<p>12Paulton Street<br />
London<br />
SW3 5DR</p>

<p><strong>James McCullogh<br />
Harcourt Pub Limited<br />
139 Ladbroke Grove<br />
London</strong></p>

<p>W10 6HJ<br />
1 October 2019</p>

<p>&nbsp;</p>

<p>Dear James,</p>

<p>I am writing to follow up on your response dated 13 September 2019 to our letter of 22 August 2019. Thank you also for sending the pre application for planning and reports.<br />
We acknowledge that the pre app appears to be well presented and sensible, but all depends on whether it ultimately receives consent. If consent is received this should immediately enhance the inherent value in the Harcourt for a buyer, but we would reiterate that we currently have little appetite to see significant money borrowed to finance the development with the attendant risk&nbsp; or to bear the drag on profitability which would result from the disruption caused over a long build period.</p>

<p>Whilst we understand why you would want to package the Harcourt as part of a pub group, we have already identified there are significant structural issues which have a direct impact on our equity in the Harcourt. But we are no wiser as to how you can assure us that our value will not be compromised by the strategy you are proposing, and we have significant concerns:</p>

<ul>
	<li>Our equity value will continue to be eroded by your 2% annual fee until at least 2023. You benefit from the delay in exit directly at our expense.&nbsp; We invested our money in the first quarter of 2015, four and a half years ago, and there is already the overhang of the 2% charges which have been rolling up.</li>
	<li>The separate SPV structure means that Pub Group is completely dependent on obtaining the consent of the shareholders in each of the other five pubs. If such consents cannot be obtained, then Pub Group does not work and the platform value and hike in exit multiple on which you are relying cannot be delivered</li>
	<li>Much depends on the management team to drive superior returns across the pub group over the next 4 years as well as the performance of all the other pubs. The track record to date has been patchy.</li>
	<li>We suspect that the Harcourt has already borne a disproportionate share of setting up the pub Group structure, supporting underperformance in the Three Cranes and false starts in the trading model with undue emphasis on the restaurant at the expense of the pub offering. We and other friends pointed out that the latter did not work when initial trading started over three years ago, and we find it irritating that it has taken so long to address this and rebalance the offering.</li>
</ul>

<p>The way in which shareholders have been treated to date does not inspire confidence or trust. Transparency and provision of information has been very poor, despite written promises to provide regular dashboard updates on various occasions. You have said that you cannot provide the financial information that we requested in our letter of 22 August until January 2020. We made the initial request for this financial information in our meeting in June. Such a long delay raises significant doubts about financial management and priorities.</p>

<p>The prolonged failure to obtain EIS certificates on a timely basis in the Hero has had a direct impact on investor liquidity, which was a critical factor in investing in the pubs.&nbsp; We know there is widespread concern amongst friends and acquaintances who are invested in the Hero and other more recent pubs, like KPH and Chiswick, that there will be problems with those as well.</p>

<p>In summary you are asking us to back you for a further four years, but the management track record leaves a lot to be desired and is, as yet, unproven across a pub estate. We lack confidence that remaining invested in the Harcourt will be good for us as opposed to seeking a sale now.</p>

<p>We note that you are considering presenting a cash alternative for those that would not wish to remain invested in the Harcourt and that may take time. Nonetheless we request that you appoint advisers immediately to opine on value and exit options and to provide their analysis by, say, 1 November. We would like assurances also that the detailed financial information that we have requested on overhead allocation across the pubs will be provided by 1 November or earlier.</p>

<p>Ultimately if you are unable to provide a satisfactory response as requested, we will proceed to requisition an EGM and ask shareholders to vote on a sale of the Harcourt to optimise our value.</p>

<p>As before we are happy to attend a meeting if you think that would be productive in addressing our concerns.</p>

<p>&nbsp;</p>

<p>Yours sincerely</p>

<p>&nbsp;</p>

<p>&nbsp;</p>

<p>Quentin Humberstone</p>

<p>Steve Partridge</p>

<p>John Soden</p>

<p>Philip Wright</p>

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