CLIG City Of London Investment Group Plc

23rd February 2024

CITY OF LONDON INVESTMENT GROUP PLC

("City of London", "CLIG", "the Group" or "the Company")

HALF YEAR RESULTS TO 31ST DECEMBER 2023 AND BOARD CHANGES

City of London (LSE: CLIG) announces that it has today made available on its website, https://www.clig.com/, the Half Year Report and Financial Statements for the six months ended 31st December 2023.

The above document will been uploaded to the National Storage Mechanism, in accordance with Listing Rule 9.6.1 R, and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

HALF YEAR SUMMARY

For access to the full interim report, please follow the link below:

http://www.rns-pdf.londonstockexchange.com/rns/1765E_1-2024-2-22.pdf

This release includes forward-looking statements, which may differ from actual results. Any forward-looking statements are based on certain factors and assumptions, which may prove incorrect, and are subject to risks, uncertainties and assumptions relating to future events, the Group's operations, results of operations, growth strategy and liquidity.

BOARD CHANGES

CLIG is pleased to announce that Sarah Ing will be joining the Board as a Non-Executive Director (NED) on 1st March 2024.  Sarah is a qualified chartered accountant with over 30 years of experience in the financial services sector including audit, corporate finance, investment banking and asset management.  She is an experienced NED in quoted financial services companies. Previously, Sarah founded and ran an investment management business and was also a top-rated equity research analyst covering the financial sector. Sarah is also an independent NED at CMC Markets plc, XPS Pensions Group plc and Marex Group plc. She is the Chair of the Remuneration Committee at CMC Markets plc, Chair of the Audit and Risk Committee and of the Sustainability (ESG) Committee at XPS Pensions Group plc and at Marex Group plc she is senior independent Director and Chair of the Audit and Compliance Committee. 

Upon joining Sarah will become a member of the Audit, Nomination and Remuneration Committees.

There is no further information required to be disclosed pursuant to paragraph 9.6.13R of the Listing Rules.

The Group also announces that Jane Stabile, a Non-Executive Director and Chair of the Nomination Committee, will be resigning from the Board on 29th February 2024, following a request from her to resign due to increasing commitments in her own business. Rian Dartnell will take over as Chair of the Nomination Committee.

Rian Dartnell, Chair of CLIG, said: "On behalf of the Board I would like to welcome Sarah Ing. Sarah's extensive experience in asset management and her record of delivering significant results across a range of businesses will add an important dimension to the Board. We look forward to her contribution. We would also like to thank Jane Stabile for her important contributions to CLIG over the last five and a half years. We wish her well in her endeavours".

For further information, please visit www.clig.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

Introduction

This is my first report to shareholders since becoming Chair in October 2023. My goal is to work with our Board and management to ensure the conditions for CLIG to grow and maintain its strong track record and client focus. We will do this while maintaining the exacting fiduciary standards for which CLIG is known and respected. We continue to engage with shareholders and investors sharing how the strong teams and investment processes at CLIG drive performance. In its fourth decade, the Group continues to be financially strong and well-managed. As always, the team will pursue excellence in its investing and maintain a focus on long-term success.

Over my investment management career, I have been an avid observer of different investment cultures and have learned the importance of a contrarian and supportive attitude when managing investment teams. Many asset managers are pro-cyclical, meaning they invest and spend more when times are good. Conversely, in downturns pressures build and budgets are slashed. It is precisely to avoid this behaviour that CLIG maintains a conservative balance sheet (with net cash) and has never had debt. Discounts in closed-end funds (CEFs) tend to be widest during hard times. It is essential that we support our teams and lend a hand, but particularly so when markets are down. This calm and methodical orientation is key to our investment teams having the equanimity to invest with conviction when opportunities present themselves.

I joined the CLIG Board the day the merger with KIM was completed on 1st October 2020 and have observed your Group's management team making continuous organisational and systems improvements in the integration process. This past September, the Board and the teams from CLIM and KIM had their first Group Strategy Meeting since the merger. The meetings were very important in building camaraderie and gave everyone the opportunity to discuss CLIG's strategic priorities. Both CLIM and KIM are team-oriented firms and benefit from highly experienced employees, many of whom have worked together for decades. It is exciting to see the teams bonding and working so well together.

Assets and performance

Group Funds under Management (FuM) went up by $152 million, an increase of 2%, in the six months ended 31st December 2023 to $9.6 billion as compared to $9.4 billion as of 30th June 2023. CLIM's FuM increased by $54 million to $6.0 billion and KIM saw an increase of $98 million to $3.6 billion.

Over the six-month period, there were net outflows of $294 million across the Group's strategies, led by Emerging Markets (EM) redemptions at CLIM and outflows to meet individual expenses, taxes and required minimum distributions from retirement accounts at KIM.

Relative investment performance at CLIM was positive for the Opportunistic Value strategy, neutral for the International strategy and slightly negative for the EM strategy, whereas relative investment performance at KIM was positive for the Taxable Fixed Income strategy and Tax-sensitive Fixed Income strategy, while negative for US Equity and Conservative Balanced mandates over the six months ended December 2023.

Marketing and sales activity picked up significantly in January 2024 as clients and prospects review their investment allocations. The Group is focused on new mandates in a number of CLIG's asset classes with very good long-term performance as CEF discounts are at compelling levels. Our business development team is actively reaching out to clients and prospects to discuss the current opportunity-rich environment.

Reporting currency

As mentioned in the Annual Report for the year ended 30th June 2023, the Board decided to change the Group's financial reporting currency to US dollars with effect from 1st July 2023. This allows us to present a more transparent statement of comparative financial performance that neutralises currency fluctuations. This is the first time the Group's results are being reported in US dollars.

ESG

Historically, we have secured renewable energy for our London and Rochester NY offices. During the period, we worked with service providers to convert the energy that powers CLIM's West Chester, Pennsylvania office to a renewable source. This improvement will come into effect during February 2024.

Business travel increased during the period with growth in our marketing efforts as the team met clients and prospects. As mentioned above, we also held our first Group Strategy Meeting for all Group employees and our Board in September 2023 after a gap of four years. To offset the impact of increased business travel, the Group has implemented a carbon offset programme.

All employees have attended our ongoing training programme directed towards diversity, equity and inclusion. To reinforce awareness of their role in protecting our network infrastructure, all employees receive monthly training on the critical issue of cybersecurity.

Alongside adherence to CLIG's governance obligations at Board level, the Group is strongly committed to regular workforce engagement sessions to develop a closer relationship between employees and the Non-Executive Directors (NEDs) who are not involved in the business on a day-to-day basis. Importantly, these sessions are structured to encourage a rapport between the NEDs and employees. NEDs spent over two days on-site with employees in a mix of formal presentations, social and team building events during the Group Strategy Meeting.

Your Board

On behalf of the Board and CLIG's employees, I would like to thank Barry Aling, our excellent Chair of five years and a member of our Board since 2013, for his outstanding service. Barry's high standards and astute judgment have had a strong positive impact on CLIG. We look forward to maintaining close touch with Barry and wish him a joyful retirement. I am pleased to announce that Sarah Ing will be joining CLIG's Board as a Non-Executive Director as of 1st March 2024. Sarah is a highly effective and seasoned professional in the financial services industry and brings significant Board experience. Sarah's appointment follows a request by Jane Stabile to resign from the Board with effect from 29th February 2024 due to increasing commitments in her own business. On behalf of our Board, I would like to thank Jane for her important contributions to CLIG over the last five and a half years. We wish her well in her endeavours and look forward to maintaining close touch.

Dividends

Your Board is declaring an unchanged interim dividend of 11p per share, taking into account 

profits for the period. The Board continues to believe that the use of a dividend cover policy based on rolling five-year periods provides a prudent template that serves to protect shareholders from the market volatility that can affect profits of asset management companies. The Board applies this policy using Underlying Profits†. The interim dividend will be paid on 28th March 2024 to those shareholders registered at the close of business on 1st March 2024.

Shareholder engagement

Since our Annual General Meeting 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. We are making progress on a series of shared priorities, including an enhanced focus on the management of our cash balances as well as maintaining our commitment to expense management. We have also been engaging with our other shareholders and, as always, plan to maintain transparency in our ongoing dialogue.

Outlook

The current very wide discounts in CEFs remind me of my early investing days. I first invested in an EM CEF in 1993, a very strong year for EM. During the year, that fund surged in value and moved to a 10% premium to net asset value at which point I sold it. When Alan Greenspan and the Fed began raising interest rates in early 1994, I was then able to invest in well-managed CEFs at 15-20% discounts at a time when emerging markets were in a severe correction. I called it buying a double-discount. Two years earlier, Barry Olliff founded CLIG to pursue a similar strategy. Little did I know then that savvy George Karpus had begun investing in discounted CEFs in the US starting in 1992. Our Founders Barry and George developed their investment processes and teams to buy low and sell high. Now in our fourth decade, this spirit of buying quality at discounts resonates strongly within the Group.

A talented investment manager we know describes his approach as investing under a cloud. He uses clouds (bad news and uncertainty) as markers for uncovering value below. Indeed, inflation, the ensuing interest tightening cycle and geopolitical headwinds are presenting opportunities. It is notable that emerging and international markets have substantially lagged the US market since the merger. Indeed, the S&P index has delivered a cumulative return of 49% in the 39-month period versus just 2% for EM and 23% for international markets. At the same time, rising interest rates have created opportunities for KIM's fixed income and municipals strategies. Relative valuations are much lower in the markets where the Group has the majority of its assets under management and discounts in our CEF portfolios are at compelling levels. Our teams are energised and we remain constructive on the outlook for performance at CLIG.

Thank you for your interest in City of London Investment Group.

Sincerely yours,

Rian Dartnell

Chair

22nd February 2024

†This is an Alternative Performance Measure (APM). Please refer to CEO review for more details on APMs.

CHIEF EXECUTIVE OFFICER'S REVIEW

Investor headwinds

Investors have been wrestling with a series of shocks over the past four years including the Covid-19 outbreak, the ensuing pandemic, post-Covid inflation, the Russia-Ukraine war and now a new conflict in the Middle East. In combination with the ongoing Russia-Ukraine conflict, the Israel-Hamas war has put further pressures on energy prices and exacerbated global supply chain difficulties.

Following eleven rate hikes since March 2022, the US Fed indicated no further rate hikes were expected at its September 2023 meeting. Just a few short weeks later, in early October, the Israel-Hamas war ignited, leading to instability in the Middle East that rattled global financial markets and sent investors scrambling to protect their portfolios from increased geopolitical risks.

In early November, market expectations were for the Fed to cut rates in 2024 supported further by the Fed's stance at their November meeting, reversing the market downturn seen in October. Clients that had remained invested during the recent market turbulence were rewarded with significant gains through year-end.

FuM & flows

As shareholders will have seen from our interim trading update (announced on 22nd January 2024) and the monthly release of data on our website, www.clig.co.uk, FuM have increased due to market rises over the six months to the end of the calendar year as shown in Figure 1.

  Figure 1. CLIG - FuM by line of business ($m)

Some individual clients, particularly those concerned about their retirement assets, reduced their portfolio's market exposure locking in losses during recent market downturns; instead choosing the safety of bank deposits and money market vehicles paying high rates of interest. Marketing for new mandates or additional investments becomes challenging, as the focus must shift to maintaining existing client relationships.

Broadly speaking, the psychology of US individual investors has been negatively impacted by rising interest rates and broad market losses in fixed income assets in 2022 and continuing into part of 2023. This is compounded by the aforementioned safety provided in bank deposits and money market funds, at a higher interest rate than at any time over the last twenty years. Finally, the ongoing drumbeat of geopolitical issues and risks add to the negative mindset of investors.

The table in Figure 2 shows flows into and out of our various business areas/strategies over the past four and a half years.

*Includes net investment flows for Retail - (24,407) and Institutional - (20,264) pertaining to period before 1st October 2020 (pre-merger)

Client asset retention was good throughout the turbulence of the past six months relative to competitors and what industry statistics suggest.

The ongoing trend of outflows from active managers into passive managers continued in 2023, but with an additional twist, as flows into money market vehicles reached an all-time high for net inflows during calendar year 2023, as reflected in the chart in Figure 3 on page 8 of the full interim report. Finally, per Morningstar, after ten years of passive flows outpacing active flows, there are more assets in passive managed investment vehicles than active managed investment vehicles for the first time ever as illustrated in Figure 3.

Investors in the Group's CEF strategies have outperformed their relevant indices over the long term aided by the additional alpha contribution of buying securities at a discount to Net Asset Value (NAV). Marketing activity has picked up in January and we remain focused on our CEF strategies which have good long-term performance and ample capacity.

Size-Weighted Average Discount (SWAD)

Markets have been volatile for an extended period of time since the outset of the pandemic in early 2020 continuing into the latest quarter. Discounts are historically wide across the strategies indicating considerable value as illustrated in Figures 4 and 5 on pages 8 and 9 of the full interim report.

Currency exposure

Following the change in the Group's presentational currency with effect from 1st July 2023, the Group's interim results for the six-month period ended 31st December 2023, and all subsequent financial information, will be prepared using US dollars.

While fee income and the bulk of expenses will now be aligned in USD, c.33% of Group's overheads are incurred in GBP that are subject to USD/GBP currency rate fluctuations. Opposite to last year's six months interim report, on an average, USD weakened by c.7% against GBP to 1.256 for the six months ended 31st December 2023 from 1.1759 for the six months ended 31st December 2022.

Expenses

With reduced FuM we have made some reductions in expenses which will benefit the P&L, largely in FY2025 rather than FY2024. We will continue to reduce our costs by taking more aggressive action in the event that FuM falls as we move closer to the current financial year end.

Over the six-month period, further investment was made in IT infrastructure based on technology advancements allowing for significant monthly cost reductions going forward. Additional increases over the same six-month period in the prior financial year relate to salary and benefit costs along with Group costs denominated in GBP as a result of sterling strengthening c.7% over the period.

Total compensation for Group employees is comprised of salaries plus related benefits and profit sharing. Salary levels are moderate relative to our competitors as a result of the volatility of markets causing variability in our results. The modest increase in salary and benefit costs over the FY2024 interim period is a product of a tight labour market and continued inflationary pressures. The group has responded to these pressures focusing salary increases on key personnel and areas where the shortage of talent is most acute.

With this said, total compensation overall for Group employees has declined over the past two years reflecting declining FuM and the strong link between remuneration and profit.

As stated in the Remuneration report contained within our FY2023 Annual Report, rather than making large numbers of employees redundant during market downturns and negatively impacting the business, the variable component of compensation can take the brunt of reduced revenues. Maintaining a high ratio of variable pay for all employees underscores the message that we are a team and rewards should be reduced when the Group underperforms. Variable pay can be adjusted in line with profitability, and aligns employees with shareholders.

The chart in Figure 6 on page 10 of the full interim report illustrates this approach in action by showing a decrease in total compensation post FY2022 when accounting for a 22% drop in the profit share component of compensation.

Financial results

Net fee income in the first six months of FY2024 of $32.6 million is slightly higher over the same period in FY2023 of $31.9 million (based on conversion of actual net fee income of £27.3 million at the average USD/GBP exchange rate). CLIM's diversification provides the ability to acquire and retain additional sources of FuM based revenues that otherwise would not have been possible - this includes new clients, but as importantly provides clients looking to diversify from EM with alternative options. Over the past ten years, we have seen a marked shift in "EM fatigue", which has been driven by geopolitical events, underperformance of EM equity relative to other regions, and an overall lack of growth.

The Group's profit before tax increased slightly for the six months ended 31st December 2023 to $11.1 million as compared to $11.0 million for the six months ended 31st December 2022*. However, underlying profit before tax for the six months ended 31st December 2023 fell by c.2% to $13.3 million from $13.6 million for the six months ended 31st December 2022 due to the adjustment of higher gains on investments of $0.6 million in the six months ended 31st December 2023 as compared to $0.2 million of gains in the six months ended 31st December 2022. EPS for the six months ended 31st December 2023 decreased by c.2% to 16.9¢ (13.4p) per share from 17.2¢ (15.0p) per share for the six months ended 31st December 2022. Underlying EPS for the six months ended 31st December 2023 decreased by c.4% to 20.4¢ (16.2p) per share from 21.3¢ (18.4p) per share for the six months ended 31st December 2022.

Dividend cover chart

We have provided an illustrative framework in Figure 7 on page 11 of the full interim report to enable shareholders and other interested parties to calculate our post-tax profits based upon some key assumptions. The dividend cover chart shows the quarterly estimated cost of a maintained dividend against actual post-tax profits for last year, the current six months ended 31st December 2023, and the assumed post-tax profit for the six months ended 30th June 2024 and the next financial year based upon assumptions included in the chart.

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 4 in the interim financial statements.

Underlying profit before tax - Profit before tax, adjusted for gain/loss on investments and amortisation of acquired intangibles. This provides a measure of the profitability of the Group for management's decision-making.

Underlying earnings per share - Underlying profit before tax, adjusted for tax as per the income statement and the 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 4 in the interim financial statements for the reconciliation.

CLIG KPI

CLIG's management team has a share price Key Performance Indicator (KPI) which is for the total return (share price plus dividends) of a CLIG share to compound annually in a range of 7.5% to 12.5% over a rolling five-year period. This KPI is meant to stretch the management team, without incentivising managers to take undue levels of risk. For the five years ended 31st December 2023, CLIG's cumulative total return in GBP was 25.7%, or 4.7% annualised, this had recovered to 6.9% by 31st January 2024. CLIG's management team is monitoring this development, as the broad market declines in October precipitated this underperformance and will update shareholders in our June 2024 Annual Report and Accounts. Since listing in April 2006, the annualised return is 11.0%.

Corporate Governance and Stakeholders

The preceding six months saw a passing of the Chair baton from Barry Aling to Rian Dartnell, as Barry retired after a ten-year tenure on the CLIG Board, including the last five as Chair. On behalf of my fellow Group Executive Committee (GEC), and CLIG employees overall, I want to say thank you to Barry for his support and leadership.

In Barry's final statement as Chair, he stated that CLIG is committed to meeting the standards of our UK listing although it has created a meaningful burden in terms of human and financial resources. To put this statement into historical perspective, CLIG moved from AIM to the main market listing of the LSE in October 2010, in order to meet the requirements of increased transparency on corporate governance initiatives from UK institutional investors. This successful transition to the main market was critical in broadening the pool of potential investors and increasing demand for Group shares. The stringent demands on the Group from the UK Corporate Governance Code help us in our role of acting as a steward of our shareholders' trust and remaining on the main market is important to the future of the Group in retaining a larger existing and prospective shareholder base. Recent announcements from the FCA that it will be reducing the regulatory burden on UK listed companies are a welcome development, and begin to address some of the concerns raised in Barry Aling's final statement as Chair.

Environmental reporting update

Employees and management of the Group are committed to protecting the environment in which we operate. We provide investment management services to our clients which have a relatively modest direct environmental impact. As noted within our FY2023 Annual Report and Accounts, we plan to reduce emissions where we can, and offset emissions where we cannot reduce. Below are descriptions of actions taken at the Group level to 1) reduce carbon emissions and 2) offset carbon emissions.

In terms of reducing carbon emissions, the electricity supplied to the London office is via contracts backed by renewable energy sources, while the Rochester office is primarily powered by wind power generated in New York State. From February 2024 onwards, our West Chester, Pennsylvania office will also be powered by renewable energy sources.

In terms of offsetting carbon emissions, in December 2023, we completed our first offset of carbon emissions. The Group purchased carbon credits for the carbon emitted from flights undertaken by Group employees during the current financial year. These credits were purchased via Gold Standard (www.goldstandard.org), in order to allay concerns about greenwashing or paying away money for minimal or unreportable short-term impact. Gold Standard's allocation methodology will fund projects that will save 173 tonnes of CO2 emissions from being released into the atmosphere.

Cybersecurity update

In cybersecurity, employee education must be the priority for a company that takes cybersecurity seriously, as employees are the gatekeepers to the Group's network, files and data. We highlighted in our FY2023 Annual Report & Accounts that all CLIG employees were given a Security Awareness Proficiency Assessment, and that CLIG employees outperformed the industry average in all seven categories, as well as overall scoring. We used the metrics provided by the assessment to fine tune the focus of our cybersecurity training for the rest of calendar year 2023.

We provide employees with monthly cybersecurity training via a third-party portal, and participation is tracked to ensure that all Group employees complete the training. All new hires are provided cybersecurity training upon their start date.

Outside of the training provided to all employees, employees within the Group's information technology department continue to strengthen and protect our network infrastructure and remain vigilant in their analysis of potential threat vectors.

CLIG outlook

In my CLIG outlook from the FY2023 Annual Reports and Accounts, I used the phrase "with a following wind" to reference that the foundations for growth have been laid, and the Group was poised for growth pending an improvement in the overall market sentiment. The wind has not yet shifted, as CEF discounts remain wide across multiple strategies. Despite a headwind versus a tailwind, the Group is positioned to go further together, with thanks and appreciation to our colleagues for navigating the rough seas.

Tom Griffith

Chief Executive Officer

22nd February 2024

* Comparative period results have been restated in US dollars.

CONSOLIDATED INCOME STATEMENT

FOR THE SIX MONTHS ENDED 31ST DECEMBER 2023

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 31ST DECEMBER 2023

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

31ST DECEMBER 2023

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 31ST DECEMBER 2023

CONSOLIDATED CASH FLOW STATEMENT

FOR THE SIX MONTHS ENDED 31ST DECEMBER 2023

 *Cash held in funds was consolidated using accounts drawn up as at end of period.

NOTES

1     BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES

The financial information contained herein is unaudited and does not comprise statutory financial information within the meaning of section 434 of the Companies Act 2006. The information for the year ended 30th June 2023 has been extracted from the latest published audited accounts (refer details of changes in presentational and functional currency below) which have been delivered to the Registrar of Companies. The report of the independent auditor on those financial statements contained no qualification or statement under s498(2) or (3) of the Companies Act 2006.

These interim financial statements have been prepared in accordance with the International Accounting Standard 34, "Interim Financial Reporting" as contained in UK-adopted International Accounting Standards and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority. The accounting policies adopted and the estimates and judgements used in the preparation of the unaudited consolidated financial statements are consistent with those set out and applied in the statutory accounts of the Group for the year ended 30th June 2023, which were prepared in accordance with UK-adopted International Accounting Standards.

The consolidated financial information contained within this report incorporates the results, cash flows and financial position of the Company and its subsidiaries for the period to 31st December 2023.

Group companies are regulated and perform annual capital adequacy and liquidity assessments, which 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 on the Group's financial position from 31st December 2023.

The Group's financial projections, capital adequacy and liquidity assessments provide comfort that the Group has adequate financial and regulatory resources to continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis of accounting in preparing the interim financial statements.

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 interim financial statements for the six months ended 31st December 2023.

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.

New or amended accounting standards and interpretations adopted

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. None of the standards not yet effective are expected to have a material impact on the Group's financial statements.

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.

* During the period, the Group entered into a long-term lease for its new West Chester office which commenced on 1st July 2023.

 3     FINANCE INCOME AND FINANCE EXPENSE 

4     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 six months ended 31st December 2023.

As set out in note 6 the Employee Benefit Trust held 1,789,369 ordinary shares in the Company as at 31st December 2023. 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 six months ended 31st December 2023.

Reported earnings per share

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 related tax impact.

Underlying profit for calculating underlying earnings per share

^ Converted to sterling using the average exchange rate for the relevant period.

* This is an Alternative Performance Measure (APM). Please refer to the CEO review for more details on APMs.

 5     INTANGIBLE ASSETS   

Goodwill, direct customer relationships, distribution channels and trade name acquired through a business combination relate to the merger with KIM on 1st October 2020.

The fair values of KIM's direct customer relationships and the distribution channels have been measured using a multi-period excess earnings method. The model uses estimates of annual attrition driving revenue from existing customers to derive a forecast series of cash flows, which are discounted to a present value to determine the fair values of KIM's direct customer relationships and the distribution channels.

The fair value of KIM's trade name has been measured using a relief from royalty method. The model uses estimates of royalty rate and percentage of revenue attributable to the trade name to derive a forecast series of cash flows, which are discounted to a present value to determine the fair value of KIM's trade name.

The total amortisation charged to the income statement for the six months ended 31st December 2023 in relation to direct customer relationships, distribution channels and trade name, was $2,799k (year ended 30th June 2023 - $5,598k; six months ended 31st December 2022 - $2,800k).

Impairment

Goodwill acquired through 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's policy is to test goodwill arising on acquisition for impairment annually, or more frequently if changes in circumstances indicate a possible impairment. The Group has considered whether there have been any indicators of impairment during the six months ended 31st December 2023 which would require an impairment review to be performed. The Group has considered indicators of impairment with regard to a number of factors, including those outlined in IAS 36 'Impairment of assets'. No indications of impairment of individual intangible assets have been identified.

6     INVESTMENT IN OWN SHARES

Investment in own shares relates to City of London Investment Group PLC shares held by an Employee Benefit Trust on behalf of City of London Investment Group PLC.

At 31st December 2023 the Trust held 593,236 ordinary 1p shares (30th June 2023 - 985,411; 31st December 2022 - 763,636), of which 241,000 ordinary 1p shares (30th June 2023 - 290,900; 31st December 2022 - 321,250) were subject to options in issue.

The Trust also held in custody 1,196,133 ordinary 1p shares (30th June 2023 - 1,003,944; 31st December 2022 - 1,009,622) for employees in relation to restricted share awards granted under the Group's Employee Incentive Plan (EIP).

The Trust has waived its entitlement to receive dividends in respect of the total shares held (31st December 2023 - 1,789,369; 30th June 2023 - 1,989,355; 31st December 2022 - 1,773,258).

7    DIVIDENDS  

A final dividend of 22p per share (2022 - 22p) (gross amount payable £11,149k; net amount paid £10,712k ($13,049k)*) in respect of the year ended 30th June 2023 was paid on 27th October 2023.

An interim dividend of 11p per share (2023 - 11p) (gross amount payable £5,575k; net amount payable £5,356k*) in respect of the year ending 30th June 2024 will be paid on 28th March 2024 to members registered at the close of business on 1st March 2024.

* Difference between gross and net amounts is due to shares held at EBT that do not receive dividend.

 8     PRINCIPAL RISKS AND UNCERTAINTIES

In the course of conducting its business operations, the Group is exposed to a variety of risks including market, liquidity, operational and other risks that may be material and require appropriate controls and on-going oversight.

The principal risks to which the Group will be exposed in the second half of the financial year are substantially the same as those described in the last annual report (see page 30 and 31 of the Annual Report and Accounts for the year ended 30th June 2023), being the potential for loss of FuM as a result of poor investment performance, client redemptions, breach of mandate guidelines or material error, loss of key personnel, technology/IT, cybersecurity and business continuity and legal and regulatory risks.

Changes in market prices, such as foreign exchange rates and equity prices will affect the Group's income and the value of its investments.

Most of the Group's revenues, and a significant part of its expenses, are denominated in US dollars. However, exchange rate movements will impact the portion of Group expenses that are incurred in non-US dollars.

9     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) The compensation paid to the Directors as well as their shareholdings in the Group and dividends paid, did not affect the financial position or the performance of the Group for the current reporting period. There were no changes to the type and nature of the related party transactions from those that were reported in the FY2023 Annual Report and Accounts.

(b) One of the Group's subsidiaries manages funds for one 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 period was $211. There were no fees outstanding as at the period end.

(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 received in fees during the period was $39k.

 10   FINANCIAL INSTRUMENTS 

The Group's financial assets include cash and cash equivalents, investments and other receivables.

Its financial liabilities include accruals and other payables. The fair value of the Group's financial assets and liabilities is materially the same as the book value.

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.

The fair values of the financial instruments are determined as follows:

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.

There were no financial liabilities at fair value at 31st December 2023 or 30th June 2023.

There were no transfers between any of the levels in any of the reporting periods.

All fair value gains and losses included in the income statement relate to the investment in own funds.

Where there is an impairment in the investment in own funds, the loss is reported in the income statement. No impairment was recognised during the period or the preceding year.

The fair value gain on the forward currency trades is offset in the income statement by the foreign exchange losses on other currency assets and liabilities held during the period and at the period end. The net profit reported for the period is $422k (30th June 2023: net profit $55k; 31st December 2022: net loss $214k).

10   GENERAL

The interim financial statements for the six months ended 31st December 2023 were approved by the Board on 22nd February 2024. These financial statements are unaudited, but they have been reviewed by the auditors, having regard to International Standard on Review Engagements (UK) 2410 (ISRE (UK) 2410) "Review of Interim Financial Information performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board.

Copies of this statement are available on our website www.clig.co.uk.

STATEMENT OF DIRECTOR'S RESPONSIBILITIES

The Directors confirm that to the best of our knowledge:

-              The condensed set of financial statements has been prepared in accordance with IAS34 Interim Financial Reporting as adopted by the UK; and

-              The Half Year Report includes a fair review of the information required by:

-              DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and 

-              DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Group during that period; and any changes in the related party transactions described in the last annual report that could do so.

The Directors of City of London Investment Group PLC are as listed in the Annual Report and Accounts 2022-2023. A list of current Directors is maintained at www.clig.co.uk.

By order of the Board

Tom Griffith

Chief Executive Officer

22nd February 2024

INDEPENDENT REVIEW REPORT TO CITY OF LONDON INVESTMENT GROUP PLC

Conclusion

We have been engaged by City of London Investment Group PLC ('the Company') to review the condensed set of financial statements of the Company and its subsidiaries (the 'Group') in the half-yearly financial report for the six months ended 31 December 2023 which comprises the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity, Consolidated Cash Flow Statement and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent material misstatements of fact or material inconsistencies with the information in the condensed set of financial statements.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2023 is not prepared, in all material respects, in accordance with International Accounting Standard 34, "Interim Financial Reporting" as contained in UK-adopted International Accounting Standards, and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" ('ISRE (UK) 2410') issued for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with UK-adopted International Accounting Standards. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting" as contained in UK-adopted International Accounting Standards.

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for Conclusion section of this report, nothing has come to our attention to suggest that management has inappropriately adopted the going concern basis of accounting or that management has identified material uncertainties relating to going concern that are not appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410, however future events or conditions may cause the Group and the Company to cease to continue as a going concern.

Responsibilities of Directors

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with International Accounting Standard 34, "Interim Financial Reporting" as contained in UK-adopted International Accounting Standards and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

In preparing the half-yearly financial report, the Directors are responsible for assessing the Group's and the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the review of the financial information

In reviewing the half-yearly financial report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report. Our conclusion, including our Conclusions Relating to Going Concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.

Use of our report

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK) 2410 "Review of Interim Financial Information performed by the Independent Auditor of the Entity". Our review work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

RSM UK Audit LLP

Chartered Accountants

25 Farringdon Street

London EC4A 4AB

22nd February 2024