Gresham House Strategic Plc
Annual Report 2020

Gresham House Strategic plc

Report and Accounts

For the year ended 31 March 2020

Gresham House Strategic plc invests in UK smaller
public companies, applying private equity techniques and
due diligence alongside a value investment philosophy to
construct a focused portfolio, the majority of which
is expected to comprise 10-15 companies.

Strategic Public Equity

Aprivateequityapproachtoquotedcompanies

The Investment Manager aims for a high level of engagement with
investee company stakeholders, including management,
shareholders, customers, suppliers, analysts and competitors,
to identify market pricing inefficiencies and support a clear equity value
creation plan, targeting above market returns over the longer term.

IN THIS REPORT

Overview

01 Strategy

02 Chairman’s Statement

04

Introduction to the Asset Class

05 About the Manager

07 Board of Directors

08

09

Investment Portfolio Holdings

Investment Manager’s Report

Governance

15 Corporate Governance Report

21 Audit Committee Report

22 Directors’ Remuneration Review

23 Directors’ Report

25 Directors’ Responsibilities

26

Independent Auditor’s Report

Financial Statements

30 Statement of Comprehensive Income

31 Statement of Financial Position

32 Statement of Cash Flows

33 Statement of Changes in Equity

34 Notes to the Financial Statements

Other Information

46 Notice of Annual General Meeting

50 Corporate Information

Throughout this report we use the more concise terms GHS or the Company.

Gresham House Strategic plc Report and Accounts 2020

01

STRATEGY

GHS uses the expertise and experience of its Board,
the Investment Manager and Investment Committee to invest
in accordance with its Strategic Public Equity (SPE) principles.

The Investment Manager focuses on undervalued
smaller companies, engaging with management teams to identify
and effect catalysts for long term shareholder value creation.

PRIVATE EQUITY APPROACH

(cid:2) Focused on inefficient areas of public markets, targeting 15%

annualised returns over the long term

(cid:2) Private equity style due diligence process with identification of

catalysts for value creation

(cid:2) Board and management engagement with portfolio companies

(cid:2) Investment Committee oversight and governance

PORTFOLIO INVESTMENTS WILL TYPICALLY HAVE THE FOLLOWING CHARACTERISTICS

(cid:2) Investments that the Investment Manager believes can generate
a 15% IRR over the medium to long term principally through
capital appreciation

(cid:2) Profitable, cash generative companies with scope to improve return

on capital

(cid:2) Investments where the Investment Manager believes there are
value creation opportunities through strategic, operational or
management initiatives

(cid:2) GHS invests the majority of its capital in a concentrated portfolio of

smaller publicly quoted companies, typically with market
capitalisations of less than £250 million

(cid:2) Expected investment holding period of three to five years

(cid:2) GHS may invest up to 30% of the portfolio in unquoted securities,

including private equity, equity-related instruments, preferred equity,
convertible and non-convertible debt instruments

(cid:2) GHS will seek to acquire influential minority stakes for cash or

share consideration

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Gresham House Strategic plc Report and Accounts 2020

CHAIRMAN’S STATEMENT

SPE strategy on track

DAVID POTTER CHAIRMAN

Dear Shareholder,

Making forward looking statements in
Chairman’s letters is a risky business. I am
sure I am not alone in getting it wrong
when I wrote to you in November. I was
speculating that once the Brexit uncertainty
was out of the way, things would look set
fair for the SPE strategy and our Company.
Along with virtually every other business,
we did not have ‘pandemic’ anywhere on
our risk register and certainly not at the top.
But here we are, and an old saying has
come right again “the hurricane always
strikes from a different direction”.

Although it is too early to make definitive
conclusions about
from
COVID-19, a few things seem discernible
in the fog:

the fallout

Households, businesses and governments
lacked resilience. There were no savings,
no reserves, no stocks, too much leverage,
too long supply chains and too much on a
knife edge of “just in time”. It is possible to
expect a more cautious and conservative
approach in the future.

History tells us that when governments
take sweeping powers, they are reluctant
to give them up quickly. The nature of the
policy response prioritising massive
borrowing will be a cost to the younger
generation who may welcome an ongoing
higher level of Government involvement
in the economy.

There will be differential outcomes for
various industrial sectors as it is generally
assumed that practices and behaviours
across customers, suppliers and the
nature of business
interaction will
experience some permanent structural
change and without doubt there will be a
rapid and dramatic shift to digitalisation.

How does this leave GHS and our
shareholders? Having had two years
that we have
when I could report

outperformed the market and indices, it is
ironic to be able to say that we have done
it again in falling markets. The GHS net
asset value (NAV) outperformed the
FTSE Small Cap Index by 10.5% in the
year and by 29.3% over the three years to
the end of March 2020. And on a Total
Shareholder Return (TSR) basis, GHS
beat the index by 41.4% over the three
years, coming second among its UK
Smaller
both
compared to other investment companies,
and the equivalent open-ended funds.
Despite the downward market adjustment
during February and March, our decline
has been less than the market and it is
important to understand why that is.

Companies

peers,

in retail,

Our portfolio contained only one company
engaged, and even then only to a small
extent,
leisure, hospitality or
transportation; the four sectors immediately
decimated by the lockdown. We entered
the market collapse with nearly 20% of the
Company in cash. So that is the good news
from an historical perspective.

The second piece of good news is that in
markets like these, babies can get
washed out with the bathwater. Many
secure companies with reasonable
business plans and prospects find
themselves in difficulty, usually because
they need finance in some form. As we
are in close communication with and have
a deep understanding of our investee
companies, we can move fast to help if
needed and appropriate. In the wider
market we will actively seek out the best
opportunities. During March, extensive
communications occurred with all our
investee companies to assess their
situation. Most were able to manage
within their existing financial resources,
but a few needed some assistance. Our
pipeline of possible investments has
never been longer and since the end of
the year a couple of new investments
have been made.

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Gresham House Strategic plc Report and Accounts 2020

03

CHAIRMAN’S STATEMENT (CONTINUED)

In the Investment Manager’s Report, you will see a summary of
each of
the key companies we are invested in and our
assessment of their resilience in the face of what comes next. I
am convinced that our knowledge of, and relationships with, our
investee companies will demonstrate the validity of the Strategic
Public Equity strategy in the coming months.

I mentioned in November that Richard Staveley had joined the
management team at Gresham House as joint Fund Manager
alongside Tony Dalwood, who remains also Chairman of the
Investment Committee, bringing his track record of over 20-years
in this specialist area to the day to day process. Graham Bird
remains a member of the Investment Committee as he pursues
his Executive and Non-Executive career. I am glad that his
experience and corporate knowledge will still be at our disposal
having made a significant contribution to the Company since
inception. In addition to Richard Staveley, the team has been
strengthened by the appointment of Paul Dudley, who joins the
team alongside Laurie Hulse, to handle the corporate finance
aspects of our transactions. Gresham House, our largest
shareholder, is growing as a platform for SPE investing as a result
of other investment mandate wins and is expanding its capabilities
in areas such as marketing, public relations and investor relations.

There have been some changes to our shareholder base. M&G,
who had been a founding shareholder in the Company in 2015
wished to realise their 12% holding in December 2019 with
various existing and new shareholders taking their place. The
GHS TSR of 24.5% since inception1 compares to the FTSE
Small-Cap Index of 11.6%. We have continued to grow our
investor base among private individuals mainly through their
wealth managers. The events of the last year have underlined
the benefits of closed-end funds, particularly for private
investors. We have underlined our commitment to all investors by
honouring our promise to raise our dividend by 15% this year
and commit to do so by at least that again in 2020/21.

One of the most pleasing aspects of the year has been the
narrowing of the discount between the share price and the NAV
(-22.9% March 2019, -15% March 2020.) This has been as a
result of good performance and a careful programme of share
buy-backs. During the year, we spent £1.7 million which helped
support the share price rising from 1,030 pence to 1,320 pence.
Maintaining a smaller discount remains an important objective of
the company and it reached a low of -3% before COVID-19
impacted markets. We believe that there has never been a better
opportunity amongst unloved and un-researched small
companies. MIFID II has also continued to work to our
advantage as research on small companies dwindles and I hope
that next year we will be able to capitalise further as the manager
builds in team capabilities. There has been increased focus on
how investment companies can attract and involve retail
shareholders. The closed-end structure has proved its worth
recently and it is to be hoped that IFAs and the retail platforms
focus on bringing these benefits to the attention of their clients
in seeking the best way to access the excess returns we have
delivered historically through our specialist approach.

We have a large number of quite small shareholders, some of
whom appear to have lost touch with us. Shareholders may be
surprised to hear that we have £22k of uncashed dividend
payments. We make continuous efforts to trace these
shareholders, however, we shall in due course apply to the
courts for the relevant outstanding sums to be re-credited for
the benefit of the remaining shareholders.

I would like to thank my colleagues on the Board, our Investment
Management
team at Gresham House and all our other
stakeholders for their constructive engagement during the year.

DAVID POTTER
CHAIRMAN

22 June 2020

1 To 31 May 2020

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Gresham House Strategic plc Report and Accounts 2020

INTRODUCTION TO THE ASSET CLASS

What was already a difficult backdrop in 2019 for UK small-
cap investors, with political uncertainty and the Woodford
situation, has been overshadowed by the Coronavirus
outbreak. Despite measures put in place by the Government
to help small businesses survive the crisis, talk of insolvencies
has clouded the horizon for UK smaller companies.

Indeed, many investors have retreated to the safety of larger
corporations, where they hope historical strength will be an
indication of future survival. However, outstanding valuations
and the opportunity to re-finance small businesses with
considerable recovery potential present an optimal entry
point for medium-term investors prepared to break from
market consensus.

By adopting a highly-engaged approach to investing and
mapping out an exit strategy from the start, investors can
uncover hidden gems and help these companies realise their
potential for strong profit recovery, above average growth and
attractive dividend outlooks.

FIGHTING OFF BIASES
With a recession priced in, UK small caps are particularly
cheap compared to large caps - reminiscent of the post Brexit
referendum period, or at the bottom of the financial crisis more
than a decade ago. Within small caps, value stocks are the
cheapest compared to growth in a decade. Small cap growth
stocks are trading at a 12-month forward P/E of 24.4x versus
13.3x for small cap value stocks - a gap only surpassed in
December 2009.

However, periods of risk-off sentiment are characterised by
behavioural traits - such as loss aversion, anchoring to prior
beliefs and being slow to react to changing information - which
are making investors miss these discounts. In market sell-offs,
investors are afraid of straying from consensus and continue
buying the same factors which have been successful prior to
the crisis - in this case, large-cap, growth, tech and US stocks,
as well as bond proxies. With many companies needing to
borrow money to survive this crisis, investors have also flocked
to businesses with strong balance sheets.

This narrow market consensus is stretching the band between
extreme levels of valuation. Many investors concerned about
capital protection in the short term are willing to pay more for
companies with proven success - leaving untested stocks to
plummet. This is creating a window of opportunity for
medium-term investors willing to write off 2020 performance
in favour of returns for the next three to five years.

We expect this opportunity set to last for the next 18 months,
as waves of capital raises succeed each other - first, from
companies needing to raise cash immediately, then from
those finding themselves in too much debt,
followed by
companies which did not raise enough in the first instance.
When the economy begins to recover, there will be a vast
acceleration in activity, where an even wider range of
companies will need further capital to enable growth.

ASSISTING RECOVERY
While investing in companies that are going through a tough
time might seem like too much trouble for many mainstream
funds, these are exactly the type of businesses we seek out -
and which seek us out. We choose to participate in turnaround
situations where we can provide companies with capital and
support them at a critical moment in their business evolution.
These value creation opportunities allow us to buy low, add
value, then sell high.

Even before investing in a company, we identify our exit thesis.
This means considering potential acquirers of the business
and what needs to be done to ensure the company is
attractive to that buyer. We conduct extensive research and
use our resource platform at Gresham House to understand
the multiples private equity acquirers are willing to pay and
what sectors they are active in.

We take large stakes in companies, ranging from 5-25%,
where the most likely outcome is a buyout, rather than a
gradual exit to other investors. Because we invest such a large
proportion of
the portfolio in businesses facing initial
difficulties, we stress the importance of due diligence and take
an in-depth private equity approach to engaging with company
management, end customers and other stakeholders.

RICHARD STAVELEY
MANAGING DIRECTOR, STRATEGIC PUBLIC EQUITY AT
GRESHAM HOUSE AND JOINT FUND MANAGER, GHS

Gresham House Strategic plc Report and Accounts 2020

05

ABOUT THE MANAGER

ANTHONY (TONY) DALWOOD
FUND MANAGER & CHAIRMAN OF THE INVESTMENT COMMITTEE

With over 25 years in the industry, Tony is an experienced investor and has advised numerous
public and private equity businesses. In 2002, Tony founded and became CIO of SVG
Investment Managers and subsequently CEO of SVG Advisers (formerly Schroder Ventures
(London) Limited), the global private equity funds business and specialist alternatives manager.
He established and led the growth of SVG Investment Managers, before launching Strategic
Equity Capital plc, a London listed Investment Trust in 2005.

Tony was Chairman of the Investment Committee for the successful PFS Downing Active
Management Fund. In December 2014, Tony became CEO of Gresham House and brought in
a new management team that has transformed the company from an investment trust into a
London Stock Exchange quoted specialist asset management group. Tony spent eight years
as a non-executive member of the Board for the London Pensions Fund Authority and was
Chair of the Investment Panel for three years overseeing strategic asset allocation for the
£5 billion LPFA fund. He is also an Independent non-executive Director of JPEL plc (formerly
JP Morgan PE Ltd plc) and advises St. Edmund’s College, Cambridge, Endowment Fund.

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RICHARD STAVELEY
FUND MANAGER & MEMBER OF THE INVESTMENT COMMITTEE

Richard leads the Strategic Public Equity team alongside Tony Dalwood. He has over twenty
years’ experience of equity investing and fund management and joined Gresham House Asset
Management in September 2019.

Having qualified as a Chartered Accountant at PricewaterhouseCoopers, he joined Bradshaw
Asset Management, as Assistant Fund Manager in 1999. He subsequently joined Societe
Generale Asset Management where he became Head of UK Small Companies and a CFA
Charterholder. In 2006 Richard became a co-Founder of River and Mercantile Asset Management
where he ran the UK Small Company Fund and UK Income Fund. In 2013 Richard joined Majedie
Asset Management to co-manage and eventually solely manage the UK small company
investments.

PAUL DUDLEY
CORPORATE FINANCE

Paul is a Fellow of the Chartered Institute of Accountants of England and Wales and is a
Member of the UK’s Chartered Institute of Securities and Investment. He co-founded HD
Capital Partners Ltd in 2010, a corporate advisory business that is authorised and regulated
by the UK’s Financial Conduct Authority.

Earlier in his career, he worked as a Qualified Executive for stockbroking firm WH Ireland,
where he acted as a Nominated Adviser on numerous flotations, fundraisings and provided
advice on takeovers and other transactions in the private and public arena. Previously, Paul was
seconded to the listing department of the London Stock Exchange and worked at Sigma Capital
plc, a venture capital investment firm, where he advised on investment into emerging growth
companies. He began his career at PriceWaterhouseCoopers.

LAURENCE HULSE
INVESTMENT MANAGER

Laurence is a part of the Investment Team for the Strategic Public Equity strategy at Gresham
House, a strategy in which he has over five years of experience. This work includes both public
and private equity transactions across a range of sectors for the SPE funds, including Gresham
House Strategic and Strategic Public Equity LP.

Laurence has a Bachelor’s degree in Politics with Economics from the University of Warwick.
During his studies and before joining Gresham House, Laurence interned at Rothschild working
on the Mergers and Acquisitions Team in the Industrials sector and Barclays Capital on the
Equities trading floor.

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Gresham House Strategic plc Report and Accounts 2020

ABOUT THE MANAGER (CONTINUED)

INVESTMENT COMMITTEE

THOMAS (TOM) TEICHMAN

Tom has over 30 years’ venture capital and banking experience and founded Spark in 1995. He
is a former Investment Committee member at Brandt’s, Credit Suisse, Bank of Montreal and
Mitsubishi Finance London, and a start-up investor and previous Director of lastminute.com,
mergermarket.com, Chairman of Kobalt Music, notonthehighstreet.com, ARC, MAID, amongst
others. Tom is also a previous Investor/Director in System C Healthcare, Argonaut Games,
World Telecom, and delivered various disposals to trade, private equity, and through IPO. Tom
holds a BSc (Hons) in Economics from University College London and is a Non-Executive
Director of Market-Tech.

BRUCE CARNEGIE-BROWN

Bruce Carnegie-Brown was appointed Chairman of Lloyd’s in June 2017. He is currently also
Chairman of Moneysupermarket Group and a Vice-Chairman of Banco Santander. He was a
Non-Executive Director of JLT Group plc from 2016 to 2017, prior to which he was Non-
Executive Chairman of Aon UK Ltd from 2012 to 2015, Senior Independent Director of Catlin
Group Ltd from 2010 to 2014 and Chief Executive for Marsh UK and Europe from 2003 to
2006. He was also a Senior Independent Director of Close Brothers Group plc from 2006 to
2014. He previously worked at JP Morgan for 18 years in a number of senior roles and was
Managing Partner of 3i Group plc’s Quoted Private Equity Division from 2007 to 2009. He is
President of the Chartered Management Institute.

GRAHAM BIRD

Graham transitioned during the year from the investment team to the Investment Committee.
He has subsequently been appointed Finance Director of Escape Hunt plc and Non-Executive
Director of Space & People plc and remains in an advisory capacity for the portfolio.

Prior to joining Gresham House, Graham spent six years as a senior Executive at PayPoint plc,
most recently as Director of Strategic Planning and Corporate Development. He was Executive
Chairman and President of PayByPhone, a multi-national division of PayPoint operating out of
Canada, the UK and France between 2010-2014. Prior to joining PayPoint, Graham was a
Fund Manager and Head of Strategic Investment at SVG Investment Managers where he
helped to establish and then co-manage the Strategic Recovery Fund II and Strategic Equity
Capital Investment Trust.

Before joining SVGIM he was a Director in Corporate Finance at JP Morgan Cazenove. He is
a qualified Chartered Accountant and has a Master’s degree in Economics from the University
of Cambridge.

KEN WOTTON

Ken is Managing Director, Public Equity at Gresham House, and leads the investment team
managing public equity investments. He is lead manager for LF Gresham House UK Micro Cap
Fund, LF Gresham House UK Multi Cap Income Fund and manages AIM listed portfolios on
behalf of the Baronsmead VCTs. Ken graduated from Brasenose College, Oxford, before
qualifying as a Chartered Accountant with KPMG. He was an equity research analyst with
Commerzbank and then Evolution Securities prior to spending the past 12 years as a Fund
Manager at Livingbridge and now Gresham House specialising in smaller companies.

Gresham House Strategic plc Report and Accounts 2020

07

BOARD OF DIRECTORS

DAVID POTTER
AGE: 75

NON-EXECUTIVE CHAIRMAN

David is currently Chairman of Illustrated London News and Coeus Software and a Non-
Executive Director of Fundsmith Emerging Equities Trust. David is the former Deputy
Chairman of Investec Bank UK. Prior to this, he was Group CEO of Guinness Mahon Group.
He was a Managing Director of Samuel Montagu, Midland Montagu and Midland Global
Corporate Banking (now HSBC). David was also a Managing Director of CSFB and its
predecessor companies.

David joined the Board in 2002 and was appointed Chairman of the renamed Gresham House
Strategic plc in 2015.

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CHARLES BERRY
AGE: 49

NON-EXECUTIVE DIRECTOR

Charles works at SS&C Technologies Inc, a US quoted financial technology and services
business. Charles was formerly an executive with Spark from 2001 to 2005 working as a
Director at Aspex, Mergermarket, Kobalt, and Insurancewide.com. Charles has worked at Virgin
Group building Virgin’s mobile phone and related ventures around the globe, and also at Lloyds
Banking Group working on restructuring the bank’s customers and the Group’s Strategy.

Charles was appointed to the Board on 15 September 2004, Charles is Chairman of the Audit
Committee.

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KENNETH LEVER
AGE: 66

NON-EXECUTIVE DIRECTOR

Ken Lever is Chairman of Biffa plc and RPS Group plc. He is also a Non-Executive Director of
Blue Prism Group plc and Vertu Motors plc.

Ken was formerly Chief Executive of Xchanging plc and during his career has held listed company
executive Board positions with Tomkins plc, Albright and Wilson plc, Alfred McAlpine plc and private
equity owned Numonyx BV. Ken qualified as a Chartered Accountant and was a partner in Arthur
Andersen. He was a member of the UK Accounting Standards Board until 2014.

Appointed to the Board on 1 January 2016.

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HELEN SINCLAIR
AGE: 54

NON-EXECUTIVE DIRECTOR

Helen is a Non-Executive Director of The Income & Growth VCT plc, Mobeus Income & Growth 4
VCT plc, North East Finance (Holdco) Ltd, and Chairman of British Smaller companies VCT plc.

After working in investment banking Helen spent nearly eight years at 3i plc focusing on MBOs
and growth capital investments. She later co-founded Matrix Private Equity (now Mobeus
Equity Partners) in early 2000 establishing Mobeus Income & Growth 2 VCT plc (formerly
Matrix e-Ventures VCT plc). Helen subsequently became Managing Director of Matrix Private
Equity before moving to take on a portfolio of Non-Executive Director roles.

Appointed to the Board on 17 December 2009.

08

Gresham House Strategic plc Report and Accounts 2020

INVESTMENT PORTFOLIO HOLDINGS
TOP TEN PORTFOLIO HOLDINGS AS AT 31 MARCH 2020

Company

Deal type

Secondary - cash generation; performance
recovery and re-rating

Hazardous and Industrial waste management services in the UK.

% of total
portfolio

% ownership
of the
company

Value

23.3%

£8.6m

6.1%

Recovery and growth capital - equity and
Convertible Loan Note (CLN)

11.2%

£4.2m

11.8%

Specialist load bank and drilling tool design and rental serving global markets.

Secondary recovery capital - strategic refocus
to drive organic growth and cultural change

6.7%

£2.5m

15.1%

Specialist metallic components and wear-parts for high pressure and
hazardous environments.

Primary growth capital, CLN

6.0%

£2.2m

N/A

Whisky distillery based in a UNESCO world heritage site in the Lake District.

Secondary - growth and re-rating,
reinvestment of cashflow

5.6%

£2.1m

0.8%

Digital consumer communications software and services.2

Original investment through growth capital
equity and CLN. Now focused on integration,
cash generations and organic growth

5.5%

£2.0m

10.6%

Mid-market UK digital media group.

Primary - pre-IPO growth capital - equity
and CLN converted into equity

4.9%

£1.8m

2.4%

Legal services focussed on the Asset Management sector in the UK and Europe.

Secondary - strategic refocus,
operational initiatives

4.2%

£1.5m

4.9%

Digital media and marketing business.

Secondary growth capital - product roll out,
re-rating and improved communications

4.0%

£1.5m

6.6%

Technology business developing property conveyancing software.

Secondary growth capital - strategic refocus

2.8%

£1.0m

5.4%

passionate about beauty

Portfolio of UK healthcare and beauty brands.

2 The investment in IMIMobile was exited post year end.

INVESTMENT MANAGER’S REPORT

INTRODUCTION
The background to the last 12 months for Gresham House
Strategic plc has been tumultuous. The UK has been grappling
with the uncertainty of Brexit and related negotiations, a
General Election pitching vastly different views on the best path
forward for the future of Britain, anaemic worldwide economic
activity and the final few weeks of the financial year brought
the onslaught of COVID-19 to the globe and UK. Whilst the
NAV has fallen,
it has outperformed almost all relevant
competitors and stock indices.3 Additionally, both the team and
the portfolio have evolved during the year and whilst the post
period-end economic and ‘lock-down’ conditions create much
uncertainty, we are even more confident
the SPE
approach and process will deliver excellent future returns. The
investment and economic environment are creating the
opportunities that will drive the portfolio to meet and hopefully
exceed our return targets in the future.

that

INVESTMENT HIGHLIGHTS
(cid:2) GHS Total Shareholder Return4 of -5.19% in the year to
31 March 2020 compares to the average IMA open-ended
fund universe of -17.95% where GHS has outperformed
all but one UK Small Companies OEIC5

(cid:2)

(cid:2)

(cid:2)

(cid:2)

12-month NAV total return6 performance of -14.3% to
1,062.2 pence7/share vs FTSE Small Cap Index total return
of -24.7% in the year from 1 April 2019 to 31 March 2020

Four-year anniversary of management by Gresham
House marked with strong audited NAV total return of
31.6% since inception vs FTSE Small Cap Index total
return of 13.9%

£1.7 million return of cash to GHS shareholders via a
share buy-back and dividends funded by net profitable
realisations and dividend income

Share price discount to NAV8 reduced from 22.6% at
31 March 2019 to 15% at 31 March 2020, having reached
a low point discount of 3.4% in December prior to the
recent market sell-off

Gresham House Strategic plc Report and Accounts 2020

09

(cid:2)

(cid:2)

invested (in portfolio
A total of £11.1 million capital
companies) between the start of the financial year and
31 May 20209

Final dividend of 12.8 pence per share proposed, bringing
total dividends for the year to 22.9 pence per share

POST-PERIOD END
(cid:2) Completed the realisation of the investment in IMImobile,
reducing weighting from 23.4% to 5.6% during the year
and generating £14.6 million profits and a 23.8% IRR over
the past five years since strategy inception

(cid:2) NAV began to recover post period end, increasing 16.3%
since the year-end to 1233.4 pence in the eight weeks to
31 May 2020

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PORTFOLIO HIGHLIGHTS
Portfolio evolution:
(cid:2)

— Outstanding investment performance from Augean

plc and IMImobile plc

— Conversion of
Group plc

loan notes at

IPO in MJ Hudson

— Five smaller investments exited

— Material progress of strategic catalysts at Pressure

Technologies plc

— New investments in ULS Technology plc, Lakes
Distillery Company plc and Van Elle Holdings plc

— Increased investment in Centaur Media plc

(cid:2)

Increasing opportunities, as a result of COVID-19 and oil
price shock, for private equity techniques to identify attractive
investments at lower valuations and increased engagement

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3 The FTSE Small Cap Index is referenced because we invest in small companies and the FTSE All-share Index is referenced because the Company mainly invests

in equities

4 Total shareholder return is the financial gain that results from a change in the stock's price plus any dividends paid by the Company during the measured interval

divided by the initial purchase price of the stock

5 Data compiled by FE Trustnet and Morningstar for the year to 31 March 2020, shows that GHS outperformed all but one open-ended UK smaller companies'

funds. Since inception in August 2015, GHS has outperformed its benchmark by 17.7%

6 NAV total return is the change in the net asset value of the Company over a given time period
7 The audited NAV per share includes valuations of the Company's unlisted investments as at 31 March 2020. The valuation of all unlisted investments, which
comprise approximately 15% of the NAV, almost all of which are CLN, will be reviewed for the purposes of the audited financial statements for the year-ended
31 March 2020

8 The discount is the difference between share price and NAV per share, expressed as a percentage
9 As at 31 May 2020

10

Gresham House Strategic plc Report and Accounts 2020

INVESTMENT MANAGER’S REPORT (CONTINUED)

MARKET COMMENTARY
This was not a ‘game of two-halves’. The reporting period is
better described as one of phases. From March 2019 through
to the appointment of Boris Johnson as leader of
the
Conservative Party in July 2019, market participants worried
over the nature and outcome of Brexit negotiations and
economic
confidence waned. The next phase was
characterised by the General Election campaign where a hard-
left manifesto was adopted by the Labour Party. News of a
historic Conservative victory in December 2019, providing a
large majority, generated clarity of the direction of travel on
Brexit and reduction in risk around a hard-left policy suite.
Confidence was boosted and markets rallied. Even before the
first Budget from the new government was announced, COVID-
19 had emerged and the outlook for consumers, corporates and
governments was transformed beyond any New Year prediction
made just a few weeks earlier. Other factors in the background
include the collapse of Woodford Investment Management and
low economic growth in Europe, much slower growth in China
and the linked trade war rhetoric and actions under President

PERFORMANCE REVIEW AND ATTRIBUTION

Fig. 2 - Relative performance

Trump. It is rare that a 12-month period can incorporate both
the lowest level of unemployment in decades and the conditions
for a return to the highest levels in the outlook.

Fig. 1 - UK Indices March 2019 - 2020
120
120

110
110

100
100

90
90

80
80

70
70

60
60

31 March
2019

31 March
2020

FSTE 100

FTSE AIM ALL SHARE

FTSE SMALL CAP

Source: Bloomberg data as at 31 March 2020

160

150

140

130

120

110

100

90

80

70

0%

-5%

-10%

-15%

-20%

-25%

-30%

-35%

Aug 15

Feb 16

Aug 16

Feb 17

Aug 17

Feb 18

Aug 18

Feb 19

Aug 19

Feb 20

GHS DISCOUNT

GHS NAV

FTSE SMALL CAP

FTSE ALL SHARE

Source: Bloomberg Data as at 31 March 2020

Fig. 3 - Table of performance

Start date
End date

Share price total return
NAV total return
FTSE Small Cap total return
FTSE All Share total return

Source: Bloomberg Data as at 31 March 2020

Note: Inception August 2015

14 Aug 15
31 Mar 20

31 Mar 19
30 Sep 19

30 Sep 19
31 Mar 20

31 Mar 19
31 Mar 20

01 Apr 17
31 Mar 20

Since inception

FY20 H1

FY20 H2

1 year

3 year

24.5%
13.0%
-11.6%
3.1%

16.2%
11.4% -15.0%
-5.3%
4.1%
-0.2% -14.1% -14.3%
-0.3% -24.2% -24.4% -25.2%
4.5% -22.2% -18.7% -12.5%

Gresham House Strategic plc Report and Accounts 2020

11

INVESTMENT MANAGER’S REPORT (CONTINUED)

PERFORMANCE
The portfolio is very concentrated and therefore it should be
expected that over any shorter period, such as a year, a
dominant stock or two will drive performance. On a positive
basis, this period’s driver has been Augean plc. We will always
thesis still holds and
run our winners if our investment
valuation upside exists, which is the case for Augean, but we
remain ever mindful of our exit thesis.

On the negative side, we decided to exit our investment in
Escape Hunt and crystallise a material loss. The investment
was already disappointing compared to our original
investment thesis, which left it vulnerable as COVID-19 set in.
The company had failed to become profitable on schedule,
making our equity investment in the company vulnerable to an
extended lockdown - the company’s operations require
consumers to be locked inside a room for 60 minutes and in
close proximity to others. We, therefore, chose to recover what
capital we could to reinvest in new opportunities than risk
further value erosion.

We are pleased to be able to report that the NAV performance
has partially recovered post-period end, with the NAV growing
16.3% in the eight weeks to 31 May 2020, ending the month
at 1,233.4 pence and continuing to outperform equity markets.

Fig 7. NAV performance attribution

Top 5 contributors to NAV FY 20

Top five performers

Augean plc
IMImobile plc
The Lakes Distillery
Company plc (CLN)
Pressure Technologies plc
Hanover Active Equity
Partners II LP (HAEP II LP)

Profit/Loss
in the year % uplift

£3,692,287
£1,642,317

10.0%
4.4%

£338,344
£98,996

0.9%
0.9%

£23,759

0.3%

p/Share

106.07
47.18

9.72
9.72

2.84

Top 5 detractors to NAV FY 20

Investment

Escape Hunt
Northbridge Industrial
Services plc
(equity and CLN)
Centaur Media plc
Be Heard plc
(equity and CLN)
Brand Architekts
Group plc

Data as at 31 March 2020

Profit/Loss
in the year % uplift

p/Share

(£2,567,069)

(6.9%)

(73.75)

(£2,384,353)
(£1,365,135)

(6.4%)
(3.7%)

(68.50)
(39.22)

(£1,168,225)

(3.2%)

(33.57)

(£642,749)

(1.7%)

(18.47)

INVESTMENT ACTIVITY
During the period we made a number of portfolio changes. We
purchased five new holdings and exited five positions. We also
continued to reduce the holding in IMImobile as our
investment thesis was completed. This has now been fully
exited, post period-end.

During the first half of the year, we exited a number of small
positions where our investment theses have not delivered,
into higher conviction
enabling deployment of capital
opportunities. These were Quarto, Prophotonix and Hydrodec.
During the final quarter, with COVID-19 emerging, we exited
leisure business Escape Hunt and alternative lender PCF plc
where risk profiles had increased significantly. Total
realisations in the reporting period were £12.4 million, almost
entirely from profitable investments in the period; including
IMImobile (£5.3 million, 24.5% IRR), Augean (£1.6 million,
162% IRR) and Tax Systems (£1.9 million, 26.4% IRR).

We put £11.1 million of cash to work in the year to 31 March
2020, and an additional £3.2 million post-period end. We
invested the majority of this into new investments: £2.1 million
into The Lakes Distillery, £2.1 million into ULS Technology plc,
£2.0 million into Van Elle Holdings plc and smaller investments
of £940k in Fulcrum Utility Services and £490k in Bonhill
Group plc. We also increased our investments in Centaur
Media plc by £1.4 million and in Pressure Technologies by
£1.5 million.

INVESTMENT REVIEW
To varying degrees, all portfolio companies will be impacted by
the first order and knock-on effects of this enforced economic
shutdown which, despite fast and material central bank
monetary and government fiscal support, will significantly
curtail economic activity and cause bankruptcies, impair end-
market demand, extend sales cycles, reduce credit availability,
as well as disrupt employees and suppliers. Furthermore, the
collapse in the oil price will have additional negative effects
on those of our holdings with exposure to this industry.
However,
the portfolio finishes the year with little direct
exposure to the impacted sectors of oil production, travel,
leisure, retail or financial industries. We seek to support our
portfolio companies more than ever through this difficult
period, including financially, if prudent to do so, and we will
also exploit share prices which are at an even greater discount
to intrinsic value. We remain heavily engaged across the
portfolio and highlight the excellent news of the appointment
of Sir Roy Gardner as Chairman of Pressure Technologies in
January. Some new investments were established prior to the
recent market sell-off, which has affected small quoted
companies more than large plc’s in line with other ‘risk-off’
periods and across the board. However, we believe these
companies offer compelling value and strong business
prospects once economic activity recommences and we are
confident they will generate the returns we target over our
typical three to five-year holding period.

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Gresham House Strategic plc Report and Accounts 2020

INVESTMENT MANAGER’S REPORT (CONTINUED)

TOP 10

Augean plc

Our
investment was first made in October 2017 and
subsequently increased on growing conviction through 2018 to
become one of the largest positions in the portfolio. Having had
the second half of 2017 to formulate a recovery strategy, in 2018
the executive team, led by Jim Meredith (Executive Chairman)
and Mark Fryer (FD), began to enact the plan, starting with a
rightsizing of the cost base to respond to the anticipated HMRC
assessment to landfill tax and related penalties and fines
(quantum as yet undecided, but
final assessments have
provided an expected cap). Having exceeded 30% of the
portfolio during the final quarter, we reduced our position
modestly into secondary market demand. The management
team have done an outstanding job developing and delivering
upon their strategy, which resulted during 2019 in justified
remuneration. External
further
factors
outperformance as strong volumes and pricing in waste flows
created by emerging ‘energy-for-waste’ plants have boosted
profitability and cash flow such that Augean has been able to
‘pay’ the still disputed HMRC assessments, without admitting
‘guilt’ or accepting them, thus de-risking the equity investment
case for other investors. We anticipate COVID-19 effects on
profitability will be modest, mainly centred on North Sea
activities. As such, Augean will in 2020 again demonstrate the
highly cash generative business that it is, driven from its strategic
position as the largest hazardous waste company in the UK.The
shares now trade, in our view, at a significant discount to intrinsic
value and transaction multiples in the relevant sector.

driven

have

Northbridge Industrial Services plc (Northbridge)
It remains the case that the recent results from Northbridge
finally provided a material return to profitability following our
initial investment in 2016. Increased business activity, in the
US and the traditional markets for load banks, have benefitted
from emerging areas, such as Data Centres and Energy
Storage Systems. The ‘Crestchic’ business division therefore
entered our financial year with a full production schedule. The
collapse in the oil price and world-wide economic downturn is
going to have a negative effect, the extent of which is currently
unclear. The company has reduced debt and has
unencumbered freehold properties, in addition to its significant
asset-backed hire fleet. The ‘Tasman’ business division will be
more heavily impacted but is a smaller proportion of group
profitability than in the last downturn and has pivoted more to
gas projects, which may be more resilient than oil. We are
currently heavily engaged with the Board and Executive team
to ensure that the company drives and protects shareholder
value during the next period.

Pressure Technologies plc
Additional investment via a block placing at the start of the
year made us the largest shareholder, backing a new
management team to deliver a return of organic growth and
simplification of the operational structure of the business.
Chesterfield Specialist Cylinders (CSC) is a leader in the
design, manufacture and maintenance of large-scale high-
pressure cylinders for military, marine and oil and gas
industries. A significant opportunity is emerging for their
expertise in the Hydrogen sector. Defence activities remain

the dominant sector. Precision Machined Components (PMC)
supplies key metallic engineered components that are
destined for extreme or hostile environments in mission critical
functions, such as the oil and gas and extractive industries. It
came under significant pressure in the oil and gas downturn
between 2014 and 2018 and will do so again. New CEO, Chris
Walters joined in September 2018 and commenced the
implementation of a revised strategy to dispose of the loss-
making alternative energy business, reducing debt in the
process, and to rationalise the core businesses PMC and CSC
with a goal of reinvigorating organic growth. He now has a new
set of challenges. We are delighted, therefore, that the highly
experienced Sir Roy Gardner has become the new Chairman
to help guide the business through this period.

The Lakes Distillery Company plc (Lakes Distillery)
We made a pre-IPO investment of £2.1 million via a secured
CLN that pays an 8% cash yield and an additional 12%
payment in kind (PIK) roll-up interest, combining to generate a
20% per annum return. The loan notes convert to equity at the
point of IPO which is now likely to be delayed. We provided
growth capital to the business to further develop production
capacity and fund additional whisky production in future. Lakes
Distillery is a recently established, leading English distillery with
a vision to create one of the prime single malt whiskies in the
world. The company was formed in 2011, commenced
operations in 2014 and has steadily grown retail sales. It has
an impressive facility in the Lake District, with a number of
income streams to support the growth of its brands. The
distillery is based on the banks of the River Derwent in the
English Lake District National Park, a UNESCO World Heritage
Site. The company has already established a UK and
international sales base with gin, vodka and blended whisky
ahead of its largest release of a premium single malt whisky
product, and online sales have accelerated significantly in
recent months. It runs a visitor centre, bistro and shop at the
distillery which hosts over 100,000 visitors per annum
generating sales of c.£2 million but is currently closed due to
‘lock-down’ restrictions. If the company has not floated within
three years, the loan plus rolled up interest are repayable or
can be extended on pre-agreed terms. We have security over
the property and whisky stocks.

IMImobile plc
The company has been a material part of the portfolio since
the Investment Manager’s appointment. A clear investment
thesis was developed and has pleasingly been delivered for
this international mobile communications services specialist.
During the period, the company made an acquisition in the
US and delivered further organic top-line growth. The
technology sector both in the UK and elsewhere has
performed strongly and valuations across the sector have
moved higher,
in some cases to all-time high multiples.
IMImobile shares have themselves been re-rated in recent
years, not in the least part, in our view, due to the engagement
and involvement we provided. Key workstreams included
revised investor relations and communications approach,
simplified share capital structure and Board composition
changes. During the period, we further reduced the position
and post-period end have exited.

Gresham House Strategic plc Report and Accounts 2020

13

INVESTMENT MANAGER’S REPORT (CONTINUED)

Be Heard Group plc (Be Heard)

ULS Technology plc

As has been previously reported, following disappointment to
our original investment thesis we have been heavily engaged
with our investment in marketing services company Be Heard.
Initially, changes were made in the finance area, with the well-
regarded Simon Pyper joining in April, following the departure
of Robin Price. Peter Scott then left his position as CEO in
September, with Simon Pyper stepping up to replace him. Ben
Rudman joined the board as COO. Simon and Ben have
brought fresh perspective to the operational management of
the business, with a greater focus on delivering benefits from
the integration of Be Heard’s divisional businesses and a new
approach to cost and expenditure management, both of which
we are highly supportive of. The 2019 results demonstrated the
difference these changes have made. After significant
reorganisation work,
full-year EBITDA has increased to
£4 million from £1.6 million in 2017. We continue to work closely
with Chairman David Morrison, Simon and Ben on the future
the business and efforts to translate the improving
for
operational performance into value recovery for our investment.

MJ Hudson Group plc (MJ Hudson)
We made our original investment in MJ Hudson in 2016. The
company is led by the highly experienced and dynamic
Matthew Hudson who is utilising his extensive prior business-
building capabilities to develop a leading services business to
the asset management industry. This is being achieved both
organically and through acquisition. The attractions of what
the group offers and the quality of what has been built to date
were demonstrated by him and his senior management team
listing the company on AIM on 12 December 2019, the day of
the General Election. This was no mean feat, during a very
difficult year for new issues generally. The business now faces
a disrupted end market which will no doubt create
opportunities and the net cash balance sheet
is well
positioned for further progress.

Centaur Media plc
We doubled our existing position in Centaur Media, where the
new CEO’s strategy to rebuild margins after significant portfolio
restructuring is highly focused on future value creation. The
business struggled, like many B2B media businesses, to adapt
quickly enough to the structural changes that were occurring in
the business world as a result of digitalisation.The previous CEO
had very effectively grasped the nettle and disposed of a range
of titles and divisions, ably supported by Finance Director (and
now the new CEO) Swag Mukerji utilising his private equity
experience and with this process almost completed handed over
the reins. What remains has significant unrecognised value.
There are two divisions: Legal and Marketing. Significant cost
savings are being extracted from the business due to historic
central costs reflecting a much larger business.The legal division
centres on the industry-leading property “The Lawyer”. The
marketing division has a range of activities serving that industry
including the top industry event “Festival of Marketing”. The
impact of COVID-19 on the events industry is clear, and a down-
turn in advertising is also inevitable. However, Centaur Media’s
properties have largely migrated to subscription and digital
activities; with net cash we believe the new team is highly
focused on shareholder value with lots of levers to pull.

has

potentially

During the period, we purchased ULS Technology, the leading
digital conveyancing platform for housing transactions.Their new
product, DigitalMove,
transformational
capabilities for the business, improving the efficiency and speed
of the process materially for consumers and advisers alike.
Despite high investor desire for ‘platform’ businesses and with
resulting valuations commensurate, ULS Technology is valued
very attractively. We believe this is in part due to unexpected
executive changes in 2018, in addition to a fragile housing
transaction market and the loss of a material client. Since then,
significiant material Board changes have been made, most
importantly the appointment of Martin Rowlands as Chairman.
As market leader, the company still has quite a small market
share in a fragmented market, and we see the opportunity for
ULS Technologies to grow substantially once the housing market
re-opens. Further work is required to clearly explain and
communicate this to investors, whilst financial delivery on
DigitalMove is critical to driving the significant value that trade
and private equity potential buyers also see in this digitisation of
the housing market. The company generated £4.8 million profit
in the year to 31 March 2020 and was capitalised at £23 million
(31 March 2020) at period end.

Brand Architekts Group plc (Brand Architekts)
This was a year of huge change for the company, formerly
known as Swallowfield. The reasons for this stem from the
sale of the company’s low margin contract manufacturing
activities for £35 million consideration (100% cash) in July
2019. This has left shareholders with a large net cash balance
and also a need for executive change. The Board has only
recently announced the appointment of a new CEO and FD.
They take responsibility for activities now solely in the
development of consumer brands in the personal care
category of consumer retail. Lead brands are Super Facialist,
Fish, Dr Salts and Dirty Works. The portfolio clearly has some
is extremely
work to do and the external environment
challenging, albeit
the company has a listing and good
relationships with key retailers such as Boots and Sainsburys.
Innovation, digital channels and creativity are going to be key
whilst from a strategic viewpoint, scale - either organically or
acquisitively - is required to offset central costs.

NEW TOP TEN INVESTMENT POST-PERIOD END

Van Elle Holdings plc (Van Elle)

We took an initial position in Van Elle, a leading piling and
ground engineering specialist for the construction industry and
a market leader in the Rail sector, pre COVID-19. We have
subsequently acted as a cornerstone investor in an issue of
new stock to support the business through the period of
disruption and through to the opportunities which lie ahead.Van
Elle will benefit from a high level of infrastructure spending that
we expect in the next few years. This spending was arguably
well overdue, and the clear communication by the new UK
Government provided confidence of a commitment to this
changing. This was subsequently evidenced by the ‘go-ahead’
for the massive HS2 project, which Van Elle should benefit from.
The company, however, has been disappointing investors since
its IPO in 2016. We are backing a new management team and

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Gresham House Strategic plc Report and Accounts 2020

INVESTMENT MANAGER’S REPORT (CONTINUED)

Board evolution to professionalise the business, enhance the
banking arrangements and drive improved returns in future
years from a very well invested fleet of equipment.

OUTLOOK
All companies and individuals are striving to predict what lies
ahead. The recent crisis demonstrates that often we have an
inaccurate sense of certainty or confidence in what the future
holds. Therefore, it is so important to have an understanding
of value. With careful analysis, a conservative approach to
financial leverage and deep insight into a company’s value
drivers, a material margin of safety can be created to enable
investments into stocks with significant medium-term returns.
Near-term outlooks have of course been impaired, but for
those that survive this current crisis their market positions may
be stronger, the competitive position easier and their cost-
bases leaner, primed for profit growth in the future.

We expect the national discussion around ‘lives’ vs ‘livelihoods’
to intensify. The speed of transition back to normality (if in
many instances this is indeed ever possible) is fraught with
uncertainty. We believe it is prudent to expect, on average,
economic activity to be impaired for some time based on the
debt overhang this crisis is generating. The work on tests for
antibodies and a vaccine is likely to be successful eventually.
Those over-leveraged companies and weaker industry players
going into this crisis may not survive, including many of the
already loss-making businesses that have been increasingly
in vogue in recent years, but the banking sector is better
placed to deal with this stress than when it entered the global
financial crisis of 2008-09. The longer-term repercussions of
the use of helicopter money and the level of fiscal stimulus
taking government debt to previously unacceptable levels
await us all.

The financial requirements of companies due to COVID-19
will generate significant opportunities for capital deployment
during this financial year. Abundant additional capital from
public markets to support these already ignored and under-
researched companies is not in evidence. These conditions
typically influence fund managers to focus primarily on what
they own and know. We must remain careful to consider what
structural changes are underway such that value traps are
avoided and ensure we have a sufficient margin of safety to
offset an on-going challenging environment. However, by
hunting in an overlooked area of the market, driving influence
in outcomes and behaviours via our engaged approach, we
believe the seeds for continued and future performance of the
portfolio are available. We believe strongly that our
concentrated, engaged, SPE approach and portfolio are well
positioned for the challenges ahead.

on stocks with characteristics indicating that a company is
intrinsically undervalued, such as low-valuation multiples, high
free cash return on capital characteristics and tangible asset
cover. There is a strong focus on cash generation, improving
return on capital, and - where we believe there are
opportunities to - we look to create shareholder value through
strategic, operational or management initiatives.

Our approach is differentiated from other public equity
investment strategies in several ways. This includes the depth
of due diligence and analysis undertaken,
the level of
interaction and constructive engagement with management
teams and boards, the focused and concentrated portfolio and
the investment horizon in which we typically seek to support
a three to five-year value creation plan with identified
milestones and catalysts.

In addition to our financial return criteria, we make a qualitative
assessment of investment opportunities looking at:

(cid:2) Market characteristics and dynamics

(cid:2)

(cid:2)

(cid:2)

(cid:2)

(cid:2)

The company’s competitive positioning within the market,
including barriers to entry, ability to grow, pricing power,
and client/customer quality

The strength, experience and alignment of management

The financial characteristics, focusing on areas such as
customer concentration, sustainability of margins, capital
intensity and cash flow characteristics, stability and
predictability

The likely attractiveness to other buyers, whether
institutional, trade or private equity

The intrinsic value in relation to the market value

(cid:2) Our ability to acquire a stake and assist in value creation

and enhancement to bridge the value gap

We also make use of a network of seasoned executives from
a range of professional and commercial backgrounds with
whom we consult, including those who form part of the
Investment Committee and Gresham House Advisory Group.

Gresham House believes this approach can lead to superior
returns, exploiting inefficiencies in certain
investment
segments of
the public markets. There are over 1,000
companies in the FTSE Small Cap index and on AIM. These
companies typically suffer from a lack of research coverage
and often have limited access to growth capital.

STRATEGIC PUBLIC EQUITY INVESTMENT STRATEGY
We use the philosophy, approach and techniques adopted by
private equity investors to identify investment opportunities
that we believe can generate a 15% annualised return over
the medium to long term - typically three to five years.
Targeting UK smaller public companies, the strategy focuses

In addition to publicly quoted companies, we also have the
flexibility to invest up to 30% of the portfolio in selected
unquoted securities, including preference shares, convertible
instruments and other forms of investments. This enables us
to support pre-IPO and take private opportunities as well as
being able to invest in other capital instruments.

CORPORATE GOVERNANCE REPORT

AIC CODE STATEMENT OF COMPLIANCE
Gresham House Strategic plc is a member of the Association
of Investment Companies and has adopted the AIC Code of
Corporate Governance issued in July 2019 (the AIC Code)
which sets out the framework of best practice in respect of the
governance of investment companies. The Board attaches
great importance to the matters set out in the Code and strives
to observe its principles.

The AIC Code is made up of eighteen principles and 42
provisions over five sections covering:

(cid:2)

Board Leadership and Purpose;

(cid:2) Division of Responsibilities;

(cid:2) Composition, Succession and Evaluation;

(cid:2)

Audit, Risk and Internal Control; and

(cid:2) Remuneration

The Board considers that reporting against the AIC Code
which has been endorsed by the Financial Reporting Council
provides better information to shareholders. Throughout the
year,
the Company complied with the Principles and
Provisions of the AIC Code, except as set out below:

(cid:2)

(cid:2)

(cid:2)

to appoint a Senior
The Company has chosen not
Independent Director as the Board considers that this
would be unnecessarily burdensome. Shareholders may
contact the Chairman of the Audit Committee if they have
any concerns which they do not feel able to raise with the
Chairman.

The Directors do not consider it appropriate to establish
a nomination,
remuneration or a management and
engagement Committee. The functions carried out by
these committees are dealt with by the full Board.

As the Company has no employees and its functions are
undertaken by third parties, the Audit Committee does not
consider it necessary for the Company to establish its own
internal audit function.

Details of how the Company has complied with the principles
and provisions of the AIC Code are set out within its Corporate
Governance Statement which can be found on the Company’s
website.

The AIC Code is available on the AIC website
(www.theaic.co.uk). It includes an explanation of how the AIC
Code adapts the Principles and Provisions set out in the UK
Code to make them relevant for investment companies.

THE BOARD OF DIRECTORS
The Board is responsible for the effective oversight and long
term sustainable success of the Company, generating value
the
for shareholders and controlling of all aspects of

Gresham House Strategic plc Report and Accounts 2020 15

Company’s affairs, notwithstanding any delegation of
responsibilities to third parties.

The Board consists of three independent Non-Executive
Directors and a Non-Executive Chairman all of whom are
independent of the Investment Manager. No one individual
dominates the Board’s decision making. David Potter and
Charles Berry were Directors of Spark Ventures plc prior to its
reincarnation with a new investment philosophy, a new
investment manager, new shareholders and a new name. The
AIC Code recommendations note that Boards of investment
companies are likely to benefit from having at least one
director with considerably longer than nine years’ experience.

to the leadership of

The Directors possess a wide range of skills, knowledge and
experience relevant
the Company,
including financial, legal, regulatory and industry experience
as well as the ability to provide constructive challenge to the
views and assumptions of the Investment Manager and hold
third party service providers to account.

All members of the Board own shares in the Company. Further
detail on each of their shareholding can be found on page 22.
After consideration of the above factors, and taking into
account guidance from the AIC, which encourages directors
owning shares, the Board is of the view that all the Non-
executive Directors continue to be independent in character
and judgement and free from relationships or circumstances
that could affect their judgement within the meaning of the AIC
Code. The Board considers that all Directors continue to be
committed to their roles and have sufficient time available to
meet their Board responsibilities.

The names and responsibilities of the Directors, together with
their biographies and details of their significant commitments,
are set out on page 7.

investor

BOARD AND COMMITTEE MEETINGS
The Board holds quarterly Board meetings (with additional
meetings arranged as necessary) where it considers
investment performance,
relations, share price
performance and other relevant matters. Regular discussions
are held with the Manager and its advisers about the discount
to NAV at which the shares trade and how this might be
the Company has
reduced. Over the past
undertaken share buybacks in an effort
to reduce this
information on the Company’s share
discount. Further
buyback programme during the year can be found on page 17.

three years,

operates. At

The Company Secretary and Investment Manager regularly
provide the Board with relevant statutory, regulatory and
corporate governance updates relating to the sector in which
the Company
each Board meeting,
representatives from the Investment Manager attend to
present verbal and written reports covering the Company’s
the period.
portfolio and investment performance over
Communication between the Board and the Investment
Manager and other service providers is maintained between
formal meetings.

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G
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16

Gresham House Strategic plc Report and Accounts 2020

CORPORATE GOVERNANCE REPORT (CONTINUED)

The Board reviews annually the performance, services and
the terms of its engagement with all the Company’s third-party
providers to ensure they continue to be competitive and
effective. Strategy sessions are held annually, and the Board
may meet from time to time without the Investment Manager
present, when considering the Manager’s performance, fees
and contractual arrangements.

The Board has delegated certain responsibilities to its Audit
Committee so that it can operate efficiently and give an
appropriate level of attention and consideration to relevant
matters. Given the size of the Board, the Directors do not
consider
it appropriate to establish a nomination,
remuneration or a Management and Engagement Committee.
The functions that would normally be carried out by these
committees are dealt with by the full Board.

The Board and its Audit Committee are supported by the
Company Secretary who ensures that appropriate policies
and procedures are in place in order for the Board to function
effectively and efficiently. A formal agenda is produced for
each meeting and papers are distributed several days before
meetings take place allowing all Board members to contribute
even if they are unable to attend.

The Directors have access to the advice and services of the
Company Secretary and individual Directors are able to take
independent legal and financial advice at the Company’s
expense when necessary to support the performance of
their duties as Directors. During the year, the Chairman
met regularly with the non-executive Directors without the
Manager present.

The table below sets out the attendance record of individual
Directors at the scheduled Board and Committee meetings
held during the year-ended 31 March 2020:

Scheduled Board
meetings

Scheduled
Audit Committee
meetings

Number attended

Number attended

8/8
7/8
8/8
8/8

–
1/1
1/1
1/1

David Potter*
Charles Berry
Kenneth Lever
Helen Sinclair

*not a member of the Audit Committee

CONFLICTS OF INTEREST
The Company has effective procedures in place to monitor
and deal with conflicts of interest. A register has been set up
to record all actual and potential conflict situations which have
been declared. All declared conflicts have been approved by
the Board. The Board is aware of the other commitments and
interests of its Directors, and changes to these commitments
and interests are reported to and, where appropriate, agreed
with the rest of the Board.

DIRECTORS’ APPOINTMENT AND RE-ELECTION
All Non-Executive Directors are appointed on the basis of
letters of appointments which provide for a maximum of three
months’ notice of termination by the Director or the Company.
The letters of appointment are available for inspection at each
AGM. The Board is aware of the AIC Code provisions relating
to tenure but has decided against imposing term limits on the
appointment of
to
continued satisfactory performance.

the Non-Executive Directors subject

The appointment of any new Director is made on the basis of
assessing the candidate’s merits and measuring his or her
skills and experience against the criteria identified by the
Board. Whilst the Board has not put in place a policy on
Diversity, the Board fully endorses the AIC Code principle to
promote diversity of gender, social and ethnic backgrounds
on the Board and would always consider this when making
any new Director appointments.

The Board recognises the importance of succession planning
to refresh the Board and the AIC provisions relating to this.
Whilst the Board has no succession plans in place at this time,
it is envisaged that should a Board member be unable to fulfil
their duties for a period of time, one of the other Directors
with the most appropriate experience would step in to perform
the role on an interim basis until a longer-term solution
is identified.

The Company considers annual re-election of Directors to be
good corporate governance and has therefore chosen to
follow this practice. The Directors have considered the
performance of each Director serving on the Board, including
the Chairman, and believe that each of the Directors continues
to make a valuable contribution to Board discussions and
decisions and supports their re-election at the 2020 AGM.

The Company has maintained Directors’ and Officers’ liability
insurance on behalf of the Directors, through a policy arranged
by the Manager, indemnifying the Directors in respect of
certain liabilities which may be incurred by them in connection
with the activities of the Company.

BOARD EVALUATION
The Board has formalised a process to conduct a regular
evaluation of its performance and that of individual Directors
and its Audit Committee on an annual basis. This process is
led by the Chairman (supported by the Company Secretary)
and is conducted internally using a questionnaire designed to
assess the strengths and weaknesses of the Board and its
Committees, the composition of the Board and how effectively
Board members work together. Each Director is required to
complete a questionnaire covering the assessment of the
composition, functioning and operation of the Board as a
whole and a similar review of the effectiveness of the Audit
Committee and Investment Manager is also carried out.

Gresham House Strategic plc Report and Accounts 2020

17

CORPORATE GOVERNANCE REPORT (CONTINUED)

the Directors recognise that

The Company has no employees and delegates its day-to-day
management and administration to third parties. The Board
considers its key stakeholders to be its shareholders, its
Investment Manager and its third-party service providers while
also taking into account the Company’s responsibilities to
regulators and the wider community. Given the out-sourced
nature of the Company’s operations, the Company has very
little direct impact on the community or the environment.
However,
the Investment
Manager can influence an investee company’s approach to
Environmental, Social and Governance (ESG) matters. As a
signatory to the UN-supported Principles for Responsible
Investment, the Investment Manager is committed to operating
responsibly and sustainably and believes investments in
businesses that have a positive ESG impact will drive
improved investment performance wherever possible. The
Investment Manager recognises that the integration of ESG
sustainable investing considerations into its business
processes can have a positive impact on financial
performance and consistency of the investment returns of the
Company.

Over the course of the past financial year, the Investment
Manager has taken further steps to define its approach more
formally such that it can be implemented with consistency,
confidence and rigour. This includes an asset-class specific
policy, which sets out in overview our integrated approach,
tools to assess ESG risk, monitor progress and report change;
and active tracking of ESG performance. In particular, our
Strategic Public Equity approach has an extremely high level
of on-going engagement on Governance matters due to its
investment style.
the Investment Manager
continues to use its significant experience in listed equity,
along with other asset class expertise and the support of
external advisers, to develop a robust approach to ESG
investment in order to drive value within the Company’s
portfolio and seek to minimise its investment risk.

In summary,

The results of the evaluation revealed no significant concerns
amongst the Directors about the effectiveness of the Board,
the Audit Committee or the Investment Manager.

The Board does not consider it necessary at present to
employ the services or to incur the additional expense of an
external third party to conduct the evaluation process but will
keep this under review.

INTERNAL CONTROLS AND RISK MANAGEMENT
SYSTEMS
The Board has established an ongoing process for identifying,
evaluating and managing the significant risks faced by the
Company. Further details are provided in note 12.

The Board maintains a risk register to identify any new risks
and makes the necessary adjustments required to existing
risks and the controls and mitigation measures in place in
respect of these risks.

SHARE CAPITAL
During the year, on various dates between 18 October 2019
and 27 March 2020,
the Company bought back 74,446
Ordinary Shares of 50 pence each at an average price of
1,201 pence. The shares bought back, along with any other
Ordinary Shares purchased by the Company pursuant to the
Buyback Programme, were immediately cancelled. A special
resolution to renew the Company’s authority to buy back
shares is proposed at the Company’s forthcoming AGM.

As at 31 March 2020, the Company’s issued share capital was
3,480,884 Ordinary Shares of 50 pence each, of which none
were held in treasury.

The Company’s Ordinary Shares are quoted on the
Alternative Investment Market of the London Stock Exchange
under reference GHS.

SECTION 172 STATEMENT
Section 172 of the Companies Act 2006 (the ‘Act’) requires
Directors to act in good faith and in a way that is the most likely
to promote the success of the Company. In doing so, Directors
must take into consideration the interests of the Company’s
various stakeholders, the impact on the wider community and
the environment when making decisions.

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18

Gresham House Strategic plc Report and Accounts 2020

CORPORATE GOVERNANCE REPORT (CONTINUED)

Stakeholder
group

Shareholders

Importance of engagement

Key methods of engagement

Topics of engagement

Outcome and actions

(cid:2)

(cid:2)

(cid:2) Review of the

Company’s discount
and the decision to
undertake a Share
Buyback to narrow
discount

(cid:2) Review of marketing
strategy to raise
awareness of GHS
and the SPE
strategy

(cid:2) Review of Dividend

Policy

Following the
conclusion of the
buyback, the
Company’s discount
narrowed to -3%

Appointment of
Edison, KL
Communications as
PR Firm and
Panmure Gordon as
joint broker. Launch
of new website and
subscription to
Directors’ talk

(cid:2) Confirmation of the

Company’s
commitment to
increase dividend
by 15%

Shareholders remain
central to the Company’s
ability to access capital to
support its strategic
objectives and goals and
in ensuring the long-term
success of the business

The Board is committed to
ensuring that there is
open and effective
communication with the
Company’s shareholders
on a range of matters
including: governance,
strategy and performance
against the Company’s
investment objective and
policy to ensure that the
Directors understand the
views of shareholders on
such matters

The Company communicates
with its shareholders in a
number of ways including:

(cid:2)

Through its annual and
half-yearly reports

(cid:2) Regulatory

announcements

(cid:2) Website – the website

(cid:2)

(cid:2)

provides all existing and
potential shareholders
with information about the
Company, its investment
policy and performance to
allow shareholders to fully
understand the
risk/reward balance of
holding shares in the
Company

Informal meetings: the
Chairman meets with the
Company’s major
shareholders annually if
they wish to do so to
discuss matters of
governance, strategy and
performance against the
Company’s investment
objective and policy

Annual General Meeting:
this provides a further
opportunity to
communicate with
shareholders who attend
and for the Board to
respond to their
questions at the meeting.
All shareholders are
encouraged to attend
and vote at the
Company’s AGM, to be
held on 17 September
2020 at 10:00am

Gresham House Strategic plc Report and Accounts 2020

19

CORPORATE GOVERNANCE REPORT (CONTINUED)

Stakeholder
group

Investment
Manager

Importance of engagement

Key methods of engagement

Topics of engagement

Outcome and actions

The Board has
contractually delegated the
management of the
portfolio to the Investment
Manager (GHAM). The
performance of GHAM is
crucial to the Company
executing its investment
strategy successfully and
providing attractive returns
to shareholders. Therefore,
maintaining a close and
constructive working
relationship with GHAM
remains important to the
Board and the long-term
success of the Company.

The Board regularly engages
with the Investment Manager
and meets with the
Investment Manager on a
quarterly basis and other
times throughout the year
enabling the Directors to
discuss the performance of
the investee companies
(amongst other matters) and
probe further should there be
matters of concern or
requirement for clarification
on certain matters.

The performance of the
Investment Manager is
monitored and reviewed by
the Board as a whole in the
absence of a management
and engagement Committee.
In addition, an annual
appraisal of the Investment
Manager’s performance is
undertaken as part of the
Board Evaluation process. It
is the opinion of the Board
that the continuing
appointment of the
Investment Manager is in
the interests of shareholders
as a whole.

Service
providers and
suppliers

As an externally managed
investment Company,
GHS relies on a diverse
range of advisors to
support the Company in
meeting all its relevant
obligations including: the
company secretary,
administrator, auditors,
registrar, depositary and
brokers.

(cid:2)

The Board maintains regular
contact with its key external
providers and receives
regular reporting from them,
both through the Board and
committee meetings, as well
as outside of the regular
meeting cycle.

(cid:2) Continuous

(cid:2)

engagement on the
impact of Brexit and
COVID-19 on
portfolio

(cid:2) Review of
Investment
Manager’s fees to
ensure they remain
competitive

(cid:2) Review of resourcing
within the GHAM
investment team
following
organisational
changes including
the creation of a
Gresham Strategic
Equities Division

(cid:2) Discussion of the

The Board continues
to review this
regularly and
obtains regular
updates from the
Investment Manager

(cid:2) No changes to the
current structure or
fees paid to the
Investment Manager.
The Board will keep
this under review

(cid:2) No specific action

required

(cid:2) GHAM actively

engages with
investee companies
on ESG matters and
is a signatory to the
United Nation’s
Principles of
Responsible
Investment

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G
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S

O
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I

N
F
O
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M
A
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I
O
N

No specific action was
undertaken in this area.

increasing impact of
environmental, social
and governance
(‘ESG’) and how the
Investment Manager
ensures investee
companies take this
into consideration
and adhere to
corporate
governance best
practice

The Board assesses
the performance,
fees and continuing
appointment of its
service providers
and suppliers
annually to ensure
that the key service
providers continue to
function at an
acceptable level and
are appropriately
remunerated to
deliver the expected
level of service. An
informal review is
also undertaken by
the Company’s
auditors

20

Gresham House Strategic plc Report and Accounts 2020

CORPORATE GOVERNANCE REPORT (CONTINUED)

Stakeholder
group

Regulators

Importance of engagement

Key methods of engagement

Topics of engagement

Outcome and actions

GHS can only operate with
the approval of its
regulators who have a
legitimate interest in how
the Company operates in
the market and treats its
shareholders.

The Company continues to
monitor and ensure its
compliance with the relevant
regulatory, legal and statutory
obligations along with
corporate governance best
practice.

No specific action
required

The Board reviewed its
compliance with the AIC
Code of Governance
published in February
2019 to assess the
extent of its compliance
and identify any gaps.
Regular updates are
received from the
Company Secretary on
governance matters to
inform the Board of any
changes in market
practice or any legal or
statutory obligations
which could affect the
Company.

SGH COMPANY SECRETARIES LIMITED
Company Secretary

22 June 2020

AUDIT COMMITTEE REPORT

The Audit Committee is chaired by Charles Berry and its other
members are Ken Lever and Helen Sinclair. Charles Berry has
recent and relevant
financial experience and the Audit
Committee as a whole has competence in the investment
company sector. The Chairman and the Investment Manager
are not members of the Committee but are invited to attend
meetings of the Committee from time to time. Representatives
of the Company’s Auditor attend the Committee meetings at
which the draft Interim and Annual Report and Accounts are
reviewed and are given the opportunity to speak to the
Committee members without the presence of the Manager.

The Audit Committee operates within a scope and remit
defined by specific terms of reference determined by the
Board. The Committee meets twice a year to review and
discuss the Company’s full and half-yearly results.

The purpose of the Committee is to:

(cid:2) Monitor the integrity of the financial statements of the
Company and any formal announcements relating to the
Company’s financial performance;

(cid:2) Review the significant issues/judgements relating to the
financial statements, and how these issues were
addressed;

(cid:2)

Ensure that
the Company has followed appropriate
accounting standards and made appropriate estimates
and judgements, taking into account the views of the
external auditor;

(cid:2) Review and make recommendations to the Board relating
the Financial Statements and
to the content of
accompanying narrative included within the Annual
Report;

(cid:2) Review and assess the independence, objectivity and
effectiveness of
the external audit process and the
approach taken to the appointment or reappointment of
the external auditor;

(cid:2)

Approve the remuneration of the independent auditors;
and

(cid:2) Monitor and review the effectiveness of the Company’s
internal control and risk

financial controls,

internal
management systems.

Gresham House Strategic plc Report and Accounts 2020

21

PRINCIPAL ACTIVITIES DURING THE YEAR
(cid:2) Considered the external auditor’s annual scope and
reports on the full year results and the key areas of focus;

(cid:2) Reviewed the full year and half-year results, including the
underlying accounting issues and judgements and the
processes underpinning the preparation of
those
documents;

(cid:2) Reviewed the information presented in the Interim and
Annual Reports to assess whether, taken as a whole, the
Reports are fair, balanced and understandable and the
information presented will enable the shareholders to
assess the Company’s performance and strategy;

(cid:2) Reviewed and recommended the reappointment of BDO

LLP as the external auditor for the Company; and

(cid:2) Reviewed the need to establish an internal audit function.

EXTERNAL AUDITOR
BDO LLP has been the external auditor for the Company
since 2014. The Committee reviews the appointment of BDO
legislation,
LLP each year,
guidance and best practice appropriate for a company of its
size, nature and stage of development. The Committee meets
with the external auditors at least once a year at the time of the
approval of the full year results.

taking into account relevant

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S

In March 2020, the Board discussed the performance of the
external auditor and the effectiveness of the audit process by
discussing the results of the 2019 external audit, including
their views on material accounting issues and key judgements;
considering the robustness of the audit process; reviewing the
quality of the people and service provided by BDO LLP; and
assessing their independence and objectivity.

O
T
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I

N
F
O
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M
A
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I
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N

The Committee is satisfied with the effectiveness of the
external auditor and recommends the reappointment of BDO
LLP as the external auditor for the Company at its 2020 AGM.

The breakdown of fees between audit and non-audit services
paid to BDO LLP during the financial year is set out in note 4
of the Financial Statements.

CHARLES BERRY
CHAIRMAN, AUDIT COMMITTEE

22 June 2020

22

Gresham House Strategic plc Report and Accounts 2020

DIRECTORS’ REMUNERATION REVIEW

The report on Directors’ remuneration for the year-ended
31 March 2020 is set out in the table below. As mentioned
previously,
the
Remuneration Committee given the size of the Board.

the full Board undertake the role of

DIRECTORS AND THEIR INTERESTS
The Directors serving during the year-ended 31 March 2020
had the following interests in the share capital of
the
Company:

David Potter

Charles Berry

Kenneth Lever

Helen Sinclair

As at
22 June
2020

31 March
2020

31 March
2019

22,312

20,085

17,313

2,550

3,330

1,767

2,550

3,330

1,767

2,550

3,330

1,767

The following employees of the Investment Manager are
considered
be Persons Discharging Managerial
Responsibility in relation to the Company and they had the
following interests in its share capital.

to

Anthony Dalwood

Richard Staveley

31 March
2020

31 March
2019

33,381

33,381

5,179

–

Furthermore, as the Company is an externally managed
investment company with no employees or executive
Directors, the Board does not consider it appropriate to put in
place a remuneration policy. The fees paid to the Board are
reviewed periodically and may also be reviewed when new
Non-Executive Directors are recruited to the Board. A review
of the Directors’ fees was undertaken in December 2019,
following which it was agreed that the Directors’ fees be
increased by 10% (effective 1 January 2020) to reflect the
additional time commitment required from Directors given the
increasing regulatory burden and to bring the fees in line with
that of similar companies. The Directors’ fees had remained
unchanged since the Company was founded in 2015.

The fees payable in respect of each of the Directors who
served during the financial year were as follows:

David Potter

Charles Berry

Kenneth Lever

Helen Sinclair

Total

31 March
2020

31 March
2019

51,250

50,000

25,624

25,000

25,624

25,000

25,624

25,000

128,122 125,000

The annual fee for members of the Board with effect from
1 January 2020 is as follows: Chairman £55,000, other Non-
Executive Directors: £27,500.

The total aggregate annual fees payable to Directors under
the Company’s Articles of Association (Articles) is £250,000.
As per the Company’s Articles, Directors are entitled to
reasonable expenses properly incurred in
be paid all
their duties as Directors including
the performance of
their expenses
travelling to and from Board and
Committee meetings.

As the Board is solely composed of Non-Executive Directors,
the consideration of their remuneration does not involve any
variable or performance-related bonuses, or other benefits
such as pensions. The level of remuneration has been set in
order to attract individuals of a calibre appropriate to the future
development of the Company and reflects the duties and
responsibilities of the Directors and the value and amount of
time committed to the Company’s affairs.

DIRECTORS’ REPORT

The contents of the Strategic Report are spread between the
Chairman’s Statement and Investment Manager’s Report. The
Directors present
their Annual Report and the audited
financial statements for the year-ended 31 March 2020.

ACTIVITIES
Gresham House Strategic plc (the Company) is an investment
company. Its principal activity is to make investments primarily
in UK and European smaller public companies, applying
private equity style techniques and due diligence alongside a
value investment philosophy to construct a focused portfolio,
the majority of which comprises 10-15 companies.

The Company has no employees but has a Board consisting
of four Non-Executive Directors.

DIRECTORS
The Directors in office at the date of this Annual Report are
shown on page 7.

SUBSTANTIAL SHAREHOLDINGS
As at the date of this report, the Company has been notified
of the following substantial interests representing 3% or more
of its total voting rights:

Shareholder

Number of

% of
total
Ordinary voting
rights

Shares held

Gresham House Strategic plc Report and Accounts 2020

23

The COVID-19 pandemic has presented the Company with
additional immediate risks in respect of the performance and
valuation of portfolio companies. The pandemic has adversely
affected the valuation of the portfolio as at 31 March 2020 and
has caused substantial volatility in financial markets. The
Directors nevertheless consider the Company to be well
placed to operate through the crisis and to continue to operate
for at least twelve months from the date of this report, as the
Company has sufficient cash liquidity to pay its liabilities as
and when they fall due and also to invest in new opportunities
as they arise. The cash and publicly tradeable investments
when compared to the non-discretionary cash outflows of the
Company are more than sufficient to allow the Company to
continue to meet
investee
companies cease to be able to pay dividends or loan stock
interest. This has been further discussed in Note 1 to the
financial statements.

these commitments, even if

SHARE PRICE
The average share price of the Company’s quoted Ordinary
Shares in the year-ended 31 March 2020 was 1,138.5 pence.
In the year the share price reached a maximum of 1,355.0
pence and a minimum of 865.05 pence. The closing share
price on 31 March 2020 was 902.5 pence.

SUBSEQUENT EVENTS
There have been no material events since the date of the
statement of financial position.

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Gresham House plc and GH Holdings Ltd

812,913 23.3%

James Sharp & Co

238,015 6.8%

Hargreaves Lansdown Asset Management 227,104 6.5%

Unicorn Asset Management

217,528 6.2%

Smith & Williamson Investment
Management

Premier Miton Investors

Interactive Investor Glasgow

Investec Wealth & Investment

Berkshire County Council

194,858 5.6%

176,225 5.1%

119,734 3.4%

107,596 3.1%

105,000 3.0%

DIVIDENDS
The Directors have recommended the payment of a final
dividend in respect of the year-ended 31 March 2020 of
12.8 pence pence per Ordinary Share (bringing total dividends
for the year to 22.9 pence per share), payable on 30 September
2020 to shareholders who appear on the register of members
on 4 September 2020 (2019: 11.1 pence per share).

FINANCIAL RISK MANAGEMENT
The principal risks and uncertainties regarding the Company’s
future financial performance are set out in note 12 of the
financial statements. The Directors do not consider that the
Company faces any significant credit risk, liquidity risk or cash
flow risk.

The COVID-19 pandemic continues to adversely impact the
UK and world economy. The effect of this on the investment
portfolio has been reflected in the fair value of investments at
impact of the pandemic and
31 March 2020. As the full
Government restrictions is unknown, there may be further
information that emerges but the impact of this could not be
known at 31 March 2020.

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is noted that post year end,

the unaudited NAV has
It
increased to 1,237.6 pence per share as at 5 June 2020
(1,060.4 pence per share at 31 March 2020).

AUDIT INFORMATION
Each of the Directors who held office at the date of approval
of the Report of the Directors confirms that:

(1) So far as the Director is aware, there is no relevant audit
information of which the Company’s auditor is unaware;
and

(2) The Director has taken all the steps that they should have
taken as a Director in order to make themselves aware of
any relevant audit information and to establish that the
Company’s auditor is aware of that information.

24

Gresham House Strategic plc Report and Accounts 2020

DIRECTORS’ REPORT (CONTINUED)

ANNUAL GENERAL MEETING
In light of the UK Government's social distancing guidelines
associated with the COVID-19 pandemic restricting public
gatherings and non-essential travel, physical attendance at
the Company's AGM may not be permitted. It is accordingly
the way in which our AGM’s are
necessary to adjust
conducted going forward. The formal part of the AGM will be
held with a quorum of members only, supplemented by way of
a conference call allowing shareholders to dial into the AGM
at which time they can submit questions to the Board.
Shareholders wishing to access the conference call facility or
submit questions to Board ahead of the meeting are asked to
contact the Company Secretary. Please note that it will not be
possible to vote on the matters to be considered at the AGM
through the dial-in facility.

The Notice of Annual General Meeting to be held at 10:00am
on Thursday 17 September 2020 is set out on pages 46 to 47.
Details of the business to be transacted are outlined below:

Report and accounts

As required by company law, the annual report and accounts
will be laid before shareholders.

Dividend

Shareholders will be asked to approve the final dividend of
12.8 pence per share.

Re-election of directors

Each of the Directors will stand for re-election at the AGM.

Auditor

The re-appointment of BDO LLP as auditor and a resolution
allowing the Directors to determine their remuneration.

Directors’ authority to allot shares

The Directors are seeking the usual authority to allot shares.
Resolution 8 in the Notice of Annual General Meeting seeks
authority to allot Ordinary Shares up to an aggregate nominal
amount of £574,345 (being an amount equal to 33% of the
total issued share capital of the Company as at the date of
this report).

Under Resolution 9, which is a special resolution,
the
Directors are also seeking authority to allot new Ordinary
Shares and/or sell Ordinary Shares held by the Company as
treasury shares for cash as if section 561 of the Companies
Act 2006 did not apply. (This section requires that, when equity
securities are allotted for cash, such new shares are first
offered to existing equity shareholders in proportion to their
existing holdings of shares, this entitlement being known as
“pre-emption rights”). The purpose of holding shares in

treasury is to allow the Company to re-issue those shares
quickly and cost-effectively. Allotments of Ordinary Shares
under these authorities would allow the Directors to issue
shares for cash to take advantage of changes in market
conditions that may arise, in order to increase the amount of
the Company’s issued share capital.

The purpose of such an increase would be to improve the
liquidity of the market in the Company’s shares and to spread
the fixed costs of administering the Company over a wider
base. The Directors believe that this would increase the
investment attractiveness of the Company to the benefit of
existing shareholders.

Resolution 9, if passed, will give the Directors power to allot
Ordinary Shares of the Company for cash and to sell Ordinary
Shares out of treasury up to a maximum nominal amount of
£174,044 (being an amount representing 10% of the total
issued ordinary share capital of the Company as at the date
of this report) without the application of the pre-emption rights
described above.

Resolution 10 gives the Company authority to make market
purchases of up to 521,785 Ordinary Shares, representing
14.99% of
the Company’s issued ordinary share capital
(excluding treasury shares) as at 22 June 2020 (the latest
practicable date before publication of this document).

The resolution sets minimum and maximum prices. The
Directors will only use this authority to undertake a further
share buyback and consider it useful to retain the authority for
the future in case circumstances alter.

The authorities contained in Resolutions 8 to 10 will continue
until the AGM of the Company in 2021, or 30 September 2021
if earlier. It is intended that renewal of these authorities will be
sought at each AGM.

RECOMMENDATION
The Board considers that the passing of the resolutions
to be proposed at
the
Company and its shareholders as a whole and they
unanimously recommend that shareholders vote in favour of
those resolutions.

the AGM is in the interests of

Approved by the Board of Directors
and signed on its behalf

SGH COMPANY SECRETARIES LIMITED
COMPANY SECRETARY

22 June 2020

Gresham House Strategic plc Report and Accounts 2020

25

DIRECTORS’ RESPONSIBLIITY STATEMENT

The Directors are responsible for preparing the Directors’
Report and the financial statements in accordance with
applicable law and regulations.

Company law requires the Directors to prepare financial
law the
statements for each financial year. Under that
Directors have elected to prepare the Company financial
statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European
Union. Under company law the Directors must not approve
the financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Company
and of the profit or loss of the Company for that period.
The Directors are also required to prepare financial
statements in accordance with the rules of the London Stock
Exchange for companies trading securities on the Alternative
Investment Market.

In preparing these financial statements, the Directors are
required to:

(cid:2)

Select suitable accounting policies and then apply them
consistently;

(cid:2) Make judgements and accounting estimates that are

reasonable and prudent;

(cid:2)

(cid:2)

State whether they have been prepared in accordance
with IFRSs as adopted by the European Union, subject
to any material departures disclosed and explained in the
financial statements; and

Prepare the financial statements on the going concern
the
basis unless it
Company will continue in business.

is inappropriate to presume that

The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain the
Company’s transactions and disclose with reasonable
accuracy at any time the Financial Position of the Company
and enable them to ensure that the financial statements
comply with the requirements of the Companies Act 2006.
They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.

The Directors are responsible for preparing the Annual Report
in accordance with applicable law and regulations. The
Directors consider the Annual Report and the Financial
Statements,
taken as a whole, provide the information
necessary to assess the Company’s position, performance
and strategy and is fair, balanced and understandable.

WEBSITE PUBLICATION
The Directors are responsible for ensuring that the Annual
Report and Financial Statements are made available on a
website. Financial statements are published on the Company’s
website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of financial
statements, which may vary from legislation in other
jurisdictions. The maintenance and integrity of the Company’s
website is the responsibility of the Directors. The Directors’
responsibility also extends to the ongoing integrity of the
Financial Statements contained herein.

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26

Gresham House Strategic plc Report and Accounts 2020

INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF GRESHAM HOUSE STRATEGIC PLC

OPINION
We have audited the Financial Statements of Gresham House
Strategic plc (the ‘Company’) for the year ended 31 March
2020 which comprise the Statement of Comprehensive
Income, Statement of Financial Position, Statement of
Changes in Equity, Statement of Cash Flows and the notes to
the Financial Statements, including a summary of significant
accounting policies.

The financial reporting framework that has been applied in
their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European
Union.

In our opinion the financial statements:

(cid:2)

(cid:2)

(cid:2)

give a true and fair view of the state of the Company’s
affairs as at 31 March 2020 and of its loss for the year
then ended;

have been properly prepared in accordance with IFRSs
as adopted by the European Union; and

have been prepared in accordance with the requirements
of the Companies Act 2006.

responsibilities under

BASIS FOR OPINION
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law.
those standards are further
Our
described in the Auditor’s responsibilities for the audit of the
Financial Statements section of our
report. We are
independent of the Company in accordance with the ethical
requirements that are relevant to our audit of the Financial
Statements in the UK, including the FRC’s Ethical Standard as

applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.

CONCLUSIONS RELATING TO GOING CONCERN

We have nothing to report in respect of the following matters
in relation to which the ISAs (UK) require us to report to you
where:

(cid:2)

(cid:2)

the Directors’ use of
the going concern basis of
accounting in the preparation of the Financial Statements
is not appropriate; or

the Directors have not disclosed in the Financial
Statements any identified material uncertainties that may
cast significant doubt about the Company’s ability to
continue to adopt the going concern basis of accounting
for a period of at least twelve months from the date when
the Financial Statements are authorised for issue.

KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the
Financial Statements of the current period and include the
most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the
allocation of resources in the audit; and directing the efforts
of the engagement team. These matters were addressed in
the context of our audit of the Financial Statements as a
whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.

Gresham House Strategic plc Report and Accounts 2020

27

INDEPENDENT AUDITOR’S REPORT (CONTINUED)

Key audit matters

How our audit addressed the key audit matters

Valuation of Investments
(Page 39 and note 8)

Investments are primarily held
in quoted companies which
should not generally require
significant judgement in their
valuation.

However there is a higher level
of estimation uncertainty
involved in determining the
unquoted investment valuations.
This risk is enhanced by the fact
that the Investment Manager is
remunerated based on the Net
Asset Value of the Company,
which is largely driven by the
valuation of the investment
portfolio.

QUOTED

In respect of all quoted investments we performed the following:

(cid:2) Agreed all additions and disposals to supporting contract notes

(cid:2) Agreed the bid price of the investee company’s shares as at the year end to publically

available data

(cid:2) Re-performed the calculation of the value attributable to the Company based on the

closing bid price

(cid:2) Considered the economic environment in which the investment operates to identify

factors that could impact the investment valuation

(cid:2) Reviewed the workings behind the MJH loan conversion and agreed the inputs to
publically available data surrounding the initial public offering and the relevant
agreements in place.

UNQUOTED

For all debt instruments held at fair value, we performed the following:

(cid:2) Agreed security held to supporting documentation and considered the recoverability of
loans through consideration of the investee company’s ability to repay them through
review of recent financial information

(cid:2) Considered the assumption that fair value is not significantly different to par value by
challenging the assumption that there is no significant movement in the market interest
rate since acquisition by comparing the par value to the Investment Manager’s
assessment of the fair value of the loan instruments

(cid:2) Reviewed the treatment of accrued redemption premium/other fixed returns in line with

the requirements of applicable accounting standards

(cid:2) Considered the need for impairment through review of the investee’s recent trading

information and performance reports

(cid:2) Considered the inputs and assumption applied in valuing conversion options where

applicable and benchmarked these to publically available information.

For all unquoted equity instruments held at fair value we have:

(cid:2) Considered whether the assumptions and underlying evidence supporting the year

end valuations were in line with applicable accounting standards

(cid:2) Considered whether the valuation methodology is the most appropriate in the
circumstances under the International Private Equity and Venture Capital Valuation
(“IPEV”) Guidelines

(cid:2) Agreed the valuation to the report from the fund General Partner

(cid:2) Considered the sector in which the investment operates to identify factors that could

impact the investment valuation.

Key observations:

Based on the procedures performed we concluded that the valuation of the investments
was not materially misstated.

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28

Gresham House Strategic plc Report and Accounts 2020

INDEPENDENT AUDITOR’S REPORT (CONTINUED)

OUR APPLICATION OF MATERIALITY
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements.
For planning, we consider materiality to be the magnitude by which misstatements, including omissions, could reasonably
influence the economic decisions of users that are taken on the basis of the financial statements. In order to reduce to an
appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance
materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be
evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of
their occurrence, when evaluating their effect on the financial statements as a whole.

The application of these key considerations gives rise different of materiality, the quantum and purpose of which are
tabulated below.

Materiality Measure

Purpose

Financial Statement Materiality
(1.25% of the value of the
investment portfolio)

(2019: 1.2% of the value of
the investment portfolio)

Assessing whether the
financial statements as a
whole present a true and
fair view.

Key considerations and
benchmarks

2020
Quantum
(£)

2019
Quantum
(£)

(cid:2) The value of investments

375,000

490,000

(cid:2) The level of judgement

inherent in the valuation

(cid:2) The nature and disposition
of the investment portfolio

Performance Materiality
(75% of financial statement
materiality)

(2019: 75% financial
statement materiality)

Lower level of materiality
applied in performance of the
audit when determining the
nature and extent of testing
applied to individual balances
and classes of transactions.

(cid:2) Financial statement

280,000

370,000

materiality

(cid:2) Risk and control environment

(cid:2) History of prior errors

We also determined that for other classes of transactions,
balances or disclosures relating to the Company’s investment
income, costs and other relevant transactions and balances
that drive the revenue return to shareholders, a misstatement
of less than materiality for the financial statements as a whole,
specific materiality, could influence the economic decisions of
users as it is a measure of the Company’s on-going costs and
net realised revenue returns. As a result we determined that
materiality for these areas should be £75,000 (2019: £70,000)
based on 5% of gross expenditure (2019: 5% of gross
expenditure excluding the performance fee).

We agreed with the Audit Committee that we would report to
them all
individual audit differences in excess of £20,000
(2019: £24,000).

AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Our audit approach was developed by obtaining an
understanding of the Company’s activities and the overall
control environment. Based on this understanding we assessed
those aspects of the Company’s transactions and balances
which were most likely to give rise to a material misstatement.

As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the Directors
made subjective judgements, for example in respect of the
valuation of investments.

OTHER INFORMATION
The Directors are responsible for the other information. The
other information comprises the information included in the
report and accounts, other than the financial statements and
our auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and, except
to the extent otherwise explicitly stated in our report, we do
not express any form of assurance conclusion thereon.

the other

In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
information is materially
consider whether
inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially
misstated. If we identify such material
inconsistencies or
apparent material misstatements, we are required to
determine whether there is a material misstatement in the
financial statements or a material misstatement of the other
information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have
nothing to report in this regard.

Gresham House Strategic plc Report and Accounts 2020

29

INDEPENDENT AUDITOR’S REPORT (CONTINUED)

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE
FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial
statements.

A further description of our responsibilities for the audit of the
financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.

USE OF OUR REPORT
This report is made solely to the Company’s shareholders, as
a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so
that we might state to the Company’s shareholders those
matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s shareholders as
a body, for our audit work, for this report, or for the opinions we
have formed.

PETER SMITH (SENIOR STATUTORY AUDITOR)
For and on behalf of
BDO LLP, Statutory Auditor
London, United Kingdom

22 June 2020

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

OPINIONS ON OTHER MATTERS PRESCRIBED BY THE
COMPANIES ACT 2006
In our opinion, based on the work undertaken in the course of
the audit:

(cid:2)

(cid:2)

the information given in the strategic report and the
Directors’ report
for the financial year for which the
financial statements are prepared is consistent with the
financial statements; and

the strategic report and the Directors’ report have been
prepared
legal
in
requirements.

accordance with

applicable

MATTERS ON WHICH WE ARE REQUIRED TO REPORT
BY EXCEPTION
In the light of
the
Company and its environment obtained in the course of the
audit, we have not identified material misstatements in the
strategic report or the Directors’ report.

the knowledge and understanding of

We have nothing to report in respect of the following matters
in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:

(cid:2)

(cid:2)

(cid:2)

adequate accounting records have not been kept, or
returns adequate for our audit have not been received
from branches not visited by us; or

the financial statements are not in agreement with the
accounting records and returns; or

certain disclosures of Directors’ remuneration specified
by law are not made; or

(cid:2) we have not received all the information and explanations

we require for our audit.

RESPONSIBILITIES OF DIRECTORS
As explained more fully in the Directors’ responsibilities
statement, the Directors are responsible for the preparation of
the financial statements and for being satisfied that they give
a true and fair view, and for such internal control as the
Directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error.

In preparing the financial statements,
the Directors are
responsible for assessing the Company’s ability to continue
as a going concern, disclosing, as applicable, matters related
to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the
Company or
to cease operations, or have no realistic
alternative but to do so.

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Gresham House Strategic plc Report and Accounts 2020

STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR-ENDED 31 MARCH 2020

(Losses)/Gains on Investments

Revenue
Bank Interest income
Loan note interest income
Portfolio dividend income

Administrative expenses
Salaries and other staff costs
Performance fee
Other costs

Total administrative expenses

(Loss)/profit before taxation
Taxation

(Loss)/profit for the financial year

Attributable to:
– Equity shareholders of the Company

Basic and Diluted earnings per ordinary share for (loss)/profit
from continuing operations and for profit for the year (pence)

Year-ended
31 March
2020
£’000

Year-ended
31 March
2019
£’000

(5,728)

6,102

Note

8

8
782
265

1,055

(138)
–
(1,363)

(1,501)

(6,174)
–

(6,174)

11
634
225

870

(129)
(2,333)
(1,257)

(3,719)

3,253
–

3,253

3
13
4

5

(6,174)

3,253

6

(174.34p)

91.06p

There are no components of other comprehensive income for the current year, (2019: None), all income arose from continuing
operations.

STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2020

Non-current assets
Investments at fair value through profit or loss

Current assets
Trade and other receivables
Cash and cash equivalents

Total assets

Current liabilities
Trade and other payables
Performance fee payable

Total liabilities

Net current assets

Net assets

Equity
Issued capital
Share premium
Revenue reserve
Capital redemption reserve

Total equity

Gresham House Strategic plc Report and Accounts 2020 31

Note

8

9

10

11

31 March
2020
£’000

29,960

29,960

266
6,864

7,130

31 March
2019
£’000

40,718

40,718

106
6,728

6,834

37,090

47,552

(178)
–

(178)

6,952

(473)
(2,333)

(2,806)

4,028

36,912

44,746

1,751
13,063
11,224
10,874

36,912

1,788
13,063
19,058
10,837

44,746

The NAV per share on 31 March 2020 is 1,060.4 pence (2019: 1,258.6 pence)

These financial statements were approved and authorised for issue by the Board of Directors on 22 June 2020. Signed on
behalf of the Board of Directors.

DAVID POTTER
CHAIRMAN

CHARLES BERRY
DIRECTOR

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Gresham House Strategic plc Report and Accounts 2020

STATEMENT OF CASH FLOWS
FOR THE YEAR-ENDED 31 MARCH 2020

Cash flow from operating activities
Cash flow from operations

Net cash outflow from operating activities

Cash flows from investing activities
Purchase of financial investments
Sale of financial investments

Net cash inflow from investing activities

Cash flows from financing activities
Dividends paid
Share buy backs

Net cash outflow from financing activities

Change in cash and cash equivalents
Opening cash and cash equivalents

Closing cash and cash equivalents

NOTE
a) Reconciliation of loss for the year to net cash outflow from operations

(Loss)/profit for the year
Rolled up interest
Losses/(gains) on investment

Operating results

Change in trade and other receivables
Change in trade and other payables

Net cash outflow from operations

Note

a

8*
8*

7

2

8

Year-ended
31 March
2020
£’000

Year-ended
31 March
2019
£’000

(3,157)

(3,157)

(11,360)
16,313

4,953

(686)

(686)

(10,124)
16,356

6,232

(752)
(908)

(924)
(938)

(1,660)

(1,862)

136
6,728

6,864

3,684
3,044

6,728

£’000

(6,174)
(329)
5,728

(775)

42
(2,424)

(3,157)

£’000

3,253
(226)
(6,102)

(3,075)

(35)
2,424

(686)

* The purchase and sale of financial investments are the cash paid or received during the year and excludes unsettled

investments as at 31 March 2020.

Gresham House Strategic plc Report and Accounts 2020 33

STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR-ENDED 31 MARCH 2020

Balance at 31 March 2018

Profit and total comprehensive income
for the year

Total profit and comprehensive
income for the year

Contributions by and distributions
to owners
Share buy back
Dividends paid

Balance at 31 March 2019

Loss and total comprehensive loss
for the year

Total Loss and comprehensive income
for the year

Contributions by and distributions
to owners
Share buy back
Dividends paid

Balance at 31 March 2020

D shares
£’000

10

–

10

–
–

10

–

10

–
–

10

Ordinary
Share
Capital
£’000

1,827

Share
Premium
£’000

13,063

Revenue
Reserve
£’000

17,667

Capital
Redemption
Reserve
£’000

Total
Equity
£’000

10,788

43,355

–

–

3,253

–

3,253

1,827

13,063

20,920

10,788

46,608

(49)
–

–
–

(938)
(924)

49
–

(938)
(924)

1,778

13,063

19,058

10,837

44,746

–

–

(6,174)

–

(6,174)

1,778

13,063

12,884

10,837

38,572

(37)
–

–
–

(908)
(752)

37
–

(908)
(752)

1,741

13,063

11,224

10,874

36,912

O
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V
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W

G
O
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I

F
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C
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L
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T
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T
E
M
E
N
T
S

O
T
H
E
R

I

N
F
O
R
M
A
T
I
O
N

34

Gresham House Strategic plc Report and Accounts 2020

NOTES TO THE FINANCIAL STATEMENTS

1. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
Gresham House Strategic plc (the Company) is a company incorporated in the UK and registered in England and Wales
(registration number: 3813450). The accounting policies applied are consistent with the prior year.

Basis of Preparation

The financial statements for the year ended 31 March 2020 have been prepared in accordance with International Financial
Reporting Standards (IFRS) approved by the International Accounting Standards Board (IASB), as adopted by the European
Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The financial statements are prepared on a historical cost basis except for the revaluation of certain financial instruments stated
at fair value. Standards and interpretations applied for the first time have had no material impact on these financial statements.

New standards effective in the year

IFRS 16 “Leases” is effective for accounting periods beginning on or after 1 January 2019.

The adoption of the above standard had no impact on the Company’s reported net assets as the Company does not have
any leases.

New and revised accounting standards and amendments that are effective for annual periods beginning on or after 1 January
2019:

(cid:2)

(cid:2)

(cid:2)

Amendments to IFRS 9: Prepayment Features with Negative Compensation

Annual Improvements to IFRSs 2015 – 2017 Cycle

IFRIC 23: Uncertainty over Income Tax Treatments

The adoption of the standards and amendments listed above did not have any impact on the amounts recognised in prior
periods and are not expected to significantly affect the current or future periods.

New Standards and interpretations not yet applied

Other standards and amendments that are effective for subsequent reporting periods beginning on or after 1 January 2020 and
which have not been early-adopted by the Company include:

(cid:2) Definition of Material (Amendments to IAS 1 and IAS 8);

(cid:2) Revised Conceptual Framework for Financial Reporting

These standards and amendments are not expected to have a significant impact on the financial statements in the period of
initial application and therefore detailed disclosures have not been provided.

The Company’s business activities, together with the factors likely to affect its future development, performance and position
are set out in the Directors’ Report and Investment Manager’s Report. The key risks facing the business and management’s
policy and practices to manage these are further discussed in note 12.

In assessing the Company as a going concern, the Directors have considered the forecasts which reflect the Directors’ proposed
strategy for portfolio investments and the current economic outlook. The Directors acknowledge that the coronavirus
(COVID-19) outbreak has had a significant adverse economic impact globally, and that this has caused substantial volatility in
financial markets. The Directors nevertheless consider the Company to be well placed to operate through the crisis and to
continue to operate for at least twelve months from the date of this report, as the Company has sufficient liquidity to pay its
liabilities as and when they fall due and also to invest in new opportunities as they arise. The Company is in a net current asset
position of £7.0 million (2019: £4.0 million) and a net asset position of £36.9 million (2019: £44.7 million). Furthermore, the
Company has a cash balance of £6.9 million (2019: £6.7 million) and non-discretionary expenditure for the financial year was
£1.5 million (2019: £3.7 million), which is covered 4.6 times by the year end cash position. The Company’s forecasts and
projections, taking into account the current economic environment and other, reasonably possible changes in performance, show
that the Company is able to operate within its available working capital and continue to settle all liabilities as they fall due for
the foreseeable future. The Company has consistent, predictable ongoing costs and all major cash outflows, such as for the
payment of dividends or for investment into portfolio companies, are at the full discretion of the Board.

Gresham House Strategic plc Report and Accounts 2020

35

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

O
V
E
R
V
I
E
W

G
O
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E
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N
A
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C
E

I

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S

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1. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Directors have considered the use of the going concern basis for the preparation of these financial statements within the
context of the Company’s stated investment strategy. The strategy targets superior long-term returns through a policy of
constructive, active engagement with investee companies, adopting private equity techniques to manage risk. The Investment
Manager (Gresham House Asset Management Limited or GHAM) targets smaller, predominantly quoted UK companies which
it believes can benefit from strategic, operational or management initiatives and applies structured investment appraisal, due
diligence and risk management on these companies. Accordingly, the Directors remain of the view that the going concern basis
of preparation is appropriate.

Financial instruments:

Trade debtors and creditors

Trade debtors and creditors are held at amortised cost and are accounted for at transaction value when an asset or liability is
incurred as these are short term in nature.

Cash and cash equivalents

Cash and cash equivalents include cash in hand and deposits held at call with banks and other short term highly liquid
investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Financial Investments

Investments are included at valuation on the following basis:

(a) Quoted investments are recognised on trading date and valued at the closing bid price at the year end.

(b)

Investments considered to be mature are valued according to the Directors’ best estimate of the Company’s share of that
investment’s value. This value is calculated in accordance with the International Private Equity and Venture Capital Valuation
Guidelines (the IPEV guidelines) and industry norms which include calculations based on appropriate earnings or sales
multiples.

The IPEV guidelines which are effective for reporting periods on or after 1 January 2019 have been adopted by the Company.
The core principles of the new IPEV guidelines are:

(i) Price of a recent investment removed as a valuation technique and is no longer a valid methodology in its own right; and

(ii) Valuing debt investment is expanded.

The Directors consider that a substantial measure of the performance of the Company is assessed through the capital gains
and losses arising from the investment activity of the Company.

Consequently, for measurement purposes, financial investments, including equity, loan and similar instruments, are designated
at fair value through profit and loss, and are valued in compliance with IFRS 9 ‘Financial Instruments’, IFRS 13 ‘Fair Value
Measurement’ and the IPEV Guidelines as recommended by the British Venture Capital Association.

Gains and losses on the realisation of financial investments are recognised in the statement of comprehensive income for the
year and taken to retained earnings. The difference between the market value of financial investments and book value to the
Company is shown as a gain or loss for the year and taken to the statement of comprehensive income.

Revenue

Dividends receivable on unquoted equity shares are brought into account when the Company’s right to receive payment is
established and there is no reasonable doubt that payment will be received.

Dividends receivable on quoted equity shares are brought into account when the right to receive payment is established and
the amount of the dividend can be measured reliably.

Interest receivable is included on an effective interest rate basis.

36

Gresham House Strategic plc Report and Accounts 2020

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

1. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Taxation

The tax expense included in the statement of comprehensive income comprises current and deferred tax. Current tax is the
expected tax payable based on the taxable profit for the year, using tax rates that have been enacted or substantially enacted
by the reporting date. Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the
accounts and the corresponding tax bases used in the computation of taxable profit and are accounted for using the statement
of financial position liability method.

Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to
the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.
Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition of
other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. The carrying amount of
deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that
are expected to apply in the period when the liability is settled, or the asset is realised. Deferred tax is charged or credited in
the statement of comprehensive income, except when it relates to items charged or credited directly to equity, in which case
the deferred tax is also recognised in equity.

Performance Fee

Under the terms of the Investment Management Agreement, the Company will pay the Investment Manager a performance fee
in respect of each performance fee period in which the Net Asset Value per Ordinary Share on the last business day of such
performance fee period exceeds both a compounding hurdle growth in Net Asset Value per share of 7% per annum
(compounding weekly, the ‘Hurdle Net Asset Value per share’) and the highest Net Asset Value per share at which a performance
fee was previously paid (the ‘High Watermark’). The performance fee shall be calculated at a rate of 15% of the amount by which
the Net Asset Value per share exceeds the High Watermark, multiplied by the time weighted number of shares in issue during
such performance fee period, provided that the Performance Fee payable will be reduced to ensure that the Net Asset Value
per share after the payment of such Performance Fee does not fall below the Hurdle Net Asset Value per share. Up to 50% of
any performance fee may (at the Board’s discretion) be satisfied by the issue of Ordinary Shares.

The performance fee is calculated for each performance fee period which is aligned with the Company’s accounting year. It is
accounted for on an accrual basis and is recognised in the Statement of Comprehensive Income once a performance fee is
triggered during the performance fee period. The performance fee becomes payable at the end of the performance fee period.

Foreign exchange

Transactions denominated in foreign currencies are translated into the functional currency at the rate ruling at the dates of the
transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated at the
rates ruling at that date. These translation differences are recognised in the Statement of ComprehensiveIincome.

Critical accounting judgements and key sources of estimation uncertainty

The preparation of financial statements requires the use of estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reported period. It also requires Management to exercise their judgement in the process of applying the accounting policies.
The main area of estimation is in the inputs used in determination of the valuation of the unquoted investments in Note 8.
Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results ultimately
may differ from those estimates. Management believes that the underlying assumptions are appropriate and that the Company’s
financial statements are fairly presented.

Segmental analysis

Segmental analysis is not applicable as there is only one operating segment of the business – investment activities. The
performance measure of investment activities is considered by the Board to be profitability and is disclosed on the face of the
Statement of Comprehensive Income.

2. STATEMENT OF COMPREHENSIVE INCOME
The Company’s loss for the year was £6.174 million (2019: profit of £3.253 million).

The Company has recognised losses on investments through the Statement of Comprehensive Income of £5.728 million
(2019: gains of £6.102 million).

Gresham House Strategic plc Report and Accounts 2020

37

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

3. INFORMATION REGARDING DIRECTORS AND EMPLOYEES

Directors’ remuneration summary
Basic salaries
Social security costs

Analysis of Directors’ remuneration
C Berry
D Potter
H Sinclair
K Lever
Social security costs

The Company has no employees.

Directors
Investment and related administration

Year-ended
31 March
2020
£’000

Year-ended
31 March
2019
£’000

129
9

138

Year-ended 31 March 2020

Year-ended 31 March 2019

Emoluments
£’000

Social
Security
costs
£’000

Total Emoluments
£’000
£’000

Social
Security
costs
£’000

26
51
26
26
–

129

–
–
–
–
9

9

26
51
26
26
9

25
50
25
25
–

138

125

–
–
–
–
4

4

125
4

129

Total
£’000

25
50
25
25
4

129

O
V
E
R
V
I
E
W

G
O
V
E
R
N
A
N
C
E

I

F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S

O
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H
E
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I

N
F
O
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M
A
T
I
O
N

Year-ended
31 March
2020
No.

Year-ended
31 March
2019
No.

4

4

4

4

Year-ended
31 March
2020
£’000

Year-ended
31 March
2019
£’000

31

3
3
13

379
858
76

26

–
–
10

338
795
88

1,363

1,257

4. OTHER COSTS
Loss for the year has been derived after taking the following items into account:

Auditors remuneration
Fees payable to the current auditor for the audit of the Company’s annual financial statements
Fees payable to the Company’s current auditor and its associates for other services:

Under provision of audit fee for year ended 31 March 2019
Fees paid for review of interim report
Other services relating to taxation

Analysis of other costs:
Professional fees
Management fee
Other general overheads

38

Gresham House Strategic plc Report and Accounts 2020

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

5. TAXATION

UK corporation tax
Corporation tax liability at 19% (2019: 19%)

Current tax
Deferred tax

Tax on (loss)/profit from ordinary activities

Year-ended
31 March
2020
£’000

Year-ended
31 March
2019
£’000

–

–
–

–

–

–
–

–

Factors affecting the tax charge for the current period

The tax assessed for the year is different than that resulting from applying the standard rate of corporation tax in the UK: 19%
(2019: 19%)

The differences are explained below:

Current tax reconciliation
Loss before taxation

Current tax charge at 19% (2019: 19%)
Effects of:
Non-taxable income
Deferred tax not recognised

Tax on (loss)/profit on ordinary activities

Deferred tax

Year-ended
31 March
2020
£’000

Year-ended
31 March
2019
£’000

(6,174)

(1,173)

1,037
136

–

3,253

618

(1,202)
584

–

There remains an unrecognised deferred tax asset in respect of tax losses and other temporary differences. The unrecognised
deferred tax asset is £29 million (2019: £26 million) for the Company. The increase in the balance for unrecognised deferred
tax is due to an increase to management expenses carried forward available for deduction against future income. The assessed
loss on which no deferred tax has been recognised amounts to £151 million (2019: £153 million).

Company deferred tax asset
Balance at 1 April
Movement in the year

Balance at 31 March

The movement in the year is taken to the Statement of Comprehensive Income.

Year-ended
31 March
2020
£’000

Year-ended
31 March
2019
£’000

–
–

–

–
–

–

Gresham House Strategic plc Report and Accounts 2020

39

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

6. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the profit/loss attributable to ordinary shareholders by the weighted average
number of Ordinary Shares during the year. Diluted earnings per share is calculated by dividing the profit/loss attributable to
shareholders by the adjusted weighted average number of Ordinary Shares in issue.

Earnings

(Loss)/Profit for the year

Number of shares (‘000)

Weighted average number of ordinary shares in issue for basic EPS

Weighted average number of ordinary shares in issue for diluted EPS

Earnings per share

Basic EPS

Diluted EPS

Year-ended
31 March
2020
£’000

Year-ended
31 March
2019
£’000

(6,174)

3,253

3,541

3,541

3,573

3,573

(174.34p)

(174.34p)

91.06p

91.06p

As at 31 March 2020, the total number of shares in issue was 3,480,884 (2019: 3,555,330). During the year, the Company
cancelled nil Treasury shares (2019: nil). From October 2019 to March 2020, 74,446 shares were bought back (2019: 99,714).
There are no share options outstanding at the end of the year.

7. DIVIDENDS
The Company paid £752,374 in dividends to shareholders in the year ended 31 March 2020 (2019: £924,387).

8. INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Year-ended 31 March 2020

Value at
31 March
2019
£’000

Additions
£’000

Disposals
(Loss)/gain
Proceeds on Disposals Revaluation
£’000

£’000

£’000

Transfer
between
Levels
£’000

Value at
31 March
2020
£’000

Investments in quoted companies
(Level 1)
Other unquoted investments (Level 3)

Total investments at fair value
through profit or loss

31,849
8,869

9,010
2,474

(13,843)
(2,671)

(199)
359

(5,560)
(328)

2,301
(2,301)

23,558
6,402

40,718

11,484

(16,514)

160

(5,888)

–

29,960

Year-ended 31 March 2019

Value at
31 March
2018
£’000

Additions
£’000

Disposals
Proceeds
£’000

Gain on

Disposals Revaluation
£’000

£’000

Transfer
between
Levels
£’000

Value at
31 March
2019
£’000

Investments in quoted companies
(Level 1)
Other unquoted investments (Level 3)

Total investments at fair value
through profit or loss

36,283
4,166

8,248
2,275

(16,256)
(100)

2,783
–

2,785
534

(1,994)
1,994

31,849
8,869

40,449

10,523

(16,356)

2,783

3,319

–

40,718

O
V
E
R
V
I
E
W

G
O
V
E
R
N
A
N
C
E

I

F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S

O
T
H
E
R

I

N
F
O
R
M
A
T
I
O
N

40

Gresham House Strategic plc Report and Accounts 2020

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

8. INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)
The revaluations and (loss)/gain on disposals above are included in the Statement of Comprehensive Income as (losses)/gains
on investments.

Opening valuation
Acquisitions
Unrealised and realised (losses)/gains on investment
Disposals

Closing valuation

Value at
31 March
2020
£’000

40,718
11,484
(5,728)
(16,514)

29,960

Value at
31 March
2019
£’000

40,449
10,523
6,102
(16,356)

40,718

The following table analyses investment 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 are defined as follows:

(i)

level one measurements are at quoted prices (unadjusted) in active markets for identical assets or liabilities;

(ii)

level two measurements are valuations techniques with all material inputs observable for the asset or liability, either directly
(that is, as prices) or indirectly (that is, derived from prices); and

(iii) level three measurements are valuations not based on solely observable market data (that is, the measurement requires

significant unobservable inputs).

The Company’s investments are summarised as follows:

Level 1
Level 2
Level 3

31 March

2020
£’000

23,558
–
6,402

29,960

2019
£’000

31,849
–
8,869

40,718

On 12 December 2019, MJ Hudson floated and was admitted to AIM. As a result of this, there was a transfer from Level 3 to
Level 1 of the fair value hierarchy for MJ Hudson which amounted to £2,300,574. For the year ended 31 March 2019, there was
a transfer from Level 1 to Level 3 for Tax Systems plc which amounted to £1,994,168, as a result of a take-over and subsequent
de-listing of the company.

Fair values of financial assets and financial liabilities

Financial assets and liabilities are carried in the statement of financial position at either their fair value (investments), or the
statement of financial position amount is a reasonable approximation of the fair value (dividends receivable, accrued income,
accruals, and cash at bank).

As at 31 March 2020 and 31 March 2019, all investments, except for the investments in the table below, fall into the category
‘Level 1’ under IFRS 7 fair value hierarchy.

Gresham House Strategic plc Report and Accounts 2020

41

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

8. INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)
A summary of the Level 3 investments are as follows:

Market value
(reviewed for impairment)

31 March 2020

31 March 2019

Material investments included

£’000s

Material investments included

Be Heard Group Holdings
The Lakes Distillery Company
HAEP II LP
Northbridge Industrial Services
plc convertible bonds

1,838 MJH Group Holdings (Bond)
2,348 MJH Group Holdings (Equity)

254

1,962

Be Heard Group Holdings
Northbridge Industrial Services
plc convertible bonds
HAEP II LP
Tax Systems plc

Contracted sales proceeds in
post balance sheet period

None

–

None

6,402

£’000s

2,063
475
1,788

2,319
230
1,994

–

8,869

Valuation policy: Every six months, the investment manager within Gresham House Asset Management Limited is asked to
revalue the investments that he looks after and submit his valuation recommendation to the Investment Committee and the
Finance Team. The Investment Committee considers the recommendation made, and assuming the Finance Team confirm that
the investment valuation calculations are correct, submits its valuation recommendations to the Board of the Company to
consider. The final valuation decision taken by the Board is made after taking into account the recommendation of the Manager.

Investments in Level 3 investments have been valued in accordance with the IPEV guidelines, and represent the following:

(cid:2) Hanover Equity Partners II LP was purchased on 11 July 2017. It is valued based on the NAV of the Limited Partnership

which is a proxy for fair value as its underlying investments are held at fair value;

(cid:2)

Be Heard Group plc Bond was purchased on 28 November 2017, and a further investment was made on 10 July 2019. The
bonds are valued at fair value which approximates to the bond issue amount, as the value of the conversion right is
considered to be nil. There has been no change in the circumstances of Be Heard Group plc that would indicate a material
change in value;

(cid:2) Northbridge Convertible Bond was purchased on 10 April 2018, and a further investment was made on 3 July 2018. The
bonds are valued at fair value which approximates the bond issue amount plus the “in the money” value of the conversion
right, valued using a Black Scholes valuation model; and

(cid:2)

The Lakes Distillery Company plc Convertible Bond was purchased on 20 June 2019. It is valued at fair value which
approximates to the bond issue amount plus rolled up “payment in kind” notes and capitalised interest.

Investments in quoted companies (Level 1) have been valued according to the quoted bid price as at 31 March 2020.

O
V
E
R
V
I
E
W

G
O
V
E
R
N
A
N
C
E

I

F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S

O
T
H
E
R

I

N
F
O
R
M
A
T
I
O
N

9. TRADE AND OTHER RECEIVABLES

Other debtors
Prepayments

31 March
2020
£’000

31 March
2019
£’000

244
22

266

101
5

106

42

Gresham House Strategic plc Report and Accounts 2020

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

10. TRADE AND OTHER PAYABLES

Performance fees payable
Other creditors
Trade creditors
Accrued expenses
Social security and other taxes

31 March
2020
£’000

31 March
2019
£’000

–
7
91
74
6

178

2,333
212
176
79
6

2,806

Other creditors related to the acquisition of further equities in Fulcrum Utility Services Ltd, an existing investment, in March 2020.
This was settled in April 2020 (2019: £0.21 million that related to the acquisition of further equities in Northbridge Industrial
Services, Be Heard plc and Swallowfield plc).

11. ISSUED CAPITAL

Called up, allotted and fully paid:
3,480,884 (2019: 3,555,330) Ordinary Shares of 50 pence (2019: 50 pence)
10,000 (2019: 10,000) D shares of 100 pence (2019: 100 pence)

31 March
2020
£’000

31 March
2019
£’000

1,741
10

1,751

1,778
10

1,788

As at 31 March 2020, the total number of shares in issue were 3,480,884 (2019: 3,555,330). During the year the Company
bought back 74,446 shares (2019: 99,174).

The average share price of Gresham House Strategic plc quoted Ordinary Shares in the year-ended 31 March 2020 was
1,138.5 pence. In the year the share price reached a maximum of 1,355.0 pence and a minimum of 865.0 pence. The closing
share price on 31 March 2020 was 902.5 pence.

The Company’s shares are listed on London’s AIM market under reference GHS.

12. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
The Company invests in quoted companies in accordance with the investment policy and SPE investment strategy. In addition
to investments in smaller listed companies in the UK, the Company maintains liquidity balances in the form of cash held for
follow-on financing and debtors and creditors that arise directly from its operations. As at 31 March 2020, £23.6 million of the
Company’s net assets were invested in quoted investments, £6.4 million in unquoted investments and £6.9 million in liquid
balances (31 March 2019: £31.8 million in quoted investments, £8.9 million in unquoted investments and £6.7 million in liquidity).

In pursuing its investment policy, the Company is exposed to risks that could result in a reduction in the value of net assets and
consequently funds available for distribution by way of dividend or for re-investment.

The main risks arising from the Company’s financial instruments are due to fluctuations in market prices (market price risk),
currency risk and cash flow interest rate risk, although credit risk and liquidity risk are also discussed below. The Board regularly
reviews and agrees policies for managing each of these risks and they are summarised below. These have been in place
throughout the current and preceding years.

All financial assets with the exception of investments, which are held at fair value through profit or loss, are categorised as
financial assets at amortised cost and all financial liabilities are categorised as amortised cost.

Gresham House Strategic plc Report and Accounts 2020

43

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

12. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (CONTINUED)

a) Market risk

i) Price risk

Market price risk arises from uncertainty about the future valuations of financial instruments held in accordance with the
Company’s investment objectives. These future valuations are determined by many factors but include the operational and
financial performance of the underlying investee companies, as well as market perceptions of the future of the economy and
its impact upon the economic environment in which these companies operate. This risk represents the potential loss that the
Company might suffer through holding its investment portfolio in the face of market movements, which was a maximum of £30.0
million (2019: £40.7 million).

The investments in fixed interest stocks of unquoted companies that the Company holds are not traded and as such the prices
are more uncertain than those of more widely traded securities.

The Board’s strategy in managing the market price risk is determined by the requirement to meet the Company’s investment
objective. Risk is mitigated to a limited extent by the fact that the Company holds investments in several companies. At 31 March
2020, the Company held interests in 15 companies (2019: 15 companies). The Directors monitor compliance with the investment
policy, review and agree policies for managing this risk and monitor the overall level of risk on the investment portfolio on a
regular basis.

MARKET PRICE RISK SENSITIVITY
The Board considers that the value of investments in quoted equity instruments is ultimately sensitive to changes in quoted share
prices. The value of investments in CLN, where the valuation methodology is to estimate the value of the conversion option of
the instrument, is similarly linked to quoted share prices. The table below shows the impact on the return and net assets if there
were to be a 25% (2019: 20%) movement in overall share prices.

As at 31 March 2020

Security

Quoted investments

Valuation basis

Latest share price

Fair value

23,558

Unquoted investments
– Northbridge and Be Heard CLNs Bond issue amount +

+25%

-25%

Impact
£’000

5,890

Impact
per share
(in pence)

Impact
£’000

Impact
per share
(in pence)

169.20

(5,890)

(169.20)

conversion right

3,800

38

1.08

(11)

(0.32)

As at 31 March 2019

Security

Quoted investments

Valuation basis

Latest share price

Fair value

31,849

Unquoted investments
– Northbridge and Be Heard CLNs Bond issue amount +

+20%

-20%

Impact
£’000

6,370

Impact
per share
(in pence)

Impact
£’000

Impact
per share
(in pence)

179.16

(6,370)

(179.16)

conversion right

4,107

380

10.70

(278)

(7.83)

The impact of a change of 25% (2019: 20%) has been selected as this is considered reasonable given the current level of
volatility, observed both on a historical basis, and market expectations for future movement.

A sensitivity has not been performed for the other unquoted investments held by the Company, as there is no exposure to
market price risk in the valuation methodology applied for these investments.

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Gresham House Strategic plc Report and Accounts 2020

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

12. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (CONTINUED)

ii) Currency risk

The Company does not hold any significant assets or liabilities denominated in a currency other than sterling, the functional
currency. The transactions in foreign currency for the Company are highly minimal. Therefore, currency risk sensitivity analysis
was not performed as the results would not be significantly affected by movements in the value of foreign exchange rates.

iii) Cash flow interest rate risk

As the Company has no borrowings, it only has limited interest rate risk. The impact is on income and operating cash flow and
arises from changes in market interest rates. Some of the Company’s cash resources are placed in an interest paying current
account to take advantage of preferential rates and are subject to interest rate risk to that extent.

b) Credit risk

Credit risk is the risk that a counterparty will fail to discharge an obligation or commitment that it has entered into with
the Company.

The Company’s maximum exposure to credit risk is:

Loan stock investments
Cash and cash equivalents
Trade and other debtors

31 March
2020
£’000s

6,148
6,864
266

31 March
2019
£’000s

6,156
6,728
106

13,278

12,990

Credit risk relating to loan stock investments in unquoted companies is considered to be part of market risk.

The Company’s cash balances are maintained by major UK clearing banks. The credit rating of The Royal Bank of Scotland plc
by Fitch Ratings is A+ (2019: A+)

c) Liquidity risk

The Directors consider that there is no significant liquidity risk faced by the Company. The Company maintains sufficient
investments in cash to pay accounts payable and accrued expenses. All liabilities are current and repayable upon demand.

Capital disclosures

The Company’s objective has been to maximise shareholder value from all assets, which in recent years has been to realise
its portfolio at the most advantageous time and return the proceeds to shareholders.

The capital subscribed to the Company has been managed in accordance with the Company’s objectives. The available capital
at 31 March 2020 is £36.9 million (31 March 2019: £44.7 million) as shown in the statement of financial position, which includes
the Company’s share capital and reserves.

The Company has no borrowings and there are no externally imposed capital requirements other than the minimum statutory
share capital requirements for public limited companies.

Gresham House Strategic plc Report and Accounts 2020

45

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

13. RELATED PARTY TRANSACTIONS
The related parties of Gresham House Strategic plc are its Directors, persons connected with its Directors, its Investment
Manager and Gresham House plc as a significant shareholder.

Details of related party transactions between the Company and of non-salary related transactions involving Directors are
detailed below.

During the year to 31 March 2020, Gresham House Strategic plc was charged management fees of £858k (2019: £795k) by
Gresham House Asset Management Limited (GHAM).

There is no performance fee payable to GHAM as at 31 March 2020 (2019: £2,333k (includes VAT)).

As at 31 March 2020, the total amount owing to GHAM is £61k (2019: £2,465k).

As at 31 March 2020, the following shareholders of the Company that are related to GHAM had the following interests in the
issued shares of the Company as follows:

A L Dalwood
G Bird
Gresham House Holdings Ltd
R Staveley

33,381 Ordinary Shares
22,651 Ordinary Shares
812,913 Ordinary Shares
5,179 Ordinary Shares

The Company has signed a co-investment agreement with Gresham House Strategic Public Equity Fund LP (SPE Fund LP),
a sister fund to the Company launched by GHAM on 15 August 2016. Under the agreement, the Company undertook to co-
invest £7.5 million with the SPE Fund LP.

The Directors’ remuneration and their interest in the Company are disclosed in the Director’s remuneration review on page 22.

There are no other related party transactions of which we are aware in the year ended 31 March 2020.

14. SUBSEQUENT EVENTS NOTE
The COVID-19 pandemic continues to adversely impact the UK and world economy. The effect of this on the investment
portfolio has been reflected in the fair value of investments at 31 March 2020. As the full impact of the pandemic and
Government restrictions is unknown, there may be further information that emerges but the impact of this could not be known
at 31 March 2020.

It is noted that post year end, the unaudited NAV has increased to 1,237.6 pence per share as at 5 June 2020 (1,060.4 pence
per share at 31 March 2020).

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Gresham House Strategic plc Report and Accounts 2020

NOTICE OF ANNUAL GENERAL MEETING
GRESHAM HOUSE STRATEGIC PLC (THE “COMPANY”)

NOTICE IS GIVEN that the Annual General Meeting of the Company will be held at the offices of Shakespeare Martineau LLP,
60 Gracechurch Street, London EC3V 0HR at 10:00am on Thursday 17 September 2020 to consider the following resolutions,
of which resolutions 1 to 8 will be proposed as ordinary resolutions and resolutions 9 and 10 will be proposed as
special resolutions:

In light of the UK Government's social distancing guidelines associated with the COVID-19 pandemic restricting public
gatherings and non-essential travel, physical attendance at the Company's AGM may not be permitted. It is accordingly
necessary to adjust the way in which our AGM’s are conducted going forward. The formal part of the AGM will be held with a
quorum of members only, supplemented by way of a conference call allowing shareholders to dial into the AGM at which time
they can submit questions to the Board. Shareholders wishing to access the conference call facility or submit questions to the
Board ahead of the meeting are asked to contact the Company Secretary (Olajumoke.kupoluyi@shma.co.uk ). Please note that
it will not be possible to vote on the matters to be considered at the AGM through the dial-in facility, shareholders are encouraged
to vote electronically, or to appoint the Chair as their proxy with their voting instructions.

ORDINARY RESOLUTIONS
1. To receive the Annual Report and Accounts for the year-ended 31 March 2020

2. To declare a final dividend of 12.8 pence per share

3. To re-elect Charles Berry as a Director of the Company

4. To re-elect Ken Lever as a Director of the Company

5. To re-elect David Potter as a Director of the Company

6. To re-elect Helen Sinclair as a Director of the Company

7. To reappoint BDO LLP as auditors to the Company to hold office until the conclusion of the next general meeting at which

accounts are laid before the shareholders and to authorise the Directors to determine their fees.

8. THAT the Directors of the Company be generally and unconditionally authorised in accordance with section 551 of the
Companies Act 2006 (the Act) to exercise all the powers of the Company to allot shares in the Company or to grant rights
to subscribe for, or convert any security into, shares in the Company (Rights) up to an aggregate nominal amount of
£574,345 during the period commencing on the date of the passing of this resolution and expiring at the conclusion of the
next Annual General Meeting of the Company or on 30 September 2021, whichever is earlier, and provided further that the
Company shall be entitled before such expiry to make an offer or agreement which would or might require shares to be
allotted or Rights to be granted after such expiry and the Directors shall be entitled to allot shares and grant Rights under
such offer or agreement as if this authority had not expired.

SPECIAL RESOLUTIONS
9. THAT, subject to and conditional upon the passing of resolution 8 above, the Directors of the Company be empowered under
section 570 of the Companies Act 2006 (the Act) to allot equity securities (within the meaning of section 560 of the Act) for
cash and/or to sell or transfer shares held by the Company in treasury (as the Directors shall deem appropriate) under the
authority conferred on them under section 551 of the Act by resolution 8 above as if section 561(1) of the Act did not apply
to any such allotment provided that this power shall be limited to:

(a)

the allotment of equity securities in connection with any rights issue or other pro-rata offer in favour of the holders of
Ordinary Shares of 50 pence each in the Company where the equity securities respectively attributable to the interests
of all such holders of shares are proportionate (as nearly as may be) to the respective numbers of shares held by them,
provided that the Directors of the Company may make such arrangements in respect of overseas holders of shares
and/or to deal with fractional entitlements as they consider necessary or convenient; and

(b)

the allotment (otherwise than under sub-paragraph (a) above) of equity securities and/or the sale or transfer of shares
held by the Company in treasury (as the Directors shall deem appropriate) up to an aggregate nominal amount of
£174,044.

and this authority shall expire on the earlier of 30 September 2021 or the conclusion of the Company’s Annual General
Meeting in 2021 provided that the Company may before such expiry make offers or agreements which would or might
require equity securities to be allotted after such expiry and the Directors of the Company may allot equity securities under
such offers or agreements as if the power conferred by this resolution had not expired and provided further that this authority
shall be in substitution for, and to the exclusion of, any existing authority conferred on the Directors.

Gresham House Strategic plc Report and Accounts 2020 47

NOTICE OF ANNUAL GENERAL MEETING (CONTINUED)

10. THAT, the Company be generally and unconditionally authorised to make market purchases (as defined in the Companies
Act 2006) of Ordinary Shares of 50 pence each in the capital of the Company (Ordinary Shares) on such terms and in such
manner as the Directors may from time to time determine, provided that:

(a)

the maximum number of Ordinary Shares authorised to be purchased shall be 521,785;

(b)

the minimum price which may be paid for an Ordinary Share is 50 pence;

(c)

(d)

(e)

the maximum price which may be paid for an Ordinary Share is an amount equal to 105% of the average of the middle
market quotations for an Ordinary Share (as derived from the Daily Official List) for the five business days immediately
preceding the date on which the Ordinary Share is contracted to be purchased;

the minimum and maximum prices per Ordinary Share referred to in sub-paragraphs (b) and (c) of this resolution are
in each case exclusive of any expenses payable by the Company;

the authority conferred by this resolution shall expire at the end of the Annual General Meeting in 2021 (or if earlier at
the close of business on 30 September 2021) unless such authority is varied, revoked or renewed prior to such time
by the Company in general meeting; and

(f)

the Company may make a contract to purchase Ordinary Shares under the authority hereby conferred prior to the
expiry of such authority which will or may be completed wholly or partly after the expiration of such authority.

The Directors consider that all the resolutions to be proposed at the Annual General Meeting are in the best interests of the
Company and its shareholders as a whole. The Directors unanimously recommend that shareholders vote in favour of all the
resolutions, as they intend to do in respect of their own beneficial holdings.

By order of the Board

SGH COMPANY SECRETARIES LIMITED
COMPANY SECRETARY

22 June 2020

Registered Office:
77 Kingsway
London
WC2B 6SR

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Gresham House Strategic plc Report and Accounts 2020

NOTICE OF ANNUAL GENERAL MEETING (CONTINUED)

NOTICE OF MEETING NOTES:
The following notes explain your general rights as a shareholder and your right to attend and vote at this Meeting or to appoint
someone else to vote on your behalf.

1. To be entitled to attend and vote at the Meeting (and for the purpose of the determination by the Company of the number
of votes they may cast), shareholders must be registered in the Register of Members of the Company at close of trading
on Tuesday 15 September 2020. Changes to the Register of Members after the relevant deadline shall be disregarded in
determining the rights of any person to attend and vote at the Meeting.

2. Shareholders, or their proxies, intending to attend the Meeting in person are requested, if possible, to arrive at the Meeting
venue at least 20 minutes prior to the commencement of the Meeting at 9:40am (UK time) on Thursday 17 September 2020
so that their shareholding may be checked against the Company’s Register of Members and attendances recorded. In light
of the UK Government's social distancing guidelines associated with the COVID-19 pandemic restricting public
gatherings and non-essential travel, physical attendance at the Company's AGM may not be permitted.The Company
encourages shareholders to vote electronically, or to appoint the Chair as their proxy with their voting instructions.

3. Shareholders are entitled to appoint another person as a proxy to exercise all or part of their rights to attend and to speak
and vote on their behalf at the Meeting. A shareholder may appoint more than one proxy in relation to the Meeting provided
that each proxy is appointed to exercise the rights attached to a different Ordinary Share or Ordinary Shares held by that
shareholder. A proxy need not be a shareholder of the Company.

4.

In the case of joint holders, where more than one of the joint holders’ purports to appoint a proxy, only the appointment
submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint
holders appear in the Company’s Register of Members in respect of the joint holding (the first named being the most senior).

5. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against
the resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her discretion. Your proxy
will vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the Meeting.

6. You can vote either:

(cid:2)

(cid:2)

(cid:2)

by logging on to www.signalshares.com and following the instructions;

You may request a hard copy form of proxy directly from the registrars, Link Asset Services (previously called Capita),
on Tel: 0371 664 0300. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the
United Kingdom will be charged at the applicable international rate. Lines are open between 09:00 – 17:30, Monday
to Friday excluding public holidays in England and Wales.

in the case of CREST members, by utilising the CREST electronic proxy appointment service in accordance with the
procedures set out below.

In order for a proxy appointment to be valid a form of proxy must be completed. In each case the form of proxy must be
received by Link Asset Services at 34 Beckenham Road, Beckenham, Kent, BR3 4TU by 10am on Tuesday 15 September
2020.

7.

If you return more than one proxy appointment, either by paper or electronic communication, the appointment received last
by the Registrar before the latest time for the receipt of proxies will take precedence.You are advised to read the terms and
conditions of use carefully. Electronic communication facilities are open to all shareholders and those who use them will
not be disadvantaged.

8. The return of a completed form of proxy, electronic filing or any CREST Proxy Instruction (as described in note 11 below)
will not prevent a shareholder from attending the Meeting and voting in person if he/she wishes to do so. As mentioned
above, the Company advises shareholders to vote electronically, or to appoint the Chair as their proxy as physical
attendance in person may now be permitted.

9. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may
do so for the Meeting (and any adjournment of the Meeting) by using the procedures described in the CREST Manual
(available from www.euroclear.com/site/public/EUI). CREST Personal Members or other CREST sponsored members, and
those CREST members who have appointed a service provider(s), should refer to their CREST sponsor or voting service
provider(s), who will be able to take the appropriate action on their behalf.

10. In order for a proxy appointment or instruction made by means of CREST to be valid, the appropriate CREST message (a
‘CREST Proxy Instruction’) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s
specifications and must contain the information required for such instructions, as described in the CREST Manual. The
message must be transmitted so as to be received by the issuer’s agent (ID RA10) by 10am on Tuesday 15 September
2020. For this purpose, the time of receipt will be taken to mean the time (as determined by the timestamp applied to the
message by the CREST application host) from which the issuer’s agent is able to retrieve the message by enquiry to
CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through
CREST should be communicated to the appointee through other means.

Gresham House Strategic plc Report and Accounts 2020

49

NOTICE OF ANNUAL GENERAL MEETING (CONTINUED)

11. CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK
& Ireland Limited does not make available special procedures in CREST for any particular message. Normal system timings
and limitations will, therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST
member concerned to take (or, if the CREST member is a CREST Personal Member, or sponsored member, or has
appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action
as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In
this connection, CREST members and, where applicable, their CREST sponsors or voting system providers are referred,
in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the
Uncertificated Securities Regulations 2001.

12. Any corporation which is a shareholder can appoint one or more corporate representatives who may exercise on its behalf
all of its powers as a shareholder provided that no more than one corporate representative exercises powers in relation to
the same shares.

13. As at 22 June 2020 (being the latest practicable business day prior to the publication of this Notice), the Company’s ordinary
issued share capital consists of 3,480,884 Ordinary Shares, carrying one vote each. Therefore, the total voting rights in the
Company as at 22 June 2020 are 3,480,884.

14. Any shareholder attending the Meeting has the right to ask questions. The Company must cause to be answered any such
question relating to the business being dealt with at the Meeting but no such answer need be given if: (a) to do so would
interfere unduly with the preparation for the Meeting or involve the disclosure of confidential information; (b) the answer has
already been given on a website in the form of an answer to a question; or (c) it is undesirable in the interests of the
Company or the good order of the Meeting that the question be answered.

15. The following documents are available for inspection during normal business hours at the registered office of the Company
on any business day from the date of this Notice until the time of the Meeting and may also be inspected at the Meeting
venue, as specified in this Notice, from 10am on the day of the Meeting until the conclusion of the Meeting: copies of the
Directors’ letters of appointment or service contracts.

16. You may not use any electronic address (within the meaning of Section 333(4) of the Companies Act 2006) provided in either
this Notice or any related documents (including the form of proxy) to communicate with the Company for any purposes other
than those expressly stated.

A copy of this Notice, and other information required by Section 311A of the Companies Act 2006, can be found on the
Company’s website.

By order of the Board

SGH COMPANY SECRETARIES LIMITED
COMPANY SECRETARY

22 June 2020

Registered Office:
77 Kingsway
London
WC2B 6SR

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Gresham House Strategic plc Report and Accounts 2020

CORPORATE INFORMATION

DIRECTORS
D R W Potter (Chairman)
C R Berry
K Lever
H R Sinclair

COMPANY SECRETARY
SGH Company Secretaries Limited
6th Floor
60 Gracechurch Street
London
EC3V 0HR

REGISTERED OFFICE
77 Kingsway
London
WC2B 6SR

INVESTMENT MANAGER
Gresham House Asset Management Limited
Octagon Point
5 Cheapside
London
EC2V 6AA

BANKERS
The Royal Bank of Scotland plc
Brunel House
17/27 Station Road
Reading
Berkshire
RG1 1LG

SOLICITORS
CMS Cameron McKenna Nabarro Olswang LLP
Cannon Place
78 Cannon Street
London
EC4N 6AF

Bracher Rawlins
77 Kingsway
London
WC2B 6SR

AUDITOR
BDO LLP
150 Aldersgate Street
London
EC1A 4AB

REGISTRARS
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU

NOMINATED ADVISOR AND BROKERS
finnCap Ltd
60 New Broad Street
London
EC2M 1JJ

Panmure Gordon (UK) Limited
One New Change
London
EC4M 9AF

Please contact a member of the Gresham House team if you wish to discuss your investment or provide feedback on this
document. Gresham House is committed to meeting the needs and expectations of all stakeholders and welcomes any
suggestions to improve its service delivery. www.greshamhouse.com

Gresham House Strategic plc Report and Accounts 2020

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FOR YOUR NOTES

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Gresham House Strategic plc Report and Accounts 2020

FOR YOUR NOTES

STRATEGIC PUBLIC EQUITY

www.ghsplc.com