Proposed Change of Investment Strategy & Ge...

10 October 2011

LMS CAPITAL PLC

                  PROPOSED CHANGE OF INVESTMENT STRATEGY and                   

                         CONVENING OF GENERAL MEETING                          

On 6 September 2011 the Board of LMS Capital plc (LMS or the "Company")
announced that it had received an approach by its Chairman, The Honourable
Robert Rayne, and certain members of the Rayne Concert Party together
representing approximately 35 percent of the Company's shares, requesting that
the Company be broken up in the short term.

An independent committee, comprising the Non-Executive Directors excluding
Robert Rayne (the "Independent Committee") and under the Chairmanship of John
Barnsley, has considered this request and, with its advisers, consulted certain
shareholders about possible solutions.

The Independent Committee has sought to structure an exit for the Concert
Party, but it has not been possible to establish a price at which the Concert
Party would be willing to sell its holding and at which a buyer or buyers for
those shares could be found in current market conditions.

In consequence, the Independent Committee no longer believes that the status
quo is sustainable, given the wide discount at which the Company's shares trade
(along with the shares of other similar companies) and in excess of one third
of the Company's shares are held by the Rayne Concert Party, which is emphatic
that the Company must pursue a realisation strategy.

The Independent Committee has concluded that, whilst it has every confidence in
the incumbent management team led by Glenn Payne, it would be in the interests
of shareholders as a whole for a new strategy to be implemented which would
require the Company's portfolio to be realised in an orderly manner. This
strategy would be expected to achieve a balance between an efficient return of
cash to shareholders and maximising the value of the Company's investments. No
new investments will be made. The Independent Committee proposes that this
strategy be implemented, under its supervision, by the incumbent management,
with a streamlined cost structure and suitable incentive arrangements in place
to align management's interests more closely with the shareholders under the
new strategy.

The Board will accordingly be publishing a circular and notice of General
Meeting shortly to propose a change to the Company's investment policy as
outlined above, and to address the composition of the Board so as to ensure its
full independence as it supervises the wind-down. Accordingly, Robert Rayne has
been asked to resign from the Board.

In the event that these objectives are not achieved, three of the independent
non-executive directors, John Barnsley, Richard Christou and David Verey, will
resign from the Board.

John Barnsley, Chairman of the Independent Committee, commented:

"Institutional shareholders have told us that, if the current investment
strategy cannot be continued given the opposition of the Rayne family Concert
Party, institutions would support an orderly wind-down by the current
management team under the supervision of independent directors. The Company
will be writing to shareholders shortly to table resolutions to approve the
orderly wind-down and to address the composition of the Board so as to ensure
its full independence as it supervises the wind-down. The Board is concerned to
ensure there is no possibility of the Rayne family Concert Party having, or
appearing to have, any undue influence or confidential information during the
course of the implementation of the wind-down."

A further announcement will be made in due course.

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Enquiries

Quayle Munro:

Andrew Tuckey / Colin La Fontaine Jackson 020 7907 4200

Matrix Corporate Capital LLP

Paul Fincham / Rob Naylor 0203 206 7175

Brunswick Group

Simon Sporborg / Fiona Micallef-Eynaud 0207404 5959

About LMS

Under its current strategy, LMS is an investment company focused on investing
in profitable and growing private companies where our involvement is additive
to the value and performance of the company. Our focus is on small to medium
sized companies in our preferred sectors of consumer, energy and business
services. We partner with experienced managers in profitable, growing companies
where we believe we can add value. We aim to grow our investments (and NAV) by
15%+ per annum without undue risk or investing in unproven businesses.

Our recent deal experience has confirmed to us that potential partners place
great store on working with people who not only understand their business
(typically through previous deals in the same sector) but also have themselves
worked in operational management positions and who therefore understand and
empathise with the role of management in a business partnership.

In the 12 months to 30 June 2011, we have increased NAV by 12%, reported a
maiden profit at the plc level, increased underlying EBITDA at portfolio
companies by 42%, reduced overheads at the plc by 20%, and outperformed the
listed PE comparables and the broader FTSE indices. The Company's Net Asset
Value at 30 June 2011 was £252.4 million - including the investment portfolio
valued at £224.3 million and net cash of £30.5 million. Harvesting our legacy
investments should produce the capital required to finance growth at our
existing and new direct holdings.

John Barnsley, Non-executive Director

Mr Barnsley is the Senior Independent Non-executive Director of the Company,
having been appointed to the Board on 7 April 2006. He currently holds a number
of other directorships, including: Grainger Trust plc, Northern Investors
Company plc, American Appraisal Associates LLP and European Cardiovascular
Genetics Foundation. Prior to December 2001, Mr Barnsley spent 22 years as a
partner at PricewaterhouseCoopers, including four years as UK managing partner.

Richard Christou, Non-executive Director

Mr Christou is an independent Non-executive Director of the Company, having
been appointed to the Board on 7 April 2006. He has been executive chairman of
Fujitsu Services Holdings plc since April 2004. With a law degree from
Cambridge, Mr Christou began his career in 1967 and spent a number of years as
legal adviser and company secretary of STC Telecommunications Ltd. In 1985, he
became company secretary and legal director of Solaglas (UK) Ltd, before
returning, in 1987, to STC plc as Director, Commercial and Legal Affairs. He
moved to ICL in 1990, becoming chief executive in 2000. ICL plc changed its
name to Fujitsu Services Holdings plc in April 2002.

David Verey, CBE, Non-executive Director

Mr. Verey is an independent Non-executive Director of the Company, having been
appointed to the Board on 7 September 2009. He is currently a Senior Adviser to
Lazard & Co., Limited, Senior non- executive director at the Department of
Culture, Media and Sport, a non-executive director of Daily Mail and General
Trust plc, Sofina SA and Bank Gutmann. Formerly, he was Chairman and Chief
Executive of Lazard Brothers & Co., Limited and Chairman of Blackstone Group
UK.