CIN.L Regulatory News (CIN)

For immediate release

City of London Group plc

04 December 2013

THIS ANNOUNCEMENT, INCLUDING THE APPENDICES (TOGETHER, THE 'ANNOUNCEMENT'), IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN AND THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL. THIS ANNOUNCEMENT IS NOT AN OFFER OF SECURITIES IN THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL.

THIS ANNOUNCEMENT NEITHER COMPRISES LISTING PARTICULARS NOR A PROSPECTUS AND INVESTORS SHOULD NOT SUBSCRIBE FOR OR PURCHASE ANY SECURITIES REFERRED TO IN THIS ANNOUNCEMENT EXCEPT ON THE BASIS OF INFORMATION TO BE CONTAINED IN THE PROSPECTUS COMPRISING A CIRCULAR TO BE PUBLISHED IN DUE COURSE BY THE COMPANY IN CONNECTION WITH THE PROPOSED EQUITY RAISING (THE "PROSPECTUS"). COPIES OF THE PROSPECTUS WILL BE AVAILABLE FROM THE COMPANY'S REGISTERED OFFICE AND WILL BE AVAILABLE FOR INSPECTION BY THE PUBLIC DURING NORMAL BUSINESS HOURS ON ANY DAY (EXCEPT SATURDAYS, SUNDAYS AND PUBLIC HOLIDAYS) AT THE FINANCIAL CONDUCT AUTHORITY'S DOCUMENT VIEWING FACILITY.

City of London Group plc ("COLG" or the "Company" or the "Group")

Fundraising and Board changes

Further to the announcements on 1 November 2013 and 29 November 2013, the Board of COLG (the "Board") is pleased to announce that it has entered into a conditional agreement with Paul Iliescu, a high net worth German citizen, and Bruce Mee, founder and CEO of LibraAM AG and a Zug based financial investor (together, the "New Investors"), to invest £17.4 million into the Company through a firm placing of 30,260,870 New Ordinary Shares at 57.5p per share (the "Placing"), which will result in the New Investors controlling c.59.0% of the Enlarged Share Capital of the Company on a fully diluted basis. The agreement is conditional, inter alia, on the £17.4 million Placing proceeds being placed into escrow by no later than 16 December 2013.

The Placing will materially strengthen the Company's financial position and provide the Company with sufficient working capital whilst enabling it to invest in future growth initiatives.

Bruce Mee will be appointed as a Non-Executive Director of COLG with effect from the date of the Placing proceeds being placed into escrow and will be appointed Chief Executive Officer with effect from Completion. John Kent will remain as acting Chief Executive until Completion and will then continue to serve in a consultancy role thereafter.

Key highlights

· On Completion, the Placing will make available £17.4 million of additional capital to the Company to fund its capital requirements and to repay some of its existing drawn loan facilities

· Irrevocable undertakings to support the Placing have been received from Shareholders representing approximately 51.3% of the Existing Ordinary Shares

· The Placing, if it becomes unconditional, will result in the New Investors being interested in c.59.0% of the Enlarged Issued Share Capital

· Bruce Mee will be appointed as a Non-Executive Director of COLG with effect from the date of the Placing proceeds being placed into escrow and will be appointed an Executive Director and Chief Executive Officer with effect from Completion

· The Placing is conditional, inter alia, upon:

o the £17.4 million Placing proceeds being placed into escrow by no later than 16 December 2013;

o Admission of the New Ordinary Shares;

o the approval by the Shareholders of the Resolutions;

o the approval by the UKLA of the Prospectus;

o the approval by the Panel of the waiver of the obligations under Rule 9 and restrictions under Rule 16 of the Takeover Code; and

o Regulatory approval for the change in the controlling shareholder of City of London Financial Services Limited.

· The Board considers the Placing to be in the best interests of shareholders and will recommend shareholders to vote in favour of the Resolutions to approve it

Full details of the Placing will be set out in a Prospectus and Circular to Shareholders containing notice of a General Meeting, which is expected to be sent to Shareholders in late December 2013 or early January 2014.

Shareholders should be aware that the Group is currently dependent on the proceeds of the Placing to meet the identified capital requirements of the Company and to take advantage of the immediately identified investment opportunities. If Admission does not take place the Company's identified capital requirements would exceed the amount then available to it under its facilities.

In the event that the Resolutions are not passed and Admission does not take place, the Company would need to raise additional funds from alternative sources if it is to continue funding the new growth opportunities highlighted in the Board's announcement on 1 November 2013. This could entail investment from new or existing shareholders and/or the sale by the Company of existing assets, including one or more Trading Platforms. Existing finance facilities provide the Company with time to pursue these options but during this period further investment in the Trading Platforms would not be possible. There can be no certainty over the proceeds that could be generated from a sale of assets nor the time necessary to complete a successful sale. In these circumstances the Board believes that the value of its Trading Platforms would fall, potentially leading to a significant loss of value to shareholders.

John Williams, the Chairman of COLG, said: "We announced on 1 November 2013 and 29 November 2013 that a number of recent initiatives are now gaining momentum and we required further investment for the commercial potential of the Trading Platforms to be realised. The investment by the New Investors provides this capital. We believe the Group is now in a position to build the scale necessary to take advantage of the growth prospects available to the platforms and we welcome this development."

Bruce Mee, on behalf of the New Investors, said: "We are delighted to have reached agreement with the Board of COLG to refinance and stabilise the Group. We are strong supporters of the Group's strategy. The Group has excellent people and Trading Platforms which, when combined with the capital we bring to support them, should deliver excellent value to shareholders. We firmly believe that the Group's future is now secure and, with this, the Group can consider future expansion."

Enquiries:

City of London Group plc +44 (0)20 7628 5518

John Williams / John Kent

Investec Bank plc (Financial adviser to COLG) +44 (0)20 7597 5970

Chris Treneman / James Ireland

N+1 Singer Capital Markets Limited (Corporate Broker to COLG) +44 (0)20 7496 3000

Jonny Franklin-Adams

FTI Consulting +44 (0)20 7269 7103

Hazel Stevenson

New Investors +44 (0)20 7628 5518

Bruce Mee

Important Information

This announcement neither comprises Listing Particulars nor a Prospectus relating to the Company nor constitutes nor forms nor should be construed as constituting or forming part of any offer or invitation to sell or any solicitation of any offer to purchase or to subscribe for any securities in the Company in any jurisdiction, or any other body corporate, and should not be relied upon in connection with a decision to purchase or subscribe for any such securities nor shall they or any part of them form the basis of or be relied upon in connection with any contract thereof. A Prospectus is to be published by the Company in due course in connection with the Placing and copies of the Prospectus will, upon publication, be available from the Company's registered office.

The release, publication or distribution of this announcement in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which this announcement is released, published or distributed should inform themselves about and observe such restrictions.

Investec Bank plc ("Investec"), which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority is acting as financial adviser in respect of the Placing, and N+1 Singer Capital Markets Limited ("N+1"), which is also authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority is acting as broker in respect of the Placing. Investec and N+1 are acting exclusively for the Company and for no one else in connection with the Placing and will not regard any person (whether or not a recipient of this announcement or the Prospectus) as a client in relation to the Placing and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Investec and N+1 or for providing advice in relation to the Placing, the contents of this announcement and the accompanying documents or any matters or arrangements referred to herein or therein.

This announcement should not be considered a recommendation by Investec or N+1 or any of their directors, officers, employees, advisers or any of its affiliates in relation to any purchase of or subscription for securities. Neither Investec or N+1 nor any of their directors, officers, employees, advisers or any of its affiliates accepts any responsibility or liability whatsoever for/or makes any representation or warranty, express or implied, as to this announcement, including the truth, accuracy, fairness, sufficiency or completeness of the information or the opinions or the beliefs contained in this announcement (or any part hereof). None of the information contained in this announcement has been independently verified or approved by Investec or N+1 or any of their directors, officers, employees, advisers or any of its affiliates. Save in the case of fraud, no liability is accepted by Investec or N+1 or any of their directors, officers, employees, advisers or any of its affiliates for any errors, omissions or inaccuracies in such information or opinions or for any loss, cost or damage suffered or incurred howsoever arising, directly or indirectly, from any use of this announcement or its contents or otherwise in connection with this announcement. No person has been authorised to give any information or to make any representations other than those contained in this announcement and, if given or made, such information or representations must not be relied on as having been authorised by the Company, Investec or N+1. Subject to the Listing Rules, the Prospectus Rules and the Disclosure and Transparency Rules, the issue of this announcement shall not, in any circumstances, create any implication that there has been no change in the affairs of the Group since the date of this announcement or that the information in it is correct as at any subsequent date.

The statements contained in this announcement that are not historical facts are "forward-looking" statements. These forward-looking statements are subject to a number of substantial risks and uncertainties, many of which are beyond the Company's control and actual results and developments may differ materially from those expressed or implied by these statements for a variety of factors. These forward-looking statements are statements based on the Company's current intentions, beliefs and expectations about among other things, the Company's results of operations, financial condition, prospects, growth, strategies and the industry in which the Company operates. Forward-looking statements are typically identified by the use of forward-looking terminology such as "believes", "expects", "may", "will", "could", "should", "intends", "estimates", "plans", "assumes" or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. By their nature, forward-looking statements involve risks and uncertainties, including, without limitation, the risks and uncertainties to be set forth in the Prospectus, because they relate to events and depend on circumstances that may or may not occur in the future. In addition, from time to time, the Company or its representatives have made or may make forward-looking statements orally or in writing. Furthermore, such forward-looking statements may be included in, but are not limited to, press releases or oral statements made by or with the approval of an authorised executive officer of the Company. No assurance can be given that such future results will be achieved; actual events or results may differ materially from those expressed in or implied by these statements as a result of risks and uncertainties facing the Company and its subsidiaries. Many of these risks and uncertainties relate to factors that are beyond the Company's ability to control or estimate precisely, such as changes in taxation and fiscal policy, future market conditions, currency fluctuations, the behaviour of other market participants, the actions of governmental regulators and other risk factors such as the Company's ability to continue to obtain financing to meet its liquidity needs, changes in the political, social and regulatory framework in which the Company operates or in economic or technological trends or conditions, including inflation and consumer confidence, on a global, regional or national basis. Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed or implied in such forward-looking statements. The forward-looking statements contained in this announcement speak only as of the date of this announcement and the Company undertakes no duty to update any of them publicly in light of new information or future events, except to the extent required by applicable law, the Prospectus Rules, the Listing Rules and the Disclosure and Transparency Rules.

No statement in this announcement is intended as a profit forecast or a profit estimate and no statement in this announcement should be interpreted to mean that earnings per Ordinary Share for the current or future financial years would necessarily match or exceed the historical published earnings per Ordinary Share. Prices and values of, and income from, shares may go down as well as up and an investor may not get back the amount invested. It should be noted that past performance is no guide to future performance. Persons needing advice should consult an independent financial adviser.

Neither the content of the Company's website (or any other website) nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

This announcement has been prepared for the purposes of complying with applicable law and regulation in the United Kingdom and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and regulations of any jurisdiction outside of the United Kingdom.

Notes to Editors

City of London Group plc is fully listed on the London Stock Exchange plc (LSE symbol CIN). COLG is a financial services group focused on providing merchant banking services to finance the SME and professional services sectors. It does this by financing trade and securing specialist funding throughout the supply chain to help fuel growth in these sectors, as major national and foreign banks limit new lending to these borrowers. COLG seeks to identify and exploit product niches and business models in these sectors where they are supported by strong day to day management teams, providing initial equity, working capital and seed funding for those teams. Since 2009, COLG has focused on Specialist Financing and Alternative Fund Management. As part of its strategy to build a quality Financial Services Group, COLG has developed four specialist financing funds, pledging significant seed funds to Therium Capital Management Limited, a third party Litigation Funder, Credit Asset Management Limited and Professions Funding Limited, which respectively provide asset backed finance to SMEs and working capital loans to professional practice firms and finally Trade Finance Partners Limited, a trade finance provider to the SME market.

City of London Group plc ("COLG" or the "Company" or the "Group")

Fundraising and Board changes

1. Introduction

The Board of COLG (the "Board") is pleased to announce that it has entered into a conditional agreement with Paul Iliescu, a high net worth German citizen, and Bruce Mee, founder and CEO of LibraAM AG and a Zug based financial investor (together, the "New Investors"), to invest £17.4 million into the Company through a firm placing of 30,260,870 New Ordinary Shares at 57.5p per share. The agreement is conditional, inter alia, on the £17.4 million Placing proceeds being placed into escrow by no later than 16 December 2013.

The Placing will materially strengthen the Company's financial position and provide the Company with sufficient working capital whilst enabling it to invest in future growth initiatives.

Bruce Mee will be appointed as a Non-Executive Director of COLG with effect from the date of the Placing proceeds being placed into escrow and will be appointed Chief Executive Officer of COLG with effect from Completion. John Kent will remain as acting Chief Executive until Completion and will then continue to serve in a consultancy role thereafter.

The Placing is conditional, inter alia, upon:

o the £17.4 million Placing proceeds being placed into escrow by no later than 16 December 2013;

o Admission of the New Ordinary Shares;

o the approval by the Shareholders of the Resolutions;

o the approval by the UKLA of the Prospectus;

o the approval by the Panel of the waiver of the obligations under Rule 9 and restrictions under Rule 16 of the Takeover Code; and

o Regulatory approval for the change in the controlling shareholder of City of London Financial Services Limited.

Full details of the Placing will be set out in a Prospectus and Circular to Shareholders containing notice of a General Meeting, which is expected to be sent to shareholders in December 2013 or early January 2014.

Shareholders should be aware that the Group is currently dependent on the proceeds of the Placing to meet the identified capital requirements of the Company and to take advantage of the immediately identified investment opportunities. If Admission does not take place the Company's identified capital requirements would exceed the amount then available to it under its facilities.

In the event that the Resolutions are not passed and Admission does not take place, the Company would need to raise additional funds from alternative sources if it is to continue funding the new growth opportunities highlighted in the Board's announcement on 1 November 2013. This could entail investment from new or existing shareholders and/or the sale by the Company of existing assets, including one or more Trading Platforms. Existing finance facilities provide the Company with time to pursue these options but during this period further investment in the Trading Platforms would not be possible. There can be no certainty over the proceeds that could be generated from a sale of assets nor the time necessary to complete a successful sale. In these circumstances the Board believes that the value of its Trading Platforms would fall, potentially leading to a significant loss of value to shareholders.

2. Background to and rationale for the Placing

Following management changes in 2009, the Company has pursued a strategy of identifying opportunities and developing platforms in the financial services sector, with a particular focus on providing specialist finance to UK SMEs. Specialist funding is a growth market as major national and foreign banks limit new lending to potential borrowers. The Company has identified niche products and created four specialist financing platforms ("Trading Platforms"):

· Therium Capital Management Limited ("Therium");

· Credit Asset Management Limited ("CAML");

· Professions Funding Limited ("PFL"); and

· Trade Finance Partners Limited ("TFPL").

TFPL, CAML and PFL provide trade and asset finance to SMEs and working capital loans to professional practice firms. Therium provides litigation funding.

Since 2009, good progress has been made in developing these Trading Platforms into attractive, scalable businesses. The Group has identified a number of opportunities which would be capable of delivering growth in the Trading Platforms provided sufficient capital is available for their needs. On 1 November 2013, the Board announced that it had concluded that the Group needed to raise approximately £17 million in order to realise the commercial potential of its operating platforms.

On 29 November 2013, the Group announced its results for the six months ended 30 September 2013. The results showed an underlying loss before tax of £1.3 million before exceptional losses of £666,000. At the same time, the Group also announced that it had secured additional short term financing of £3.5 million (see "Details of Interim Financing" in paragraph 12 below). As part of this arrangement, Paul Milner, Chief Executive of the Estate Office Shoreditch, was appointed as a non-executive Director as a Board representative of Harvey Bard, a principal creditor of the Group ("HB").

Prior to and following the announcement on 1 November 2013, the Board held discussions with a number of potential investors in the Group and also in the Trading Platforms with a view to securing the Group's funding needs. None of these discussions, other than those in relation to the proposed Placing, whether individually or in combination, have progressed sufficiently for the Board to have confidence that a complete and satisfactory alternative solution to the Group's funding needs would be delivered.

The Placing provides the Group with the financial resources it currently needs to exploit these opportunities and to repay some of its existing drawn loan facilities. The Board believes the Placing provides an opportunity for the Company, its Shareholders and employees to generate value through the increased investment in the Trading Platforms to bring them to scale and profitability.

3. Strategy

The New Investors have confirmed their support for COLG's existing growth strategy and investment policy at both Company and Trading Platform level, on the basis set out below.

The Placing is intended to provide funds to strengthen the Company's financial position, increase liquidity to enable the Company to provide the Group with the resources it needs to grow and finance opportunities in the Trading Platforms. The Board anticipates that the Company will seek to expand the Group in adjacent and complementary markets through the development of further asset management platforms.

The immediate growth opportunities within the existing Trading Platforms are:

· Trade Finance Partners Limited

The Board considers there is an opportunity to grow TFPL into one of the leading independent trade finance businesses in the UK. Accordingly approximately £4 million of the proceeds of the Placing will be invested into TFPL in the coming months. This investment should enable TFPL to increase the utilisation of its trade finance facility with Macquarie Bank from £18 million to £25 million.

· Therium Capital Management Limited

The Board believes there is an opportunity to develop a leading litigation funding business with operations in the UK and US over time. Therium is in advanced discussions to form a new international joint venture fund with a US partner. The new fund would be managed by a joint venture group to include Therium. Under the terms being discussed, Therium's share of the joint venture profits is expected to bring it to profitability, and the Board believes the joint venture has the potential to generate positive returns over the life of the fund for COLG. In order to execute this transaction, Therium is likely to require, over time, further capital of approximately £4 million.

· Credit Asset Management Limited and Professions Funding Limited

CAML is the only leasing provider which has been selected to participate in HM Government's Business Finance Partnership Initiative for SMEs and currently manages a fund of up to £10 million in partnership with the Department for Business, Innovation & Skills. This should in turn provide further opportunities for CAML. CAML is now in advanced discussions with a major UK Clearing Bank relating to the terms of a £22.5 million senior debt facility. As part of these arrangements, the Board anticipates CAML will require further capital of up to £7.5 million. The Company is exploring whether this capital requirement needs to come from COLG or whether it can be sourced in conjunction with monies managed by CAML or from other third parties. The Company is committed to using proceeds from the Placing to continue to fund CAML.

The form and terms on which the proceeds of the Placing are made available to the Trading Platforms will be the subject of further discussion with the management of the Trading Platforms.

Following Completion, the Board will review the cost structure of the Group and Trading Platforms to ensure it is appropriate and efficient for the Group's ongoing strategy.

The New Investors have confirmed to the Directors that the existing employment rights, including pension rights, of all employees of the Group will be fully safeguarded.

4. Financial Strategy

The principal role of the Board will continue to be to decide the allocation of capital to the Trading Platforms (and in what form and on what terms). The Group will, in effect, act as a 'treasury' for the subsidiaries. In addition to making a proper commercial assessment of the merits of a request for capital and the broader needs of the Group, other key elements into decision making will be:

· the relative merits of equity versus debt finance;

· the Group's equity position in the Trading Platforms; and

· the impact on the incentivisation of Trading Platform management.

In terms of financial returns, the Board's strategy will be to seek to deliver private equity style returns on equity for the Company going forward, in the expectation that investors will increasingly value the Group as a specialist asset manager.

5. The Investment Portfolio

COLG has managed a broad portfolio of shareholdings in a variety of small and medium sized companies. In recent years COLG has implemented a policy of liquidating from its investment portfolio and redeploying the funds across the Trading Platforms. The Board will carefully consider the remaining investments with a view to liquidating these on a timely basis. The Board does not intend to continue making such investments in the future for the Company's own account.

6. Listing and Investment Company Status

It is the Board's current intention to retain the Company's premium listing on the main market of the London Stock Exchange as an investment company under Listing Rule 15 of the UK Listing Rules. The New Investors have confirmed their support for this following completion of the Placing.

7. Dividends

It is the intention of the New Investors to support the Company in applying to the court for a capital reduction in order to cancel the Company's share premium account to facilitate the payment of future dividends, once the Company achieves profitability and generates surplus cash. Although Shareholder approval was given for this at the AGM in September 2013, further shareholder approval will be required in due course as the Board has postponed the application to the court until the Company's financing requirements are resolved.

8. The New Investors

Paul Iliescu will be investing £17.4 million to acquire all the New Ordinary Shares in his personal capacity. Paul Iliescu is currently the director of PAMI Holding Ltd (BVI) and a representative of Marhel AG, Zug, an investment holding company. He has extensive experience in steel trading including as managing director of HVBB Handels GMBH (1997-1999), Stainless Steel International Ltd (2008-2009) and as the CEO of STS Swiss Trade & Services AG and STS Swiss Trade & Services FZ LLC (2010-2011). Originally born in Romania, Paul Iliescu is a German citizen who currently resides in Zug, Switzerland.

Bruce Mee is presently the President and chief executive of LibraAM AG, an asset management company based in Zug, and chief executive of Libra Equity Ltd, a fund management company based in London. Libra Group affiliates specialise in asset management solutions for ultra-high net worth investors. Libra's affiliates are regulated in the UK, Switzerland and the Cayman Islands. Prior to founding Libra Group in 2001, Bruce was a partner at Compass Capital, a global hedge fund based in London.

Before becoming an asset manager, Bruce spent seventeen years working in Investment Banking, focusing on equity markets. He worked at UBS/SBC, initially as executive director and then head of global European equity sales and head of securities in New York, J.P. Morgan, Schroder Securities, and CreditAnstalt Investment Bank as global head of equity sales. He has worked in London, New York, Vienna, Geneva, Moscow and lately in Zug. Bruce is an FCA approved person in the UK and has in the past been regulated with the SEC and NASDAQ. Prior to working in financial markets, Bruce spent 6 years with Price Waterhouse where he qualified as a Chartered Accountant and spent three years in New York as a management consultant in the financial services industry.

Bruce Mee and Paul Iliescu have entered into an agreement between themselves under which Bruce Mee has an option to acquire up to 8,000,000 of the New Ordinary Shares being placed with Paul Iliescu at a price of 57.5p per Ordinary Share. These options will vest on a straight line basis over a period of four years (the first vesting date being 30 June 2014) but will not be exercisable until 30 June 2018 other than on a change of control, on the death of Mr Iliescu, or the death of Mr Mee, where the options may be exercised earlier. Accordingly, the voting rights attaching to those shares will remain with Paul Iliescu until such exercise date. The New Investors are considered to be a Concert Party for the purposes of the Takeover Code.

9. Proposed Board Changes

As part of the Placing, it has been agreed that Bruce Mee will be appointed as a Non-Executive Director of COLG with effect from the date of Placing proceeds being placed into escrow and will be appointed as Chief Executive Officer of the Company with effect from Completion. Following Completion, Bruce will relinquish all of his other executive responsibilities and focus solely on COLG. John Kent will remain as Chief Executive Officer until Completion.

Following Completion, it is expected that the Board will comprise seven Directors: John Williams as Chairman; Bruce Mee as Chief Executive; Howard Goodbourn as Group Finance Director; and four non-executive Directors, one of whom will be a nominee of Paul Iliescu, and one of whom will be Paul Milner. The two other non-executive Directors will be independent.

In the coming weeks the Board will seek to identify two independent, non-executive Directors with the appropriate skills and experience for the Company following Completion. Nigel Sidebottom, a current non-executive Directors, has indicated his willingness to step down from the Board either on Completion or as soon afterwards as new directors are appointed, to ensure that the Company is, as far as possible, able to continue to meet the provisions of the UK Corporate Governance Code in relation to board composition. It is anticipated that following Completion John Kent will continue to serve in a consultancy role for a period.

Under the proposed terms of Bruce Mee's appointment as Chief Executive, it has been agreed that he will be paid an annual salary of £300,000, with no other benefits. It is proposed that Bruce Mee's service agreement may initially be terminated by the Company on 12 months' notice and by Bruce Mee on 6 months' notice. It is intended that following Completion, and subject to the prior approval of the new board and shareholders, the term of Bruce Mee's service agreement will be extended to five years from Completion.

10. Subscription Agreement

The terms of the Placing are set out in a subscription agreement entered into between the Company and the New Investors (the "Subscription Agreement"), pursuant to which Paul Iliescu has agreed to subscribe for 30,260,870 New Ordinary Shares at 57.5p per share to raise £17.4 million. The Subscription Agreement is conditional, inter alia, upon:

· the £17.4 million Placing proceeds being placed into escrow by no later than 16 December 2013;

· Admission of the New Ordinary Shares;

· the approval by Shareholders of the Resolutions;

· the approval by the UKLA of the Prospectus;

· the approval by the Panel of a waiver of the obligations under Rule 9 and restrictions under Rule 16 of the Takeover Code; and

· Regulatory approval for the change in the controlling shareholder of City of London Financial Services Limited.

The Company has provided to the New Investors limited warranties, including, in respect of the Company's authority to implement the Placing, its share capital and compliance with laws, constitutional documents and contractual obligations.

The New Investors have each agreed to provide certain warranties and undertakings to the Company. The Subscription Agreement includes a standstill arrangement for a period of 12 months following Admission whereby the New Investors shall not:

· acquire, or offer any securities in the Company or any indirect rights or options to acquire any securities in the Company or do anything which would require them to make a general offer for the entire issued share capital of the Company;

· solicit proxies or consent from other Shareholders with regards to any matter;

· seek to make a general offer for any of the securities in the Company;

· deposit any securities of the Company in a voting trust arrangement; or

· form, join or in any way participate in a partnership, limited partnership or similar such vehicle for the purpose of acquiring, holding or voting or disposing of securities of the Company.

The Subscription Agreement terminates automatically in the event that the Conditions are not satisfied or waived or in the event of the insolvency of any Group company.

The Subscription Agreement may also be terminated by either the New Investors or the Company, following consultation with the other, in the event of a material breach of certain warranties given to each other under the Subscription Agreement, and the occurrence of certain other events which have a material adverse effect on the Group

Paul Iliescu has also agreed to enter into a lock-in agreement on customary terms not to dispose of the New Ordinary Shares for a period of 12 months from Admission, and to abide by a 12 month orderly market provision thereafter.

Paul Iliescu has entered into a conditional escrow agreement with the Company where he has agreed that, subject to the Subscription Agreement being entered into, he will place £17.4 million into an escrow account pending Completion or termination of the Subscription Agreement.

11. Relationship and Controlling Shareholder Agreement

The Company is aware that the FCA has published a Consultation Paper (FCA 13/15) earlier this month which set out a package of near final rules on the FCA's proposals in an earlier Consultation Paper (FSA CP12/25) to enhance the effectiveness of the Listing regime and ultimately amend the Listing Rules for premium listed companies. The FCA has indicated that it intends to publish final rules by the middle of 2014. The proposed amendments cover the concept of carrying on "independent business" for premium listed companies (and clarifying the requirement for an applicant to control the majority of its business), implementing the concept of a "controlling shareholder" and introducing new eligibility and continuing obligation requirements for premium listed companies. This would include a requirement for a relationship agreement to be put in place between a premium listed company and any controlling shareholder (and its associates). The Board is committed to ensuring good corporate governance for the Company and accordingly will implement any applicable requirements under the Listing Rules at the appropriate time.

With a view to such new rules coming into force next year and to comply with principles of good corporate governance, the Company has entered into a relationship agreement and controlling shareholder agreement with the New Investors (the "Relationship and Controlling Shareholder Agreement"), conditional upon the Placing. Pursuant to the Relationship and Controlling Shareholder Agreement, the New Investors agree to procure that they, and so far as they are able their associates, exercise any voting rights and take action (or as the case may be, refrain from doing either) in order to ensure that:

· the Group is capable at all times of carrying on an independent business as its main activity

· all transactions and arrangements between the New Investors (and their Associates) and the Company are made at arm's length and on normal commercial terms and are approved by the Independent Directors (the quorum for any such meeting being two Independent Directors)

· any dispute between the New Investors (and their Associates) and the Company shall be dealt with on behalf of the Company by a committee comprising only of Independent Directors

· that no Director shall be appointed or removed other than in accordance with the approval of the Board (supported by a majority of the Independent Directors)

· that any Independent Director who is removed or is no longer independent be replaced with a new Independent Director; and

· that the Company complies with its obligations under the Listing Rules, and Disclosure and Transparency Rules.

12. Details of Interim Financing

On 29 November 2013, COLG announced that a principal creditor of the Group, HB, has agreed to fund the repayment of £1.289 million of loans made to the Group and also provide further facilities to the Company secured through the grant of a debenture by the Company, amounting, in aggregate, to £3.5 million. £2.5 million of these new facilities were made available to the Group immediately and the balance of £1.0 million will be made by 5 January 2014. These facilities, provided by HB, assisted the Company with its operational capital needs whilst the Company finalised the terms of this Placing. Agreement has been reached in principle between the Company and HB for the proceeds of the Placing to be used in part to repay at par certain existing loans to HB and HB Associates at Completion, further details of which are provided in paragraph 18 below.

13. Effect of the Placing

Pursuant to the Placing, the New Investors will subscribe for 30,260,870 new Ordinary Shares in the Company which will represent c.59.0% of the Enlarged Issued Share Capital on a fully diluted basis.

14. Importance of Shareholder Vote

Shareholders should be aware that the Group is currently dependent on the proceeds of the Placing to meet the identified capital requirements of the Company and to take advantage of the immediately identified investment opportunities. If Admission does not take place the Company's capital requirements would exceed the amount then available to it under its facilities.

In the event that the Resolutions are not passed and Admission does not take place, the Company would need to raise additional funds from alternative sources if it is to continue funding the new growth opportunities highlighted in the Board's announcement on 1 November 2013. This could entail investment from new or existing shareholders and/or the sale by the Company of existing assets, including one or more Trading Platforms. Existing finance facilities provide the Company with time to pursue these options but during this period further investment in the Trading Platforms would not be possible. There can be no certainty over the proceeds that could be generated from a sale of assets nor the time necessary to complete a successful sale. In these circumstances the Board believes that the value of its Trading Platforms would fall, potentially leading to a significant loss of value to shareholders.

15. Investment Policy

The Company is currently classified as a closed-end investment company pursuant to Rule 15 of the Listing Rules. The Company's investment policy is:

· The majority of the Company's portfolio will be invested in the financial services sector through a series of equity and non-equity investments in unquoted and quoted companies which provide specialist financing and alternative asset management services. The Company will give particular focus to professional services and the SME Market. It will also continue to hold a smaller portfolio of quoted stocks for the purposes of balance, liquidity and short term investment return and unquoted stocks where the Company believes there is an attractive growth opportunity.

· The Company's main strategy will be to provide equity, working capital and seed funding to management teams and early stage companies to enable them to build a track record. When appropriate, the Company will assist those companies in expanding their activities by raising third party funding. The Company will then be able to progressively redeploy its initial working capital and seed funding whilst retaining its long term equity interest.

· The Company will be able to hold majority and minority equity positions in its investee companies. Where it has a majority of the equity, the day to day control will remain with each management team within those companies, and the Company will exercise its rights as a shareholder in order to ensure appropriate investor protection and strategic direction. The Company will not generally have a fixed timescale for the realisation of investments and these will be assessed periodically in order to optimise their value.

· No more than 20 per cent. of the Company's total gross assets, as at the date of acquisition, will be invested in any one single company. If the Company acquires a portfolio of companies in a single transaction, this limitation shall be applied individually to each of the underlying companies where the investment has taken place and not to the portfolio as a whole. In the event that any of the Company's investee companies are combined, this limitation shall be applied to the combined entities.

· Each of the investments will be separate from all others, stand alone and there will be no cross financing or funding requirements between them.

· Borrowing will take place when the Company believes it to be in its best interests but the amount borrowed will not exceed 100% of its total gross assets at the time of borrowing and will, in any event, remain subject to limitations on borrowing contained in the Company's articles of association. Compliance with investment restrictions and guidelines will be monitored continuously by the Board. Any material changes to the investment policy must be approved by the shareholders in accordance with the Listing Rules and the Companies Act 2006.

The Company's investment policy will be reviewed from time to time as the Group evolves.

16. Prospectus, Circular and Notice of General Meeting

A Prospectus and Circular which will provide further details of, and the background to, the Placing and the Resolutions to be considered at the General Meeting as well as the Board recommendation, is expected to be posted to Shareholders in late December 2013 or early January 2014. The General Meeting is expected to be held in January 2014.

17. Waiver of obligation under Rule 9.1 of the Takeover Code

The Placing gives rise to certain considerations under the Takeover Code.

The purpose of the Takeover Code is to supervise and regulate takeovers and other matters to which it applies. The Takeover Code is issued and administered by the Panel. COLG is a company to which the Takeover Code applies and as such its Shareholders are therefore entitled to the protections afforded by the Takeover Code.

Under Rule 9 of the Takeover Code, any person who acquires an interest (as defined in the Takeover Code) in shares which, taken together with shares in which he is already interested and in which persons acting in concert with him are interested, carry 30 per cent or more of the voting rights of a company which is subject to the Takeover Code, is normally required to make a general offer to all the remaining shareholders to acquire their shares.

An offer under Rule 9 must be made in cash and at the highest price paid by the person required to make the offer or any person acting in concert with him, for any interest in shares of the company during the 12 months prior to the announcement of the offer.

The New Investors are deemed to be acting in Concert for the purposes of the Takeover Code. On Completion of the deal, Paul Iliescu will hold 30,260,870 shares equating to c.59.0% of the fully diluted Enlarged Issued Share Capital of the Company. The New Investors do not currently own any Ordinary Shares and nor have they at any point in the last 12 months.

Following an application by the Board, the Panel has agreed, subject to the Waiver Resolution being passed on a poll by the Shareholders, to waive the requirement for the New Investors to make an offer to Shareholders as would otherwise arise under Rule 9 of the Takeover Code as a result of the Placing. The Placing is therefore conditional on the approval of the Waiver by the Shareholders being obtained.

Shareholders should be aware that if successful, the Placing would result in Paul Iliescu holding over 50% of the Enlarged Ordinary Issued Share Capital and as such, Paul Iliescu would be free to increase his interest in Ordinary Shares without incurring any obligations under Rule 9 of the Takeover Code. However, Bruce Mee will not be able to increase his individual interest above 30% of the Enlarged Issued Share Capital without a separate waiver from the Panel and a shareholder vote.

18. Agreement to repay certain loans - Rule 16 of the Takeover Code

The Company has agreed in principle with HB, a Shareholder, and a principal lender to the Company to enter into a conditional agreement that would commit the Company to repaying certain existing loans provided by HB and HB Associates on completion of the Placing (the "Loan Repayment Agreement").

The Loan Repayment Agreement gives rise to considerations under Rule 16 of the Takeover Code. Rule 16 of the Takeover Code prohibits arrangements being made with persons who hold Ordinary Shares or rights over Ordinary Shares which have favourable conditions which are not being extended to all shareholders unless, inter alia, the consent of the Panel is first obtained and Shareholder approval is obtained in general meeting.

The Panel have indicated that they will consent to the Loan Repayment Agreement provided that the independent adviser to the Company publicly states that in his opinion the terms of the Loan Repayment Agreement are fair and reasonable and may also require that the Loan Repayment Agreement is approved at a general meeting of the Company's Shareholders. Further, this vote by Shareholders, if required, must be a separate vote, taken on a poll, by shareholders who are deemed to be independent of the Loan Repayment Agreement.

The Loan Repayment Agreement will therefore be conditional upon, amongst other things:

· The Panel granting consent to the Loan Repayment Agreement under Rule 16;

· If required by the Panel, Shareholders deemed to be independent of the Loan Repayment Agreement approving the agreement;

· The independent adviser to the Company providing a fair and reasonable opinion in relation to the Loan Repayment Agreement; and

· The publication of a circular to shareholders approved by the Panel, in relation to the Waiver.

The facilities covered by the Loan Repayment Agreement are detailed below:

· £464,000 facility pursuant to a loan agreement between Advanced Plasma Power Limited and the Company, dated 8 January 2013, (of which £464,000 was drawn down as at 3 December 2013) (the "APP Loan");

· £500,000 facility pursuant to a loan agreement between Nationwide Secured Contractors Limited and the Company, dated 17 October 2013 (of which £500,000 was drawn down as at 3 December 2013) (the "NSC Loan");

· £325,000 facility pursuant to a loan agreement between D & E Litwack and the Company, dated 10 April 2013 (of which £325,000 was drawn down as at 3 December 2013) (the "DEL Loan");

· £6,000,000 facility pursuant to a loan agreement between IPS Pension Builder- HP Bard and the Company, dated 21 May 2013 and 17 July 2013 (of which £5,175,000 was drawn down as at 3 December 2013) (the "IPS Loan"); and

· £3,500,000 pursuant to the Interim Financing facility agreement between HB and the Company, dated 29 November 2013, of which £2,500,000 was made immediately available to the Group and the balance of £1,000,000 by 5 January 2014 (the "Interim Financing Facility").

The key terms of the Loan Repayment Agreement are that outstanding balances under the APP Loan, NSC Loan, DEL Loan and Interim Financing Facility will be repaid on Completion. This is expected to result in a repayment of c. £1.3 million. In addition the Loan Repayment Agreement would require the Company to repay amounts outstanding under the IPS Loan over and above £3.175 million. The remaining £3.175 million is to be repaid in accordance with the facility's existing terms. If the Loan Repayment Agreement is not entered into or does not come into effect, these facilities will be repaid in accordance with their existing terms.

Once it is entered into, the Company will provide further details of the Loan Repayment Agreement together with information about other Shareholders who may be beneficiaries of the Loan Repayment Agreement in the Prospectus and circular relating to the approval of the Waiver.

19. Irrevocable undertakings

Shareholders, representing 9,994,697 Ordinary Shares have provided irrevocable undertakings to vote in favour of the Resolutions. In addition, the Directors who in aggregate own 377,282 Ordinary Shares have also irrevocably undertaken to vote in favour of the Resolutions.

In aggregate, irrevocable undertakings to vote in favour of the Resolutions are in respect of 10,371,979 Ordinary Shares, representing approximately 51.3% of the Existing Ordinary Shares in issue.

Subject to agreement with the Panel, those shareholders deemed to be HB Associates will not be considered independent for the purposes of voting on the Rule 9 and Rule 16 Resolutions. Further detail will be provided in due course.

20. Recommendation

The Board, which has been advised by Investec, considers that the Placing is in the best interests of the Company and the Shareholders as a whole. In providing its advice, Investec has taken into account the commercial assessment of the Board. Given the importance of the Shareholder vote as outlined above, the Board intends to unanimously recommend that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting, as the Board have irrevocably undertaken to do so in respect of the Company's Ordinary Shares representing in aggregate 1.87% of the Company's Issued Share Capital.

The Board anticipates that Paul Milner, a Board nominee of HB, a principal creditor of the Group, will not be deemed to be an Independent Director in relation to resolutions relating to the Loan Repayment Agreement and will not join in any Board recommendation on this resolution.

In accordance with Rule 2.10 of the Takeover Code, the Company has 20,206,617 Ordinary Shares in issue each admitted to trading on the Official List. The International Securities Identification Number for the Company's Ordinary Shares is GB0001991685.

A copy of this announcement will be available at www.cityoflondongroup.com. The content of the website referred to in this announcement is not incorporated into and does not form part of this announcement.

Appendix - Definitions