Trading Update

RNS Number : 1560H

City of London Investment Group PLC

17 June 2013

City of London Investment Group PLC

17 June 2013

CITY OF LONDON INVESTMENT GROUP PLC

("City of London" or "the Group")

TRADING UPDATE

for the Year to 31 May 2013

City of London (LSE: CLIG), a leading emerging markets asset management group, provides a trading update for its financial year ended 31 May 2013. The numbers that follow are all unaudited.

Funds under management were US$3.7 billion (£2.4 billion) at 31 May 2013 (2012: US$4.5 billion or £2.9 billion), representing a 17% decrease in US$ terms and a 16% decrease in sterling terms. Over the same period (31 May 2012 to 31 May 2013) the MSCI Emerging Markets Index (MXEF) increased by 11% in US$ terms.

For the year to 31 May 2013, City of London expects that pre-tax profits will be approximately £8.9 million (2012: £11.5 million), and that profits after an anticipated tax charge of £2.6 million (29% of pre-tax profits) will be approximately £6.3 million (2012: profits of £8.5 million after a tax charge of £3.0 million, representing 26% of pre-tax profit). Basic and fully diluted earnings per share are expected to be 24.9p and 24.6p respectively (2012: 33.8p and 32.8p). The above pre-tax figures are stated net of a compromise settlement of £700,000 agreed with two former executives.

The Group has established a dividend policy of 1.5 times earnings cover which is applied with flexibility. As a result of both falls in Emerging Markets, and client redemptions during the first half of the financial year, earnings cover will be reduced this year but given the Group's strong cash position and optimism with regard to the future, the Board is recommending a final dividend of 16p per share (2012: 16p). This would bring the total for the year to 24p (2012: 24p), making cover 1.04 times earnings per share (2012: 1.41 times).

As reported in our half year results, released 21 January 2013, we continue to focus on reducing costs and this has been achieved, resulting in an annualised saving of £1 million.

Investment performance of the Emerging Markets Closed End Fund Strategy has improved very significantly. As noted in last year's Trading Update, the momentum of corporate activity, coupled with mean reversion of net asset value performance and increasing discount volatility have been the major drivers of improved investment performance. With the size weighted average discount of emerging market closed end funds still quite wide, there continue to be trading opportunities to generate further outperformance. We are maintaining a robust pipeline of client additions.

Diversification efforts continue to focus on the Developed closed end fund strategy and the Frontier Emerging Markets Strategy, where both products continue to attract attention from consultants and institutional prospects.

The China A Share Strategy received a mandate for $25 million in December 2012 which closed the Qualified Foreign Institutional Investor account quota of $100 million approved for City of London Investment Management Company Limited (CLIM). A new application for an additional $100 million in QFII quota was requested from the China Securities Regulatory Commission in April 2013 and, if approved, will allow for new marketing opportunities.

City of London Investment Group expects to announce final full year results for the year to 31 May 2013 on 9 September 2013, followed by an Investor Day on 10 September. The Company's Annual General Meeting date and final dividend payment dates are expected to be 7 October 2013 and 25 October 2013 respectively.

Summary and unaudited trading update
	Year to 31 May
	2013	2012
Funds under Management (at period end)	US$3.7bn	US$4.5bn
Turnover (plus investment income)	£29.9m	£34.6m
Administrative expenses, commission payable, and profit-share	£21.0m	£23.1m
Profit before tax	£8.9m	£11.5m
Profit after tax	£6.3m	£8.5m
Profit per share, basic	24.9p	33.8p
Profit per share, diluted	24.6p	32.8p

Financials - consolidated income statement
	Year to 31 May
£'000	2013	2012
Fee income	29,363	34,142
Interest & other	501	428
Finder's commission	(4,194)	(5,195)
Custody & Administration	(1,244)	(1,433)
Total net income	24,426	27,942

Costs:
Human resources	7,629	6,765
Premises	612	628
Communications & IT	1,534	1,619
Business development	695	909
General	1,041	1,135
Total costs	11,511	11,056
Operating profit	12,915	16,886
Profit-share	4,055	5,424
Pre-tax profit	8,860	11,462
Tax	(2,594)	(2,964)
Post-tax profit	6,266	8,498
Dividends (prior year final plus current year interim)	(6,046)	(6,052)
Retained	220	2,446