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Investment Trust

City of London Investment Trust

Elite Rated by FundCalibre

Launched in 1891, this is one of the longest-running investment trusts in UK. It aims to provide growth in income and capital by investing in predominantly larger UK companies with international exposure. It has increased its dividend payment every year for the last 50 years.

Investment Manager

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Henderson Global Investors is the investment company employed to manage this trust. Founded in 1934, the company has grown over the past few years through the acquisition of New Star and Gartmore. Funds are managed by autonomous teams with distinct investment strategies.

Since 1991, the trust has been managed by Job Curtis, who works closely with the global equity income team. Job has more than 30 years of industry experience, beginning his career as a trainee stock broker in 1983. He joined Henderson in 1992, when it acquired Touche Remnant, where Job was employed as a fund manager.

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I have a conservative personality and it is reflected in the portfolio. I pay attention to the downside risks as well as the upside potential.

Job Curtis - Trust Manager

Investment Trust Board

The trust’s board comprises six members and is headed by the highly respected chairperson Phillip Remnant CBE. Phillip holds various independent directorships with investment institutions, including chairperson of M&G Investments and deputy chair of the Panel on Takeovers and Mergers. The remainder of the board are Simon Barratt, David Brief, Richard Hextall, Martin Morgan and Samantha Wren, who between them have an array of industrial, accountancy and investment management company experience. The board meets with the investment manager seven times per year and the company year-end is 30 June.

The Investment Process

A company’s ability to pay, and over time increase, its dividends has a high priority in Job’s stock selection process. However, he is also driven by valuations and is careful not to pay too much for any stock. Job particularly likes companies whose business model provides them with a competitive advantage, and multinational consumer staples brands with relatively stable earnings and growth prospects in emerging markets are at the heart of the portfolio.

Risk

This trust invests primarily in UK equities, although it does have the flexibility to invest up to 20% in overseas equities. Over the very long term, the trust has been about as volatile as the UK stock market, tending to fluctuate slightly higher or lower for periods. Stock specific risk is somewhat mitigated by the number of stocks Job holds, which is typically more than 100.

Gearing

Other than in exceptional circumstances, the trust’s gearing is not be allowed to exceed 20%. The long-term gearing target is between 0% and 20%. The company has a mix of fixed and variable loan facilities in place providing funds for the manager. The fixed borrowings are quite expensive, but they are due to be repaid in 2020 and 2021. There is also a bank facility in place at a rate of 1.25% above base rates. The manager may use gearing to actively manage the portfolio.

Share price discount/premium

There is no set discount control mechanism in place; however, owing to the diversity of the type of investors in the trust, Job ensures the share price trades near to net asset value (NAV). As a result, the board have actively issued shares in the past and will continue to do so when they feel it is warranted.

Our Opinion

This is a well-established income and growth trust, run by a very experienced manager. Job and the Henderson team have a thorough research process and a conservative approach to stock selection, which has helped the trust to deliver steady returns over an extremely long period of time. Maintaining dividend income is of the utmost importance to the board, making this trust an excellent core option for investors wanting UK equity exposure.

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