City Lon Inv Regulatory News (CLIG)

27 Oct 2008 07:00



27 October 2008

CITY OF LONDON INVESTMENT GROUP PLC

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

Annual General Meeting

Trading Update

At the Company's Annual General Meeting to be held at its new offices at 77 Gracechurch Street, London, EC3V 0AS today at 11.30 am., the Chairman of City of London Investment Group (AIM: CLIG), Andrew Davison, will update shareholders as follows:

"The emerging markets and natural resource companies in which City of London invests have experienced a significant reduction in value over the past six months following their appreciation in the Group's last financial year to 31 May 2008. The MSCI Emerging Markets Index has declined by 57% in the period from our last year end to 23 October 2008 as a result of the turmoil in financial markets worldwide. This decline compares to a 44% fall in the FTSE 100 and a 31% drop in the Dow Jones Industrial Index over the same period. Funds under management ("FUM") have continued to outperform the MSCI Emerging Markets Index, reducing by 51%, from US$ 4.7 billion at 31 May 2008 to US$2.3 billion as at 23 October 2008. Client rebalancing has gone from negative to positive as emerging market allocations are increased following the falls in markets, and overall net new funds received from clients since our year end total $0.3 billion, while committed new monies for the next quarter amount to a further $0.4 billion.

"Despite the reduction in FUM, and as a direct consequence of the high variable element of our cost base, unaudited pre-tax profits for the first four months of the financial year have held up well - declining by 12% to £2.9 million (2007/8: £3.3 million). The relative strength of the US dollar throughout this period has significantly reduced the effect on earnings of the fall in FUM. 

"As we have advised shareholders previously, the Directors believe City of London is well placed to withstand the global downturn. In our opinion, our principal investment markets are in better shape to face such a downturn than at any period in the past: they are now less dependent on exports to Western economies, in many instances their foreign exchange reserves are at record levels and economic growth rates are forecast to be significantly ahead of the major, developed economies. City of London's risk-averse business model, founded on relative return products, offers greater stability in these difficult times, and the financial strength of the Company derives from highly liquid net assets with no discernible counterparty risk.

"The Company's policy of paying dividends that are approximately one and a half times covered by net earnings, which will be flexibly applied, will be maintained. The aim will be to allocate, as usual, one third/two thirds between the interim and final dividends.

"As a result of current conditions in financial markets and based upon feedback from shareholders, the Directors have decided to postpone the proposed transition from AIM to a full market listing on the London Stock Exchange for the time being, whilst being committed to this at the point that FUM returns to earlier levels.

"The Company will next update shareholders with its quarterly announcement of funds under management as at 30 November in early December 2008." 

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