city of london
i n v e s t m e n t g r o u p p l c
ANNUAL REPORT & ACCOUNTS 2011
London office
77 Gracechurch Street
London
EC3V 0AS
United Kingdom
Telephone: + 44 (0) 207 711 0771
Facsimile: + 44 (0) 207 711 0772
US office
The Barn
1125 Airport Road
Coatesville, PA 19320
United States
Telephone: + 1 610 380 2110
Facsimile: + 1 610 380 2116
Singapore office
20 Collyer Quay
10-04 T ung Centre
Singapore 049319
Telephone: + 65 6236 9136
Facsimile: + 65 6532 3997
Dubai office
Unit 2, 2nd Floor
The Gate Village Building 1
Dubai International Financial Centre
PO Box 506695
Dubai
United Arab Emirates
Telephone: + 971 (0)4 423 1780
Facsimile: + 971 (0)4 437 0510
www.citlon.co.uk
CITY OF LONDON INVESTMENT GROUP PLC    ANNUAL REPORT & ACCOUNTS 2011
1      City of London Investment Group Plc
We are an established asset management group which has built its
reputation, with an institutional client focus, by specialising in Emerging
Market closed-end fund investment. At 31st May 2011 our funds under
management amounted to US$5.8 billion.
In recent years we have successfully added equities (Natural Resources and
Emerging Markets) and Developed Market closed-end fund strategies to our
product range. We operate our business from offices in London, the US,
Singapore and Dubai.
City of London Investment Group PLC 
What we do
At City of London, we focus on building products that reflect our expertise.
Initially, and for many years since the firm was founded, that expertise was
very specific to closed-end funds which offered emerging markets exposure.
This was subsequently complemented by research into the underlying equities,
which in turn spawned regional and global emerging market equity funds. Most
recently, we have applied our unrivalled knowledge of closed-end funds to the
development of a global (ex US) closed-end fund product. So today, while we
remain both proud and protective of our “boutique” status, we offer a range of
products which are defined by the twin pillars of our expertise: emerging
markets and closed-end funds.
“While we remain both proud and
protective of our “boutique”status,
we offer a range of products
which are defined by the twin 
pillars of our expertise: emerging
markets and closed-end funds.”
Investment process
We have developed and nurtured a team investment process which does not
rely on ‘star’ fund managers, but rather upon a series of analytical
procedures that can produce repeatable and sustainable first or second
quartile performance versus our peers. 
Our process employs an array of proprietary tools for analysing and identifying
value. These quantitative tools supplement both macroeconomic analysis and
20 years of trading expertise. Whether it is taking advantage of discount
anomalies in closed-end funds, or company specific valuation in our equity
business, through three full market cycles in Emerging Markets, the process has
delivered consistent relative outperformance combined with low volatility
relative to our clients’ benchmarks.
www.citlon.co.uk
Stage 1
Macroeconomic research
Stage 2
Qualitative research
Stage 3
Country re-
ranking city of london
i n v e s t m e n t g r o u p p l c
ANNUAL REPORT & ACCOUNTS 2011
London office
77 Gracechurch Street
London
EC3V 0AS
United Kingdom
Telephone: + 44 (0) 207 711 0771
Facsimile: + 44 (0) 207 711 0772
US office
The Barn
1125 Airport Road
Coatesville, PA 19320
United States
Telephone: + 1 610 380 2110
Facsimile: + 1 610 380 2116
Singapore office
20 Collyer Quay
10-04 T ung Centre
Singapore 049319
Telephone: + 65 6236 9136
Facsimile: + 65 6532 3997
Dubai office
Unit 2, 2nd Floor
The Gate Village Building 1
Dubai International Financial Centre
PO Box 506695
Dubai
United Arab Emirates
Telephone: + 971 (0)4 423 1780
Facsimile: + 971 (0)4 437 0510
www.citlon.co.uk
CITY OF LONDON INVESTMENT GROUP PLC    ANNUAL REPORT & ACCOUNTS 2011
1      City of London Investment Group Plc
We are an established asset management group which has built its
reputation, with an institutional client focus, by specialising in Emerging
Market closed-end fund investment. At 31st May 2011 our funds under
management amounted to US$5.8 billion.
In recent years we have successfully added equities (Natural Resources and
Emerging Markets) and Developed Market closed-end fund strategies to our
product range. We operate our business from offices in London, the US,
Singapore and Dubai.
City of London Investment Group PLC 
What we do
At City of London, we focus on building products that reflect our expertise.
Initially, and for many years since the firm was founded, that expertise was
very specific to closed-end funds which offered emerging markets exposure.
This was subsequently complemented by research into the underlying equities,
which in turn spawned regional and global emerging market equity funds. Most
recently, we have applied our unrivalled knowledge of closed-end funds to the
development of a global (ex US) closed-end fund product. So today, while we
remain both proud and protective of our “boutique” status, we offer a range of
products which are defined by the twin pillars of our expertise: emerging
markets and closed-end funds.
“While we remain both proud and
protective of our “boutique”status,
we offer a range of products
which are defined by the twin 
pillars of our expertise: emerging
markets and closed-end funds.”
Investment process
We have developed and nurtured a team investment process which does not
rely on ‘star’ fund managers, but rather upon a series of analytical
procedures that can produce repeatable and sustainable first or second
quartile performance versus our peers. 
Our process employs an array of proprietary tools for analysing and identifying
value. These quantitative tools supplement both macroeconomic analysis and
20 years of trading expertise. Whether it is taking advantage of discount
anomalies in closed-end funds, or company specific valuation in our equity
business, through three full market cycles in Emerging Markets, the process has
delivered consistent relative outperformance combined with low volatility
relative to our clients’ benchmarks.
www.citlon.co.uk
Stage 1
Macroeconomic research
Stage 2
Qualitative research
Stage 3
Country re-
ranking Designed and produced by fourthquarter
Where we operate
United Kingdom
The London office, our first, has been based in the City of London since
1991. In London, we undertake investment management for our clients 
and research into our global markets from the European time zone.
USA
Our second office was established near Philadelphia in the United States 
in 1995 to better service the growing client base in North America 
and to enable us to provide investment management from the Americas 
time zone.
Singapore
The third office, to cover Far East Emerging Markets in real time, 
opened in central Singapore in 2000, positioning the Group to cover 
our worldwide target investment markets 24 hours a day.
Dubai
In 2008, we opened our fourth office, in Dubai, which allowed us to access
investment opportunities in the region as well as to increase the Group’s
visibility with funds in the area.
We recognise that our shareholders have trusted us with their money. 
We seek to communicate with our shareholders in a transparent and open
fashion, whether at face-to-face meetings with our larger institutional holders or
at group meetings with advisers and individual shareholders. We try to make all
of our announcements simple and accessible. We believe that our shareholders
have a right to know what to expect from us.
We have sought, for example, to make our dividend policy – the most direct way
we have of rewarding shareholders – understandable to all. We pay out the major
part of post-tax profits in dividends, based on a formula of one and a half times
cover with one third payable as an interim dividend and two thirds as a final.
Financial calendar
Year end 31st May 2011
Pre-close trading update 13th June 2011
Preliminary final results, first quarter funds under
management (FuM) and final dividend announcement 6th September 2011
Posting of Annual Report and Notice of Meeting (AGM) 9th September 2011
AGM and Interim Management Statement (IMS) 3rd October 2011
Ex-dividend date for the final dividend 5th October 2011
Final dividend record date 7th October 2011
Final dividend payment 21st October 2011
Second quarter FuM announcement 5th December 2011
Half year results and interim dividend announcement 23rd January 2012
Ex-dividend date for the interim dividend 8th February 2012
Interim dividend record date 10th February 2012
Interim dividend payment 27th February 2012
Third quarter FuM announcement and IMS 5th March 2012
Year end 31st May 2012
Investor relations
City of London’s client base is, and always has been, overwhelmingly
institutional. Our clients include pension funds, foundations and endowments
and other professional money managers.  
What they have in common is a desire to access the returns available in
‘difficult’ emerging markets. We have provided that access over many years 
and cycles with a consistent record of investment performance against their
benchmarks. Clients can then focus on their asset class allocation decisions.
Our clients
     Pension 48%
     Other institutional 9%
     Retail 1%
     Endowments & Foundations 42%
“We use technology to leverage
our capabilities, allowing us to
trade worldwide 24/7 based
on real time information on
underlying investment portfolios.”
We believe that our approach and philosophy differs significantly from 
our peers. Our resolute focus is on generating consistent investment
performance – over time and through economic cycles.  
We use technology to leverage our capabilities, allowing us to trade worldwide
24/7 based on real time information on underlying investment portfolios. 
Our process driven investment approach is applicable to markets other than 
the core, original emerging markets closed-end funds. We have internalised our
marketing to aid this process of diversification.
The way in which we manage our business is important too. We are above all
risk-averse. Profits, margins and costs are carefully managed to provide our
staff with appropriate remuneration and shareholders with progressive,
meaningful dividends.
Our competitive advantage Designed and produced by fourthquarter
Where we operate
United Kingdom
The London office, our first, has been based in the City of London since
1991. In London, we undertake investment management for our clients 
and research into our global markets from the European time zone.
USA
Our second office was established near Philadelphia in the United States 
in 1995 to better service the growing client base in North America 
and to enable us to provide investment management from the Americas 
time zone.
Singapore
The third office, to cover Far East Emerging Markets in real time, 
opened in central Singapore in 2000, positioning the Group to cover 
our worldwide target investment markets 24 hours a day.
Dubai
In 2008, we opened our fourth office, in Dubai, which allowed us to access
investment opportunities in the region as well as to increase the Group’s
visibility with funds in the area.
We recognise that our shareholders have trusted us with their money. 
We seek to communicate with our shareholders in a transparent and open
fashion, whether at face-to-face meetings with our larger institutional holders or
at group meetings with advisers and individual shareholders. We try to make all
of our announcements simple and accessible. We believe that our shareholders
have a right to know what to expect from us.
We have sought, for example, to make our dividend policy – the most direct way
we have of rewarding shareholders – understandable to all. We pay out the major
part of post-tax profits in dividends, based on a formula of one and a half times
cover with one third payable as an interim dividend and two thirds as a final.
Financial calendar
Year end 31st May 2011
Pre-close trading update 13th June 2011
Preliminary final results, first quarter funds under
management (FuM) and final dividend announcement 6th September 2011
Posting of Annual Report and Notice of Meeting (AGM) 9th September 2011
AGM and Interim Management Statement (IMS) 3rd October 2011
Ex-dividend date for the final dividend 5th October 2011
Final dividend record date 7th October 2011
Final dividend payment 21st October 2011
Second quarter FuM announcement 5th December 2011
Half year results and interim dividend announcement 23rd January 2012
Ex-dividend date for the interim dividend 8th February 2012
Interim dividend record date 10th February 2012
Interim dividend payment 27th February 2012
Third quarter FuM announcement and IMS 5th March 2012
Year end 31st May 2012
Investor relations
City of London’s client base is, and always has been, overwhelmingly
institutional. Our clients include pension funds, foundations and endowments
and other professional money managers.  
What they have in common is a desire to access the returns available in
‘difficult’ emerging markets. We have provided that access over many years 
and cycles with a consistent record of investment performance against their
benchmarks. Clients can then focus on their asset class allocation decisions.
Our clients
     Pension 48%
     Other institutional 9%
     Retail 1%
     Endowments & Foundations 42%
“We use technology to leverage
our capabilities, allowing us to
trade worldwide 24/7 based
on real time information on
underlying investment portfolios.”
We believe that our approach and philosophy differs significantly from 
our peers. Our resolute focus is on generating consistent investment
performance – over time and through economic cycles.  
We use technology to leverage our capabilities, allowing us to trade worldwide
24/7 based on real time information on underlying investment portfolios. 
Our process driven investment approach is applicable to markets other than 
the core, original emerging markets closed-end funds. We have internalised our
marketing to aid this process of diversification.
The way in which we manage our business is important too. We are above all
risk-averse. Profits, margins and costs are carefully managed to provide our
staff with appropriate remuneration and shareholders with progressive,
meaningful dividends.
Our competitive advantage Annual Report 2011 1
Highlights 2
Chairman’s statement 3
Chief Executive Officer’s review 5
Business review 9
Financial review 11
Board of Directors 14
Directors’ report 16
Corporate governance report 18
Remuneration report 22
Statement of Directors’ responsibilities 27
Independent auditors’ report 28
Consolidated income statement 30
Consolidated and Company statement
of comprehensive income 30
Consolidated and Company statement
of financial position 31
Consolidated statement of changes in equity 32
Company statement of changes in equity 33
Consolidated and Company
cash flow statement 34
Notes to the financial statements 35
Notice of Annual General Meeting 55
Notes to the Notice of Annual General Meeting 57
Professional advisers 60
Contents Financial highlights
2 City of London Investment Group PLC
•
Funds under management (FuM) at 31st May 2011
increased by 33% in US$ terms to US$5.82 billion
(2010: US$4.38 billion) and by 18% in sterling terms
to £3.54 billion (2010: £3.01 billion). The rise in the
MSCI Emerging Markets Index (MXEF) was 29%.
•
FUM at the end of August 2011 were US$5.22 billion,
a fall of 10.3% since the financial year end.
This compares to a fall of 10.6% in MXEF over the
same period.
•
Profit before tax was up 27% to £13.1 million
(2010: £10.4 million) with basic earnings per share
up 23% to 35.1p (2010: 28.5p).
•
Recommended final dividend of 16p per share
(2010: 15p), payable on 21st October 2011, subject
to shareholder approval, to shareholders on the
register on 7th October 2011, making a total for
the year of 24p (2010: 22p).
Operational highlights
•
Listed on the main market of the London Stock
Exchange on 29th October 2010.
07 08 09 10 11
3,793 
4,706
3,500
4,379
5,822
Funds under management US$m
07 08 09 10 11
Pre-tax profit £m
7.3
10.7
5.4
10.4
13.1 For the second year in a row, our principal
investment markets (as measured by the
MSCI Emerging Markets Index, MXEF)
grew by in excess of 20%. Funds under
management (“FuM”) were US$5.82
billion (£3.54 billion) at 31st May 2011
(2010: US$4.38 billion or £3.01 billion),
representing a 33% increase in US$ terms
and an 18% increase in sterling terms. This
reflects net new client monies as well as out
performance over and above MXEF , which
increased by 29% over the same period
(31st May 2010 to 31st May 2011).
As anticipated by our investment
management team, emerging markets since
our year end have essentially tracked down
as investors, domestic and international,
have settled for the (almost) risk-free
returns available on cash as a result of a
series of rate rises in the principal emerging
markets. As at 31st August 2011, MXEF
has fallen 10.6% since our year end.
FUM were US$5.22 billion at 31st August
2011, a fall of 10.3% over the figure at
31st May 2011.
Results  
Revenue for the year to 31st May 2011
(being the fees derived from the Group’s
management charges on FuM) increased by
22% to £36.5 million (2010: £30.0 million) .
Profit before tax increased by 27% to 
£13.1 million (2010: £10.4 million) net of 
a one-off charge of £0.4 million relating to
the costs of our upgrade to the main market
of the London Stock Exchange (2010: nil).
Basic profit per share, after a tax charge of
£4.4 million, representing 33% of pre-tax
profits (2010: £3.4 million, representing
33% of pre-tax profits), increased by 23%
to 35.1p (2010: 28.5p). Fully diluted profit
per share increased by 26% to 34.0p
(2010: 26.9p). Cash and cash equivalents
at the year-end were £6.1 million (2010:
£4.8 million).
Dividends
In line with the Group’s policy of paying
dividends that are approximately 1.5 times
covered by profit per share, the Board is
recommending a final dividend for the
year to 31st May 2011 of 16p per share
(2010: 15p) to be paid some four weeks
earlier than last year on 21st October
2011 to shareholders on the register on
7th October 2011. This would bring the
total for the year, including the interim
dividend of 8p paid on 28th February
2011 (2010: 7p), to 24p (2010: 22p),
representing an increase of 9%. The level
of payout this year is covered 1.46 times
by basic profit per share compared to 
1.30 times last year.
Upgrade to the Main Market
At the end of October 2010, the
Company’s ordinary shares were delisted
from AIM, where they had traded for 
four and a half years, and admitted to the
Official List of the UK Listing Authority
and the London Stock Exchange’s main
market. The Board believed that this
natural progression would result in a 
wider potential investor universe for 
City of London Investment Group shares. 
This has proved to be the case in the 
10 months since, both for individual
investors (who can now hold our shares 
in ISAs) and for institutional investors 
(a number of whom are unable to invest
in AIM listed entities). 
Chairman’s statement
“Despite the volatility in the
markets in which we operate,
we are confident that our
investment process can continue
to produce good returns for our
clients and shareholders.”
Annual Report 2011 3 4 City of London Investment Group PLC
Chairman’s statement
Continued
Diversification
We are seeing significant progress in two
of our diversification products. The first is
Natural Resources where the Group has
recently won a number of mandates to 
be funded over the next few months. 
The second is developed market closed-
end funds where we have recently won 
a significant mandate which we hope 
will be the first of many, based upon the
consistent outperformance demonstrated
by this product. In both cases there 
is significant consultant interest in 
the products.
From 1st June 2011, the Group has
employed two additional marketers,
bringing the total team to three people.
Our aim is to attract new monies which
for the most part earn significantly higher
margins for the Group because they do
not attract the marketing commission
charged by the Group’s former third
party marketing agency. We hope to see
further increases in the net margins
earned by the Group as the expanded
internal marketing team gains traction
and we focus increasingly on the
diversification products.
Board and management
Post our year end, on 3rd June 2011, the
Group announced the appointment of 
an additional non-executive Director, 
Rian Dartnell. Rian is a US citizen and
resident and is Chief Investment Officer
for Granite Associates, responsible for
setting and implementing the firm’s
investment strategy and for managing 
the investment team. He joined Granite
Associates in 2001, prior to which he 
held a number of senior international
investment management appointments,
latterly with Global Asset Management.
Rian knows both our investment and
client markets well and I am sure that 
his experience and knowledge will benefit
the Board’s decisions. I welcome him 
to the Group. 
The Board has carefully considered the
important matter of Barry Olliff’s
succession. He has the roles of both 
Chief Executive Officer (CEO) and
Chief Investment Officer (CIO), and he
has already told shareholders that he
wishes to be able to retire in 2015 – his
well publicised share sale programme is a
preparation for this event. He now holds
13.5% of the shares. Working closely
with Barry the Board decided that Doug
Allison, who is currently Chief Financial
Officer (CFO) and has been with the
company 14 years, will make an excellent
successor CEO and intend to make this
appointment in 2013. The Board is also
discussing with Barry the best way to
ensure that his role as CIO is passed on 
so as to ensure the continuation of the
Group’s successful investment performance. 
Staff
During the year great demands have been
made on the staff in all areas of the
Group, reflecting the challenging markets
in which we trade and the need to be
properly equipped to maintain the highest
standards of professionalism. I heartily
thank them all for their hard work,
initiative and loyalty.
Outlook
This year has already felt the effects of the
economic turbulence resulting from the
difficulties of Governments to manage
their economies satisfactorily. We believe
that our core products together with our
newer strategies will place us in a relatively
good position to confront the future
uncertainties. Despite the volatility in the
markets in which we operate, we are
confident that our investment process can
continue to produce good returns for our
clients and shareholders.
I will update shareholders on progress at
the time of the AGM, which will be held
on 3rd October 2011.
Andrew Davison
Chairman
1st September 201 1 Annual Report 2011 5
Chief Executive Officer’s review
“As Corporate Governance is
such a topical subject at
present, I thought it would be
good to go through some of our
core values in this regard
which, as a result of us being
CEF specialists, are in some
instances a little nuanced.”
Looking back at our financial year to the end
of May 2011 it seems to have been in two
halves. During the first half, MXEF which,
as we have said before, is a good proxy for
measuring both what we do and also for our
investment performance, appreciated 25%.
In the second half of our financial year,
while demonstrating a little volatility, it
was relatively unchanged.
It was this period of sideways-moving
markets that has led to some widening of the
Discounts to NAV in several of the Closed-
End Funds (CEFs) in which we invest.
This has happened under similar
circumstances in the past. Whilst this has
impacted investment performance it has
also been seen by a few of our clients as an
opportunity to add further assets.
Going back through many cycles, the 
CEF industry seems to take advantage of
significant issuance opportunities when
relevant markets are doing well. We have
watched this time and time again. Retail
seems to support markets that are
appreciating, encouraging brokers and
investment banks (who as we say, have very
active minds!) to grow our industry via
rights issues and new issuance of additional
CEF products. While this is good for us 
in the long term as a result of providing
additional investment opportunities,
sometimes it can lead to an overhang.
When markets disappoint, and the
Emerging markets have now been trending
sideways for nearly a year, and discounts
become wide, we expect the reverse to
occur – that is, we expect corporate actions
to reduce the supply of CEF shares.
In our view responsibility for this lies with
the CEF Directors because it is unlikely
that a CEF Manager will volunteer to have
his fees reduced via some type of corporate
action such as a buy back, a tender offer or
an in specie distribution.
Bigger is better, seems to be the motto.
But smaller? Only if Shareholders insist!
That this has been going on for over 100
years is not in doubt. You just have to read
the history of the CEF sector to see that.
What we are referencing however are the
relevant events over the past twenty years
since we started our business.
In this regard the first really relevant
corporate governance document that we
produced was in 1999, our “Statement 
on Corporate Governance and Voting
Intentions for Closed-End Funds.” 
This was sent to all of our clients and
relevant Directors of the CEFs in which 
we invested at that time. Subsequently 
we have regularly updated this document,
with the last version, dated 2011,
having just been sent to our clients,
consultants and relevant CEF Directors.
It is also available on our website,
www.citlon.co.uk.
As Corporate Governance is such a topical
subject at present, I thought it would be
good to go through some of our core
values in this regard which, as a result of 
us being CEF specialists, are in some
instances a little nuanced.
First, an observation: it’s extraordinary the
extent to which the UK and the US are so
different in terms of the CEF regulatory
environment in which we work. Chief Executive Officer’s review
Continued
6 City of London Investment Group PLC
Regarding “Control” as an example. In the
UK, if a corporation owns 30% of a
company, that corporation will have to make
a bid. In the US, control is not rules-based,
but there are some principles that suggest
that ownership above 40% could be assumed
to imply “Control”. An additional subtlety is
that at 40% you would not have to make a
bid, rather you might be responsible for
“Short Swing Profits” which in the event that
it was proven would mean that you would
make a payment (a disgorgement of your
profits) to the relevant CEF .
In other areas too, London is simpler. In the
UK we know what 3% and 5% ownership
represents, but what about 13D’s, 13G’s
and 13F’s? These are all relevant parts of the
US Securities Exchange Act of 1934 as
amended, but obtaining a clear definition
from a US lawyer of some of the more
subtle differences can be difficult.
V oting is different as well. In London CLIM
can vote “For” or “Against” a Director. That’s
easy, and in the event that a Director of a
fund in which we are invested does not meet
our criteria (please see our list on the
opposite page) then we will vote against him
or her. In the US it is much more opaque;
we can either vote “For” or “Withhold.” The
“Withhold” vote does absolutely nothing in
terms of airing a grievance and inevitably
there will be enough votes cast “For” to ensure
that the relevant Director is appointed.
In some cases, where a company has an
entire suite of CEFs, you’ll find Directors
collecting in excess of US$250,000 in fees
on an annual basis, and serving on more than
30 boards! In the table below, we’ve listed
several such Directors (names omitted) who
serve on the boards of some of the funds in
which we invest on behalf of our clients:
Board seats 
Date of first within the 
appointment combine Fees (US$)
2005 141 579,062
1996 133 508,000
2003 133 484,000
1994 133 468,000
1994 105 290,000
1991 104 400,000
1991 104 260,000
2006 38 511,000 
2008 31 355,000
1998 23 189,000
It should be noted that, apart from serving
on many Boards and receiving significant
fees, some of these Directors have been in
place for around 20 years!
Which brings me back to the topic of
independence.
In the UK, independence has a relevant
definition. In addition, we are able to
work within the UK Corporate
Governance Code and the AIB Guidelines
with the result that it is possible to
understand from a practical standpoint
how we should vote. Sometimes we look
to a higher standard, one that is more
relevant to CEFs, but the bottom line is
that our vote counts and there have been
a few recent examples of where we have
actually made a difference.
In the US, all of the above – the large
number of Directorships, the high fees, 
the excessive length of service – is legal 
and is also considered ethical. All of the
Directors referenced in the table are
regarded as Independent!
We have tried very hard to make the point
that having in excess of three or four
Directorships must be very time consuming.
Possibly four within a combine could be
contemplated, but this is where the
difference between the UK and the US
becomes even more pronounced.
First in the US, Board meetings are 
often batched. What this means is that in
some cases every 15 or 20 minutes a
different CEF’s Board Paper is reviewed.
The Board then moves on.
Further, and bearing in mind that these
Funds are fighting for recognition in a
crowded financial service marketplace, in
many instances investment matters are
discussed over dinner the previous night
and investment matters hardly factor in 
the actual Board Meeting at all!
An additional issue is that in just about
every US Board meeting that we hear
about, lawyers are effectively in “the Chair”.
The business of the Board meeting seems
to be largely about legal issues and the real
business of the company, which in our
opinion should be about investing, benchmarks, volatility and risk is forgotten.
Whether the Manager is actually doing a
good job is often discussed over dinner.
Put around the other way, surely, if
anything illegal was occurring this could 
be ascertained via a box-ticking exercise
with a relevant sign off, and the real reason
for holding the Board Meeting in the first
place (an agenda based upon investment
issues) could then occur.
The trouble with the US system as it
relates to CEFs is that Boards while
considering themselves independent are
not, and, more importantly, as we are
unable to vote “Against”, it means that
they are invariably reappointed.
There is however one remedy open to US
CEF shareholders and that is the ability to
propose termination of the investment
management contract, which is one of the
subtleties of the 1934 Act. In the event of 
a successful vote, it would require the
Directors to find another Manager and,
after a few attempts at this, the likely
outcome would be either liquidation or
some type of reduction in size that would
get rid of the shareholder promoting
the termination.
The trouble with the solution referenced
above is that in the US, the checks and
balances that can be demonstrated by a
sensibly constructed Board cannot occur.
First we do not get an opportunity to
place a relevant vote. Next, they the Board
spend a very short time actually asking
the right questions as they are limited
regarding time. Also, having responsibility
for many CEF’s does not help from
another perspective. They have little time
to listen and learn. You would say that
they should at the very least be expert in
their knowledge of the CEF industry;
we would suggest that they are neither
resourced adequately nor able to
demonstrate control over their brief.
In reality we would also suggest that they
are, on a Fund by Fund basis, underpaid.
From the table on page 6 it can be seen
that the average of the averages per fund
is around US$5,700. This is a small price
to pay for the responsibilities of a CEF
Director and we would suggest that it
should at least be four or five times that
amount, but we would also suggest that
boards be reduced to say five, that they
take on the responsibilities of a
conventional US Director directing a
corporation, that they oversee the Manager
and that they familiarise themselves with
the industry in which they work, that they
concern themselves with the
competitiveness of the product that they
have responsibility for… and yes that they
should give up those dinners!
Over the past few years the standards 
of corporate governance demonstrated by
the average UK CEF (I should say an
Investment T rust) Director has improved
significantly. It seems to be accepted that
having a “good” Board actually assists in
marketing, in potentially growing the
relevant fund (or at the very least not
overseeing shrinkage), and assisting with
regard to oversight of the Discounts to NAV
at which so many of these funds trade.
In no way am I suggesting that the UK 
is all good and the US is all bad. What I
would say is that at present it could be
said that based on a level playing field
from a tax perspective etc. the
opportunity to invest or raise money
knowing the above should favour the
UK Investment T rust industry.
As a shareholder you will be aware of the
fact that around 95% of our profits come
from our Closed-End Fund business. 
You will also be aware that we are an
institutional firm and that our 300
institutional clients make up 99% of our
assets. You will also be aware of our wish 
to diversify our business. 
Separate from our view regarding Closed-
End Funds which have been referenced in
some detail above, we have been
attempting to develop our business into
other areas away from the Emerging
Markets Closed-End Fund industry for
some time. Having originally been a single
product company focused on CEFs and
having recently ended a third party
relationship (North Bridge Capital are also
mentioned by Doug Allison our Finance
Director later in these accounts), the
marketing process has to be developed one
step at a time, as I referenced last year.
As you are aware we now have a number
of new products as shown in the
Business Review on page 10.
Annual Report 2011 7
In our opinion it:
Is able to demonstrate real
independence
Is correctly remunerated
Is resourced properly
Is available
Understands the Investment
Management industry
Has Directors who sit on no
more than four Boards
Has at least one Director
who understands the
Investment T rust industry
Is aware of issues surrounding
the Discount to NAV at
which Investment T rusts trade
Holds the investment
manager accountable and thus
understands the investment
process employed
Understands risk management
and sees the investment returns
achieved within that context
Views the Fund as a consumer
product and understands the
Fund’s peer group
Is regularly externally
evaluated
How do we measure 
a“good” Investment
Trust Board? 8 City of London Investment Group PLC
Chief Executive Officer’s review
Continued
Obviously having new products is only 
half of the story. They also need to be
performing well. In addition we need
marketing and we have recently taken 
on two additional experienced marketers.
One to complement our existing marketer
in the US and the other to develop our
marketing presence ex-US. As of the time
of writing our diversification products
represented US$143m of the total AUM 
of US$5.22bn that we manage. We are
anticipating significant progress this year
in terms of the development of our
diversification products.
Regarding the past year we have begun 
to benefit from the run off in the North
Bridge Capital contract. Doug Allison has
referenced this in the Financial review. 
As shareholders will be aware over the next
few years this should have a significant
effect on our margin.
Recent market volatility has seen FUM at
US$4.97bn at the low on 9th August
(MXEF: 968), recovering to US$5.22bn
at 31st August (MXEF: 1,033). This has
presented us with opportunities to
significantly benefit in terms of our
investment performance.
Cash, a defensive country allocation and
discount volatility have all played their
part recently in allowing us to create
significant alpha.
In an attempt to provide shareholders with
more up to date information regarding
FUM flows, reviewing the month to
31st August we have received three
redemption requests totalling US$10m
and have received commitments of just
over US$44m in additional funds.
Our clients have remained very sticky.
As a result of Board deliberations, in 2013
Doug Allison will become CEO. As with
many things at City of London this plan
has been in place for some time, and the
transition is expected to be seamless.
I would intend to retain my responsibilities
as CIO for at least another four years,
during which time our objective will be to
achieve an equally seamless transition of
the CIO role, thereby enabling me to
consider retirement.
Regarding my CLIG shareholding,
currently 3,632,580 shares, or 13.5%, 
I intend to continue with my long term
plan to reduce my holding at pre-defined
price intervals. As part of my tax planning
I have made a commitment to pass 
an additional 1,000,000 shares to the 
Newlin Foundation, which currently holds
472,207 shares. The Foundation and 
I will each make available for sale 250,000
shares at £4.50, and the same number
again at each of £5.00, £5.50 and £6.00.
I would like to thank all staff for your
ongoing contribution to the success of the
business, and for your loyalty, which has 
in many instances been demonstrated over
an extended period of time.
B MOlliff
Chief Executive Officer
1st September 2011 Annual Report 2011 9
Institutional investor demand for emerging
market equities continued over the period,
helping us raise almost US$300 million in
new assets under management, all in the
context of managing a restricted pipeline of
new opportunities. The focus of business
development continues to be on building
awareness of our equity and developed
closed-end fund strategies.
T o this end, two new marketers were hired
and joined the firm on June 1st, one in 
the US, the other in Europe, to raise the
profile of our investment strategies with
consultants and institutional plan sponsors.
In the US, we now have two marketing
professionals covering the substantial
institutional marketplace which we expect
should result in heightened awareness of
our strategies. Likewise, the addition of a
dedicated marketer in Europe will allow 
us to begin to raise the firm’s profile
among European institutions.
We have adopted a deliberate approach in
our marketing that focuses on investment
performance, which then makes it possible
to establish long-term relationships with
the most sophisticated consultants. Over
time, this has proven to be an excellent
means of attracting and retaining client
assets resulting in significantly higher fee
margins and longer client retention.
Products
We are pleased to report that US$10
million in new monies were awarded 
to the Natural Resource strategy in the
second quarter of 2011, which at the end
of the period was US$87.3 million in size.
In addition to segregated mandate
capabilities, we have both a US fund and
a Dublin UCITS that provide Natural
Resource strategies.
As this Natural Resource strategy clears
the US$100 million threshold it should
become eligible for inclusion in more
consultant searches. As part of the due
diligence process undertaken by many
consultants, the asset threshold is always
the most difficult to overcome when
launching a new strategy. Nonetheless,
good progress has been made and with
continued interest in the commodity and
natural resource space we hope to make
further inroads.
In January 2011 we launched a new strategy
in Asia, ex Japan, small capitalisation stocks,
which will supplement our global emerging
markets equity strategy launched in August
2009. We intend to support and grow our
equity product offerings as opportunities
present themselves.
Also of note over the period was the recent
mandate win of US$50 million, by our
Developed closed-end fund strategy (from
an existing client of the firm). This is a key
win for the strategy and will certainly
assist in building momentum. Our initial
feedback from select clients has been
positive with many appreciating that we
are using a dedicated team with the same
process of buying and selling closed-end
funds for global stocks as we employ in
Business review
“We have adopted a deliberate
approach in our marketing that
focuses on investment 
performance, which then makes
it possible to establish long-
term relationships with the
most sophisticated consultants.” emerging markets. A fund for US
institutions was launched during the
period and was seeded by the firm to
begin the track record.
An adjunct of our emerging markets
expertise via closed-end funds has been our
Frontier strategy, which has an investment
record dating back to 2005 and is now
beginning to attract institutional interest
in the form of educational visits from
the investment team.
Performance
Global composite investment returns for
the emerging market closed-end fund
strategy for the rolling one year ending
May 31st, 2011 were 30.2% vs 29.2% 
for MXEF in USD (14.9% vs 14% 
in GBP). Market volatility contributed
to widening discounts to net asset value
across the closed-end fund universe as debt
problems in Europe and the US stoked
risk aversion in the emerging markets.
Widening discounts signal value in the
closed-end fund universe and our
investment team has been taking advantage
of opportunities to invest in attractively
priced funds during this period.
Outlook
Marketing efforts in the new fiscal year
will be targeted at investment consultants,
foundations, endowments and family
offices in the US, Europe and Asia. 
Our growing equity and developed closed-
end fund capability will be the focus of
our product diversification and business
development activities.
Carlos Yuste
Business Development Director
1st September 2011
10 City of London Investment Group PLC
Emerging Asia
Small Cap Fund
Brazil Equities
Value & Growth
Mexico Equities
Value & Growth
Chile Equities
Value & Growth
GFM-I 
Emerging
Market
Global
Developed
ACWI xUS
Tradex
Global
Developed
Emerging
World Fund
Frontier
Global
Absolute
Return Fund 
China A-Share
Dublin UCITS
Emerging Market
CEFs
Frontier
Funds
Total Return
CEF’s
Developed
CEF’s
Equities
US Institutional Funds Canadian Funds
Natural
Resource
Fund
Natural
Resource
Fund
Emerging
Markets
Value & Growth
Emerging
Markets
Value & Growth
Emerging
Market
EM Plus Fund
Business diversification – products map
Business review
Continued Financial review
Annual Report 2011 11
“Operating profit before profit-
share was £19.7 million which
net of the 30% profit-share
and the £0.4 million cost of
the main market listing gave a
pre-tax profit of £13.1 million.”
Consolidated income statement
The Group effectively has a single 
source of income – fees charged for the
management of client accounts – this year
totalling £36.5 million (2010: £30.0
million). The fee applied to any given
account depends upon the particular
mandate and on the size of the investment.
For many of our accounts, 20% of the 
fee we earn is passed on to third party
marketers, principally North Bridge
Capital, under the terms of a contract
which expired in October 2010, and for
some of the commingled accounts the
Group is responsible for the custody and
administration costs.  The commission
paid to third parties this year was 
£5.8 million (2010: £4.8 million) and the
custody and administration fees were 
£1.2 million (2010: £1.1 million). While
these charges are presented in the income
statement as administrative expenses, it is
perhaps easier to think in terms of net fees
(that include these charges), which during
the year under review were £29.5 million
(2010: £24.1 million), and which have
represented over the last two years a fairly
constant 85 basis points in weighted
average terms across the range of accounts
managed by the Group.
Having noted that the North Bridge
contract has now expired, it is appropriate
to expand a little as to the implications 
of this event for future years’ results. 
The agreement with North Bridge was 
for a ten year “trail”, meaning that their
commission on any account runs for ten
years from the point of initial investment,
with the basis of their fee mirroring ours,
i.e. net asset value as measured monthly 
or quarterly. As at the year end, the
North Bridge commission is payable
with respect to US$4.6 billion of the
US$5.8 billion under management. 
The original contract with North Bridge
dates back to 1994, and there are a number
of accounts won in the period 1994 to
1997 which have over recent years come
through the ten year trail period. From
1998 to 2002 the Group was not active 
in raising new money, having closed the
funds to new investors in 1997, so further
run offs of the ten year trail will not occur
until our financial year 2012-13, from
which point the payments decline steadily
through to 2020-21, the last year in which
the commission will be payable (always
assuming that the relevant accounts are 
still in place at that time). It is also worth
making the point that to the extent 
that from time to time there may be
redemptions against accounts which
attract the commission, and there may be
opportunities to replace these assets with
new mandates, it would seem likely that
there could be some uplift in the net fee
rate. T o some extent we can see this effect
coming through at the end of the year,
with the margin increasing just slightly to
86 basis points as the year drew to a close.
The table on page 12 illustrates the
projected run off of the North Bridge
commission assuming: 
(1) constant market values
(2) constant US$/£ exchange rate
(3) all relevant accounts remain invested
through to their tenth anniversary. Financial review
Continued
North Bridge Capital commission run-off
(based on FUM at 31st July 2011)
Financial year £m
(@ US$1.60/£1)
2011-12 5.8
2012-13 5.8
2013-14 5.5
2014-15 4.8
2015-16 3.6
2016-17 3.0
2017-18 2.4
2018-19 1.3
2019-20 0.3
2020-21 0.1
Aside from fee income, the Group has
interest income and, from time to time,
investment income. For the current year,
interest income rounds to zero (2010: 
£0.1 million), while investment income 
of £0.2 million (2010: £nil) relates in the
main to a gain realised on the reduction 
of one of the Group’s seed investments
during the year.
After separating out third party
commissions and custody and
administration costs, the administrative
expenses which form “overheads” for the
year totalled £10.1 million (2010:
£8.9 million). Of this, 59% (2010: 56%)
was human resources costs - salaries, in the
main. With the US$/£ rate averaging 1.59
this year, exactly as it did in the previous
year, the increase was attributable to an
increase in headcount from 64 to 73, plus
a small general increase in salaries. The
cost-income ratio using this definition of
costs, and taking fee income net of the
commissions and net of custody and
administration, was 34%, a further
improvement on last year’s 37% as would
be expected based upon the growth in
funds under management.
Operating profit before profit-share was
£19.7 million (2010: £15.2 million), which
net of the 30% profit-share (plus associated
taxes of £0.5 million, 2010: £0.3 million)
and the £0.4 million cost of the main
market listing gave a pre-tax profit 
of £13.1 million (2010: £10.4 million).
T axes this year amount to 33.3% of profit
(2010: 32.7%), resulting in profit after tax
of £8.8 million, an increase of 25.6%
against the prior year’s £7.0 million.
Consolidated statement of financial
position and statement of changes 
in equity
At the beginning of the period, the Group’s
net assets were £10.6 million. Profit after
tax was £8.8 million, and dividends of 
£5.8 million were paid in the year, being
the prior year’s final dividend of 15p per
share (2008/9: 10p) and the current 
year’s interim dividend of 8p per share
(2009/10: 7p). An unrealised profit of
£0.4m (2010: £0.3m) arose in respect of
the Group’s investments in its own funds.
The exercise of share options during the
year directly contributed £0.8m to the
increase in equity (2010: £0.4 million),
whilst indirectly generating a further 
£1.1 million in the form of a reduced tax
charge (2010: £0.3 million). 
As in previous years, the Group sought to
apply surplus cash opportunistically to add
to the ESOP trust’s shareholding, buying
365,000 shares for a total investment of
£1.5 million (2010: 243,350 shares for
£0.7 million). At the year end the ESOP
trust held 1,632,167 shares, of which
1,421,292 shares were subject to options
issued to Directors and staff (2010:
1,589,158 of which 1,427,533 were
under option). The loan by the Group to
the trust stood at £4.2 million (2010:
£3.1 million), while the value of the
trust’s shareholding, using the lower of
exercise prices and closing list price,
was £4.9 million (2010: £3.6 million).
Separate from the options issued against
trust held shares, there were also 556,800
dilutive share options in issue at the year
end (2010: 1,446,447).
“Available-for-sale financial assets” is a less
than perfect description for investments
which the Group has made in a range of
funds in support of our diversification
strategy. At the close of the year there were
five such “seed investments”, with a total
net asset value of £5.8 million (2010: £3.6
million), reflecting an unrealised gain of
£0.7 million (2010: £0.3 million) which
forms the revaluation reserve.
Debtors (principally accrued fees
receivable) and creditors (principally
accrued fees payable plus profit-share)
offset each other to a significant degree, 
12 City of London Investment Group PLC
“Cash generated from operating
activities, net of taxation, was
£9.6 million and the principal
applications of cash have been
the payment of dividends of
£5.8 million, net additions to
the seed investments of
£1.7 million and the purchase
of shares for the ESOP for
£1.5 million.” Annual Report 2011 13
as tends to be the case, and thus the only
remaining substantial figure in the
statement of financial position is cash, 
£6.1 million compared to the opening
position of £4.8 million.
Consolidated cash flow statement
As ever, operating cash flow is not
materially different to pre-tax profit –
unsurprising given that there are few
extended time lags inherent in the business
that would affect the conversion of profit
to cash. Cash generated from operating
activities, net of taxation, was £9.6 million
(2010: £8.9 million), and the principal
applications of cash have been the payment
of dividends of £5.8 million (2010: 
£4.2 million), net additions to the seed
investments of £1.7 million (2010: £2.8
million), and the purchase of shares for 
the ESOP , as noted above, for £1.5 million
(2010: £0.7 million).
Currency exposure
This statement would not be complete
without the usual commentary on
currency exposure. The key point is that
while a business that earns almost all of its
income in US dollars, but reports results
in sterling, may superficially be assumed
to be critically exposed to the US$/£
exchange rate, in reality within the context
of our business it is more appropriate to
“see through” the US dollar to the
underlying currencies in which the
Group’s client accounts are invested. 
The relative strength or weakness of the
US$ against those (principally emerging
market) currencies will feed directly
through to US$ denominated funds 
under management and thus to fee
income in US$ terms, whereas the
translation into reported sterling income
will be influenced by the strength or
weakness of the US$ against sterling.
Notwithstanding the effects described
above, and remaining conscious of the
interdependency between US$ strength
and the US$ net asset value of funds
under management, it is appropriate to
repeat in updated form the following
table, which illustrates expected annualised
post-tax profit outcomes given a range of
combinations of funds under management
and US$/£ exchange rates:
Post-tax profit: Illustration 
of US$/£ rate effect:
FuM US$bn: 5.0 5.5 6.0 6.5
US$/£ Post-tax, £m
1.50 8.3 9.6 11.0 12.3
1.55 7.9 9.2 10.5 11.8
1.60 7.6 8.9 10.1 11.4
1.65 7.3 8.5 9.7 11.0
1.70 7.0 8.2 9.4 10.6
Assumes:
1. Average net fee 86 bp’s
2. Annual operating costs £4.5m
plus US$8.5m plus SGD1.7m
(£1 = SGD2.00)
3. Profit-share 30%
4. Average tax 33%
The “assumptions”, which are in fact a
close approximation to the Group’s current
operating environment, reflecting as they
do the net fee margin at 86 basis points
and the split of the Group’s expenses
between the major underlying currencies,
generate the values in the table by way of
straightforward calculation. These values
are not forecasts, of course – because it
would be a strange year in which both
funds under management and exchange
rates held constant throughout – but they
provide a useful point of reference. Given
that the numbers are purely formulaic, 
it follows that it is perfectly valid to
extrapolate between the numbers in the
table to achieve any desired combination,
and also that the annualised numbers 
can be time apportioned to provide an
indication for periods of less than a year.
Finally, on the subject of currency exposure,
we maintained the forward sales of US$
which hedge the Group’s balance sheet
exposure, and at 31st May these totalled
US$13.5 million, with a weighted average
exchange rate of 1.5837 (2010: US$6.5
million at a weighted average rate of 1.5973).
Doug Allison
Finance Director
1st September 2011 14 City of London Investment Group PLC
Board of Directors
A J Davison
NON EXECUTIVE CHAIRMAN
Andrew Davison, a Chartered Accountant, joined County Bank Limited in 1972 
and by 1984 had become Managing Director of NatWest Ventures. In 1987 he 
became Chairman and CEO of Business Mortgages Bank which was sold in 1991. 
He subsequently joined the Boards of a number of listed and unlisted companies.
B MOlliff 
CHIEF EXECUTIVE OFFICER
Barry Olliff’s career has spanned over 40 years within the investment trust 
(closed-end fund) sector. He began his career in 1964 with Denny Brothers, 
ultimately Pinchin Denny, as a market maker in the sector. In 1979 he moved 
to Laing & Cruickshank as a member of their investment trust department, 
and became a director in 1984. In 1987 he established Olliff & Partners, the 
stockbroker business from which City of London was founded in the early 1990’s.
D F Allison 
FINANCE DIRECTOR
Doug Allison graduated in Economics & Accountancy at the University of
Southampton, and went on to qualify as a Chartered Accountant with Ernst & Young 
in 1980. He moved to the financial services sector in 1984, and joined City of London
in 1997. Doug is also an Associate of the Chartered Institute of Bankers.
C MYuste
BUSINESS DEVELOPMENT DIRECTOR
Carlos Yuste joined the firm in 2000. From 1994 to 1998 he worked as a Project Officer
at the International Development Research Centre in Ottawa, which specializes in
emerging markets research. He holds an MBA (Finance) from the Schulich School 
of Business, York University, an MA in Political Economy from Carleton University, 
and a Bachelor of Social Sciences from the University of Ottawa.
T W Griffith
CHIEF OPERATING OFFICER
Prior to joining City of London Group in 2000, Thomas Griffith held various positions
in the institutional client division of The Vanguard Group including roles as both 
a Client Relationship Manager and a Marketing Executive. In 1986 he obtained a
bachelor’s degree in Corporate Finance and Investment Management from the 
University of Alabama. Annual Report 2011 15
O I Ashur (resigned 14.8.10)
NON EXECUTIVE DIRECTOR
Omar Ashur is the chief financial officer of Future Management Holdings SA, one 
of the founders of the Company and CFO of Future Pipe Industries Group Limited, 
a leading fibreglass pipe manufacturer and has an MBA and PhD from the 
Wharton School of the University of Pennsylvania, in Philadelphia.
D MCardale
NON EXECUTIVE DIRECTOR
David Cardale has worked extensively in both Corporate Finance and Private Equity. 
He has advised a number of fund management groups including Gartmore, 
Ivory & Sime and MIM, and ran the European operations of NatWest Equity Partners.
He has been a director of two London listed Investment T rusts. David Cardale holds 
an MBA from INSEAD.
G A Robb 
NON EXECUTIVE DIRECTOR
George Robb qualified as a solicitor before becoming fully involved with the asset
management sector in 1971. In 1994 he established Asset Management Investment
Company PLC as a specialist vehicle investing in the asset management sector and 
was appointed managing director on its flotation. He is chairman of Asset Management
Advisers Limited and European Wealth Management Group Plc, and a director of
several other companies.
Dr A S Bufferd 
NON EXECUTIVE DIRECTOR
Allan Bufferd is T reasurer Emeritus of Massachusetts Institute of T echnology (“MIT”),
where he served for over 30 years prior to his retirement in 2006. At MIT , he served as
an ex-officio member of the governing board and its executive committee, and supervised
the formulation and implementation of investment policy for US$12 billion of
endowment and retirement fund assets. He is a current or former member of a large
number of corporate, foundation and investment advisory boards. 
R A Dartnell (appointed 1.6.11)
NON EXECUTIVE DIRECTOR
Rian Dartnell is Chief Investment Officer for Granite Associates and is a trustee of, 
or adviser to, a number of US Foundation and Endowment committees. His past
experience includes senior roles at Bankers T rust, where he focussed on Africa, Eastern
Europe and the Middle East, and at Global Asset Management, where he was a fund
manager responsible forinternational funds with an emphasis on Emerging Markets and
Asia, initially based in London and subsequently in Brazil. Rian holds a BSc (Econ) 
and a MSc (Econ), both from the London School of Economics and Political Science. Directors’ report
16 City of London Investment Group PLC
The Directors present their annual report and the audited financial statements for the year ended 31st May 2011.
Going concern
The Directors are satisfied that the Company has adequate resources to meet its business needs for the foreseeable future, and the
Financial Statements have therefore been prepared on the going concern basis.
Principal activity and review of business
City of London Investment Group PLC is the holding company for a number of investment management subsidiaries. The principal
operating subsidiary is City of London Investment Management Company Limited, which acts as an investment adviser and which
advises on 33 accounts (2010 – 32 accounts) with a total of £5,822 million (2010– £3,012 million) under management as at the
end of the year. Accounts may be commingled or segregated. City of London Investment Management Company Ltd has a
subsidiary in Singapore and a branch in Dubai.
The Directors’ report should be read in conjunction with the Chairman’s statement, the Business review, the Chief Executive
Officer’s review, and the Financial review on pages 11 to 13, which together provide a commentary on the operations of the Group
and include relevant key performance indicators required by section 417 of the Companies Act 2006.
The principal risk that the Group faces is the potential loss of Funds under Management as a result of either client redemptions or
market volatility. The Group seeks to attract and retain clients through consistent outperformance supplemented by first class client
servicing, and the Directors have implemented a diversification strategy, as described in the Business Review on pages 9 to 10, which
should further mitigate these risks. In addition to this key business risk, there are a number of less significant financial risks as
outlined in note 28 on pages 50 to 54.
Results and dividend
The results of the Group for the year, together with details of amounts transferred to reserves, are set out on pages 30, 32 and 33.
The Company has paid dividends of £5,786,600 during the year (2010 – £4,182,692). The final dividend for the year to 31st May 2011
of 16p per share (2010 – 15p) has been proposed, payable on 21st October 2011, subject to shareholder approval, to shareholders
who are on the register of members on 7th October 2011.
Annual General Meeting
The Company’s AGM will be held at 11.30am on Monday 3rd October 2011 at 77 Gracechurch Street, London EC3V 0AS.
Directors
The names and biographical details of the Directors of the Company who served during the year and who were appointed since the
year end, are given on pages 14 and 15.
On 14th August 2010 the Board accepted the resignation of Omar Ashur as non-executive Director.
Rian Dartnell was appointed by the Board as non-executive Director from 1st June 2011.
Directors’ interests in the share capital and equity of the Company at the year end were as follows:
Ordinary Shares of
1p each 1p each
2011 2010
A J Davison (Chairman) (non-executive) 104,500 104,500
B MOlliff 3,632,580 5,168,683
D F Allison 414,375 310,625
T W Griffith 268,625 49,925
C M Yuste 314,925 314,925
A S Bufferd (non-executive) 30,000 20,000
D M Cardale (non-executive) 106,250 106,250
G A Robb (non-executive) 45,000 45,000 Annual Report 2011 17
Substantial shareholdings
At 31st July 2011, the Company had been notified of the following interests of 3% or more in the Company’s ordinary shares:
Number of Percentage of
Interested party shares issued shares
B MOlliff 3,632,580 13.5
BlackRock Investment Management 2,514,818 9.4
The City of London Employee Share Option T rust 1,628,088 6.1
F&C Asset Management 1,628,088 6.1
Hargreave Hale 1,484,490 5.5
Artemis Investment Management 1,192,050 4.4
LV Asset Management 1,105,723 4.1
Slater Investments 1,055,000 3.9
Legal & General Investment Management 957,671 3.6
Directors’ indemnity arrangements
The Company maintains appropriate Directors’ and officers’ insurance. The Directors also have the benefit of the indemnity
provisions in the Company’s Articles of Association. These provisions which are qualifying third party indemnity provisions as
defined by S236 of the Companies Act 2006, were in force throughout the year and are currently in force.
Own shares
The Company is, until the date of the next Annual General Meeting (AGM), generally and unconditionally authorised to buy back
up to 2,596,500 of its own ordinary shares of nominal value £0.01. The Company did not purchase any of its own shares in the year
under review (2010 – purchased and cancelled 439,000 ordinary shares at £2.65 representing approximately 1.7% of called up share
capital at the time of the transaction). The Company is seeking a renewal of this authority at the 2011 AGM.
The number of own shares purchased by the Company’s employee benefit trust during the year was 365,000 (2010 – 243,350) at a
cost of £1.5 million (2010 – £0.7million). The number of own shares held by the trust as at 31st May 2011 was 1,632,167 (2010 –
1,589,158). The trust has waived its entitlement to receive dividends in respect of the shares held. Further details can be found in
note 22 of the financial statements and in the Financial review.
Creditor payment policy
The Group’s policy is to follow its suppliers’ terms of payment and to make payment in accordance with those terms subject to
receipt of satisfactory invoicing. In practice, payments to creditors are generally made upon receipt of an invoice. The Group does
not follow any specific published code or standard on payment practice.
As at 31st May 2011, the creditor days were nil (2010 – nil).
Environmental and social policy
The Board seeks to conduct the Company’s affairs responsibly and considers relevant social and environmental matters where appropriate.
Auditors
A resolution to re-appoint Moore Stephens LLP as the Company’s auditor will be put to the forthcoming Annual General Meeting.
Each of the persons who are Directors at the time when this report is approved has confirmed that:
(a) so far as each Director is aware, there is no relevant audit information of which the Company’s auditors are unaware; and
(b) each Director has taken all the steps that ought to have been taken as a Director, including making appropriate enquiries of
fellow Directors and the Company’s auditors for that purpose, in order to be aware of any information needed by the Company’s
auditors in connection with preparing their report and to establish that the Company’s auditors are aware of that information.
Approved by the Board of Directors and signed on behalf of the Board
D F Allison
Company Secretary
1st September 2011 Corporate governance report
18 City of London Investment Group PLC
Directors
The Board comprises:
•the non-executive Chairman, who is independent of the Company and its major shareholders and was considered independent at
the time of his initial appointment;
•four executive Directors (the Chief Executive, Finance Director, Business Development Director and Chief Operating Officer); and
• four further non-executive Directors, all of whom are independent of the Company and its major shareholders.
Brief details of all the Directors may be found on pages 14 to 15.
Corporate governance
General corporate governance compliance
The Combined Code has applied to the Company from 29th October 2010, the date that its shares were admitted to the main
market, through to its financial year end at 31st May 2011. Thereafter, it is superseded by the UK Corporate Governance Code.
The Company considers itself a smaller company for the purposes of compliance with the Codes.
The Board is committed to high standards of corporate governance. There are however a small number of provisions within the
Combined Code that the Board considers to be incompatible with the nature and size of the Company’s operations, and these are
described below. The discussion of the Company’s compliance with the Combined Code applies equally to its compliance with the
UK Corporate Governance Code as the principles set out below will not change under the UK Corporate Governance Code and
there are no material additional principles with which the Company must comply when the UK Corporate Governance Code
applies to the Company from 1st June 2011.
Remuneration policy
The Combined Code recommends that performance-related elements of remuneration should form a significant proportion of the
total remuneration package of executive Directors and should be designed to link rewards to corporate and individual performance
and align their interests with those of shareholders and to give those Directors strong incentives to perform at the highest levels.
In particular, the Combined Code recommends that annual bonuses should be subject to performance conditions that are relevant,
stretching and designed to enhance shareholder value and that upper limits should be set and disclosed. The Combined Code also
recommends that there may be a case for part payment of bonuses in shares which are to be held for a significant period.
The Company operates a bonus scheme for all employees, including the executive Directors, that is linked to the Group’s profitability,
allocating 30% of pre-bonus, pre-tax, operating profit for this purpose. Bonus awards are made by the Board following recommendations
by the Remuneration Committee. Barry Olliff is entitled under his service agreement to a bonus equal to 5% of the pre-tax profits of
the Company, and payment of this entitlement is covered by Mr Olliff’s allocation from the 30% bonus pool. Bonuses are not subject
to individual performance conditions and are paid in cash. Although this remuneration policy does not comply with the Combined
Code, the Board believes that this bonus scheme has worked well in motivating staff at all levels within the Company, and that this is
demonstrated by the high employee retention rates experienced by the Group. The Remuneration Committee will keep the Company’s
remuneration policy under review but does not currently intend to make any changes in the short to medium term.
The Company is subject to, and adheres with, the FSA’s Remuneration Code. In being a limited license firm, the Company is classified as
a ‘proportionality Tier 4’ firm. Proportionality tier four firms are considered to be the lowest category from a risk perspective and as such
can disapply a number of the FSA’s remuneration code requirements. Prior to doing so however, firms must first consider their individual
circumstances and be satisfied that risks relating to remuneration must not be unduly increased. The Company believes that its systems
and processes relating to remuneration do not pose a risk to either itself, the industry, or the regulator’s objectives. In line with FSA
guidance, and following its own assessment, the Company has opted to disapply certain rules under the remuneration principles
proportionality rule relating to deferral, payment in shares or other instruments and ratio between fixed and variable remuneration.
Share options
The ABI Guidelines recommend that dilutive share awards should be limited to 5% of the Company’s issued share capital over a
rolling 10 year period. As at the date of admission to the main market, dilutive awards were outstanding over 5.5% of the
Company’s share capital. As of 31st May 2011 this has been reduced to 2.1% as a result of the exercise of options.
In addition, the ABI Guidelines recommend that no more than 5% of a Company’s issued share capital be held in an employee
benefit trust (EBT). As of 31st May 2011 the EBT holding comprises 6.1% of the Company’s share capital, unchanged since the
date of admission. Annual Report 2011 19
The Company has found that the issue of share awards to executives and employees has been a very useful tool in motivating and
retaining key staff and therefore maintains a pool of shares of a size it considers appropriate for such purposes. While there is no
intention to issue further dilutive options in the future, the Board does intend to support further share purchases by the EBT from
time to time so as to maintain the Company’s ability to reward and motivate staff by the issue of non-dilutive options.
The Board
The Combined Code recommends that the Board should include a balance of executive and non-executive Directors (and in particular
independent non-executive Directors) such that no individual or small group of individuals can dominate the board’s decision making.
The Combined Code recommends that smaller companies should have at least two independent non-executive Directors.
Currently, the Board is composed of nine members, consisting of the non-executive Chairman, the executive Directors (four in total) and
the non-executive Directors (four in total). Accordingly, no individual or group of individuals can dominate the Board’s decision making.
The Board believes that it has sufficient members to contain a balance of experience and skills but is not so large as to be unwieldy.
The independence of non-executive Directors is considered at least annually and is based on criteria suggested in the Combined
Code, and the composition of the Board and balance between executive and non-executive Directors is kept under review.
On the basis of the criteria set out in the Combined Code, of the non-executive Directors, David Cardale, Allan Bufferd and Rian
Dartnell are considered to be independent of management and free from any business or other relationship that could materially
interfere with the exercise of their independent judgement in accordance with the Combined Code.
Each of Andrew Davison and George Robb has served on the Board of the Company for more than nine years since his first election.
The Company recognises and understands investor concerns over longer-serving non-executive Directors but nevertheless continues to regard
Andrew Davison and George Robb as independent. Andrew Davison’s and George Robb’s long association with the Group enables each of
them to provide a robust and effective challenge to management because of the sound and detailed knowledge of the Group’s business that
they have both developed. The Board believes that Andrew Davison’s and George Robb’s length of service, when taken in the context of the
Board as a whole, enhances their effectiveness as non-executive Directors and that they remain independent in character and judgement.
The Combined Code recommends that the Board should appoint one of its independent non-executive Directors as Senior
Independent Director and David Cardale fills this role. The Senior Independent Director is available to shareholders if they have
concerns which contact through the normal channels of Chairman, Chief Executive or Group Finance Director has failed to resolve
or for which such contact is inappropriate.
The roles of Chairman and Chief Executive are separate and are set out in writing. The non-executive Chairman’s role is to ensure
good corporate governance. His responsibilities include leading the Board, ensuring the effectiveness of the Board in all aspects of its
role, ensuring effective communication with Shareholders, setting the Board’s agenda and ensuring that all Directors are encouraged
to participate fully in the activities and decision-making process of the Board. The Chief Executive is responsible for the leadership
and day-to-day management of the Company, which includes formulating and recommending the Group’s strategy for Board
approval and executing the approved strategy.
The Board reviews trading performance, ensures adequate financing, sets and monitors strategy, examines investment and acquisition
opportunities and discusses reports to Shareholders. The Board has a formal schedule of matters specifically reserved to it for
decisions, which in addition to the above includes:
• Dividend policy
• Share buy-back policy
• Effectiveness of compliance
• Effectiveness of internal controls
• Annual budget
• Capital expenditure in excess of £100,000
• Board and committee appointments
The Company maintains appropriate Directors’ and Officers’ Liability Insurance. Corporate governance report
Continued
20 City of London Investment Group PLC
Board Committees
The Board has established Nomination, Remuneration and Audit Committees, with formally delegated duties and responsibilities
and written terms of reference. From time to time, separate committees may be set up by the Board to consider specific issues when
the need arises. Each committee and each Director has the authority to seek independent professional advice where necessary to
discharge their duties, in each case at the Company’s expense. In addition, each Director and committee has access to the advice of
the Company Secretary, Doug Allison.
The Board keeps the membership of its committees under review to ensure gradual refreshing of skills and experience and is satisfied
that all Directors have sufficient time to devote to their roles and that it is not placing undue reliance on key individuals.
Nomination Committee
The Nomination Committee has defined terms of reference which are published on the Company’s website and assists the Board in
discharging its responsibilities relating to the composition and make up of the Board.
The Nomination Committee is responsible for making recommendations on the appointment of additional Directors and for
reviewing the size, structure and composition of the Board and the membership of Board committees. Appointments are made on
merit and against objective criteria; care is taken to ascertain that appointees have sufficient time available to devote to their position.
The Company’s Nomination Committee is chaired by the non-executive Chairman and comprises two other independent non-
executive Directors, David Cardale and Allan Bufferd. The Combined Code provides that a majority of the members of the
Nomination Committee should be independent non-executive Directors. The Company therefore considers that it complies with
the Combined Code recommendations in this regard.
The Nomination Committee will meet formally at least twice a year and otherwise as required. During the year to 31st May 2011
the committee met on five occasions, and composition of the Board’s Committees and the appointment of new non-executive
Directors was discussed. While external search consultancy was considered in respect of these appointments, it was not used because
the committee identified two candidates by way of arms length introduction who were considered to have the experience and
attributes that the committee and the Board had identified as necessary to complement the existing Board.
Remuneration Committee
The Remuneration Committee has defined terms of reference which are published on the Company’s website and is responsible for
setting and reviewing the remuneration and other terms of employment of the Company’s executive officers and management and
determining and reviewing any share incentive plans. The Remuneration Committee consults, where appropriate, with the Chief
Executive about its proposals. No Director or senior executive participates in discussions about his own remuneration.
The membership of the Company’s Remuneration Committee comprises George Robb, Andrew Davison, David Cardale, Allan
Bufferd and Rian Dartnell. The Chairman of the Remuneration Committee is George Robb. The Combined Code provides that
the Remuneration Committee of a smaller company should consist of at least two members who are independent non-executive
Directors. The Company therefore considers that it complies with the Combined Code recommendations in this regard.
The Remuneration Committee will meet formally at least twice a year and otherwise as required. During the year to 31st May 2011
the committee met on four occasions.
Audit Committee
The Audit Committee has defined terms of reference which are published on the Company’s website and is responsible for ensuring
that the financial performance of the Company is properly monitored and reported on, reviewing and monitoring the independence
of the external auditors and the effectiveness of the audit procedure, meeting with the auditors and reviewing reports from the auditors
relating to the Company’s accounting and internal controls, reviewing the effectiveness of the Company’s systems of internal control
(including considering annually the need or otherwise for an internal audit function), and agreeing the terms of appointment and
remuneration of the auditors. The membership of the Company’s Audit Committee comprises four independent non-executive
Directors, namely David Cardale, Allan Bufferd, Andrew Davison and Rian Dartnell. The Chairman of the Audit Committee is
David Cardale. The Combined Code provides that the Audit Committee of a smaller company should consist of at least two members
who are independent non-executive Directors. It also requires that at least one member of the Audit Committee should have recent
and relevant financial experience, and the Board considers that Andrew Davison, as a Chartered Accountant, satisfies this requirement. Annual Report 2011 21
The Company therefore considers that it complies with the Combined Code as regards these requirements. The Audit Committee
will meet formally at least three times a year and otherwise as required. During the year to 31st May 2011 the committee met
three times.
The Audit Committee has considered the non-audit services provided by the Company’s auditors this year and are satisfied that they
have not affected the auditors’ independence and objectivity in conducting the annual audit process.
Board and committee attendance
The table below sets out the number of pre-scheduled meetings of the Board and its committees and individual attendance by
the Directors and committee members respectively:
Audit Remuneration Nominations
Board Committee Committee Committee
Total number of meetings between 1st June 2010 and 31st May 2011 734 5
Attendance:
Doug Allison 7–– –
Omar Ashur (resigned 14th August 2010) 1–1 –
Allan Bufferd 634 5
David Cardale 734 5
Rian Dartnell (appointed 1st June 2011) ––– –
Andrew Davison 734 5
Tom Griffith 7–– –
Barry Olliff 7–– –
George Robb 723 –
Carlos Yuste 7–– –
Board performance evaluation
The Board has established a formal process, led by the Chairman and the Senior Independent Director, for the annual evaluation of
the performance of the Board and its appointed committees. The Directors complete performance evaluations to ensure that the
Board and its committees are operating effectively and that each Director is contributing effectively and continues to demonstrate
commitment to the role.
Internal control
The Group has maintained a comprehensive system of internal control, including financial, operational and compliance controls.
Each function within the firm is subject to formal quarterly review by senior management, who are required to identify and report
on the key controls pertinent to their responsibilities. The Board reviews the effectiveness of the system of internal control annually
in December, and the Audit Committee evaluates this process annually in January.
In advance of the Group’s move from AIM to the main market, the Board commissioned the Group’s auditors, Moore Stephens LLP ,
to conduct a review of the Group’s financial reporting procedures and related internal controls, and to report their findings to the
Board and to the sponsors, Singer Capital Markets Ltd. The report did not identify any material weaknesses.
The Board and the Audit Committee have considered the need for an internal audit function and has concluded that, given the size
of the business, the nature of its activities, and the other control mechanisms that are in place, an internal audit function is currently
unnecessary.
Shareholder relations
Communication with shareholders is of paramount importance to the Group. The Directors, including on occasions the Senior
Independent non-executive Director and the Chairman, endeavour to meet with large shareholders at least twice annually, generally
following interim and final results announcements. Where possible, all of the Directors attend the Annual General Meeting in person. Remuneration report
This report describes the role of the remuneration committee, its responsibilities and membership, and matters considered during
the year. It has been compiled in accordance with the Directors’ Remuneration Report regulations contained in the Companies Act
2006 and the relevant UK Listing Rules. It also describes how the Company has complied with the Combined Code on Corporate
Governance as it relates to Directors’ remuneration.
Role of the committee
The remuneration committee has defined terms of reference which are published on the Company’s website and is responsible for
setting and reviewing the remuneration and other terms of employment of the Company’s executive officers and management and
determining and reviewing any share incentive plans. The remuneration committee consults, where appropriate, with the Chief
Executive about its proposals. No Director or senior executive participates in discussions about his own remuneration.
Membership
The membership of the Company’s remuneration committee comprises George Robb, Andrew Davison, David Cardale and Allan
Bufferd. The Chairman of the remuneration committee is George Robb. The Combined Code provides that the remuneration
committee of a smaller company should consist of at least two members who are independent non-executive Directors. The Company
therefore considers that it complies with the Combined Code recommendations in this regard.
Meetings
The remuneration committee meets formally at least twice a year and otherwise as required. During the year to 31st May 2011 the
committee met on four occasions principally to review and approve the quarterly assessment of the profit share pool, and allocations
therefrom to Directors and senior employees, and the semi-annual salary review including both the overall level of awards and
individual awards to Directors and senior employees. In addition, the committee discussed and refreshed its terms of reference,
which are available on the Group’s website, and reviewed the fees paid to non-executive Directors.
Service contracts
Executive Directors’ service contracts are valid until the Director reaches retirement age, currently 65, and have notice periods of not
more than one year. In the event of termination, compensation payouts will not exceed one year’s notice. This relates to all executive
Directors except Barry Olliff, whose contract is valid until he reaches 70 years of age and his payment is capped at 135% of one
year’s salary.
Details of Directors’ service contracts are below:
Notice period Notice period Provision of compensation
Group Date of contract from company from Directors for loss of office
Barry Olliff 28th January 2009 One year One year 135% of one year’s salary
Doug Allison 6th April 2006 One year One year One year’s salary
Tom Griffith 6th April 2006 One year One year One year’s salary
Carlos Yuste 6th April 2006 One year One year One year’s salary
Non-executive Directors
Non-executive Directors do not have service contracts. They are appointed for an initial period of three years and, subject to
shareholder approval, may be re-appointed for a further three years. After three such periods, non-executive Directors are subject to
annual re-election. Their appointment can be terminated by serving six months’ notice by either party.
Non-executive Directors receive a basic annual cash fee; additional fees are paid to the Senior Independent Director and to the
Chairman of the Group. Non-executive Directors do not participate in any performance-related incentive plans and receive no
other benefits.
22 City of London Investment Group PLC The non-executive Directors’ fees were reviewed in the year by the Group Board, and having regard to the Company’s move to the main
market and the individual time commitment for the specific responsibilities of each role, the following took effect as of 1st October 2010:
£
For services as non-executive Chairman and Director 45,000
For services as Senior Independent Director 37,000
For services as a Director 30,000
The non-executive Directors’ letters of appointment became effective on the following dates:
Andrew Davison 6th April 2006
George Robb 6th April 2006
David Cardale 6th April 2006
Allan Bufferd 24th June 2010
Rian Dartnell 1st June 2011
Components of remuneration
1) Salaries
The salaries of all employees, including executive Directors, are reviewed at least twice a year and are adjusted as appropriate, subject
to budget constraints and to Remuneration Committee approval. The firm’s policy is to pay salaries which are at mid-market or
lower, and to use profit-share and share options in order to offer a competitive overall package.
2) Discretionary bonuses
The Company operates a bonus scheme for all employees, including the executive Directors, that is linked to the Group’s profitability,
allocating 30% of pre-bonus, pre-tax, operating profit for this purpose. Bonus awards are made by the Board following
recommendations by the Remuneration Committee. Barry Olliff is entitled under his service agreement to a bonus equal to 5% of the
pre-tax profits of the Company, and payment of this entitlement is covered by Mr Olliff’s allocation from the 30% bonus pool.
Bonuses are not subject to individual performance conditions and are paid in cash. Although this remuneration policy does not
comply with the Combined Code, the Board believes that this bonus scheme has worked well in motivating staff at all levels within
the Company and that this is demonstrated by the high employee retention rates experienced by the Group. The Remuneration
Committee will keep the Company’s remuneration policy under review but does not currently intend to make any changes in the
short to medium term.
3) Share option scheme
The Company operates an Employee Share Option Plan which is administered by the remuneration committee. The scheme is open
to employees of all Group companies and Directors who are required to work more than 25 hours per week provided they do not
have a material interest in the Company, that is to say the ability to control more than 25% of the ordinary share capital.
The ABI Guidelines recommend that dilutive share awards should be limited to 5% of the Company’s issued share capital over a
rolling 10 year period. As at the date of admission to the main market, dilutive awards were outstanding over 5.5% of the
Company’s share capital. As of 31st May 2011 this has been reduced to 2.1% as a result of the exercise of options.
Annual Report 2011 23 Remuneration report
Continued
24 City of London Investment Group PLC
In addition, the ABI Guidelines recommend that no more than 5% of a company’s issued share capital be held in an employee
benefit trust (EBT). As of 31st May 2011 the EBT holding comprises 6.1% of the Company’s share capital, unchanged since the
date of admission.
The Company has found that the issue of share awards to executives and employees has been a very useful tool in motivating and
retaining key staff and therefore maintains a pool of shares of a size it considers appropriate for such purposes.
4) Pension
All employees, including executive Directors, are entitled to membership of the Group’s defined contribution pension arrangements.
The employer’s contribution on behalf of all permanent employees, including executive Directors, is 12.5% of basic salary, except
where local overseas regulations stipulate otherwise.
Total shareholder return
The Regulations require the inclusion of a graph which illustrates the total shareholder return for a holding in the Company’s shares
against a broad equity market index. The FTSE All-Share Index has been used on the basis that it includes all UK listed stocks,
including the Company’s ordinary shares. The Board considers this to be an appropriate index against which to measure
performance because it includes all other UK listed financial stocks and therefore represents the closest comparator for benchmark
purposes. The index is calculated on a total return basis, i.e. assuming reinvestment of dividends. The Regulations require this
information to be provided for the five years up to 31st May 2011, however it should be noted that the Company was only included
in the official list as of 29th October 2010.
-50%
0%
50%
100%
150%
200%
Five year total shareholder return (dividends reinvested) to 31st May 2011
May 2006 May 2007 May 2008 May 2009 May 2010 May 2011
City of London
City of London
full listing
29th October 2010
FTSE All Share Directors’ interests and remuneration (audited information)
(a) Directors’ interests in share options as at 31st May 2011
Number
Exercise Market price 
Total Exercised Issued Total price at exercise Date from which Expiry
2010 during the year 2011 ££ exercisable date
B MOlliff 303,897 (303,897) – – 0.26 4.060 14th May 2007 14th May 2014
25,000 (25,000) – – 1.40 4.060 31st Mar 2009 31st Mar 2016
5,000 (5,000) – – 2.61 4.060 30th Jan 2010 30th Jan 2017
5,000 (5,000) – – 2.73 4.060 30th Mar 2010 30th Mar 2017
12,000 –– 12,000 2.75 – 1st Oct 2011 1st Oct 2018
8,000 –– 8,000 2.30 – 5th Jun 2012 5th Jun 2019
358,897 (338,897) – 20,000
D F Allison 200,000 (200,000) – – 0.26 3.50 14th May 2007 14th May 2014
18,750 (18,750) – – 1.40 3.50 31st Mar 2009 31st Mar 2016
5,000 (5,000) – – 2.61 4.40 30th Jan 2010 30th Jan 2017
5,000 (5,000) – – 2.73 4.40 30th Mar 2010 30th Mar 2017
12,000 –– 12,000 2.75 – 1st Oct 2011 1st Oct 2018
8,000 –– 8,000 2.30 – 5th Jun 2012 5th Jun 2019
12,500 –– 12,500 3.14 – 18th Jan 2013 18th Jan 2020
–– 7,500 7,500 3.625 – 13th Oct 2013 13th Oct 2020
–– 5,000 5,000 4.03 – 5th Apr 2014 5th Apr 2021
261,250 (228,750) 12,500 45,000
T W Griffith 50,000* (50,000) – – 0.45 3.12 10th Jan 2004 10th Jan 2011
16,650* –– 16,650 0.45 – 13th Sept 2004 13th Sept 2011
250,000* (218,700) – 31,300 0.26 4.475 14th May 2007 14th May 2014
12,500 –– 12,500 1.40 – 31st Mar 2009 31st Mar 2016
5,000 –– 5,000 2.61 – 30th Jan 2010 30th Jan 2017
5,000 –– 5,000 2.73 – 30th Mar 2010 30th Mar 2017
12,000 –– 12,000 2.75 – 1st Oct 2011 1st Oct 2018
8,000 –– 8,000 2.30 – 5th Jun 2012 5th Jun 2019
12,500 –– 12,500 3.14 – 18th Jan 2013 18th Jan 2020
–– 7,500 7,500 3.625 – 13th Oct 2013 13th Oct 2020
–– 5,000 5,000 4.03 – 5th Apr 2014 5th Apr 2021
371,650 (268,700) 12,500 115,450
C MYuste 31,300* (31,300) – – 0.26 3.50 14th May 2007 14th May 2014
12,500 –– 12,500 1.40 – 31st Mar 2009 31st Mar 2016
5,000 –– 5,000 2.61 – 30th Jan 2010 30th Jan 2017
5,000 –– 5,000 2.73 – 30th Mar 2010 30th Mar 2017
12,000 –– 12,000 2.75 – 1st Oct 2011 1st Oct 2018
8,000 –– 8,000 2.30 – 5th Jun 2012 5th Jun 2019
12,500 –– 12,500 3.14 – 18th Jan 2013 18th Jan 2020
–– 7,500 7,500 3.625 – 13th Oct 2013 13th Oct 2020
–– 5,000 5,000 4.03 – 5th Apr 2014 5th Apr 2021
86,300 (31,300) 12,500 67,500
*Options granted before appointment to Director.
The closing market price of the Company’s ordinary shares at 31st May 2011 was £4.35 and the price moved during the year
between a low of £2.735 and a high of £4.615.
Annual Report 2011 25 Remuneration report
Continued
26 City of London Investment Group PLC
(b) Remuneration
The remuneration of the Directors who held office during the year ended 31st May 2011 is set out below:
Health Total Total Pension Pension
Fees/salary Profit share insurance 2011 2010 2011 2010
£££ £ £ £ £
Non-executive
A J Davison 41,000 –– 41,000 32,000 – –
G A Robb 27,667 –– 27,667 22,000 – –
O I Ashur* 13,417 –– 13,417 22,000 – –
D MCardale 32,333 –– 32,333 22,000 – –
A Bufferd 27,667 –– 27,667 22,000 – –
142,084 –– 142,084 120,000 – –
Executive
B MOlliff 228,049 950,203 4,005 1,182,257 1,124,933 28,506 27,418
D F Allison 148,250 500,000 1,979 650,229 540,255 18,531 17,625
T W Griffith 148,865 316,734 4,005 469,604 384,327 18,608 17,489
C M Yuste 148,232 316,734 4,005 468,971 383,857 18,529 17,430
673,396 2,083,671 13,994 2,771,061 2,433,372 84,174 79,962
*Resigned 14th August 2010.
Approved by the Board of Directors and signed on behalf of the Board
G A Robb
Chairman of the Remuneration Committee
1st September 2011 Statement of Directors’ responsibilities
Annual Report 2011 27
The Directors are responsible for preparing the Annual Report, the Directors’ remuneration report and the financial statements in
accordance with applicable laws and regulations.
Company law requires the Directors to prepare Group and Company financial statements for each financial year. Under that law the
Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards (IFRS) as
adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Company and of the profit or loss of the Group for that period. In preparing these
financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable IFRSs have been followed, subject to any material departures disclosed and explained in the
financial statement;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of the financial statements may
differ from legislation in other jurisdictions.
Responsibilities statement
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the applicable set of accounting standards give a true and fair view of the
assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken
as a whole; and
• the Directors’ report includes a fair review of the development and performance of the business and the position of the issuer and
the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and
uncertainties that they face.
For and on behalf of the Board
B MOlliff D F Allison
Chief Executive Officer Finance Director Independent auditors’ report to the members of
City of London Investment Group PLC
We have audited the financial statements of City of London Investment Group PLC for the year ended 31st May 2011 which are
set out on pages 30 to 54. The financial reporting framework that has been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company
financial statements, as applied in accordance with the provisions of the Companies Act 2006.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state
to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.
Respective responsibilities of Directors and auditor
As explained more fully in the Directors’ responsibilities statement set out on page 27, the Directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and
express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and
Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the group’s and the parent company’s circumstances and have been
consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the
overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual
Report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and the Parent Company’s affairs as at 31st May 2011
and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
• the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European
Union and as applied in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards
the group financial statements, Article 4 of the IAS Regulation.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
• the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act
2006; and
• the information given in the Directors’ report for the financial year for which the financial statements are prepared is consistent
with the financial statements.
28 City of London Investment Group PLC Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the Parent Company financial statements and the part of the Directors’ remuneration report to be audited are not in agreement with
the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or we have not received all the information and
explanations we require for our audit.
Under the Listing Rules we are required to review:
• the Directors’ statement, set out on page 16, in relation to going concern;
• the part of the Corporate Governance Statement relating to the company’s compliance with the nine provisions of the
June 2008 Combined Code specified for our review; and certain elements of the report to shareholders by the Board on
Directors’ remuneration.
Timothy West 
Senior Statutory Auditor
5th September 2011
For and on behalf of Moore Stephens LLP , Statutory Auditor
150 Aldersgate Street
London
EC1A 4AB
Annual Report 2011 29 30 City of London Investment Group PLC
Consolidated income statement
For the year ended 31st May 2011
Total Total
2011 2010
Note £ £
Revenue 3,4 36,494,163 29,969,539
Administrative expenses
Staff costs 6(b) 11,685,867 9,378,107
Commissions payable 5,785,441 4,768,780
Other administrative expenses 5,266,342 5,184,733
Main market listing costs 437,778 –
Depreciation and amortisation 370,902 348,196
(23,546,330) (19,679,816)
Operating profit 8 12,947,833 10,289,723
Interest receivable and similar gains/(losses) 9 122,322 (70,066)
Impairment of seed investments 10 79,372 159,418
Profit before taxation 13,149,527 10,379,075
Income tax expense 11 (4,380,204) (3,396,293)
Profit for the year 8,769,323 6,982,782
Basic earnings per share 12 35.1p 28.5p
Diluted earnings per share 12 34.0p 26.9p
Consolidated and Company statement of comprehensive income
For the year ended 31st May 2011
Group Company
2011 2010 2011 2010
£ £ £ £
Profit for the year 8,769,323 6,982,782 7,610,444 5,437,758
Fair value gains/(losses) on available-for-sale investments* 461,154 266,790 461,082 266,862
Release of fair value (gains)/losses on disposal of
available-for-sale investments* (62,394) – (62,394) –
Other comprehensive income 398,760 266,790 398,688 266,862
Total comprehensive income for the year
attributable to equity holders of the company 9,168,083 7,249,572 8,009,132 5,704,620
*Net of deferred tax, detailed in note 20. Consolidated and Company statement of financial position
31st May 2011
Annual Report 2011 31
Group Company
2011 2010 2011 2010
Note £ £ £ £
Non-current assets
Property and equipment 13 543,748 687,657 277,946 359,466
Intangible assets 14 363,684 409,144 – –
Other financial assets 15 73,210 76,679 828,777 829,940
Deferred tax asset 16 1,380,017 1,503,498 266,214 319,513
2,360,659 2,676,978 1,372,937 1,508,919
Current assets
T rade and other receivables 17 5,576,011 4,365,999 1,114,332 803,547
Current tax receivable – – 624,824 950,601
Available-for-sale financial assets 18 5,807,787 3,595,873 5,807,787 3,595,873
Cash and cash equivalents 6,104,673 4,774,473 161,683 255,677
17,488,471 12,736,345 7,708,626 5,605,698
Current liabilities
T rade and other payables 19 (4,013,419) (3,887,781) (5,224,742) (5,081,468)
Current tax payable (1,340,386) (811,983) – –
Creditors, amounts falling due within one year (5,353,805) (4,699,764) (5,224,742) (5,081,468)
Net current assets 12,134,666 8,036,581 2,483,884 524,230
Total assets less current liabilities 14,495,325 10,713,559 3,856,821 2,033,149
Non-current liabilities
Deferred tax liability 20 (235,129) (105,203) (235,129) (105,203)
Net assets 14,260,196 10,608,356 3,621,692 1,927,946
Capital and reserves
Called up share capital 21 268,584 259,688 268,584 259,688
Share premium account 1,975,084 1,640,667 1,975,084 1,640,667
Investment in own shares 22 (4,183,659) (3,071,259) (4,183,659) (3,071,259)
Revaluation reserve 669,211 270,451 669,211 270,523
Share option reserve 1,621,936 1,721,492 622,646 651,056
Capital redemption reserve 18,562 18,562 18,562 18,562
Retained earnings 13,890,478 9,768,755 4,251,264 2,158,709
Total equity 14,260,196 10,608,356 3,621,692 1,927,946
The Board of Directors approve and authorise for issue these financial statements on 1st September 2011.
Signed on behalf of the Board of Directors of City of London Investment Group PLC, company number 2685257.
B MOlliff D F Allison
Chief Executive Officer Finance Director 32 City of London Investment Group PLC
Consolidated statement of changes in equity
31st May 2011
Share Investment Share Capital Total
Share premium in own Revaluation option redemption Retained attributable to
capital account shares reserve reserve reserve earnings shareholders
£ £££ ££££
At 1st June 2009 259,816 1,518,441 (2,633,932) 3,661 1,767,730 14,172 7,811,792 8,741,680
Profit for the year –– ––– – 6,982,782 6,982,782
Comprehensive income –– – 266,790 –– – 266,790
T otal comprehensive income –– – 266,790 – – 6,982,782 7,249,572
T ransactions with owners
Share option exercise 4,262 122,226 293,512 – (72,962) – 72,962 420,000
Share cancellation (4,390) –– –– 4,390 (1,165,678) (1,165,678)
Purchase of own shares –– (730,839) –– –– (730,839)
Share-based payment –– –– 84,905 –– 84,905
Deferred tax –– –– (58,181) – (31,099) (89,280)
Current tax on share options –– ––– – 280,688 280,688
Dividends paid –– ––– – (4,182,692) (4,182,692)
T otal transactions with owners (128) 122,226 (437,327) – (46,238) 4,390 (5,025,819) (5,382,896)
At 1st June 2010 259,688 1,640,667 (3,071,259) 270,451 1,721,492 18,562 9,768,755 10,608,356
Profit for the year –– ––– – 8,769,323 8,769,323
Comprehensive income –– – 398,760 –– – 398,760
T otal comprehensive income –– – 398,760 –– 8,769,323 9,168,083
T ransactions with owners
Share option exercise 8,896 334,417 414,431 – (131,002) – 131,002 757,744
Purchase of own shares –– (1,526,831) –– –– (1,526,831)
Share-based payment –– –– 130,241 –– 130,241
Deferred tax –– –– (98,795) – (49,575) (148,370)
Current tax on share options –– ––– – 1,057,573 1,057,573
Dividends paid –– ––– – (5,786,600) (5,786,600)
T otal transactions with owners 8,896 334,417 (1,112,400) – (99,556) – (4,647,600) (5,516,243)
At 31st May 2011 268,584 1,975,084 (4,183,659) 669,211 1,621,936 18,562 13,890,478 14,260,196 Annual Report 2011 33
Company statement of changes in equity
31st May 2011
Share Investment Share Capital Total
Share premium in own Revaluation option redemption Retained attributable to
capital account shares reserve reserve reserve earnings shareholders
£ £££ ££££
At 1st June 2009 259,816 1,518,441 (2,633,932) 3,661 609,542 14,172 2,034,189 1,805,889
Profit for the year –– ––– – 5,437,758 5,437,758
Comprehensive income –– – 266,862 –– – 266,862
T otal comprehensive income –– – 266,862 –– 5,437,758 5,704,620
T ransactions with owners
Share option exercise 4,262 122,226 293,512 – (72,962) – 22,516 369,554
Share cancellation (4,390) –– –– 4,390 (1,165,678) (1,165,678)
Purchase of own shares –– (730,839) –– –– (730,839)
Share-based payment –– –– 84,905 –– 84,905
Deferred tax –– –– 29,571 – (6,305) 23,266
Current tax on share options –– ––– – 18,921 18,921
Dividends paid –– ––– – (4,182,692) (4,182,692)
T otal transactions with owners (128) 122,226 (437,327) – 41,514 4,390 (5,313,238) (5,582,563)
At 1st June 2010 259,688 1,640,667 (3,071,259) 270,523 651,056 18,562 2,158,709 1,927,946
Profit for the year –– ––– – 7,610,444 7,610,444
Comprehensive income –– – 398,688 –– – 398,688
T otal comprehensive income –– – 398,688 –– 7,610,444 8,009,132
T ransactions with owners
Share option exercise 8,896 334,417 414,431 – (131,002) – 59,581 686,323
Purchase of own shares –– (1,526,831) –– –– (1,526,831)
Share-based payment –– –– 130,241 –– 130,241
Deferred tax –– –– (27,649) – (18,150) (45,799)
Current tax on share options –– ––– – 227,280 227,280
Dividends paid –– ––– – (5,786,600) (5,786,600)
T otal transactions with owners 8,896 334,417 (1,112,400) – (28,410) – (5,517,889) (6,315,386)
At 31st May 2011 268,584 1,975,084 (4,183,659) 669,211 622,646 18,562 4,251,264 3,621,692 34 City of London Investment Group PLC
Consolidated and Company cash flow statement
For the year ended 31st May 2011
Group Company
2011 2010 2011 2010
Note £ £ £ £
Cash flow from operating activities
Operating profit 12,947,833 10,289,723 166,974 167,856
Adjustments for:
Depreciation charges 325,442 302,735 152,136 143,541
Amortisation of intangible assets 45,460 45,461 – –
Share-based payment charge 130,241 84,905 56,630 36,238
T ranslation adjustments 53,320 (293,254) 238,009 (18,308)
(Profit)/loss on disposal of fixed assets – (342) – –
Cash generated/(used) in operations before changes
in working capital 13,502,296 10,429,228 613,749 329,327
(Increase)/decrease in trade and other receivables (1,210,012) (1,497,601) (310,785) 259,154
Increase/(decrease) in trade and other payables 125,638 1,538,447 143,274 2,261,602
Cash generated from operations 12,417,922 10,470,074 446,238 2,850,083
Interest received 28,258 66,579 551 12,591
Interest paid – – – –
Taxation (paid)/received (2,819,116) (1,681,580) 81,040 351,888
Net cash generated from operating activities 9,627,064 8,855,073 527,829 3,214,562
Cash flow from investing activities
Dividends received from subsidiaries – – 7,749,000 5,383,363
Purchase of property and equipment (181,533) (189,407) (70,616) (26,553)
Proceeds from sale of property and equipment – 910 – –
Purchase of intangible assets – (454,605) – –
Purchase of non-current financial assets (608) (10,318) – (3,439)
Purchase of current financial assets (2,307,698) (3,146,241) (2,307,698) (3,146,241)
Proceeds from sale of current financial assets 560,204 379,853 560,204 379,853
Net cash (used)/generated from investing activities (1,929,635) (3,419,808) 5,930,890 2,586,983
Cash flow from financing activities
Proceeds from issue of ordinary shares 343,313 126,488 343,313 126,488
Ordinary dividends paid 23 (5,786,600) (4,182,692) (5,786,600) (4,182,692)
Purchase and cancellation of own shares – (1,165,678) – (1,165,678)
Purchase of own shares by employee share option trust (1,526,831) (730,838) (1,526,831) (730,838)
Proceeds from sale of own shares by employee share option trust 414,431 293,511 414,431 293,511
Net cash used in financing activities (6,555,687) (5,659,209) (6,555,687) (5,659,209)
Net increase/(decrease) in cash and cash equivalents 1,141,742 (223,944) (96,968) 142,336
Cash and cash equivalents at start of period 4,774,473 4,718,766 255,677 108,638
Effect of exchange rate changes 188,458 279,651 2,974 4,703
Cash and cash equivalents at end of period 6,104,673 4,774,473 161,683 255,677 Annual Report 2011 35
Notes to the financial statements
For the year ended 31st May 2011
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 31st May 2011 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 years 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 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 the measurement at fair
value of derivative financial instruments and certain financial assets that are held at fair value through profit or loss. The Group
financial statements have been prepared on a going concern basis.
(a) New IFRS Standards and Interpretations
At the date of authorisation of these financial statements, the following Standards and Interpretations, which are relevant to the
Group, were in issue but not yet effective:
IAS 1 (revised) Presentation of financial statements – Minor changes to reporting of other comprehensive income effective
for annual periods beginning on or after 1st January 2011. IAS 1 will also be amended by the changes noted
below in IFRS 9.
IFRS 7 Financial instruments: disclosures – Amendments effective for annual periods beginning on or after 1st January
2011 relating to clarification of qualitative and quantitative disclosures and removal of references to materiality
in relation to risk. In addition, IFRS 7 will also be amended by the changes noted below in IFRS 9. In
particular the disclosures by category of financial asset will be altered to reflect the new categorisation.
IFRS 9 Financial instruments – Effective for annual periods beginning on or after 1st January 2013. This is the first
part of a new standard on classification and measurement of financial assets that will replace IAS 39.
IFRS 9 replaces the four categories of financial assets with two; those carried at amortised cost and those at
fair value. The Group will need to consider how it wishes to reclassify its financial assets, in particular those
currently classified as available-for-sale. The Group’s approach will determine the impact of the new standard
on the financial statements.
IFRS 10 Consolidated financial statements – This standard establishes principles for the presentation and preparation of
consolidated financial statements when an entity controls one or more other entities. It replaces the
consolidation requirements in IAS 27 – Consolidated and Separate Financial Statements and 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. It is effective for annual periods
beginning on or after 1st January 2013. The Company is considering the impact that this standard could have
on the financial statements.
There are a number of other Standards and Interpretations, and revisions to existing Standards and Interpretations, including the
2009 improvements project, in issue but not in force at 31st May 2011. These are not considered likely to have a material
impact on the Group’s financial statements. Notes to the financial statements
Continued
2 Basis of consolidation
These financial statements consolidate the financial statements of the Company and all of its subsidiary undertakings.
The Company’s principal subsidiaries as at 31st May 2011 are City of London Investment Management Company Limited
and City of London US Services Limited. A complete list of the Group companies can be found in note 15. 
The Company is domiciled in the UK and its shares are issued in sterling. The functional currency of the business is however
US Dollars. Management have decided that the presentational currency of the financial statements should be sterling rather than
the functional currency due to the Company being a UK registered entity.
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).
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 areas 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. Details of these assumptions are outlined in note 26.
Intangible assets
The useful economic life of intangible assets, such as computer software, is determined on acquisition using value in use
calculations based on management’s assumptions and estimates of future cash flows.
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 accounts. In addition, where presentational changes are made in the current year, 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.
36 City of London Investment Group PLC 3 Significant accounting policies continued
(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.
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 derivatives are designated 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:
• Options – priced using the quoted market bid price
• Forward currency trades – priced using prevailing exchange rates
The only exception is where the Group holds an investment in options on unquoted equity instruments. Such investments are
designated as available-for-sale financial assets and are measured at cost less impairment on the grounds that the fair value can
not be reliably measured.
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 28.
(iv) T rade receivables
T rade receivables are measured at 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.
Annual Report 2011 37 Notes to the financial statements
Continued
38 City of London Investment Group PLC
3 Significant accounting policies continued
(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) T rade payables
T rade payables are measured at initial recognition at fair value and subsequently measured at amortised cost.
(vii) Deferred taxation
Deferred tax is provided using the balance sheet 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 substantially 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.
In accordance with the transitional provisions of IFRS2, the above treatment has been applied only to grants of share options
after 7th November 2002 that had not vested as at 1st June 2006, although, as required by IFRS2, the disclosures in note 26(b)
include grants of share options prior to 7th November 2002.
(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 of 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. Annual Report 2011 39
3 Significant accounting policies continued
(xi) Foreign currency translation
Foreign currency transactions are translated using the exchange rates prevailing at the transaction date. Foreign exchange gains
and losses resulting from the settlement of such transactions and from the translation of period-end monetary assets and
liabilities are 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
are sold to the Company and therefore it is the only entity with any exchange differences. 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.
(xii) Leases
The cost of operating leases is charged to the income statement in equal periodic instalments over the periods 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 Revenue
2011 2010
£ £
Management fees earned by subsidiary companies charged as a
percentage of funds under management 36,494,163 29,969,539 Notes to the financial statements
Continued
40 City of London Investment Group PLC
5 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.
Europe
USA Canada (ex UK) UK Other Total
£ £££££
Year to 31st May 2011
Revenue 29,968,449 1,708,514 2,198,343 2,618,857 – 36,494,163
Non-current assets:
Property and equipment 265,802 –– 193,824 84,122 543,748
Intangible assets 363,684 ––– – 363,684
Year to 31st May 2010
Revenue 24,185,206 1,702,328 1,909,388 2,026,138 146,479 29,969,539
Non-current assets:
Property and equipment 328,191 –– 239,529 119,937 687,657
Intangible assets 409,144 ––– – 409,144
The Group has classified revenue 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 are material.
6 Employees
2011 2010
(a) Average number of persons employed by the Group in the year: Number Number
Investment Management/Research 25 23
Performance and Attribution 5 4
Business Development/Marketing 3 3
Client Services 10 8
Administration, Accounts and Settlements 25 24
68 62
2011 2010
(b) Staff costs incurred during the year in respect of these employees were: £ £
Wages and salaries 4,622,477 3,876,432
Profit sharing payments 5,573,953 4,524,986
Social security costs 845,599 448,613
Defined contribution pension costs 513,597 443,171
Share options charge 130,241 84,905
11,685,867 9,378,107
The Group made contributions of £513,597 (2010 – £443,171) in the period to individual defined contribution pension
schemes established for Directors and employees. There were no outstanding or prepaid contributions at 31st May 2011. Annual Report 2011 41
7 Directors
2011 2010
Directors’ emoluments comprise: £ £
Emoluments (excluding pension contributions and awards under share option schemes) 2,913,145 2,553,372
Pension contributions 84,174 79,962
Share option charge 19,905 14,274
Gains on exercise of share options 2,174,795 766,645
2011 2010
Number Number
Number of Directors on whose behalf pension contributions were paid during the year 4 4
Number of Directors who exercised share options during the year 4 1
2011 2010
Highest paid Director’s remuneration: £ £
Emoluments (excluding pension contributions and awards under share option schemes) 1,182,257 1,124,933
Pension contributions 28,506 27,418
Share option charge 1,996 2,795
Gains on exercise of share options 1,235,209 –
8 Operating profit
2011 2010
The operating profit is arrived at after charging/(crediting): £ £
Depreciation of owned assets 325,442 302,735
Amortisation of intangible assets 45,460 45,461
Auditors’ remuneration:
– Reporting accountants on move to main market 85,000 –
– Statutory audit 57,761 44,227
– Taxation services 15,488 19,057
– Other services 9,763 14,097
Operating lease rentals:
– Land and buildings 386,168 373,955
– Other – 12,187
Foreign exchange (gains)/losses (10,366) (177,664)
(Profit)/loss on disposal of fixed assets – (342)
9 Interest receivable and similar gains/(losses)
2011 2010
£ £
Interest on bank deposit 28,258 66,579
Gain/(loss) on sale of investments 94,064 (136,645)
122,322 (70,066) Notes to the financial statements
Continued
42 City of London Investment Group PLC
10 Impairment of seed investments
Due to improved market conditions, the Group has written back the remaining balance of £79,372 (2010 – £159,418) of the
£238,790 impairment charge recognised in 2009 against the fair value of its seed investments in new funds held as available-for-
sale financial assets.
11 Tax charge on profit on ordinary activities
2011 2010
(a) Analysis of tax charge on ordinary activities: £ £
Tax at 28% (2010 – 28%) based on the profit for the year 3,859,859 2,938,223
Double taxation relief (1,971,573) (951,584)
Deferred tax (24,889) 13,077
Change in tax rate to 26% (19,830) –
Adjustments in respect of prior years 4,791 12,957
Domestic tax total 1,848,358 2,012,673
Foreign tax for the current period 2,825,634 1,422,908
Adjustments in respect of prior years (293,788) (39,288)
Foreign tax total 2,531,846 1,383,620
Total tax charge in income statement 4,380,204 3,396,293
(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 – 28%
(prior year – 28%). The differences are explained below:
2011 2010
£ £
Profit on ordinary activities before tax 13,149,527 10,379,075
Tax at 28% (2010 – 28%) thereon (3,681,868) (2,906,141)
Effects of:
Unrelieved overseas tax (854,061) (471,324)
Expenses not deductible for tax purposes (159,044) (30,979)
Capital allowances less than depreciation (57,754) (63,911)
Prior period adjustments 288,997 26,331
Deferred tax on share based-payments and impairment 24,889 (13,077)
Impairment in seed investments not tax deductible 22,224 44,637
Change in tax rate to 26% 19,830 –
Other 16,583 18,171
Total tax charge in income statement (4,380,204) (3,396,293)
On 23rd March 2011 the Chancellor announced a reduction in the main rate of UK corporation tax to 26% with effect from 
1st April 2011. Therefore the effect of the rate reduction has been reflected in the figures above.
12 Earnings per share
The calculation of earnings per share is based on the profit for the period of £8,769,323 (2010 – £6,982,782) divided by the
weighted average number of ordinary shares in issue for the year ended 31st May 2011 of 24,998,168 (2010 – 24,491,592).
As set out in Note 22, the Employee Benefit T rust held 1,632,167 ordinary shares in the Company as at 31st May 2011. The
T rustees of the T rust have waived all rights to dividends associated with these shares. In accordance with IAS 33 the ordinary shares
held by the Employee Benefit T rust have been excluded from the calculation of the weighted average of ordinary shares in issue. Annual Report 2011 43
12 Earnings per share continued
The calculation of diluted earnings per share is based on the profit for the year of £8,769,323 (2010 – £6,982,782) divided by
the diluted weighted average of ordinary shares for the year ended 31st May 2011 of 25,818,990 (2010 – 25,953,758).
Reconciliation of the figures used in calculating basic and diluted earnings per share:
2011 2010
Number of shares Number of shares
Weighted average number of shares – basic earnings per share 24,998,168 24,491,592
Effect of dilutive potential shares – share options 820,822 1,462,166
Weighted average number of shares – diluted earnings per share 25,818,990 25,953,758
13 Property and equipment
2011 2010
Computer Computer 
Furniture and Short Furniture and Short
and telephone leasehold and telephone leasehold
equipment equipment improvements T otal equipment equipment improvements T otal
££ ££ £££ £
Group
Cost
At 1st June 166,031 1,440,733 293,225 1,899,989 145,413 1,294,307 293,225 1,732,945
Additions 12,735 126,519 42,279 181,533 20,952 168,455 – 189,407
Disposals –– –– (334) (22,029) – (22,363)
At 31st May 178,766 1,567,252 335,504 2,081,522 166,031 1,440,733 293,225 1,899,989
Accumulated depreciation
At 1st June 114,626 992,432 105,274 1,212,332 88,673 772,699 70,019 931,391
Charge for the year 27,704 256,331 41,407 325,442 26,287 241,193 35,255 302,735
Disposals –– –– (334) (21,460) – (21,794)
At 31st May 142,330 1,248,763 146,681 1,537,774 114,626 992,432 105,274 1,212,332
Net book value
At 31st May 36,436 318,489 188,823 543,748 51,405 448,301 187,951 687,657
Company
Cost
At 1st June 102,160 511,591 266,481 880,232 93,930 493,268 266,481 853,679
Additions 10,834 48,981 10,801 70,616 8,230 18,323 – 26,553
Disposals –– –– –– ––
At 31st May 112,994 560,572 277,282 950,848 102,160 511,591 266,481 880,232
Accumulated depreciation
At 1st June 60,530 381,706 78,530 520,766 38,852 295,098 43,275 377,225
Charge for the year 23,815 88,663 39,658 152,136 21,678 86,608 35,255 143,541
Disposals –– –– –– ––
At 31st May 84,345 470,369 118,188 672,902 60,530 381,706 78,530 520,766
Net book value
At 31st May 28,649 90,203 159,094 277,946 41,630 129,885 187,951 359,466 Notes to the financial statements
Continued
44 City of London Investment Group PLC
14 Intangible assets
2011 2010
Long term Long term
software software
licences licences
Group £ £
Cost
At 1st June 454,605 –
Additions – 454,605
At 31st May 454,605 454,605
Amortisation charge
At 1st June (45,461) –
Charge for the year (45,460) (45,461)
At 31st May (90,921) (45,461)
Net book value
At 31st May 363,684 409,144
The Company did not hold any intangible assets during the current or preceding year.
15 Other financial assets (non-current)
2011 2010
Unlisted Unlisted
investments investments
Group £ £
Cost
At 1st June 76,679 57,535
Additions 608 10,318
Disposals – –
Fair value (losses)/gains recognised in other comprehensive income (4,077) 8,826
At 31st May 73,210 76,679
2011 2010
Investment in Investment in
Unlisted subsidiary Unlisted subsidiary
investments undertakings Total investments undertakings Total
Company £££ £££
Cost
At 1st June 69,873 760,067 829,940 57,535 835,845 893,380
Additions – 80,767 80,767 3,439 53,392 56,831
Disposals – (152,578) (152,578) – (55,171) (55,171)
Impairment – 73,999 73,999 – (73,999) (73,999)
Fair value (losses)/gains recognised 
in other comprehensive income (3,351) – (3,351) 8,899 – 8,899
At 31st May 66,522 762,255 828,777 69,873 760,067 829,940
The additions and disposals in investments in subsidiary undertakings reflect the allocation of share-based payments from the
Company to its subsidiaries under IFRIC 11. Annual Report 2011 45
15 Other financial assets (non-current) continued
In addition, last year’s impairment was realised and transferred to disposals, reflecting the reduction in share capital of City of
London Unit T rust Managers Limited, a fully owned dormant subsidiary which was dissolved on 12th October 2010.
Holding of
Subsidiary undertakings Activity ordinary shares
City of London Investment Management Company Limited Management of funds 100%
City of London US Investments Limited Holding company for US companies 100%
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
All the companies above are incorporated in Great Britain and registered in England and Wales except for City of London
Investment Management (Singapore) PTE Ltd which is incorporated and registered in Singapore.
All of the above mentioned companies are included in the consolidated financial statements of the Group. In the opinion of
the Directors, the value of the subsidiaries is at least equal to their cost.
16 Deferred tax asset
Share-based payments Impairment Total
Group Company Group Company Group Company
££££££
At 1st June 2009 1,538,994 263,876 66,861 66,861 1,605,855 330,737
Credit/(charge) to income 31,560 10,147 (44,637) (44,637) (13,077) (34,490)
Credit/(charge) to equity (89,280) 23,266 –– (89,280) 23,266
At 1st June 2010 1,481,274 297,289 22,224 22,224 1,503,498 319,513
Credit/(charge) to income 47,113 14,723 (22,224) (22,224) 24,889 (7,501)
Credit/(charge) to equity (148,370) (45,798) –– (148,370) (45,798)
At 31st May 2011 1,380,017 266,214 –– 1,380,017 266,214 Notes to the financial statements
Continued
46 City of London Investment Group PLC
17 Trade and other receivables
Group Company
2011 2010 2011 2010
£ £ £ £
T rade receivables 210,154 278,283 – –
Accrued income 4,320,512 3,595,334 – –
Amounts owed by Group undertakings – – 807,466 500,962
Other debtors 471,688 108,874 43,488 89,072
Prepayments 573,657 383,508 263,378 213,513
5,576,011 4,365,999 1,114,332 803,547
18 Available-for-sale financial assets
2011 2010
Group and Company £ £
Unlisted investments at market value 5,807,787 3,595,873
Unlisted investments at cost 4,915,417 3,307,673
19 Trade and other payables
Group Company
2011 2010 2011 2010
£ £ £ £
T rade creditors 86,784 71,894 – –
Sundry creditors 366 467,435 366 65,775
Amounts owed to Group undertakings – – 3,894,388 3,800,462
Other taxation and social security 93,432 39,712 93,432 39,712
Accruals and deferred income 3,832,837 3,308,740 1,236,556 1,175,519
4,013,419 3,887,781 5,224,742 5,081,468
20 Deferred tax liability
Group and Company £
At 1st June 2009 1,424
Increase due to gain in fair value of available-for-sale investments 103,779
At 1st June 2010 105,203
Decrease due to change in tax rate from 28% to 26% (7,515)
Increase due to gain in fair value of available-for-sale investments 161,705
Released on disposal of available-for-sale investments (24,264)
At 31st May 2011 235,129 Annual Report 2011 47
21 Share capital
2011 2010
Group and Company No of shares No of shares
Authorised
Ordinary shares of 1p each (2010 – 1p each) 90,000,000 90,000,000
£ £
Ordinary shares of 1p each (2010 – 1p each) 90,000 90,000
2011 2010
Group and Company £ £
Allotted, called up and fully paid
At start of year 25,968,803 (2010 – 25,981,603) Ordinary shares of 1p each 259,688 259,816
Dilutive share options exercised; 889,647 (2010 – 426,200) 8,896 4,262
Shares repurchased and cancelled; nil (2010 – 439,000) – (4,390)
At end of year 26,858,450 (2010 – 25,968,803) Ordinary shares of 1p each 268,584 259,688
Fully paid ordinary shares carry one vote per share and carry a right to dividends.
22 Investment in own shares
Investment in own shares relates to City of London Investment Group PLC shares held by an Employee Benefit T rust on behalf
of City of London Investment Group PLC.
At 31st May 2011 the T rust held 1,632,167 ordinary 1p shares (2010 – 1,589,158), of which 1,421,292 ordinary 1p shares
(2010 – 1,427,533) were subject to options in issue.
23 Dividend
2011 2010
£ £
Dividends paid:
Interim dividend of 8p per share (2010 – 7p) 2,046,663 1,727,652
Final dividend in respect of year ended:
31st May 2010 of 15p per share (2009 – 10p) 3,739,937 2,455,040
5,786,600 4,182,692
A final dividend of 16p per share has been proposed, payable on 21st October 2011, subject to shareholder approval,
to shareholders who are on the register of members on 7th October 2011.
24 Profit of the Parent Company
As permitted by section 408 of the Companies Act 2006, the income statement of the Parent Company is not presented as part of
these financial statements. The Parent Company’s profit for the financial period, amounted to £7,610,444 (2010 – £5,437,758). Notes to the financial statements
Continued
48 City of London Investment Group PLC
25 Operating lease commitments
At 31st May 2011 the Group had the following commitments for future minimum lease payments under non-cancellable
operating leases:
Group Company
Land and Land and Land and Land and
buildings buildings buildings buildings
2011 2010 2011 2010
£ £ £ £
Within one year 349,173 297,996 174,384 174,384
In the second to fifth years inclusive 470,987 506,226 188,917 363,301
820,160 804,222 363,301 537,685
Operating lease payments relating to land and buildings represent rents payable by the Group for its various offices. The Group
enters into formal occupational property leases ranging from one to ten years.
26 Share-based payments
(a) The estimated fair values of options which fall under IFRS2, and the inputs used in the Binomial pricing model to calculate
those fair values, are as follows:
Number
Expected Risk-free Share price Exercise Dividend Estimated originally
Date of grant Expiry date life (yrs) rate at grant (£) price (£) Volatility yield fair value (£) granted
14/05/2004 14/05/2014 3.00 5.0411% 0.2600 0.2600 33.5589% 4.50% 0.0668 2,000,000
17/12/2004 17/12/2014 3.00 4.5420% 0.4500 0.4500 30.9463% 4.50% 0.1061 536,250
31/03/2006 31/03/2016 3.00 4.5300% 1.4000 1.4000 25.4798% 4.50% 0.2450 818,750
10/10/2006 10/10/2016 3.00 4.9865% 1.8000 1.8000 29.3594% 4.50% 0.3196 50,000
30/01/2007 30/01/2017 3.00 5.4828% 2.6100 2.6100 29.8223% 4.50% 0.4834 140,500
30/03/2007 31/03/2017 3.00 5.4338% 2.7300 2.7300 29.3557% 4.50% 0.4948 143,500
01/10/2008 01/10/2018 3.00 4.0720% 2.3000 2.7500 32.9241% 7.00% 0.2401 312,000
13/01/2009 13/01/2019 3.00 1.9645% 1.6300 2.7500 41.9187% 11.82% 0.1324 20,000
05/06/2009 05/06/2019 6.50 3.2805% 2.3000 2.3000 32.7809% 8.04% 0.5134 242,000
18/01/2010 18/01/2020 6.50 3.4428% 3.1400 3.1400 30.9664% 4.67% 0.7924 259,000
13/10/2010 13/10/2020 6.50 2.2273% 3.6250 3.6250 33.7369% 5.92% 0.7406 191,500
05/04/2011 05/04/2021 6.50 3.0432% 4.0300 4.0300 33.7062% 5.65% 0.9307 166,000
Historically, the expected life of the options has been assumed to be three years, however this assumption has been revised for
the latest grants to six and a half years based upon the empirical evidence available. The risk-free rate has been assumed to be
represented by the yield to maturity at the date of grant of a UK Gilt strip with term to maturity equal to the expected life of
the option. Historically, the volatility of the Company’s share price at each date of grant has been calculated as the average of the
standard deviations of daily continuously compounded returns on the stock of a group of comparable companies. Now that
there is sufficient share price data for the Company it has been possible to calculate its historic volatility and this has been
used to calculate the fair value of awards granted on and after 5th June 2009. Annual Report 2011 49
26 Share-based payments continued
(b) All share options granted are equity settled. The number and weighted average exercise price of share options for each of
the following groups is as follows:
2011 2010
Weighted average Weighted average
exercise price exercise price
Number £ Number £
Outstanding at the beginning of the year 2,873,980 1.38 3,135,022 1.02
Granted during the year 357,500 3.81 501,000 2.73
Forfeited during the year 41,750 2.81 64,000 2.63
Exercised during the year 1,211,638 0.63 698,042 0.60
Outstanding at the end of the year 1,978,092 2.25 2,873,980 1.38
Exercisable at the end of the year 882,342 1.21 2,149,980 0.87
The weighted average share price at the date of exercise
for share options exercised during the year was 3.91 2.85
The total share-based payment charge for the year is £130,241 (2010 – £84,905).
27 Related party transactions
In the ordinary course of business, the Company and its subsidiary undertakings carry out transactions with related parties as
defined under IAS 24 Related Party Disclosures. Material transactions are set out below.
(i) Remuneration of key management personnel
The remuneration of the Directors who are the key management personnel of the Group is provided in the Remuneration report
on page 26 and in note 7.
(ii) Intra-group transactions
During the period the Company received from its subsidiaries £7,262,520 (2010 – £6,500,876) in respect of management
service charges and dividends of £7,749,000 (2010 – £5,383,363).
Amounts outstanding between the Company and its subsidiaries as at 31st May 2011 are given in notes 17 and 19. Notes to the financial statements
Continued
50 City of London Investment Group PLC
28 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 Assets at fair
Loans and value through Available-
31st May 2011 receivables profit or loss for-sale Total
Assets as per statement of financial position £ £££
Other financial assets –– 73,210 73,210
T rade and other receivables 5,241,448 334,563 – 5,576,011
Available-for-sale financial assets –– 5,807,787 5,807,787
Cash and cash equivalents 6,104,673 –– 6,104,673
Total 11,346,121 334,563 5,880,997 17,561,681
Liabilities at Financial 
fair value liabilities at
through amortised
profit or loss cost Total
Liabilities as per statement of financial position £££
T rade and other payables – 4,013,419 4,013,419
Total – 4,013,419 4,013,419
Assets at fair
Loans and value through Available-
31st May 2010 receivables profit or loss for-sale Total
Assets as per statement of financial position ££££
Other financial assets –– 76,679 76,679
T rade and other receivables 4,365,999 –– 4,365,999
Available-for-sale financial assets –– 3,595,873 3,595,873
Cash and cash equivalents 4,774,473 –– 4,774,473
Total 9,140,472 – 3,672,552 12,813,024
Liabilities at Financial 
fair value liabilities at
through amortised
profit or loss cost Total
Liabilities as per statement of financial position £££
T rade and other payables 401,660 3,486,121 3,887,781
Total 401,660 3,486,121 3,887,781 Annual Report 2011 51
28 Financial instruments continued
Company Assets at fair
Investment Loans and value through Available-
31st May 2011 in subsidiaries receivables profit or loss for-sale Total
Assets as per statement of financial position £££££
Other financial assets 762,255 –– 66,522 828,777
T rade and other receivables – 1,114,332 –– 1,114,332
Available-for-sale financial assets ––– 5,807,787 5,807,787
Cash and cash equivalents – 161,683 –– 161,683
Total 762,255 1,276,015 – 5,874,309 7,912,579
Liabilities at Financial 
fair value liabilities at
through amortised
profit or loss cost Total
Liabilities as per statement of financial position £ ££
T rade and other payables – 5,224,742 5,224,742
Total – 5,224,742 5,224,742
Assets at fair
Investment Loans and value through Available-
31st May 2010 in subsidiaries receivables profit or loss for-sale Total
Assets as per statement of financial position £££££
Other financial assets 760,067 –– 69,873 829,940
T rade and other receivables – 803,547 –– 803,547
Available-for-sale financial assets ––– 3,595,873 3,595,873
Cash and cash equivalents – 255,677 –– 255,677
Total 760,067 1,059,224 – 3,665,746 5,485,037
Liabilities at Financial 
fair value liabilities at
through amortised
profit or loss cost Total
Liabilities as per statement of financial position £££
T rade and other payables – 5,081,468 5,081,468
Total – 5,081,468 5,081,468 Notes to the financial statements
Continued
28 Financial instruments continued
(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 prevailing quoted exchange 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
31st May 2011 ££££
Available-for-sale financial assets
Investment in own funds 2,336,763 3,498,636 – 5,835,399
Total 2,336,763 3,498,636 – 5,835,399
Financial assets at fair value through profit or loss
Forward currency trades – 334,563 – 334,563
Total – 334,563 – 334,563
Level 1 Level 2 Level 3 Total
31st May 2010 ££££
Available-for-sale financial assets
Investment in own funds 1,816,491 1,804,472 – 3,620,963
Total 1,816,491 1,804,472 – 3,620,963
Financial liabilities at fair value through profit or loss
Forward currency trades – (401,660) – (401,660)
Total – (401,660) – (401,660)
52 City of London Investment Group PLC 28 Financial instruments continued
Company
Level 1 Level 2 Level 3 Total
31st May 2011 ££££
Available-for-sale financial assets
Investment in own funds 2,336,763 3,491,948 – 5,828,711
Total 2,336,763 3,491,948 – 5,828,711
Level 1 Level 2 Level 3 Total
31st May 2010 £ £££
Available-for-sale financial assets
Investment in own funds 1,816,491 1,797,666 – 3,614,157
Total 1,816,491 1,797,666 – 3,614,157
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. Due to improved
market conditions again this year, the Group has written back the remaining balance of £79,372 (2010 – £159,418) of the
£238,790 impairment charge recognised in 2009.
The fair value profit on the forward currency trades is offset in the income statement by the foreign exchange loss on other
currency assets and liabilities held during the year and at year end. The net gain reported for the year is £10,366 (2010 – net
gain £177,664).
(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. Each of the Group’s subsidiaries
eliminates its currency exposure by transfer to the holding company. All hedging activity is therefore assessed at the Group level.
Forward foreign exchange transactions are executed 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 31st May 2011, the Group had net asset balances of US$11,694,999 (2010 – US$6,854,423), offset by forward sales
totalling US$13,500,000 (2010 – US$6,500,000), and net asset balances of C$401,876 (2010 – C$411,851) and
SGD1,051,314 (2010 – SGD1,049,466).
Had the US Dollar strengthened or weakened against Sterling as at 31st May 2011 by 10%, with all other variables held
constant, there would have been no material impact on the Group’s net assets, because the US Dollar position is minimised 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 on page 13.
Annual Report 2011 53 54 City of London Investment Group PLC
Notes to the financial statements
Continued
28 Financial instruments continued
(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.
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 on page 13.
The Group is, from time to time, exposed to market risk directly via its investment holdings and 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 cost of hedging recognised in the Group income statement for the period is £62,682 (2010 – £32,027).
(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 and its strategy 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 31st May 2011
the Group held £6,104,673 (2010 – £4,774,473) in cash balances, of which £5,514,198 (2010 – £4,168,469) 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 on pages 32 and 33.
The Group’s principal operating subsidiary company, City of London Investment Management Company Ltd is subject to the
minimum capital requirements of the Financial Services Authority (“FSA”) in the UK. This subsidiary held surplus capital over
its requirements throughout the year. Annual Report 2011 55
Notice is hereby given that the Annual General Meeting of City of London Investment Group PLC (the “Company”) will be held at
77 Gracechurch Street, London EC3V 0AS on Monday 3rd October 2011 at 11.30 am for the following purposes:
Ordinary business
1. To receive and adopt the financial statements for the year ended 31st May 2011 together with the reports of the Directors and
auditors thereon.
2. To approve the Directors’ remuneration report for the year ended 31st May 2011.
3. To declare a final dividend of 16p per ordinary share for the year ended 31st May 2011 payable on 21st October 2011.
4. Having been appointed by the Board since the last Annual General Meeting, to re-elect Rian Avery Arthur Dartnell as a Director
of the Company in accordance with article 137 of the Company’s articles of association.
5. Having last been re-elected at the 2008 Annual General Meeting, to re-elect Douglas Forbes Allison as a Director of the Company
in accordance with article 132(a) of the Company’s articles of association.
6. Having last been re-elected at the 2008 Annual General Meeting, to re-elect Allan Seymour Bufferd as a Director of the Company
in accordance with article 132(a) of the Company’s articles of association.
7. Having served longer than nine years as a non-executive Director, to re-elect Andrew John Davison as a Director of the Company.
8. Having served longer than nine years as a non-executive Director, to re-elect George Alan Robb as a Director of the Company.
9. To re-appoint Moore Stephens LLP as auditors of the Company to hold office from the conclusion of the meeting until the
conclusion of the next general meeting of the Company at which accounts are laid before the Company.
10. To authorise the Board to determine the auditors’ remuneration.
Special business
To consider and, if thought fit, pass resolution 11 as an ordinary resolution and resolutions 12 and 13 as special resolutions:
11. THAT, in accordance with section 551 of the Companies Act 2006, the Directors be generally and unconditionally authorised to
exercise all powers conferred pursuant to Article 10 of the Company’s Articles of Association to allot shares in the Company
(which for this purpose includes grants of rights to subscribe for or to convert any security into shares) up to a maximum nominal
amount of £89,528, (representing approximately one third of the Company’s issued ordinary capital at the date of this notice),
provided that this authority shall, unless renewed, varied or revoked by the Company, expire at the conclusion of the Company’s
Annual General Meeting to be held in 2012, save that the Company may, before such expiry, make an offer or agreement which
would or might require shares to be allotted (or rights to be granted) and the Directors may allot shares (or grant rights) in
pursuance of such offer or agreement notwithstanding that the authority conferred by this resolution has expired.
This authority is in substitution for all previous authorities conferred on the Directors in accordance with section 551 of the
Companies Act 2006.
12. THAT, subject to the passing of resolution 11 and in accordance with section 570 and section 573 of the Companies Act 2006,
the Directors be generally and unconditionally authorised to exercise all powers conferred pursuant to Article 10 of the Company’s
Articles of Association to allot equity securities (as defined in section 560 of the Companies Act 2006) pursuant to the authority
conferred by resolution 11, as if the pre-emption provisions of section 561(1) of the Companies Act 2006 did not apply to any
such allotment, provided that this power shall be limited to the allotment of equity securities up to a maximum nominal amount
of £13,429 (representing approximately 5% of the Company’s issued ordinary capital at the date of this notice), provided that this
authority shall, unless renewed, varied or revoked by the Company, expire at the conclusion of the Company’s Annual General
Meeting to be held in 2012, save that the Company may, before such expiry, make an offer or agreement which would or might
require shares to be allotted (or rights to be granted) and the Directors may allot shares (or grant rights) in pursuance of such offer
or agreement notwithstanding that the authority conferred by this resolution has expired.
Notice of Annual General Meeting 56 City of London Investment Group PLC
Notes to the Notice of Annual General Meeting
Continued
13. THAT, in accordance with section 701 of the Companies Act 2006, the Company be generally and unconditionally authorised to
make market purchases (within the meaning of section 693(4) of the Companies Act 2006) of any of its ordinary shares of £0.01
(1p) provided that:
(a) the maximum number of ordinary shares which may be purchased is 2,685,845 (representing approximately 10% of the
Company’s issued ordinary share capital at the date of this notice);
(b) the minimum price which may be paid for each ordinary share is £0.01 (1p) which amount shall be exclusive of expenses, if any;
(c) the maximum price, exclusive of any expenses, which may be paid for any ordinary share shall be the higher of:
(i) an amount equal to 105% of the average of the middle market quotations for the ordinary shares of the Company as
derived from the Daily Official List of the London Stock Exchange plc for the five business days immediately preceding
the date on which such ordinary share is contracted to be purchased; and
(ii) the higher of the price quoted for
(a) the last independent trade of, and
(b) the highest current independent bid for,
any number of ordinary shares on the trading venue where the purchase is carried out, and
(d) unless previously renewed, revoked or varied, this authority shall expire at the conclusion of the Company’s next annual
general meeting, or on 3rd April 2013 (whichever is the earlier),
under this authority the Company may make a contract to purchase ordinary shares which would or might be executed wholly or
partly after the expiry of this authority and may make purchases of ordinary shares pursuant to it as if this authority had not expired.
By order of the Board
D F Allison
Company Secretary
1st September 2011
Registered office: 77 Gracechurch Street, London EC3V 0AS 
Registered in England and Wales No 2685257 Annual Report 2011 57
Notes to the Notice of Annual General Meeting
1. Information about this meeting is available on the Company’s website – www.citlon.co.uk
2. A member entitled to receive notice, attend and vote at the annual general meeting is entitled to appoint a proxy or proxies to
attend and, on a poll, vote instead of him. Such proxy need not be a member of the Company. Completion of a form of proxy
does not preclude the member attending the meeting and voting in person if they so wish. To be valid, the instrument appointing
a proxy, together, if appropriate, with a power of attorney or other authority (if any) under which it is signed, or a notarially
certified copy of such authority, must be deposited at the offices of the Company’s registrars, Capita Registrars, 34 Beckenham
Road, Beckenham, Kent BR3 4TU no later than 11.30 am on 29th September 2011. A form of proxy accompanies this notice.
3. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the time by which a person must be entered on the
register of members of the Company in order to have the right to attend and vote at the annual general meeting (and for the
purposes of the determination by the Company of the numbers of votes they may cast) is 6.00 pm on 29th September 2011.
The rights of members to attend and vote at the meeting will be determined by reference to entries on the register of members
at 6.00 pm on 29th September 2011. Changes to entries on the register of members of the Company after that time will be
disregarded in determining the rights of any person to attend or vote at the meeting.
4. The right to appoint a proxy does not apply to persons whose ordinary shares are held on their behalf by another person and
who have been nominated to receive communications from the Company in accordance with section 146 of the Companies Act
2006 (‘nominated persons’). Nominated persons may have a right under an agreement with the registered shareholder who holds
shares on their behalf to be appointed (or to have someone else appointed) as a proxy. Alternatively, if nominated persons do not
have such a right, or do not wish to exercise it, they may have a right under such an agreement to give instructions to the person
holding the ordinary shares as to the exercise of voting rights.
5. In the case of joint holders, the signature of only one of the joint holders is required on the form of proxy, but the vote of the
first named on the register of members will be accepted to the exclusion of the other joint holders.
6. The following documents are available for inspection between 10.00 am and 12.00 noon at the registered office of the Company
on any weekday and will also be available for inspection at the place of the annual general meeting from the commencement of
the meeting until the conclusion thereof:
(a) The register of interests of the Directors (and their families) in the share capital of the Company.
(b) Copies of the Directors’ contracts of service and letters of appointment of the non-executive Directors. 
(c) Terms of reference of the Audit, Remuneration and Nominations Committees.
(d) Copies of the Company’s articles of association. 58 City of London Investment Group PLC
Explanation of the business of the Annual General Meeting
Report and accounts (Resolution 1)
The first item on the agenda requires that the Directors must present the accounts of the Company for the year ended 31st May 2011
together with the Directors’ report and the independent auditors’ report thereon.
Directors’ remuneration (Resolution 2)
In line with regulations relating to the preparation and approval of a Directors’ remuneration report, resolution 2 is to be proposed
at the AGM. This resolution will provide shareholders with the opportunity to comment on the remuneration matters and policy,
although shareholders should note that in accordance with the regulations the vote will be advisory in nature.
Declaration of final dividend (Resolution 3)
Your Directors are recommending a final dividend of 16p per ordinary share for the year ended 31st May 2011 which will be paid
on 21st October 2011 to shareholders on the register at the close of business on 7th October 2011.
The Company’s shares will trade ex-dividend from 5th October 2011 until the payment date.
Re-appointment of Directors (Resolutions 4 – 8)
Articles 132 and 137 of the Company’s articles of association require that at each annual general meeting, any Director who has
been in office for more than three years shall retire by rotation and that any Director who has been appointed by the Directors since
the last annual general meeting of the Company will stand for re-appointment. In addition, such further Directors (if any) shall
retire by rotation as would bring the number retiring by rotation up to one-third of the number of Directors in office as at 1st
September 2011 (or if their number is not a multiple of three, the number nearest to but not greater than one third).
Article 138 of the Company’s articles of association requires that a resolution for the appointment or re-appointment of two or more
persons as Directors by a single resolution may not be moved unless a resolution that it shall be so moved has first been agreed to by
the meeting without any vote being given against it. Consequently separate resolutions will be put to the meeting.
Section B.7.1. of the UK Corporate Governance Code (which replaces Section A.7.2. of the Combined Code for financial years
beginning on or after 29th June 2010) provides that non-executive Directors may serve longer than nine years (e.g. three three year
terms), subject to annual re-election. Accordingly resolutions 7 and 8 are proposed for the re-election of Andrew Davison and
George Robb as Directors of the Company.
Brief biographical details of all the Directors may be found on pages 14 and 15 of the annual report.
Re-appointment of auditors (Resolution 9)
The Company is required at each general meeting at which its annual accounts and reports are laid before the shareholders (an
“accounts meeting”) to appoint auditors for the next financial year to hold office from the conclusion of that accounts meeting until
the conclusion of the next accounts meeting. Moore Stephens LLP are the current auditors and have indicated their willingness to
continue in office. If resolution 9 is passed, Moore Stephens LLP will be re-appointed as auditors to the Company for the financial
year ending 31st May 2012.
Remuneration of auditors (Resolution 10)
In accordance with the Companies Act 2006, the remuneration of the auditors appointed by the shareholders may be fixed in such
manner as the shareholders in general meeting may determine. It is normal practice for a company’s Directors to be authorised to agree
the auditors’ fees. If this resolution is passed, the Audit Committee will review and approve the fees for recommendation to the Board.
Authority to allot shares (Resolution 11)
Resolution 11 will be proposed as an ordinary resolution, in accordance with section 551 of the Companies Act 2006, to authorise
the Directors generally to allot shares and rights over shares up to a maximum nominal amount of £89,528 representing
approximately one third of the existing issued ordinary share capital as at the date of this notice.
Such authority will expire at the conclusion of the Annual General Meeting to be held in 2012, unless renewed, varied or revoked by
the Company prior to or on that date. Annual Report 2011 59
Explanation of the business of the Annual General Meeting
Continued
Disapplication of pre-emption rights (Resolution 12)
Resolution 12 will be proposed as a special resolution, in accordance with section 570 of the Companies Act 2006, to authorise the
Directors of the Company to allot a limited number of shares for cash other than on a pre-emptive basis, up to an aggregate nominal
value of £13,429, representing approximately 5% of the issued ordinary share capital at the date of this notice. This authority will
expire at the conclusion of the Annual General Meeting to be held in 2012, unless renewed, varied or revoked by the Company
prior to or on that date.
Your Board of Directors is aware of the institutional guidelines which state that no more than 7.5% of a company’s ordinary share
capital should be issued for cash on a non pre-emptive basis in any three year rolling period. Over the last three years, the Directors
have not allotted shares for cash on a non pre-emptive basis other than pursuant to employee share schemes.
Purchase by the Company of its own shares (Resolution 13)
Under section 701 of the Companies Act 2006, the Directors of a company may make market purchases of that company’s shares if
authorised to do so. The Company’s articles of association give a general authority to the Directors to purchase shares on the market
but that authority is subject to the approval of shareholders. Your Directors believe that granting such approval would be in the best
interests of shareholders in allowing Directors the flexibility to react promptly to circumstances requiring market purchases.
Accordingly, Resolution 13, which will be proposed as a special resolution, will give the Directors the authority to purchase issued
shares of the Company under section 701 of the Companies Act 2006. The authority contained in this Resolution will be limited to
an aggregate nominal value of £26,858 which represents approximately 10% of the issued ordinary share capital of the Company at
the date of this notice. The price which may be paid for those shares is also restricted as set out in the Resolution. This authority will
expire at the conclusion of the Company’s annual general meeting in 2012 or on 3rd April 2013 (whichever is the earlier).
The Board has no present intention of exercising this authority. However, this will be kept under review, and the Board will use this
power only if and when, taking account of market conditions prevailing at the time, other investment opportunities, appropriate
gearing levels and the overall financial position of the Group, they believe that the effect of such purchases will be in the best
interests of shareholders generally and that they will result in an increase in earnings per share.
Shares purchased under this authority may be held as treasury shares. The Company may purchase and hold shares as treasury shares
up to a maximum amount equal to 10% of the nominal value of the issued ordinary share capital at that time, rather than cancelling
them. Shares held in treasury do not carry voting rights and no dividends will be paid on any such shares. Shares held in treasury in
this way can be sold for cash or cancelled. This would allow the Company to manage its capital base more effectively and to
replenish its distributable reserves.
If and when the Board resolves to exercise its authority to make market purchases, it will at that time decide whether shares
purchased are to be cancelled or held in treasury. 60 City of London Investment Group PLC
Professional advisers
Financial adviser and
joint broker
Singer Capital Markets
One Hanover Street
London
W1S 1YZ
Joint broker
Canaccord Genuity Limited
Cardinal Place
7th Floor
80 Victoria Street
London
SW1E 5JL
Auditors
Moore Stephens LLP
Chartered Accountants
150 Aldersgate Street
London
EC1A 4AB
Bankers
The Royal Bank of Scotland plc
London City Office
62-63 Threadneedle Street
London
EC2R 8LA
Financial communications
Tavistock Communications
131 Finsbury Pavement
London
EC2A 1NT
Registrar
Capita Registrars 
Northern House
Woodsome Park
Fenay Bridge
Huddersfield
West Yorkshire
HD8 0GA
77 Gracechurch Street
London
EC3V 0AS
Registered office Designed and produced by fourthquarter
Where we operate
United Kingdom
The London office, our first, has been based in the City of London since
1991. In London, we undertake investment management for our clients 
and research into our global markets from the European time zone.
USA
Our second office was established near Philadelphia in the United States 
in 1995 to better service the growing client base in North America 
and to enable us to provide investment management from the Americas 
time zone.
Singapore
The third office, to cover Far East Emerging Markets in real time, 
opened in central Singapore in 2000, positioning the Group to cover 
our worldwide target investment markets 24 hours a day.
Dubai
In 2008, we opened our fourth office, in Dubai, which allowed us to access
investment opportunities in the region as well as to increase the Group’s
visibility with funds in the area.
We recognise that our shareholders have trusted us with their money. 
We seek to communicate with our shareholders in a transparent and open
fashion, whether at face-to-face meetings with our larger institutional holders or
at group meetings with advisers and individual shareholders. We try to make all
of our announcements simple and accessible. We believe that our shareholders
have a right to know what to expect from us.
We have sought, for example, to make our dividend policy – the most direct way
we have of rewarding shareholders – understandable to all. We pay out the major
part of post-tax profits in dividends, based on a formula of one and a half times
cover with one third payable as an interim dividend and two thirds as a final.
Financial calendar
Year end 31st May 2011
Pre-close trading update 13th June 2011
Preliminary final results, first quarter funds under
management (FuM) and final dividend announcement 6th September 2011
Posting of Annual Report and Notice of Meeting (AGM) 9th September 2011
AGM and Interim Management Statement (IMS) 3rd October 2011
Ex-dividend date for the final dividend 5th October 2011
Final dividend record date 7th October 2011
Final dividend payment 21st October 2011
Second quarter FuM announcement 5th December 2011
Half year results and interim dividend announcement 23rd January 2012
Ex-dividend date for the interim dividend 8th February 2012
Interim dividend record date 10th February 2012
Interim dividend payment 27th February 2012
Third quarter FuM announcement and IMS 5th March 2012
Year end 31st May 2012
Investor relations
City of London’s client base is, and always has been, overwhelmingly
institutional. Our clients include pension funds, foundations and endowments
and other professional money managers.  
What they have in common is a desire to access the returns available in
‘difficult’ emerging markets. We have provided that access over many years 
and cycles with a consistent record of investment performance against their
benchmarks. Clients can then focus on their asset class allocation decisions.
Our clients
     Pension 48%
     Other institutional 9%
     Retail 1%
     Endowments & Foundations 42%
“We use technology to leverage
our capabilities, allowing us to
trade worldwide 24/7 based
on real time information on
underlying investment portfolios.”
We believe that our approach and philosophy differs significantly from 
our peers. Our resolute focus is on generating consistent investment
performance – over time and through economic cycles.  
We use technology to leverage our capabilities, allowing us to trade worldwide
24/7 based on real time information on underlying investment portfolios. 
Our process driven investment approach is applicable to markets other than 
the core, original emerging markets closed-end funds. We have internalised our
marketing to aid this process of diversification.
The way in which we manage our business is important too. We are above all
risk-averse. Profits, margins and costs are carefully managed to provide our
staff with appropriate remuneration and shareholders with progressive,
meaningful dividends.
Our competitive advantage city of london
i n v e s t m e n t g r o u p p l c
ANNUAL REPORT & ACCOUNTS 2011
London office
77 Gracechurch Street
London
EC3V 0AS
United Kingdom
Telephone: + 44 (0) 207 711 0771
Facsimile: + 44 (0) 207 711 0772
US office
The Barn
1125 Airport Road
Coatesville, PA 19320
United States
Telephone: + 1 610 380 2110
Facsimile: + 1 610 380 2116
Singapore office
20 Collyer Quay
10-04 T ung Centre
Singapore 049319
Telephone: + 65 6236 9136
Facsimile: + 65 6532 3997
Dubai office
Unit 2, 2nd Floor
The Gate Village Building 1
Dubai International Financial Centre
PO Box 506695
Dubai
United Arab Emirates
Telephone: + 971 (0)4 423 1780
Facsimile: + 971 (0)4 437 0510
www.citlon.co.uk
CITY OF LONDON INVESTMENT GROUP PLC    ANNUAL REPORT & ACCOUNTS 2011
1      City of London Investment Group Plc
We are an established asset management group which has built its
reputation, with an institutional client focus, by specialising in Emerging
Market closed-end fund investment. At 31st May 2011 our funds under
management amounted to US$5.8 billion.
In recent years we have successfully added equities (Natural Resources and
Emerging Markets) and Developed Market closed-end fund strategies to our
product range. We operate our business from offices in London, the US,
Singapore and Dubai.
City of London Investment Group PLC 
What we do
At City of London, we focus on building products that reflect our expertise.
Initially, and for many years since the firm was founded, that expertise was
very specific to closed-end funds which offered emerging markets exposure.
This was subsequently complemented by research into the underlying equities,
which in turn spawned regional and global emerging market equity funds. Most
recently, we have applied our unrivalled knowledge of closed-end funds to the
development of a global (ex US) closed-end fund product. So today, while we
remain both proud and protective of our “boutique” status, we offer a range of
products which are defined by the twin pillars of our expertise: emerging
markets and closed-end funds.
“While we remain both proud and
protective of our “boutique”status,
we offer a range of products
which are defined by the twin 
pillars of our expertise: emerging
markets and closed-end funds.”
Investment process
We have developed and nurtured a team investment process which does not
rely on ‘star’ fund managers, but rather upon a series of analytical
procedures that can produce repeatable and sustainable first or second
quartile performance versus our peers. 
Our process employs an array of proprietary tools for analysing and identifying
value. These quantitative tools supplement both macroeconomic analysis and
20 years of trading expertise. Whether it is taking advantage of discount
anomalies in closed-end funds, or company specific valuation in our equity
business, through three full market cycles in Emerging Markets, the process has
delivered consistent relative outperformance combined with low volatility
relative to our clients’ benchmarks.
www.citlon.co.uk
Stage 1
Macroeconomic research
Stage 2
Qualitative research
Stage 3
Country re-
ranking