Update on investment management arrangements

27 September 2019

For immediate release

LMS Capital plc

(The "Company")

Update on investment management arrangements

The Board of LMS Capital wishes to provide shareholders with an update on the review of the Company's investment management arrangements which was initiated in July.

The review concluded with a majority of the Board deciding that Gresham House Asset Management ("GHAM") should continue as the appointed investment manager of the Company on terms that include both a reduction in the annual management fee payable to GHAM due to no fees being payable on cash amounts over 5 per cent. of the prevailing net asset value and reconstituting the Company's Investment Committee with the Board having observer status. Certain changes to the existing performance fee arrangements have been agreed in principle with GHAM (subject to shareholder approval as required by the Listing Rules).

In conjunction with the new terms agreed with GHAM, the Board also intends to introduce a 5-year continuation vote alongside a progressive dividend policy, starting in 2020 with an initial yield target of 4 per cent. of NAV.

An alternative proposal which would have terminated the existing agreement with GHAM and replaced it with LMS becoming self-managed was submitted by Mr Robert Rayne.  As part of the review this proposal has been carefully considered by the independent members of the Board (Messrs. Knight, Birkett and Lerner, together the "Independent Directors") alongside other proposals received.  Following that review, the Independent Directors unanimously concluded that the reappointment of GHAM was in the best interests of the Company.  Mr Rayne continues to support a self-managed proposal and has stated to the Board that his view is also supported by a number of shareholders.

The Board has therefore decided to make the reappointment of GHAM subject to shareholder approval.

A circular convening a general meeting of the Company will be sent to all shareholders as soon as possible. The circular will contain full details of the GHAM proposal and Mr Rayne will separately provide details of the self-managed proposal to shareholders at the same time.

The approval of the reappointment of GHAM on the terms set out in the new investment management agreement will be decided by a majority vote of shareholders represented by proxy or by person at the meeting. The Independent Directors will be recommending to shareholders that they vote in favour of the resolution to reappoint GHAM.

In the event that shareholders do not approve the resolution reappointing GHAM, the Independent Directors have stated that they would intend to resign from the Board of the Company with immediate effect. In these circumstances, it is expected that Mr Rayne, together with the replacement directors, would seek to implement the self-managed proposal.

This announcement contains inside information.

For further information, please contact:

LEI: 2138004UJ1TW8UCELX08

Important Information

The initial yield target is a target only and does not constitute a profit forecast. There can be no assurance that the initial yield target can or will be achieved from time to time and neither should be seen as an indication of the Company's expected or actual results or returns. Accordingly, investors should not place any reliance on the initial yield target in deciding whether to invest in the Company.

In addition, this announcement includes statements that are, or may be deemed to be, "forward-looking statements".  These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "may", "will", or "should" or, in each case, their negative or other variations or comparable terminology.  These forward-looking statements relate to matters that are not historical facts regarding the Company's investment strategy, financing strategies, investment performance, results of operations, financial condition, prospects and dividend policies of the Company and the instruments in which it will invest.  By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future.  Forward-looking statements are not guarantees of future performance.  There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements.    These factors include, but are not limited to, changes in general market conditions, legislative or regulatory changes, changes in taxation regimes or development planning regimes, the Company's ability to invest its cash in suitable investments on a timely basis and the availability and cost of capital for future investments.