Trading Update

RNS Number : 0664T

City of London Investment Group PLC

15 July 2015

City of London Investment Group PLC

15 July 2015

CITY OF LONDON INVESTMENT GROUP PLC

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

TRADING UPDATE

for the year to 30 June 2015

City of London (LSE: CLIG), a leading emerging markets asset management group, provides a trading update for its financial year ended 30 June 2015. The numbers that follow are all unaudited.

Funds under management were US$4.2 billion (£2.7 billion) at 30 June 2015 (2014: US$3.9 billion or £2.3 billion), representing an 8% increase in US$ terms and a 17% increase in GBP terms as a result of the cross rate moving from 1.71 to 1.57 over the period. Over the same period the MSCI Emerging Markets Index (MXEF) fell by 5% in US$ terms.

For the year to 30 June 2015, City of London expects that pre-tax profits will be approximately £8.8 million (2014: £7.2 million, 13 months), and that profits after an anticipated tax charge of £2.3 million (26% of pre-tax profits) will be approximately £6.5 million (2014: profits of £5.2 million after a tax charge of £2.0 million, representing 28% of pre-tax profit). Basic and fully diluted earnings per share are expected to be 26.1p and 25.7p respectively (2014: 20.7p and 20.6p).

The Board is recommending a final dividend of 16p per share (2014: 16p). This would bring the total for the year to 30 June 2015 to 24p (2014: 24p), making cover 1.1 times earnings per share (2014: 0.86 times). As previously announced the Board's dividend policy is based around a cover of 1.2 times earnings on a rolling five year average. The proposed dividend is in-line with this policy.

Overheads for the year to 30 June 2015 are expected to be £9.4 million (2014: £10.3 million, 13 months) and the current monthly run-rate is slightly in excess of £0.8m.

Investment performance in the emerging markets closed-end fund (CEF) strategy remains strong, with first or second quartile results versus manager peers year to date in 2015. The present wide size-weighted average discount (SWAD) of c12-13% across client portfolios indicates value in the strategy. The investment approach adds value beyond this by exploiting volatility of the underlying discounts in the CEF universe, from which portfolios are constructed with their specific SWAD characteristics.

During the period, marketing efforts led to new inflows of $477 million in emerging market strategies, which were countered by outflows of $437 million as investor risk aversion rose due to ongoing volatility in global markets. Fundraising in the diversification products resulted in $255m of new mandates ($100m in Frontier Emerging Markets strategies, and $155m in Global Tactical Asset Allocation strategies) and outflows of $20 million.

As noted in the interim statement these wins will assist with efforts to raise the profile of our diversification CEF products with institutional consultants and plan sponsors. Diversification products now represent 8.5% of Group AUM, compared with 2% last year.

City of London Investment Group expects to announce final results along with the Accounts for the year to 30 June 2015 on 14 September 2015. The Company's Annual General Meeting date, and final dividend payment dates are expected to be 19 October 2015 and 30 October 2015 respectively. An Investor Day will be held after the Annual General Meeting on 19 October 2015. Details will be included within the Accounts.

As a result of increased volatility, Shareholders will see in the Template below that we have reduced our assumptions regarding net new money from mandates next year to $250 million for the emerging market strategy and an additional $250 million in diversification products. Subsequent to the year end, we are aware of new mandates of circa $35 million with deminimis redemptions. As a result of recent volatility we are reviewing our budget for 2015/2016; as shareholders would expect we will be monitoring costs closely as the year progresses. We will continue to update our web site www.citlon.co.uk for the most recent FUM on a monthly basis.

Please note that going forward we will not include an estimate for market growth within the Template.

Summary and unaudited trading update

	Year to 30 June 2015	13 months to 30 June 2014
Funds under Management (at period end)	US$4.2bn	US$3.9bn
Turnover (plus investment income)	£25.4m	£24.4m
Administrative expenses, commission payable, and profit-share	£16.6m	£17.2m
Profit before tax	£8.8m	£7.2m
Profit after tax	£6.5m	£5.2m
Profit per share, basic	26.1p	20.7p
Profit per share, diluted	25.7p	20.6p

Financials - consolidated income statement
£'000	Year to 30 June 2015	13 months to 30 June 2014
Fee income	25,356	24,215
Interest & other	65	244
Commissions payable	(2,275)	(3,068)
Custody & Administration	(738)	(845)
Total net income	22,408	20,546

Costs:
Human resources	6,250	6,559
Premises	634	671
Communications & IT	1,376	1,464
Business development	499	529
General	686	1,075
Total costs	9,445	10,298
Operating profit	12,963	10,248
Profit-share	4,171	3,005
Pre-tax profit	8,792	7,243
Tax	(2,302)	(2,043)
Post-tax profit	6,490	5,200
Dividends (prior year final plus current period interim)	(5,960)	(6,031)
Retained/(Used)	530	(831)