London Finance & Investment Group Plc Annual Report 2016

FY2016 Annual Report · London Finance & Investment Group Plc

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London Finance &
Investment Group P.L.C.

Annual Report and Accounts

30t

2016

J
u
n
e
LONDON FINANCE & INVESTMENT GROUP P.L.C.
(“Lonfin” or the “Company”)

Lonfin is a United Kingdom investment finance and management company. Its core
portfolio centres on quality companies in the FTSE Eurofirst 300 and S&P 500 indices.
Additionally, Lonfin holds investments in United Kingdom listed companies where it
has Directors in common. Lonfin is also a 43.8% shareholder in its associated
company, Western Selection P.L.C. (“Western”). Western’s share capital is admitted
to trading on the ICAP ISDX Growth Market.

Lonfin’s shares are quoted in the official lists of the London and Johannesburg stock
exchanges. The current price of the Company's shares can be found on the website
of the London Stock Exchange (www.londonstockexchange.com) and in the business
section of some of the major South African newspapers.

_______________________________

CITY GROUP P.L.C.
(“City Group”)

City Group, which is owned by Lonfin and Western, provides management, office and
company secretarial services to both companies and to other clients requiring a
London presence, including companies in which Lonfin and Western have an
investment.

Contents

Directors and Advisers

Summary of Investments and Financial Calendar

Strategic Report

Composition of General Portfolio

Investment Policy

Consolidated Statement of Total Comprehensive Income

Consolidated Statement of Changes in Shareholders’ Equity

Consolidated Statement of Financial Position

Company Statement of Financial Position

Consolidated Statement of Cash Flow

Notes to the Accounts

Directors’ Report

Corporate Governance

Statement of Directors’ Responsibilities in Respect of the Accounts

Directors’ Remuneration Report

Report of the Independent Auditors

Summary of Results

Notice of Annual General Meeting

Page

Proxy Form

Enclosed

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(cid:3)
(cid:3)
London Finance & Investment Group P.L.C.

Directors

D.C. MARSHALL, Chairman ♦(cid:3)
David Marshall joined the Board in 1971. He is the chairman of London Finance & Investment
Group PLC, which is a substantial shareholder of Western. David is also chairman of Western,
chief executive of Marshall Monteagle PLC. He is a non-executive director of Northbridge Industrial
Services PLC and Industrial & Commercial Holdings PLC. He resides in South Africa, where he
has interests in listed trading, financial and property companies.(cid:3)

E.J. BEALE, Non-Executive(cid:3)
Edward Beale joined the Board on 13th April 2016. He is a Chartered Accountant and is the chief
executive of City Group PLC., the Company’s company secretary and administrator. Up until
August 2013, Edward was a member of the Accounting Council of the Financial Reporting Council.
He is currently a member, and previously chairman, of the Corporate Governance Expert Group of
the Quoted Companies Alliance. He is the non-executive chairman of Marshall Monteagle PLC
and is a non-executive director of Western, Finsbury Food Group PLC, Swallowfield PLC,
Heartstone Inns Limited, Industrial & Commercial Holdings PLC and Tudor Rose International
Limited.

F.W.A. LUCAS, BSc, PhD, Independent Non-Executive * (cid:31) (cid:3)
Frank Lucas was appointed a Director in 1999. He is a mining geologist by profession and one of
the founding shareholders and a Director of Loeb Aron & Company Ltd.(cid:3)

L.H. MARSHALL, Non-Executive ♦(cid:3)
Lloyd Marshall joined the Board in 2011. He is the Finance Director of Marshall Monteagle PLC
and has extensive investment management experience. He is a non-executive director of
Western, Industrial & Commercial Holdings PLC, Tudor Rose International Limited, and
Heartstone Inns Limited.(cid:3)

J.H. MAXWELL, CA, CCMI, FRSA, Senior Independent Non-Executive *
John Maxwell, who is a Chartered Accountant, was appointed a Director of the Company in 2003.
He currently serves as a non-executive director of The Royal Automobile Club Motor Sports
Association Limited.

(cid:31) (cid:3)

J.M. ROBOTHAM, OBE, FCA, Non-Executive
Michael Robotham joined the Board in 1984. He is a non-executive director of Western and is a
Chartered Accountant.

♦(cid:3)

* Member of the Audit Committee
♦ Member of the Investment Committee (cid:31)

Member of Nomination Committee(cid:3)
Member of Remuneration Committee(cid:3)

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Advisers

United Kingdom

Republic of South Africa

Company
Secretary and
Registered Office

City Group PLC
6 Middle Street,
London EC1A 7JA
Tel: +44 (0)20 7796 9060

D.A. Greer
11 Sunbury Park
La Lucia Ridge Office Estate
La Lucia 4051
Durban
Tel: +27 (0)31 566 7600

Company
Registered Number

201151

Website

www.city-group.com/london-finance-investment-group-plc

Registrars

Sponsor

Auditors

Proposed
Auditors

Neville Registrars Limited
Neville House
18 Laurel Lane
Halesowen
West Midlands B63 3DA
Tel: +44 (0)121 585 1131

Computershare Investor Services (Pty.)
Limited
70 Marshall Street
Johannesburg, 2001
(P.O. Box 61051, Marshalltown 2107)
Tel: +27 11 370 5000

JSE Limited Sponsor:
Sasfin Capital (a division of Sasfin Bank
Limited)
29 Scott Street, Waverley 2090
Johannesburg, South Africa
Tel: +27 (11) 809 7500

SRG LLP
28 Ely Place
London EC1N 6AA

PKF Littlejohn LLP
1 Westferry Circus
Canary Wharf
London E14 4HD

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London Finance & Investment Group P.L.C.

2016
£000

3,537
8,880
12,417

7,125
22
588
-
(44)
(850)
(90)

19,168

61.4p

0.5p
0.55p

5.2p

2015
£000

3,694
8,000
11,694

5,801
31
115
(1,500)
(2)
(442)
(75)

15,622

50.1p

0.5p
0.5p

0.8p

Summary of Investments

At 30th June

Strategic Investment at market value:
Western Selection PLC
Finsbury Food Group PLC

General Equity Portfolio at market value
Tangible non-current assets
Cash, bank balances and deposits
Bank loans
Other net liabilities
Deferred taxation
Non-Controlling interests

Net assets, including investments at market value

Net assets per share

Dividends
Interim
Proposed Final

Earnings per share (excluding unrealised changes in the
market value of investments):

Financial Calendar

Announcement of Unaudited
Preliminary Results for the
year ended 30th June 2016

30th September 2016

Annual General Meeting

30th November 2016

Final Dividend for 2016

Payable on 9th December 2016 to shareholders on the register of

Half year results to
31st December 2016

to be announced in February 2017

members at 18th November 2016

Interim Dividend for 2017

to be announced in February 2017

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Strategic Report
Strategy and Business Model

Lonfin is an investment company whose objective is to generate growth in shareholder value in real
terms over the medium to long term whilst maintaining a progressive dividend policy.

The Company invests in other companies in accordance with the Company’s Investment Policy as set
out on page 11. In the short term, the performance of the Company can be influenced by overall stock
market performance and to ameliorate this short term risk the Company has a combination of Strategic
Investments together with a General Portfolio. Strategic Investments are significant investments in
smaller UK quoted companies and these are balanced by a General Portfolio, which consists of a
broad range of investments in major USA, UK and other European companies which provides a
diversified exposure to international equity markets.

Results

(cid:31) Net assets have increased over the year by 22.6% from 50.1p per share to 61.4p per share
(cid:31) Strategic Investments have increased in value over the year by 6.0%, from £11,694,000 to

£12,417,000 largely due to the increase in value of our investment in Finsbury Food Group Plc.

The General Portfolio has increased over the year by 22.8% from £5,801,000 to £7,125,000
The General Portfolio yielding 2.4% (2015 – 2.9%)

(cid:31) Strategic investments are yielding 2.9% (2015 – 2.7%)
(cid:31)
(cid:31)
(cid:31) No borrowings at 30th June 2016, compared with borrowings of £1,385,000 at 30th June 2015
(cid:31) Operating costs were broadly in line with 2015
(cid:31) A final dividend of 0.55p per share is recommended, making a total of 1.05p per share for the

year (2015 – 1p)

The Company and its subsidiaries (“Group”) achieved a profit for the year, before tax and changes to
the fair value adjustments of investments, of £1,683,000 (2015- £334,000). The profit, after positive
fair value adjustments, tax and non-controlling interest was £3,873,000 (2015 - £1,978,000), giving a
headline earnings per share of 5.2p (2015 – headline earnings per share of 0.8p).

Strategic Investments

Western

The Group owns 7,860,515 ordinary shares, being 43.8%, of the issued share capital of Western.

On 30th September 2016, Western announced unaudited preliminary results showing a profit before
exceptional items of £64,000 for the year to 30th June 2016 (2015 – profit before exceptional items of
£159,000).
Including associates and after exceptional items and tax, earnings per share were 0.4p
(2015 – earnings per share – 15.5p).

Western has paid an interim dividend of 1.05p and proposes a final dividend of 1.05p making 2.1p for
the year (2015 – 2.1p). Western’s net assets at market value as at 30th June 2016 were £14,217,000
equivalent to 79p per share, an increase of 5.3% from 75p last year.

Our share of the net assets of Western, including the value of Western’s investments at market
value, was £6,627,000 (2015 - £5,907,000). The fair value recorded in the Statement of Financial
Position is the market value of £3,537,000 (2015 - £3,694,000). This represents 26% (2015 – 24%)
of the net assets of the Group. Western’s objective is to generate growth in value for shareholders
over the medium to long term and pay a progressive dividend.

Western’s business model is to take sizeable minority stakes in relatively small companies usually
before or as their shares are admitted to trading on one of the UK’s stock exchanges and have
directors in common through which they can provide advice and support for these growing companies.
These may or may not become associated companies. The aim is that these companies (“Core
Holdings”) will grow to a stage at which Western’s support is no longer required and its stake can be

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London Finance & Investment Group P.L.C.

sold over time into the relevant stock market. Companies that are targeted as Core Holdings will have
an experienced management team, a credible business model and good prospects for growth.

Mr. D. C. Marshall is the Chairman of Western and Mr L.H. Marshall, Mr. J.M. Robotham and Mr. E.J.
Beale are non-executive directors. Western’s main Core Holdings are Northbridge Industrial Services
plc, Swallowfield plc, Bilby Plc and Tudor Rose International Limited.

An extract from Western’s announcement relating to its main Core Holdings is set out below:

Northbridge Industrial Services plc (“Northbridge”)
Northbridge hires and sells specialist industrial equipment to a non-cyclical customer base. It has
offices or agents in the UK, USA, Dubai, Germany, Belgium, France, Australia, Singapore, India,
Brazil, Korea and Azerbaijan, Customers include utility companies, the oil and gas sector, shipping,
construction and the public sector. The product range includes loadbanks, transformers, generators,
compressors, loadcells and oil tools. Further information about Northbridge is available on their
website: www.northbridgegroup.co.uk

Northbridge announced its unaudited interim results for the six months ended 30th June 2016 on 29th
September 2016 and recorded a loss after tax of £2,338,000 for the period.

Western acquired a further 1,323,632 Northbridge shares during the year for £964,000 bringing its
holding to 3,223,632 shares. Western’s holding is now 12.45 % of Northbridge’s issued share capital.
The value of this investment at 30th June 2016 was £2,772,000 (2015 - £3,895,000) being 19% (2015
- 29%) of Western’s net assets.

Mr D. C. Marshall is a non-executive director of Northbridge.

Swallowfield plc (“Swallowfield”)
Swallowfield is a market leader in the development, formulation, manufacture and supply of cosmetics,
toiletries and related household products for global brands and retailers operating in the cosmetics,
personal care and household goods market. Further information about Swallowfield is available on
their website: www.swallowfield.com

Swallowfield announced its annual results to 25th June 2016 on 20th September 2016 and recorded a
profit after tax of £2,001,000 compared to a profit of £746,000 for the comparable period last year.

Dividends of £52,000 were received from Swallowfield during the year (2015 – nil). A final dividend of
2.3p per share has been declared and Western will receive a further £46,000.

Western acquired a further 130,851 Swallowfield shares during the year for £203,000. At the reporting
date, Western owned 2,000,000 shares which was 11.9 % of Swallowfield’s issued share capital. The
market value of this investment on 30th June 2016 had increased to £3,400,000 from the value at 30th
June 2015 of £2,019,000. The value of this investment is 24 % (2015 - 15%) of Western’s net assets.

On 23rd September 2016, Western sold 200,000 Swallowfield shares for £520,000 (before selling
expenses).

Mr E. J. Beale is a non-executive director of Swallowfield.

Bilby Plc (“Bilby”)
Bilby is an established, and award winning, provider of gas installation, maintenance and general
building services to local authority and housing associations across London and South East England.
They have a strategy of growing organically and by acquisition. Further information about Bilby is
available on their website: www.bilbyplc.com.

In July 2015, Western invested £1,500,000 in acquiring 1,875,000 shares in Bilby and, in April 2016,
a further £545,000 for 462,088 Bilby shares. Western now holds 2,337,088 shares which is 5.9 % of
Bilby’s issued share capital. The market value of this investment on 30th June 2016 was £2,968,000
which is 21 % of Western’s net assets.

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Bilby announced its results for the year ended 31st March 2016 on 14th July 2016 showing a profit after
tax of £954,000 compared to a profit of £1,426,000 for the 14 month period ended 31 st March 2015.
Dividends of £58,000 were received from Bilby during the year. Bilby announced a final dividend of
2.00 p per share which was paid in September 2016 which provided Western with further income of
£46,700.

Tudor Rose International Limited (previously Hartim Limited) (“Tudor Rose International”)

Tudor Rose International works closely with a number of leading UK branded fast moving consumer
goods companies, offering a complete sales, marketing and logistical service. Based in Stroud,
Gloucestershire, Tudor Rose International sells into 78 countries worldwide including USA, Spain,
Portugal, Italy, Czech Republic, Russia, Turkey, South Africa, Saudi Arabia, UAE, Malaysia, Australia
and China.

Western holds 49.5% of the issued share capital of Tudor Rose International, which has a 31st
December year end, and which generated trading profits before tax in the year to 30th June 2016 of
£71,000. Turnover in the period was £18,542,000 (2015 - £18,022,000).

Western’s share of profit after tax, including a charge for disallowed tax losses, for the twelve months
to 30th June 2016 was £35,000 (2015 –loss of £5,000) and the book value of the investment at 30th
June 2016 was £1,290,000 (2015 - £1,223,000) being 9 % (2015 – 9 %) of Western’s net assets.

Western has two nominees on the board of Tudor Rose International: Mr E. J. Beale and Mr L. H.
Marshall.

Finsbury Food Group plc (“Finsbury”)

Finsbury is one of the largest producers and suppliers of premium cakes, bread and morning goods
in the UK and currently supplies most of the UK's major supermarket chains. Further information
about Finsbury is available on its website: www.finsburyfoods.co.uk

During the year, Lonfin disposed of 2,000,000 shares in Finsbury for £1,984,000, realising a profit of
£1,408,000. At 30th June 2016, Lonfin held 8,000,000 Finsbury shares, representing 6.1 % of
Finsbury’s issued share capital. The market value of the holding was £8,880,000 as at 30th June 2016
(cost - £2,300,000) and represents 46% (2015 – 51%) of Lonfin’s net assets.

On 19th September 2016, Finsbury announced audited profits on continuing operations after tax and
minority interests of £8,504,000 for the 52 week period ended 2nd July 2016 (2015 - £6,620,000).

Finsbury paid an interim dividend of 0.93p and has recommended to its shareholders a final dividend
of 1.87p per share, making 2.8p for the year (2015 – 2.5p).

On 27th September 2016, Lonfin sold 1,000,000 Finsbury shares for £1,200,000 (before selling
expenses) and, on 29th September 2016, Lonfin sold a further 1,000,000 Finsbury shares for
£1,250,000 (before selling expenses). Lonfin now holds 6,000,000 Finsbury shares which represent
4.6% of Finsbury’s issued share capital.

Mr. E.J. Beale is a non-executive director of Finsbury.

General Portfolio

The investments comprising the General Portfolio at 30th June 2016 are listed on page 10.

The portfolio is diverse with material interests in Food and Beverages, Natural Resources,
Chemicals and Tobacco. We believe that the portfolio of quality companies we hold has the
potential to outperform the market in the medium to long term.

At the year end the number of holdings in the General Portfolio was 26. We have decreased the
amount invested in the General Portfolio over the year by £20,000 (2015 - increased by £100,000).

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London Finance & Investment Group P.L.C.

Operations and Employees

All of our operations and those of our associated company, Western, except investment selection,
are outsourced to our subsidiary, City Group Limited (“City Group”). City Group also provides office
accommodation, company secretarial and head office finance services to a number of other UK
and Jersey companies. City Group has responsibility for the initial identification and appraisal of
potential new strategic investments for the Company and the day to day monitoring of existing
strategic investments and employs 8 people.

Save for the appointment of Mr E.J. Beale to the Board in April 2016, all directors of the Company
and the directors of its subsidiaries are unchanged from last year and are male. The Group has set
a target of 25% female members of the Company’s Board and female candidates will be considered
on their merits when vacancies arise. The Board has enlarged during the year through the
appointment of Mr E.J. Beale, the chief executive of City Group, and since this was an internal
appointment, no female candidates were considered. Excluding directors, 4 of the 6 other
employees of the Group at 30th June 2016 were female (30th June 2015 - 4 of 6).

Dividend

The Board recommends a final dividend of 0.55p per share, making a total of 1.05p per ordinary
share for the year (2015 – 1p). Subject to shareholders’ approval at the Company’s Annual
General Meeting on 30th November 2016, the dividend will be paid on 9th December 2016 to
those shareholders on the register at the close of business on 18th November 2016.
Shareholders on the Johannesburg register will receive their dividend in South African rand
converted from sterling at the closing rate of exchange on 23rd September 2016 being GBP1=
ZAR 17.7257.

The number of shares in issue as at the dividend declaration date is 31,207,479 and the Company’s
UK Income Tax reference number is 948/L32120.

Dividend dates:

Last date to trade (SA)
Shares trade ex dividend (SA)
Shares trade ex dividend (UK)
Record date (UK and SA)
Pay date

Tuesday, 15th November 2016
Wednesday, 16th November 2016
Thursday, 17th November 2016
Friday, 18th November 2016
Friday, 9th December 2016

The JSE Listings Requirements require disclosure of additional information in relation to any
dividend payments.

Shareholders registered on the Johannesburg register are advised that the dividend withholding
tax will be withheld from the gross final dividend amount of 9.74914 SA cents per share at a rate
of 15% unless a shareholder qualifies for an exemption; shareholders registered on the
Johannesburg register who do not qualify for an exemption will therefore receive a net dividend of
8.28677 SA cents per share. The dividend is payable in cash as a ‘Dividend’ (as defined in the
South African Income Tax Act, 58 of 1962, as amended) by way of a reduction of income reserves.
The dividend withholding tax and the information contained in this paragraph is only of direct
application to shareholders registered on the Johannesburg register, who should direct any
questions about the application of the new dividend withholding tax to Computershare Investor
Services (Pty) Limited, Tel: +27 11 373-0004.

Share certificates may not be de-materialised or re-materialised between Wednesday, 16th
November 2016 and Friday, 18th November 2016, both days inclusive. Shares may not be
transferred between the registers in London and South Africa during this period either.

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Outlook

We believe our mix of Strategic Investments and a General Portfolio gives us every chance of
outperforming the broader market in the medium to long term notwithstanding any short term
volatility in markets, currencies and commodities.

Future Developments

The future development of the Company is dependent on the success of the Company’s Investment
Strategy in the light of economic and equity market developments and the continued support of its
shareholders.

Business Environment, Financial Instruments & Principal Risks and
Uncertainties

The financial instruments of the Group, in addition to its investments, comprise cash and
borrowings to finance those investments.

As an investment company our principal risks and uncertainties arise from the Group’s financial
instruments, and are:

Stock market volatility and economic uncertainty
The Company’s investment performance will be affected by general economic and market
conditions. Although the Company cannot predict the level of growth in the global economy, as
with most businesses, it believes a period of weak market growth will have an adverse effect on
its investments. Volatility relating to the Company’s investments, including movements in
interest rates and returns from equity and other investments will impact upon the value of the
Group’s investment portfolio.

Possible volatility of share prices of investments
A number of factors outside the control of the Company may impact the share price performance
of its investments. Such factors could include investor sentiment, local and international stock
market conditions, divergence of results from analysts’ expectations, changes in earnings
estimates by analysts and changes in political and economic sentiment. Exchange rate
movements will contribute to the volatility of prices of foreign stocks.

Dividend income
The ability of the companies that we invest in to pay dividends to shareholders depends upon
their profitability, cash flow and the extent to which, as a matter of law, they have sufficient
distributable reserves from which any proposed dividends may be paid and the willingness of
the boards of such companies to pay. There can be no guarantee that the companies we invest
in will be able to sustain their dividend policies in the future.

Ability to make strategic investments
There are limited opportunities for the Company to make strategic investments and therefore
there is no guarantee that the Company will be able to do so at a price the directors believes
will represent fair value.

Liquidity of equity investments in strategic investments
Strategic investments may be made in the equity of “small cap” companies, both listed and
unlisted. There is a risk that due to the low level of liquidity in the equity of these strategic
investments the Company may not be able to realise its investment, either at all, or at a price
the Company believes reflects fair value.

The depth and overlap of experience of directors means that there is no key-man dependency.
Note 20 on page 26 sets out the policies of the Board, which have remained substantially
unchanged for the year under review, for managing risks associated with its financial instruments.

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London Finance & Investment Group P.L.C.

In addition, the Company is exposed to investment risk arising from the selection of investments
which it mitigates by drawing on the investment experience of its directors.

The Board does not consider that there is any further information relating to environmental matters,
employees, social, community and human rights issues that it is necessary to report for an
understanding of the development, performance or position of the Company’s business.

Key Performance Indicators

Key Performance Indicators (“KPIs”) are the yardsticks against which the Board measures the
performance of the Company. Our objectives are real growth over the long term in dividends and
net assets per share. As an investment company we have no relevant non-financial KPIs.
Comments on the movement of these indicators over the year are detailed above.

Net assets per share
Change in net assets per share over 5
years
Dividends (net) per share

2016
61.4p

75%

1.05p

2015
50.1p

85%

1.0p

2014
44.7p

192%

0.9p

2013
45.7p

18%

0.8p

Definition of KPIs used above
Net assets per share - Net assets including investments at market value at their period end
valuation divided by the number of shares in issue at the year end.

Dividends per share - Dividends declared for the year divided by the number of shares in issue at
the year end.

Financing Structure

The Group is financed by a mixture of debt and equity. The Board believes that a reasonable level
of gearing can enhance returns to shareholders. At 30th June 2016, the Group had bank facilities
of £ 1,900,000 which expire in April 2021.

At 30th June 2016, the Company had only one class of share, namely Ordinary Shares of 5p each,
of which there were 31,207,479 in issue. The rights and obligations attached to these shares are
set out in the Company’s Articles of Association which may only be amended by a vote of
shareholders at a General Meeting. Each share entitles the holder to one vote on each shareholder
resolution. There are no special arrangements or restrictions relating to any of these shares,
whether in terms of transfers, voting or other rights, or relating to changes in control of the
Company.

To provide directors with flexibility over the management of the Company’s capital, shareholders
are being asked to approve resolutions at the forthcoming Annual General Meeting (“AGM”) which
would permit the Company to issue new shares as explained in the Directors’ Report. Similar
resolutions were approved at the last Annual general Meeting.

Investment Policy

The Group’s Investment Policy is set out on page 11 and restricts the balance of investments
between equity and debt instruments and other assets. The Board would like the opportunity to
consider a higher proportion of investments in other assets to achieve growth in shareholder value
in real terms over the medium to long term whilst maintaining a progressive dividend policy. At the
AGM shareholders will be asked to approve a revised Investment Policy. The proposed wording
of the updated policy is set out on page 11.

28th October 2016

By Order of the Board
City Group P.L.C.
Company Secretary

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Composition of General Portfolio
At 30th June 2016

British American Tobacco
Schindler-Holdings
Henkel
Heineken
Reckitt Benckiser
Imperial Tobacco
Nestle
Investor
Philip Morris International
Unilever
Diageo
L'Oreal
Pernod-Ricard
Anheuser Busch Inbev
Exxon
3M
Danone
Chevron
Procter & Gamble
Novartis
BASF
ABB
Givaudan
United Technologies
Linde
LVMH

Analysis by currency
Euro
Sterling
US Dollar
Swiss Franc
Swedish Kroner

£000
421
395
380
371
367
361
349
345
334
314
312
302
287
267
250
241
211
211
208
203
199
194
190
182
125
106

%
5.9
5.5
5.3
5.2
5.2
5.1
4.9
4.8
4.7
4.4
4.4
4.2
4.0
3.7
3.5
3.4
3.0
3.0
2.9
2.8
2.8
2.7
2.7
2.6
1.8
1.5

7,125

100.0

£000
2,248
1,775
1,426
1,331
345

7,125

%
31.6
24.9
20.0
18.7
4.8

100.0

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London Finance & Investment Group P.L.C.

Investment Policy

The Company’s investment policy is to invest in a range of “strategic” investments, a “general portfolio”
consisting of liquid stock market investments, both in equity instruments and bonds, and, at the Board’s
discretion, ‘other investments’, typically property and other physical assets. This investment policy is
designed to achieve the Company’s objectives of capital growth in real terms over the medium term, while
maintaining a progressive dividend policy.

Both “strategic” and “general portfolio” investments can be in any industry sector. “Strategic” investments
are significant minority positions in UK small cap companies which can be either quoted or unquoted; to
diversify risk the policy is to maintain a number of such investments. Most investments will be in shares
of companies that are publicly traded but investments can also be made in publicly traded and untraded
debt or equity instruments of companies that are strategic investments. The “general portfolio” aims to
further diversify risk through a spread of investments and a target of between 20 and 30 holdings in some
of the world’s largest quoted companies.

The intention is for between 30% and 70% of the overall investment portfolio with a maximum limit of 80%
to be in “strategic” investments at the point of investment, with the balance of the portfolio, net of “other
investments”, to be in the “general portfolio”. “Other investments” will be limited to 20 per cent of the
overall value of the investment portfolio, measured at the point of investment. No one “strategic
investment” or “other investment” will represent more than 30% and 20% respectively of the value of all
investments at the time of making such investment and no one “general portfolio” investment will
represent more than 10 per cent of the value of the “general portfolio” at the time of such investment.

Within these parameters, changes in strategic and other investments are decided on by the Board and
changes to the general portfolio are decided on by the Board or, between Board meetings, by an
Investment Committee of the Board. The investment guidelines within which the Investment Committee
operates allow the Investment Committee discretion within the parameters set by the Investment Policy.
The investment mix and level of borrowings are reviewed at each Board meeting.

The Company’s gearing is limited at or below 70% of the total value of investments.

Proposed Update to Investment Policy

Set out below are proposed changes to the Investment Policy which are subject to shareholder approval
at the forthcoming Annual General Meeting.

The intention is for between 30% and 70% of the overall investment portfolio with a maximum limit of 80%
to be in “strategic” and “other” investments immediately following such investment, with the balance
of the portfolio, to be in the “general portfolio”. “Other investments” will be limited to 50 per cent of the
overall value of the investment portfolio, measured immediately following such investment. No one
“strategic investment” or “other investment” will represent more than 30% and 50% respectively of the
value of all investments immediately following the making of such investment and no one “general
portfolio” investment will represent more than 10 per cent of the value of the “general portfolio” at the time
of such investment.

53583_LondonFinance_RepAcc_2016_TXT-5.indd 12

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Proposed Update to Investment Policy (continued)

The Company’s gearing is limited at or below 70% of the total value of investments.

53583_LondonFinance_RepAcc_2016_TXT-5.indd 13

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London Finance & Investment Group P.L.C.

Consolidated Statement of Total Comprehensive Income
For the year ended 30th June

Dividends – Listed investments

Rental and other Income
Profits realised on sales of investments
Management service fees

Operating income

Administration expenses

Operating profit

Unrealised changes in the carrying value of investments
Interest payable

Profit on ordinary activities before taxation

Tax on result of ordinary activities

Profit on ordinary activities after taxation

Non-controlling interest
Profit for the financial year attributable to members of the
holding company

Other comprehensive income

Total comprehensive income attributable to
shareholders

Reconciliation of headline earnings

Basic earnings per share
Adjustment for the unrealised changes in the carrying value
of investments, net of tax
Headline earnings per share

All profits and losses are on continuing activities

Notes

3
2

2016
£000

550

82
1,448
252
2,332

(649)
1,683

2,643
(16)
4,310

(437)
3,873

(15)

3,858

2015
£000

487

82
175
233
977

(643)
334

2,049
(48)
2,335

(357)
1,978

(10)

1,968

3,858

1,968

12.4p

(7.2)p
5.2p

6.3p

(5.5)p
0.8p

The notes on pages 18 to 28 form part of these accounts.

53583_LondonFinance_RepAcc_2016_TXT-5.indd 14

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Consolidated Statement of Changes in Shareholders’ Equity

Ordinary
Share
Capital
£000

Share
Premium
Account
£000

Unrealised Undistributed
Results of
Profits on
Subsidiaries
Investments
£000
£000

Share of Retained
realised
Profits &
Losses
£000

Non-
Controlling
Interests
£000

Total
£000

Year ended 30th June 2015
Balances at 1st July 2014
Total comprehensive
income

Dividends paid
Total transactions with
shareholders
Balances at 30th June 2015

1,560

2,320

-
1,560

-
2,320

4,585

1,719

-
6,304

(294)

5,779

13,950

320

-
26

(71)

1,968

(296)

(296)
5,412

(296)
15,622

-
75

Total
Equity
£000

14,015

1,978

(296)

(296)
15,697

Year ended 30th June 2016

Balances at 1st July 2015

1,560

2,320

6,304

5,412

15,622

Total comprehensive
income
Dividends paid
Total transactions with
shareholders
Balances at 30th June 2016

2,235

1,795

(172)

3,858

(312)

1,560

2,320

8,539

1,821

4,928

19,168

19,258

15,697

3,873

(312)

The notes on pages 18 to 28 form part of these accounts.

53583_LondonFinance_RepAcc_2016_TXT-5.indd 15

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London Finance & Investment Group P.L.C.

Consolidated Statement of Financial Position

Notes

9
11(a)

11(b)
12

2016
£000

22
12,417
12,439

7,125
272
588
7,985

2015
£000

31
11,694
11,725

5,801
218
115
6,134

(316)

(1,720)

7,669

4,414

(850)
19,258

(442)
15,697

1,560
2,320
8,539
1,821
4,928

19,168
90
19,258

1,560
2,320
6,304
26
5,412

15,622
75
15,697

At 30th June

Non-current Assets

Tangible assets
Investments

Current Assets
Listed investments
Trade and other receivables
Cash at bank

Current Liabilities

Trade and other payables: falling due within the year

Net Current Assets

Deferred Taxation
Total Assets less Current Liabilities

Capital and Reserves
Called up share capital
Share premium account
Unrealised profits and losses on investments
Share of retained realised profits and losses of subsidiaries
Company’s retained realised profits and losses

Non-controlling equity interests

All profits and losses are on continuing activities

Approved and authorised by the Board
on 28th October 2016

E. J. Beale
Director

The notes on pages 18 to 28 form part of these accounts.

53583_LondonFinance_RepAcc_2016_TXT-5.indd 16

03/11/2016 09:54

Company Statement of Financial Position
At 30th June

Notes

11(b)
12

15/16
16
16
16

2016
£000

3,847
3,847

7,125
27
451
7,603

(93)

7,510

(330)
11,027

1,560
2,320
2,219
4,928
11,027

2015
£000

6,203
6,203

5,801
19
71
5,891

(1,597)

4,294

(442)
10,055

1,560
2,320
763
5,412
10,055

Non-current Assets
Investments in Group companies

Current Assets
Listed investments
Trade and other receivables
Cash at bank

Current Liabilities

Trade and other payables: falling due within the year

Net Current Assets

Deferred Taxation

Total Assets less Current Liabilities

Capital and Reserves
Called up share capital
Share premium account
Unrealised profits and losses on investments
Realised profits and losses

Equity shareholders’ funds

E. J. Beale
Director
London Finance & Investment Group P.L.C.
Registered in England and Wales – Number 201151

The notes on pages 18 to 28 form part of these accounts.

53583_LondonFinance_RepAcc_2016_TXT-5.indd 17

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London Finance & Investment Group P.L.C.

Consolidated Statement of Cash Flow
For the year ended 30th June

Cash flows from operating activities
Profit before tax
Adjustments for non-cash and non-operating activities -
Finance expense
Depreciation charges
Profit on non-current investment
Unrealised changes in the fair value of investments

Notes

2016
£000

4,310

16
9
(1,408)
(2,643)
284

Taxes paid

(29)

Changes in working capital

(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Decrease in current asset investments

Cash flows from investment activity

Disposal/(Purchase) of strategic investment
Net cash inflow/(outflow) from investment activity

Cash flows from financing

Interest paid
Equity dividends paid
Net drawdown/(repayment) of loan facilities
Net cash inflow/(outflow) from financing

Decrease in cash and cash equivalents

Cash and cash equivalents at the beginning of the year

Cash and cash equivalents at end of the year

(54)
97
20
63

1,984
1,984

(16)
(312)
(1,500)
(1,828)

473

115
588

2015
£000

2,335

48
8
-
(2,049)
342

(26)

27
(5)
100
122

(593)
(593)

(48)
(296)
575
231

39
115

The notes on pages 18 to 28 form part of these accounts.

53583_LondonFinance_RepAcc_2016_TXT-5.indd 18

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Notes to the Accounts
For the year ended 30th June 2016

1. Accounting Policies

(i) The accounts have been prepared in accordance with International Financial Reporting Stand-
ards (IFRS) as adopted by the European Union and with those parts of the Companies Acts 2006
applicable to companies reporting under IFRS. The accounts are prepared on the historical cost
bases, except for certain assets and liabilities which are measured at fair value, in accordance
with IFRS and comply with IAS 34.

The preparation of financial statements in conformity with IFRS requires management to make
judgements, estimates and assumptions that affect the application of policies and reported
amounts of assets and liabilities, income and expenses. The estimates and associated
assumptions are based on historical experience and other factors that are believed to be
reasonable under the circumstances, the results of which form the basis for making judgements
about carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the estimate is revised if the revision
affects only that period, or in the period of the revision and future periods if applicable. The most
significant techniques for estimation are described in the accounting policies below. These
policies have been applied consistently to all of the years presented, unless otherwise stated.

(ii) These consolidated accounts include the results of the subsidiaries (all of which are companies)
for the year to 30th June 2016. The non-controlling interests are wholly attributable to equity
interests in subsidiaries. Under Section 396 of the Companies Act 2006, the Company is exempt
from the requirement to present its own income statement.

(iii) Dividends receivable are taken to the credit of the income statement in respect of listed shares
when the shares are quoted ex dividend and in respect of unlisted shares when the dividend is
declared.

(iv) Financial assets are classified by category, depending on the purpose for which the asset was

acquired. The Company’s accounting policy is as follows:

a) Fair value through income: Non-derivative financial assets other than unquoted investments
and trade and other receivables are classified as associates, strategic and general portfolio
investments and are recognised as being fair value through income. They are valued using
quoted prices and movements in value are taken to the income statement.

b) Unquoted investments. These are stated at cost net of impairment provisions because
market value cannot be readily determined. Reviews for indications of impairment are
carried out at least annually.

c) Trade and other receivables. The carrying amounts approximate to their fair values, the
transactions giving rise to these balances arising in the normal course of trade and standard
industry terms.

53583_LondonFinance_RepAcc_2016_TXT-5.indd 19

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London Finance & Investment Group P.L.C.

Notes to the Accounts (continued)
For the year ended 30th June 2016

1. Accounting Policies (continued)

(v) The charge for taxation is based on the taxable profit for the year. Taxable profit differs from net
profit as reported in the Statement of Total Comprehensive Income. It excludes items of income
(primarily franked dividend income) and expense that are never taxable or deductible and items
which are taxable or deductible in other years.

Deferred taxation is provided on the full liability method, at tax rates that are expected to apply,
for temporary differences arising between the treatment of certain items for taxation and
accounting purposes. Deferred tax assets are recognised only to the extent that the directors
consider that it is more likely than not that there will be suitable taxable profits from which the
underlying timing differences can be deducted. Taxation charges or recoveries are recognised
in the income statement, or directly to equity when related to items recognised directly to equity.

(vi) Transactions denominated in foreign currencies are translated at the exchange rate at the date
of the transaction. Foreign currency assets and liabilities at the year-end are translated at year-
end exchange rates.

2. Operating profit – Segmental Analysis

Dividends – Listed investments
Rental and other income
Profits on sales of investments, including
provisions
Management services fees
Operating income
Administration expense – normal
Operating profit/(loss)

Investment
Operations

Management
Services

2016
£000

550
-
1,448

-
1,998
(346)
1,652

2015
£000

487
-
175

-
662
(345)
317

2016
£000

-
82
-

252
334
(303)
31

2015
£000

-
82
-

233
315
(298)
17

All revenues are derived from operations within the UK. Consequently no separate geographical
segment information is provided.

3. Administration Expenses

Management

2016
£000

9
26
3
75
294

2015
£000

8
30
4
75
292

Normal administration expenses include:
Depreciation
Auditors’ remuneration

- Audit services
- non-audit services
- Note 4
- Note 5

Directors’ emoluments
Staff Costs

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4. Directors' Emoluments and Related Party Disclosures

The key management personnel are considered to be the Group directors. Their emoluments are
detailed in the Remuneration Report on pages 38 to 42.

Related Party Disclosures
Lonfin and its wholly owned subsidiary, Lonfin Investments Limited, owns 43.8% of its associated
company, Western, of which Mr. D.C. Marshall, Mr L.H. Marshall, Mr. J. M. Robotham and Mr. E.J
Beale are directors. Mr. D.C. Marshall and Mr. J. M. Robotham's shareholdings in Lonfin are set out
in the accompanying Directors’ Report.

Lonfin and Western hold shares in Finsbury Food Group Plc and Northbridge Industrial Services Plc
respectively. Mr. D.C. Marshall is a director of Northbridge Industrial Services plc and Mr. E. J. Beale
is a director of Finsbury Food Group Plc.

Mr. D. C. Marshall and Mr. L. H. Marshall are directors and Mr. E.J. Beale is the non-executive
Chairman of Marshall Monteagle PLC and Mr D. C. Marshall and Mr J. M. Robotham are
shareholders in Marshall Monteagle PLC which in turn is a substantial shareholder in Halogen
Holdings PLC. Mr. D. C. Marshall is Chairman of Halogen Holdings PLC and Mr L. H. Marshall and
Mr. E. J. Beale are directors of Halogen Holdings PLC.

Lonfin and Western own City Group in the ratio 51.4% and 48.6% respectively. City Group provides
offices and company secretarial and administrative services to various companies in the UK and
abroad most of which are associated with Lonfin and Western including all of the above companies.

City Group operates as a shared service centre and does not seek to make a profit from the provision
of its standard services to these related parties. The various company secretarial, accounting, and
directors’ fees received by City Group from those companies, their associates and subsidiaries, total
£255,000 (2015 - £204,000) for the year under review. At the reporting date the aggregate balance
due in respect of fees invoiced was £85,000 (2015 - £194,000) and no fees have been paid in
advance (2015 - nil). Settlement is within normal credit terms.

As disclosed in Notes 12 and 13 below, the Company was owed £6,000 from City Group on current
account and it owed City Group £45,000 for fees. The Company was also owed £3,758,000 by
Lonfin Investments Limited as disclosed in Note 10 below.

Other than as disclosed above, no director was interested in any contract between the directors, the
Company and any other related party that subsisted during or at the end of the financial year.

5. Staff Costs

Staff costs, excluding those relating to the directors shown in the Remuneration Report on pages 38
to 42:-

Salaries
Social security costs
Defined contribution pension scheme contributions

The average weekly number of staff employed, excluding Group
Directors, was:

2016
£000

2015
£000

223
41
30
294

218
41
33
292

53583_LondonFinance_RepAcc_2016_TXT-5.indd 21

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London Finance & Investment Group P.L.C.

Notes to the Accounts (continued)
For the year ended 30th June 2016

6. Taxation

The tax charge for the year comprises:

Tax on overseas investment income
Deferred Tax

Tax charged

2016
£000

2015
£000

29
408

437

26
331

357

The tax assessed for the year is lower than the standard rate of corporation tax in the UK.
The differences are explained below:

Profit on ordinary activities before taxation

Taxation at 20% (2015 – 20.75%)

Effects of:
Non taxable items – fair values and franked income
Loss utilised
Tax charged for the year

4,310

2,335

862

484

(638)
213

437

(147)
20

357

Dividends received from UK companies are recognised in the income statement net of their
associated tax credit.

7. Total Comprehensive Income attributable to members of the holding
company

Dealt with in the accounts of:

- The holding company
- The subsidiary undertakings

8. Earnings per share

Earnings per share are based on the profit on ordinary activities after
taxation and non-controlling interests of £3,858,000 (2015 -
£1,968,000) and on 31,207,479 (2015 – 31,207,479) shares being
the weighted average of number of shares in issue during the year.

Headline earnings are required to be disclosed by the JSE.
Headline earnings per share are based on the ordinary activities after
taxation and non-controlling interests, before unrealised changes in
the fair value of investments net of tax, of £1,623,000 (2015 -
£250,000) and on 31,207,479 (2015 – 31,207,479) shares being the
weighted average of number of shares in issue during the year.

2016
£000
(172)
4,030
3,858

2015
£000
(428)
2,396
1,968

2016
£000

2015
£000

12.4p

6.3p

5.2p

0.8p

53583_LondonFinance_RepAcc_2016_TXT-5.indd 22

03/11/2016 09:54

9. Tangible assets

At cost – 1st July 2015
Additions
Disposals
30th June 2016

Depreciation
Balance – 1st July 2015
Charges for the year
Disposals
30th June 2015

Net book amount 30th June 2016

Net book amount 30th June 2015

The office equipment is held by a subsidiary company.

10. Investment in Group companies

Office
Equipment
£000

53
-
-

22
9
-
31

Operating subsidiaries, incorporated and operating in England and consolidated in these financial
statements.

Percentage
of Equity

2016
£000

2015
£000 Principal Activities

Held by the Company – at cost
City Group P.L.C.

51.4

Lonfin Investments Limited
- Loan to subsidiary, less provision

100

-
3,758
3,847

89 Management
services
Investment holding

-
6,114
6,203

The loan to the subsidiary is net of a provision of £1,681,000, because the Board considers the
recoverability of the loan has been impaired by permanent loss in its value of one of the underlying
investments held by the subsidiary.

53583_LondonFinance_RepAcc_2016_TXT-5.indd 23

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London Finance & Investment Group P.L.C.

Notes to the Accounts (continued)
For the year ended 30th June 2016

11. Investments

(a) Held as non-current assets

(i) Listed associated undertaking (Western Selection P.L.C.)
Share at cost – brought forward
Fair value adjustment – unrealised losses
Market value at 30th June

(ii) Other listed investments (Finsbury Food Group Plc)
At cost, brought forward, less provisions
Addition during year
Disposal during year
Fair value adjustment – unrealised profit

Market value at 30th June

Total at 30th June

(b) Held as current assets

(i) Listed investments (General Portfolio)
At cost less provision
Fair value adjustment – unrealised gains
Market value at 30th June

Group
2016
£000

2015
£000

6,159
(2,622)
3,537

2,876
-
(576)
6,580

8,880

6,159
(2,465)
3,694

2,283
593
-
5,124

8,000

12,417

11,694

Company and Group
2016
£000

2015
£000

3,286
3,839

7,125

3,306
2,495

5,801

(c) Associated undertaking
Western Selection P.L.C., the associated undertaking, is traded on the ISDX Growth Market
and is incorporated and operates in the UK with a financial year end of 30th June.

At 30th June 2016 it had 17,949,872 ordinary shares of 40p each in issue, of which 43.8% are
owned by the Company’s wholly owned subsidiary, Lonfin Investments Limited.

Extracts from Western’s results are:-

Profit after tax
Non-current assets
Current assets
Liabilities within one year
Liabilities due over one year

Net asset value per share
Middle market price per share on 30th June

2016
£000

2015
£000

64
15,119
197
(98)
(1,000)

2,774
9,690
3,913
(116)
-

79p
45.0p

75p
49.5p

53583_LondonFinance_RepAcc_2016_TXT-5.indd 24

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12. Trade and other receivables

Trade debtors
Prepayments and accrued income

13. Trade and other payables

Bank loans
Group companies
Other taxes
Other creditors
Trade creditors
Accruals

Group

Company

2016
£000
217
55
272

2016
£000
-
-
29
61
17
209
316

2015
£000
173
45
218

2015
£000
1,500
-
34
4
29
153
1,720

2016
£000
-
27
27

2016
£000
-
-
5
1
-
87
93

2015
£000
-
19
19

2015
£000
1,500
39
3
1
13
41
1,597

The Company’s loan facilities are secured by a charge over certain of the Company’s listed
investments.

14. Deferred taxation

The Group has provided £850,000 in respect of potential taxation on unrealised investment
gains (2015 - £442,000).

15. Share Capital and Reserves

Authorised equity share capital
35,000,000 ordinary shares of 5p each

Allotted, issued and fully paid ordinary shares of 5p each
31,207,479 at 1st July 2015 and 30th June 2016

Company and Group

2016
£000

2015
£000

1,750

1,560

The Group and Company’s capital comprises its shareholders’ equity. Our objective is to
manage capital in a manner that enables the continued payment of dividends to be achieved.

The following describes the nature and purpose of each reserve within shareholders’ equity:-

53583_LondonFinance_RepAcc_2016_TXT-5.indd 25

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London Finance & Investment Group P.L.C.

Notes to the Accounts (continued)
For the year ended 30th June 2016

15. Share Capital and Reserves (continued)

Share capital
Share premium

Unrealised profits and losses on
investments
Share of undistributed profits of
subsidiaries

Realised profits and losses

Description and purpose
Nominal value of issued share capital.
Amount subscribed for share capital in excess of
nominal value.
Cumulative unrealised gains and losses on
investments.
The Company’s share of cumulative undistributed
post-acquisition gains and losses of subsidiaries
recognised in the income statement.
Realised profits of the Company less realised losses
and unrealised losses other than on investments.

The balances and movements on each of the above reserves are disclosed in the Consolidated
Statement of Total Comprehensive Income on page 13 and the Consolidated Statement of
Changes in Shareholders’ Equity on page 14 and the Company’s Statement of Comprehensive
Income and Changes in Shareholders’ Equity below.

16. Company Statement of Comprehensive Income and Changes in Shareholders’ Equity

Year ended 30th June
2015
Balance at 1st July 2014

Total comprehensive
income
Dividends paid

Total transactions with
shareholders

Ordinary
Share
Capital
£000

Share
Premium
Account
£000

Unrealised
Profits and
(losses) on
Investments
£000

Realised
Profits and
(losses)
£000

Total
£000

1,560

2,320

1,120

5,779

10,779

-
-

(357)
-

763

(71)
(296)

(428)
(296)

(296)

5,412

10,055

Balances at 30th June 2015

1,560

2,320

Year ended 30th June
2015
Balance at 1st July 2015

Total comprehensive
income
Dividends paid

Total transactions with
shareholders

Balances at 30th June
2016

1,560

2,320

763

5,412

10,055

-
-

1,456
-

(172)
(312)

1,284
(312)

(312)

1,560

2,320

2,219

4,928

11,027

53583_LondonFinance_RepAcc_2016_TXT-5.indd 26

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17. Pension Schemes

The Group makes pension contributions to the personal pension schemes of certain employees
which are money purchase schemes and for which it has not responsibility for unfunded liabilities.
Amounts paid are declared in Note 5.

18. Reconciliation of consolidated net cash flow to movement in net debt

2015/2016
Cash at bank
Bank loan

2014/2015
Cash at bank
Bank loan

At start
of year
£000

115
(1,500)
(1,385)

Cash
Flow
£000

473
1,500
1,973

At end
of year
£000

588
-
588

39
(925)
(886)

76
(575)
(499)

115
(1,500)
(1,385)

19. Operating leases

The Group has an operating lease commitment in respect of an office property entered into in
January 2014 which terminates in January 2019. Payments of £44,200 were recognised in the year
and the minimum amount payable to termination is £132,849. The Company has guaranteed the
obligations under this lease.

20. Financial Instruments

Set out below is an explanation of the role that financial instruments have had during the year in
creating or changing the risks the Group faces in its activities. The explanation summarises the
objectives and policies for holding or issuing financial instruments and similar contracts, and the
strategies for achieving their objectives that have been followed during the year. The Company
monitors its performance against these objectives on a continuous basis and through bi-monthly
reports of the investments portfolio and cash position.

The categories of financial instruments used by the Company to achieve its objectives as set out in
the Directors’ Report are:

2016
£000

2015
£000

Financial assets
At fair value through income

Non-current investments (associated companies and strategic investments)
Current asset investments (general portfolio)

12,417
7,125

11,694
5,801

Loans and receivables

Trade and other receivables
Cash at bank

Financial liabilities

Trade and other payables
Bank overdrafts

53583_LondonFinance_RepAcc_2016_TXT-5.indd 27

272
588

316
-

218
115

220
1,500

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London Finance & Investment Group P.L.C.

Notes to the Accounts (continued)
For the year ended 30th June 2016

20. Financial Instruments (continued)

Interest Rate Profile
The Group finances its operations through a mixture of retained profits and bank borrowings, in
pounds sterling. Drawings under the facility are at a rate fluctuating with base rate.

The effective rate of interest on borrowings for the year was 3.5% (2015 – 3.5%) and on deposits
was nil. The sensitivity of the Group to a 1% change in interest rates would have been negligible in
the current year (2015 – £14,000).

The Group’s principal financial assets are its investment portfolios. The investment portfolios consist
of equity investments, for which an interest rate profile is not relevant. Interest is not charged on
trade and other receivables nor incurred on trade and other payables.

Currency Exposures
The table below shows the Group’s currency exposures. Such exposures comprise the monetary
assets, at fair values, that are not traded in Sterling.

Currency
Euro
Swiss Franc
US Dollar
Swedish kroner

2016
£000

2,248
1,331
1,426
345
5,350

2015
£000

1,890
1,134
1,096
327
4,447

The sensitivity to a 1% change in the sterling exchange rate would be to increase or decrease the
fair values as set out by £53,500 in aggregate (2015 - £44,000).

Liquidity Risk
The Group’s policy is that its borrowings should be flexible and available over the medium term. The
Group has a loan facility of £1,900,000 expiring in April 2021, which is unused at the reporting date.
The Group holds investments, most of which are listed on recognised stock exchanges. In normal
markets these are, by their nature, liquid. However, there are long periods when the market may
not be prepared to deal at realistic prices in unusually large blocks of certain shares and this
particularly applies to our Strategic Investment holdings. The Company maintains a General
Portfolio of investment holdings within normal market size and which have aggregate market values
in excess of the borrowings at any point in time. The policy is these have an aggregate market value
of at least 167% of borrowings at any point in time.

Market Risk
The Company is exposed to market risk through the equity investments in other companies. The
Company maintains a spread of investments over various sectors and monitors performance
continuously as described above. The majority of the General Portfolio investments are in
companies with good levels of liquidity. The future values of these investments will fluctuate because
of changes in interest rates and other market factors.

Reviews for indications of permanent impairment are carried out at least annually. The directors
believe that the exposure to market price risk from these activities is acceptable in the Company’s
circumstances.

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20. Financial Instruments (continued)

The sensitivity to each 1% decrease in the value of investments would result in the fair values of
non-current asset investments decreasing by £124,000 (2015 - £117,000) and a corresponding
decrease in the unrealised profits reserve. A 1% increase, would, on the same basis, increase fair
values and increase the unrealised profits reserve. The same percentage increase/decrease in the
current asset investments would increase/decrease carrying values by £71,000 (2015 - £58,000)
and unrealised profits reserve (or earnings where a decline was below cost) by an equal amount.

Fair Value
Investments within the general and strategic portfolios are carried at fair values determined by the
prices available from the markets on which the instruments involved are traded. Unlisted investments
are stated at cost net of impairment provisions because fair value cannot be readily determined.
Movements in fair value net of impairment provisions are taken through the income statement.

The fair value of short term deposits, borrowings and trade and other receivables and payables
approximates to the carrying amount because of the short maturity of these instruments.

Credit risk
No concentration of credit risk exists in the Company’s principal financial assets, and credit risk is
minimised as the counter-parties are institutions with high credit ratings. There has been no
impairment of trade and other debtors during the year, there are no provisions against these assets
and none are past their due date.

21. International Financial Reporting Standards

As indicated in note 1, at the date of authorisation of these financial statements the IASB and the
International Financial Reporting Interpretations Committee (IFRIC) have issued interpretations and
amended or revised standards, to be applied to financial statements with periods commencing either
on or after 1st July 2016.

None of the new standards, interpretations and amendments, effective for the first time from 1st July
2016, have had a material effect on the financial statements. None of the other new standards,
interpretations and amendments, which are effective for periods beginning after 1st July 2016 and
which have not been adopted early, are expected to have a material effect on the Company's future
financial statements.

22. Related Undertakings

In accordance with section 409 of the Companies Act 2006, a full list of related undertakings, the
country of incorporation and the percentage of equity owned, directly or indirectly, as at 30th June
2016, is disclosed below:

Company

Country

% ownership

Lonfin Investments Limited

United Kingdom

City Group P.L.C.

United Kingdom

Western Selection P.L.C.

United Kingdom

100%

51.4%

43.8%

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London Finance & Investment Group P.L.C.

Directors’ Report

The Directors present their Report for the year ended 30th June 2016.

Results, Future Developments, Dividends, & Financial Instruments

A review of the Group’s operations and performance during the financial year, setting out the position at
the year-end, significant changes in the year, an indication of the outlook for the future, proposed
dividends and the Group’s policy in relation to financial instruments is contained in the Strategic Report
on pages 4 to 9.

Directors

A list of the directors of the Company is shown on page 1. The interests in the Company’s ordinary
shares of the directors who have held office in the period from 1st July 2015 were as follows:

D.C. Marshall *
F.W.A. Lucas †
J.M. Robotham *
J.H. Maxwell
L.H. Marshall
E.J. Beale

30th June 2016
30th June 2015
No. of Ordinary No. of Ordinary Shares
12,890,693
162,500
12,890,693
65,000
-
-

12,890,693
162,500
12,890,693
65,000
-
-

These holdings arise as the individuals concerned are trustees and/or directors of entities that hold ordinary
shares in the Company. The interest of Mr. J.M. Robotham overlaps with the interest of Mr. D.C. Marshall.
At 30th June 2016, Mr J.M. Robotham had a beneficial interest in 30,000 (2015 – 30,000) of these ordinary
shares, and Mr D.C. Marshall had no beneficial interest in these shares (2015 – nil).

†

Of this figure Dr. Lucas owns 80,000 ordinary shares personally and 82,500 ordinary shares are owned by

Loeb Aron & Company Ltd, of which Dr. Lucas is a director and shareholder.

On 29th February 2016, Mr E.J. Beale, being an eligible employee under the rules of the London Finance
& Investment Group Company Share Option Plan (“Plan”), was granted options over 80,000 ordinary
shares with an exercise price of 37.5p per share. The options granted may not be exercised earlier than
the third anniversary of the date of grant.

There have been no changes in directors' share interests between 1st July 2016 and the date of this
report.

The appointment or removal of directors is determined by shareholders at a General Meeting. Between
General Meetings the Board may appoint additional directors who are required to stand for election at
the next General Meeting. In addition, the Company’s Articles of Association require one third of
directors to stand for re-election every year. The directors have now agreed to offer themselves for re-
election on an annual basis. Accordingly, this year, Mr D.C. Marshall, Dr F.W.A. Lucas, Mr J.M.
Robotham, Mr L.H. Marshall and Mr J.H. Maxwell will retire and, being eligible, offer themselves for re-
election at the AGM as directors. Mr E.J. Beale was appointed to the Board in April this year.
Accordingly, Mr E.J. Beale will be proposed to shareholders at the AGM for election as a director.

Substantial Interests

In addition to the directors’ shareholdings shown above, as at 30th June 2016, the Company had been
notified under Disclosure and Transparency Rule 5 of the following significant holdings of voting rights
in its shares.

Identity of person or group

No. of Ordinary Shares Percentage of issued

Lynchwood Nominees Limited
W.T. Lamb Investments Limited
Winterflood Client Nominees Limited
Forest Nominees Limited

12,885,520
4,600,000
1,443,201
1,232,000

Ordinary Share capital
41.3%
14.7%
4.62%
3.95%

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There have been no changes to the above significant holdings between 1st July 2016 and the date of
this report.

Auditors

Each director has taken all the steps that they ought to have taken as a director including making
appropriate enquiries of fellow directors to make themselves aware of any information needed by the
Company’s Auditors for the purposes of their audit and to establish that the Auditors are aware of that
information. The Directors are not aware of any relevant audit information of which the Auditors are
unaware.

It is proposed that PKF Littlejohn LLP be appointed at the forthcoming AGM as the Company’s auditors
following the decision by the Company’s current auditors, SRG LLP, to not seek re-appointment. A
resolution to appoint PKF Littlejohn LLP as the Company’s new Auditors will be proposed at the AGM.

Pursuant to S. 519 of the Companies Act 2006 (the “Act”), SRG LLP has informed the Company that it
is not seeking re-appointment at the AGM and has provided a statement of the circumstances upon
ceasing to hold office. In accordance with S. 520 of the Act, a copy of this statement is set out below:

Chartered Accountants and Registered Auditors

S R G LLP

__________________________________________

The Board of Directors
London Finance & Investment Group PLC
4th Floor
6 Middle Street
London
EC1A 7JA

Dear Sirs,

28 Ely Place
London EC1N 6AA

26 September 2016

In accordance with section 519 of the Companies Act 2006, we consider that the following circum-
stances connected with our ceasing to hold office should be brought to the attention of the members
and creditors of the Company:

In the light of recent changes to the regulations pertaining to the provision of non- audit services to
listed companies we decided not to seek re-appointment as auditors of the Company at the AGM to be
held on 30 November 2016.

There are no other circumstances in connection with our ceasing to hold office that should be brought to
the attention of the members or any creditors of the Group.

Following upon the AGM we will advise the Financial Reporting Council that we have ceased to hold
office and send them a copy of this statement. You are required to do the same.

We are also required to file a copy of this statement with Companies House.

Yours faithfully,

SRG LLP

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London Finance & Investment Group P.L.C.

Going Concern

The directors have reasonable expectation that the Group has adequate resources to continue to
operate for the foreseeable future. For this reason they adopt the going concern basis for preparing the
financial statements.

Corporate Governance

Information on the Company’s corporate governance can be found in the Corporate Governance Report
on pages 33 to 36.

Annual General Meeting

The Notice of AGM, to be held on 30th November 2016, can be found on pages 47 to 49 of these
accounts and sets out the business to be considered at the meeting. Resolutions 1 to 4 and 6 to 13 and
Resolution 15 will be proposed as Ordinary Resolutions and Resolutions 5 and 14 will be proposed as
Special Resolutions. Certain elements of the business relating to these Resolutions are explained
below:

Resolution 5
Changes to the Articles of Association
At every Annual General Meeting, it is a requirement under the Company’s Articles of Association that
one-third of the directors are subject to retirement by rotation provided that the number of directors
retiring shall not exceed one-third. However, as the Board has resolved that all Directors be subject to
annual re-election at this Annual General Meeting and in the future, this resolution seeks shareholder
approval for certain new Articles of Association relating to the re-election of directors.

Resolutions 6, 7, 8, 9 and 10
Re-election of Directors
The Board has resolved that all the Directors will be subject to annual re-election. Accordingly, subject
to the passing of Resolution 5, each of the Directors, save for Mr E.J. Beale, who offers himself for
election as a director, will retire at the Annual General Meeting and each offers himself for re-election
as a director of the Company. The Board has confirmed, following a performance review of the directors
and the Chairman, that each of the directors subject to re-election continues to perform effectively and
demonstrates commitment to his role. Further information relating to their experience and background
can be found on page 1.

Resolution 11

Election of Non-Executive Director
Mr E.J. Beale was appointed as a Non-Executive Director in April this year. Accordingly, Mr E.J. Beale
offers himself for election as a director. Information relating to Mr E.J. Beale’s experience and
background can be found on page 1.

Resolution 12
Appointment of new Auditor
It is proposed that PKF Littlejohn LLP be appointed as the Company’s auditors to take office following
the AGM.

Resolution 13

Allotment of share capital
Resolution 13 provides authority to allot shares in accordance with section 551 of the Companies Act
2006 in the period up to the conclusion of the Company’s Annual General Meeting in 2017. If passed,
this resolution would enable the directors to allot shares (and to grant rights to subscribe for or convert
any security into shares in the Company) up to a maximum nominal amount of £189,626 (being
3,792,521 ordinary shares) which is the amount of the Company’s authorised but unissued share capital.
The directors have no specific plans to allot any ordinary shares in the Company.

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Resolution 14

Disapplication of pre-emption rights
Resolution 14 will empower the directors to allot ordinary shares for cash, pursuant to the authority
granted by Resolution 13, on a non-pre-emptive basis (a) in connection with a rights issue or open offer
and (b) (otherwise than in connection with a rights issue or open offer) up to a maximum nominal value
of £78,000 (being 1,560,000 ordinary shares) representing approximately 5% of the issued ordinary
share capital of the Company as at 28th October 2016 (being the latest practicable date prior to
publication of this report) in the period up to the conclusion of the Company’s Annual General Meeting
in 2017.

The directors have no present intention of issuing any part of the unissued share capital and no issue
will be made which would effectively alter the control of the Company without the approval of the
shareholders in general meeting.

Resolution 15
Revised Investment Policy
As set out in the Strategic Report the directors believe that the Board should have the opportunity to
make substantial investments in property and other assets where they consider that such investments
will contribute to achieving growth in shareholder value in real terms over the medium to long term whilst
maintaining a progressive dividend policy. The proposed changes to the Investment Policy are set out
on page 11, and this Resolution requests shareholder approval to these changes.

Recommendation

The Board believes that the approval of Resolutions 1 to 15 will promote the success of the Company
and is in the best interests of the Company and its shareholders as a whole. The Board unanimously
recommends that you vote in favour of Resolutions 1 to 15 as the directors intend to do in respect of
their own beneficial holdings which as at 28th October 2016 (being the latest practicable date prior to
publication of this report) amount in aggregate to 175,000 ordinary shares, representing approximately
0.56% of the ordinary shares currently in issue.

Relationship Agreement

In compliance with the Listing Rules the Company has entered into a Relationship Agreement with Mr
D.C. Marshall, the Company’s Chairman, in his capacity as a Trustee of a controlling shareholder of the
Company as defined by the Listing Rules. The Company has complied with the independence provisions
contained in the Relationship Agreement throughout the year ended 30th June 2016 and so far as the
Company is aware, the controlling shareholder has complied with the provisions and also the
procurement obligation contained in the Relationship Agreement.

Directors’ Service Contracts and Letters of Appointment

None of the directors has a service contract with the Company. Each of the directors has received a
Letter of Appointment from the Company in respect of his services under the terms of the articles of
association.

Directors’ and Officers’ Liability Insurance

During the year, the Company has maintained insurance cover for its directors and officers under a
Directors’ and Officers’ liability insurance policy.

Greenhouse Gas Emissions

The Group is required to report on its greenhouse gas emissions. The Group had no Scope 1 emissions.
This report is made in respect of Scope 2 emissions. During the year ended 30th June 2016, the Group
purchased electricity equating to a carbon dioxide equivalent of 10 tonnes (1 tCO2e/employee) (2015 –
10 tonnes).

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London Finance & Investment Group P.L.C.

Corporate Governance

Corporate Governance is the process by which companies are controlled and directed to achieve the
objectives of the organisation. Key to achievement of objectives is having clarity about the objective
and the right people in place. Processes and structures are of secondary importance as, without a
focus on outcomes and without the right people, it is only by chance that objectives will be met.

The UK Listing Authority requires UK premium listed companies to comply with the UK Corporate
Governance Code (the Code), which focuses on processes and structures, and which is deemed to
constitute best practice in Corporate Governance for most companies. Directors are required to
report to shareholders on how the Company applies the principles and confirm that the Company
complies with the Code’s provisions, or explain why it does not.

The Company has been in full compliance with the Code throughout the year ended 30th June 2016
except for the fact that Requirement B.7.1 recommends that non-executive directors who have served
on the Board longer than nine years should be subject to annual re-election. David Marshall, Frank
Lucas, John Maxwell and Michael Robotham have all served longer than nine years. Previously,
having considered the matter, the Board has decided that, given the size of the Company and the
nature of the business, it was not appropriate for these directors to be subject to re-election annually.
However, the Board has now resolved that all directors will now be subject to annual re-election. In
addition to this, the Code recommends that a majority of the members of a company’s nomination
committee should be independent non-executive directors with the chairman also being independent.
The Company’s Nomination Committee now comprises of three directors, two of which are deemed
to be independent and the Chairman is not independent. The Board, having considered the matter,
considers that the Chairman of the Nominations Committee should now be independent. Accordingly,
Mr J.M. Robotham has stood down as Chairman and Mr J.H. Maxwell has been appointed as
Chairman in his place.

The JSE requires that companies report on their compliance with Code of Corporate Practices and
Conduct (‘King Code’) contained in the King Report on Corporate Governance. The Board has
reviewed the matter and recorded that in so far as those matters contained in the King Code are of
concern to the Company, in complying with King Code, it is satisfied that the Group has complied with
its requirements throughout the year ended 30th June 2016.

Composition of the Board

The Board comprises the Chairman, David Marshall, Senior Independent Non-Executive Director,
John Maxwell, Michael Robotham, Dr Frank Lucas, Lloyd Marshall, and Edward Beale. The Board
has reviewed the independence of the non-executive directors and John Maxwell and Dr Frank Lucas
are considered by the Board to be independent despite the fact that both have served on the Board
for more than nine years. The Code suggests that serving more than nine years could be relevant to
the determination of a non-executive director’s independence. The Board has concluded that John
Maxwell and Frank Lucas both continue to demonstrate the essential characteristics of independence
expected by the Board. In reaching this decision, the Board also took into account the fact that Dr
Frank Lucas is a director of Loeb Aron & Company Ltd which acted as ISDX corporate adviser to
Western until June this year. Edward Beale, the chief executive of our subsidiary, City Group, was
appointed to the Board on 13th April 2016 to bring his experience of Group operations, governance
and reporting requirements to the Board.

Responsibility for the process of appointment of directors rests with the Board acting on the
recommendations of the Nomination Committee. The removal of directors is a Board decision. The
Board reviews the need for succession planning on a regular basis.

The Company’s Articles of Association require that all new directors seek election to the board at the
next Annual General meeting after their appointment. Edward Beale, is therefore standing for

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Corporate Governance (continued)

re-election at the Annual General Meeting. In addition, at every Annual General Meeting, it has been
a requirement under the Company’s Articles of Association that one-third of the directors are subject
to retirement by rotation provided that the number of directors retiring shall not exceed one-third. The
Board has resolved that all members of the Board will be subject to annual re-election and there will
therefore be no requirement at the forthcoming AGM or in the future for any directors to retire by
rotation. Resolutions approving the re-election of each of the directors and a resolution approving
new provisions for the Company’s Articles of Association in relation to the re-election of directors will
be proposed to Shareholders at the forthcoming AGM.

As a long term investment company it is appropriate for directors to serve on the Board for more than
a single term, subject to continuing satisfactory performance. Given the small size of the Board, this
results in infrequent changes to the composition of the Board.

Workings of the Board

The Board is collectively responsible to shareholders for the success of the Group. Entrepreneurial
leadership is provided by capitalising on the skills and experience of the Investment Committee allied
to the strategic vision and expertise of other Board members.

The Board now has four committees: The Investment Committee is chaired by David Marshall and its
other members are Lloyd Marshall and Michael Robotham. The Nomination Committee is chaired by
John Maxwell and its other members are Dr Frank Lucas and Michael Robotham. The Audit
Committee is chaired by Dr Frank Lucas and its other member is John Maxwell. Both members of
the Audit Committee have recent and relevant financial experience. A Remuneration Committee has
now been established and this is chaired by John Maxwell and its other member is Dr Frank Lucas.

Committee meetings are held independently of Board meetings and invitations to attend are extended
by the committee chairman to other directors and the Group’s advisers as appropriate.

The aggregate remuneration of directors is limited by the Company’s Articles of Association and this
aggregate amount and the Company’s Remuneration Policy can only be changed by the Company
in General Meeting. The current rates of remuneration are set out in detail in the Remuneration
Report. The remuneration of the executive directors and employees of the Company’s subsidiary,
City Group, is determined by the Board of City Group, which includes David Marshall, Lloyd Marshall,
Michael Robotham and Edward Beale.

As an investment company, the Company has no Chief Executive. The Chairman is responsible for
the effective performance of the Board through control of the Board’s agenda and running of its
meetings. The Chairman organises opportunities for directors to spend time with each other on an
informal basis to improve communication and relations between directors.

A representative of City Group, the Company Secretary, attends all Board meetings to record
proceedings and is available at any time to advise on any corporate governance issues that arise.
The Company Secretary is also responsible to the Chairman for the efficient organisation of Board
and Committee meetings including circulation of papers in advance of meetings. Management
reports including cash movements, portfolio movements and valuations are regularly circulated to all
directors for review.

The Board met on eight occasions during the year, there were no Audit Committee meetings during
the year and the Nomination Committee met on one occasion, all such meetings following a formal
agenda. Attendance at the Board meetings and the Nomination Committee meetings during the year
is shown in the following table:

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London Finance & Investment Group P.L.C.

Corporate Governance (continued)

Board

Board by Phone

Nomination Committee

No. of meetings in year
D.C. Marshall
F.W.A. Lucas
L.H. Marshall

J.H. Maxwell

J.M. Robotham

E.J. Beale

The Group’s strategic aim is to generate growth in shareholder value in real terms over the long term
through a mix of investments and utilising a prudent level of bank borrowing. The investment mix and
level of gearing are reviewed at each Board meeting. All major investment decisions are taken by the
Board. The Investment Committee has delegated authority within certain limits for the management of
the General Portfolio between Board meetings.

The Board, through review of the management reports, scrutinises the performance of the Company
against the objective of real growth in shareholder value over the long term.

New directors receive an induction programme and all directors are encouraged to maintain personal
continuing professional education programmes.

The Board evaluates its own performance and that of its committees and its Chairman and individual
directors through the annual completion and review of questionnaires.

As an investment company, all matters and all decisions are reserved for the Board except for any matter
specifically delegated to a Board committee or any operational decisions of the Company’s subsidiary
undertakings.

Audit Committee
The Board, through its Audit Committee, annually reviews all material internal controls, including
financial, operational and compliance controls, and risk management systems. As a result of this review,
procedures are adopted which mitigate those risks which have not been specifically accepted under the
Group’s Investment Policy. The responsibility on a day to day basis for maintaining a sound system of
internal controls rests with the directors of City Group which provides day to day administration and
accounting services to the Group.

There is a well-established system of internal controls set within a framework of clearly defined
structures and accountabilities with well understood policies and procedures; supported by training,
budgeting, reporting and review procedures. Board decisions are implemented on a day to day basis
by the subsidiary company, City Group. The framework for internal financial control established in that
company has been reviewed by the Board and is regarded as effective. The reporting and review
procedures provide assurance to the Board as to the adequacy and effectiveness of internal controls.
The Board recognise that it is not possible to divide some functions as would be the case in larger
organisations and accepts that close supervision is necessary. The directors have considered the need
for an internal audit function and do not believe that one is appropriate because monitoring processes
are applied to give reasonable assurance to the Board that the systems of internal control are functioning
as intended.

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Corporate Governance (continued)

An annual self-assessment of risk is performed which identifies the areas in which the Group is most
exposed to risk, considers the financial implications and assesses the adequacy and effectiveness of
their control. The Board has discussed the results of this review and the directors can therefore confirm
that they have reviewed the effectiveness of the Company’s system of internal control. The Board has
maintained an appropriate relationship with the Company’s current auditors through the
Audit Committee. The auditors, SRG LLP, do not provide any non-audit services other than payroll
processing and limited advice on taxation matters (see note 3, on page 19).

SRG LLP have given notice to the Company that it will not be seeking re-appointment as auditors at the
forthcoming AGM. Accordingly, following a review process and with the recommendation of the Audit
Committee, the Board has provisionally appointed PKF Littlejohn LLP as its new auditors and a
resolution to approve their appointment will be put to shareholders at the forthcoming AGM.

Nomination Committee

The Board has a Nomination Committee which, from time to time, has been charged with nominating
suitable candidates for the Board to consider recommending to the shareholders for appointment as
directors of the Company. Changes to the composition of the Board are not anticipated to occur on a
frequent basis. Whenever a change is anticipated, a job description for the role will be agreed by the
Nomination Committee, taking into account the expertise available to the Group from the other members
of the Board and the need to acquire any specific capabilities. The Nomination Committee will then
undertake whatever process is most appropriate for the identification of suitable candidates and their
assessment, taking into account any other commitments candidates might have. Appointments will be
made on merit against objective criteria.

Remuneration Committee

The Board has established a Remuneration Committee which will review, determine and recommend to
the Board the future Remuneration Policy for the Chairman of the Board and the Directors. The
Remuneration Committee will consider base fees and where appropriate salaries, annual and long-term
incentive entitlements and awards and, where appropriate, pension arrangements. In determining the
remuneration policy for the Board, the Remuneration Committee takes into account many factors having
regard to the requirements of the Corporate Governance Code.

Shareholder Communications

The Board strives to present a balanced and understandable assessment of the Company’s position
and prospects in all interim and other price-sensitive public reports and in reports to regulators as well
as in the information required to be presented by statutory requirements. The Chairman welcomes
comments on the quality of reports and any areas for improvement.

Shareholder communication centres primarily on the publication of annual and interim accounts and
occasional press releases and trading updates. The Chairman is available for discussions with
shareholders throughout the year and particularly at the time of results announcements. Mr J. H.
Maxwell, the Senior Independent non-executive director, is also always available should a shareholder
wish to draw any matters to his attention. The Annual General Meeting provides a forum for discussion
by Shareholders with the Board. Shareholders are encouraged to attend the AGM and to participate in
proceedings by asking questions during the formal part of the meeting, voting on the resolutions put to
the meeting and providing Board members with their views in informal discussions after the meeting.

53583_LondonFinance_RepAcc_2016_TXT-5.indd 37

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London Finance & Investment Group P.L.C.

Statement of Directors’ Responsibilities in Respect of the Accounts

The directors are responsible for preparing the Directors’ Report and the financial statements in
accordance with applicable law and regulations.

Company law requires the directors to prepare 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 (IFRSs) as adopted by the European Union. 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 Company and of the profit or loss of the Company for that period.

In preparing these financial statements, the directors are required to:

select suitable accounting policies and then apply them consistently;

(cid:31)
(cid:31) make judgements and accounting estimates that are reasonable and prudent;
(cid:31)

prepare financial statements in accordance with IFRSs as adopted by the European Union , subject
to any material departures disclosed and explained in the financial statements;
prepare the financial statements on the going concern basis unless it is inappropriate to presume
that the Company will continue in business.

(cid:31)

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.

Each of the directors whose names and functions are listed on page 1 confirms that to the best of each
person’s knowledge and belief:

(cid:31)

the financial statements, prepared in accordance with IFRSs as adopted by the EU, give a true
and fair view of the assets, liabilities, financial position and profit of the Group and the Company;
and
the Directors’ Report contained in the Annual Report includes a fair review of the development and
performance of the business and the position of the Group and the Company, together with a
description of the principle risks and uncertainties that they face.

(cid:31) Considers that the Annual Report, taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess the Company’s performance,
business model and strategy.

28th October 2016

By Order of the Board

City Group P.L.C.
Company Secretary

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Directors’ Remuneration Report
This report has been prepared in accordance with the Directors' Remuneration Report Regulations
and also meets the relevant requirements of the UK Listing Authority Listing Rules. A resolution to
approve the report will be proposed at the Annual General Meeting of the Company at which the
financial statements will be approved. A separate resolution will be proposed at the Annual General
Meeting of the Company to approve the Company’s Remuneration Policy contained in this report.

All members of the Board in attendance at the Annual General Meeting will be available to answer
shareholders’ questions about directors’ remuneration.

Annual Statement on Directors’ Remuneration

In August 2016, following the financial year end, the Board established a Remuneration Committee.
The Remuneration Committee is chaired by the Company’s Senior Independent Non-Executive
director, John Maxwell, and its other member is Dr Frank Lucas.

The Remuneration Committee will review, consider and make recommendations on directors’
remuneration in the future. Furthermore, the Chairman of the Remuneration Committee will make an
annual statement regarding the Company’s Remuneration Policy and any decisions or proposed
changes in relation to directors’ remuneration.

No changes are envisaged for the Directors’ Remuneration Policy in the current year.

Directors’ Remuneration Policy

Directors’ remuneration for the year ended 30th June 2016 has been maintained at the same level as
the previous year by the Board. The Company’s Remuneration Policy at present is to pay fixed fees to
directors. There is no variable element of pay for directors and, with the exception of Edward Beale,
directors are not eligible to receive awards under the Group’s Approved Share Option Plan or
Unapproved Employee Benefit Scheme. No benefits are provided for Group directors. The level of
directors’ fees has been set by the Board subject to the Company’s Articles of Association.

Directors’ remuneration in the current year will be paid by way of directors’ fees only. The table set out
below shows the directors’ fees payable in the current year:

Total fees

Non-Executive Chairman
Mr D.C. Marshall

Non-Executive Directors
Mr. J.H. Maxwell
Dr. F.W.A. Lucas
Mr. L.H. Marshall
Mr. J.M. Robotham
Mr E.J. Beale *

2016-2017
Total
£000

12
12
12
19
-

Directors fees for Mr E.J. Beale are surrendered to his primary employer, City Group PLC. Mr
E.J. Beale receives a salary and other benefits from City Group PLC which are reviewed annually
and updated on 1st April.

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London Finance & Investment Group P.L.C.

Future Remuneration Policy Table

Directors
receive a
fixed annual
fee

Fees are set at a level
to attract, motivate and
retain talented
individuals

The maximum amount of a fee will be set by the
Board from time to time and increases will not be
higher than inflation unless this can be justified
having regard to the performance of the Company or
additional responsibilities taken on by directors

Mr E.J. Beale will continue to receive an additional remuneration for his role as Chief Executive of City
Group.

The Group’s policy for future increases in fees to directors is similar to the policy for increases in
salary to Group employees.

Remuneration on Recruitment

It is anticipated that new non-executive directors will be remunerated on a similar basis as existing
directors and no additional payments will be made.

Should a new executive director be recruited, their remuneration package will be designed to attract
high quality individuals and will be commensurate with those available in the market at the time of
recruitment for persons with similar experience and any equity incentives granted on appointment will
be subject to shareholder approval. The remuneration package could include fixed and variable
bonuses, pension contributions, medical health and death in service insurance, travel and other
allowances as well as a salary.

Loss of Office

No payments will be made to directors for loss of office as Directors of the Company.

Bonuses or other Discretionary Payments

The Company does not make bonus payments to any director. Part of the profits of City Group
(currently 50%) are allocated to a staff bonus pool and Mr E J Beale may receive a discretionary
bonus from this pool as authorised by Mr D.C. Marshall.

Long Term Incentive Schemes

The Company will consider these in the light of changing legislation, but has no plans to adopt long-
term incentive schemes, other than the Group Approved Share Option Plan.

The Group Approved Share Option Plan was created to incentivise full time employees and directors
of the Company’s subsidiary, City Group. Awards will be made to directors and employees of City
Group to recognise outstanding efforts or achievements, or otherwise to attract, motivate or retain
staff.

The Group previously established a Group Unapproved Employee Benefit Scheme to incentivise full
time employees and directors of the Company’s subsidiary, City Group. There are no outstanding
awards under this scheme and it expired on 29th September 2016.

City Group

The remuneration payable to the executive director and employees of the Company's subsidiary, City
Group, is reviewed and considered by the board of City Group, which includes Mr. D.C. Marshall, Mr
L. H. Marshall, Mr. J.M. Robotham and Mr E.J. Beale.

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Performance Graph

Lonfin Total Shareholder Return v FTSE Eurofirst 100 Index

100.00%

80.00%

60.00%

40.00%

20.00%

0.00%

-20.00%

-40.00%

FTSEurofirst 100 ETF

Lonfin Finance & Investment Group

The above graph shows Lonfin's Total Shareholder Return (TSR) performance compared to the TSR
of the FTSE Eurofirst 100 index over the past five years. The Company’s main activity is that of an
investment company and the Board believes that because the Company’s General Portfolio
concentrates on FTSE 100 companies, or European equivalents, that this index is best suited as the
comparator index. The Company is not a part of the FTSE Eurofirst 100 Index, being a member of
the FTSE Fledgling index which is not deemed an appropriate comparator as it contains many small
companies of varying nature.

TSR is defined as the percentage change over the period in market price assuming the reinvestment
of income and funding of liabilities of the theoretical holding. TSR has been calculated on a one-
month averaging basis in order to reduce the volatility associated with spot prices.

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London Finance & Investment Group P.L.C.

Chairman’s Remuneration

As the Company has no Chief Executive Officer the table below shows the remuneration of the Chairman
for the 5 years to 30th June 2016 by way of comparison with the total return to shareholders illustrated
in the Performance Graph set out above.

The Chairman’s remuneration is fixed and he receives no variable element or equity incentive.

Chairman’s total remuneration

Years ending 30th June:

Total
remuneration
£’000

2011
2012
2013
2014
2015
2016

10
10
10
14
18
18

The table below compares the total remuneration paid to the Group’s directors and employees to the
distributions paid to shareholders by way of dividends in the last two years.

The Board and employees
of the Group
Years ending 30th June:

Dividends
paid
£’000

Total staff
remuneration
£’000

2014
2015
2016

265
296
312

408
367
369

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Directors’ Remuneration

Set out below is audited information in relation to Directors’ remuneration.

The directors’ remuneration for the year ended 30th June 2016, which was reviewed by the Board in the
previous year, has been maintained at £12,000 per annum for Non-Executive directors and £18,000 per
annum for the Chairman. The directors’ remuneration is by way of directors’ fees only and during the year
ended 30th June 2016 comprised:

Total fees

Non-Executive Chairman
Mr D.C. Marshall

Non-Executive Directors
Mr. J.H. Maxwell
Dr. F.W.A. Lucas
Mr. L.H. Marshall
Mr. J.M. Robotham
Mr E.J. Beale

2016 Notes
Total
£000

12
12
12
19
-

†
♦
♣
#

2015
Total
000

12
12
12
19
-

♦
†
♣

Mr. D.C. Marshall ceded his fees to a company which supplies his services and in which none of
the directors, including Mr D.C. Marshall, is beneficially interested. The Chairman received no
other payment or benefits from the Company.
Mr. L.H. Marshall ceded his fees of £12,000 (2015 - £9,750) to his primary employer.
Dr F.W.A. Lucas ceded his fees of £12,000 (2015 - £9,750) to his primary employer.
Of this sum, £7,500 (2015 - £7,500) relates to Mr. Robotham's fees paid by the Company’s
subsidiary, City Group PLC, and the balance is in respect of fees received from the Company.
Mr E. J. Beale was appointed to the Board on 13th April 2016. He did not receive any remuneration
in respect of his appointment. His remuneration as Chief Executive of City Group PLC for the
period from appointment to 30th June 2016 was as follows:

Salary
Pension Contributions

£17,823
£7,500

Bonuses and other discretionary payments
The Company did not make any bonus or discretionary payments to the Directors in the year ended 30th
June 2016.

Share Options
On 29th February 2016, Mr E.J. Beale, being an eligible employee under the rules of the Group Approved
Share Option Plan, was granted options over 80,000 ordinary shares with an exercise price of 37.5p per
share. The options granted may not be exercised earlier than the third anniversary of the date of grant.
The options are exercisable at any time thereafter up until the tenth anniversary of the date grant.

Save for the options granted to Mr E.J. Beale referred to above, no options, no other options or other
share incentives have been awarded or granted to any director or employee of the Group.

Pensions
Contributions of £30,000 per annum are being made to a private pension scheme on behalf of Mr E.J.
Beale. There are no other Company contributions payable to the directors of the Group in respect of
pensions.

28th October 2016

On behalf of the Board
David Marshall
Chairman

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London Finance & Investment Group P.L.C.

Report of the Independent Auditors

TO THE MEMBERS OF LONDON FINANCE & INVESTMENT GROUP PLC

We have audited the Group and parent company financial statements of London Finance & Investment
Group P.L.C. for the year ended 30th June 2016 which comprise the Consolidated and Parent Company
Statements of Financial Position, the Consolidated Statements of Total Comprehensive Income,
Consolidated Statements of Changes in Equity and the Consolidated Statements of Cash Flow and
related notes. 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.

This report is made solely to the Company's members, as a body, in accordance with Sections 495, 496
and 497 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 shareholders 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 in Respect of the Accounts on page
37, 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 Strategic Report to identify
material inconsistencies with the audited financial statements and to identify any information that is
apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in
the course of performing the audit. 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:
(cid:31) give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 30th June

(cid:31)

2016 and of the Group’s and the parent company’s profit for the year then ended;
the financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union; 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.

Our assessment of risks of material misstatement

We have identified the following risks of material misstatement that had the greatest effect on the overall
audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team:
(cid:31)

the valuation of the Group’s investments.

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Our application of materiality

We apply the concept of materiality both in planning and performing our audit, and in evaluation the effect
of identified misstatements, if any, on the audit and of uncorrected misstatements, if any, on the financial
statements and in forming our audit opinion in the Auditors’ Report.

When establishing our overall audit strategy, we determined materiality for the Group to be £15,000 which
is 2% of total operating income. This provided a basis for determining the nature, timing and extent of risk
assessment procedures, identifying and assessing the risk of material misstatement and determining the
nature, timing and extent of further audit procedures.

On the basis of our risk assessment, together with our assessment of the Group’s overall control
environment, our judgement was that overall performance materiality (i.e. our tolerance for misstatement
in an individual account or balance) for the Group should be 50% of materiality, namely £7,500. Our
objective in adopting this approach was to ensure that total uncorrected and undetected audit differences
in the financial statements did not exceed our materiality level.

We have agreed to report to the Audit Committee all audit differences in excess of £7,500, as well as
differences below that threshold that, in our view, warrant reporting on qualitative grounds.

An overview of the scope of our audit

Our response to the risk identified above was as follows:
(cid:31) we agreed 100% of year end prices for quoted investments to an independent source.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion:
(cid:31) the part of the Directors’ Remuneration Report to be audited has been properly prepared in accord-

(cid:31)

ance 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.

Matters on which we are required to report by exception

We have nothing to report in respect of the following:

Under the ISAs (UK and Ireland), we are required to report to you if, in our opinion, information in the
Annual Report is:

(cid:31) materially inconsistent with the information in the audited financial statements; or
(cid:31) apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group

acquired in the course of performing our audit; or
is otherwise misleading

(cid:31)

In particular, we are required to consider whether we have identified any inconsistencies between our
knowledge acquired during the audit and the directors’ statement that they consider the Annual Report is
fair, balanced and understandable and whether the Annual Report appropriately discloses those matters
that we communicated to the Audit Committee which we consider should have been disclosed.

Under the Companies Act 2006 we are required to report to you if, in our opinion:

(cid:31) certain disclosures of directors’ remuneration specified by law are not made; or
(cid:31) we have not received all the information and explanations we require for our audit.

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London Finance & Investment Group P.L.C.

Under the Listing Rules we are required to review:
(cid:31)
(cid:31)

the directors’ statement, set out on page 31, in relation to going concern;
the part of the Corporate Governance Statement relating to the Company’s compliance with the nine
provisions of the UK Corporate Governance Code specified for our review; and

(cid:31) certain elements of the report to shareholders by the Board on directors’ remuneration.

John Park CA
For and on behalf of SRG LLP
Chartered Accountants and Statutory Auditors
London, United Kingdom 28th October 2016

53583_LondonFinance_RepAcc_2016_TXT-5.indd 46

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Summary of Results

For the five years ended 30th June 2016

Consolidated Statement of Financial position

2016
£000

2015
£000

2014
£000

2013
£000

2012
£000

Issued share capital
Share premium and other reserves
Company’s retained realised profits
Shareholders’ funds (all equity)
Non-controlling interest

1,560
12,680
4,928
19,168
90
19,258

1,560
8,650
5,412
15,622
75
15,697

1,560
6,611
5,779
13,950
65
14,015

1,560
6,652
6,046
14,258
81
14,339

1,560
2,084
6,211
9,855
98
9,953

Disposition of Capital
Non-current assets

Current assets

Listed investments (General Portfolio)
Other current assets
Cash and deposits

12,439

11,725

9,065

9,423

5,098

7,125
272
588
7,985

5,801
218
115
6,134

5,927
245
39
6,211

5,601
256
116
5,973

4,533
272
2,217
7,022

Liabilities and deferred tax

(1,166)
19,258

(2,162)
15,697

(1,261)
14,015

(1,057)
14,339

(2,167)
9,953

Net assets per share
Dividend per share

61.4p
1.05p

50.1p
1.0p

44.7p
0.9p

45.7p
0.8p

31.6p
0.7p

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London Finance & Investment Group P.L.C.

Notice of Annual General Meeting

NOTICE is hereby given that the ANNUAL GENERAL MEETING of London Finance & Investment
Group P.L.C. (the “Company”) will be held at the offices of City Group P.L.C., 6 Middle Street, London,
EC1A 7JA on Wednesday 30th November 2016 at 11.00 am for the following purposes:

To consider and, if thought fit, pass the following resolutions, of which Resolutions 1 to 4, 6 to 13 and
15 will be proposed as Ordinary Resolutions and Resolutions 5 and 14 will be proposed as Special
Resolutions.

1. To receive the financial statements for the year ended 30th June 2016, together with the reports of

the directors and auditors thereon.

2. To declare a final dividend for the year ended 30th June 2016 of 0.55 pence for each ordinary

share in the capital of the Company.

To approve the Directors’ Remuneration Policy in the form set out in the Directors’ Remuneration
Report in the Company’s Annual Report and Accounts for the year ended 30th June 2016.

To approve the Directors’ Remuneration Report, other than the part containing the Directors’
Remuneration Policy, in the form set out in the Company’s Annual Report and Accounts for the
year ended 30th June 2016.

5. THAT the articles of association (“Articles”) of the Company be amended as follows:

(a) by deleting the present articles 100 to 102 of the Articles in their entirety and by adopting
the following new articles 100 to 102 (with article 102 to be blank) namely:

“100. Annual re-election of Directors

At every annual general meeting, each of the Directors at that time shall retire from office and if
willing may offer himself/herself for re-election subject to the provisions of article 101 of these
Articles.”

“101. Retiring Director to remain in office until successor appointed

Subject to these Articles (and in particular article 104), the Company at the meeting at which a
Director retires may fill the vacated office and in default, the retiring Director shall, if willing to
act and, provided the requisite approval is obtained pursuant to article 104, be re-appointed,
unless at the meeting it is resolved not to fill the vacancy or unless a resolution for the re-
appointment of the Director is put to the meeting and lost.”

“102. (this Article shall be blank)”

(b) by deleting the words “whether by rotation or otherwise” after the words, in the first
paragraph of article 103 of the Articles, “103.1 No person other than a Director retiring” and
before the words “shall be appointed”.

6. Subject to the passing of Resolution 5, to re-elect Mr D.C. Marshall, who is subject to annual re-

election, who retires and offers himself for re-election as a director.

7. Subject to the passing of Resolution 5, to re-elect Dr F.W.A. Lucas, who is subject to annual re-

election, who retires and offers himself for re-election as a director.

8. Subject to the passing of Resolution 5, to re-elect Mr J. M. Robotham who is subject to annual re-

election, who retires and offers himself for re-election.

9. Subject to the passing of Resolution 5, to re-elect Mr J. H. Maxwell who is subject to annual re-

election, who retires and offers himself for re-election.

10. Subject to the passing of Resolution 5, to re-elect Mr L.H. Marshall who is subject to annual re-

election, who retires and offers himself for re-election.

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11. To elect Mr E. J. Beale as a director, who has been appointed as a director since the last Annual

General Meeting.

12. To appoint PKF Littlejohn LLP as Auditors of the Company and to authorise the directors to agree

their remuneration.

13. THAT the directors be generally and unconditionally authorised, pursuant to and in accordance
with section 551 of the Companies Act 2006, to exercise all the powers of the Company to allot
shares in the Company and to grant rights to subscribe for, or to convert any security into shares in
the Company (‘Rights’) up to an aggregate nominal amount of £189,626 (being 3,792,521 shares),
provided that this authority shall expire at the conclusion of the annual general meeting of the
Company to be held in 2017, save that the Company shall be entitled to make offers or
agreements before the expiry of this authority which would or might require shares to be allotted or
Rights to be granted after such expiry and the directors shall be entitled to allot shares and grant
Rights pursuant to any such offers or agreements as if this authority had not expired; and all
unexercised authorities previously granted to the directors to allot shares and grant Rights be and
are hereby revoked.

14. THAT,

(a) subject to the passing of Resolution 13 set out above, the directors be empowered, pursuant to
section 570 and section 573 of the Companies Act 2006, to allot equity securities, within the
meaning of section 560 of that Act, for cash pursuant to the authority conferred by Resolution 13,
as if section 561(1) of that Act did not apply to any such allotment, provided that this power shall be
limited to:

(i)

the allotment of shares in the Company in connection with or pursuant to an offer by way of
rights, bonus issues or similar issues to the holders of Shares of 5p each in the capital of the
Company and other persons entitled to participate therein in proportion (as nearly as may
be) to such holders' holdings of such shares (or, as appropriate, to the numbers of such
shares which such other persons are for those purposes deemed to hold) subject only to
such exclusions or other arrangements as the directors may feel necessary or expedient to
deal with (i) fractional entitlements or legal or practical problems under the laws or the re-
quirements of any recognised regulatory body in any territory (ii) underwriting of such an
issue and (iii) applications by shareholders for equity instruments offered to other sharehold-
ers as part of such an issue, but not taken up by other shareholders; and

(ii)

the allotment to any person or persons (otherwise than in connection with a rights issue) of
equity securities up to an aggregate nominal amount of £78,000 (being 1,560,000 shares),
representing approximately 5% of the issued ordinary share capital of the Company;

(b)

the power given by this resolution shall expire upon the expiry of the authority conferred by
Resolution 13 set out above, save that the directors shall be entitled to make offers or agreements
before the expiry of such power which would or might require equity securities to be allotted after
such expiry and the directors shall be entitled to allot equity securities pursuant to any such offers
or agreements as if the power conferred hereby had not expired; and

bear the same meaning herein.

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London Finance & Investment Group P.L.C.

15. THAT in place of the Company’s existing Investment Policy the revised Investment Policy set out

below be approved and adopted by the Company:

The Company’s investment policy is to invest in a range of “strategic” investments, a “general
portfolio” consisting of liquid stock market investments, both in equity instruments and bonds, and,
at the Board’s discretion, ‘other investments’, typically property and other physical assets. This
investment policy is designed to achieve the Company’s objectives of capital growth in real terms
over the medium term, while maintaining a progressive dividend policy.

Both “strategic” and “general portfolio” investments can be in any industry sector. “Strategic”
investments are significant minority positions in UK small cap companies which can be either quoted
or unquoted; to diversify risk the policy is to maintain a number of such investments. Most such
investments will be in shares of companies that are publicly traded but investments can also be made
in publicly traded and untraded debt or equity instruments of companies that are strategic
investments. The “general portfolio” aims to further diversify risk through a spread of investments
and a target of between 20 and 30 holdings in some of the world’s largest quoted companies.

The intention is for between 30% and 70%. of the overall investment portfolio with a maximum limit
of 80% to be in “strategic” and “other” investments immediately following such investment, with the
balance of the portfolio, to be in the “general portfolio”. “Other investments” will be limited to 50 per
cent of the overall value of the investment portfolio, measured immediately following such
investment. No one “strategic investment” or “other investment” will represent more than 30% and
50% respectively of the value of all investments immediately following the making of such investment
and no one “general portfolio” investment will represent more than 10 per cent of the value of the
“general portfolio” at the time of such investment.

Within these parameters, changes in strategic and other investments are decided on by the Board
and changes to the general portfolio are decided on by the Board or, between Board meetings, by
an Investment Committee of the Board. The investment guidelines within which the Investment
Committee operates allow the Investment Committee discretion within the parameters set by the
Investment Policy. The investment mix and level of borrowings are reviewed at each Board meeting.

The Company’s gearing is limited at or below 70% of the total value of investments.

6 Middle Street
London EC1A 7JA

28th October 2016

By Order of the Board
City Group P.L.C.
Company Secretary

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Notes

1. A form of proxy is enclosed.

2. A proxy need not be a member of the Company.
3. To be valid the form of proxy should be completed and returned so as to reach the Company’s Reg-
istrars, Neville Registrars Limited, Neville House, 18 Laurel Lane, Halesowen, West Midlands, B63
3DA, U.K., for those shareholders on the U.K. branch of the register, or Computershare Investor Ser-
vices (Pty.) Limited, P.O. Box 61051, Marshalltown 2107, for those shareholders on the South African
branch of the register, not later than 11.00 am on 28th November 2016. Completion of a form of proxy
does not preclude a member from subsequently attending and voting in person.

4. A member may appoint more than one proxy in relation to the Meeting, provided that each proxy is
appointed to exercise the rights attached to a different share or shares held by that member. The right
to appoint a proxy does not apply to any person to whom this Notice is sent who is a person nominated
under section 146 of the Companies Act 2006 to enjoy information rights (a “Nominated Person”).
5. Any member or his/her proxy attending the Meeting has the right to ask any question at the Meeting

relating to the business of the Meeting.

6. Only shareholders registered in the register of members of the Company as at 6.00 pm on 28th No-
vember 2016 shall be entitled to attend and vote at the Meeting in respect of the number of shares
registered in their name at such time. If the Meeting is adjourned, the time by which a person must be
entered in the register of members of the Company in order to have the right to attend and vote at the
adjourned Meeting is 48 hours before the time of any adjourned Meeting. Changes to the register of
members after the relevant times shall be disregarded in determining the rights of any person to attend
and vote at the Meeting.

7. In the case of joint holders, the vote of the senior holder who tenders a vote whether in person or by
proxy shall be accepted to the exclusion of the votes of the other joint holders and, for this purpose,
seniority shall be determined by the order in which the names stand in the register of members of
the Company in respect of the relevant joint holding.

8. Copies of directors’ letters of appointment are available for inspection at the registered office of the
Company, 6 Middle Street, London, EC1A 7JA during usual business hours on any weekday (Satur-
days, Sundays and public holidays excluded) from the date of this Notice until the conclusion of the
Meeting and will be available for inspection at the place of the Meeting for at least 15 minutes prior to
and during the Meeting.

9. As at 28th October 2016 (being the last business day prior to the publication of this Notice) the Com-
pany’s issued share capital consists of 31,207,479 ordinary shares, carrying one vote each. The total
voting rights in the Company as at 28th October 2016 are 31,207,479.

10. The information required to be published by section 311(A) of the Companies Act 2006 (information

about the contents of this Notice and numbers of shares in the Company and voting rights
exercisable at the Meeting and details of any members’ statements, members’ resolutions and
members’ items of business received after the date of this Notice) may be found at www.city-
group.com/london-finance-investment-group-plc

11. Members satisfying the thresholds in section 527 of the 2006 Act can require the Company to

publish a statement on its website setting out any matter relating to (a) the audit of the Company’s
accounts (including the Auditor’s report and the conduct of the audit) that are to be laid before the
AGM; or (b) any circumstances connected with an Auditor of the Company ceasing to hold office
since the last AGM, which the members propose to raise at the meeting. The Company cannot
require the members requesting the publication to pay its expenses. Any statement placed on the
website must also be sent to the Company’s Auditors no later than the time it makes its statement
available on the website. The business which may be dealt with at the AGM includes any statement
that the Company has been required to publish on its website pursuant to this right.

12. A Nominated Person may, under an agreement between him/her and the shareholder by whom

he/she was nominated, have a right to be appointed (or to have someone else appointed) as a proxy
entitled to attend and speak and vote at the Meeting. A Nominated Person is advised to contact the
shareholder who nominated him/her for further information on this and the procedure for appointing
any such proxy.

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London Finance & Investment Group P.L.C.

13. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he/she
may, under any such agreement, have a right to give instructions to the shareholder as to the
exercise of voting rights. Such Nominated Person is advised to contact the shareholders who
nominated him/her for further information on this.

14. Note: For shareholders registered on the South African branch of the register:

A form of proxy is attached for the convenience of any certificated or dematerialised Lonfin
shareholders with own-name registrations who cannot attend the Annual General Meeting, but who
wish to be represented thereat. To be valid completed forms of proxy must be received by the
transfer secretaries of the Company, Computershare Proprietary Limited, PO Box 61051,
Marshalltown, 2107 by no later than 11:00 am on 28th November 2016.

All beneficial owners of Lonfin shares who have dematerialised their shares through a CSDP or
broker, other than those with own-name registration, and all beneficial owners of shares who hold
certificated shares through a nominee, must provide their CSDP, broker or nominee with their voting
instructions, in accordance with the agreement between the beneficial owner and the CSDP, broker
or nominee as the case may be. Should such beneficial owners wish to attend the meeting in person
they must request their CSDP, broker or nominee to issue them with the appropriate letter of
authority. If shareholders who have not dematerialised their shares or who have dematerialised their
shares with own-name registration and who are entitled to attend and vote at the Annual General
Meeting do not deliver proxy forms to the transfer secretaries timeously, such shareholders will
nevertheless at any time prior to the commencement of the voting on the resolutions at the Annual
General Meeting be entitled to lodge the form of proxy in respect of the Annual General, in
accordance with the instructions therein with the Chairman of the Annual General Meeting.

Change of Address

Members are requested to advise the United Kingdom Registrars, Neville Registrars Limited,
or the South African Registrars, Computershare Investor Services (Pty.) Limited, of any change of
address.

__________________

Form of Proxy

I / We, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

being (a) member(s) of the above-named company (the “Company”) hereby appoint the chairman of the

meeting, failing whom

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

as my / our proxy to vote for me / us on my / our behalf at the Annual General Meeting of the

Company to be held on 30th November 2016 at 11.00 am and at any adjournment thereof.

I / We hereby authorise and instruct my/our proxy to vote (or abstain from voting) as indicated below

on the resolutions to be proposed at such meeting. Unless otherwise directed the proxy will vote or

abstain from voting as he thinks fit.

RESOLUTIONS

For

Against Withheld

1. To receive the financial statements for the year ended 30th June 2016,

together with the reports of the directors and auditors thereon.

2. To declare a final dividend for the year ended 30th June 2016.

3. To approve the Directors’ Remuneration Policy contained in the

Directors’ Remuneration Report.

4. To approve the Directors’ Remuneration Report (excluding the

Director’s Remuneration Policy).

Special Resolution

5. To approve new Articles in relation to the re-election of directors.

6. To re-elect Mr D.C. Marshall as a director.

7. To re-elect Dr F.W.A. Lucas as a director.

8. To re-elect Mr J. M. Robotham as a director.

9. To re-elect Mr J. H. Maxwell as a director.

10. To re-elect Mr L.H. Marshall as a director.

11. To elect Mr. E. J. Beale as a director.

12. To appoint PKF Littlejohn LLP as Auditors of the Company and to

authorise the directors to agree their remuneration.

13. To authorise the directors to allot shares under Section 551 of the

Companies Act 2006.

Special Resolution

14. To disapply pre-emption rights.

15. To approve the Company’s new Investment Policy.

Dated . . . . . . . . . . . . . . . . . . . . . . . . . . 2016

Signature . . . . . . . . . . . . . . . . . . . . . .

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London Finance & Investment Group P.L.C.

London Finance & Investment Group P.L.C.
__________________

Form of Proxy
I / We, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

being (a) member(s) of the above-named company (the “Company”) hereby appoint the chairman of the

meeting, failing whom

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

as my / our proxy to vote for me / us on my / our behalf at the Annual General Meeting of the
Company to be held on 30th November 2016 at 11.00 am and at any adjournment thereof.

I / We hereby authorise and instruct my/our proxy to vote (or abstain from voting) as indicated below
on the resolutions to be proposed at such meeting. Unless otherwise directed the proxy will vote or
abstain from voting as he thinks fit.

RESOLUTIONS

For

Against Withheld

1. To receive the financial statements for the year ended 30th June 2016,

together with the reports of the directors and auditors thereon.

2. To declare a final dividend for the year ended 30th June 2016.

3. To approve the Directors’ Remuneration Policy contained in the

Directors’ Remuneration Report.

✃

4. To approve the Directors’ Remuneration Report (excluding the

Director’s Remuneration Policy).

Special Resolution
5. To approve new Articles in relation to the re-election of directors.

6. To re-elect Mr D.C. Marshall as a director.

7. To re-elect Dr F.W.A. Lucas as a director.

8. To re-elect Mr J. M. Robotham as a director.

9. To re-elect Mr J. H. Maxwell as a director.

10. To re-elect Mr L.H. Marshall as a director.

11. To elect Mr. E. J. Beale as a director.

12. To appoint PKF Littlejohn LLP as Auditors of the Company and to

authorise the directors to agree their remuneration.

13. To authorise the directors to allot shares under Section 551 of the

Companies Act 2006.

Special Resolution
14. To disapply pre-emption rights.

15. To approve the Company’s new Investment Policy.

Dated . . . . . . . . . . . . . . . . . . . . . . . . . . 2016

Signature . . . . . . . . . . . . . . . . . . . . . .

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Notes

1. A proxy need not be a member of the Company. You may appoint as your proxy persons of your own choice by
inserting their names in the space provided. If no name is inserted in the space provided, the Chairman will be
deemed appointed as the proxy. If the proxy is being appointed in relation to less than your full voting entitlement,
please enter in the space provided next to the proxy’s name the number of shares in relation to which he or she is
authorised to act as your proxy. If left blank your proxy will be deemed to be authorised in respect of your full voting
entitlement (or if this proxy form has been issued in respect of a designated account for a shareholder, the full
voting entitlement for that designated account).

2. To appoint more than one proxy, you may photocopy this form. All forms must be signed and should be returned
together in the same envelope.

3. Please indicate with a cross in the appropriate box how you wish your votes to be cast. If you do not make a
specific direction, the proxy will vote (or abstain from voting) at his or her discretion. On any other business which
properly comes before the Meeting (including any motion to amend any resolution or to adjourn the Meeting) the
proxy will vote or abstain at his or her discretion.

4. The ‘withheld’ vote box on the Form of Proxy is provided to enable you to abstain on any particular resolution.
However, it should be noted that a ‘withheld’ vote is not a vote in law and will not be counted in the calculation of
the proportion of votes ‘for’ and ‘against’ a resolution but will be counted to establish if a quorum is present.

5. To be valid your signed and dated form of proxy, and power of attorney or other authority (if any), must be
received at the offices of the Company’s Registrars, Neville Registrars Limited, Neville House, 18 Laurel Lane,
Halesowen, West Midlands, B63 3DA UK, or the South African Registrars, Computershare Investor Services (Pty.)
Limited, P.O. Box 61051, Marshalltown 2107, South Africa, not later than 11.00 am on 28th November 2016. (see
Note 14 to the Notice above).

6. Completion and return of this form of proxy will not prevent a member from attending and voting at the Meeting.

7. In the case of a corporate shareholder, this form of proxy should either be executed by the company under seal
or under the hand of two authorised signatories or a director in the presence of a witness (whose name, address
and occupation should be stated).

8. In the case of joint holders, the vote of the first-named in the register of members of the Company will be
accepted to the exclusion of that of other joint holders.

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