2021/2022
ANNUAL REPORT & ACCOUNTS
www.clig.co.uk
Our Purpose
The Group exists for the mutual benefit of our three primary
stakeholders: Clients, Employees and Shareholders
A tribute to Barry Olliff
Barry’s career spanned over 50 years within
the investment trust (closed-end fund) sector.
Barry was the architect and driving force in
the development of the business for many
years and leaves a legacy of high standards
of corporate transparency which is written
into the CLIG DNA.
He retired as the CEO of CLIG at the end of
2019, and remained on the CLIG Board as a
Non-Executive Director until his retirement
in July 2022.
On behalf of the Board, employees and all our
shareholders, we would like to say a heartfelt
thank you to Barry and wish him the very best
in his well-deserved retirement.
Corporate statement
SUMMARY
City of London Investment Group PLC Annual Report 2021/2022 1
CONTENTS
Funds under Management (FuM) of US$9.2 billion
(£7.6 billion) at 30th June 2022. This compares with
US$11.4 billion (£8.3 billion) at the beginning of this
financial year on 1st July 2021
Net fee income was £58.2 million (2021: £52.5 million)
Underlying profit before tax* was £27.9 million
(2021: £26.7 million). Profit before tax was £23.2 million
(2021: £22.2 million)
Underlying basic earnings per share* were 44.2p (2021:
48.1p). Basic earnings per share were 36.9p (2021: 39.4p)
after an effective tax charge of 22% (2021: 24%) of
profit before taxation
Recommended final dividend of 22p per share (2021: 22p)
payable on 4th November 2022 to shareholders on the
register on 30th September 2022, making a total for the
year of 46.5p (2021: 33p), including the special dividend
of 13.5p paid on 25th March 2022 (2021: nil)
*This is an Alternative Performance Measure (APM). Please refer to page 33 for more
details on APMs.
Jun 19 Jun 20 Jun 21 Jun 22Jun 18
3.9
4.3
4.4
8.3
7.6
11.4
9.2
5.1
5.4
5.5
Overview
Summary 1
Financial highlights 2
At a glance 3
Strategic report
Chair’s statement 4
Our ESG initiatives 7
Chief Executive Officer’s statement 8
Investment review – CLIM 12
Investment review – KIM 14
Business development review 15
Our business model 17
Our strategy and objectives 20
Key performance indicators 23
Risk management 28
Financial review 30
Corporate and social responsibility policy 34
Task Force on Climate-Related
Financial Disclosures 38
Section 172 (1) statement 40
Governance
Chair’s introduction 42
Board of Directors 44
Board activities 46
Stakeholder engagement 52
Corporate governance framework 54
Board evaluation 55
Nomination Committee report 56
Audit & Risk Committee report 59
Chair of the Remuneration
Committee’s annual statement 63
Remuneration overview 65
Annual report on remuneration 68
Directors’ remuneration policy 79
Directors’ report 84
Statement of Directors’ responsibilities 86
Financial statements
Independent auditor’s report 88
Consolidated income statement 94
Consolidated and Company statement
of comprehensive income 94
Consolidated and Company statement
of financial position 95
Consolidated statement of changes in equity 96
Company statement of changes in equity 97
Consolidated and Company cash flow statement 98
Notes to the financial statements 99
Shareholder information
Notice of Annual General Meeting 127
Explanatory notes to the Notice of AGM 130
Further notes 134
Company information IBC
Funds under Management
Full year ended: US$bn £bn
Average FuM: US$bn £bn
Overview
Strategic report Financial statements Shareholder informationGovernance
Overview
FINANCIAL HIGHLIGHTS
2 City of London Investment Group PLC Annual Report 2021/2022
Overview
* This is an Alternative Performance Measure (APM). Please refer to page 33 for more details on APMs.
24.3
15.5
Net fee income £m
£58.2m 46.5p
£23.2m £2 7.9m
36.9p 44.2p
15.6
15.4
15.3
29.9
31.6
29.9
31.7
52.5
6.2
6.2
3.1
13.4
12.8
11.4
9.4
22.2
6.6
5.2
6.3
8.8
9.6
23.2
13.6
16.0
14.5
16.4
22.6
28.4
58.2
29.8
First half year
Second half year
Jun 18 Jun 19 Jun 20 Jun 21
Jun 22
Profit before tax £m
Jun 18 Jun 19 Jun 20 Jun 21 Jun 22
Jun 18 Jun 19 Jun 20 Jun 21 Jun 22
Jun 18 Jun 19 Jun 20 Jun 21 Jun 22
19.3
18.7
10.4
21.7
39.5
35.0
30.3
39.4
20.2
16.3
19.9
17.7
6.1
5.5
5.4
26.7
12.6
10.6
11.5
6.5
5.1
6.1
11.2
12.4
27.9
15.5
Underlying profit before tax* £m
Jun 18 Jun 19 Jun 20 Jun 21
15.4
36.9
21.5
Jun 22
Basic earnings per share pence
Jun 18 Jun 19 Jun 20 Jun 21
18.0
18.0
20.0
22.0
9.0
9.0
13.5
13.5
10.0
11.0
18.9
16.2
18.8
48.1
38.9
32.3
38.2
20.0
16.1
19.4
23.8
19.7
Jun 22
44.2
24.5
Underlying earnings per share* pence
Dividends paid and proposed per share pence
Interim
Special
Final
27.0
40.5
30.0
33.0
22.0
11.0
46.5
AT A GLANCE
Overview
City of London Investment Group PLC Annual Report 2021/2022 3
Strategic report
Financial statements
Shareholder information
Governance
Overview
Investment Management Company Limited
Karpus Investment Management (KIM) provides closed-end fund
strategies across all asset classes to wealth management clients in the
United States.
City of London Investment Management Company Limited (CLIM),
historically specialised in Emerging Markets, but now has expanded
its range to include International, Opportunistic Value, Frontier,
and Real Estate Investment Trust (REIT) strategies, primarily for
institutional clients.
City of London Investment Group PLC (CLIG) is an established asset
management group listed on the London Stock Exchange, consisting
of two wholly owned subsidiaries that invest primarily in closed-end
funds for the benefit of their respective clients
CLIG
$9.2b FuM (£7.6b)
$5.8b FuM (£4.8b) $3.4b FuM (£2.8b)
CLIM KIM
CHAIR’S STATEMENT
4 City of London Investment Group PLC Annual Report 2021/2022
Strategic report
At the start of 2022, it was already clear
that global markets faced challenges from
tightening monetary policy and simmering
tensions in Eastern Europe, as noted in my
17th February 2022 interim statement.
However, the Russian invasion of Ukraine
just one week later served to magnify
dramatically these headwinds in terms of
both intensity and time-scale. The
emergence of open warfare in Eastern
Europe and rising geopolitical tensions
elsewhere is prompting a fundamental
re-think of strategic planning both in terms
of security and defence arrangements as
well as supply patterns of strategic materials,
including energy and food. Arguably,
it is the monetary and inflationary
consequences of supply disruptions, rather
than overt conflict that have most troubled
global markets in 2022, as evidenced by
the 20%+ falls in most developed markets
in the first half of the year. Although the
MSCI emerging market index (MXEF) fell
by less than 20% in the period, it has now
fallen by more than 30% since its 2021
high, placing it firmly in bear market
territory. A paradigm shift in US monetary
policy in response to the inflation surge has
meant that fixed income markets have
provided limited shelter with the US
10-year Treasury benchmark falling 12%
and the 30-year Treasury by no less
than 21% in the year to June 2022.
Despite this plethora of negative news,
corporate balance sheets are relatively
healthy as evidenced by the rising level
of shareholder distributions and buy-backs.
Should supply bottlenecks ease in the
coming months, there are grounds for a
degree of optimism that the surge in price
inflation and monetary tightening will
prove to be of limited duration. Once
again, the high level of market volatility has
illustrated the benefits gained from the
Karpus merger in 2020 in terms of the
diversified revenue base derived from the
transaction and, as always, we view the
defensive qualities of closed-end funds
(CEFs) across each of the CLIG strategies
as an effective means to participate in a
recovery in markets in due course.
Assets and performance
Inevitably, the marked falls across all market
segments have reduced CLIG’s Funds
under Management (FuM) with a 19% fall
in the year as a whole, nearly all of which
occurred in the second half of the year.
Within these figures, CLIM’s FuM fell
23% to US$5.8 billion while KIM’s FuM
fell by 12% to US$3.4 billion, underlining
the defensive nature of KIM’s higher
exposure to fixed income markets.
Shareholders will appreciate that these
figures are due in large part to matters
beyond our control and are mirrored across
the asset management industry as a whole.
Importantly, it was pleasing to note that
fund flows improved markedly in the
second half of the year as a number of
CLIM’s institutional clients chose to
increase equity exposure, in contrast to the
withdrawals that occurred during the more
buoyant conditions of 2021. Particularly
strong inflows to the International CEF
strategy in the second half of the year mean
that this product now accounts for more
than 30% of CLIM’s FuM. Across the year
as a whole, net Group inflows totalled
US$102 million, compared with net
outflows of US$752 million in the previous
year and with a resumption of more active
marketing opportunities in the post-
pandemic world, we are hopeful that the
healthy pipeline will translate into further
inflows in the months ahead.
Relative performance of the main CLIM
strategies was impacted in the immediate
aftermath of the Ukraine invasion
following a mandatory write-down of all
Russian exposure and a widening of
discounts in the CEF universe. More
recently, however, some recovery in relative
performance has been achieved as market
volatility returns to more typical levels and
we expect that, over time, strict adherence
to our investment process will enable a
resumption of the long-term track record
of outperformance. Relative performance
at KIM has again been outstanding with
strong outperformance across six of the
seven strategies. Reduced weightings to
CEFs at a time of widening discounts,
allied to a shift to the more defensive
shorter maturities at a time of rising
interest rates proved key to maintaining
KIM’s excellent long-term track record.
“Irrespective of the macro-economic outlook, the CLIG
business model, focused on value-orientated CEFs
and encompassing a mix of institutional and wealth
management clients, is stronger than in previous
periods of difficult markets. ”
Barry Aling Chair
City of London Investment Group PLC Annual Report 2021/2022 5
Results
Group statutory pre-tax profits rose by 4%
in the year ended 30th June 2022 to
£23.2 million (2021: £22.2 million) while
underlying pre-tax profits*, which exclude
exceptional or non-recurrent items, also
rose by 4% to £27.9 million (2021: £26.7
million). Since results for the prior year
included only a nine-month contribution
from KIM, a more accurate year-on-year
(YoY ) comparison is provided by earnings
per share (EPS). On this basis, fully diluted
statutory EPS fell 6% to 36.4p (2021:
38.8p) and underlying fully-diluted EPS*
fell by 7% to 43.7p (2021: 47.4p). Despite
the ongoing competitive pressure on fees in
the institutional market-place, the Group’s
average revenue margin declined slightly
to 73bp (2021: 74bp).
In parallel to the “Ukraine” impact on
equity and fixed income markets, the
conflict has also prompted strong capital
flows into US dollars, due to its traditional
safe-haven characteristics. The fact that
100% of CLIG’s revenues are earned in
US dollars, therefore, provides a significant
cushion to revenues and profits when
translated into sterling and represents a
useful hedge against sterling weakness.
The benefit of this “hedge” has been
reduced somewhat by the Karpus
acquisition, with non-sterling costs rising
from 56% to 66% of total operating
expenses. Nevertheless an 8% reduction in
average monthly US$ revenues between
the three-month period leading up to the
conflict and the three-month period
thereafter, was reduced to just a 3%
decline when expressed in sterling terms.
Dividends
Shareholders will have noted from my
interim statement a note of prudence
with regard to normal distributions
(i.e. excluding special dividends)
notwithstanding a buoyant result for the
first half of the financial year. While a
build-up of surplus cash allowed the
payment of a 13.5p special dividend in
March, it was already clear at the interim
stage that the second half of the year
would be more challenging and events
since have certainly vindicated the earlier
caution. In light of this, the Board has
declared an unchanged final dividend of
22p to be paid on 4th November 2022 to
those shareholders on the register at
30th September 2022. Taken together
with the interim payment of 11p, total
dividends of 33p for the year (excluding
the special dividend) will be covered 1.13
times by this year’s post-tax earnings or
1.22 times on a rolling five-year average
basis, slightly ahead of the Group’s five-year
dividend cover policy of 1.2 times.
Board
Shareholders were informed at the
interim stage that a full review of Board
composition was underway with a view
to meeting (as far as possible) the
requirements of the UK Corporate
Governance Code (the Code) in terms
of both independence and diversity.
Following this review, led by the Chair of
the Nomination Committee, Jane Stabile,
a reorganisation of the Board was agreed,
to take effect from the close of the financial
year on 30th June 2022, involving the
resignation of three Executive Directors,
Carlos Yuste, Dan Lippincott and Mark
Dwyer, who have joined the new Group
Executive Committee (GEC) to oversee
the day-to-day running of both operating
companies. CEO Tom Griffith’s report in
later pages will provide shareholders with
additional detail regarding the GEC’s
functions while Jane’s Nomination
Committee Report will also address
these changes and the ongoing plans for
diversity and inclusion but I am pleased
to be able to report to shareholders this
significant progress in our governance
architecture less than two years after the
transformative Karpus merger.
I am very grateful to the three Executive
Directors for their invaluable contributions
to the Board’s deliberations over a number
of years as well as their agreement to a
corporate restructuring, which will
facilitate our compliance with the Code
in a timely fashion. The devolution of
operational management to the GEC
will help streamline decision-making on
a day-to-day basis, while providing
clearer demarcation between executive
management and an independent Board.
I am sure that all shareholders will wish to
join me in offering a special thank you to
Barry Olliff, CLIG’s founder and architect
over more than thirty years. As I said in
our April announcement, Barry’s laser-like
focus on value to both shareholders and
clients lies at the core of CLIG’s culture
and permeates everything we do for all
stakeholders. Barry’s willingness to
challenge entrenched orthodoxy in the
investment universe is well recognised and
represents a hugely positive long-term
legacy. The issue of founder succession is
fraught with challenges and can often be
a disruptive process but thanks to Barry’s
support throughout the management
transition, I am pleased to report that it
has been seamless. On behalf of the
Board and all our shareholders, I would
like to say a heartfelt thank you to Barry
and wish him the very best in his well-
deserved retirement.
ESG
One of the positives arising from the
COVID-19 pandemic was the acceleration
in the use of technology to drive reductions
in the environmental impact of business
and CLIG has been active in capitalising
on the gains to be realised in this
important area. Inevitably, a network of six
offices across three continents meant that,
historically, air travel was a significant
component of CLIG’s otherwise low
carbon footprint. The decision to
streamline CLIG’s office network this year,
therefore, with the closure of the Seattle
and Dubai offices, has helped reduce
CLIG’s carbon footprint materially.
Similarly, an increase in client briefings
via video conferences and additional
investment in technology solutions has
enabled greater use of video conferencing
for internal communication and meetings.
Overview
Financial statements
Shareholder information
Governance
Strategic report
* This is an Alternative Performance Measure (APM). Please refer to page 33 for more details on APMs.
CHAIR’S STATEMENT
CONTINUED
6 City of London Investment Group PLC Annual Report 2021/2022
Strategic report
A concerted effort to reduce paper usage
using web-based alternatives for the Annual
Report, portfolio reports and other
research-based publications is helping
reduce the Group’s waste output and the
Group remains committed to further
reductions in our environmental impact
wherever possible.
Many commercial businesses have had to
adjust to new working practices in the post-
COVID world and CLIG is no exception.
The necessity of remote working during the
pandemic provided a template for potential
longer term solutions and to that end, a
hybrid “work-from-home” (WFH) policy
for all employees has been implemented.
Group-wide policies have also been
established on a range of social issues,
including anti-slavery, human trafficking,
anti-corruption, bribery and health and
safety, while all employees will receive two
training sessions on diversity, equity and
inclusion (D/E/I) in the course of calendar
year 2022. We regard these initiatives as
central to the goal of good corporate
citizenship and will continue to encourage
the widest possible level of employee
awareness in the social dimension.
Since the appointment of Prism Cosec Ltd
as Corporate Secretary in 2021 and the
formation of the Corporate Governance
Working Group (CGWG), a series of
changes have been made to CLIG’s
working practices and these are detailed in
the Governance section of this report on
pages 42 to 86. Alongside the measures
taken for Board-level Code compliance
detailed earlier, a programme of regular
engagement with employees has been
established with video conference meetings
across all offices. These meetings provide
employees with the opportunity to raise
any issues with Board members but they
also give Independent Non-Executive
Directors the ability to gain greater insight
into the organisation at all levels, thereby
assisting them in their oversight role.
Outlook
Over the course of the last two years, we
have witnessed extreme volatility in capital
markets and with the threat of long-term
conflict in Europe and double-digit
inflation ever present, it would be foolish
to paint too optimistic a picture for the
year ahead. Nevertheless, at the risk of
sounding “glass-half-full”, I believe there
are some early signs of a more stable
market environment. The economic
dislocation created by reduced energy
and food supplies together with supply
bottlenecks in industry will take time to be
fully resolved but, just as the pandemic
forced technological change in a condensed
time-frame, so economies and companies
will develop alternative trade patterns over
time. While it appears unlikely that we will
see the “V-shaped” bounce that followed
the 2020 COVID-19 lockdowns, central
bankers and businesses alike can see that
the current constraints are largely supply-
driven and not permanent in nature. Since
markets look well beyond the near horizon,
and provided geopolitical friction does not
proliferate beyond the existing conflict,
there are grounds to support the view
that the July 2022 “mini-bounce” may
not be a flash in the pan.
Irrespective of the macro-economic
outlook, the CLIG business model,
focused on value-orientated CEFs and
encompassing a mix of institutional and
wealth management clients, is stronger
than in previous periods of difficult
markets. Furthermore, bear markets
also bring opportunities, be it in the
investment universe or the asset
management industry more generally
and, with this in mind, we continue to
view the future with cautious optimism.
Finally and most importantly, I would
like to thank all of our employees for
their continued and sustained efforts
in helping us navigate another
challenging year with typical dedication,
loyalty and commitment.
Barry Aling
Chair
15th September 2022
City of London Investment Group PLC Annual Report 2021/2022 7
OUR ESG INITIATIVES
Strategic report
• Reduction of two offices – Seattle
& Dubai – which will reduce future
carbon emissions
• Investment in further enhancement
of our technology solutions to
promote regular video conferencing
• Continued DocuSign
implementation across the Group
• Client briefings conducted via
video conferencing
• Further reduction in printing of
annual reports/periodical portfolio
reports and other research-based
publications
Please refer to page 35 for the Group’s
environmental policy initiatives.
• Introduction of a hybrid WFH
policy for all employees
• Established Group level Anti-
Slavery and Human Trafficking
Policy, Anti-Corruption and
Bribery Policy and reviewed
our Health & Safety Policy
• All UK employees received
training on the UK Equality Act
2010 in April 2022
• All employees will receive two
focused diversity, equity and
inclusion training sessions during
calendar year 2022
Please refer to page 34 for the Group’s
social initiatives.
• Board size has been reduced to
meet the UK Corporate Governance
Code requirements of a majority
independent Board
• In-person & virtual workforce
engagement with the Board
• Enhanced reporting in Annual
Report and on Group website
• Risk management – Internal
controls, regulatory compliance
and data protection and privacy
Please refer to page 40 for our
section 172 (1) statement.
Environment Social Governance
Overview
Financial statements
Shareholder information
Governance
Strategic report
CHIEF EXECUTIVE OFFICER’S STATEMENT
8 City of London Investment Group PLC Annual Report 2021/2022
Strategic report
Stronger together
The past year was a successful one for your
Company in the face of the macroeconomic
headwinds outlined in Barry Aling’s
comprehensive Chair’s Statement. This
success resulted from the combined strength
of the merged entity for reasons which will
be detailed below. We enter the new financial
year focused on delivering continued growth
driven by strong investment performance
and the high quality of services supporting
our institutional and high net worth
(HNW) clients.
A number of headwinds confronted us
during the past year. In addition to
pandemic-related quarantines, labour
shortages and supply-chain disruptions,
the outbreak of war in Ukraine in February
2022 led to steep declines in global stock
and bond markets while causing the US
dollar to soar as a haven asset.
To illustrate the extent of the market falls
over the year ending 30th June 2022, the
US bond market, as measured by the
Bloomberg US Aggregate Bond Index, had
its worst twelve-month period since 1976,
as shown in the table on the right.
Further, and for the first time in over
20 years, all eight main asset categories
managed at the Group’s two subsidiaries
delivered negative annual returns, as
illustrated in the asset class returns
chart below.
“We will continue to strengthen the operational and
investment capabilities of the Group by building out
the distribution pipeline for institutional investment
and wealth management products.”
Tom Griffith Chief Executive Officer
Bloomberg US Aggregate Bond Index
Rolling 12 Month Returns
1976 to 2022 (US$)
Worst 12 Months
End Date Returns
30/6/2022 -10.29%
31/3/1980 -9.20%
29/4/2022 -8.51%
29/2/1980 -8.34%
31/5/2022 -8.22%
30/6/1981 -5.15%
31/7/1981 -5.01%
Asset Class Returns
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
Source: Bloomberg, Annual periods ending 30th June. (US$) terms
30/6/2012
30/6/2013
30/6/2014
30/6/2015
30/6/2016
30/6/2017
30/6/2018
30/6/2019
30/6/2020
30/6/2021
30/6/2022
30/6/2001
30/6/2002
30/6/2003
30/6/2004
30/6/2005
30/6/2006
30/6/2007
30/6/2008
30/6/2009
30/6/2010
30/6/2011
-20%
-10%
Index Index Name Strategy
MXEF
MSCI EM Index Emerging
MXWO
MSCI World Index International
MXWOU
MSCI World Ex US Index Global
LMBITR
Bloomberg Muni Bond Total Return Index Municipal Bond
VBINX
Vanguard Balanced Index ETF Balanced
LEGATRUU
Bloomberg Global-Agg Total Return Index Global Bond
LBUSTRUU
Bloomberg US Aggregate Bond Index US Bond
SPX
S&P 500 Index Domestic US
City of London Investment Group PLC Annual Report 2021/2022 9
As a result of the Karpus Investment
Management (KIM) merger your
Company now demonstrates a
dramatically more diversified asset base,
with 40% of Funds under Management
(FuM) in Emerging Markets (EM), down
from 69% at the point of the merger,
along with significantly reduced volatility
in the earnings stream. The reduction of
EM-specific risk to shareholders is a
significant benefit of the merger and
supports the dividend policy
of the Company.
Through the merger, our commitment to
our Clients and their Consultants was that
the investment teams would not be
impacted by corporate changes in order to
safeguard our well-honed investment
processes. This stability of people and
process is critical to both institutional
investors and HNW clients.
Equally importantly, our expanded group of
colleagues at CLIG see opportunities for
career growth within the Group as new
opportunities arise. We anticipate that more
such opportunities will arise as we continue
to conservatively build upon sharing
services across the subsidiary companies.
The past financial year demonstrates why
diversification has been prioritised.
Executive management will continue to
evaluate opportunities for consideration
by your Board.
FuM & flows
FuM as at 30th June 2022 was US$9.2
billion, which is a 19.4% decrease over the
financial year, reflecting weakness in the
underlying asset classes.
While it is difficult to tout the importance
of diversification after a year when both
fixed income and equity markets fell, the
smaller decline in fixed income relative to
EM equities is a good reminder that
diversification remains beneficial, and that
CLIG shareholders receive exposure to a
broad variety of asset classes. This broad
asset class exposure was achieved after years
of organic growth within City of London
Investment Management (CLIM), and
bolstered by the KIM merger in October
2020, as shown in the table above.
CLIG had net inflows during the financial
year, despite a challenging market
environment. At CLIM, the International
(INTL) strategy has been the main driver of
inflows during this financial year after re-
opening to new clients earlier in 2022. The
INTL strategy has now seen net inflows
for five of the last six financial years.
KIM had net outflows for the financial
year, as their primarily HNW client base
reduced exposure to markets given the
higher volatility, especially in the second
half of the financial year.
Net outflows at CLIM’s flagship EM
strategy continued. As the table above
shows, CLIM’s EM strategy has now had
Net investment flows (US$000’s)
CLIM FYE 2019 FYE 2020 FYE 2021 FYE 2022
Emerging Markets (183,521) (279,459) (275,493) (315,770)
International 252,883 551,102 (14,145) 452,554
Opportunistic Value 48,236 45,914 (102,663) 617
Frontier (21,336) 16,178 (168,843) (4,748)
Other/REIT 6,000 4,600 – 79,133
CLIM total 102,262 338,335 (561,144) 211,786
KIM FYE 2019 FYE 2020 FYE 2021* FYE 2022
Retail 33,701 26,323 (104,222) (106,444)
Institutional 9,050 (67,087) (130,911) (3,302)
KIM total 42,751 (40,764) (235,133) (109,746)
* Includes net investment flows for Retail (24,407) and Institutional (20,264) pertaining to period before 1st October (pre-merger).
net outflows for each of the last four
financial years, despite strong relative
performance for the majority of this
period. The geopolitical concerns that have
arisen in EM countries, including
Russia/Ukraine, North Korea/South
Korea, and China/Taiwan, have given
some investors pause, despite attractive
valuations and wide discounts. The
underperformance of EM vs Developed
equities over the past ten years, shown in
the chart on the following page, has also
had a negative effect on investor sentiment
towards the asset class. EM equities as
shown by the MSCI EM Index have
significantly lagged two widely used
proxies of Developed Market equities:
1) The US market, as shown by the S&P
Overview Financial statements Shareholder informationGovernance
Strategic report
CLIG – FuM by line of business (US$m)
30 June 2019 30 June 2020 30 June 2021 30 June 2022
% of CLIM % of CLIM % of CLIM % of CLIG % of CLIM % of CLIG
CLIM US$m total* US$m total* US$m total* total US$m US$m total
Emerging Markets 4,221 78% 3,828 69% 5,393 72% 47% 3,703 64% 40%
International 729 14% 1,244 23% 1,880 25% 17% 1,812 32% 20%
Opportunistic Value 233 4% 256 5% 231 3% 2% 193 3% 2%
Frontier 206 4% 175 3% 13 0% 0% 9 0% 0%
Other/REIT 7 0% 9 0% 13 0% 0% 74 1% 1%
CLIM total 5,396 100% 5,512 100% 7,530 100% 66% 5,791 100% 63%
30 June 2019 30 June 2020 30 June 2021 30 June 2022
% of KIM % of KIM % of KIM % of CLIG % of KIM % of CLIG
KIM US$m total* US$m total* US$m total* US$m US$m total total
Retail 2,291 67% 2,401 69% 2,804 72% 24% 2,419 70% 26%
Institutional 1,105 33% 1,087 31% 1,115 28% 10% 1,014 30% 11%
KIM total 3,396 100% 3,488 100% 3,919 100% 34% 3,433 100% 37%
CLIG total 11,449 100% 9,224 100%
* Denotes pre-merger percentages.
500 Index, and 2) Non-US Developed
Markets, as shown by the MSCI World
Ex-US Index. While the US market has
driven overall Developed market
outperformance, non-US markets have
also outperformed their EM peers.
The investment and business development
reviews on pages 12 to 16 further explain
factors impacting global equity and fixed
income markets over the period.
Business integration update
Your management team spent the past
financial year continuing the integration
of the KIM business via projects in
Finance, Operations, Information
Technology, and Marketing. An updated
version of KIM’s website was rolled out
in October 2021 to improve the client
experience. The Group is benefiting
directly from sharing services across
Finance and Information Technology
departments. We intend to continue
to develop synergies as appropriate.
Group’s financial results
The Group’s average net fee margin for the
year was 73bp (2021: 74bp). The Group’s
net fee income over the period was
£58.2 million. Coupled with the US dollar
strengthening versus sterling throughout
the year from 1.39 to 1.21, Group
earnings were buoyed by a full year of
KIM fee income which is 100% US
dollar denominated.
CLIG profitability, cash and dividends
Operating profit before profit-share,
EIP, share option (charge)/credit and
investment gains/(losses) grew by 7.7%
to £38.4 million (2021: £35.6 million)
(as set out on page 30) primarily as a result
of full year results for KIM in FY 2022 as
against nine months (since merger) in FY
2021. Profit before tax increased to £23.2
million (2021: £22.2 million). Please refer
to the Financial Review on page 30 for
additional financial results.
The Board has recommended a final
dividend of 22p per share (2021: 22p),
subject to approval by shareholders at the
Company’s Annual General Meeting to be
held on 31st October 2022. This would
bring the total dividend payment for the
year to 46.5p, including the special
dividend of 13.5p paid in March 2022
(2021: 33p, special dividend nil).
Rolling five-year dividend cover, excluding
the special dividend equates to 1.22 times
(2021: 1.29 times) in line with our target.
Please refer to page 22 for the dividend
cover chart, which provides an overview
of our dividend policy.
Inclusive of our regulatory and statutory
capital requirements, cash in the bank was
£22.7 million as at 30th June 2022 as
compared to £25.5 million at 30th June
2021, in addition to the seed and other
own investments of US$9.1 million
(£7.4 million) (2021: US$5.8 million
(£4.4 million)). Our cash reserves will
allow us to continue managing the business
conservatively through volatile markets
while following our dividend policy. The
CLIG Board continues to review the
appropriate cash reserves needed to run the
larger, but more diversified business, and
assesses variables such as the impact of
future revenue projections in case of a
broad retreat in underlying asset prices.
A review of CLIG’s Share Price KPI can
be found on page 23. Over the past five
years, the average annualised return to
shareholders is 9.2%, within the 7.5% –
12.5% target range.
10 City of London Investment Group PLC Annual Report 2021/2022
CHIEF EXECUTIVE OFFICER’S STATEMENT
CONTINUED
Strategic report
10 Year Underperformance of Emerging Markets Equities (US$, re-based to 100)
0
100
200
300
400
500
30/6/2012
30/6/2013
30/6/2014
30/6/2015
30/6/2016
30/6/2017
30/6/2018
30/6/2019
30/6/2020
30/6/2021
30/6/2022
MSCI EM IndexMSCI World Ex-US IndexS&P 500 Index
Source: Bloomberg
Overview
Financial statements
Shareholder information
Governance
City
of London
Investment
Group PLC
Annual
Report
2021/2022
11
EIP
The Employee Incentive Plan (EIP)
continues to be an integral part of our
remuneration package in order to align
employee and shareholder interests. This is
highlighted by the ongoing take-up by
employees across the Group who continue
to benefit from 1) being part of, and 2)
owning, a public company. As at 30th June
2022, CLIG employees owned 7% (2021:
6.4%) of CLIG’s issued share capital.
Corporate Governance & Stakeholders
As Barry Aling stated in his Chair’s
statement, on 26th April 2022 our Board
announced the restructure of the CLIG
Board, and the creation of the Group
Executive Committee (GEC) to provide
executive oversight of the Group’s
operating businesses, CLIM and KIM.
The GEC is comprised of myself,
as CEO, Carlos Yuste (Head of Business
Development), Mark Dwyer (Chief
Investment Officer – CLIM), Dan
Lippincott (Chief Investment Officer –
KIM), and Deepranjan Agrawal (Group
Chief Financial Officer). Simply stated,
the GEC is responsible for the
management and oversight of Group
operating activities, including the executive
management of CLIG’s subsidiary
companies. Each member of the GEC is
responsible for reporting directly to the
CLIG Board, and may participate in
CLIG Board presentations and
discussions as necessary. One of our goals
over the past two financial years was to
determine how to best become compliant
with Provision 11 of the UK Corporate
Governance Code, and this restructuring
allows us to achieve that objective.
The CLIG Board was helped directly from
the skills, expertise, and on-the-ground
oversight by the Executive Directors during
the pandemic, when travel and in-person
engagement was limited. With pandemic-
related restrictions lifting, we have more
recently benefited from opportunities for
Board members to meet CLIG employees
in-person in London (October 2021),
Coatesville (April 2022), and Rochester
(July 2022) at off-site events. You can
find additional details on the Board’s
engagement with stakeholders in our
Section 172 (1) statement, on page 40.
Cybersecurity update
Information Security remains a critical
area of concern within the financial
services industry. In the US, the Securities
Exchange Commission (SEC) is
increasingly focused on data issues,
recently proposing new regulations
governing cybersecurity and data privacy
and protection designed to improve the
industry’s ability to respond to threats.
Each year, the number of cybersecurity
attacks and breaches increases.
To best position CLIG’s defences against
potential threats, the Group undertook an
assessment with a leading organisation in
the Information Security industry to
gauge our overall cybersecurity
framework. This follows an ongoing
multi-year effort to bolster our internal
systems, controls and procedures,
inclusive of penetration testing, employee
training, and threat detection.
We received an above average assessment
of our programme based on the size of
our organisation within the financial
services industry. We also received several
suggestions to further strengthen our
defences mainly based on reporting and
incident response protocols. Efforts are
underway to implement changes designed
to further strengthen the Group’s
programme. We are focused on constant
improvement, and we are committed in
our approach to safeguarding the
Group’s data and infrastructure from
criminal attacks.
Retirement of CTO
CLIG’s Chief Technology Officer,
Alan Hoyt, retired on 30th June 2022.
Over his tenure at CLIG, Alan guided the
development of our global infrastructure
and the related implementation of systems,
applications and data sharing necessary in
a continuously evolving technology
environment. Alan’s transition includes a
six-month post-retirement consultancy
arrangement with CLIG. We wish Alan
the best of luck in his retirement, and
extend our gratitude for his work on
CLIG’s IT and Cybersecurity efforts over
the past 12+ years. Matt Szoke was
promoted to the Head of IT role on
1st July 2022.
Environmental reporting update
The Taskforce on Climate-Related
Financial Disclosures (TCFD) developed
guidance in relation to consistent climate-
related financial disclosures. CLIG
welcomes the TCFD recommendations
and have included our report on page 38
in alignment with them.
Retirement of Barry Olliff,
CLIG Founder
Finally, with CLIG Founder Barry Olliff’s
retirement from the Board on 31st July
2022, I’d like to extend my thanks and
appreciation for his work on behalf of all
stakeholders. Specifically, Barry’s counsel as
the Founder and long-time CEO has been
invaluable during the management
transition. Barry’s passion for the business,
and clear eye towards the future growth
opportunities via diversification, are woven
into the culture of CLIG, and will
continue into the future.
CLIG outlook
CLIG remains well-positioned in the
current market environment. Our
conservative management style will not
change, nor will our investment-led
approach with a view to ensuring strong
investment performance for our clients.
We will continue to strengthen the
operational and investment capabilities of
the Group by building out the distribution
pipeline for institutional investment and
wealth management products. We will also
continue to be selective in identifying
potential acquisitions, which we believe
will inevitably appear given the difficult
market conditions of the past year.
Tom Griffith
Chief Executive Officer
15th September 2022
Strategic report
INVESTMENT REVIEW – CLIM
12 City of London Investment Group PLC Annual Report 2021/2022
Strategic report
12
10
8
6
4
2
0
-2
-4
EM CEF
Frontier
Rate of return (%)
Emerging (Free) Markets Country Fund Composite
MSCI EM Net TR Index
Global Developed CEF International Equity Composite
MSCI ACWI ex-US Net TR Index
Frontier Markets Composite
S&P Extended Frontier 150 Index
Opportunistic Value Composite
Blended 50/50 MSCI ACWI/Barclays Global Agg Index
*The above returns are annualized and presented as gross of fees performance figures, which do not reflect the deduction of
investment management fees. The Emerging (Free) Markets Country Fund Composite and MSCI EM Net TR Index are shown
against the eVestment Global Emerging Markets Equity Universe. The Global Developed CEF International Equity Composite and
MSCI ACWI ex-US Net TR Index are shown against the eVestment All ACWI ex-US Equity Universe. The Frontier Markets Composite
and the S&P Extended Frontier 150 Index are shown against the eVestment Frontier Markets Equity Universe. The Opportunistic
Value Composite and the Blended 50/50 MSCI AWCI/Bloomberg Global Agg Index are shown against the eVestment All Global
Balanced/TAA Universe. Data is as of 30th June 2022. Past performance is no guarantee of future results.
Source: eVestment Analytics System, BNY Mellon, City of London Investment Management, MSCI, S&P, Bloomberg
INTL CEF
OV
CLIM Composite Returns – Five years ending June 2022
Risk assets fell over the twelve-month
period ending 30th June 2022 as elevated
US valuations met sharply higher interest
rates, reducing the value of future cash
flows. Most risk assets declined in a
relatively correlated manner, reducing
the benefits of diversification.
Active equity managers generally struggled
to outperform over the period. In CLIM’s
case this was noticeable through weaker net
asset value (NAV) performance at the
underlying closed-end funds (CEFs) – and
particularly visible in the International
(INTL) CEF Strategy (underperformed by
4.2%) as the funds we own in aggregate
had a bias to smaller, higher growth
equities. In the core Emerging Market
(EM) strategy (underperformed by 2.4%) a
modest, long held overweight to Russia was
negative as Russian equities were marked to
zero. Discounts generally widened over the
period, particularly for the INTL CEF
strategy as retail investors, typically the
marginal CEF buyer, turned cautious after
a decade of strong returns. CLIM’s smaller
strategies Opportunistic Value (OV) and
Frontier had a mixed year – OV suffered
from the same NAV underperformance
trend as the INTL strategy and ended the
year 2.6% behind benchmark. The
Frontier strategy outperformed by 8.2%
with good returns from country allocation
and NAV performance.
CLIM’s REIT team delivered another year
of solid relative performance. The strategy,
which incepted in January 2019, ended
the period with a strong three-year track
record which bodes well for asset growth
in the medium term. Unfortunately the
EM REIT asset class remains out of favour
with allocators given the long-term
absolute performance. Indeed EM REITs,
with a total return of minus 23% over the
ten years ending June 2022, have proved
the exception to the “Everything Rally”
of the past decade. Although this weak
performance does not imply imminent
mean reversion the value characteristics of
the asset class – a dividend yield of 5.4%,
price to book value of 0.7x and P/E ratio
of 7.8x – speak for themselves.
Despite the relative underperformance over
the period, over 95% of CLIM’s assets
remain ahead of benchmark and peer group
over the five years ended June 2022 (see
CLIM Composite Returns chart below).
Our focus on exploiting discount volatility has served clients well for over
thirty years in both bull and bear markets.
Overview
Financial statements
Shareholder information
Governance
City of London Investment Group PLC Annual Report 2021/2022 13
Net flows were positive over the year
following the reopening of the INTL
CEF strategy in December 2020.
Outflows continued in the EM CEF
strategy as the ten-year downtrend in
relative performance between developed
market and EM equities remained in
place. On a positive note outflows
slowed markedly in H2 coincident
with a reversal in this trend.
Robust new CEF issuance increased the
universe by over US$30 billion in the
twelve months ending June 2022. An
enlarged universe of global CEFs (funds
that invest in world markets including the
USA) and US equity focused CEFs
encouraged CLIG to seed a Global CEF
strategy. This product invests in global
equity markets including the USA (in
contrast to the INTL CEF strategy which
excludes the USA) and fills a niche for
US institutions that prefer a “one stop
shop” solution for their global equity
exposure. The INTL, Global, OV and EM
REIT strategies have significant capacity
and will remain a focus for marketing.
CLIM continues to develop proprietary
solutions to enhance and refine the
investment process; typically this
involves further development of our
research database to improve
productivity and client outcomes.
The ability to fully look through
CLIM’s portfolios to the underlying
securities was an important development
in 2020/21. Subsequently we have
partnered with StyleAnalytics to better
understand style factors and ESG risks
in CLIM’s portfolios.
CEF discounts are the overriding
consideration in CLIM’s investment
process but our manager due diligence
does include a review of how ESG risk is
managed by the underlying managers.
We undertake this work in order to
encourage managers to improve their ESG
disclosures and also to keep our clients
better informed about their portfolios.
We believe that improved transparency
will result in better management of ESG
risks by CEF managers and ultimately in
better returns for our clients. The raw
scores for MSCI ACWI suggest that
companies are improving their ESG
performance. In addition, based on
Sustainalytics’ analysis, CLIM’s CEF
portfolios have slightly lower overall
ESG risk than their benchmarks on
average, though this is not a targeted
outcome. Our detailed annual
stewardship report is available here:
https://www.citlon.com/esg-reports/
AnnualStewardshipReport3_22.pdf
The direction of equity markets is
important for fund management
companies. Additionally, for CLIM,
higher markets in a bullish environment
typically result in tighter discounts which
benefits performance – the same can also
be true in reverse. That said the factors
that have negatively impacted our
investment performance over the last six
months – widespread active manager
underperformance and significant
geopolitically driven asset dislocations –
are fortunately rare events. Our focus on
exploiting discount volatility has served
clients well for over thirty years in both
bull and bear markets. Wide discounts and
persistent discount volatility give us
confidence that our CEF strategies will
continue to meet our clients’ longer term
performance expectations.
Strategic report
INVESTMENT REVIEW – KIM
14 City of London Investment Group PLC Annual Report 2021/2022
Strategic report
Recap and outlook
On 13th June 2022 the S&P 500 Index
close marked a greater than 20% decline
from the recent peak on 3rd January 2022
and the Bloomberg US Government/
Credit Bond Index and Bloomberg
Municipal Bond Index both continued
losses from the first quarter at a historic
pace rarely seen.
Aggregate supply continues to be
restricted (largely due to COVID and
global pressures tied to Ukraine) and
demand has been elevated (due to
improved personal balance sheets and pent
up demand post-COVID reopening).
The US Federal Reserve (Fed) was also
extremely accommodative since the
pandemic and heading into this year,
with low borrowing costs aiding both
consumers and businesses.
Coupled with other government aid and
borrowing, some fear that the Fed may
have waited too long to steer the US
economy toward a soft landing (i.e. away
from a recession). Nevertheless, the Fed
has thus far raised rates by 2.25% and
markets expect the Fed funds rate to peak
at 3.5% by year-end. The Fed has also
begun to unwind its balance sheet by
allowing some of the proceeds of maturing
bonds to roll-off. In addition to this,
balance sheet reductions were announced
to scale up to US$95 billion each month
by the end of September 2022.
Two consecutive quarters of negative GDP
in the US coupled with an inverted yield
curve are signalling that a recession is
likely on the horizon. At the forefront for
investors is whether the Fed will continue
on its quest to quell inflation or whether it
will pivot at any sign of market stress and
turn dovish. Either way, we foresee returns
below historic norms and anticipate
continued volatility.
Performance
KIM’s strategies performed well over the
past twelve months driven in large part by
our tactical reduction of closed-end funds
(CEFs) and our significant allocation to
special purpose acquisition companies
(pre-acquisition) (SPACs) trading at
discounts to trust value.
Our discipline calls for us to lower our
exposure to CEFs when discounts are
narrow. This allows us to lock in the added
value and affords us “dry powder” to
purchase CEFs when discounts widen.
Our approach worked well as CEF
discounts widened significantly year over
year. Additionally, CEF net asset value
performance was generally poor
throughout the year.
Where applicable, we opportunistically
allocated a significant portion of our fixed
income and balanced accounts to SPACs.
Our conservative approach is based on
utilising SPACs as a short-term fixed
income alternative. Among other reasons,
we like SPACs because they can trade at
a premium or discount to the cash value
of the trust account (similar to CEFs).
By purchasing shares below the cash value
of the trust account, we view our approach
as buying cash at a discount. Moreover, if
the SPAC management company finds
what the market perceives to be an
attractive acquisition, shares of the SPAC
could trade above cash value.
Clients benefited from our allocation to
SPACs as they were one of the few asset
classes that produced positive returns over
the twelve months ended 30th June 2022.
With all of this said, we continue to
favour the risk/reward proposition
offered by SPACs.
Despite solid short and long-term
performance, flows were net negative as
high net worth clients withdrew funds to
pay taxes and institutional clients sought
to rebalance. While markets have been
challenging, we feel that our strategy has
held up very well. With volatility comes
opportunity and we feel our strategy
is positioned well to capitalise on
market inefficiencies.
The war in Ukraine, global inflationary concerns, and global economic growth
prospects are three major conditions that have rattled both the stock and bond
markets so far this year.
Overview
Financial statements
Shareholder information
Governance
Despite volatile asset markets, net
investment flows were US$102 million
for the Group over the period, with City
of London Investment Management
(CLIM) posting net gains, while Karpus
Investment Management (KIM) saw net
outflows as clients reduced exposure to
markets in the second half of the year.
After a pause in 2020, recently renewed
marketing emphasis for the International
closed-end fund (CEF) strategy was
rewarded, in combination with the
excellent long-term track record.
A key reason for the merger was to
diversify FuM, with Emerging Market
(EM) CEF strategies now accounting for
40% of Group FuM at 30th June 2022,
as compared to 47% at 30th June 2021.
KIM provides balanced mandates for high
net worth and wealth management clients
in the US, with both equity and fixed
income investments. At 30th June 2022,
KIM strategies comprised 37% of Group
FuM, while International CEF strategies
totalled 20% of Group FuM.
With regard to business development,
the Group continues to develop an
active pipeline across all of its major
CEF offerings.
-2,000
-4,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
KIM FuM at merger
Market moves
Opening FuM, as of close of prior financial year
Years shown represent start of historical financial year data which reflects the previous year end FuM as a starting point.
Net flows during financial year
FuM in US$ millions
2013
2012
2011
2010
2015
2014
2009
2006
2007
2008
2017
2019
2021
2023
2022
2020
2018
2016
Total in flows – out flows
City of London Investment Group PLC Annual Report 2021/2022 15
BUSINESS DEVELOPMENT REVIEW
Strategic report
Strategic report
The Emerging Markets CEF strategy
(EM) utilises CEFs to provide exposure
to global emerging markets.
The Conservative Balanced strategy
utilises a combination of CEFs and
other securities, providing exposure to
fixed income and equities in US and
global markets.
The International Equity CEF strategy
(INTL) utilises our experience with
CEFs in our core EM strategy to provide
exposure to global developed markets.
The Opportunistic Value CEF strategy
(OV) provides exposure to a variety of
asset classes via CEFs with a go anywhere
approach. While this is a separate team
from the team managing client assets
in the EM, both teams use the same
methodology and internal operational
resources. Both taxable and tax-exempt
products are available.
The Frontier Emerging Markets CEF
strategy is an extension of the EM core
equity product focusing on the smallest
or pre-emerging markets with high
growth potential.
The REIT strategies, EM and
International are focused on finding
value within the global universe of listed
real estate investment trusts.
PRODUCTS
CLIG’s FuM were US$9.2 billion (£7.6 billion) as at 30th June 2022. This compares
with US$11.4 billion (£8.3 billion) as at 30th June 2021.
BUSINESS DEVELOPMENT REVIEW
CONTINUED
16 City of London Investment Group PLC Annual Report 2021/2022
Strategic report
Performance
Long-term investment performance across
the EM and INTL CEF strategy, as well as
Conservative Balanced mandates, remains
strong, with first or second quartile results
versus manager peers over the three,
five and ten-year rolling periods ending
30th June 2022.
For the year ended 30th June 2022,
investment performance was behind
relevant benchmarks for the bulk of
CLIM's assets due to a combination of
country allocation in the EM strategy
and NAV performance at the underlying
CEFs in the INTL and OV strategies.
KIM’s equity and fixed-income
strategies outperformed their market
indices over the period, while US equity
lagged its benchmark.
The Global Emerging Markets Composite
net investment returns for the rolling
one year ended 30th June 2022 were
-27.9% vs. -25.3% for the MSCI
Emerging Markets Index in USD, and
-24.6% for the S&P Emerging Frontier
Super BMI Index in USD.
The KIM Conservative Balanced
Composite net investment returns for
the rolling one year ended 30th June
2022 were -9.7% vs. -11.3% for the
Morningstar US Fund Allocation –
30% to 50% Equity Category in USD.
The International CEF Composite
net investment returns for the rolling
one year ended 30th June 2022 were
-23.7% vs. -19.4% for the MSCI ACWI
ex US in USD.
The Frontier Markets Composite net
investment returns for the rolling one
year ended 30th June 2022 were -8.6%
vs. -15.6% for the S&P Frontier EM
150 benchmark in USD.
The Opportunistic Value Composite
net investment returns for the rolling
one year ended 30th June 2022 were
-18% vs. -15.2% for the 50/50 MSCI
ACWI/Barclays Global Aggregate Bond
benchmark in USD.
Outlook
Marketing efforts will continue to be
targeted at investment consultants,
foundations, endowments and pension
funds. We will also continue to introduce
our capabilities to family offices, outsourced
CIO firms, and alternative consultants.
Our International CEF, Balanced
mandates, Opportunistic Value capabilities
and REIT strategies will be the focus of
our product diversification and business
development activities.
•
Global Emerging
Markets – 1991
•
China A Share
– 2003
•
Frontier – 2005
•
Special Situations
– 2012
•
Private Equity
– 2016
•
International Equity –
2009
•
Taxable International
Equity – 2019
•
Global Equity – 2021
•
Opportunistic Value
– 2014
•
Tactical Income
– 2014
•
US Municipal Bonds –
2018
•
Taxable Fixed Income
– 1993
•
Tax-sensitive Fixed
Income – 1993
•
Equities – 1993
•
Short-term Fixed
Income – 1993
•
Growth Balanced
– 2004
•
Conservative Balanced
– 2004
Emerging Market
International / Global
Opportunistic Value
KIM Balanced
•
EM REIT
– 2019
•
International REIT
– 2019
REITs
Business diversification – Products map
Overview
Financial statements
Shareholder information
Governance
OUR BUSINESS MODEL
While we remain both proud and protective of our ‘boutique’ status, we seek to meet client needs across a suite of products anchored by
our core expertise in the global universe of CEFs.
City of London Investment Group PLC Annual Report 2021/2022 17
We support teams. What this means is that we discourage the cult of the individual or ‘star’ fund manager, believing that the
risks associated with a star culture are detrimental to both shareholders and clients.
Strategic report
• Emerging Markets
• International
• Opportunistic Value
• Frontier
• REITS
• Taxable Fixed Income
• Tax-Sensitive Fixed Income
• Equities
• Growth Balanced
• Conservative Balanced
• Short-Term Fixed Income
CLIM (INSTITUTIONAL FOCUS)
KIM (HNW FOCUS)
• Management team of 12 senior managers
• Average tenure of 13 portfolio managers is 15 years
• Management team of 5 senior managers
• Average tenure of 8 portfolio managers is 15 years
CLIM (INSTITUTIONAL FOCUS)
KIM (HNW FOCUS)
WHAT WE DO: For many years since the Group was founded, CLIM’s expertise was very specific to
closed-end funds which offered emerging markets exposure. Over time, CLIM has diversified into a
multi-strategy fund manager. KIM became part of the CLIG Group with effect from 1st October 2020.
HOW WE MANAGE: The way in which we manage our business is different too. We are very
risk-averse. Profits, margins and costs are carefully managed to provide our employees with
appropriate remuneration and shareholders with significant, sustainable dividends.
OUR BUSINESS MODEL
CONTINUED
18 City of London Investment Group PLC Annual Report 2021/2022
Strategic report
Stage 1
Analyse
macroeconomic data
Stage 2
Rank markets according to
macroeconomics, based on 13 key criteria
Stage 3
Re-rank markets based upon relative pricing
of country-specific securities
Stage 1
Macro process (top-down) Country allocation
Stock picking (bottom-up) Stock selection
Corp.
activity
Liquidation dates
Discounts to net asset value
Expertise of the fund managers
Stage 2
Stage 3
U
S
E
A
S
T
C
O
A
S
T
UK
S
I
N
G
A
P
O
R
E
Communication – The 24hr trading and management clock (GMT)
12
1
11
2
10
3
9
4
8
5
7
6
6
7
5
8
4
9
3
10
2
11
1
12
MIDNIGHT
MIDDAY
UK/US
IM Meeting
Plus:
• Emails • Blogs • Intranet • Video Conference
US/Singapore
Ad hoc Review
Singapore/UK
IM Meeting
Weekly
Video Conference
on Monday
(All offices attend)
HOW WE DO IT: At CLIM, we have developed and nurtured a team investment process
that does not rely on ‘star’ fund managers, but rather upon experienced fund managers using
analytical procedures that can produce repeatable and sustainable first or second quartile
performance versus our peers.
CLIM’S INVESTMENT PROCESS
CLIM’S COMPETITIVE ADVANTAGE
Our process employs an array of
proprietary tools for analysing and
identifying value. These quantitative tools
supplement both macroeconomic analysis
and over thirty years of trading expertise.
This process has delivered long-term
relative outperformance combined with
low volatility relative to our clients’
benchmarks through both bull and
bear markets.
We believe that our approach and
philosophy differs significantly from our
peers. Our investment process identifies
opportunities to capture pricing anomalies
in securities trading at a discount to their
net asset value. Our resolute focus is on
generating consistent investment
performance – over time and through
economic cycles within a controlled risk
environment.
Overview
Financial statements
Shareholder information
Governance
City of London Investment Group PLC Annual Report 2021/2022 19
Top-down analysis
Global macroeconomic analysis / country, region
and sector analysis / Inflation, interest rates, GDP /
asset allocation targets
Bottom-up analysis
Individual security assessment / Fundamentals
Quantitative
and
qualitative
research
Ongoing
portfolio
monitoring
Select securities
with attractive
risk-adjusted
return potential
Portfolio
construction
Strategic report
KIM has been an active investment manager since the Company’s inception in 1986. With the focus
of managing risk, our Investment Committee formulates our economic overview by reviewing the
economic cycle, analysing historical valuations, analysing growth and policy prospects, and
analysing liquidity and economic momentum.
KIM’S INVESTMENT PROCESS
KIM’S COMPETITIVE ADVANTAGE
By conducting our own proprietary,
in-house research, our strategists, analysts,
portfolio managers, and traders work
together to generate independent and
unbiased ideas.
Our Company’s size also allows us to
capitalise on fundamentally attractive
market inefficiencies as they arise.
Our insight and extensive experience in
closed-end funds identifies opportunities
others may miss. It also allows us to avoid
pitfalls that others may not be aware of.
IN-HOUSE RESEARCH
EXTENSIVE EXPERIENCE
AGILITY
Once an overview is established, a target investment matrix is then created. Sector weightings,
yield curve positioning, and duration targets are guided by this research. Analysts continuously
conduct a security-by-security analysis to identify and capitalise on market inefficiencies.
Our focus is on the advantages offered by purchasing securities, particularly CEFs, at a
discount. However, we also utilise index-based securities if CEFs are not trading at what we
believe are attractive discounts. Once purchased, holdings are analysed on an ongoing basis.
KIM continuously monitors key investment variables, as well as corporate governance
attributes to assess whether shareholder value is being maximised.
OUR STRATEGY AND OBJECTIVES
20 City of London Investment Group PLC Annual Report 2021/2022
Strategic report
Our responsibility is to keep
these three stakeholders in
balance (avoid conflicts) and
to ensure that each of their
interests is safeguarded.
Expect: Superior investment performance,
Openness and accountability, Ethical
treatment.
Expect: Fair treatment, Open
communication, To share in success.
Expect: Relevant risk controls, Quality
earnings, Cost controls.
OUR STRATEGIC GOAL WHY IT IS IMPORTANT
Outperform CLIG’s two operating subsidiaries are active managers, and their
job is to add value over and above a relevant benchmark through
an investment cycle which we define as five years.
Retain
employees
As shareholders would expect, in a Group that has always used
a partnership approach, we take a very long-term view with
regard to remuneration.
Increase FuM
from long-term
investors
The client base of CLIG’s two operating subsidiaries is long-term
and US based, and include pension funds, foundations,
endowments and other institutional money managers.
Remain open in
our dealings with
shareholders, available
and accountable
We believe that our shareholders have a right to know what
to expect from us.
Keep costs
down
We keep costs down because we believe that the assets
over which we provide stewardship are, by definition, not
ours but are owned by CLIG shareholders.
Corporate citizenship Over the past few years there has been a realisation that
corporations have a responsibility both for, and separately
within, the community.
Continue to diversify
our business
We see this as an important component of our strategy to make
the business more robust, manage risk and enhance long-term
shareholder return.
T
H
E
C
L
I
E
N
T
S
P
A
Y
T
H
E
B
I
L
L
S
T
H
E
S
H
A
R
E
H
O
L
D
E
R
S
O
W
N
T
H
E
B
U
S
I
N
E
S
S
T
H
E
E
M
P
L
O
Y
E
E
S
M
A
N
A
G
E
T
H
E
B
U
S
I
N
E
S
S
EXPECT. . .
• Relevant risk
controls
• Quality earnings
• Cost controls
EXPECT. . .
•
Superior
investment
performance
•
Openness and
accountability
•
Ethical
treatment
EXPECT. . .
• Fair treatment
• Open communication
• To share in success
THE CLIENTS:
PAY THE BILLS
THE EMPLOYEES:
MANAGE THE BUSINESS
THE SHAREHOLDERS:
OWN THE BUSINESS
WHY IT IS IMPORTANTOUR STRATEGIC GOAL
HOW ARE WE DOING
CLIM
• Our investment horizon is five years, and over this period the three strategies that make up ~99% of CLIM’s Funds under
Management are all outperforming their peers and benchmark.
KIM
• Long and short-term performance remains solid, with the KIM investment process continuing to add value on behalf
of clients in the face of volatile markets.
Investment
performance
page 24.
Our remuneration policy is stress-tested in a number of ways:
• We have to deal with very volatile cash flows, thus our need to keep salaries towards the lower end of market levels.
• With four offices (not all of which are in financial centres) in three countries, we have to be aware
of different pay scales, policies, costs of living and tax rates.
Employee longevity
page 25.
We have always taken great pride in our client retention outreach programme, and remain open and accountable. Client entity longevity
page 25.
We take the opportunity to meet shareholders whenever possible. This might be at one-to-one meetings with our
larger institutional holders or at group meetings with advisers and individual shareholders. We try to make all of our
announcements clear and accessible. Refer to page 22 for our dividend cover chart and dividend policy.
Dividend paid and
proposed per share
page 2.
A stable workforce limits the cost of recruitment and other costs related to employee turnover.
We do not work in expensive offices and when we travel we do not stay in five star hotels.
Keeping overheads down is good business practice as it provides more money for dividends, bonuses and reserves,
and thus assists with relative job security.
In addition, efforts are made to limit inter-office air travel. Internal meetings are almost exclusively conducted by
video conferencing.
Weighted average net
fee rate page 26.
Cost/Income ratio
page 26.
We encourage employee participation in both local events of national and global charities, as well as local community
specific events. Additionally, by the nature of our four-office structure, this means that we are able to offer a wide array
of community involvement events to employees, and we have found that a greater variety allows for greater participation
throughout the year. In turn, this can also provide for meaningful results as some events will be chosen on a personal
level and will have a greater impact for specific employees and their families. These efforts and services work hand in
hand to protect cultures and customs not only within the community outreach programmes but also within the workplace.
Refer to details on
community contributions
referenced within the
corporate and social
responsibility policy
page 36.
The corporate goal of diversifying the Group's income by building strategies complementary to the flagship Emerging
Markets (EM) CEF strategy was, and continues to be, a priority. The merger with KIM has allowed that diversification to
occur more quickly, as the EM strategy at CLIM has been reduced to 40% of the combined entity as of 30th June 2022.
Marketing efforts remain focused on all strategies to grow the business.
FuM & diversification
page 27.
Overview
Financial statements
Shareholder information
Governance
City of London Investment Group PLC Annual Report 2021/2022 21
*Refer to pages 24 to 27 of explanation of additional KPIs.
Strategic report
LINK TO
ADDITIONAL KPIs
HOW WE ARE DOING
22 City of London Investment Group PLC Annual Report 2021/2022
OUR STRATEGY AND OBJECTIVES
CONTINUED
Strategic report
Dividend cover chart
We have provided an illustrative framework
which we update twice a year to enable
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 year and the assumed
post-tax profit for next financial year based
upon assumptions included in the chart.
Dividends
We have communicated and maintained a
policy of distributing a proportion of net
profits to shareholders by way of ordinary
dividends with a target of 1.2 times (1.2x)
coverage ratio over a rolling five-year
period. This coverage ratio allows for the
needs of the three primary stakeholders to
be balanced.
Receive a predictable and consistent income
stream at an attractive yield that drives
demand for the shares in the marketplace.
Retain a conservative amount of cash at the
corporate level to weather shocks due to the
volatility of underlying assets. This allows
for management to take advantage of
opportunities that arise during periods of
market dislocations when competitors and
the marketplace are stressed.
Have confidence that the underlying
business which they are investing in
will be an ongoing entity with stable
ownership/governance/employees.
We have sought to make our dividend
policy – the most direct way we have of
rewarding shareholders – as clear as we
can. We will continue to pay out the
major part of post-tax profits in dividends.
The Group’s dividend policy is detailed
below. This is going to be applied with
flexibility, with approximately one-third
payable as an interim dividend and
two-thirds as a final.
Dividend policy
This policy was introduced in 2014 and
was reviewed in 2019. No changes were
proposed. It was designed to incorporate
the required flexibility to deal with the
potential volatility of CLIG’s income.
Details as follows:
•
This is not a long-term policy. Rather,
it will be reviewed after five years and
every five years thereafter.
• This policy specifically takes into
account CLIG’s earnings as a result of
its significant present exposure to the
emerging markets.
• This would imply a cover ratio of 1.2x.
• While the cover is targeted as 1.2x, this
will continue to be applied flexibly and
the annual dividend will approximate to
this cover on a rolling five-year average.
• The Board will take into account both
the CLIG budget for the next year and
market outlook when determining the
current year’s dividend.
8,000k
0
1,000k
2,000k
3,000k
4,000k
5,000k
6,000k
7,000k
2021/2022 – £5.6m to reserves 2022/2023 – £3.9m to reserves
2021/2022
2022/2023
2020/2021 – £5.5m to reserves
2020/2021
33p dividend 33p dividend 33p dividend
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Projected earnings (£) Interim dividend paid at 11p.
Proposed final dividend of 22p.
Excludes 13.5p per share of special
dividend paid on 25th March 2022.
Exceptional merger-related cost (£)
Actual earnings (£)
KIMCLIM
Key assumptions
• Number of CLIG Shares in issue (50.7m) less those held by the Employee Benefit Trust (1.7m) as at 30th June 2022.
• Excludes unrealised loss/gains on seed investments.
• Excludes amortisation of intangibles arising on the merger.
• Starting FuM as at 1-Jul-22 1-Jul-22
• Net increase in FuM in 2022/2023 (straight-
lined to June 2023) US$250m US$135m
• Market grow
th:
0% 0%
• Corporation tax based on an estimated average rate 22% 24%
• Exchange rate assumed to be for entire period £1/$1.25 £1/$1.25
Present dividend breakeven (£)
1
1
SHAREHOLDERS
MANAGEMENT/EMPLOYEES
CLIENTS
Dividend cover chart
Overview
Financial statements
Shareholder information
Governance
City of London Investment Group PLC Annual Report 2021/2022 23
KEY PERFORMANCE INDICATORS
Due to the continued diversification of
CLIG’s business away from CLIM’s core
EM strategy, the comparison to MXEF
(MSCI EM Index) as a Key Performance
Indicator (KPI) is no longer relevant.
We retain the share price KPI to show the
total return of CLIG over a market cycle.
The goal of this KPI is for the total return
(share price plus dividends) to compound
annually in a range of 7.5% to 12.5% over
a 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 30th June 2022,
CLIG’s cumulative total return was 55%
(9.2% annualised). We therefore met
the Share Price KPI as the annualised
total return was within the 7.5%-12.5%
target range.
-20%
0%
20%
40%
60%
80%
100%
*Note: CLIG LN rebased to 100 as of starting date
CLIG LN Equity (GBP)
30/06/202230/06/202130/06/202030/06/201930/06/201830/06/2017
CLIG five-year graph
Strategic report
Our focus is to create shareholder value.
KEY PERFORMANCE INDICATORS
CONTINUED
24 City of London Investment Group PLC Annual Report 2021/2022
Strategic report
Annualised % return
*CLIM and KIM returns are compared to their respective eVestment and Morningstar universes.
The above returns are annualized and presented as gross of fees performance figures, which do not reflect the deduction
of investment management fees. The Emerging (Free) Markets Country Fund Composite and MSCI EM Net TR Index are
shown against the eVestment Global Emerging Markets Equity Universe of which 90.3% has been updated. The Global
Developed CEF International Equity Composite and MSCI ACWI ex-US Net TR Index are shown against the eVestment All ACWI
ex-US Equity Universe of which 93.6% has been updated. The Opportunistic Value Composite and the Blended 50/50
MSCI AWCI/Bloomberg Global Agg Index are shown against the eVestment All Global Balanced/TAA Universe of which 81.8%
has been updated. The KIM Conservative Balanced Composite and Morningstar Mod Con Tgt Risk TR USD Index are shown
against the Morningstar Separate Accounts - U.S. - Allocation--30% to 50% Equity Universe.
Data is as of 30th June 2022. Past performance is no guarantee of future results.
Source: Vestment Analytics System, BNY Mellon, City of London Investment Management Company Limited, MSCI,
Bloomberg, Morningstar, KIM
10
8
6
4
2
0
-2
CLIM
EM CEF
CLIM
Intl CEF
CLIM
OV
KIM
Conservative
Balanced
Emerging (Free) Markets Country Fund Composite
Global Developed CEF International Equity Composite
Opportunistic Value Composite
Conservative Balanced Composite
MSCI EM Net TR Index
MSCI ACWI ex-US Net TR Index
Blended 50/50 MSCI ACWI/Barclays Global Agg Index
Morningstar Mod Con Tgt Risk TR USD Index
Five-year peer group* quartile chart
Our reputation depends on consistently
strong investment performance versus
both relevant benchmarks and peers.
Outperformance drives client retention
and provides the opportunity to expand
our client base.
As detailed in the investment reviews, over
95% of the underlying strategies managed
by CLIM and KIM are ahead of
benchmark and peer group averages over
five years.
Separate from our main KPI of CLIG’s total return (share price plus dividends) over
a market cycle, we have selected additional KPIs that we believe will enable
shareholders to measure the future viability of CLIG. These are as follows:
1 INVESTMENT PERFORMANCE
Overview
Financial statements
Shareholder information
Governance
City of London Investment Group PLC Annual Report 2021/2022 25
Headcount
Portfolio
Managers
Portfolio
Managers
2018 2019 2020 2021 2022
Other Other Portfolio
Managers
Other Portfolio
Managers
Other Portfolio
Managers
Other
Over 10 years
0-5 years
5-10 years
100
90
80
70
60
50
40
30
20
10
0
Employee longevity
2000
1500
1000
500
0
Number of client entities
2019 (169)2018 (170) 2020 (173) 2021 (1,999) 2022 (1,967)
Over 10 years
0-5 years
5-10 years
Client entity longevity
Our employees are a major asset. We spend
time ensuring that we recruit, develop and
retain the right people to complement the
team, which in turn helps to create a stable
working environment.
86% of our 21 portfolio managers have
been with the Group* for five or more
years, and 48% of all employees have been
with the Group* for over ten years.
* or with KIM pre-merger
We find that stability of investment
performance equates to stability of clients,
but in addition there needs to be a belief
amongst clients that both our investment
process will be maintained and that our
employees will remain in place.
We have an active client retention
programme in place which has both
educated and ensured that our clients
understand even more about our
investment process. As at 30th June 2022,
the Group had 926 client entities in the
over 10 years category (2021: 911), 448 in
5-10 years (2021: 446) and 593 in 0-5 years
(2021: 642).
Strategic report
2. EMPLOYEE LONGEVITY
3. CLIENT ENTITY LONGEVITY
26 City of London Investment Group PLC Annual Report 2021/2022
Cost/income ratio
2020 202120192018 2022
70%
60%
50%
40%
30%
20%
10%
0%
Cost / income ratio
100
90
80
70
60
50
20
10
40
30
20222020 202120192018
0
Weighted average net fee rate based on average FuM (Bp)
This is the weighted average net fee rate
earned by the Group. Changes in fee
rates, product and investor mix are the
principal factors that impact the weighted
average rate.
The chart opposite shows the annual net fee
income measured as a percentage of the
average annual FuM.
We believe cost control is an important
discipline for any business to be successful.
We look to balance the cost of growth and
development with stakeholder returns.
The cost/income ratio for the Group is
based on our total overheads to net fee
income (as set out on page 30) and was
34% in FY 2022 as compared to 32% in
FY 2021.
4 WEIGHTED AVERAGE
NET FEE RATE
5 COST / INCOME RATIO
KEY PERFORMANCE INDICATORS
CONTINUED
Strategic report
Overview
Financial statements
Shareholder information
Governance
City of London Investment Group PLC Annual Report 2021/2022 27
The level of FuM is a key driver in the
Group’s profitability. Our main business
development strategy is to diversify our
product range. The merger with KIM in
FY 2021 has allowed that diversification
to accelerate.
FuM in US$ millions
2018 2019 202220212020
13,000
12,000
11,000
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
KIM – Institutional KIM – Retail CLIM – Other CLIM – Frontier
CLIM – Opportunistic Value CLIM – International CLIM– Emerging Markets
FuM by strategy
Strategic report
6. FuM AND DIVERSIFICATION
In the course of conducting our business operations, we are exposed to a variety of
risks, including market, liquidity, operational and other current and emerging risks
that may be material and require appropriate controls and ongoing oversight.
RISK MANAGEMENT
Group’s risk management framework
The CLIG Board has the ultimate
responsibility for setting the risk
management framework for the Group,
including discussing and agreeing what the
Group’s overall top risks are, which are
reviewed by the Board at each scheduled
Board meeting.
A Group-level risk register has been
established which identifies principal
current and emerging risks. The risk register
provides a measure of the principal risks
and a Red, Amber, Green (RAG) status
based on the level of risk, frequency and
mitigating controls in place.
CLIM’s Risk & Compliance Committee
(RCC) and KIM’s Compliance Committee
have the responsibility of the day-to-day
oversight of the risk management process at
the respective operating subsidiaries.
CLIM
CLIM’s Board has established an RCC,
which is chaired by CLIM’s Head of
Compliance. The other members of the
RCC are the Executive Directors of
CLIM, the US Chief Compliance Officer
and CLIG’s Internal Counsel. The purpose
of the RCC is to assist the CLIM Board
in the oversight, maintenance and
development of CLIM’s current and
emerging risks and compliance frameworks
in adherence with its risk appetite.
CLIM’s risk management process requires,
on a semi-annual basis, that each
department/line of business, via a
departmental risk assessment, review its
current and emerging risks and the business
processes that occur in each and assign
both an inherent and residual risk rating,
as whilst we cannot eliminate all risk, our
aim is to proactively identify and manage
those risks that have been identified.
The RCC meets quarterly to provide the
members with a regular forum at which to
ensure any relevant issues are discussed
and agreed upon. At its meetings, the
RCC reviews management information
such as the CLIM risk register, breaches
and errors, personal account dealing, other
business interests, gifts and hospitality,
complaints, AML updates including new
clients on-boarded, ongoing screenings,
capital adequacy, liquidity, employee
training, outsourcing and key regulatory
updates, as well as approving new or
updated CLIM policies.
The RCC via CLIM’s Head of
Compliance reports to the CLIG Board
on a quarterly basis and CLIG’s Audit
& Risk Committee at each of its three
scheduled meetings.
KIM
The KIM Board has established a
Compliance Committee which is chaired
by KIM’s Chief Compliance Officer
(KIM CCO) and includes three other
members: KIM’s Chief Financial Officer;
Senior Vice President & Director of
Operations; and KIM’s Chief Investment
Officer/President.
The Committee’s purpose is to review
and assess the Company’s investment
adviser compliance programme in the
following manner: assist the KIM
CCO with administering the investment
adviser compliance programme; evaluate
the Company’s compliance with federal
securities laws; monitor compliance with
the Company’s policies and procedures
as set forth in the Compliance Manual
and Code of Ethics; oversee and assess
the Company’s Information Security
policy and Business Continuity and
Disaster Recovery Plan; oversee and
assess the Company’s Identity Theft
Prevention Programme; and address
other matters that the Management
Committee deems appropriate.
The Committee meets as often as it may
be deemed necessary or appropriate in
its judgement, either in person or
remotely, and at such times and places as
the Committee shall determine; provided,
however, that the Committee shall meet at
least quarterly in the discharge of its
duties. The Committee, via the KIM CCO,
reports to the CLIG Board on a quarterly
basis and CLIG’s Audit & Risk Committee
at each of its three scheduled meetings.
Internal controls
The Group maintains a comprehensive
system of internal controls, including
financial, operational and compliance/
risk controls.
As mentioned earlier, on a six-monthly
basis each department of business
within CLIM is required to review and
update their individual risk assessment.
Additionally, each department of business
within CLIM is subject to an annual
review by senior management, who are
required to identify and report on the key
controls pertinent to their responsibilities.
The senior management team at KIM is
responsible for ensuring adequate internal
controls within KIM.
The Board reviews the effectiveness of the
system of internal controls on an ongoing
basis and this process is subsequently
evaluated by the Audit & Risk Committee.
The Board and the Audit & Risk
Committee continue to consider the need
for an internal audit function and have
concluded that, given the size of the
business, the nature of its activities, and
the other control mechanisms that are in
place, an internal audit function was not
required during the year.
Key risks
The Board has conducted a robust
assessment of the principal risks facing the
Group, including those that would threaten
its business model, future performance,
solvency or liquidity. This assessment
includes continuous monitoring of both
internal and external environments to
identify new and emerging risks, which in
turn are analysed to determine how they
can best be mitigated and managed. The
primary risk is the potential for loss of FuM
as a result of poor investment performance,
client redemptions, a breach of mandate
guidelines or market volatility. The Group
seeks to attract and retain clients through
consistent outperformance supplemented
by first class client servicing.
In addition to the above key business
risk, the Group has outlined what it
considers to be its other principal risks,
including the controls in place and any
mitigating factors.
28 City of London Investment Group PLC Annual Report 2021/2022
Strategic report
Overview Financial statements Shareholder informationGovernance
City of London Investment Group PLC Annual Report 2021/2022 29
In addition, there are a number of less significant financial risks outlined in note 24 on pages 124 to 125.
Team approach, internal procedures, knowledge sharing. Remuneration
packages reviewed as needed to ensure talent/key employees
are retained.
Risk that key employees across the business
leave/significant reliance on a small number
of key employees.
IT monitors developments in this area and ensures that systems are
adequately protected. Additional IT spend has resulted in a number of
ongoing systems vulnerability testing that has taken place on the
network, along with ongoing monitoring of the network to reduce our
vulnerabilities. The Group actively maintains a Disaster Recovery/
Business Continuity plan. All offices maintain backups of all local servers,
applications and data. The US replicates its backup to the UK cloud
provider and vice versa. Employees across its four offices are able to
work remotely, accessing information and maintaining operations.
Risk that technology systems and support
are inadequate or fail to adapt to changing
requirements; systems are vulnerable to
third party penetration or that the business
cannot continue in a disaster.
Mandate guidelines are coded (where possible) into the order
management system by the Investment Management/Compliance
teams of each operating subsidiary.
Risk of a material error or investment
mandate breach occurring.
Compliance teams of each subsidiary monitor relevant regulatory
developments – both new regulations as well as changes to existing
regulations that impact their respective subsidiary. Implementation is
done as practicably as possible taking into account the size and nature
of the business.
The finance team keeps abreast of 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.
Risk of legal or regulatory action resulting
in fines, penalties, censure or legal action
arising from failure to identify or meet
regulatory and legislative requirements in
the jurisdictions in which the Group and its
operating subsidiaries operate, including
those as a result of being a listed entity on
the London Stock Exchange. Risk that new
regulation or changes to the interpretation
of existing regulation affects the Group’s
operations and cost base.
Key person
risk
Technology, IT/
cybersecurity
and business
continuity risks
Material error/
mandate breach
Regulatory and
legal risk
Strategic report
PRINCIPAL RISK CONTROLS / MITIGATION
FINANCIAL REVIEW
30 City of London Investment Group PLC Annual Report 2021/2022
Strategic report
Group income statement and
statement of comprehensive income
For the first time the financial results for
KIM for the full twelve-month period
have been included in the consolidated
income statement ended 30th June 2022.
The merger with KIM was completed
on 1st October 2020 and thus the
consolidated income statement for the
year ended 30th June 2021 only
included the results for KIM over the
nine-month period.
FuM
FuM at 30th June 2022 were US$9.2
billion compared with US$11.4 billion
at the end of the prior financial year.
The decrease was due to a combination
of investment flows, market movements
and performance. Refer to the FuM by
line of business table on page 9 within
the CEO statement. Average FuM for
the year increased by 9% from US$9.7
billion in FY 2021 to US$10.5 billion
in FY 2022.
Revenue
The Group’s gross revenue comprises
management fees charged as a percentage
of FuM. The Group’s gross revenue has
increased YoY by 11% to £61.3 million
(2021: £55.1 million). The increase in
revenue is primarily due to a full year of
revenue for KIM in FY 2022 (nine
months in 2021), higher average FuM
during the year and by a stronger US
dollar against sterling, with an average
GBP/USD rate of 1.33 this year compared
with 1.35 last year, an increase of c.2%
over last year’s average rate.
Commission payable of £1.6 million
(2021: £1.1 million) relates to fees due
to US registered investment advisers for
the introduction of wealth management
clients. The increase is primarily due
to a full year of results for KIM being
included in FY 2022.
The Group’s net fee income, after custody
charges of £1.5 million (2021: £1.6
million), is £58.2 million (2021: £52.5
million), an increase of 11% on last year.
The Group’s average net fee margin for
the year was 73bp as compared to 74bp
for the year ended June 2021.
Net interest paid is made up of interest
earned on bank deposits offset by interest
paid on lease obligations. Refer to page 104
for our lease accounting policy and page
107 for details of net interest paid.
Costs
Total overheads before profit share, EIP, share
option charge and investments (losses)/gains
for the year totalling £19.7 million (2021:
£16.7 million) were 18% higher than 2021,
which was primarily on account of the
inclusion of full year results for KIM.
Consolidated income for financial years ended 30th June
2022 2021
£’000 £’000
Gross fee income 61,294 55,123
Commissions (1,599) (1,101)
Custody fees (1,492) (1,572)
Net fee income 58,203 52,450
Interest (121) (117)
Total net income 58,082 52,333
Employee costs (13,229) (11,126)
Other administrative expenses (5,781) (4,867)
Depreciation and amortisation (696) (719)
Total overheads (19,706) (16,712)
Profit before bonus/EIP – operating profit 38,376 35,621
Profit-share (9,162) (7,923)
EIP (1,298) (1,008)
Share option (charge)/credit (34) 12
Investment (loss)/gain (659) 540
Pre-tax profit before exceptional item and amortisation of
intangibles acquired on acquisition 27,223 27,242
Acquisition – related costs – (1,743)
Amortisation of intangibles (4,051) (3,250)
Pre-tax profit 23,172 22,249
Tax (5,081) (5,259)
Post-tax profit 18,091 16,990
The Group income statement is presented in line with UK-adopted International
Accounting Standards on page 94 but the financial information is reviewed by the
management and the Board in a slightly different way, as in the table provided
below. This makes it easier to understand the Group’s operating results and
shows the profits to which the Group’s profit-share provision applies.
Overview
Financial statements
Shareholder information
Governance
City of London Investment Group PLC Annual Report 2021/2022 31
The Group’s cost/income ratio, arrived
at by comparing total overheads with
net fee income, was 34% in FY 2022
(2021: 32%).
The largest component of overheads
continues to be employee-related at
£13.2 million (2021: £11.1 million), an
increase of 19% over last year. This is
mainly on account of the full year of
KIM employee costs in FY 2022 (as
compared to nine months of costs in
FY 2021) and a stronger US dollar during
the second half of FY 2022. Average
headcount in FY 2022 was 114 as
compared to 99 in FY 2021. Other
administrative overheads have increased
by a similar 19% to £5.8 million (2021:
£4.9 million) mainly due to a full year
of KIM costs included in FY 2022, a
stronger US dollar during the second
half of FY 2022 as well as an increase in
travel and marketing costs post-COVID.
Total net fee income less overheads
resulted in a profit before profit-share/
EIP/share options charge and investment
(losses)/gain of £38.4 million (2021:
£35.6 million).
The total variable profit-share amounted
to £9.2 million as compared with £7.9
million in 2021, an increase of 15.6%
mainly on account of the full year of KIM
costs included in FY 2022 as well as the
impact of a stronger US dollar during the
second half of FY 2022.
The Group’s Employee Incentive Plan
(EIP) charges amounted to £1.3 million
(2021: £1.0 million), the increase is a
result of the impact of a stronger US dollar
during the second half of FY 2022 and
KIM employees’ full year participation in
the current year’s plan. The Group’s EIP
was offered to KIM employees from 1st
January 2021 and thus FY 2021 only
included a charge for six months.
Investment (losses)/gains
Investment losses of £0.7 million (2021:
gain of £0.5 million) relate to the
unrealised (losses)/gains on the Group’s
seed and other investments.
Amortisation of intangibles
Intangible assets relating to direct
customer relationships, distribution
channels and KIM’s trade name
recognised on the merger with KIM are
being amortised over 7-15 years (refer to
note 1.6 of the financial statements) and
have resulted in an amortisation charge of
£4.1 million for the year (2021: £3.3
million). Deferred tax liability as at 30th
June 2022 amounted to £8.6 million
based on the relevant tax rate, which will
unwind over the useful economic life to
the associated assets. Goodwill amounting
to £69.7 million was also recognised on
the completion of the merger. Foreign
currency translation differences on the
closing balances of intangibles have been
recognised in other comprehensive
income. Refer to note 12 of the financial
statements for more details.
Taxation
The pre-tax profit of £23.2 million
(2021: £22.2 million), after a corporation
tax charge of £5.1 million in FY 2022
(2021: £5.3 million), at an effective rate of
22% (2021: 24%), results in a post-tax
profit of £18.1 million (2021: £17.0
million), which is all attributable to the
equity shareholders of the Company.
Group statement of financial position
The Group’s financial position continues
to be strong and liquid, with cash
resources of £22.7 million as at 30th
June 2022 as compared with £25.5
million as at 30th June 2021. As a result
of the merger with KIM in October
2020, as at 30th June 2022, c.53% of
the Group’s shareholders are now based
in North America. Although the
Group continues to declare dividends in
sterling, from October 2022, we have
provided the option for shareholders to
receive dividends either in sterling or
US dollars, at a pre-determined exchange
rate. Further, post-merger c.66% of
Group’s operating expenses are incurred
in non-sterling currencies. In order to
pay the anticipated US dollar dividends
and non-sterling expenses, c.58% of the
Group’s cash resources are held in
US dollars as at 30th June 2022.
The Group invested US$5 million
(£3.9 million) in seeding its two REIT
funds at the start of January 2019. By
the end of June 2022, these investments
were valued at £3.8 million (2021:
£4.2 million), with the unrealised loss
(2021: gains) taken to the income
statement.
During the year the Group has invested
US$2.5 million (£1.9 million) in seeding
a new Global Equity CEF Fund in
December 2021 and US$2.5 million
(£1.9 million) in a Special Purpose
Acquisition Company (SPAC) strategy in
March 2022. By the end of June 2022,
these investments were valued at £3.6
million (2021: nil), with the unrealised
loss of £0.2m (2021: nil) taken to the
income statement.
The International REIT and Global
Equity CEF funds are assessed to be
under the Group’s control and are thus
consolidated using accounts drawn up as
of 30th June 2022. There were no third
party investments, collectively known as
the non-controlling interest (NCI) in
these funds as at 30th June 2022 (2021:
£0.2 million).
The Group’s right-of-use assets (net of
amortisation) amounted to £2.4 million
as at 30th June 2022 as compared with
£2.8 million as at 30th June 2021.
Additions to the right-of-use assets during
the year are on account of the Singapore
office lease being modified and extended
during the period.
Strategic report
FINANCIAL REVIEW
CONTINUED
32 City of London Investment Group PLC Annual Report 2021/2022
Strategic report
The EBT purchased 552,730 shares
(2021: 496,354 shares) at a cost of
£2.7 million (2021: £2.5 million) in
preparation for the annual EIP awards
due at the end of October 2022.
The EIP has had a consistently high
level of participation each year since
inception (>60% of Group employees),
with the first tranche of awards vesting
in October 2018. Only 23.5%
(2021: 21.1%) of the shares vesting
during the year were sold in order to
help cover the employees’ resulting tax
liabilities, leading to a very healthy
76.5% (2021: 78.9%) share retention
within the Group.
In addition, Directors and employees
exercised 92,000 (2021: 226,875)
options over shares held by the EBT,
raising £0.3 million (2021: £0.8 million)
which was used to pay down part of the
loan to the EBT.
Dividends paid during the year totalled
£21.5 million (2021: £9.7 million).
The total dividend of 46.5p per share
comprised: the 22p per share final
dividend for 2020/21, 11p per share
interim dividend for the current year
and a special dividend of 13.5p per
share paid on 25th March 2022
(2021: 20p per share final for 2019/20
and 11p per share interim). The
Group’s dividend policy is set out on
page 22.
The Group is well capitalised and its
regulated entities complied at all times
with their local regulatory capital
requirements. In the UK, the Group’s
principal operating subsidiary, CLIM,
is regulated by the FCA. As required
under the Capital Requirements
Directive, the underlying risk
management controls and capital
position are disclosed on CLIM’s
website www.citlon.co.uk.
Currency exposure
The Group’s revenue is almost entirely US
dollar based whilst its costs are incurred in
US dollars, sterling and to a lesser degree
Singapore dollars. The table presented
above aims to illustrate the effect of a
change in the US dollar/sterling exchange
rate on the Group’s post-tax profits at
various FuM levels, based on the
assumptions given, which are a close
approximation of the Group’s current
operating parameters. You can see from the
illustration that a change in exchange rate
from 1.25 to 1.16 increases post-tax profits
by £1.8 million from £15.6 million to
£17.4 million on FuM of US$9.4 billion.
It is worth noting though that while the
Group’s fee income is assessed by reference
to FuM expressed in US dollars, almost
40% of the underlying investments are
primarily in emerging market-related
stocks, and therefore the US dollar market
value is sensitive to the movement in the
US dollar rate against the currencies of
the underlying countries.
To a degree this provides a natural hedge
against the movement in the US dollar
FX/Post-tax profit matrix
Illustration of US$/£ rate effect:
FuM US$bn 8.2 9.2 9.4 9.9 10.4
US$/£ Post-tax, £m:
1.16 13.2 16.5 17.4 19.0 20.7
1.20 12.5 15.8 16.6 18.2 19.7
1.25 11.7 14.8 15.6 17.1 18.7
1.28 11.3 14.3 15.1 16.6 18.1
1.32 10.7 13.7 14.4 15.9 17.3
Assumptions: CLIM KIM
1 Average net fee 71 bp’s 76 bp’s
2 Annual operating costs £6.7m plus US$9.4m plus S$0.8m (£1 = S$1.68) US$7.9m
3 Average tax 22% 24%
4 Amortisation of Intangible £3.4m per annum
Note: This table is intended to illustrate the approximate impact of movement in US$/£, given an assumed
set of trading conditions. It is not intended to be interpreted or used as a profit forecast.
given that as the US dollar weakens
(strengthens) against these underlying
currencies the value of the FuM in US
dollar terms rises (falls).
The Group’s currency exposure also relates
to its subsidiaries’ non-sterling assets and
liabilities, which are again to a great extent
in US dollars. For the UK incorporated
entities, the exchange rate differences
arising on their translation into sterling
for reporting purposes each month is
recognised in the income statement.
In order to minimise the foreign exchange
impact, the Group monitors its net
currency position and offsets it by forward
sales of US dollars for sterling. At 30th
June 2022, these forward sales totalled
US$24.5 million, with a weighted
average exchange rate of US$1.29 to £1
(2021: US$8.3 million at a weighted
average rate of US$1.40 to £1).
The exchange rate differences arising
from translating functional currency to
presentation currency for KIM are
recognised in the Group’s other
comprehensive income.
Overview
Financial statements
Shareholder information
Governance
City of London Investment Group PLC Annual Report 2021/2022 33
Alternative Performance Measures
Jun 22 Jun 21
Underlying profit and profit before tax £ £
Net fee income 58,203,284 52,450,936
Administrative expenses (30,199,393) (25,631,432)
Net interest paid* (121,054) (117,063)
Underlying profit before tax 27,882,837 26,702,441
Deduct/add back:
(Loss)/gain on investments (659,231) 540,172
Acquisition-related costs – (1,743,424)
Amortisation of acquired intangibles (4,051,223) (3,250,185)
Profit before tax 23,172,383 22,249,004
* Net interest paid is made up of interest earned on bank deposits offset by interest paid on lease obligations.
Refer to page 104 for our lease accounting policy and page 107 for details of net interest paid.
Viability statement
In accordance with the provisions of the
UK Corporate Governance Code, the
Directors have assessed the viability of the
Group over a three-year period, taking into
account the Group’s current position and
prospects, Internal Capital Adequacy
Assessment Process (ICAAP) and the
potential impact of principal risks and how
they are managed as detailed in the risk
management report on pages 28 to 29.
The Group will produce its first Internal
Capital and Risk Assessment (ICARA)
in FY 2023.
Period of assessment
While the Directors have no reason to
believe that the Group will not be viable
over a longer period, given the
uncertainties still associated with the global
pandemic, as well as economic and
political factors and their potential impact
on financial markets, any longer time
horizon assessments are subject to a level of
more uncertainty due to external factors.
Taking into account the recommendations
of the Financial Reporting Council in
their 2021 thematic review publication,
the Board has therefore determined that
a three-year period to 30th June 2025
constitutes an appropriate and prudent
timeframe for its viability assessment.
This three year view is also more aligned
to the Group’s detailed stress testing.
Assessment of viability
As part of its viability statement, the Board
has conducted a robust assessment of the
principal risks facing the Group, including
those that would threaten its business
model, future performance, solvency or
liquidity. This assessment includes
continuous monitoring of both internal
and external environments to identify new
and emerging risks, which in turn are
analysed to determine how they can best
be mitigated and managed.
The primary risk is the potential for loss
of FuM as a result of poor investment
performance, client redemptions, breach
of mandate guidelines or market volatility.
The Directors review the principal risks
regularly and consider the options available
to the Group to mitigate these risks so as
to ensure the ongoing viability of the
Group is sustained.
The ICAAP is reviewed by the Board and
incorporates a series of stress tests on the
Group’s financial position over a three-year
period. The level of scenarios included
within the ICAAP are significantly more
severe than our risk appetite, which include:
• significant fall in FuM
• significant fall in net fee margin
• combined stress (significant fall both
in FuM and net fee margin)
Having reviewed the results of the stress
tests, the Directors have concluded that the
Group would have sufficient resources in
the stressed scenario and that the Group’s
ongoing viability would be sustained.
The stress scenario assumptions would be
reassessed if necessary over the longer term.
An example of a mitigating action in such
scenarios would be a reduction in costs
along with a reduction in dividend.
Based on the results of this analysis, the
Board confirms it has a reasonable
expectation that the Company and the
Group will be able to continue in
operation and meet their liabilities as they
fall due over the next three years.
On that basis, the Directors also
considered it appropriate to prepare the
financial statements on the going concern
basis as set out on page 84.
Alternative Performance Measures
The Directors use the following Alternative
Performance Measures (APMs) to evaluate
the performance of the Group as a whole:
Underlying profit before tax – Profit
before tax, adjusted for (loss)/gain on
investments, acquisition-related costs and
amortisation of acquired intangibles.
This provides a measure of the profitability
of the Group for management’s
decision-making.
Underlying earnings per share –
Underlying profit before tax, adjusted for
tax as per income statement, tax effect of
adjustments and non-controlling interest,
divided by the weighted average number of
shares in issue as at the period end. Refer
to note 9 in the financial statements for
reconciliation on page 109.
Strategic report
CORPORATE AND SOCIAL RESPONSIBILITY POLICY
34 City of London Investment Group PLC Annual Report 2021/2022
Strategic report
CLIG recognises that, within the prime function of managing investment assets on behalf
of its clients, it has an overriding obligation to meet the highest standards of corporate
responsibility to all stakeholders, including clients, shareholders, employees and the
communities in which the Group operates.
Employee welfare
In addition to the statutory obligations,
CLIG is committed to maintaining
transparent policies in respect of the
following:
• Recognition of diversity through
recruitment and promotion based on
merit without regard to ethnicity,
gender, religion, sexual orientation,
disability, family or marital status,
language, national origin, political
affiliation, race, age, or any other
characteristic protected by law.
• Strict adherence to and compliance with
the regulatory requirements in force by
all employees supported by clear
guidelines that enable whistleblowing.
• Participation by employees in the Group’s
activities through share ownership
arrangements that encourage employee
retention and minimise turnover.
• Ensuring good practices and creating a
workplace free of harassment and
bullying and in which all individuals are
treated with dignity and respect.
Under the 2018 Corporate Governance
Code (the Code), the Board is required
to agree a mechanism to ensure
ongoing engagement with the workforce.
Barry Aling, Chair, has been designated
as the Non-Executive Director for
employee engagement.
Health and Safety
CLIG is committed to maintain a high
level of Health and Safety (H&S). Internal
H&S audits and risk assessments are
conducted to improve ergonomics
throughout its offices. All UK employees
have access through our Group Income
Protection policy to the Lifeworks
Assistance programme, which offers
confidential advice on personal and
professional matters to employees and
members of their immediate family.
Gender diversity
As an employer, CLIG is committed to
equality and valuing diversity within its
workforce. As noted above, we believe that
people should be appointed to their roles
based on skills, merit and performance. We
recognise that diversity adds value and our
goal is to ensure that our commitments,
reinforced by our values, are embedded in
our day-to-day working practices.
Post restructure of the Board on 30th June
2022 and after the retirement of Barry
Olliff on 31st July 2022, the gender ratio
at Board level as at 31st July 2022 was
29% female to 71% male (30th June 2021:
18% to 82%).
Of our 111 employees, excluding Non-
Executive Directors, 37% are female
(2021: 36%), including 33% of senior
management including Executive
Directors (2021: 31%), and 38% of the
remaining employees (2021: 37%).
2022 Female Male Total
Executive Directors* 0 1 1
Senior managers 6 11 17
All other employees 35 58 93
41 70 111
NEDs* 2 4 6
43 74 117
* as of 31st July 2022 post restructure of the Board on
30th June 2022 and Barry Olliff’s retirement on
31st July 2022.
Work/life balance
As the Group continues to adapt with
advancements in technology, changes in
culture, and the changing family
circumstances of our employees, we try
to be fair and flexible while retaining
teamwork as one of our core values.
CLIG employees faced another
challenging year and our priority
continued to be ensuring their safety
and well-being. Accordingly, during FY
2022, employees were provided flexibility
to work from home (WFH) up to a
certain number of days.
Our management team and the Board
continued to engage ensuring open
discussion with the wider workforce and
implemented a new hybrid WFH policy
with effect from 1st July 2022. We believe
this better achieves the necessary balance
of employee flexibility with respect to
work/life balance whilst maintaining the
benefits of employees working together
in the office.
Human rights
CLIG is committed to respecting all
human rights. Our operations and
practices relevant to the workplace and
community are aligned with the United
Nations (UN) Universal Declaration of
Human Rights.
Learning and development
Our employees are an asset to us. We
recognise and support the importance of
encouraging all employees to complete
professional qualifications relevant to their
role, in order to progress and realise their
full potential. We partner with our
employees and contribute towards their
development by sponsoring their studies and
providing study leave. This year we have
sponsored employees for their CFA studies.
This is in addition to the usual seminars and
conferences our employees attend.
Mandatory anti-money laundering and
Code of Ethics training is provided annually
to all employees. Employees also take
responsibility for their own development
via our annual appraisal process, where
they are able to discuss further training
where they feel it is necessary.
We continue with the CLIG Security
Education Programme (CSEP), which
is a multi-faceted cyber security training
1. WORKPLACE
Overview
Financial statements
Shareholder information
Governance
City of London Investment Group PLC Annual Report 2021/2022 35
Strategic report
programme that includes online courses
and videos via a web-based portal.
We have further increased the use of
this web-based portal to disseminate a
number of training modules including
in relation to diversity, equity and
inclusion as noted below.
In addition, the following training sessions
are provided to all employees:
• Internal training on our investment
management services.
• Awareness sessions on a regular basis to
keep employees up to date with relevant
aspects of the business.
• Induction programme to all new
employees over a period of several
weeks. It is an ongoing process to
ensure new employees settle well into
the Group and are confident in carrying
out the full scope of their duties.
Group wide policies have been established
on a range of social issues, including
Diversity, Equity & Inclusion, Anti-Slavery
& Human Trafficking, Anti-Corruption &
Bribery and Whistleblowing.
CLIG’s Diversity Working Group which
includes Executive Directors and other
employees (including HR) is responsible for:
• Reporting and assisting in the
implementation of diversity, equity &
inclusion-related initiatives.
• Researching best practices, discussing
issues raised by employees and
implementing solutions across the Group.
• Reiterating with external recruitment
firms the importance of receiving a
diverse pool of candidates.
• Identifying training needs for employees
and distributing them via a web-based
portal. Specific trainings provided during
the year included UK Equality Act 2010
and a wide-ranging review of the terms
‘Diversity, Equity, and Inclusion’.
Ethics
All CLIG employees are required to act in
accordance with applicable Code of Ethics.
This lays out minimum standards of
conduct to ensure that employees act
ethically when dealing with our various
stakeholders. It also seeks to ensure that all
actual and potential conflicts of interest are
identified, mitigated and monitored on an
ongoing basis. Any breaches of the Code
are reported to the Board of Directors.
Tom Griffith is the Executive
Director responsible for the Group’s
environmental policy.
Environmental policy initiatives
Employees and management of the Group
are committed to protect the environment
in which we operate. We provide
investment management service to our
clients which has a relatively modest direct
environmental impact. The Group
recognises that we must first acknowledge,
then measure, and then minimise
environmental risks and, wherever
commercially possible, improve the Group’s
overall environmental performance.
For the last almost two years, our
overarching theme was to use the
(unfortunate) catalyst of the pandemic to
help the business’s environmental profile.
We believe these small improvements
will translate into material, longer-term
reductions in the environmental
footprint of the Group.
A representative list of initiatives
completed during the year to help
reduce the environmental impact of
our activities, is as follows:
• Reduction of two offices – Seattle &
Dubai – which will reduce future
carbon emissions.
• Investment in further enhancement of
our technology solutions to promote
regular video conferencing, thereby
reducing business travel.
• Continued DocuSign implementation
across the Group, thereby reducing the
need for signatures of hard copy
documents.
• Where possible, client briefings
conducted via video conferencing,
thereby reducing business travel.
• Further reduction in printing of annual
reports/periodical portfolio reports and
other research-based publications,
thereby reducing paper usage.
Climate-related risks
At a Group level, we monitor the risks
from a ‘stakeholder’ perspective, as our
three main stakeholders (clients,
employees, and shareholders) are
intertwined. Risks related to climate
change, include, but are not limited to:
• The Group’s clients will potentially be
impacted by negative investment
performance of their portfolios if
there are broad-based declines in
the value of the companies or
investment vehicles due to the
impact of climate change;
• The Group’s employees are located in
four offices around the globe, each
with their own local risks due to
climate change. Pervasive risks
relevant to our employees include
health & safety risks due to extreme
heat, impact on infrastructure,
agriculture, water supplies/scarcity,
wildfires and tree disease; and
• The Group’s shareholders are at risk
of lower returns from their investment
in CLIG due to lower assets under
management as a result of climate change
and the resultant lower profitability.
The Group is committed to using the
lessons learned during the pandemic to
ensure that we realise material, long-term
improvements in reducing the risks to the
environment presented by the Group’s
business operations.
CLIM’s investment process prioritises
good governance but it also includes an
assessment of the environmental and social
policies of the CEFs’ underlying securities.
We promote greater transparency from the
CEFs of the ESG characteristics of
their underlying portfolios.
2. ENVIRONMENT
CORPORATE AND SOCIAL RESPONSIBILITY POLICY
CONTINUED
36 City of London Investment Group PLC Annual Report 2021/2022
Strategic report
We support the work undertaken by
the TCFD and have produced our
first response in alignment with its
recommendations. To meet the listing
requirements under LR 9.8.6, we have
included the climate-related financial
disclosures consistent with the TCFD
recommendations on pages 38 to 39.
We will evolve this through our work
in FY 2023 and improve alignment in
our future disclosures.
Mandatory carbon reporting
Listed companies are required to report
their annual greenhouse gas emissions.
We have used the financial control approach
and utilised the UK Government’s GHG
Conversion Factors for Company
Reporting. For international electricity
conversion factors this year we have used
the US EPA (eGrid) and Singapore EMA
for the first time and so have restated our
prior year emissions for overseas offices for
comparative purposes. The intensity
measurement used is tonnes of carbon
dioxide equivalent (CO
2
e) per average
number of full-time equivalent (FTE)
employees during the year.
Our indirect emissions (Scope 3) increased
due to the increase in business travel
following the easing of pandemic related
restrictions during the year. While this is a
significant increase in business travel from
the previous year, it is well below the pre-
pandemic levels.
CLIG seeks to encourage employees to
regularly participate in community
support activities across a wide spectrum
of causes that encompass both monetary
and non-monetary efforts to help raise
awareness. In turn, this fosters a culture
of leadership, teamwork and appreciation
within our Group and community.
Our long-term goals include:
• Encouraging employee volunteer work
in community activities.
• Engaging in programmes that make
communities better places to live
and work.
• Using local suppliers to help support
businesses within the community.
• Raising awareness, sharing efforts
and encouraging participation via
COLeague news, our internal
newsletter.
During FY 2022, CLIG has partnered
with at least three vendors that are female-
led, which provide services across a variety
of sectors including document production,
website design and company secretarial
services. We chose these companies
because they offer best-in-class services and
products. We are also aware of the benefit
of diversity of thought and leadership
provided by female-led companies, and
will continue to include the gender and
ethnic characteristics of the leadership
teams in the consideration process for any
vendors we look to partner with.
Illustrative list of employees’ participation
in FY 2022 include:
• DEC Ukraine Humanitarian Appeal
(UK) & United Ukrainian American
Relief Committee (US).
• The Elephant Reintegration Trust (UK).
• One Warm Coat (US).
• Food Bank donations to support
underprivileged families and local
shelters in the local communities
(US & UK).
• Salvation Army, a “Socktober” event,
and Community, Youth and Women’s
Alliance gift giving and donations
(US & Singapore).
• Various athletic achievements and
fundraisers to support various causes
(US & UK).
As a matter of policy, CLIG does not
make donations to any client-related
charity, event or activity, or to any
political party or candidate.
Total CO
2
e emissions
Operational scope Greenhouse gas emission source 2022 2021* Units
Energy consumption Electricity – UK 81 79 mWh
Electricity – non-UK 348 323 mWh
Direct emissions (Scope 1) Fuel combustion in owned sources 0 0 mWh
Indirect emissions (Scope 2) Purchased electricity – UK 17 19 Tonnes CO
2
e
Purchased electricity – non-UK 88 86 Tonnes CO
2
e
Indirect emissions (Scope 3) Business travel: flights 131 9 Tonnes CO
2
e
Electricity transmission and 6 6 Tonnes CO
2
e
distribution losses
Total greenhouse gas emissions 242 120 Tonnes CO
2
e
Intensity ratio 2.1 1.2 Tonnes CO
2
e
per FTE
* restated using US EPA (eGrid) and Singapore EMA conversion factors.
Notes:
• Scope 1 emissions are direct emissions from sources owned or operated by the Group and have a mandatory reporting requirement.
• Scope 2 emissions are those associated with electricity consumption and are mandatory to report.
• Scope 3 emissions are voluntary to report but, as they are the largest source of our carbon emissions due to business air travel,
we deem it important to report them here. In accordance with government guidelines, we have also included an estimate of
transmission and distribution losses, common to all buyers of electricity, under Scope 3 emissions.
3. COMMUNITY
Overview Financial statements Shareholder informationGovernance
City of London Investment Group PLC Annual Report 2021/2022 37
Strategic report
Both of CLIG’s operating subsidiaries
invest primarily in closed-end funds
(CEFs). CLIM and KIM are committed
to promoting responsible investment.
CLIM’s investment process prioritises
good governance but it also includes an
assessment of the environmental and social
policies of the CEFs’ underlying securities.
We define ESG in the context of
stewardship policies by which we are
committed to responsible allocation,
management and oversight of capital to
create long-term value. In the context of
a CEF strategy, we have a two-pronged
approach to responsible investment:
• We promote effective governance at the
CEFs in which our clients are invested,
both via their Boards and by engaging
with the relevant regulators and
policy makers.
• We promote greater transparency from
the CEFs of the ESG characteristics of
their underlying portfolios.
CLIM is a signatory to the UN-supported
Principles for Responsible Investment
(PRI). CLIM has partnered with
Sustainalytics, a leading independent
provider of ESG research. This partnership
allows CLIM to receive data to monitor
the underlying portfolio of the CEF, and
allows CLIM to question the CEF
investment manager on their portfolio and
stance on ESG issues. We believe good
disclosure requirements by the Board to
the Investment Manager results in more
effective management of ESG risks and
therefore better outcomes for our clients.
CLIM’s Proxy Voting Record and Annual
Stewardship Report are available on our
website at: https://www.citlon.com/
esg-clients.php.
4. RESPONSIBLE INVESTMENT
CREDIBLE DISCOUNT CONTROL
INDEPENDENT BOARD
CEF GOVERNANCE UNDERLYING PORTFOLIO: OVERALL ESG RISK
EXPOSURE TO ESG
ISSUES
VS.
BENCHMARK
MANAGEMENT OF
ESG RISKS
VS.
RELEVANT BENCHM
ARK
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES
38 City of London Investment Group PLC Annual Report 2021/2022
Strategic report
We are committed to improving our climate-related reporting. We have complied with the
requirements of LR 9.8.6 during the financial year ended 30th June 2022. These pages
explain how we applied the 11 principles of the Task Force on Climate-Related Financial
Disclosures (TCFD) recommendations.
STRATEGYGOVERNANCE
1. BOARD OVERSIGHT
2. MANAGEMENT OVERSIGHT
The Group is exposed to a variety of current and emerging risks
which require appropriate controls and ongoing oversight.
We believe that every employee including Directors of our Group
have a role to play in reducing risks.
The CLIG Board has the ultimate responsibility for identification
and management of climate risk.
The Audit & Risk Committee has oversight of our reporting of
climate risk including the TCFD report.
The Executive Directors have the responsibility to bring climate
matters to the Audit & Risk Committee and Board. Going forward the
Group Executive Committee will be responsible for bringing climate
matters to the Audit & Risk Committee and Board.
Senior managers within the firm are directly responsible for the
management of climate-related risks and their associated
consequences.
3. IDENTIFICATION OF CLIMATE RISKS AND OPPORTUNITIES
4. IMPACT OF CLIMATE RISKS AND OPPORTUNITIES
5. SCENARIO ANALYSIS
Climate change is one of the biggest challenges of our time.
Climate-related risks are identified and monitored from a stakeholder
perspective, which are detailed below:
• The Group’s clients will potentially be impacted by negative
investment performance of their portfolios if there are broad-based
declines in the value of the companies or investment vehicles due to
the impact of climate change. This is a risk over the short, medium,
and long-term.
• The Group’s employees are located in four offices around the
globe, each with their own local risks and initiatives due to climate
change. Pervasive risks relevant to our employees include health
& safety risks due to extreme heat, impact on infrastructure,
agriculture, water supplies/scarcity, wildfires and tree disease.
– The Mayor of London has set targets for London to become a
zero carbon city by 2050 (www.london.gov.uk) to limit future
climate change.
– Our Singapore office is subject to the projected rise in sea levels,
which is a risk for our Singapore employees. In Singapore, the
Ministry of Sustainability and the Environment is responsible
for 1) protecting Singapore against the impacts of climate
change 2) cooperating with international partners and
3) educating Singaporeans about climate change
(www.mse.gov.sg/policies/climate-change).
– The city of Rochester, New York, USA, where our KIM business
is located, has published a ‘Climate Change Resilience Plan’
(https://www.cityofrochester.gov/CCRP/) for residents “to
better prepare our community to adapt to climate change
impacts”. In the United States, there are various initiatives
between the states, cities, and overall government, to reduce
greenhouse gas pollution by 2030 (www.whitehouse.gov –
Statement from April 22, 2021).
• The Group’s shareholders are at risk of lower returns from their
investment in CLIG due to lower assets under management as a
result of climate change and the resultant lower profitability.
CLIG will start conducting a scenario analysis in FY 2023 on various
climate-related risks and opportunities.
City of London Investment Group PLC Annual Report 2021/2022 39
Overview
Financial statements
Shareholder information
Governance
Strategic report
METRICS AND TARGETSRISK MANAGEMENT
6. IDENTIFYING AND ASSESSING CLIMATE RISKS
7. MANAGING CLIMATE RELATED RISKS
8. INTEGRATION INTO OUR RISK MANAGEMENT PROCESSES
We acknowledge that our multiple offices are a significant driver of
our resource use, including carbon and other fossil fuels. We have
reduced two offices in FY 2022 – Seattle & Dubai – which will
reduce future carbon emissions.
We have a fiduciary duty to oversee our client’s assets which they
have entrusted us to manage. To address climate-related risks in our
investments, CLIM’s investment process includes an assessment of
the environmental and social policies of the CEFs’ underlying
securities. CLIM’s investment process promotes greater transparency
from the CEFs of the ESG characteristics of their underlying portfolios.
See page 37 for our Responsible Investment Statement.
CLIG’s risk management of its own risk is included on pages 28 to 29.
9. ALIGNMENT WITH OUR STRATEGY AND RISK MANAGEMENT
10. OUR FOOTPRINT
11. OUR TARGETS
We are focused on reducing the emissions of our operations,
however, as an asset manager, the emissions of our investments
make up the majority of our carbon footprint and have the greatest
impact on the environment.
We are committed to play a positive role in the transition to a net
zero economy and align our strategy to the Paris Agreement goal.
We continue to assess our environmental impact. Refer to page 36
for disclosure of our carbon emissions.
In FY 2023, we will:
• Continue to develop our understanding of climate-related risk at
Board level and across the employee base.
• Review and identify the tools to enhance our understanding of
how climate-related risks impact our business.
• Continue to develop our path towards a net zero transition.
• Make a commitment to reach net zero by a particular date.
SECTION 172 (1) STATEMENT
40 City of London Investment Group PLC Annual Report 2021/2022
Strategic report
Section 172 (1) of the Companies Act 2006 requires Directors to act in the way they consider, in good
faith, would be most likely to promote the success of the Company for the benefit of its shareholders as
a whole and, in so doing, have regard (amongst other matters) to:
• the likely consequences of any decisions in the long term;
• the interests of the Company’s employees;
• the need to foster the Company’s business relationships with suppliers, customers and others;
• the impact of the Company’s operations on the community and environment;
• the desirability of the Company maintaining a reputation for high standards of business conduct; and
• the need to act fairly to all shareholders of the Company.
As part of its decision-making process, the Board considers a broad range of stakeholders however it is acknowledged that, in
balancing different perspectives, it may not always be possible to deliver everyone’s desired outcome. Refer to pages 52 to 53 for our
engagement with various stakeholders.
The Board fulfils its duties in collaboration with the senior management teams of its two operating subsidiaries as detailed on page 17,
who manage the day-to-day operations of the business along with the Executive Directors, the Company’s extensive corporate
responsibility activities as set out on pages 46 to 51 and through the application of the corporate governance framework as set out
in the governance report on page 54.
The relationship with the three key stakeholders of our business (shareholders, clients, employees) has been expressly acknowledged
by the Board since the Group first became a public company in 2006 and has been a key feature of every Annual Report ever since
(see page 20).
Signed on behalf of the Board of Directors of City of London Investment Group PLC.
Tom Griffith
Chief Executive Officer
15th September 2022
Should shareholders have any questions with regard to the content of this report, they are welcome to email us at
investorr elations@citlon.co.uk, but we will obviously not be able to answer any questions of a price-sensitive nature.
Contents
Board Leadership and Company Purpose
– Chair’s introduction 42
– Board of Directors 44
– Board activities 46
– Stakeholder engagement 52
Division of responsibilities
– Corporate governance framework 54
Composition, succession and evaluation
– Board evaluation 55
– Nomination Committee report 56
Audit, risk and internal control
– Audit & Risk Committee report 59
Remuneration
– Chair of the Remuneration Committee’s annual statement 63
– Remuneration overview 65
– Annual report on remuneration 68
– Directors’ remuneration policy 79
Statutory, regulatory and other information
– Directors’ report 84
– Statement of Directors’ responsibilities 86
City of London Investment Group PLC Annual Report 2021/2022 41
Strategic report
Overview
Financial statements Shareholder information
Governance
GOVERNANCE
CHAIR’S INTRODUCTION
On behalf of the Board I am pleased to introduce the
Company’s corporate governance report for this year.
The past year has been a period of evolution in the Company’s
governance framework as we have reflected on the role of the
Board going forward and worked through the implications of
the merger with KIM. While we have made good progress with
this, we are not complacent and recognise that further progress
will be necessary to meet the evolving standards of the UK
Corporate Governance Code (the Code).
Board composition
Last year, I referred to plans that we were developing with
regards to Board composition and I am pleased to report that we
were able to announce those plans in April 2022. The changes
included the formation of a Group Executive Committee
(GEC), chaired by our Chief Executive Officer, Tom Griffith,
which now consists of Tom and our senior executives – Carlos
Yuste, Dan Lippincott, Deepranjan Agrawal and Mark Dwyer.
The creation of the GEC provided an opportunity to
restructure the Board as a result of which Carlos, Dan and
Mark resigned from the Board on 30th June 2022. We believe
that the new structure is more efficient for ensuring that
executive matters at subsidiary level are given the right level of
focus whilst freeing up the Board to oversee the strategic
development of the Group.
On 31st July 2022, Barry Olliff the Company’s Founder retired
from the Board after more than thirty years’ service. As I said
when we announced his retirement, Barry was the architect
and driving force in the development of the business for many
years and he leaves a legacy of high standards of corporate
transparency which are written into the CLIG DNA. His
contribution to the Board’s discussions will be greatly missed.
Last year, we approved the appointments to the Board of Rian
Dartnell and Tazim Essani as Independent Non-Executive
Directors. As a result, we now comply with Provision 11 of
the Code in relation to Board composition, which was an
objective we set ourselves last year.
Looking forward, I have entered my tenth year on the Board
as of 1st August 2022 and we have begun the process of
identifying who will succeed me as Chair. In order to give my
Board colleagues time to undertake this process in a robust and
considered manner, I will offer myself for re-election to the
Board at the 2022 Annual General Meeting (AGM) for one
further year with the intention that I will not seek re-election
at the 2023 AGM.
Diversity and inclusion
In addition to the level of independent representation on the
Board, we are also cognisant of the requirements of the
Hampton-Alexander Review and the new consultation paper
from the FCA on changes to the Listing Rules, both regarding
the level of representation of those from diverse backgrounds
on the Board and in senior management positions. Board
changes during the year have helped us move towards
compliance with the expectations now set and we have begun
to consider how we will comply with recent updates to the
Listing Rules in this regard.
It is our firm intention to comply fully with best practice in
respect of independence, diversity and inclusion both on the
Board and throughout the Group, although shareholders will
appreciate that this needs to be planned over time to ensure
appropriate continuity in serving our clients’ best interests.
During the year, the Board implemented a Board diversity
policy, details of which can be found in the Nomination
Committee report on page 58.
42 City of London Investment Group PLC Annual Report 2021/2022
Governance: Board Leadership and Company Purpose
“We believe that the Board has made some positive and
significant steps forward this year in establishing an
appropriate governance framework for the Group.”
Barry Aling Chair
City of London Investment Group PLC Annual Report 2021/2022 43
Succession planning
The Nomination Committee has continued in its work of
reinforcing and elaborating upon our succession plans, with
focus placed on thoroughly planning out our response in
relation to planned, unplanned and emergency departures.
Further detail on succession planning can be found in the
Nomination Committee report on page 57.
Remuneration Policy
As required by the Companies Act, we will be submitting our
Directors’ Remuneration Policy for shareholder approval at the
2022 AGM. The Remuneration Committee has undertaken a
review of the current policy with two objectives in mind: (i) to
ensure that it remains appropriate as a means of incentivising
our senior executive team, especially in the light of the merger
with KIM; and (ii) to ensure we are clear about our investors’
expectations in designing the new policy. To assist the
Remuneration Committee in this task, FIT Remuneration
Consultants were engaged as an adviser to the Remuneration
Committee and their guidance has been valuable in helping
us shape the updated policy which I commend to
shareholders for approval.
UK Corporate Governance Code
During the year, the Group complied with the spirit of all
principles of the Code, and with all provisions with the
exception of provision 11 regarding the composition and
independence of the Board. As a result of the changes in the
membership of the Board which have occurred during the year,
we now expect to comply with provision 11 in future years.
Board performance
We delayed our annual assessment of the effectiveness of the
Board and its committees by a few months to give members
some time to assess how the Board – in its new format – is
operating. An internal assessment is currently under way using
questionnaires to be completed by each Director.
Full details on the Board evaluation process can be found on
page 55.
Culture, purpose, values and strategy
The Board is responsible for setting the Group’s purpose, values
and strategy and strives to set a positive tone from the top,
leading by example and acting with integrity. We were pleased to
be able to resume our visits to the Company’s offices both in the
UK and US. These are always valuable opportunities to help us
monitor and assess the culture of the Group in person, in
addition to our regular reviews of the key performance indicators
related to employee retention. Further details on the Group’s
culture, purpose and values can be found on page 51 and detail
on the Group’s strategy can be found on pages 20 to 22.
Looking ahead
We believe that the Board has made some positive and
significant steps forward this year in establishing an appropriate
governance framework for the Group. There is still work to do,
not least in making our Board more diverse. Current macro-
economic and geo-political situations are creating a challenging
business environment which we as a Board need to navigate
carefully; however I believe that we have a Board structure
which will enable us to focus on and address those challenges
in the interests of all of our stakeholders.
Barry Aling
Chair of the Board
15th September 2022
Strategic report
Overview
Financial statements Shareholder information
Governance
BOARD OF DIRECTORS
44 City of London Investment Group PLC Annual Report 2021/2022
Governance: Board Leadership and Company Purpose
Audit & Risk Committee
Nomination Committee
Remuneration Committee
Committee Chair
Barry Aling
CHAIR OF THE BOARD
Date of appointment:
1st August 2013
Tenure: >8 years
Experience
Barry Aling has worked
extensively in international
equity markets over a 40-year
period. Within the emerging
market universe, Barry has held
senior executive positions with
W.I.Carr and Swiss Bank
Corporation in Asia and the
UK, and more recently was a
Director of Asset Management
Investment Company plc,
a listed investment trust
specialising in the investment
management industry and
Gaffney Cline & Associates
Limited, a leading petroleum
consultancy, prior to its sale to
Baker Hughes Inc. in 2007.
External listed directorships:
none
Contributes to the Board:
financial and emerging
markets knowledge; asset
management; consultancy;
Board and Chair experience.
CHAIR
Peter Roth
SENIOR INDEPENDENT
NON-EXECUTIVE DIRECTOR
Date of appointment:
1st June 2019
Tenure: >3 years
Experience
Peter Roth has more than
35 years of experience in the
financial services industry.
During his career, he has held
senior executive positions with
Fox-Pitt, Kelton and Keefe,
Bruyette & Woods. Peter
currently serves as Managing
Partner of Rothpoint Group
LLC, a New York based
consulting firm focusing on
the financial services industry.
He also serves as a trustee of the
Guggenheim Credit Income
Fund and is chairman of the
audit committee and a member
of the nominating and
governance committee and
independent trustee committee.
Peter is also a Director of the
Stone Point Credit Corporation
and is the Chairman of the audit
committee and member of the
nomination and governance
committee. Finally, he also
serves on the Board of St Mary’s
Healthcare System for Children
where he Chairs the finance
committee and serves on the
executive, nomination and
development committees.
External listed directorships:
none
Contributes to the Board:
experienced investor; extensive
knowledge of financial services
industry; Audit Committee Chair
experience; and wide-ranging
governance experience.
Jane Stabile
INDEPENDENT NON-
EXECUTIVE DIRECTOR
Date of appointment:
2nd July 2018
Tenure: >4 years
Experience
Jane Stabile is the president and
founder of IMP Partners LLC,
a FinTech consulting firm
founded in 2004 that counts
four of the top ten global asset
managers amongst their clients.
In addition to managing IMP
Partners LLC, Jane provides
advisory services to clients
making strategic decisions on
the use of technology within
their firms. Jane has over
30 years of experience in the
financial services industry.
External listed directorships:
none
Contributes to the Board:
extensive knowledge of financial
services industry; leadership;
strategic consulting; and strong
entrepreneurial skills.
Rian Dartnell
INDEPENDENT NON-
EXECUTIVE DIRECTOR
Date of appointment:
1st October 2020
Aggregate tenure: >7 years
Experience
Rian Dartnell is the Managing
Partner of PAXIS Key Holdings
and works with endowment,
foundation and family
relationships to identify and
monitor exceptional managers
and investments. He also serves
as a Trustee, Adviser, or
Investment member for high
quality family, endowment and
institutional investors. Rian
served as a Non-Executive
Director on the Group Board
from June 2011 to July 2016.
External listed directorships:
none
Contributes to the Board:
strong leadership; extensive
experience of asset management
industry; experienced investor;
and financial and emerging
markets knowledge.
INDEPENDENT NON-EXECUTIVE DIRECTORS
a) Mark Dwyer, Carlos Yuste and Daniel
Lippincott resigned on 30th June 2022
b) Barry Olliff retired on 31st July 2022
City of London Investment Group PLC Annual Report 2021/2022 45
Strategic reportOverview Financial statements Shareholder information
Governance
EXECUTIVE DIRECTOR INDEPENDENT NON-
EXECUTIVE DIRECTOR
NON-INDEPENDENT
NON-EXECUTIVE DIRECTOR
Tazim Essani
INDEPENDENT NON-
EXECUTIVE DIRECTOR
Date of appointment:
1st February 2021
Tenure: <2 years
Experience
Tazim Essani has over 30 years
of experience in executive roles
at Close Brothers Group plc,
Santander UK plc and GE
Capital. She has a significant
track record in strategy and
M&A in financial services in the
UK and internationally covering
integration, management
transition and realisation of
synergy benefits. She also serves
as a Non-Executive Director on
the Board of Quilter plc where
she sits on the Audit and
Remuneration Committees.
In addition, Tazim has
responsibility for employee
engagement focusing
particularly on diversity and
inclusion. Tazim is also a Trustee
(Council member) of the Royal
Horticultural Society and
member of the remuneration
committee of Sovereign Housing.
External listed directorships:
Non-Executive Director
Quilter plc
Contributes to the Board:
extensive knowledge of financial
services industry; leadership;
strategic consulting; and strong
entrepreneurial skills.
George Karpus
KIM FOUNDER AND
NON-INDEPENDENT
NON-EXECUTIVE DIRECTOR
Date of appointment:
19th October 2020
Tenure: <2 years
Experience
George Karpus founded KIM in
1986 to improve how client
value is defined and delivered in
the investment industry. For 18
years prior to 1986, George held
key positions at two brokerage
firms, a regional bank and
another investment advisory
firm. George earned his BSc.
(Physics) from St. Lawrence
University and attended
Rensselaer Polytechnic Institute
for the MSc. Programme.
External listed directorships:
none
Contributes to the Board:
founder; strong leadership;
extensive experience of asset
management industry; experienced
investor; and financial and
emerging markets knowledge.
Tom Griffith
CHIEF EXECUTIVE OFFICER
Date of appointment:
1st June 2004
Aggregate tenure: >18 years
Experience
Tom was the Deputy Chief
Executive Officer and COO of
the firm before becoming the
CEO in March 2019. Prior to
joining City of London Group
in 2000, Tom held various
positions in the institutional
client division of The Vanguard
Group including roles as both
a Client Relationship Manager
and a Marketing Executive. In
1986, he obtained a bachelor’s
degree in Corporate Finance and
Investment Management from
the University of Alabama.
External listed directorships:
none
Contributes to the Board:
strong entrepreneurial leadership;
asset management experience;
proven track record implementing
successful business strategies; and
Board experience.
BOARD ACTIVITIES
BOARD AND COMMITTEE MEETING AND ATTENDANCE
Board Audit & Risk Committee Nomination Committee Remuneration Committee
Number of scheduled meetings 6 3 3 4
Current Directors
Executive Directors
Tom Griffith 6/6 – – –
Mark Dwyer
(1)
6/6 – – –
Carlos Yuste
(1)
6/6 – – –
Daniel Lippincott
(1)
6/6 – – –
Non-Executive Directors
Barry Olliff
(2)
6/6 – – –
George Karpus 6/6 – – –
Barry Aling 6/6 – – –
Peter Roth 6/6 3/3 3/3 4/4
Jane Stabile 6/6 – 3/3 4/4
Rian Dartnell 6/6 3/3 – 4/4
Tazim Essani 6/6 3/3 3/3 4/4
Notes:
• Includes scheduled meeting dates that have taken place up until the financial year ended 30th June 2022.
1) Mark Dwyer, Carlos Yuste and Daniel Lippincott resigned from the Board on 30th June 2022.
2) Barry Olliff retired from the Board on 31st July 2022.
TOTAL BOARD AND COMMITTEE MEETINGS
Board 6
Audit & Risk Committee 3
Nomination Committee 3
Remuneration Committee 4
BOARD STATISTICS*
46 City of London Investment Group PLC Annual Report 2021/2022
Governance: Board Leadership and Company Purpose
Male
Female
2
5
Non-Executive
Executive
1
6
3-6 years
0-3 years
6-8+ years
Rian Dartnell’s previous tenure as
CLIG’s Director has been included
2
2
3
Non-Independent
Independent
4
2
Gender balance Executive vs
Non-Executive
Tenure Independent vs.
Non-Independent
(excluding Chair)
*As at the date of signing of the Annual Report – excluding Mark Dwyer, Carlos Yuste and Daniel Lippincott, who resigned from the Board on 30th June 2022
and Barry Olliff, who retired from the Board on 31st July 2022.
City of London Investment Group PLC Annual Report 2021/2022 47
CORPORATE GOVERNANCE ARRANGEMENTS
Compliance with the UK Corporate Governance Code
The Board applies and reports against the UK Corporate
Governance Code (the Code), a copy of which can be found
at www.frc.org.uk.
This report has been structured to assist shareholders and
other stakeholders in interpreting the Company’s application
of the Code principles. Appropriate cross-references are made
where relevant information is disclosed outside of the
corporate governance report.
Throughout the financial year and to the date of this report,
the Company has complied with all provisions of the Code
with the exception of the following:
Provision 11 – Board independence
The Board did not have a majority of independent Directors
throughout the financial year but, as reported in the 2021
Annual Report, the Company has been progressing plans to
achieve full compliance. Following changes to the Board
composition which were announced in April 2022 and
which took effect during June and July 2022 the Board now
comprises of seven Directors, five of whom are independent.
Please refer to pages 5 and 11 for additional commentary in
relation to Board independence.
The role of the Board
The Board is responsible for promoting the Company’s long-
term success. It achieves this by setting the Group’s strategy
and monitoring delivery against it. Further details can be
found on pages 20 to 22. Group strategy is guided by the
Company’s purpose and values, further details of which can
be found on page 51.
Matters reserved to the Board
The Board operates a policy of matters formally reserved for its
decision, which includes items that are material in delivering on
the Group’s strategy and purpose. These matters include:
• Setting the Company’s values and standards and monitoring
progress against them.
• Approval of strategic aims and objectives.
• Approval of budgets, capital expenditure and changes to
the Group’s capital structure.
• Ensuring a sound system of internal controls and risk
management.
• Approval of financial results and trading updates.
• Approval of dividends and review of dividend policy.
• Approval of workforce policies.
The full schedule of matters reserved can be found on the
Company’s website: www.clig.co.uk.
Board meetings
The Group Chief Financial Officer prepares an agenda for each
Board meeting in conjunction with the Company Secretary,
Chief Executive Officer and Chair of the Board. Agendas are
structured to allow sufficient time for discussion and debate,
and to ensure that the Board covers all items it needs to in
order to discharge its duties.
Conflicts of interest
On appointment, Directors are required to disclose conflicts of
interest to the Company. Details of existing conflicts of interest
are tabled at each Board meeting and Directors are asked to
flag updates where required. Conflicts of interest are also
verified as part of year-end reporting.
Director time commitment and external appointments
Director time commitments are assessed annually by the
Nomination Committee. Directors are required to disclose
any significant commitments upon appointment and all
external appointments must be approved by the Board
before they are accepted.
Strategic report
Overview
Financial statements Shareholder information
Governance
BOARD ACTIVITIES
CONTINUED
48 City of London Investment Group PLC Annual Report 2021/2022
Governance: Board Leadership and Company Purpose
Application of Code Principles
The table below provides an explanation of how the Board has applied the Code Principles during the year ended 30th June 2022.
BOARD LEADERSHIP AND COMPANY PURPOSE
DIVISION OF RESPONSIBILITIES
CODE PRINCIPLE SUMMARY
A
A successful Company is led by an effective and entrepreneurial Board, whose role is to promote the long-term
sustainable success of the Company, generating value for shareholders and contributing to wider society.
The role of the Board is set out on page 47. The section 172 (1) statement on page 40 explains how the Directors carry
out their duty to promote the long-term success of the Company, taking into account the outcome of engagement
with key stakeholders.
B
The Board should establish the Company’s purpose, values and strategy, and satisfy itself that these and its
culture are aligned. All Directors must act with integrity, lead by example and promote the desired culture.
Please see page 51 for a summary of the Group’s culture, purpose, values and pages 20 to 22 for strategy.
C
The Board should ensure that the necessary resources are in place for the Company to meet its objectives,
and measure performance against them. The Board should also establish a framework of prudent and effective
controls, which enable risk to be assessed and managed.
The Board’s role in ensuring the Group has the necessary resources is stated on page 54. The Audit & Risk Committee
report on pages 59 to 62 includes a description of the Group’s approach to risk management and internal control.
D
In order for the Company to meet its responsibilities to shareholders and stakeholders, the Board should ensure
effective engagement with, and encourage participation from, these parties.
Commentary about stakeholder engagement can be found on pages 52 to 53.
E
The Board should ensure that workforce policies and practices are consistent with the Company’s values and
support its long-term sustainable success. The workforce should be able to raise any matters of concern.
The approval of workforce policies is a matter reserved to the Board. Please see page 52 for more details on the
Board’s role in relation to workforce policies and whistleblowing.
F
The Chair leads the Board and is responsible for its overall effectiveness in directing the Company. He or she
should demonstrate effective judgement throughout their tenure and promote a culture of openness and debate.
In addition, the Chair facilitates constructive Board relations and the effective contribution of all Non-Executive
Directors, and ensures that Directors receive accurate, timely and clear information.
Information about the Company’s Board performance evaluation can be found on page 55.
G
The Board should include an appropriate combination of Executive and Non-Executive (and in particular,
Independent Non-Executive) Directors, such that no one individual or small group of individuals dominates the
Board’s decision-making. There should be a division of responsibilities between the leadership of the Board and
the executive leadership of the Company’s business.
The composition of the Board is kept under review. A description of the division of responsibilities between the Board
and the Group Executive Committee can be found on page 54.
H
Non-Executive Directors should have sufficient time to meet their Board responsibilities. They should provide
constructive challenge and strategic guidance, offer specialist advice, and hold management to account.
Expectations about time commitment and the duties of the role are set on appointment and the Chair of the Board provides
support to the Non-Executive Directors as necessary thereafter. Please see pages 47 and 57 for additional commentary
.
I
The Board, supported by the Company Secretary, should ensure that it has the policies, processes, information,
time and resources it needs in order to function effectively and efficiently.
Information about the Company’s Board performance evaluation, which includes a review of Board processes,
can be found on page 55
.
City of London Investment Group PLC Annual Report 2021/2022 49
Strategic report
Overview
Financial statements Shareholder information
Governance
COMPOSITION, SUCCESSION AND EVALUATION
AUDIT, RISK AND INTERNAL CONTROL
REMUNERATION
CODE PRINCIPLE SUMMARY
J
Appointments to the Board should be subject to a formal, rigorous and transparent procedure and an effective
succession plan should be maintained for Board and senior management. Both appointments and succession
plans should be based on merit and objective criteria and, within this context, should promote diversity of
gender, social and ethnic backgrounds, cognitive and personal strengths.
The approach to Board appointments and succession planning and the Board Diversity policy are described on
pages 57 to 58.
K
The Board and its committees should have a combination of skills, experience and knowledge. Consideration
should be given to the length of service of the Board as a whole and membership regularly refreshed.
The Board reviews the balance of skills and experience needed as part of its discussions on succession planning.
See page 57 for more information.
L
Annual evaluation of the Board should consider its composition, diversity and how effectively members work
together to achieve objectives. Individual evaluation should demonstrate whether each Director continues
to contribute effectively.
Information about the annual Board evaluation and the individual evaluation of Directors can be found on page 55.
M
The Board should establish formal and transparent policies and procedures to ensure the independence
and effectiveness of internal and external audit functions and satisfy itself on the integrity of financial and
narrative statements.
The Board monitors the need for an internal audit function and the policies and processes in place to ensure the
independence and effectiveness of the external auditor. Further details can be found in the Audit & Risk Committee
Report on pages 59 to 62.
P
Remuneration policies and practices should be designed to support strategy and promote long-term
sustainable success. Executive remuneration should be aligned to Company purpose and values, and be
clearly linked to the successful delivery of the Company’s long-term strategy.
The Remuneration Committee considers the alignment of rewards policies with long-term strategy. Refer page 63.
Q
A formal and transparent procedure for developing policy on executive remuneration and determining
Director and senior management remuneration should be established. No Director should be involved in
deciding their own remuneration outcome.
Details about the operation of the Remuneration Committee are included in the Chair of the Remuneration Committee’s
Annual Statement and the Annual Report on Remuneration on pages 63 to 72.
R
Directors should exercise independent judgement and discretion when authorising remuneration outcomes,
taking account of Company and individual performance, and wider circumstances.
The Remuneration Committee exercises appropriate discretion when authorising remuneration outcomes, as described
in the Annual Report on Remuneration on pages 68 to 72.
N
The Board should present a fair, balanced and understandable assessment of the Company’s position
and prospects.
The Audit & Risk Committee and the Board consider whether the annual report is fair, balanced and understandable
and the appropriate statement is included on page 60.
O
The Board should establish procedures to manage risk, oversee the internal control framework and determine
the nature and extent of the principal risks the Company is willing to take in order to achieve its long-term
strategic objectives.
Disclosures on the Company’s internal control and risk management systems are included in the Audit & Risk Committee
Report on pages 59 to 62 and in the Directors’ Report on page 85.
50 City of London Investment Group PLC Annual Report 2021/2022
BOARD ACTIVITIES
CONTINUED
Governance: Board Leadership and Company Purpose
The Board discharges its duties through an annual programme of meetings.
Some key areas of focus during the financial year are shown below.
STRATEGY AND PERFORMANCE
• Received and discussed regular reports from the Executive
Directors and senior management on performance.
• Reviewed and approved Group strategy and KPIs, as set
out on pages 20 to 27.
• Reviewed culture, purpose and values and alignment
with culture.
LEGAL AND GOVERNANCE
Succession and appointments
• The Board progressed plans for changes to its composition
and structure.
Annual General Meeting
• Held an AGM which shareholders were once again able to
attend in person following the lifting of COVID restrictions.
Governance
• Considered reports from the Committee Chairs.
• Approved proposed updates to Group policies.
• Group’s compliance with corporate governance guidelines
and regulations considered.
FINANCIAL OVERSIGHT
Dividends
• Reviewed the Group’s dividend policy.
• Considered and declared an interim dividend of 11p per
share and a special dividend of 13.5p per share for payment
on 25th March 2022.
• Considered and recommended a final dividend of 22p per
share for payment on 4th November 2022.
External reporting
• Upon the recommendation of the Audit & Risk Committee,
reviewed and approved full and half year results and the
Annual Report and Accounts.
• Reviewed and approved quarterly trading statements.
Budget and financial resource
• Reviewed and approved the 2021/2022 Group budget.
AUDIT, RISK AND INTERNAL CONTROL
• Reviewed and approved the Internal Capital Adequacy
Assessment Process (ICAAP). The Group will produce its first
Internal Capital and Risk Assessment (ICARA) in FY 2023.
• Reviewed systems of risk management and internal control.
• Approved the going concern statement and assessment
of viability.
• Carried out a robust assessment of the Company’s
principal and emerging risks.
City of London Investment Group PLC Annual Report 2021/2022 51
Strategic report
Overview
Financial statements Shareholder information
Governance
The Board reviewed its purpose, values and methods for
assessing and monitoring culture in September 2022.
PURPOSE
The Group exists for the mutual benefit of our three primary
stakeholders: Clients, Employees and Shareholders.
CULTURE
The Board is responsible for setting the cultural tone of
the Group by way of clear policies, procedures and codes
designed to set out, and ensure, attainment of stakeholder
expectations. The Board’s goal is to empower employees
through the setting of an appropriate cultural framework
to deliver consistently and sustainably against the
strategy it sets.
New employees receive an induction including coaching on
the Company’s Code of Ethics, which covers behavioural
expectations around topics such as bribery and corruption,
conflicts of interest, insider dealing, confidentiality, personal
securities account dealing, inclusion, gifts and hospitality and
delegated levels of authority.
The Board receives updates on employee retention, an
important indicator that the Board has succeeded in
embedding a positive culture. The Group boasts a very low
level of employee turnover with high levels of employee
satisfaction reported. Employee retention not only remains a
key cornerstone of the Group’s strategy, but is also one of the
Group’s additional key performance indicators. Further details
on strategy can be found on pages 20 to 22 and additional key
performance indicators can be found on pages 24 to 27.
The Board receives regular updates from CLIM’s Head of
Compliance and KIM’s Chief Compliance Officer, which
contain details of policy breaches, including in relation to the
Code of Ethics. The Board monitors such breaches closely
with a view to taking action should the reported issues indicate
a trend as opposed to an exception.
The Board also reviews and assesses the Company’s culture
by directly engaging with the employees at both operating
subsidiaries. The following are some examples of such
engagement that have taken place during the financial year
and up to the date of the Annual Report:
October 2021 AGM & Board meetings in London
• Board visit to London office (limited attendance due to COVID)
• Board’s informal interaction with all employees
April 2022 Board meeting in Coatesville, PA
• CLIM employee presentations to Board
• Visit by some Board members to Coatesville office
• Formal NED & Employee Engagement Sessions held by
video conference with CLIM and KIM employees across all
offices on 26th April 2022
• Board’s informal interaction with all CLIM’s US employees
July 2022 Board meeting in Rochester, NY
• KIM employee presentations to Board
• Board’s informal interaction with all KIM employees
VALUES
• The Clients pay the bills – Clients expect superior
investment performance, openness and accountability,
and ethical treatment.
• The Employees manage the business – Employees expect
fair treatment, open communication and to share in the
success of the Group.
• The Shareholders own the business – Shareholders expect
relevant risk and cost controls, quality earnings and within
the bounds of prudential balance sheet management,
regular dividend distributions.
The Board is responsible for setting the Company’s purpose, values and strategy,
and for satisfying itself that these and its culture are aligned.
52 City of London Investment Group PLC Annual Report 2021/2022
STAKEHOLDER ENGAGEMENT
Governance: Board Leadership and Company Purpose
CLIENTS
Key considerations
• Ensure client needs are understood
and met.
• Ensure transparency on key issues
related to investment products,
including investment performance,
regulatory requirements and
ESG considerations.
• Clear communication.
How the Board engaged
• Received regular reports providing
updates on client relationships,
including details of client calls
and engagement.
EMPLOYEES
Key considerations
• Ensure employees have an ongoing opportunity to share ideas and raise issues
with senior management and the Board of Directors.
• Develop employee expertise and provide opportunities for advancement.
• Ensure that employees are supported in their lives outside of their work in order
to support their families’ and communities’ well-being (see page 34 for further
detail on employee welfare).
How the Board engaged
• Board meetings are held at Company offices to provide employees with the
opportunity for informal interaction with the Board.
• An annual strategy day is held, with all employees and members of the
Board invited to attend.
• Regular site visits take place.
• Formal NED & Employee Engagement Sessions were held by video conference
with CLIM and KIM employees across all offices in April 2022.
• Board’s informal interaction with employees from various offices in October 2021,
April 2022 and July 2022.
• The Board keeps workforce policies under review to ensure they are consistent
with the Group’s values and support the long-term success of the Company.
How the business engaged
• Refer to page 34 for employee welfare policies.
SHAREHOLDERS
Key considerations
• Ensure that shareholder interests and
concerns are understood and addressed.
• Ensure transparency on key issues and
provide clear communications.
How the Board engaged
• Annual General Meeting.
• Regular in-person/video conference
meetings with shareholders.
How the business engaged
• Video conference presentations
and in-person/virtual roadshows
around results announcements.
Workforce engagement
Provision 5 of the UK Corporate Governance Code
The Board is required to agree a mechanism for ensuring ongoing engagement
with the workforce and has designated Barry Aling, the Chair of the Board,
as the Non-Executive Director in charge of employee engagement. This role entails
championing strength of communication between the Board and employees,
and ensuring appropriate opportunities are created to elicit employee feedback.
Whistleblowing
Provision 6 of the UK Corporate Governance Code
The Company’s whistleblowing mechanism enables the workforce to report concerns
anonymously. The Board receives details about reports received pursuant to this
mechanism at each scheduled meeting and ensures that a proportionate and
independent investigation and follow up action is taken in relation to all reports.
The Board must act in a way that promotes the success of the Company for the
benefit of shareholders, whilst having due regard to its wider stakeholders.
Details of the Board and wider Group’s engagement with its stakeholders are set out below and the s172 (1) statement
can be found on page 40.
City of London Investment Group PLC Annual Report 2021/2022 53
Strategic reportOverview Financial statements Shareholder information
Governance
THE ENVIRONMENT
Key considerations
• The Group is dedicated to ensuring
that the environment is protected.
How the Board engaged
• Receives reports regarding the
Group’s carbon footprint and
sustainability data.
• Refer to disclosures recommended
by TCFD on page 38.
How the business engaged
• The Group endeavours to limit its
carbon footprint through a series of
Group-wide initiatives with an aim to
reduce absolute levels of emissions and
waste volumes as detailed on page 35.
• We utilise Sustainalytics to ensure
that the investment process supports
ESG initiatives. Refer to page 37 in
relation to responsible investment.
• Refer to disclosures recommended
by TCFD on page 38.
OUR COMMUNITIES
Key considerations
• The Group is dedicated to ensuring
that we are good citizens in the
communities in which we have offices.
How the Board engaged
• The Board spearheaded an initiative
to increase the level of applications
being received from candidates from
diverse backgrounds by consulting
with recruiters and working with
Universities to recruit directly.
How the business engaged
• Community outreach and support
efforts are a key element of our
ongoing business operations. Further
details can be found on page 36.
REGULATORS
Key considerations
• Ensure that the Group is in
compliance with all relevant
regulatory requirements.
• Proactively monitor changes in
regulatory requirements and ensure
the Group makes changes as required.
How the Board engaged
• Receive and challenge regular reports
from finance and compliance.
How the business engaged
• The compliance function at each
operating subsidiary is integral
to investment management and
client functions and reports to
the Board.
VENDORS
Key considerations
• Ensure that vendors adopt and execute
data security practices consistent with
internal Group policies.
• Ensure that arms-length relationships
exist in order to protect client and
shareholder interests.
How the Board engaged
• Receive and challenge regular reports
from operations.
How the Board engaged
• All vendor relationships are managed
by senior management with
responsibilities clearly enumerated.
• ESG considerations are applied to
all vendors.
• All expense authorisations are approved
by an Executive Director, after due
consideration of the rationale for
choosing a particular vendor.
CONSIDERATION OF STAKEHOLDERS IN DECISION-MAKING
Key considerations
Approved special dividend
In addition to the interim dividend of
11p, the Board approved a special
dividend of 13.5p which was paid on
25th March 2022.
Approved the final dividend
As described in the CEO’s statement, the
Board is recommending a final dividend
of 22p, making a total of 46.5p for the
year, including the special dividend of
13.5p. Refer to page 10.
54 City of London Investment Group PLC Annual Report 2021/2022
BOARD ROLES
Chair
• Leads the Board and ensures its effectiveness.
• Supports the CEO in the execution of duties and providing constructive challenge.
• Works closely with Executive and Non-Executive Directors, and facilitates a culture of open, robust and effective debate.
• Ensures that the Board maintains effective communications with shareholders and other stakeholders.
• Ensures stakeholder interests are considered in Board’s decision-making.
Chief Executive Officer
• Responsible for executive management of the Group.
• Formulates and recommends Group strategy for Board approval and responsible for execution of approved strategy.
• Runs the business within appropriate delegated authorities, risk management and internal controls.
• Communicates and embeds a shared purpose, sets business values and builds management talent.
• Develops an effective relationship with the Chair and leverages the knowledge of Non-Executive Directors.
Senior Independent Director
• Provides a sounding board for the Chair and, if required, acts as an intermediary between Directors and shareholders.
• Leads the annual evaluation of the Chair’s performance.
• Leads the search for the appointment of a successor to the roles of Chair of the Board and Chair of the
Nomination Committee, where required.
• Available as an additional point of contact for shareholders and other stakeholders if they feel matters raised have
not been appropriately dealt with by the Chair and CEO.
CORPORATE GOVERNANCE FRAMEWORK
Governance: Division of responsibilities
BOARD OF DIRECTORS
Chaired by Barry Aling
Roles and responsibilities
• Establishes the Company’s purpose, values and strategy, satisfying itself that these
and its culture are aligned.
• Ensures that the Group’s financial structure, resources, talent and culture support
its objectives and long-term success.
• Oversees the framework for risk management and internal control.
• Maintains engagement with stakeholders.
AUDIT & RISK COMMITTEE
Chaired by Peter Roth
Comprised exclusively of three
Independent Non-Executive Directors.
Roles and responsibilities
• Oversees financial reporting,
audit and risk.
See page 59 for the Audit & Risk
Committee report.
NOMINATION COMMITTEE
Chaired by Jane Stabile
Comprised exclusively of three
Independent Non-Executive Directors.
Roles and responsibilities
• Oversees Board composition,
succession planning and
governance matters.
See page 56 for the Nomination
Committee report.
REMUNERATION COMMITTEE
Chaired by Rian Dartnell
Comprised exclusively of four
Independent Non-Executive Directors.
Roles and responsibilities
• Oversees Group remuneration
policy and strategy ensuring there
is an appropriate linkage between
strategy and reward.
See page 63 for the Remuneration
Committee report.
GROUP EXECUTIVE COMMITTEE (GEC)
Chaired by Tom Griffith
Comprised of five members – Carlos Yuste,
Dan Lippincott, Deepranjan Agrawal,
Mark Dwyer and Tom Griffith.
Roles and responsibilities
• Provides executive oversight of the
Group’s operating businesses and day-
to-day management of the Group.
There is a clear division of responsibilities between the Board and its Committees.
Each role is clearly defined and distinct.
City of London Investment Group PLC Annual Report 2021/2022 55
BOARD EVALUATION
EVALUATION PROCESS
A review of the effectiveness of the Board, its Committees and
individual Directors is conducted on an annual basis. The 2021
effectiveness review generated an in-depth discussion about the
governance structure of the Group and the optimal composition
of the Board. This culminated in the Board re-structure that was
announced in April 2022 and took effect in June 2022. Elements
of the Board process e.g. the format of the Board papers and
running of the meetings, have also been reviewed in tandem with
the Board re-structure. As a result of this change, it was decided
to delay the timing of the 2022 Board effectiveness review for a
few weeks in order to allow the Board to settle into its new
structure and process. The 2022 effectiveness review is currently
in progress, and again has been facilitated by the Company
Secretary using questionnaires based on but updated from the
questionnaires used in the 2021 effectiveness review. Jane Stabile,
Chair of Nomination Committee, has been the Board sponsor
for the 2022 review. As the Company is not a constituent of the
FTSE 350 and given the recent changes, the Board determined
that it would not undertake an externally facilitated Board
evaluation in 2022. The need to undertake an external
evaluation will remain under review by the Board.
Questionnaire topics included:
• Strategy
• The Board and stakeholders
• Board discussion and processes
• Risk, internal control and the Audit & Risk Committee
• Succession and the work of the Nomination Committee
• The Remuneration Committee
• Chairship
OUTCOMES
As at the date of this report, the outcomes of the 2022 Board
effectiveness review have not been finalised. It is anticipated that
the findings of the review will be discussed at the Board meeting
in December 2022 and reported in the 2022-2023 annual report.
Strategic report
Overview
Financial statements Shareholder information
Governance: Composition, succession and evaluation
Governance
2021 EFFECTIVENESS REVIEW OUTCOMES ACTIONS UNDERTAKEN
Board’s engagement with the Group’s
strategy focused on growth
• Two strategy sessions held by the Board in October 2021 and April 2022
Develop the Board programme and
agenda to allow more time for key
strategic and operational matters
• The format of the Board papers has been reviewed and revamped
• More non-Group matters – especially in relation to compliance – are now reviewed at
subsidiary Board level or at the Audit & Risk Committee
• Board directly engaged with the employees across the four offices on multiple occasions
during the year with employee presentations directly to the Board
Continue to develop ESG strategy
in line with market expectations
• Recommendations of the Task Force on Climate-Related Financial Disclosures discussed at the
Board and Audit and Risk Committee meeting
• Group wide policies established on a range of social issues, including anti-slavery, human
trafficking, anti-corruption, bribery and health and safety
• Training to all employees in relation to diversity, equity and inclusion
Opportunity for Board to engage with
the work done in relation to risk and
internal controls
• Focused discussion on risk and internal controls at each of the three Audit and Risk
Committee meetings
Development of Board and senior
management succession plan taking
account of the size, composition and
diversity of the Board and the
management pipeline
• Board re-structure announced in April 2022 and took effect in June 2022
• Group Executive Committee (GEC) established to provide executive oversight of Group’s
operating businesses
Individual Directors
The individual skills, time commitment and independence of
each Director, are assessed annually and the Board confirmed
that each Director continues to contribute effectively to the
Board both within and outside of Board meetings.
Chair of the Board
The Non-Executive Directors met in April 2022 without the Chair
of the Board, Barry Aling, present to discuss his performance. It was
concluded unanimously that the Chair of the Board had performed
strongly during the year, demonstrating a keen understanding of the
business and listening well, offering appropriate challenges to the
executive team where necessary. He continues to maintain a culture
of open communication and foster active participation in meetings.
NOMINATION COMMITTEE REPORT
56 City of London Investment Group PLC Annual Report 2021/2022
Governance: Composition, succession and evaluation
COMMITTEE MEMBERSHIP
Jane Stabile (Chair)
Tazim Essani
Peter Roth
I am pleased to present the report of the Nomination Committee
(the Committee) for the year ended 30th June 2022.
Given that the past twelve months have been a period during
which there have not been any new appointments to the Board,
it has been a surprisingly busy period for the Nomination
Committee as it has sought to work through a Board development
and succession plan. We had expanded the Board in 2020-2021
following the merger with KIM to ensure a smooth transition.
Following the successful completion of the merger, it became clear
that a different structure would be more appropriate. As a
consequence and following much discussion, the creation of the
Group Executive Committee allowed us to consolidate the
membership of the Board and bring the Board composition into
line with the requirements of the UK Corporate Governance Code.
In tandem, Board succession has been a topic to which we have
devoted much time during the year. Our aim has been to allow the
Group to prepare for the future whilst optimising the considerable
benefits that the Company derives from the individuals who have
brought the Group to the place it has reached today. CLIG’s
Founder, Barry Olliff, retired from the Board in July 2022 with
our gratitude for his sage guidance over these many years. Our
current Chair, Barry Aling, has indicated that he will serve one
more year as Chair before standing down at the 2023 Annual
General Meeting. George Karpus will continue to serve on the
Board for the 2022-2023 financial year and we will provide an
update prior to next year’s AGM regarding his future plans. Each of
these changes has been agreed following much discussion, and we
still have work to do to see these succession plans through.
In 2021, our annual Board Evaluation review was immensely
useful to the Committee and the Board in establishing some of
the priorities for change that have culminated in a number of
steps that we and the Board have taken during the year.
The 2022 review is currently in progress and we are looking
forward to using that exercise to reflect on what has gone well
and to identify areas for further attention.
I am grateful to my colleagues on the Nomination Committee
for their support and efforts during the year as well as the
considerable input that we receive from other Board colleagues,
in particular our Chair of the Board and Chief Executive Officer.
Jane Stabile
Chair of the Nomination Committee
15th September 2022
KEY ROLES AND RESPONSIBILITIES
• Monitor the structure, size and composition of the Board
and its principal Committees.
• Oversee succession planning for Board and senior
management roles.
• Identify and nominate candidates to fill Board vacancies.
• Review time commitment for Non-Executive Directors.
• Approve Directors for re-appointment at the end of their
terms and at Annual General Meetings.
• Review results of annual Board effectiveness reviews.
• Approve Directors’ external appointments.
Full terms of reference of the Committee can be found on
the Company’s website: www.clig.co.uk.
“The creation of the Group Executive Committee allowed
us to consolidate the membership of the Board and bring
the Board composition into line with the requirements
of the UK Corporate Governance Code.”
Jane Stabile Chair of the Nomination Committee
City of London Investment Group PLC Annual Report 2021/2022 57
Committee composition and attendance
The Committee held three scheduled meetings during the year,
all of which were attended by all Committee members. Full
attendance details can be found on page 46. The Committee
comprises of three Independent Non-Executive Directors. At the
invitation of the Committee, meetings are regularly attended by
the Chair of the Board, Executive Directors and other Non-
Executive Directors. Other members of senior management are
invited to attend and present at meetings from time to time.
The Company Secretary is secretary to the Committee.
COMMITTEE ACTIVITIES
Terms of reference
The Committee reviewed its terms of reference in May 2022,
approving minor administrative changes.
Succession planning
The Committee reviewed Board and senior management
succession plans during the year and concluded that no material
changes to plans were required.
Succession and contingency plans are formulated to cover the
following scenarios:
• Emergencies.
• Unplanned departures.
• Planned departures.
Succession plans take into account the need to maintain an
appropriate combination of skills and experience on the Board.
This informs the succession planning process and helps the
Committee to ensure that any gaps identified in Director skills
and experience are addressed.
Where possible, potential successors are identified and, in doing
so, diversity of backgrounds of candidates in relation to gender
and ethnicity are considered. Further details of the Board’s
approach to diversity and inclusion is set out on page 58.
Board and Committee evaluation
During the year, the Committee reviewed the process for
the annual Board effectiveness evaluation, which consists of
a questionnaire issued to each Board member and questions
related to the Board and each of its Committees. Given the
priority for bringing the Company into compliance with the
UK Corporate Governance Code with regards to Board size and
composition, the results of the evaluation were prioritised for
full discussion by the Board in July 2021. Full details of the
Board evaluation process can be found on page 55.
Director induction and ongoing training
A formal induction process is in place for new Directors,
which aims to:
• familiarise Directors with the Group’s business, departments
and processes;
• cover the role, duties and responsibilities of Directors of
a UK listed company; and
• facilitate engagement with employees.
Comprehensive and tailored programmes are formulated for
each Director, depending on their individual background and
experience. New Directors meet members of the Board,
including the Chair, as well as Heads of Departments from
around the business. They are given documentation providing
key information related to the Group, including financial
performance, Board policies and procedures and governance
matters. These documents remain available to Directors as
a continuing point of reference.
The ongoing training needs of Directors are kept under review
and training sessions are planned as necessary.
Board size and composition
The Committee keeps under review the size and composition
of the Board and its Committees, making recommendations
for change to the Board as necessary. Following a review of the
Group’s governance arrangements, a series of Board-level
discussions were held regarding the composition of the
Board, and a restructure of the Board was announced. Key
elements of the restructure included streamlining the Board
by creating a Group Executive Committee (GEC). Carlos Yuste,
Mark Dwyer and Dan Lippincott stepped down from the
Board on 30th June 2022 and became members of the GEC.
In addition, on 31st July 2022, Barry Olliff, the Company’s
Founder, retired as a Director of the Company. The Board has
placed on record its sincere appreciation for Barry’s years of
service to the Group and the Board.
The size of the Board is now more appropriate to the size of the
Company, and the proportion of Independent Directors is now
compliant with Provision 11 of the Code.
Appointment of Directors
A formal, rigorous and transparent process is in place for the
recruitment of new Directors. Appointments are made on merit
against objective criteria, with due regard to the importance of
promoting diversity of gender, social and ethnic backgrounds,
and cognitive and personal strengths. The Company endeavours
to use open advertising and/or a search consultant to recruit for
Board positions.
All Directors are subject to annual re-election by shareholders
at the Company’s Annual General Meeting. The Committee
makes recommendations to the Board regarding Director
re-appointment by reference to the results of the annual Board
evaluation and an assessment of Directors’ time commitments
and tenures.
Strategic reportOverview Financial statements Shareholder information
Governance
58 City of London Investment Group PLC Annual Report 2021/2022
NOMINATION COMMITTEE REPORT
CONTINUED
Governance: Composition, succession and evaluation
Diversity and inclusion
The Board is committed to ensuring that its membership reflects
diversity in its broadest sense, with a diverse range of demographics,
skills, experience, race, age, gender, educational and professional
backgrounds and other relevant personal attributes being reflected
on the Board. The Company’s Board diversity policy (Policy) was
reviewed and approved by the whole Board in July 2022. A
summary of the Policy and its objectives can be found below.
With the restructure complete, a key area of focus for the
Committee will be to consider the Company’s approach to
diversity among the Board and senior management. The
introduction of new Listing Rules will require the Company to
report on whether it has met specified diversity targets. There
are currently two female Directors on the Board, representing
29% of the composition of our Board. Details of the gender
breakdown across the Group can be found in the Strategic
Report on page 34.
The Company remains committed to fostering diversity when
making future Board appointments.
BOARD DIVERSITY POLICY
Policy statement
The Board endorses the benefits of representation of a diversity
of backgrounds, including in relation to age, gender, ethnicity
and educational or professional background, and is committed
to ensuring that the Board reflects a wide range of skills,
knowledge, experience, backgrounds and perspectives. All
appointments will be made on merit against objective criteria
within the context of the required balance of skills and
background the Board requires to function effectively.
Objectives
To agree measurable objectives for achieving gender, ethnic
and cultural diversity on the Board.
To ensure that all searches conducted in relation to Board
appointments, whether by the Company or external search
firms, identify and present an appropriately diverse range
of candidates for the relevant vacancy.
Monitoring and reporting
The Nomination Committee will present annually in its
Committee report:
• a summary of this policy and progress made against its objectives;
• the process used in relation to Board appointments;
• its approach to succession planning and the development
of a diverse pipeline of candidates;
• how diversity helps the Company meet its strategic
objectives; and
• the gender balance of senior managers and their direct reports.
Draw up an initial list of role requirements
Appoint an executive search agency, where necessary
Draw up long- and short-lists of candidates with support
from the search consultant to conduct screening
interviews and take up references
Short-listed candidates interviewed by a number of Directors
and discussion had as to which candidates to take forward
Feedback gained from candidates and second
interviews undertaken
Recommendation made to the Board regarding appointment
Review undertaken of actual or potential conflicts of
interest and assessment of the proposed Directors’
existing commitments
APPOINTMENT PROCESS FOR NEW DIRECTORS
AUDIT & RISK COMMITTEE REPORT
City of London Investment Group PLC Annual Report 2021/2022 59
Strategic reportOverview Financial statements Shareholder information
COMMITTEE MEMBERSHIP
Peter Roth (Chair)
Tazim Essani
Rian Dartnell
I am pleased to present the report of the Audit & Risk Committee
(the Committee) for the year ended 30th June 2022, setting out
how the Committee has discharged its duties.
As the Group moved into the second year following the KIM
merger, the Committee has continued to focus on the integration
of KIM into the Group and monitor the development of
processes and procedures in line with the Group’s size and
complexity. Overall, this transition has been a smooth one, well
supported by the finance and compliance teams across the Group.
The Committee has also received regular reports from the external
auditor, RSM, which also indicated a satisfactory conclusion in
extending their audit procedures to the new wider Group.
During the year, the Committee focused particularly on the
accounting for impairment and goodwill, including a review
of work undertaken by BDO US. Overall, the Committee is
satisfied that the Company is adopting the appropriate
accounting judgements in both cases.
The Committee also spent time during the second half of the
year to understand the implications of climate-related risk for
the Company’s financial reporting. The Committee has now
undertaken responsibility for the Company’s reporting in
accordance with the recommendations of the Task Force on
Climate-Related Financial Disclosures.
The many macro-economic and geo-political challenges
currently impacting on the business environment necessitates
the Committee is careful in its judgement and assessment of risk
over the coming months and this will be an important priority.
With a change in Audit Partner in the next year due to partner
rotation, we will be working with RSM to ensure the external
audit process is a smooth and timely one.
Peter Roth
Chair of the Audit & Risk Committee
15th September 2022
KEY ROLES AND RESPONSIBILITIES
Financial and narrative reporting
• Monitor the integrity of the financial statements of the
Company and report to the Board on significant financial
reporting issues and judgements.
• Review the content of the Annual Report and Accounts and
advise the Board on whether, taken as a whole, it is fair,
balanced and understandable.
External audit
• Make recommendations to the Board regarding the
re-appointment of the external auditor.
• Oversee the relationship with the external auditor.
• Assess the external auditor’s independence and objectivity,
including oversight of the policy on non-audit services.
• Assess the effectiveness of the external audit.
Risk management and internal control
• Review the adequacy and effectiveness of the Company’s
systems of risk management and internal control.
• Review and approve statements to be included in the annual
report regarding risk management and internal control,
principal and emerging risks and the viability statement.
• Consider the need for an internal audit function.
Compliance, speaking up and fraud
• Review the adequacy and security of the Company’s
whistleblowing arrangements, and procedures related to
fraud, bribery and money laundering.
Full terms of reference of the Committee can be found on
the Company’s website: www.clig.co.uk.
Governance: Audit, risk and internal control
“The Committee has continued to focus on the
integration of KIM into the Group and monitor the
development of processes and procedures in line
with the Group’s size and complexity.”
Peter Roth Chair of the Audit & Risk Committee
Governance
AUDIT & RISK COMMITTEE REPORT
CONTINUED
60 City of London Investment Group PLC Annual Report 2021/2022
Governance: Audit, risk and internal control
Committee composition and attendance
The Committee held three meetings during the year, all of
which were fully attended by all Committee members. The
Committee is composed of three Independent Non-Executive
Directors. All members have extensive knowledge of the asset
management industry and the analytical tools used in the
appraisal of Company reports and accounts. The Chair of the
Committee, Peter Roth, has recent and relevant experience
serving on audit committees in the financial services industry.
At the invitation of the Committee, meetings are regularly
attended by the Chair of the Board, Executive Directors, other
Non-Executive Directors, the Chief Financial Officer and the
external auditor. Other members of senior management are
invited to attend and present at meetings from time to time.
FINANCIAL AND NARRATIVE REPORTING
The Committee reviews the Group financial statements,
including half and full year results and the Annual Report and
Accounts, and makes recommendations to the Board for
approval. The Committee is responsible for reviewing the
significant financial judgements, key assumptions and estimates
employed by management, an analysis of which can be found in
the table below. As part of the review, the Committee satisfies
itself that the policies set out in note 1 of the financial
statements on pages 99 to 105 are appropriate.
Fair, balanced and understandable
The Committee reviewed and concluded that the Annual Report
and Accounts for the year ended 30th June 2022 are representative of
the year and present a fair, balanced and understandable overview,
providing the necessary information for shareholders to assess the
Group’s position, performance, business model and strategy.
Viability and going concern
The Committee concluded that a three-year assessment period
continued to be appropriate and recommended the viability
statement (found on page 33) to the Board for approval.
The Committee also reviewed the going concern disclosure
(see page 84) and recommended to the Board that the Group
had adequate resources to continue in operational existence
for the foreseeable future and that it was appropriate for the
financial statements to be prepared on a going concern basis.
Significant financial judgements, key assumptions and estimates
The following table sets out the key accounting issues and
judgements reviewed and monitored by the Committee during
the year in accordance with UK Corporate Governance Code
provision 26.
Share-based payments
The calculation of share-based payment charges under the
Group’s Employee Share Option Plan and the Employee
Incentive Plan.
The Committee has reviewed management’s assumptions in
relation to the calculation of share options and EIP charge and
is satisfied that such charges are reflected appropriately in the
financial statements. Further details on share-based payments can
be found in note 22 of the financial statements on page 118.
Goodwill
Goodwill for the Group’s cash generating unit is tested for
impairment at least annually through the application of a
‘value in use’ model. This requires estimates concerning future
cash flows, growth rates and associated discount rates to be
taken into account.
The services of an independent valuation consultant, BDO
USA, LLP (BDO), were retained during the year to perform an
assessment of impairment as at 30th April 2022.
The Committee considered BDO’s report outlining the
methodology for the impairment assessment and challenged the
assumptions underpinning the goodwill valuation model including
cash flow projections, discount rates and any other inputs.
The Committee also considered whether there were any
significant changes or indicators of impairment in the period
from the assessment date to 30th June 2022.
Further details can be found in note 12 of the financial
statements on page 113.
Nature of interest in EM REIT fund
The Company holds a seed investment in the above fund.
Judgement is required to be exercised in assessing whether the
Company has significant influence over the fund.
The Committee reviewed management’s assessment and agreed
with the conclusion that the Company does not have significant
influence over the EM REIT fund.
Further details can be found in note 1.3 of the financial
statements on page 99.
SIGNIFICANT JUDGEMENTS, KEY ASSUMPTIONS AND ESTIMATES COMMITTEE ACTIONS
City of London Investment Group PLC Annual Report 2021/2022 61
OTHER
Terms of reference
The Committee reviewed its terms of reference in February
2022 and no changes were made.
Committee evaluation
An internal Board and Committee evaluation exercise is
currently in progress, which consisted of a questionnaire issued
to each Board member containing questions on a variety of
topics. A section of the questionnaire focusses on the topic of
the Audit & Risk Committee. Full details of the Board
evaluation process can be found on page 55.
RISK MANAGEMENT AND INTERNAL CONTROL
Audit and Risk Committee
The Committee has responsibility for assisting the Board in
maintaining an effective internal control environment. In order
to achieve this objective, the Committee receives regular reports
on compliance and internal control procedures from CLIM’s
Head of Compliance, KIM’s Chief Compliance Officer and
CLIG’s management for managing the Company’s risks. The
Group maintains a Group risk register which is under constant
review by the Group’s Executive Directors.
CLIM’s Risk & Compliance Committee (RCC) and KIM’s
Compliance Committee have the responsibility of the day-to-
day oversight of the risk management process at the respective
operating subsidiaries. They are also tasked to identify any
areas where there are perceived to be risk exposures for their
respective subsidiaries.
For the year ended 30th June 2022, the Committee is
satisfied that the risk register has been appropriately amended
and maintained.
Internal audit function
The Committee has discussed the need for an internal audit
function extensively throughout the year. It is satisfied that the
objectives and activities of an internal audit function are
sufficiently fulfilled by the Group’s current systems of risk
management and internal control, as described above, and that
a stand-alone function was not required during the year. In
addition, Prism Cosec Ltd as the Company Secretary reinforces
the Company’s corporate governance arrangements.
The Committee will continue to keep the need for an internal
audit function under review and to appropriately challenge and
debate the topic.
EXTERNAL AUDIT
RSM UK Audit LLP (RSM) is the Company’s appointed
external auditor. RSM attended each scheduled meeting of the
Committee during the year and reported on the status of the
Group external audit process. The Committee met privately
with the external auditor at each meeting to allow for any
concerns to be flagged by the external auditor. No such concerns
were flagged during the year.
Rotation and re-appointment
The Statutory EU Audit Directive (the Directive) sets out rules
for public interest entities audit firm tenure and rotation and the
provision of non-audit services.
The Company last undertook an audit tender in 2017, with the
Company’s current external auditor, RSM, being appointed for
the year ended 30th June 2018. RSM has therefore served for
five consecutive years. In order to comply with the Directive,
the Company intends to undertake an audit tender at least
every ten years. There are no contractual obligations that restrict
the Committee’s choice of external auditor.
Malcolm Pirouet completed his fifth year as lead external audit
partner for the year ended 30th June 2022. External auditors are
required to rotate their lead partner every five years. Therefore,
the Company will have a new lead audit partner appointed for
the year ending 30th June 2023.
The Committee concluded that the effectiveness of the
external audit process carried out by RSM was satisfactory and
that their independence and objectivity were sufficiently
maintained. Therefore, the Committee recommended to the
Board the re-appointment of RSM at the Company’s next
Annual General Meeting.
The disclosures provided within this report constitute the
Company’s statement of compliance with the requirements of
the Statutory Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitive Tender Processes
and Audit Committee Responsibilities) Order 2014.
Assessment of external audit effectiveness
During the year, the Committee reviewed the external auditor’s
effectiveness in carrying out the year end audit and concluded
that the audit process had been carried out effectively.
Strategic report
Overview
Financial statements Shareholder information
Governance
62 City of London Investment Group PLC Annual Report 2021/2022
AUDIT & RISK COMMITTEE REPORT
CONTINUED
Governance: Audit, risk and internal control
Independence and objectivity
Both the Committee and the external auditor have policies and
procedures designed to protect the independence and objectivity
of the external auditor. During the year, the Committee was
provided with a number of assurances by the external auditor
regarding the checks and balances in place to safeguard
independence and objectivity. Overall, the Committee has
concluded that RSM remain independent.
Non-audit services policy
The Company’s non-audit services policy sets out a list of non-
audit services that the external auditor is either permitted or
prohibited from providing to the Group. The policy places a
requirement for all non-audit services that the external auditor
is engaged for to be approved in advance as follows:
Value of non-audit service Approver
Up to £25,000 Chair of the Audit & Risk Committee
£25,001 and above Audit & Risk Committee
The policy further mandates that the total fees for non-audit
services provided by the external auditor to the Group shall be
limited to no more than 70% of the average of the statutory
audit fee for the Company, of its controlled undertakings and
of the consolidated financial statements paid to the external
auditor in the last three consecutive financial years.
Pursuant to the policy, the Committee undertakes to seek
annually from the external auditor information about policies
and processes for maintaining independence and monitoring
compliance with relevant requirements, including those
regarding the rotation of audit partners and staff.
External auditor fee
During the year, the Committee reviewed and approved the
external auditor’s fee. Refer note 5 for fees paid to RSM in
the years ended 30th June 2022 and 2021.
CHAIR OF THE REMUNERATION COMMITTEE’S ANNUAL STATEMENT
City of London Investment Group PLC Annual Report 2021/2022 63
Strategic reportOverview Financial statements Shareholder information
Governance: Remuneration
COMMITTEE MEMBERSHIP
Rian Dartnell (Chair)
Tazim Essani
Peter Roth
Jane Stabile
On behalf of our Board and the Remuneration Committee, I am
pleased to present our report for the year ended 30th June 2022.
For those of you who have followed us for many years, you will
know of City of London Investment Group’s disciplined,
performance-oriented culture and our collegial team-based
approach. There is a growing sense of empowerment and
excitement among the teams at CLIM & KIM and a clearer vision
of the budding opportunities in the larger Group. The integration
of the two firms has been hard work, yet its success enhances
management’s confidence to continue to diversify and grow.
As Tom Griffith mentions in his CEO report, employment
conditions have been tight and inflation has been an added
complication. Overall, the management team has remained fair and
pragmatic, while managing to keep salary increases under control.
Following the re-structure announced in April 2022, there is
now only one Executive Director (our Chief Executive Officer,
Tom Griffith) on the Board of Directors of the Company
(the Board). This report discusses the remuneration of our
Executive Directors which, given the team-based approach that is
part of the Group’s culture and ethos, are largely aligned with the
principles and practices guiding compensation for the team as a
whole. As a consequence, the changes in Board structure have not
required the Remuneration Committee to change its approach to
executive remuneration more generally. This has enabled the
Committee to focus on the future and, in particular, think ahead
to the renewal of the Group’s Directors’ Remuneration Policy (the
Remuneration Policy) which we reviewed extensively this past year
and needs to be approved by shareholders at the Company’s
Annual General Meeting (the AGM) in October 2022.
Code compliance
Recognising that the Company had not previously complied
with provision 36 of the UK Corporate Governance Code
(the Code), the Committee implemented a two year post-
employment holding period policy in September 2021, bringing
it into compliance with provision 36 shortly after the end of the
2021 financial year. The Company also extended the vesting
period for awards made to Executive Directors under the
Employee Incentive Plan (EIP) from three years to five years,
applicable to awards granted from 2021 onwards. These changes
have also been incorporated into the proposed 2022
Remuneration Policy.
The full statement of compliance with the Code is set out on
page 47.
Group key performance indicator
Our Group’s key performance indicator (KPI) of CLIG’s total
return (share price plus dividends) over a market cycle underpins
our approach to rewarding employees and Executive Directors
alike and is a key cornerstone of our inclusive and team-based
culture, helping to create a common goal for the Group. We
continue to endorse this approach and its ability to help us fulfil
the requirements of provision 40 of the Code (which we discuss
in more detail on page 78). Further detail regarding our rationale
for using the Group KPI and its link to remuneration outcomes
is shown in the flow chart on pages 66 to 67.
KEY ROLES AND RESPONSIBILITIES
• Determine policy for Directors’ remuneration and set
remuneration for the Chair, Executive Directors and
senior management.
• Establish remuneration schemes aligning Executive
Directors with shareholder interests.
• Review workforce remuneration and related policies.
Full terms of reference of the Committee can be found on
the Company’s website: www.clig.co.uk.
Governance
“There is a growing sense of empowerment and excitement
among the teams at CLIM & KIM and a clearer vision
of the budding opportunities in the larger Group.”
Rian Dartnell Chair of the Remuneration Committee
CHAIR OF THE REMUNERATION COMMITTEE’S ANNUAL STATEMENT
CONTINUED
64 City of London Investment Group PLC Annual Report 2021/2022
Governance: Remuneration
Remuneration outcomes
An overview of Executive Director remuneration outcomes and
the single total figures of remuneration for all Directors are
shown on pages 65 and 68 respectively.
2022 Remuneration Policy review
We continue to believe our Remuneration Policy is structured in
an appropriate way given the size, function and culture of the
Group and thus it supports us in delivering our strategy. The
Committee was pleased to note that shareholders have continued
to support the Company’s approach to executive remuneration
with over 92% of the shareholders who voted at the 2021 AGM
endorsing our Remuneration Report. Given this level of support,
we have not been inclined to make any substantial changes to the
Remuneration Policy when it is proposed to shareholders for
approval at the 2022 AGM.
Nevertheless, we wanted to ensure that the Remuneration Policy
remains appropriate given our Company’s context and is aligned
with the expectations of our shareholders. To assist us in this task,
we engaged FIT Remuneration Consultants as the Committee’s
independent adviser on executive remuneration. As a consequence of
our discussions with FIT and other advisers, we have concluded that
some amendments to the Remuneration Policy would be beneficial
whilst retaining the existing structure and its alignment with
sustained long-term positive outcomes produced. The Remuneration
Policy that we are putting to shareholders for approval at the 2022
AGM will be substantially the same as the current one.
Proposed changes to our Remuneration Policy
Base salary/fees – Base salaries and fees will be reviewed annually
rather than every six months.
Pension – Clarification that the maximum pension contribution
rate is no more than the level for the wider workforce.
Employee Incentive Plan – The RSAs for Executive Directors
will vest one-third each year over a three-year period from the
end of the third year after participation. This means that RSAs
will vest one-third each after three, four and five years.
ESOP – No further share option awards will be granted to
Executive Directors under this scheme.
Malus and clawback – Material error and reputational damage
have been added to the list of exceptional events which could
lead to malus and/or clawback. The malus and/or clawback
period has been extended from 18 months to 24 months
following payment or vesting.
Shareholding guidelines – Post-employment shareholding
requirements have been incorporated in the policy.
The Committee intends to undertake a further review of
Executive Directors and employee pay arrangements over the
forthcoming year and, if it concludes that changes are required,
we will consult with leading shareholders in advance.
And finally…
In conclusion, we continue to believe that the Committee’s
approach to executive remuneration incentivises the right
priorities for our executive team in a way that aligns well with
the culture of our organisation and the interests of our
shareholders. I hope that you will agree and give your support to
the new Remuneration Policy at the forthcoming AGM.
I am always happy to discuss our approach to remuneration with
shareholders and would be happy to answer any shareholder
questions about the work of the Committee.
Rian Dartnell
Chair of the Remuneration Committee
15th September 2022
Profit-share payments during the year are based on forecasted annual profit determined using quarterly results.
The fourth and largest payment is made once the final results are known.
Percentage splits are therefore approximate.
Fee income is received on both a monthly and quarterly basis.
Q1
September
Q2
December
Q3
March
Q4
July
10%
20%
40%
For Executive Directors, 10%
of this payment is deferred
until September
30%
Profit-share payment schedule – financial year 1st July 2021 – 30th June 2022
City of London Investment Group PLC Annual Report 2021/2022 65
Strategic report
Overview
Financial statements Shareholder information
REMUNERATION OVERVIEW
Governance: Remuneration
Governance
REMUNERATION OVERVIEW
Executive Director remuneration components
Remuneration Maximum under the current Remuneration Policy Maximum under the proposed 2022 Remuneration Policy
Fixed Base salary Aligns with pay adjustments for the Aligns with pay adjustments for the
wider employee population wider employee population
Fees Market competitive Market competitive
Benefits Market competitive Market competitive
Pension No higher than workforce contribution
Variable Bonus 2.5 times aggregate salary and fees 2.5 times aggregate salary and fees
Employee Incentive Plan One times match on bonus waived One times match on bonus waived
Share options No further ESOP awards will be granted
to Executive Directors
Governance Share ownership guidelines 200% of salary 200% of salary (in and post-employment)
Malus and clawback Profit-share and EIP up to 18 months Profit-share and EIP up to 24 months
after termination date after payment/vesting date
Executive Director remuneration outcomes
Executive Directors’ single total remuneration figures
The chart below compares the single total remuneration figures for FY 2022 for each Executive Director with the maximum total
remuneration that could be awarded under the Directors’ remuneration policy as per 30th June 2021 illustrative reward scenario
and the single total remuneration figures for FY 2021.
2021 Actual
Executive Director Single total remuneration figure (£’000)
2022 Maximum
2022 Actual
824
941
873
Tom Griffith
Chief Executive Officer
38%
33%
37%
56%
61%
57%
6%
6%
6%
2021 Actual
2022 Maximum
2022 Actual
879
1,015
950
Mark Dwyer
CLIM’s
Chief Investment
Officer
35%
28%
32%
48%
39%
45%
17%
33%
23%
2021 Actual
2022 Maximum
2022 Actual
689
940
802
Carlos Yuste
Head of Business
Development
36%
27%
33%
47%
39%
44%
17%
34%
23%
2021 Actual
2022 Maximum
2022 Actual
259
702
563
Daniel Lippincott
KIM’s
Chief Investment
Officer
43% 46% 11%
30% 57% 13%
38% 54% 8%
Salary and related costs
Variable cash bonus Employee Incentive Plan (EIP)
Single total remuneration figures
Assumptions:
1) Based on the FY 2021 and FY 2022 actual results.
2) 2022 maximum is the level of remuneration that could have been received in FY 2022 in accordance with Group’s Director’s remuneration policy as included in FY 2021’s
illustrative reward scenario. This reflects the minimum remuneration plus the maximum bonus opportunity as detailed in the future policy table. The maximum variable
cash bonus has been adjusted by the maximum amount of the bonus that can be waived, which in turn is matched by the Company and the total is shown as EIP.
3) Daniel Lippincott joined the Board on 19th October 2020 and his remuneration for 2021 is reflected for the period for which he was a Director.
4) Under the Directors' remuneration policy, the EIP awards once awarded, will vest one-fifth per annum over a five-year period.
66 City of London Investment Group PLC Annual Report 2021/2022
REMUNERATION OVERVIEW
CONTINUED
Governance: Remuneration
Our Group’s interplay between the legitimate needs of our various constituents
is exemplified by the relationship between our KPI and our remuneration policy.
In order to understand our corporate culture and the tone from the top, one
must understand this key relationship.
CLIG KPI’S RELATIONSHIP TO OUR REMUNERATION POLICY
We continue to believe that a key measure of the management team is the long-
term total return of the shares of the Company they manage. Our business model
is very simple. We receive fees for managing client assets against a benchmark index.
As an active investment manager, our job is to beat the relevant benchmark through an
investment cycle, which we define as five years. We believe that our approach and
philosophy differs significantly from our peers. Our investment process identifies
opportunities to capture pricing anomalies in securities trading at a discount to their net
asset value. Our resolute focus is on generating consistent investment performance –
over time and through economic cycles within a controlled risk environment.
We have developed and nurtured a team investment process which does not rely on
“star” fund managers, but rather upon experienced fund managers using a disciplined
analytical process that can produce repeatable and sustainable first or second quartile
performance versus our peers.
We support teams and a team approach across the Group. What this means is that
we discourage the cult of the individual, believing that the risks associated with
a star culture are detrimental to both shareholders and clients.
If we do our job well, our FuM and fee income can grow over time. Proactively
managing operating costs is the lever that allows us to maintain profitability levels.
Profits lead to shareholder value through dividends, retained earnings and the
CLIG share price increases.
Although the business is simple, a large part of the assets are in a volatile asset class –
EM. As a result of this volatility our FuM and, therefore, our future fee income are
difficult to predict with any level of accuracy.
This volatility is also why total return of CLIG over a market cycle which is defined as a
rolling five-year period has been selected as the KPI. This KPI presents a challenge for
the management team to achieve, without incentivising managers to take undue risks.
We have a conservative approach to risk. We do not charge performance fees and there
is no debt on our balance sheet.
As a specialist in CEFs, the universe of EM equity investment options is capacity
constrained. To address this constraint we have added strategies by market segment that
take advantage of our expertise in CEFs. This enables us to grow FuM for clients who
support our investment philosophy, which drives increased fee revenues on a more
predictable scale.
CLIG share price total return:
best measurement of management
Volatility of earnings
Business managed through:
team approach
Management team KPI
(See page 23 for further details)
Main business driver:
outperformance
Delivered through:
team approach
Results in: FuM, fee income
and profitability
Leads to: dividends, retained earnings
and share price
City of London Investment Group PLC Annual Report 2021/2022 67
Strategic report
Overview
Financial statements Shareholder information
Governance
Employees are compensated through a combination of salary and profit-share. Salaries
are a fixed cost and are managed to account for the volatility of earnings. The profit-
share pool is fixed at a maximum of up to 30% of operating profit of the Group
and aligns employees’ variable income component of total compensation with
Group profitability and shareholder value.
All employees are offered the opportunity to defer a portion of their annual profit-share
allocation to purchase CLIG shares through the Employee Incentive Plan (EIP). The
Company matches the employees’ deferral 100%. Both the employee deferral and
Company matching amounts vest over a three-year period in equal amounts each year.
These amounts vest annually over a five-year period for Executive Directors from FY2021.
As per the proposed 2022 Remuneration Policy, for Executive Directors, these amounts will
vest one-third each year after the 3rd, 4th and 5th anniversaries of grant from FY2023.
Employee share purchases and the vesting schedule further align them with
long-term shareholder value.
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, but
in particular for Directors, 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.
On balance, when markets are good, employees share in the increased profits of the
Group. We accomplish this through profit sharing. Ingrained in our culture is the belief that
all employees contribute to the success of the Group. The Portfolio Manager may have
made the right decision on the investment, but he or she was able to do so because the
data was correct, the systems were running properly, compliance applied the correct
constraints, and so on.
Allocation of profit-share is a management responsibility. We operate in an open office
environment. While annual appraisals are completed, the open office environment
provides for daily, honest feedback through interactions between colleagues. This allows
for an ongoing, real-time evaluation of a number of variable factors that
influence performance.
Individual KPIs are not relevant to a business that employs a team-based approach to
operating a business, which in many respects is similar to a partnership. In fact, individual
KPIs would not only be divisive, but would introduce unnecessary risks. Our team approach
to managing the business, with a profit-share pool based on operating profit, aligns the
constituents of our business, as summarised below:
Clients expect superior investment performance. Long-term investment performance
drives FuM and revenue growth over time. The clients pay the bills.
Employees expect to share in the success of the Group as they provide the investment
performance that generate the earnings, while managing risks and controlling costs to
ensure their sustainability. Employees manage the business. Employees and Directors’
compensation are in alignment with our corporate culture, and these are taken into
account when setting the policy for Directors’ compensation.
Shareholders expect appropriate risk and cost controls to help deliver quality earnings
and dividends. The shareholders own the business.
CLIG KPI’S RELATIONSHIP TO OUR REMUNERATION POLICY CONTINUED
Profit-share pool aligns
employees compensation
with shareholder value
Volatility of earnings
requires flexibility
Profit-share pool provides
single focus
Individual appraisals
and evaluation
Individual KPIs are not appropriate
for CLIG due to our team-based
environment
EIP further aligns employees
with shareholder value
ANNUAL REPORT ON REMUNERATION
68 City of London Investment Group PLC Annual Report 2021/2022
Governance: Remuneration
The information provided within the Annual Report on Remuneration has been audited where indicated
and summarises how the Directors’ remuneration policy was implemented during the financial period under
review, as well as setting out total remuneration figures and rationales.
Committee composition and attendance
The Committee comprises of four Independent Non-Executive
Directors: Jane Stabile, Peter Roth, Tazim Essani and Rian
Dartnell serving as Chair. The Committee is focused on
maintaining the entrepreneurial can-do team-based culture of
the Group, while at the same time continuing to deepen its
processes. Our goal is to be a balanced Group, managing
investment mandates with consistent long-term outperformance
while empowering a culture of inclusion and an atmosphere in
which colleagues strive to do their best work.
The Committee held four meetings during the year, all of
which were attended by all of the Committee members. At the
invitation of the Committee, meetings are regularly attended
by the Chair of the Board, Executive Directors, other
Non-Executive Directors and the Chief Financial Officer.
Other members of senior management are invited to attend
and present at meetings from time to time.
This section of the Report is made up of four parts:
1) Single total figure of remuneration
2) Future implementation
3) Further remuneration disclosures
4) Governance disclosures
The proposed Director’s Remuneration Policy is summarised in
the future Policy table on pages 79 to 81 and will govern all
future remuneration to be awarded to Directors.
1) SINGLE TOTAL FIGURE OF REMUNERATION (AUDITED)
The table below shows the single total figure of remuneration for each Director in relation to the financial year ending 30th June 2022
(2022) relative to the previous financial year ended 30th June 2021 (2021).
Salary/ Waived
(2)
EIP
(3)
Dividend
Director advisory
(1)
Taxable Total Profit- profit- share equivalent Total
fees fee Pension benefits fixed share share awards EIP vesting variable Total
£ £ £ £ £ £ £ £ £ £ £
Current Directors
Executive Directors
Mark Dwyer 2022 35,000 210,000 26,250 3,336 274,586 535,000 (107,000) 214,000 33,782 675,782 950,368
2021 35,000 206,500 25,813 3,541 270,854 500,000 (75,000) 150,000 33,272 608,272 879,126
Tom Griffith 2022 35,000 214,874 26,859 5,557 282,290 526,308 (27,594) 55,188 36,639 590,541 872,831
2021 35,000 211,104 26,388 6,046 278,538 486,559 (24,040) 48,080 34,909 545,508 824,046
Daniel Lippincott
(4)
2022 35,000 172,702 29,697 6,018 243,417 289,712 (30,142) 60,284 – 319,854 563,271
2021 24,680 47,250 26,270 349 98,549 149,858 (10,696) 21,392 – 160,554 259,103
Carlos Yuste 2022 35,000 185,301 23,163 6,707 250,171 448,634 (93,951) 187,902 9,471 552,056 802,227
2021 35,000 181,500 22,688 6,046 245,234 384,268 (56,937) 113,874 2,728 443,933 689,167
Non-Executive Directors
Barry Aling
(5)
2022 75,000 – – – 75,000 – – – – – 75,000
2021 105,538 – – – 105,538 – – – – – 105,538
Rian Dartnell
(6)
2022 50,000 – – – 50,000 – – – – – 50,000
2021 33,750 – – – 33,750 – – – – – 33,750
Tazim Essani
(7)
2022 40,000 – – – 40,000 – – – – – 40,000
2021 16,667 – – – 16,667 – – – – – 16,667
George Karpus
(8)
2022 40,000 77,180 – 2,958 120,138 – – – – – 120,138
2021 27,179 54,400 – – 81,579 – – – – – 81,579
Barry Olliff
(9)
2022 40,000 36,749 4,594 5,056 86,399 – – – – – 86,399
2021 37,500 73,872 9,234 3,377 123,983 – – – – – 123,983
Peter Roth 2022 55,000 – – – 55,000 – – – – – 55,000
2021 51,250 – – – 51,250 – – – – – 51,250
Jane Stabile 2022 50,000 – – 933 50,933 – – – – – 50,933
2021 47,500 – – – 47,500 – – – – – 47,500
Past Directors
Susannah Nicklin
(10)
2022 – – – – – – – – – – –
2021 40,449 – – – 40,449 – – – – – 40,449
Total 2022 490,000 896,806 110,563 30,565 1,527,934 1,799,654 (258,687) 517,374 79,892 2,138,233 3,666,167
2021 489,513 774,626 110,393 19,359 1,393,891 1,520,685 (166,673) 333,346 70,909 1,758,267 3,152,158
Notes:
1) Health insurance is offered to all employees but is not considered a taxable benefit in all countries. For comparative purposes we have based our calculations on all health
insurance costs incurred, whether a taxable benefit or not.
2) The EIP share awards relate to the current year’s waived bonus plus the 100% match by the Company. The combined amount is the value of the awards that will be awarded in
October following the year end. For non-UK Directors, the value is subject to movement as a result of currency translation.
3) This represents dividend equivalent on EIP shares vested during the year.
4) Daniel Lippincott was appointed as Director of the Company with effect from 19th October 2020.
5) One-off payment of £35,000 was made to Barry Aling in 2021 in relation to his work on the KIM merger.
6) Rian Dartnell was appointed as Director of the Company with effect from 1st October 2020.
7) Tazim Essani was appointed as Director of the Company with effect from 1st February 2021.
8) George Karpus was appointed as Director of the Company with effect from 19th October 2020. George Karpus receives a corporate advisory fee of $100,000 per annum.
9) In addition to his Non-Executive Director’s fee, Barry Olliff received a corporate advisory fee of $100,000 per annum until 31st December 2021.
10) Susannah Nicklin ceased to be a Director of the Company with effect from 10th September 2020.
City of London Investment Group PLC Annual Report 2021/2022 69
Non-Executive Director fees
2022 2021
£ £
Base fee for services as a Non-Executive Director 40,000 40,000
Supplemental fee for services as Chair of the Board 35,000 35,000
Supplemental fee for services as Chair of a Committee 10,000 10,000
Supplemental fee for services as Senior Independent Director 5,000 5,000
Commentary on single total figure table
The Remuneration Committee satisfied itself that the single total figures of remuneration for each Director are appropriate.
A commentary on each element of Directors’ fixed and variable remuneration is set out below. As previously noted, the Directors’
remuneration policy will be put to a binding shareholder vote at the Annual General Meeting in 2022.
a) Fixed pay
Salary/advisory fee
Executive Director salaries are kept at the lower end of what may be described as market average to allow the Group to manage fixed
remuneration costs. A high proportion of total remuneration is provided by way of variable pay, allowing for remuneration to be
trimmed in a timely fashion if market events threaten to impact profitability.
The year on year comparison of salaries in the single total figure table reflects movements which have arisen as follows:
1) Tom Griffith, CEO – did not receive a pay rise during the year (2% on 1st January 2021). His salary is paid in US dollars and
reported in sterling. The difference is due in part to a stronger US dollar to the pound this year as compared with last year.
2) Mark Dwyer, CLIM’s CIO – did not receive a pay rise during the year (3% on 1st January 2021).
3) Carlos Yuste, Head of Business Development – did not receive a pay rise during the year (4% on 1st July 2020 and a further 3%
increase on 1st January 2021). His salary is paid in US dollars and reported in sterling. The difference is due in part to
a stronger US dollar to the pound this year as compared with last year.
4) Daniel Lippincott, KIM’s CIO – Daniel's salary was increased to US$200,000 per annum on 1st July 2021 and then by a further
US$50,000 per annum on 1st January 2022 to bring it in line with his role and responsibilities as the CIO and President of KIM
and as a Director of KIM and CLIG. His salary is paid in US dollars and reported in sterling. The difference is also due in part to
a stronger US dollar to the pound this year as compared with last year.
Further, as approved at the 2019 AGM, a separate Director’s fee has been carved out from all the Executive Director’s current salaries
to reflect their Director/governance duties with effect from 1st November 2019, and has been shown separately. Daniel Lippincott
received a Director’s fee of £35,000 per annum in addition to his salary from the date of his appointment on the CLIG Board with
effect from 19th October 2020.
Benefits
Taxable benefits relate to private medical insurance for Executive Directors* and their dependants. It should be noted that although
the Group offers private medical insurance to all employees it is not considered a taxable benefit for those resident in the US.
Taxable benefits for Non-Executive Directors relate to reimbursed accommodation expenses whilst attending UK Board and
Committee meetings. The amounts shown are grossed up as the Group accounts for the tax due on these benefits. As part of his
corporate advisory contract, Barry Olliff received private medical insurance in FY 2021.
Pension
All employees*, including Executive Directors, are entitled to membership of the Group’s defined contribution pension arrangements.
Contributions are capped at 12.5% of annual salary. Employer contributions in respect of all Executive Directors were 12.5%
for the period under review. As part of his corporate advisory contract, Barry Olliff also received pension contribution at 12.5%.
* As per the merger agreement, compensation and benefits for KIM employees remain consistent with pre-merger practices of KIM.
Strategic reportOverview Financial statements Shareholder information
1) SINGLE TOTAL FIGURE OF REMUNERATION (AUDITED) CONTINUED
Governance
ANNUAL REPORT ON REMUNERATION
CONTINUED
70 City of London Investment Group PLC Annual Report 2021/2022
Governance: Remuneration
b) Variable pay
Profit-share
The Company operates a profit-share plan for all employees, including the Executive Directors, that is linked to Group profitability.
Profit-share constitutes a large part of employee and Executive Director remuneration – being variable, it can be adjusted in line
with profitability and can therefore account for inherent volatility in earnings. We have allocated a maximum profit-share of up to
30% of the pre-profit-share, pre-tax, operating profit for this purpose. Such allocation may be reduced infrequently as a result of an
assessment of the projected intermediate term financial performance of the Group, and consistent with our fundamental objective
of an appropriate balance of interests among all stakeholders, including clients, employees and shareholders.
Measuring performance
We are focused on fostering a team approach across the Group, discouraging the ‘cult of the individual’ and the risks associated with
a star culture. The Group therefore takes the view that individual KPIs are not appropriate for a business that employs a team-based
approach, and that individual KPIs could prove divisive and introduce unnecessary risk. Refer to pages 66 to 67 for CLIG’s KPI’s
relationship to our remuneration policy.
The profit-share pool aligns employees and Executive Directors variable income with Group profitability. Both employees and
Executive Directors are therefore incentivised to drive Group profitability. Driving Group profit leads to shareholder value by way
of dividends, retained earnings and Company share price increases.
Executive Director performance appraisals are conducted on an annual basis and, in-keeping with the Group’s team-based
approach, are partly deduced from daily, honest feedback solicited from the open office environment in which the Group operates.
Discretion is applied appropriately, with bonus awards being adjusted upwards or downwards depending on the outcome of annual
performance appraisals.
In the case of market downturns due to extenuating circumstances not linked to poor individual performance, the Committee can
use its discretion to reduce profit-share awards for employees and Executive Directors. Being the more accountable parties, Executiv
e
Directors take a larger proportion of the reduction in comparison with employees.
See ‘Executive Director remuneration outcomes’ on page 65 for details of profit-share awards for FY2022 compared with the
illustrative reward scenario disclosed in the FY 2021 Annual report on remuneration.
Deferred profit-share payments
Profit-share awards in the fourth quarter of each financial year are calculated based upon an estimate of full year operating pr
ofits,
thus there is the possibility that actual performance could be below expectation. Executive Directors therefore have up to 10% of
their annual profit-share awards in the fourth quarter deferred to the following quarter in order that the awards can be adjusted
based upon the final figures (that are not available in the fourth quarter). The table below sets out the amounts deferred for payment
once the financial statements have been audited and approved.
2022 2021
Deferred profit-share payments £ % of annual award £ % of annual award
Mark Dwyer 25,000 5% 21,500 4%
Tom Griffith 25,675 5% 22,009 5%
Daniel Lippincott
(1)
15,657 5% 16,044 11%
Carlos Yuste 22,390 5% 16,268 4%
Note:
1) Daniel Lippincott became a Director on 19th October 2020 so only his profit-share paid from that date is included.
These amounts are included in the profit-share reported in the table on page 68.
1) SINGLE TOTAL FIGURE OF REMUNERATION (AUDITED) CONTINUED
City of London Investment Group PLC Annual Report 2021/2022 71
Strategic reportOverview Financial statements Shareholder information
1) SINGLE TOTAL FIGURE OF REMUNERATION (AUDITED) CONTINUED
Employee Incentive Plan
Summary of Employee Incentive Plan (EIP) interests
The EIP was approved by shareholders at the October 2016 AGM and adopted by the Group in December 2016. It is open to
employees of all Group companies, including Executive Directors. Participants are invited to waive up to 20% (or up to 30% if
there is headroom within the cap agreed by shareholders) of their annual profit-share in return for the right to participate in the
EIP for the relevant financial year. Under the EIP, they are granted Restricted Share Awards (RSAs) over shares in the Company
equal in value to two times the amount they have waived.
Due to high level of employee elections, participation had to be scaled back this year across the Group. In order to encourage maximum
employee participation, and ownership of CLIG shares, the Directors elected to reduce their participation so that employees were not
scaled down below 20%. In respect of bonus earned for FY 2022, Executive Directors restricted their participation in the EIP to
between 5% and 20% of bonus earned. A 100% match was provided by the Company on the amount waived.
The RSAs in respect of the waived profit-share disclosed in the single total figure of remuneration table on page 68 will be granted
in October 2022. The number of shares is calculated based on the average share price over the ten days preceding the grant date.
For Executive Directors, the RSAs vest one-third each year over a three-year period following grant for the awards made up until
October 2020 and one-fifth each year over a five-year period following grant for awards made from October 2021 onwards. As
Executive Directors have already elected to participate under the current policy for FY 2023, the revised vesting period as per the
proposed Director’s Remuneration Policy (on page 80) will only take effect from the next round of elections, which will be in June
2023 and relate to the awards to be made in October 2024.
These awards accrue an amount equal to the dividend that the Director would have received had they owned the shares from the
date of grant. The dividend equivalent paid on shares vested during the year is disclosed in the single total figure of remuneration
table on page 68.
The RSAs are subject to forfeiture upon termination. For further details see the future policy table on pages 79 to 81.
EIP Restricted Share Awards
Share
(1)
Market
Awards
Awards price price on
held Awarded Vested
held used for date of
Date of 30th June during during
30th June award vesting
Vesting period
Director Award 2021 the year the year 2022 £ £ From To
M Dwyer 26/10/2018 23,806 – (23,806) – 3.873 5.10 26/10/18 26/10/21
26/10/2019 16,022 – (8,011) 8,011 4.258 5.10 26/10/19 26/10/22
26/10/2020 37,240 – (12,413) 24,827 4.028 5.10 26/10/20 26/10/23
26/10/2021 – 28,600 – 28,600 5.245 26/10/21 26/10/26
77,068 28,600 (44,230) 61,438
T Griffith 26/10/2018 25,498 – (25,498) – 3.873 5.10 26/10/18 26/10/21
26/10/2019 18,524 – (9,262) 9,262 4.258 5.10 26/10/19 26/10/22
26/10/2020 40,120 – (13,373) 26,747 4.028 5.10 26/10/20 26/10/23
26/10/2021 – 9,168 – 9,168 5.245 26/10/21 26/10/26
84,142 9,168 (48,133) 45,177
C Yuste 26/10/2019 18,182 – (9,091) 9,091 4.258 5.10 26/10/19 26/10/22
26/10/2020 34,036 – (11,345) 22,691 4.028 5.10 26/10/20 26/10/23
26/10/2021 – 21,712 – 21,712 5.245 26/10/21 26/10/26
52,218 21,712 (20,436) 53,494
D Lippincott 26/10/2021 – 4,080 – 4,080 5.245 26/10/21 26/10/26
– 4,080 – 4,080
213,428 63,560 (112,799) 164,189
1) The number of shares awarded is calculated based on ten day average share price on the day prior to award.
Governance
72 City of London Investment Group PLC Annual Report 2021/2022
ANNUAL REPORT ON REMUNERATION
CONTINUED
Governance: Remuneration
Summary of share option plan interests
The Company operates an Employee Share Option Plan which is open to employees of all Group companies and Executive
Directors who work more than 25 hours per week, provided they do not have a material interest in the Company, that is to say the
ability to control more than 25% of the ordinary share capital. During the year, options over ordinary shares of the Company were
granted to some employees.
Number of options
Exercised Lapsed Granted Exercise Price at Face value
Held during the during the during the
Held price grant at grant Vesting Vesting Expiry
2021 period period period 2022 £ £ £ period date date
Tom Griffith 6,000 (6,000) – – – 3.4875 3.4875 – 3 yrs 04/11/14 04/11/21
17,000 – – – 17,000 2.55 2.5 42,500 3 yrs 30/01/17 30/01/24
23,500 – – – 23,500 3.52 3.52 82,720 3 yrs 19/06/18 19/06/25
Total 46,500 (6,000) – – 40,500
Mark Dwyer 50,000 (50,000) – – – 3.6 3.6 – 3 yrs 03/05/15 03/05/22
5,500 – – – 5,500 2.55 2.5 13,750 3 yrs 30/01/17 30/01/24
17,500 – – – 17,500 3.52 3.52 61,600 3 yrs 19/06/18 19/06/25
Total 73,000 (50,000) – – 23,000
Carlos Yuste 46,000 – – – 46,000 5.04 5.04 231,840 3 yrs 16/03/24 16/03/31
Total 46,000 – – – 46,000
Daniel Lippincott 20,000 – – – 20,000 5.04 5.04 100,800 3 yrs 16/03/24 16/03/31
Total 20,000 – – – 20,000
The closing market price of the Company’s ordinary shares at 30th June 2022 was £4.29 (2021: £5.36) and the price moved
during the year between a low of £4.00 to a high of £5.50 (2021: low £3.76 high £5.60).
1) SINGLE TOTAL FIGURE OF REMUNERATION (AUDITED) CONTINUED
City of London Investment Group PLC Annual Report 2021/2022 73
2) FUTURE IMPLEMENTATION
The Committee will table a new Directors’ remuneration policy at the AGM in 2022. Subject to being approved by shareholders at
the 2022 AGM, the Remuneration Policy on pages 79 to 83 will apply.
The core aspects of Director remuneration will remain the same, with Executive Directors receiving fixed elements
of salary, Director fee, taxable benefits and pension, and the variable element of the profit-share plan.
The base salary (including Director’s fee) with effect from 1st July 2022 for Tom Griffith is US$332,500. The annual bonus will hav
e
a maximum value of 250% of base salary (including Director’s fee). The maximum cash bonus will be adjusted by the maximum
amount of bonus that can be waived (30%), which in turn is matched by the Company.
The fee arrangements for Non-Executive Directors for FY 2023 will remain the same as listed on page 69, subject to the two-year
review on 1st January 2023.
3) FURTHER REMUNERATION DISCLOSURES
Total shareholder return
The following graph illustrates the total shareholder return of a holding in the Company against an appropriate index for the 10 years
to 30th June 2022. We have chosen the MSCI Emerging Markets T/R Net Index which is calculated on a total return basis, i.e.
assuming reinvestment of dividends.
Strategic reportOverview Financial statements Shareholder information
30/6/2012
30/6/2013
30/6/2014
30/6/2015
30/6/2016
30/6/2017
30/6/2018
30/6/2019
30/6/2020
30/6/2021
30/6/2022
400%
350%
300%
250%
200%
150%
100%
50%
0%
Total shareholder return (dividends reinvested) for ten years to 30th June 2022 (GBP)
City of London
MSCI Emerging Markets
Source: Bloomberg.
Governance
ANNUAL REPORT ON REMUNERATION
CONTINUED
74 City of London Investment Group PLC Annual Report 2021/2022
Governance: Remuneration
3) FURTHER REMUNERATION DISCLOSURES CONTINUED
Chief Executive Officer single figure of remuneration
The following table shows the change in total remuneration for the Chief Executive Officers, Barry Olliff (CEO 1) and Tom
Griffith (CEO 2) during the ten years to 30th June 2022. This table is included for the purpose of comparison against total
shareholder return as detailed above.
Year to
Year to 13 months Year to Year to Year to Year to 30th June Year to Year to Year to
31st May to 30th June 30th June 30th June 30th June 30th June 2019 30th June 30th June 30th June
2013 2014 2015 2016 2017 2018 Prorated 2020 2021 2022
£ £ £ £ £ £ £ £ £ £
Single total figure
CEO 1 580,922 693,550 805,430 763,686 1,038,679 1,108,646 627,887 –
– –
CEO 2 – – – – – – 212,036 782,762 824,046 872,831
Annual bonus
(as % of current cap)
(2)
CEO 1 51% 84% 85% 84% 84% 84% 74% – – –
CEO 2 – – – – – – 88% 64% 79% 84%
EIP – % of maximum
opportunity
(3)
CEO 1 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
CEO 2 – – – – – – 100% 100% 100% 100%
Notes:
1) Barry Olliff stepped down as CEO on 1st January 2013 and resumed the role on 15th April 2013. During this time, he remained a Director and Chief
Investment Officer on the same salary. Therefore, his remuneration for the full year has been included in this table to provide a useful comparativ
e.
Barry Olliff subsequently stepped down as CEO on 1st March 2019, being replaced by Tom Griffith. Barry Olliff remained on the Board, serving as
Non-Independent Non-Executive Director until his retirement from the Board on 31st July 2022. His total remuneration incurred in accordance with this
role is not detailed here but can instead be found in the total single figure of remuneration table on page 68.
2) In 2015, the Directors’ remuneration policy was amended to include a cap on bonuses paid to Directors and Barry Olliff’s cap was set at 5% of operating
profits pre-profit-share and EIP. For comparison purposes prior years’ annual bonuses are shown as a percentage of 5% of operating profits pre-profit-share
and EIP. The cap on Tom Griffith’s bonus was 2.5% of operating profit pre-bonus and EIP until 30th June 2019, when it was changed to 250% of salary
and base fee for the year ended 30th June 2020 onwards.
3) As detailed in the single total figure commentary on page 68, EIP awards are made on the basis of the amount of the bonus that has been waived in the
scheme year. These awards vest based on continued service and therefore have been shown at 100% in the table.
City of London Investment Group PLC Annual Report 2021/2022 75
3) FURTHER REMUNERATION DISCLOSURES CONTINUED
Annual percentage change in the remuneration of Directors and employees
The table below shows the change in Director and employee salary/fees, benefits and profit-share over the preceding two years.
The average change for employees as a whole is given using a per capita figure based on the average number of employees for the period.
Salary/fees Benefits Bonus
% % %
2022
(1)
2021
(2)
2022
(1)
2021
(2)
2022
(1)
2021
(2)
% % % % % %
Employees
(3)
8% 5% 6%
(3)
25% 3% 7%
Executive Directors
Mark Dwyer
(4)
2% 8% -1% 7% 7% 33%
Tom Griffith
(4)
1% 6% -3% 3% 1% 33%
Daniel Lippincott
(5)
184% n/a 31% n/a 77% n/a
Carlos Yuste
(4)
2% 4% 2% 5% 9% 23%
Non-Executive Directors
Barry Aling
(6)
6% 18% n/a n/a n/a n/a
Rian Dartnell
(7)
47% n/a n/a n/a n/a n/a
Tazim Essani
(7)
135% n/a n/a n/a n/a n/a
George Karpus
(8)
43% n/a n/a n/a n/a n/a
Barry Olliff
(9)
-33% -7% 3% -19% n/a -100%
Peter Roth
(6)
8% 13% n/a -100% n/a n/a
Jane Stabile
(6)
6% 4% n/a -100% n/a n/a
Notes:
1) 2022 – June 2022 month end exchange rate has been applied to USD payments for the two accounting periods 2021 to 2022 to eliminate the impact of
FX movements.
2) 2021 – June 2021 month end exchange rate has been applied to USD payments for all two accounting periods 2020 to 2021 to eliminate the impact of
FX movements.
3) Based on average cost per employee.
4) % increase in 2022 reflects full impact of mid-year salary increase on 1st January 2021 in FY 2021. There was no change in salary in 2022.
5) Daniel Lippincott joined the Board part way during FY2021 on 19th October 2020. He also received salary increases of 123% on 1st July 2021
and a further 25% on 1 January 2022 to bring it in line with his role and responsibilities.
6) Base fee for Non-Executive Directors was increased by 14% and supplemental fee for services as the Chair of the Board was increased by 40% with effect
from 1st January 2021. Barry Aling’s one-off payment of £35,000 in FY 2021 for his work on the KIM merger has been excluded for this analysis. 2022 %
increase reflects full year impact of mid-year base fee increase for Non-Executive Directors. There was no change in Non-Executive Director fee in 2022.
7) Rian Dartnell and Tazim Essani joined the Board part way FY 2021 and 2022 % increase reflects full year impact of their base fee.
8) George Karpus joined the Board part way in FY 2021 on 19th October 2020. 2022 % increase reflects full year impact of his base and corporate advisory fee.
9) Barry Olliff ceased to receive the corporate advisory fee from 31st December 2021.
Relative importance of spend on pay
The table below shows the overall expenditure on employee remuneration and shareholder distributions and the percentage
change between the current and previous period.
2022 2021 Change
£ £ £
Total employee spend 23,532,973 20,045,406 17%
Average headcount (number) 114 99 15%
Profit after tax 18,091,151 16,971,233 7%
Dividends relating to the period
(1)
22,788,187 14,233,013 60%
Note:
1) The current period includes an estimate of the final dividend based on the number of qualifying shares as at 30th June 2022 excluding those held in the
employee benefit trust. The Board are recommending a final dividend of 22p per share (2021: 22p), which would make the total for the year 46.5p per
share which includes a special dividend of 13.5p (2021: 33p, special dividend : nil). This is subject to shareholder approval at the AGM in October.
The prior period estimate has been restated to include the actual final dividend paid.
A breakdown of the employee spend can be found in note 3 to the financial statements on page 106.
Strategic reportOverview Financial statements Shareholder information
Governance
ANNUAL REPORT ON REMUNERATION
CONTINUED
76 City of London Investment Group PLC Annual Report 2021/2022
Governance: Remuneration
4) GOVERNANCE DISCLOSURES
Payments to past Directors
No payment or transfer of assets was made during the financial period to any past Director of the Company.
Payments for loss of office
There were no termination payments made to any person who has served as a Director during the financial period.
Beneficial interest of the Directors and their families in the shares of the Company at the period end were as follows:
Ordinary shares of 1p each Restricted share awards of 1p each
2022 2021 2022 2021
Executive Directors
Mark Dwyer 215,654 133,924 61,438 77,068
Tom Griffith 467,868 413,735 45,177 84,142
Daniel Lippincott
(1)
249,347 249,347 4,080 –
Carlos Yuste 147,028 76,592 53,494 52,218
Non-Executive Directors
Barry Aling 184,300 134,300 – –
Rian Dartnell
(2)
50,000 50,000 – –
Tazim Essani
(3)
5,350 5,350 – –
George Karpus
(4)
18,371,205 18,371,205 – –
Barry Olliff 1,268,410 1,228,018 – –
Peter Roth 5,000 5,000 – –
Jane Stabile 5,000 – – –
Notes:
1) Daniel Lippincott was appointed as Director of the Company with effect from 19th October 2020.
2) Rian Dartnell was appointed as Director of the Company with effect from 1st October 2020.
3) Tazim Essani was appointed as Director of the Company with effect from 1st February 2021.
4) George Karpus was appointed as Director of the Company with effect from 19th October 2020.
Executive Director shareholding guidelines
All Executive Directors are required to hold shares equivalent in value to 200% of salary within a five-year period from their date
of appointment. The below illustration shows the Executive Director’s share ownership against this target as at 30th June 2022.
To reduce the impact of share price volatility on this calculation, the closing share price of £4.29 for the financial year ended
30th June 2022 has been used.
Tom Griffith
Shares held
0 100 200 300 400 500 600 700 800 900
Unvested EIP shares (net of tax) Shareholding guidelines
781%
Shareholding guidelines
City of London Investment Group PLC Annual Report 2021/2022 77
4) GOVERNANCE DISCLOSURES CONTINUED
Remuneration Committee
None of the Executive Directors are in attendance during discussions regarding their own remuneration.
Details of attendance by members of the Remuneration Committee are set out on page 46.
Dividends received by Directors and their families from holdings of shares in the Company during the financial year were as follows:
2022 2021
£ £
Executive Directors
Mark Dwyer 82,299 32,264
Tom Griffith 206,969 116,852
Daniel Lippincott 102,232 20,571
Carlos Yuste 52,872 21,925
Non-Executive Directors
Barry Aling 74,700 33,633
Rian Dartnell 23,250 5,500
Tazim Essani 2,488 589
George Karpus 7,532,194 1,515,624
Barry Olliff 570,723 514,519
Peter Roth 2,325 –
Note: Dividends paid have been included only from the date of appointment until the date of resignation from the Board.
Statement of voting at the last Annual General Meeting (AGM)
The resolution seeking approval of the Annual report on remuneration at the AGM in October 2021 received the following votes.
Remuneration report
October 2021
Number Percentage
of votes of votes cast
For* 22,968,627 92.9%
Against 1,757,125 7.1%
Total votes cast** 24,725,752
Votes withheld 17,339
* Includes discretionary votes.
** Excludes withheld votes.
Consideration of employment conditions elsewhere in the Group
The Group has always adopted a partnership approach so in essence this policy is consistent with that applied across the Group.
While employees were not directly consulted on the Directors’ remuneration, the Group remuneration policy is available to all
employees and any feedback or concerns are welcomed.
Terms of reference
The Committee reviewed its terms of reference in May 2022, approving minor administrative changes.
Strategic report
Overview
Financial statements Shareholder information
Governance
78 City of London Investment Group PLC Annual Report 2021/2022
ANNUAL REPORT ON REMUNERATION
CONTINUED
4) GOVERNANCE DISCLOSURES CONTINUED
Compliance with Provision 40 of the UK Corporate Governance Code
Governance: Remuneration
CLARITY
Remuneration arrangements should be transparent and promote
effective engagement with shareholders and the workforce.
Executive Director remuneration is aligned to employee remuneration,
meaning that both parties have common goals and incentives. The
Group remuneration policy is available to all employees and any
feedback or concerns are welcomed. The simplicity of Directors’
remuneration assists in effective engagement with shareholders.
SIMPLICITY
Remuneration structures should avoid complexity and their rationale
and operation should be easy to understand.
The Policy for Executive Director remuneration is extremely simple
and straightforward, with fixed remuneration consisting of salary,
Director fees, taxable benefits and pensions, and variable pay
consisting of the profit-share plan and Employee Incentive Plan.
There are no complex individual KPIs – Executive Directors simply
share in the operating profit that their performance helps to generate
over the course of the financial year.
RISK
Remuneration arrangements should ensure reputational and other
risks from excessive rewards, and behavioural risks that can arise
from target-based incentive plans, are identified and mitigated.
There are no individual KPIs that introduce the behavioural risks that
can arise from target-based forms of incentive. The appropriate risk
and cost controls necessary to deliver high quality earnings and
dividends, and thus increased the profit-share pool, robustly aligns
the interests of Executive Directors, employees and shareholders.
PREDICTABILITY
The range of possible values of rewards to individual Directors and
any other limits or discretions should be identified and explained at
the time of approving the policy.
Due to its simplicity, both fixed and variable Executive Director
remuneration is very predictable. See page 65 for 2022
remuneration outcomes for Executive Directors, plus a forecast
for 2023, on page 82.
PROPORTIONALITY
The link between individual awards, the delivery of strategy and the
long-term performance of the Company should be clear. Outcomes
should not reward poor performance.
The Group’s simple approach to remunerating its Directors means
that it is impossible for poor performance to be rewarded. If the
Company’s operating profit is down, then so is the pool from which
Director profit-share are paid and Employee Incentive Plan shares are
matched. Executive Directors have a greater impact on the Group
than other employees, therefore hold themselves more accountable
in instances of market downturns, and therefore have their profit-
share participation adjusted accordingly.
ALIGNMENT TO CULTURE
Incentive schemes should drive behaviours consistent with Company
purpose, values and strategy.
The Group has an inclusive and team-based culture. Executive
Directors and employees have a common KPI tied to their variable
remuneration, being operating profit, a metric that shareholders
value due to its potential to provide increased distributions and
Company share price. This alignment of interests is consistent with
the Group’s purpose, to exist for the mutual benefit of its three
primary stakeholders: client, employees and shareholders, as well
as its values. Further detail on Group culture, purpose and values
can be found on page 51.
City of London Investment Group PLC Annual Report 2021/2022 79
Strategic report
Overview
Financial statements Shareholder information
Governance
DIRECTORS’ REMUNERATION POLICY
Governance: Remuneration
The Directors’ Remuneration Policy (the Policy) was last put to a binding shareholder vote at the AGM in October 2019 and
passed with a vote of 84% in favour. The policy must be presented to shareholders for approval at least every three years. Following
a review this year and taking into account feedback from the Company’s largest shareholders and their main representative bodies,
the Remuneration Committee proposes the following minor changes:
Future Policy table
The following table sets out the principal components of the new policy which will be put to shareholders for approval and, if
approved, be effective from the conclusion of the AGM on 31st October 2022.
Base salary (fixed pay)
EXECUTIVE DIRECTORS
To pay a fair base salary,
commensurate with the size of
the business and the individual’s
role and experience.
Reviewed annually, with changes, if any,
generally effective 1st January or 1st July. The
Committee considers salaries in the context of
an overall package with regard to market data,
Group performance and individual experience
and performance. Adjustments may be made at
other times to reflect a change of responsibility.
The annual pay review does not guarantee
an increase. The Committee considers it
important to keep fixed costs under tight
control and as such salaries are at the
lower end of what may be described as
market average.
There is no set maximum salary, however,
the Committee is guided by market
data/practice when setting pay awards
and the average level of increase across
the workforce.
Not applicable. Not applicable.
Component
and purpose
Base salary/fees
Base salaries and fees will be reviewed annually rather than
every six months.
To align with investor and typical
market practice.
Pension
Clarification that the Executive Director pension contribution rate is
no more than the level for the wider workforce.
To align with investor
expectations.
Employee Incentive Plan
The vesting period for RSAs has been extended so that RSAs for
Executive Directors will vest one-third each year after the 3rd, 4th
and 5th anniversaries of grant. Previously, RSAs vested one-fifth each
year over five years after the 1st, 2nd, 3rd, 4th and 5th anniversaries
of grant.
Consolidating changes which
comply with the Code and
investor expectations.
Malus and clawback
Material error and reputational damage have been added to the list
of exceptional events which could lead to malus and/or clawback.
The malus and/or clawback period has been extended from 18 months
to 24 months.
To align with investor
expectations.
Shareholding guidelines
Post-employment shareholding requirements have been incorporated
in the policy.
Consolidating changes which
comply with the Code and align
with investor expectations.
Employee Stock Ownership Plan
(ESOP)
Removed participation in the ESOP as there will be no further grants
to Executive Directors under this scheme.
Simplification of pay
arrangements.
Remuneration element Rationale for changeProposed changes to the Policy
Operation Maximum opportunity Performance measures
and targets
Recovery
Base fee (fixed pay)
Provides a fee allocation to
cover UK Director duties.
The fees are equivalent to the Non-Executive
Directors’ base fee. These are reviewed
periodically with the last review effective from
January 2021. It is Company’s intention to
review these fees every two years.
As this fee relates specifically to the Executive
Directors’ governance duties, it is capped at
no more than the Non-Executive Directors’
base fee. The aggregate annual fees for
Executive and Non-Executive Directors are
limited to £450,000.
Not applicable. Not applicable.
Pension (fixed pay)
To provide defined contribution
pension arrangements to assist
with recruitment and retention.
Employer contributions are made to defined
contribution pension arrangements or
equivalent cash allowances are paid, subject to
local practice in the relevant country.
The maximum defined pension contribution
or cash equivalent is 12.5% per annum of
base salary. It is no higher than the defined
pension contribution level of the wider
employee workforce.
Not applicable. Not applicable.
DIRECTORS’ REMUNERATION POLICY
CONTINUED
80 City of London Investment Group PLC Annual Report 2021/2022
Governance: Remuneration
EXECUTIVE DIRECTORS continued
Component
and purpose
Operation Maximum opportunity Performance measures
and targets
Recovery
Other benefits (fixed pay)
To provide market competitive
fringe benefits.
Currently benefits offered include: life insurance,
medical insurance (or a contribution towards the
cost), disability insurance, sabbatical, paid
holiday and travel season ticket loans.
Executives will be eligible for any other benefits
which are introduced for the wider workforce on
broadly similar terms.
Additional benefits may be provided if required,
for example to support international relocation.
These benefits represent a small element of
the overall remuneration package and as
such are not subject to a specific cap.
Directors are entitled to 30 days paid
holiday, in addition to public holidays.
Not applicable. Benefits are provided up to termination
of employment and any outstanding
travel season ticket loan is repayable
in full.
Bonus (variable pay)
To incentivise and reward
Directors for their contribution to
the corporate goals outlined in
the strategic report.
The Company operates a bonus plan for all
employees, including the Executive Directors,
which is linked to the Group’s profitability,
allocating a maximum of up to 30% of
pre-bonus, pre-tax, operating profit for this
purpose. Bonus awards are made by the
Board following recommendations by the
Remuneration Committee.
Bonuses are paid quarterly in September
(approximately 10% of the estimated annual
bonus), December (20%), March (30%)
and July (40%). A minimum of 10% of the
July payment is deferred until September
once the financial statements have been
audited and approved.
The maximum payment for an Executive
Director is capped at 2.5 times the
aggregate of salary and fees.
Bonuses are not subject
solely to individual
performance conditions and
are paid in cash. The Board
believes that this bonus
scheme has worked well in
motivating employees at all
levels within the Company
and that this is demonstrated
by the high employee
retention rates experienced
by the Group.
See malus and clawback section below
Employee Incentive Plan (Plan)
To encourage and reward
loyalty, and to align the long-
term interests of Directors with
that of shareholders and clients.
The Plan is designed to work in
line with the Group’s current
annual bonus policy.
The Plan is open to employees of all existing
Group companies and Executive Directors.
Participants will initially be invited to waive up
to 20% of their annual bonus in return for the
right to participate in the Plan for the financial
year. Under the Plan, they will be granted
Restricted Share Awards (RSAs) in the
Company equal in value to two times the
amount they have waived.
The RSAs for Executive Directors will vest in
equal instalments after the 3rd, 4th and 5th
anniversaries following grant.
As the Executive Directors have already elected
to participate under the current policy for FY
2023, the revised vesting period will only take
effect from the next round of elections, which
will be in June 2023 and relate to the awards
to be made in October 2024.
The RSAs are funded 50% by waived bonus
and 50% by the Company.
Depending on the level of participation,
if there is headroom, employees and
Executive Directors will be offered the
opportunity to increase their participation
up to 30% of their annual bonus.
Awards held until they vest will receive a
dividend equivalent payment, equal to the
amount that they would have received had
they been entitled to dividends from the
date of grant.
In the event of a change of control of the
Company, the RSAs relating to the waived
bonus will vest in full on an accelerated
basis. Only a prorated number of the
Company matching RSAs will vest on an
accelerated basis according to the number
of days elapsed since grant over the total
vesting period.
Not applicable. See malus and clawback section below.
Malus and clawback
To provide a way of recovering
payments where there have
been exceptional negative events
The Committee can seek to recover the annual
bonus and EIP in the exceptional event of:
misstatement or misleading representation of
performance; a material error; a significant failure
of risk management and control; reputational
damage; or serious misconduct of an individual.
The Committee has discretion to determine
the amount of any award which it seeks for
malus and/or clawback.
Not applicable. Up to 24 months after payment/vesting.
City of London Investment Group PLC Annual Report 2021/2022 81
Strategic report
Overview
Financial statements Shareholder information
Governance
Component
and purpose
Operation Maximum opportunity Performance measures
and targets
Recovery
Minimum shareholding
Guidance to encourage Director
share ownership and ensure
alignment of their long-term
interests with that of
shareholders.
The Remuneration Committee will monitor the
Executive Directors share ownership and
participation in the EIP annually to ensure they
are on track to meet the minimum shareholding
requirement within the desired timeframe.
Shares that count towards these guidelines
include shares that are owned outright,
vested and unvested EIP shares (on a net of
tax basis).
In addition a post-employment shareholding
requirement applies. Executive Directors are
required to hold lower of 200% of such
Executive Director’s basic salary or the value of
shares held by the Executive Director at the
date of termination of employment. Only
awards granted and shares vested thereof after
the introduction of this policy in September
2021 will count against the post cessation
guideline. All awards granted or vested or
shares acquired before the implementation of
the policy (September 2021) are excluded.
The Committee retains discretion to allow for
the sale of shares by Executive Directors before
the second anniversary of termination of
employment in the event of exceptional
circumstances.
The Remuneration Committee expects
Executive Directors to build up a
shareholding of at least 200% of salary
within a five-year period.
Not applicable. Not applicable.
EXECUTIVE DIRECTORS continued
Fees
To pay a fair fee, commensurate
with the skills, experience and
time required to undertake
the role.
Fees are normally reviewed every two years
taking into account factors such as the time
commitment and contribution of the role and
market levels in companies of a comparable
size and complexity. Adjustments may be made
at other times to reflect a change of
responsibility.
Fees for Non-Executive Directors may include a
base fee and additional fees for further
responsibilities (for example, chair-ship of
Board committees or holding the office of
Senior Independent Director or taking up
significant additional responsibility).
Fees are paid monthly or quarterly in arrears,
depending on Director’s preference.
The aggregate annual fees for
Non-Executive Directors are limited to
£310,000 in the Company’s Articles
of Association.
Not applicable. Not applicable.
NON-EXECUTIVE DIRECTORS
Expenses
To enable the Non-Executive
Directors to perform their duties.
All reasonable travelling, hotel and other
expenses properly incurred in the performance of
their duties as Directors, including any expenses
incurred in attending meetings of the Board or
any committee of the Board or general meetings
or separate meetings of the shareholders may
be repaid.
Expenses are not subject to a specific cap
but they must be reasonable and
appropriate. The Company may settle any
tax incurred.
Not applicable. Not applicable.
DIRECTORS’ REMUNERATION POLICY
CONTINUED
82 City of London Investment Group PLC Annual Report 2021/2022
Governance: Remuneration
Reward scenarios
The chart below illustrates the level of remuneration that would be received by the Director in accordance with the Group Directors’
remuneration policy in the first year to which it applies, the first full financial year being that ending 30th June 2023, provided all
components of remuneration remain the same as they currently are.
Assumptions:
1) Based on FY 2022 results.
2) Minimum – reflects salary as of 1st July 2022, and current pension and taxable benefits, as disclosed in the single figure remuneration table.
3) In line with expectation – reflects the minimum remuneration plus bonus and total EIP awards as disclosed in the single figure remuneration table. It
includes expected dividend equivalent payments due on vesting EIP awards.
4) Maximum – reflects the minimum remuneration plus the maximum bonus opportunity as detailed in the future policy table on pages 79 to 81.
The
maximum variable cash bonus has been adjusted by the maximum amount of bonus that can be waived (30%), which in turn is matched by the Company
and the total is shown as EIP. It includes expected dividend equivalent payments due on vesting EIP awards.
5) Under the new Director’s remuneration Policy, the EIP awards once awarded, will vest one-third per annum from the end of the third year after
participation. This means that RSAs will not vest in years 1 and 2. RSAs will vest one-third each in years 3, 4 & 5.
The above reward scenario chart is not a projection and is being provided for guidance only. This chart is based on future
remuneration scenarios for the year ending June 2023.
Share price impact
Directors’ remuneration is not linked to performance targets or measures relating to more than one financial year. Hence no
illustrations are shown in respect of the impact on the Directors’ remuneration outcomes based on future share price movements.
Consideration of employment conditions elsewhere in the Group
The Company has always adopted a partnership approach so in essence this policy is consistent with that applied across the Group.
While employees were not directly consulted on the Directors’ remuneration, the Group remuneration policy is provided to all
staff and any feedback or concerns are welcomed.
Recruitment of new Directors
The structure of the package offered to new Directors mirrors that offered to current Directors under the new Director’s
remuneration policy as detailed in the future policy table. The base salary positioning will take into consideration a number of
factors including external market forces, the nature of the role, and the experience, calibre and background of the new Director.
Pension contributions, bonus and EIP participation will not exceed the levels set out in the Policy table.
In addition, the Group may pay compensation to new Directors for remuneration the individual has forfeited in order to take up
the role at CLIG. The Committee may offer additional cash and/or share-based buyout awards when it considers these to be in the
best interests of the Company (and therefore shareholders) to take account of remuneration given up at the individual’s former emplo
yer.
MaximumMinimum (Fixed) In line with expectation
0
200
400
600
800
1,000
1,200
35%100% 23%
57%
8%
47%
30%
£’000
Salary and related costs
Variable cash bonus Employee Incentive Plan (EIP)
308
882
1,366
Tom Griffith
Chief Executive Officer
City of London Investment Group PLC Annual Report 2021/2022 83
Strategic report
Overview
Financial statements Shareholder information
Governance
This includes the use of awards made under 9.4.2 of the Listing Rules. Such awards would be capped at a reasonable estimate of the
value foregone and would reflect, as far as possible, the delivery mechanism, time horizons and whether performance requirements
are attached to that remuneration. Shareholders will be informed of any such payments at the time of appointment and/or in the next
published Annual Report. For internal appointments, any outstanding share awards held may continue to vest on their original terms.
For external and internal appointments, the Committee may agree that the Company will meet appropriate relocation and/or
incidental expenses as appropriate.
For the appointment of a new Chair or Non-Executive Director, the fee arrangement would be set in accordance with the approved
Remuneration Policy.
Service contracts and letters of appointment and policy on payments for loss of office
Executive Directors
In line with general market practice, the Executive Director service contracts are based on a rolling twelve-month period. Termination
of any service contract requires twelve months written notice by either party, and the Company may terminate the contract with
immediate effect with or without cause by making a payment in lieu of notice, typically in monthly instalments equal to the value
of one year’s base salary only.
No bonus shall be payable for any time after the Director has given or received notice of termination.
In respect of the EIP, in the event of termination before the normal vesting date, the RSAs funded by the waived bonus, will be
repaid at the lower of the value of those shares on the date of award and the date of forfeiture. The Company-funded RSAs will be
forfeited upon termination, except in the case of a good leaver, where there will be an entitlement to a prorated amount. A good
leaver is a Director who leaves due to ill health or disability, sale of the business, on retirement, through redundancy or in other
special circumstances approved by the Remuneration Committee (acting fairly and reasonably).
Non-Executive Directors
Non-Executive Directors do not have service contracts, but are engaged under letters of appointment. As with all other Directors,
they are required to stand for re-election annually in accordance with the UK Corporate Governance Code.
Details of Directors’ service contracts and letters of appointment are below:
Notice period Notice period
Name Date of appointment from Company from Director Provision of compensation
Executive Director
Tom Griffith 31st March 2020 One year One year One year’s salary
Non-Executive Directors
Barry Aling 1st August 2013 Six months Six months Six months’ fees
Rian Dartnell 30th September 2020 Six months Six months Six months’ fees
Tazim Essani 20th January 2021 Six months Six months Six months’ fees
George Karpus 13th October 2020 N/A N/A N/A
Peter Roth 1st June 2019 Six months Six months Six months’ fees
Jane Stabile 1st June 2018 Six months Six months Six months’ fees
Consideration of shareholders views
The Committee greatly values and have considered the views of shareholders and proxy advisers in developing this Remuneration Policy.
DIRECTORS’ REPORT
84 City of London Investment Group PLC Annual Report 2021/2022
Governance: Statutory, regulatory and other information
The information contained in the sections of this Annual
Report and Accounts identified below forms part of this
Directors’ report:
• Strategic report set out on pages 4 to 40;
• Corporate governance section set out on pages 42 to 83; and
• Statement of Directors’ responsibilities set out on page 86.
Principal activity
City of London Investment Group PLC is the holding company
for its two principal operating subsidiaries: City of London
Investment Management Company Limited (CLIM) and
Karpus Investment Management (KIM). Both CLIM and
KIM act as investment managers with a total of US$9.2 billion
(£7.6 billion) (2021: US$11.4 billion (£8.3 billion)) under
management as at 30th June 2022.
Branches
CLIM has a subsidiary in Singapore.
Going concern
The Directors’ report should be read in conjunction with the
governance report on pages 42 to 83 and the strategic report on
pages 4 to 40, which together provide a commentary on the
operations of the Group and include factors likely to affect its
future development as well as relevant key performance indicators
and principal risks and how they are managed, using the
information available to the date of these financial statements.
During the year to 30th June 2022, the Group had no external
borrowings and is wholly funded by equity. As at 30th June
2022, cash and cash equivalents were £22.7 million (2021:
£25.5 million). Accordingly, the Directors are satisfied that the
Group and Parent Company have adequate resources to meet
their business needs for the foreseeable future, and the Financial
Statements have therefore been prepared on the going concern
basis. Please see page 33 for the viability statement.
Results and dividend
The results of the Group for the year to 30th June 2022,
together with details of amounts transferred to reserves, are set
out on pages 94, 96 and 97. The Company has paid dividends
of £21,484,909 during the period (2021: £9,743,124). The final
dividend for the year to 30th June 2022 of 22p per share (2021:
22p) has been proposed, payable on 4th November 2022,
subject to shareholder approval, to shareholders who are on the
register of members on 30th September 2022. Refer to page 22
for dividend policy.
Annual General Meeting
The Company’s AGM will be held at 11:30am on 31st October
2022 at 77 Gracechurch Street, London EC3V 0AS. All resolutions
will be taken on a poll and, accordingly, you are asked to vote by
the means as set out in the Notes of the Notice of meeting.
Directors
The names and biographical details of the current Directors of the
Company are given on pages 44 to 45. The Directors’ interests are
set out in the Directors’ remuneration report on page 76.
Directors’ indemnity arrangements
The Company maintains appropriate Directors’ and Officers’
insurance. The Directors also have the benefit of the indemnity
provisions in the Company’s Articles of Association. These
provisions, which are qualifying third party indemnity
provisions as defined by s236 of the Companies Act 2006 were
in force throughout the year and are currently in force.
Powers of Directors
Subject to the Company’s Articles. UK legislation and any
Directions given by special resolution, the business of the
Company is managed by the Directors and they may exercise all
the powers of the Company. Provisions relating to the issuing of
shares are included in the Articles and shareholders are asked
each year at the Company’s AGM to renew the Directors’
authorities to issue shares.
Share capital
As at 30th June 2022, the issued share capital of the Company
was 50,679,095 (2021: 50,679,095) fully paid ordinary shares
of 1p each, carrying one vote per share and a right to dividends,
amounting to £506,791 (2021: £506,791). The ordinary shares
of the Company have a premium listing on the London Stock
Exchange. There are no restrictions on the transfer of shares.
Following completion of the merger with KIM, the Company
entered a relationship agreement with the ‘Controlling
Shareholder Group’ which regulates the ongoing relationship
between the Company and the Controlling Shareholder Group.
The members of the Controlling Shareholder Group agreed to
limit their voting rights at any shareholder meeting, including
the Annual General Meeting, to the lower of: (i) the number of
shares held by them; and (ii) 24.99% of the votes cast on any
resolution by all shareholders.
Own shares
The Company is, until the date of the next AGM on 31st
October 2022, generally and unconditionally authorised to buy
back up to 5,067,910 of its own ordinary shares of nominal
value £0.01, representing approximately 10% of the Company’s
issued share capital as at the date of the 2021 Notice of AGM.
In the year under review, the Company purchased and cancelled
nil shares (2021: nil). The Company is seeking a renewal of this
authority at the 2022 AGM.
The number of own shares purchased by the Company’s
Employee Benefit Trust during the year was 552,730 (2021:
496,354). The number of own shares held by the Trust as at
30th June 2022 was 1,708,763 (2021: 1,591,158), of which
328,750 shares (2021: 405,750) were subject to options in issue.
The Trust has waived its entitlement to receive dividends in
respect of the shares held. The trust will abstain from voting on
resolutions that concern a change of control in the Company.
The Trust also holds 682,437 shares (2021: 678,120) in custody
for employees under the terms of the Employee Incentive Plan,
see the Directors’ remuneration report on page 71 for further
details of the plan.
City of London Investment Group PLC Annual Report 2021/2022 85
Strategic reportOverview Financial statements Shareholder information
Substantial shareholdings
At 31st August 2022, the Company had been notified of the
following interests of 3% or more in the Company’s ordinary shares:
Number of % of total
Name of shareholder voting rights voting rights held
Aberforth Partners LLP 2,560,745 5.05
George Karpus 15,948,201 31.5
Statement of Directors’ responsibilities
The statement of Directors’ responsibilities for preparing the
Annual Report and Accounts is set out on page 86 and is
deemed to form part of the Directors’ report.
Corporate governance
The UK Corporate Governance Code (Code) is publicly available
on the Financial Reporting Council’s website: www.frc.org.uk. Refer
to the governance report, as set out on pages 42 to 83, for detail
regarding the Group’s corporate governance arrangements. A full
statement of compliance with the Code can be found on page 47.
Corporate responsibility
Details of the Group’s employment practices and carbon emissions
can be found in the Corporate and Social Responsibility section
of the Strategic report on pages 34 to 37.
Conflict of interests
There are no potential conflicts of interest between any duties
owed by the Directors or senior managers to the Company and
their private interests and/or other duties; and no arrangements
or understandings with any of the shareholders of the Company,
clients, suppliers or others pursuant to which any Director or
senior manager was selected to be a Director or senior manager.
The Company tests regularly to ensure awareness of any future
potential conflicts of interest and related party transactions.
Political donations
The Company did not make any political donations or incur
any political expenditures to candidates or political campaigns
during the period.
Greenhouse gas emissions
Information regarding the Group’s greenhouse gas emissions
can be found on page 36.
Engagement with Employees Statement
The Company is exempted from some reporting requirements,
as it has not employed more than 250 employees in the UK
during the year under review.
Engagement with Stakeholders Statement
The Company adheres to best-in-class operating standards,
with a strong focus on clients, employees, shareholders and the
environment. This element of reporting is discussed in the
s172 (1) Statement on pages 40.
Auditors
The auditors for the financial year were RSM UK Audit LLP.
Each of the persons who are Directors at the time when this
report is approved has confirmed that:
(a) so far as each Director is aware, there is no relevant audit
information of which the Company’s auditors are unaware; and
(b) each Director has taken all the steps that ought to have been
taken as a Director, including making appropriate enquiries
of fellow Directors and the Company’s auditors for that
purpose, in order to be aware of any information needed by
the Company’s auditors in connection with preparing their
report and to establish that the Company’s auditors are
aware of that information.
Internal control and risk management
The Audit & Risk Committee has responsibility for overseeing
the framework for risk management and internal control and
ensuring it functions appropriately.
The Group also has a robust financial controls framework designed
to provide assurance that proper accounting records are adequately
maintained and that information used within the business and for
external publication is reliable and free from material misstatement.
This includes segregation of duties, balance sheet reconciliations,
and quarterly compliance checks on revenue recognition.
The Board reviews the effectiveness of the system of internal
control annually and this process is subsequently evaluated by
the Audit & Risk Committee.
The Board is also responsible for the Internal Capital Adequacy
Assessment Process (ICAAP), a process required by the UK
regulator, which summarises the risk management framework
and regulatory capital requirements of the Group. The Group
will produce its first Internal Capital and Risk Assessment
(ICARA) in FY 2023.
A detailed description of the risk management framework and
the principal risks identified is set out on pages 28 to 29.
Shareholder relations
Engagement with shareholders is of paramount importance to
the Group. The Directors, including on occasions the Senior
Independent Non-Executive Director and the Chair of the
Board, endeavour to meet with large shareholders at least
twice annually, generally following interim and final results
announcements. Following these meetings, the Directors report
back to the Board. All of the Directors aim to attend the Annual
General Meeting either in person or by video conference.
Approved by the Board of Directors and signed on behalf of
the Board
Tom Griffith
Chief Executive Officer
15th September 2022
Governance
86 City of London Investment Group PLC Annual Report 2021/2022
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
Governance: Statutory, regulatory and other information
The Directors are responsible for preparing the Strategic report,
the Directors’ report, the Directors’ remuneration report, the
separate Corporate governance statement and the Financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and
Company financial statements for each financial year. The
Directors have elected under Company law and are required
under the Listing Rules of the Financial Conduct Authority to
prepare Group financial statements in accordance with UK-
adopted International Accounting Standards. The Directors have
elected under Company law to prepare the Company financial
statements in accordance with UK-adopted International
Accounting Standards.
The Group and Company financial statements are required by
law and UK-adopted International Accounting Standards to
present fairly the financial position of the Group and the
Company and the financial performance of the Group; the
Companies Act 2006 provides in relation to such financial
statements that references in the relevant part of that Act to
financial statements giving a true and fair view are references
to their achieving a fair presentation.
Under Company law, the Directors must not approve the
financial statements unless they are satisfied that they give a true
and fair view of the state of affairs of the Group and the
Company and of the profit or loss of the Group for that period.
In preparing each of the Group and Company financial
statements, the Directors are required to:
• select suitable accounting policies and then apply
them consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
• state whether they have been prepared in accordance with
UK-adopted International Accounting Standards; and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the
Company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group’s and
the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Group and
the Company and enable them to ensure that the financial
statements and the Directors’ remuneration report comply with
the Companies Act 2006. They are also responsible for
safeguarding the assets of the Group and the Company and
hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
Directors’ statement pursuant to the Disclosure and
Transparency Rules
Each of the Directors, whose names and functions are listed on
pages 44 and 45 confirm that, to the best of each person’s
knowledge:
• the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair
view of the assets, liabilities, financial position and profit of
the Company and the undertakings included in the
consolidation taken as a whole; and
• the Strategic Report and Directors’ report contained in the
Annual Report includes a fair review of the development
and performance of the business and the position of the
Company and the undertakings included in the consolidation
taken as a whole, together with a description of the principal
risks and uncertainties that they face.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
City of London Investment Group’s website.
Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
For and on behalf of the Board
Tom Griffith
Chief Executive Officer
15th September 2022
City of London Investment Group PLC Annual Report 2021/2022 87
Strategic report
Overview
Shareholder information
Governance
Financial statements
FINANCIAL STATEMENTS
Contents
Independent auditor’s report 88
Consolidated income statement 94
Consolidated and Company statement of
comprehensive income 94
Consolidated and Company statement of financial position 95
Consolidated statement of changes in equity 96
Company statement of changes in equity 97
Consolidated and Company cash flow statement 98
Notes to the financial statements 99
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF CITY OF LONDON INVESTMENT GROUP PLC
88 City of London Investment Group PLC Annual Report 2021/2022
Opinion
We have audited the financial statements of City of London
subsidiaries (the ‘Group’) for the year ended 30th June 2022
which comprise the Consolidated Income Statement,
Consolidated and Company Statement of Comprehensive
Income, Consolidated and Company Statement of Financial
Position, Consolidated Statement of Changes in Equity,
Company Statement of Changes in Equity, Consolidated and
Company Cash Flow Statement and notes to the financial
statements, including significant accounting policies. The
financial reporting framework that has been applied in the
preparation of the Group financial statements is applicable
law and UK-adopted International Accounting Standards.
The financial reporting framework that has been applied in
the preparation of the Parent Company financial statements is
applicable law and UK-adopted International Accounting
Standards and as applied in accordance with the provisions
of the Companies Act 2006.
In our opinion:
• the financial statements give a true and fair view of the state
of the Group’s and of the Parent Company’s affairs as at 30th
June 2022 and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared
in accordance with UK-adopted International Accounting
Standards;
• the Parent Company financial statements have been properly
prepared in accordance with UK-adopted International
Accounting Standards and as applied in accordance with
the Companies Act 2006; and
• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described
in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the Group
and Parent Company in accordance with the ethical requirements
that are relevant to our audit of the financial statements in the
UK, including the FRC’s Ethical Standard as applied to listed
public interest entities and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Summary of our audit approach
Key audit Group
matters • Accuracy and completeness of management fees
• Breach of investment mandates
• Regulatory requirements
• Impairment of goodwill and intangible assets
Materiality Group
• Overall materiality: £1,150,000 (2021: £1,190,000)
• Performance materiality: £868,000
(2021: £899,000)
Parent Company
• Overall materiality: £795,000 (2021: £652,000)
• Performance materiality: £596,000
(2021: £489,000)
Scope Our audit procedures covered 100% of
revenue, 100% of total assets and 100%
of profit before tax.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the Group
and Parent Company financial statements of the current period
and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified,
including those which had the greatest effect on the overall
audit strategy, the allocation of resources in the audit and
directing the efforts of the engagement team. These matters
were addressed in the context of our audit of the Group and
Parent Company financial statements as a whole, and in
forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Financial statements: Independent Auditor’s report
City of London Investment Group PLC Annual Report 2021/2022 89
Strategic reportOverview Shareholder informationGovernance
Accuracy and completeness of management fees
Key audit As described in the accounting policies on
matter page 103 management fees of £61,293,627
description (note 2) are based on a percentage of Funds
under Management in accordance with the
respective management agreements. There is a
risk of management fee income being inaccurate
or incomplete if incorrect Funds under
Management or incorrect percentages are
used and is therefore determined to be a
key audit matter.
How the Our audit work included analytical review of the
matter was total revenue and substantive testing of a sample
addressed of management fees from the fund listing through
in the audit to the posting of the income in the general ledger
detail. This testing included: obtaining third party
custodian records of the relevant month-end Net
Asset Value (NAV), reviewing the Investment
Management Agreements (IMA) in place for key
inputs into the management fee calculation and
recalculating the expected management fee based
on the NAV and % fee income documented in the
IMA. In addition, our work included consideration
of the design and implementation of controls over
the inputs and calculation of management fee
income with a sample tested to evidence review
and approval of the management fee calculation.
Our review of investment mandates also provided
additional evidence of the operation of
management controls over fee income.
Key No significant variances were identified between
observations the income recognised by the Group and our
recalculation of the expected income. Furthermore,
net asset values from the fund administrator
records were in line with documentation held
by the client.
Breach of investment mandates
Key audit The Group is responsible for managing assets in
matter accordance with mandates agreed with its clients.
description There is a risk of financial and reputational loss
for the Group if it trades or invests outside the
scope of the mandates and this is therefore
determined to be a key audit matter.
How the Our audit work included review and testing of the
matter was design and implementation of controls over reports
addressed generated by the Group’s trade order management
in the audit system. For a sample of days during the year, we
checked that the daily control sheets are being
reviewed on a daily basis and that any breaches
identified in respect of investment mandates were
properly recorded and addressed in a timely
manner. For parts of the Group where specific
mandates are not applicable, we tested a sample
of management fee transactions and confirmed
that the fees were calculated in accordance with
the investment management agreements.
Key No issues were identified from review and testing
observations of the design and implementation of the controls
over reports generated by the Group’s trade order
management system and review of breach of
mandates. Furthermore, we confirmed that any
breaches identified by the controls for a sample of
days during the period are being properly addressed.
Regulatory requirements
Key audit The continued compliance of City of London
matter Investment Management Company Limited
description (“CLIM”) with its FCA registration and Karpus
Management Inc (“KIM”) with its SEC regulatory
requirements represents a key audit matter as
there is a risk associated with non-compliance
with either regulatory body.
How the Our audit work included reviewing the controls in
matter was place to ensure ongoing compliance with the FCA
addressed regulatory requirements including reporting to the
in the audit Board. In addition, we completed work to review
compliance with the FCA laws and regulations.
Our audit work in respect of KIM’s compliance
with the SEC regulatory requirements included
holding discussions with US colleagues, KIM’s
Chief Compliance Officer and review of
compliance documentation prepared by both
management and an external consultant, including
the outcome of an SEC regulatory examination.
Key Our testing did not identify any issues in respect
observations of non-compliance with CLIM’s FCA registration or
KIM’s SEC registration.
Financial statements
Impairment of goodwill and intangible assets
Key audit Goodwill of £73,962,910 and intangible assets
matter arising on acquisition of £36,097,314 as set out
description in note 12 are included in the consolidated
Statement of Financial Position at 30th June 2022.
Management are required by IAS 36 ‘Impairment
of assets’ to perform an annual impairment review
for goodwill and for finite-life intangible assets
where there are indicators of impairment. The test
for impairment compares the carrying value of the
cash generating unit to which the assets are
allocated to their recoverable amount which is
the higher of their fair value less costs to sell or
value in use. Calculating the value in use requires
management judgement as set out in the
accounting policies in note 1.3 and the disclosures
in note 12. The headroom in the impairment
assessment is sensitive to changes in key
assumptions (see note 12) and thus we consider
this to represent a key audit matter.
How the Our work on the impairment of goodwill and
matter was intangible assets included:
addressed • Considering management’s assessment of the
in the audit allocation of goodwill and intangible assets to
a cash generating unit.
• Testing the value in use calculations for
mechanical accuracy and consistency with the
requirements of IAS 36.
• Assessing the length of the forecast period and
long-term growth rates.
• Challenging management on key assumptions
in the forecast model including revenue and
AUM growth and EBITDA margins.
• Retrospective review of the accuracy of
management’s forecasts from the prior year.
• Working with our internal valuation specialists
to determine the appropriateness of the value
in use calculation and accuracy of the discount
rate calculation and basis.
• Evaluating the sensitivity analysis prepared by
management.
• Considering the qualifications, credentials and
independence of the valuation expert engaged
by management to assist with the impairment
assessment.
• Assessing the completeness and accuracy of
disclosures within the financial statements.
Key Following our work we are satisfied that the
observations impairment review has been carried out in
accordance with the requirements of IAS 36 and
with the disclosures that have been made.
Our application of materiality
When establishing our overall audit strategy, we set certain
thresholds which help us to determine the nature, timing and
extent of our audit procedures. When evaluating whether the
effects of misstatements, both individually and on the financial
statements as a whole, could reasonably influence the economic
decisions of the users we take into account the qualitative nature
and the size of the misstatements. Based on our professional
judgement, we determined materiality as follows:
Group
Overall materiality £1,150,000 (2021: £1,190,000)
Basis for determining 5% of profit before tax (2021: 5% of
overall materiality profit before tax and exceptional items).
Rationale for Profitability is considered to be a key
benchmark applied benchmark monitored by management
and investors.
Performance materiality £868,000 (2021: £899,000)
Basis for determining 75% of overall materiality.
performance materiality
Reporting of Misstatements in excess of £10,000
misstatements to the and misstatements below that
Audit Committee threshold that, in our view, warranted
reporting on qualitative grounds.
Parent Company
Overall materiality £795,000 (2021: £652,000)
Basis for determining 5% of profit before tax, adjusted for
overall materiality average dividend income (2021: 5% of
profit before tax and exceptional items).
Rationale for Profitability is considered to be a
benchmark applied key benchmark monitored by
management and investors.
Performance materiality £596,000 (2021: £489,000)
Basis for determining 75% of overall materiality.
performance materiality
Reporting of Misstatements in excess of £10,000
misstatements to the and misstatements below that
Audit Committee threshold that, in our view, warranted
reporting on qualitative grounds.
An overview of the scope of our audit
The Group consists of 8 components, located in the
following countries;
• United Kingdom;
• United States of America; and
• Singapore
INDEPENDENT AUDITOR’S REPORT
CONTINUED
90 City of London Investment Group PLC Annual Report 2021/2022
Financial statements: Independent Auditor’s report
City of London Investment Group PLC Annual Report 2021/2022 91
The coverage achieved by our audit procedures was:
Number of Total Profit
components Revenue assets before tax
Full scope audit 5 100% 97% 94%
Specific audit procedures 3 0% 3% 6%
Total 8 100% 100% 100%
The Group’s trading subsidiary in the United States of America
was subject to a full scope audit to component materiality
because the component was assessed as significant to the Group
based on its individual financial significance and the nature of
the significant risks identified.
RSM UK Audit LLP carried out analytical procedures at Group
level on the overseas subsidiary based in Singapore and specific
audit procedures for the International REIT Fund and Global
Equity CEF Fund, based in the United States of America.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our
evaluation of the Directors’ assessment of the Group’s and
Parent Company’s ability to continue to adopt the going
concern basis of accounting included review of financial
forecasts for a period of at least twelve months from approval of
the financial statements including evaluation of downside
scenarios and stress testing for the assessment period.
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Group’s or the Parent Company’s ability to continue as a going
concern for a period of at least twelve months from when the
financial statements are authorised for issue.
In relation to the entity reporting on how they have applied the
UK Corporate Governance Code, we have nothing material to
add or draw attention to in relation to the Directors’ statement in
the financial statements about whether the Directors considered
it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with
respect to going concern are described in the relevant sections of
this report.
Other information
The other information comprises the information included in
the annual report other than the financial statements and our
auditor’s report thereon. The Directors are responsible for the
other information contained within the annual report. Our
opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated
in our report, we do not express any form of assurance
conclusion thereon.
Our responsibility is to read the other information and, in doing
so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the course of the audit or otherwise appears to be
materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to determine
whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed,
we conclude that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the Directors’ remuneration report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of
the audit:
• the information given in the Strategic Report and the
Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
• the Strategic Report and the Directors’ Report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group
and the Parent Company and their environment obtained in
the course of the audit, we have not identified material
misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report
to you if, in our opinion:
• adequate accounting records have not been kept by the Parent
Company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the Parent Company financial statements and the part of the
Directors’ remuneration report to be audited are not in
agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by
law are not made; or
• we have not received all the information and explanations
we require for our audit.
Strategic reportOverview Shareholder informationGovernance Financial statements
INDEPENDENT AUDITOR’S REPORT
CONTINUED
Corporate governance statement
We have reviewed the Directors’ statement in relation to going
concern, longer-term viability and that part of the Corporate
Governance Statement relating to the Parent Company’s
compliance with the provisions of the UK Corporate
Governance Code specified for our review by the Listing Rules.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial
statements and our knowledge obtained during the audit:
• Directors’ statement with regards the appropriateness of
adopting the going concern basis of accounting and any
material uncertainties identified set out on page 84;
• Directors’ explanation as to their assessment of the Group’s
prospects, the period this assessment covers and why the
period is appropriate set out on page 33;
• Director’s statement on whether they have a reasonable
expectation that the Group will be able to continue in
operation and meets its liabilities set out on page 33;
• Directors’ statement on fair, balanced and understandable
set out on page 60;
• Board’s confirmation that it has carried out a robust assessment
of the emerging and principal risks set out on page 28;
• Section of the annual report that describes the review of
effectiveness of risk management and internal control systems
set out on page 61; and,
• Section describing the work of the audit committee set out
on pages 59 to 62.
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities
statement set out on page 86, the Directors are responsible for
the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such internal
control as the Directors determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group’s and the Parent 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 Parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis
of these financial statements.
The extent to which the audit was considered capable of
detecting irregularities, including fraud
Irregularities are instances of non-compliance with laws and
regulations. The objectives of our audit are to obtain sufficient
appropriate audit evidence regarding compliance with laws and
regulations that have a direct effect on the determination of
material amounts and disclosures in the financial statements,
to perform audit procedures to help identify instances of non-
compliance with other laws and regulations that may have a
material effect on the financial statements, and to respond
appropriately to identified or suspected non-compliance with
laws and regulations identified during the audit.
In relation to fraud, the objectives of our audit are to identify
and assess the risk of material misstatement of the financial
statements due to fraud, to obtain sufficient appropriate audit
evidence regarding the assessed risks of material misstatement
due to fraud through designing and implementing appropriate
responses and to respond appropriately to fraud or suspected
fraud identified during the audit.
However, it is the primary responsibility of management, with
the oversight of those charged with governance, to ensure that
the entity’s operations are conducted in accordance with the
provisions of laws and regulations and for the prevention and
detection of fraud.
In identifying and assessing risks of material misstatement in
respect of irregularities, including fraud, the Group audit
engagement team:
• obtained an understanding of the nature of the industry and
sector, including the legal and regulatory frameworks that the
Group and Parent Company operate in and how the Group
and Parent Company are complying with the legal and
regulatory frameworks;
• inquired of management, and those charged with governance,
about their own identification and assessment of the risks of
irregularities, including any known actual, suspected or
alleged instances of fraud; and
• discussed matters about non-compliance with laws and
regulations and how fraud might occur including assessment
of how and where the financial statements may be susceptible
to fraud having obtained an understanding of the
effectiveness of the control environment.
92 City of London Investment Group PLC Annual Report 2021/2022
Financial statements: Independent Auditor’s report
City of London Investment Group PLC Annual Report 2021/2022 93
The most significant laws and regulations were determined
as follows:
Additional audit procedures performed by
Legislation/Regulation the Group audit engagement team included:
UK-adopted International Review of the financial statement
Accounting Standards disclosures and testing to supporting
and Companies Act documentation.
2006 Completion of disclosure checklists to
identify areas of non-compliance.
Tax compliance Inspection of correspondence with
regulations local tax authorities.
Consideration of whether any matter
identified during the audit required
reporting to an appropriate authority
outside the entity.
FCA and SEC Refer to the Key Audit Matter in respect
regulations of regulatory requirements for details of
the audit procedures performed.
The areas that we identified as being susceptible to material
misstatement due to fraud were:
Audit procedures performed by the
Risk audit engagement team:
Management override Testing the appropriateness of journal
of controls entries and other adjustments;
Assessing whether the judgements made
in making accounting estimates are
indicative of a potential bias; and
Evaluating the business rationale of any
significant transactions that are unusual
or outside the normal course of business.
A further description of our responsibilities for the audit of the
financial statements is located on the Financial Reporting Council’s
website at: http://www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Other matters which we are required to address
Following the recommendation of the audit committee, we were
appointed by the Board on 23rd October 2017 to audit the
financial statements for the year ending 30th June 2018 and
subsequent financial periods.
The period of total uninterrupted consecutive appointments
is five years, covering the years ending 30th June 2018 to
30th June 2022.
The non-audit services prohibited by the FRC’s Ethical
Standard were not provided to the Group or the Parent
Company and we remain independent of the Group and the
Parent Company in conducting our audit.
Our audit opinion is consistent with the additional report to
the audit committee in accordance with ISAs (UK).
Use of our report
This report is made solely to the Company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might
state to the Company’s members those matters we are required
to state to them in an auditor’s 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 and
the Company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
In due course, as required by the Financial Conduct Authority
(FCA) Disclosure Guidance and Transparency Rule (DTR)
4.1.14R, these financial statements will form part of the European
Single Electronic Format (ESEF) prepared Annual Financial
Report filed on the National Storage Mechanism of the UK FCA
in accordance with the ESEF Regulatory Technical Standard
(‘ESEF RTS’). This auditor’s report provides no assurance over
whether the annual financial report has been prepared using the
single electronic format specified in the ESEF RTS.
Malcolm Pirouet (Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
25 Farringdon Street
London
EC4A 4AB
16th September 2022
Strategic reportOverview Shareholder informationGovernance Financial statements
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30TH JUNE 2022
Year to Year to
30th June 2022 30th June 2021
Note £ £
Revenue
Gross fee income 2 61,293,627 55,123,274
Commissions payable (1,598,421 ) (1,100,708 )
Custody fees payable (1,491,922 ) (1,571,630 )
Net fee income 58,203,284 52,450,936
Administrative expenses
Employee costs 3(b) 23,532,973 20,045,406
Other administrative expenses 5,970,527 4,866,625
Depreciation and amortisation 4,747,116 3,969,586
(34,250,616 ) (28,881,617 )
Underlying operating profit 5 23,952,668 23,569,319
Exceptional item
Acquisition-related costs – (1,743,424 )
Operating profit 5 23,952,668 21,825,895
Finance income 7 32,136 557,861
Finance expense 7 (812,421 ) (134,752 )
Profit before taxation 23,172,383 22,249,004
Income tax expense 8 (5,081,232 ) (5,258,486 )
Profit for the period 18,091,151 16,990,518
Profit attributable to:
Non-controlling interests (NCI) – 19,285
Equity shareholders of the parent 18,091,151 16,971,233
Basic earnings per share 9 36.9 p 39.4 p
Diluted earnings per share 9 36.4 p 38.8 p
CONSOLIDATED AND COMPANY STATEMENT
OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30TH JUNE 2022
Group Company
Year to Year to Year to Year to
30th June 2022 30th June 2021 30th June 2022 30th June 2021
£ £ £ £
Profit for the period 18,091,151 16,990,518 26,303,606 11,157,096
Other comprehensive income:
Foreign currency translation differences 12,826,714 (6,675,136 ) – –
Total comprehensive income for the period 30,917,865 10,315,382 26,303,606 11,157,096
Attributable to:
Equity shareholders of the parent 30,917,865 10,296,097 26,303,606 11,157,096
Non-controlling interests – 19,285 – –
94 City of London Investment Group PLC Annual Report 2021/2022
Financial statements
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION
30TH JUNE 2022
City of London Investment Group PLC Annual Report 2021/2022 95
Group Company
30th June 2022 30th June 2021 30th June 2022 30th June 2021
Note £ £ £ £
Non-current assets
Property and equipment
10 511,208 455,983 247,832 280,596
Right-of-use assets
11 2,418,745 2,757,179 1,085,153 1,263,534
Intangible assets
12 110,078,091 100,961,992 17,867 7,377
Other financial assets 13 7,434,586 4,373,485 108,912,203 106,962,140
Deferred tax asset 14 394,831 366,405 5,066 9,458
Current assets
Trade and other receivables
15 6,498,019 6,953,470 5,180,722 6,662,266
Current tax receivable – – 1,132,209 1,005,736
Cash and cash equivalents 22,677,893 25,514,619 6,919,935 2,905,184
Current liabilities
Trade and other payables
16 (9,461,606 ) (8,260,597 ) (3,749,598) (3,281,116)
Lease liabilities 17 (388,986 ) (392,954 ) (121,573) (131,180)
Current tax payable (538,158 ) (1,367,564 ) – –
Creditors, amounts falling due within one year (10,388,750 ) (10,021,115 ) (3,871,171) (3,412,296)
Net current assets 18,787,162 22,446,974 9,361,695 7,160,890
Total assets less current liabilities 139,624,623 131,362,018 119,629,816 115,683,995
Non-current liabilities
Lease liabilities
17 (2,213,854 ) (2,348,101 ) (1,026,248) (1,148,549)
Deferred tax liability 18 (8,642,208 ) (8,696,813 ) (21,178) (24,141)
Net assets 128,768,561 120,317,104 118,582,390 114,511,305
Capital and reserves
Share capital 19 506,791 506,791 506,791 506,791
Share premium account
20 2,256,104 2,256,104 2,256,104 2,256,104
Merger relief reserve
19 101,538,413 101,538,413 101,538,413 101,538,413
Investment in own shares 20 (7,045,817 ) (6,068,431 ) (7,045,817) (6,068,431)
Share option reserve
20 126,181 195,436 105,513 109,657
EIP share reserve 20 1,481,107 1,282,884 1,481,107 1,282,884
Foreign currency differences reserve
20 6,197,463 (6,629,251 ) – –
Capital redemption reserve 20 26,107 26,107 26,107 26,107
Retained earnings 20 23,682,212 27,019,584 19,714,172 14,859,780
Attributable to:
Equity shareholders of the parent 128,768,561 120,127,637 118,582,390 114,511,305
Non-controlling interests – 189,467 – –
Total equity 128,768,561 120,317,104 118,582,390 114,511,305
As permitted by section 408 of the Companies Act 2006, the income statement of the Parent Company is not presented as part of
these financial statements. The Parent Company’s profit for the financial period amounted to £26,303,606 (2021: £11,157,096).
The Board of Directors approve and authorise for issue these financial statements on 15th September 2022.
Signed on behalf of the Board of Directors of City of London Investment Group PLC, company number 2685257.
Tom Griffith
Chief Executive Officer
Strategic reportOverview Shareholder informationGovernance
Financial statements
Financial statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
30TH JUNE 2022
Total
Share Merger Investment Share EIP Foreign Capital attributable
Share premium relief in own option share exchange redemption Retained to
capital account reserve shares reserve reserve reserve reserve earnings shareholders NCI Total
£ £ £ £ £ £ £ £ £ £ £ £
As at 30th June 2020 265,607 2,256,104 – (5,765,993 ) 241,467 1,232,064 45,885 26,107 20,626,405 18,927,646 170,182 19,097,828
Profit for the period – – – – – – – – 16,971,233 16,971,233 19,285 16,990,518
Other comprehensive income – – – – – – (6,675,136 ) – – (6,675,136 ) – (6,675,136 )
Total comprehensive income – – – – – – (6,675,136 ) – 16,971,233 10,296,097 19,285 10,315,382
Transactions with owners
Issue of ordinary shares on merger 241,184
Share issue costs – – – – – – – – (967,881 ) (967,881 ) – (967,881 )
Share option exercise – – – 830,819 (119,787 ) – – – 119,787 830,819 – 830,819
Purchase of own shares – – – (2,503,244 ) – – – – – (2,503,244 ) – (2,503,244 )
Share-based payment – – – – (12,023 ) 760,645 – – – 748,622 – 748,622
EIP vesting/forfeiture – – – 1,369,987 – (709,825 ) – – – 660,162 – 660,162
Deferred tax on share options – – – – 85,779 – – – (20,574 ) 65,205 – 65,205
Current tax on share options – – – – – – – – 33,738 33,738 – 33,738
Dividends paid – – – – – – – – (9,743,124 ) (9,743,124 ) – (9,743,124 )
Total transactions with owners 241,184
(10,578,054 ) 90,903,894 – 90,903,894
As at 30th June 2021 506,791 2,256,104 101,538,413 (6,068,431 ) 195,436 1,282,884 (6,629,251 ) 26,107 27,019,584 120,127,637 189,467 120,317,104
Profit for the period – – – – – – – – 18,091,151 18,091,151 – 18,091,151
Other comprehensive income – – – – – – 12,826,714 – – 12,826,714 – 12,826,714
Total comprehensive income – – – – – – 12,826,714 – 18,091,151 30,917,865 – 30,917,865
Transactions with owners
Derecognisation of NCI holding – – – – – – – – – – (189,467 ) (189,467 )
Share option exercise – – – 320,193 (38,435 ) – – – 38,435 320,193 – 320,193
Purchase of own shares – – – (2,665,042 ) – – – – – (2,665,042 )
Share-based payment – – – – 34,291 884,265 – – – 918,556
EIP vesting/forfeiture – – – 1,367,463 – (686,042 ) – – – 681,421
Deferred tax on share options – – – – (65,111 ) – – – (7,902 ) (73,013 )
Current tax on share options – – – – – – – – 25,853 25,853
Dividends paid – – – – – – – (21,484,909 ) (21,484,909 )
(2,665,042 )
(73,013 )
(21,484,909 )
Total transactions with owners – – – (977,386 ) (69,255 ) 198,223 – – (21,428,523 ) (22,276,941 ) (189,467 ) (22,466,408 )
As at 30th June 2022 506,791 2,256,104 101,538,413 (7,045,817 ) 126,181 1,481,107 6,197,463 26,107 23,682,212 128,768,561
96 City of London Investment Group PLC Annual Report 2021/2022
Financial statements
COMPANY STATEMENT OF CHANGES IN EQUITY
30TH JUNE 2022
City of London Investment Group PLC Annual Report 2021/2022 97
Total
Share Investment Share EIP Capital attributable
Share premium Merger in own option share redemption Retained to
capital account reserve shares reserve reserve reserve earnings shareholders
£ £ £ £ £ £ £ £ £
As at 30th June 2020 265,607 2,256,104 – (5,765,993) 241,467 1,232,064 26,107 14,363,024 12,618,380
Profit for the period – – – – – – – 11,157,096 11,157,096
Other comprehensive income – – – – – – – – –
Total comprehensive income – – – – – – – 11,157,096 11,157,096
Transactions with owners
Issue of ordinary shares on merger 241,184 – 101,538,413 – – – – – 101,779,597
Share issue costs – – – – – – – (967,881) (967,881)
Share option exercise – – – 830,819 (119,787) – – 43,546 754,578
Purchase of own shares – – – (2,503,244) – – – – (2,503,244)
Share-based payment – – – – (12,023) 760,645 – – 748,622
EIP vesting/forfeiture – – – 1,369,987 – (709,825) – – 660,162
Deferred tax on share options – – – – – – – (3,142) (3,142)
Current tax on share options – – – – – – – 10,261 10,261
Dividends paid – – – – – – – (9,743,124) (9,743,124)
Total transactions with owners 241,184 – 101,538,413 (302,438) (131,810) 50,820 – (10,660,340) 90,735,829
As at 30th June 2021 506,791 2,256,104 101,538,413 (6,068,431) 109,657 1,282,884 26,107 14,859,780 114,511,305
Profit for the period – – – – – – – 26,303,606 26,303,606
Other comprehensive income – – – – – – – – –
Total comprehensive income – – – – – – – 26,303,606 26,303,606
Transactions with owners
Share option exercise – – – 320,193 (38,435) – – 26,587 308,345
Purchase of own shares – – – (2,665,042) – – – – (2,665,042)
Share-based payment – – – – 34,291 884,265 – – 918,556
EIP vesting/forfeiture – – – 1,367,463 – (686,042) – – 681,421
Deferred tax on share options – – – – – – – (5,052) (5,052)
Current tax on share options – – – – – – – 14,160 14,160
Dividends paid – – – – – – – (21,484,909) (21,484,909)
Total transactions with owners – – – (977,386) (4,144) 198,223 – (21,449,214) (22,232,521)
As at 30th June 2022 506,791 2,256,104 101,538,413 (7,045,817) 105,513 1,481,107 26,107 19,714,172 118,582,390
Strategic reportOverview Shareholder informationGovernance
Financial statements
Financial statements
CONSOLIDATED AND COMPANY CASH FLOW STATEMENT
FOR THE YEAR ENDED 30TH JUNE 2022
Group Company
30th June 2022 30th June 2021 30th June 2022 30th June 2021
Note £ £ £ £
Cash flow from operating activities
Profit/(Loss) before taxation 23,172,383 22,249,004 181,843 (888,940)
Adjustments for:
Depreciation of property and equipment 10 191,149 187,714 99,157 107,667
Depreciation of right-of-use assets 11 496,367 492,730 178,381 178,382
Amortisation of intangible assets 12 4,059,600 3,289,142 8,377 11,375
Loss on disposal of fixed assets 4,296 – 4,296 –
Share-based payment charge/(credit) 3b 33,440 (12,023 ) 3,474 (697)
EIP-related charge 892,097 802,314 392,458 325,971
Unrealised loss/(gain) on investments 7 659,231 (540,172 ) 47,963 (282,169)
Interest receivable 7 (32,136 ) (17,689 ) (8,539) (253)
Interest payable on leased assets 7 153,190 133,827 87,111 97,444
Interest payable 7 – 925 – –
Translation adjustments 98,684 33,529 (141,847) 184,313
Cash generated from/(used in) operations before
changes in working capital 29,728,301 26,619,301 852,674 (266,907)
Decrease/(increase) in trade and other receivables 458,199 (439,607 ) 1,868,752 556,716
Increase in trade and other payables 1,886,245 2,800,465 1,156,028 3,251,325
Cash generated from operations 32,072,745 28,980,159 3,877,454 3,541,134
Interest received 7 32,136 17,689 8,539 253
Interest paid on leased assets 7 (153,190 ) (133,827 ) (87,111) (97,444)
Interest paid 7 – (925 ) – –
Taxation paid (7,004,074 ) (5,841,493 ) (154,496) (240,142)
Net cash generated from operating activities 24,947,617 23,021,603 3,644,386 3,203,801
Cash flow from investing activities
Dividends received from subsidiaries – – 26,160,323 12,200,000
Purchase of property and equipment and intangibles 10/12 (258,852 ) (93,342 ) (89,557) (47,176)
Purchase of non-current financial assets 13 (3,877,446 ) (715 ) (1,889,216) (724)
Proceeds from sale of current financial assets 8,442 – 8,442 –
Cash consideration paid on merger net of cash acquired – 946,773 – (107,943)
Net cash (used in)/generated from investing activities (4,127,856 ) 852,716 24,189,992 12,044,157
Cash flow from financing activities
Ordinary dividends paid 21 (21,484,909 ) (9,743,124 ) (21,484,909) (9,743,124)
Purchase of own shares by employee share option trust (2,665,042 ) (2,503,244 ) (2,665,042) (2,503,244)
Proceeds from sale of own shares by employee
share option trust 320,193 830,819 320,193 830,819
Payment of lease liabilities 17(c) (407,772 ) (486,680 ) (131,908) (168,367)
Share issue costs – (967,881 ) – (967,881)
Net cash used in financing activities (24,237,530 ) (12,870,110 ) (23,961,666) (12,551,797)
Net (decrease)/increase in cash and cash equivalents (3,417,769 ) 11,004,209 3,872,712 2,696,161
Cash and cash equivalents at start of period 25,514,619 14,594,333 2,905,184 213,510
Cash held in funds* 40,936 20,357 – –
Effect of exchange rate changes 540,107 (104,280 ) 142,039 (4,487)
Cash and cash equivalents at end of period 22,677,893 25,514,619 6,919,935 2,905,184
Note:
* Cash held in International REIT and Global Equity CEF funds was consolidated using accounts drawn up as of 30th June.
98 City of London Investment Group PLC Annual Report 2021/2022
Financial statements
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 2022
City of London Investment Group PLC Annual Report 2021/2022 99
1. SIGNIFICANT ACCOUNTING POLICIES
on 29th October 2010 and is domiciled and incorporated in the United Kingdom
1.1 Basis of preparation
The financial statements have been prepared in accordance with UK-adopted International Accounting Standards.
The Group financial statements have been prepared under the historical cost convention, except for certain financial assets held by the
Group that are reported at fair value. The Group and Company financial statements have been prepared on a going concern basis.
The principal accounting policies adopted are set out below and have, unless otherwise stated, been applied consistently to all
periods presented in these financial statements.
1.2 New or amended accounting standards and interpretations
The Group has adopted all the new or amended accounting standards and interpretations issued by the International Accounting
Standards Board (IASB) that are mandatory for the current reporting period. Any new or amended accounting standards that are
not mandatory have not been early adopted.
The following amendments to standards have been adopted in the current period and have not had a material impact on the
Group’s financial statements:
• IFRS 9, IAS 39 and IFRS 7 – Interest Rate Benchmark Reforms
• IFRS 16 – COVID-19 Related rent concessions
The following amended standards and interpretations are in issue but not yet effective:
• IAS 16 (amendments) – Property, Plant and Equipment – Proceeds before Intended Use (effective 1 January 2022)
• Annual Improvements 2018-2020 Cycle – Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 4) (effective 1 January 2022)
• IFRS 3 (amendments) – Reference to the Conceptual Framework (effective 1 January 2022)
• IAS 37 (amendments) – Onerous Contracts – Cost of Fulfilling a Contract (effective 1 January 2022)
• IAS 1 (amendments) – Presentation of Financial Statements: Classification of Liabilities as Current or Non-Current and
Classification of Liabilities as Current or Non-Current – Deferral of Effect Date (effective 1 January 2024)
The Directors do not expect the adoption of these standards and amendments to have a material impact on the Financial Statements.
1.3 Accounting estimates and judgments
The preparation of these financial statements in conformity with UK-adopted International Accounting Standards requires
management to make estimates and judgments that affect the application of policies and reported amounts of assets and liabilities,
income and expenses. Whilst estimates are based on management’s best knowledge and judgement using information and financial
data available to them, the actual outcome may differ from those estimates.
The most significant areas of the financial statements that are subject to the use of estimates and judgments are noted below:
(i) Share-based payments
Share-based payments relate to equity settled awards and are based on the fair value of those awards at the date of grant. In order to
calculate the charge for share-based compensation as required by IFRS 2 Share-based payments, the Group is required to estimate
the fair value of the Employee Incentive Plan (EIP) awards due to be granted in October 2022. This cost is estimated during the
financial year and at the point when the actual award is made the share-based payment charge is re-calculated and any difference is
taken to the profit or loss. Refer to note 1.13 for accounting policy.
(ii) EM REIT fund
The Company has a c.20% ownership interest in the EM REIT fund. However, it does not have any voting powers and its decision-
making powers are held in the capacity of an agent of the investors as a group. The Company has exercised judgement and have
concluded that it does not control or have significant influence over this fund.
(iii) Impairment of Goodwill
The recognition of goodwill in a business combination and subsequent impairment assessments are based on significant accounting
estimates. Note 12 details our estimates and assumptions in relation to the impairment assessment of goodwill.
Strategic report
Overview
Shareholder information
Governance
Financial statements
Financial statements
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
100 City of London Investment Group PLC Annual Report 2021/2022
1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
1.4 Basis of consolidation
The consolidated financial statements are based on the financial statements of the Company and all of its subsidiary undertakings.
The Group’s subsidiaries are those entities which it directly or indirectly controls. Control over an entity is evidenced by the Group’s
ability to exercise its power in order to affect any variable returns that the Group is exposed to through its involvement with the
entity. The consolidated financial statements also incorporate the results of the business combination using the acquisition method.
The acquiree’s identifiable net assets are initially recognised at their fair values at the acquisition date. The results of the acquired
business are included in the consolidated statement of comprehensive income from the date on which control is obtained.
When assessing whether to consolidate an entity, the Group evaluates a range of control factors as defined under IFRS 10
Consolidated financial statements, namely:
• the purpose and design of the entity;
• the relevant activities and how these are determined;
• whether the Group’s rights result in the ability to direct the relevant activities;
• whether the Group has exposure or rights to variable returns; and
• whether the Group has the ability to use its power to affect the amount of its returns.
Subsidiaries are consolidated from the date on which control is transferred to the Group and are deconsolidated from the date
that control ceases.
The Group’s subsidiary undertakings as at 30th June 2022 are detailed below:
City of London Investment Group PLC holds a controlling interest in the following:
Controlling Country of
Subsidiary undertakings Activity interest incorporation
City of London Investment Management Company Limited Management of funds 100% UK
City of London US Investments Limited Holding company 100% UK
Karpus Management Inc. Management of funds 100% USA
International REIT Fund * Delaware Statutory Trust Fund 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
* International REIT fund has a year-end of 31st December. As this fund has a financial year end that differs from that of the Company, it is consolidated
using accounts drawn up as of 30th June.
The registered addresses of the subsidiary companies are as follows:
City of London Investment Management 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
International REIT fund 4005 Kennett Pike, Suite 250, Greenville, DE 19807, USA
Global Equity CEF fund
City of London Latin America Limited is dormant and as such is not subject to audit.
Financial statements
City of London Investment Group PLC Annual Report 2021/2022 101
1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
1.5 Property and equipment
For all property and equipment, depreciation is calculated to write off their cost to their estimated residual values by equal annual
instalments over the period of their estimated useful lives, which are considered to be:
Short leasehold property improvements – over the remaining life of the lease
Furniture and equipment – 4 to 10 years
Computer and telephone equipment – 4 to 10 years
1.6 Intangible assets
Intangible assets acquired separately are initially recognised at cost. Intangible assets acquired through a business combination other
than goodwill, are initially measured at fair value at the date of the acquisition.
(i) Goodwill
Goodwill arises through a business combination. Goodwill represents the excess of the purchase consideration paid over the fair
value of the identifiable assets, liabilities and contingent liabilities of the business at the date of the acquisition.
Goodwill is measured at cost less accumulated impairment losses. Goodwill on acquisition is allocated to a cash generating unit
(CGU) that is expected to benefit from the acquisition, for the purpose of impairment testing. The CGU to which goodwill is
allocated represents the lowest level at which goodwill is monitored for internal management purposes. A CGU is identified as a
group of assets generating cash inflows which are independent from cash inflows from other Group cash generating assets and are
not larger than the Group’s operating segments.
(ii) Direct customer relationships and distribution channels
The fair values of direct customer relationships and distribution channels acquired in the business combination have been measured
using a multi-period excess earnings method. These are amortised on a straight line basis over the period of their expected benefit,
being a finite life of 10 years for direct customer relationships and a finite life of 7 years for distribution channels.
(iii) Trade name
The fair value of the trade name acquired in the business combination has been measured using a relief from royalty method. This is
amortised on a straight line basis over the period of its expected benefit, being a finite life of 15 years.
(iv) Software licences
Software licences are capitalised at cost and amortised on a straight line basis over the useful life of the asset. Costs are capitalised on
the basis of the costs incurred to acquire and bring into use the specific software. Costs also include directly attributable overheads.
The estimated useful life over which the software is depreciated is between 4 to 10 years. Software integral to a related item of
hardware equipment is accounted for as property and equipment. Costs associated with maintaining computer software programs
are expensed to the income statement as incurred.
1.7 Impairment of goodwill and other assets
Goodwill arising on acquisition is not subject to annual amortisation and other assets listed in 1.6 (ii) and (iii) above which are
amortised on a straight line basis are tested annually for impairment, or more frequently if changes in circumstances indicate a
possible impairment. The Group annually reviews the carrying value of its CGU to ensure that those assets have not suffered from
any impairment loss. The review compares the recoverable amount of the CGU to which goodwill is allocated against its carrying
amount. Where the recoverable amount is higher than the carrying amount, no impairment is required. The recoverable amount is
defined as the higher of (a) fair value less costs to sell or (b) value in use, which is based on the present value of future cash flows
expected to derive from the CGU.
Any impairment loss is recognised immediately through the income statement.
Strategic report
Overview
Shareholder information
Governance
Financial statements
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
1.8 Business combinations
The Group accounts for business combinations using the acquisition method. A business combination is determined where in a
transaction, the asset acquired and the liabilities assumed constitute a business.
The consideration transferred on the date of the transaction is measured at fair value as are the identifiable assets acquired and
liabilities assumed. Intangible assets are recognised separately from goodwill at the acquisition date only when they are identifiable.
1.9 Financial instruments
Financial instruments are only recognised in the financial statements and measured at fair value when the Group becomes party to
the contractual provisions of the instrument.
Under IFRS 9 Financial Instruments, financial assets are classified as either:
• amortised at cost;
• at fair value through the profit or loss; or
• at fair value through other comprehensive income.
Financial liabilities must be classified at fair value through profit or loss or at amortised cost.
The Group’s investments in securities and derivatives are classified as financial assets or liabilities at fair value through profit or loss.
Such investments are initially recognised at fair value, and are subsequently re-measured at fair value, with any movement recognised
in the income statement. The fair value of the Group’s investments is determined as follows:
Shares – priced using the quoted market mid-price*
Options – priced using the quoted market bid price
Forward currency trades – priced using the forward exchange bid rates from Bloomberg
*The funds managed by the Group are valued at the mid-price in accordance with US GAAP. Therefore, where the Group has identified investments
in those funds as subsidiaries, the fair value consolidated is the net asset values as provided by the administrator of the funds. The underlying investments
in these funds are liquid companies with a small bid-ask spread.
The consolidated Group assesses and would recognise a loss allowance for expected credit losses on financial assets which are
measured at amortised cost. The measurement of the loss allowance depends upon the consolidated entity’s assessment at the end
of each reporting period as to whether the financial instrument’s credit risk has increased significantly since initial recognition,
based on reasonable and supportable information that is available, without undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a twelve-month expected credit
loss allowance is estimated. This represents a portion of the asset’s lifetime expected credit losses that is attributable to a default event
that is possible within the next twelve months. Where a financial asset has become credit impaired or where it is determined that
credit risk has increased significantly, the loss allowance is based on the asset’s lifetime expected credit losses. The amount of
expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over
the life of the instrument discounted at the original effective interest rate.
Under the expected credit loss model, impairment losses are recorded if there is an expectation of credit losses, even in the absence of
a default event. This model is applicable to assets amortised at cost or at fair value through other comprehensive income. The assets
on the Group’s balance sheet to which the expected loss applies to are fees receivable. At the end of each reporting period, the Group
assesses whether the credit risk of these trade receivables has increased significantly since initial recognition, based on reasonable and
supportable information that is available, without undue cost or effort to obtain.
1.10 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and on-demand deposits with an original maturity of three months or less from
inception, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject
to an insignificant risk of changes in value.
102 City of London Investment Group PLC Annual Report 2021/2022
Financial statements
City of London Investment Group PLC Annual Report 2021/2022 103
1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
1.11 Trade payables
Trade payables are measured at initial recognition at fair value and subsequently measured at amortised cost.
1.12 Current and deferred taxation
The Group provides for current tax according to the tax regulations in each jurisdiction in which it operates, using tax rates that
have been enacted or substantively enacted by the reporting date.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. However, deferred tax is not
accounted for if it arises from goodwill or the initial recognition (other than in a business combination) of other assets or liabilities
in a transaction that affects neither the accounting nor the taxable profit or loss.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no
longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. The tax
rates used are those that have been enacted, or substantively enacted, by the end of the reporting period. Deferred tax is charged or credited
to the income statement, except when it relates to items charged or credited directly as part of other comprehensive income, in which case
the deferred tax is also dealt with as part of other comprehensive income. For share-based payments, where the estimated future tax
deduction exceeds the amount of the related cumulative remuneration expense, the excess deferred tax is recognised directly in equity.
1.13 Share-based payments
The Company operates an Employee Incentive Plan (EIP) which is open to all employees in the Group. Awards are made to
participating employees over shares under the EIP where they have duly waived an element of their annual profit-share before the
required waiver date, in general before the start of the relevant financial year.
The awards are made up of two elements: Deferred Shares and Bonus Shares. The Deferred Shares represent the waived profit-share
and the Bonus Shares represent the additional award made by the Company as a reward for participating in the EIP. Awards will vest
(i.e. no longer be forfeitable) over a three-year period with one-third vesting each year for all employees, other than Executive
Directors of CLIG. Awards granted from October 2021 onwards will vest (i.e. no longer be forfeitable) over a five-year period with
one-fifth vesting each year for the Executive Directors of CLIG.
The full cost of the Deferred Shares is recognised in the year to which the profit-share relates. The value of the Bonus Shares is
expensed on a straight line basis over the period from the date the employees elect to participate to the date that the awards vest.
This cost is estimated during the financial year and at the point when the actual award is made, the share-based payment charge is
re-calculated and any difference is taken to the profit or loss.
The Company operates an Employee Share Option Plan. The fair value of the employee services received in exchange for share
options is recognised as an expense. The fair value has been calculated using the Black-Scholes pricing model, and is being expensed
on a straight line basis over the vesting period, based on the Company’s estimate of the number of shares that will actually vest.
At the end of the three-year period when the actual number of shares vesting is known, the share-based payment charge is re-
calculated and any difference is taken to the profit or loss.
1.14 Revenue recognition
Revenue is recognised within the financial statements based on the services that are provided in accordance with current investment
management agreements (IMAs). The fees are charged as a percentage of Funds under Management. The performance obligations
encompassed within these agreements are based on daily/monthly asset management of funds. Payment terms are monthly/quarterly
in advance or in arrears. The Group has an enforceable right to the payment of these fees for services provided, in accordance with
the underlying IMAs.
For each contract, the Group: identifies the contract with a customer; identifies the performance obligations in the contract;
determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates
the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct
service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the
transfer to the customer of services promised.
Strategic report
Overview
Shareholder information
Governance
Financial statements
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
1.15 Commissions payable
A portion of the Group’s revenue is subject to commissions payable under third party marketing agreements. Commissions payable
are recognised in the same period as the revenue to which they relate.
1.16 Foreign currency translation
Foreign currency transactions are translated using the exchange rates prevailing at the transaction date. Monetary assets held in a
currency other than the functional currency are translated at the end of each financial period at the period end closing rates.
The functional currency of the Group’s subsidiaries, City of London Investment Management Company Limited, Karpus
Investment Management and City of London US Services Limited, is US dollars.
The functional currency of City of London Investment Group PLC (the Company) is sterling. The Group uses sterling as the presentation
currency and under IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’, exchange rate differences arising from translating a
subsidiary company’s functional currency to presentation currency have to be recognised in the Group’s other comprehensive income.
Accordingly, on consolidation, exchange rate differences arising from translating functional currency to presentation currency for
Karpus Investment Management are recognised in the Group’s other comprehensive income.
However, for its other subsidiaries, the Group operates a policy whereby it manages foreign exchange exposure of subsidiary
monetary assets through its inter-company accounts. Any gains or losses are recognised within the Company’s own income
statement. Therefore, on consolidation, there are no exchange differences arising from the translation of monetary items from the
subsidiary functional currency to its presentational currency. This means that all such exchange differences are included in the
income statement and no split is required between other comprehensive income and the income statement.
The subsidiaries translate the non-monetary assets at the period end rate and any movement is reflected in other comprehensive income.
1.17 Leases
The total outstanding lease cost, discounted at the Group’s weighted average incremental borrowing rate to its present value, is
shown as a lease liability in the statement of financial position. The payment of the lease charge is allocated between the lease
liability and an interest charge in the income statement.
On recognition of the lease liability, the associated asset is shown as a right-of-use asset. This is further adjusted for any lease
payments made prior to adoption and any future restoration costs as implicit within the lease contract. The resulting total value
of the right-of-use asset is depreciated on a straight line basis over the term of the lease period.
The Group re-measures the lease liability whenever:
• there is a change in the lease term;
• there is a change in the lease payments; and
• a lease contract is modified and the lease modification is not accounted for as a separate lease.
Where there is a change in the lease term or lease payments, the lease liability is re-measured by discounting the revised lease
payments at the current or revised discount rate depending on the nature of the event. Where the lease liability is re-measured,
a corresponding adjustment is made to the right-of-use assets.
Where extension/termination options exists within a lease, the Group would assess at the lease commencement date as to whether it is
reasonably certain that it will exercise these options. The Group would reassess these option if there was a significant event or significant
change in circumstances within its control, which would warrant the Group with reasonable certainty to exercise these options.
Payments in relation to short-term leases, those that are less than twelve months in duration continue to be expensed to the income
statement on a straight line basis. At the end of the year, all of the Group’s leases were recognised as right-of-use assets.
104 City of London Investment Group PLC Annual Report 2021/2022
Financial statements
City of London Investment Group PLC Annual Report 2021/2022 105
1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
1.18 Pensions
The Group operates defined contribution pension schemes covering the majority of its employees. The costs of the pension schemes are
charged to the income statement as they are incurred. Any amounts unpaid at the end of the period are reflected in other creditors.
1.19 Exceptional items
Exceptional items are significant items of non-recurring expenditure that have been separately presented by virtue of their nature to
enable a better understanding of the Group’s financial performance. Exceptional items relate to acquisition-related costs incurred by
the Group in relation to its merger. There were no exceptional items in the current financial year.
2. SEGMENTAL ANALYSIS
The Directors consider that the Group has only one reportable segment, namely asset management, and hence only analysis by
geographical location is given.
Europe
USA Canada UK (ex UK) Other Total
£ £ £ £ £ £
Year to 30th June 2022
Gross fee income 58,502,020 1,400,160 279,802 1,082,660 28,985 61,293,627
Non-current assets:
Property and equipment 263,376 – 233,693 – 14,139 511,208
Right-of-use assets 1,245,649 – 1,085,153 – 87,943 2,418,745
Intangible assets 110,060,224 – 17,867 – – 110,078,091
Year to 30th June 2021
Gross fee income 52,215,280 1,458,957 356,462 1,092,575 – 55,123,274
Non-current assets:
Property and equipment 175,387 – 254,197 – 26,399 455,983
Right-of-use assets 1,421,279 – 1,263,534 – 72,366 2,757,179
Intangible assets 100,954,615 – 7,377 – – 100,961,992
The Group has classified its fee income based on the domicile of its clients and non-current assets based on where the assets are
held. Included in revenues are fees of £5,825,226 (2021: £5,470,051) which arose from fee income from the Group’s largest client.
No other single client contributed 10% or more to the Group’s revenue in either of the reporting periods.
3. EMPLOYEES
Group Company
Year to Year to Year to Year to
(a) Average number of persons employed
30th June 2022 30th June 2021 30th June 2022 30th June 2021
by the Group in the period: Number Number Number Number
Investment Management/Research 40 37 19 17
Performance and Attribution 4 4 – –
Business Development/Marketing 16 12 1 1
Client Services 11 10 2 2
Administration, Accounts and Settlements 43 36 8 8
114 99 30 28
Strategic report
Overview
Shareholder information
Governance
Financial statements
3. EMPLOYEES CONTINUED
Group Company
Year to Year to Year to Year to
(b) The aggregate employment costs of
30th June 2022 30th June 2021 30th June 2022 30th June 2021
employees and Directors: £ £ £ £
Wages and salaries 10,180,500 8,695,066 3,522,720 3,396,654
Profit sharing payments 8,374,697 7,426,912 3,041,723 3,158,650
Social security costs 1,526,894 1,283,227 917,297 796,720
Defined contribution pension costs 1,325,245 1,169,045 364,448 349,649
EIP-related charges 1,201,452 950,705 559,383 460,833
Share options charge/(credit) 33,440 (12,023) 3,474 (697)
Other staff costs 890,745 532,474 250,081 149,896
23,532,973 20,045,406 8,659,126 8,311,705
4. DIRECTORS
Year to Year to
30th June 2022 30th June 2021
Directors’ emoluments comprise: £ £
Emoluments (excluding pension contributions and awards under share option schemes) 2,927,773 2,618,151
EIP participation 258,687 166,673
Pension contributions 110,563 110,393
EIP-related charges 272,299 250,770
Gains on exercise of share options 97,575 5,750
Other taxable benefits ^ 30,565 19,359
3,697,462 3,171,096
Social security costs 205,256 174,144
3,902,718 3,345,240
Year to Year to
30th June 2022 30th June 2021
Number Number
Number of Directors on whose behalf pension contributions were paid during the period 5 5
Number of Directors who exercised share options during the period 2 1
Year to Year to
30th June 2022 30th June 2021
Highest paid Director’s remuneration: £ £
Emoluments (excluding pension contributions and awards under share option schemes) 673,000 708,623
EIP participation 107,000 24,040
Pension contributions 26,250 26,388
EIP-related charges 104,645 91,011
Gains on exercise of share options 87,000 5,750
Other taxable benefits ^ 3,336 6,046
1,001,231 861,858
Social security costs 135,007 17,618
1,136,238 879,476
(^) The regulations require us to disclose taxable benefits. Health insurance is offered to all employees but is not considered a taxable benefit in all countries.
For comparative purposes, we have based our calculations on all health insurance costs incurred, whether a taxable benefit or not.
Further details relating to Directors’ emoluments can be found in the Remuneration report on pages 63 to 83.
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
106 City of London Investment Group PLC Annual Report 2021/2022
Financial statements
City of London Investment Group PLC Annual Report 2021/2022 107
Strategic report
Overview
Shareholder information
Governance
5. OPERATING PROFIT
Year to Year to
30th June 2022 30th June 2021
The operating profit is arrived at after charging: £ £
Depreciation of property and equipment 191,149 187,714
Depreciation of right-of-use assets 496,367 492,730
Amortisation of intangible assets 4,059,600 3,289,142
Auditor’s remuneration:
– Statutory audit 141,984 122,318
– Audit related assurance services 25,000 20,297
– Under/(over) accrual of prior year audit fees 5,143 (168)
Short-term lease expense 13,196 7,891
6. BUSINESS COMBINATIONS
On 1st October 2020, City of London Investment Group PLC completed the merger of Snowball Merger Sub, Inc. with and into
Karpus Management Inc. doing business as Karpus Investment Management (KIM), a US-based investment management business,
on a debt-free basis, by way of a scheme of arrangement in accordance with the New York Business Corporation Law, with KIM
being the surviving entity in the merger. CLIG acquired 100% of voting equity interest in KIM and the merger was satisfied by
issue of new ordinary shares and cash for a total consideration of £101,887,540. KIM uses closed-end funds (CEFs) amongst other
securities as a means to gain exposure for its client base comprising of US high net worth clients and corporate accounts. It qualifies
as a business as defined in IFRS 3 “Business Combinations”. The merger is considered to be of substantial strategic and financial
benefit to the Group and its shareholders.
Details of the net assets acquired, goodwill and purchase consideration are detailed in note 6 on pages 107 and 108 of the
Annual Report and Accounts for the year ended 30th June 2021.
7. FINANCE INCOME AND FINANCE EXPENSE
Year to Year to
30th June 2022 30th June 2021
£ £
Finance income:
Interest on bank deposits 32,136 17,689
Unrealised gain on investments – 540,172
Total finance income 32,136 557,861
Finance expense:
Unrealised loss on investments (659,231) –
Interest payable on lease liabilities (153,190) (133,827)
Other interest payable – (925)
Total finance expense (812,421) (134,752)
Net finance (expense)/income (780,285) 423,109
Financial statements
8. TAX CHARGE ON PROFIT ON ORDINARY ACTIVITIES
Year to Year to
30th June 2022 30th June 2021
(a) Analysis of tax charge on ordinary activities: £ £
Current tax:
UK corporation tax at 19% (2021: 19%) based on the profit for the period 4,533,109 4,510,249
Double taxation relief (909,780) (947,061)
Adjustments in respect of prior years (53,810) 35,246
UK tax total 3,569,519 3,598,434
Foreign tax 2,720,112 2,435,832
Adjustments in respect of prior years (54,854) (81,966)
Foreign tax total 2,665,258 2,353,866
Total current tax charge 6,234,777 5,952,300
Deferred tax:
UK – origination and reversal of temporary differences (119,105) 39,423
Foreign – origination and reversal of temporary differences (1,034,440) (733,237)
Total deferred tax credit (1,153,545) (693,814)
Total tax charge in income statement 5,081,232 5,258,486
(b) Factors affecting tax charge for the current period:
The tax charge on profit for the year is different to that resulting from applying the standard rate of corporation tax in the UK –
19% (prior year – 19%). The differences are explained below:
Year to Year to
30th June 2022 30th June 2021
£ £
Profit on ordinary activities before tax 23,172,383 22,249,004
Tax on profit from ordinary activities at the standard rate (4,402,753) (4,227,311)
Effects of:
Unrelieved overseas tax (3,614,710) (2,793,433)
Foreign profits taxed at rates different to those of the UK 2,574,111 1,922,253
Expenses not deductible for tax purposes (774,538) (947,021)
(Losses)/gains not eligible for tax (115,481) 49,022
Capital allowances less than depreciation (14,177) (19,255)
Prior period adjustments 108,664 46,720
Deferred tax originating from timing differences 1,153,545 693,814
Other 4,107 16,725
Total tax charge in income statement (5,081,232) (5,258,486)
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
108 City of London Investment Group PLC Annual Report 2021/2022
Financial statements
City of London Investment Group PLC Annual Report 2021/2022 109
Strategic report
Overview
Shareholder information
Governance
9. EARNINGS PER SHARE
The calculation of earnings per share is based on the profit for the period attributable to the equity shareholders of the parent
divided by the weighted average number of ordinary shares in issue for the period ended 30th June 2022.
As set out in the Directors’ report on page 84 the Employee Benefit Trust held 1,708,763 (2021: 1,591,158) ordinary shares in
the Company as at 30th June 2022. The Trustees of the Trust have waived all rights to dividends associated with these shares.
In accordance with IAS 33 Earnings per share, the ordinary shares held by the Employee Benefit Trust have been excluded from
the calculation of the weighted average number of ordinary shares in issue.
The calculation of diluted earnings per share is based on the profit for the period attributable to the equity shareholders of the
parent divided by the diluted weighted average number of ordinary shares in issue for the period ended 30th June 2022.
Reported earnings per share
Year to Year to
30th June 2022 30th June 2021
£ £
Profit attributable to the equity shareholders of the parent for basic earnings 18,091,151 16,971,233
Number of shares Number of shares
Issued ordinary shares as at 1st July 50,679,095 26,560,707
Effect of own shares held by EBT (1,614,063) (1,502,266)
Effect of shares issued in the period – 18,039,233
Weighted average shares in issue 49,065,032 43,097,674
Effect of movements in share options and EIP awards 647,134 677,739
Diluted weighted average shares in issue 49,712,166 43,775,413
Basic earnings per share (pence) 36.9 39.4
Diluted earnings per share (pence) 36.4 38.8
Underlying earnings per share*
Underlying earnings per share is based on the underlying profit after tax*, where profit after tax is adjusted for gain/loss on
investments, acquisition-related costs, amortisation of acquired intangibles, their relating tax impact and non-controlling interest.
Underlying profit for calculating underlying earnings per share
Year to Year to
30th June 2022 30th June 2021
£ £
Profit before tax 23,172,383 22,249,004
Add back:
– Loss/(gain) on investments 659,231 (540,172)
– Acquisition-related costs – 1,743,424
– Amortisation on acquired intangibles 4,051,223 3,250,185
Underlying profit before tax 27,882,837 26,702,441
Tax expense as per the consolidated income statement (5,081,232) (5,258,486)
Tax effect of fair value adjustments (125,253) 102,633
Unwinding of deferred tax liability (972,294) (780,045)
Adjustment for NCI – (19,285)
Underlying profit after tax for the calculation of underlying earnings per share 21,704,058 20,747,258
Underlying earnings per share (pence) 44.2 48.1
Underlying diluted earnings per share (pence) 43.7 47.4
* This is an Alternative Performance Measure (APM). Please refer to page 33 for more details on APMs.
Financial statements
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
110 City of London Investment Group PLC Annual Report 2021/2022
10. PROPERTY AND EQUIPMENT
30th June 2022 30th June 2021
Computer Short Computer Short
Furniture and leasehold Furniture and leasehold
and telephone improve- and telephone improve-
equipment equipment ments Total equipment equipment ments Total
£ £ £ £ £ £ £ £
Group
Cost
At start of period 383,871 1,534,800 627,654 2,546,325 391,426 1,597,979 661,094 2,650,499
Acquired on acquisition – – – – 7,480 9,075 15,005 31,560
Currency translation 20,579 80,289 63,280 164,148 (16,945) (81,259) (48,445) (146,649)
Additions 6,487 214,393 19,105 239,985 1,910 91,432 – 93,342
Disposals (12,358) (50,918) (80,257) (143,533) – (82,427) – (82,427)
At close of period 398,579 1,778,564 629,782 2,806,925 383,871 1,534,800 627,654 2,546,325
Accumulated depreciation
At start of period 254,766 1,393,522 442,054 2,090,342 245,994 1,433,039 428,548 2,107,581
Currency translation 19,893 78,620 54,949 153,462 (15,976) (77,711) (28,839) (122,526)
Charge for the period 24,348 129,818 36,983 191,149 24,748 120,621 42,345 187,714
Disposals (12,358) (46,621) (80,257) (139,236) – (82,427) – (82,427)
At close of period 286,649 1,555,339 453,729 2,295,717 254,766 1,393,522 442,054 2,090,342
Net book value
At close of period 111,930 223,225 176,053 511,208 129,105 141,278 185,600 455,983
Company
Cost
At start of period 236,141 492,792 213,321 942,254 235,371 483,498 213,321 932,190
Additions – 70,690 – 70,690 770 46,406 – 47,176
Disposals (12,358) (50,918) (80,257) (143,533) – (37,112) – (37,112)
At close of period 223,783 512,564 133,064 869,411 236,141 492,792 213,321 942,254
Accumulated depreciation
At start of period 115,225 404,116 142,317 661,658 97,715 361,214 132,174 591,103
Charge for the period 17,510 71,503 10,144 99,157 17,510 80,014 10,143 107,667
Disposals (12,358) (46,621) (80,257) (139,236) – (37,112) – (37,112)
At close of period 120,377 428,998 72,204 621,579 115,225 404,116 142,317 661,658
Net book value
At close of period 103,406 83,566 60,860 247,832 120,916 88,676 71,004 280,596
Financial statements
City of London Investment Group PLC Annual Report 2021/2022 111
Strategic report
Overview
Shareholder information
Governance
Financial statements
11. RIGHT-OF-USE ASSETS
30th June 2022 30th June 2021
Office Office
Property equipment Property equipment
leases leases Total leases leases Total
£ £ £ £ £ £
Group
Cost
At start of period 3,529,441 59,515 3,588,956 2,278,892 – 2,278,892
Acquired on acquisition – – – 156,405 – 156,405
Currency translation 9,208 8,078 17,286 (12,240) – (12,240)
Additions – – – – 59,515 59,515
Effect of modification of lease term 90,567 – 90,567 1,106,384 – 1,106,384
Disposals (195,746) – (195,746) – – –
At close of period 3,433,470 67,593 3,501,063 3,529,441 59,515 3,588,956
Depreciation charge
At start of period 822,621 9,156 831,777 345,481 – 345,481
Currency translation (53,053) 2,973 (50,080) (6,588) 154 (6,434)
Charge for the period 477,300 19,067 496,367 483,728 9,002 492,730
Disposals (195,746) – (195,746) – – –
At close of period 1,051,122 31,196 1,082,318 822,621 9,156 831,777
Net book value
At close of period 2,382,348 36,397 2,418,745 2,706,820 50,359 2,757,179
Company
Cost
At start of period 1,620,297 – 1,620,297 1,620,297 – 1,620,297
At close of period 1,620,297 – 1,620,297 1,620,297 – 1,620,297
Depreciation charge
At start of period 356,763 – 356,763 178,381 – 178,381
Charge for the period 178,381 – 178,381 178,382 – 178,382
At close of period 535,144 – 535,144 356,763 – 356,763
Net book value
At close of period 1,085,153 – 1,085,153 1,263,534 – 1,263,534
As at the period end, the Group’s right-of-use assets consisted of four property leases and one office equipment lease. The current
lease periods range between less than one year and ten years, with the average remaining term being 5.4 years. Expenses in relation
to short-term leases are shown in note 5.
Details of lease liabilities are shown in note 17.
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
112 City of London Investment Group PLC Annual Report 2021/2022
12. INTANGIBLE ASSETS
30th June 2022 30th June 2021
Direct
customer Distribution Long-term
Goodwill relationships channels Trade name software Total Total
£ £ £ £ £ £ £
Group
Cost
At start of period 65,123,297 33,472,334 4,590,186 1,018,983 689,100 104,893,900 761,971
Acquired on acquisition – – – – – – 111,323,195
Additions – – – – 18,867 18,867 –
Currency translation 8,839,613 4,343,439 583,967 134,247 – 13,901,266 (7,191,266)
At close of period 73,962,910 37,815,773 5,174,153 1,153,230 707,967 118,814,033 104,893,900
Amortisation charge
At start of period – 2,673,300 522,535 54,350 681,723 3,931,908 714,662
Currency translation – 612,302 119,684 12,448 – 744,434 (71,896)
Charge for the period – 3,332,159 651,319 67,745 8,377 4,059,600 3,289,142
At close of period – 6,617,761 1,293,538 134,543 690,100 8,735,942 3,931,908
Net book value:
At close of period 73,962,910 31,198,012 3,880,615 1,018,687 17,867 110,078,091 100,961,992
Company
Cost
At start of period – – – – 57,162 57,162 57,162
Additions – – – – 18,867 18,867 –
At close of period – – – – 76,029 76,029 57,162
Amortisation charge
At start of period – – – – 49,785 49,785 38,410
Charge for the period – – – – 8,377 8,377 11,375
At close of period – – – – 58,162 58,162 49,785
Net book value – – – – 17,867 17,867 7,377
Goodwill, direct customer relationships, distribution channels and trade name acquired through business combination relate to the
merger with KIM on 1st October 2020.
The fair values of KIM’s direct customer relationships and the distribution channels have been measured using a multi-period excess
earnings method. The model uses estimates of annual attrition driving revenue from existing customers to derive a forecast series of
cash flows, which are discounted to a present value to determine the fair values of KIM’s direct customer relationships and the
distribution channels.
The fair value of KIM’s trade name has been measured using a relief from royalty method. The model uses estimates of royalty rate
and percentage of revenue attributable to trade name to derive a forecast series of cash flows, which are discounted to a present value
to determine the fair value of KIM’s trade name.
The total amortisation charged to the income statement during the financial year in relation to direct client relationships,
distribution channels and trade name was £4,051,223 (2021: £3,250,185).
Financial statements
City of London Investment Group PLC Annual Report 2021/2022 113
Strategic report
Overview
Shareholder information
Governance
Financial statements
12. INTANGIBLE ASSETS CONTINUED
Impairment
Goodwill acquired through the business combination is in relation to the merger with KIM and relates to the acquired workforce
and future expected growth of the CGU.
The Group has carried out an annual review of the carrying value of the CGU to which the goodwill is allocated to see if it has
suffered any impairment. The recoverable amount of the CGU is determined by its value in use. This income-based approach model
is based on the estimates of future cash flows, over a four-year period plus a terminal value, discounted to its present value.
The Group’s cash flow forecasts are based on its most recent and current trading activity and on current financial budgets for twelve
months that are approved by the Board. The key assumptions underlying the budgets are based on the most recent trading activity
with built in organic growth, revenue and cost margins. The Board approved budget is extrapolated for a total of three years and then
a terminal value is calculated. The annual growth rate used for extrapolating revenue forecasts was 4.1% and for direct costs was 3.0%
based on the Group’s expectation of future growth of the business.
A Gordon growth model was applied to estimate the terminal value based on a long-term growth rate of 3.0% and is based on both
economic and industry growth outlooks. The pre-tax discount rate used to measure the value in use of the cash generating unit was
17.4% which reflects specific risks relating to the CGU and is based on the risk adjusted weighted average cost of capital.
The goodwill impairment assessment date of 30th April 2022 was different to the current reporting date. The performance of the
CGU is reviewed for the period between the assessment date and the reporting date to determine whether any changes in
circumstances or impairment indicators have occurred since the assessment date. Following our review, it was determined that there
were no changes in circumstances or impairment indicators that would require the CGU to be impaired at the reporting date.
The recoverable amount of the CGU exceeded the carrying amount of the CGU at 30th April 2022 by £1,391,854 (2021: £6,745,000).
Sensitivity analysis was applied to the key assumptions to measure the impact on the headroom in existence under the current
impairment review. The areas where the sensitivity analysis was tested related to discount rates used, movements in FuM,
and impact on margins.
Following the sensitivity review, the recoverable amount of this CGU would equal its carrying amount if the key assumptions
were to change as follows:
2022
From To
Pre-tax discount rate 17.4% 17.6%
Average FuM growth rate 2.5% 1.5%
Average EBIT margin 54.5% 54%
The Directors and management have considered and assessed possible changes to other key assumptions and have not identified any
instances that could cause the carrying amount of the CGU to exceed its recoverable amount. Current economic circumstances have
become more uncertain due to events outside the control of the business such as the impact of the war in Ukraine. The potential
impact on global markets cannot be reliably estimated and if these result in a sustained period of weakness in financial markets this
could result in a future impairment.
Based on the recoverable amount, using the value in use model, no impairment was required at 30th June 2022.
13. OTHER FINANCIAL ASSETS (NON-CURRENT)
30th June 2022 30th June 2021
Unlisted Listed Unlisted Listed
investments investments Total investments investments Total
Group £ £ £ £ £ £
At start of period 1,874,766 2,498,719 4,373,485 1,781,741 2,212,986 3,994,727
Additions – 3,877,446 3,877,446 715 – 715
Disposals (13,647) – (13,647) – – –
Fair value (losses)/gains (42,952) (570,279) (613,231) 92,310 285,733 378,043
Deconsolidation of NCI* – (189,467) (189,467) – – –
At close of period 1,818,167 5,616,419 7,434,586 1,874,766 2,498,719 4,373,485
* The Group's external investor liquidated its holding in the International REIT fund during the year and thus there is no NCI at the year end.
1) Differences to unrealised gain/(loss) on investments shown in note 7 are on account of net assets (cash, receivable and payables) of consolidated International
REIT and Global Equity CEF funds being included within the respective balance sheet line and the impact of currency translation on unlisted investments.
30th June 2022 30th June 2021
Unlisted Investment in Unlisted Investment in
investments subsidiary Total investments subsidiary Total
undertakings undertakings
Company £ £ £ £ £ £
At start of period 1,874,766 105,087,374 106,962,140 1,781,732 3,243,650 5,025,382
Acquired on acquisition – – – – 101,887,540 101,887,540
Additions – 2,020,942 2,020,942 724 53,100 53,824
Disposals – (14,280) (14,280) – (96,916) (96,916)
Fair value gains/(losses) (56,599) – (56,599) 92,310 – 92,310
At close of period 1,818,167 107,094,036 108,912,203 1,874,766 105,087,374 106,962,140
The additions and disposals in investments in subsidiary undertakings include the allocation of share-based payments from the
Company to its subsidiaries under IFRS 2 Share-based payment and investment in the new seed fund ‘Global Equity CEF Fund’.
All Group companies are listed in note 1.4.
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
114 City of London Investment Group PLC Annual Report 2021/2022
Financial statements
City of London Investment Group PLC Annual Report 2021/2022 115
Strategic report
Overview
Shareholder information
Governance
Financial statements
14. DEFERRED TAX ASSET
Share-based payments Other Total
Group £ £ £
At 30th June 2020 348,008 – 348,008
(Charged)/credited to income (74,044) 27,236 (46,808)
Credited to equity 65,205 – 65,205
At 30th June 2021 339,169 27,236 366,405
Credited to income 62,806 – 62,806
Charged to equity (73,013) – (73,013)
Currency translation 35,353 3,280 38,633
At 30th June 2022 364,315 30,516 394,831
Share-based payments Other Total
Company £ £ £
At 30th June 2020 12,600 – 12,600
Charged to equity (3,142) – (3,142)
At 30th June 2021 9,458 – 9,458
Credited to income 660 – 660
Charged to equity (5,052) – (5,052)
At 30th June 2022 5,066 – 5,066
15. TRADE AND OTHER RECEIVABLES
Group Company
30th June 2022 30th June 2021 30th June 2022 30th June 2021
£ £ £ £
Trade receivables 191,444 110,293 – –
Accrued income 4,852,186 5,618,878 – –
Amounts owed by Group undertakings – – 4,682,983 6,239,676
Other receivables 166,534 142,560 81,502 82,787
Prepayments 1,287,855 1,081,739 416,237 339,803
6,498,019 6,953,470 5,180,722 6,662,266
16. TRADE AND OTHER PAYABLES
Group Company
30th June 2022 30th June 2021 30th June 2022 30th June 2021
£ £ £ £
Trade payables 3,267 98,486 – –
Sundry payables 1,000,645 92,565 76,242 151
Amounts owed to Group undertakings – – 463,546 261,503
Other taxation and social security 165,432 150,363 142,720 131,442
Accruals and deferred income 8,292,262 7,919,183 3,067,090 2,888,020
9,461,606 8,260,597 3,749,598 3,281,116
17. LEASE LIABILITIES AND COMMITMENTS
Group Company
30th June 2022 30th June 2021 30th June 2022 30th June 2021
a) Lease liabilities £ £ £ £
Lease liabilities
Current 388,986 392,954 121,573 131,180
Non-current 2,213,854 2,348,101 1,026,248 1,148,549
2,602,840 2,741,055 1,147,821 1,279,729
Group Company
Present value Undiscounted Present value Undiscounted
of minimum minimum of minimum minimum
lease payments lease payments lease payments lease payments
b) Lease maturities £ £ £ £
Within one year 388,986 525,006 121,573 198,448
In the second to fifth year inclusive 1,271,352 1,544,191 739,221 847,682
After five years 942,502 940,681 287,027 217,383
2,602,840 3,009,878 1,147,821 1,263,513
The total cash outflow in respect of lease liabilities for the period to 30th June 2022 was £560,962 (2021: £620,507).
Group Company
c) Liabilities from financing activities £ £
Net debt as at 30th June 2020 1,958,398 1,448,096
Cash flows (486,680) (168,367)
New and modified leases 1,326,857 –
Currency translations (57,520) –
Net debt as at 30th June 2021 2,741,055 1,279,729
Cash flows (407,772) (131,908)
New and modified leases 90,567 –
Currency translations 178,990 –
Net debt as at 30th June 2022 2,602,840 1,147,821
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
116 City of London Investment Group PLC Annual Report 2021/2022
Financial statements
City of London Investment Group PLC Annual Report 2021/2022 117
Strategic report
Overview
Shareholder information
Governance
Financial statements
18. DEFERRED TAX LIABILITY
Right-of-use assets Intangible assets Other financial assets Total
Group £ £ £ £
At 30th June 2020 26,854 – 31,020 57,874
Arising upon acquisition – 9,985,920 – 9,985,920
(Credited)/charged to income (5,934) (780,045) 45,357 (740,622)
Credited to equity – currency translation – (606,359) – (606,359)
At 30th June 2021 20,920 8,599,516 76,377 8,696,813
Credited to income (2,963) (972,293) (115,482) (1,090,738)
Charged to equity – currency translation – 1,036,133 – 1,036,133
At 30th June 2022 17,957 8,663,356 (39,105) 8,642,208
Right-of-use assets Intangible assets Other financial assets Total
Company £ £ £ £
At 30th June 2020 26,854 – 3,221 30,075
Credited to income (5,934) – – (5,934)
At 30th June 2021 20,920 – 3,221 24,141
Credited to income (2,963) – – (2,963)
At 30th June 2022 17,957 – 3,221 21,178
19. SHARE CAPITAL AND MERGER RELIEF RESERVE
Share capital Merger relief reserve
Group and Company £ £
At start and end of period 50,679,095 ordinary shares of 1p each 506,791 101,538,413
20. RESERVES
Share premium account – used to record the issue of share capital at a premium to nominal value.
Merger relief reserve – created on the business combination (see note 19).
Investments in own shares – balance with trustees in relation to employee benefit schemes.
Share option reserve – provision for outstanding options in relation to employee share option scheme.
EIP share reserve – provision for Company contribution to EIP employee benefit scheme.
Foreign currency differences reserve – records exchange differences arising from the translation of non-monetary assets and
consolidation of foreign subsidiary.
Capital redemption reserve – created on the cancellation of share capital and reflects the value of share capital redeemed by
the Company.
Retained earnings – includes all current and prior year retained profits and losses.
21. DIVI DE N D
30th June 2022 30th June 2021
£ £
Dividends paid:
Interim dividend of 11p per share (2021: 11p) 5,394,361 4,762,818
Special dividend of 13.5p per share (2021: nil) 6,620,352 –
30th June 2021 of 22p per share (2020: 20p) 9,470,196 4,980,306
21,484,909 9,743,124
A final dividend of 22p per share (gross amount payable £11,149,401; net amount payable £10,773,473) has been proposed,
payable on 4th November 2022, subject to shareholder approval, to shareholders who are on the register of members on
30th September 2022.
*Difference between gross and net amounts is due to shares held at EBT that do not receive dividend.
22. SHARE-BASED PAYMENTS
(a) The estimated fair value of options which fall under IFRS 2, and the inputs used in the Black-Scholes model to calculate those
values at fair value, are as follows:
Number
Expected Risk-free Share price Exercise Dividend Estimated originally
Date of grant Expiry date life (yrs) rate at grant (£) price (£) Volatility yield Fair value (£) granted
16/03/2021 16/03/2031 6.5 0.5264% 5.04 5.04 35.9225% 6.19% 0.8111 154,000
31/03/2022 31/03/2032 6.5 1.4678% 4.86 4.795 35.7981% 6.79% 0.8037 18,500
The expected share price volatility is based on historical volatility over the past 6.5 years. The expected life of the options has been
assumed to be 6.5 years based upon the empirical evidence available.
The risk-free rate has been assumed to be represented by the yield to maturity at the date of grant of a UK Gilt Strip, with term to
maturity equal to the expected life of the option.
(b) All share options granted are equity settled. The number and weighted average exercise price of share options for each of the
following groups is as follows:
Year to 30th June 2022 Year to 30th June 2021
Weighted average Weighted average
exercise price exercise price
Number £ Number £
Outstanding at the beginning of the period 405,750 3.94 521,875 3.47
Granted during the period 18,500 4.80 154,000 5.04
Forfeited during the period 3,500 5.04 43,250 3.60
Exercised during the period 92,000 3.46 226,875 3.66
Outstanding at the end of the period 328,750 4.11 405,750 3.94
Exercisable at the end of the period 159,750 3.16 251,750 3.27
The weighted average share price at the date of exercise
for share options exercised during the period was 5.29 4.92
The total share-based payment for the period is a charge of £33,440 (2021: credit of £12,023). For outstanding share options the
exercise price ranged between £2.55 and £5.04 (2021: between £2.55 and £5.04), and their weighted average contractual life was
5.7 years (2021: 5.3 years).
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
118 City of London Investment Group PLC Annual Report 2021/2022
Financial statements
City of London Investment Group PLC Annual Report 2021/2022 119
Strategic report
Overview
Shareholder information
Governance
Financial statements
22. SHARE-BASED PAYMENTS CONTINUED
(c) The Group introduced an Employee Incentive Plan (EIP) in 2016/17 which is open to employees of all Group companies and
Executive Directors, details of the EIP can be found in the Directors’ Remuneration Report.
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.
Awards under the EIP 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.
The Deferred Shares are treated as cash settled and the full cost is recognised in the income statement in the year of service. The Bonus
Shares are treated as equity settled and as such their estimated fair value is spread over the period from the time the employee elects to
participate, to when the award vests (i.e. no longer forfeitable). This will be re-calculated when the awards are granted and any amount
under or over the estimated value will be recognised through the income statement at that point in time. The estimated fair value of
the Bonus Share awards is based on the cash equivalent at the time of award.
Estimated Actual
Vesting charge charge 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 Total
date £’000s £’000s £’000s £’000s £’000s £’000s £’000s £’000s £’000s £’000s £’000s £’000s £’000s £’000s
Awards granted October 2018
Bonus Shares tranche 1 Oct-19 280 269 119 112 38 – – – – – – – – 269
Bonus Shares tranche 2 Oct-20 280 269 84 78 81 26 – – – – – – – 269
Bonus Shares tranche 3 Oct-21 279 269 65 60 62 62 20 – – – – – – 269
839 807 268 250 181 88 20 – – – – – – 807
Awards granted October 2019
Bonus Shares tranche 1 Oct-20 212 215 – 91 94 30 – – – – – – – 215
Bonus Shares tranche 2 Oct-21 212 214 – 63 65 65 21 – – – – – – 214
Bonus Shares tranche 3 Oct-22 212 215 – 49 50 50 50 16 – – – – – 215
636 644 – 203 209 145 71 16 – – – – – 644
Awards granted October 2020
Bonus Shares tranche 1 Oct-21 242 241 – – 103 103 35 – – – – – – 241
Bonus Shares tranche 2 Oct-22 242 240 – – 72 72 72 24 – – – – – 240
Bonus Shares tranche 3 Oct-23 242 240 – – 55 55 56 56 18 – – – – 240
726 721 – – 230 230 163 80 18 – – – – 721
Awards granted October 2021
Bonus Shares tranche 1 Oct-22 289 281 – – – 88 154 39 – – – – – 281
Bonus Shares tranche 2 Oct-23 289 281 – – – 88 81 85 27 – – – 281
Bonus Shares tranche 3 Oct-24 289 281 – – – 88 41 65 66 21 – – 281
Bonus Shares tranche 4 Oct-25 33 32 – – – 8 4 6 6 6 2 – 32
Bonus Shares tranche 5 Oct-26 33 32 – – – 9 2 8 4 4 4 1 32
933 907 – – – 281 282 203 103 31 6 1 – 907
Awards expected to be
granted October 2022
Bonus Shares tranche 1 Oct-23 360 – – – – – 155 155 50 – – – – 360
Bonus Shares tranche 2 Oct-24 360 – – – – – 108 108 108 36 – – – 360
Bonus Shares tranche 3 Oct-25 360 – – – – – 83 83 82 83 29 – – 360
Bonus Shares tranche 4 Oct-26 52 – – – – – 10 10 10 10 9 3 – 52
Bonus Shares tranche 5 Oct-27 52 – – – – – 9 8 8 8 8 8 3 52
1,184 – – – – – 365 364 258 137 46 11 3 1,184
Total share-based payment charge 268 453 620 744 901 663 379 168 52 12 3 4,263
23. 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 68, 76 and 77 and in note 4.
(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 £58,232 (2021: £39,300). There were no fees
outstanding as at the year end.
(ii) Summary of transactions and balances
During the period, the Company received from its subsidiaries £11,840,471 (2021: £11,154,306) in respect of management service
charges and dividends of £26,160,323 (2021: £12,200,000).
Amounts outstanding between the Company and its subsidiaries as at 30th June 2022 are given in notes 15 and 16.
M Dwyer, a Director of the Company until 30th June 2022, is also a Director of the World Markets Umbrella Fund plc, a fund
managed by City of London Investment Management Company Ltd. The management fees earned by the Group during the year
from this fund totalled £1,082,662 (2021: £1,092,575), with £92,295 (2021: £117,128) outstanding at the year end.
24. 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
Financial assets value through
30th June 2022 at amortised cost profit or loss Total
Assets as per statement of financial position £ £ £
Other non-current financial assets – 7,434,586 7,434,586
Trade and other receivables 5,210,164 _ 5,210,164
Cash and cash equivalents 22,677,893 _ 22,677,893
Total 27,888,057 7,434,586 35,322,643
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
120 City of London Investment Group PLC Annual Report 2021/2022
Financial statements
City of London Investment Group PLC Annual Report 2021/2022 121
Strategic report
Overview
Shareholder information
Governance
Financial statements
24. FINANCIAL INSTRUMENTS CONTINUED
Liabilities at
Financial fair value
liabilities at through
amortised cost profit or loss Total
Liabilities as per statement of financial position £ £ £
Trade and other payables 8,350,276 945,898 9,296,174
Current lease liabilities 388,986 – 388,986
Non-current lease liabilities 2,213,854 – 2,213,854
Total 10,953,116 945,898 11,899,014
Assets at fair
Financial assets at value through
30th June 2021 amortised cost profit or loss Total
Assets as per statement of financial position £ £ £
Other non-current financial assets – 4,373,485 4,373,485
Trade and other receivables 5,871,731 _ 5,871,731
Cash and cash equivalents 25,514,619 _ 25,514,619
Total 31,386,350 4,373,485 35,759,835
Liabilities at
Financial fair value
liabilities at through
amortised cost profit or loss Total
Liabilities as per statement of financial position £ £ £
Trade and other payables 8,040,676 69,558 8,110,234
Current lease liabilities 392,954 – 392,954
Non-current lease liabilities 2,348,101 – 2,348,101
Total 10,781,731 69,558 10,851,289
Company Assets at fair
Investment in Financial assets at value through
30th June 2022 subsidiaries amortised cost profit or loss Total
Assets as per statement of financial position £ £ £ £
Other non-current financial assets 103,244,651 3,849,385 1,818,167 108,912,203
Trade and other receivables – 4,764,485 – 4,764,485
Cash and cash equivalents – 6,919,935 – 6,919,935
Total 103,244,651 15,533,805 1,818,167 120,596,623
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
24. FINANCIAL INSTRUMENTS CONTINUED
Liabilities at
Financial fair value
liabilities at through
amortised cost profit or loss Total
Liabilities as per statement of financial position £ £ £
Trade and other payables 3,530,682 76,196 3,606,878
Current lease liabilities 121,573 – 121,573
Non-current lease liabilities 1,026,248 – 1,026,248
Total 4,678,503 76,196 4,754,699
Financial Assets at fair
Investment assets at value through
30th June 2021 in subsidiaries amortised cost profit or loss Total
Assets as per statement of financial position £ £ £ £
Other non-current financial assets 103,127,205 1,960,169 1,874,766 106,962,140
Trade and other receivables – 6,322,463 – 6,322,463
Cash and cash equivalents – 2,905,184 – 2,905,184
Total 103,127,205 11,187,816 1,874,766 116,189,787
Liabilities at
Financial fair value
liabilities at through
amortised cost profit or loss Total
Liabilities as per statement of financial position £ £ £
Trade and other payables 3,149,674 – 3,149,674
Current lease liabilities 131,180 – 131,180
Non-current lease liabilities 1,148,549 – 1,148,549
Total 4,429,403 – 4,429,403
(ii) Fair value measurements recognised in the statement of financial position
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value,
grouped into levels 1 to 3 based on the degree to which the fair value is observable.
• Level 1: fair value derived from quoted prices (unadjusted) in active markets for identical assets and liabilities.
• Level 2: fair value derived from inputs other than quoted prices included within level 1 that are observable for the assets or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3: fair value derived from valuation techniques that include inputs for the asset or liability that are not based on
observable market data.
122 City of London Investment Group PLC Annual Report 2021/2022
Financial statements
City of London Investment Group PLC Annual Report 2021/2022 123
Strategic report
Overview
Shareholder information
Governance
Financial statements
24. FINANCIAL INSTRUMENTS CONTINUED
The fair values of the financial instruments are determined as follows:
• Investments for hedging purposes are valued using the quoted bid price and shown under level 1.
• Investments in own funds are determined with reference to the net asset value (NAV) of the fund. Where the NAV is a quoted
price the fair value is shown under level 1, where the NAV is not a quoted price the fair value is shown under level 2.
• Forward currency trades are valued using the forward exchange bid rates and are shown under level 2.
• Unlisted equity securities are valued using the net assets of the underlying companies and are shown under level 3.
The level within which the financial asset or liability is classified is determined based on the lowest level of significant input to the
fair value measurement.
Group
Level 1 Level 2 Level 3 Total
30th June 2022 £ £ £ £
Financial assets at fair value through profit or loss
Investment in other non-current financial assets 5,616,419 1,818,167 – 7,434,586
Total 5,616,419 1,818,167 – 7,434,586
Financial liabilities at fair value through profit or loss
Forward currency trades – 945,898 – 945,898
Total – 945,898 – 945,898
Level 1 Level 2 Level 3 Total
30th June 2021 £ £ £ £
Financial assets at fair value through profit or loss
Investment in other non-current financial assets 2,498,719 1,874,766 – 4,373,485
Total 2,498,719 1,874,766 – 4,373,485
Financial liabilities at fair value through profit or loss
Forward currency trades – 69,558 – 69,558
Total – 69,558 – 69,558
Company
Level 1 Level 2 Level 3 Total
30th June 2022 £ £ £ £
Investment in other non-current financial assets – 1,818,167 – 1,818,167
Total – 1,818,167 – 1,818,167
Level 1 Level 2 Level 3 Total
30th June 2021 £ £ £ £
Investment in other non-current financial assets – 1,874,766 – 1,874,766
Total – 1,874,766 – 1,874,766
24. FINANCIAL INSTRUMENTS CONTINUED
Level 3
Level 3 assets as at 30th June 2022 are nil (2021: nil).
Where there is an impairment in the investment in own funds, the loss is reported in the income statement. No impairment was
recognised during the period or the preceding year.
The fair value gain on the forward currency trades is offset in the income statement by the foreign exchange losses on other
currency assets and liabilities held during the period and at the period end. The net loss reported for the period is £519,633
(2021: net loss £60,607).
(iii) Foreign currency risk
Almost all of the Group’s revenues, and a significant part of its expenses, are denominated in currencies other than sterling,
principally US dollars. These revenues are derived from fee income which is based upon the net asset value of accounts managed,
and have the benefit of a natural hedge by reference to the underlying currencies in which investments are held. Inevitably, debtor
and creditor balances arise which in turn give rise to currency exposure.
The Group assesses its hedging requirements and executes forward foreign exchange transactions so as to substantially reduce the
Group’s exposure to currency market movements. The level of forward currency hedging is such as is judged by the Directors to be
consistent with market conditions.
As at 30th June 2022, the Group had net asset balances of US$23,917,936 (2021: US$9,211,328), offset by forward sales totalling
US$24,500,000 (2021: US$8,300,000). Other significant net asset balances were C$499,036 (2021: C$648,301), and
SGD1,736,510 (2021: SGD1,924,212).
Had the US dollar strengthened or weakened against sterling as at 30th June 2022 by 10%, with all other variables held constant,
the Group’s net assets would have increased or decreased (respectively) by less than 1%, because the US dollar position is hedged by
the forward sales.
(iv) Market risk
Changes in market prices, such as foreign exchange rates and equity prices will affect the Group’s income and the value of its
investments.
Where the Group holds investments in its own funds categorised as unlisted investments, and in other listed investments, the market
price risk is managed through diversification of the portfolio. A 10% increase or decrease in the price level of the funds’ relevant
benchmarks, with all other variables held constant, would result in an increase or decrease of approximately £0.3 million in the value
of the investments and profit before tax.
The Group’s International REIT and Global Equity CEF funds have been consolidated as controlled entities, and therefore the
securities held by the funds are reported in the consolidated statement of financial position under investments. At 30th June 2022,
all those securities were listed on a recognised exchange. A 10% increase or decrease in the price level of the securities would result in
a gain or loss respectively of approximately £0.4 million to the Group.
The Group is also exposed to market risk indirectly via its Funds under Management, from which its fee income is derived.
To hedge against potential losses in fee income, the Group may look to invest in securities or derivatives that should increase in
value in the event of a fall in the markets. The purchase and sale of these securities are subject to limits established by the Board
and are monitored on a regular basis. The investment management and settlement functions are totally segregated.
The profit from hedging recognised in the Group income statement for the period is £nil (2021: £nil).
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
124 City of London Investment Group PLC Annual Report 2021/2022
Financial statements
City of London Investment Group PLC Annual Report 2021/2022 125
Strategic report
Overview
Shareholder information
Governance
Financial statements
24. FINANCIAL INSTRUMENTS CONTINUED
(v) Credit risk
The majority of debtors relate to management fees due from funds and segregated account holders. As such, the Group is able to
assess the credit risk of these debtors as minimal. For other debtors a credit evaluation is undertaken on a case by case basis.
The Group has zero experience of bad or overdue debts.
The majority of cash and cash equivalents held by the Group are with leading UK and US banks. The credit risk is managed by
carrying out regular reviews of each institution’s credit rating and of their published financial position. Given their high credit
ratings, management does not expect any counterparty to fail to meet its obligations.
(vi) Liquidity risk
The Group’s liquidity risk is minimal because commission payable forms the major part of trade creditors, and payment is made
only upon receipt of the related fee income plus the Group’s strategy is to maximise its cash position. In addition, the Group’s
investments in funds that it manages can be liquidated immediately if required.
(vii) Interest rate risk
The Group has no borrowings, and therefore has no exposure to interest rate risk other than that which attaches to its interest
earning cash balances and forward currency contracts. The Group’s strategy is to maximise the amount of cash which is maintained
in interest bearing accounts, and to ensure that those accounts attract a competitive interest rate. At 30th June 2022, the Group
held £22,677,893 (2021: £25,514,619) in cash balances, of which £19,381,084 (2021: £23,911,707) was held in bank accounts
which attract variable interest rates. The effect of a 100 basis points increase/decrease in interest rates on the Group’s net assets
would not be material.
(viii) Capital risk management
The Group manages its capital to ensure that all entities within the Group are able to operate as going concerns and exceed any
minimum externally imposed capital requirements. The capital of the Group and Company consists of equity attributable to the
equity holders of the Parent Company, comprising issued share capital, share premium, retained earnings and other reserves as
disclosed in the statement of changes in equity.
The Group’s operating subsidiary company in the UK, City of London Investment Management Company Ltd is subject to the
minimum capital requirements of the Financial Conduct Authority (FCA) in the UK. This subsidiary held surplus capital over its
requirements throughout the period.
The Group is required to undertake an Internal Capital Adequacy Assessment Process (ICAAP), under which the Board quantifies
the level of capital required to meet operational risks. The Group will produce its first Internal Capital and Risk Assessment (ICARA)
in FY 2023. The objective of this is to ensure that the Group has adequate capital to enable it to manage risks which are not
adequately covered under the Pillar 1 requirements. This process includes stress testing for the effects of major risks, such as a
significant market downturn, and includes an assessment of the Group’s ability to mitigate the risks.
25. POST BALANCE SHEET EVENTS
There have been no material events occurring between the balance sheet date and the date of signing this report.
Contents
Notice of Annual General Meeting
– Notice of Annual General Meeting 127
– Explanatory notes to the Notice of AGM 130
– Further notes 134
Company information IBC
SHAREHOLDER INFORMATION
126 City of London Investment Group PLC Annual Report 2021/2022
City of London Investment Group PLC Annual Report 2021/2022 127
NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the AGM of the Company will be held on Monday 31st October 2022 at 77 Gracechurch Street,
London EC3V 0AS at 11:30am (Greenwich Mean Time) to consider and, if thought appropriate, pass the following resolutions, of which
resolutions 1 to 14 will be proposed as ordinary resolutions and resolutions 15 to 19 will be proposed as special resolutions.
Voting
In order to save paper we no longer post hard copy Proxy Forms, and encourage shareholders to vote online by logging on to
www.signalshares.com and follow the instructions given. CREST members may also use the CREST electronic proxy appointment
service to submit their proxy appointment in respect of the AGM. Full details regarding voting can be found in the Further Notes to the
Notice of the AGM on pages 134 to 136.
Please note that all proxy and appointments must be received by 11:30am on Thursday 27th October 2022.
Voting on the business of the meeting will be conducted by way of a poll. The results of voting on the resolutions will be posted on the
Company’s website as soon as practicable after the AGM.
Ordinary Resolutions
Reports and Accounts
1. To receive the Directors’ report and the accounts of the Company for the year ended 30th June 2022.
Directors’ remuneration report
2. To approve the Directors’ remuneration report for the year ended 30th June 2022, set out on pages 68 to 78 of the Annual Report
and Accounts for the year ended 30th June 2022.
3. To approve the remuneration policy, as set out in the remuneration policy report in the Annual Report and Accounts for the year
ended 30th June 2022.
Dividend
4. To declare a final dividend of 22p per Ordinary Share of 1p each in the Company (Ordinary Share) for the year ended 30th June 2022,
payable on 4th November 2022 to members on the register as at 30th September 2022.
Directors
5. To re-appoint Barry Aling as a Director
6. To re-appoint Thomas Griffith as a Director.
7. To re-appoint Rian Dartnell as a Director.
8. To re-appoint Tazim Essani as a Director.
9. To re-appoint George Karpus as a Director.
10. To re-appoint Peter Roth as a Director.
11. To re-appoint Jane Stabile as a Director.
Auditors
12. To re-appoint RSM UK Audit LLP as auditors of the Company, to hold office from the conclusion of this AGM until the
conclusion of the next AGM at which accounts are laid before the Company.
13. To authorise the Audit & Risk Committee of the Company to fix the remuneration of the auditors.
Strategic report
Overview
Financial statements
Governance
Shareholder information
NOTICE OF ANNUAL GENERAL MEETING
CONTINUED
128 City of London Investment Group PLC Annual Report 2021/2022
Other information
Directors’ authority to allot shares
14. To generally and unconditionally authorise the Directors, pursuant to and in accordance with Section 551 of the Companies Act
2006 (the 2006 Act), to exercise all the powers of the Company to allot shares or grant rights to subscribe for or to convert any
security into shares in the Company:
(a) up to an aggregate nominal amount of £168,930; and
(b) comprising equity securities (as defined in Section 560(1) of the 2006 Act) up to a further aggregate nominal amount of
£168,930 in connection with an offer by way of a rights issue;
such authorities to apply in substitution for all previous authorities pursuant to Section 551 of the 2006 Act and to expire at the
end of the next Annual General Meeting or on 31st October 2023, whichever is the earlier, but in each case so that the
Company may make offers and enter into agreements during the relevant period which would, or might, require shares to be
allotted or rights to subscribe for or to convert any security into shares to be granted after the authority ends.
For the purposes of this resolution, ‘rights issue’ means an offer to:
(i) ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings; and
(ii) holders of other equity securities, if this is required by the rights of those securities or, if the Directors consider it necessary,
as permitted by the rights of those securities, to subscribe for further securities by means of the issue of a renounceable letter
(or other negotiable document) which may be traded for a period before payment for the securities is due, but subject in
both cases to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to treasury
shares, fractional entitlements, record dates or legal, regulatory or practical problems in, or under the laws of, any territory.
Special Resolutions
Employee benefit trust
15. That the trustees of City of London Employee Benefit Trust (the EBT) be and are hereby authorised to hold ordinary shares in the
capital of the Company from time to time, for and on behalf of the Employee Share Ownership Plan and Employee Incentive Plan,
up to a maximum in aggregate equal to 10% of the issued Ordinary Share capital of the Company.
Disapplication of pre-emption rights
16. That, if resolution 14 is passed, the Directors be authorised to allot equity securities (as defined in the 2006 Act) for cash under the
authority given by that resolution and/or to sell ordinary shares held by the Company as treasury shares for cash as if section 561 of
the 2006 Act did not apply to any such allotment or sale, such authority to be limited:
(a) to allotments for rights issues and other pre-emptive issues; and
(b) to the allotment of equity securities or sale of treasury shares (otherwise than under paragraph (a) above) up to a nominal amount
of £25,339:
such authority to expire at the end of the next AGM of the Company or, if earlier, at the close of business on 31st October 2023
but, in each case, prior to its expiry the Company may make offers, and enter into agreements, which would, or might, require
equity securities to be allotted (and treasury shares to be sold) after the authority expires and the Directors may allot equity securities
(and sell treasury shares) under any such offer or agreement as if the authority had not expired.
17. That, if resolution 14 is passed, the Directors be authorised, in addition to any authority granted under resolution 16, to allot equity
securities (as defined in the 2006 Act) for cash under the authority given by that resolution and/or to sell ordinary shares held by the
Company as treasury shares for cash, as if section 561 of the 2006 Act did not apply to any such allotment or sale, such authority to be:
(a) limited to the allotment of equity securities or sale of treasury shares up to a nominal amount of £25,339; and
(b) used only for the purposes of financing (or refinancing, if the authority is to be used within six months after the original
transaction) a transaction which the Directors of the Company determine to be an acquisition or other capital investment of
a kind contemplated by the Statement of Principles on Disapplying Pre-Emption Rights most recently published by the
Pre-emption Group prior to the date of this Notice of AGM,
such authority to expire at the end of the next AGM of the Company or, if earlier, at the close of business on 31st October 2023 but,
in each case, prior to its expiry the Company may make offers, and enter into agreements, which would, or might, require equity
securities to be allotted (and treasury shares to be sold) after the authority expires and the Directors may allot equity securities
(and sell treasury shares) under any such offer or agreement as if the authority had not expired.
City of London Investment Group PLC Annual Report 2021/2022 129
Strategic report
Overview
Financial statements
Governance
Shareholder information
Authority to purchase own shares
18. To unconditionally and generally authorise the Company for the purpose of Section 701 of the 2006 Act to make market purchases
(as defined in Section 693(4) of the 2006 Act) of ordinary shares, provided that:
(a) the maximum number of ordinary shares that may be purchased is 5,067,910;
(b) the minimum price that may be paid for each ordinary share is £0.01;
(c) the maximum price that may be paid for an ordinary share is an amount equal to the higher of (i) 105% of the average of the
closing price of the Company’s ordinary shares, as derived from the London Stock Exchange Daily Official List for the five
business days immediately preceding the day on which such ordinary share is contracted to be purchased, and (ii) an amount
equal to the higher of the price of the last independent trade of an ordinary share and the highest current independent bid for an
ordinary share as derived from the London Stock Exchange Trading System; and
(d) this authority shall expire at the conclusion of the Company’s next AGM or, if earlier, 31st October 2023 (except in relation to
the purchase of ordinary shares, the contract for which was concluded before the expiry of such authority and which might be
executed wholly or partly after such expiry), unless such authority is renewed prior to such time.
Notice of general meetings
19. To authorise the Directors to call a general meeting, other than an Annual General Meeting, on not less than 14 clear days’ notice.
By order of the Board
Prism Cosec Limited
Company Secretary
15th September 2022
Registered in England and Wales No. 02685257
Registered Office: 77 Gracechurch Street, London EC3V 0AS
EXPLANATORY NOTES TO THE NOTICE OF AGM
130 City of London Investment Group PLC Annual Report 2021/2022
Other information
The notes on the following pages give an explanation
of the proposed resolutions
Resolutions 1 to 14 are proposed as ordinary resolutions.
For each of these resolutions to be passed, more than half of the
votes cast must be in favour of the resolution. Resolutions 15 to 19
are proposed as special resolutions. For each of these resolutions to
be passed, at least three-quarters of the votes cast must be in
favour of the resolution.
Resolution 1: Report and Accounts
The first item of business is the receipt by the shareholders of the
Directors’ report and the accounts of the Company for the year
ended 30th June 2022. The Directors’ report, the accounts, and
the Report of the Company’s auditors on the accounts and on
those parts of the Directors’ remuneration report that are capable
of being audited, are contained within the 2022 Annual Report.
Resolution 2: Directors’ remuneration report
Resolution 2 seeks shareholder approval of the Directors’
remuneration report for the year ended 30th June 2022, which is
set out on pages 68 to 78 of the 2022 Annual Report. The
Company’s auditors, RSM UK Audit LLP, have audited those parts
of the Directors’ remuneration report that are required to be
audited and their report may be found on pages 88 to 93 of the
2021 Annual Report. The vote on this resolution is advisory in
nature and Directors’ remuneration is not conditional on the
passing of this resolution.
Resolution 3: Directors’ remuneration policy
Resolution 3 seeks shareholder approval of the Company’s
remuneration policy. This policy will replace the policy previously
approved by shareholders at the AGM on 21st October 2019. No
substantive changes have been made to the policy but it has been
generally refreshed and streamlined. The policy can be found in
the 2022 Annual Report on pages 79 to 83 together with a
summary of the changes proposed. Once the policy is approved,
the Company will not be able to make a remuneration payment
to a current or future Director or a payment for loss of office to a
current or past Director unless that payment is consistent with
the policy or has been approved by shareholders.
Resolution 4: Dividend
Resolution 4 seeks approval for a final dividend of 22p per
ordinary share for the year ended 30th June 2022 (Final
Dividend). If approved by shareholders, the Final Dividend will
be paid on 4th November 2022 to all shareholders on the
register at the close of business on 30th September 2022.
Resolutions 5 to 11: Re-appointment of Directors
The Company’s Articles of Association (Articles) require all
Directors to stand for re-appointment at each AGM. Therefore,
and in line with provision 18 of the UK Corporate Governance
Code, all Directors are submitting themselves for re-appointment
by shareholders.
The Board carries out a review of the independence of its Directors
on an annual basis. In considering the independence of the
Independent Non-Executive Directors proposed for re-appointment,
the Board has taken into consideration the guidance provided by the
UK Corporate Governance Code. Accordingly, the Board considers
Barry Aling, Rian Dartnell, Tazim Essani, Peter Roth and Jane
Stabile to be independent (the Independent Directors).
All Directors submit themselves for annual re-appointment by
shareholders in accordance with the Articles and the UK
Corporate Governance Code. Chair of the Board, Barry Aling,
will have served as a Non-Executive Director for a little over 9
years at the date of publication of this Notice of AGM. Typically,
a Non-Executive Director would step down after that period of
time in line with UK corporate governance best practice.
However, the Board believed it to be in the best interests of
shareholders to extend Barry Aling’s tenure for a further, limited
period that would take his beyond the usual 9 years to enable him
to see through to completion the Board restructure that was
announced in April 2022.
On 1st October 2020, the Company completed its merger with
Karpus Management Inc. (KIM). Pursuant to the merger, the
KIM stockholders received shares in the Company capable of
being voted at meetings of the shareholders of the Company.
Due to familial relationships, certain of the KIM stockholders are
regarded as controlling shareholders and form part of a Controlling
Shareholder Group holding, in aggregate, 19,145,215 shares, being
37.8% of the Company’s issued share capital, and consisting of:
George W. Karpus, Karin Popham Anello, Katie Popham
McCormick, William Popham, Alana Heahl, Nicholas Kuszlyk,
Douglas Kuszlyk, Barbara Kuszlyk, Donald Heahl, Deborah
Haehl, Alexandria Haehl, Dianna Kuszlyk and Rodd Riesenberger
(the Controlling Shareholder Group).
Under the Listing Rules, because the Controlling Shareholder
Group together control in concert more than 30% of the voting
rights of the Company (even though they have agreed to limit
their voting rights as noted in note 21 of Further Notes to this
Notice of AGM), the appointment or re-appointment of any
Independent Director by shareholders must be approved by a
majority vote of both:
(i) the shareholders of the Company; and
(ii) the independent shareholders of the Company (that is the
shareholders of the Company entitled to vote on the
election of Directors who are not part of the Controlling
Shareholder Group).
City of London Investment Group PLC Annual Report 2021/2022 131
Strategic report
Overview
Financial statements
Governance
Shareholder information
Other information
Resolutions 5, 7, 8, 10 and 11 are therefore being proposed as
ordinary resolutions which all shareholders may vote on, but in
addition the Company will separately count the number of votes
cast by independent shareholders in favour of the resolution (as a
proportion of the total votes of independent shareholders cast on
the resolution) to determine whether the second threshold referred
to in (ii) above has been met. The Company will announce the
results of the resolutions on this basis as well as announcing the
results of the ordinary resolutions of all shareholders.
Under the Listing Rules, if a resolution to re-appoint and
Independent Director is not approved by a majority vote of both
the shareholders as a whole and the independent shareholders of
the Company at the AGM, a further resolution may be put
forward to be approved by the shareholders as a whole at a meeting
which must be held more than 90 days after the date of the first
vote but within 120 days of the first vote. Accordingly, if any of
resolutions 5, 7, 8, 10 and 11 are not approved by a majority vote
of the Company’s independent shareholders at the AGM, the
relevant Director(s) will be treated as having been re-appointed
only for the period from the date of the AGM until the earlier of:
(i) the close of any general meeting of the Company, convened for
a date more than 90 days after the AGM but within 120 days of
the AGM, to propose a further resolution to re-appoint him or
her; (ii) the date that is 120 days after the AGM; and (iii) the
date of any announcement by the Board that it does not intend
to hold a second vote.
In the event that the Director’s re-appointment is approved by a
majority vote of all shareholders at a second meeting, the Director
will then be re-appointed until the next AGM. The Company is
also required to provide details of:
(i) any previous or existing relationship, transaction or
arrangement between an Independent Director and the
Company, its Directors, any controlling shareholder or any
associate of a controlling shareholder;
(ii) why the Company considers the proposed Independent
Director will be an effective Director;
(iii) how the Company has determined that the proposed
Director is an Independent Director; and
(iv) the process by which the Company has selected each
Independent Director.
This is set out below:
Previous/existing relationships: The Company has received
confirmation from each of the Independent Directors that, except
as disclosed below, there is no existing or previous relationship,
transaction or arrangement that the Independent Directors have
or have had with the Company, its Directors, any controlling
shareholder or any associate of a controlling shareholder.
Effectiveness: Biographical details of each Director seeking
re-appointment, appear on pages 44 to 45 of this document.
The biographical details also set out each Independent Director’s
experience. The Board considers, following a formal Board
performance evaluation, that each Director seeking re-appointment
continues to contribute effectively and to demonstrate
commitment to his or her role.
This consideration of effectiveness is based on, amongst other
things, the business skills, industry experience, business model
experiences and other contributions individuals may make
(including diversity considerations), both as an individual and also
in contributing to the balance of skills, knowledge and capability
of the Board as a whole, as well as the commitment of time for
Board and Committee meetings and other duties.
Independence: As previously stated, each Independent Director’s
independence was determined by reference to the relevant
provisions of the 2018 UK Corporate Governance Code. The
Board also considers that each of the Independent Directors is
independent in character and judgement and that there are no
relationships or circumstances which are likely to affect, or could
appear to affect, their judgement.
Selection: For the selection of Independent Director’s, recruitment
consultants are engaged to assist in conducting a thorough search
to identify suitable candidates. The selection process involves,
amongst other things, giving the recruitment consultants a detailed
brief of the desired candidate profile against objective criteria and a
rigorous process of interviews and assessments is then carried out.
The Nomination Committee is responsible in each case for
identifying and nominating, for the approval of the Board,
candidates to fill Board vacancies.
Resolution 12: Re-appointment of auditors
The auditors of a company must be appointed or re-appointed at
each general meeting at which the accounts are laid. Resolution 12
proposes, on the recommendation of the Audit & Risk
Committee, the re-appointment of RSM UK Audit LLP as the
Company’s auditors, until the conclusion of the next general
meeting of the Company at which accounts are laid.
Resolution 13: Remuneration of auditors
This resolution seeks shareholder consent for the Company’s Audit
& Risk Committee to set the remuneration of the auditors.
Resolution 14: Directors’ authority to allot
The purpose of this resolution is to renew the Directors’ power to
allot shares. The authority in paragraph (a) will allow the Directors
to allot new shares and grant rights to subscribe for, or convert
other securities into, shares up to approximately one-third
(33.33%) of the Company’s total issued ordinary share capital
(exclusive of treasury shares) which, as at 15th September 2022,
being the Latest Practicable Date prior to publication of this
Notice of AGM (Latest Practicable Date), is equivalent to a
nominal value of £168,930.
EXPLANATORY NOTES TO THE NOTICE OF AGM
CONTINUED
132 City of London Investment Group PLC Annual Report 2021/2022
Other information
The authority in paragraph (b) will allow the Directors to allot new
shares and grant rights to subscribe for, or convert other securities
into, shares only in connection with a rights issue up to a further
nominal value of £168,930, which is equivalent to approximately
one-third (33.3%) of the total issued ordinary share capital of the
Company (exclusive of treasury shares) as at the Latest Practicable
Date. The Company currently holds no shares in treasury.
There are no present plans to undertake a rights issue, or to allot
new shares. The Directors consider it desirable to have the
maximum flexibility permitted by corporate governance guidelines
to respond to market developments and to enable allotments to
take place to finance business opportunities as they arise.
If the resolution is passed, the authority will expire on the earlier
of 31st October 2023 or the end of the AGM in 2023.
Resolution 15: Employee Benefit Trust (EBT)
In accordance with the Investment Association’s Principles of
Remuneration, the prior approval of shareholders should be
obtained before 5% or more of the Company’s issued share
capital is held on behalf of the EBT.
Your Board of Directors therefore seeks the approval of
shareholders by ordinary resolution to permit the trustees of the
EBT to hold a maximum of 10% of the Company’s issued
ordinary share capital from time to time. Your Directors believe
that granting such approval would be in the best interests of
shareholders because it will offer the opportunity to align more
closely the interests of employees and shareholders, will extend
the Company’s opportunities with respect to attracting new talent
and will promote confidence in the stability of the Company’s
investment process from a client perspective.
Resolutions 16 and 17: Disapplication of pre-emption rights
If the Directors wish to allot new shares and other equity
securities, or sell treasury shares, for cash (other than in connection
with an employee share scheme), Company law requires that these
shares are offered first to shareholders in proportion to their
existing holdings.
Resolution 16 deals with the authority of the Directors to allot
new shares or other equity securities pursuant to the authority
given by resolution 14, or sell treasury shares, for cash without the
shares or other equity securities first being offered to shareholders
in proportion to their existing holdings. Such authority shall only
be used in connection with a pre-emptive offer or, otherwise, up to
an aggregate nominal amount of £25,339, being approximately
5% of the total issued ordinary share capital of the Company as
at the Latest Practicable Date. The Company does not hold any
treasury shares as at the Latest Practicable Date.
The Pre-emption Group Statement of Principles supports the
annual disapplication of pre-emption rights in respect of allotments
of shares and other equity securities (and sales of treasury shares for
cash) representing no more than an additional 5% of issued
ordinary share capital (exclusive of treasury shares), to be used only
in connection with an acquisition or specified capital investment.
The Pre-emption Group’s Statement of Principles defines ‘specified
capital investment’ as meaning one or more specific capital
investment related uses for the proceeds of an issuance of equity
securities, in respect of which sufficient information regarding the
effect of the transaction on the Company, the assets the subject of
the transaction and (where appropriate) the profits attributable to
them is made available to shareholders to enable them to reach
an assessment of the potential return.
Accordingly, and in line with the template resolutions published
by the Pre-emption Group, resolution 17 seeks to authorise the
Directors to allot new shares and other equity securities pursuant
to the authority given by resolution 14, or sell treasury shares,
for cash up to a further nominal amount of £25,339, being
approximately 5% of the total issued Ordinary Share capital of the
Company as at the Latest Practicable Date, only in connection
with an acquisition or specified capital investment which is
announced contemporaneously with the allotment, or which has
taken place in the preceding six-month period and is disclosed in
the announcement of the issue.
If the authority given in resolution 17 is used, the Company will
publish details of the placing in its next annual report.
If these resolutions are passed, the authorities will expire at the
end of the next AGM, or on 31st October 2023, whichever is
the earlier.
The Board considers the authorities in resolutions 16 and 17 to be
appropriate in order to allow the Company flexibility to finance
business opportunities or to conduct a rights issue or other pre-
emptive offer without the need to comply with the strict
requirements of the statutory pre-emption provisions.
The Board intends to adhere to the provisions in the Pre-emption
Group’s Statement of Principles not to allot shares for cash on a
non-pre-emptive basis (other than pursuant to a rights issue or pre-
emptive offer) in excess of an amount equal to 7.5% of the total
issued ordinary share capital of the Company within a rolling
three-year period other than: (i) after prior consultation with
shareholders; or (ii) in connection with an acquisition or specified
capital investment which is announced contemporaneously with
the allotment or which has taken place in the preceding six-month
period and is disclosed in the announcement of the allotment.
City of London Investment Group PLC Annual Report 2021/2022 133
Strategic report
Overview
Financial statements
Governance
Shareholder information
Resolution 18: Purchase of own shares
The effect of resolution 18 is to grant authority to the Company to
purchase its own ordinary shares, up to a maximum of 5,067,910
ordinary shares, until the AGM in 2023 or 31st October 2023,
whichever is the earlier. This represents 10% of the Company’s
ordinary share capital in issue (excluding shares held in treasury)
as at the Latest Practicable Date. The Company’s exercise of this
authority is subject to the stated upper and lower limits on the
price payable.
Pursuant to the 2006 Act, the Company can hold any shares
which are repurchased as treasury shares and either re-sell them for
cash, cancel them, either immediately or at a point in the future, or
use them for the purposes of its employee share schemes. Holding
the repurchased shares as treasury shares will give the Company the
ability to re-sell or transfer them in the future and will provide the
Company with additional flexibility in the management of its
capital base. No dividends will be paid on, and no voting rights
will be exercised in respect of, treasury shares. Shares held as
treasury shares will not automatically be cancelled and will not be
taken into account in future calculations of earnings per share
(unless they are subsequently re-sold or transferred out of treasury).
The Directors consider it desirable and in the Company’s interests
for shareholders to grant this authority. The Directors have no
present intention to exercise this authority and will only do so if
and when conditions are favourable with a view to enhancing net
asset value per share.
The Company will not, save in accordance with a predetermined,
irrevocable and non-discretionary programme, repurchase shares in
the period immediately preceding the preliminary announcement
of its annual or interim results as dictated by the Listing Rules or
Market Abuse Regulation (as applicable in the UK) (UK MAR) or,
if shorter, between the end of the financial period concerned and
the time of a relevant announcement or, except in accordance with
the Listing Rules and UK MAR, at any other time when the
Directors would be prohibited from dealing in shares.
Resolution 19: Notice of General Meetings
Under the 2006 Act, as amended, the notice period required for
all general meetings of the Company is 21 days, although
shareholders can approve a shorter notice period for general
meetings that are not Annual General Meetings, which cannot
however be less than 14 clear days. Annual General Meetings will
continue to be held on at least 21 clear days’ notice. The shorter
notice period for which shareholder approval is sought under
resolution 19 would not be used as a matter of routine for such
meetings, but only where the flexibility is merited by the business
of the meeting and is thought to be to the advantage of
shareholders as a whole. In the event that a general meeting is
called on less than 21 days’ notice, the Company will meet the
requirements for electronic voting under The companies
(Shareholders’ Rights) Regulations 2009. Shareholder approval
will be effective until the Company’s next AGM, when it is
intended that a similar resolution will be approved.
FURTHER NOTES
134 City of London Investment Group PLC Annual Report 2021/2022
Other information
Entitlement to attend and vote
1. Only those shareholders registered in the Company’s register
of members as at close of business on 27th October 2022,
or, if this meeting is adjourned, at close of business on the day
which is two business days’ prior to the adjourned meeting,
shall be entitled to attend and vote at the meeting. Changes to
the register of members after the relevant deadline shall be
disregarded in determining the rights of any person to attend
and vote at the meeting.
Entry to the AGM, security arrangements and
conduct of proceedings
2. If any shareholders or their proxies intend to attend the
meeting in person, we request that they advise the Company
at least 48 hours in advance of the meeting by email to
investorrelations@citlon.co.uk. We will continue to closely
monitor any developments in public health guidance in
relation to COVID-19.
Our website, www.clig.co.uk, contains the latest information
for shareholders and will be updated before the AGM should
there be any changes to the arrangements set out above.
Where appropriate, we will notify shareholders of the change
via a Regulatory Information Service announcement as early
as is possible before the date of the meeting.
Website giving information regarding the meeting
3. A copy of this Notice of AGM and other information regarding
the meeting, including the information required by section
311A of the 2006 Act, can be found at www.clig.co.uk.
Shareholders may not use any electronic address provided in
either this Notice of AGM or any related documents
(including the Proxy Form) to communicate with the
Company for any purposes other than those expressly stated.
Appointment of proxies
4. Hard copy Proxy Forms are not being issued this year to save
paper, however shareholders can request a hard copy directly
from the registrar, Link Group, on +44 (0)371 664 0300.
Calls are charged at the standard geographic rate and will vary
by provider. Calls outside the United Kingdom will be charged
at the applicable international rate. Lines are open between
09:00 – 17:30, Monday to Friday, excluding public holidays
in England and Wales.
5. Although shareholders are entitled to appoint another person
as their proxy to exercise all or any of their rights to attend and
to speak and vote at the AGM, shareholders are encouraged
to appoint the Chair of the meeting as their proxy as the
appointment of any proxy other than the Chair of the
meeting could result in your vote not being cast if the
proxy is unable to attend the meeting due to pandemic-
related restrictions. A proxy need not be a shareholder of the
Company. A shareholder may appoint more than one proxy in
relation to the AGM provided that each proxy is appointed to
exercise the rights attached to a different share or shares held
by that shareholder.
The appointment of a proxy does not preclude a shareholder
from attending and voting in person at the AGM.
6. In the case of joint holders, any one holder may vote. If more
than one holder is present at the meeting, only the vote of the
senior will be accepted, seniority being determined in the order
in which the names appear on the register. A space has been
included in the Proxy Form to allow members to specify the
number of shares in respect of which that proxy is appointed.
Shareholders who return the Proxy Form duly executed but
leave this space blank will be deemed to have appointed the
proxy in respect of all of their shares. Where appointing
multiple proxies, shareholders should indicate on each Proxy
Form the name of the proxy they wish to appoint and the
number of Ordinary Shares in respect of which the proxy is
appointed. All Proxy Forms should be returned together.
Shareholders can also appoint multiple proxies by logging on
to www.signalshares.com and completing the online
instructions.
7. To appoint a proxy, either: (a) deposit the Proxy Form, and
any power of attorney or other authority under which it is
executed (or a duly certified copy of any such power or
authority), with the Company’s Registrar, Link Group, PXS1,
10th Floor, Central Square, 29 Wellington Street, Leeds, LS1
4DL; or (b) lodge the proxy appointment using the CREST
Proxy Voting Service in accordance with note 12 below; or
(c) lodge online proxies, in accordance with note 10 below,
in each case so as to be received no later than 48 hours
(excluding non-working days) before the time of the holding
of the AGM or any adjournment thereof.
Please note that all Proxy Forms and appointments,
whether postal or electronic, must be received by 11:30am
on 27th October 2022.
City of London Investment Group PLC Annual Report 2021/2022 135
Corporate representatives
8. A corporation that is a shareholder can appoint one or more
corporate representatives who may exercise, on its behalf, all its
powers as a shareholder provided that no more than one
corporate representative exercises powers over the same share.
Under the current circumstances, corporate shareholders are
strongly encouraged to complete and return a Proxy Form
appointing the Chair of the meeting to ensure their votes are
included in the poll.
Nominated persons
9. The right to appoint a proxy does not apply to persons whose
shares are held on their behalf by another person and who
have been nominated to receive communications from the
Company in accordance with section 146 of the 2006 Act
(Nominated Persons). Nominated Persons may have a right
under an agreement with the member who holds the shares
on their behalf to be appointed (or to have someone else
appointed) as a proxy. Alternatively, if Nominated Persons do
not have such a right, or do not wish to exercise it, they may
have a right under such an agreement to give instructions to
the person holding the shares as to the exercise of voting rights.
Voting
10. The website address for online voting is www.signalshares.com.
You will need your Shareholder Reference Number to log in
and follow the instructions to lodge your votes.
You can vote either:
• by logging on to www.signalshares.com and following
the instructions;
• requesting a hard copy form of proxy directly from the
registrars, Link Group, on Te l : 0371 664 0300. Calls are
charged at the standard geographic rate and will vary by
provider. Calls outside the United Kingdom will be
charged at the applicable international rate. We are open
between 09:00 - 17:30, Monday to Friday, excluding
public holidays in England and Wales; or
• in the case of CREST members, by utilising the CREST
electronic proxy appointment service in accordance with
the procedures set out below.
Total voting rights
11. The total number of issued ordinary shares in the Company
on the Latest Practicable Date, is 50,679,095. As described in
note 21, the Controlling Shareholder Group’s voting is
capped at the lower of (i) the number of shares held by them;
and (ii) 24.99% of the votes cast on any resolution by all
shareholders. Therefore, the total number of votes exercisable
as at the Latest Practicable Date is 42,039,568.
CREST proxy instructions
12. CREST members who wish to appoint a proxy or proxies
through the CREST electronic proxy appointment service may
do so for the meeting (and any adjournments thereof) by
following the procedures described in the CREST Manual
(available via www.euroclear.com). CREST Personal Members
or other CREST sponsored members (and those CREST
members who have appointed a voting service provider) should
refer to their CREST sponsor or voting service provider, who
will be able to take the appropriate action on their behalf.
13. In order for a proxy appointment or instruction made by
means of CREST to be valid, the appropriate CREST message
(a CREST Proxy Instruction) must be properly authenticated
in accordance with Euroclear’s specifications and must contain
the information required for such instructions, as described in
the CREST Manual. The message (regardless of whether it
constitutes the appointment of a proxy or an amendment to
the instruction given to a previously appointed proxy) must,
in order to be valid, be transmitted so as to be received by the
issuer’s agent (ID RA10) by the latest time(s) for receipt of
proxy appointments specified in note 7, above. For this
purpose, the time of receipt will be taken to be the time (as
determined by the timestamp applied to the message by the
CREST Applications Host) from which the issuer’s agent is
able to retrieve the message by enquiry to CREST in the
manner prescribed by CREST. After this time, any change of
instructions to proxies appointed through CREST should be
communicated to the appointee through other means.
14. CREST members (and, where applicable, their CREST
sponsors or voting service providers) should note that Euroclear
does not make available special procedures in CREST for any
particular messages. Normal system timings and limitations will
therefore apply in relation to the input of CREST Proxy
Instructions. It is the responsibility of the CREST member
concerned to take (or, if the CREST member is a CREST
personal member or sponsored member or has appointed a
voting service provider, to procure that their CREST sponsor or
voting service provider takes) such action as shall be necessary
to ensure that a message is transmitted by means of the CREST
system by any particular time. In this connection, CREST
members (and, where applicable, their CREST sponsors or
voting service providers) are referred, in particular, to those
sections of the CREST Manual concerning practical limitations
of the CREST system and timings.
The Company may treat as invalid a CREST Proxy
Instruction in the circumstances set out in Regulation 35(5)
(a) of the Uncertificated Securities Regulations 2001.
Strategic report
Overview
Financial statements
Governance
Shareholder information
136 City of London Investment Group PLC Annual Report 2021/2022
FURTHER NOTES
CONTINUED
Other information
Proxy appointment via Proxymity
15. If you are an institutional investor you may be able to
appoint a proxy electronically via the Proxymity platform.
For further information regarding Proxymity, please go to
www.proxymity.io. Your proxy must be lodged 48 hours prior
to the time appointed for the Meeting in order to be
considered valid. Before you can appoint a proxy via this
process you will need to have agreed to Proxymity’s associated
terms and conditions. It is important that you read these
carefully as you will be bound by them and they will govern
the electronic appointment of your proxy.
Automatic poll voting
16. Each of the resolutions to be put to the meeting will be voted on
by poll and not by show of hands. A poll reflects the number of
voting rights exercisable by each member and so the Board
considers it a more democratic method of voting. Members and
proxies will be asked to complete a poll card to indicate how
they wish to cast their votes. These cards will be collected at the
end of the meeting. The results of the poll will be published on
the Company’s website and notified to the London Stock
Exchange once the votes have been counted and verified.
Publication of audit concerns
17. Under section 527 of the 2006 Act, members meeting the
threshold requirements set out in that section have the right to
require the Company to publish, on a website, a statement
setting out any matter relating to: (a) the audit of the
Company’s accounts (including the auditors’ report and the
conduct of the audit) that are to be laid before the AGM; or
(b) any circumstance connected with an auditor of the
Company ceasing to hold office since the previous meeting at
which annual accounts and reports were laid in accordance
with section 437 the 2006 Act. The Company may not require
the shareholders requesting any such website publication to
pay its expenses in complying with sections 527 or 528 of the
2006 Act. Where the Company is required to place a
statement on a website under section 527 of the 2006 Act, it
must forward the statement to the Company’s auditor not later
than the time when it makes the statement available on the
website. The business which may be dealt with at the AGM
includes any statement that the Company has been required
under section 527 of the 2006 Act to publish on a website.
Right to request circulation or resolutions
18. Under section 338 and section 338A of the Companies Act
2006, members meeting the threshold requirements in those
sections have the right to require the Company: (i) to give, to
members of the Company entitled to receive notice of the
meeting, notice of a resolution which may properly be moved
and is intended to be moved at the meeting; and/or (ii) to
include in the business to be dealt with at the meeting any
matter (other than a proposed resolution) which may be
properly included in the business. A resolution may properly
be moved or a matter may properly be included in the
business unless (a) (in the case of a resolution only) it would, if
passed, be ineffective (whether by reason of inconsistency with
any enactment or the Company’s constitution or otherwise),
(b) it is defamatory of any person, or (c) it is frivolous or
vexatious. Such a request may be in hard copy form or in
electronic form, must identify the resolution of which notice is
to be given or the matter to be included in the business, must
be authorised by the person or persons making it, must be
received by the Company not later than the date which is six
clear weeks before the AGM, and (in the case of a matter to be
included in the business only) must be accompanied by a
statement setting out the grounds for the request.
Questions
19. All shareholders will have the opportunity to ask questions at
the AGM.
Documents on display
20. Copies of Directors’ service contracts or letters of appointment
will be available upon request during usual business hours on
any weekday (Saturdays, Sundays and public holidays
excluded) until the date of the AGM.
Controlling Shareholder Group
21. Following completion of the merger with KIM, the Company
entered into a relationship agreement with the Controlling
Shareholder Group which regulates the ongoing relationship
between the Company and the Controlling Shareholder
Group. The members of the Controlling Shareholder Group
agreed to limit their voting rights at any shareholder meeting,
including the Annual General Meeting, to the lower of: (i) the
number of shares held by them; and (ii) 24.99% of the votes
cast on any resolution by all shareholders.
Other information
COMPANY INFORMATION
Financial calendar
Ex-dividend date for the final dividend 29th September 2022
Final dividend record date 30th September 2022
First quarter FuM announcement 17th October 2022
AGM 31st October 2022
Final dividend payment 4th November 2022
Second quarter FuM announcement 18th January 2023
Half year results and interim dividend announcement 17th February 2023
Ex-dividend date for the interim dividend 23rd February 2023
Interim dividend record date 24th February 2023
Interim dividend payment 24th March 2023
Third quarter FuM announcement 25th April 2023
Year end 30th June 2023
For further information, please visit our website www.clig.co.uk
Financial adviser and broker
Zeus Capital
10 Old Burlington Street
London
W1S 3AG
Auditors
RSM UK Audit LLP
Chartered Accountants
25 Farringdon Street
London
EC4A 4AB
Bankers
The Royal Bank of Scotland plc
London City Office
62-63 Threadneedle Street
London
EC2R 8LA
Registrar
Link Group
10th Floor, Central Square
29 Wellington Street
Leeds
LS1 4DL
By phone on 0871 664 0300 from the
UK and +44 371 664 0300 from overseas.
(Calls cost 12 pence per minute plus
network extras. Calls outside the United
Kingdom will be charged at the applicable
international rate. Lines are open from
9am to 5:30pm Mon – Fri, excluding
public holidays in England and Wales).
By email:
enquiries@linkgroup.co.uk
Company registered office
City of London Investment Group PLC
Company registration number
2685257
Company Secretary
Prism Cosec Ltd
enquiries@prismcosec.com
Designed and produced byDesigned and produced by
The paper used in this document contains
materials sourced from responsibly
managed and sustainable commercial
forests, certified in accordance with the
F
SC
®
(Forest Stewardship Council
®
).
CLIG office locations
London
77 Gracechurch Street
London
EC3V 0AS
United Kingdom
Telephone: + 44 (0) 207 711 0771
US
The Barn
1125 Airport Road
Coatesville, PA 19320
United States
Telephone: + 1 610 380 2110
Karpus Investment Management
183 Sully’s Trail
Pittsford
NY 14534
Telephone: + 1 866 527 7871
Singapore
20 Collyer Quay
#10-04
Singapore 049319
Telephone: + 65 6236 9136
www.clig.co.uk