London Finance & Investment Group Plc
Annual Report 2021

Plain-text annual report

London Finance & Investment Group PLC Annual Report and Financial Statements 30th June 2021 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_CVR.indd 1-3 28/09/2021 09:33 LONDON FINANCE & INVESTMENT GROUP PLC (“Lonfin” or the “Company”) Lonfin is a United Kingdom investment finance and management company. Its core portfolio centres on quality companies in the FTSE Eurofirst 300 and S&P 500 indices. Additionally, Lonfin holds investments in United Kingdom listed companies where it has Directors in common. Lonfin is also a 43.8% shareholder in Western Selection PLC (“Western”). Western’s share capital is admitted to trading on the Aquis Growth Market. Lonfin’s shares are quoted in the official lists of the London and Johannesburg stock exchanges. The current price of the Company's shares can be found on the website of the London Stock Exchange (www.londonstockexchange.com) and in the business section of some of the major South African newspapers. _______________________________ CITY GROUP PLC (“City Group”) City Group, which is owned by Lonfin and Western, provides office accommodation, company secretarial, finance and head office services to both companies and to other clients requiring a London presence, including companies in which Lonfin and Western have an investment. 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_CVR.indd 4-6 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_CVR.indd 4-6 28/09/2021 09:33 28/09/2021 09:33 _____________________________________________ Contents Directors Corporate Contacts Summary of Net Assets Financial Calendar Strategic Report Composition of General Portfolio Statement of Directors’ Responsibilities in Respect of the Financial Statements Independent auditor’s report to the members of London Finance & Investment Group PLC Consolidated Statement of Total Comprehensive Income Consolidated Statement of Financial Position Company Statement of Financial Position Consolidated Statement of Cash Flows Company Statement of Cash Flows Consolidated Statement of Changes in Shareholders’ Equity Company Statement of Changes in Shareholders’ Equity Notes to the Financial Statements Directors’ Report Corporate Governance Statement Audit Committee Report Directors’ Remuneration Report Summary of Results NOTICE OF ANNUAL GENERAL MEETING Proxy Form Page 2 2 3 3 4 11 12 13 19 20 21 22 23 24 25 26 42 48 54 58 65 66 Enclosed 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 1 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 1 28/09/2021 15:07 28/09/2021 15:07 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC Directors D.C. MARSHALL, Chairman ♦ David Marshall joined the Board in 1971. He is the chairman of London Finance & Investment Group PLC. David is also chairman of Western and chief executive of Marshall Monteagle PLC. He is also a non-executive director of Industrial & Commercial Holdings PLC. He resides in South Africa, where he has interests in listed trading, financial and property companies. E.J. BEALE, Non-Executive ♦ Edward Beale is a Chartered Accountant and is the Financial Director of Marshall Monteagle PLC. He was a member of the Accounting Council of the Financial Reporting Council for 6 years until August 2013. He is currently a member, and previously was chairman, of the Corporate Governance Expert Group of the Quoted Companies Alliance. He is a non-executive director of Western, Brand Architekts Group plc, Heartstone Inns Limited and Industrial & Commercial Holdings PLC. He joined the Board in April 2016. J.H. MAXWELL, CA, CCMI, Senior Independent Non-Executive * John Maxwell, who is a Chartered Accountant, was appointed a Director of the Company in November 2003. He currently serves as Chief Executive Officer of Vulcan Industries Plc and as a non-executive director of The Grosvenor Waterside Residents Company Limited. John is Chairman of the Remuneration and Nomination Committees. • F.W.A. LUCAS, BSc, PhD, Independent Non-Executive * Frank Lucas was appointed a Director in August 1999. He is a mining geologist by profession and one of the founding shareholders and a Director of Loeb Aron & Company Ltd. Frank is Chairman of the Audit Committee. • W.H. MARSHALL, Non-Executive Warwick Marshall joined the Board in January 2019. Warwick is a son of David Marshall and lives in Zug, Switzerland. He established the trading division of the Monteagle Group in 1993 initially trading in retailer branded fast moving consumer goods, and then later diversifying into metals, minerals, logistics and trade finance. He is a director of various other group operating companies and has extensive investment experience in his private capacity. * Member of the Audit Committee ♦ Member of the Investment Committee Member of the Nomination Committee • Member of the Remuneration Committee 1 1 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 2 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 2 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ Corporate Contacts United Kingdom Republic of South Africa Company Secretary Registered Office City Group PLC 1 Ely Place, London, EC1N 6RY Tel: + 44 (0) 20 7796 9060 Company Registered Number 201151 11 Sunbury Park La Lucia Ridge Office Estate La Lucia 4051 Durban Tel: +27 (0)31 566 7600 Website www.city-group.com/london-finance-investment-group-plc Registrars Sponsor Neville Registrars Limited Neville House Steelpark Road Halesowen West Midlands B62 8HD Tel: +44 (0)121 585 1131 Computershare Investor Services (Pty.) Limited 70 Marshall Street Johannesburg, 2001 (P.O. Box 61051, Marshalltown 2107) Tel: +27 11 370 5000 JSE Limited Sponsor: Sasfin Capital (a member of the Sasfin Group) 29 Scott Street, Waverley 2090 Johannesburg, South Africa Tel: +27 (11) 809 7500 Independent Auditor PKF Littlejohn LLP Statutory Auditor 15 Westferry Circus Canary Wharf London E14 4HD 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 3 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 3 28/09/2021 15:07 28/09/2021 15:07 2 2 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC 2021 £000 2,712 5,490 8,202 12,081 22 145 309 (624) (178) (806) (129) 19,022 2020 £000 2,751 3,540 6,291 9,948 31 512 269 (59) (571) (520) (103) 15,798 60.5p 50.6p 0.55p 0.60p 40.5p 0.55p 0.60p 32.5p Summary of Net Assets At 30th June Strategic Investments at fair value: Western Selection Plc Finsbury Food Group Plc General Equity Portfolio at fair value Tangible non-current assets Right of use asset Cash, bank balances and deposits Other net current liabilities Lease liabilities Deferred taxation Non-Controlling interests Net assets, including investments at fair value Net assets per share Dividends* Interim Proposed Final Mid-market price on 30th June *Information on Dividends is set out on page 7 Financial Calendar Announcement of Final Results for the year ended 30th June 2021 27 September 2021 Annual General Meeting 1 December 2021 Final Dividend for 2021 Payable on 22 December 2021 to shareholders on the register of Half year results to 31st December 2021 to be announced in February 2022 members at 10 December 2021 Interim Dividend for 2021 to be announced in February 2022 3 3 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 4 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 4 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ Strategic Report Strategy, Business Model and Investment Policy 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 Group’s investment policy is to invest in a range of ‘Strategic’, ‘General Portfolio’ and from time to time ‘Other Investments’. General 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. These are balanced by the General Portfolio, which consists of a broad range of investments in major USA, UK and other European companies which provides a diversified exposure to international equity markets. Further information on the Group’s Investment Policy can be found in the Directors’ Report on page 43. The Group’s net assets per share for 2021 have increased from the previous year to 60.5p and decreased 7.7% over the last five years. Shareholders’ dividends for 2021 remains the same at 1.15p and increased by 4.5% over the last five years. Information on the Group’s performance against the Board’s key performance indicators (KPIs) is set out on page 9 of this report. Results  Net assets have increased to 60.5p per share (2020 – 50.6p per share)  Strategic Investments have increased in value over the year, from £6,291,000 to £8,202,000  Strategic investments are yielding 0% (2020 – 2.6%)  The General Portfolio has increased, adjusting for investment purchases and sales, over the year, by 21.4% from £9,948,000 to £12,081,000 Fair value movement is £1,196,000   No significant increase in Group operating costs  A final dividend of 0.60p per share is recommended, making a total of 1.15p per share for the year (2020 – 1.15p) The Company and its subsidiaries (“Group”) recorded an operating profit for the year, before interest, tax and changes to the fair value adjustments of investments of £225,000, compared to operating profit for the previous year, before tax and changes to the fair value adjustments of investments, of £130,000. The significant increase in fair value of strategic investments that occurred during the year has led to Total Comprehensive income for the year of £3,421,000 compared to loss of £2,112,000 for the previous year. Basic and headline profits per share are 4.8p (2020- losses of 2.6p). Strategic Investments Strategic Investments have increased in value by £1,911,000 due to the market movements in the share prices. Western Selection PLC (“Western”) The Group holds 7,860,515 ordinary shares, being 43.8%, of the issued share capital of Western. On 24th September 2021, Western announced unaudited preliminary results showing a loss after tax of £109,000 for the year to 30th June 2021 (2020 loss – £180,000). Losses per share are 0.62p (2020 - losses of 1.0p). Western’s Board has not recommended payment of an interim or a final dividend for the year. 4 4 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 5 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 5 28/09/2021 15:07 28/09/2021 15:07 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC Strategic Report (continued) Western’s net assets at market value at 30th June 2021 were £10,038,000 equivalent to 56p per share, an increase of 24.44% from 45p last year. Our share of the net assets of Western, including the value of Western’s investments at market value, was £4,396,000 (2020 – £3,560,000). The fair value for Western recorded in the Statement of Financial Position is the market value of £2,712,000 (2020 - £2,751,000). This represents 14.2% (2020 – 17.3%) of the net assets of the Group. Western’s objective is to generate growth in value for shareholders over the medium to long-term. Western’s business model is to take sizeable minority stakes in relatively small companies and maintain a dialogue 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 will grow to a stage at which our support is no longer required, and our stake can then be sold over time into the relevant stock market. Companies that are targeted will have an experienced management team, a credible business model and good prospects for growth. In addition, as part of its Treasury Operations, Western holds a General Portfolio of shares which consists of investments, primarily in blue-chip companies in the U.S., U.K. and Europe. 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 IFRS 10. David Marshall is the Chairman of Western and Edward Beale is non-executive director. Western’s main Core Holdings are Northbridge Industrial Services plc and Kinovo Plc. An extract from Western’s announcement on 24th September 2021 relating to its main Core Holdings is set out below: Core Holdings 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, Germany, Belgium, France, Australia, New Zealand, China and Singapore, 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. Further 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 31 December 2020 on 13 April 2021 and recorded a loss after tax, before exceptional items, of £186,000 for the year (2019 - loss after tax £236,000). No dividend was recommended by Northbridge during the year (2020 - £Nil). Western holds 3,300,000 Northbridge shares which represents 11.69% of Northbridge’s issued share capital. The market value of this investment at 30 June 2021 was £3,828,000 (2020 - £2,739,000) which represents approximately 38.1% (2020 – 33.7%) of Western’s net assets. Brand Architekts Group Plc (“BAG”) BAG, which is admitted to trading on AIM, is a beauty brands business specialising in the delivery of a growing portfolio of innovative and exciting new products, spanning areas such as haircare, skincare and body care, to consumers and retailers. Further information about BAG is available on its website: https://www.brandarchitekts.com/ Western sold its entire shareholding of 1,300,000 shares in Brand Architekts on 28 September 2020 realising £1,425,000. 5 5 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 6 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 6 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ Kinovo Plc (“Kinovo”) (formerly Bilby Plc) Kinovo is an established, and award winning, provider of gas installation, maintenance and general building services to local authority and housing associations across London and South East England. They have a strategy of growing organically and by acquisition. Further information about Kinovo is available on their website: www.kinovoplc.com. Kinovo, which is admitted to trading on AIM, announced its results for the year ended 31 March 2021 on 6 July 2021 showing a profit before tax, before exceptional items, of £2,363,000 compared to a profit before tax, before exceptional items, of £3,691,000 for the previous year ended 31 March 2020. No interim dividends were paid during the year. A final dividend of 0.5p per share was approved at its AGM held on 1 September 2021 (2020 - £nil). Western acquired 1,163,637 shares in the period and now holds 7,500,000 Kinovo shares which represents 12.07% of Kinovo’s issued share capital. Following the additional £408,059 acquisitions during the year, the market value of this investment on 30 June 2021 has increased to £2,775,000 (2020- £1,235,590), which represents approximately 27.7% (2020 – 15.2%) of Western’s net assets. Associated Companies Finsbury Food Group plc (“Finsbury”) Finsbury is one of the largest producers and suppliers of premium cakes, bread and morning goods in the UK and currently supplies most of the UK's major supermarket chains. Further information about Finsbury, which is admitted to trading on AIM, is available on its website: www.finsburyfoods.co.uk At 30th June 2021, Lonfin held 6,000,000 Finsbury shares, representing 4.6% of Finsbury’s issued share capital. The market value of the holding was £5,490,000 as at 30th June 2021 (value - £3,540,000) and represents approximately 29% (2020 – 22%) of Lonfin’s net assets. On 20th September 2021, Finsbury announced operating profits after tax of £12,131,000 for the 52 weeks ended 27th June 2021 (2020 – £10,330,000). No dividends were received during the financial year. Finsbury has recommended to its shareholders a final dividend of 2.4p per share for 2021, the resolution for which shall be put to the shareholders at the Annual General Meeting to be held on 20th November 2021. General Portfolio The investments comprising the General Portfolio at 30th June 2021 are listed on page 11. The portfolio is diverse with material interests in Food and Beverages, Natural Resources, Chemicals and Tobacco. We believe that the portfolio of quality companies we hold has the potential to outperform the market in the medium to long term. At 30th June 2021, the number of holdings in the General Portfolio was 36 (2020 – 31). The amount invested in the General Portfolio over the year by has increased by £2,133,000 (2020 - decreased by £170,000). The opening value of our General Portfolio investments at 30th June 2020 was £9,948,000 which compared with a cost of such investments at the same date of £6,038,000. After investment purchases during the year of £1,706,000 and investment sales (including selling expenses) during the same period of £769,000, the value of the General Portfolio investments as at 30th June 2021 had increased by 21.4% to £12,081,000. Further details of our General Portfolio investments are set out on page 11. 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 7 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 7 28/09/2021 15:07 28/09/2021 15:07 6 6 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC Board Changes Whilst the Board is satisfied that it has a sufficient spread of skills, experience and support within the Board to operate the Company and to develop the Company’s investment business, the Board will continue to seek further suitable Board candidates who can add value to the Board. Operations, Directors and Employees All of our operations and those of Western, with the exception of investment selection, are outsourced to our subsidiary, City Group PLC (“City Group”). City Group also provides office accommodation, company secretarial, finance and head office services to a number of other companies. City Group is responsible 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 6 people. Dividend The Board recommends a final dividend of 0.60p (ZAR 12.1190 cents) per share, making a total of 1.15p (ZAR 23.1650 cents) per ordinary share for the year (2020 – 1.15p). Subject to shareholders’ approval at the Company’s AGM to be held on Wednesday, 1st December 2021, the dividend will be paid on Wednesday, 22nd December 2021 to those shareholders on the register at the close of business on Friday, 10th December 2021. Shareholders on the South African register will receive their dividend in South African rand converted from sterling at the closing rate of exchange on Thursday, 23rd September 2021 being GBP1= ZAR 20.1983 JSE Disclosure Requirements 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 Friday, 10th December 2021. • • • The number of shares in issue as at the dividend declaration date is 31,207,479; The dividend has been declared from income reserves. Funds are sourced from the Company’s main bank account in London and is regarded as a foreign dividend by South African shareholders; and The Company’s UK Income Tax reference number is 948/L32120. Dividend dates: Last date to trade (SA) Shares trade ex-dividend (SA) Shares trade ex-dividend (UK) Record date (UK and SA) Pay date Tuesday, 7 December 2021 Wednesday, 8 December 2021 Thursday, 9 December 2021 Friday, 10 December 2021 Wednesday, 22 December 2021 The JSE Listings Requirements require disclosure of additional information in relation to any dividend payments. Shareholders registered on the South African register are advised that a dividend withholding tax will be withheld from the gross final dividend amount of ZAR 12.1190 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 ZAR 9.6952 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 7 7 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 8 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 8 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ 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, 8th December 2021 and Friday, 10th December 2021,, both days inclusive. Shares may not be transferred between the registers in London and South Africa during this period either. Financial Instruments, Principal Risks and Uncertainties The financial instruments of the Group, in addition to its investments, comprise cash and borrowings to finance those investments. The Company also has a bank revolving credit facility which will run until 30th September 2022. The interest rate on any funds drawn down is 2.75% above the bank’s base rate. The Group 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: Stock market volatility, economic uncertainty, Covid and Brexit The Group’s investment performance will be affected by general economic and market conditions. Although the Group cannot predict the level of growth in the global economy, as with most businesses, it believes a period of weak market growth will have an adverse effect on its investments. Volatility relating to the 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. Covid-19 continues to be a global pandemic effecting not only the United Kingdom but countries across the globe. The United Kingdom has experienced two additional lockdowns in November 2020 and January 2021 which impacted all areas of the economy. Consequently, there have continued to be large fluctuations on stock markets in both the United Kingdom and globally, although stock market indices have recovered substantially since their lows in March 2020. The long-term effect In continues to be on dividends cancelled, deferred, or re-based, and on increased volatility. addition, the Covid- 19 additional lockdowns had an effect on one of the Core Holdings although this has improved since the opening of hospitality venues in consumer spending brought about reduction through the Possible volatility of share prices of Strategic Investments and General Portfolio investments A number of factors outside the control of the Group, such as Covid-19, may impact the share price performance of its investments. Such factors could include investor sentiment, local and international stock market conditions, divergence of results from analysts’ expectations, changes in earnings estimates by analysts and changes in political and economic sentiment. Exchange rate movements will contribute to the volatility of prices of foreign stocks. Dividend income The ability of the companies that we invest in to pay dividends to shareholders depends upon their profitability, cash flow and the extent to which, as a matter of law, they have sufficient distributable reserves from which any proposed dividends may be paid and the willingness of the boards of such companies to pay. There can be no guarantee that the companies we invest in will be able to sustain their dividend policies in the future. Covid-19 has had an effect on the payment of dividends by companies and Core Holdings in particular have not paid dividends during this period due to the uncertainty created by Covid-19. Despite this companies have however slowly begun to return to the payment of dividends and the Board expect this trend to continue. Ability to make strategic investments There are limited opportunities for the Group to make strategic investments and therefore there is no guarantee that the Group will be able to do so at a price the directors believe will represent fair value. 8 8 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 9 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 9 28/09/2021 15:07 28/09/2021 15:07 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC 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 Group may not be able to realise its investment, either at all, or at a price the Group believes reflects fair value. The depth and overlap of experience of directors means that there is no key-man dependency. Note 21 on pages 39 to 41 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 Group is exposed to investment risk arising from the selection of investments which it mitigates by drawing on the investment experience of its directors. Key Performance Indicators Key Performance Indicators (‘KPIs’) are the yardsticks against which the Board measures the performance of the Group. 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 Group’s total shareholder return (TSR) with the TSR of the FTSE Eurofirst 100 index. A graph setting out that performance is set out on page 61. 2021 2020 2019 (restated) Net assets per share Change in net assets per share over 5 years Dividends (net) per share 60.5p 50.6p 58.5p (7.7%) (17.6%) 17.7% 1.15p 1.15p 1.15p 2018 65.4p 46% 1.15p 2017 65.6p 108% 1.1p 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. Financing Structure The Group is financed by equity funding. However, the Board believes that a reasonable level of gearing can enhance returns to shareholders. Accordingly, the Group has secured a bank credit revolving facility with Coutts & Co which was extended in 2019 to 30th September 2022. At 30th June 2021, the Group had undrawn bank facilities of £1,250,000. 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 AGM which would permit the Company to issue new ordinary shares, details of which are explained in the Directors’ Report on page 42. Similar resolutions have been approved by Shareholders at the Company’s previous AGMs. S172 Statement In line with their duties as set out in s172 of the Companies Act 2006, the Board of Directors act in a way they consider would be most likely to promote the long term success of the Group for the benefit of its members as a whole, whilst also having regard to the views and interests of wider stakeholders and matters as set out in s172(1). 9 9 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 10 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 10 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ As an investment Group, the goal of the Group is to provide financial returns to the shareholders over the long term. In this respect the Board of Directors, at all times, have due consideration as to the po- tential effect of investment decisions and the benefit they may bring to the shareholders. Key invest- ment decisions and matters that are of strategic importance to the Group are appropriately informed by s172 factors. With regards to wider stakeholders, the Board of Directors consider the underlying strategic companies in which the Group has invested as well as advisors and suppliers amongst the key stakeholders of the Group. In this respect the Board of Directors engage with these stakeholders on a frequent basis in oder to build and strengthen such relationships. It is noted that, due to the nature of the Group, it does not have executives, employees, or operations to consider as stakeholders except in the case of City Group PLC. The views of and impact upon the wider stakeholders of the Group are considered as part of the board decision process including engaging with stakeholders to ensure they have a clear understanding of the long term goals of the Group and how the Board of Directors intend to achieve these goals. The Board of Directors are committed to upholding the highest standard of corporate governance within the Group and to ensure that they maintain a high level of knowledge and understanding of governance requirements to be implemented by the Group. The Board of Directors have also implemented policies to ensure the integrity and sustainability of the Group is upheld. The Directors’ Report and Corporate Governance report contain further details as to how the Board of Directors undertake their decisions with regards to s172 of the Companies Act 2006 and the effect on the decision making of the Board. Outlook The UK economy continues to adapt to the effect of Covid-19 and Brexit. Worldwide we are still coming to grips with the prospects of living with Covid-19 and this is showing through most prominently in staff shortages and supply chain disruption. We can expect further volatility and turbulence in the markets ahead, particularly due to the emergence of the Delta variant of Covid-19. Whilst the last 12 months has continued to be challenging for the Group’s investments, particularly its Strategic Investments, and we can likely expect further challenges ahead, the Board is pleased to see one of the Strategic Investments already committed to return to the payment of dividends and is confident that the Group has a solid base of investments which can lead to further capital growth in the medium to long term. Future Developments The Group’s development and its financial performance are dependent on the success of its Investment Strategy and the continued support of its Shareholders. Against a background of challenging and uncertain times in the markets particularly due to Covid-19 and the emergence of the Delta variant, the Board continues to seek out investments which will generate growth in shareholder value. The Board also continues to monitor and enhance the quality of investments in the General Portfolio. The Board continues to pursue its current Investment Policy and has no plans to make any further changes to the policy in the near future. As at 30th June 2021, the Company held 36 investments in the General Portfolio. By Order of the Board City Group PLC Company Secretary 24 September 2021 10 10 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 11 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 11 28/09/2021 15:07 28/09/2021 15:07 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC Composition of General Portfolio At 30th June 2021 Pernod Ricard Nestle LVMH Moet Hennessey Heineken Holding Schindler-Holdings AG CHF1.00 REGD (Post Subd) Diageo Procter & Gamble Co L'Oreal Unilever Brown Forman (B) Givaudan AP Moeller-Maersk A/S Deutsche Post Rio Tinto Phillip Morris International Inc BHP Group Compagnie Financiere Richemont SA Antofagasta 3M Co Henkel Preferred Reckitt Benckiser Group Danone Exxon Mobil Corp British American Tobacco Linde AG BAE Systems Plc Royal Dutch Shell B Anheuser Busch Inbev SA Becton Dickinson & Co BASF M&G Plc Otis Worldwide Corp Imperial Brands Raytheon Legal & General Compagnie Financiere Richemont SA warrant Analysis by currency Euro Sterling US Dollar Swiss Franc Danish Kronas 11 £000 555 545 511 474 456 441 439 435 426 417 404 395 369 367 365 362 358 330 316 316 313 306 301 274 272 261 252 250 246 240 229 226 218 210 198 4 12,081 £000 3,726 3,673 2,520 1,767 395 12,081 % 4.6 4.5 4.2 3.9 3.8 3.7 3.6 3.6 3.5 3.5 3.3 3.3 3.1 3.0 3.0 3.0 3.0 2.7 2.6 2.6 2.6 2.5 2.5 2.3 2.3 2.2 2.1 2.1 2.0 2.0 1.9 1.9 1.8 1.7 1.6 0.0 100 % 31.9 24.0 22.5 15.3 1.8 100 11 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 12 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 12 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ Statement of Directors’ Responsibilities in Respect of the Financial Statements The Directors are responsible for preparing the Strategic Report, the Directors’ Report, the Corporate Governance Statement, the Audit Committee Report, the Directors’ Remuneration 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 Accounting Standards in conformity with the requirements of the Companies Act 2006. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Parent Company and of the profit or loss of the Group and Parent Company for that period. In preparing these financial statements, the Directors are required to: • • • • select suitable accounting policies and then apply them consistently; make judgements and accounting estimates that are reasonable and prudent; prepare financial statements in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006, 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 Group and Parent Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and Parent Company and enable them to ensure that the financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group 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. Each of the Directors whose names and functions are listed on page 1 confirms that to the best of each person’s knowledge and belief: • • • The financial statements, prepared in accordance with International Accounting Standards in con- formity with the requirements of the Companies Act 2006, give a true and fair view of the assets, li- abilities, financial position and profit/loss of the Group and the Parent Company. The Directors’ Report contained in the Annual Report includes a fair review of the development and performance of the business and the position of the Group and the Parent Company, together with a description of the principal risks and uncertainties that they face, and The Annual Report, taken as a whole, is fair, balanced and understandable and provides the in- formation necessary for Shareholders to assess the Group’s performance, business model and strategy. By Order of the Board City Group PLC Company Secretary 24 September 2021 12 12 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 13 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 13 28/09/2021 15:07 28/09/2021 15:07 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC Independent auditor’s report to the members of London Finance & Investment Group PLC Opinion We have audited the financial statements of London Finance and Investment Group PLC (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 30 June 2021 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Parent Company Statements of Financial Position, the Consolidated and Parent Company Statements of Changes in Equity, the Consolidated and Parent Company Statements of Cash Flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and international accounting standards in conformity with the requirements of the Companies Act 2006 and as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. 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 30 June 2021 and of the group’s profit for the year then ended; the group financial statements have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006; the parent company financial statements have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and as applied in accordance with the provisions of the Companies Act 2006; and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006; and as regard to the group financial statements, international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. Basis for opinion 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 and parent company 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. Conclusions relating to going concern In auditing the financial statements, we have concluded that the director’s use of the going concern basis of accounting in preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group’s and parent company’s ability to continue to adopt the going concern basis of accounting included: • • • Assessing management’s assumptions in their consideration of the future financial performance and cash flow requirements; Assessing mitigating factors available to management including their ability to generate cash from the investment portfolio, should that be required, and the liquidity of the portfolio; and Assessing whether management has adequately disclosed the conditions which cast significant doubt on the ability of the group and company to continue as a going concern in the financial statements Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group’s or parent company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. 13 13 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 14 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 14 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ In relation to the entities reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the director’s considered it appropriate to adopt the going concern basis of accounting. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. Our application of materiality We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. For planning and fieldwork, we consider materiality to be the magnitude by which misstatements, including omissions, either individually or in aggregate, could reasonably be expected to influence the economic decisions of users that are taken on the basis of the financial statements. Importantly, misstatements below this level will not necessarily be evaluated as immaterial as we also take account 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. Group Materiality Materiality measure Group financial statement materiality – Based on 1% of invested assets (the aggregate of non- current and current investments) Specific materiality – classes of transactions and balances other than those at fair value – Based on 5% of estimated normalised EBITDA excluding fair value movements Purpose and basis Assessing whether financial statements as a whole present a true and fair view. the is based Materiality the investment balance on the basis that this is the main driver of the balance sheet. on ISA 320, an auditor is Under required to consider whether there are one or more classes of transactions or account balances, lesser for which misstatements of than materiality could amounts reasonably to influence the economic decisions of users taken on the basis of the financial statements. This specific level of materiality was used to test non-investment related transactions and balances. expected be Key considerations and benchmarks The value of investments The level of inherent in the valuation judgement The range of alternative valuations reasonable Amount £ 203,800 (2020 - 175,000) The level of normalised earnings 37,540 (2020 - 37,540) We have applied a performance materiality of 80% - £163,000 (2020 - £140,000). We reassessed mate- riality at the end of the audit and did not find it necessary to revise our planning materiality. We have applied a lower level materiality in the audit of the in-scope component entities i.e. London Finance & Investment Group PLC (Parent), City Group PLC and Lonfin Investments Limited. We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of 5% - £10,100 (2020 - £8,750) of materiality as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. Our approach to the audit 14 14 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 15 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 15 28/09/2021 15:07 28/09/2021 15:07 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC___________ London Finance & Investment Group PLC Our audit approach was developed by obtaining an understanding of the group’s activities, the key 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 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 group and control environment. Based on this understanding, we assessed those aspects of the group and subsidiary companies transactions and balances which were most likely to give rise to a material subsidiary companies transactions and balances which were most likely to give rise to a material misstatement and were most susceptible to irregularities including fraud or error. Specifically, we misstatement 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. identified what we considered to be key audit matters and planned our audit approach accordingly. The Group and all its components were subject to a full scope audit by a team with relevant sector experience undertaken from our office based on London. The Group and all its components were subject to a full scope audit by a team with relevant sector experience undertaken from our office based on London. Key audit matters 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) we identified, including 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. Key audit matters 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) we identified, including 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. Area Area Reason Reason Audit response Audit response Valuation Valuation and and existence of existence of investments investments (note 13) (note 13) The valuation of the portfolio at 30 The valuation of the portfolio at 30 June 2021 was £20.283m (2020 - June 2021 was £20.283m (2020 - £16.239m), comprising a general £16.239m), comprising a general portfolio of listed investments and portfolio of listed investments and two strategic investments in two strategic investments in Western Selection PLC and Western Selection PLC and Finsbury Group PLC. Finsbury Group PLC. The valuation of investments, which The valuation of investments, which are held at fair value, was are held at fair value, was considered a key audit matter as considered a key audit matter as investments are the single most investments are the single most significant component of the significant component of the financial statements and the fair financial statements and the fair value movements thereon could value movements thereon could have a pervasive impact on the have a pervasive impact on the financial statements. Furthermore, financial statements. Furthermore, although the relevant investments although the relevant investments are in companies whose shares are are in companies whose shares are traded on recognised stock traded on recognised stock exchanges, the nature of those exchanges, the nature of those exchanges and volume of trades in exchanges and volume of trades in those shares may be such that those shares may be such that there is insufficient liquidity for bid there is insufficient liquidity for bid price to be a suitably reliable price to be a suitably reliable measure of fair value. measure of fair value. Additionally, there is a risk that the Additionally, there is a risk that the investments recorded as held by investments recorded as held by the Group may not represent the Group may not represent assets of the Group. assets of the Group. As investments comprise a general portfolio of As investments comprise a general portfolio of listed investments and two separate strategic listed investments and two separate strategic holdings, we applied our audit procedures to holdings, we applied our audit procedures to the general portfolio and both the strategic the general portfolio and both the strategic investments. Specifically, we: investments. Specifically, we: • • • • • • • • • • • • re-performed the calculation of the re-performed the calculation of the investment valuations and investment valuations and benchmarked key inputs and benchmarked key inputs and estimates to independent information estimates to independent information and our own research. and our own research. performed initial analytical procedures performed initial analytical procedures to determine the extent of our work to determine the extent of our work considering, inter alia, the composition considering, inter alia, the composition of the investment portfolio, the sectors of the investment portfolio, the sectors invested in and, based on publicly invested in and, based on publicly available data, the expected available data, the expected movements on the portfolio; movements on the portfolio; had regard to the size of investment had regard to the size of investment stake held, the impact of liquidity stake held, the impact of liquidity constraints and any unusual constraints and any unusual movement in observable share prices movement in observable share prices around the year end; around the year end; confirmed that bid price had been used; confirmed that bid price had been used; confirmed there were no contra- confirmed there were no contra- indicators, such as liquidity indicators, such as liquidity considerations, to suggest bid price considerations, to suggest bid price was not the most appropriate was not the most appropriate indication of fair value; and indication of fair value; and confirmed the existence of confirmed the existence of investments through agreeing 100% of investments through agreeing 100% of the investments held to Custodian the investments held to Custodian reports independently obtained from reports independently obtained from the Custodian and to share certificates the Custodian and to share certificates evidencing title by the Group. evidencing title by the Group. 15 15 15 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 16 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 16 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ _____________________________________________ Area Area Audit response Audit response Reason Reason Based on the procedures we performed, we Based on the procedures we performed, we found that the valuation of the Group’s found that the valuation of the Group’s investments was supported by the evidence investments was supported by the evidence obtained and that the Group had title to the obtained and that the Group had title to the investments reported in the financial investments reported in the financial statements. statements. Other information The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the group and parent company financial 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. 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 course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. Other information The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the group and parent company financial 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. 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 course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. We have nothing to report in this regard. Opinions on other matters prescribed by the Companies Act 2006 In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. Opinions on other matters prescribed by the Companies Act 2006 In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. In our opinion, based on the work undertaken in the course of the audit: 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 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 which the financial statements are prepared is consistent with the financial statements; and the strategic report and the directors’ report have been prepared in accordance with applicable the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. legal requirements. Matters on which we are required to report by exception In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report. Matters on which we are required to report by exception In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report. 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: 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 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 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 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 audited are not in agreement with the accounting records and returns; or • • certain disclosures of directors’ remuneration specified by law are not made; 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. • we have not received all the information and explanations we require for our audit. Corporate governance statement The Listing Rules require us to review the directors' statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the group’s and parent company's compliance with the provisions of the UK Corporate Governance Statement specified for our review. Corporate governance statement The Listing Rules require us to review the directors' statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the group’s and parent company's compliance with the provisions of the UK Corporate Governance Statement specified for our review. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit: Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit: 16 16 16 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 17 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 17 28/09/2021 15:07 28/09/2021 15:07 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC • Directors' statement with regards the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out on page 43; • Directors’ explanation as to its assessment of the entity’s prospects, the period this assessment covers and why they period is appropriate set out on page 43. • Directors' statement that they consider the annual report and the financial statements, taken as a whole, to be fair, balanced and understandable set out on page 55; Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 43; The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on page 52; and The section describing the work of the audit committee set out on page 54 • • • Responsibilities of directors As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the group and parent company 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 preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the group and parent company 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 liquidate 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. 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. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: • We obtained an understanding of the group and parent company and the sector in which they operate to identify laws and regulations that could reasonably be expected to have a direct ef- fect on the financial statements. We obtained our understanding in this regard through discus- sions with management, industry research, application of cumulative audit knowledge and ex- perience of the sector. • We determined the principal laws and regulations relevant to the group and parent company in this regard to be those arising from the Listing Rules, applicable FCA rules, Corporate Govern- ance Code, Companies Act 2006 and UK Tax legislation. • We designed our audit procedures to ensure the audit team considered whether there were any indications of non-compliance by the group and parent company with those laws and regula- tions. These procedures included, but were not limited to: o enquiries of management, review of minutes, review of any legal and regulatory corre- spondence, reviewing financial statement disclosures and testing to supporting docu- mentation to assess compliance with applicable laws and regulations 17 17 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 18 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 18 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ • We also identified the risks of material misstatement of the financial statements due to fraud. We considered, in addition to the non-rebuttable presumption of a risk of fraud arising from management override of controls, that a potential management bias was identified in relation to the valuation of investments. We addressed this risk by challenging the assumptions and judg- ments made by management. We also reviewed the key inputs used in the valuation by benchmarking them to independent and reliable sources. • As in all of our audits, we addressed the risk of fraud arising from management override of con- trols by performing audit procedures which included but were not limited to: the testing of jour- nals; reviewing accounting estimates for evidence of bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business. Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Other matters which we are required to address Following the recommendation of the Audit Committee, we were appointed by the Board on the 30th November 2016 to audit the financial statements for the period ended 30 June 2017 and subsequent financial periods. We were reappointed by the members of the company at the Annual General Meeting held on 25th November 2020. Our total uninterrupted period of engagement is 5 years, covering the periods ending 2017 to 2021. 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. Our audit opinion is consistent with the additional report to the audit committee. Use of our report 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. Ian Cowan (Senior Statutory Auditor) For and on behalf of PKF Littlejohn LLP Statutory Auditor Date: 15 Westferry Circus Canary Wharf London E14 4HD 18 18 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 19 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 19 28/09/2021 15:07 28/09/2021 15:07 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC Consolidated Statement of Total Comprehensive Income For the year ended 30th June Operating Income Notes Dividends receivable 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 General Portfolio investments Other income Interest payable Profit/(Loss) before taxation Tax expense Profit/(Loss)after taxation Non-controlling interest Profit/(Loss) attributable to shareholders Other comprehensive income/(expense) Items that will not be reclassified to profit or loss Unrealised changes in the carrying value of Strategic investments Other taxation - Deferred tax Total Other Comprehensive Income/(Loss) attributable to shareholders Total Comprehensive Income/(Loss) attributable to owners of the parent Reconciliation of headline earnings Basic and diluted earnings per share Adjustment for the unrealised changes in the carrying value of investments, net of tax Headline earnings per share 4a 4a 3 13 4b 7 7 9 9 The notes on pages 26 to 41 form part of these financial statements. 2021 £000 326 154 245 304 1,029 (392) (412) (804) 225 1,651 36 (39) 1,873 (337) 1,536 (26) 1,510 1,911 - 1,911 2020 £000 425 150 68 284 927 (417) (380) (797) 130 (700) - (62) (632) (164) (796) (11) (807) (1,305) - (1,305) 3,421 (2,112) 4.8p - 4.8p (2.6)p - (2.6)p 19 19 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 20 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 20 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ Consolidated Statement of Financial Position At 30th June Notes 10 11 13 13 14 15 11 11 16 17 18 2021 £000 22 145 8,202 8,369 12,081 125 309 12,515 (228) (71) (299) 2020 £000 31 512 6,291 6,834 9,948 166 269 10,383 (225) (52) (277) 12,216 10,106 (107) (650) (806) (1,563) 19,022 1,560 2,320 4,530 4,734 5,749 18,893 129 19,022 (519) - (520) (1,039) 15,901 1,560 2,320 1,708 4,712 5,498 15,798 103 15,901 Non-current Assets Property, Plant and Equipment Right of use asset Investments at fair value though other comprehensive income Current Assets Listed investments at fair value through profit and loss Trade and other receivables Cash and cash equivalents Current Liabilities Trade and other payables Lease liabilities Net Current Assets Non-current Liabilities Lease liabilities Borrowings Deferred Taxation Total Assets less Total Liabilities Capital and Reserves Ordinary share capital Share premium 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 interests Total Capital and Reserves Approved and authorised by the Board On 24 September 2021 Edward Beale Director The notes on pages 26 to 41 form part of these financial statements. 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 21 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 21 28/09/2021 15:07 28/09/2021 15:07 20 20 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC Company Statement of Financial Position At 30th June Notes 12 13 14 15 16 17 18 18 18 Non-current Assets Investments in Group companies Current Assets Listed investments at fair value through profit or loss Trade and other receivables Cash and cash equivalents Current Liabilities Trade and other payables Net Current Assets Non-current Liabilities Borrowings Deferred Taxation Total Assets less Total Liabilities Capital and Reserves Ordinary share capital Share premium Unrealised profits and losses on investments Realised Profit and Loss Balance at 1st July Net Profit/(Loss)/ for the period Dividends paid Balance at 30th June Equity shareholders’ funds 2021 £000 2,079 12,081 17 23 12,121 (106) (106) 11,365 (650) (806) (1,456) 12,639 1,560 2,320 3,010 6,890 5,498 577 (326) 5,749 12,639 2020 £000 2,074 9,948 16 91 10,055 (132) (132) 9,923 - (520) (520) 11,477 1,560 2,320 2,099 5,979 3,739 2,118 (359) 5,498 11,477 Under Section 408 of the Companies Act 2006, the Parent Company is exempt from the requirement to present its own income statement. Approved and authorised by the Board On 24 September 2021 Edward Beale Director London Finance & Investment Group PLC Registered in England and Wales – Number 201151 The notes on pages 26 to 41 form part of these financial statements. 21 21 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 22 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 22 28/09/2021 15:07 28/09/2021 15:07 London Finance & Investment Group PLC___________ Company Statement of Financial Position At 30th June _____________________________________________ Consolidated Statement of Cash Flows Non-current Assets For the year ended 30th June Investments in Group companies Current Assets Listed investments at fair value through profit or loss Trade and other receivables Cash and cash equivalents Cash flows from operating activities Trade and other payables Current Liabilities Profit/(Loss) before tax Adjustments for non-cash items - Finance expense Net Current Assets Depreciation charges Depreciation on right of use asset Non-current Liabilities Lease adjustment Borrowings Unrealised changes in the fair value of investments Deferred Taxation Realised gain on disposal of investments Decrease in trade and other receivables Increase/(Decrease) in trade and other payables Total Assets less Total Liabilities Taxes paid Capital and Reserves Net cash inflow from operating activities Ordinary share capital Share premium Unrealised profits and losses on investments Cash flows from investment activity Realised Profit and Loss Acquisition of property, plant and equipment Acquisition of current investments Balance at 1st July Proceeds from disposal of current investments Net Profit/(Loss)/ for the period Dividends paid Net cash (outflow)/inflow from investment activity Balance at 30th June Cash flows from financing activities Equity shareholders’ funds Notes 12 13 Notes 14 15 16 13 17 13 7 18 18 18 13 2021 £000 2,079 12,081 2021 17 £000 23 12,121 1,873 (106) (106) 39 11,365 10 62 (36) (650) (1,196) (806) (700) (1,456) 41 10 12,639 (51) 52 1,560 2,320 3,010 6,890 - (1,706) 5,498 1,469 577 (237) (326) 5,749 12,639 2020 £000 2,074 9,948 2020 16 £000 91 10,055 (632) (132) (132) 62 9,923 10 62 - - 1,265 (520) (633) (520) 10 (7) 11,477 (39) 98 1,560 2,320 2,099 5,979 (2) (163) 3,739 966 2,118 801 (359) 5,498 11,477 Interest paid Interest paid on lease liabilities Repayment of lease liabilities Equity dividends paid Net drawdown/(repayment) of loan facilities (31) (31) (49) Under Section 408 of the Companies Act 2006, the Parent Company is exempt from the requirement to (359) present its own income statement. (400) (870) (19) (28) (52) (326) 650 225 16 Net cash inflow/(outflow) from financing activities Approved and authorised by the Board On 24 September 2021 Increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at end of the year 20 40 269 309 29 240 269 Edward Beale Director London Finance & Investment Group PLC Registered in England and Wales – Number 201151 The notes on pages 26 to 41 form part of these financial statements The notes on pages 26 to 41 form part of these financial statements. . 21 22 22 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 23 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 23 28/09/2021 15:07 28/09/2021 15:07 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC Company Statement of Cash Flows For the year ended 30th June Cash flows from operating activities Profit before tax Adjustments for non-cash items - Finance expense Release of Impairment provision Unrealised changes in the fair value of investments Realised gain on disposal of investments (Increase)/Decrease in trade and other receivables Decrease in trade and other payables Overseas Taxes paid Net cash outflow from operating activities Cash flows from investment activity Acquisition of investments Proceeds from disposal of investments Net cash (outflow)/inflow from investment activity Cash flows from financing activities Interest paid Equity dividends paid (Increase)/Decrease in loan to subsidiary Net drawdown/(repayment) of loan facilities Net cash inflow/(outflow) from financing activities (Decrease)/Increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at end of the year Notes 12 13 13 7 12 16 2021 £000 1,825 11 - (1,197) (700) (1) (18) (51) (131) (1,706) 1,469 (237) (19) (326) (5) 650 300 (68) 91 23 The notes on pages 26 to 41 form part of these financial statements. 2020 £000 891 31 (1,681) 1,266 (633) 7 (16) (39) (174) (163) 966 803 (15) (359) 135 (400) (639) (10) 101 91 23 23 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 24 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 24 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ Consolidated Statement of Changes in Shareholders’ Equity Ordinary 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 Total Non- Controlling Interests Total Equity £000 £000 £000 £000 £000 £000 £000 £000 Year ended 30th June 2021 Balances at 1st July 2020 1,560 2,320 - - - - 1,708 911 1,911 1,560 2,320 2,822 - - - - - - 4,712 5,498) 15,798 103 15,901 22 - 22 - - 577 1,510 26 1,536 - 1,911 - 1,911 577 3,421 26 3,447 (359) (359) 33 33 - - (359) 33 1,560 2,320 4,530 4,734 5,749 18,893 129 19,022 Balances at 1st July 2019 1,560 2,320 6,085 - - - - - - - - - - (1,391) (1,305) (2,696) (1,681) - 4,565 147 - 147 - - 3,739 18,269 92 18,361 437 (807) 11 (796) - (1,305) - (1,305) 437 (2,112) 11 (2,101) 1,681 - (359) (359) - - -) (359) 1,560 2,320 1,708 4,712 5,498) 15,798 103 15,901 The notes on pages 26 to 41 form part of these financial statements. 24 24 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 25 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 25 28/09/2021 15:07 28/09/2021 15:07 Profit for the Year Other Comprehensive Income Total comprehensive income Dividends paid and total transactions with shareholders Unclaimed dividends Balances at 30th June 2021 Year ended 30th June 2020 (Loss)/profit for the Year Other Comprehensive Income Total comprehensive income Impairment provision released Dividends paid and total transactions with shareholders Balances at 30th June 2020 London Finance & Investment Group PLC London Finance & Investment Group PLC___________ Company Statement of Changes in Shareholders’ Equity Year ended 30th June 2021 Balances at 1st July 2020 Profit for the Year and total comprehensive income Dividends paid and total transactions with shareholders Unclaimed dividends Ordinary Share Capital Share Premium Account Unrealised profits and losses on Investments Realised profits and losses Equity Total £000 £000 £000 £000 £000 1,560 2,320 2,099 5,498 11,477 - - - - - - 911 577 1,488 - - (359) (359) 33 33 Balances at 30th June 2021 1,560 2,320 3,010 5,749 12,639 Year ended 30th June 2020 Balances at 1st July 2019 (Loss)/profit for the Year and total comprehensive income Dividends paid and total transactions with shareholders 1,560 2,320 3,490 3,739 11,109 - - - - (1,391) 2,118 727 - (359) (359) Balances at 30th June 2020 1,560 2,320 2,099 5,498 11,477 The notes on pages 26 to 41 form part of these financial statements. 25 25 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 26 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 26 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ Notes to the Financial Statements For the year ended 30th June 2021 1. Accounting Policies The consolidated financial statements of the London Finance & Investment Group PLC have been prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 and interpretations issued by the IFRS Interpretations Committee (IFRS IC) and with the Companies Act 2006 applicable to companies reporting under IFRS. The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if applicable. The most significant techniques for estimation are described in the accounting policies below. These policies have been applied consistently to all of the years presented, unless otherwise stated. (i) 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 June 2021. The non-controlling interests are wholly attributable to equity interests in subsidiaries. Western has not been consolidated as the Directors consider that the Group, as the parent and ultimate parent undertaking, 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. (ii) Dividends receivable are credited to 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. Revenue from management services is recognised when the right to such income is established through a contract and in line with the provision of services to which they relate. (iii) The Company pays final and interim dividends. Dividends are recognised in the period in which they are appropriately authorised. For 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. (iv) Financial assets are classified by category, depending on the purpose for which the asset was acquired. The Group’s accounting policy is as follows: a) Fair value through income: Non-derivative financial assets other than unquoted invest- ments and trade and other receivables are classified as strategic and general portfolio in- vestments and are recognised as being at fair value through Profit or Loss or Other Com- prehensive 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. 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 27 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 27 28/09/2021 15:07 28/09/2021 15:07 26 26 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC 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 in 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 realised profits and losses. Derivative financial instruments, which have been entered into to hedge future cash flows but which for accounting purposes are not designated as hedging instruments consist of an Interest rate swap contract. This is initially measured at fair value and is revalued at subsequent reporting dates using bank valuation. 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. Borrowings are recognised initially at fair value and subsequently carried at amortised cost. The charge for taxation is based on the taxable profit or loss for the year. Taxable profit or loss differs from net profit or loss as reported in the Statement of Total Comprehensive Income. It excludes items of income (primarily franked dividend income) and expenses 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 probable 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 in equity. Transactions denominated in foreign currencies are translated at the exchange rate at the date of the transaction. Foreign currency assets and liabilities at the year-end are translated at year- end exchange rates. Property plant and equipment - Computer and electronic equipment expenditure of less than £2,500 is written off in the year of acquisition. All other property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributa- ble to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be meas- ured reliably. The carrying amount of any component accounted for as a separate asset is de- recognised when replaced. All other repairs and maintenance are charged to profit or loss dur- ing the reporting period in which they are incurred. Gains and losses on disposals are deter- mined by comparing proceeds with carrying amount. These are included in profit or loss. Property, plant and equipment are depreciated at rates calculated to write off the cost of the relevant assets over their effective useful economic lives. Depreciation is charged at following rates: Leasehold improvements – over the life of the lease Office equipment – 20% on cost 27 (v) (vi) (vii) (viii) 27 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 28 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 28 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ Notes to the Financial Statements (continued) 1. Accounting Policies (continued) (ix) Leases - At the lease commencement date, the Group recognises a right-of-use asset and a lease liability in the Statement of Financial Position. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs in- curred by the Group and an estimate of any costs to dismantle and remove the asset at the end of the lease. The Group depreciates the right-of-use assets on a straight-line basis from the lease com- mencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist. At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate of the Group’s incremen- tal borrowing rate (5%). Lease payments included in the measurement of the lease liability are made up of fixed pay- ments, payments arising from options reasonably certain to be exercised and amounts ex- pected to be payable under a residual value guarantee. If the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use Asset. The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of recognising a right-of-use asset and lease liability, the pay- ments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term. On the statement of financial position, right-of-use assets and lease liabilities have been presented separately from Property, Plant and Equipment and Trade and other payables. (x) The group operates a defined contribution plan which received fixed contributions from the sub- sidiary company City Group PLC. The group legal or constructive obligations for this plan is lim- ited to the contributions. The expense recognised in the consolidated statement of total com- prehensive income for the period in relation to these contributions was £15,000 (see note 6). (xi) Cash and cash equivalents comprise cash balances 2. Changes in accounting policies and disclosures a) New standards, amendments and interpretations adopted by the Group No new standards, amendments or interpretations, effective for the first time for financial years beginning on or after 1st January 2020 have had a material impact on the Group or Parent Company. b) New standards, amendments and interpretations not yet adopted A number of new standards and amendments to standards and interpretations are effective for financial periods beginning after 1st January 2021 and have not been applied in preparing these financial statements. None of these are expected to have a significant effect on the financial statements of the Group or Parent Company. 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 29 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 29 28/09/2021 15:07 28/09/2021 15:07 28 28 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC 3. Operating profit – Segmental Analysis The Directors manage the Group through two classes of business, Investment Operations and Management Services, and present the segmental analysis on that basis. The segment performance measure is operating profit. Investment Operations Management Services Dividends – Listed investments Rental and other income Profits on sales of including provisions Management services fees Operating income Administration expense – normal Operating profit investments, 2021 £000 326 - 245 - 571 (392) 179 2020 £000 425 - 68 - 493 (417) 76 2021 £000 - 154 - 304 458 (412) 46 2020 £000 - 150 - 284 434 (380) 54 All revenues are derived from operations within the UK. Consequently, no separate geographical segment information is provided. 4. Administration Expenses and Other Income a) Administration expenses include: Depreciation Depreciation on Right of use asset Auditors’ remuneration Directors’ emoluments Staff Costs b) Other income 2021 £000 10 62 32 76 454 36 2020 £000 10 62 27 76 392 - - Audit services - Note 5 - Note 6 - Lease adjustment 29 29 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 30 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 30 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ Notes to the financial statements (continued) 5. Directors' Emoluments and Related Party Disclosures The key management personnel are considered to be the Group directors. Their emoluments are detailed in the Directors’ Remuneration Report on pages 59 to 64. Related Party Disclosures London Finance & Investment Group PLC (“Lonfin”) and its wholly owned subsidiary, Lonfin Investments Limited, owns 43.8% of Western Selection PLC (“Western”). Western is a company incorporated in England with its registered office at 1 Ely Place, London, EC1N 6RY. Under IFRS 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 IFRS 10. Mr. D.C. Marshall and Mr. E.J Beale are directors. Mr. D.C. Marshall’s shareholdings in Lonfin, and Mr E.J. Beale’s share options, are set out in the Directors’ Report on page 44. Lonfin and Western own City Group in the ratio 51.4% and 48.6% respectively. City Group provides office accommodation, company secretarial, finance and head office services to both Lonfin and Western and to various other companies in the UK and abroad most of which are associated with Lonfin and Western. City Group operates as a shared service centre and does not seek to make a profit from the provision of its standard services to these related parties. The various company secretarial, accounting, and directors’ fees receivable by City Group from those companies, their associates and subsidiaries, total £395,000 (2020 - £413,000) for the year under review. At the reporting date the aggregate balance due in respect of fees invoiced was £83,000 (2020 - £118,000). Settlement is within normal credit terms. At 30th June 2021, as disclosed in Notes 14 and 15 below, City Group owed the Company £Nil (2020 – £ Nil) and it owed City Group £36,000 (2020 - £55,000) for fees. The Company was also owed £1,990,000 (2020 - £1,985,000) by Lonfin Investments Limited as disclosed in Note 12 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. 6. Staff Costs 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, excluding Group Directors’ fees which are shown in the Directors’ Remuneration Report on pages 59 to 64, were: Salaries Social security costs Defined contribution pension scheme contributions The average weekly number of staff employed, excluding Group Directors, was: 2021 £000 393 46 15 454 5 2020 £000 337 40 15 392 6 30 30 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 31 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 31 28/09/2021 15:07 28/09/2021 15:07 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC 7. Tax Expense The tax charge for the year comprises: Tax on overseas investment income Corporation tax Deferred Tax Tax charged 2021 £000 51 - 286 337 The tax assessed for the year is lower than the standard rate of corporation tax in the UK. The differences are explained below: Profit/(Loss) on ordinary activities before taxation Taxation at 19% (2020 – 19%) Effects of: Non-taxable items – fair values and franked income Loss utilised/(carried forward) Tax charged 1,873 356 (289) 268 337 2020 £000 39 - 125 164 (632) (120) 323 (39) 164 Dividends received from UK companies are recognised in the income statement net of their associated tax credit. Factors affecting the tax charge in future years From 1 April 2023, the Corporation Tax main rate will increase gradually for profits over £50,000 reaching 25% for profits over £250,000. The Group’s future tax charge, and effective tax rate are affected by this announcement and the ability of the Group to utilise the accumulated capital losses which at present 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 Group’s capital losses can be utilised and retain value. 8. Dividends Amounts recognised as distributions to the shareholders of the Company in the year were as follows: Final dividend for the prior year ended 30th June Interim dividend for the current year ended 30th June 2021 Per Share 2020 Per Share 0.60p 0.55p 0.60p 0.55p The total dividends paid and to be paid in 2021 and 2020 were £359,000 (1.15p per share) and £359,000 (1.15p per share) respectively. A final dividend in respect of the year ended 30th June 2021 of 0.60p per share is to be proposed at the AGM to be held on 1st December 2021. These financial statements do not reflect this dividend. During the year, old unclaimed dividends amounting £33,000 were credited back to the group. 31 31 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 32 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 32 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ Notes to the financial statements (continued) 9. Earnings per share Reconciliation of headline earnings Basic and headline earnings/(loss) per share, based on the profit attributable to the shareholders after tax and non-controlling interests of £1,510,000 (2020 – loss £807,000) and on 31,207,479 shares issued Diluted earnings/(loss) per share, based on the loss attributable to the shareholders after tax and non-controlling interests of £1,510,000 (2020 – loss £807,000) and on 31,207,479 shares issued plus 80,000 share options granted in 2016. 2021 2020 4.8p (2.6)p 4.8p (2.6)p 10. Property, Plant and Equipment Group At cost – 1st July 2020 Additions in the year Disposals in the year 30th June 2021 Depreciation Balance – 1st July 2020 Charges for the year Disposals in the year 30th June 2021 Net book amount 30th June 2021 Net book amount 30th June 2020 The office equipment is held by a subsidiary company. Office Equipment £000 84 - - 84 53 10 - 63 22 31 32 32 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 33 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 33 28/09/2021 15:07 28/09/2021 15:07 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC 11. Leases The Group has an operating lease commitment in respect of an office property entered into in October 2018 which terminates in October 2028. During the year the directors have made the decision to take advantage of the 5-year break clause in the lease agreement available to the Company. This has led to adjustment to the carrying values of the Right of use asset and the Lease liability. The Company has guaranteed the obligations under this lease. Right of use asset – Office At 1st July Adjustment to cost At 30th June Depreciation Balance – 1st July Lease adjustment Charges for the year Depreciation 30th June Net book amount 30th June Lease Liabilities Current Non-Current Total Lease Liabilities Maturity Analysis Less than one year One to five years More than five years 2021 £000 620 (298) 322 (108) (7) (62) (177) 145 2021 £000 71 107 178 71 107 - 2020 £000 614 6 620 (46) - (62) (108) 512 2020 £000 52 519 571 52 251 268 Amounts recognised in the Consolidated Statement of Total Comprehensive Income Interest charged on lease liabilities Gain in lease adjustment 29 36 31 - 33 33 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 34 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 34 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ Notes to the financial statements (continued) 12. Investment in Group companies Operating subsidiaries incorporated and operating in England and consolidated in these financial statements. Principal Activities Percentage of Equity Management services Investment holding 51.4% 100% Held by the Company – at cost City Group PLC Lonfin Investments Limited Loan to subsidiary at 1st July Amount borrowed/(repaid) in the year Loan to subsidiary before provision as at 30th June 2021 £000 89 - 1,985 5 1,990 2,079 2020 £000 89 - 2,120 (135) 1,985 2,074 The address of the registered office of these subsidiaries is 1 Ely Place, London EC1N 6RY. 13. Investments General Portfolio £000 Strategic Holdings Western Selection £000 Finsbury Food Group £000 Cost at 1st July 2020 Opening unrealised gain/(losses) Opening valuation as at 1st July 2020 Movements in the year Purchases Sales - proceeds Realised gain on disposal Net unrealised gains transferred to realised gain on disposal Unrealised fair value gains/(losses) in the year Closing valuation at 30th June 2021 Cost at 30th June 2021 Unrealised gain/(losses) at 30th June 2021 Closing valuation at 30th June 2021 6,038 3,910 9,948 1,706 (1,469) 700 (455) 1,651 12,081 6,975 5,106 12,081 6,159 (3,408) 2,751 - - - - (39) 2,712 6,159 (3,447) 2,712 1,723 1,817 3,540 - - - - 1,950 5,490 1,723 3,767 5,490 Total £000 13,920 2,319 16,239 1,706 (1,469) 700 (455) 3,562 20,283 14,857 5,426 20,283 34 34 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 35 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 35 28/09/2021 15:07 28/09/2021 15:07 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC Cost at 1st July 2019 Opening unrealised gain/(losses) Opening valuation as at 1st July 2019 Movements in the year Purchases Sales - proceeds Realised gain on disposal Net unrealised gains transferred to realised gain on disposal Unrealised fair value losses in the year Closing valuation at 30th June 2020 General Portfolio £000 6,208 5,175 Strategic Holdings Western Selection £000 6,159 (2,583) Finsbury Food Group £000 1,723 2,297 11,383 3,576 4,020 163 (966) 633 (565) (700) 9,948 - - - - (825) 2,751 - - - - (480) 3,540 Total £000 14,090 4,889 18,979 163 (966) 633 (565) (2,005) 16,239 Western Selection PLC, a subsidiary undertaking, is traded on the Aquis Growth Market and is incorporated and operates in the UK with a financial year end of 30th June. At 30th June 2021 and 30th June 2020, Western had 17,949,872 ordinary shares of 40p each in issue, of which 7,860,515 shares (43.8%) are held by the Company’s wholly owned subsidiary, Lonfin Investments Limited. Extracts from Western’s unaudited results are as follows: Loss after tax Non-current assets Current assets Liabilities within one year Capital Reserves Share Premium account Capital Reserve account Net asset value per share Value of investment in Western at Net asset value per share Middle market price per share on 30th June Value of investment in Western at market value 2021 £000 (111) 6,777 4,045 (790) 7,180 2,654 3 56p 4,396 34.5p 2,712 2020 £000 (180) 5,752 2,502 (127) 7,180 2,654 3 45p 3,560 35p 2,751 35 35 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 36 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 36 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ Notes to the financial statements (continued) 14. Trade and other receivables Trade debtors Other debtors Prepayments and accrued income Group Company 2021 £000 105 - 20 125 2020 £000 124 13 29 166 2021 £000 - - 17 17 15. Trade and other payables Group Company Group companies Other creditors Trade creditors Accruals Derivative financial instrument 16. Borrowings Bank revolving credit facility 2021 £000 - 94 14 102 18 228 Group 2021 £000 650 2020 £000 - 92 10 86 37 225 2020 £000 - 2021 £000 36 - 11 41 18 106 Company 2021 £000 650 2020 £000 - - 16 16 2020 £000 55 - 5 35 37 132 2020 £000 - The Group has drawn down £650,000 on its revolving credit facility with Coutts & Co as of 30th June 2021; the facility is repayable in full on the 30th September 2022 and is presented as a non-current liability. The revolving credit facility incurs interest at the rate of 2.75% per annum above the Bank’s base rate. The facility is secured by a charge by Coutts & Co over the General Portfolio. The Group also has an interest rate swap from Coutts & Co to minimise the impact of possible interest rate fluctuations. The fair value of the interest rate swap as at 30th June 2021 is a liability of £18,000, and as it is not material, it is presented in Trade and other Payables, Note 15, as a Derivative financial instrument. 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 37 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 37 28/09/2021 15:07 28/09/2021 15:07 36 36 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC 17. Deferred taxation The Group has provided £806,000 in respect of potential taxation on unrealised investment gains (2020 - £520,000). This is after taking into account available tax losses of £164,000 (2020: £223,000). Balance at 1st July Profit or Loss Other Comprehensive Income Balance at 30th June Group 2021 £000 520 286 - 806 Group 2020 £000 395 125 - 520 Company 2021 £000 520 286 - 806 Company 2020 £000 395 125 - 520 Deferred tax has been provided at a weighted average of 19% (2019: 19%). 18. Share Capital and Reserves Allotted, issued and fully paid ordinary shares of 5p each 31,207,479 at 1st July 2020 and 30th June 2021 Company and Group 2021 £000 2020 £000 1,560 1,560 The Group and the Company’s capital comprises its shareholders’ equity. Our objective is to manage capital in a manner that enables the continued payment of dividends to be achieved. The following describes the nature and purpose of each reserve within shareholders’ equity: - Ordinary share capital Share premium Unrealised profits and losses on investments Share of retained realised profits and losses of subsidiaries Retained realised profits and losses Description and purpose Nominal value of issued share capital. Amount subscribed for share capital in excess of nominal value, less issue expenses. Cumulative unrealised gains and losses on investments. The Group’s share of cumulative undistributed post- acquisition gains and losses of subsidiaries recognised in the income statement. Realised profits of the Group and Company less realised losses and unrealised losses other than on investments. The balances and movements on each of the above reserves are disclosed in the Consolidated and Company Statement of Financial Positions on pages 20 and 21 and the Consolidated Statement of Changes in Shareholders’ Equity on page 24. 37 37 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 38 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 38 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ Notes to the financial statements (continued) 18. Share Capital and Reserves (continued) Share Options The Group has had two long-term incentive plans established to incentivise full-time employees and directors of City Group and to recognise outstanding efforts or achievements, or otherwise to attract, motivate or retain staff: The Group’s Unapproved Employee Benefit Scheme (which terminated on 29th September 2019) and a more recent scheme, the Group’s Company Share Option Plan. On 29th February 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 Group’s Company Share Option Plan. The options granted may be exercised no later than the tenth anniversary of the date of grant and had not been exercised as at 30th June 2021. 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 has been booked for these share options. 19. Pension Schemes The Group makes pension contributions to the personal pension schemes of certain employees which are money purchase schemes and for which it has no responsibility for unfunded liabilities. Amounts paid are disclosed in Note 6 and in the Directors’ Remuneration Report on pages 59 to 64. 20. Reconciliation of consolidated net cash flow to movement in net debt Group 2020/2021 Cash at bank Borrowings Lease liability Net Debt 2019/2020 Cash at bank Borrowings Lease liability Net Debt At start of year £000 269 - (571) (302) 240 (400) (632) (792) Cash Non-cash Flow transactions £000 £000 - 40 - (650) 313 80 (530) 313 29 400 80 509 - - (19) (19) At end of year £000 309 (650) (178) (519) 269 - (571) (302) 21. Financial Instruments Set out below is an explanation of the role that financial instruments have had during the year in creating or changing the risks the Group faces in its activities. The explanation summarises the objectives and policies for holding or issuing financial instruments and similar contracts, and the strategies for achieving their objectives that have been followed during the year. The Directors monitor its performance against these objectives on a continuous basis and through bi-monthly reports of the investment’s portfolio and cash position. 38 38 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 39 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 39 28/09/2021 15:07 28/09/2021 15:07 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC 21. Financial Instruments (continued) The categories of financial instruments used by the Group to achieve its objectives as set out in the Directors’ Report are: Financial assets At fair value through Other comprehensive income Non-current investments (strategic investments) At fair value through profit or loss Current asset investments (listed investments) Loans and receivables at amortised costs Trade and other receivables Cash at bank Financial liabilities At amortised costs Trade and other payables (including corporation tax) Lease liabilities Borrowings At fair value through profit or loss Derivative financial instrument 2021 £000 8,202 12,081 125 309 210 178 650 18 2020 £000 6,291 9,948 166 269 188 571 - 37 Interest Rate Profile The Group finances its operations through a mixture of retained profits and bank borrowings, in pounds sterling. Drawings under the facility are at a rate fluctuating with base rate. The effective rate of interest on borrowings for the year was 2.85% (2020 – 3.25%) and on deposits was nil. The sensitivity of the Group to a 1% change in interest rates would have been £3,800 in the current year (2020 – £9,600). In order to minimise the impact from possible interest rate fluctuations the Company entered into an Interest rate swap agreement with Coutts & Co on 1st October 2018. The fair value of the Interest rate swap, a derivative financial instrument as at 30th June 2021 is a liability of £18,000 (2020 - £37,000). The Group’s principal financial assets are its investment portfolios. The investment portfolios consist of equity investments, for which an interest rate profile is not relevant. Interest is not charged on trade and other receivables nor incurred on trade and other payables. Currency Exposures The table below shows the Group’s currency exposures. Such exposures comprise the monetary assets, at fair values, that are not traded in Sterling. Currency Euro Swiss Franc US Dollar Danish kroner Swedish kroner 2021 £000 3,726 1,767 2,520 395 - 8,408 2020 £000 3,173 1,523 2,238 179 445 7,558 The sensitivity to a 1% change in the sterling exchange rate would be to increase or decrease the fair values as set out by £83,247 in aggregate (2020 - £74,829). 39 39 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 40 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 40 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ Notes to the financial statements (continued) 22. Financial Instruments (continued) Liquidity Risk The Group’s policy is that its borrowings should be flexible and available over the medium term. The Group has a loan facility of £1,900,000 which expires on 30th September 2022, £650,000 of which was drawn down at 30th June 2021. The Group holds investments, most of which are listed on recognised stock exchanges. In normal markets these are, by their nature, liquid. However, there are long periods when the market may not be prepared to deal at realistic prices in unusually large blocks of certain shares and this particularly applies to the shares of Western and Finsbury. The Group maintains a General Portfolio of investment holdings within normal market size and which have aggregate market values in excess of the borrowings at any point in time. The policy is such investments must have an aggregate fair value of at least 167% of borrowings at any point in time. Market Risk The Group is exposed to market risk through the equity investments in other companies. The Group maintains a spread of investments over various sectors and monitors performance continuously as described above. The majority of the General Portfolio investments are in companies with good levels of liquidity. The future values of these investments will fluctuate because of changes in interest rates and other market factors. Reviews for indications of permanent impairment are carried out at least annually. The Directors believe that the exposure to market price risk from these activities is acceptable in the Group’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 £82,000 (2020 - £62,000) 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 £120,800 (2020 - £99,500) 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. Fair Value Investments within the general and strategic portfolios are carried at fair values determined by the prices available from the markets on which the instruments involved are traded. Unlisted investments are stated at cost net of impairment provisions because fair value cannot be readily determined. Movements in fair value net of impairment provisions are taken through the income statement. 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. Credit risk 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 40 40 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 41 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 41 28/09/2021 15:07 28/09/2021 15:07 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC of trade and other debtors during the year, there are no provisions against these assets and none are past their due date. 23. Related Undertakings In accordance with section 409 of the Companies Act 2006, a full list of related undertakings, the country of incorporation and the percentage of equity owned, directly or indirectly, as at 30th June 2021, is disclosed below: Company Lonfin Investments Limited City Group PLC Western Selection PLC* *No individual investor has control of the company Country % ownership United Kingdom United Kingdom United Kingdom 100% 51.4% 43.8% 41 41 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 42 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 42 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ Directors’ Report The Directors present their Report for the year ended 30th June 2021. 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 10. 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 Governance Statement, approved by the Board, is provided on pages 48 to 53 and is incorporated by reference herein. Results, Future Developments, Dividends, & Financial Instruments A review of the Group’s operations and performance during the financial year, setting out the position at the year-end, significant changes in the year, 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. Investment Policy The Group’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 Group’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 30 and 40 holdings in some of the world’s largest quoted companies. The intention is for between 30% and 70% of the overall investment portfolio with a maximum limit of 80% to be in “strategic” and “other” investments immediately following such investment, with the balance of the portfolio, to be in the “general portfolio”. “Other investments” will be limited to 50% of the overall value of the investment portfolio, measured immediately following such investment. No one “strategic investment” or “other investment” will represent more than 30% and 50% respectively of the value of all investments immediately following the making of such investment and no one “general portfolio” investment will represent more than 10 per cent of the value of the “general portfolio” at the time of such investment. Within these parameters, changes in strategic and other investments are decided on by the Board and changes to the general portfolio are decided on by the Board or, between Board meetings, by an Investment Committee of the Board. The investment guidelines within which the Investment Committee operates allow the Investment Committee discretion within the parameters set by the Investment Policy. The investment mix and level of borrowings are reviewed at each Board meeting. The Group’s gearing is limited at or below 70% of the total value of investments. 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 43 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 43 28/09/2021 15:07 28/09/2021 15:07 42 42 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC Going Concern Covid-19 has continued to have a profound personal, social and financial impact around the world. The United Kingdom has endured two additional lockdowns throughout the year, starting in November 2020 and January 2021, which continued to impact all areas of the economy. Although the Government removed the majority of legal restrictions on the 19th July 2021, this was amidst rising cases due to the Delta variant not only in the United Kingdom but also worldwide. Consequently, there have been additional fluctuations on stock markets in both the United Kingdom and globally, due to the uncertainty caused by the Delta variant. The long-term effect is likely to be on dividends cancelled, deferred, or re-based, and on increased volatility. At the time of writing the pandemic continues to influence both the United Kingdom and global economies and, with the potential for new waves of the pandemic occurring, it is not possible to say with any certainty when the effects of the pandemic may dissipate substantially. There is also concern of the potential effects when the Government assistance provided throughout the pandemic so far is withdrawn from companies that have struggled due to the lockdowns. In response to these uncertainties the Board has sought to minimise the risks to the Group and are actively monitoring the performance of the Group’s investments on a monthly basis. Due to the relatively low cost of operating the Group compared to the high value of assets held and that the Group has access to funds that will allow the Group and Parent Company to continue trading, the Board is satisfied that the Group shall continue to be able to meet its financial obligations as they fall due both in the short and longer term. The board will continue to seek out investment opportunities that will enhance the financial performance of the Group. The Board continues to adopt the going concern basis of accounting in the preparation of these financial statements. Risk Management and Principal Risks A description of the principal risks which arise from the Group’s financial instruments is set out in the Strategic Report on pages 8 and 9 and in Note 21 to the Financial Statements (Financial Instruments) on pages 38 to 40. Viability Statement In accordance with the provisions of the UK Corporate Governance Code, the Board has assessed the viability of the Group. The Group is a long-term investor and the Board believes it is appropriate to as- sess the Group’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- zon and the inherent uncertainties of looking to the future. In assessing the viability of the Group, the Board has carried out a robust assessment of the following factors: • • • • • the principal risks and uncertainties facing the Group as set out in the Strategic Report on pages 8 and 9; the potential operational and financial impacts of these risks and uncertainties in severe but plausible scenarios together with the effectiveness of any mitigating actions; the Group’s current position and strategy; the liquidity of the Group’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 Group’s prospects and viability in the future. 43 43 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 44 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 44 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ Directors’ Report (continued) 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 Group, the Board has concluded that it has a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the five-year period to 30th June 2026. Directors’ and Directors’ Interests A list of the present directors of the Company is shown on page 1. A list of all the directors who served during the year and their beneficial interests (and those of their connected persons) in the Company’s ordinary shares as at 30th June 2020 and 2021 is set out below: D.C. Marshall * F.W.A. Lucas † J.H. Maxwell E.J. Beale W.H. Marshall * 30th June 2021 30th June 2020 No. of Ordinary Shares 12,890,693 Shares 162,500 65,000 - 12,890,693 No. of Ordinary Shares 12,890,693 162,500 65,000 - 12,890,693 * † These holdings arise as the individuals concerned are/were trustees and/or directors of entities that hold/held ordinary shares in the Company. The interest of Mr. W.H. Marshall, overlaps with the interest of Mr. D.C. Marshall. Neither Mr D.C. Marshall nor Mr W. H. Marshall had any beneficial interest in these shares (2019 – nil). Of this figure, Dr. F.W.A. Lucas owns 80,000 ordinary shares personally and 82,500 ordinary shares are owned by Loeb Aron & Company Ltd, of which Dr. F.W.A. Lucas is a director and shareholder. On 29th February 2016, Mr E.J. Beale, being an eligible employee under the rules of the London Finance & Investment Group Company Share Option Plan, was granted options over 80,000 ordinary shares with an exercise price of 37.5p per share. The options granted may be exercised no later than the tenth anniversary of the date of grant. There have been no changes in directors' share interests between 1st July 2021 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 General Meeting. Between General Meetings the Board may appoint additional directors who are required to stand for election at the next General Meeting. In addition, the Company’s Articles of Association, as amended, now require all the directors of the Company to offer themselves for re-election on an annual basis. Accordingly, this year, Mr D.C. Marshall, Dr F.W.A. Lucas, Mr J.H. Maxwell, Mr E.J. Beale and Mr W. H. Marshall will retire and being eligible, offer themselves for re- election as directors at the AGM on 1st December 2021. Substantial Interests In addition to the directors’ shareholdings shown above, as at 30th June 2021, the Company had been notified under Disclosure and Transparency Rule 5 of the following significant holdings of voting rights in its shares. Identity of person or group Lynchwood Nominees Limited W.T. Lamb Investments Limited Winterflood Client Nominees Limited No. of Ordinary Shares 14,928,832 4,629,000 2,174,524 Percentage of issued Ordinary Share capital 47.8% 14.8% 7.0% No changes to the significant holdings set out above have been notified to the Company between 1st July 2021 and the date of this report. Gross 44 44 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 45 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 45 28/09/2021 15:07 28/09/2021 15:07 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC Independent Auditor The respective responsibilities of the Directors and the Independent Auditor, PKF Littlejohn LLP, in connection with the financial statements appear on pages 12 to 18. Each Director has taken all the steps that they ought to have taken as a director including making appropriate enquiries of fellow Directors to make themselves aware of any information needed by the Company’s 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. At the Company’s forthcoming AGM to be held on 1 December 2021 a resolution will be proposed that PKF Littlejohn LLP be re-appointed as the Company’s Independent Auditor following the AGM. Corporate Governance 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 Annual General Meeting (AGM) The Notice of the AGM, to be held on 1st December 2021, can be found on pages 66 to 67 and sets out the business to be considered at the meeting. Resolutions 1 to 11 will be proposed as Ordinary Resolutions and Resolution 12 will be proposed as a Special Resolution. Certain elements of the business relating to these Resolutions are explained below: Resolution 3 Directors’ Remuneration Report The annual report on Directors’ Remuneration, as set out in the Directors’ Remuneration Report on pages 58 to 64 provides information on the Directors’ remuneration. Resolution 4 proposes the approval of the Directors’ Remuneration Report, other than the part containing the Directors’ Remuneration Policy, which will be the subject of Resolution 3. Resolutions 4, 5, 6, 7 and 8 Re-election of Directors The Directors, David Marshall, Dr Frank Lucas, John Maxwell, Edward Beale and Warwick Marshall, are subject to annual re-election. Accordingly, each of these Directors will retire at the AGM on 1st December 2021 and each offers himself for re-election as a director of the Company. The Board has confirmed, following a performance review of the directors and the Chairman, that each of the directors, subject to re-election, continues to perform effectively and demonstrates commitment to his role. Further information relating to their experience and background can be found on page 1. Resolution 9 Re-appointment of the Independent Auditor It is proposed that PKF Littlejohn LLP be re-appointed as the Company’s Independent Auditor to continue in office following the AGM on 1st December 2021. Resolution 10 Allotment of share capital Resolution 11 provides authority to allot shares in accordance with section 551 of the Companies Act If passed, this resolution would 2006 in the period up to the conclusion of the Company’s AGM in 2022. 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. 45 45 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 46 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 46 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ Directors’ Report (continued) Annual General Meeting (AGM) (continued) Resolution 11 Disapplication of pre-emption rights Resolution 12 will empower the directors to allot ordinary shares for cash, pursuant to the authority granted by Resolution 11, 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 23rd September 2021 (being the latest practicable date prior to publication of this report). The power given by this resolution shall expire upon the expiry of the authority conferred by Resolution 11 set out above, Although the directors will be entitled to make offers or agreements before the expiry of that power which would or might require equity securities to be allotted. 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. Recommendation The Board believes that the approval of Resolutions 1 to 11 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 11 as the directors intend to do in respect of their own beneficial holdings which as at 23rd September 2021 (being the latest practicable date prior to publication of this report) amount in aggregate to 145,000 ordinary shares, representing approximately 0.46% of the ordinary shares currently in issue. Relationship Agreement In compliance with the Listing Rules the Company has entered into a Relationship Agreement with David Marshall, the Company’s Chairman, in his capacity as a Trustee of a controlling shareholder of the Company as defined by the Listing Rules. The Company has complied with the independence provisions contained in the Relationship Agreement throughout the year ended 30th June 2021 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. Material Agreements 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. Each 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. 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. 46 46 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 47 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 47 28/09/2021 15:07 28/09/2021 15:07 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC Political and Charitable Donations No political or charitable donations have been made during this last financial year. Environmental, Social and Human Rights Issues The Board does not consider that there is any further information relating to environmental matters, employees, social, community and human rights issues that it for an understanding of the development, performance or position of the Company’s business. is necessary to report Greenhouse Gas Emissions The Group is required to report on its greenhouse gas emissions. The Group had no Scope 1 emissions. This report is made in respect of Scope 2 emissions. During the year ended 30th June 2021, the Group purchased electricity equating to a carbon dioxide equivalent of 10 tonnes (1 tCO2e/employee) (2020 – 10 tonnes). By Order of the Board City Group PLC Company Secretary 24th September 2021 47 47 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 48 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 48 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ Corporate Governance Statement Corporate Governance Policy Corporate Governance 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 from time to time by the Financial Reporting Council (FRC), which focuses on processes and structures, and which is deemed to constitute best practice in Corporate Governance for most companies. Directors are required to report to shareholders on how the Company applies the principles of the Code and confirm that the Company complies with the Code’s provisions or explain why it does not. In July 2018, the Code’s Principles and Provisions were revised further by the FRC to simplify the Code and enhance requirements for governance structures and processes. The 2018 Code Principles and Provisions apply to companies whose accounting periods commence on or after 1st January 2019. Accordingly, for the year ended 30th June 2021, the Company has applied the principles of the 2018 UK Corporate Governance Code and confirms its compliance with those principles or has duly explained any non-compliance. The JSE (Johannesburg Stock Exchange) requires that JSE listed companies report on their compliance with the Code of Corporate Practices and Conduct (‘King Code’) contained in the King Report on Corporate Governance. Currently, all JSE listed companies are required to comply with the disclosure requirements and principles of the King Code as set out the King IV Report. As the Company’s primary listing is on the Main Market of the London Stock Exchange and, as such, is required to comply with the Code, the Company is not required to comply with the King Code as well. Compliance This Corporate Governance Statement describes how the Company applies the principles set out in 2018 UK Corporate Governance Code (the “Code”). The Company has been in full compliance with the Code throughout the year ended 30th June 2021. Composition of the Board The Board comprises the Chairman, David Marshall, Senior Independent Non-Executive Director, John Maxwell, Dr Frank Lucas, Edward Beale and Warwick Marshall. All of the Directors are Non-Executive Directors. Independence of the Chairman The board has reviewed the independence of the Chairman in respect of David Marshall having served more than nine years on the board. The board consider David Marshall to be an effective Chairman who continues to use independent judgement in his role and brings a wealth of experience to the role. The Board are therefore are satisfied that David Marshall continue in hie role as Chairman. Independence of the Directors The Board has reviewed the independence of the non-executive directors and John Maxwell and Dr Frank Lucas are considered by the Board to be independent despite the fact that both have served on the Board for more than nine years. The Board has concluded that John Maxwell and Dr Frank Lucas both continue to demonstrate the essential characteristics of independence expected by the Board. In reaching this decision, the Board also took into account the fact that Dr Frank Lucas is a director of Loeb Aron & Company Limited which acted as Nex Exchange Growth Market (Now Aquis Growth Market) corporate adviser to Western until June 2018. 48 48 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 49 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 49 28/09/2021 15:07 28/09/2021 15:07 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC Conflicts of Interest 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 Group, 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. Appointment, election and re-election of Directors Responsibility for the process of appointment of the 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 General Meeting. Between General Meetings the Board may appoint additional directors who are required to stand for election at the next General Meeting. The Company’s Articles of Association require that all new directors seek election to the Board at the next Annual General meeting after their appointment. In addition, at every Annual General all members of the Board, other than newly appointed Directors who are subject to election, are subject to annual re- election and there is, therefore, no requirement at the forthcoming AGM or in the future for any directors to retire by rotation. Resolutions approving the re-election and election of each of the Directors will be proposed to Shareholders at the forthcoming AGM. The Board has reviewed the skills and experience of each and supports their re-election or election, as the case may be. As a long-term investment company it is appropriate for the Directors to serve on the Board for more than a single term, subject to continuing satisfactory performance. Given the small size of the Board, this results in infrequent changes to the composition of the Board. Workings of the Board The Board is collectively responsible to Shareholders for the success of the Group. Entrepreneurial leadership is provided by capitalising on the skills and experience of the Investment Committee allied to the strategic vision and expertise of other Board members. 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 General Portfolio between Board meetings. Board Operation As an investment company, the Company’s Board is comprised of Non-Executive directors. It has no Chief Executive or any other executive directors. The Non-Executive 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 the 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, subject to constraints imposed as a result of Covid-19 49 49 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 50 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 50 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ Corporate Governance Statement (continued) 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 Group, 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 five occasions during the year; there were also two Audit Committee meetings, one Remuneration Committee meeting and one Nomination Committee meeting during the year. All such meetings were quorate and followed a formal agenda. Attendance at the Board meetings and the Audit, Remuneration and Nomination Committee meetings during the year is shown in the following table: Board Audit Committee Remuneration Committee Nomination Committee No. of meetings in the year to 30th June 2021 D.C. Marshall F.W.A. Lucas J.H. Maxwell E.J. Beale W. H. Marshall 5 5 5 5 5 5 2 - 2 2 2 - 1 - 1 1 - - 1 - 1 1 - - The Board’s Committees The Board now has four committees: The Investment Committee is chaired by David Marshall and its other member is Edward Beale. The Nomination Committee is chaired by John Maxwell and its other member is Dr Frank Lucas. The Audit Committee is chaired by Dr Frank Lucas and its other member is John Maxwell. Both members of the Audit Committee have recent and relevant financial experience. The Remuneration Committee is chaired by John Maxwell and its other member is Dr Frank Lucas. Committee Meetings are held independently of Board meetings and invitations to attend are extended by the committee chairmen to other directors and the Group’s advisers as appropriate. Investment Committee 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 European 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. 50 50 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 51 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 51 28/09/2021 15:07 28/09/2021 15:07 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC Audit Committee The Audit Committee has a number of specific responsibilities including reviewing the Group’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. Nomination Committee 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 Group from the other members of the Board and the need to acquire any specific capabilities. The Nomination Committee will then undertake whatever process is most appropriate for the identification of suitable candidates and their assessment, taking into account any other commitments candidates might have. Appointments will be made on merit against objective criteria. Remuneration Committee The 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 General Meeting. The current rates of remuneration are set out in detail in the Directors’ Remuneration Report on pages 61 to 63. The remuneration of the executive directors and employees of the Company’s subsidiary, City Group, is determined by the Board of City Group, which includes David Marshall and Edward 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. Performance Evaluation 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. Furthermore, the Board is satisfied that its committees, as currently constituted, continue to be effective. 51 51 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 52 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 52 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ Corporate Governance Statement (continued) Board Succession and Diversity 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 Board 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. There are no female Board members or senior management members at present. Internal Control and Risk Management There is a well-established system of internal controls set within a framework of clearly defined structures and accountabilities with well understood policies and procedures; supported by training, budgeting, reporting and review procedures. Board decisions are implemented on a day to day basis by the subsidiary company, City Group. The framework for internal financial control established in that company has been reviewed by the Board and is regarded as effective. The 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 Group which provides day to day administration and accounting services to the Group. 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 Group is most exposed to risk, considers the financial implications and assesses the adequacy and effectiveness of their control. The Board has discussed the results of this review and the Directors can therefore confirm that they have reviewed the effectiveness of the Company’s system of internal control. Auditors The Board, through the Audit Committee, is developing a good working relationship with its Independent Auditor, PKF Littlejohn LLP, who were appointed at the Annual General Meeting in November 2016. Shareholder Communications The Board strives to present a fair, balanced and understandable assessment of the Group’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. 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 53 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 53 28/09/2021 15:07 28/09/2021 15:07 52 5252 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC Shareholder communication centres primarily on the publication of annual and interim accounts and occasional press releases and trading updates. The Chairman is available for discussions with Shareholders throughout the year and particularly at the time of results announcements. Mr J. H. Maxwell, the Senior Independent Non-Executive Director, is also always available should a Shareholder wish to draw any matters to his attention. The Annual General Meeting provides a forum for discussion by Shareholders with the Board. Shareholders are encouraged to attend the AGM and to participate in proceedings by asking questions during the formal part of the meeting, voting on the resolutions put to the meeting and providing Board members with their views in informal discussions after the meeting. Shareholders are also encouraged, if they have any questions or enquiries to make contact with the Company at any time during the year by contacting the Company Secretary, City Group PLC (1 Ely Place, London EC1N 6RY; Tel: 020 7796 9060). David Marshall Chairman 24th September 2021 53 53 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 54 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 54 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ Audit Committee Report Audit Committee 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 Frank Lucas and John Maxwell have recent and relevant financial experience. The Committee meets at least twice a year to consider the Group’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 re-assessed on an annual basis. Responsibilities The main responsibilities of the Committee are: • • • • • • • • • • to review the half yearly and annual financial statements of the Group, the accounting policies applied therein and compliance with financial and regulatory reporting requirements. to assess whether the annual report and financial statements, taken as a whole, is fair, balanced and understandable and provide the information necessary for Shareholders to assess the Group’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 on completion of their work. The Committee also uses these meetings 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 the Independent Auditor’s effectiveness, resources and qualification. independence, objectivity, to review and monitor the internal control systems and risk management systems (including non- financial risks) on which the Group is reliant. to consider annually whether there is a need for the Group to have its own internal audit function. to review the arrangements in place whereby management, office and Group secretarial services are provided to the Group and whereby management and staff may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters (‘whistleblowing’) and 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 Group’s financial statements. Audit Committee Activities The Audit Committee met on two occasions in the year ended 30th June 2021, in September 2020 and February 2021. 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. 54 54 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 55 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 55 28/09/2021 15:07 28/09/2021 15:07 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC The Audit Committee has undertaken the following activities in the year ended 30th June 2021 in discharge of its responsibilities: Financial Statements 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 mind, the Committee reviewed and considered the draft 2021 Annual Report & Financial Statements as a whole and subsequently made recommendations to the Board and City Group, the Company Secretary. The Committee considers the revised 2021 Annual Report & Financial Statements to be ‘fair, balanced and understandable’. The Group’s 2021 interim results and report were also reviewed and considered by the Committee prior to publication in February 2021. Valuations Listed investments are a significant component of the Group’s investment business and are also a significant feature in the Group’s financial statements. The Committee has reviewed the Group’s valuation policy for its investments. All such investments are listed in active stock markets and the Committee considers that the Group’s General Portfolio Investments are substantially liquid. The Group’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, which are quoted on junior UK stock markets to be appropriate, notwithstanding their illiquidity. Going concern and viability statements The Committee assessed whether it was appropriate to prepare the Group’s 2021 Annual Report & Financial Statements and for the 2021 Interim results and report on a going concern basis and following such assessments, made recommendations to the Board whose conclusions were included in the Interim results and report published in February 2021 and are set out in the Directors’ Report on page 42. The Group’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 Group 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 Group. After reviewing the Group’s Strategic Investments and General 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 June 2026, could be made in the 2021 Annual Report & Financial Statements for the reasons set out in the Directors’ Report on page 42. Significant Risks and Issues The significant accounting issue considered by the Committee during the year in relation to the Group's financial statements was the valuation of investments particularly with reference to the on-going effects of Covid-19. A further significant risk is to ensure the investment portfolio accounted for in the financial statements reflects ownership of the relevant securities. 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. 55 55 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 56 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 56 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ Audit Committee Report (continued) Internal control The Board as whole is responsible for the Group’s system of internal control and for reviewing its effectiveness. The system is designed to manage rather than eliminate the risk of failure to achieve the Group’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 June 2021, reviewed the Group’s internal control processes and is satisfied that no significant areas of weakness have been identified and that the existing processes and controls are appropriate having regard to the Group’s investment business. In particular, the Committee reviews reports from its subsidiary, City Group, to ensure that internal controls over the Group’s investments are adequate. The Group’s audit includes independent confirmation of the existence of all investments and the valuation of investments to external price sources. Audit process and the Independent Auditor PKF Littlejohn LLP was appointed as the Company’s new Independent Auditor at the Company’s AGM in November 2016 and was re-appointed as the Company’s Independent Auditor at the Company’s AGM in November 2020. The Committee meets each year with the Independent Auditor. The Company’s Independent Auditor, PKF Littlejohn LLP, provided a detailed planning report in advance of the annual audit work. The Committee was able to review PKF Littlejohn LLP’s detailed planning report prior to commencement of the audit work and, following completion of their audit work, the Committee discussed with PKF Littlejohn LLP their audit report and findings. In the course of these discussions the Committee was able to review the level and scope of materiality adopted by PKF Littlejohn LLP in the audit process. Audit effectiveness The Committee reviews annually the audit process conducted by PKF Littlejohn LLP and considers 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 also obtains assurance from PKF Littlejohn LLP on the quality of its audit work. Non-audit work 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. City Group has confirmed to the Committee that PKF Littlejohn LLP has not carried out any non-audit work activities on behalf of the Company in the year ended 30th June 2021 or since the year-end. Re-appointment of PKF Littlejohn LLP as Independent Auditor PKF Littlejohn LLP was re-appointed as the Company’s Independent Auditor at last year’s AGM. The Committee has concluded that PKF Littlejohn LLP have provided an effective audit and the Committee has recommended to the Board the re-appointment of PKF Littlejohn LLP as the Group’s Independent Auditor at the Company’s forthcoming AGM. 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 57 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 57 28/09/2021 15:07 28/09/2021 15:07 56 56 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC Relations with Shareholders The Board places great importance on communication with shareholders and up to date information can be obtained on the Group through City Group, the Company Secretary. The Group’s Annual Report & Financial Statements is sent to shareholders and the Annual Report & Financial Statements and the Company’s Interim results and report can be downloaded from City Group’s website www.city- group.com/london-finance-investment-group-plc Dr Frank Lucas Chairman of the Audit Committee 24th September 2021 57 57 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 58 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 58 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ Directors’ Remuneration Report Remuneration 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 John Maxwell and Dr Frank Lucas have recent and relevant financial experience. The Committee meets at least once a year to consider the remuneration arrangements for the Directors and senior managers. The Committee will ensure that the arrangements are aligned to the Company’s strategy, the aim of which is to promote long term sustainable success and generate growth in shareholder value in real terms over the medium to long term whilst maintaining a progressive dividend policy. 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 re-assessed on an annual basis. Key Objectives of the Committee The key objectives of the Committee in reviewing the Company’s Remuneration Policy and making recommendations to the Board as to changes in the policy are as follows: • • • • • remuneration for the current Directors, all of whom are Non-Executive Directors, should be competitive, but not excessive, in order to motivate and retain its Directors and grow the Group successfully remuneration packages for new Non-Executive Directors or Executive Directors, should the appointment of Executive Directors be considered appropriate, should be competitive but not excessive, in order to attract, motivate and retain such Directors and grow the Group successfully remuneration of Executive Directors, if the appointment of Executive Directors is considered appropriate, should be linked to the long-term performance of the Group’s business any performance related remuneration for Executive Directors should be set so as to align the interests of the Executive Directors with those of the Shareholders In determining remuneration arrangements for the Directors, the Committee will also take into consideration the pay and employment conditions in other parts of the Group The Form of the Directors’ Remuneration Report The Directors’ Remuneration Report has been prepared the Directors' 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 remuneration arrangements for the 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, John Maxwell. 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 59 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 59 28/09/2021 15:07 28/09/2021 15:07 58 58 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC Directors’ Remuneration Policy The current remuneration policy for the Directors was approved by shareholders at the Company’s AGM held in November 2019. The Company’s Remuneration Policy needs to be put to a binding shareholders’ vote at least once every three years. The Committee has reviewed the Company’s Remuneration Policy and has considered whether changes to the policy should be made at this time. A new policy shall not be required to be presented to the shareholders until the AGM in 2022 unless the Committee consider it appropriate to propose revisions to the policy before this date. The Directors’ Remuneration Policy is as follows: Salaries and fees The Company’s Board has no Executive Directors and is entirely comprised of Non-Executive Directors. 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 is 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, following recommendations from the Committee, and increases will not be higher than inflation unless this can be justified having regard to the performance of the Group or additional responsibilities taken on by Directors. The Group’s policy for future increases in Directors’ fees is similar to the policy for increases in salaries to City Group employees but in the case of Directors’ fees the reviews will be performed every 3-5 years, with a review having taken place in July 2018. The next review is expected to take place around September 2022. Long term Incentive Schemes Save for the Group’s Company Share Option Plan, the Group has no other long-term incentive schemes. The Group has no plans to adopt any further long-term incentive schemes in the future, although the Board will keep such schemes under review in the light of changing legislation. The Group’s Company Share Option Plan was established, in September 2006, to incentivise full-time employees and directors of City Group and to recognise outstanding efforts or achievements, or otherwise to attract, motivate or retain staff. Edward Beale has been the only Director to receive option awards. Edward Beale was awarded options on 29th February 2016 over 80,000 shares, prior to his appointment to the Board, and these options may be exercised at any time prior to 1st March 2026. Bonuses or other Discretionary Payments The Company does not make bonus payments or other discretionary payments to any of the Directors. Part of the profits of City Group (currently 50%) are allocated to a staff bonus pool. Pensions and other Benefits The Directors are covered by the Company’s directors’ and officers’ liability insurance cover which is renewed annually. Other than this insurance cover, no other benefits, such as pension contributions, private medical health cover, death in service insurance, life insurance or company cars are provided for the Directors. 59 59 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 60 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 60 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ Directors’ Remuneration Report (continued) Remuneration on Appointment to the Board It is anticipated that new Non-Executive Directors will be remunerated on a similar basis to existing Directors. No additional payments will be made to such Directors. The Company has no Executive Directors at present and there is no intention in the immediate future to appoint any Executive Directors. However, should it be appropriate in the future to recruit an Executive 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. The remuneration package offered in respect of an Executive 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 basic salary. Loss of Office The Chairman and the Directors have no entitlement to compensation for loss of office as Directors of the Company. City Group The remuneration paid to the directors and employees of the Company's subsidiary, City Group, in the year ended 30th June 2021 was reviewed and considered by the board of City Group, which includes David Marshall and Edward Beale. Performance Graph The above graph shows Lonfin's Total Shareholder Return (TSR) performance compared to the TSR of the FTSE Eurofirst 100 index over the past five years. The Group’s main activity is that of an investment Group and the Board believes that because the Group’s General Portfolio concentrates on FTSE 100 companies, or European equivalent, this index is best suited as the comparator index. The Group is not a part of the FTSE Eurofirst 100 Index, being a member of the FTSE Fledgling Index, which is not deemed an appropriate comparator as it contains many small companies of varying nature. TSR is defined as the percentage change over the period in market price assuming the reinvestment of income and funding of liabilities of the theoretical holding. TSR has been calculated on a three-month basis in order to reduce the volatility associated with spot prices. 60 60 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 61 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 61 28/09/2021 15:07 28/09/2021 15:07 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC 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 2021 and describes how the Company’s Remuneration Policy will be implemented for the year ending 30th June 2021. Chairman’s Remuneration As the Company has no Chief Executive Officer the table below shows the total remuneration of the Chairman, David Marshall, for the 5 years to 30th June 2021 (all of which have been audited) by way of comparison with the total return to shareholders illustrated in the Performance Graph set out above. 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 June 2021. The Chairman’s remuneration is by way of fixed fees only. He receives no variable pay element or equity incentives or taxable benefits. David Marshall, Non-Executive Chairman, Total fees paid Year ended 30th June 2017 2018 2019 2020 2021 Year ending 30th June 2022 £ 18,000 18,000 18,000 20,000 20,000 Total fees expected to be paid 20,000 The Chairman, David Marshall, cedes his Director’s fees to Marshall Monteagle PLC. The Chairman receives no other payment or benefits from the Company. 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 David Marshall, the Chairman, and the Directors, in the year ended 30th June 2021, compared with the fees paid to the Chairman and the Directors in the previous year. The table also shows the fees expected to be paid to the Chairman and the Directors in the year ending 30th June 2022. 61 61 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 62 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 62 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ Directors’ Remuneration Report (continued) Non-Executive Directors Mr. D. C. Marshall  Mr. J.H. Maxwell Dr. F.W.A. Lucas Mr E.J. Beale ⧫ Mr W.H. Marshall Total fees payable Year ending 30th June 2022 Total fees paid Year ended 30th June 2021 Year ended 30th June 2020 £ 20,000 14,000 14,000 14,000 14,000 76,000 £ 20,000 14,000 14,000 14,000 14,000 76,000 £ 20,000 14,000 14,000 14,000 14,000 76,000  In the year ended 30th June 2020, Mr Marshall has ceded his Director’s fees to Marshall Monteagle PLC. Dr F.W.A. Lucas has ceded his Director’s fees to Loeb Aron & Co Limited. ♦ Mr E.J. Beale has ceded his Director’s fees to Marshall Monteagle PLC The remuneration of the Chairman and the Directors for the year ending 30th June 2022 will be at the same level as for the year ended 30th June 2021. The Group’s policy for future increases in fees to Directors is similar to the policy for increases in salary to Group employees save that in the case of Directors’ fees the reviews will be performed every 3-5 years with the next review being expected to take place in September 2022. Directors’ and Group Employees’ Remuneration compared to Shareholders’ dividends 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 for the three years ended 30th June 2021, which has been audited, is set out below. Year ended 30th June 2019 2020 2021 The Board and employees of the Group’s total remuneration (audited) £ 460,000 468,000 530,000 Dividends paid to Shareholders (audited) £ 360,000 359,000 359,000 Directors’ interests in the Company The interests of the Directors (and their connected persons) at 30th June 2021 are as set out in the table in the Directors’ Report on page 44. 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 63 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 63 28/09/2021 15:07 28/09/2021 15:07 62 62 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC Long term Incentive Schemes No option awards under the Group’s Company Share Option Plan have been made to any of the Directors or employees of the Group in the year ended 30th June 2021 and no option awards are envisaged for the year ending 30th June 2022. No Directors or current employees of the Group have received option awards under the Company’s Group Share Option Plan in the past save for Edward Beale who, being at the time an eligible employee under the rules of the Group’s Company Share Option Plan, on 29th February 2016 was granted options over 80,000 ordinary shares in the Company with an exercise price of 37.5p per share. These options may be exercised at any time prior to 1st March 2026. This information has been audited. Bonuses or other Discretionary Payments No bonuses or other discretionary payments have been made by the Group to any of the Directors in the year ended 30th June 2021 and no bonuses or other discretionary payments will be paid in the year ending 30th June 2022. This information has been audited. Pensions and other Benefits No pension contributions have been paid in respect of any of the Directors in the year ended 30th June 2021 and no pension contributions will be paid by the Company in the year ending 30th June 2022. This information has been audited. Loss of Office 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 June 2021 and no such payments will be paid in the year ending 30th June 2022. This information has been audited. Remuneration on Appointment to the Board No payments or commitments in respect of payments in respect of any Board appointments have been paid in the year ended 30th June 2021. This information has been audited. It is anticipated that, if new Non-Executive Directors are appointed in the year ending 30th June 2022 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 an Executive Director to the Board in the year ending 30th June 2022 or in subsequent years, the remuneration package to be offered will be in line with the policy for Executive Directors as set out in the Directors Remuneration Policy above. City Group The remuneration payable to the executive directors and employees of the Company's subsidiary, City Group, for the year ended 30th June 2022 will be reviewed and considered by the board of City Group, which includes David Marshall and Edward Beale. 63 63 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 64 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 64 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ Annual Statement by John Maxwell, Chairman of the Remuneration Committee On behalf of the Board, I am pleased to present the Directors’ Remuneration Report for the year ended 30th June 2021. I confirm that the Directors’ Remuneration Policy, set out above, summarises the policy which was approved by shareholders at the AGM in November 2019. The Company’s Remuneration Policy needs to be put to a binding shareholders’ vote at least once every three years At this time, the Board is comprised wholly of Non-Executive Directors, including the Chairman, who only receive directors’ fees, the scale of which is limited by the provisions of the Company’s Articles of Association. Notwithstanding the scale of fees received by each of the Directors, the Board as a whole is committed to promoting the success of the Company and the growth in the Company’s net assets and the dividends paid to Shareholders. 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 June 2021 and the remuneration arrangements for the Board for the year ending 30th June 2021. A resolution to approve the Directors’ Remuneration Report, will be proposed at the Company’s AGM to be held on 1st December this year at which the financial statements will be approved. This Directors’ Remuneration Report was approved by the Board and signed on its behalf by: John Maxwell Chairman of the Remuneration Committee 24th September 2021 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 65 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 65 28/09/2021 15:07 28/09/2021 15:07 64 64 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC Summary of Results For the five years ended 30th June 2021 Consolidated Statement of Financial Position Issued share capital Share premium and other reserves Company’s retained realised profits Shareholders’ funds (all equity) Non-controlling interest Disposition of Capital Non-current assets Current assets Listed investments (General Portfolio) Other current assets Cash and deposits Liabilities and deferred tax Net assets per share Dividend per share 2021 £000 2020 £000 2019 £000 2018 £000 2017 £000 1,560 11,584 5,749 18,893 129 19,022 1,560 8,740 5,498 15,798 103 15,901 1,560 12,960 3,749 18,269 92 18,361 1,560 14,583 4,253 20,396 105 20,501 1,560 14,379 4,544 20,483 97 20,580 8,369 6,834 8,203 10,663 10,687 12,081 125 309 12,515 (1,862) 19,022 60.5p 1.15p 9,948 166 269 10,383 (1,316) 15,901 11,383 194 240 11,817 (1,659) 18,361 10,676 251 304 11,231 (1,393) 20,501 10,766 220 222 11,208 (1,315) 20,580 50.6p 1.15p 58.6p 1.15p 65.7p 1.15p 65.9p 1.1p 65 65 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 66 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 66 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ NOTICE OF ANNUAL GENERAL MEETING NOTICE is hereby given that the Annual General Meeting of London Finance & Investment Group PLC (the “Company”) will be held at the offices of City Group PLC, 1 Ely Place, London EC1N 6RY on Wednesday 1st December 2021 at 12.30 p.m. (14.30 p.m. South Africa time). In order to ensure the safety of those planning to attend the Annual General Meeting and that the appropriate safety arrangements are in place, it is requested that shareholders inform the company secretary of their intention to attend the Annual General Meeting by email to mail@citygroup.com. If shareholders do not wish to attend, we strongly encourage you to appoint the Chairman as your proxy and submit the proxy form as soon as possible. Questions may also be submit- ted by email and responses. will be provide subsequent to the meeting. Resolutions The Resolutions to be voted upon at the Annual General Meeting are as follows: To consider and, if thought fit, pass the following resolutions, of which Resolutions 1 to 10 will be proposed as Ordinary Resolutions and Resolution 11 will be proposed as a Special Resolution. 1. 2. 3. 4. 5. 6. 7. 8. 9. To receive the financial statements for the year ended 30th June 2021, together with the reports of the directors and auditors thereon. To declare a final dividend for the year ended 30th June 2021 of 0.60 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 Financial Statements for the year ended 30th June 2021. To re-elect Mr D.C. Marshall as a director, who, is subject to annual re-election and who retires and offers himself for re-election. To re-elect Dr F.W.A. Lucas as a director, who is subject to annual re-election and who retires and offers himself for re-election To re-elect Mr J. H. Maxwell as a director, who is subject to annual re-election and who retires and offers himself for re-election. To re-elect Mr E. J. Beale as a director, who is subject to annual re-election and who retires and offers himself for re-election. To re-elect Mr W. H. Marshall as a director, who. is subject to annual re-election and who retires and offers himself for re-election. To re-appoint PKF Littlejohn LLP as the Company’s Independent Auditor and to authorise the directors to agree its remuneration. 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 67 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 67 28/09/2021 15:07 28/09/2021 15:07 66 66 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC 10. 11. (a) 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 2022, 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. THAT, subject to the passing of Resolution 11 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 11, 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 11 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. By Order of the Board City Group PLC Company Secretary 67 1 Ely Place London EC1N 6RY 24th September 2021 67 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 68 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 68 28/09/2021 15:07 28/09/2021 15:07 _____________________________________________ Notes 1. 2. 3 4. 5. 6. 7. 8. 9. A form of proxy is enclosed. Shareholders are encouraged to nominate the Chairman as their proxy. 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, Steelpark Road, Halesowen, West Midlands, B62 8HD, 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 12.30 p.m. (14.30 p.m. South Africa time) on 29th November 2021. Any member or his/her proxy, with the right to attend the Meeting has the right to submit any question, relating to the business of the Meeting, to the company secretary at mail@city- group.com. All questions should be received by 12.30 p.m. (14.30 p.m. South Africa time) on 29th November 2021 Only shareholders registered in the register of members of the Company as at 18.00 p.m. (20.00 p.m. South Africa time) on 26th November 2021 shall be entitled to vote by proxy at the Meeting in respect of the number of shares registered in their name at such time as long as their proxy form is submitted within the deadline. In the case of joint holders, the vote of the senior holder who tenders a vote 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 on request to the company secretary by making the request to mail@city-group.com. As at 23rd September 2020 (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 23rd September 2020 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 shareholders’ 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 10. Shareholders 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 Meeting; or (b) any circumstances connected with an Auditor of the Company ceasing to hold office since the last AGM, which the members propose to raise at the meeting. The Company cannot require the shareholders requesting the publication to pay its expenses. Any statement placed on the website must also be sent to the Company’s Auditors no later than the time it makes its statement available on the website. The business which may be dealt with at the Meeting includes any statement that the Company has been required to publish on its website pursuant to this right. Note: For shareholders registered on the South African branch of the register: 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 69 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 69 28/09/2021 15:07 28/09/2021 15:07 68 68 London Finance & Investment Group PLC___________ London Finance & Investment Group PLC 11. A form of proxy is attached for the convenience of any certificated or dematerialised Lonfin shareholders with own-name registrations who cannot attend the 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 12.30 p.m. (14.30 p.m. South Africa time) on 29th November 2020. 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 Meeting do not deliver proxy forms to the transfer secretaries timeously, such shareholders will nevertheless at any time prior to the commencement of the voting on the resolutions at the Meeting be entitled to lodge the form of proxy in respect of the Meeting, in accordance with the instructions therein with the Chairman of the Meeting. Record Dates: 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 General Meeting (‘the notice record date’) Annual Report published on SENS and posting date The last date to trade in order to be eligible to participate in and vote at the Annual General Meeting Record date for the purpose of determining which shareholders of the Company are entitled to participate in and vote at the Annual General Meeting (‘the voting record date’) Last day for lodging forms of proxy by 14.30 p.m. (SA time) Date of the Annual General Meeting at 14.30 p.m. (SA time) Result of Annual General Meeting published on SENS 2021 Thursday 7th October Friday 8th October Tuesday 23rd November Friday 26th November Monday, 29th November Wednesday, 1st December Wednesday, 1st December Change of Address: Members are requested to advise the United Kingdom Registrars, Neville Registrars Limited, or the South African Registrars, Computershare Investor Services (Pty.) Limited, of any change of address. 69 69 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 70 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 70 28/09/2021 15:07 28/09/2021 15:07 London Finance & Investment Group PLC _____________________________________________ FORM OF PROXY 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 Annual General Meeting, failing whom …………………………………………………………………………………………………………….. as my / our proxy to vote for me / us on my / our behalf at the Annual General Meeting of the Company to be held on 1st December 2021 at 12:30 p.m. (14.30 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. RESOLUTIONS Ordinary Resolutions For Against Withheld ✃ 1. To receive the financial statements for the year ended 30th June 2021, together with the reports of the directors and auditors thereon. 2. To declare a final dividend for the year ended 30thJune 2021. 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-elect Mr W. H. Marshall as a director. 9. To re-appoint PKF Littlejohn LLP as Auditors of the Company and to authorise the directors to agree its remuneration. 10. To authorise the directors to allot shares under Section 551 of the Companies Act 2006. Special Resolution 11. To disapply pre-emption rights. Dated………………………………………2021 Signature…………………………………… 70 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 71 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 71 28/09/2021 15:07 28/09/2021 15:07 London Finance & Investment Group PLC___________ Notes 1. 2. 3. 4. 6. 7. 8. The shareholders are encouraged to nominate the Chairman as their proxy. Please indicate with a cross in the appropriate box how you wish your votes to be cast at the Meeting. 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. 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, Steelpark Road, Halesowen, West Midlands, B62 8HD UK; or • the South African Registrars, Computershare Investor Services (Pty.) Limited: o by hand to 15 Biermann Avenue, Rosebank, 2196; or by mail to P.O. Box 61051, Marshalltown 2107, South Africa o not later than 12:30 p.m. (14.30 p.m. South Africa time) on 29th November 2021. (See Note 11 to the Notice above). Completion and return of this form of proxy will be taken as your final votes where the Chairman has been appointed as the proxy. 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. 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 72 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_TXT-72pp.indd 72 28/09/2021 15:07 28/09/2021 15:07 71 London Finance & Investment Group PLC Annual Report and Financial Statements 30th June 2021 66583_LONDON-FINANCE_Annual-Rep+Fin-Stats_2021_CVR.indd 1-3 28/09/2021 09:33 

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