Lms Capital Regulatory News (LMS)

LMS Capital plc

Half Year Results for the six months ended 30 June 2018

The Board of LMS Capital plc ("LMS Capital" or "the Company") is pleased to announce the Company's half year results for the six months to 30 June 2018.

· Net proceeds of realisations to the group in the period were £12.5 million, including initial consideration from the sale of Penguin Computing;

· Net cash in the group at 30 June 2018 was £14 million (31 December 2017: £4 million).

· Net Asset Value at 30 June 2018 was £63.8 million, 79.0p per share (31 December 2017: £64.5 million, 79.9p per share).

· The investment portfolio showed a net gain in the first half of £0.2 million (2017: net gain of £5.4 million) after including unrealised net currency gains of £0.8 million (2017: unrealised net losses of £1.9 million).

· The loss for the period was £0.7 million (six months to 30 June 2017: profit of £3.5 million).

· Cost reduction targets have been exceeded with run rate savings in excess of £1.4 million per annum implemented since the adoption of the new investment policy and the appointment of Gresham House Asset Management ("GHAM").

· Stage 3 of GHAM's transition plan for LMS was to restart investment, which was initiated in the period through investment in a private 8% convertible loan note in an AIM quoted oil services and equipment business.

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

For further information please contact:

Chairman's statement

I am pleased to present the Company's results for the six months to 30 June 2018.

Performance review

There has been good progress realising value from the portfolio. Following the sale of Penguin and Brockton Capital LLP, the Group's cash at 30 June 2018 has increased to £14 million (Company £10.9 million; subsidiaries £3.1 million) compared to £4 million at 31 December 2017.

The exercise by the Company of its warrants in shares of Gresham House plc and realisation of approximately 80% of the shares so acquired produced a net cash surplus of £0.1 million and at the same time enabled the Company to maintain a 5% shareholding in Gresham House plc which continues its positive growth momentum.

Net asset value per share at 30 June 2018 was 79.0p (31 December 2017: 79.9p) a reduction of 1.1% for the first half of the year. For the 12 months to 30 June 2018 there has been an increase in net asset value per share of 5.5% when adjusted for the impact of last year's tender offer.

Portfolio gains (realised and unrealised) for the six months were £0.2 million net (2017: net gains of £5.4 million), the key elements of which were:

· The sale of Brockton Capital LLP produced a realised gain of £0.6 million;

· Within the quoted portfolio IDE Group incurred an unrealised loss of £1.7 million.

The portfolio gains for the period are stated after the impact of unrealised exchange gains of £0.8 million (six months to 30 June 2017: losses of £1.9 million). During the first quarter of 2018 Sterling strengthened against the US Dollar, but this reversed during the second quarter and over the six month period Sterling has weakened against the US Dollar by approximately 2%.

Overhead costs of the Company and its subsidiaries were £0.9 million (Company £0.7 million, Subsidiaries £0.2 million), significantly lower than the previous year (six months to 30 June 2017: £1.6 million), reflecting the transition to external management.

Conclusion and outlook

The Board and the Manager are now focused on growing the Investment portfolio and net asset value and, in due course, paying a dividend. Realisations in the first six months of the year have created liquidity for the Company, and the Board sees a reasonable prospect of further realisations in 2019.

It is pleasing to have restarted investment activity with an investment sourced through the Gresham House network, in a company operating in an area of historic LMS expertise. The Company is now in the position to take advantage of a pipeline of investment opportunities and the Board expects further investment activity.

Martin Knight

Chairman

12 September 2018

Manager's Review - 30 June 2018

Introduction

Gresham House Asset Management ("GHAM") was appointed investment manager in August 2016, and therefore the half year to 30 June 2018 brings to almost two years its tenure as manager.

The objective for the first 12-18 months following appointment was to transition the Company to being externally managed and to fulfill the Company's commitment, made in July 2016, to return a maximum of a further £11 million of capital to shareholders, alongside targeting annual cost savings.

These objectives have been fully achieved, ahead of expectations. New investment management processes have been established, and an independent investment committee appointed. Annualised cost savings in excess of £1.4 million have been achieved. In August 2017, following investment realisations in the first half of last year, the Company returned £11 million to its shareholders, fulfilling its commitment made in 2016.

During the first six months of 2018, following further investment realisations, the cash resources of the Company and its subsidiaries have grown from £4 million to £14 million and the Company is now positioned to commence investing in accordance with the investment policy adopted in August 2016.

Investment approach

The investment approach is now focused predominantly on private equity investment and alternative, specialist asset classes using the experience of the GHAM team in asset management, private equity and public markets:

· The Manager will invest in and partner with management teams of profitable and cash generative businesses and investments to create value, targeting an annual return on equity of 12% -15% net of costs over the long term;

· The focus will primarily be on smaller private investment opportunities below £50 million value where the Manager believes there to be significant market inefficiencies which create opportunities for superior long term returns and to leverage the experience of the investment team;

· Investments may include alternative, specialist asset classes which target long term, illiquid strategies both through co-investment and fund opportunities on preferred terms; and

· The manager will seek to optimise the value of existing holdings and, where growth prospects are clear, to preserve and support longer term value creation.

As a result, and having sourced an attractive investment in an area of historic expertise, LMS has invested in a private 8% yielding convertible loan note issued by Northbridge Industrial Services PLC ("Northbridge"), an oil and gas equipment and services group quoted on the London Stock Exchange AIM market. The investment represents the recommencement of investment and the culmination of the transition plans for LMS under GHAM management.

Market background

2018 saw a bullish start to the year, notably in US markets, followed by a correction and return of volatility in February as markets reacted to rising inflation and the prospect of rising interest rates as well as the threat of increased tariffs. US 10-year yields approached 3% and global equity markets pared back from near record highs. The domestic environment continues to be dominated by Brexit. Understandably some investors and commentators have sought to call time on one of the longest bull markets in history. However, taking an objective view of the global economy and UK markets, there remains much to be positive about and we saw some recovery into the second quarter. High valuations, fund raising and increased competition for deals means private equity firms have high levels of uninvested funds, particularly for the larger enterprise value deals. We believe there are significant inefficiencies at the smaller end of the market, focusing on established smaller private companies below £50 million enterprise value where there tends to be less competition for deals and where valuations are more attractive. This segment of the market is frequently off radar for venture and early stage funding providers and sub-threshold for mid-market private equity investors, creating an opportunity to generate superior long-term returns.

Performance review

The movement in Net Asset Value during the six months to 30 June 2018 was as follows:

Net cash realisations by the group from the portfolio were as follows:

Realisations in 2018 (of which Company £3 million; Subsidiaries £9.5 million) include:

· Proceeds of £9.0 million following the sale of Penguin;

· £3.1 million of proceeds from the sale of the Company's interest in Brockton Capital LLP;

· Net cash of £0.1 million received as a result of the exercise by the Company's Gresham House share options; and

· Other distributions and loan repayments amounted to £0.3 million.

The follow-on investments relate principally to a working capital loan for Elateral, a UK direct investment, and participation in a short term loan note issued by Medhost, a US co-investment, as part of an arrangement to facilitate the refinancing of its debt. There were also fund calls amounting to £0.1 million.

The new investment is a £600,000 investment in Northbridge an AIM quoted company that hires and sells specialist industrial equipment to utilities, public sector and oil and gas industries. The investment is via an 8% yielding convertible loan note and is the Company's first investment, other than follow on investments, since the conclusion of its realisation strategy and adoption of its new investment policy in August 2016.

Below is a summary of the investment portfolio of the Company and its subsidiaries:

The Company's 10 largest investments at 30 June 2018 comprising 71.6% of the net asset value are shown below. Group cash comprises a further 21.9% of the net asset value.

*includes holdings by SFEP and co-investments held by the Company

Basis of valuation:

· Quoted investments - bid price of security quoted on relevant securities exchange;

· Unquoted investments - multiple of revenues or earnings of comparable quoted companies with appropriate discounts for marketability; and

· Fund interests - based on amounts reported by the general partner unless the reported value is not in line with the Company's valuation policy.

Performance of the investment portfolio

The return on investments for the six months ended 30 June 2018 was as follows:

The charge for incentive plans in 2017 included £44,000 for carried interest relating to historic schemes.  

Approximately 62% of the portfolio at 30 June 2018 is denominated in US dollars (31 December 2017: 63%) and the above table includes the impact of currency movements. In the six months ended 30 June 2018, the strengthening of the US Dollar against sterling resulted in an unrealised foreign currency gain of £812,000 (2017: unrealised loss of £1,939,000). As is common practice in private equity investment, it is the Board's current policy not to hedge the Company's underlying non-sterling investments.

Quoted investments

The net loss on the quoted portfolio arose as follows:

Gresham House plc

At 31 December 2017 the Company held 801,985 shares in Gresham House plc and 909,908 warrants to acquire shares in Gresham House plc.

The Gresham House share price increased from 412p at 31 December 2017 to 440p at 30 June 2018.

In May 2018 the Company exercised its 909,908 warrants to acquire shares in Gresham House plc at a price of 323.27p per share. At the time of exercise of the warrants, the Gresham House plc share price was 443p per share. The Company retained 182,344 of the shares acquired and sold 727,564 shares. The shares retained, in conjunction with shares it already owned, leave the Company with a holding of approximately 5% in Gresham House plc.

The 909,908 warrants had a carrying value of £0.8 million at 31 December 2017 and cost of exercise was £2.94 million. Proceeds from the sale of 727,564 shares were £3.05 million and the value of the 182,344 shares retained at 30 June was £0.8 million. The net gain to the Company from the exercise of the warrants, based on its carrying value at 31 December 2017 was £0.09 million.

The warrants had been acquired by the Company in October 2016, at a price of 28p per warrant, as part of the arrangements put in place to promote alignment between the Company and its new manager, when it appointed GHAM as manager of its portfolio in August 2016. Based on the acquisition cost of the warrants, the gain to the Company from the warrant exercise has been £0.65 million.

IDE Group

The performance of IDE Group has been disappointing and the share price fell substantially, following a number of announcements in the first half of the year. The share price at 30 June 2018, reflected above is 11p per share.

Subsequent to the half year balance sheet date the share price has reduced further and, on 31 July 2018 the Company announced an underwritten rescue financing package. This later share price reduction is not included in the 30 June 2018 carrying value.

Other quoted

During the period the Company received distributions of shares in Solaredge Inc, from its fund investment, Opus Capital Venture Partners. These shares had a carrying value at 30 June 2018 of £675,000 and are included above within "Other" above.

Unquoted investments

\* These are co-investments with SFEP

The net gain/(loss) on the unquoted portfolio arose as follows:

*£125,000 was advanced during the period, this was accrued for at December 2017.

Valuations are sensitive to changes in the following two inputs:

· The operating performance of the individual businesses within the portfolio; and

· Changes in the revenue and profitability multiples and transaction prices of comparable businesses, which are used in the underlying calculations.

In most cases the multiples used at 30 June 2018 are similar to those prevailing at the end of 2017 and therefore the unrealised gains or losses set out in the table above arise principally as a result of the companies' performance.

Comments on individual companies are set out below.

Medhost

Medhost is a co-investment with funds of Primus Capital, in which the Company has previously had investments. The Company has based its carrying value on the valuation approach adopted by Primus Capital. Medhost's financial performance is satisfactory and is expecting to show growth in profitability and cash generation in 2018.

Brockton Capital LLP

The sale of Brockton Capital LLP was completed in March 2018. The Company received total proceeds of £3.1 million for its minority shareholding plus its share of excess cash in Brockton Capital LLP at the time of sale.

The Company had originally acquired its minority holding in 2006 when, together with 3 other cornerstone investors, it backed the establishment of Brockton Capital LLP, a private equity real estate investment adviser, and became an investor in Brockton Capital Fund I LP ("the Fund", a real estate investment fund. The investment in Brockton Capital LLP gave the Company the right to participate in entities that would receive a share of any carried interest in relation to the performance of the Fund and subsequent Brockton-advised funds. The Company still retains its interest in Brockton Capital Fund I LP.

Nationwide Energy Partners ("NEP")

This investment comprises a US$5.0 million loan note repayable (with interest) in instalments over 4 years. The loan note was issued in December 2017 as part of the consideration in a transaction whereby the Company sold its equity interest in NEP back to the founder. The carrying value is the present value of the Company's current estimate of amounts receivable from the loan note.

Entuity

Following the appointment of a new CEO in 2016, the business is performing satisfactorily and is focussed on future value growth. Operating cash flows were sufficiently strong to enable it to repay part of its shareholder loan in June 2018.

Elateral

The new leadership team at Elateral continues to look to grow its revenues and improve profitability. Progress is expected during the second half of the year.

Penguin Computing

The Company's total interests are held through its investment in SFEP and directly through a co-investment with SFEP. The amounts shown above relate to the directly held co-investment. As explained below, the business was sold in June 2018 and initial consideration has been received. The carrying value represents the estimated further proceeds that may be received from earn out arrangements and the release of amounts held in escrow.

Fund interests

(Losses) and gains on the Company's funds portfolio for the six months ended 30 June 2018 were as follows:

San Francisco Equity Partners ("SFEP")

LMS Capital is the majority investor in SFEP (as opposed to the other fund interests where the Company has only a minority stake).

SFEP has two remaining investments, YesTo and the remaining interest in the further proceeds expected to be received following the sale of Penguin Computing ("Penguin").

The sale of Penguin has enabled the general partner of SFEP to meet performance thresholds and become entitled to carried interest payments in accordance with the SFEP 1 fund agreement. An estimate of these payments has been included in arriving at the carrying values for the SFEP 1 fund interests in YesTo and Penguin below:

· Penguin - fund carrying value £3,497,000 (31 December 2017: £11,148,000). This investment was sold in June 2018, and an initial payment of consideration received. The carrying value at 30 June 2018 relates to amounts of sale consideration estimated still to be receivable from payments under an earn out arrangement and the release of amounts retained in escrow. As noted above, the valuation reflects an estimate of additional amounts of carried interest that may become payable to the general partner of SFEP .

In addition to the fund investments noted above the Company has a co-investment in Penguin of £833,000 (31 December 2017: £1,747,000) . The Penguin co-investment has been valued to reflect proceeds received from the initial consideration plus an estimate of potential further proceeds from the release of amounts held in escrow and payments under the earn out arrangement. There is no carried interest payable in relation to the co-investment.

The Company's total investment in Penguin at 30 June 2018, via its SFEP fund interest and its co-investment is £4,330,000 (31 December 2017: £12,895,000).

· YesTo - fund carrying value £8,237,000 (31 December 2017: £8,564,000) YesTo continues to perform strongly. The Investment was revalued upwards in 2017 reflecting the valuation achieved at the time of the partial exit in June 2017 and the continued performance of the business. As noted above, the valuation reflects an estimate of additional amounts of carried interest that may become payable to the general partner of SFEP.

In addition to the fund investments noted above the Company has a directly held co investment in YesTo of £896,000 (31 December 2017: £874,000).

The Company's total investment in YesTo at 30 June 2018, via its SFEP fund interest and its co-investment is £9,133,000 (31 December 2017: £9,438,000).

Other fund interests

· Eden Ventures - this early stage fund has performed below expectations and remains valued by the Company at a discount to the fund net asset value published by the general partner;

· Brockton Capital -The Company's discounted cash flow valuation methodology for this investment results in a small uplift for its interest;

· Opus Capital, a US venture fund, made stock distributions in kind in the six months to 30 June 2018 of £815,000.

Overhead costs

Overhead costs for the six months to 30 June 2018 (including amounts incurred by subsidiaries) were £862,000 - significantly lower than the corresponding period last year (six months to 30 June 2017: £1,635,000). This reduction reflects the savings achieved, now that the transition to external management is complete.

Taxation

The Company has a tax charge amounting to £2,000 for the six months ended 30 June 2018 (2017: nil).

Financial resources and commitments

Including cash in subsidiaries, cash holdings were £14,032,000 (31 December 2017: £3,960,000) with no debt.

At 30 June 2018 subsidiary companies had commitments of £3,112,000 (31 December 2017: £3,133,000) to meet outstanding capital calls from fund interests.

Outlook

GHAM is focussed on managing the existing portfolio. Whilst in many cases exits are under the control of third party managers, GHAM maintains a close dialogue and seeks to influence outcomes to the extent it can. Based on the information available to it today, GHAM sees a reasonable prospect of further liquidity in 2019.

The Company's increased cash following recent realisations enables us actively to access and reinvest in direct private equity opportunities at the smaller end of the market and alternative asset classes targeting long term, illiquid strategies in each case leveraging capabilities within GHAM. The Board and the Manager continue to evaluate strategic options for the Company.

Gresham House Asset Management Limited

12 September 2018

Principal risks and uncertainties

The principal risks and uncertainties that affect the Company are described on pages 6 to 7 of the Company's Annual Report for the year ended 31 December 2017. These are still considered the most relevant risks and uncertainties which the Company faces and they could have an impact on the Company's performance in the second half of the financial year.

For the near future, the market risk factors set out in the 2017 Annual Report are expected to be influenced by the UK's decision to leave the European Union. The volatility and uncertainty as negotiations continue in connection with that decision may include:

· Reduction in the demand for the products and services of the Company's investments, which may negatively impact the performance, growth rates and overall value of those investments;

· A lack of liquidity in the capital markets and an increased aversion to risk on the part of potential buyers could mean that the Company may not be able to realise its investments in line with planned timings and values; and

· Changes in market prices for the Company's quoted investments, as well as movements in interest rates and exchange rates. A significant proportion of the investment portfolio is denominated in a currency other than pounds sterling, principally US dollars. It is the Board's current policy not to hedge the Company's underlying non-Sterling investments.

Going concern

As stated in note 1 to the condensed financial statements, the directors are satisfied that the Company has sufficient resources to continue in operation for the foreseeable future, a period of not less than twelve months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial statements.

Martin Knight

Chairman

12 September 2018

Condensed income statement

The notes form part of these financial statements.

Condensed statement of other comprehensive income

The notes form part of these financial statements.

Condensed statement of financial position

The financial statements were approved by the Board on 12 September 2018 and were signed on its behalf by:

Neil Lerner

Director

The notes form part of these financial statements.

Statement of changes in equity

Six months ended 30 June 2018

Six months ended 30 June 2017

The notes form part of these financial statements.

Condensed cash flow statement

The notes form part of these financial statements.

Notes to the financial information

1. Principal accounting policies

Reporting entity

LMS Capital plc ("the Company") is domiciled in the United Kingdom. These condensed financial statements are presented in pounds sterling because that is the currency of the principal economic environment of the Company's operations.

These condensed financial statements do not constitute the statutory accounts of the Company within the meaning of section 434(3) and 435(3) of the Companies Act 2006. The comparative figures for the financial year ended 31 December 2017 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditor and delivered to the registrar of companies. The report of the auditor on the Company's statutory accounts for the financial year ended 31 December 2017 was (i) unqualified and (ii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

The Company was formed on 17 March 2006 and commenced operations on 9 June 2006 when it received the demerged investment division of London Merchant Securities.

Statement of compliance

These condensed financial statements have been prepared in accordance with IAS 34: Interim Financial Reporting as adopted by the EU. They do not include all of the information required for full annual financial statements and should be read in conjunction with the annual financial statements for the year ended 31 December 2017 which were prepared in accordance with International Financial Reporting Standards as adopted by the EU ("Adopted IFRS").

As required by the Disclosure and Transparency Rules of the Financial Conduct Authority, the condensed financial statements have been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published financial statements for the year ended 31 December 2017, except as noted below.

New accounting standards effective during the Period

IFRS 9 "Financial instruments" is effective on or after accounting periods beginning on 1 January 2018. The new standard requires the Directors to evaluate the classification, measurement and recognition of financial assets and financial liabilities.

The Company has adopted IFRS 9 with effect from 1 January 2018, which has the following impact:

§  No effect on the classification and measurement of its financial assets, as these are held at fair value through profit or loss and will continue to be measured on the same basis under IFRS 9;

§  No impact on the accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss. The Company has no such financial liabilities.

IFRS 15 "Revenue from contracts with customers" is effective on or after accounting periods beginning on 1 January 2018.

The core principle of the new standard is for entities to recognise revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the Company expects to be entitled in exchange for those goods or services.

The Company is not exposed to IFRS 15 given its business model and therefore this has no impact on the Company.

Basis of preparation

These condensed financial statements have been prepared in accordance with International Financial Reporting Standards as adopted for use in the European Union ("Adopted IFRS").

Consistent with the year ended 31 December 2017 the Directors have concluded that the Company has all the elements of control as prescribed by IFRS 10 "Consolidated Financial Statements" in relation to all its subsidiaries and that the Company satisfies the criteria to be regarded as an investment entity as defined in IFRS 10, IFRS 12 "Disclosure of Interests in Other Entities" and IAS 27 "Consolidated and Separate Financial Statements". Subsidiaries are therefore measured at fair value through profit or loss, in accordance with IFRS 13 "Fair Value Measurement" and IFRS 9 "Financial Instruments: Recognition and Measurement".

Taking account of the financial resources available to the Company, the directors believe that the Company is well placed to manage its business risks successfully despite the current uncertain economic outlook. After making enquiries the directors have a reasonable expectation that the Company has adequate resources for the foreseeable future, a period of not less than twelve months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial statements.

Use of estimates and judgements

The preparation of condensed financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis; revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

2. Gains on investments

The gains and losses on investments were as follows:

3. (Loss) / earnings per ordinary share

The calculation of the basic and diluted (loss)/earnings per share, in accordance with IAS 33, is based on the following data:

 \* There were no potentially dilutive shares in the period to June 2018 since the Company made a loss.

4. Investments

The Company's investments comprised the following:

The carrying amounts included in the investment portfolio were as follows:

The following table analyses investments carried at fair value at the end of the year, by the level in the fair value hierarchy into which the fair value measurement is categorised. The different levels have been defined as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets;

Level 2: inputs other than quoted prices included within level 1 that are observable for the asset, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3: inputs for the asset that are not based on observable market data (unobservable inputs such as trading comparables and liquidity discounts).

Fair value measurements are based on observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's view of market assumptions in the absence of observable market information.

The Company's investments are analysed as follows:

Level 3 amounts include £47,476,000 (2017: £59,695,000) relating to the investment portfolios of subsidiaries (including quoted investments of £3,196,000 (2017: £4,521,000)) and £87,383,000 (2017: £78,146,000) in relation to the other net assets of subsidiaries.

If the valuation for level 3 category investments declined by 10% from the amount at the reporting date, with all other variables held constant, the profit for the six months ended 30 June 2018 would have decreased by £13.6 million (2017: £13.5 million). An increase in the valuation of level 3 category investments by 10% at the reporting date would have an equal and opposite effect.

5. Capital commitments

The outstanding commitments to funds comprise unpaid calls in respect of funds where one of the Company's subsidiaries is a limited partner.

6. Related party transactions

Gresham House Asset Management Limited, the investment manager of LMS Capital plc charged £439,000 to 30 June 2018 (six months to 30 June 2017: £437,000).

With effect from January 2011 the Company entered into a lease agreement with Derwent London plc in respect of the premises comprising its head office and registered office. The lease was formally terminated on 24 March 2018. Under the terms of the lease the Company paid rent of £104,000 (six months to 30 June 2017: £203,000) to Derwent London plc. Robert Rayne is Chairman of Derwent London plc.

7. Subsidiaries

The Company's subsidiaries are as follows:

In addition to the above, certain of the Company's carried interest arrangements are operated through five limited partnerships (LMS Capital 2007 LP, LMS Capital 2008 LP, LMS Capital 2009 LP, LMS Capital 2010 LP and LMS Capital 2011 LP) which are registered in Bermuda.

The registered addresses of the Company's subsidiaries are as follows:

Subsidiaries incorporated in England and Wales: Two London Bridge, London, SE1 9RA.

Subsidiaries and partnerships incorporated in Bermuda: Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.

Subsidiary incorporated in the United States of America: c/o Two London Bridge London SE1 9RA.

8. Net asset value per share

The net asset value per ordinary shares in issue are as follows:

Statement of Directors' responsibilities

The Directors listed on pages 18 of the Company's Annual Report for the year ended 31 December 2017 continued in office during the six months ended 30 June 2018.

We confirm that to the best of our knowledge:

a) the condensed financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU; and

b) the interim management report includes a fair review of the information required by:

i. DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the current financial year and their impact on the condensed financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

ii. DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during that period; and any changes in the related party transactions described in the last annual report that could do so.

N Lerner

Director

12 September 2018

Independent review report to LMS Capital plc

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2018 which comprises the condensed income statement, condensed statement of other comprehensive income, condensed statement of financial position, statement of changes in equity, condensed cash flow statement and notes to the financial statements.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of and has been approved by the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the Company are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, ''Interim Financial Reporting'', as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting its responsibilities in respect of half-yearly financial reporting in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2018 is not prepared, in all material respects, in accordance with International Accounting Standard 34, as adopted by the European Union, and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

BDO LLP

Chartered Accountants

LONDON, UK

12 September 2018

BDO LLP is a limited liability partnership registered n England and Wales (with registered number OC305127).