's net fee income, after custody charges of GBP1.5
million (2021: GBP1.6 million), is GBP58.2 million (2021: GBP52.5
million), an increase of 11% on last year. The Group's average net
fee margin for the year was 73bp as compared to 74bp for the year
ended June 2021.
Net interest paid is made up of interest earned on bank deposits
offset by interest paid on lease obligations. Refer to page 104 of
the full report for our lease accounting policy and page 107 of the
full report for details of net interest paid.
Costs
Total overheads before profit share, EIP, share option charge
and investments (losses)/gains for the year totalling GBP19.7
million (2021: GBP16.7 million) were 18% higher than 2021, which
was primarily on account of the inclusion of full year results for
KIM.
The Group's cost/income ratio, arrived at by comparing total
overheads with net fee income, was 34% in FY 2022 (2021: 32%).
The largest component of overheads continues to be
employee-related at GBP13.2 million (2021: GBP11.1 million), an
increase of 19% over last year. This is mainly on account of the
full year of KIM employee costs in FY 2022 (as compared to nine
months of costs in FY 2021) and a stronger US dollar during the
second half of FY 2022. Average headcount in FY 2022 was 114 as
compared to 99 in FY 2021. Other administrative overheads have
increased by a similar 19% to GBP5.8 million (2021: GBP4.9 million)
mainly due to a full year of KIM costs included in FY 2022, a
stronger US dollar during the second half of FY 2022 as well as an
increase in travel and marketing costs post-COVID.
Total net fee income less overheads resulted in a profit before
profit-share/ EIP/share options charge and investment (losses)/gain
of GBP38.4 million (2021: GBP35.6 million).
The total variable profit-share amounted to GBP9.2 million as
compared with GBP7.9 million in 2021, an increase of 15.6% mainly
on account of the full year of KIM costs included in FY 2022 as
well as the impact of a stronger US dollar during the second half
of FY 2022.
The Group's Employee Incentive Plan (EIP) charges amounted to
GBP1.3 million (2021: GBP1.0 million), the increase is a result of
the impact of a stronger US dollar during the second half of FY
2022 and KIM employees' full year participation in the current
year's plan. The Group's EIP was offered to KIM employees from 1st
January 2021 and thus FY 2021 only included a charge for six
months.
Investment (losses)/gains
Investment losses of GBP0.7 million (2021: gain of GBP0.5
million) relate to the unrealised (losses)/gains on the Group's
seed and other investments.
Amortisation of intangibles
Intangible assets relating to direct customer relationships,
distribution channels and KIM's trade name recognised on the merger
with KIM are being amortised over 7-15 years (refer to note 1.6 of
the financial statements) and have resulted in an amortisation
charge of GBP4.1 million for the year (2021: GBP3.3 million).
Deferred tax liability as at 30th June 2022 amounted to GBP8.6
million based on the relevant tax rate, which will unwind over the
useful economic life to the associated assets. Goodwill amounting
to GBP69.7 million was also recognised on the completion of the
merger. Foreign currency translation differences on the closing
balances of intangibles have been recognised in other comprehensive
income. Refer to note 12 of the full report financial statements
for more details.
Taxation
The pre-tax profit of GBP23.2 million (2021: GBP22.2 million),
after a corporation tax charge of GBP5.1 million in FY 2022 (2021:
GBP5.3 million), at an effective rate of 22% (2021: 24%), results
in a post-tax profit of GBP18.1 million (2021: GBP17.0 million),
which is all attributable to the equity shareholders of the
Company.
Group statement of financial position
The Group's financial position continues to be strong and
liquid, with cash resources of GBP22.7 million as at 30th June 2022
as compared with GBP25.5 million as at 30th June 2021. As a result
of the merger with KIM in October 2020, as at 30th June 2022, c.53%
of the Group's shareholders are now based in North America.
Although the Group continues to declare dividends in sterling, from
October 2022, we have provided the option for shareholders to
receive dividends either in sterling or US dollars, at a
pre-determined exchange rate. Further, post-merger c.66% of Group's
operating expenses are incurred in non-sterling currencies. In
order to pay the anticipated US dollar dividends and non-sterling
expenses, c.58% of the Group's cash resources are held in US
dollars as at 30th June 2022.
The Group invested US$5 million (GBP3.9 million) in seeding its
two REIT funds at the start of January 2019. By the end of June
2022, these investments were valued at GBP3.8 million (2021: GBP4.2
million), with the unrealised loss (2021: gains) taken to the
income statement.
During the year the Group has invested US$2.5 million (GBP1.9
million) in seeding a new Global Equity CEF Fund in December 2021
and US$2.5 million (GBP1.9 million) in a Special Purpose
Acquisition Company (SPAC) strategy in March 2022. By the end of
June 2022, these investments were valued at GBP3.6 million (2021:
nil), with the unrealised loss of GBP0.2m (2021: nil) taken to the
income statement.
The International REIT and Global Equity CEF funds are assessed
to be under the Group's control and are thus consolidated using
accounts drawn up as of 30th June 2022. There were no third party
investments, collectively known as the non-controlling interest
(NCI) in these funds as at 30th June 2022 (2021: GBP0.2
million).
The Group's right-of-use assets (net of amortisation) amounted
to GBP2.4 million as at 30th June 2022 as compared with GBP2.8
million as at 30th June 2021. Additions to the right-of-use assets
during the year are on account of the Singapore office lease being
modified and extended during the period.
The EBT purchased 552,730 shares (2021: 496,354 shares) at a
cost of GBP2.7 million (2021: GBP2.5 million) in preparation for
the annual EIP awards due at the end of October 2022.
The EIP has had a consistently high level of participation each
year since inception (>60% of Group employees), with the first
tranche of awards vesting in October 2018. Only 23.5% (2021: 21.1%)
of the shares vesting during the year were sold in order to help
cover the employees' resulting tax liabilities, leading to a very
healthy 76.5% (2021: 78.9%) share retention within the Group.
In addition, Directors and employees exercised 92,000 (2021:
226,875) options over shares held by the EBT, raising GBP0.3
million (2021: GBP0.8 million) which was used to pay down part of
the loan to the EBT.
Dividends paid during the year totalled GBP21.5 million (2021:
GBP9.7 million). The total dividend of 46.5p per share comprised:
the 22p per share final dividend for 2020/21, 11p per share interim
dividend for the current year and a special dividend of 13.5p per
share paid on 25th March 2022 (2021: 20p per share final for
2019/20 and 11p per share interim). The Group's dividend policy is
set out on page 22 of the full report.
The Group is well capitalised and its regulated entities
complied at all times with their local regulatory capital
requirements. In the UK, the Group's principal operating
subsidiary, CLIM, is regulated by the FCA. As required under the
Capital Requirements Directive, the underlying risk management
controls and capital position are disclosed on CLIM's website
www.citlon.co.uk .
Currency exposure
The Group's revenue is almost entirely US dollar based whilst
its costs are incurred in US dollars, sterling and to a lesser
degree Singapore dollars. The table presented below aims to
illustrate the effect of a change in the US dollar/sterling
exchange rate on the Group's post-tax profits at various FuM
levels, based on the assumptions given, which are a close
approximation of the Group's current operating parameters. You can
see from the illustration that a change in exchange rate from 1.25
to 1.16 increases post-tax profits by GBP1.8 million from GBP15.6
million to GBP17.4 million on FuM of US$9.4 billion.
FX/Post-tax profit
matrix
Illustration of US$/GBP
rate effect:
-------------------------------------- ------------- ---------- ---------- ---------
FuM US$bn: 8.2 9.2 9.4 9.9 10.4
----------- ------------- ---------- ---------- ---------
US$/GBP Post-tax, GBPm
-------------------------------------------------------------
1.16 13.2 16.5 17.4 19.0 20.7
1.20 12.5 15.8 16.6 18.2 19.7
1.25 11.7 14.8 15.6 17.1 18.7
1.28 11.3 14.3 15.1 16.6 18.1
1.32 10.7 13.7 14.4 15.9 17.3
----------- ------------- ---------- ---------- ---------
Assumptions: CLIM KIM
-------------------------------------- ------------------------------------- ---------
1. Average net fee 71bps 76bps
2. Annual operating GBP6.7m plus US$9.4m plus S$0.8m US$7.9m
costs (GBP1 = S$1.68)
3. Average tax 22% 24%
4. Amortisation of intangible GBP3.4m per annum
Note: The above table is intended to illustrate the approximate
impact of movement in US$/GBP, given an assumed set of trading
conditions. It is not intended to be interpreted or used as
a profit forecast.
It is worth noting though that while the Group's fee income is
assessed by reference to FuM expressed in US dollars, almost 40% of
the underlying investments are primarily in emerging market-related
stocks, and therefore the US dollar market value is sensitive to
the movement in the US dollar rate against the currencies of the
underlying countries.
To a degree this provides a natural hedge against the movement
in the US dollar given that as the US dollar weakens (strengthens)
against these underlying currencies the value of the FuM in US
dollar terms rises (falls).
The Group's currency exposure also relates to its subsidiaries'
non-sterling assets and liabilities, which are again to a great
extent in US dollars. For the UK incorporated entities, the
exchange rate differences arising on their translation into
sterling for reporting purposes each month is recognised in the
income statement. In order to minimise the foreign exchange impact,
the Group monitors its net currency position and offsets it by
forward sales of US dollars for sterling. At 30th June 2022, these
forward sales totalled US$24.5 million, with a weighted average
exchange rate of US$1.29 to GBP1 (2021: US$8.3 million at a
weighted average rate of US$1.40 to GBP1).
The exchange rate differences arising from translating
functional currency to presentation currency for KIM are recognised
in the Group's other comprehensive income.
Viability statement
In accordance with the provisions of the UK Corporate Governance
Code, the Directors have assessed the viability of the Group over a
three-year period, taking into account the Group's current position
and prospects, Internal Capital Adequacy Assessment Process (ICAAP)
and the potential impact of principal risks and how they are
managed as detailed in the risk management report on pages 28 to 29
of the full report. The Group will produce its first Internal
Capital and Risk Assessment (ICARA) in FY 2023.
Period of assessment
While the Directors have no reason to believe that the Group
will not be viable over a longer period, given the uncertainties
still associated with the global pandemic, as well as economic and
political factors and their potential impact on financial markets,
any longer time horizon assessments are subject to a level of more
uncertainty due to external factors.
Taking into account the recommendations of the Financial
Reporting Council in their 2021 thematic review publication, the
Board has therefore determined that a three-year period to 30th
June 2025 constitutes an appropriate and prudent timeframe for its
viability assessment. This three year view is also more aligned to
the Group's detailed stress testing.
Assessment of viability
As part of its viability statement, the Board has conducted a
robust assessment of the principal risks facing the Group,
including those that would threaten its business model, future
performance, solvency or liquidity. This assessment includes
continuous monitoring of both internal and external environments to
identify new and emerging risks, which in turn are analysed to
determine how they can best be mitigated and managed.
The primary risk is the potential for loss of FuM as a result of
poor investment performance, client redemptions, breach of mandate
guidelines or market volatility. The Directors review the principal
risks regularly and consider the options available to the Group to
mitigate these risks so as to ensure the ongoing viability of the
Group is sustained.
The ICAAP is reviewed by the Board and incorporates a series of
stress tests on the Group's financial position over a three-year
period. The level of scenarios included within the ICAAP are
significantly more severe than our risk appetite, which
include:
--significant fall in FuM
--significant fall in net fee margin
--combined stress (significant fall both in FuM and net fee
margin)
Having reviewed the results of the stress tests, the Directors
have concluded that the Group would have sufficient resources in
the stressed scenario and that the Group's ongoing viability would
be sustained. The stress scenario assumptions would be reassessed
if necessary over the longer term. An example of a mitigating
action in such scenarios would be a reduction in costs along with a
reduction in dividend.
Based on the results of this analysis, the Board confirms it has
a reasonable expectation that the Company and the Group will be
able to continue in operation and meet their liabilities as they
fall due over the next three years.
On that basis, the Directors also considered it appropriate to
prepare the financial statements on the going concern basis as set
out on page 84 of the full report.
Alternative Performance Measures
The Directors use the following Alternative Performance Measures
(APMs) to evaluate the performance of the Group as a whole:
Underlying profit before tax - Profit before tax, adjusted for
(loss)/gain on investments, acquisition-related costs and
amortisation of acquired intangibles. This provides a measure of
the profitability of the Group for management's
decision-making.
Underlying earnings per share - Underlying profit before tax,
adjusted for tax as per income statement, tax effect of adjustments
and non-controlling interest, divided by the weighted average
number of shares in issue as at the period end. Refer to note 9 in
the full report financial statements for reconciliation.
Alternative Performance Measures
Underlying profit and profit Jun 22 Jun 21
before tax
-------------------------------------
GBP GBP
------------------------------------- ------------ ------------
Net fee income 58,203,284 52,450,936
Administrative expenses (30,199,393) (25,631,432)
Net interest paid* (121,054) (117,063)
------------------------------------- ------------ ------------
Underlying profit before tax 27,882,837 26,702,441
------------------------------------- ------------ ------------
Add back/(deduct):
Gain/(loss) on investments (659,231) 540,172
Acquisition-related costs - (1,743,424)
Amortisation on acquired intangibles (4,051,223) (3,250,185)
------------------------------------- ------------ ------------
Profit before tax 23,172,383 22,249,004
------------------------------------- ------------ ------------
* Net interest paid is made up of interest earned on bank
deposits offset by interest paid on lease obligations. Refer to
page 104 of our full report for our lease accounting policy and
page 107 of our full report for details of net interest paid.
FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 30TH JUNE 2022
Year to Year to
30th June 30th June
Note 2022 2021
GBP GBP
---------------------------------- ------ ------------ ------------
Revenue
Gross fee income 2 61,293,627 55,123,274
Commissions payable (1,598,421) (1,100,708)
Custody fees payable (1,491,922) (1,571,630)
---------------------------------- ------ ------------ ------------
Net fee income 58,203,284 52,450,936
---------------------------------- ------ ------------ ------------
Administrative expenses
Employee costs 23,532,973 20,045,406
Other administrative expenses 5,970,527 4,866,625
Depreciation and amortisation 4,747,116 3,969,586
---------------------------------- ------ ------------ ------------
(34,250,616) (28,881,617)
---------------------------------- ------ ------------ ------------
Underlying operating profit 3 23,952,668 23,569,319
Exceptional item
Acquisition-related costs - (1,743,424)
Operating profit 3 23,952,668 21,825,895
Finance income 5 32,136 557,861
Finance expense 5 (812,421) (134,752)
---------------------------------- ------ ------------ ------------
Profit before taxation 23,172,383 22,249,004
Income tax expense 6 (5,081,232) (5,258,486)
---------------------------------- ------ ------------ ------------
Profit for the period 18,091,151 16,990,518
---------------------------------- ------ ------------ ------------
Profit attributable to:
Non-controlling interests (NCI) - 19,285
Equity shareholders of the parent 18,091,151 16,971,233
---------------------------------- ------ ------------ ------------
Basic earnings per share 7 36.9p 39.4p
---------------------------------- ------ ------------ ------------
Diluted earnings per share 7 36.4p 38.8p
---------------------------------- ------ ------------ ------------
CONSOLIDATED AND COMPANY STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 30TH JUNE 2022
Group Company
------------
Year to Year to Year to Year to
30th June 30th June 30th June 30th June
2022 2021 2022 2021
GBP GBP GBP GBP
----------------------------------- ------------ ------------ ------------ ------------
Profit for the period 18,091,151 16,990,518 26,303,606 11,157,096
----------------------------------- ------------ ------------ ------------ ------------
Other comprehensive income:
Foreign currency translation
differences 12,826,714 (6,675,136) - -
----------------------------------- ------------ ------------ ------------ ------------
Total comprehensive income for
the period 30,917,865 10,315,382 26,303,606 11,157,096
----------------------------------- ------------ ------------ ------------ ------------
Attributable to:
Equity shareholders of the parent 30,917,865 10,296,097 26,303,606 11,157,096
Non-controlling interests - 19,285 - -
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION
30TH JUNE 2022
Group Company
------ --------
30th June 30th June 30th June 30th June
2022 2021 2022 2021
Note GBP GBP GBP GBP
----------------------------- ----- ------------ ------------ ----------- -------------
Non-current assets
Property and equipment 511,208 455,983 247,832 280,596
Right-of-use assets 2,418,745 2,757,179 1,085,153 1,263,534
Intangible assets 8 110,078,091 100,961,992 17,867 7,377
Other financial assets 7,434,586 4,373,485 108,912,203 106,962,140
Deferred tax asset 394,831 366,405 5,066 9,458
----------------------------- ----- ------------ ------------ ----------- -----------
120,837,461 108,915,044 110,268,121 108,523,105
----------------------------- ----- ------------ ------------ ----------- -----------
Current assets
Trade and other receivables 6,498,019 6,953,470 5,180,722 6,662,266
Current tax receivable - - 1,132,209 1,005,736
Cash and cash equivalents 22,677,893 25,514,619 6,919,935 2,905,184
----------------------------- ----- ------------ ------------ ----------- -----------
29,175,912 32,468,089 13,232,866 10,573,186
----------------------------- ----- ------------ ------------ ----------- -----------
Current liabilities
Trade and other payables (9,461,606) (8,260,597) (3,749,598) (3,281,116)
Lease liabilities (388,986) (392,954) (121,573) (131,180)
Current tax payable (538,158) (1,367,564) - -
----------------------------- ----- ------------ ------------ ----------- -----------
Creditors, amounts falling
due within one year (10,388,750) (10,021,115) (3,871,171) (3,412,296)
----------------------------- ----- ------------ ------------ ----------- -----------
Net current assets 18,787,162 22,446,974 9,361,695 7,160,890
----------------------------- ----- ------------ ------------ ----------- -----------
Total assets less current
liabilities 139,624,623 131,362,018 119,629,816 115,683,995
----------------------------- ----- ------------ ------------ ----------- -----------
Non-current liabilities
Lease liabilities (2,213,854) (2,348,101) (1,026,248) (1,148,549)
Deferred tax liability (8,642,208) (8,696,813) (21,178) (24,141)
----------------------------- ----- ------------ ------------ ----------- -----------
Net assets 128,768,561 120,317,104 118,582,390 114,511,305
----------------------------- ----- ------------ ------------ ----------- -----------
Capital and reserves
Share capital 9 506,791 506,791 506,791 506,791
Share premium account 2,256,104 2,256,104 2,256,104 2,256,104
Merger relief reserve 9 101,538,413 101,538,413 101,538,413 101,538,413
Investment in own shares (7,045,817) (6,068,431) (7,045,817) (6,068,431)
Share option reserve 126,181 195,436 105,513 109,657
EIP share reserve 1,481,107 1,282,884 1,481,107 1,282,884
Foreign currency differences
reserve 6,197,463 (6,629,251) - -
Capital redemption reserve 26,107 26,107 26,107 26,107
Retained earnings 23,682,212 27,019,584 19,714,172 14,859,780
----------------------------- ----- ------------ ------------ ----------- -----------
Attributable to:
Equity shareholders
of the parent 128,768,561 120,127,637 118,582,390 114,511,305
Non-controlling interests - 189,467 - -
----------------------------- ----- ------------ ------------ ----------- -----------
Total equity 128,768,561 120,317,104 118,582,390 114,511,305
----------------------------- ----- ------------ ------------ ----------- -----------
As permitted by section 408 of the Companies Act 2006, the
income statement of the Parent Company is not presented as part of
these financial statements. The Parent Company's profit for the
financial period amounted to GBP26,303,606 (2021:
GBP11,157,096).
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
30TH JUNE 2022
Foreign Capital Total
Share Investment Share EIP currency redemption attributable
Share premium Merger in own option Share differences reserve Retained to share-
capital account relief shares reserve reserve reserve GBP earnings holders NCI Total
GBP GBP reserve GBP GBP GBP GBP GBP GBP GBP GBP
GBP
------------------- -------- --------- ----------- ----------- --------- --------- ----------- ---------- ------------ ------------ --------- ------------
As at 30th
June 2020 265,607 2,256,104 - (5,765,993) 241,467 1,232,064 45,885 26,107 20,626,405 18,927,646 170,182 19,097,828
------------------- -------- --------- ----------- ----------- --------- --------- ----------- ---------- ------------ ------------ --------- ------------
Profit for
the period - - - - - - - - 16,971,233 16,971,233 19,285 16,990,518
Other comprehensive
income - - - - - - (6,675,136) - - (6,675,136) - (6,675,136)
------------------- -------- --------- ----------- ----------- --------- --------- ----------- ---------- ------------ ------------ --------- ------------
Total comprehensive
income - - - - - - (6,675,136) - 16,971,233 10,296,097 19,285 10,315,382
Transactions
with owners
Issue of
ordinary
shares on
merger 241,184 - 101,538,413 - - - - - - 101,779,597 - 101,779,597
Share issue
costs - - - - - - - - (967,881) (967,881) - (967,881)
Share option
exercise - - - 830,819 (119,787) - - - 119,787 830,819 - 830,819
Purchase
of own shares - - - (2,503,244) - - - - - (2,503,244) - (2,503,244)
Share-based
payment - - - - (12,023) 760,645 - - - 748,622 - 748,622
EIP
vesting/forfeiture - - - 1,369,987 - (709,825) - - - 660,162 - 660,162
Deferred
tax on share
options - - - - 85,779 - - - (20,574) 65,205 - 65,205
Current tax
on share
options - - - - - - - - 33,738 33,738 - 33,738
Dividends
paid - - - - - - - (9,743,124) (9,743,124) - (9,743,124)
------------------- -------- --------- ----------- ----------- --------- --------- ----------- ---------- ------------ ------------ --------- ------------
Total transactions
with owners 241,184 - 101,538,413 (302,438) (46,031) 50,820 - - (10,578,054) 90,903,894 - 90,903,894
------------------- -------- --------- ----------- ----------- --------- --------- ----------- ---------- ------------ ------------ --------- ------------
As at 30th
June 2021 506,791 2,256,104 101,538,413 (6,068,431) 195,436 1,282,884 (6,629,251) 26,107 27,019,584 120,127,637 189,467 120,317,104
------------------- -------- --------- ----------- ----------- --------- --------- ----------- ---------- ------------ ------------ --------- ------------
Profit for
the period - - - - - - - - 18,091,151 18,091,151 - 18,091,151
Other comprehensive
income - - - - - - 12,826,714 - - 12,826,714 - 12,826,714
------------------- -------- --------- ----------- ----------- --------- --------- ----------- ---------- ------------ ------------ --------- ------------
Total comprehensive
income - - - - - - 12,826,714 - 18,091,151 30,917,865 - 30,917,865
Transactions
with owners
Derecognisation
of NCI holding - - - - - - - - - - (189,467) (189,467)
Share option
exercise - - - 320,193 (38,435) - - - 38,435 320,193 - 320,193
Purchase
of own shares - - - (2,665,042) - - - - - (2,665,042) - (2,665,042)
Share-based
payment - - - - 34,291 884,265 - - - 918,556 - 918,556
EIP
vesting/forfeiture - - - 1,367,463 - (686,042) - - - 681,421 - 681,421
Deferred
tax on share
options - - - - (65,111) - - - (7,902) (73,013) - (73,013)
Current tax
on share
options - - - - - - - - 25,853 25,853 - 25,853
Dividends
paid - - - - - - - (21,484,909) (21,484,909) - (21,484,909)
------------------- -------- --------- ----------- ----------- --------- --------- ----------- ---------- ------------ ------------ --------- ------------
Total transactions
with owners - - - (977,386) (69,255) 198,223 - - (21,428,523) (22,276,941) (189,467) (22,466,408)
------------------- -------- --------- ----------- ----------- --------- --------- ----------- ---------- ------------ ------------ --------- ------------
As at 30th
June 2022 506,791 2,256,104 101,538,413 (7,045,817) 126,181 1,481,107 6,197,463 26,107 23,682,212 128,768,561 - 128,768,561
------------------- -------- --------- ----------- ----------- --------- --------- ----------- ---------- ------------ ------------ --------- ------------
COMPANY STATEMENT OF CHANGES IN EQUITY
30TH JUNE 2022
Share Share EIP Capital Total
premium Merger Investment option share redemption Retained attributable
Share account reserve in own reserve reserve reserve earnings to
capital GBP GBP shares GBP GBP GBP GBP shareholders
GBP GBP GBP
------------------- -------- --------- ----------- ----------- --------- --------- ----------- ------------ -------------
As at 30th June
2020 265,607 2,256,104 - (5,765,993) 241,467 1,232,064 26,107 14,363,024 12,618,380
------------------- -------- --------- ----------- ----------- --------- --------- ----------- ------------ -------------
Profit for the
period - - - - - - - 11,157,096 11,157,096
Other comprehensive - - - - - - - - -
income
------------------- -------- --------- ----------- ----------- --------- --------- ----------- ------------ -------------
Total comprehensive
income - - - - - - - 11,157,096 11,157,096
Transactions
with owners
Issue of ordinary
shares on merger 241,184 - 101,538,413 - - - - - 101,779,597
Share issue
costs - - - - - - - (967,881) (967,881)
Share option
exercise - - - 830,819 (119,787) - - 43,546 754,578
Purchase of
own shares - - - (2,503,244) - - - - (2,503,244)
Share-based
payment - - - - (12,023) 760,645 - - 748,622
EIP
vesting/forfeiture - - - 1,369,987 - (709,825) - - 660,162
Deferred tax
on share options - - - - - - - (3,142) (3,142)
Current tax
on share options - - - - - - - 10,261 10,261
Dividends paid - - - - - - - (9,743,124) (9,743,124)
------------------- -------- --------- ----------- ----------- --------- --------- ----------- ------------ -------------
Total transactions
with owners 241,184 - 101,538,413 (302,438) (131,810) 50,820 - (10,660,340) 90,735,829
------------------- -------- --------- ----------- ----------- --------- --------- ----------- ------------ -------------
As at 30th June
2021 506,791 2,256,104 101,538,413 (6,068,431) 109,657 1,282,884 26,107 14,859,780 114,511,305
------------------- -------- --------- ----------- ----------- --------- --------- ----------- ------------ -------------
Profit for the
period - - - - - - - 26,303,606 26,303,606
Other comprehensive - - - - - - - - -
income
------------------- -------- --------- ----------- ----------- --------- --------- ----------- ------------ -------------
Total comprehensive
income - - - - - - - 26,303,606 26,303,606
Transactions
with owners
Share option
exercise - - - 320,193 (38,435) - - 26,587 308,345
Purchase of
own shares - - - (2,665,042) - - - - (2,665,042)
Share-based
payment - - - - 34,291 884,265 - - 918,556
EIP
vesting/forfeiture - - - 1,367,463 - (686,042) - - 681,421
Deferred tax
on share options - - - - - - - (5,052) (5,052)
Current tax
on share options - - - - - - - 14,160 14,160
Dividends paid - - - - - - - (21,484,909) (21,484,909)
------------------- -------- --------- ----------- ----------- --------- --------- ----------- ------------ -------------
Total transactions
with owners - - - (977,386) (4,144) 198,223 - (21,449,214) (22,232,521)
------------------- -------- --------- ----------- ----------- --------- --------- ----------- ------------ -------------
As at 30th June
2022 506,791 2,256,104 101,538,413 (7,045,817) 105,513 1,481,107 26,107 19,714,172 118,582,390
------------------- -------- --------- ----------- ----------- --------- --------- ----------- ------------ -------------
CONSOLIDATED AND COMPANY CASH FLOW STATEMENT
FOR THE YEARED 30TH JUNE 2022
Group Company
-------------------------------------- ------ --------------------------- --------------------------
30th June 30th June 30th June 30th June
Note 2022 2021 2022 2021
GBP GBP GBP GBP
-------------------------------------- ------ ------------- ------------ ------------ ------------
Cash flow from operating activities
Profit/(Loss) before taxation 23,172,383 22,249,004 181,843 (888,940)
Adjustments for:
Depreciation of property and
equipment 191,149 187,714 99,157 107,667
Depreciation of right-of-use
assets 496,367 492,730 178,381 178,382
Amortisation of intangible assets 4,059,600 3,289,142 8,377 11,375
Loss on disposal of fixed assets 4,296 - 4,296 -
Share-based payment charge/(credit) 33,440 (12,023) 3,474 (697)
EIP-related charge 892,097 802,314 392,458 325,971
Unrealised loss/(gain) on investments 5 659,231 (540,172) 47,963 (282,169)
Interest receivable 5 (32,136) (17,689) (8,539) (253)
Interest payable on leased assets 5 153,190 133,827 87,111 97,444
Interest payable 5 - 925 - -
Translation adjustments 98,684 33,529 (141,847) 184,313
-------------------------------------- ------ -------------
Cash generated from/(used in)
operations before changes
in working capital 29,728,301 26,619,301 852,674 (266,907)
Decrease/(increase) in trade
and other receivables 458,199 (439,607) 1,868,752 556,716
Increase in trade and other
payables 1,886,245 2,800,465 1,156,028 3,251,325
-------------------------------------- ------ ------------- ------------ ------------ ------------
Cash generated from operations 32,072,745 28,980,159 3,877,454 3,541,134
Interest received 5 32,136 17,689 8,539 253
Interest paid on leased assets 5 (153,190) (133,827) (87,111) (97,444)
Interest paid 5 - (925) - -
Taxation paid (7,004,074) (5,841,493) (154,496) (240,142)
Net cash generated from operating
activities 24,947,617 23,021,603 3,644,386 3,203,801
-------------------------------------- ------ ------------- ------------ ------------ ------------
Cash flow from investing activities
Dividends received from subsidiaries - - 26,160,323 12,200,000
Purchase of property and equipment
and intangibles (258,852) (93,342) (89,557) (47,176)
Purchase of non-current financial
assets (3,877,446) (715) (1,889,216) (724)
Proceeds from sale of current
financial assets 8,442 - 8,442 -
Cash consideration paid on merger
net of cash acquired - 946,773 - (107,943)
Net cash (used in)/generated
from investing activities (4,127,856) 852,716 24,189,992 12,044,157
-------------------------------------- ------ ------------- ------------ ------------ ------------
Cash flow from financing activities
Ordinary dividends paid 10 (21,484,909) (9,743,124) (21,484,909) (9,743,124)
Purchase of own shares by employee
share option trust (2,665,042) (2,503,244) (2,665,042) (2,503,244)
Proceeds from sale of own shares
by employee
share option trust 320,193 830,819 320,193 830,819
Payment of lease liabilities (407,772) (486,680) (131,908) (168,367)
Share issue costs - (967,881) - (967,881)
Net cash used in financing activities (24,237,530) (12,870,110) (23,961,666) (12,551,797)
-------------------------------------- ------ ------------- ------------ ------------ ------------
Net (decrease)/increase in cash
and cash equivalents (3,417,769) 11,004,209 3,872,712 2,696,161
Cash and cash equivalents at
start of period 25,514,619 14,594,333 2,905,184 213,510
Cash held in funds* 40,936 20,357 - -
Effect of exchange rate changes 540,107 (104,280) 142,039 (4,487)
-------------------------------------- ------ ------------- ------------ ------------ ------------
Cash and cash equivalents at
end of period 22,677,893 25,514,619 6,919,935 2,905,184
-------------------------------------- ------ ------------- ------------ ------------ ------------
Notes:
* Cash held in International REIT and Global Equity CEF funds
are consolidated using accounts drawn up as of 30th June.
NOTES TO THE FINANCIAL STATEMENTS
The contents of this preliminary announcement have been
extracted from the Company's Annual Report, which is currently in
print and will be distributed within the week. The information
shown for the years ended 30th June 2022 and 30th June 2021 does
not constitute statutory accounts and has been extracted from the
full accounts for the years ended 30th June 2022 and 30th June
2021. The reports of the auditors on those accounts were
unqualified and did not contain adverse statements under sections
498(2) or (3) of the Companies Act 2006. The accounts for the year
ended 30th June 2021 have been filed with the Registrar of
Companies. The accounts for the year ended 30th June 2022 will be
delivered to the Registrar of Companies in due course.
1. SIGNIFICANT ACCOUNTING POLICIES
City of London Investment Group PLC (the Company) is a public
limited company which listed on the London Stock Exchange on 29th
October 2010 and is domiciled and incorporated in the United
Kingdom under the Companies Act 2006.
1.1 Basis of preparation
The financial statements have been prepared in accordance with
UK-adopted International Accounting Standards.
The Group financial statements have been prepared under the
historical cost convention, except for certain financial assets
held by the Group that are reported at fair value. The Group and
Company financial statements have been prepared on a going concern
basis.
The principal accounting policies adopted are set out below and
have, unless otherwise stated, been applied consistently to all
periods presented in these financial statements.
1.2 New or amended accounting standards and interpretations
The Group has adopted all the new or amended accounting
standards and interpretations issued by the International
Accounting Standards Board (IASB) that are mandatory for the
current reporting period. Any new or amended accounting standards
that are not mandatory have not been early adopted.
The following amendments to standards have been adopted in the
current period and have not had a material impact on the Group's
financial statements:
--IFRS 9, IAS 39 and IFRS 7 - Interest Rate Benchmark
Reforms
--IFRS 16 - COVID-19 Related rent concessions
The following amended standards and interpretations are in issue
but not yet effective:
--IAS 16 (amendments) - Property, Plant and Equipment - Proceeds
before Intended Use (effective 1 January 2022)
--Annual Improvements 2018-2020 Cycle - Amendments to IFRS 1,
IFRS 9, IFRS 16 and IAS 4) (effective 1 January 2022)
--IFRS 3 (amendments) - Reference to the Conceptual Framework
(effective 1 January 2022)
--IAS 37 (amendments) - Onerous Contracts - Cost of Fulfilling a
Contract (effective 1 January 2022)
--IAS 1 (amendments) - Presentation of Financial Statements:
Classification of Liabilities as Current or Non-Current and
Classification of Liabilities as Current or Non-Current - Deferral
of Effect Date (effective 1 January 2024)
The Directors do not expect the adoption of these standards and
amendments to have a material impact on the Financial
Statements.
1.3 Accounting estimates and assumptions
The preparation of these financial statements in conformity with
UK-adopted International Accounting Standards requires management
to make estimates and judgments that affect the application of
policies and reported amounts of assets and liabilities, income and
expenses. Whilst estimates are based on management's best knowledge
and judgement using information and financial data available to
them, the actual outcome may differ from those estimates.
The most significant areas of the financial statements that are
subject to the use of estimates and judgments are noted below:
(i) Share-based payments
Share-based payments relate to equity settled awards and are
based on the fair value of those awards at the date of grant. In
order to calculate the charge for share-based compensation as
required by IFRS 2 Share-based payments, the Group is required to
estimate the fair value of the Employee Incentive Plan (EIP) awards
due to be granted in October 2022. This cost is estimated during
the financial year and at the point when the actual award is made
the share-based payment charge is re-calculated and any difference
is taken to the profit or loss. Refer to note 1.13 for accounting
policy.
(ii) EM REIT fund
The Company has a c.20% ownership interest in the EM REIT fund.
However, it does not have any voting powers and its decision-making
powers are held in the capacity of an agent of the investors as a
group. The Company has exercised judgement and have concluded that
it does not control or have significant influence over this
fund.
(iii) Impairment of Goodwill
The recognition of goodwill in a business combination and
subsequent impairment assessments are based on significant
accounting estimates. Note 8 details our estimates and assumptions
in relation to the impairment assessment of goodwill.
1.4 Basis of consolidation
The consolidated financial statements are based on the financial
statements of the Company and all of its subsidiary undertakings.
The Group's subsidiaries are those entities which it directly or
indirectly controls. Control over an entity is evidenced by the
Group's ability to exercise its power in order to affect any
variable returns that the Group is exposed to through its
involvement with the entity. The consolidated financial statements
also incorporate the results of the business combination using the
acquisition method. The acquiree's identifiable net assets are
initially recognised at their fair values at the acquisition date.
The results of the acquired business are included in the
consolidated statement of comprehensive income from the date on
which control is obtained.
When assessing whether to consolidate an entity, the Group
evaluates a range of control factors as defined under IFRS 10
Consolidated financial statements, namely:
--the purpose and design of the entity;
--the relevant activities and how these are determined;
--whether the Group's rights result in the ability to direct the
relevant activities;
--whether the Group has exposure or rights to variable returns;
and
--whether the Group has the ability to use its power to affect
the amount of its returns.
Subsidiaries are consolidated from the date on which control is
transferred to the Group and are deconsolidated from the date that
control ceases.
The Group's subsidiary undertakings as at 30th June 2022 are
detailed below:
City of London Investment Group PLC holds a controlling interest
in the following:
Controlling Country of
Subsidiary undertakings Activity interest incorporation
----------------------------- -------------------- ----------- -------------
City of London Investment Management of funds 100% UK
Management Company Limited
City of London US Investments Holding company 100% UK
Limited
Karpus Management Inc. Management of funds 100% USA
International REIT Fund * Delaware Statutory 100% USA
Trust Fund
Global Equity CEF Fund Delaware Statutory 100% USA
Trust Fund
----------------------------- -------------------- ----------- -------------
City of London Investment Management Company Limited holds 100%
of the ordinary shares in the following:
City of London Investment Management of funds Singapore
Management (Singapore) PTE
Ltd
City of London Latin America Dormant Company UK
Limited
City of London US Investments Limited holds
100% of the ordinary shares in the following:
------------------------------------------------- --------------------- ---------
City of London US Services Limited Service company UK
------------------------------------------------- --------------------- ---------
* International REIT fund has a year-end of 31st December. As
this fund has a financial year end that differs from that of the
Company, it is consolidated using accounts drawn up as of 30th
June.
The registered addresses of the subsidiary companies are as
follows:
City of London Investment Management 77 Gracechurch Street, London
Company Limited EC3V 0AS, UK
City of London US Investments
Limited
City of London US Services Limited
City of London Latin America Limited
-------------------------------------- -----------------------------------
City of London Investment Management 20 Collyer Quay, #10-04, Singapore
Company (Singapore) PTE Ltd 049319
-------------------------------------- -----------------------------------
Karpus Management Inc. 183 Sully's Trail, Pittsford,
New York 14534, USA
-------------------------------------- -----------------------------------
International REIT fund 4005 Kennett Pike, Suite 250,
Global Equity CEF Fund Greenville, DE 19807, USA
-------------------------------------- -----------------------------------
City of London Latin America Limited is dormant and as such is
not subject to audit.
1.5 Property and equipment
For all property and equipment depreciation is calculated to
write off their cost to their estimated residual values by equal
annual instalments over the period of their estimated useful lives,
which are considered to be:
Short leasehold property improvements-over the remaining life of
the lease
Furniture and equipment-4 to 10 years
Computer and telephone equipment-4 to 10 years
1.6 Intangible assets
Intangible assets acquired separately are initially recognised
at cost. Intangible assets acquired through a business combination
other than goodwill, are initially measured at fair value at the
date of the acquisition.
(i) Goodwill
Goodwill arises through a business combination. Goodwill
represents the excess of the purchase consideration paid over the
fair value of the identifiable assets, liabilities and contingent
liabilities of the business at the date of the acquisition.
Goodwill is measured at cost less accumulated impairment losses.
Goodwill on acquisition is allocated to a cash generating unit
(CGU) that is expected to benefit from the acquisition, for the
purpose of impairment testing. The CGU to which goodwill is
allocated represents the lowest level at which goodwill is
monitored for internal management purposes. A CGU is identified as
a group of assets generating cash inflows which are independent
from cash inflows from other Group cash generating assets and are
not larger than the Group's operating segments.
(ii) Direct customer relationships and distribution channels
The fair values of direct customer relationships and
distribution channels acquired in the business combination have
been measured using a multi-period excess earnings method. These
are amortised on a straight line basis over the period of their
expected benefit, being a finite life of 10 years for direct
customer relationships and a finite life of 7 years for
distribution channels.
(iii) Trade name
The fair value of the trade name acquired in the business
combination has been measured using a relief from royalty method.
This is amortised on a straight line basis over the period of its
expected benefit, being a finite life of 15 years.
(iv) Software licences
Software licences are capitalised at cost and amortised on a
straight line basis over the useful life of the asset. Costs are
capitalised on the basis of the costs incurred to acquire and bring
into use the specific software. Costs also include directly
attributable overheads. The estimated useful life over which the
software is depreciated is between 4 to 10 years. Software integral
to a related item of hardware equipment is accounted for as
property and equipment. Costs associated with maintaining computer
software programs are expensed to the income statement as
incurred.
1.7 Impairment of goodwill and other assets
Goodwill arising on acquisition is not subject to annual
amortisation and other assets listed in 1.6 (ii) and (iii) above
which are amortised on a straight line basis are tested annually
for impairment, or more frequently if changes in circumstances
indicate a possible impairment. The Group annually reviews the
carrying value of its CGU to ensure that those assets have not
suffered from any impairment loss. The review compares the
recoverable amount of the CGU to which goodwill is allocated
against its carrying amount. Where the recoverable amount is higher
than the carrying amount, no impairment is required. The
recoverable amount is defined as the higher of (a) fair value less
costs to sell or (b) value in use, which is based on the present
value of future cash flows expected to derive from the CGU.
Any impairment loss is recognised immediately through the income
statement.
1.8 Business Combinations
The Group accounts for business combinations using the
acquisition method. A business combination is determined where in a
transaction, the asset acquired and the liabilities assumed
constitute a business.
The consideration transferred on the date of the transaction is
measured at fair value as are the identifiable assets acquired and
liabilities assumed. Intangible assets are recognised separately
from goodwill at the acquisition date only when they are
identifiable.
1.9 Financial instruments
Financial instruments are only recognised in the financial
statements and measured at fair value when the Group becomes party
to the contractual provisions of the instrument.
Under IFRS 9 Financial Instruments, financial assets are
classified as either:
--amortised at cost;
--at fair value through the profit or loss; or
--at fair value through other comprehensive income.
Financial liabilities must be classified at fair value through
profit or loss or at amortised cost.
The Group's investments in securities and derivatives are
classified as financial assets or liabilities at fair value through
profit or loss. Such investments are initially recognised at fair
value, and are subsequently re-measured at fair value, with any
movement recognised in the income statement. The fair value of the
Group's investments is determined as follows:
Shares-priced using the quoted market mid-price*
Options-priced using the quoted market bid price
Forward currency trades-priced using the forward exchange bid
rates from Bloomberg
*The funds managed by the Group are valued at the mid-price in
accordance with US GAAP. Therefore, where the Group has identified
investments in those funds as subsidiaries, the fair value
consolidated is the net asset values as provided by the
administrator of the funds. The underlying investments in these
funds are liquid companies with a small bid-ask spread.
The consolidated Group assesses and would recognise a loss
allowance for expected credit losses on financial assets which are
measured at amortised cost. The measurement of the loss allowance
depends upon the consolidated entity's assessment at the end of
each reporting period as to whether the financial instrument's
credit risk has increased significantly since initial recognition,
based on reasonable and supportable information that is available,
without undue cost or effort to obtain.
Where there has not been a significant increase in exposure to
credit risk since initial recognition, a twelve-month expected
credit loss allowance is estimated. This represents a portion of
the asset's lifetime expected credit losses that is attributable to
a default event that is possible within the next twelve months.
Where a financial asset has become credit impaired or where it is
determined that credit risk has increased significantly, the loss
allowance is based on the asset's lifetime expected credit losses.
The amount of expected credit loss recognised is measured on the
basis of the probability weighted present value of anticipated cash
shortfalls over the life of the instrument discounted at the
original effective interest rate.
Under the expected credit loss model, impairment losses are
recorded if there is an expectation of credit losses, even in the
absence of a default event. This model is applicable to assets
amortised at cost or at fair value through other comprehensive
income. The assets on the Group's balance sheet to which the
expected loss applies to are fees receivable. At the end of each
reporting period, the Group assesses whether the credit risk of
these trade receivables has increased significantly since initial
recognition, based on reasonable and supportable information that
is available, without undue cost or effort to obtain.
1.10 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and on-demand
deposits with an original maturity of three months or less from
inception, and other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
1.11 Trade payables
Trade payables are measured at initial recognition at fair value
and subsequently measured at amortised cost.
1.12 Current and deferred taxation
The Group provides for current tax according to the tax
regulations in each jurisdiction in which it operates, using tax
rates that have been enacted or substantively enacted by the
reporting date.
Deferred tax is provided using the balance sheet liability
method, providing for temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes
and the amounts used for tax purposes. However, deferred tax is not
accounted for if it arises from goodwill or the initial recognition
(other than in a business combination) of other assets or
liabilities in a transaction that affects neither the accounting
nor the taxable profit or loss.
Deferred tax liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences
can be utilised.
The carrying amount of deferred tax assets is reviewed at the
end of each reporting period and reduced to the extent that it is
no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset
realised. The tax rates used are those that have been enacted, or
substantively enacted, by the end of the reporting period. Deferred
tax is charged or credited to the income statement, except when it
relates to items charged or credited directly as part of other
comprehensive income, in which case the deferred tax is also dealt
with as part of other comprehensive income. For share-based
payments, where the estimated future tax deduction exceeds the
amount of the related cumulative remuneration expense, the excess
deferred tax is recognised directly in equity.
1.13 Share-based payments
The Company operates an Employee Incentive Plan (EIP) which is
open to all employees in the Group. Awards are made to
participating employees over shares under the EIP where they have
duly waived an element of their annual profit-share before the
required waiver date, in general before the start of the relevant
financial year.
The awards are made up of two elements: Deferred Shares and
Bonus Shares. The Deferred Shares represent the waived profit-share
and the Bonus Shares represent the additional award made by the
Company as a reward for participating in the EIP. Awards will vest
(i.e. no longer be forfeitable) over a three-year period with
one-third vesting each year for all employees, other than Executive
Directors of CLIG. Awards granted from October 2021 onwards will
vest (i.e. no longer be forfeitable) over a five-year period with
one-fifth vesting each year for the Executive Directors of
CLIG.
The full cost of the Deferred Shares is recognised in the year
to which the profit-share relates. The value of the Bonus Shares is
expensed on a straight line basis over the period from the date the
employees elect to participate to the date that the awards vest.
This cost is estimated during the financial year and at the point
when the actual award is made, the share-based payment charge is
re-calculated and any difference is taken to the profit or
loss.
The Company operates an Employee Share Option Plan. The fair
value of the employee services received in exchange for share
options is recognised as an expense. The fair value has been
calculated using the Black-Scholes pricing model, and is being
expensed on a straight line basis over the vesting period, based on
the Company's estimate of the number of shares that will actually
vest. At the end of the three-year period when the actual number of
shares vesting is known, the share-based payment charge is
re-calculated and any difference is taken to the profit or
loss.
1.14 Revenue recognition
Revenue is recognised within the financial statements based on
the services that are provided in accordance with current
investment management agreements (IMAs). The fees are charged as a
percentage of Funds under Management. The performance obligations
encompassed within these agreements are based on daily/monthly
asset management of funds. Payment terms are monthly/quarterly in
advance or in arrears. The Group has an enforceable right to the
payment of these fees for services provided, in accordance with the
underlying IMAs.
For each contract, the Group: identifies the contract with a
customer; identifies the performance obligations in the contract;
determines the transaction price which takes into account estimates
of variable consideration and the time value of money; allocates
the transaction price to the separate performance obligations on
the basis of the relative stand-alone selling price of each
distinct service to be delivered; and recognises revenue when or as
each performance obligation is satisfied in a manner that depicts
the transfer to the customer of services promised.
1.15 Commissions payable
A portion of the Group's revenue is subject to commissions
payable under third party marketing agreements. Commissions payable
are recognised in the same period as the revenue to which they
relate.
1.16 Foreign currency translation
Foreign currency transactions are translated using the exchange
rates prevailing at the transaction date. Monetary assets held in a
currency other than the functional currency are translated at the
end of each financial period at the period end closing rates.
The functional currency of the Group's subsidiaries, City of
London Investment Management Company Limited, Karpus Investment
Management and City of London US Services Limited, is US
dollars.
The functional currency of City of London Investment Group PLC
(the Company) is sterling. The Group uses sterling as the
presentation currency and under IAS 21 'The Effects of Changes in
Foreign Exchange Rates', exchange rate differences arising from
translating a subsidiary company's functional currency to
presentation currency have to be recognised in the Group's other
comprehensive income.
Accordingly, on consolidation, exchange rate differences arising
from translating functional currency to presentation currency for
Karpus Investment Management are recognised in the Group's other
comprehensive income.
However, for its other subsidiaries, the Group operates a policy
whereby it manages foreign exchange exposure of subsidiary monetary
assets through its inter-company accounts. Any gains or losses are
recognised within the Company's own income statement. Therefore, on
consolidation, there are no exchange differences arising from the
translation of monetary items from the subsidiary functional
currency to its presentational currency. This means that all such
exchange differences are included in the income statement and no
split is required between other comprehensive income and the income
statement.
The subsidiaries translate the non-monetary assets at the period
end rate and any movement is reflected in other comprehensive
income.
1.17 Leases
The total outstanding lease cost, discounted at the Group's
weighted average incremental borrowing rate to its present value,
is shown as a lease liability in the statement of financial
position. The payment of the lease charge is allocated between the
lease liability and an interest charge in the income statement.
On recognition of the lease liability, the associated asset is
shown as a right-of-use asset. This is further adjusted for any
lease payments made prior to adoption and any future restoration
costs as implicit within the lease contract. The resulting total
value of the right-of-use asset is depreciated on a straight line
basis over the term of the lease period.
The Group re-measures the lease liability whenever:
--there is a change in the lease term;
--there is a change in the lease payments; and
--a lease contract is modified and the lease modification is not
accounted for as a separate lease.
Where there is a change in the lease term or lease payments, the
lease liability is re-measured by discounting the revised lease
payments at the current or revised discount rate depending on the
nature of the event. Where the lease liability is re-measured, a
corresponding adjustment is made to the right-of-use assets.
Where extension/termination options exists within a lease, the
Group would assess at the lease commencement date as to whether it
is reasonably certain that it will exercise these options. The
Group would reassess these option if there was a significant event
or significant change in circumstances within its control, which
would warrant the Group with reasonable certainty to exercise these
options.
Payments in relation to short-term leases, those that are less
than twelve months in duration continue to be expensed to the
income statement on a straight line basis. At the end of the year,
all of the Group's leases were recognised as right-of-use
assets.
1.18 Pensions
The Group operates defined contribution pension schemes covering
the majority of its employees. The costs of the pension schemes are
charged to the income statement as they are incurred. Any amounts
unpaid at the end of the period are reflected in other
creditors.
1.19 Exceptional items
Exceptional items are significant items of non-recurring
expenditure that have been separately presented by virtue of their
nature to enable a better understanding of the Group's financial
performance. Exceptional items relate to acquisition-related costs
incurred by the Group in relation to its merger. There were no
exceptional items in the current financial year.
2 SEGMENTAL ANALYSIS
The Directors consider that the Group has only one reportable
segment, namely asset management, and hence only analysis by
geographical location is given.
USA Canada UK Europe (ex Other Total
GBP GBP GBP UK) GBP GBP
GBP
----------------------- ----------- --------- --------- ---------- ------ -----------
Year to 30th June
2022
Gross fee income 58,502,020 1,400,160 279,802 1,082,660 28,985 61,293,627
Non-current assets:
Property and equipment 263,376 - 233,693 - 14,139 511,208
Right-of-use assets 1,245,649 - 1,085,153 - 87,943 2,418,745
Intangible assets 110,060,224 - 17,867 - - 110,078,091
Year to 30th June
2021
Gross fee income 52,215,280 1,458,957 356,462 1,092,575 - 55,123,274
Non-current assets:
Property and equipment 175,387 - 254,197 - 26,399 455,983
Right-of-use assets 1,421,279 - 1,263,534 - 72,366 2,757,179
Intangible assets 100,954,615 - 7,377 - - 100,961,992
----------------------- ----------- --------- --------- ---------- ------ -----------
The Group has classified its fee income based on the domicile of
its clients and non-current assets based on where the assets are
held. Included in revenues are fees of GBP5,825,226 (2021:
GBP5,470,051) which arose from fee income from the Group's largest
client. No other single client contributed 10% or more to the
Group's revenue in either of the reporting periods.
3. OPERATING PROFIT
Year to Year to
30th June 2022 30th June
The operating profit is arrived at after GBP 2021
charging: GBP
------------------------------------------- -------------- ---------
Depreciation of property and equipment 191,149 187,714
Depreciation of right-of-use assets 496,367 492,730
Amortisation of intangible assets 4,059,600 3,289,142
Auditor's remuneration:
- Statutory audit 141,984 122,318
- Audit related assurance services 25,000 20,297
- Under/(over)-accrual of prior year audit
fees 5,143 (168)
Short-term lease expense 13,196 7,891
----------------------------------------------- -------------- ---------
4 BUSINESS COMBINATIONS
On 1st October 2020, City of London Investment Group PLC
completed the merger of Snowball Merger Sub, Inc. with and into
Karpus Management Inc. doing business as Karpus Investment
Management (KIM), a US-based investment management business, on a
debt-free basis, by way of a scheme of arrangement in accordance
with the New York Business Corporation Law, with KIM being the
surviving entity in the merger. CLIG acquired 100% of voting equity
interest in KIM and the merger was satisfied by issue of new
ordinary shares and cash for a total consideration of
GBP101,887,540. KIM uses closed-end funds (CEFs) amongst other
securities as a means to gain exposure for its client base
comprising of US high net worth clients and corporate accounts. It
qualifies as a business as defined in IFRS 3 "Business
Combinations". The merger is considered to be of substantial
strategic and financial benefit to the Group and its
shareholders.
Details of the net assets acquired, goodwill and purchase
consideration are detailed in note 6 on pages 107 and 108 of the
Annual Report and Accounts for the year ended 30th June 2021.
5 FINANCE INCOME AND FINANCE EXPENSE
Year to Year to
30th June 2022 30th June
GBP 2021
GBP
-------------------------------------- --------------- ----------
Finance income:
Interest on bank deposits 32,136 17,689
Unrealised gain on investments - 540,172
-------------------------------------- --------------- ----------
Total finance income 32,136 557,861
-------------------------------------- --------------- ----------
Finance expense:
Unrealised loss on investments (659,231) -
Interest payable on lease liabilities (153,190) (133,827)
Other interest payable - (925)
-------------------------------------- --------------- ----------
Total finance expense (812,421) (134,752)
-------------------------------------- --------------- ----------
Net finance (expense)/income (780,285) 423,109
-------------------------------------- --------------- ----------
6 TAX CHARGE ON PROFIT ON ORDINARY ACTIVITIES
Year to Year to
30th June 2022 30th June
(a) Analysis of tax charge on ordinary activities: GBP 2021
GBP
----------------------------------------------------- -------------- ---------
Current tax:
UK corporation tax at 19% (2021: 19%) based
on the profit for the period 4,533,109 4,510,249
Double taxation relief (909,780) (947,061)
Adjustments in respect of prior years (53,810) 35,246
-------------------------------------------------------- -------------- ---------
UK tax total 3,569,519 3,598,434
-------------------------------------------------------- -------------- ---------
Foreign tax 2,720,112 2,435,832
Adjustments in respect of prior years (54,854) (81,966)
Foreign tax total 2,665,258 2,353,866
-------------------------------------------------------- -------------- ---------
Total current tax charge 6,234,777 5,952,300
-------------------------------------------------------- -------------- ---------
Deferred tax:
UK - origination and reversal of temporary
differences (119,105) 39,423
Foreign - origination and reversal of temporary
differences (1,034,440) (733,237)
-------------------------------------------------------- -------------- ---------
Total deferred tax credit (1,153,545) (693,814)
-------------------------------------------------------- -------------- ---------
Total tax charge in income statement 5,081,232 5,258,486
-------------------------------------------------------- -------------- ---------
(b) Factors affecting tax charge for the current period:
The tax charge on profit for the year is different to that
resulting from applying the standard rate of corporation tax in the
UK - 19% (prior year - 19%). The differences are explained
below:
Year to Year to
30th June 2022 30th June
GBP 2021
GBP
------------------------------------------------- ---------------- -----------
Profit on ordinary activities before tax 23,172,383 22,249,004
------------------------------------------------- ---------------- -----------
Tax on profit from ordinary activities at
the standard rate (4,402,753) (4,227,311)
Effects of:
Unrelieved overseas tax (3,614,710) (2,793,433)
Foreign profits taxed at rates different to
those of the UK 2,574,111 1,922,253
Expenses not deductible for tax purposes (774,538) (947,021)
(Losses)/gains not eligible for tax (115,481) 49,022
Capital allowances less than depreciation (14,177) (19,255)
Prior period adjustments 108,664 46,720
Deferred tax originating from timing differences 1,153,545 693,814
Other 4,107 16,725
------------------------------------------------- ---------------- -----------
Total tax charge in income statement (5,081,232) (5,258,486)
------------------------------------------------- ---------------- -----------
7 EARNINGS PER SHARE
The calculation of earnings per share is based on the profit for
the period attributable to the equity shareholders of the parent
divided by the weighted average number of ordinary shares in issue
for the period ended 30th June 2022.
As set out in the Directors' report on page 84 of the full
report the Employee Benefit Trust held 1,708,763 (2021: 1,591,158)
ordinary shares in the Company as at 30th June 2022. The Trustees
of the Trust have waived all rights to dividends associated with
these shares. In accordance with IAS 33 Earnings per share, the
ordinary shares held by the Employee Benefit Trust have been
excluded from the calculation of the weighted average number of
ordinary shares in issue.
The calculation of diluted earnings per share is based on the
profit for the period attributable to the equity shareholders of
the parent divided by the diluted weighted average number of
ordinary shares in issue for the period ended 30th June 2022.
Reported earnings per share
Year to Year to
-------------------------------------
30th June 2022 30th June 2021
-------------------------------------
GBP GBP
------------------------------------- ---------------------------------- ----------------------------------
Profit attributable to the equity
shareholders of the parent for
basic earnings 18,091,151 16,971,233
------------------------------------- ---------------------------------- ----------------------------------
Number of shares Number of shares
Issued ordinary shares as at 1st
July 50,679,095 26,560,707
Effect of own shares held by EBT (1,614,063) (1,502,266)
Effect of shares issued in the
period - 18,039,233
Weighted average shares in issue 49,065,032 43,097,674
Effect of movements in share options
and EIP awards 647,134 677,739
Diluted weighted average shares
in issue 49,712,166 43,775,413
Basic earnings per share (pence) 36.9 39.4
Diluted earnings per share (pence) 36.4 38.8
Underlying earnings per share*
Underlying earnings per share is based on the underlying profit
after tax*, where profit after tax is adjusted for gain/loss on
investments, acquisition-related costs, amortisation of acquired
intangibles, their relating tax impact and non-controlling
interest.
Underlying profit for calculating underlying earnings per
share
Year to Year to
30th June 30th June 2021
2022
GBP GBP
Profit before tax 23,172,383 22,249,004
Add back:
- Loss/(gain) on investments 659,231 (540,172)
- Acquisition-related costs - 1,743,424
- Amortisation on acquired intangibles 4,051,223 3,250,185
Underlying profit before tax 27,882,837 26,702,441
Tax expense as per the consolidated
income statement (5,081,232) (5,258,486)
Tax effect of fair value adjustments (125,253) 102,633
Unwinding of deferred tax liability (972,294) (780,045)
Adjustment for NCI - (19,285)
Underlying profit after tax for the
calculation of underlying earnings
per share 21,704,058 20,747,258
Underlying earnings per share (pence) 44.2 48.1
Underlying diluted earnings per share
(pence) 43.7 47.4
* This is an Alternative Performance Measure (APM). Please refer
to the Financial Review for more details on APMs.
8 INTANGIBLE ASSETS
Group Direct
Goodwill customer Distribution Trade Long term 30th
relationships channels name software Total June 2021
GBP GBP GBP GBP GBP GBP GBP
Cost
At start of period 65,123,297 33,472,334 4,590,186 1,018,983 689,100 104,893,900 761,971
Acquired on
acquisition - - - - - - 111,323,195
Additions - - - - 18,867 18,867 -
Currency translation 8,839,613 4,343,439 583,967 134,247 - 13,901,266 (7,191,266)
At close of period 73,962,910 37,815,773 5,174,153 1,153,230 707,967 118,814,033 104,893,900
Amortisation charge
At start of period - 2,673,300 522,535 54,350 681,723 3,931,908 714,662
Currency translation - 612,302 119,684 12,448 - 744,434 (71,896)
Charge for the
period - 3,332,159 651,319 67,745 8,377 4,059,600 3,289,142
At close of period - 6,617,761 1,293,538 134,543 690,100 8,735,942 3,931,908
Net book value:
At close of period 73,962,910 31,198,012 3,880,615 1,018,687 17,867 110,078,091 100,961,992
Company
Cost
At start of period 57,162 57,162 57,162
Additions 18,867 18,867 -
At close of period 76,029 76,029 57,162
Amortisation charge
At start of period 49,785 49,785 38,410
Charge for the
period 8,377 8,377 11,375
At close of period 58,162 58,162 49,785
Net book value 17,867 17,867 7,377
Goodwill, direct customer relationships, distribution channels
and trade name acquired through business combination relate to the
merger with KIM on 1st October 2020.
The fair values of KIM's direct customer relationships and the
distribution channels have been measured using a multi-period
excess earnings method. The model uses estimates of annual
attrition driving revenue from existing customers to derive a
forecast series of cash flows, which are discounted to a present
value to determine the fair values of KIM's direct customer
relationships and the distribution channels.
The fair value of KIM's trade name has been measured using a
relief from royalty method. The model uses estimates of royalty
rate and percentage of revenue attributable to trade name to derive
a forecast series of cash flows, which are discounted to a present
value to determine the fair value of KIM's trade name.
The total amortisation charged to the income statement during
the financial year in relation to direct client relationships,
distribution channels and trade name was GBP4,051,223 (2021:
GBP3,250,185).
Impairment
Goodwill acquired through the business combination is in
relation to the merger with KIM and relates to the acquired
workforce and future expected growth of the CGU.
The Group has carried out an annual review of the carrying value
of the CGU to which the goodwill is allocated to see if it has
suffered any impairment. The recoverable amount of the CGU is
determined by its value in use. This income-based approach model is
based on the estimates of future cash flows, over a four-year
period plus a terminal value, discounted to its present value.
The Group's cash flow forecasts are based on its most recent and
current trading activity and on current financial budgets for
twelve months that are approved by the Board. The key assumptions
underlying the budgets are based on the most recent trading
activity with built in organic growth, revenue and cost margins.
The Board approved budget is extrapolated for a total of three
years and then a terminal value is calculated. The annual growth
rate used for extrapolating revenue forecasts was 4.1% and for
direct costs was 3.0% based on the Group's expectation of future
growth of the business.
A Gordon growth model was applied to estimate the terminal value
based on a long-term growth rate of 3.0% and is based on both
economic and industry growth outlooks. The pre-tax discount rate
used to measure the value in use of the cash generating unit was
17.4% which reflects specific risks relating to the CGU and is
based on the risk adjusted weighted average cost of capital.
The goodwill impairment assessment date of 30th April 2022 was
different to the current reporting date. The performance of the CGU
is reviewed for the period between the assessment date and the
reporting date to determine whether any changes in circumstances or
impairment indicators have occurred since the assessment date.
Following our review, it was determined that there were no changes
in circumstances or impairment indicators that would require the
CGU to be impaired at the reporting date.
The recoverable amount of the CGU exceeded the carrying amount
of the CGU at 30th April 2022 by GBP1,391,854 (2021:
GBP6,745,000).
Sensitivity analysis was applied to the key assumptions to
measure the impact on the headroom in existence under the current
impairment review. The areas where the sensitivity analysis was
tested related to discount rates used, movements in FuM, and impact
on margins.
Following the sensitivity review, the recoverable amount of this
CGU would equal its carrying amount if the key assumptions were to
change as follows:
2022
From To
Pre-tax discount rate 17.4% 17.6%
Average FuM growth rate 2.5% 1.5%
Average EBIT margin 54.5% 54%
The Directors and management have considered and assessed
possible changes to other key assumptions and have not identified
any instances that could cause the carrying amount of the CGU to
exceed its recoverable amount. Current economic circumstances have
become more uncertain due to events outside the control of the
business such as the impact of the war in Ukraine. The potential
impact on global markets cannot be reliably estimated and if these
result in a sustained period of weakness in financial markets this
could result in a future impairment.
Based on the recoverable amount, using the value in use model,
no impairment was required at 30th June 2022.
9 SHARE CAPITAL AND MERGER RELIEF RESERVE
Share capital Merger relief
reserve
Group and Company GBP GBP
-------------
At start and end of period 50,679,095
ordinary shares of 1p each 506,791 101,538,413
-------------
10 DIVID
30th June 30th June
2022 2021
GBP GBP
-----------
Dividends paid:
Interim dividend of 11p per share (2021: 11p) 5,394,361 4,762,818
Special dividend of 13.5p per share (2021: nil) 6,620,352 -
30th June 2021 of 22p per share (2020: 20p) 9,470,196 4,980,306
21,484,909 9,743,124
A final dividend of 22p per share (gross amount payable
GBP11,149,401; net amount payable GBP10,773,473) has been proposed,
payable on 4th November 2022, subject to shareholder approval, to
shareholders who are on the register of members on 30th September
2022.
*Difference between gross and net amounts is due to shares held
at EBT that do not receive dividend.
11 FINANCIAL INSTRUMENTS
The Group's financial assets include cash and cash equivalents,
investments and other receivables. Its financial liabilities
include accruals, lease liabilities and other payables. The fair
value of the Group's financial assets and liabilities is materially
the same as the book value.
(i) Financial instruments by category
The tables below show the Group and Company's financial assets
and liabilities as classified under IFRS 9 Financial
Instruments:
Group
Assets at
Financial fair value
assets through
30th June 2022 at amortised profit or Total
cost loss
Assets as per statement of GBP GBP GBP
financial position
Other non-current financial
assets - 7,434,586 7,434,586
Trade and other receivables 5,210,164 _ 5,210,164
Cash and cash equivalents 22,677,893 _ 22,677,893
Total 27,888,057 7,434,586 35,322,643
Liabilities
at
fair value
Financial through
liabilities
at amortised profit or Total
cost loss
Liabilities as per statement GBP GBP GBP
of financial position
Trade and other payables 8,350,276 945,898 9,296,174
Current lease liabilities 388,986 - 388,986
Non-current lease liabilities 2,213,854 - 2,213,854
Total 10,953,116 945,898 11,899,014
Assets at
fair
Financial value through
30th June 2021 assets at profit or Total
amortised loss
cost
Assets as per statement of GBP GBP GBP
financial position
Other non-current financial
assets - 4,373,485 4,373,485
Trade and other receivables 5,871,731 _ 5,871,731
Cash and cash equivalents 25,514,619 _ 25,514,619
Total 31,386,350 4,373,485 35,759,835
Liabilities
at
fair value
Financial through
liabilities
at amortised profit or Total
cost loss
Liabilities as per statement GBP GBP GBP
of financial position
Trade and other payables 8,040,676 69,558 8,110,234
Current lease liabilities 392,954 - 392,954
Non-current lease liabilities 2,348,101 - 2,348,101
Total 10,781,731 69,558 10,851,289
Company
Assets at
Investment Financial fair value
in assets through
30th June 2022 subsidiaries at amortised profit or Total
cost loss
Assets as per statement of GBP GBP GBP GBP
financial position
Other non-current financial
assets 103,244,651 3,849,385 1,818,167 108,912,203
Trade and other receivables - 4,764,485 - 4,764,485
Cash and cash equivalents - 6,919,935 - 6,919,935
Total 103,244,651 15,533,805 1,818,167 120,596,623
Liabilities
at
fair value
Financial through
liabilities
at amortised profit or Total
cost loss
Liabilities as per statement GBP GBP GBP
of financial position
Trade and other payables 3,530,682 76,196 3,606,878
Current lease liabilities 121,573 - 121,573
Non-current lease liabilities 1,026,248 - 1,026,248
Total 4,678,503 76,196 4,754,699
Assets at
Investment Financial fair value
in assets through
30th June 2021 subsidiaries at amortised profit or Total
cost loss
Assets as per statement of GBP GBP GBP GBP
financial position
Other non-current financial
assets 103,127,205 1,960,169 1,874,766 106,962,140
Trade and other receivables - 6,322,463 - 6,322,463
Cash and cash equivalents - 2,905,184 - 2,905,184
Total 103,127,205 11,187,816 1,874,766 116,189,787
Liabilities
at
fair value
Financial through
liabilities
at amortised profit or Total
cost loss
Liabilities as per statement GBP GBP GBP
of financial position
Trade and other payables 3,149,674 - 3,149,674
Current lease liabilities 131,180 - 131,180
Non-current lease liabilities 1,148,549 - 1,148,549
Total 4,429,403 - 4,429,403
(ii) Fair value measurements recognised in the statement of
financial position
The following table provides an analysis of financial
instruments that are measured subsequent to initial recognition at
fair value, grouped into levels 1 to 3 based on the degree to which
the fair value is observable.
-- Level 1: fair value derived from quoted prices (unadjusted)
in active markets for identical assets and liabilities.
-- Level 2: fair value derived from inputs other than quoted
prices included within level 1 that are observable for the
assets or liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices).
-- Level 3: fair value derived from valuation techniques that
include inputs for the asset or liability that are not based
on observable market data.
The fair values of the financial instruments are determined as
follows:
- Investments for hedging purposes are valued using the
quoted bid price and shown under level 1.
- Investments in own funds are determined with reference
to the net asset value (NAV) of the fund. Where the NAV
is a quoted price the fair value is shown under level
1, where the NAV is not a quoted price the fair value
is shown under level 2.
- Forward currency trades are valued using the forward exchange
bid rates and are shown under level 2.
- Unlisted equity securities are valued using the net assets
of the underlying companies and are shown under level
3.
The level within which the financial asset or liability is
classified is determined based on the lowest level of significant
input to the fair value measurement.
Group
Level 1 Level 2 Level 3 Total
30th June 2022 GBP GBP GBP GBP
Financial assets at fair value
through profit or loss
Investment in other non-current
financial assets 5,616,419 1,818,167 - 7,434,586
Total 5,616,419 1,818,167 - 7,434,586
Financial liabilities at fair
value through profit or loss
Forward currency trades - 945,898 - 945,898
Total - 945,898 - 945,898
Level 1 Level 2 Level 3 Total
30th June 2021 GBP GBP GBP GBP
Financial assets at fair value
through profit or loss
Investment in other non-current
financial assets 2,498,719 1,874,766 - 4,373,485
Total 2,498,719 1,874,766 - 4,373,485
Financial liabilities at fair
value through profit or loss
Forward currency trades - 69,558 - 69,558
Total - 69,558 - 69,558
Company
Level 1 Level 2 Level 3 Total
30th June 2022 GBP GBP GBP GBP
Investment in other non-current
financial assets - 1,818,167 - 1,818,167
Total - 1,818,167 - 1,818,167
Level 1 Level 2 Level 3 Total
30th June 2021 GBP GBP GBP GBP
Investment in other non-current
financial assets - 1,874,766 - 1,874,766
Total - 1,874,766 - 1,874,766
Level 3
Level 3 assets as at 30th June 2022 are nil (2021: nil).
Where there is an impairment in the investment in own funds, the
loss is reported in the income statement. No impairment was
recognised during the period or the preceding year.
The fair value gain on the forward currency trades is offset in
the income statement by the foreign exchange losses on other
currency assets and liabilities held during the period and at the
period end. The net loss reported for the period is GBP519,633
(2021: net loss GBP60,607).
(iii) Foreign currency risk
Almost all of the Group's revenues, and a significant part of
its expenses, are denominated in currencies other than sterling,
principally US dollars. These revenues are derived from fee income
which is based upon the net asset value of accounts managed, and
have the benefit of a natural hedge by reference to the underlying
currencies in which investments are held. Inevitably, debtor and
creditor balances arise which in turn give rise to currency
exposure.
The Group assesses its hedging requirements and executes forward
foreign exchange transactions so as to substantially reduce the
Group's exposure to currency market movements. The level of forward
currency hedging is such as is judged by the Directors to be
consistent with market conditions.
As at 30th June 2022, the Group had net asset balances of
US$23,917,936 (2021: US$9,211,328), offset by forward sales
totalling US$24,500,000 (2021: US$8,300,000). Other significant net
asset balances were C$499,036 (2021: C$648,301), and SGD1,736,510
(2021: SGD1,924,212).
Had the US dollar strengthened or weakened against sterling as
at 30th June 2022 by 10%, with all other variables held constant,
the Group's net assets would have increased or decreased
(respectively) by less than 1%, because the US dollar position is
hedged by the forward sales.
(iv) Market risk
Changes in market prices, such as foreign exchange rates and
equity prices will affect the Group's income and the value of its
investments.
Where the Group holds investments in its own funds categorised
as unlisted investments, and in other listed investments, the
market price risk is managed through diversification of the
portfolio. A 10% increase or decrease in the price level of the
funds' relevant benchmarks, with all other variables held constant,
would result in an increase or decrease of approximately GBP0.3
million in the value of the investments and profit before tax.
The Group's International REIT and Global Equity CEF funds have
been consolidated as controlled entities, and therefore the
securities held by the funds are reported in the consolidated
statement of financial position under investments. At 30th June
2022, all those securities were listed on a recognised exchange. A
10% increase or decrease in the price level of the securities would
result in a gain or loss respectively of approximately GBP0.4
million to the Group.
The Group is also exposed to market risk indirectly via its
Funds under Management, from which its fee income is derived. To
hedge against potential losses in fee income, the Group may look to
invest in securities or derivatives that should increase in value
in the event of a fall in the markets. The purchase and sale of
these securities are subject to limits established by the Board and
are monitored on a regular basis. The investment management and
settlement functions are totally segregated.
The profit from hedging recognised in the Group income statement
for the period is GBPnil (2021: GBPnil).
(v) Credit risk
The majority of debtors relate to management fees due from funds
and segregated account holders. As such, the Group is able to
assess the credit risk of these debtors as minimal. For other
debtors a credit evaluation is undertaken on a case by case
basis.
The Group has zero experience of bad or overdue debts.
The majority of cash and cash equivalents held by the Group are
with leading UK and US banks. The credit risk is managed by
carrying out regular reviews of each institution's credit rating
and of their published financial position. Given their high credit
ratings, management does not expect any counterparty to fail to
meet its obligations.
(vi) Liquidity risk
The Group's liquidity risk is minimal because commission payable
forms the major part of trade creditors, and payment is made only
upon receipt of the related fee income plus the Group's strategy is
to maximise its cash position. In addition, the Group's investments
in funds that it manages can be liquidated immediately if
required.
(vii) Interest rate risk
The Group has no borrowings, and therefore has no exposure to
interest rate risk other than that which attaches to its interest
earning cash balances and forward currency contracts. The Group's
strategy is to maximise the amount of cash which is maintained in
interest bearing accounts, and to ensure that those accounts
attract a competitive interest rate. At 30th June 2022, the Group
held GBP22,677,893 (2021: GBP25,514,619) in cash balances, of which
GBP19,381,084 (2021: GBP23,911,707) was held in bank accounts which
attract variable interest rates. The effect of a 100 basis points
increase/decrease in interest rates on the Group's net assets would
not be material.
(viii) Capital risk management
The Group manages its capital to ensure that all entities within
the Group are able to operate as going concerns and exceed any
minimum externally imposed capital requirements. The capital of the
Group and Company consists of equity attributable to the equity
holders of the Parent Company, comprising issued share capital,
share premium, retained earnings and other reserves as disclosed in
the statement of changes in equity.
The Group's operating subsidiary company in the UK, City of
London Investment Management Company Ltd is subject to the minimum
capital requirements of the Financial Conduct Authority (FCA) in
the UK. This subsidiary held surplus capital over its requirements
throughout the period.
The Group is required to undertake an Internal Capital Adequacy
Assessment Process (ICAAP), under which the Board quantifies the
level of capital required to meet operational risks. The Group will
produce its first Internal Capital and Risk Assessment (ICARA) in
FY 2023. The objective of this is to ensure that the Group has
adequate capital to enable it to manage risks which are not
adequately covered under the Pillar 1 requirements. This process
includes stress testing for the effects of major risks, such as a
significant market downturn, and includes an assessment of the
Group's ability to mitigate the risks.
12 POST BALANCE SHEET EVENTS
There have been no material events occurring between the balance
sheet date and the date of signing this report.
APPIX
1. Key risks
The Board has conducted a robust assessment of the principal
risks facing the Group, including those that would threaten its
business model, future performance, solvency or liquidity. This
assessment includes continuous monitoring of both internal and
external environments to identify new and emerging risks, which in
turn are analysed to determine how they can best be mitigated and
managed. The primary risk is the potential for loss of FuM as a
result of poor investment performance, client redemptions, a breach
of mandate guidelines or market volatility. The Group seeks to
attract and retain clients through consistent outperformance
supplemented by first class client servicing.
In addition to the above key business risk, the Group has
outlined what it considers to be its other principal risks,
including the controls in place and any mitigating factors.
Principal risk Controls / mitigation
Key person risk Risk that key employees Team approach, internal
across the business procedures, knowledge
leave/significant sharing. Remuneration
reliance on a small packages reviewed
number of key employees. as needed to ensure
talent/key employees
are retained.
Technology, IT / Risk that technology IT monitors developments
cybersecurity and systems and support in this area and ensures
business continuity are inadequate or that systems are adequately
risks fail to adapt to changing protected. Additional
requirements; systems IT spend has resulted
are vulnerable to in a number of ongoing
third party penetration systems vulnerability
or that the business testing that has taken
cannot continue in place on the network,
a disaster. along with ongoing
monitoring of the
network to reduce
our vulnerabilities.
The Group actively
maintains a Disaster
Recovery/Business
Continuity plan. All
offices maintain backups
of all local servers,
applications and data.
The US replicates
its backup to the
UK cloud provider
and vice versa. Employees
across its four offices
are able to work remotely,
accessing information
and maintaining operations.
Material error / Risk of a material Mandate guidelines
mandate breach error or investment are coded (where possible)
mandate breach occurring. into the order management
system by the Investment
Management/Compliance
teams of each operating
subsidiary.
Regulatory and legal Risk of legal or regulatory Compliance teams of
risk action resulting in each subsidiary monitor
fines, penalties, relevant regulatory
censure or legal action developments - both
arising from failure new regulations as
to identify or meet well as changes to
regulatory and legislative existing regulations
requirements in the that impact their
jurisdictions in which respective subsidiary.
the Group and its Implementation is
operating subsidiaries done as practicably
operate, including as possible taking
those as a result into account the size
of being a listed and nature of the
entity on the London business.
Stock Exchange. Risk The finance team keeps
that new regulation abreast of any changes
or changes to the to Listing Rules,
interpretation of accounting and other
existing regulation standards that may
affects the Group's have an impact on
operations and cost the Group.
base. Finance and both the
compliance teams receive
regular updates from
a variety of external
sources including
regulators, law firms,
consultancies etc.
2. Related party transactions
In the ordinary course of business, the Company and its
subsidiary undertakings carry out transactions with related parties
as defined under IAS 24 Related Party Disclosures. Material
transactions are set out below.
(i) Transactions with key management personnel
Key management personnel are defined as Directors (both
Executive and Non-Executive) of City of London Investment Group
PLC.
(a) Details of compensation paid to the Directors as well as
their shareholdings in the Group is provided in the Remuneration
report on pages 68, 76 and 77 and in note 4 of the full report.
(b) One of the Group's subsidiaries manages funds for some of
its key management personnel, for which it receives a fee. All
transactions between key management and their close family members
and the Group's subsidiary are on terms that are available to all
employees of that Company. The amount received in fees during the
year was GBP58,232 (2021: GBP39,300). There were no fees
outstanding as at the year end.
(ii) Summary of transactions and balances
During the period, the Company received from its subsidiaries
GBP11,840,471 (2021: GBP11,154,306) in respect of management
service charges and dividends of GBP26,160,323 (2021:
GBP12,200,000).
Amounts outstanding between the Company and its subsidiaries as
at 30th June 2022 are given in notes 15 and 16 of the full
report.
M Dwyer, a Director of the Company until 30th June 2022, is also
a Director of the World Markets Umbrella Fund plc, a fund managed
by City of London Investment Management Company Ltd. The management
fees earned by the Group during the year from this fund totalled
GBP1,082,662 (2021: GBP1,092,575), with GBP92,295 (2021:
GBP117,128) outstanding at the year end.
3. Statement of Directors' responsibilities
The Directors are responsible for preparing the Strategic
report, the Directors' report, the Directors' remuneration report,
the separate Corporate governance statement and the Financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and Company
financial statements for each financial year. The Directors have
elected under Company law and are required under the Listing Rules
of the Financial Conduct Authority to prepare Group financial
statements in accordance with UK-adopted International Accounting
Standards. The Directors have elected under Company law to prepare
the Company financial statements in accordance with UK-adopted
International Accounting Standards.
The Group and Company financial statements are required by law
and UK-adopted International Accounting Standards to present fairly
the financial position of the Group and the Company and the
financial performance of the Group; the Companies Act 2006 provides
in relation to such financial statements that references in the
relevant part of that Act to financial statements giving a true and
fair view are references to their achieving a fair
presentation.
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 Group and the Company and of
the profit or loss of the Group for that period.
In preparing each of the Group and Company financial 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 they have been prepared in accordance with
UK-adopted International Accounting Standards; and
- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the
Company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's and the
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and the Company and enable
them to ensure that the financial statements and the Directors'
remuneration report comply with the Companies Act 2006. They are
also responsible for safeguarding the assets of the Group and the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Directors' statement pursuant to the Disclosure and Transparency
Rules
Each of the Directors, whose names and functions are listed on
pages 42 and 45 of the full report confirm that, to the best of
each person's knowledge:
- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair
view of the assets, liabilities, financial position and profit
of the Company and the undertakings included in the consolidation
taken as a whole, and;
- the Strategic Report and Directors' report contained in
the Annual Report includes a fair review of the development
and performance of the business and the position of the Company
and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks
and uncertainties that they face.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the City of
London Investment Group's website.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
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END
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September 20, 2022 02:00 ET (06:00 GMT)
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