Further re Proposals for the future of the Company

Further re Proposals for the future of the Company

Gresham House plc

Gresham House plc (the “Company”)

Proposals for the future of the Company

Introduction

The board of directors of the Company (the “Board”) is pleased to announce that it is in discussions relating to the future of the Company which, if brought to a satisfactory conclusion, would provide an attractive alternative to the current plan of liquidation and distribution as approved at the 2011 annual general meeting. The expected key features of the alternative plan (the “Proposals”) include:

• the appointment of a substantially new board of directors and a new management team (together the “New Team”) whose members would include individuals with long-standing and successful investment track records;
• a new strategic direction for the Company including the proposed development of an asset management business and investment portfolio;
• the issue of new ordinary shares in the Company (“Ordinary Shares”) by way of a placing (“Placing”) to new investors at a discount of 11.25 per cent. to the net asset value per Ordinary Share as at 30 June 2014 in order to raise approximately ₤20 million. Preliminary non-binding indications of interest in subscribing for a significant portion of this sum have already been expressed to the Company’s advisers;
• the issue of warrants (“Warrants”), to be admitted to trading on AIM, to those holders of the Company’s shares (the “Shareholders”), other than placees, on a one Warrant per five Ordinary Shares basis;
• the purchase of up to 850,000 supporter warrants (the “Supporter Warrants”) by members of the New Team at a price of ₤0.075 per Supporter Warrant;
• the cancellation of the Company’s listing on the Main Market and the admission of the share capital of the Company as enlarged by the Placing (the “Enlarged Share Capital”) and the Warrants to trading on AIM (“Admission”);
• the reduction of the Company’s share premium account by cancelling the share premium arising on the issue of the new Ordinary Shares; and
• the amendment of the Company’s Investment Policy.

It should be noted that discussions are at an early stage and there is no certainty that agreement as regards the implementation of the Proposals, or any part of the Proposals, will be reached. Furthermore, if progressed, implementation of the Proposals will be subject to, amongst other things, approval by the Shareholders (including of special resolutions requiring approval of 75% of votes cast on the relevant resolutions to be cast in favour). If any of the resolutions are not approved by Shareholders, none of the Proposals will proceed.

The Board believes that, if implemented, the Proposals provide an attractive alternative to the current plan of liquidation and distribution which, as announced, will involve a significant amount of the proceeds of realisation being distributed to Shareholders being paid in multiple stages over up to three years following a sale of the Company’s property assets. This is driven by the payment policy currently being adopted by residential developers which could delay the resultant distributions due to Shareholders if the Company were to continue its pursuit of the current plan, as opposed to implementing the Proposals.

At such time as the Proposals are finalised, a circular containing details of the Proposals (the “Circular”) and an AIM admission document (the “Admission Document”) will be sent to Shareholders. The Circular will include a notice of general meeting of the Company (“General Meeting”) at which various resolutions will be put to Shareholders (the “Resolutions”) in order to seek approval for the Proposals.

1. Appointment of the New Team

The New Team will consist of new members of the Board as well as a new management team. It is expected that the New Team be led by Anthony (Tony) Dalwood, formerly CEO and Chairman of SVG Investment Managers and Michael Phillips, the founder and former CEO of iimia Investment Group plc and Christows Limited, who would both join the Board at the time of Admission.

In addition to Tony Dalwood and Michael Phillips it is expected that a number of non-executive appointments would also be made to the Board, and that all of these changes would become effective on Admission (at which point implementation of the Proposals would complete). Accordingly, on Admission it is proposed that at least the following individuals will be appointed as directors in the capacities set out opposite their name:

Chairman:	Â	Â	Â	Anthony Townsend
Senior Non-executive Director:				Peter Moon
Executive Director:				Tony Dalwood
Executive Director:				Michael Phillips
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One existing director will remain on the Board until at least December 2015 to assist the New Team with the process of familiarisation with the existing assets and the integration of the New Team. Aside from this one director, it is intended that the existing Board will resign on Admission.

As previously announced, notices were served to terminate the service contracts and letters of appointment of each of the Company’s executive and non-executive directors as at 31 July 2014. From 1 August 2014 until Admission, it is intended that the current members of the Board will remain as directors of the Company and that new agreements will be entered into under which they will be paid a daily rate for their work for the Company.

Brief biographical details of the proposed new Board members referred to above are set out below.

• Anthony Townsend – Anthony Townsend has spent over 40 years working in the City and was Chairman of the Association of Investment Companies from 2001 to 2003. He is Chairman of Baronsmead VCT 3 plc, British & American Investment Trust PLC, F&C Global Smaller Companies PLC, Finsbury Growth & Income Trust PLC and Miton Worldwide Growth Investment Trust PLC. He was a director of Brit Insurance Holdings plc from 1999 to 2008 and represented it on the Council of Lloyd’s from 2006 to 2008. He was managing director of Finsbury Asset Management Ltd from 1988 to 1998.
• Peter Moon – Peter Moon joined the City in 1972 and worked as an investment analyst and fund manager in a number of roles in unit and investment trusts, insurance and finally pension schemes. The last 25 years of his career were spent as an Investment Manager of the British Airways Pensions scheme and Chief Investment Officer of the Universities Superannuation Scheme. He is currently a director of Scottish American Investment Company and First Property Group and Chairman of Arden, a UK stockbroker and Bell Potter Securities UK Limited, the UK branch of an Australian stockbroker.
• Tony Dalwood – Tony is an experienced investor and adviser to public and private equity businesses. Tony established SVG Investment Managers (a subsidiary of SVG Capital plc), acted as CEO and Chairman of this entity, and launched Strategic Equity Capital plc. His former appointments include membership of the UK Investment Committee of PDFM and the board of Schroders Private Equity Funds. He is currently on the Investment Committee and board of the London Pensions Fund Authority and is chairman of Downing Public Equity Investment Committee.
• Michael Phillips – Michael is an experienced business manager with a history of founding and building businesses in fund management. Michael has served as a director of Strategic Equity Capital plc for the last seven years, founded iimia Investment Group plc (now Miton Group plc), Christows Limited (now part of Investec’s retail operations), and more recently REDS Investments Limited. Michael is a fellow of the Chartered Institute for Securities and Investments and is a non-executive director of Miton Worldwide Growth Investment Trust.

The New Team will be supported by both an Investment Committee and an Advisory Group, brief details of which are set out below.

• Investment Committee - It is anticipated that the Investment Committee will initially consist of the two executive members of the New Team, Tony Dalwood and Michael Phillips, alongside three or four (or more as appropriate) independent individuals who are experienced in the investment sectors in which the Company will be focussed. The purpose of the Investment Committee will be to promote and maintain a prudent and effective allocation of capital across the Company’s entire investment portfolio.
• Advisory Group - It is anticipated that the Advisory Group will initially consist of a small number of independent individuals who are experienced in the investment sectors in which the Company will be focussed, and specifically in the business of asset management. The purpose of the Advisory Group will be to act as a general sounding board for the executive team, and to provide a comprehensive and high quality source of knowledge, experience and contacts on which they can draw.

2. New Strategic Direction

The New Team’s strategy for the ongoing operation of the Company is to develop the Company as a listed platform for investment in differentiated and illiquid assets. The New Team intend to use the funds raised in the Placing to create or acquire a fund management business, to act as the cornerstone investor in a strategic public equity fund and to execute direct investments in public and private smaller companies. The New Team will also seek to maximise the value of the Company’s existing assets as at the date of Admission.

The New Team considers that the above strategy will enable the Company to capture the illiquidity premium that exists within inefficient areas of the public markets. The New Team considers that the appetite exists for investment in a Gresham House plc, reshaped along the lines set out above, in particular amongst smaller institutional investors, family offices, wealth managers, private banks and ultra-high net worth individuals.

3. Placing of Ordinary Shares

The Company intends to seek potential investors who will agree to subscribe for Ordinary Shares in the Placing. The Placing will aim to raise £20 million, with a minimum raise of £15 million. Early conversations with a limited number of potential investors have resulted in preliminary non-binding indications of interest in subscribing for a significant proportion of the target sum being expressed to the Company’s advisers.

The New Team have written to the Board expressing their intention to invest at least ₤1m in the Company as part of the Proposals. The New Team will invest in Ordinary Shares and in the Supporter Warrants to demonstrate their commitment to, and confidence in, the revised strategy for the Company, as set out below.

The placing price for the Ordinary Shares will be derived by calculating a discount of 11.25% on the unaudited net asset value of the Company as at 30 June 2014, which shall be announced in the interim results of the Company for the six month period ended 30 June 2014 (the “Net Asset Value”). Shareholder approval will be required to implement the Placing, including to approve the price of the Placing at a discount to the Net Asset Value.

This capital will be used primarily as additional working and investment capital for the Company in accordance with the amended Investment Policy. The new funds may also be used to fund a possible buyback of Ordinary Shares following completion of the Proposals.

4. Issue of Warrants and Supporter Warrants

Each existing Shareholder on the register shortly prior to Admission will be issued with one warrant for every five Ordinary Shares held by that Shareholder (the “Warrant”). Each such Warrant will entitle the Shareholder to subscribe for one Ordinary Share in the capital of the Company, exercisable between 31 December 2014 and 31 December 2019. It is intended that the Warrants will be admitted to trading on AIM and that the exercise price of the Warrants would be the Net Asset Value.

The New Team, together with a small group of others who have assisted with the development and negotiation of the Proposals and who will either become members of the Board, employees, members of the Investment Committee or Advisory Group, intend to demonstrate their confidence in the Company by acquiring 850,000 Supporter Warrants at a price of £0.075 per Supporter Warrant. These Supporter Warrants would have the same entitlements as the Warrants to be issued to Shareholders save that they will not be admitted to trading on AIM nor will they be exercisable until one year from Admission. Each such Supporter Warrant will entitle the holder to subscribe for one Ordinary Share in the capital of the Company, exercisable at any time after the first anniversary of Admission and before 31 December 2019. This deferred period for exercise is intended to align the interests of holders with those of the Company, and to incentivise the new Team appropriately to maximise Shareholder value.

5. Change of Listing from the Main Market to AIM

As part of the Proposals the Company intends to seek Shareholder approval for a move of its listing from the Main Market of the London Stock Exchange to AIM (as an investing company). The New Team believe that the AIM market is a more appropriate venue for the listing of the Enlarged Share Capital and the Warrants having regard to the likely future size of the Company, the prospective investor base and the proposed investment activity. Shareholder approval will be sought and an Admission Document will be produced in connection with this move.

6. Reduction of Share Premium Account

In order to generate the distributable reserves to facilitate the payment of dividends and any share buyback that the New Team may in the future approve, it is proposed that the share premium account be reduced by cancelling the share premium arising on the issue of the new Ordinary Shares in the Placing. The New Team will, from time to time, consider the desirability of implementing a share buyback.

7. Next Steps

The Board considers that it is in the interests of Shareholders to have the future strategy for the Company resolved as quickly as possible and are targeting the publication of the Circular and the Admission Document by the end of August, with the General Meeting, de-listing and Admission to occur as soon thereafter as is practicable. (Following publication of the Circular and Admission Document, the timetable will be driven by the General Meeting notice period, de-listing and AIM Admission requirements.)

Publication of the required documents is subject to the parties agreeing the terms. There is no certainty that all the terms connected with the Proposals will be agreed or that the Proposals will be put to Shareholders for their consideration.

This announcement is for information purposes only and does not constitute an offer to sell or an invitation to purchase any securities or the solicitation of an offer to buy securities pursuant to the Proposals or otherwise.

Enquiries:	Â	Â	Â	Â
Gresham House plc	Â	Â	Â
John Lorimer, Property director				020 7592 7020
Brian Hallett, Finance director and company secretary	Â	Â	Â	01489 570 861
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Westhouse Securities Limited				020 7601 6100
Robert Finlay
Rose Ramsden	Â	Â	Â	Â
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