<p><strong>Preparation</strong>: Start constructively, and avoid making JM defensive, and to get him to volunteer as much information as possible. I was also going to record the call.</p>

<ul>
	<li>What is JM currently working on with respect to Harcourt pubs (the 6 pubs in the chain)?</li>
	<li>What are the plans for re-opening?</li>
	<li>Has he fired any staff or still furloughed?
	<ul>
		<li>Are all staff on furlough or any active?&nbsp;</li>
		<li>If staff active, what are they doing?</li>
	</ul>
	</li>
	<li>Backward-looking data
	<ul>
		<li>What is the update regarding EIS applications?</li>
		<li>When can we expect to receive all the historic financials (PnL, balance sheet), material contracts for each of the pubs?</li>
		<li>How has he been distributing them in the past? Who has received and when were they sent?</li>
		<li>Is he aware that he is under a contractual obligation to provide financials every 6 months?
		<ul>
			<li>What is the reason(s) for failing to provide this data? Future plans</li>
		</ul>
		</li>
	</ul>
	</li>
	<li>In light of the current circumstances and performance pre CV-19, as well as the impact of CV-19 going forward - would JM offer to unilaterally renegotiate the management contract to reduce fees and make a larger percentage performance related?</li>
	<li>Why does he think opening up the pubs makes financial sense - given the projections provided.
	<ul>
		<li>Shareholders will make this decision.</li>
	</ul>
	</li>
	<li>Exit plans
	<ul>
		<li>What is the rationale for appointing 2 additional directors - who is paying for them and what is their relationship?</li>
		<li>What is the update on the exit proposals? When will they be finalised and can he give some indication as to the content now?</li>
		<li>Shareholders will certainly require there to be a competitive auction - one bidder is economically unpalatable - what is the timing to advise other bidders of the process?</li>
	</ul>
	</li>
</ul>

<p>&nbsp;</p>

<p><strong>Summary of the call</strong></p>

<ul>
	<li>Are all staff furloughed?
	<ul>
		<li>Ans: Yes, all staff are furloughed &quot;from head office down&quot;
		<ul>
			<li>Beginning to take some staff off furlough, who are planning for reopening</li>
			<li>FD has not been furloughed as she is not an employee
			<ul>
				<li>She is dealing with suppliers, banks etc.&nbsp;&nbsp;</li>
			</ul>
			</li>
		</ul>
		</li>
		<li>All contracts the PR agencies, consultants and all other costs are all switched off, with exception of property insurance</li>
	</ul>
	</li>
	<li>Pur re-opening plans.
	<ul>
		<li>When are pubs reopening?
		<ul>
			<li>Discussion of 2-metre vs 1-metre and discussions of layout of the pub</li>
		</ul>
		</li>
	</ul>
	</li>
	<li>If you think the pubs only take 50% of takings, do they make any money?&nbsp;&nbsp;
	<ul>
		<li>Answer: No, none of them.</li>
	</ul>
	</li>
	<li>Are the pubs making money now, pre CV-19
	<ul>
		<li>Initial answer:
		<ul>
			<li>Yes: Three Cranes, Coach, Hero</li>
			<li>No: Harcourt, KPH, Crown</li>
		</ul>
		</li>
		<li>Clarified that the definition of profitable applies after management fees</li>
		<li>Revised answer: After management fees, the following were making money: Coach, Three Cranes</li>
		<li>Note: we should make sure James understands that the investors see the management fee as no different from other fees/wages.&nbsp; It is misleading and disingenuous to treat them otherwise - this is deception</li>
	</ul>
	</li>
	<li>Should the management fees be paid when the pubs are not open?&nbsp;
	<ul>
		<li>James did not answer if management fees still being paid (I can see fees are still accruing)&nbsp;&nbsp; (10mins in)</li>
	</ul>
	</li>
	<li>If the decision is not to open in 2020, what implications for each pub?
	<ul>
		<li>Not answered in detail</li>
	</ul>
	</li>
	<li>What are the costs to make people redundant?
	<ul>
		<li>Answer: &quot;We are trying to work out the figures now&quot;.&nbsp;&nbsp;</li>
		<li>He is worried about destroying goodwill and he is worried about rehiring staff</li>
		<li>Worried about goodwill from the customers.
		<ul>
			<li>James is working on ideas around re-opening - 4d weeks, cutting salaries, central kitchens</li>
			<li>JS and SN: We should not reopen if the pubs will not be profitable</li>
		</ul>
		</li>
	</ul>
	</li>
	<li>What about closing the eating area and make it drink only- use the space</li>
	<li>James suggesting moving staff between Coach and Hero etc
	<ul>
		<li>John mentioned the need to worry about the EIS risk of having staff work across pubs (15mins).</li>
		<li>James responses was &quot;Pub groups do it&quot;
		<ul>
			<li>SN corrected James that these are independent pubs.</li>
		</ul>
		</li>
	</ul>
	</li>
	<li>EIS status? (18mins)
	<ul>
		<li>Pubs without EIS certificate:&nbsp; KPH, Hero, Crown.</li>
		<li>Recapped on trading starts (updated-&gt; https://london-pubs.atts-systems.com/dashboard/pub/&nbsp; )</li>
		<li>Last correspondence with the HMRC was at the end of March</li>
		<li>SN asked James to forward all correspondence on the EIS&nbsp; *****
		<ul>
			<li>&nbsp; James said &quot;Yes&quot; (20mins into call)</li>
		</ul>
		</li>
		<li>Advisors - what do the advisors think the status is
		<ul>
			<li>James thinks we should get the certification.</li>
			<li>JS asked JM to chase HMRC ****</li>
		</ul>
		</li>
	</ul>
	</li>
	<li>Reopening.&nbsp; Looking at apps for taking orders &amp; Deliveroo</li>
	<li>JS proposition
	<ul>
		<li>Assume 1 metre, what assumptions that means for revenue, furlough impact and derive if we can make money?</li>
		<li>The fact that the pubs didn&#39;t make money pre CV19 then how can we justify reopening now?
		<ul>
			<li>James is working on that.&nbsp; Opening hours, distancing etc</li>
		</ul>
		</li>
	</ul>
	</li>
	<li>SN suggested changing the management contract to align
	<ul>
		<li>&quot;Barely taking any management fees as is&quot; - Definitely mis-messaging what &quot;profitable&quot; means</li>
		<li>&quot;No incentive other than my management fee in the current structure&quot;
		<ul>
			<li>Need James to understand if the pubs are not profitable we need to close asap.</li>
		</ul>
		</li>
	</ul>
	</li>
	<li>Provision of financials, documents
	<ul>
		<li>SN asked for all the financials right away</li>
	</ul>
	</li>
	<li>Why haven&#39;t investors been receiving management accounts
	<ul>
		<li>James claimed every investor has received investor material throughout their investment</li>
		<li>SN reminded JM of his obligations send them six monthly</li>
		<li>JM claimed he last sent financials in November
		<ul>
			<li>note:&nbsp; I received financials on 21 Oct, but only for 3 pubs (out of 4 I am invested in)</li>
		</ul>
		</li>
		<li>JM claims that before November this year, the responsibility was with Rob Cherry
		<ul>
			<li>We should question this - contract presumably doesn&#39;t specify the sender.&nbsp;&nbsp;</li>
		</ul>
		</li>
	</ul>
	</li>
	<li>Loan
	<ul>
		<li>Harcourt 3k pcm. RBS loan. Interest is 3k pcm.&nbsp; Loan is for &pound;500k. 7.2% interest.</li>
		<li>All the loans and interest rate costs will be broken down for you.&nbsp; [Not sent]</li>
	</ul>
	</li>
	<li>Will the pubs run out of cash?
	<ul>
		<li>Hero - short term issue. Other pub</li>
	</ul>
	</li>
	<li>Harcourt - Status of the contract with &lt;Andrew Embe?&gt;
	<ul>
		<li>James has been trying to get contract terminated, but demanding money to terminate</li>
		<li>No point in paying him to terminate the contract if exit pending</li>
		<li>Restructure - counsel opinion was &#39;no&#39;.&nbsp; Until it is sold or restructured, it is.... ?? ... he may agree to terminate but accrued fees to be paid (70k)</li>
		<li>James said he was going to provide these details on Wednesday **** .</li>
	</ul>
	</li>
	<li>Exit plan - General plan, who was it with?
	<ul>
		<li>Original plan -Sale and lease back - Cubitt as a tenant.&nbsp;
		<ul>
			<li>However, market destroyed.&nbsp; Open market rents are very difficult</li>
		</ul>
		</li>
		<li>Current plan - reorganising pub with a &quot;chunky payout&quot; and an equity stake in a wider group.&nbsp; Normal operating company.</li>
		<li>Admits that the non-operating costs aren&#39;t sustainable de.
		<ul>
			<li>James will have something to discuss in early July. 4 July&nbsp; (across all pubs)</li>
		</ul>
		</li>
		<li>Price tension and other bidders - opinion?</li>
	</ul>
	</li>
	<li>Harcourt redevelopment plans
	<ul>
		<li>Couple of options
		<ul>
			<li>Lump-sum &#39;partial exit&#39;
			<ul>
				<li>Capital required to develop upper floors, with equity based performance on redeveloped assets</li>
			</ul>
			</li>
			<li>Or simple exit sale.</li>
			<li>Planning permission - positive pre-app,&nbsp; but no detailed planning consent at this stage</li>
			<li>Timing etc on planning permission</li>
			<li>&pound;1m to redevelop</li>
		</ul>
		</li>
	</ul>
	</li>
	<li>Exit plans on all pubs
	<ul>
		<li>Savills will be providing a valuation across all pubs; will be part of the proposal</li>
		<li>Exit proposal due</li>
	</ul>
	</li>
</ul>

<p>&nbsp;</p>

<p><strong>Agreed next steps</strong></p>

<ul>
	<li>Was due to reconvene on Friday 19th June to look at financials.&nbsp;</li>
	<li>James to share reopening plan stages on 19th June -even if it was a work in progress doc.</li>
</ul>

<p>SN message - Investors want to be actively involved going forward</p>

<p>Investors want to be involved in the EIS negotiations (Steve Partridge)</p>

<p>&nbsp;</p>

<p><strong>My observations/thoughts when I replayed the call </strong></p>

<p>1. Management fee:</p>

<ul>
	<li>James mentioned management fees are not being paid but are accruing.
	<ul style="list-style-type:circle">
		<li>Question: Are the management fees included in the PnL stats</li>
	</ul>
	</li>
	<li>James mentioned all staff including head office are furloughed
	<ul style="list-style-type:circle">
		<li>If that is the case, why are the pubs still paying the fee?</li>
	</ul>
	</li>
</ul>

<p>2. Information requested, and promised in the 17th June pack, but missing</p>

<ul>
	<li>&nbsp;Details of all loans: Lender, amounts and interest rates.&nbsp;</li>
	<li>All correspondence on EIS with HMRC and Guinness</li>
	<li>Contract details for Harcourt contractor</li>
	<li>Cashflow projections for each pub in the event of non-opening</li>
</ul>

<p>3. Historic information</p>

<ul>
	<li>James claims that Rob Cherry was responsible for sending out accounts prior to November 2019
	<ul>
		<li>Speaking with Rob, James did not provide him with the information to do so</li>
	</ul>
	</li>
</ul>

<p>&nbsp;</p>

<p>My views:</p>

<ul>
	<li>We should reiterate to James
	<ul>
		<li>Accrued costs are equally relevant costs as those paid out in a given year,&nbsp;
		<ul>
			<li>As value is being capitalised, cashflow timing isn&#39;t relevant-&nbsp; it is the PV of all costs/fees etc</li>
		</ul>
		</li>
		<li>Although we recognise the argument that buyouts <strong>may</strong> be based on EBITDA without non-operating expenses, until such time as this materialises, investors should not be mislead that pubs are profitable when they are not</li>
		<li>Also, when describing value and returning par, the EIS discount should not be considered.&nbsp; This is not value added by Harcourt</li>
		<li>The primary consideration JM should have in all decisions is to maximise shareholder value.
		<ul>
			<li>We see a conflict in personal motivations as his fees continue to accrue.&nbsp; How can we align those interests?</li>
		</ul>
		</li>
	</ul>
	</li>
</ul>

<p>&nbsp;</p>

<p>&nbsp;</p>

<p>&nbsp;</p>

<p>&nbsp;</p>