Company Announcements

LEGAL ENTITY IDENTIFIER: 213800F3NOTF47H6AO55

THE CITY OF LONDON INVESTMENT TRUST PLC

Unaudited Results for the Half-Year Ended 31 December 2023

This announcement contains regulated information

INVESTMENT OBJECTIVE

The Company's objective is to provide long-term growth in income and capital, principally by investment in equities listed on the London Stock Exchange. The Board fully recognises the importance of dividend income to shareholders.

PERFORMANCE

Sources: Morningstar Direct, Janus Henderson, LSEG Datastream

1 Net asset value per ordinary share total return with debt at fair value (including dividends reinvested)

2 Share price total return using mid-market closing price

3 AIC UK Equity Income sector size weighted average NAV total return (shareholders' funds)

4 The Investment Association ("IA") peer group average is based on mid-day NAV whereas the returns of the investment trust are calculated using close of business NAV

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INTERIM MANAGEMENT REPORT

CHAIRMAN'S STATEMENT

Introduction

City of London achieved a 6.5% net asset value total return during the six months to 31 December 2023 against a backdrop of falling inflation and market expectations that interest rates have peaked.

The Markets

Although economic growth slowed, the main developed countries appear to have avoided a significant downturn, with employment remaining at high levels. Inflation fell by more than expected, especially towards the end of the period, with investors anticipating cuts to interest rates by central banks globally during 2024. The 10-year gilt yield, which was 4.4% at the beginning of July, ended 2023 at 3.5%.

The UK equity market returned 5.2%, as measured by the FTSE All-Share Index, with medium-sized and small companies slightly outperforming larger peers. The best performing sector was real estate investment trusts, reflecting the downward move in gilt yields, followed by technology, in line with trends overseas. Some more defensive sectors, such as food & beverage and health care, were notable underperformers.

Net Asset Value Total Return

City of London's net asset value total return was 6.5% - higher than the FTSE All-Share Index (5.2%) and the AIC UK Equity Income sector average (5.0%), but behind the IA UK Equity Income OEIC sector average (6.9%). The negative impact of the fall in gilt yields on the fair value of the Company's fixed interest debt detracted performance by 34 basis points. It should be noted, however, that the £30 million 2.67% 2046 and £50 million 2.94% 2049 secured notes, both issued in recent years, provide borrowings at fixed low interest rates for investment in equities by City of London over the next quarter of a century.

Stock and sector selection contributed by 171 bps. The underweight positions in pharmaceuticals and AstraZeneca were respectively the biggest sector and stock contributors. The second biggest sector impact arose from being overweight in real estate investment trusts, with Land Securities a notable stock contributor. The biggest detracting sector was food producers, with Nestlé a detractor over the six months. The second biggest detracting sector was aerospace and defence, where the Company missed out on the rise in Rolls Royce (which was not held) but benefited from its position in BAE Systems. Other notable stock contributors were 3i, whose main asset is its shareholding in Action, a fast-growing discount retailer in Europe, and Round Hill Music Royalties Fund, which was taken over. The biggest detracting stock was St James's Place, which announced changes in the structure of its customer fees.

Earnings and Dividends

Earnings per share rose marginally compared with the same six-month period last year, from 8.79p to 8.80p. Special dividends, received and accounted as income, were down from £2.4 million to £0.9 million. The trend in ordinary dividends received was similar to City of London's last financial year, with cuts from mining companies being offset by increases from banks and oil companies.

City of London has declared two interim dividends to date of 5.05p each in respect of this financial year. The Company's diverse portfolio, strong cash flow and revenue reserve give the Board confidence that, in line with its objective to provide long-term income and capital growth, it will be able to increase the total annual dividend for the 58th consecutive year. The quarterly dividend rate will be reviewed by the Board before the third interim dividend is declared in April 2024.

Management Fee and Expenses

The investment management fee rate was last reviewed in 2019. Since then, the Company has grown its net assets under management by 48%, from £1,360 million to £2,019 million, partly due to the issue of 143 million shares. The Board has agreed with the Company's investment manager, Janus Henderson, to reduce the investment management fee rate from 0.325% to 0.300% with effect from 1 January 2024. The consequence of this change is that the ongoing charge, which represents the investment management fee and other administrative non-interest related expenses as a percentage of shareholder funds, is expected to be lower for this financial year than last year, when it was 0.37%. The Board continues rigorously to review costs to ensure that City of London's ongoing charge remains low compared with other investment trusts and discretionary (non-tracker) managed equity investment products. Furthermore, in the event that net assets under management exceed £3,000 million, the management fee on any such excess will be reduced to 0.275%.

Material Events and Transactions during the Period

A total of 5.3 million new shares, raising £21 million were issued during the six months to 31 December 2023. The proceeds were invested across the portfolio. The Board is continuing its stated policy, subject to prevailing circumstances, of considering issuance of new shares within a narrow band relative to net asset value. As at 29 December 2023 (the last dealing day during the six months), the Company's share price was trading at a premium of 0.9% to NAV (with debt at fair value). As at 13 February 2024 (the last practicable date before printing this report), the Company's share price was trading at a discount of 0.6% to NAV (with debt at fair value).

Three new holdings were bought during the six months. Burberry is a luxury British fashion company with around half of its stores in the Asia Pacific region. Hilton Foods is a packer and distributor of meat products, with operations in the UK, Europe and Australasia. The purchase of ENI, the international oil and gas company, was financed by the sale of Woodside, the Australian company with a focus on liquified natural gas. Complete sales were also made in Cisco, the information technology and networking services company; Ferguson, the US building products distributor; Sanofi, the pharmaceutical company; and Round Hill Music Royalties Fund, which was taken over.

Delisting from New Zealand Stock Exchange

The Company's ordinary shares have a primary listing on the London Stock Exchange and a secondary listing on the New Zealand Stock Exchange (NZX Main Board). Shareholdings on the New Zealand register now only represent 1.2% of the Company's total shares in issue and the costs of maintaining the listing have been steadily increasing. The Board considers that these costs, together with the administrative and compliance burdens of maintaining the secondary listing in New Zealand, have become disproportionate to the benefits of maintaining that listing and relative to the percentage of shares involved. After careful consideration, the Board has therefore resolved to delist the shares from the NZX Main Board from 21 March 2024. Shares on the New Zealand register will be automatically transferred to the UK register, which already has a number of shareholders with addresses in New Zealand.

The Board

The Board is delighted to announce that Sally Lake will be joining the Board on 1 August 2024. Sally is currently Group Finance Director of Beazley plc, the FTSE 100 specialist insurance company, but will be stepping down from that role later in 2024. She has wide ranging experience of financial markets, risk management and the operational challenges facing listed companies. She will succeed Samantha Wren as Audit Committee Chair following the Company's Annual General Meeting in October, when Samantha will retire after serving nine years on the Board.

Outlook for the Six Months to 30 June 2024

The tightening of monetary policy in 2022 and 2023 by the world's leading central banks is expected to lead to a further reduction in the rate of inflation. A significant slowdown in economic activity, however, appears unlikely as consumers continue to draw down excess savings from the Covid lockdowns and employment statistics remain relatively buoyant. Although it is generally accepted that interest rates have now peaked, market expectations for cuts may be exaggerated given continuing wage increases and "quantitative tightening" by central banks. There are also considerable risks resulting from the current war in the Middle East, with a widening conflict, such as the recent hostilities in the Red Sea area, raising the prospect of further political and economic turbulence including the disruption of supply chains and destabilisation of energy markets, as observed already in the Ukraine conflict.

UK equities remain attractively valued relative to overseas equivalents. This has encouraged further takeovers of UK companies by private equity firms and foreign businesses, including the acquisition of Round Hill Music Royalties Fund from the Company's portfolio. There has subsequently been a bid in January 2024 for Wincanton, another of City of London's investee companies, from a large French private company. More takeovers can be expected while the discounted value of UK equities relative to global peers persists. Although the prospect of political change in the UK may weigh on equity valuations until after the general election, the compelling dividend yields from many companies effectively "pay investors to hold on" and should help to mitigate the downside risks of current uncertainties.

Sir Laurie Magnus CBE

Chairman

16 February 2024

SECTOR EXPOSURE

As a percentage of the investment portfolio excluding cash

Source: Janus Henderson

SECTOR BREAKDOWN OF INVESTMENTS

¹ Overseas listed

All classes of equity in any one company are treated as one investment.

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks and uncertainties associated with the Company's business can be divided into the following main areas:

·           Geopolitical

·           Global pandemics

·           Portfolio and market price

·           Dividend income

·           Investment activity, gearing and performance

·           Tax and regulatory

·           Operational

Information on these risks and how they are managed is given in the Annual Report for the year ended 30 June 2023. In the view of the Board, these principal risks and uncertainties at the year end remain and are as applicable to the remaining six months of the financial year as they were to the six months under review.

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors confirm that, to the best of their knowledge:

On behalf of the Board

Sir Laurie Magnus CBE

Chairman

16 February 2024

INCOME STATEMENT

The total columns of this statement represent the Company's Income Statement, prepared in accordance with FRS 104. The revenue and capital columns are supplementary to this and are published under guidance from the Association of Investment Companies.

The Company has no recognised gains or losses other than those disclosed in the Income Statement and Statement of Changes in Equity. All items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period.

The accompanying notes are an integral part of these financial statements.

STATEMENT OF CHANGES IN EQUITY

The accompanying notes are an integral part of these financial statements.

STATEMENT OF FINANCIAL POSITION

The accompanying notes are an integral part of these financial statements.

NOTES

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