City of London Investment Trust PLC

Earnings Release • Mar 1, 2022

The City of London Investment Trust plc

Update for the half-year ended 31 December 2021

Objective

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

This update contains material extracted from the unaudited half-year results of the Company for the six months ended 31 December 2021. The unabridged results for the half year are available on the Company's website:

www.cityinvestmenttrust.com

Performance

NAV per ordinary share 31 Dec 2021 30 June 2021 404.4p 387.6p Ordinary share price 31 Dec 2021 30 June 2021 394.0p 390.0p NAV per ordinary share (debt at fair value) 31 Dec 2021 30 June 2021 400.8p 384.1p Dividend yield 31 Dec 2021 30 June 2021 4.9% 4.9%

Total Return Performance to 31 December 2021 (including dividends reinvested)

	6 months %	1 year %	3 years %	5 years %	10 years %
NAV1	6.9	20.1	25.4	27.2	126.8
Ordinary share price2	3.5	11.8	18.9	22.5	114.6
FTSE All-Share Index (Benchmark)	6.5	18.3	27.2	30.2	110.7
AIC UK Equity Income sector3	6.0	19.2	31.3	34.7	140.6
IA UK Equity Income OEIC sector4	5.6	18.4	26.7	26.3	115.4

Sources: Morningstar Direct, Janus Henderson, Refinitiv Datastream

• 1 Net asset value ("NAV") per ordinary share total return with debt at fair value (including dividends reinvested)
• 2 Share price total return using mid-market closing price
• 3 AIC UK Equity Income sector size weighted average NAV total return (shareholders' funds)
• 4 The Investment Association ("IA") peer group average is based on mid-day NAV whereas the returns of the investment trust are calculated using close of business NAV

Chairman's Statement

Net Asset Value Total Return

The UK economy, benefiting from very accommodative monetary and fiscal policies, continued to recover from the damage caused mainly by the first lockdown of the pandemic. A similar picture was seen in overseas economies. Increasing global demand for energy, particularly for supply constrained oil, contributed to a rise in inflation, with additional pressure on prices coming from a tight labour market and shortages of materials. In December, the Bank of England, having earlier in the year considered the inflationary trends to be "transitory", raised the Bank Rate from 0.1% to 0.25%, the first increase in interest rates for over three years.

UK equities continued to benefit from the recovery in corporate profits and dividends and produced a total return of 6.5%, as measured by the FTSE All-Share Index. City of London's net asset value total return was 6.9%, slightly ahead of the index benchmark and the averages for the UK equity income investment trust and OEIC sectors.

Both stock selection and gearing contributed positively to this result, with a key factor being our position in the food retail sector through stakes in Tesco and Wm Morrison. While it was disappointing to see a good company like Wm Morrison leave the stock market, its takeover came after a bidding war between two private equity groups and at an exit price well ahead of what had prevailed before the first bid was announced. Other important stock contributors were our shareholdings in RELX (business and professional information provider), Microsoft (software and computer services) and St. James's Place (wealth management advice and services). M&G (life assurer and wealth manager) and La Française des Jeux (French national lottery operator), which had been among the best contributors in our last financial year, were the two biggest stock detractors over the six-month period.

Earnings and Dividends

It is pleasing to report revenue earnings per share of 8.94p, 23% ahead of last year and 4% better than the same period in 2019 (just before the start of the pandemic). A highlight has been the dividend increases from our holdings in mining companies, with Anglo American and Rio Tinto also paying special dividends. There has been a significant recovery in dividends from our holdings in banks (HSBC, Barclays and Lloyds), which were stopped from paying dividends by their regulator in the first stage of the pandemic, and also from oil companies (BP and Royal Dutch Shell), which have partially restored the disappointingly large cuts made in 2020. A total of £2.8 million of special dividends was received and accounted as income (representing 6.7% of gross revenue). A further £3.5 million special dividend (from Pennon, the water utility) was accounted as capital.

City of London has declared two interim dividends of 4.80p each so far during this financial year. The Company's diverse portfolio, strong cash flow and revenue reserve give the Board confidence that it will be able to increase the dividend for the fifty-sixth consecutive year. The quarterly dividend rate will be reviewed by the Board before the third interim dividend is declared in April 2022.

Expenses

The ongoing charge, which represents the investment management fee and other administrative non-interest-bearing expenses as a percentage of shareholders' funds, remains low compared with most other equity investment products. The ongoing charge for the six months indicates a full year rate remaining around 0.38% of net assets.

Chairman's Statement

Material Events and Transactions during the Period

A total of 925,000 new shares, raising net proceeds of £3.6 million, were issued during the six months to 31 December 2021 at a premium to net asset value. The proceeds were invested across the portfolio. The Board is continuing its stated policy, subject to prevailing circumstances, of considering issuance of new shares and buybacks within a narrow band relative to net asset value. As at 31 December 2021, the Company's shares were trading at a discount of 1.7% to NAV (with debt at fair value). As at 16 February 2022 (the last practicable date before printing this report), the Company's share price was trading at a premium of 1.8% to NAV (with debt at fair value).

Two new holdings were acquired during the period. 3i is an investment company with stakes in private companies. Its largest investment is in Action, a discount retailer in Europe. 3i has a successful track record and provides City of London with exposure to a range of fast-growing private companies. The other new holding is in Holcim, the Swissheadquartered, international building materials group. It should benefit from infrastructure spending in both developed and emerging markets.

Two companies left the portfolio as a result of takeover bids: Wm Morrison (food retailer) and Daily Mail & General (newspaper publisher and business information provider). Two other holdings, Go Ahead (transport operator) and Hammerson (shopping centre owner), were sold because of their respective poor performances in favour of better opportunities.

Outlook for the Six Months to 30 June 2022

The Omicron variant of Covid-19 appears to cause less severe illness than earlier variants, especially for those who are fully vaccinated. It is now increasingly unlikely that there will be a return to an economically damaging lockdown and the UK and other developed economies are expected fully to reopen during the next six months.

The monetary response to the pandemic currently remains largely in place, but is likely to be progressively withdrawn with rises in interest rates (albeit remaining low by historic standards) expected because inflation is proving to be more severe and persistent than had been hoped. Governments are moving to phase out the fiscal reliefs introduced in response to the pandemic and, as already proposed in the UK, to increase tax rates in order to restrain their borrowing requirements. The resulting reduction in liquidity may test equity valuations, especially at the more speculative end of the markets. International tensions are a further reason for caution, with the crisis in Eastern Europe causing particular concern.

At present, no more than a slowdown in economic growth is expected and therefore corporate profits and dividends during the rest of the current financial year should continue to increase. Households in aggregate still have a high level of enforced savings from the lockdowns to support consumption, although their discretionary real spending power may be reduced by inflation, tax increases and rising interest rates in the next financial year and beyond. The dividend yield from many high-quality UK equities remains attractive, with the continuing trend of takeovers demonstrating potential additional overall upside.

Sir Laurie Magnus CBE Chairman 17 February 2022

Financial Summary

	Half year ended
Extract from Income Statement (Unaudited)	31 December 2021 Revenue return £'000	31 December 2021 Capital return £'000	31 December 2021 Total £'000	31 December 2020 Total £'000
Gains on investments	–	81,154	81,154	68,598
Income from investments	42,134	–	42,134	32,496
Other income	75	–	75	154
Gross revenue and capital gains	42,209	81,154	123,363	101,248
Expenses, finance costs and taxation	(2,306)	(3,457)	(5,763)	(6,110)
Net return after taxation	39,903	77,697	117,600	95,138
Return per ordinary share – basic and diluted	8.94p	17.40p	26.34p	22.81p1

1 For the half year ended 31 December 2020, the revenue return per share was 7.25p and the capital return per share was 15.56p

Extract from Statement of Financial Position (Unaudited except June 2021 figures)	31 December 2021 £'000	31 December 2020 £'000	30 June 2021 £'000
Investments held at fair value through profit or loss	1,954,891	1,637,961	1,847,021
Net liabilities	(149,209)	(130,321)	(119,696)
Net assets	1,805,682	1,507,640	1,727,325
Net asset value per ordinary share –
basic and diluted	404.36p	357.38p	387.62p

Dividends

A first interim dividend of 4.80p per ordinary share was paid on 30 November 2021. The second interim dividend of 4.80p per ordinary share (declared on 9 December 2021) will be paid on 28 February 2022 to shareholders on the register on 28 January 2022. The Company's shares went ex-dividend on 27 January 2022.

Share Capital and Reserves

925,000 new ordinary shares were issued during the half year ended 31 December 2021 for total proceeds of £3,625,000 (half-year ended 31 December 2020: 1,175,000 ordinary shares bought back into treasury for a total cost of £3,736,000 and then reissued for total proceeds of £3,860,000 and a further 5,445,000 new ordinary shares issued for total proceeds of £19,622,000; year ended 30 June 2021: 1,175,000 ordinary shares bought back into treasury for a total cost of £3,736,000 and then re-issued for total proceeds of £3,860,000 and a further 29,220,00 new ordinary shares issued for total proceeds of £109,811,000). The number of ordinary shares in issue at 31 December 2021 was 446,549,868 (31 December 2020: 421,849,868; 30 June 2021: 445,624,868). There were no shares in treasury (31 December 2020 and 30 June 2021: nil). At 31 December 2021, the Company's revenue reserve was £34,602,000 (31 December 2020: £36,371,000; 30 June 2021: £37,567,000), capital reserve arising on investments sold was £307,144,000 (31 December 2020: £300,424,000; 30 June 2021: £296,561,000), both of which are distributable; and the capital reserve arising on revaluation of investments held was £490,601,000 (31 December 2020: £291,324,000; 30 June 2021: £423,487,000), which is not distributable. 4

Portfolio Informationat 31 December 2021

Forty Largest Investments

Company	Market value 31 December 2021 £'000	Company	Market value 31 December 2021 £'000
Diageo	79,906	Anglo American	32,724
British American Tobacco	71,006	Persimmon	31,987
RELX	61,060	Direct Line Insurance	31,806
Royal Dutch Shell	54,519	Reckitt Benckiser	31,700
Tesco	50,153	Lloyds Banking	31,070
Unilever	48,721	Nestlé	30,980
Phoenix	46,794	Severn Trent	30,207
GlaxoSmithKline	46,029	IG	30,081
National Grid	45,147	Schroders	29,070
AstraZeneca	45,105	Ferguson	28,820
BAE Systems	44,809	Barclays	28,050
Rio Tinto	44,517	Verizon Communications	26,854
HSBC	44,411	Segro	25,839
M&G	44,189	3i Group	25,357
St. James's Place	43,350	Vodafone	24,680
Imperial Brands	42,837	Land Securities	23,274
BP	41,147	Taylor Wimpey	23,166
Legal & General	37,757	Munich Re	21,867
SSE	36,668	Microsoft	21,596
BHP	35,734	TotalEnergies	18,736

These investments total £1,511,723,000 or 77.3% of the portfolio.

Convertibles and all classes of equity in any one company are treated as one investment.

Sector Exposure

As a percentage of the investment portfolio excluding cash

Source: Janus Henderson

Portfolio Informationat 31 December 2021

Sector Breakdown of Investments

	Valuation
	31 December 2021
	£'000
ENERGY
Oil, Gas and Coal
Royal Dutch Shell	54,519
BP	41,147
TotalEnergies1	18,736
	114,402
Total Energy	114,402
BASIC MATERIALS
Chemicals
Synthomer	13,979
Croda International	11,598
Victrex	7,814
Johnson Matthey	4,604
	37,995
Industrial Metals and Mining
Rio Tinto BHP	44,517 35,734
Anglo American	32,724
	112,975
Total Basic Materials	150,970
INDUSTRIALS
Aerospace and Defence
BAE Systems	44,809
	44,809
Construction and Materials
Ibstock	14,732
Holcim1	12,246
Marshalls	6,440
	33,418

Electronic and Electrical Equipment IMI XP Power Rotork	31 December 2021 £'000 16,214 10,200 6,251 32,665
General Industrials
Siemens1	12,135
Mondi	11,869
Smiths	5,528
Swire Pacific1	4,244
	33,776
Industrial Support Services
Ferguson	28,820
PayPoint	10,640
	39,460
Total Industrials	184,128
CONSUMER STAPLES
Beverages
Diageo	79,906
Britvic	11,270
Coca-Cola1	9,617
	100,793
Food Producers
Nestlé1	30,980
Tate & Lyle	11,905
	42,885

Portfolio Information (continued)

27,297

Sector Breakdown of Investments (continued)

	Valuation
	31 December 2021
	£'000
Personal Care, Drug and Grocery Stores
Tesco	50,153
Unilever	48,721
Reckitt Benckiser	31,700
	130,574
Tobacco
British American Tobacco	71,006
Imperial Brands	42,837
	113,843
Total Consumer Staples	388,095
HEALTH CARE
Medical Equipment and
Services
Smith & Nephew	9,575
	9,575
Pharmaceuticals and
Biotechnology
GlaxoSmithKline	46,029
AstraZeneca	45,105
Novartis1	17,109
Merck1	15,843
Johnson & Johnson1	13,132
	137,218
Total Health Care	146,793
CONSUMER DISCRETIONARY
Retailers
Kingfisher	14,538
Halfords	7,276
DFS	5,483

	Valuation 31 December 2021 £'000
Media
RELX	61,060
	61,060
Household Goods and Home Construction
Persimmon	31,987
Taylor Wimpey	23,166
Berkeley	10,363
	65,516
Travel and Leisure La Française des Jeux1	12,728
Young	2,995
	15,723
Total Consumer Discretionary	169,596
TELECOMMUNICATIONS Telecommunications Service Providers Verizon Communications1 Vodafone Deutsche Telekom1 Orange1	26,854 24,680 11,957 10,667
	74,158
Telecommunications Equipment
Cisco Systems1	11,695
	11,695
Total Telecommunications	85,853
UTILITIES Electricity
SSE	36,668 36,668

Portfolio Information (continued)

Sector Breakdown of Investments (continued)

	Valuation
	31 December 2021
	£'000
Gas, Water and Multi-utilities
National Grid	45,147
Severn Trent	30,207
United Utilities	13,591
Pennon	7,715
	96,660
Total Utilities	133,328
FINANCIALS
Banks
HSBC	44,411
Lloyds Banking	31,070
Barclays	28,050
Nationwide Building Society
10.25% Var Perp CCDS	12,418
	115,949
Investment Banking and Brokerage Services
M&G	44,189
St. James's Place	43,350
IG	30,081
Schroders	29,070
3i Group	25,357
Brewin Dolphin	16,928
	188,975
Life Insurance
Phoenix	46,794
Legal & General	37,757
Prudential	16,568
	101,119

Total Financials	482,716
	76,673
Hiscox	6,886
Beazley	7,924
Sabre Insurance	8,190
Munich Re1	21,867
Direct Line Insurance	31,806
Non-life Insurance
	Valuation 31 December 2021 £'000

REAL ESTATE

Real Estate Investment Trusts Segro 25,839 Land Securities 23,274 British Land 14,602 63,715

Total Real Estate	63,715

TECHNOLOGY

Software and Computer Services
Microsoft1	21,596
Sage	13,352
	34,948
Total Technology	34,948
TOTAL INVESTMENTS	1,954,544

1 Overseas listed

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

Additional Information

Principal Risks and Uncertainties

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

• Global pandemic
• Portfolio and market price
• Dividend income
• Investment activity, gearing and performance
• Tax and regulatory
• Operational

Information on these risks and how they are managed are given in the Annual Report for the year ended 30 June 2021. In the view of the Board, these principal risks and uncertainties at the year end remain and are as applicable to the remaining six months of the financial year as they were to the six months under review.

In addition, in the last Annual Report, the Board had identified as an emerging risk heightened political tensions in and among a number of countries around the world which had the potential to increase the risk of market volatility (geopolitical risk). On further review of current international tensions, the Board has upgraded geopolitical risk, including an increased risk to cyber security, from an emerging risk to a principal risk.

Related Party Transactions

Other than the relationship between the Company and its Directors, the provision of services by Janus Henderson is the only related party arrangement currently in place. Other than fees payable by the Company in the ordinary course of business and the provision of marketing services, there have been no material transactions with this related party affecting the financial position of the Company during the period under review.

Going Concern

The assets of the Company consist of securities that are readily realisable. The Directors have also considered the impact of Covid-19, including cash flow forecasting, a review of covenant compliance including the headroom above the most restrictive covenants and an assessment of the liquidity of the portfolio. They have concluded that the Company has adequate resources to meet its financial obligations, including the repayment of the bank overdraft, as they fall due for a period of at least twelve months from the date of approval of the financial statements. Having assessed these factors and the principal risks, the Board has determined that it is appropriate for the financial statements to be prepared on a going concern basis.

Directors' Responsibility Statement

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

• the condensed set of financial statements has been prepared in accordance with FRS 104 "Interim Financial Reporting";
• the Interim Management Report includes a fair review of the information required by Disclosure Guidance and Transparency Rule 4.2.7R (indication of important events during the first six months and description of the principal risks and uncertainties for the remaining six months of the year); and
• the Interim Management Report includes a fair review of the information required by Disclosure Guidance and Transparency Rule 4.2.8R (disclosure of related party transactions and changes therein).

On behalf of the Board Sir Laurie Magnus CBE Chairman 17 February 2022 9

The City of London Investment Trust plc 201 Bishopsgate London EC2M 3AE

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