REG - City of Lon Inv Grp - FINAL RESULTS FOR THE YEAR TO 30TH JUNE 2024
24/09/2024 07:00
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RNS Number : 3259F City of London Investment Group PLC 24 September 2024
24th September 2024
CITY OF LONDON INVESTMENT GROUP PLC (LSE: CLIG)
("City of London", "the Group" or "the Company")
FINAL RESULTS FOR THE YEAR TO 30TH JUNE 2024, DIVIDEND DECLARATION AND BOARD
CHANGE
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 2024
(the 2024 Annual Report); and
- Notice of 2024 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 2024 Annual Report and the Notice of AGM, which will be held on 28th
October 2024, will be posted to shareholders on 30th September 2024.
The Appendix to this announcement contains additional information which has
been extracted from the 2024 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 2024 Annual Report.
SUMMARY
- Funds under Management (FuM) of US$10.2 billion at 30th June 2024. This
compares with US$9.4 billion at the beginning of this financial year on 1st
July 2023
- Net fee income was $66.2 million (2023: $65.5 million)
- Underlying profit before tax* was $27.2 million (2023: $27.0 million). Profit
before tax was $22.6 million (2023: $22.1 million)
- Underlying basic earnings per share* were 33.5p (2023: 36.5p). Basic earnings
per share were 27.8p (2023: 30.2p) after an effective tax charge of 24% (2023:
21%) of profit before taxation
- Recommended final dividend of 22p per share (2023: 22p) payable on 7th
November 2024 to shareholders on the register on 4th October 2024, making a
total for the year of 33p (2023: 33p)
*This is an Alternative Performance Measure (APM). Please refer to the
Financial Review for more details on APMs.
For access to the full report, please follow the link below:
http://www.rns-pdf.londonstockexchange.com/rns/3259F_1-2024-9-23.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/3259F_1-2024-9-23.pdf)
Dividend
The Board is proposing to recommend a final dividend of 22p per share (2023:
22p), subject to approval by shareholders at the Company's Annual General
Meeting (AGM) to be held on 28th October 2024. This would bring the total
dividend payment for the year to 33p (2023: 33p). Rolling five-year dividend
cover based on underlying profits equates to 1.19 times (2023: 1.24 times).
The Board confirms the final dividend timetable for the year to 30th June
2024:
· Ex-dividend date: 3rd October 2024
· Dividend record date: 4th October 2024
· DRIP election date: 18th October 2024
· Dividend payment date: 7th November 2024
CLIG no longer offers a currency election for its dividend payment.
Dividend cover template
Please see dividend cover template attached here.
http://www.rns-pdf.londonstockexchange.com/rns/3259F_2-2024-9-23.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/3259F_2-2024-9-23.pdf)
The dividend cover template shows the quarterly estimated cost of dividend
against actual post-tax profits for last year, the current year and the
assumed post-tax profit for next financial year based upon specified
assumptions.
BOARD CHANGE
Tazim Essani has notified the Board that having completed her three-year term
she will not seek re-election at the Company's AGM on 28th October 2024. She
will step down as Chair of the Remuneration Committee and as an independent
Non-executive Director of the Company at the conclusion of the 2024 AGM.
The search for a new independent Non-Executive Director is progressing well
with a shortlist of candidates being considered by the Board with a view to
making an appointment in the near future. Sarah Ing will assume the Chair of
the Remuneration Committee from the conclusion of the 2024 AGM.
Tazim has been a valued and active member of the Board over the last three
years, and we would like to extend our sincere thanks for her tireless efforts
throughout that period both as a Director and Chair of the Remuneration
Committee. We wish her well in her future endeavours.
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/James Hornigold
Zeus Capital Limited
Financial Adviser & Broker
Tel: +44 (0)20 3829 5000
CHAIR'S STATEMENT
In my February interim statement, I had three objectives:
· to remind readers of CLIG's careful and collaborative culture;
· to convey the strength of our teams; and
· to highlight the attractive opportunity set our portfolio
managers were detailing.
As we begin our 2024/2025 financial year, I am pleased to report Funds under
Management (FuM) have grown, recovering to $10.2 billion as of 30th June 2024
and by c.22% from the lows reached last October. At that time, the confluence
of weak bond markets and the sudden Middle East violence provoked severe
declines in asset prices. International and Emerging Markets (EM) were in
decline and closed-end fund (CEF) discounts were wide. Fortunately, our teams
were energised and prepared to take advantage of the weakness.
Since late October, we have begun to enjoy positive momentum on a number of
fronts. We have experienced the start of discount narrowing in a number of
CEFs and lower inflation readings have supported bonds and powered very good
performance from our KIM fixed income and municipal bond strategies.
Corporate governance has been a key focus and our teams at CLIM and KIM have
been successful in engaging with CEF Boards to support discount control
measures.
Performance at CLIG has been strong and our teams have done well on an
absolute basis and in their peer group rankings with all strategies in first
or second quartiles over five and ten-year timeframes. This strong relative
performance provides opportunity for our sales and marketing teams which have
been actively engaging with clients and a growing number of prospects. Our
Global Strategy, managed by our talented International Developed CEF Equity
team led by Mike Edmonds and Mike Sugrue, will have a three-year track record
as of December 2024 and moves are underway to grow this strategy.
While our investment teams successfully navigated a complex environment, it
was also a year of broad-based accomplishments for our non-investment teams.
Our Relationship Managers and Executive Assistants at KIM and Marketing and
Client Servicing teams at CLIM increased contact and information flow with
clients and prospects, including the production of informative videos to
highlight the strong capabilities of our investment teams and the attractive
environment for increasing exposure to our strategies.
Our Operations and Information Technology teams set high goals for improving
workflows and reducing errors across the Group with an ever-heightened focus
on cybersecurity.
Our Finance team worked diligently to improve and streamline processes,
including enhancing their budgeting process. As of 30th June 2024, the Group
successfully completed its first year using the US dollar as its reporting
currency. I would like to thank the Finance team for their diligence in
preparing for and executing this transition.
From my vantage point, it was also a year in which the Group Executive
Committee (GEC) further solidified its communications and processes. The
current members of the GEC are Tom Griffith - CEO, Dan Lippincott - President
of Karpus, Deepranjan Agrawal - Group CFO and Carlos Yuste - Head of Business
Development. These individuals meet formally each week to assess detailed
knowledge of Group activities and set priorities. Group management possess an
ethos of continual improvement and are engaged in a series of initiatives to
make the business more robust while managing risk and working proactively to
enhance long-term returns for shareholders. In addition, at CLIM the
Investment Management Resources and Operations Committee (IMROC) was
formalised during the year to facilitate even better support and communication
within the portfolio management teams.
ESG
The Group continues its commitment to the environment with continual efforts
to reduce negative effects. We implemented a carbon offset programme to
address our impact related primarily to air travel and other activities.
Diversity, equity and inclusion continue to be important areas of focus across
the Group, with two dedicated training sessions per calendar year provided to
all employees. Additionally, all employees receive regular monthly training
programs to reinforce awareness of their role in protecting our technology
network and infrastructure, with an elevated focus on cybersecurity.
The Group continues to be strongly committed to regular workforce engagement
events. These sessions ensure the Non-Executive Directors (NEDs) maintain a
good understanding of the many elements at play in the Group as well as the
teams and individuals working to grow and improve the business. As mentioned
in our interim statement, the Board spent over two days with employees last
September at our Strategy Meeting in West Chester, Pennsylvania, participating
in a mix of formal presentations, social and teambuilding events.
Your Board
Your Board maintained active oversight of Group activities during the year and
engaged with employees on a frequent basis both in person on visits to
Rochester, West Chester and London as well as during numerous video sessions.
I began my new role as Chairman in October 2023. One of my first activities
was to work closely with our Nomination Committee to identify an excellent
addition to our Board. Sarah Ing joined us in March of this year and is
already making important contributions. Peter Roth continues to work
diligently as Senior Independent Director as well as Chair of the Audit &
Risk committee. Sarah Ing will become Chair of the Remuneration Committee at
the conclusion of the Company's Annual General Meeting (AGM) in October 2024.
Tazim Essani has notified the Board that, having completed her three-year
term, she will not seek re-election. As we search for a new independent NED,
we will ensure that the Board continues to be well-balanced with members
possessing a good mix of skills and perspectives. Assuming I am re-elected as
Chair at this year's AGM, we will begin the process of reviewing Chair
succession as discussed in the Nomination Committee statement later in this
report.
Dividends
Your Board formally reviewed the Group dividend policy and discussed it with
management as part of our regular process. We continue to believe that the
existing dividend policy will serve the Group well and formally voted to
extend it. Our dividend policy of maintaining a 1.2 coverage ratio over a
rolling five-year period has provided a useful structure and discipline since
its adoption in 2014.
Management has plans in place for cost reductions of c.$2.5 million over the
next financial year. Subject to approval by shareholders, we recommend a
maintained final dividend of 22 pence per share, payable on 7th November 2024.
Our annual dividend will therefore total 33 pence, providing an attractive
yield for our shareholders. Please refer to the CEO Statement for CLIG's
dividend history.
CLIG remains debt-free and has a cash balance of $33.7 million as of 30th June
2024 (2023: $28.6 million) with the final dividend of 22 pence per share to be
paid in November 2024.
Shareholder engagement
Since our last AGM on 23rd October 2023, we have pursued a strategy of
engagement with our largest shareholder and have had a series of constructive
meetings. Discussions on strategy for CLIG's businesses have been ongoing and
we welcome the positive engagement. We are making progress on a number of
shared priorities, including growth and asset retention, maintaining our
commitment to expense control and enhancing our focus on the management of our
cash balances. I am pleased to report that relations with our controlling
shareholder have been progressing well. All involved are happy to be moving
forward steadily and on an even keel. We have also been engaging with our
other shareholders and, as always, plan to maintain transparency in our
ongoing dialogue.
Outlook
As I assess prospects, it gives me confidence to be a part of a Group with
conservative business practices, dedicated and talented teams and a recurring
cash flow business model. Positive momentum appears to be building at a time
when a number of factors are improving. Discounts in CEFs remain at wide
levels and ongoing corporate governance initiatives by our teams are gaining
traction. Many CEF Boards have recently adopted share buyback and discount
narrowing mechanisms. The level of inquiry and requests for proposals for
International and EM mandates have improved markedly over the past six months.
After our AGM twelve months ago, your Board and members of Senior Management
met to thank retiring Chairman Barry Aling for his outstanding decade of
service to CLIG. Former Board Chairmen David Cardale and Andrew Davison were
in attendance, both having supported and ably steered the Group from its early
days. Tom Griffith, Carlos Yuste, Deepranjan Agrawal, Dan Lippincott and Mark
Dwyer represented management, each with many years of excellent service.
Together, this group of individuals embodied a timely reminder of the talent,
consistency and determination of the team at CLIG.
CLIG successfully navigated a challenging year by sticking to its team-based
approach, relying on process, while emphasising transparency and
accountability to our clients and shareholders. The past twelve months have
been a period of achievement for the Group and I want to thank our teams for
their dedication and hard work.
Rian Dartnell
Chair
23rd September 2024
CHIEF EXECUTIVE OFFICER'S STATEMENT
Game of two halves
"Game of two halves" is a British phrase that is commonly used to describe
football (soccer) matches that have very different outcomes in each half. In a
wider context, the phrase can refer to a situation or event that is evenly
split into two parts or halves, often with contrasting or opposing qualities
or outcomes.
We saw an upward momentum swing in the second half of the financial year,
making it a true game of two halves as Figure 1 illustrates. Net inflows of
c.$42 million at KIM during the second half of the financial year is a
significant development showing a change in investor sentiment, which also
corresponded with a reduction in net outflows at CLIM. Performance, both on an
absolute and relative basis, also improved across the bulk of our main
strategies in the second half of the financial year. Funds under Management
(FuM), driven primarily by higher market returns, increased by a greater
percentage in the second half of the financial year.
Figure 1. Relative results
Full year Half year
FYE 2024 H2 vs H1 FYE 2024 FY-H1 2024 FY-H2 2024
Funds under Management
FuM $ change (billions) Improved 0.8 0.2 0.6
FuM % change Improved 8.4% 2.1% 6.3%
Absolute Performance
CLIM Emerging Markets Strategy Improved 12.16% 4.59% 7.24%
CLIM International Strategy Improved 13.00% 5.70% 6.90%
CLIM Opportunistic Value Strategy Flat 13.10% 6.47% 6.20%
KIM Tax-Sensitive Fixed Income Strategy Improved 8.99% 3.36% 5.45%
KIM Conservative Balanced Strategy Improved 11.73% 4.22% 7.21%
Relative Performance
CLIM Emerging Markets Strategy Improved -1.42% -1.65% 0.33%
CLIM International Strategy Improved 1.33% 0.07% 1.19%
CLIM Opportunistic Value Strategy Improved 3.24% 0.69% 2.37%
KIM Tax-Sensitive Fixed Income Strategy Improved 5.77% -0.28% 5.85%
KIM Conservative Balanced Strategy Improved 2.64% -0.86% 3.39%
Net Flows ($'000)
Group Improved (320,095) (294,301) (25,794)
CLIM Improved (316,257) (248,582) (67,675)
KIM Improved (3,838) (45,719) 41,881
As commented in recent Annual Reports, Emerging Markets (EM) strategies have
been out of favour as an asset class for an extended period. However, there
appears to be a momentum swing underway with a renewed interest in EM from
institutional investors in the US marketplace. Most recently, this is
evidenced by Figure 2 on page 8 of the full report, which shows a reversal of
net outflows in 2023 from strategies focused on EM to net inflows in the first
calendar quarter of 2024.
A leading indicator in the institutional marketplace of potential future
mandates and subsequent inflows is the volume of searches performed for a
particular asset class. Our data on flows and searches in the investment
management universe is from Nasdaq eVestment Advantage.
According to Nasdaq eVestment Advantage, EM strategies were a primary focus
area for research undertaken by institutional investors globally and the top
strategy researched by institutions in North America during Q1 calendar year
(CY) 2024 as compared to Q1 CY 2023 as shown in Figure 3 on page 9 of the full
report. Substantiating this trend further, more recent data obtained from
eVestment shows a 32% increase in EM product searches across the investment
universe from Q2 CY 2023 to Q2 CY 2024.
A positive view towards the asset class is only part of the story; there also
needs to be a compelling reason for institutional asset allocators to choose
an active manager. Figure 4 on page 9 of the full report reflects the rolling
90-day Size Weighted Average Discount (SWAD) of the largest account in CLIM's
longest-tenured EM composite over the past five years. While there has been
some discount narrowing from the extremes in 2020 through 2022, the wide
discounts reflect the value in EM CEFs.
Figure 5: CLIG - FuM by line of business ($m)
CLIM 30 Jun 2021 30 Jun 2022 30 Jun 2023 30 Jun 2024
$m % of CLIM total % of CLIG total $m % of CLIM total % of CLIG total $m % of CLIM total % of CLIG total $m % of CLIM total % of CLIG total
Emerging Markets 5,393 72% 47% 3,703 64% 40% 3,580 61% 38% 3,568 56% 35%
International 1,880 25% 17% 1,812 32% 20% 1,983 34% 21% 2,394 38% 23%
Opportunistic Value 231 3% 2% 193 3% 2% 244 4% 3% 251 4% 3%
Frontier 13 0% 0% 9 0% 0% 9 0% 0% 10 0% 0%
Other/REIT 13 0% 0% 74 1% 1% 88 1% 1% 94 2% 1%
CLIM total 7,530 100% 66% 5,791 100% 63% 5,904 100% 63% 6,317 100% 62%
KIM 30 Jun 2021 30 Jun 2022 30 Jun 2023 30 Jun 2024
$m % of KIM total % of CLIG total $m % of KIM total % of CLIG total $m % of KIM total % of CLIG total $m % of KIM total % of CLIG total
Retail 2,804 72% 24% 2,419 70% 26% 2,441 69% 26% 2,655 68% 26%
Institutional 1,115 28% 10% 1,014 30% 11% 1,079 31% 11% 1,269 32% 12%
KIM total 3,919 100% 34% 3,433 100% 37% 3,520 100% 37% 3,924 100% 38%
CLIG total 11,449 100% 9,224 100% 9,424 100% 10,241 100%
Annual results
The Group's FuM increased by 8.8% from $9.4 billion to $10.2 billion, revenue
by 1.0% from $65.5 million to $66.2 million, and net client outflows of $320
million. All strategies other than EM had positive relative performance over
the financial year.
Profit before profit-share, EIP, share option charge and investment gains was
$39.3 million (2023: $39.0 million), profit before tax was $22.6 million
(2023: $22.1 million) and profit after tax was $17.1 million ($17.5 million).
Underlying profit after tax was $20.6 million (2023: $21.2 million); the
difference to the profit after tax was due to the adjustment of gain on
investments and amortisation of intangibles (net of tax). Refer to page 30 of
the full report for further information.
Inclusive of our regulatory and statutory capital requirements, cash and cash
equivalents were $33.7 million (2023: $28.6 million).
As a result of this financial performance, we are happy to announce that the
Board has once again recommended a final dividend of 22p per share (2023:
22p), subject to approval by shareholders at the Group's Annual General
Meeting (AGM) to be held on 28th October 2024. This would bring the total
dividend for the year to 33p per share (2023: 33p). Rolling five-year dividend
cover based on underlying profits is 1.19 (2023: 1.24), slightly below our
target of 1.20. Please refer to Figure 6 for CLIG's dividend history and our
website at https://clig.com/dividend-cover/ for the dividend cover chart,
which provides a template for determining cover based on a number of
variables.
Figure 6. Dividend history
Pence per share Dividend cover* Pence per share
FY Interim Final Total 1yr Rolling 5yr Special dividend Total (inc. special dividend)
2005-06 8.6 - 8.6 1.48 n/a - 8.6
2006-07 3.0 7.0 10.0 1.99 n/a - 10.0
2007-08 6.0 13.5 19.5 1.51 n/a - 19.5
2008-09 5.0 10.0 15.0 1.05 n/a - 15.0
2009-10 7.0 15.0 22.0 1.28 1.46 - 22.0
2010-11 8.0 16.0 24.0 1.44 1.45 - 24.0
2011-12 8.0 16.0 24.0 1.40 1.34 - 24.0
2012-13 8.0 16.0 24.0 1.04 1.24 - 24.0
2013-14 8.0 16.0 24.0 0.87 1.24 - 24.0
2014-15 8.0 16.0 24.0 1.10 1.17 - 24.0
2015-16 8.0 16.0 24.0 0.96 1.07 - 24.0
2016-17 8.0 17.0 25.0 1.46 1.09 - 25.0
2017-18 9.0 18.0 27.0 1.47 1.17 - 27.0
2018-19 9.0 18.0 27.0 1.30 1.26 13.5 40.5
2019-20 10.0 20.0 30.0 1.01 1.24 - 30.0
2020-21 11.0 22.0 33.0 1.46 1.34 - 33.0
2021-22 11.0 22.0 33.0 1.34 1.32 13.5 46.5
2022-23 11.0 22.0 33.0 1.11 1.24 - 33.0
2023-24 11.0 22.0 33.0 1.01 1.19 - 33.0
*Excluding special dividends
The Group changed its presentational currency this year, having reported its
FY 2023 results in sterling ahead of a switch to US dollars. Consistent with
previous years, the Group's revenue is almost entirely in US dollars, whilst
the costs are approximately two-thirds in US dollars and the remaining one
third are primarily in sterling. A stronger US dollar improves our profit
through making the sterling-incurred costs relatively lower. Conversely, a
weaker US dollar relatively increases the weight of those sterling costs as
well as the impact of the sterling-denominated dividend, while the US dollar
revenue is flat.
The US dollar weakened by an average of 4% during the year as compared to
sterling and negatively impacted the Group's profit before profit-share, EIP,
share option charge and investment gains by c.$0.4 million.
Share Price KPI
CLIG targets a total return (share price plus dividends) to compound annually
in a range of 7.5% to 12.5% over a five-year period. For the five years ended
30th June 2024, the total return was 34.7%, or 6.2% annualised (source,
Bloomberg). The environment for UK listed asset managers has been negative for
the past three years due to the broader shift of underlying investors to
passively managed vehicles. We go into additional detail on the underlying
investment performance and flows in the Business and Investment Review on page
12 of the full report, which provides additional information to shareholders
on our market positioning.
Cybersecurity
On 19th July 2024, a software update by CrowdStrike impacted machines running
Microsoft Windows' operating system. This widespread incident demonstrated the
vulnerability of global systems to IT and cybersecurity events. In this case
there was no malicious actor involved but there often is, and that constitutes
one of the most significant and real risks the company faces. CLIG was well
prepared to mitigate the CrowdStrike incident, with our Singapore office
providing an early warning system and both the London and US teams working
out-of-hours to execute our incident response policy. Consequently, all
offices were fully functional by the time the US markets opened, minimising
the potential impact.
To mitigate the wider cybersecurity risk, we provide monthly training and
education to employees. Additionally, our IT department continues to increase
their use of cyber defence tools and procedures, working alongside our
third-party cybersecurity vendor who leverage their extensive capabilities to
oversee our Security Operations Centre.
Environmental reporting update
In the previous years, we have committed to:
•Continue to develop our understanding of climate-related risk at Board
level and across the employee base;
•Identify and review the tools to enhance our understanding of how
climate-related risks impact our business;
•Continue to develop our path to a net zero transition; and
•Make a commitment to reach net zero emissions by a particular date, which
is 2050 at the latest.
As we reported in our interim statement, CLIG completed its first offset of
carbon emissions. The Group purchased carbon credits for the carbon emitted
primarily from business travel undertaken by Group employees during the
current financial year. CLIG's offset purchases come from the Gold Standard
marketplace.
We note recent market developments, specifically from The Integrity Council
for the Voluntary Carbon Market and their ongoing carbon-crediting programs
that meet the high-integrity criteria set out in its Core Carbon Principles
(CCPs). Gold Standard is amongst the programs to become CCP-eligible. For any
future offsets, we will also consider CCP labelling. The Group remains open
about documenting its emissions and documenting the steps we are taking to
avoid, eliminate and reduce where we can, and to offset what we cannot.
One of the perennial themes at CLIG is "constant improvement," and so we look
forward to seeing how carbon offset standards evolve and how we can best
position ourselves to ensure any offsets we purchase are put towards robust
emissions reduction projects.
Please see page 42 of the full report for additional information on these
important initiatives.
UK Corporate Governance
As readers may be aware, the Financial Reporting Council (FRC) issued the
updated UK Corporate Governance Code in January 2024. The new Provision 29
enhanced the responsibility of the Board to not only establish, but also
oversee the monitoring of its effectiveness and review the Group's internal
control framework. The Board has formally created an Internal Audit (IA)
function to support them in meeting the requirements of Provision 29. During
the financial year 2024/25, the IA function will carry out a complete mock
process, ahead of it being fully operational and in place, with effect from
1st July 2025.
We welcome the recent changes to the UK Listing Rules published by the
Financial Conduct Authority (FCA) in July 2024. These changes are intended to
make London a more attractive and competitive place for companies to list and
raise capital, while maintaining high standards of governance and investor
protection.
Mark Dwyer retirement
As announced on 3rd October 2023, CLIM's Chief Investment Officer Mark Dwyer
retired from the Company effective 30th June 2024. We are immensely grateful
for Mark's leadership and diligence in over two decades with the Group and
wish him a long and happy retirement. CLIM's investment leadership now rests
with the senior portfolio managers, all of whom have extensive experience with
the Group, with an average tenure of nearly twenty years at CLIM.
Closing thoughts
I would like to thank CLIG's employees across our four offices: London, West
Chester, Rochester and Singapore. The Board and management recognise the
commitment and loyalty shown by our teams in propelling the Group forward and
look forward to new challenges in the year ahead.
Tom Griffith
Chief Executive Officer
23rd September 2024
BUSINESS AND INVESTMENT REVIEW
The ability to capture discount volatility of closed-end funds has proved to
be a persistent and exploitable inefficiency over the decades, as evidenced by
long-term outperformance versus the benchmark at both CLIM and KIM.
Funds under Management (FuM) were $10.2 billion as at 30th June 2024, an
increase of 8.8% as compared to $9.4 billion as at 30th June 2023. The main
theme for the year was one of steady progress focused on rebuilding the
Emerging Markets (EM) performance track record, client retention - including
reducing outflows - and cost synergies across the Group.
Flows & performance
Net investment outflows reduced significantly to $26 million in the second
half of the financial year, from $294 million in the six months ended 31st
December 2023. Net outflows from the EM strategy included a $100 million
transfer of a long-term client who reallocated within CLIM from the EM
strategy to the International Equity (INTL) strategy, due to their underlying
asset allocation decision. An additional promising development is that KIM saw
net inflows of $42 million over the second half of the financial year. Figure
1 shows the underlying data of net investment flows over the first and second
half of the financial year, to provide context around the shift in sentiment
during the year.
The total net investment outflows of $320 million were in large part down to
clients reducing their exposure to EM due to ongoing geopolitical volatility.
By contrast, INTL strategies attracted more than $150 million in net new
inflows over the twelve-month period. Attractive discounts in the strategies
continue to be the focus of marketing efforts across the Group's asset
classes.
Figure 1. Net investment flows ($000's)
Full year Half year
FY 2022 FY 2023 FY 2024 FY H1 2024 FY H2 2024
CLIM
Emerging Markets (315,770) (205,924) (424,101) (171,151) (252,950)
International 452,554 (50,824) 153,371 (89,815) 243,186
Opportunistic Value 617 34,942 (33,237) 15,015 (48,252)
Frontier (4,748) - - - -
Other/REIT 79,133 (5,709) (12,290) (2,631) (9,659)
CLIM total 211,786 (227,515) (316,257) (248,582) (67,675)
KIM
Retail (106,444) (141,952) (39,587) (40,031) 444
Institutional (3,302) 12,530 35,749 (5,688) 41,437
KIM total (109,746) (129,422) (3,838) (45,719) 41,881
CLIG total 102,040 (356,937) (320,095) (294,301) (25,794)
Investment performance was ahead of the benchmark for the majority of the
Group's strategies during the financial year. CLIM's INTL, Opportunistic Value
(OV) and Frontier Markets outperformed, while EM equity lagged its index over
the period. On the EM equity side, we have seen improved relative performance
since 1st January 2024, as reflected in Figure 2 on page 12 of the full
report, showing CLIM vs EM index over the three months, six months and twelve
months to 30th June 2024.
After an operational review, the EM and International REIT strategies were
closed due to lack of institutional interest in the asset class.
KIM's Fixed Income strategies, International Equity, Conservative Balanced and
Cash Management strategies outperformed their market indices over the period,
while the US Equity strategy lagged its benchmark.
Closed-end fund (CEF) environment and outlook
The Group's two operating subsidiaries, CLIM and KIM, both invest primarily in
CEFs for the benefit of their respective clients. The key driver for both CLIM
and KIM is their ability to independently successfully capture the discount
volatility inherent in CEFs. The ability to capture discount volatility has
proved to be a persistent and exploitable inefficiency over the decades, as
evidenced by long-term outperformance versus the benchmark at both CLIM and
KIM.
The recent discount cycle has been challenging, with a correlated de-rating
across asset classes and jurisdictions. Using the UK-listed market as an
example, the discount headwinds of the last two and a half years are clear
(see Figure 3 on page 13 of the full report). To put this in context, the last
time the sector traded so cheaply was in the weeks immediately post the
collapse of Lehman Brothers in 2008. As of 30th June 2024, there had been a
slight recovery to a 14.5% discount. The average discount over the last ten
years is 6.1%.
Encouragingly, capital markets have noticed these distortions and are starting
to fix them, as they did in 2009. Hedge funds and other fast-moving investors
have seen the CEF market as a good opportunity to buy low and sell high, using
various levers to shrink discounts. Activist investors have also come back to
buy solid assets at distressed prices, in structures that can be unwound.
Moreover, Boards are actively taking steps to increase shareholder value and
reduce discounts. CEF prices have stopped falling but are still far from their
historical levels.
The overall CEF market is thus undergoing a regime change. The valuation
dislocation of the last two years and the prolonged relative underperformance
of active managers has driven a predictable evolution. Specifically:
•Capital is being retired from the sector, after a fifteen-year net issuance
cycle.
•The recent trend of take-privates, wind-downs and mergers &
acquisitions is well anchored.
•The evolution of shareholder registers from passive to engaged, and
activist shareholders, has increased the pace of both of the above.
All of these represent a necessary condition for a more generalised
normalisation in valuations.
Capacity
The Group's return to growth strategy continues to focus its marketing efforts
on the consultants that dominate the new business flows in the sector. We
calculate there to be c.$6 billion of spare capacity at CLIG in the CEF
universe ($4 billion between EM, INTL and OV, $1 billion in US Municipal
Bonds, $1.2 billion across US Fixed Income and Equity strategies).
Besides the consultant focus, marketing resources for KIM are geared towards
high-net-worth individuals, family offices and the Registered Investment
Advisor (RIA) channel in the US.
Aiding this outreach is the fact that CLIM's Global Strategy will have a
three-year track record in December 2024, and that CLIM's Listed Private
Equity strategy is drawing renewed client interest.
KIM strategies
KIM delivered positive returns in FY 2024, with four of its six strategies
outperforming their respective benchmarks by more than 250 bps. KIM clients
benefited from its opportunistic exposure to US high yield and municipal bond
CEFs, which rallied on the back of a strong economic recovery and narrowing
discounts (see Figure 5 on page 15 of the full report). KIM also saw gains
from its technology and quality factor holdings in US and international
equities, as well as from CEF activism and semiconductor-related funds.
The KIM Conservative Balanced composite net investment returns for the rolling
one year ended 30th June 2024 were 11.73% vs. 9.12% for the Morningstar US
Fund Allocation - 30% to 50% Equity category in USD.
The KIM Growth Balanced composite net investment returns for the rolling one
year ended 30th June 2024 were 13.76% vs. 10.93% for the Morningstar Average
Balanced Fund category in USD.
The KIM Tax-Sensitive Fixed Income composite net investment returns for the
rolling one year ended 30th June 2024 were 8.99% vs. 4.36% for the Morningstar
Average Municipal Bond Fund category in USD.
The KIM Taxable Fixed Income composite net investment returns for the rolling
one year ended 30th June 2024 were 9.30% vs. 4.75% for the Morningstar Average
General Bond Fund category in USD.
The KIM Equity composite net investment returns for the rolling one year ended
30th June 2024 were 16.65% vs. 14.72% for the Morningstar 65% Average Domestic
Fund/35% Average International Stock Fund category in USD.
The KIM Cash composite net investment returns for the rolling one year ended
30th June 2024 were 5.97% vs. 4.53% for the BOA ML benchmark in USD.
CLIM strategies
CLIM Emerging Markets (EM)
CLIM's EM strategy returned 12.2% net of fees vs. 13.6% for the S&P EM
Frontier Super Composite BMI Index, as it lagged the benchmark by 140 bps due
to unfavourable country allocation and weak NAV performance. However, we were
able to generate positive discount alpha by exploiting the discount volatility
and engaging with Boards to improve shareholder value. We saw several mergers,
liquidations and buybacks that helped narrow the discounts in our portfolio.
We remain optimistic about the prospects for EM equities, which offer
attractive valuations and exposure to growth sectors such as artificial
intelligence. We believe that our active and opportunistic approach will
benefit from a shift in sentiment towards this underappreciated asset class.
CLIM International (INTL)
Developed Markets performed strongly over the last twelve months, led by the
US market, which itself was dominated by the "Magnificent Seven" technology
and communication services companies namely Apple, Alphabet, Amazon, Meta,
Microsoft, Tesla and Nvidia. Nvidia, in particular, garnered much attention as
being the leader in providing semiconductor chips for the Large Language
Models that underpin artificial intelligence applications. Within non-US
markets these themes were played out in companies such as the ASML and Taiwan
Semiconductor, which provided strong, if not magnificent, returns. Other
market themes included the growth in the use of obesity drugs whereby
Denmark's Novo Nordisk and the US's Eli Lilly were the leading providers and
whose share prices benefitted accordingly. Among non-US Developed markets, the
local Japanese market was also particularly strong, finally surpassing its
previous peak in 1989 following the bursting of its asset price bubble and the
subsequent decades of deflation, albeit for international investors roughly
half of these gains were eroded due the weakness of the Japanese Yen.
CLIM's INTL strategy returned 13.0% net of fees vs. its benchmark MSCI ACWI
ex-US Net TR Index which returned 11.6%, outperforming by 140 bps. Country
allocation was positive, aided by out of benchmark exposure to the US market,
particularly to the technology sector, as well as underweight exposure to
European ex-UK markets. Conversely, our underweight exposure to EM, especially
tech-heavy Taiwan, detracted from returns. Mid-and-smaller-company exposure
also detracted from returns as large caps continued to outperform. Discounts
remained historically wide in the INTL universe but was a positive contributor
overall as discount narrowing was captured largely through corporate
initiatives, such as tender offers, whereby the CEF returns capital to the
shareholders at the fund's net asset value. CLIM's long history of corporate
engagement continues to bear fruit for the INTL strategy as we proactively
work with CEF Boards to create sustainable discount management policies in a
constructive approach focused on creating a fair deal for shareholders and
aligned with our long-term approach to investing.
CLIM Opportunistic Value (OV)
The OV strategy delivered strong returns in FY 2024, rising 13.1% net of fees
vs. its benchmark Blended 50/50 MSCI ACWI/Barclays Global Agg Index, which
returned 9.9%, outperforming by 320 bps. The portfolio benefited from
investing in high-conviction, event-driven situations with positive discount
alpha and catalysts. The largest gain came from a takeover bid for the
Hipgnosis Songs Fund. The strategy is well-positioned to exploit the "Regime
Change" theme and attract additional capital. Single-sleeve opportunistic
mandates in areas of the fixed income market performed strongly over the
period, most notably US High Yield and US Municipal Bond CEF strategies.
FINANCIAL REVIEW
The Group income statement is presented in line with UK-adopted International
Accounting Standards on page 106 of the full report, but the financial
information is reviewed by the management and the Board as shown in the table
below. This makes it easier to understand the Group's operating results and
shows the profits which is used to calculate Group's profit-share.
Consolidated income for financial years ended 30th June
2024 2023
$'000 $'000
Gross fee income 69,453 68,725
Commissions (1,811) (1,823)
Custody fees (1,475) (1,422)
Net fee income 66,167 65,480
Net interest income 1,079 536
Total net income 67,246 66,016
Employee costs (18,767) (17,802)
Other administrative expenses (8,177) (8,382)
Depreciation and amortisation (975) (835)
Overheads before profit-share, EIP, share option charge and gain on (27,919) (27,019)
investments
Profit before profit-share, EIP, share options charge and gain on investments 39,327 38,997
Profit-share (10,617) (10,405)
EIP (1,506) (1,518)
Share option charge (35) (37)
Investment gain/(loss) 1,051 689
Profit before tax and amortisation on intangibles 28,220 27,726
Amortisation of intangibles (5,599) (5,599)
Profit before tax 22,621 22,127
Tax (5,506) (4,630)
Profit after tax 17,115 17,497
Alternative Performance Measures
2024 2023
$'000 $'000
Profit before tax 22,621 22,127
Add back/(deduct):
Gain on investments (1,051) (689)
Amortisation of intangibles 5,599 5,599
Underlying profit before tax 27,169 27,037
Tax (5,506) (4,630)
Tax effect on adjustments (1,083) (1,199)
Underlying profit after tax 20,580 21,208
FuM
FuM as of 30th June 2024 increased by $0.8 billion (8.8%) to $10.2 billion
from $9.4 billion at the end of the last financial year. The increase was a
result of a combination of investment flows, market movements and performance.
Refer to Figure 5 on page 10 - FuM by line of business table within the CEO
statement for more details. Average FuM for the year increased by 3.6% from
$9.2 billion in FY 2023 to $9.6 billion in FY 2024.
Functional and reporting currency change
The functional currency of the Company and the presentational currency of the
Group changed to US dollars with effect from 1st July 2023. Following the
change in the Group's presentational currency, the Group's financial
statements have been prepared using US dollars. Prior year comparatives have
been restated to US dollars using average exchange rate for the period. Refer
to note 1.2 in the financial statements on page 111 of the full report for
further information.
Alternative Performance Measures
The Directors use the following Alternative Performance Measures (APMs) to
evaluate the performance of the Group as a whole:
Earnings per share in pence - Earnings per share in US dollars as per the
income statement is converted to sterling using the average exchange rate for
the period. Refer to note 8 in the financial statements on page 121 of the
full report.
Underlying profit before tax - Profit before tax, adjusted for gain on
investments and amortisation of intangibles. This provides a measure of the
profitability of the Group for management's decision-making.
Underlying earnings per share in pence - CLIG's shares are quoted and the
dividend is declared in sterling. Underlying profit before tax, adjusted for
tax as per income statement and tax effect of adjustments, divided by the
weighted average number of shares in issue as at the period end.
Underlying earnings per share is converted to sterling using the average
exchange rate for the period. Refer to note 8 in the financial statements for
reconciliation on page 121 of the full report.
Group income statement and statement of comprehensive income
Revenue
The Group's gross revenue comprises of management fees charged as a percentage
of FuM. The Group's gross revenue increased by 1% YoY to $69.5 million (2023:
$68.7 million). Increase in revenue is due to higher average FuM during the
year, offset by general fee erosion during the year.
Commissions payable of $1.8 million (2023: $1.8 million) relate to fees due to
US registered investment advisers for the introduction of wealth management
clients, remained at the similar levels as last year.
The Group's net fee income, after custody charges of $1.5 million (2023: $1.4
million), increased by 1% to $66.2 million (2023: $65.5 million). The Group's
average net fee margin for FY 2024 was c.69bps as compared to c.72bps for FY
2023.
Net interest income is made up of interest earned on bank deposits and short
term investments in treasury money market instruments offset by interest paid
on lease obligations. Refer to page 116 of the full report for our lease
accounting policy and page 119 of the full report for details of net interest
earned.
Costs
Overheads before profit share, EIP, share option charge and gain on
investments for FY 2024 totalling $27.9 million (2023: $27.0 million) were 3%
higher than FY 2023, of which c.1% was due to the US dollar weakening against
sterling during the year. The US dollar weakened by an average of 4% during
the year as compared to sterling and c.32% of the Group's overheads are
incurred in sterling.
The Group's cost/income ratio is arrived at by comparing overheads before
profit share, EIP, share option charge and gain on investments with net fee
income, was 42.2% in FY 2024 as compared to 41.2% in FY 2023.
The largest component of overheads continues to be employee-related at $18.8
million (2023: $17.8 million), an increase of c.5% over last year, out of
which c.1% is due to the impact of the US dollar weakening against sterling
during the year and salary and associated cost increases with effect from 1st
July 2023.
Profit before profit-share, EIP, share options charge and gain on investments
was $39.3 million (2023: $39.0 million), an increase of c.1% over the last
year.
The total variable profit-share for FY 2024 increased slightly to $10.6
million as compared with $10.4 million in FY 2023 in line with the Profit
before profit-share, EIP, share options charge and gain on investments for the
year.
The Group's Employee Incentive Plan (EIP) charge for FY 2024 remained the same
as FY 2023 at $1.5 million.
Gain on investments
Investment gains of $1.1 million (2023: gain of $0.7 million) relate to the
realised and unrealised gains/(losses) on the Group's seed investments and
other investments in Special Purpose Acquisition Companies (SPACs). During the
year, the Group fully redeemed its seed investments in the two REIT funds and
subsequently closed the strategy.
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 seven to fifteen years (refer to note 1.8 on page 113 of the
full report) and have resulted in an amortisation charge of $5.6 million for
the year (2023: $5.6 million). Deferred tax liability on these intangibles as
of 30th June 2024 amounted to $7.9 million (2023: $9.2 million) based on the
relevant tax rate, which will unwind over the useful economic life of the
associated assets. Goodwill amounting to $90.1 million was also initially
recognised on the completion of the merger. Refer to note 11 of the financial
statements on page 124 of the full report for more details.
Taxation
Profit before tax of $22.6 million (2023: $22.1 million), after a corporation
tax charge of $5.5 million (2023: $4.6 million), with an effective rate of 24%
(2023: 21%), resulted in profit after tax of $17.1 million (2023: $17.5
million), which is all attributable to the equity shareholders of the Company.
The effective tax rate increased during the year due to the higher UK
corporation tax rate of 25% effective from April 2023.
Underlying profits
Underlying profit before tax for the year of $27.2 million was marginally
higher than the $27.0 million achieved in FY 2023. Underlying profit after tax
for the year was 3% lower at $20.6 million when compared to FY 2023 at $21.2
million, which was mainly due to the full year impact of the increase in the
UK corporation tax rate.
Group statement of financial position
The Group's financial position continues to be strong and liquid, with cash
resources of $33.7 million as at 30th June 2024, compared with $28.6 million
as at 30th June 2023.
The Group had invested $2.5 million in seeding the Global Equity CEF in
December 2021 and $2.5 million in SPACs in March 2022. As at the end of June
2024, these investments were valued at $5.7 million (2023: $4.6 million).
During the year, the Group fully redeemed its seed investments in the two REIT
funds and the strategy was subsequently closed. Total realised gains
recognised on the de-seeding of its investments and its SPACs products was
$0.9 million (2023: gain $0.4 million) and unrealised gains of $0.2 million
(2023: gain $0.3 million) was taken to the income statement.
The Global Equity CEF fund is assessed to be under the Group's control and is
thus consolidated using accounts drawn up as of 30th June 2024. There were no
third-party investors, collectively known as the non-controlling interest
(NCI) in this fund as of 30th June 2024 (2023: nil).
The Group's right-of-use assets (net of depreciation) amounted to $5.1 million
as of 30th June 2024 as compared with $2.5 million as of 30th June 2023. The
Group took occupancy of the new US office in West Chester on 1st July 2023 and
right-of-use assets amounting to $3.0 million were recognised from that date.
The Group also extended its current lease for the Singapore office and
additional right-of-use assets of $0.2 million were added as a result of lease
modifications with effect from January 2024.
The Employee Benefit Trust (EBT) purchased 318,000 shares (2023: 622,746
shares) at a cost of $1.3 million (2023: $3.1 million) in preparation for the
annual EIP awards due at the end of October 2024.
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. During the year 35.8% (2023: 26.2%) of the shares
vesting were sold to help cover the employees' resulting tax liabilities,
leading to a very healthy 64.2% (2023: 73.8%) share retention within the
Group.
In addition, Directors and employees exercised 47,400 (2023: 23,350) options
over shares held by the EBT, raising $0.1 million (2023: $0.1 million) which
was used to pay down part of the loan to the EBT.
Dividends paid during the year totalled $19.9 million (2023: $19.4 million).
The total dividend of 33p per share comprised: the 22p per share final
dividend for FY 2023 and the 11p per share interim dividend for the current
year (2023: 22p per share final for FY 2022 and 11p per share interim
dividend). 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.com.
Currency exposure
Following the change in the Group's presentational currency with effect from
1st July 2023, the Group's financial results for the year ended 30th June 2024
have been prepared using US dollars.
While Group's revenue and the bulk of its expenses are now aligned in US
dollars, c.32% of Group's overheads are incurred in sterling and to a lesser
degree Singapore dollars, that are subject to currency rate fluctuations
against US dollars.
The Group's currency exposure also relates to its non-US dollar assets and
liabilities, which are mostly in sterling. The exchange rate differences
arising on their translation into US dollars for reporting purposes each month
is recognised in the income statement.
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,
considering the Group's current position and prospects, Internal Capital
Adequacy and Risk Assessment (ICARA) 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.
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 economic and political factors and their potential impact on financial
markets, any longer time horizon assessments are subject to more uncertainty
due to external factors.
Considering the recommendations of the Financial Reporting Council in their
2021 thematic review, the Board has therefore determined that a three-year
period to 30th June 2027 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, reputational damage, 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 ICARA is reviewed by the Board and incorporates stress testing based on
loss of revenue on the Group's financial position over a three-year period.
The Group has performed additional stress tests using several different
scenario levels, over a three-year period which are significantly more severe
than our acceptable risk appetite, which include:
•a significant fall in FuM;
•a significant fall in net fee margin; and
•combined stress (significant falls 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 scenarios 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 91 of the
full report.
FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30TH JUNE 2024
Year to
Year to 30th June 2023
30th June 2024 (restated)
Note $'000 $'000
Revenue
Gross fee income 2 69,453 68,725
Commissions payable (1,811) (1,823)
Custody fees payable (1,475) (1,422)
Net fee income 66,167 65,480
Administrative expenses
Employee costs 30,925 29,762
Other administrative expenses 8,177 8.382
Depreciation and amortisation 6,574 6,434
(45,676) (44,578)
Operating profit 3 20,491 20,902
Finance income 4a 1,460 700
Finance expense 4b (381) (164)
Gain on investments 4c 1,051 689
Profit before taxation 22,621 22,127
Income tax expense 5 (5,506) (4,630)
Profit for the period 17,115 17,497
Profit attributable to:
Equity shareholders of the parent 17,115 17,497
Basic earnings per share (cents) 6 35.1 35.8
Diluted earnings per share (cents) 6 34.4 35.2
CONSOLIDATED AND COMPANY STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30TH JUNE 2024
Year to
Year to 30th June 2023
30th June 2024 (restated)
$'000 $'000
Profit for the period 17,115 17,497
Other comprehensive income: Items that may be subsequently reclassified to
profit or loss if specific conditions are met
Foreign currency translation differences (1) 1,432
Total comprehensive income for the period 17,114 18,929
Attributable to:
Equity shareholders of the parent 17,114 18,929
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION
30TH JUNE 2024
Group Company
30th June 2024 30th June 2023 30th June 2022 30th June 2024 30th June 2023 30th June 2022
Note $'000 (restated) $'000 (restated) $'000 $'000 (restated) $'000 (restated) $'000
Non-current assets
Property and equipment 9 1,128 921 623 227 280 302
Right-of-use assets 10 5,076 2,524 2,946 925 1,152 1,321
Intangible assets 11 122,853 128,462 134,053 20 30 22
Other financial assets 12 5,750 10,020 9,054 134,283 139,150 133,328
Deferred tax asset 13 1,879 1,162 1,164 313 332 272
136,686 143,089 147,840 135,768 140,944 135,245
Current assets
Trade and other receivables 14 8,380 8,090 7,913 3,654 3,860 6,309
Current tax receivable 167 - - 2,426 981 1,379
Cash and cash equivalents 15 33,738 28,569 27,617 20,381 14,779 8,427
42,285 36,659 35,530 26,461 19,620 16,115
Current liabilities
Trade and other payables 16 (10,432) (10,733) (11,523) (5,519) (5,239) (4,566)
Lease liabilities 17 (526) (251) (484) (284) (44) (148)
Current tax payable - (1,009) (655) - - -
Creditors, amounts falling due within one year (10,958) (11,993) (12,662) (5,803) (5,283) (4,714)
Net current assets 31,327 24,666 22,868 20,658 14,337 11,401
Total assets less current liabilities 168,013 167,755 170,708 156,426 155,281 146,646
Non-current liabilities
Lease liabilities 17 (5,207) (2,498) (2,686) (964) (1,257) (1,250)
Deferred tax liability 18 (9,162) (9,789) (11,158) (256) (311) (277)
Net assets 153,644 155,468 156,864 155,206 153,713 145,119
Capital and reserves
Share capital 19 644 828 828 644 828 828
Share premium account 20 2,866 4,080 4,080 2,866 4,080 4,080
Merger relief reserve 19 128,984 131,188 131,188 128,984 131,188 131,188
Investment in own shares 20 (9,227) (13,162) (11,883) (9,227) (13,162) (11,883)
Share option reserve 20 187 748 739 187 740 714
20
EIP share reserve 20 2,046 2,246 1,943 2,046 2,246 1,943
Foreign currency translation reserve 20 (1,011) (6,697) (8,129) 466 (4,732) (10,866)
Capital redemption reserve 20 33 52 52 33 52 52
Retained earnings 20 29,122 36,185 38,046 29,207 32,473 29,063
Attributable to:
Equity shareholders of the parent 153,644 155,468 156,864 155,206 153,713 145,119
Total equity 153,644 155,468 156,864 155,206 153,713 145,119
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 $20,445k (2023:
$22,754k).
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
30TH JUNE 2024
Foreign currency translation reserve Capital redemption reserve Total attributable to share-
Share premium account Investment in own shares Share option reserve EIP $'000 $'000 holders
Share capital $'000 Merger relief reserve $'000 $'000 Share Retained earnings $'000
$'000 $'000 reserve $'000
$'000
As at 30th June 2022 (restated) 828 4,080 131,188 (11,883) 739 1,943 (8,129) 52 38,046 156,864
Profit for the period - - - - - - - - 17,497 17,497
Other comprehensive income - - - - - - 1,432 - - 1,432
Total comprehensive income - - - - - - 1,432 - 17,497 18,929
Transactions with owners
Share option exercise - - - 88 (10) - - - 10 88
Purchase of own shares - - - (3,078) - - - - - (3,078)
Share-based payment - - - - 36 1,174 - - - 1,210
EIP vesting/forfeiture - - - 1,711 - (871) - - - 840
Deferred tax on share options - - - - (17) - - - (1) (18)
Current tax on share options - - - - - - - - 5 5
Deferred tax on leases - - - - - - - - 6 6
Dividends paid - - - - - - - - (19,378) (19,378)
Total transactions with owners - - - (1,279) 9 303 - - (19,358) (20,325)
As at 30th June 2023 (restated) 828 4,080 131,188 (13,162) 748 2,246 (6,697) 52 36,185 155,468
Effect of change in functional currency (184) (1,214) (2,204) 2,861 (578) (46) 5,687 (19) (4,303) -
As at 1st July 2023 644 2,866 128,984 (10,301) 170 2,200 (1,010) 33 31,882 155,468
Profit for the period - - - - - - - - 17,115 17,115
Other comprehensive income - - - - - - (1) - - (1)
Total comprehensive income - - - - - - (1) - 17,115 17,114
Transactions with owners
Share option exercise - - - 154 (9) - - - 9 154
Purchase of own shares - - - (1,315) - - - - - (1,315)
Share-based payment - - - - 35 1,039 - - - 1,074
EIP vesting/forfeiture - - - 2,235 - (1,193) - - - 1,042
Deferred tax on share options - - - - (9) - - - (22) (31)
Current tax on share options - - - - - - - - 27 27
Dividends paid - - - - - - - (19,889) (19,889)
Total transactions with owners - - - 1,074 17 (154) - - (19,875) (18,938)
As at 30th June 2024 644 2,866 128,984 (9,227) 187 2,046 (1,011) 33 29,122 153,644
COMPANY STATEMENT OF CHANGES IN EQUITY
30TH JUNE 2024
Foreign currency translation reserve
Share premium account Share option reserve EIP $'000 Capital redemption reserve Total attributable to shareholders
$'000 Merger reserve Investment in own shares $'000 share $'000 Retained earnings $'000
Share capital $'000 $'000 reserve $'000
$'000 $'000
As at 30th June 2022 (restated) 828 4,080 131,188 (11,883) 714 1,943 (10,866) 52 29,063 145,119
Profit for the period - - - - - - - - 22,754 22,754
Other comprehensive income - - - - - - 6,134 - - 6,134
Total comprehensive income - - - - - - 6,134 - 22,754 28,888
Transactions with owners
Share option exercise - - - 88 (10) - - - 9 87
Purchase of own shares - - - (3,078) - - - - - (3,078)
Share-based payment - - - - 36 1,174 - - - 1,210
EIP vesting/forfeiture - - - 1,711 - (871) - - - 840
Current tax on share options - - - - - - - - 3 3
Deferred tax on leases - - - - - - - - 22 22
Dividends paid - - - - - - - - (19,378) (19,378)
Total transactions with owners - - - (1,279) (26) 303 - - (19,344) (20,294)
As at 30th June 2023 (restated) 828 4,080 131,188 (13,162) 740 2,246 (4,732) 52 32,473 153,713
Effect of change in functional currency (184) (1,214) (2,204) 2,861 (579) (46) 5,200 (19) (3,815) -
As at 1st July 2023 644 2,866 128,984 (10,301) 161 2,200 468 33 28,658 153,713
Profit for the period - - - - - - - - 20,445 20,445
Other comprehensive income - - - - - - - - - -
Total comprehensive income - - - - - - - - 20,445 20,445
Transactions with owners
Share option exercise - - - 154 (9) - - - (1) 144
Purchase of own shares - - - (1,315) - - - - - (1,315)
Share-based payment - - - - 35 1,039 - - - 1,074
EIP vesting/forfeiture - - - 2,235 - (1,193) - - - 1,042
Deferred tax on share options - - - - - - - - (6) (6)
Foreign exchange translation - - - - - - (2) - - (2)
Dividends paid - - - - - - - - (19,889) (19,889)
Total transactions with owners - - - (1,074) 26 (154) (2) - (19,896) (18,952)
As at 30th June 2024 644 2,866 128,984 (9,227) 187 2,046 466 33 29,207 155,206
CONSOLIDATED AND COMPANY CASH FLOW STATEMENT
FOR THE YEAR ENDED 30TH JUNE 2024
Group Company
30th June 2024 30th June 2023 30th June 2024 30th June 2023
Note $'000 (restated) $'000 (restated)
$'000 $'000
Cash flow from operating activities
Profit before taxation 22,621 22,127 1,675 776
Adjustments for:
Depreciation of property and equipment 293 274 97 92
Depreciation of right-of-use assets 672 553 227 215
Amortisation of intangible assets 5,609 5,607 10 8
Loss on disposal of property and equipment - 1 - -
Share-based payment charge 35 37 4 4
EIP-related charge 1,438 1,267 581 549
Gain on investments 4c (1,051) (689) (323) (115)
Interest receivable 4a (1,460) (700) (898) (252)
Interest payable 4b 24 - 24 -
Interest payable on leased assets 4b 357 164 17 92
Translation adjustments 29 (328) 149 22
Cash generated from operations before changes
in working capital 28,567 28,313 1,563 1,391
(Increase)/decrease in trade and other receivables (302) 154 880 3,662
Increase/(decrease) in trade and other payables 365 (296) 3,038 2,832
Cash generated from operations 28,630 28,171 5,481 7,885
Interest received 4a 1,460 700 898 252
Interest payable 4b (24) - (24) -
4
Interest paid on leased assets 4b (357) (164) (17) (92)
Taxation paid (8,122) (5,772) (3,857) (1,876)
Net cash generated from operating activities 21,587 22,935 2,481 6,169
Cash flow from investing activities
Dividends received from subsidiaries - - 19,150 22,131
Purchase of property and equipment and intangibles (500) (578) (44) (74)
Purchase of non-current financial assets (4,594) (1,356) - -
Proceeds from sale of current financial assets 9,997 1,356 5,203 -
Net cash generated from/(used in) investing activities 4,903 (578) 24,309 22,057
Cash flow from financing activities
Ordinary dividends paid 21 (19,889) (19,378) (19,889) (19,378)
Purchase of own shares by employee share option trust (1,315) (3,078) (1,315) (3,078)
Proceeds from sale of own shares by employee
benefit trust 154 888 154 88
Payment of lease liabilities 17(c) (231) (476) (48) (149)
Net cash used in financing activities (21,281) (22,844) (21,098) (22,517)
Net increase/(decrease) in cash and cash equivalents 5,209 (487) 5,692 5,709
Cash and cash equivalents at start of period 28,569 27,617 14,779 8,427
Cash held in funds - 77 - -
Effect of exchange rate changes (40) 1,362 (90) 643
Cash and cash equivalents at end of period 33,738 28,569 20,381 14,779
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 2024 and
30th June 2023 do not constitute statutory accounts and has been extracted
from the full accounts for the years ended 30th June 2024 and 30th June 2023.
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 2023 have been filed with the
Registrar of Companies. The accounts for the year ended 30th June 2024 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 Changes in presentational and functional currency
With effect from 1st July 2023, the Group has changed its presentational
currency from sterling to US dollars, to mirror the primary economic
environment that it operates in. This change will provide investors and other
stakeholders greater transparency of the Group's performance and reduced
foreign exchange volatility on its income and costs.
The change in the Group's presentational currency to US dollars has resulted
in a change in the parent company's primary economic environment. Dividend
streams from its subsidiaries are now received and retained by the parent
company in US dollars. Hence, all the parent company's income is now in US
dollars and a large portion of its costs are also in US dollars. As a result,
the parent company's functional currency has changed to US dollars with effect
from 1st July 2023.
In accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates
and Errors, the change in presentational currency has been applied
retrospectively, whereas the change in functional currency has been applied
prospectively with effect from 1st July 2023.
Certain elements of historical financial information have been restated in US
dollars and form the basis of the comparative financial information included
in these financial statements for the year ended 30th June 2024.
In accordance with the provisions of IAS 21, the Effects of Changes in Foreign
Exchange Rates, due to the change in presentational currency, financial
information has been restated from sterling to US dollars as follows:
•assets and liabilities in non-US denominated currencies were translated
into US dollars at the rate of exchange at the relevant balance sheet date;
•non-US dollar income statements and cash flows were translated into US
dollars at average rates of exchange for the relevant period;
•share capital, share premium and all other equity items were translated at
the historical rates prevailing on 1st June 2007, the date of transition to
IFRS or the subsequent rates prevailing on the date of each relevant
transaction or average rates as relevant; and
•the cumulative foreign exchange translation reserve was set to zero on 1st
June 2007, the date of transition to IFRS, and this reserve has been restated
on the basis that the Group has reported in US dollars since that date.
The change in functional currency has been applied prospectively. Share
capital, share premium and all other equity items were translated at the
closing rate of exchange on 30th June 2023 for the relevant entities.
1.3 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.
Amendments to IAS 12 - Income taxes published in May 2021 were adopted as from
1 July 2023. The amendments require companies to recognise deferred tax on
particular transactions that, on initial recognition, give rise to equal
amounts of taxable and deductible temporary differences. The amendments
typically apply to transactions where assets and liabilities are recognised
from a single transaction, such as leases for the lessee and decommissioning
and restoration obligations.
An adjustment has been made to recognise a deferred tax asset on the present
value of lease liabilities and a deferred tax liability on the right of use
assets. The adjustment have been made retrospectively in 2022 and resulted in
a net increase in reserves of $50k for the Group and $15k for the company.
There are no new or amended standards and interpretations that are issued, but
not yet effective, up to the date of issuance of the Group's consolidated
financial statements that would be expected to have a material impact on the
Group's consolidated financial statements when they become effective.
1.4 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:
Impairment of Goodwill
The recognition of goodwill in a business combination and subsequent
impairment assessments are based on significant accounting estimates. Note 7
details our estimates and assumptions in relation to the impairment assessment
of goodwill.
1.5 Investment in subsidiaries
Investments in subsidiaries in the Company only accounts are stated at cost
less, where appropriate, provision for impairment.
1.6 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 2024 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 Company Limited Management of funds 100% UK
City of London US Investments Limited Holding company 100% UK
Karpus Management Inc. (aka Karpus Investment Management) Management of funds 100% USA
Global Equity CEF Fund Delaware Statutory Trust Fund 100% USA
City of London Investment Management Company Limited holds 100% of the
ordinary shares in the following:
City of London Investment Management (Singapore) PTE Ltd Management of funds Singapore
City of London Latin America Limited Dormant Company UK
City of London US Investments Limited holds 100% of the ordinary shares in the
following:
City of London US Services Limited Service company UK
The registered addresses of the subsidiary companies are as follows:
City of London Investment Management Company Limited 77 Gracechurch Street, London 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 Company (Singapore) PTE Ltd 20 Collyer Quay, #10-04, Singapore 049319
Karpus Management Inc. 183 Sully's Trail, Pittsford, New York 14534, USA
Global Equity CEF Fund 4005 Kennett Pike, Suite 250, Greenville, DE 19807, USA
City of London Latin America Limited is dormant and Karpus Management Inc. are
not subject to audit.
1.7 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 - four to ten years
Computer and telephone equipment - four to ten years
1.8 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 ten years for direct
customer relationships and a finite life of seven 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
fifteen 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 four to ten 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.
1.9 Impairment of goodwill and other assets
Goodwill arising on acquisition is not subject to annual amortisation and is
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 of disposal or
(b) value in use, which is based on the present value of future cash flows
expected to derive from the CGU.
For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash inflows which are
largely independent of the cash inflows from other assets or groups of assets
(cash-generating units).
Other assets are tested for impairment whenever management identifies any
indicators of impairment.
Any impairment loss is recognised immediately through the income statement.
1.10 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.
1.11 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 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 traded in active markets - priced using the quoted closing price
•Unlisted seed capital investments in funds - priced using net asset value
at the reporting date
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.
1.12 Cash and cash equivalents
Cash and cash equivalents comprise cash in 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.
1.13 Trade payables
Trade payables are measured at initial recognition at fair value and
subsequently measured at amortised cost.
1.14 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.
1.15 Deferred tax related to Assets and Liabilities arising from a Single
Transaction (Amendment to IAS 12)
Amendments to IAS 12 - Income taxes published in May 2021 were adopted as from
1 July 2023. The amendments require companies to recognise deferred tax on
particular transactions that, on initial recognition, give rise to equal
amounts of taxable and deductible temporary differences. The amendments
typically apply to transactions where assets and liabilities are recognised
from a single transaction, such as leases for the lessee and decommissioning
and restoration obligations.
An adjustment has been made to recognise a deferred tax asset on the present
value of lease liabilities and a deferred tax liability on the right of use
assets. The adjustment have been made retrospectively in 2022 and resulted in
a net increase in reserves of $50k for the Group and $15k for the
company.
1.16 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 for the Executive Directors of CLIG will vest (i.e. no longer be
forfeitable) over a five-year period with one-fifth vesting each year, and
from October 2024 onwards over a five-year period with one-third vesting each
year for the third, fourth and fifth anniversaries following grant.
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.
1.17 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.
1.18 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.
1.19 Foreign currency translation
The functional and presentational currency of the company and all its
subsidiaries is US dollars.
Transactions in currencies other than the relevant group entity's functional
currency are recorded at the rates of exchange prevailing on the dates of the
transactions. At each balance sheet date, monetary assets and liabilities that
are denominated in foreign currencies are retranslated at the rates prevailing
on the balance sheet date. Gains and losses arising on retranslation are
included in the profit or loss for the year.
1.20 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 options 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.
1.21 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.
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 UK) Other Total
$'000 $'000 $'000 $'000 $'000 $'000
Year to 30th June 2024
Gross fee income 66,885 1,465 - 1,001 102 69,453
Non-current assets:
Property and equipment 901 - 205 - 22 1,128
Right-of-use assets 4,030 - 925 - 121 5,076
Intangible assets 122,833 - 20 - - 122,853
Year to 30th June 2023 (restated)
Gross fee income 66,110 1,414 - 1,121 80 68,725
Non-current assets:
Property and equipment 641 - 264 - 16 921
Right-of-use assets 1,319 - 1,152 - 53 2,524
Intangible assets 128,432 - 30 - - 128,462
3. OPERATING PROFIT
Year to
Year to 30th June 2023
The operating profit is arrived at after charging: 30th June 2024 (restated)
$'000 $'000
Depreciation of property and equipment 293 274
Depreciation of right-of-use assets 672 553
Amortisation of intangible assets 5,609 5,607
Auditor's remuneration:
- Statutory audit of the parent and consolidated financial statements 149 132
- Statutory audit of subsidiaries of the Company 134 100
- Audit related assurance services 62 36
Short-term lease expense 21 18
4a. FINANCE INCOME
Year to
Year to 30th June 2023
30th June 2024 (restated)
$'000 $'000
Interest on cash and cash equivalents 1,460 700
4b. FINANCE EXPENSE
Year to
Year to 30th June 2023
30th June 2024 (restated)
$'000 $'000
Interest payable on lease liabilities 357 164
Interest payable other 24 -
381 164
4c. GAIN ON INVESTMENTS
Year to
Year to 30th June 2023
30th June 2024 (restated)
$'000 $'000
Unrealised gain on investments 180 305
Realised gain on investments 871 384
1,051 689
5. TAX CHARGE ON PROFIT ON ORDINARY ACTIVITIES
Year to
Year to 30th June 2023
(a) Analysis of tax charge on ordinary activities: 30th June 2024 (restated)
$'000 $'000
Current tax:
UK corporation tax at 25% (2023: 19%) based on the profit for the period 5,417 4,225
Double taxation relief (887) (1,074)
Change in tax rate to 25% - 157
Adjustments in respect of prior years (7) 106
UK tax total 4,523 3,414
Foreign tax 2,453 3,188
Adjustments in respect of prior years (123) (600)
Foreign tax total 2,330 2,588
Total current tax charge 6,853 6,002
Deferred tax:
UK - origination and reversal of temporary differences 68 (5)
Foreign - origination and reversal of temporary differences (1,415) (1,367)
Total deferred tax credit (1,347) (1,372)
Total tax charge in income statement 5,506 4,630
(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 - 25% (prior year -
19%). The differences are explained below:
Year to
Year to 30th June 2023
30th June 2024 (restated)
$'000 $'000
Profit on ordinary activities before tax 22,621 22,127
Tax on profit from ordinary activities at the standard rate (5,655) (4,204)
Effects of:
Unrelieved foreign tax at rates different to those of the UK (166) (1,051)
Income ineligible for tax 75 315
Capital allowances less than depreciation 98 (26)
Prior period adjustments 129 494
Change in tax rate to 25% - (157)
Other 13 (1)
Total tax charge in income statement (5,506) (4,630)
6. 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
2024.
As set out in the Directors' report on page 92 of the full report the Employee
Benefit Trust held 1,829,637 (2023: 1,989,355) ordinary shares in the Company
as at 30th June 2024. 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 2024.
Reported earnings per share
Year to
Year to 30th June 2023
30th June 2024 (restated)
$'000 $'000
Profit attributable to the equity shareholders of the parent for basic 17,115 17,497
earnings
Number of shares Number of shares
Issued ordinary shares as at 1st July 50,679,095 50,679,095
Effect of own shares held by EBT (1,875,340) (1,842,182)
Weighted average shares in issue 48,803,755 48,836,913
Effect of movements in share options and EIP awards 978,997 892,422
Diluted weighted average shares in issue 49,782,752 49,729,335
Basic earnings per share (cents) 35.1 35.8
Diluted earnings per share (cents) 34.4 35.2
Basic earnings per share (pence) 27.8 30.2
Diluted earnings per share (pence) 27.3 29.6
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, amortisation
of acquired intangibles and their relating tax impact.
Underlying profit for calculating underlying earnings per share
Year to
Year to 30th June 2023
30th June 2024 (restated)
$'000 $'000
Profit before tax 22,621 22,127
Add back/(deduct):
- (Gain)/loss on investments (1,051) (689)
- Amortisation on acquired intangibles 5,599 5,599
Underlying profit before tax 27,169 27,037
Tax expense as per the consolidated income statement (5,506) (4,630)
Tax effect of fair value adjustments 261 145
Unwinding of deferred tax liability (1,344) (1,344)
Underlying profit after tax for the calculation of underlying earnings per 20,580 21,208
share
Underlying earnings per share (cents) 42.2 43.4
Underlying diluted earnings per share (cents) 41.3 42.6
Underlying earnings per share (pence) 33.5 36.5
Underlying diluted earnings per share (pence) 32.8 35.8
* This is an Alternative Performance Measure (APM). Please refer to the
Financial Review for more details on APMs.
7. INTANGIBLE ASSETS
Group Direct customer relationships Distribution channels Trade name Long term software Total 30th June 2023
(restated)
Goodwill
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Cost
At start of period 90,072 46,052 6,301 1,405 914 144,744 144,692
Additions - - - - - - 15
Currency translation - - - - - - 37
At close of period 90,072 46,052 6,301 1,405 914 144,744 144,744
Amortisation charge
At start of period - 12,665 2,476 257 884 16,282 10,639
Currency translation - - - - - - 36
Charge for the period - 4,605 900 94 10 5,609 5,607
At close of period - 17,270 3,376 351 894 21,891 16,282
Net book value:
At close of period 90,072 28,782 2,925 1,054 20 122,853 128,462
Company
Cost
At start of period 112 112 93
Additions - - 15
Currency translation - - - - - - 5
At close of period 112 112 112
Amortisation charge
At start of period 82 82 71
Charge for the period 10 10 8
Currency translation - - - - - - 3
At close of period 92 92 82
Net book value 20 20 30
Goodwill, direct customer relationships, distribution channels and trade name
acquired through business combination relate to the merger with KIM on 1st
October 2020.
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 cash generating unit (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.
Management also considered whether there were any indicators of impairment of
other intangible assets. The Group had assessed the recoverable amount of the
CGU by its value in use and found that it was less than the carrying value
owing to a higher discount rate and reduced growth forecasts due to changes in
market conditions. The Group thus reassessed the recoverable amount by its
fair value (Fair Value) less cost of disposal (FVLCOD), which exceeds the
carrying value. The Fair Value is based on the Market Comparable Method (or
"Comparable Company Analysis") that indicates the value of KIM by comparing it
to publicly traded companies in a similar line of business. An analysis of the
trading multiples of comparable companies yields insight into investor
perceptions and, therefore, the value of the subject company i.e., the value
of KIM.
FuM and EBITDA multiples were selected and applied to the historical and
forecasted metrics of KIM. The multiples were evaluated and selected based on
the relative growth potential, operating margins and risk profile of KIM
vis-a-vis the publicly traded comparable companies and also to reflect the
degree of control and lack of marketability of the interest held in KIM. As
such, FuM multiple of 3.5% and EBITDA multiples of 9.0x and 10.0x (calendar
year 2023 and 2024, respectively) were selected based on the Comparable
Company Analysis prior to concluding the Fair Value of KIM on a weighted
average basis. This Fair Value is classified within Level 3 of IFRS 13 fair
value hierarchy.
The Group's 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 annual growth rate used for extrapolating revenue forecasts was
1.3% and for direct costs was 3.0% based on the Group's expectation of future
growth of the business.
The goodwill impairment assessment date of 30th April 2024 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 2024 by $9,496k (2023: $5,697k).
Sensitivity analysis was applied to the selected multiples to measure the
impact on the headroom in existence under the current impairment review. The
following table shows the extent to which each of the selected multiples will
be required to be changed in isolation for the recoverable amount of this CGU
to be equal to its carrying amount. This highlights that further adverse
movements in the selected multiples would be required before an impairment
would be recognised. The below sensitivities make no allowance for mitigating
actions that management would take if such market conditions persisted.
2024
From To
EV / December LYM FuM - (USD Mn) 3.5% 2.5%
EV / CY 2024 FuM - (USD Mn) 3.5% 2.6%
EV / CY 2023 EBITDA Post Bonus 10.0x 7.4x
EV / CY 2024 EBITDA Post Bonus 9.0x 6.4x
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.
The Group's forecasted FuM and EBITDA are most sensitive to the movements in
the global financial markets because they have a direct impact on the CGU's
results. The potential impact of the current uncertainties on global financial
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 fair value model, no impairment was
required at 30th June 2024.
8. SHARE CAPITAL AND MERGER RELIEF RESERVE
Share capital Merger relief reserve
Group and Company $'000 $'000
At start and end of period 50,679,095 ordinary shares of 1p each 644 158,984
9. DIVIDEND
30th June 2023 (restated)
30th June 2024
$'000 $'000
Dividends paid:
Interim dividend of 11p per share (2023: 11p) 6,840 6,472
30th June 2023 of 22p per share (2022: 22p) 13,049 12,906
19,889 19,378
A final dividend of 22p per share (gross amount payable $14,098k; net amount
payable £13,589k*) has been proposed, payable on 7th November 2024, subject
to shareholder approval, to shareholders who are on the register of members on
4th October 2024.
*Difference between gross and net amounts is due to shares held at EBT that do
not receive dividend.
10. 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 fair value through
Financial assets
30th June 2024 at amortised cost profit or loss Total
Assets as per statement of financial position $'000 $'000 $'000
Other non-current financial assets - 5,750 5,750
Trade and other receivables 6,687 - 6,687
Cash and cash equivalents 33,738 _ 33,738
Total 40,425 5,750 46,175
Liabilities at
fair value
Financial liabilities through
at amortised cost profit or loss Total
Liabilities as per statement of financial position $'000 $'000 $'000
Trade and other payables 10,236 - 10,236
Current lease liabilities 526 - 526
Non-current lease liabilities 5,207 - 5,207
Total 15,969 - 15,969
Assets at fair
Financial assets at amortised cost value through
30th June 2023 (restated) profit or loss Total
Assets as per statement of financial position $'000 $'000 $'000
Other non-current financial assets - 10,020 10,020
Trade and other receivables 6,259 99 6,358
Cash and cash equivalents 28,569 _ 28,569
Total 34,828 10,119 44,947
Liabilities at
fair value
Financial liabilities through
Liabilities as per statement of financial position at amortised cost profit or loss Total
$'000 $'000 $'000
Trade and other payables 10,532 - 10,532
Current lease liabilities 251 - 251
Non-current lease liabilities 2,498 - 2,498
Total 13,281 - 13,281
Company
Assets at fair value through
Investment in Financial assets
30th June 2024 subsidiaries at amortised cost profit or loss Total
Assets as per statement of financial position $'000 $'000 $'000 $'000
Other non-current financial assets 131,733 2,500 50 134,283
Trade and other receivables - 3,250 - 3,250
Cash and cash equivalents - 20,381 - 20,381
Total 131,733 26,131 50 157,914
Liabilities at
fair value
Financial liabilities through
at amortised cost profit or loss Total
Liabilities as per statement of financial position $'000 $'000 $'000
Trade and other payables 5,339 - 5,339
Current lease liabilities 284 - 284
Non-current lease liabilities 964 - 964
Total 6,587 - 6,587
Assets at fair value through
Investment in Financial assets
30th June 2023 (restated) subsidiaries at amortised cost profit or loss Total
Assets as per statement of financial position $'000 $'000 $'000 $'000
Other non-current financial assets 131,719 5,000 2,431 139,150
Trade and other receivables - 3,300 90 3,390
Cash and cash equivalents - 14,779 - 14,779
Total 131,719 23,079 2,521 157,319
Liabilities at
fair value
Financial liabilities through
at amortised cost profit or loss Total
Liabilities as per statement of financial position $'000 $'000 $'000
Trade and other payables 5,060 - 5,060
Current lease liabilities 44 - 44
Non-current lease liabilities 1,257 - 1,257
Total 6,361 - 6,361
(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 2024 $'000 $'000 $'000 $'000
Financial assets at fair value through profit or loss
Investment in other non-current financial assets 5,700 50 - 5,750
Total 5,700 50 - 5,750
Level 1 Level 2 Level 3 Total
30th June 2023 (restated) $'000 $'000 $'000 $'000
Financial assets at fair value through profit or loss
Investment in other non-current financial assets 7,589 2,431 - 10,020
Foreign currency trades - 99 - 99
Total 7,589 2,530 - 10,119
Company
Level 1 Level 2 Level 3 Total
30th June 2024 $'000 $'000 $'000 $'000
Investment in other non-current financial assets - 50 - 50
Forward currency trades - - - -
Total - 50 - 50
Level 1 Level 2 Level 3 Total
30th June 2023 (restated) $'000 $'000 $'000 $'000
Investment in other non-current financial assets - 2,431 - 2,431
Forward currency trades - 90 - 90
Total - 2,521 - 2,521
There were no financial liabilities at fair value at any of the reported
periods.
Level 3
Level 3 assets as at 30th June 2024 are nil (2023: 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.
(iii) Foreign currency risk
Almost all of the Group's revenues, and a significant part of its expenses,
are denominated in US dollars. However, expenses related to UK and Singapore
offices are denominated in currencies other than US dollars. As a result,
expenses and balances arise which give rise to currency exposure.
As at 30th June 2024, significant net asset balances included within the
Group's net asset balances were (£413k) (2023: £4,755k) denominated in
sterling, C$520k (2023: C$494k) in Canadian dollars and SGD1,676k (2023:
SGD1,943k) in Singapore dollars.
Had the US dollar strengthened or weakened against these currencies as at 30th
June 2024 by 10%, with all other variables held constant, the Group's net
assets and profit before tax would have increased or decreased (respectively)
by $109k (2023: $785k). 10% represents management's assessment of the
reasonably possible change in foreign exchange rate.
(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, 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 nil (2023: $0.2 million) in the value
of the investments and profit before tax.
The Group's Global Equity CEF funds has been consolidated as controlled
entities, and therefore the securities held by the fund are reported in the
consolidated statement of financial position under investments. At 30th June
2024, 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 $0.3 million (2023: $0.5 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 $nil (2023: $£nil).
(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 trade and other sundry payables are immaterial and thus the
liquidity risk is minimal. 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 and cash
equivalents balances. The Group's strategy is to maximise the amount of cash
which is maintained in interest bearing accounts and short-term
treasuries/money market funds, and to ensure that those accounts attract a
competitive interest rate. At 30th June 2024, the Group held $33,738k (2023:
$28,569k) in cash balances, of which $33,245k (2023: $27,515k) was held in
bank accounts, short-term deposits and short-term treasuries/money market
funds, 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 and Risk Assessment,
which is approved by the Board. 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.
APPENDIX
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, reputational
damage, 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 across the business leave/significant reliance on a Team approach, internal procedures, knowledge sharing. Remuneration packages
small number of key employees. reviewed as needed to ensure talent/key employees
are retained. In addition, the Nomination Committee regularly reviews talent
and succession plans for both Board and key senior management positions.
Technology, IT / cybersecurity and business continuity risks Risk that technology systems and support are inadequate or fail to adapt to IT monitors developments in this area and ensures that systems are adequately
changing requirements; systems are vulnerable to third party penetration or protected. Additional IT spend occurred on both vulnerability awareness,
that the business cannot continue in a disaster. mitigation, and incident response planning. Each subsidiary of the Group has a
Disaster Recovery/Business Continuity plan. Our offices maintain backups of
local servers, applications and data. Additionally, back-ups are replicated to
other offices and/or an external cloud-based provider. Employees across its
four offices are able to work remotely, accessing information and maintaining
operations.
Material error / mandate breach Risk of a material error or investment mandate breach occurring. Mandate guidelines are coded (where possible) into the order management system
by the Investment Management/Compliance teams of each operating subsidiary.
Regulatory and legal risk Risk of legal or regulatory action resulting in fines, penalties, censure or Compliance teams of each subsidiary monitor relevant regulatory developments -
legal action arising from failure to identify or meet regulatory and both new regulations as well as changes to existing regulations that impact
legislative requirements in the jurisdictions in which the Group and its their respective subsidiary. Implementation is done as practicably as possible
operating subsidiaries operate, including those as a result of being a listed taking into account the size and nature of the business.
entity on the London Stock Exchange. Risk that new regulation or changes to
the interpretation of existing regulation affects the Group's operations and The finance team with the support of CLIG's Company Secretary keeps abreast of
cost base. any changes to Listing Rules, accounting and other standards that may have an
impact on the Group.
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 and dividends paid are provided in the Remuneration
report on pages 65, 83 and 84 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 $7k. There were no fees outstanding as at
the year-end.
(c) A close member of a key management's personnel provides professional
services to the Group. The amount paid during the period for these services
were $43k. The amount outstanding at the year-end was $11k.
(ii) Person with significant influence
One of the Group's subsidiaries manages funds for a person with significant
influence based on his shareholding in the Group. The amount of fees received
by the Group during the period was $81k (2023: $70k).
(iii) Summary of transactions and balances
During the period, the Company received from its subsidiaries $13,308k (2023:
$13,172k) in respect of management service charges and dividends of $19,150k
(2023: $22,131k).
Amounts outstanding between the Company and its subsidiaries as at 30th June
2024 are given in notes 14 and 16 of the full report.
3. Statement of Directors' responsibilities
The Directors are responsible for preparing the Strategic report, the
Directors' report, the Directors' remuneration report 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 50 and 51
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.
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. END FR SEAFWDELSEIURecent news on City of London Investment
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