City of London Investment Group is a City investment 'boutique' with a specifdic focus on emerging market closed-end funds. This is supplemented by natural resource and country specific emerging markets stocks within regional and global emerging market equity funds. Therefore they are firmly embedded in both emerging markets and closed-end funds.

They have had a tough year with FUM falling from £3bn to £2.4bn over the past 12 months although circa 83% of this was attributable to the loss of one major client. This client decided to take the management of its emerging market exposure (0.5bn) in-house after 5 years, based upona change in their strategic objectives.

During this period the shareprice has also fallen by 30% from 359p to 249p. However it looks as though the fall could have bottomed out and we could now see the shareprice rising again over the next 12 months due to a number of factors and management initiatives.

* The benchmark MXEF emerging market index is up by 7% over the past 7 weeks

* FUM increased by £100m of 4% during December

* Margins are up by 7%

* At the end of H1 the company had net cash of £5.8m (22p per share) and no pension deficit.

* Current year profit after tax should be circa £7m with eps of 26p

* Cost savings of £1m have been identified and implemented and are expected to be fully reflected in the new financial year 2013 - 2014

* A wide discount to NAV within many of their closed investment funds reflects does not yet reflect under supply of constructed product, which should result in a narrowing of discounts narrow and a corresponding improvement in investment performance.

* Their dividend policy is normally based on a split of one third/two thirds between the interim and the final. The interim dividend was confirmed at 8p and since there are currently "no plans for this to change" then the final dividend should remain at 16p. At the current shareprice this results in any annual yield of 9.5%

* Insiders hold 27% of the shares and 5 institutions hold around 35% of the stock.

CLIG is one of the most transparent and intelligently managed niche city investment operations. Their management philosophy was succinctly summarised by founder and CEO Barry Olliff last year:
"As shareholders are aware, we run a business with a very simple business model. We collect fees from our clients for our services, we pay our bills which are both forecastable and to a great extent fixed. We don't use leverage, nor off-balance sheet instruments, nor do we trade derivatives as principal (other than occasional low level hedging). There are no associated companies or minority interests within the Group. We do not use tax havens. We do not handle client monies. We have a significant amount of cash in the bank relative to our size and we basically stick to what we know.

With regard to remuneration we continue to distribute 30% of our profits as profit-share. Our staff, clients and shareholders understand this formulaic approach. It's a pity that this approach has not been embraced by the financial service industry generally. As it is, in many parts of the financial services industry it seems as if losses are not the responsibility of mangers rather it's the shareholders who take the rap. Whilst our formulaic approach seems out of keeping with many in our industry, at least our shareholders have an idea that our returns go up and down together with theirs.

We have continued to manage our business very conservatively. We have continued to attempt to keep costs down. We do not spend shareholders' funds entertaining and we generally attempt to manage our business as if shareholders were present in our offices every day of the week. One reason I would suggest that expenses are kept down is because staff are either shareholders themselves or own shares via the CLIG ESOP. At present staff own (including ESOP ownership) 27.9% of CLIG shares, and 75 out of 82 of us are incentivised in this way (a handful of more recent recruits do not yet hold options).

CLIG are also fully listed so they are ISA eligible too.
In my view they offer a good recovery proposition plus a stonking dividend in the meantime.
As always people should do their own research and the best place to start is on the company's own website.

http://www.citlon.com/indexf.php

Hi burgdorf

It is comforting for me to know that you are still a fan of this stock, one of my core holdings. I was particularly relieved this morning to see:-

* The benchmark MXEF emerging market index is up by 7% over the past 7 weeks

* FUM increased by £100m of 4% during December

* Margins are up by 7%

The shares had been weak and a small concern to me since the last trading statement.

I nearly added to my significant holding this morning but have not done so yet. I always am happier when going with an established market flow. I am not sure if the market has really got hold of the good December news yet and I have no other positions that I can bring myself to liquidate.

ATB
Tomt

Whilst our formulaic approach seems out of keeping with many in our industry, at least our shareholders have an idea that our returns go up and down together with theirs.

so does it mean that if they make a loss, and their 30% share of the loss is higher than their fixed salary, they will pay the company to come to work?

Hi Tom,

I'm not only remain long and strong here but I also added at 252.9p yesterday. The yield at that price is 9.5% and my personal yield on my overall holding is still a stonking 8.6%. In my view this is an extremely professional, ethical and well managed company where management interest is also aligned with the external shareholders and I expect their FUM and profits to rise over the next 12 months.

Furthermore, Barry Olliff will retire in two years time when he reaches 70 and he has already implemented a good succession plan with Doug Allison moving up from FD to CEO this month. Barry Olliff will now concentrate his activities in the role of Chief Investment Officer in order to get the share price up so that he can cash in some of his shareholding in 2015 and also optimise their value for the benefit of his charitable endowment of shares to the Newlin Foundation.

This was the view expressed by Barry Olliff in the FT this morning.

City of London IG hit by loss of big client

“It was not performance-related, so it was a bit of a bolt out of the blue.” However, the company said it has already replaced the funds lost, and forecast that it would benefit from an expected uptick in trade this year.

Whole article can be accessed here: http://www.ft.com/cms/s/0/db7cf0a8-63e9-11e2-b92c-00144feab4...

I have held this stock since early '10. I emailed D Allison (CEO)on a couple of points in November and he replied immediately. That's pretty good for a man who is flat out most of the time. On the strength of the brief correspondence I added a fair chunk to my holding. I like the business but I suspect they will face increasing competition in an area that will attract more interest over time. However, I think they are more than equal to the task. One niggle. Pity about the typo/grammar in Barry Olliff's statement. A small point I know, but a bit of proof reading does no harm.

F1

PS - Tom, good to see you are in play on this one.

F1

Tom, good to see you are in play on this one.

I wish that I had been yesterday by adding more. They are up 7% today so far!
:-(

Still I can't complain, they make a fair sized chunk of my PEP/ISA porty and I am happy that they are rising out of the doldrums.

ATB
Tom.

Tom

Phew! Must admit it had me chewing my nails a bit last autumn when many seemed to be bailing and I was topping up for the long term. What do Slater Investments know about investing, heh! As always, a fine line between bravery and stupidity. Relief. Doesn't always work to plan. Fingers crossed for the future.

Best

F1

PS - Keep an eye on WZR.

Heading back towards the doldrums in the last few days. Can't find any news. Is this a Buy moment, or is summat up?

V8

Heading back towards the doldrums in the last few days. Can't find any news. Is this a Buy moment, or is summat up?

The shareprice climbed 17% in the two weeks following the interims and there has been a slight retrace over the past 10 days on very low volumes. The average daily volume over the past four months was 88K, but over the past 10 days since the price peaked post interims, the average daily volume has only been 37k or just 42% of the longer term recent average. This suggests boredom and maybe a little profit taking but it is not indicative of any distribution having taken place.

There has been no significant news since the interims over 5 weeks ago, other than founder and CIO Barry Olliff buying 50,000 shares at an average price of 287.5p, so, as far as I am concerned, "nuthins up" !

Strange news yesterday:

'The Trust announces that its Investment Manager, Alpha Real Capital LLP ("ARC"), today purchased 3,000,000
ordinary shares at 6p per share. This transaction represents 2.6% of the issued share capital. Following the purchase ARC will own 7,400,000 ordinary shares.'

If this is true, given a share price of 265p it seems rather a bargain, depending which side of the bargain one is on.

V8

Strange news yesterday:

'The Trust announces that its Investment Manager, Alpha Real Capital LLP ("ARC"), today purchased 3,000,000
ordinary shares at 6p per share. This transaction represents 2.6% of the issued share capital. Following the purchase ARC will own 7,400,000 ordinary shares.'

If this is true, given a share price of 265p it seems rather a bargain, depending which side of the bargain one is on.

Hi V8,

What is the link between Alpha Pyrenees (that you post above refers to - link below) and City of London Investment Group ("CLIG")?

http://www.investegate.co.uk/alpha-pyrenees-trust--alph-/rns...

There's no link I can immediately see - is it relevant to CLIG?

SM

There's no link I can immediately see - is it relevant to CLIG?

Hmmmm, I think perhaps not. It may be bs that I should have checked before posting on here. If I find otherwise, I'll be back...

V8

I seem to remember reading this was one of Kevin Goldstein-Jackson's core holdings.

Some interesting developments at CLIG

http://m.londonstockexchange.com/exchange/mobile/news/detail...

CEO and FD depart (fired? anyone has insights?), never a good sign, share price reaction is pretty muted, down some 3%.

RNS is at pains to put a positive spin on current operations -

Operations
Since announcing in the Quarterly Funds Under Management Update on 4 March 2013, investment performance has continued to improve and the client base has remained stable. Existing clients have given preliminary indications of funding additional mandates of approximately $75 million in the Emerging Markets CEF strategy.
Furthermore the Group re-confirms that the current run-rate for operating profit, before profit-share, is approximately £1.1 million per month based upon current FuM and a US$/£ exchange rate of US$1.535 to £1.
Dividends
As previously stated, the Board's intention remains to recommend a final dividend of not less than 16 pence, subject to stable markets and profitability over the final month of the financial year.

PlayDumb
Opened position last week, looking forward to further falls to (gulp) add more :|

I think the RNS gives an indication of the issue. Two key cogs departing, CEO (former FD) and acting FD. Number crunchers tend to be prudent by their nature. That is the requirement and traditional role of a sensible beancounter. My guess is they are not comfortable with the affordability of the divi re performance/cash flow of the outfit. B Olliff, ex CEO, taking back the reigns doesn't look great. I think they are sailing close to the wind on divi cover. I suspect that B Olliff, ex CEO and main man of the outfit, is taking the Captain Ahab route of 'we'll do it by hook or by crook'.

F1

My guess is they are not comfortable with the affordability of the divi re performance/cash flow of the outfit. B Olliff, ex CEO, taking back the reigns doesn't look great. I think they are sailing close to the wind on divi cover. I suspect that B Olliff, ex CEO and main man of the outfit, is taking the Captain Ahab route of 'we'll do it by hook or by crook'.

Fabius1,

Mr Olliff is just one director and they were two ! One must also assume there are a number of non executive directors involved in any change in strategy or dispute within the boardroom. There must be a chairman involved and I presume he or she will be keeping the City informed. We just see RNS announcements !

UKDT

Not sure if you are familiar with the company so a few points.

B Olliff effectively founded City of London Investment Grp in 1991. They specialise in managing funds mainly focusing on closed end investments of one description or another in the emerging markets. Market cap as of today is £65m. B Olliff has been at the helm since the inception of the company and stood down as CEO in January (officially) to prepare the way for his retirement. He owns shares to the tune of £7.5m and six directors own a snip under £2m. He was officially succeeded by D Allison, the former FD, in Jan '13. I believe he sold his shares in Sep '12 & Nov '12 (including those transferred to his wife). Not sure about options without ferreting around in the accounts. Given the above, it seems a little odd that he should relinquish his position together with the acting FD after such a short period. As far as I know, it was not a caretaker position although the sale of shares might indicate a relaxed commitment to the business. I would add that the divi has been under scrutiny for the best part of a year, despite assurances via several RNS that it is the intention of the BOD to maintain the existing dividend payout subject to the usual etc. Please note that the company policy on dividend cover was relaxed last year in order to maintain the payout in view of the optimism regarding future trading. I am sure the chairman and the non exec BOD are up to speed but I think we all know that the activities and views on the shopfloor are not always reflected in the boardroom minutes.

Hence my comments.

F1

Ok so why have 3 board members resigned in in quick succession after very short tenure in some cases? I see the sp has dropped even further - another 3% now to 243.
a