REG - City of Lon Inv Grp - Final Results <Origin Href="QuoteRef">CLIG.L</Origin> - Part 1

City of London InvestmentAnnouncement

14/09/2015 07:01

RNS Number : 8955Y
City of London Investment Group PLC
14 September 2015
14th September 2015
CITY OF LONDON INVESTMENT GROUP PLC (LSE:CLIG)
("City of London" or "the Group")
FINAL RESULTS FOR THE YEAR TO 30TH JUNE 2015
SUMMARY
Funds under management (FuM) at 30th June 2015 were US$4.2 billion (2014: US$3.9 billion), an increase of 8%. In sterling terms, FuM increased by 17% to 2.7 billion (2014: 2.3 billion) as a result of the cross rate moving from1.71 to 1.57 over the period. The MSCI Emerging Markets TR Net Index fell 5% over the same period.
Revenues, representing the Group's management charges on FuM, were 25.4 million (2014: 24.2 million). Profit before tax was 8.9 million (2014: 7.4 million).
Basic earnings per share were 26.4p (2014: 21.1p) after a tax charge of 26% (2014: 28%) of pre-tax profits.
A maintained final dividend of 16p per share is recommended, payable on 30th October 2015 to shareholders on the register on 9th October 2015, making a total for the year of 24p (2014: 24p).
Opened new office in Seattle, May 2015.
For a copy of the full report or further information, please visit the shareholders page of our website http://www.citlon.co.uk or contact:
Barry Olliff (CEO)
City of London Investment Group PLC
Tel: 001 215 313 3774
Roger Lambert
Canaccord Genuity Limited
Financial Adviser and Broker
Tel: +44 (0)20 7523 8000
CHAIRMAN'S STATEMENT
This is my third Statement as Chairman and I have to report that making a success of investing in our core area of focus, the Emerging Markets, remains as great a challenge as it has ever been. Developed Markets have been obsessed by the much anticipated but as yet still unrealised interest rate "lift-off " in the U.S. and elsewhere, which would at least mean confirmation of robust growth in those markets. Emerging Market countries, however, must contend with the consequences of the resulting stronger U.S. Dollar's impact on swollen borrowings taken on during an extended period of negative real interest rates. Compounding these headwinds, the export prop of natural resources, critical to many EM economies, has been compressed by the prolonged downturn in commodity prices. Developed Markets have been spooked by the Greek crisis, which in my opinion has only been deferred not resolved, whereas in the emerging world the woes of China above all but also Brazil and Russia are of far greater consequence. China has been hitting the headlines with bad news, Russia's difficulties are by now well entrenched and well documented and Brazil shows no sign of improvement and continues to have problems in attracting much needed international capital. The only brighter spot amongst the larger emerging market economies for the time being is India - of the original BRIC countries, it is the only one that stands out with encouraging near term prospects.
Results
At the six month marker in February this year I stated "I anticipate good progress in the further development of your Company over the rest of the current year and beyond". With hindsight I perhaps should have said good progress relative to both our markets and our peer group given that the performance of Emerging Markets in particular, after a material improvement through to the end of April has subsequently been sharply negative. At the time of writing MXEF has fallen to 819 compared to 956 at the time of my Interim Statement. As I have made a habit of doing, I have left it to individual investors to form their own view on the direction of markets.
Against this challenging backdrop I am pleased to report that Funds under Management ("FuM") at the 30th June 2015 year end rose to US$4.2 billion (2.7 billion; 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. This positive result compares, over the same period, with a fall of 5% in the MSCI Emerging Markets Index (MXEF) in US$ terms. For a more recent update please reference our website at www.citlon.co.uk.
This impressive increase in FuM has been driven by good investment performance versus our peers for our emerging markets closed-end fund ("CEF") strategy, together with success in fundraising for our diversification products which now represent 8.5% of FuM, up from 2% of FuM at end June 2014. Our revenues follow directly from the levels of FuM and rose to 25.4m for the 12 months up from 24.2m for the non-comparable 13 month period to 30th June 2014 (a "pro-rata" 13% increase). Pre-tax profits were 8.9 million (2014: 7.4 million, 13 months: a "pro-rata" 30% increase), and profits after an anticipated tax charge of 2.3 million (26% of pre-tax profits) will be 6.6 million (2014: profits of 5.4 million after a tax charge of 2.1 million, representing 28% of pre-tax profit and therefore a "pro-rata" 34% increase ). Basic and fully diluted earnings per share are 26.4p and 26.0p respectively (2014: 21.1p and 21.0p therefore "pro-rata" increases of 35% and 34% respectively).
Dividends
In line with our established dividend policy which targets a five year rolling average cover of approximately 1.2 times, the Board is recommending a final dividend of 16p per share (2014: 16p). This would bring the total for the year to 30th June 2015 to 24p (2014: 24p), giving a cover of 1.1 x earnings per share (2014: 0.86 x).
Your Board
As announced on 21st August, Carlos Yuste, our Business Development Director, has decided, for personal reasons, that the time has come after 15 years with CLIG to move on. We are appreciative that he has agreed to remain until 31st December as an executive Director of both CLIG and our fund management subsidiary, City of London Investment Management, to ensure a smooth hand over period. Carlos's responsibilities are being assumed by colleagues internally and no new external appointment is at present anticipated as a result of Carlos's departure.
Also announced on 21st August, your Board is proposing the appointment of two new Directors, Mark Dwyer and Tracy Rodrigues, at the forthcoming October AGM. In line with the plan first announced in our Interim Report in January 2014, Mark has been progressively assuming responsibility as CIO of our Emerging Markets business which currently represents the majority of our FuM. It is therefore appropriate that he is represented on the Board. Since the departure of our previous Finance Director in April 2013, responsibility for financial matters has been assumed by Tracy Rodrigues. Your Board has been impressed by the professional manner in which she has carried out these duties and propose that she should be appointed as Finance Director thereby formalising her position. I very much welcome these two appointments which will greatly strengthen the CLIG Board. Shareholders are strongly recommended to vote in favour of these two appointments.
Futhermore, following this year's annual evaluation of the Board and its members, I can confirm that each Director is operating effectively. I therefore recommend that those Directors standing for re-election this year be so elected.
West Coast office
For some time a West Coast office has been under consideration to support both our prospective client marketing and the servicing of our existing clients. Having been fortunate in identifying and recruiting an experienced West Coast marketeer we have now established an office in Seattle. A further benefit has been better communication with and management of our Singapore office where the local time zone has meant that in implementing 24 hour trading the office has been relatively isolated, particularly in the Singapore morning.
Outlook
Over the 2014/15 year the average month end FuM (the relevant dates for fee determination) was US$4.1 billion. To date in the current year the average has been US$3.8 billion. Costs have been contained but clearly the outcome for the year will be determined by the direction of markets (on which I am not expressing an opinion but note our proactive stance in ensuring that our cost base responds to adverse movements), our investment performance and client wins and redemptions. As regards the latter we are grateful to the loyalty shown by clients during a period when Emerging Markets have fallen out of favour. I have every reason to believe that our well honed investment process for our core products will continue to deliver returns superior to our peer group and thereby reward both longstanding and new clients for putting their trust in this firm.
All shareholders are most welcome at our AGM in October and your Directors will be available to meet individual shareholders following the meeting's formal business.
David Cardale
Chairman
10th September 2015
START OF STRATEGIC REPORT
CHIEF EXECUTIVE OFFICER'S STATEMENT
Further to last year's Accounts we have again attempted to provide CLIG shareholders with additional insights into the business of City of London Investment Management (CLIM).
The following attempts to provide shareholders with relevant information with regard to City of London Investment Group (CLIG), and specifically its major operating subsidiary City of London Investment Management (CLIM).
As last year, we have followed the guidelines that were discussed and approved in Parliament and set out in The Companies Act 2006 (Strategic report and Directors' report) Regulations 2013. We believe that this legislation provides good guidance for listed companies and enables them to demonstrate to their shareholders (who own these companies) what they do, how they do it, their prospects, and most importantly, encourages them to define the risks associated with any potential investment that might be made.
Having said that, and since CLIG shares were listed in April 2006, as a small company we consider ourselves at the leading edge in terms of shareholder disclosure.
Over five years ago we started to periodically provide CLIG shareholders with monthly data from our Management Accounts. This information was provided to our shareholders via Shareholder Presentations which were placed on our website subsequent to a relevant announcement.
This data enabled our shareholders to see that while our costs were very stable, our income was variable and demonstrated a very close correlation with the MSCI Emerging Markets T/R Index and the more widely available MXEF Index. Just over a year ago we started to provide additional monthly data with regard to FuM via our web site. Based upon
a consistent overhead this information effectively allows CLIG shareholders to calculate our P&L on a monthly basis.
In a further attempt to provide additional information, in the 2013/14 Interim Statement we started to provide Forward Guidance for shareholders based upon a number of assumptions.
Obviously stock markets, both developed and even more so in the case of the emerging markets, are volatile, and over the years the CLIG share price has exaggerated this volatility. Recently, and specifically subsequent to our starting to provide Forward Guidance, we have seen a significant reduction in that share price volatility.
This is what we believed would happen. Obviously one of the good things about Forward Guidance, and via the provision of up to date information, is that shareholders will see each month's FuM in both good times as well as bad. The net result of this is that they will be much more aware of when things are going badly as well as going well, much earlier than in the past.
Continuing in the vein of transparency, I would like to restate my intention regarding potential future sales of shares in the Company. I founded CLIG as an asset management business in 1991 and from the outset, I have always sought to align my interests with those of the Group's shareholders, both before and subsequent to the public listing in 2006.
The consequence of this is that, as the largest shareholder and the Chief Executive of CLIG, close to all of my investible wealth remains in CLIG shares and I believe it is appropriate and prudent, for both the Company and me personally, that I gradually reduce my holding prior to my retirement in 2020.
Accordingly, I propose:
 Selling 500,000 at 4.00 and 500,000 at 4.50. These intentions are the same as were communicated to shareholders, and specifically subsequent to my previous sale of 500,000 shares at 3.50 earlier this year.
As announced on 21st August, Carlos Yuste will leave CLIG and CLIM on 31st December. Carlos has been with the firm for 15 years and has played an important role in many areas of our development. He will be missed and we wish him all the best in whatever he decides to do. Carlos's responsibilities, varied as they are, will be redistributed internally.
I hope that you will find the following interesting and informative.
Barry Olliff
Chief Executive Officer
10th September 2015
Shareholders should note that they are invited to our Investor Afternoon on 19th October at the offices of Canaccord Genuity Limited, 88 Wood Street, London, EC2V 7QR starting at 3pm. If shareholders are planning to attend it would be helpful, but not necessary, if they could email us at investorrelations@citlon.co.uk to let us know.
BUSINESS DEVELOPMENT REVIEW
Relative investment performance in the emerging markets closed-end fund (CEF) strategy remains strong, with first or second quartile results versus manager peers over the period.
 
Marketing efforts led to new inflows of US$477 million in emerging market strategies, which were countered by outflows of US$437 million as investor risk aversion rose due to ongoing volatility in global markets. Fundraising in the diversification products resulted in US$255m of new mandates (US$100m in Frontier Emerging Markets strategies, and US$155m in Global Tactical Asset Allocation strategies) and outflows of US$20 million.
Diversification products now represent 8.5% of Group Assets under Management (AUM), compared with 2% last year. These additional assets will assist in efforts to raise the profile of our extension CEF products with institutional consultants and plan sponsors.
Products
Our diversification products attracted additional AUM over the year as several mandates were funded in the Global Tactical Asset Allocation CEF Strategy. The Global Tactical Asset Allocation Strategy encompasses a variety of asset classes via closed-end funds and adopts a go anywhere approach which is managed as part of the Developed closed-end fund strategy team, which is a separate team from that managing client assets in the emerging markets. Both taxable and tax-exempt products are available.
A new mandate was also funded in The Frontier Emerging Markets CEF Strategy, which is an extension of the Emerging Markets core equity product focusing on the smallest emerging markets with high growth potential.
Performance
Global composite investment returns for the emerging market closed-end fund strategy for the rolling one year ending 30th June, 2015 were -2.43% vs. -5.13% for the MSCI Emerging Markets Index in USD and 6.08% vs. 3.15% for the benchmark in GBP.
Global composite investment returns for the developed market closed-end fund strategy for the rolling one year ending 30th June, 2015 were 4.51% vs. -5.26% for the MSCI ACWI ex US in USD and 13.63% vs. 3.01% for the benchmark in GBP.
Composite investment returns for the Frontier Emerging Market closed-end fund strategy for the rolling one year ending 30th June, 2015 were -0.8% vs. -9.25% for the S&P Frontier EM 150 benchmark in USD and 7.85% vs. -1.34% for the benchmark in GBP.
Outlook
Marketing efforts will be targeted at investment consultants, foundations, endowments and pension funds. In order to better cover the US institutional marketplace, we have opened an office in Seattle and added a new marketing resource to focus on the West Coast of the US. We will also continue to introduce our capabilities to family offices, outsourced CIO firms and alternative consultants. Our Developed, Global Tactical Asset Allocation, and Frontier Emerging Market capability will be the focus of our product diversification and business development activities.
FINANCIAL REVIEW
This year the Group adopted IFRS 10, which revises the principles for the presentation and preparation of consolidated financial statements. It redefines the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. This concept of control applies to all entities and includes the Group's seed investments in funds that it manages, previously reported as "available-for-sale financial assets". As a result, the change in fair value of these investments is now recognised in the income statement, where previously it was recognised as part of other comprehensive income. Any other third party investor holdings in these funds are disclosed under non-controlling interests. Further details can be found in the notes to the financial statements but the net impact on the equity attributable to shareholders of the Group is nil.
Consolidated income statement and statement of comprehensive income
As shareholders may recall the Group changed its financial year end from 31st May to 30th June in 2014 therefore the results for the last financial period consist of thirteen months, which should be taken into account when considering the Group's year on year performance. On the face of the financial statements the profit attributable to shareholders indicates a 24% increase but compared to the annualised results for 2013/2014 this equates to a 34% increase year on year. The various components of this increase are detailed below.
Gross fee income of 25.4 million (2014: 24.2 million, 13 months) represents management fees charged as a percentage of funds under management ("FuM"). FuM were relatively stable during the year, with only a 10% differential in the highest and lowest value (2014: 22%). This level of consistency in a very volatile market is a result of strong performance in our emerging market closed-end funds, with first or second quartile results versus our peers plus successful fundraising. During the year we raised circa US$250 million in our diversification products and US$500 million in our emerging market strategies. This was countered by outflows of close to US$450 million as investor risk aversion rose due to ongoing volatility in global markets.
Commissions payable of 2.3 million (2014: 3.1 million, 13 months) relates to fees due to third party marketing agents for the introduction of clients. The contract to which all but a small proportion of these commissions relate, expired in October 2010. Under the agreement, commission is based on a period of ten years from the date of initial investment. The Group is now half way through the last of the ten year trail and while this has resulted in savings, the fall in the commission rate (as a percentage of gross fee income 2015: 9% vs 2014: 13%) can also be attributed to the level of new client money invested, which is free of commission. As a guide, the table presented illustrates the rate of the commission run-off relating to the expired contract, based upon current FuM and market levels.
Marketing commission run-off
(based on FuM at 30th June 2015)
Financial year
m (@ $1.57/1)
2015-16
1.6
2016-17
1.4
2017-18
1.2
2018-19
0.8
2019-20
0.1
Assumptions:
- No change in client holding
- Constant market level
- Indexed investment performance
- No change in management fees
Custody fees payable of 0.7 million (2014: 0.8 million, 13 months) are the fees paid to custodian banks for the safekeeping and administration of the assets of the commingled Delaware Statutory Trust funds (segregated account clients pay their own custody fees). The reduction in these fees can be attributed in part to the change in the mix of accounts held as well as a general reduction in the charges levied.
The net of the above rounds to 22.4 million (2014: 20.3 million, 13 months) and represents the Group's net fee income. The weighted average net fee rate is currently 85 basis points and compares to 86 basis points this time last year.
Administration expenses of 13.6 million (2014: 13.3 million, 13 months) can be split into two main categories:
 fixed - overheads of the Group, the largest components being salaries, pension and employment taxes
 variable - profit share calculated as a percentage of pre-tax, pre-bonus profit
The Group maintained its control of the fixed costs following the successful achievement of previous cost reduction targets resulting in overheads for the year of 9.4 million. This compares to the annualised overheads for 2014 of 9.5 million (2014: 10.3 million, 13 months) and 10.8 million in 2013 (excluding exceptional costs of 0.7million).
Profit share for the year was charged at 30% having been temporarily reduced to 28% last year and amounts to 4.2 million including payroll related taxes (2014: 3.0 million). The extent of the rise in variable compensation this year reflects the increase in performance of the overall business, with only a very modest amount attributable to the adjustment of the profit share rate.
Interest receivable and similar gains of 0.2 million includes bank interest on deposits of 0.1 million and 0.1 million from the increase in fair value of the funds in which the Group has a controlling interest.
The net result is a pre-tax profit of 8.9 million (2014: 7.4 million, 13 months). Corporation tax this year amounts to 2.3 million, an effective rate of 26% compared to 28% last period (2014: 2.0 million, 13 months) as a result of the reduction in the UK corporation tax rate as well as a shift in the geographical mix of the business.
Consolidated statement of financial position and statement of changes in equity
The Group's financial position remains strong with no borrowings and net assets of 13.7 million (2014: 13.9 million), excluding the non-controlling interest, the major part of that being cash of 10.2 million (2014: 10.2 million).
During the year, non-current assets increased by 0.4 million, 0.1 million relating to deferred tax in connection with the share price appreciation on share-based awards. The Company's share price increased from 2.9375 at the start of the year to close at 3.3050. The remaining 0.3 million relates to the increase in fair value of the diversification funds in which the Group has seed investments.
Current assets grew by 1.0 million, of which 0.9 million relates to trade and other receivables. The main constituent of this is fee income receivable, and the year on year increase is primarily due to new client mandates. The remaining 0.1 million relates to the increase in value of seed investments in our diversification products.
Current liabilities increased by 1.3 million, principally due to a change in the timing of the payments of profit share and related payroll taxes. The final payment of the Group's annual bonus has historically been in June, with the related taxes due in July. Last year when the year end changed from 31st May to 30th June, the profit share was still paid in June, mainly due to staff expectation. This was a transitional period and subsequently, it was agreed that going forward the final payment would revert to being made one month after the year end.
As one would expect, the major changes in shareholders equity are this year's profit of 6.6 million (2014: 5.2 million) and the dividends paid during the year of 6.0 million (2014: 6.0 million). The dividend comprised the 16p final dividend for 2013/14 plus the 8p interim dividend for the current year. The Group's dividend policy is set out on under section 4 of the Strategy and Objectives.
Other movements during the year were the purchase of shares via the Group's ESOP Trust to the value of 1.0 million (2014: nil), this outlay being offset by the proceeds from share option exercises of 0.3 million, including corporation tax allowances (2014: 0.1 million). In addition, 101,500 shares were purchased for cancellation (2014: nil) and the 0.3 million cost set against retained earnings. The value of the share option reserve increased by 0.1 million in relation to the deferred tax referred to previously.
The Group ensures its regulated entities comply at all times with their local regulatory capital requirements. In the UK the Group's principal operating subsidiary, City of London Investment Management Company Ltd, is regulated by the FCA. As required under the Capital Requirements Directive, the underlying risk management controls and capital position are disclosed on our website www.citlon.co.uk.
Consolidated cash flow
Net cash generated from operating activities was 7.0 million (2014: 3.7 million), illustrating that there are relatively few significant timing differences that would cause cash flow to deviate materially from profits. As noted earlier, the Group spent 6.0 million (2014: 6.0 million) on dividend payments and a net 1.0 million (2014: nil) on share transactions. In addition, the Group invested 0.1 million (2014: nil) in property and equipment which brought the net cash spent to 0.1 million (2014: 0.4 million net cash raised). The effect of exchange rate differences on foreign currency bank deposits for the year was a profit of 0.1 million (2014: a loss of 0.2 million).
It should be noted that the overall impact on the consolidated income from translating the Group's foreign currency assets and liabilities into sterling was minimal, due to the Group's hedging strategy which is detailed below and in note 11.
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 and UAE dirhams. As at 30th June 2014 the US dollar/sterling exchange rate was 1.71 and closed at 1.57 on 30th June 2015 (2014: US$1.52 - US$1.71 to 1). The table presented here 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 1.55 to 1.70 on FuM of US$4.0 billion reduces post-tax profits by 0.8 million.
Post-tax profit: Illustration of US$/ rate effect
FuM US$bn
3.5
4.0
4.5
5.0
5.5
US$/ Post -tax
m
1.50
5.4
6.9
8.4
9.9
11.3
1.55
5.2
6.6
8.0
9.5
10.9
1.60
5.0
6.3
7.7
9.1
10.5
1.65
4.7
6.1
7.4
8.7
10.1
1.70
4.5
5.8
7.1
8.4
9.7
Assumes:
1. Average net fee 85 bp's
2. Annual operating costs 4.0m plus $7m plus S$1.3m (1 = S$2)
3. Profit-share 30%
4. Average tax rate 26%
It is worth noting though that while the Group's FuM is reported in US dollars the underlying investments are primarily in emerging market related stock, 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 given that as the US dollar weakens (strengthens) against these underlying currencies the value of the FuM in US dollar terms rises (falls).
Another aspect of the Group's currency exposure relates to its non-sterling assets and liabilities, which are again to a great extent in US dollars. 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 this impact the Group monitors its net currency position and offsets it by forward sales of US dollars for sterling. At 30th June 2015 these forward sales totalled US$5.3 million, with a weighted average exchange rate of 1.57 to 1 (2014: US$5.3 million at a weighted average rate of 1.65 to 1).
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30TH JUNE 2015
Note
Year to
30th June 2015
13 months to
30th June 2014 (restated)
Revenue
Gross fee income
4
25,356,009
24,215,277
Commissions payable
(2,274,745)
(3,068,001)
Custody fees payable
(737,513)
(844,663)
Net fee income
22,343,751
20,302,613
Administrative expenses
Staff costs
10,418,571
9,549,686
Other administrative expenses
3,027,637
3,569,791
Depreciation and amortisation
170,852
185,264
(13,617,060)
(13,304,741)
Operating profit
5
8,726,691
6,997,872
Interest receivable and similar gains
6
204,979
417,927
Profit before taxation
8,931,670
7,415,799
Income tax expense
7
(2,318,004)
(2,061,742)
Profit for the period
6,613,666
5,354,057
Profit attributable to: 
Non-controlling interests
35,821
50,822
Equity shareholders of the parent
6,577,845
5,303,235
Basic earnings per share
8
26.4p
21.1p
Diluted earnings per share
8
26.0p
21.0p
CONSOLIDATED AND COMPANY STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30TH JUNE 2015
Group
Company
Year to
30th June 2015
13 months to
30th June 2014 (restated)
Year to
30th June 2015
13 months to
30th June 2014 (restated)
Profit for the period
6,613,666
5,354,057
5,446,205
6,700,608
Items which may be realised through the profit or loss:
Fair value gains/(losses) on available-for-sale investments*
2,117
(822)
2,117
(822)
Release of fair value losses/(gains) on disposal of
available-for-sale investments*
40
(34,022)
40
(34,022)
Foreign exchange gains/(losses) on non-monetary assets
50,988
(58,639)
-
-
Other comprehensive income/(loss)
53,145
(93,483)
2,157
(34,844)
Total comprehensive income for the period
6,666,811
5,260,574
5,448,362
6,665,764
Attributable to:
Equity shareholders of the parent
6,630,990
5,209,752
5,448,362
6,665,764
Non-controlling interests
35,821
50,822
-
-
*Net of deferred tax.
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION
30TH JUNE 2015
Group
Company
Note
30th June 2015
30th June 2014 (restated)
30th June 2015
30th June 2014 (restated)
Non-current assets
Property and equipment
384,083
376,831
88,643
126,045
Intangible assets
196,343
215,323
-
-
Other financial assets
2,075,954
1,824,984
1,810,792
1,755,782
Deferred tax asset
395,354
283,366
34,674
15,776
3,051,734
2,700,504
1,934,109
1,897,603
Current assets
Trade and other receivables
4,509,184
3,635,477
1,935,076
2,288,484
Current tax receivable
-
-
317,095
399,537
Cash and cash equivalents
10,226,705
10,242,906
82,804
90,045
14,735,889
13,878,383
2,334,975
2,778,066
Current liabilities
Trade and other payables
(2,609,944)
(1,294,456)
(1,601,947)
(438,270)
Current tax payable
(814,638)
(760,445)
-
-
Creditors, amounts falling due within one year
(3,424,582)
(2,054,901)
(1,601,947)
(438,270)
Net current assets
11,311,307
11,823,482
733,028
2,339,796
Total assets less current liabilities
14,363,041
14,523,986
2,667,137
4,237,399
Non-current liabilities
Deferred tax liability
(115,525)
(98,818)
(2,154)
(1,718)
Net assets
14,247,516
14,425,168
2,664,983
4,235,681
Capital and reserves
Share capital
269,123
269,727
269,123
269,727
Share premium account
2,117,888
2,060,809
2,117,888
2,060,809
Investment in own shares
(5,692,430)
(4,884,025)
(5,692,430)
(4,884,025)
Fair value reserve
8,619
6,462
8,619
6,462
Share option reserve
807,106
732,651
620,541
646,862
Foreign exchange reserve
(7,651)
(58,639)
-
-
Capital redemption reserve
21,597
20,582
21,597
20,582
Retained earnings
16,127,877
15,759,107
5,319,645
6,115,264
Shareholders interest
13,652,129
13,906,674
2,664,983
4,235,681
Non-controlling interest
595,387
518,494
-
-
Total equity
14,247,516
14,425,168
2,664,983
4,235,681
Approved and authorised for issue by the Board on 10th September 2015.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
30TH JUNE 2015
Share capital
Share premium account
Investment in own shares
Fair value reserve
Foreign exchange reserve
Share option reserve
Capital redemption reserve
Retained earnings
Total attributable to share-
holders
Non- controlling interest
Total
At 1st June 2013
Adjustment re: change in accounting policy
269,377
-
2,045,409
-
(4,910,800)
-
302,867
(261,561)
-
-
716,660
-
20,582
-
16,185,941
261,561
14,630,036
-
-
-
14,630,036
-
269,377
2,045,409
(4,910,800)
41,306
-
716,660
20,582
16,447,502
14,630,036
-
14,630,036
Profit for the period
-
-
-
-
-
-
-
5,303,235
5,303,235
50,822
5,354,057
Comprehensive income
-
-
-
(34,844)
(58,639)
-
-
-
(93,483)
-
(93,483)
Total comprehensive income
-
-
-
(34,844)
(58,639)
-
-
5,303,235
5,209,752
50,822
5,260,574
Transactions with owners
Non-controlling interest investment
-
-
-
-
-
-
-
-
-
467,672
467,672
Share option exercise
350
15,400
26,775
-
-
(4,145)
-
4,145
42,525
-
42,525
Share-based payment
-
-
-
-
-
(15,184)
-
-
(15,184)
-
(15,184)
Deferred tax
-
-
-
-
-
35,320
-
5,660
40,980
-
40,980
Current tax on share options
-
-
-
-
-
-
-
29,627
29,627
-
29,627
Dividends paid
-
-
-
-
-
-
-
(6,031,062)
(6,031,062)
-
(6,031,062)
Total transactions with owners
350
15,400
26,775
-
-
15,991
-
(5,991,630)
(5,933,114)
467,672
(5,465,442)
At 1st July 2014
269,727
2,060,809
(4,884,025)
6,462
(58,639)
732,651
20,582
15,759,107
13,906,674
518,494
14,425,168
Profit for the period
-
-
-
-
-
-
-
6,577,845
6,577,845
35,821
6,613,666
Comprehensive income
-
-
-
2,157
50,988
-
-
-
53,145
-
53,145
Total comprehensive income
-
-
-
2,157
50,988
-
-
6,577,845
6,630,990
35,821
6,666,811
Transactions with owners
Forex movement on
NCI investment
-
-
-
-
-
-
-
-
-
41,072
41,072
Share option exercise
411
57,079
188,536
-
-
(36,358)
-
36,358
246,026
-
246,026
Share cancellation
(1,015)
-
-
-
-
-
1,015
(325,054)
(325,054)
-
(325,054)
Purchase of own shares
-
-
(996,941)
-
-
-
-
-
(996,941)
-
(996,941)
Share-based payment
-
-
-
-
-
10,037
-
-
10,037
-
10,037
Deferred tax
-
-
-
-
-
100,776
-
8,737
109,513
-
109,513
Current tax on share options
-
-
-
-
-
-
-
30,711
30,711
-
30,711
Dividends paid
-
-
-
-
-
-
-
(5,959,827)
(5,959,827)
-
(5,959,827)
Total transactions with owners
(604)
57,079
(808,405)
-
-
74,455
1,015
(6,209,075)
(6,885,535)
41,072
(6,844,463)
At 30th June 2015
269,123
2,117,888
(5,692,430)
8,619
(7,651)
807,106
21,597
16,127,877
13,652,129
595,387
14,247,516
COMPANY STATEMENT OF CHANGES IN EQUITY
30TH JUNE 2015
Share capital
Share premium account
Investment in own shares
Fair value reserve
Share option reserve
Capital redemption reserve
Retained earnings
Total attributable to shareholders
At 1st June 2013
Adjustment re: change
269,377
2,045,409
(4,910,800)
302,867
666,191
20,582
5,437,994
3,831,620
in accounting policy
-
-
-
(261,561)
-
-
-
(261,561)
269,377
2,045,409
(4,910,800)
41,306
666,191
20,582
5,437,994
3,570,059
Profit for the period
-
-
-
-
-
-
6,700,608
6,700,608
Comprehensive income
-
-
-
(34,844)
-
-
-
(34,844)
Total comprehensive income
-
-
-
(34,844)
-
-
6,700,608
6,665,764
Transactions with owners
Share option exercise
350
15,400
26,775
-
(4,145)
-
428
38,808
Share-based payment
-
-
-
-
(15,184)
-
-
(15,184)
Deferred tax
-
-
-
-
-
-
7,296
7,296
Dividends paid
-
-
-
-
-
-
(6,031,062)
(6,031,062)
Total transactions with owners
350
15,400
26,775
-
(19,329)
-
(6,023,338)
(6,000,142)
At 1st July 2014
269,727
2,060,809
(4,884,025)
6,462
646,862
20,582
6,115,264
4,235,681
Profit for the period
-
-
-
-
-
-
5,446,205
5,446,205
Comprehensive income
-
-
-
2,157
-
-
-
2,157
Total comprehensive income
-
-
-
2,157
-
-
5,446,205
5,448,362
Transactions with owners
Share option exercise
411
57,079
188,536
-
(36,358)
-
16,943
226,611
Share cancellation
(1,015)
-
-
-
-
1,015
(325,054)
(325,054)
Purchase of own shares
-
-
(996,941)
-
-
-
-
(996,941)
Share-based payment
-
-
-
-
10,037
-
-
10,037
Deferred tax
-
-
-
-
-
-
17,280
17,280
Current tax on share options
-
-
-
-
-
-
8,834
8,834
Dividends paid
-
-
-
-
-
-
(5,959,827)
(5,959,827)
Total transactions with owners
(604)
57,079
(808,405)
-
(26,321)
1,015
(6,241,824)
(7,019,060)
At 30th June 2015
269,123
2,117,888
(5,692,430)
8,619
620,541
21,597
5,319,645
2,664,983
CONSOLIDATED AND COMPANY CASH FLOW STATEMENT
FOR THE YEAR ENDED 30TH JUNE 2015
Group
Company
Note
30th June 2015
30th June 2014 (restated)
30th June 2015
30th June 2014 (restated)
Cash flow from operating activities
Operating profit
8,726,691
6,997,872
183,428
204,465
Adjustments for:
Depreciation charges
125,392
136,015
56,919
68,533
Amortisation of intangible assets
45,460
49,249
-
-
Share-based payment charge
10,037
(15,184)
8,090
(20,651)
Translation adjustments
(154,153)
294,202
(70,383)
121,706
(Profit)/loss on disposal of fixed assets
-
(363)
-
-
Cash generated from operations before changes
in working capital
8,753,427
7,461,791
178,054
374,053
(Increase)/decrease in trade and other receivables
(873,707)
(96,751)
353,408
(82,296)
Increase/(decrease) in trade and other payables
1,315,488
(1,836,467)
1,163,677
(3,453,808)
Cash generated from operations
9,195,208
5,528,573
1,695,139
(3,162,051)
Interest received
57,482
97,369
404
713
Interest paid
-
(384)
-
(384)
Taxation (paid)/received
(2,219,304)
(1,926,509)
52,439
21,540
Net cash generated from/(used in) operating activities
7,033,386
3,699,049
1,747,982
(3,140,182)
Cash flow from investing activities
Dividends received from subsidiaries
-
-
5,292,000
6,421,000
Purchase of property and equipment
(108,136)
(38,960)
(19,517)
(23,515)
Proceeds from sale of property and equipment
-
782
-
-
Purchase of non-current financial assets
-
(470,595)
-
(2,923)
Proceeds from sale of non-current financial assets
5,960
493,834
3,168
487,385
Purchase of current financial assets
(328,962)
(1,105,022)
(328,962)
(1,105,022)
Proceeds from sale of current financial assets
329,382
3,298,452
329,382
3,298,452
Net cash generated from investing activities
(101,756)
2,178,491
5,276,071
9,075,377
Cash flow from financing activities
Proceeds from issue of ordinary shares
57,490
15,750
57,490
15,750
Ordinary dividends paid
10
(5,959,827)
(6,031,062)
(5,959,827)
(6,031,062)
Purchase and cancellation of own shares
(325,054)
-
(325,054)
-
Purchase of own shares by employee share option trust
(996,941)
-
(996,941)
-
Proceeds from sale of own shares by employee
share option trust
188,536
26,775
188,536
26,775
Capital from non-controlling interest
-
467,672
-
-
Net cash used in financing activities
(7,035,796)
(5,520,865)
(7,035,796)
(5,988,537)
Net (decrease)/increase in cash and cash equivalents
(104,166)
356,675
(11,743)
(53,342)
Cash and cash equivalents at start of period
10,242,906
10,061,185
90,045
146,416
Effect of exchange rate changes
87,965
(174,954)
4,502
(3,029)
Cash and cash equivalents at end of period
10,226,705
10,242,906
82,804
90,045
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 2015
The contents of this preliminary announcement have been extracted from the Company's Annual Report, which is currently in print and will be distributed within the week. The information shown for the year ended 30th June 2015 and the 13 months ended 30th June 2014 does not constitute statutory accounts and has been extracted from the full accounts for the year ended 30th June 2015 and the 13 months ended 30th June 2014. The reports of the auditors on those accounts were unqualified and did not contain adverse statements under sections 498(2) or (3) of the Companies Act 2006. The accounts for the period ended 30th June 2014 have been filed with the Registrar of Companies. The accounts for the year ended 30th June 2015 will be delivered to the Registrar of Companies in due course.
City of London Investment Group PLC ("the Company") is a public limited company which listed on the London Stock Exchange on 29th October 2010 and is domiciled and incorporated in the United Kingdom under the Companies Act 2006.
The Group financial statements for the year ended 30th June 2015 comprise the Company and its subsidiaries ("the Group"). The significant accounting policies applied in the preparation of the Group financial statements are summarised below. These policies have been consistently applied to all the financial periods presented, unless otherwise stated.
1 BASIS OF PREPARATION
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union ("EU") and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
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.
New IFRS Standards and Interpretations
The Group adopted the following during the year:
IFRS 10 Consolidated financial statements (revised) - This standard establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. It builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. An investor controls an investee when it has power over the relevant activities, exposure to variable returns from the investee, and the ability to affect those returns through its power over the investee. This control model applies to all entities and includes the Group's seed investments in funds that it manages, previously reported as "available-for-sale financial assets". As a result, the change in fair value of these investments is now recognised in the income statement, where previously recognised as part of other comprehensive income. The impact of the standard on this year's income statement is 0.1 million to the owners of the Company (2014: 0.1 million) and 0.0 million in relation to non-controlling interests (2014: 0.1 million). In accordance with the reporting requirements the prior period has been restated.
IFRS 12 Disclosure of Interests in Other Entities (revised) - The Standard is intended to complement IFRS 10 and requires disclosures about the judgement used by management in determining which entities it controls as well as the financial effects of, and risks associated with, investments in subsidiaries, joint arrangements, associates and unconsolidated structured entities. These disclosures can be found in the notes to the financial statements.
As at 30th June 2015, the following Standards and Interpretations, which are relevant to the Group, were in issue and EU endorsed but not yet effective:
IFRS 9 has yet to be endorsed by the EU and replaces the classification and measurement models for financial instruments in IAS 39 with three classification categories: amortised cost, fair value through profit or loss and fair value through other comprehensive income. The Group's business model and the contractual cash flows arising from its investments in financial instruments determine the classification. Equity instruments will be recorded at fair value, with gains or losses reported either in the Income statement or through equity. However, where fair value gains and losses are recorded through equity there will no longer be a requirement to transfer gains or losses to the Income statement on impairment or disposal.
IFRS 9 also introduces an expected loss model for the assessment of impairment. The current incurred loss model (under IAS 39) requires the Group to recognise impairment losses when there is objective evidence that an asset is impaired; under the expected loss model, impairment losses are recorded if there is an expectation of credit losses, even in the absence of a default event. The Group does not anticipate that this will have a material impact on results.
IFRS 15 deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. Revenue is recognised when a customer obtains control of goods or service and thus has the ability to direct the use and obtain the benefits from the goods or service. The Standard replaces IAS 18 'Revenue' and IAS 11 'Construction contracts' and related interpretations. The Standard is effective for annual periods beginning on or after 1st January 2018 and earlier application is permitted subject to EU endorsement. The Group is currently assessing the impact of IFRS 15 on its financial statements. No other Standards or Interpretations issued and not yet effective are expected to have an impact on the Group's financial statements. The preparation of these financial statements in conformity with IFRS requires management to make estimates and assumptions 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 area of the financial statements that are subject to the use of estimates and assumptions are noted below:
Share-based payments
In order to calculate the charge for share-based compensation as required by IFRS 2, the Group makes estimates principally relating to the assumptions used in its option pricing model.
2 BASIS OF CONSOLIDATION
These financial statements consolidate 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.
When assessing whether to consolidate an entity, the Group evaluates a range of control factors, 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
 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 2015 are detailed below.
Controlling
Subsidiary undertakings
Activity
interest
City of London Investment Management Company Limited
Management of funds
100%
City of London US Investments Limited
Holding company for US companies
100%
World Markets Umbrella Global Equity Fund
Open-end offshore sub-fund
100%
International Equity CEF Fund
Delaware Statutory Trust fund
52%
 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
 City of London Latin America Limited Dormant company
 City of London US Investments Limited holds 100% of the ordinary shares in the following: 
 City of London US Services Limited Service company)
The consolidated financial statements are prepared on the historical cost basis except for the revaluation of certain financial instruments as outlined in note 3 (iii).
3 SIGNIFICANT ACCOUNTING POLICIES
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. In addition, where presentational changes are made in the current period, the prior year figures are also updated to present a true comparative.
(i) 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 - four years
Computer and telephone equipment - four years
(ii) Intangible assets
Intangible assets acquired separately are capitalised at cost and amortised on a straight line basis. Amortisation charges are spread over the useful life of the asset as follows:
Long term software licences - ten years
This represents a perpetual licence for the Group's fund accounting system. The Directors consider ten years as a reasonable estimate of useful life given the improved control and flexibility to manage and develop the software in-house.
(iii) Financial instruments
Under IAS 39, "Financial Instruments: Recognition and Measurement", financial assets must be classified as either:
 Loans and receivables
 Held-to-maturity investments
 Available-for-sale financial assets
 At fair value through profit or loss
Financial liabilities must be classified at fair value through profit or loss or at amortised cost.
Except where investments in funds are identified as subsidiaries, the Group's investments in the funds that it manages are designated as available-for-sale financial assets. Such investments are initially recognised at fair value, being the consideration given together with any acquisition costs associated with the investment. They are subsequently carried at fair value, with any gains or losses arising from changes in fair value included as part of other comprehensive income. Fair value is determined using the price based on the net asset value of the fund. Investments are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred all risks and rewards of ownership. When derecognition occurs a realised profit or loss is recognised in the income statement, calculated as the difference between the net sales proceeds and the original cost of the financial asset. Any fair value gains or losses previously recognised as part of other comprehensive income are recycled into the income statement as part of this calculation of the profit or loss arising on derecognition.
The Group assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired. In the case of an investment classified as available-for-sale, a significant or prolonged decline in the fair value of the investment below its cost is considered as an indicator that the investment is impaired. If any such evidence exists for available- for-sale investments, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement - is removed from other comprehensive income and recognised in the income statement.
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 remeasured at fair value, with any movement recognised in the income statement. The fair value of the derivatives held by the Group 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 predominantly in blue chip companies and as such are very tradable with a small bid-ask spread.
The Group's investments have been classified here for recognition and measurement purposes under IAS39 but are not necessarily reported in the statement of financial position under those headings. A table showing how they are reported is shown in note 11.
(iv) Trade receivables
Trade receivables are measured on initial recognition at fair value, and are subsequently carried at the lower of original fair value and their recoverable amount. Appropriate allowances for estimated irrecoverable amounts are recognised in the income statement when there is objective evidence that the asset is impaired.
(v) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and 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.
(vi) Trade payables
Trade payables are measured at initial recognition at fair value and subsequently measured at amortised cost.
(vii) Deferred taxation
Deferred tax is provided using the statement of financial position 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.
(viii) Share-based payments
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 Binomial pricing model, and has then been 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.
(ix) Revenue
Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and such revenue can be reliably measured. Revenue is recognised as services are provided and comprises investment management fees based on a percentage of Funds under Management, in accordance with the underlying agreements.
(x) Commissions payable
A significant 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.
(xi) 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. Non-monetary assets are translated at the date of the transaction and held at historic costs with any gains or losses recognised in the income statement.
The functional currency of the Group's main trading subsidiaries, City of London Investment Management Company Limited 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. Under IAS 21 this means that exchange differences caused from translating from the functional currency to presentational currency for the main trading subsidiaries would be recognised in equity. However, the Group operates a policy whereby the foreign exchange positions of the subsidiaries in relation to the income statement and monetary assets are sold to the Company. As such any exchange differences arising in the Company are "real" in that the functional currency matches the 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.
(xii) Leases
The cost of operating leases is charged to the income statement in equal periodic instalments over the period of the leases.
(xiii) 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.
4 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.
USA
Canada
UK
Europe 
(ex UK)
Other
Total
Year to 30th June 2015
Gross fee income
23,607,743
789,710
185,731
772,825
-
25,356,009
Non-current assets:
Property and equipment
295,440
-
84,635
-
4,008
384,083
Intangible assets
196,343
-
-
-
-
196,343
13 months to 30th June 2014
Gross fee income
22,212,008
764,445
287,139
951,685
-
24,215,277
Non-current assets:
Property and equipment
250,786
-
119,958
-
6,087
376,831
Intangible assets
215,323
-
-
-
-
215,323
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. Any individual client generating revenue of 10% or more would be disclosed separately, as would assets in a foreign country if they were material.
5 OPERATING PROFIT
Year to
13 months to
The operating profit is arrived at after charging:
30th June 2015
30th June 2014
Depreciation of owned assets
125,392
136,015
Amortisation of intangible assets
45,460
49,249
Auditors' remuneration:
- Statutory audit
80,347
69,138
- Taxation services
10,562
6,152
- Audit related assurance services
7,572
7,398
- Other services
1,937
3,817
Operating lease rentals:
- Land and buildings
377,837
385,351
- Other
1,527
888
6 INTEREST RECEIVABLE AND SIMILAR GAINS
13 months to
Year to
30th June 2015
30th June 2014
(restated)
Interest on bank deposit
57,482
96,985
Gain on sale of investments
7,205
147,427
Unrealised gain on investments
140,292
173,515
204,979
417,927
7 TAX CHARGE ON PROFIT ON ORDINARY ACTIVITIES
13 months to
Year to 
30th June 2014
(a) Analysis of tax charge on ordinary activities:
30th June 2015
(restated)
Tax at 21% (2014: 23%) based on the profit for the period
1,862,091
1,717,137
Double taxation relief
(1,163,081)
(1,057,311)
Deferred tax
13,795
16,564
Change in tax rate to 20%
(8,214)
(13,209)
Adjustments in respect of prior years
(1,689)
(1,681)
Domestic tax total
702,902
661,500
Foreign tax for the current period
1,634,366
1,378,365
Adjustments in respect of prior years
(19,264)
21,877
Foreign tax total
1,615,102
1,400,242
Total tax charge in income statement
2,318,004
2,061,742
(b) Factors affecting tax charge for the current period:
The tax assessed for the period is different to that resulting from applying the standard rate of corporation tax in the UK - 21% (prior year - 23%). The differences are explained below:
Year to
30th June 2015
  
13 months to
30th June 2014 (restated)
Profit on ordinary activities before tax
8,931,670
7,415,799
Tax at 21% (2014: 23%) thereon
(1,875,651)
(1,705,634)
Effects of:
Unrelieved overseas tax
(471,285)
(321,054)
Expenses not deductible for tax purposes
1,415
(25,294)
Income ineligible for tax
29,461
39,908
Capital allowances less than depreciation
(21,290)
(26,029)
Prior period adjustments
20,953
(20,196)
Deferred tax on share based-payments and investments
(13,795)
(16,564)
Change in tax rate to 20%
8,214
13,209
Other
3,974
(88)
Total tax charge in income statement
(2,318,004)
(2,061,742)
The reduction in the main rate of UK corporation tax to 20% with effect from 1st April 2015 is substantively enacted for accounting purposes. The effect of the rate reduction has been reflected in the figures above.
8 EARNINGS PER SHARE
The calculation of earnings per share is based on the profit attributable to shareholders of the parent for the period of 6,577,845 (2014: 5,303,235) divided by the weighted average number of ordinary shares in issue for the period ended 30th June 2015 of 24,907,864 (2014: 25,128,462).
The Employee Benefit Trust held 2,032,118 ordinary shares in the Company as at 30th June 2015. The Trustees of the Trust have waived all rights to dividends associated with these shares. In accordance with IAS 33 the ordinary shares held by the Employee Benefit Trust have been excluded from the calculation of the weighted average of ordinary shares in issue.
The calculation of diluted earnings per share is based on the profit attributable to shareholders of the parent for the period of 6,577,845 (2014: 5,303,235) divided by the diluted weighted average of ordinary shares for the period ended 30th June 2015 of 25,272,704 (2014: 25,305,973).
Reconciliation of the figures used in calculating basic and diluted earnings per share:
30th June 2015
30th June 2014
Number of shares
Numberofshares
Weighted average number of shares - basic earnings per share
24,907,864
25,128,462
Effect of dilutive potential shares - share options
364,840
177,511
Weighted average number of shares - diluted earnings per share
25,272,704
25,305,973
9 SHARE CAPITAL
 30thJune2015
30th June 2014
Group and Company
Allotted, called up and fully paid
At start of period 26,972,707 (2014: 26,937,707) Ordinary shares of 1p each
269,727
269,377
Dilutive share options exercised; 41,064 (2014: 35,000)
411
350
Shares repurchased and cancelled; 101,500 (2014: Nil)
(1,015)
_
At end of period 26,912,271 (2014: 26,972,707) Ordinary shares of 1p each
269,123
269,727
Fully paid ordinary shares carry one vote per share and carry a right to dividends.
10 DIVIDEND
 30thJune2015
30th June 2014
Dividends paid:
Interim dividend of 8p per share (2014: 8p)
1,985,039
2,010,354
Final dividend in respect of year ended:
30th June 2014 of 16p per share (2013: 16p)
3,974,788
4,020,708
5,959,827
6,031,062
A final dividend of 16p per share has been proposed, payable on 30th October 2015, subject to shareholder approval, to shareholders who are on the register of members on 9th October 2015.
11 FINANCIAL INSTRUMENTS
The Group's financial assets include cash and cash equivalents, investments and other receivables. Its financial liabilities include accruals 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 IAS39:
Group
Loans and
Assets at fair value through
Available-
30th June 2015
receivables
profit or loss
for-sale
Total
Assets as per statement of financial position
Other financial assets
-
2,049,170
26,784
2,075,954
Trade and other receivables
4,505,655
3,529
-
4,509,184
Cash and cash equivalents
10,226,705
-
-
10,226,705
Total
14,732,360
2,052,699
26,784
16,811,843
Liabilities at
Financial
fair value
liabilities at
through
amortised
profit or loss
cost
Total
Liabilities as per statement of financial position
Trade and other payables (1)
-
2,609,944
2,609,944
Total
-
2,609,944
2,609,944
Assets at fair
30th June 2014 (restated)
Loans and
receivables
value through
profit or loss
Available-
for-sale
Total
Assets as per statement of financial position
Other financial assets
-
1,796,202
28,782
1,824,984
Trade and other receivables
3,529,728
105,749
-
3,635,477
Cash and cash equivalents
10,242,906
-
-
10,242,906
Total
13,772,634
1,901,951
28,782
15,703,367
Liabilities at
Financial
fair value
liabilities at
through
amortised
profit or loss
cost
Total
Liabilities as per statement of financial position
Liabilities as per statement of financial position
-
1,294,456
1,294,456
Trade and other payables (1)
-
1,294,456
1,294,456
Note (1) Trade and other payables are due within three months
Company
Investment
Loans and
Assets at fair value through
Available-
30th June 2015
insubsidiaries
receivables
profitorloss
for-sale
Total
Assets as per statement of financial position
Other financial assets
1,784,645
-
-
26,147
1,810,792
Trade and other receivables
-
1,935,076
-
-
1,935,076
Cash and cash equivalents
-
82,804
-
-
82,804
Total
1,784,645
2,017,880
-
26,147
3,828,672
Liabilities at
Financial
fair value
liabilities at
through
amortised
profit or loss
cost
Total
Liabilities as per statement of financial position
Trade and other payables (1)
-
1,601,947
1,601,947
Total
-
1,601,947
1,601,947
 Assetsatfair
30th June 2014 (restated)
Investment
insubsidiaries
Loansandvaluethrough
receivablesprofitorloss
Available-
for-sale
Total
Assets as per statement of financial position
 
Other financial assets
1,730,509
- -
25,273
1,755,782
Trade and other receivables
-
2,288,484 -
-
2,288,484
Cash and cash equivalents
-
90,045 -
-
90,045
Total
1,730,509
2,378,529 -
25,273
4,134,311
Liabilities at
Financial
fair value
liabilities at
through
amortised
profit or loss
cost
Total
Liabilities as per statement of financial position
Trade and other payables (1)
-
438,270
438,270
Total
-
438,270
438,270
Note (1) Trade and other payables are due within three months
(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.
The fair values of the financial instruments are determined as follows:
 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.
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 2015
Available-for-sale financial assets
Investment in own funds
-
25,765
-
25,765
Total
-
25,765
-
25,765
Financial assets at fair value through profit or loss
Investment in other financial assets
2,020,615
29,561
13
2,050,189
Forward currency trades
-
3,529
-
3,529
Total
2,020,615
33,090
13
2,053,715
30th June 2014 (restated)
Level 1
Level 2
Level 3
Total
Available-for-sale financial assets
Investment in own funds
-
27,894
-
27,894
Total
-
27,894
-
27,894
Financial liabilities at fair value through profit or loss
Investment in other financial assets
1,782,333
14,743
14
1,797,090
Forward currency trades
-
105,749
-
105,749
Total
1,782,333
120,492
14
1,902,839
Company
30th June 2015
Level 1
Level 2
Level 3
Total
Available-for-sale financial assets
Investment in own funds
-
26,147
-
26,147
Total
-
26,147
-
26,147
30th June 2014 (restated)
Level 1
Level 2
Level 3
Total
Available-for-sale financial assets
Investment in own funds
-
25,273
-
25,273
Total
-
25,273
-
25,273
Level 3
Assets as of 30th June 2015 consist of one security valued at 13 (2014: 14). The Level 3 asset is an investment fund where significant unobservable inputs are being used to assign value as the investment fund is in liquidation. Previously quoted prices in active markets were being used in the valuation of the security. When the shares were placed into liquidation and market activity ceased, significant unobservable inputs were used to assign a value to the security as of year end.
The Fund establishes valuation processes and procedures to ensure that the valuation techniques for investments that are categorised within Level 3 of the fair value hierarchy are fair, consistent, and verifiable. The Group is responsible for overseeing the implementation of the valuation policies and procedures, which includes the valuation process of the Fund's Level 3 investments.
There were no transfers between any of the levels in the reporting period.
All fair value gains and losses included in other comprehensive income relate to the investment in own funds.
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 year or the preceding period.
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 94,670 (2014: net loss 26,563).
(iii) Foreign currency risk
Most of the Group's revenues, and a significant part of its expenses, are denominated in currencies other than sterling, principally US and Canadian 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 30 June 2015, the Group had net asset balances of US$4,819,332 (2014: S$4,543,237), offset by forward sales totalling US$5,250,000 (2014: US$5,250,000). Other significant net asset balances were C$325,558 (2014: C$287,421) and AED290,456 (2014: AED363,558), as well as net liability balances of SGD651,590 (2014: net assets of SGD389,947).
Had the US dollar strengthened or weakened against sterling as at 30th June 2015 by 10%, with all other variables held constant, the Group's net assets would have increased or decreased (respectively) by approximately 0.7%, because the US dollar position is hedged by the forward sales.
Further details on the effects on the Group's post-tax profits due to movements in the US dollar/sterling exchange rate have been demonstrated in the Financial review.
(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, 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 0.2 million in the value of the investments and profit before tax.
The Group is also exposed to market risk indirectly via its assets under management, from which its fee income is derived. To hedge against any potential loss in fee income due to a fall in the markets, the Group will look to invest in out-of-the-money put options on the emerging markets index. The purchase and sale of these options 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 income from hedging recognised in the Group income statement for the period is 7,604 (2014: no hedging activity). Further details on the effects on the Group's post-tax profits due to movements in market prices have been demonstrated in the Financial review.
(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 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 current available-for-sale assets represent investments in funds that it manages and 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 2015 the Group held 10,226,705 (2014: 10,242,906) in cash balances, of which 9,977,221 (2014: 9,650,902) 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 principal operating subsidiary company, 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 Adequacy Assessment Process ("ICAAP"), under which the Board quantifies the level of capital required to meet operational risks. The objective of this is to ensure that the firm 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.

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  END
FR PKBDBPBKDBCD