London Finance & Investment Group Plc
Annual Report 2017

Plain-text annual report

d on L on F v estm en t G c e & P r ou l R ep or t a A 30th J une 2017 c ou n ts 55902_LondonFinance_RepAcc_2017_CVR-4.indd 3 26/09/2017 09:14 i n a n I n p . L . C . A n n u a n d c O ND O N F I NA NC & I NV E NT G P . (“Lonfin” or the “Company”) Lonfin is a United Kingdom investment finance and management company. Its core portfolio centres on quality companies in the F TSE E urofirst 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 Western Selection P.L.C. (“Western”). Western’s share capital is admitted to trading on the NE E xchange G rowth 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 E xchange (www.londonstockexchange.com) and in the business section of some of the major South African newspapers. _______________________________ G P (“City Group”) City G roup, 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. 55902_LondonFinance_RepAcc_2017_CVR-4.indd 4 26/09/2017 09:14 L E E S T M R O U P . L . C X C I T Y R O U P L C C on ten ts Directors Corporate Contacts Summary of Net Assets and F inancial Calendar Strategic Report Composition of G eneral Portfolio Statement of Directors’ Responsibilities in Respect of the Accounts Report of the Independent Auditors Consolidated Statement of Total Comprehensive Income Consolidated Statement of F inancial Position Company Statement of F inancial Position Consolidated Statement of Cash F low Page 1 2 3 4 12 13 14 20 21 22 23 Company Statement of Cash F low 24 Consolidated Statement of Changes in Shareholders’ Equity 25 Company Statement of Changes in Shareholders’ Equity 26 Notes to the Accounts Directors’ Report Corporate G overnance Statement 27 42 48 Audit Committee Report 53 Directors’ Remuneration Report Summary of Results Notice of Annual G eneral Meeting Proxy F orm 58 66 67 E nclosed 55902_LondonFinance_RepAcc_2017_TXT-2.indd 1 26/09/2017 15:22 London Finance & Investment Group P.L.C. r ec tor s . M , C ♦ David Marshall joined the Board in 1971. He is the chairman of London F Investment roup P.L.C.. David is also chairman of Western and chief executive of Marshall Monteagle inance & PLC. He is also 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. . B , Non x ec u ti v e ♦ inancial Director of Marshall Monteagle E dward Beale is a Chartered Accountant and is the F PLC. He was a member of the Accounting Council of the F inancial Reporting Council for 6 years until August 2013. He is currently a member, and previously was chairman, of the Corporate roup of the Q uoted Companies Alliance. He is a non-executive director of G overnance E xpert G Western, Swallowfield PLC, Heartstone Inns Limited, Industrial & Commercial Holdings PLC and Tudor Rose International Limited. He joined the Board in 2016. , C . M , C d ep en J ohn 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. J ohn is Chairman of the Remuneration and Nomination Committees. d en t Non , S en i or I v e * x ec u ti , F . L , B , P , I d ep en d en t Non F rank 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. F rank is the Chairman of the Audit Committee. . R , O , F , Non x ec u ti v e ♦ Michael Robotham joined the Board in 1984. He is a non-executive director of Western and is a Chartered Accountant. * Member of the Audit Committee ♦ Member of the Investment Committee • Member of Remuneration Committee Member of Nomination Committee 1 55902_LondonFinance_RepAcc_2017_TXT-2.indd 2 26/09/2017 15:22 D i D . C A R S H A L L h a i r m a n G E . J E A L E - E J . H A X W E L L A C M I R S A n - E F . W . A U C A S S c h D n - J . M O B O T H A M B E C A - E C or p or a te C on ta c ts i ted d om R ep of S ou th A C om S ec R eg r eta y a i ster ed c e C om R eg Nu y i ster ed b er W eb si te R eg i str r s P i ty G r ou 6 Middle Street, London E C1A 7J A Tel: + 44 (0)20 7796 9060 11 Sunbury Park La Lucia Ridge Office E state La Lucia 4051 Durban Tel: + 27 (0)31 566 7600 www.city-group.com/ london-finance-investment-group-plc i ted r s L l e R eg Nev i str Neville House 18 Laurel Lane Halesowen West Midlands B63 3DA Tel: + 44 (0)121 585 1131 ) L r e I c es v estor S er u ter sh i ted C om P ty 70 Marshall Street J ohannesburg, 2001 (P.O. Box 61051, Marshalltown 2107) Tel: + 27 11 370 5000 p on sor JSE Limited Sponsor: l (a division of Sasfin i ta a sf C Bank Limited) 29 Scott Street, Waverley 2090 J ohannesburg, South Africa Tel: + 27 (11) 809 7500 d en t d ep en i tor L L i ttl ej oh Statutory Auditor 1 Westferry Circus Canary Wharf London E 14 4HD 55902_LondonFinance_RepAcc_2017_TXT-2.indd 3 2 26/09/2017 15:22 U n K i n g u b l i c f r i c a p a n y r n d O f f i C p L C p a n m 2 0 1 1 5 1 a i l a i m p a n v i ( . i m S S i n a p I n A u d P K F n L P London Finance & Investment Group P.L.C. y of Net A ssets t 3 th J n e a teg S tr Western Selection PLC I v estm en ts at fair value: insbury F ood G roup PLC i o at fair value l E i ty P or tf ol G en er Tangible non-current assets Cash, bank balances and deposits Other net liabilities Deferred taxation Non-Controlling interests Net a ssets, i i v estm en ts a t f r v u e Net a ssets p er sh r e d s* d en Interim Proposed F inal k et p c e on 3 th n e 2 *Information on Dividends is set out on pages 8 and 9 l C l en r Announcement of Preliminary Results for the year ended 30th J une 2017 27th September 2017 Annual G eneral Meeting 5th December 2017 2016 £ 000 3,537 8,880 12,417 7,125 22 588 (44) (850) (90) 19,168 61.4p 0.5p 0.55p 38p inal Dividend for 2017 Payable on 15th December 2017 to shareholders on the register of Half year results to 31st December 2017 to be announced in F ebruary 2018 members at 24th November 2017 Interim Dividend for 2017 to be announced in F ebruary 2018 3 55902_LondonFinance_RepAcc_2017_TXT-2.indd 4 26/09/2017 15:22 S u m m a r A 0 u 2 0 1 7 £ 0 0 0 i c n 3 , 7 7 3 F 6 , 9 0 0 1 0 , 6 7 3 a q u 1 0 , 7 6 6 1 4 2 2 2 ( 2 6 6 ) ( 8 2 9 ) ( 9 7 ) n c l u d i n g n a i a l 2 0 , 4 8 3 a 6 5 . 6 D i v i 0 . 5 5 p 0 . 5 5 p M i d - m a r r i 0 J u 0 1 7 4 4 . 5 p F i n a n c i a a d a F tr a teg R ep or t tr a teg , B u si n ess M od el a I v estm en t P ol 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 G roup’s investment policy is to invest in a range of ‘Strategic’, ‘G eneral Portfolio’ and from time to time ‘Other Investments’. G eneral Portfolio Investments comprise liquid stock market investments, both in equity instruments and bonds, and, at the Board’s discretion, ‘Other Investments’ are typically property and other physical assets. Strategic Investments are significant investments in smaller UK quoted companies and these are balanced by a G eneral Portfolio, which consists of a broad range of investments in major USA, UK and other E uropean companies which provides a diversified exposure to international equity markets. F urther information on the G roup’s Investment Policy can be found in the Directors’ Report on page 42. roup’s net assets per share for 2017 increased by 7% over In pursuance of the Investing Policy, the G over the last five years. the previous year to 65.6p and net assets per share have increased 108% Shareholders’ dividends for 2017 have increased by 4.7% over the last five years. Information on the Group’s performance against the Board’s key performance indicators (KPIs) is set out on page 10 of this report. over the previous year and by 37.5% R esu l ts (cid:13) Net assets have increased over the year by 7% (cid:13) Strategic Investments have decreased in value, over the year, by 14% insbury F ood G £ 10,673,000 due to the sale of part of our investment in F from 61.4p per share to 65.6p per share , from £ 12,417,000 to roup Plc. (cid:13) Profit on sale of strategic investments - £ 1,861,700 (see below) (cid:13) Strategic investments are yielding 3.1% (2016 – 2.9% (cid:13) The G eneral Portfolio has increased, adjusting for investment purchases and sales, over the ) year, by 51% F air value movement is £ 2,199,000 from £ 7,125,000 to £ 10,766,000 (cid:13) (cid:13) No significant increase in G (cid:13) A final dividend of 0.55 per share is recommended, making a total of 1.1p per share for the year roup operating costs (2016 – 1.05p) Of the £ 1,861,700 realised profit arising on the sale of strategic investments, £ 217,000 has been recognised in the current year ‘other comprehensive income’. The remaining profit has been recognised in prior years as net unrealised fair value gains and a transfer from unrealised to realised reserves has been made for this amount and is reflected in the Consolidated Statement of Changes in Shareholders E quity on page 25. In F ebruary this year, when we released our unaudited Interim Results, we announced that the Board had decided to early adopt IF RS 9 with effect from the Interim accounting period. As a result, the comparative figures for the year ended 30th J une 2016 in the Consolidated Statement of Total Comprehensive Income in these Accounts are restated. Accordingly, the Company and its subsidiaries (“Group”) achieved an operating profit for the year, before interest, tax and changes to the fair value adjustments of investments of £ 275,000, compared to a restated operating profit for the previous year, before tax and changes to the fair value adjustments of investments, of £ 239,000. The Total Comprehensive Income for the year, comprising profit after tax and the other comprehensive income (the fair value adjustments, net of tax, of Strategic Investments) was £ 1,658,000 compared to £ 3,858,000 for the previous year. Basic earnings per share are 3.5p (2016- restated earnings per share of 5.4p) and headline earnings per share are 1.0p (2016 – restated headline earnings per share of 1.9p). 55902_LondonFinance_RepAcc_2017_TXT-2.indd 5 4 26/09/2017 15:22 S i c S y n d n i c y London Finance & Investment Group P.L.C. tr a teg I v estm en ts Strategic Investments have reduced in value by £ 1,744,000 being the net proceeds of investment disposals of £ 2,438,000 and a fair value uplift in the remaining portfolio of investments of £ 476,000. The investment disposals gave rise to an historic cost profit of £ 1,862,000, of which £ 217,000 has been taken to the Consolidated Statement of Comprehensive Income in the year under review. W ester Selection P.L.C. (“Western”) The G roup owns 7,860,515 ordinary shares, being 43.8% , of the issued share capital of Western. On 26th September 2017, Western announced unaudited preliminary results showing a profit after tax of £ 850,000 for the year to 30th J une 2017 (2016 – profit after tax, of £ 64,000). E arnings per share were 4.7p (2016 – earnings per share – 0.4p). Western paid an interim dividend of 1.1p in March this year and proposes a final dividend of 1.1p making 2.2p for the year (2016 – 2.1p). Western’s net assets at market value at 30th J une 2017 were £ 17,125,000 equivalent to 95p per share, an increase of 20% from 79p last year. Our share of the net assets of Western, including the value of Western’s investments at market value, inancial was £ 7,500,000 (2016 - £ 6,227,000). The fair value for Western recorded in the Statement of F Position is the market value of £ 3,773,000 (2016 - £ 3,537,000). This represents 18% ) of the net assets of the group. (2016 – 26% 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 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. Western is a strategic investment which is technically a subsidiary of the Company that has not been consolidated due to the application of the investment entity exemption under IF RS 10. David Marshall is the Chairman of Western and. Michael Robotham and E dward 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: C or e H ol g s Northbridge Industrial Services plc (“Northbridge”) Northbridge hires and sells specialist industrial equipment to a non-cyclical customer base. With offices or agents in the UK, USA, Dubai, G ermany, Belgium, F rance, Australia, New Z ealand, Singapore, Braz il, Korea and Az erbaijan, Northbridge has a global customer base. This includes utility companies, the oil and gas sector, shipping, construction and the public sector. The product range includes loadbanks, transformers and oil tools. F urther information about Northbridge is available on their website: www.northbridgegroup.co.uk Northbridge, which is admitted to trading on AIM, announced its results for the year ended 31st December 2016 on 25th April 2017 and recorded a loss after tax of £ 6,298,000 for the year. No dividend was recommended by Northbridge and no dividends were received by Western from Northbridge during the year. 5 55902_LondonFinance_RepAcc_2017_TXT-2.indd 6 26/09/2017 15:22 S i c n n d i n  of Western holds 3,223,632 Northbridge shares which Northbridge’s issued share capital. The value of this investment at 30th J une 2017 was £ 3,320,000 (2016 - £ 2,772,000) which represents approximately 19% (2016 - 19%) of Western’s net assets. represents approximately12.45% David 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. F urther information about Swallowfield is available on their website: www.swallowfield.com Swallowfield, which is admitted to trading on AIM, announced its annual results for the 52 weeks ended 24th J une 2017 on 19th September 2017 and recorded a profit after tax of £ 2,572,000 compared to a profit after tax of £ 2,001,000 for the comparable period last year. Dividends of £ 66,900 were received from Swallowfield during the year (2016 – £ 52,000). A final dividend of 3.5p per share has been declared and, if approved, Western will receive a further £ 52,500 of income in December 2017. Western sold 500,000 Swallowfield shares, realising a profit of £ 845,000, during the year. At the reporting date, being 30th J une 2017, Western held 1,500,000 shares which was 8.90% of Swallowfield’s issued share capital. The market value of our reduced holding in Swallowfield on 30th J une 2017 had increased to £ 5,700,000 from the value of our holding at 30th J une 2016 of (2016 - 24%) of Western’s £ 3,400,000. The value of this investment represents approximately 33% net assets. E dward 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 E ast E ngland. They have a strategy of growing organically and by acquisition. F urther information about Bilby is available on their website: www.bilbyplc.com. During the year Western invested £ 190,000 in acquiring 362,912 shares in Bilby. Western now holds 2,699,280 Bilby shares which represents approximately 6.8% of Bilby’s issued share capital. The market value of this investment on 30th J une 2017 was £ 1,917,000 which represents approximately 11% of Western’s net assets. Bilby, which is admitted to trading on AIM, announced its results for the year ended 31st March 2017 on 26th J une 2017 showing a profit before tax and non-underlying items of £ 64,000 compared to a restated profit before tax and non-underlying items of £ 718,000 for the 14 month period ended 31st March 2016. Dividends of £ 53,000 were received from Bilby during the year (2016 - £ 58,000). Bilby announced a final dividend of 1.5p per share which was paid in J uly 2017 and which provided Western with further income of £ 40,500. 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, loucestershire, Tudor Rose International sells into 78 countries worldwide including USA, Spain, , Malaysia, Portugal, Italy, Cz ech Republic, Russia, Turkey, South Africa, Saudi Arabia, UAE Australia and China. Western holds 441,090 A ordinary shares in Tudor Rose International which represents 49.5% of the issued ordinary shares in Tudor Rose International. In F ebruary 2017, Western subscribed for £ 1,000,000 redeemable preference shares in Tudor Rose International at a par value of 1p per share. These shares were subscribed for by converting Western’s previous loan to Tudor Rose International of £ 500,000 and paying a further £ 500,000. Subsequent to the year end, the Company 55902_LondonFinance_RepAcc_2017_TXT-2.indd 7 6 26/09/2017 15:22 G London Finance & Investment Group P.L.C. has made available to Tudor Rose International a working capital facility of £ 500,000 bearing interest at the rate of 6% per annum and which has been fully draw down. Tudor Rose International, which is a private company, has a 31st December year end, generated trading profits before tax in the year to 30th J une 2017 of £ 63,100. Turnover in the period was £ 17,145,000 (2016 - £ 18,542,000). Western’s share of a profit after tax for the twelve months to 30th J une 2017 was £ 49,550 (2016 – £ 35,000) and the fair value of the investment at 30th J une 2017 was £ 1,647,000 (2016 - £ 1,290,000) being 10% (2016 – 9 %) of Western’s net assets. Western has two nominees on the board of Tudor Rose International: E dward Beale and David Marshall. Finsbury Food Group plc (“Finsbury”) insbury 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. F urther information about insbury, which is admitted to trading on AIM, is available on its website: www.finsburyfoods.co.uk insbury for £ 2,438,000, realising an historic During the year, Lonfin disposed of 2,000,000 shares in F cost profit of £ 1,861,700. At 30th J une 2017, Lonfin held 6,000,000 F insbury shares, representing approximately 4.6% of Finsbury’s issued share capital. The market value of the holding was £ 6,900,000 as at 30th J une 2017 (cost - £ 1,724,000) and represents approximately 34% ) of Lonfin’s net assets. (2016 – 46% On 18th September 2017, F minority interests of £ 12,958,000 for the 52 weeks ended 1st J uly 2017 (2016 - £ 12,754,000). insbury announced audited profits on continuing operations after tax and insbury paid an interim dividend of 1.0p and has recommended to its shareholders a final dividend of 2.0p per share, making 3.0p for the year (2016 – 2.8p). The final dividend, if approved, will be paid in December and will provide the Company with further income of £ 120,000. E dward Beale was a non-executive director of F insbury up until 23rd November 2016. G en er l P or tf ol i o The investments comprising the G eneral Portfolio at 30th J une 2017 are listed on page 12. The portfolio is diverse with material interests in F ood 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 30th J une 2017, the number of holdings in the G eneral Portfolio was 30 (2016 – 26). We have increased the amount invested in the G eneral Portfolio over the year by £ 2,767,000 (2016 - decreased by £ 20,000). The opening value of our G eneral Portfolio investments at 30th J une 2016 was £ 7,124,863 which compared with a cost of such investments at the same date of £ 3,285,706. After investment purchases (including purchase costs) during the year of £ 2,854,593 and investment sales (including selling expenses) during the same period of £ 206,560, the value of the G eneral Portfolio investments as at 30th to £ 10,765,695. F urther details of our G eneral Portfolio investments J une 2017 had increased by 51% are set out on page 12. 7 55902_LondonFinance_RepAcc_2017_TXT-2.indd 8 26/09/2017 15:22 F F F a B oa C g es It was with great sadness that we announced, on 23rd November 2016, the death of Lloyd Marshall. He was a highly valued member of the management team who brought a wealth of experience, knowledge and common sense to the G roup along with strong principles. Michael Robotham will be retiring from the Board at the Annual General Meeting (‘AGM’) on 5th December 2017, after a long period of service to the Company as a non-executive director. The Board, for itself, and on behalf of the shareholders, would like to thank Michael for his considerable dedication and service to the Company. Notwithstanding the loss to the Board of Lloyd Marshall, who passed away last November, and Michael Robotham, after he has retired at the AG M, the Board is satisfied that it has, for the time being, a sufficient spread of skills, experience and support to operate the Company. p er a ti on s, D r ec tor s a E l oy ees All of our operations and those of Western, except investment selection, are outsourced to our roup PLC (“City Group”). City Group also provides office accommodation, company subsidiary, City G secretarial and head office finance services to a number of other companies. City G roup 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. n t E v en ts si c e th e en of th e f l y ea r On 30th August 2017, a new relationship agreement between the Company and Coutts & Co was signed in relation to the Company’s existing credit revolving facility. This extended the available facilities to 30th September 2022 and set an interest rate of 2.75% per annum above the bank’s base rate (3% as at 30th August 2017). On 20th September 2017, Western made available to Tudor Rose International a working capital facility of £ 500,000 bearing interest at a rate of 6% per annum which has been fully drawn down. d en The Board recommends a final dividend of 0.55p per share, making a total of 1.1p per ordinary share for the year (2016 – 1.05p). Subject to shareholders’ approval at the Company’s AG M to be held on 5th December 2017, the dividend will be paid on 15th December 2017 to those shareholders on the register at the close of business on 24th November 2017. Shareholders on the South African register will receive their dividend in South African rand converted from sterling at the closing rate of exchange on 19th September 2017 being G BP1= Z AR 18.0089. In respect of the normal gross cash dividend, and in terms of the South African Tax Act, the following dividend tax ruling only applies to those shareholders who are registered on the South African register on F riday 15th September 2017. Al other shareholders are exempt  The number of shares in issue now and as at the dividend declaration date is 31,207,479;  The dividend has been declared from income reserves, which funds are sourced from the Company’s main bank account in London and is regards as a foreign dividend by South African shareholders; and The Company’s UK Income Tax reference number is 948/L32120.  55902_LondonFinance_RepAcc_2017_TXT-2.indd 9 8 26/09/2017 15:22 r d h a n O i n d m p S i g n i f i c a n d i n a n c i a D i v i d London Finance & Investment Group P.L.C. Dividend dates: Last date to trade (SA) Tuesday, 21st November 2017 Shares trade ex-dividend (SA) Shares trade ex-dividend (UK) Record date (UK and SA) Pay date Wednesday, 22nd November 2017 Thursday, 23rd November 2017 F riday, 24th November 2017 F riday, 15th December 2017 The J SE payments. Listings Requirements require disclosure of additional information in relation to any dividend Shareholders registered on the South African register are advised that the dividend withholding tax will be withheld from the gross final dividend amount of 9.90489 SA cents per share at a rate of 20% unless a shareholder qualifies for an exemption; shareholders registered on the South African register who do not qualify for an exemption will therefore receive a net dividend of 7.92392 SA cents per share. The dividend withholding tax and the information contained in this paragraph is only of direct application to shareholders registered on the South African register, who should direct any questions about the application of the dividend withholding tax to Computershare Investor Services (Pty) Limited, Tel: + 27 11 370 5000. Share certificates may not be de-materialised or re-materialised between Wednesday, 22nd November 2017 and F riday, 24th November 2017, both days inclusive. Shares may not be transferred between the registers in London and South Africa during this period either. l I n str m en ts, P l R i sk s a U c er ta n ti es The financial instruments of the G roup, in addition to its investments, comprise cash to finance those investments. The Company also has a bank revolving credit facility which will run until 30th September roup 2022. The interest rate on any funds drawn down is 2.75% above the bank’s base rate. The G currently has no borrowings under this facility. As an investment company, our principal risks and uncertainties which arise from the Group’s financial instruments are: Economic uncertainty The Group’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. V olatility relating to the Group’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 roup may impact the share price performance of its A number of factors outside the control of the G 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. E xchange rate movements will contribute to the volatility of prices of foreign stocks. 9 55902_LondonFinance_RepAcc_2017_TXT-2.indd 10 26/09/2017 15:22 F i n a n c i a u r i n c i p a n d n i Brexit The UK is experiencing unprecedented political and economic uncertainty as well as indications of slowing economic growth as a result of the UK’s decision to leave the EU and the ongoing Brexit negotiation process. Until the nature of the UK’s future relationship with the EU becomes clear and depending on the terms of that relationship the ability of UK businesses to plan for the future will be affected. Whilst the Board will continue to pursue its business objective for the benefit of its shareholders and make investments in major companies based in E urope and the USA, as a London listed investment company, the Company may in time, in the light of Brexit, experience adverse movement on its share price, its net assets and total shareholder returns. 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 39 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. 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. K ey P er f or c e I a tor s Key Performance Indicators (‘KPIs’) are the yardsticks against which the Board measures the performance of the G roup. Our objectives are real growth over the long term in dividends and net assets per share. Our performance on these KPIs are shown below. As an investment company, we have no relevant non-financial KPIs. In addition, the Board also compares the Company’s total shareholder return (TSR) with the TSR of the F TSE E urofirst 100 index. A graph setting out that performance is set out on page 61. Net assets per share Change in net assets per share over 5 years Dividends (net) per share 2017 65.6p 108% 1.1p 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 the 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. 55902_LondonFinance_RepAcc_2017_TXT-2.indd 11 10 26/09/2017 15:22 m a n n d i c London Finance & Investment Group P.L.C. S tr c tu r e The G roup is financed by equity funding. However, the Board believes that a reasonable level of gearing can enhance returns to shareholders. Accordingly, the Company has secured a bank credit Co which has recently been extended to 30th September 2022. At 30th revolving facility with Coutts & J une 2017, the G roup had undrawn bank facilities of £ 1,900,000. The Board currently has no plans to implement a share buy-back policy. Although the Board has no intention of issuing further shares in the Company at this time, to provide Directors with flexibility over the management of the Company’s capital, Shareholders are being asked to approve resolutions at the forthcoming AG M which would permit the Company to issue new shares, details of which are explained in the Directors’ Report. Similar resolutions were approved by Shareholders at the Company’s last AG M. u tl ook We believe our mix of Strategic Investments and a G eneral 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. u tu r e D ev el op m en ts roup’s Investment Strategy The future development of the G in the light of economic and equity market developments and the continued support of its Shareholders. The Board will maintain the current Investment Policy for the foreseeable future and has no plans to change the policy. roup is dependent on the success of the G 26th September 2017 By Order of the Board G i ty r ou Company Secretary P 11 55902_LondonFinance_RepAcc_2017_TXT-2.indd 12 26/09/2017 15:22 F i n a n c i n g u O F C p L C C om t 3 p osi ti on of G en er l P or tf ol i o th J n e 2 British American Tobacco Investor Phillip Morris International Inc Schindler Henkel Unilever Nestle Heineken Holding HSBC Holding Diageo LV MH Moet Hennessey roup Reckitt Benckiser G Pernod Ricard 3M Co Danone Kimberley Clark Corp L' Oreal ABB Z urich Linde ivaudan United Technologies Corp Anheuser Busch Inbev Chevron Corp E xxon Mobil Corp Brown F orman (B) Imperial Brands Procter & BASF Becton Dickinson & Compagnie F G amble Co Co inanciere Richemont y si s b y c r en E uro Sterling US Dollar Swiss F ranc Swedish Kroner 513 503 460 459 437 419 405 404 391 386 383 381 356 353 347 338 338 338 335 324 319 317 313 311 308 307 303 299 210 209 3,215 2,398 2,915 1,735 503 4.8 4.7 4.3 4.3 4.1 3.9 3.8 3.6 3.6 3.6 3.6 3.5 3.3 3.3 3.2 3.1 3.1 3.1 3.1 3.0 3.0 2.9 2.9 2.9 2.9 2.9 2.8 2.8 2.0 1.9 29.8 22.3 27.1 16.1 4.7 55902_LondonFinance_RepAcc_2017_TXT-2.indd 13 12 26/09/2017 15:22 a A 0 u 0 1 7 £ 0 0 0 % G 1 0 , 7 6 6 1 0 0 . 0 A n a l u r c y £ 0 0 0 % 1 0 , 7 6 6 1 0 0 . 0 London Finance & Investment Group P.L.C. Statement of Directors’ Responsibilities in Respect of the c ou n ts The Directors are responsible for preparing the Directors’ Report and the financial statements in accordance with applicable law and regulations. Company law requires 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 F inancial Reporting Standards (IF RSs) as adopted by the E uropean 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 G roup for that period. roup and the Parent Company and of the profit or loss of the G In preparing these financial statements, the Directors are required to: select suitable accounting policies and then apply them consistently;   make judgements and accounting estimates that are reasonable and prudent;  prepare financial statements in accordance with IF RSs as adopted by the E uropean 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.  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 the roup and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. The Company does not have a website but information about the Company is available on its subsidiary, City Group’s website. Legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in other jurisdictions. E ach of the Directors whose names and functions are listed on page 1 confirms that to the best of each person’s knowledge and belief:   the financial statements, prepared in accordance with IF RSs as adopted by the E U, give a true and fair view of the assets, liabilities, financial position and profit of the G 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 G description of the principal risks and uncertainties that they face. roup and the Company, together with a roup and the Company;  Considers that the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Group’s performance, business model and strategy. 26th September 2017 By Order of the Board G i ty r ou Company Secretary P 13 55902_LondonFinance_RepAcc_2017_TXT-2.indd 14 26/09/2017 15:22 A c G C p L C R ep or t of th e I d ep en d en t A i tor T M O L O ND O N F I NA NC & I NV E NT G P Independent auditor’s report to the memb er s of L on d on F c e & I v estm en t r ou P . i on We have audited the financial statements of London Finance & Investment Group P.L.C. (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 30th J une 2017 which comprise the consolidated statement of total comprehensive income, the consolidated and parent company statements of financial position, the consolidated and parent company statements of cash flows and the consolidated and parent and company statements of changes in shareholders equity and the notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International F inancial Reporting Standards (IF RSs) as adopted by the E uropean Union. This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone, other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. In our opinion the financial statements:  give a true and fair view of the state of the group’s and of the parent company’s affairs as at 30th June 2017 and of the group’s profit for the year then ended;  have been properly prepared in accordance with IF RSs as adopted by the E uropean Union; and,  have been prepared in accordance with the requirements of the Companies Act 2006 and, as re- gards the group financial statements, Article 4 of the IAS Regulation. a si s f or op i on We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. C on u si on s r el a ti to p l r i sk s, g oi c on c er a v i ty sta tem en t We have nothing to report in respect of the following information in the annual report, in relation to which the ISAs (UK) require us to report to you whether we have anything material to add or draw attention to:    the disclosures in the annual report set out on pages 9 and 10 that describe the principal risks and explain how they are being managed or mitigated; the directors’ confirmation set out on pages 9,10 and 43 in the annual report that they have carried out a robust assessment of the principal risks facing the group, including those that would threaten its business model, future performance, solvency or liquidity; the directors’ statement set out on page 42 in the financial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements and the directors’ identification of any material uncertainties to the group and the parent company’s ability to continue to do so over a period of at least twelve months from the date of ap- proval of the financial statements; 55902_LondonFinance_RepAcc_2017_TXT-2.indd 15 14 26/09/2017 15:22 n u d T O H E E M B E R S F E E S T M R O U P L C i n a n n G p . L . C O p i n B i n c l n g r i n c i p a n g n n d i a b i l London Finance & Investment Group P.L.C.  whether the directors’ statement relating to going concern required under the Listing Rules in ac- cordance with Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit; or  the directors’ explanation set out on page 43 in the annual report as to how they have assessed the prospects of the group, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions. r a a ti on of m a ter i ty We apply the concept of materiality both in planning and performing our audit, and in evaluating the ef- fect of misstatements. F or planning, we consider materiality to be the magnitude by which misstate- ments, including omissions, either individually or in aggregate, could reasonably be expected to influ- ence the economic decisions of users that are taken on the basis of the financial statements. Important- ly, misstatements below this level will not necessarily be evaluated as immaterial as we also take ac- count of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements. The application of these key considerations gives rise to two levels of materiality, the quantum and purpose of which are tabulated below. a ter m ea su i ty r e p ose K ey c on si b en d er k s a ti on s a m ou n t 200,000    The value of invest- ments The level of judge- ment inherent in the valuation The range of reason- able alternative valua- tion The level of normalised earnings 40,000 Assessing whether the financial statements as a whole present a true and fair view inancial statement materiality – Based on 1 per cent. of invested assets (the aggregate of fixed and current investments) Specific materiality – classes of transactions and balances other than those at fair value – Based on 10% per cent. of estimated normalised E BITDA excluding fair value movements Assessing those classes of transactions, balances or disclosures for which misstatements of lesser amounts than materiality for the financial statements as a whole could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements We agreed with the Audit Committee that we would report to the Committee all audit differences in ex- cess of £ 10,000 as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We reassessed materiality at the end of the audit and did not find it necessary to revise our planning materiality. 15 55902_LondonFinance_RepAcc_2017_TXT-2.indd 16 26/09/2017 15:22 O u p p l i c i a l M i a l P u r n d c h m a r A £ F  ov er i ew of th e sc op e of ou r a i t Our audit approach was developed by obtaining an understanding of the Group’s activities, the key functions undertaken on behalf of the Board by specialist outsourced service providers and the overall control environment. Based on this understanding we assessed those aspects of the G roup and Subsid- iary Companies transactions and balances which were most likely to give rise to a material misstate- ment and were most susceptible to irregularities including fraud or error. Specifically, we identified what we considered to be key audit matters and planned our audit approach accordingly. K ey a i t m a tter s Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. r ea R ea son i t r esp on se Non- current investment valuation note 12 of valuation investments are The non-current investments, which are held at fair value, was considered a key audit matter as the single most significant component of the financial statements and the fair value movements thereon could have a pervasive impact on the financial statements. F urthermore, although the relevant investments are in companies whose shares are stock on traded exchanges, those exchanges and volume of trades in those shares may be such that there is insufficient liquidity for bid reliable price measure of fair value. recognised the nature of to be a suitably We performed initial analytical procedures to determine the extent of our work considering, inter alia, the composition of the investment portfolio, the sectors invested in and, based on publically available data, the expected move- ments on the portfolio. We also had regard to the siz e of investment stake held, the impact of liquidity constraints and any unusual move- ment in observable share prices around the year end. As non-current investments is comprised of two investments we applied our audit proce- dures to both investments. Specifically, we:    confirmed that bid price had been used; confirmed there were no contra-indicators, such as liquidity considerations, to suggest bid price was not the most appropriate in- dication of fair value; and re-performed the calculation of the invest- ment valuations and benchmarked key in- puts and estimates to independent infor- mation and our own research. In respect of one of the investments where li- quidity was considered to be a potential con- cern, we requested that Management consider the volume of actual trading in the investment around the year end and rationalise the implied discount between fair value and the net asset value of the investee company concerned. Our testing did not identify any evidence of material misstatement. 55902_LondonFinance_RepAcc_2017_TXT-2.indd 17 16 26/09/2017 15:22 A n v u d u d A A u d London Finance & Investment Group P.L.C. r ea R ea son i t r esp on se Revenue recognition - investment income (note 1) Investment income arises from dividend income from the group’s investment portfolio. Such income is not predictable and its generation is outside of the control of the group. F or this reason we considered there was a risk investment income could be incomplete. Revenue recognition is a significant audit risk as it is one of the key drivers of dividend returns to investors. We assessed the design and the implementation of the controls relating to revenue recognition and we developed expectations for investment income receivable based on investment holdings and publically available information. In respect of dividends receivable, we compared actual income to expectations set based on independent published data on dividends declared by the portfolio companies held. We also agreed a sample of income receipts from bank statement to the nominal ledger and vice versa. Our testing did not identify any evidence of material misstatement. The Audit Committee’s consideration of their key issues is set out on page 56. th er inf ormation The other information comprises the information included in the annual report namely, the Strategic Re- port set out on pages 4 to 11, the Directors’ Report set out on pages 42 to 47, the Audit Committee Re- port set out on pages 54 to 57, the Corporate G overnance Statement set out on pages 48 to 53 and the Directors’ Remuneration Report set out on pages 58 to 64, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information. Our opinion on the fi- nancial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such ma- terial inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact. We have nothing to report in this regard. In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in the other information and to report as uncorrected material misstatements of the other information where we conclude that those items meet the following conditions:   u a , b c ed d er sta l e’ set out on page 55 – the statement given by the directors ‘F that they consider the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the group’s per- formance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or i t c om i ttee reporting set out on pages 54 to 57 – the section describing the work of the audit committee does not appropriately address matters communicated by us to the audit committee; or  Directors’ statement of compliance with the UK Corporate Governance Code set out on page 48 – the parts of the directors’ statement required under the Listing Rules relating to the company’s compliance with the UK Corporate G overnance Code containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R (2) do not properly disclose a departure from a relevant provision of the UK Corporate G overnance Code. 17 55902_LondonFinance_RepAcc_2017_TXT-2.indd 18 26/09/2017 15:22 A A u d O a i r a l a n n d n n d a b A u d m i on s on oth er m a tter s p r esc b ed b y th e C om i es A c t 2 6 In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. In our opinion, based on the work undertaken in the course of the audit:    the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements and those reports have been prepared in accordance with applicable legal requirements; the information about internal control and risk management systems in relation to financial reporting processes and about share capital structures, given in compliance with rules 7.2.5 and 7.2.6 in the Disclosure G uidance and Transparency Rules sourcebook made by the F inancial Conduct Authority (the F CA Rules), is consistent with the financial statements and has been prepared in accordance with applicable legal requirements; and information about the company’s corporate governance code and practices and about its adminis- trative, management and supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the F CA Rules. a tter s on w w e a r e r eq r ed to r ep or t b y ex c ep ti on In the light of the knowledge and understanding of the group and the parent company and its environ- ment obtained in the course of the audit, we have not identified material misstatements in:   the Strategic Report or the Directors’ Report; or the information about internal control and risk management systems in relation to financial reporting processes and about share capital structures, given in compliance with rules 7.2.5 and 7.2.6 of the F CA Rules. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:  adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or   the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are not made; or  we have not received all the information and explanations we require for our audit; or  a corporate governance statement has not been prepared by the parent company. R esp on si i ti es of d r ec tor s As explained more fully in the Directors’ Responsibilities Statement set out on page 13, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the prepa- ration of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liq- uidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. 55902_LondonFinance_RepAcc_2017_TXT-2.indd 19 18 26/09/2017 15:22 O p i n r i p a n 0 0 M h i c h u i b i l i London Finance & Investment Group P.L.C. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the / www.frc.org.uk/ Our-Work/ Audit/ Audit-and- at: Financial Reporting Council’s website assurance/ Standards-and-guidance/ Standards-and-guidance-for-auditors/ Auditors-responsibilities-for- audit/ Description-of-auditors-responsibilities-for-audit.aspx. This description forms part of our auditor’s report. https:/ th er m a tter s w w e a r e r eq r ed to a r ess F ollowing the recommendation of the Audit Committee, we were appointed by the Board on 30th No- vember 2016 to audit the financial statements for the year ending 30th J une 2017 and subsequent fi- nancial periods. This is the first financial period we have audited and the current engagement partner has a further four years as senior statutory auditor of this G roup before an audit rotation is required. The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent company and we remain independent of the group and the parent company in conducting our audit. We have not provided any other professional services to the group that have not already been disclosed in the financial statements in note 4. Our audit opinion is consistent with the additional report to the Audit Committee. h od i W i tl oc k ( S en i or S ta tu tor y A i tor ) F or and on behalf of PKF Statutory Auditor Littlejohn LLP 1 Westferry Circus Canary Wharf London United Kingdom E 14 4HD 26th September 2017 19 55902_LondonFinance_RepAcc_2017_TXT-2.indd 20 26/09/2017 15:22 O h i c h u i d d R r h u d C on sol a ted F or th e y ea r en d ed 3 S th J ta tem en t of T ota l C om r eh en si v e I c om e n e p er a ti I c om e Notes Dividends received Rental and other income Profits on sales of investments Management service fees Administrative expenses Investment operations Management services Total administrative expenses Operating profit Unrealised changes in the carrying value of G eneral Portfolio investments Interest payable Profit before taxation Tax expense Profit after taxation Non-controlling interest Profit attributable to shareholders v e i c om e/ r eh en si th er c om p en se) ( ex Unrealised changes in the carrying value of Strategic investments Profit on sale of investments Other taxation - Deferred tax Corporation tax Total Other Comprehensive Income Total Comprehensive Income attributable to owners of the parent R ec on a ti on of h ea n e ea g s Basic and diluted earnings per share Adjustment for the unrealised changes in the carrying value of investments, net of tax Headline earnings per share ) Restated 2016 £ 000 550 82 4 252 888 (346) (303) (649) 239 1,379 (16) 1,602 106 1,708 (15) 1,693 2,323 385 (543) - 2,165 3,858 5.4p (3.5)p 1.9p The notes on pages 27 to 41 form part of these accounts. The notes on pages 27 to 41 form part of these accounts. 55902_LondonFinance_RepAcc_2017_TXT-2.indd 21 20 26/09/2017 15:22 i d p n 0 u O n g n 2 0 1 7 £ 0 0 0 6 0 8 1 0 9 3 2 9 6 1 , 0 1 6 4 ( 3 5 2 ) ( 3 8 9 ( 7 4 1 ) 3 2 7 5 1 2 9 8 9 ( 3 3 ) 1 , 2 3 1 7 ( 1 2 1 ) 1 , 1 1 0 ( 7 ) 1 , 1 0 3 O p n 4 7 7 2 1 7 9 9 7 ( 2 3 8 ) 5 5 5 8 1 , 6 5 8 c i l i d l i r n i n 9 3 . 5 p ( 2 . 5 ) p 9 1 . 0 p London Finance & Investment Group P.L.C. C on sol th J t 3 n e a ted S ta tem en t of F l P osi ti on Notes Non r en t A ssets Property, Plant and E quipment Investments r en t A ssets Listed investments Trade and other receivables Cash at bank r en t L i ti es Trade and other payables after tax Net C r en t A ssets D ef er T ota T a ti on r ed l A ssets l ess C r en t L i ti es l a i ta R eser v es 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 Capital and reserves attributable to owners Non-controlling equity interests T ota l C i ta l a R eser v es Approved and authorised by the Board On 26th September 2017 . J . B ea Director l e 2016 £ 000 22 12,417 12,439 7,125 272 588 7,985 (316) 7,669 (850) 19,258 1,560 2,320 8,539 1,821 4,928 19,168 90 19,258 The notes on pages 27 to 41 form part of these accounts. The notes on pages 27 to 41 form part of these accounts. 21 55902_LondonFinance_RepAcc_2017_TXT-2.indd 22 26/09/2017 15:22 i d i n a n c i a A 0 u 2 0 1 7 £ 0 0 0 - c u r 1 0 1 4 1 2 1 0 , 6 7 3 1 0 , 6 8 7 C u r 1 2 1 0 , 7 6 6 1 3 2 2 0 2 2 2 1 1 , 2 0 8 C u r i a b i l 1 4 ( 4 8 6 ) u r 1 0 , 7 2 2 a x 1 5 ( 8 2 9 ) u r i a b i l 2 0 , 5 8 0 C a p n d 1 6 1 , 5 6 0 2 , 3 2 0 8 , 2 6 5 3 , 7 9 4 4 , 5 4 4 2 0 , 4 8 3 9 7 a p n d 2 0 , 5 8 0 E C om t 3 th J n e y S ta tem en t of F l P osi ti on Notes r en t A ssets Non Investments in G roup companies r en t A ssets Listed investments Trade and other receivables Cash and cash equivalents r en t L i ti es Trade and other payables: falling due within the year Net C D ef er r en t A ssets T a ti on r ed r en t L i ti es T ota l A ssets l ess C R eser i ta l a v es Called up share capital Share premium account Unrealised profits and losses on investments Realised Profit and Loss Balance at 1st J uly Net Loss for the period Dividends paid Balance at 30th J une Equity shareholders’ funds . J l e . B ea Director London F Registered in E ngland and Wales – Number 201151 Investment G roup P.L.C. inance & 2016 £ 000 3,847 7,125 27 451 7,603 (93) 7,510 (330) 11,027 1,560 2,320 2,219 6,099 5,412 (172) (312) 4,928 11,027 The notes on pages 27 to 41 form part of these accounts. The notes on pages 27 to 41 form part of these accounts. 55902_LondonFinance_RepAcc_2017_TXT-2.indd 23 22 26/09/2017 15:22 p a n i n a n c i a A 0 u 2 0 1 7 £ 0 0 0 - c u r 1 1 1 , 0 7 1 C u r 1 2 1 0 , 7 6 6 1 3 2 6 1 0 1 1 0 , 8 9 3 C u r i a b i l 1 4 ( 1 1 7 ) u r 1 0 , 7 7 6 a x 1 5 ( 4 0 8 ) u r i a b i l 1 1 , 4 3 9 C a p n d 1 6 1 , 5 6 0 1 6 2 , 3 2 0 1 6 3 , 0 1 5 6 , 8 9 5 4 , 9 2 8 ( 4 1 ) ( 3 4 3 ) 4 , 5 4 4 1 1 , 4 3 9 E London Finance & Investment Group P.L.C. C on sol F or th e y ea a ted 3 d ed S th J ta tem en t of C n e r en a sh F l ow s Notes a sh f l ow s f r om op er a ti a c ti i ti es Profit before tax Adjustments for non-cash - inance expense Depreciation charges Unrealised changes in the fair value of investments Decrease/ (Increase)in trade and other receivables (Decrease)/ Increase in trade and other payables Overseas Taxes paid i Net c op er i ti es a sh r om c ti a ti l ow f a a sh f l ow s f r om i v estm en t a c ti i ty (Increase)/ Decrease in current asset investments Disposal of investment l ow l ow v estm en t a ( ou tf a sh r om c ti ) f i i Net c i ty a sh f l ow s f r om f Interest paid E quity dividends paid Net drawdown/ (repayment) of loan facilities f ou tf a sh r om l ow f Net c D ec a sh a sh r ea se) c a c a r ea se i eq eq a sh a sh c a a sh c a sh l en ts a t th e b eg l en ts a t en of th e y ea eq l en ts of th e y ea Restated 2016 £ 000 1,602 16 9 (1,379) (55) 96 (28) 261 56 1,984 2,040 (16) (312) (1,500) (1,828) 473 115 588 The notes on pages 27 to 41 form part of these accounts. The notes on pages 27 to 41 form part of these accounts. 23 55902_LondonFinance_RepAcc_2017_TXT-2.indd 24 26/09/2017 15:22 i d 0 u 2 0 1 7 £ 0 0 0 C n g v 1 , 2 3 1 F 3 3 8 ( 9 8 9 ) 5 2 ( 6 6 ) 7 ( 4 5 ) n f n g v 2 2 4 C n v ( 2 , 6 5 2 ) 1 2 2 , 4 3 8 n f / n v ( 2 1 4 ) C i n a n c i n g ( 3 3 ) ( 3 4 3 ) 1 8 - i n a n c i n g ( 3 7 6 ) ( / I n c n n d u i v a 1 8 ( 3 6 6 ) C n d u i v a i n n i n g r 5 8 8 C n d u i v a d r 2 2 2 C om F or th e y ea y S d ed r en ta tem en t of C n e 3 th J a sh F l ow s Notes a sh f l ow s f r om op er a ti a c ti i ti es Profit before tax Adjustments for non-cash and non-operating activities - inance expense Unrealised changes in the fair value of investments Decrease/ (Increase)in trade and other receivables (Decrease)/ Increase in trade and other payables Overseas Taxes paid ) f Net c ( ou tf op er i ti es a sh r om a ti c ti l ow a a sh f l ow s f r om i v estm en t a c ti i ty (Increase)/ Decrease in current asset investments c ti Net c v estm en t a ( ou tf a sh r om l ow l ow ) f i i i ty a sh f l ow s f r om f Interest paid E quity dividends paid Decrease in loan to subsidiary Net c a sh ou tf l ow f r om f D ec a sh a sh r ea se) c a c a r ea se i eq eq a sh a sh c a a sh c a sh l en ts a t th e b eg l en ts a t en of th e y ea eq l en ts of th e y ea 2016 £ 000 1,201 16 (1,379) (9) (1,504) (28) (1,703) 55 55 (16) (312) 2,356 2,028 380 71 451 The notes on pages 27 to 41 form part of these accounts. The notes on pages 27 to 41 form part of these accounts. 55902_LondonFinance_RepAcc_2017_TXT-2.indd 25 24 26/09/2017 15:22 p a n 0 u 2 0 1 7 £ 0 0 0 C n g v 8 7 8 F 3 3 ( 9 8 9 ) 1 2 4 7 ( 4 5 ) n g v ( 9 8 ) C n v ( 2 , 6 5 2 ) n f / n v ( 2 , 6 5 2 ) C i n a n c i n g ( 3 3 ) ( 3 4 3 ) 1 1 2 , 7 7 6 i n a n c i n g 2 , 4 0 0 ( / I n c n n d u i v a ( 3 5 0 ) C n d u i v a i n n i n g r 4 5 1 C n d u i v a d r 1 0 1 London Finance & Investment Group P.L.C. Consolidated Statement of Changes in Shareholders’ Equity y r e i ta r e r em c ou n t R esta ted i sed r ea i ts on r of v estm en ts R esta ted r e of u ted l ts of i es i str R esu b si R esta ted n ed R eta i sed R ea r of i ts & L osses R esta ted T ota Non C on tr ol n ter ests l T ota i ty Y ea r en d ed 3 th n e 2 Balances at 1st J uly 2015 1,560 2,320 Profit for the Year Other Comprehensive Income/ (E xpense) Total comprehensive income Dividends paid and total transactions with shareholders - - - - - - - - 6,304 1,180 1,055 2,235 26 685 5,412 15,622 (172) 1,693 75 15 15,697 1,708 1,110 - 2,165 - 2,165 1,795 (172) 3,858 15 3,873 - - (312) (312) - (312) Balances at 30th J une 2016 1,560 2,320 8,539 1,821 4,928 19,168 90 19,258 Y ea r en d ed 3 th n e 2 Balances at 1st J uly 2016 1,560 2,320 Profit for the Year Other Comprehensive Income/ (E xpense) Total comprehensive income Dividends paid and total transactions with shareholders - - - - - - - - 8,539 913 1,821 4,928 19,168 90 19,258 231 (41) 1,103 (1,187) 1,742 - 555 (274) 1,973 (41) 1,658 - - (343) (343) 7 - 7 - 1,110 555 1,665 (343) Balances at 30th J une 2017 1,560 2,320 8,265 3,794 4,544 20,483 97 20,580 The notes on pages 27 to 41 form part of these accounts. The notes on pages 27 to 41 form part of these accounts. 25 55902_LondonFinance_RepAcc_2017_TXT-2.indd 26 26/09/2017 15:22 O r d i n a r S h a C a p l S h a P i u m A c U n l P I n S h a U n d i b S u d i a r i l P l - l i n g I E q u £ 0 0 0 £ 0 0 0 £ 0 0 0 £ 0 0 0 £ 0 0 0 £ 0 0 0 £ 0 0 0 £ 0 0 0 0 J u 0 1 6 0 J u 0 1 7 C om y S ta tement of Changes in Shareholders’ Equity R esta ted n ed R eta y r e i ta r e r em c ou n t R esta ted i sed r ea i ts on r of v estm en ts i sed R ea i ts & r of L osses R esta ted T ota Y ea r en d ed 3 th n e 2 Balances at 1st J uly 2015 Profit for the Year and total comprehensive income Dividends paid and total transactions with shareholders 1,560 2,320 - - - - 763 1,456 5,412 10,055 (172) 1,284 - (312) (312) Balances at 30th J une 2016 1,560 2,320 2,219 4,928 11,027 Y ea r en d ed 3 th n e 2 Balances at 1st J uly 2016 Profit for the Year and total comprehensive income Dividends paid and total transactions with shareholders 1,560 2,320 - - - - 2,219 796 4,928 11,027 (41) 755 - (343) (343) Balances at 30th J une 2017 1,560 2,320 3,015 4,544 11,439 The notes on pages 27 to 41 form part of these accounts. The notes on pages 27 to 41 form part of these accounts. 55902_LondonFinance_RepAcc_2017_TXT-2.indd 27 26 26/09/2017 15:22 p a n i O r d i n a r S h a C a p l S h a P i u m A c U n l P I n l P l £ 0 0 0 £ 0 0 0 £ 0 0 0 £ 0 0 0 £ 0 0 0 0 J u 0 1 6 0 J u 0 1 7 London Finance & Investment Group P.L.C. Notes to th e A 3 F or th e y ea r en d ed c ou n e 2 th J n ts c ou n ti P ol i es roup Plc have been Investment G The consolidated financial statements of the London F prepared in accordance with International F inancial Reporting Standards (IF RS) as adopted by the E uropean Union and interpretations issued by the IF RS Interpretations Committee (IF RS IC) applicable to companies reporting under IF RS. The financial statements comply with IF RS as issued by the International Accounting Standards Board (IASB). inance & The preparation of financial statements in conformity with IF RS 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. (i) (ii) (iii) 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. roup early adopted IF RS 9 “Financial Instruments” in the G roup’s interim period to 31st The G December 2016, and the comparative amounts for the year ended 30th J une 2016 in the Consolidated Statement of Total Comprehensive Income have been restated on a comparable basis. Under IF RS 9, the G roup has elected to classify its long term Strategic Investments as financial instruments which are held at fair value with unrealised changes in value taken directly to Other Comprehensive Income. G eneral Portfolio investments are held at fair value with the Consolidated Statement of Total unrealised changes in fair value recognised in Comprehensive Income. Strategic and G eneral Portfolio investments are quoted investments, and their fair value continues to be calculated using quoted bid prices. This change in accounting policy has no effect on the Consolidated Statement of F inancial Position, and moves into Other Comprehensive Income certain fair value movements that were previously recognised as either realised or unrealised profits and losses. Prior to this change there were no amounts recognised in Other Comprehensive Income. This re-categorisation changed Profit after tax from £ 3,858,000 at 30th J une 2016 to £ 1,708,000. Basic and Headline E arnings per Share were also restated from 12.4p and 5.2p for the year ended 30th J une 2016 to 5.4p and 1.9p. With the exception of Western, these consolidated financial statements include the results and net assets of the Group’s subsidiaries (all of which are companies) for the year to 30th J une 2017. The non-controlling interests are wholly attributable to equity interests in subsidiaries. Under Section 408 of the Companies Act 2006, the G roup is exempt from the requirement to present its own income statement. Western has not been consolidated as the Directors consider that the G is able to take advantage of the investment entity exemption in IFRS10. Accordingly, the Group’s investment in Western, a Strategic Investment is carried at fair value with fair value movements going through the Statement of Other Comprehensive Income. roup, as the parent and ultimate parent undertaking, 27 55902_LondonFinance_RepAcc_2017_TXT-2.indd 28 26/09/2017 15:22 c 0 u 0 1 7 1 . A c n g i c (iv) 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. The Company pays final and interim dividends. Dividends are recognised in the period in which they are appropriately authorised. F or interim dividends, this will mean the date on which they are paid and, for final dividends, this will mean the date on which they are approved in general meeting. (v) inancial assets are classified by category, depending on the purpose for which the asset was acquired. The G roup’s accounting policy is as follows: a) F air value through income: Non-derivative financial assets other than unquoted invest- ments and trade and other receivables are classified as associates, strategic and general portfolio investments and are recognised as being fair value through Profit or Loss or Other Comprehensive Income. They are valued using quoted bid prices and movements in value are taken to the income statement. Investments in the general portfolio are held at fair value through Profit or Loss with changes in the fair value recognised in profit or loss. They are valued using quoted market prices. Investments in the strategic portfolio are held at fair value through Other Comprehensive Income with changes in the fair value recognised in Other Comprehensive Income and accumulated under the heading of the unrealised profits and losses on investments reserve. They are valued using quoted market prices. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the unrealised profits and losses on investments reserve is reclassified to profit or loss b) Unquoted investments. These are stated at cost net of impairment provisions because fair 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. (vi) 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. (vii) Transactions denominated in foreign currencies are translated at the exchange rate at the date of the transaction. F oreign currency assets and liabilities at the year-end are translated at year- end exchange rates. 55902_LondonFinance_RepAcc_2017_TXT-2.indd 29 28 26/09/2017 15:22 F London Finance & Investment Group P.L.C. g es i ) New sta a d s, a c ou m en n ti p ol m en ts a i es a n ter i d i sc l osu r es b r eta ti on s a d op ted y th e G r ou No new standards, amendments or interpretations, effective for the first time for the financial year beginning on or after 1st J anuary 2016 have had a material impact on the group or parent company other than the early adoption of IF RS9. ) New sta d s, a m en m en ts a i n ter r eta ti on s n ot y et a d op ted A number of new standards and amendments to standards and interpretations are effective for financial periods beginning after 1st J anuary 2016, and have not been applied in preparing these consolidated financial statement. None of these are expected to have a significant effect on the consolidated financial statements of the G roup, except the following set out below: IFRS 15, ‘Revenue from contracts with customers’ deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 ‘Revenue’ and IAS 11 ‘Construction contracts’ and related interpretations. The standard is effective for annual periods beginning on or after 1st J anuary 2018 and earlier application is permitted. The G roup is assessing the impact of IF RS 15. IFRS 16 “Leases” specifies how a company reporting under IF RS will recognise, measure, and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16’s approach to lessor accounting substantially unchanged from its predecessor IAS 17. The standard replaces IAS 17 ‘Leases’ and related interpretations. The standard is effective for annual periods beginning on or after 1st January 2019, with earlier adoption permitted if IFRS 15 ‘Revenue from contracts with customers’ has also been applied (subject to EU endorsement). The Directors are evaluating the likely impact of these new Standards. There are no other IF RSs or IF RIC interpretations that are not yet effective that would be expected to have a material impact on the G roup. 29 55902_LondonFinance_RepAcc_2017_TXT-2.indd 30 26/09/2017 15:22 2 . C h a n n c n g i c n d ( a n d a r d n d p p ( b n d a r d n d p . O p er a ti p r of i t – S eg m en ta l A y si s The Directors manage the G roup primarily by two classes of business, Investment Operations and Management Services, and present the segmental analysis on that basis. The segment performance measure is operating profit. Dividends – Listed investments Rental and other income Profits on sales of investments, including provisions Management services fees i a ti p er c om e Administration expense – normal i t p er r of a ti p v estm en t a ti on s p er g em en t c es S er 2016 restated £ 000 550 - 4 - 554 (346) 208 2016 restated £ 000 - 82 - 252 334 (303) 31 All revenues are derived from operations within the UK. Consequently, no separate geographical segment information is provided. . A i str a ti on E p en ses l a i str Nor Depreciation Auditors’ remuneration a ti on Directors’ emoluments Staff Costs ex p en ses i d e: - Audit services - non-audit services * - Note 5 - Note 6 g em en t 2016 £ 000 9 26 3 75 294 * The fees in 2016 were paid to the Company’s previous auditors, SRG LLP. r ec tor s' E m ol m en ts a R el a ted P r ty D i sc l osu r es The key management personnel are considered to be the G detailed in the Directors’ Remuneration Report on pages 58 to 64. roup directors. Their emoluments are Related Party Disclosures Lonfin and its wholly owned subsidiary, Lonfin Investments Limited, owns 43.8% of Western. Western is a company incorporated in E ngland with its registered office at 6 Middle Street, London, E C1A 7J A. Under IF RS 10, Lonfin is considered to be the parent and ultimate parent undertaking of a group of companies including Western for which group financial statements are drawn up. Copies of these group financial statements have been delivered to the Registrar of Companies. Western’s financial statements are not consolidated with this group as the Company, as the parent company, is able to take advantage of the investment entity exemption in IF RS 10. Mr. D.C. Marshall, Mr. J . M. Robotham and Mr. E director of Western. .J Beale are directors and Mr L.H. Marshall was a 55902_LondonFinance_RepAcc_2017_TXT-2.indd 31 30 26/09/2017 15:22 3 n g n a l I n O M a n a v i 2 0 1 7 2 0 1 7 £ 0 0 0 £ 0 0 0 6 0 8 - 1 1 0 8 3 - - 2 9 6 O n g n 6 1 2 4 0 4 ( 3 5 2 ) ( 3 8 9 ) O n g 2 6 0 1 5 4 d m i n x M a n a 2 0 1 7 £ 0 0 0 m a d m i n n c l u 8 2 7 - 8 0 3 0 5 5 . D i u n d a London Finance & Investment Group P.L.C. Mr. D.C. Marshall and Mr. J . M. Robotham' s shareholdings in Lonfin, and Mr E are set out in the accompanying Directors’ Report. .J . Beale’s share options, roup Plc and Northbridge Industrial Services Plc Lonfin and Western hold shares in F insbury F ood G . J . Beale respectively. Mr. D.C. Marshall is a director of Northbridge Industrial Services plc and Mr. E roup Plc until November 2016. Mr D.C. Marshall is the Chief was a director of F E xecutive and Mr E inancial Director of Marshall Monteagle PLC. Mr L.H. Marshall was also a director of Marshall Monteagle PLC. Mr D. C. Marshall and Mr J . M. Robotham are shareholders in Marshall Monteagle PLC which in turn was a substantial shareholder in Halogen Holdings PLC. Mr. . J . Beale and Mr L.H. Marshall were D. C. Marshall was Chairman of Halogen Holdings PLC and Mr. E directors of Halogen Holdings PLC. Halogen Holdings PLC was dissolved during the year. insbury F ood G .J . Beale is the F Lonfin and Western own City G roup 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. roup in the ratio 51.4% respectively. City G and 48.6% City G roup 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 roup from those companies, their associates and subsidiaries, total directors’ fees receivable by City G £ 389,000 (2016 - £ 340,000) for the year under review. At the reporting date the aggregate balance due in respect of fees invoiced was £ 97,250 (2016 - £ 85,000) and no fees have been paid in advance (2016 - nil). Settlement is within normal credit terms. At 30th J une 2017, as disclosed in Notes 13 and 14 below, there were no monies due from City G roup to the Company (2016 - £ 6,000) and it owed City G roup £ 51,000 for fees. The Company was also owed £ 982,000 by Lonfin Investments Limited as disclosed in Note 11 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. ta f C osts Other than the Directors, the Company has no staff or staff costs. All the Group’s staff, other than the Directors, are employed by the Company’s subsidiary, City Group. Group staff costs, including G roup Directors’ fees are shown in the Directors’ Remuneration Report on pages 58 to 64: Salaries Social security costs Defined contribution pension scheme contributions The average weekly number of staff employed, excluding G Directors, was: roup 5 2016 £ 000 223 41 30 294 6 31 55902_LondonFinance_RepAcc_2017_TXT-2.indd 32 26/09/2017 15:22 6 . S f 2 0 1 7 £ 0 0 0 2 5 7 3 9 2 4 3 2 0  E p en se h e ta c g e f or th e y ea r c om i ses: Tax on overseas investment income Deferred Tax Tax charged/ (credited) 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 19.75% (2016 – 20% ) f ec ts of Non-taxable items – fair values and franked income Loss utilised g ed f or th e y ea x c th er ta Deferred tax Corporation tax x i th er ta c om e c ti oth er c om r eh en si v e Dividends received from UK companies are recognised in the income statement net of their associated tax credit. c tor s a f ec ti th e ta x c g e i f u tu r e y ea r s 2016 £ 000 29 (135) (106) 1,602 320 (107) (319) (106) 543 - 543 The Group’s future tax charge, and effective tax rate are affected by the expected future rates of corporation tax which are expected to fall from 19% over the course of the next couple of the years and the ability of the G have been taken into account when evaluating the Group’s deferred tax liability. Based on current tax legislation and investment management strategy, the Directors are satisfied that the G capital losses can be utilised and retain value. roup to utilise the accumulated capital losses which at present roup’s to 17% . D d en d s Amounts recognised as distributions to the shareholders of the Company in the year were as follows: inal dividend for the year ended 30th J une Interim dividend for the year ended 30th J une Per Share Per Share 0.55p 0.55p 0.55p 0.50p The total dividends paid in 2017 and 2016 were £ 343,000 (1.1p per share) and £ 312,000 (1.0p per share). A dividend in respect of the year ended 30th J une 2017 of .55p per share is to be proposed at the AG M to be held on 5th December 2017. These financial statements do not reflect this dividend. 55902_LondonFinance_RepAcc_2017_TXT-2.indd 33 32 26/09/2017 15:22 7 . T a x x 2 0 1 7 £ 0 0 0 T x h a r p r 4 5 7 6 1 2 1 1 , 2 3 1 2 4 3 E f : ( 1 2 0 ) ( 2 ) T a h a r r 1 2 1 O x : ( 9 9 ) 2 3 8 O m p a n g p i n 1 3 9 F a f n g h a r n 8 i v i 2 0 1 7 2 0 1 6 F London Finance & Investment Group P.L.C. g s p er sh r e R ec on a ti on of h ea n e ea g s Basic earnings per share, based on the profit attributable to the shareholders after tax and non-controlling interests of £ 1,103,000 (2016 restated - £ 1,693,000) and on 31,207,479 shares issued Adjustment for the unrealised changes in the carrying value of investments, net of tax of £ (794,000) and 2016 restated £ (1,104,000) Headline earnings are required to be disclosed by the J SE Headline earnings per share are based on the profit attributable to the shareholders after tax and non-controlling interests, before unrealised changes in the fair value of investments net of tax, of £ 309,000 (2016 - £ 589,000) and on 31,207,479 (2016 – 31,207,479) shares being the weighted average of number of shares in issue during the year. . Diluted earnings per share, based on the profit attributable to the shareholders after tax and non-controlling interests of £ 1,103,000 (2016 restated - £ 1,693,000) and on 31,207,479 shares issued plus 80,000 share options granted in 2016 r op er ty , P n t a E m en t At cost – 1st J uly 2016 30th J une 2017 Depreciation Balance – 1st J uly 2016 Charges for the year 30th J une 2017 Net b ook a m ou n t 3 th n e 2 Net book amount 30th J une 2016 The office equipment is held by a subsidiary company. 2016 5.4p (3.5)p 1.9p 5.4p Office E quipment 53 53 31 8 39 14 22 33 55902_LondonFinance_RepAcc_2017_TXT-2.indd 34 26/09/2017 15:22 9 . E a r n i n a c i l i d l i r n i n 2 0 1 7 3 . 5 p ( 2 . 5 ) p 1 . 0 p 3 . 5 p 1 0 . P l a n d q u i p £ 0 0 0 0 J u 0 1 7 . I v estm en t i G r ou c om i es Operating subsidiaries, incorporated and operating in E ngland and consolidated in these financial statements. Principal Activities Percentage of E quity 2017 £ 000 2016 £ 000 Held by the Company – at cost City G roup PLC Management services 51.4% Lonfin Investments Limited Investment holding 100% Loan to subsidiary, less provision of £ 1,681,000 (2016: £ 1,681,000) at 1st J uly Amount repaid in the year - Loan to subsidiary, less provision as at 30th J une 89 - 5,114 (2,356) 3,758 3,847 55902_LondonFinance_RepAcc_2017_TXT-2.indd 35 34 26/09/2017 15:22 1 1 n n p p a n 8 9 - 3 , 5 7 8 ( 2 , 7 7 6 ) 9 8 2 1 , 0 7 1 London Finance & Investment Group P.L.C. 2 v estm en ts tr a teg H ol g s G en er P or tf ol i o W ester S el ec ti on n sb G r ou F ood C ost a t 1 st J Opening unrealised gain/ (losses) p en v a ti on a s a t 1 st J y 2 Movements in the year Sales - proceeds Realised gain on sale Net unrealised gains transferred to realised on disposal Net unrealised fair value gain/ (losses) in the year l osi v a ti on a t 3 th n e 2 C ost a t 1 st J Opening unrealised gain/ (losses) p en v a ti on a s a t 1 st J y 2 Movements in the year Purchases Sales - proceeds Realised gain on sale Net unrealised gains transferred to realised on disposal Unrealised fair value gains in the year l osi v a ti on a t 3 th n e 2 3,306 2,495 5,801 (60) 39 (35) 1,380 7,125 3,286 3,839 7,125 2,856 (207) 119 (116) 989 6,159 (2,465) 3,694 - - - (157) 3,537 6,159 (2,622) 3,537 - - - - 236 3 C ost a t 3 th n e 2 Unrealised gain/ (losses) at 30th J une l osi v a ti on a t 3 th n e 6,053 6,159 4,713 (2,386) 10,766 3,773 T ota 12,341 5,154 17,495 2.876 5,124 8,000 (1,985) (2,045) 1,409 1,448 (1,024) (1,059) 2,480 8,880 2,300 6,580 3,703 19,542 11,745 7,797 8,880 19,542 - 2,856 (2,438) (2,645) 1,862 1,981 (1,645) (1,761) 241 0 1,724 5,176 6,900 1,466 13,936 7,503 21,439 35 55902_LondonFinance_RepAcc_2017_TXT-2.indd 36 26/09/2017 15:22 1 I n S i c d i n a l n F i u r y p l £ 0 0 0 £ 0 0 0 £ 0 0 0 £ 0 0 0 u l y 2 0 1 5 O i n g a l u u l 0 1 5 C n g a l u 0 J u 0 1 6 u l y 2 0 1 6 O i n g a l u u l 0 1 6 C n g a l u 0 J u 0 1 7 1 0 , 7 6 6 3 , 7 7 6 , 9 0 2 1 , 4 3 9 0 J u 0 1 7 C n g a l u 0 J u 2 v estm en ts ( C on ti u ed ) Western Selection., a subsidiary undertaking, is traded on the NE and operates in the UK with a financial year end of 30th J une. G rowth Market and is incorporated At 30th J une 2017 and 30th J une 2016, Western 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 as follows:- Profit after tax Non-current assets Current assets Liabilities within one year Liabilities due over one year Capital Reserves Share Premium account Capital Reserve account Net asset value per share V alue of investment in Western at Net asset value per share Middle market price per share on 30th J une V alue of investment in Western at market value . T d e a oth er r ec ei l es r ou C om Trade debtors Other debtors Prepayments and accrued income . T d e a oth er p l es roup companies Corporation tax Other taxes Other creditors Trade creditors Accruals 2016 £ 000 217 - 55 272 2016 £ 000 - 13 29 61 17 209 316 2016 £ 000 64 15,119 197 (98) (1,000) 7,180 2,654 3 79p 6,210 45.0p 3,537 2016 £ 000 - - 27 27 2016 £ 000 - - 5 1 - 87 93 55902_LondonFinance_RepAcc_2017_TXT-2.indd 37 36 26/09/2017 15:22 1 I n n X 2 0 1 7 £ 0 0 0 8 5 0 1 8 , 3 1 6 4 0 ( 1 3 ) ( 1 , 2 2 5 ) 7 , 1 8 0 2 , 6 5 4 3 9 5 p 7 , 4 6 7 4 8 . 0 p 3 , 7 7 3 1 3 r a n d v a b G p p a n y 2 0 1 7 2 0 1 7 £ 0 0 0 £ 0 0 0 1 5 9 - 1 8 4 3 2 4 2 2 0 2 4 1 4 r a n d a y a b 2 0 1 7 2 0 1 7 £ 0 0 0 £ 0 0 0 G - 5 1 2 3 6 - 2 8 5 5 1 2 4 - 1 9 3 6 0 4 8 6 1 1 7 London Finance & Investment Group P.L.C. . D ef er r ed ta a ti on roup has provided £ 829,000 in respect of potential taxation on unrealised investment gains (2016 The G - £ 850,000). Balance at 1st J uly Profit and Loss Other Comprehensive Income Balance at 30th J une . S r e C i ta l a R eser v es 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 J uly 2016 and 30th J une 2017 r ou C om roup 2016 £ 000 442 (135) 543 850 Company 2016 £ 000 442 (112) - 330 C om y a G r ou 2016 £ 000 1,750 1,560 roup and the Company’s capital comprises its shareholders’ equity. Our objective is to manage The G 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:- Share capital Share premium Unrealised profits and losses on investments Share of undistributed profits of subsidiaries Realised profits and losses a p p ti on p ose D esc Nominal value of issued share capital. Amount subscribed less issue expenses for share capital in excess of nominal value, less issue expenses. Cumulative unrealised gains and losses on investments. The G 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. roup’s share of cumulative undistributed post- The balances and movements on each of the above reserves are disclosed in the Consolidated and Company Statement of F inancial Positions on pages 21 and 22 and the Consolidated Statement of Changes in Shareholders’ Equity on page 25. 37 55902_LondonFinance_RepAcc_2017_TXT-2.indd 38 26/09/2017 15:22 1 5 x G p G p a n y 2 0 1 7 2 0 1 7 £ 0 0 0 £ 0 0 0 8 5 0 3 3 0 7 8 7 8 ( 9 9 ) - 8 2 9 4 0 8 1 6 h a a p n d p a n n d p 2 0 1 7 £ 0 0 0 1 , 7 5 0 1 , 5 6 0 r i n d u r r e O p ti on s roup has had two long-term incentive plans established to incentivise full-time employees and roup and to recognise outstanding efforts or achievements, or otherwise to attract, roup’s Unapproved E mployee Benefit Scheme (which terminated on 29th The G directors of City G motivate or retain staff: the G September 2016) and a more recent scheme, the Group’s Company Share Option Plan. On 29th F ebruary 2016 options over 80,000 ordinary shares in the Company with an exercise price of 37.5p per share were granted under the rules of the G roup’s Company Share Option Plan. The options granted may not be exercised earlier than the third anniversary and no later than the tenth anniversary of the date of grant. The fair value of these options at the date of grant was estimated using the Black Scholes model to be £ 9,000 and, as this is not material, no expense is being booked for these share options. . P en si on S h em es The G roup makes pension contributions to the personal pension schemes of certain employees which are money purchase schemes and for which it has no responsibility for unfunded liabilities. Amounts paid are declared in Note 6 and in the Director’ Remuneration Report on pages 58 to 64. . R ec on a ti on of c on sol a ted n et c a sh f l ow to m ov em en t i n et d eb t a sh a t b 2015/ 2016 Cash at bank Bank loan . O p er a ti l ea ses At start of year £ 000 Cash low £ 000 t en of y ea 115 (1,500) (1,385) 473 1,500 1,973 588 - 588 The G roup has an operating lease commitment in respect of an office property entered into in J anuary 2014 which terminates in J anuary 2019. The Company has guaranteed the obligations under this lease. As at 30th J une 2017, the G roup had the following annual commitments under the operating lease: Office premises i th i th on e y ea tw o to f v e y ea r s 55902_LondonFinance_RepAcc_2017_TXT-2.indd 39 2016 £ 000 52 81 133 38 26/09/2017 15:22 S h a 1 7 c 1 8 c i l i i d n A d F r £ 0 0 0 2 0 1 6 / 2 0 1 7 C a n k 5 8 8 ( 3 6 6 ) 2 2 2 1 9 n g 2 0 1 7 £ 0 0 0 W i n r 5 2 W i n i 2 9 8 1 London Finance & Investment Group P.L.C. . F l I n str m en ts Set out below is an explanation of the role that financial instruments have had during the year in creating or changing the risks the G roup 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 Directors monitor 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 G Directors’ Report are: roup to achieve its objectives as set out in the l a ssets At fair value through income Non-current investments (strategic investments) Current asset investments (general portfolio) l es r ec ei n s a L oa Trade and other receivables Cash at bank l l i ti es Trade and other payables 2016 £ 000 12,417 7,125 272 588 316 r of a te P n ter est R The G pounds sterling. Drawings under the facility are at a rate fluctuating with base rate. roup finances its operations through a mixture of retained profits and bank borrowings, in l e The effective rate of interest on borrowings for the year was 3.0% was nil. The sensitivity of the G the current year (2016 – negligible). roup to a 1% ) and on deposits (2016 – 3.5% change in interest rates would have been £ 9,400 in 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. r en y E p osu r es The table below shows the Group’s currency exposures. Such exposures comprise the monetary assets, at fair values, that are not traded in Sterling. r en E uro Swiss F ranc US Dollar Swedish kroner 2016 £ 000 2,248 1,331 1,426 345 5,350 The sensitivity to a 1% fair values as set out by £ 83,700 in aggregate (2016 - £ 53,500). change in the sterling exchange rate would be to increase or decrease the 39 55902_LondonFinance_RepAcc_2017_TXT-2.indd 40 26/09/2017 15:22 i ty R i sk The Group’s policy is that its borrowings should be flexible and available over the medium term. The G roup has a loan facility of £ 1,900,000 which expires on 30th September 2022, which was unused at the reporting date. The G roup 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 Western and F insbury. The G roup maintains a G eneral Portfolio of investment holdings within normal market siz e and which have aggregate market values in excess of the borrowings at any point in time. The policy is such investments must have an aggregate fair value of at least 167% of borrowings at any point in time. k et R i sk The G roup is exposed to market risk through the equity investments in other companies. The roup maintains a spread of investments over various sectors and monitors performance continuously as described above. The majority of the G eneral 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 G roup’s circumstances. The sensitivity to each 1% decrease in the value of investments would result in the fair values of non-current asset investments decreasing by £ 107,000 (2016 - £ 124,000) 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 £ 107,700 (2016 - £ 71,000) and unrealised profits reserve (or earnings where a decline was below cost) by an equal amount. The Directors consider 1% to be a basis for the sensitivity analysis due to the diversified spread of investments over a range of liquid markets. Sensitivity changes on a straight line basis for each 1% increase or decrease in value investments. 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 Market value has been used for the valuation of Western despite the low liquidity of this investment because shares have traded at a relatively stable price with low volatility, and there is no better indicator available for fair value. 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. r V u e statement. r ed i t r i sk No concentration of credit risk exists in the Group’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. 2 0 i n a n c i a u 2 0 1 7 £ 0 0 0 F i n a n c i a 1 0 , 6 7 3 1 0 , 7 6 6 n d v a b 2 2 0 2 2 2 F i n a n c i a i a b i l 4 8 6 I i C u r c x 2 0 1 7 £ 0 0 0 C u r c y 3 , 2 1 5 1 , 7 3 5 2 , 9 1 5 5 0 3 8 , 3 6 8 L i q u i d M a r G F a i a l C i ty R i sk roup has a loan facility of £ 1,900,000 which expires on 30th September 2022, which was The Group’s policy is that its borrowings should be flexible and available over the medium term. The G unused at the reporting date. The G 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 Western and F roup holds investments, most of which are listed on insbury. The G roup maintains a G eneral Portfolio of investment holdings within normal market siz e and which have aggregate market values in excess of the borrowings at any point in time. The policy is such investments must have an aggregate fair value of at least 167% of borrowings at any point in time. k et R i sk The G roup is exposed to market risk through the equity investments in other companies. The roup maintains a spread of investments over various sectors and monitors performance continuously as described above. The majority of the G eneral 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 roup’s believe that the exposure to market price risk from these activities is acceptable in the G circumstances. The sensitivity to each 1% decrease in the value of investments would result in the fair values of non-current asset investments decreasing by £ 107,000 (2016 - £ 124,000) and a corresponding increase, would, on the same basis, increase fair decrease in the unrealised profits reserve. A 1% values and increase the unrealised profits reserve. The same percentage increase/ decrease in the current asset investments would increase/ decrease carrying values by £ 107,700 (2016 - £ 71,000) and unrealised profits reserve (or earnings where a decline was below cost) by an equal amount. The Directors consider 1% investments over a range of liquid markets. Sensitivity changes on a straight line basis for each 1% increase or decrease in value investments. to be a basis for the sensitivity analysis due to the diversified spread of r V u e 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. Market value has been used for the valuation of Western despite the low liquidity of this investment because shares have traded at a relatively stable price with low volatility, and there is no better indicator available for fair value. 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. r ed i t r i sk No concentration of credit risk exists in the Group’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. 55902_LondonFinance_RepAcc_2017_TXT-2.indd 41 40 26/09/2017 15:22 L i q u i d M a r G F a i a l C London Finance & Investment Group P.L.C. . R el a ted U d er ta g s 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 J une 2017, is disclosed below: Company Lonfin Investments Limited City G roup PLC Western Selection P.L.C. Country United Kingdom United Kingdom United Kingdom ownership 100% 51.4% 43.8% 41 55902_LondonFinance_RepAcc_2017_TXT-2.indd 42 26/09/2017 15:22 2 1 n k i n % Directors’ Report The Directors present their Report for the year ended 30th J une 2017. Much of the information previously provided as part of the Directors’ Report is now required, under company law, to be presented as part of the Strategic Report which is set out on pages 4 to 11. This Directors’ Report includes the information required to be included under the Companies Act or, where provided elsewhere, an appropriate cross-reference is given. The Corporate G overnance Statement, approved by the Board, is provided on pages 48 to 53 and is incorporated by reference herein. R esu l ts, F u tu r e D ev el op m en ts, D d en d s, & F l I n str m en ts 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, significant events after the financial year end, 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. v estm en t P ol y The G roup’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. and 70% The intention is for between 30% of the overall investment portfolio with a maximum limit of 80% to be in “strategic” and “other” investments immediately following such investment, with the of the balance of the portfolio, to be in the “general portfolio”. “Other investments” will be limited to 50% 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 G roup’s gearing is limited at or below 70% of the total value of investments. G oi C on c er The Directors have reasonable expectation that the G operate for the foreseeable future. F or this reason they adopt the going concern basis for preparing the financial statements. roup has adequate resources to continue to 55902_LondonFinance_RepAcc_2017_TXT-2.indd 43 42 26/09/2017 15:22 i v i i n a n c i a u I n i c n g n London Finance & Investment Group P.L.C. i sk M g em en t a P l R i sk s A description of the principal risks which arise from the G Strategic Report on pages 9 and 10.and in the Notes to the Accounts (F 39 and 40. roup’s financial instruments is set out in the inancial Instruments) on pages i ty S ta tem en t In accordance with the provisions of the UK Corporate G overnance Code, the Board has assessed the roup is a long-term investor and the Board believes it is appropriate to as- viability of the G sess the G roup’s viability over a five year period which reflects the Board’s long term investment ap- proach. The Board believes this five year period reflects a proper balance between the long term hori- z on and the inherent uncertainties of looking to the future. roup. The G In assessing the viability of the G factors: roup, the Board has carried out a robust assessment of the following   the principal risks and uncertainties facing the G pages 9 and 10; roup as set out in the Strategic Report on the potential operational and financial impacts of these risks and uncertainties in severe but plausible scenarios together with the effectiveness of any mitigating actions;  Group’s current position and strategy;   the liquidity of the G roup’s Investment Portfolio and the Board’s risk appetite; The Board has also considered such matters as significant economic or stock market volatility, a sub- stantial reduction in the liquidity of the portfolio or changes in investor sentiment, all of which could have an impact on the G roup’s prospects and viability in the future. Taking into account all of these factors, the Group’s current position and the potential impact of the principal risks and uncertainties faced by the G roup, the Board has concluded that it has a reasonable expectation that the G roup will be able to continue in operation and meet its liabilities as they fall due over the five year period to 30th J une 2022. 43 55902_LondonFinance_RepAcc_2017_TXT-2.indd 44 26/09/2017 15:22 R a n a n d r i n c i p a V i a b i l r ec tor s’ and Directors’ Interests A list of the Directors of the Company is shown on page 1. The interests of the Directors (and their connected persons) in the Company’s ordinary shares are as follows: D.C. Marshall * .W.A. Lucas † J .M. Robotham * J .H. Maxwell L.H. Marshallº .J . Beale No. of O th n e 2 r es 12,890,693 r es S r es 162,500 12,890,693 65,000 - - No. of O th n e 2 y S r es 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 J une 2017, Mr J .M. Robotham had a beneficial interest in 30,000 ordinary shares (2016 – 30,000) of these ordinary shares, and Mr D.C. Marshall had no beneficial interest in these shares (2016 – nil). † Of this figure Dr.F .W.A. Lucas owns 80,000 ordinary shares personally and 82,500 ordinary .W.A. Lucas is a director and Company Ltd, of which Dr.F shares are owned by Loeb Aron & shareholder. º Mr L.H. Marshall died on 20th November 2016 inance & On 29th F ebruary 2016, Mr E .J . Beale, being an eligible employee under the rules of the London roup Company 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. Investment G There have been no changes in directors' share interests between 1st J uly 2017 and the date of this report. Subject to the Company’s Articles of Association, the appointment or removal of directors is determined by Shareholders at a G eneral Meeting. Between G eneral 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, as amended, now require all the directors to offer themselves for re-election on .W.A. Lucas, Mr J .H. Maxwell and Mr an annual basis. Accordingly, this year, Mr D.C. Marshall, Dr F .J . Beale will retire and, being eligible, offer themselves for re-election at the AG M as directors. Mr J .M. Robotham will be retiring from the Board at the AG M. b sta n ti l I n ter ests In addition to the directors’ shareholdings shown above, as at 30th J une 2017, the Company had been notified under Disclosure and Transparency Rule 5 of the following significant holdings of voting rights in its shares. d en ti ty of p er son or g r ou No. of O Lynchwood Nominees Limited W.T. Lamb Investments Limited Winterflood Client Nominees Limited F orest Nominees Limited r es 13,605,520 4,600,000 1,432,100 1,234,000 P er c en ta S r e c g e of i ssu ed i ta 43.6% 14.7% 4.6% 4.0% No changes to the significant holdings set out above have been notified to the Company between 1st J uly 2017 and the date of this report. 55902_LondonFinance_RepAcc_2017_TXT-2.indd 45 44 26/09/2017 15:22 D i 3 0 J u 0 1 7 3 0 J u 0 1 6 r d i n a r y S h a S h a h a r d i n a r h a F E * F E S u a I p r d i n a r y S h a O r d i n a r y h a a p l London Finance & Investment Group P.L.C. d ep en d en t A i tor The respective responsibilities of the Directors and the Independent Auditor, PKF connection with the financial statements appear on pages 14 to 19. Littlejohn LLP, in E ach 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 Independent Auditor for the purposes of their audit and to establish that the Independent Auditor is aware of that information. The Directors are not aware of any relevant audit information of which the Independent Auditor are is unaware. PKF Littlejohn LLP were appointed at last year’s Annual General Meeting as the Company’s new Independent Auditor. At the Company’s forthcoming Annual General Meeting a resolution will be proposed that PKF LLP be re-appointed as the Company’s Independent Auditor following the Annual General Meeting. Littlejohn C or p or a te G ov er c e Information on the Company’s corporate governance can be found in the Corporate Governance Statement on pages 48 to 53. The Company’s Articles of Association may only be amended by special resolution and are available on the Company’s website at www.city-group.com/ london-finance-investment-group.plc l G en er l M eeti ( ) The Notice of the AG M, to be held on 5th December 2017, can be found on pages 68 to 73 of these accounts and sets out the business to be considered at the meeting. Resolutions 1 to 9 will be proposed as Ordinary Resolutions and Resolution 10 will be proposed as a Special Resolution. Certain elements of the business relating to these Resolutions are explained below: u ti on R esol Directors’ Remuneration Report 3 The annual report on Directors’ Remuneration, as set out on pages 58 to 64 provides information on the Directors’ remuneration. The resolution proposes the approval of the Directors’ Remuneration Report, other than the part containing the Directors’ Remuneration Policy, which was approved at last year’s AG M. u ti on s 4 R esol R e- el ec ti on , 5 of D , 6 a 7 r ec tor s All the Directors are subject to annual re-election. Accordingly, with the exception of Michael Robotham who will be retiring from the Board at the AG M, each of the Directors will retire at the Annual G eneral 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. F urther information relating to their experience and background can be found on page 1. R esol R e- u ti on p oi 8 n tm en t of th e I d ep en d en t A i tor It is proposed that PKF continue in office following the AG M. Littlejohn LLP be re-appointed as the Company’s Independent Auditor to 45 55902_LondonFinance_RepAcc_2017_TXT-2.indd 46 26/09/2017 15:22 I n u d n a n A n n u a a n g A G M n d i a p n u d R esol 9 u ti on l otm en t of sh r e c i ta l Resolution 9 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 2018. 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. R esol i sa u ti on 0 1 a ti on of p r e- em p ti on r h ts Resolution 10 will empower the directors to allot ordinary shares for cash, pursuant to the authority granted by Resolution 9, 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 20th September 2017 (being the latest practicable date prior to publication of this report) in the period up to the conclusion of the Company’s Annual G eneral Meeting in 2018. 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. R ec om m en a ti on The Board believes that the approval of Resolutions 1 to 10 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 10 as the directors intend to do in respect of their own beneficial holdings which as at 20th September 2017 (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. R el a ti on sh A r eem en t 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 J une 2017 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. a ter l A r eem en ts There are no agreements which the Company is party to that might affect its control following a takeover bid; and there are no agreements between the Company and its directors concerning compensation for loss of office. Other than the Relationship Agreement referred to above, the Board is not aware of any contractual agreements which ought to be disclosed in the Directors’ Report. Directors’ Service Contracts and Letters of Appointment None of the Directors has a service contract with the Company. E ach of the Directors has received a Letter of Appointment from the Company in respect of his services under the terms of the Company’s Articles of Association. 55902_LondonFinance_RepAcc_2017_TXT-2.indd 47 46 26/09/2017 15:22 A l a a p D p p l i c i g d i p g M i a g London Finance & Investment Group P.L.C. 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. P ol i ti l a C i ta l e D on a ti on s No political or charitable donations have been made during this financial year. r on m en ta , S oc l a H R h ts I ssu es 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. r een h ou se G a s E i ssi on s roup is required to report on its greenhouse gas emissions. The G roup had no Scope 1 emissions. The G This report is made in respect of Scope 2 emissions. During the year ended 30th J une 2017, the G roup purchased electricity equating to a carbon dioxide equivalent of 10 tonnes (1 tCO2e/ employee) (2016 – 10 tonnes). 26th September 2017 By Order of the Board G i ty r ou Company Secretary P 47 55902_LondonFinance_RepAcc_2017_TXT-2.indd 48 26/09/2017 15:22 c a n d h a r b E n v i l i a n d u m a n i g G m C p L C C or p or a te G ov er c e S ta tem en t C or p or a te G ov er c e P ol y Corporate G overnance is the process by which companies are controlled and directed to achieve the objectives of the organisation. Key to the 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”), updated by the Financial Reporting Council (FRC) in April 2016, which focuses on processes and structures, and which is deemed to constitute best practice in Corporate G overnance for most companies. Directors are required to report to shareholders on how the Company applies the principles of the Code and confirm that the Company complies with the Code’s provisions, or explain why it does not. The J SE (J ohannesburg Stock E xchange) requires that companies report on their compliance with the Code of Corporate Practices and Conduct (‘King Code’) contained in the King Report on Corporate listed companies are required to comply with the disclosure G overnance. Currently, all J SE requirements and principles of the King Code as set out the King III Report. After 1st October 2017, all J SE and a revised set of principles contained in a revised version of the King Code, King IV be evaluating the impact this change will have on the Group’s governance procedures. listed companies will need to comply with new disclosure requirements . The Board will C om c e This Corporate G overnance Statement describes how the Company applies the principles set out in the Code. The Company has been in full compliance with the Code throughout the year ended 30th J une 2017 and the Company is also satisfied that it has complied with the disclosure requirements and principles of the King III Report throughout the year ended 30th J une 2017. C om p osi ti on of th e B oa The Board comprises the Chairman, David Marshall, Senior Independent Non-E xecutive Director, J ohn Maxwell, Michael Robotham, Dr F rank Lucas and E dward Beale. All of the Directors are Non-E xecutive Directors. d ep en d en c e of th e D r ec tor s The Board has reviewed the independence of the non-executive directors and J ohn Maxwell and Dr F rank 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 Board has concluded that J ohn Maxwell and F rank Lucas both continue to demonstrate the essential characteristics of independence expected by the Board. In reaching this decision, the Board Company Limited which also took into account the fact that Dr F rank Lucas is a director of Loeb Aron & acted as ISDX corporate adviser to Western until J une 2016. E dward Beale, a non-executive director, previously Chief E xecutive Officer of the Company’s subsidiary, City Group, and now Financial Director of Marshall Monteagle PLC, was appointed to the Board on 13th April 2016 to bring his experience of roup operations, governance and reporting requirements to the Board. C on c ts of I n ter est The Articles of Association reflect the codification of certain directors’ duties arising from the Companies Act 2006 and in particular the duty for directors to avoid conflicts of interest. The Board has a process in order for Directors to report conflicts of interest or potential conflicts of interest. All Directors are required to notify the Company Secretary, City G roup, of any situations, or potential situations where they consider that they have or may have a direct or indirect interest or duty that conflicts or may possibly conflict with the interests of the Company. 55902_LondonFinance_RepAcc_2017_TXT-2.indd 49 48 26/09/2017 15:22 n a n n a n i c p l i a n r d I n i G f l i London Finance & Investment Group P.L.C. p oi n tm en t, el ec ti on a r e- el ec ti on of D r ec tor s 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 generally a Board decision. Subject to the Company’s Articles of Association, the appointment or removal of directors is ultimately determined by Shareholders at a G eneral Meeting. Between G eneral Meetings the Board may appoint additional directors who are required to stand for election at the next G eneral Meeting. The Company’s Articles of Association, as amended, require that all new directors seek election to the Board at the next Annual G eneral meeting after their appointment. In addition, at every Annual G eneral all members of the Board are subject to annual re-election and there is, therefore, no requirement at the forthcoming AG M or in the future for any directors to retire by rotation. Resolutions approving the re-election of each of the Directors will be proposed to Shareholders at the forthcoming AG M. The Board has reviewed the skills and experience of each and supports their re- election. 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. G iven the small siz e of the Board, this results in infrequent changes to the composition of the Board. W or g s of th e B oa The Board is collectively responsible to Shareholders for the success of the G roup. E ntrepreneurial 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. 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. 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 G eneral Portfolio between Board meetings. 49 55902_LondonFinance_RepAcc_2017_TXT-2.indd 50 26/09/2017 15:22 A p n d i k i n r d B oa O p er a ti on As an investment company, the Company’s Board is comprised of Non-E xecutive directors. It has no Chief E xecutive or any other executive directors. The Non-E xecutive Chairman leads the Board and ensures that it deals with all aspects of its role. He 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. 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. 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. A representative of City G roup, the Company Secretary, attends all Board meetings to record proceedings and is available at all times 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 and the provision of management, regulatory and financial information. Management reports including cash movements, portfolio movements and valuations are regularly circulated to all Directors for review. The Board met on seven occasions during the year; there were also four Audit Committee meetings and one Remuneration Committee meeting during the year. All such meetings were quorate and followed a formal agenda. Attendance at the Board meetings and the Audit and Remuneration Committee meetings during the year is shown in the following table: B oa B oa y P h on e i t i ttee C om R em C om n er a ti on i ttee No. of meetings in year D.C. Marshall .W.A. Lucas L.H. Marshallº J .H. Maxwell J .M. Robotham .J . Beale 6 4 2 6 5 7 º Mr L.H. Marshall died on 20th November 2016 The Board’s Committees The Board now has four committees: 3 1 4 4 1 1 v estm en t C om The I i ttee is chaired by David Marshall and its other members are Michael Robotham and E dward Beale. The Nom i ttee is chaired by J ohn Maxwell and its other i ttee is chaired by Dr F rank members are Dr F rank Lucas and Michael Robotham. The A Lucas and its other member is J ohn Maxwell. Both members of the Audit Committee have recent and relevant financial experience. A R em i ttee has now been established and this is C om chaired by J ohn Maxwell and its other member is Dr F rank Lucas. i t C om a ti on a ti on C om n er Committee meetings are held independently of Board meetings and invitations to attend are extended by the committee chairmen to other directors and the Group’s advisers as appropriate. 55902_LondonFinance_RepAcc_2017_TXT-2.indd 51 50 26/09/2017 15:22 r d r d r d b A u d m u m F E n m i n m u d m u m London Finance & Investment Group P.L.C. v estm en t C om i ttee The Investment Committee takes responsibility, between Board Meetings, for the investment decisions relating to the Company’s General Portfolio which consists of a broad range of investments in major USA, UK and other E uropean companies which provides a diversified exposure to international equity markets. All investment decisions are then implemented on the Company’s behalf by City Group which also carries out required valuation and accounting work. i t C om i ttee The Audit Committee has a number of specific responsibilities including reviewing the Company’s financial statements and supporting documentation and all audit related matters. A separate report from the Audit Committee is set out on pages 54 to 57. Nom a ti on C om i ttee The Nomination Committee, which meets 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 G roup 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. R em n er a ti on C om i ttee The Remuneration Committee reviews, determines and recommends 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 Code. 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 G eneral Meeting. The current rates of remuneration are set out in detail in the Directors’ Remuneration Report on pages 58 to 64. The remuneration of the executive directors and employees of the roup, which includes David Company’s subsidiary, City Group, is determined by the Board of City G Marshall, Michael Robotham and E dward Beale. No director is involved in the determination of his own pay. New Directors’ Induction New directors receive an induction programme which includes legal and regulatory responsibilities, information on the Group’s operations and investment company industry matters. 51 55902_LondonFinance_RepAcc_2017_TXT-2.indd 52 26/09/2017 15:22 I n m A u d m i n m u m P er f or c e E a ti on 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. All Directors are encouraged to maintain personal continuing professional education programmes and all Directors are entitled to receive relevant and appropriate training if required. The Board is satisfied, having concluded its most recent evaluations, that each Director’s performance continues to be effective and that each Director remains fully committed to the Company. F urthermore, the Board is satisfied that its committees, as currently constituted, continue to be effective. B oa S c essi on a D v er si ty In evaluating the performance of the Board and its members, the Board reviews its structure and whether it has the right mix of relevant skills, diversity and experience for the effective conduct of the Company’s business. The Group has set a target of 25% female members for the Company’s Board and female candidates will be considered on their merits when vacancies arise. n ter l C on tr ol a R i sk M g em en t 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 G roup. The framework for internal financial control established in that company has been reviewed by the Board and is regarded as effective. The Board, through the 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 G roup which provides day to day administration and accounting services to the G roup. The reporting and review procedures provide assurance to the Board as to the adequacy and effectiveness of internal controls. The Board recognises 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. An annual self-assessment of risk is performed which identifies the areas in which the G roup 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. i tor s The Board has maintained an appropriate relationship with the Company’s previous Independent Auditor, SRG LLP, through the Audit Committee. The Board is now developing a good working relationship with its new Independent Auditor, PKF Littlejohn LLP, which was appointed at last year’s Annual G eneral Meeting. 55902_LondonFinance_RepAcc_2017_TXT-2.indd 53 5252 26/09/2017 15:22 m a n v a l u r d u c n d i I n a n d a n a A u d London Finance & Investment Group P.L.C. r eh ol d er C om a ti on s The Board strives to present a fair, 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 G eneral Meeting provides a forum for discussion by Shareholders with the Board. Shareholders are encouraged to attend the AG M 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. 53 55902_LondonFinance_RepAcc_2017_TXT-2.indd 54 26/09/2017 15:22 S h a m u n i c i t C om i ttee R ep or t i t C om i ttee The members of the Audit Committee (the “Committee”) are Dr Frank Lucas (Chairman) and John Maxwell. Both members are considered to be independent and neither member has any conflicts of interest. Both Dr F rank Lucas and J ohn Maxwell have recent and relevant financial experience. The Committee meets at least twice a year to consider the Company’s financial reporting and reports from the Company’s Independent Auditor. The terms of reference for the Committee, which are available on request and on the Company Secretary’s website, are reviewed and assessed on an annual basis. R esp on si i ti es The main responsibilities of the Committee are:           to review the half yearly and annual financial statements of the G applied therein and compliance with financial and regulatory reporting requirements. roup, the accounting policies to assess whether the annual report and accounts, taken as a whole, is fair, balanced and understandable and provide the information necessary for Shareholders to assess the G roup’s position and performance, business model and strategy. to meet with the Independent Auditor to review their proposed audit programme of work and the findings of the Independent Auditor. The Committee also uses this as an opportunity to assess the effectiveness of the audit process. if appropriate, to develop and implement policy on the engagement of the Independent Auditor to supply non-audit services. to make recommendations to the Board in relation to the appointment or re-appointment of the Independent Auditor and to approve their remuneration and the terms of their engagement. to monitor and review annually effectiveness, resources and qualification. the Independent Auditor’s independence, objectivity, to review and monitor the internal control systems and risk management systems (including non- financial risks) on which the G roup is reliant. to consider annually whether there is a need for the G function. roup to have its own internal audit to review the arrangements in place whereby management, office and G services are provided to the G possible improprieties in matters of financial reporting or other matters (‘whistleblowing’) and roup secretarial roup and whereby staff may, in confidence, raise concerns about to report to the Board from time to time on any significant financial reporting issues and the views and judgements the Committee might have or make in connection with such issues and in connection with the preparation of the G roup’s financial statements. 55902_LondonFinance_RepAcc_2017_TXT-2.indd 55 54 26/09/2017 15:22 A u d m A u d m b i l London Finance & Investment Group P.L.C. i t C om i ttee A c ti i ti es The Audit Committee has met on four occasions in the year ended 30th J une 2017, in September and October 2016 and in F ebruary and May this year. In the course of such meetings the Committee has also met with the rest of the Board and with the Company’s Independent Auditor, PKF Littlejohn LLP. The Committee has undertaken the following activities in the year ended 30th J une 2017 in discharge of its responsibilities: l S ta tem en ts In accordance with the provisions of the Code, financial statements issued by the Company need to comply with the requirement for such statements to be ‘fair, balanced and understandable’. With this in Accounts as a whole mind, the Committee reviewed and considered the draft 2017 Annual Report & roup, the Company and subsequently made suitable recommendations to the Board and City G Accounts to be Secretary and as a result the Committee considers the revised 2017 Annual Report & ‘fair, balanced and understandable’. The G roup’s 2017 interim report was also reviewed and considered by the Committee prior to publication and in the preparation of the interim report the Committee reviewed and considered the impact of early adoption of IF RS 9. As a result, and with the assistance of the G roup’s new Independent Auditor, PKF roup’s financials for the interim period were revised and previous years’ financials were restated in the light of this change in accounting policy. Littlejohn LLP, the G a ti on s roup’s financial statements. The Committee has reviewed the G roup’s investment business and are also a Listed investments are a significant component of the G significant feature in the G roup’s valuation policy for its investments. All such investments are listed in active stock markets and the roup’s General Portfolio Investments are substantially liquid. The Committee considers that the G roup’s investments are valued using independent pricing sources, in accordance with the stated accounting policies and these have been reviewed by the Committee. The Committee also considered the valuation basis for strategic investments, some of which are quoted on junior UK stock markets to be appropriate, notwithstanding their illiquidity. G oi c on c er a v i ty sta tem en ts roup’s 2017 financial statements The Committee assessed whether it was appropriate to prepare the G Accounts and for the 2017 Interim Report on a going concern basis and for the 2017 Annual Report & following such assessments, made recommendations to the Board whose conclusions were included in the Interim Report and set out in the Directors’ Report on pages 42 to 47. The G roup’s assets consist substantially of equity shares in companies listed on recognised stock exchanges and in most circumstances are realisable within a short time-scale. The Committee and the Board believe it is appropriate to continue to adopt the going concern basis in the preparation of the financial statements and they consider that the G roup has a very low level of costs and has adequate resources to continue in operational existence for the foreseeable future. The Committee also assessed the viability of the G roup’s Strategic and G eneral Portfolio investments, its gearing and considering the impact of volatility in stock markets, currencies and commodities, the Committee was satisfied that the viability statement, which relates to a period of five years ending 30th J une 2022 could be made in the 2017 Report & Accounts for the reasons set out in the Directors’ Report on pages 42 to 47. roup. After reviewing the G n t R i sk s a I ssu es The significant accounting issue considered by the Committee during the year in relation to the G financial statements was the valuation of investments. roup' s A further significant risk is to ensure the investment portfolio accounted for in the financial statements reflects ownership of the relevant securities. 55 55902_LondonFinance_RepAcc_2017_TXT-2.indd 56 26/09/2017 15:22 A u d m v F i n a n c i a V a l u G n g n n d i a b i l S i g n i f i c a n d The incomplete or inaccurate recognition of income in the financial statements are also risks. Internal control systems, including reconciliations are in place to ensure income is fully accounted for. n ter l c on tr ol roup’s system of internal control and for reviewing its The Board as whole is responsible for the G effectiveness. The system is designed to manage rather than eliminate the risk of failure to achieve the roup’s business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. The Committee has also, in the course of the financial year ended 30th J une 2017, reviewed the roup’s internal control processes and is satisfied that no significant areas of weakness have been roup’s identified and that the existing processes and controls are appropriate having regard to the G investment business. roup, to ensure that internal In particular, the Committee reviews reports from its subsidiary, City G controls over the G roup’s audit includes independent confirmation of the existence of all investments and the valuation of investments to external price sources. roup’s investments are adequate. The G i t p r oc ess a th e A i tor s The Company’s previous auditors, SRG LLP, gave notice to the Company in September 2016, pursuant to S 519 Companies Act 2006, that it would not be seeking re-appointment as auditors at the 2016 AG M in the light of recent changes to the regulations pertaining to the provision of non-audit services to listed companies. There were no other circumstances in connection with SRG LLP ceasing to hold of- fice that were required to be brought to the attention of the members or any creditors of the G roup. Accordingly, following a process of selection of mid-tier accountancy firms with relevant experience of auditing small/ mid-cap listed and quoted investment companies and trusts and after a comprehensive review process, the Board, with the recommendation of the Audit Committee, appointed PKF Littlejohn LLP as its new auditors subject to shareholders’ approval at the 2016 AGM. The resolution proposing the appointment of PKF roup’s new auditors was put to the AGM and unanimously passed. Littlejohn LLP as the G The Committee meets each year with the Independent Auditor. The Company’s new Independent Auditor, PKF Littlejohn LLP, prepared for this year’s audit by providing a detailed planning report in advance of the annual audit work and, at the end of their work, will provide a detailed report on the audit process. The Committee discussed with PKF of the audit work and, following completion of their audit work, the Committee discussed with PKF Littlejohn their audit report and findings. In the course of these discussions the Committee has been able to review the level and scope of materiality adopted by PKF Littlejohn LLP its detailed planning report prior to commencement Littlejohn LLP in the audit process. i t ef f ec ti v en ess The Committee will review annually the audit process conducted by PKF consider its effectiveness. In the course of its review, the Committee will consider the quality of the PKF Littlejohn LLP staff, the appropriateness of the audit methodology as applied to the Company’s business activities and the level of challenge from PKF Littlejohn LLP and the quality of reporting to the Board and the Committee. As part of its evaluation, the Committee will obtain assurance on the quality of the audit work from the PKF Littlejohn LLP and will Littlejohn LLP. Non i t w or k In order to safeguard the Independent Auditor’s independence and objectivity, City Group, the Company Secretary, maintains a schedule of specific non-audit work activities which are carried out independently of the Independent Auditor. PKF Littlejohn LLP have not carried out any non-audit work activities on behalf of the Company in the year ended 30th J une 2017 or since the year-end. 55902_LondonFinance_RepAcc_2017_TXT-2.indd 57 56 26/09/2017 15:22 I n a G G A u d n d u d A u d - a u d London Finance & Investment Group P.L.C. R e- p oi n tm en t of P L i ttl ej oh L a s I d ep en d en t A i tor PKF Littlejohn LLP was appointed as the Company’s Independent Auditor at last year’s Annual General Littlejohn LLP have provided an effective audit and Meeting. The Committee has concluded that PKF the Committee has recommended to the Board the re-appointment of PKF roup’s Independent Auditor. Littlejohn LLP as the G R el a ti on s w i th S r eh ol d er s The Board places great importance on communication with shareholders and up to date information can be obtained on the G Accounts is sent to shareholders and the Annual Report & Accounts and the Company’s Interim Report can be down-loaded from City Group’s website www.city-group.com/ london-finance-investment-group roup, the Company Secretary. The G roup’s Annual Report & roup through City G All Directors intend to be available at the forthcoming Annual G eneral Meeting and to meet with shareholders attending. In particular, the Committee will be available to discuss with shareholders any issues relating to the G roup’s financial statements. r F L a s Chairman of the Audit Committee 26th September 2017 57 55902_LondonFinance_RepAcc_2017_TXT-2.indd 58 26/09/2017 15:22 a p K F n L P n u d h a D r a n k u c Directors’ Remuneration Report R em n er a ti on C om i ttee In August 2016, the Board established the Remuneration Committee (the “Committee”). The members of the Committee” are John Maxwell (Chairman) and Dr Frank Lucas. Both members are considered to be independent and neither member has any conflicts of interest. Both J ohn Maxwell and Dr F rank Lucas have recent and relevant financial experience. The Committee meets at least once a year to consider the remuneration arrangements for the Directors roup’s strategic aims and to enable it and ensure that the arrangements are appropriate to support the G to continue to grow successfully. The Committee reviews, considers and makes recommendations on changes to the directors’ remuneration policy in the future. The terms of reference for the Committee, which are available on request and on the Company Secretary’s website, are reviewed and assessed on an annual basis. The Form of the Directors’ Remuneration Report the Directors' The Directors’ Remuneration Report has been prepared Remuneration Report Regulations and also meets the relevant requirements of the UK Listing Authority Listing Rules. in accordance with The Directors’ Remuneration Report comprises three sections:  a remuneration policy, which sets out the framework for future remuneration payments to Directors;   an annual report on Directors’ remuneration, which sets out all payments made to Directors during the year; and an annual statement by the Chairman of the Remuneration Committee, J ohn Maxwell. r ec tor s R em n er a ti on P ol y The current remuneration policy for Directors was approved by shareholders at the Annual G eneral Meeting of the Company held in November 2016. No changes are envisaged for the Directors’ Remuneration Policy in the current year and a new policy need not be presented to shareholders until the Annual G eneral Meeting in 2019 unless the Committee considers it appropriate to propose revisions to the policy before that date. The key objectives of the Committee in reviewing the Company’s Remuneration Policy and making recommendations as to changes in the policy are as follows:    remuneration for the current Directors, all of whom are Non-E xecutive Directors, should be competitive, but not excessive, in order to motivate and retain its Directors and grow the G roup successfully remuneration packages for new Non-E xecutive Directors or E xecutive Directors, should the appointment of E xecutive Directors be considered appropriate, should be competitive but not excessive, in order to attract, motivate and retain such Directors and grow the G roup successfully remuneration of E xecutive Directors should be linked to the long-term performance of the roup’s business  performance related remuneration should be set so as to align the interests of the E xecutive Directors with the those of the Shareholders 55902_LondonFinance_RepAcc_2017_TXT-2.indd 59 58 26/09/2017 15:22 u m D i u i c G London Finance & Investment Group P.L.C. i es a f ees The Company’s Board is entirely comprised of Non-Executive Directors and the Company’s Remuneration Policy at present is to pay fixed fees to these directors. No salaries are payable and there is no variable element of pay for the Directors. The level of Directors’ fees are set with a view to attract, motivate and retain talented individuals. The maximum amount of a Director’s 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 G roup or additional responsibilities taken on by Directors. roup’s policy for future increases in Directors’ fees is similar to the policy for increases in salaries roup employees but in the case of Directors’ fees the reviews will be performed every 3-5 The G to City G years with the next review taking place in May 2018. As disclosed in the Directors Remuneration Report below, on top of his Director’s fees, Edward Beale roup up until 31st March has received additional remuneration for his role as Chief E xecutive of City G 2017. L on ter I c en ti v e S h em es roup’s Unapproved E mployee Benefit Scheme and a more recent scheme, the G roup’s Save for the G Company Share Option Plan, the G roup has no plans to adopt any further long-term incentive schemes in the future, although the Board will keep such schemes in mind in the light of changing legislation. roup has no other long term incentive schemes. The G The Group’s Unapproved Employee Benefit Scheme was established to incentivise full-time employees and directors of the Company’s subsidiary, City Group. There are no outstanding option awards under this scheme and it terminated on 29th September 2016. The Group’s Company Share Option Plan was also established to incentivise full-time employees and roup and to recognise outstanding efforts or achievements, or otherwise to attract, directors of City G motivate or retain staff. None of the Directors are entitled to option awards under the Group’s Approved Share Option Plan or Unapproved E mployee Benefit Scheme. B on u ses or oth er D i sc r eti on y P m en ts The Company does not make bonus payments or other discretionary payments to any of the Directors. ) are allocated to a staff bonus pool. E dward Beale, as Part of the profits of City G Chief E xecutive of City G roup, has received a discretionary bonus from this pool as authorised by the Chairman, David Marshall. This bonus is included in the disclosure of Edward Beale’s remuneration in the Directors’ Remuneration Report. roup (currently 50% P en si on s a oth er B en ef i ts The Directors are covered by the Company’s directors’ and officers’ liability insurance cover which is renewed annually. Other than this insurance cover, and pension contributions made to a private roup, no other pension scheme on behalf of E dward Beale by virtue of his employment with City G benefits, such as pension contributions, private medical health cover, death in service insurance, life insurance or company cars are provided for the Directors. R em n er a ti on on A p oi n tm en t to th e B oa It is anticipated that new Non-E xecutive Directors will be remunerated on a similar basis to existing Directors. No additional payments will be made to such Directors. Should it be appropriate in the future to recruit a new E xecutive Director, the remuneration package offered 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 incentive arrangements proposed to be granted on appointment will be subject to Shareholder approval. 59 55902_LondonFinance_RepAcc_2017_TXT-2.indd 60 26/09/2017 15:22 S a l a r n d g m n c a r a y n d u p r d The remuneration package offered in respect of a new E xecutive Director could include fixed and variable bonuses, pension contributions, private medical health cover, death in service insurance, travel and other allowances as well as a salary. L oss of O c e The Chairman and the Directors have no entitlement to compensation for loss of office as Directors of the Company. i ty G r ou The remuneration paid to the directors and employees of the Company' s subsidiary, City G year ended 30th J une 2017 was reviewed and considered by the board of City G David Marshall, Michael Robotham and E dward Beale. roup, in the roup, which includes P er f or c e G E urofirst 100 index over the past five years. The G The above graph shows Lonfin' s Total Shareholder Return (TSR) performance compared to the TSR of the F TSE roup’s main activity is that of an roup’s General Portfolio concentrates on investment G 100 companies, or E uropean equivalent, this index is best suited as the comparator index. The F TSE ledgling index which E urofirst 100 Index, being a member of the F TSE roup and the Board believes that because the G roup is not a part of the F TSE F 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. 55902_LondonFinance_RepAcc_2017_TXT-2.indd 61 60 26/09/2017 15:22 f f i C p m a n r a p h G London Finance & Investment Group P.L.C. Annual Report on Directors’ Remuneration The following report sets out details of remuneration paid to the Chairman and the Directors in the financial year ended 30th June 2017 and describes how the Company’s Remuneration Policy will be implemented for the year ending 30th J une 2018. Chairman’s Remuneration As the Company has no Chief E xecutive Officer the table below shows the total remuneration of the Chairman, David Marshall, for the 5 years to 30th J une 2017 (all of which have been audited) by way of raph set out above. comparison with the total return to shareholders illustrated in the Performance G The table and related information below, which have been audited, also shows the total remuneration expected to be paid to the Chairman in the year ending 30th J une 2018. The Chairman’s remuneration is by way of fixed fees only and he receives no variable element or equity incentive. M r sh u ti x ec v e C Non T ota l f ees p i ted Y ea r en th 3 n e 2013 2014 2015 2016 2017 2018 10,000 14,000 18,000 18,000 18,000 18,000 * The Chairman, Mr D.C. Marshall, ceded his Director’s 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 receives no other payment or benefits from the Company. 61 55902_LondonFinance_RepAcc_2017_TXT-2.indd 62 26/09/2017 15:22 D a v i d a a l l * , - E h a i r m a n , a i d ( a u d ) d i n g 0 J u £ Directors’ Remuneration The Company’s Board is entirely comprised of Non-Executive Directors and the Company’s Remuneration Policy at present is to pay fixed fees to these directors. No salaries are payable and there is no variable element of pay for the Directors. The table and related information set out below, which have been audited, shows the fees paid to the Directors, other than the Chairman, David Marshall, in the year ended 30th J une 2017, compared with the fees paid to the Directors in the previous year. The table also shows the fees expected to be paid to the Directors in the year ending 30th J une 2018. Non x ec u ti v e D r ec tor s .W.A. Lucas  Mr. J .H. Maxwell Dr. F Mr. L.H. Marshall º Mr. J .M. Robotham * .J . Beale  Mr E T ota l f ees p Y ea th r en n e 2 l e l f ees p T ota Y ea th r en n e 2 12,000 12,000 - 19,500 12,000 12,000 12,000 4,000 19,500 12,000 i ted Y ea th d ed r en n e 2 12,000 12,000 12,000 19,000 - Dr F.W.A. Lucas ceded his Director’s fees to his primary employer, Loeb Aron & Co Limited. º * Mr L.H. Marshall ceded his Director’s fees to his primary employer, Marshall Monteagle PLC. He died on 20th November 2016. Mr J.M. Robotham’s Director’s fees comprised £ 7,500 which related to Mr J.M. Robotham’s Director’s fees paid by the Company’s subsidiary, City G Director’s fees received from the Company. roup, and the balance, £ 12,000 which was in respect of his Mr E .J . Beale was appointed to the Board on 13th April 2016. Mr E.J. Beale’s Director’s fees for roup. With effect  the period ended 31st March 2017 were surrendered to his then primary employer, City G from 1st April 2017, Directors fees for Mr E Marshall Monteagle PLC. Mr E.J. Beale’s remuneration as Chief Executive Officer of City Group for the period from his appointment to the Board on 13th April 2016 until 30th J une 2016 and from 1st J uly 2016 to 31st March 2017, when he ceased to be paid by City G .J . Beale will be surrendered to his new primary employer, roup, was as follows: 1 st J 2 6 – 3 1 st M ( i ted th l 2 – 3 ( th n e i ted Salary and bonus Pension contributions 71,414 22,500 17,823 7.500 .J . Beale’s salary and other benefits from City Group were reviewed by the City Group board annually and Mr E updated on 1st April in every year. Directors’ remuneration for the year ended 30th J une 2017 has been maintained at the same level as the previous year by the Board and Directors’ remuneration for the year ending 30th J une 2018 is expected to be at substantially the same level as for the year ended 30th June 2017. The Group’s policy for future increases in fees to Directors is similar to the policy for increases in salary to G roup employees save that in the case of Directors’ fees the reviews will be performed every 3-5 years with the next review taking place in May 2018. 55902_LondonFinance_RepAcc_2017_TXT-2.indd 63 62 26/09/2017 15:22 a y a b a i d ( a u d ) - E i d i n g 3 0 J u 0 1 8 d i n g 3 0 J u 0 1 7 3 0 J u 0 1 6 £ £ £ u l y 0 1 a r c h 2 0 1 7 a u d ) 1 3 A p r i 0 1 6 0 J u 2 0 1 6 a u d ) £ £ London Finance & Investment Group P.L.C. Directors’ a G r ou S ta f R em n er a ti on c om r ed to S r eh ol d er s d d en d s The table below compares the total remuneration paid to the Board and the Group’s employees to the distributions paid to Shareholders by way of dividends in the last three years. The Board’s and the Group’s employees total remuneration set out below for the three years ended 30th J une 2017 has been audited. h e B oa a em l oy ees r ou of th e G h e B oa r em a em l oy ees of the Group’s total n er a ti on i ted ( d s p d en d er s ( to i ted r eh ol Y ea r en th 3 n e 2015 2016 2017 367,000 369,000 397,000 296,000 312,000 343,000 Directors’ interests in the Company The interests of the Directors (and their connected persons) at 30th J une 2017 are as set out in the table in the Directors’ Report on page 44. L on ter I c en ti v e S h em es No option awards under the G Company Share Option Plan have been made to any of the Directors or employees of the G year ended 30th J une 2017 and no option awards are envisaged for the year ended 30th J une 2018. roup’s Unapproved E mployee Benefit Scheme or under the G roup’s roup in the roup have received option awards under these schemes in the past No Directors or employees of the G save for E dward Beale who, being at the time an eligible employee under the rules of the G roup’s Company Share Option Plan, on 29th F ebruary 2016 was granted options over 80,000 ordinary shares in the Company with an exercise price of 37.5p per share The options granted may not be exercised earlier than the third anniversary and no later than the tenth anniversary of the date of grant. The G roup’s Unapproved E mployee Benefit Scheme terminated on 29th September 2016. B on u ses or oth er D i sc r eti on y P m en ts roup to any of the Directors in No bonuses or other discretionary payments have been made by the G the year ended 30th J une 2017 save that E dward Beale was paid a discretionary bonus by City G roup and this has been included in the figures for salary and bonus set out above (and which has been audited). P en si on s a oth er B en ef i ts Save for pension contributions paid on behalf of E dward Beale, no pension contributions have been paid in respect of any of the Directors in the year ended 30th J une 2017 and none are envisaged for the year ending 30th J une 2018. Contributions at a rate of £ 30,000 per annum were paid by the G roup to a private pension scheme on behalf of E dward Beale up to 31st March 2017. This information has been audited. No pension contributions will be paid by the Company in the year ending 30th J une 2018. L oss of O c e No payments or commitments in respect of payments in respect of loss of office have been paid to any Director in the year ended 30th J une 2017 and no such payments will paid in the year ending 30th J une 2018. 63 55902_LondonFinance_RepAcc_2017_TXT-2.indd 64 26/09/2017 15:22 n d p f u p a h a i v i T r d n d p p T r d n d p u a u d ) D i v i a i d S h a a u d ) d i n g 0 J u £ £ g m n c a r a y n d f f i R em n er a ti on on A p oi n tm en t to th e B oa No payments or commitments in respect of payments in respect of any Board appointments have been paid in the year ended 30th J une 2017. It is anticipated that, if new Non-E xecutive Directors are to be appointed in the year ending 30th J une 2018 or in subsequent years, they will be remunerated on a similar basis to the fees which are then paid to the existing Directors and no additional payments will be made. Should it be considered appropriate to appoint a new E xecutive Director to the Board in the year ending 30th J une 2018 or in subsequent years, the remuneration package to be offered will be in line with the policy for E xecutive Directors as set out in the Directors Remuneration Policy above. i ty G r ou The remuneration payable to the executive directors and employees of the Company' s subsidiary, City roup, which roup, for the year ended 30th J une 2018 is reviewed and considered by the board of City G includes David Marshall, Michael Robotham and E dward Beale. 55902_LondonFinance_RepAcc_2017_TXT-2.indd 65 64 26/09/2017 15:22 u p r d C p G London Finance & Investment Group P.L.C. l S ta tem en t b y J oh M w el , C of th e R em n er a ti on C om i ttee On behalf of the Board, I am pleased to present the Directors’ Remuneration Report for the year ended 30th J une 2017. I confirm that the Directors’ Remuneration Policy set out above summarises the policy which was approved by shareholders at the AG M last year. The Remuneration Policy is due for renewal in 2019 and therefore one of the key tasks of the Committee next year will be to review the Board’s remuneration arrangements to ensure that they are aligned with the Company’s strategy and are appropriate for a company of our siz e. I also confirm that the Annual Report on Directors’ Remuneration set out above summarises the entire remuneration paid to members of the Board for the year ended 30th J une 2017 and the remuneration arrangements for the Board for the year ending 30th J une 2018. A resolution to approve the Directors’ Remuneration Report, other than the part containing the Directors Remuneration Policy, will be proposed at the AG M in December this year of the G roup at which the financial statements will be approved. I and other members of the Board will be in attendance at the Annual G eneral Meeting and will be available to answer Shareholders’ questions about directors’ remuneration. This Directors’ Remuneration Report was approved by the Board and signed on its behalf by: J oh M w el l Chairman of the Remuneration Committee 26th September 2017 65 55902_LondonFinance_RepAcc_2017_TXT-2.indd 66 26/09/2017 15:22 A n n u a n a x l h a i r m a n u m n a x y of R esu l ts F or th e f v e y ea r s en d ed 3 th J n e 2 a ted S ta tem en t of F C on sol P osi ti on Issued share capital Share premium and other reserves Company’s retained realised profits Shareholders’ funds (all equity) Non-controlling interest i sp osi ti on of C i ta Non-current assets r en t a ssets Listed investments (G eneral Portfolio) Other current assets Cash and deposits Liabilities and deferred tax Net a ssets p er sh r e d en p er sh r e l 2016 £ 000 2015 £ 000 2014 £ 000 2013 £ 000 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 12,439 11,725 9,065 9,423 7,125 272 588 7,985 (1,166) 19,258 5,801 218 115 6,134 (2,162) 15,697 5,927 245 39 6,211 (1,261) 14,015 5,601 256 116 5,973 (1,057) 14,339 61.4p 1.05p 50.1p 1.0p 44.7p 0.9p 45.7p 0.8p 55902_LondonFinance_RepAcc_2017_TXT-2.indd 67 66 26/09/2017 15:22 S u m m a r i 0 u 0 1 7 2 0 1 7 £ 0 0 0 i d i n a n c i a 1 , 5 6 0 1 4 , 3 7 9 4 , 5 4 4 2 0 , 4 8 3 9 7 2 0 , 5 8 0 D a p l 1 0 , 6 8 7 C u r 1 0 , 7 6 6 2 2 0 2 2 2 1 1 , 2 0 8 1 , 3 1 5 2 0 , 5 8 0 a 6 5 . 9 p D i v i d a 1 . 1 p London Finance & Investment Group P.L.C. Noti c e of A l G en er l M eeti i s h er eb NO Investment Group P.L.C. (the “Company”) will be held at the offices of City Gr ou T 6 M a t th e A NNU th D ec em of L on 7 a t 1 b er 2 u esd E NE d on v en I NG y g on 0 a th G F M c e & P , 0 . ( l e S tr eet, L on a ti A , E d on 7 m e) f or th e f ol . S ou th l ow p y 5 p oses: To consider and, if thought fit, pass the following resolutions, of which Resolutions 1 to 9 will be proposed as Ordinary Resolutions and Resolution 10 will be proposed as a Special Resolution. 1. 2. 3. To receive the financial statements for the year ended 30th J une 2017, together with the reports of the directors and auditors thereon. To declare a final dividend for the year ended 30th J une 2017 of 0.55 pence for each ordinary share in the capital of the Company. 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 J une 2017. 4. 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. 5. To re-elect Dr F offers himself for re-election as a director. .W.A. Lucas, who is subject to annual re-election, who retires and 6. To re-elect Mr J . H. Maxwell who is subject to annual re-election, who retires and offers himself for re-election. 7. To re-elect Mr E . J . Beale as a director, who is subject to annual re-election, who retires and offers himself for re-election. 8. 9. To re-appoint PKF Littlejohn LLP as the Company’s Independent Auditor and to authorise the directors to agree their remuneration. 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 ordinary shares), provided that this authority shall expire at the conclusion of the annual general meeting of the Company to be held in 2018, 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. 67 55902_LondonFinance_RepAcc_2017_TXT-2.indd 68 26/09/2017 15:22 n n u a a n g T I C E i A L R A L E E T i n a n p L C i d d C 1 A J A a 0 1 1 . 0 . m 1 2 . 0 p . m f r i c i n g u r 10. THAT, (a) subject to the passing of Resolution 9 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 9, 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 ordinary shares 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 requirements of any recognised regulatory body in any territory (ii) underwriting all or part of such an issue and (iii) applications by shareholders for equity instruments offered to other shareholders 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 ordinary 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 9 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 (c) words and expressions defined in or for the purposes of Part 17 of the Companies Act 2006 shall bear the same meaning herein. 6 Middle Street London E C1A 7J A 26th September 2017 By Order of the Board i ty G r ou y S ec P r eta C om 55902_LondonFinance_RepAcc_2017_TXT-2.indd 69 68 26/09/2017 15:22 C p L C p a n r y London Finance & Investment Group P.L.C. Notes A form of proxy is enclosed. A proxy need not be a member of the Company. To be valid the form of proxy should be completed and returned so as to reach the Company’s Registrars, 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 Services (Pty.) Limited, P.O. Box 61051, Marshalltown 2107, for those shareholders on the South African branch of the register, not later than 11.00 a.m. (12.00 p.m. South Africa time) on 1st December 2017. Completion of a form of proxy does not preclude a member from subsequently attending and voting in person. 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”). 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. Only shareholders registered in the register of members of the Company as at 6.00 p.m. (7.00 p.m. South Africa time) on 1st December 2017 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 (excluding non-business days) 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. 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. Copies of directors’ letters of appointment are available for inspection at the registered office of the Company, 6 Middle Street, London, E C1A 7J A during usual business hours on any weekday (Saturdays, 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. As at 20th September 2017 (being the last business day prior to the publication of this Notice) the Company’s issued share capital consists of 31,207,479 ordinary shares, carrying one vote each. The total voting rights in the Company as at 20th September 2017 are 31,207,479. 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 AG M; or (b) any circumstances connected with an Auditor of the Company ceasing to hold office since the last AG M, 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 1 2. 3 4. 5. 6. .7 8. 9. 10. 69 55902_LondonFinance_RepAcc_2017_TXT-2.indd 70 26/09/2017 15:22 12. 13. time it makes its statement available on the website. The business which may be dealt with at the AG M includes any statement that the Company has been required to publish on its website pursuant to this right. 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. 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: F or sh r eh ol d er s r eg i ster ed on th e S ou th A b of th e r eg i ster 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 G eneral 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, 15 Biermann Avenue Rosebank, 2196 (PO Box 61051, Marshalltown, 2107) by no later than 11.00 a.m. (12.00 p.m. South Africa time) on 1st December 2017. 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 G eneral Meeting do not deliver proxy forms to the transfer secretaries the commencement of the voting on the resolutions at the Annual G eneral Meeting be entitled to lodge the form of proxy in respect of the Annual G eneral, in accordance with the instructions therein with the Chairman of the Annual G eneral Meeting. timeously, such shareholders will nevertheless at any time prior to D a tes: R ec or Please take note of the following important dates Record date for the purpose of determining which shareholders of the Company are entitled to receive notice of the Annual G eneral Meeting (‘the notice record date’) The last date to trade in order to be eligible to participate in and vote at the Annual G eneral Meeting Record date for the purpose of determining which shareholders of the Company are entitled to participate in and vote at the Annual G eneral Meeting (‘the voting record date’) Last day for lodging forms of proxy by 12.00 p.m. (SA time) Date of the Annual G eneral Meeting at 12.00 p.m. (SA time) F riday 15th September Tuesday 21st November F riday 24th November F riday 1st December Tuesday 5th December g e of A r ess: 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. 55902_LondonFinance_RepAcc_2017_TXT-2.indd 71 70 26/09/2017 15:22 a f r i c a n r a n c h : d C h a n d d 71 55902_LondonFinance_RepAcc_2017_TXT-2.indd 72 26/09/2017 15:22 London Finance & Investment Group P.L.C. F or of P r ox y I/We,………………………………………………………………………………………………………. …………………………………………………………………………………………………………….. (for South African Shareholders only: Telephone number:………………………………….Mobile phone number:……..…………………. Email address…………………………………………………………………………………………....). 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 G eneral Meeting of the Company to be held on 5th December 2017 at 11.00 a.m. (12.00 p.m. South Africa time) 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. RE SOLUTIONS R esol u ti on s ✃ F or n st i th h el 1. To receive the financial statements for the year ended 30th J une 2017, together with the reports of the directors and auditors thereon. 2. To declare a final dividend for the year ended 30thJ une 2017. 3. To approve the Directors’ Remuneration Report (excluding The Director’s Remuneration Policy). 4. To re-elect Mr D.C. Marshall as a director. 5. To re-elect Dr F .W.A. Lucas as a director. 6. To re-elect Mr J . H. Maxwell as a director. 7. To re-elect Mr. E . J . Beale as a director. 8. To re-appoint PKF Littlejohn LLP as Auditors of the Company and to authorise the directors to agree their remuneration. 9. To authorise the directors to allot shares under Section 551 of the Companies Act 2006. u ti on l R esol p ec 10. To disapply pre-emption rights. Dated………………………………………2017 Signature…………………………………… 55902_LondonFinance_RepAcc_2017_TXT-3.indd 73 18/10/2017 16:38 m A g a i W d O r d i n a r y S i a Notes 1. 2. 3. 4. 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). 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. 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. 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: o by hand to 15 Biermann Avenue, Rosebank, 2196; or o by mail to P.O. Box 61051, Marshalltown 2107, South Africa not later than 11.00 a.m. (12.00 p.m. South Africa time) on 1s December 2017. (See Note 14 to the Notice above). 6. 7. 8. Completion and return of this form of proxy will not prevent a member from attending and voting at the Meeting. 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). 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 55902_LondonFinance_RepAcc_2017_TXT-3.indd 74 18/10/2017 16:38 55902_LondonFinance_RepAcc_2017_CVR-4.indd 1 26/09/2017 09:22 

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