CIN.L Regulatory News (CIN)

City of London Group plc

("COLG" or the "Company")

Related Party Transaction

Acquisition of Acorn to Oaks Financial Services

COLG is pleased to announce that on 27th July 2018, it entered into a formal agreement to acquire 100% of the shares of Acorn to Oaks Financial Services Limited ("A2O") (the "Acquisition").

A2O is a financial services intermediary business focussing on SME and landlord insurance products. A2O made a profit of £177,000 for the financial year ending 31 March 2018 and had gross assets of £402,000 as at that date. A2O complements CAML and will help grow its lending business and that of Echo Financial Services Limited once it has obtained its banking licence.

The Acquisition constitutes a related party transaction under Rule 13 of the AIM Rules as Jason Oakley, his wife Claire Oakley and a vehicle controlled by Mr and Mrs Oakley (together the "Founders") own 92% of the shares of A2O. Mrs Oakley is a director and is the Chief Executive of A2O. Mr Oakley is deemed to be a related party of COLG under AIM Rules as he is a director of a wholly-owned subsidiary of COLG.

A2O has a number of related party introducer agreements in place. These include the following companies where either Mr Oakley and / or Mrs Oakley are directors: Oakland Residential Management Limited, and A2O Finance Limited.

COLG is paying an initial consideration of £1.4 million (the "Initial Consideration") and a further earn-out consideration of up to £5m may be payable (the "Earn-Out").

The Initial Consideration is made up of a) the consideration payable to the Founders, which will be satisfied by way of zero-coupon loan notes that can be converted into new shares in COLG following the preparation of the annual accounts for the financial year-ending 31 March 2021; and b) the consideration payable to the other shareholders of A2O, which will be satisfied by way of new shares in COLG.

The share conversion calculation for the Initial Consideration is based on a price per share of 140.341p, being the 30-day average price to 26 July 2018.

The Earn-Out will be calculated as six-times the average annual profit before tax over the three years ending 31 March 2021, less the Initial Consideration, subject to a maximum of £5 million. The share conversion calculation for any Earn-Out will be based on the market price when the Earn-Out amount has been determined. This will be determined following the preparation of the annual accounts for the financial year-ending 31 March 2021.

The acquisition requires FCA approval.

The independent directors of the Company, having consulted with Peel Hunt LLP in its capacity as the Company's nominated adviser for the purposes of the AIM Rules, consider the terms of the Acquisition to be fair and reasonable insofar as the Company's shareholders are concerned.

Michael Goldstein, CEO of City of London Group, commented:

"We are pleased to announce that COLG has entered into an agreement to acquire A2O, pending FCA approval. A2O fits perfectly into our sweetspot by focussing on SMEs and having a strong regional network. We are confident that this acquisition will be an important factor in helping to grow the lending side of the business."

For further information:

Notes to Editors:

City of London Group is a forward-thinking organisation focused on serving the UK SME market. While grounded with traditional values, through the strength and depth of expertise in its expanding team, it is now primed for future growth through its three-pronged strategy.

The Group's expertise covers equity release, finance for the SME sector, and secured lending. The Group has experience with commercial banking and mortgages, and access to funding arrangements such as commercial, SME, bridging and development finance, home reversion plans, and asset and loan finance.

COLG ensures its services are always delivered with a personal touch, so clients know that they are more than a customer and have a partner that will work with them as they look towards the future.

www.cityoflondongroup.com