Certain information contained within this Announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 ("MAR"). Upon publication of this Announcement, this information is considered to be in the public domain.

Craven House Capital plc

("Craven House" or the "Company")

Proposed Dividend in Specie & Change of Investing Policy

The Company announces that it has today posted a Circular and Notice of General Meeting ("GM") to shareholders of the Company. The GM will be held at 9.00am on 22 May 2020, at International House, 776-778 Barking Road, London, E13 9PJ.

A copy of the Notice of GM will be available to download from the Company's website at www.cravenhousecapital.com and the full text of the Letter from the Chairman is included in this announcement below.

PART 1 - LETTER TO SHAREHOLDERS

CRAVEN HOUSE CAPITAL PLC

(Registered in England and Wales with no. 05123368)

1^st May 2020

Dear Shareholder

Introduction

The Board has today announced a proposed dividend in specie to Ordinary Shareholders ("Dividend in Specie"), comprising shares in Craven Industrial Holdings Plc ("CIH") and a change in Investing Policy, I write to you on behalf of the Board to seek your approval of two ordinary resolutions.

Background

As has been frequently communicated to shareholders in recent years, the Company's Investment Manager and the Board have, for some time, been evaluating the suitability of the Company's AIM quotation compared with alternative trading venues and other options available. The Board has determined that the AIM market is no longer suitable for the Company in its current form, comprising a diversified portfolio of holdings in multiple jurisdictions. The costs associated with maintaining the AIM quotation and the onerous regulatory requirements on investments and divestments, which restrict the Company's growth, significantly outweigh the benefits and limited liquidity currently offered to shareholders through the AIM listing. The continued absence of liquidity and, most importantly, the number of investment opportunities that the Company has been unable to execute because of the AIM Rules mean that the Board has determined that they must act to protect shareholder's long-term interests.

The recent acquisition of shareholdings in a portfolio of e-commerce focused businesses provides the opportunity for the Company to undertake a reorganisation whereby the resulting AIM-listed company will be an initially smaller investment company with a more focused portfolio, whilst the majority of the existing investment holdings will continue to be managed on behalf of shareholders, but in without an exchange listing / quotation. We believe that a more focused portfolio is more suitable to the AIM market and will be better understood by the market which will, in turn, result in better liquidity and an enhanced valuation for Craven House shares. Upon completion of the Dividend in Specie payment / reorganisation, shareholders will own the same proportional shareholding as they do in Craven House today, however this will be split between a shareholding in Craven House Capital Plc (an investment company listed on AIM) and a shareholding in Craven Industrial Holdings Plc (an un-quoted public investment company).

The Board is confident that management of the majority of the Company's assets outside of the AIM market is in the best interests of shareholders. We believe that the underlying portfolio can be best optimised and continued growth delivered without the restrictions presented by the AIM Rules and in particular the class tests. Other options have been evaluated (including the short-term sale of assets) and we have determined that the proposed strategy represents the best alternative in delivering long-term shareholder value. The directors believe the prospective down-sides of this course of action are limited; the most obvious of which is the potential loss of immediate liquidity offered by the AIM listing, however the Board has observed extremely limited liquidity in our shares for a number of years now. The holders of shares in Craven Industrial Holdings will not be significantly hindered in this regard and will receive regular communication outlining opportunities to sell their shares or increase their holding. It is anticipated that this will be best managed via monthly share auctions whereby the highest priced buyer is matched with the equivalent price seller whose shares have been listed for the longest time. So, sellers who have been waiting the longest and are willing to accept the buyer's offer are matched first.

The trades will always be matched and transact at the buyers' price. In cases where there are several sellers stating the same minimum price, sellers will be prioritised according to how long their shares have been listed.

The following illustrations provide a summary of the proposed dividend / reorganisation:

Stage 1: Craven House Capital Plc today

As illustrated below, as of the date of this circular, Craven House owns the majority of its assets via its wholly owned subsidiary, Craven Industrial Holdings Plc. In addition, it directly owns 29.9% shareholdings in five e-commerce focused businesses, which were acquired on 13 March 2020. The gross value of the assets owned by CIH as reported in the Company's interim accounts dated 30 November 2019 was $20.5m and the valuation of shareholdings in the recently acquired e-commerce businesses was $8m.

The coronavirus pandemic is likely to cause a material impact on the carrying value of Craven's portfolio. This cannot yet be quantified given the present level of uncertainty regarding the prospective mid-to-long term impact of the measures needed to control transmission. However, the valuations of Craven House Angola Lda and Qeton Ltd (currently valued at $7.9m and $0.3m respectively) will be materially impacted as a result of the recent shock to oil prices and the likely knock-on effect this will have on the Angolan economy in which both of these subsidiaries are active. Similarly, a core investment owned by Craven House Capital North America LLC (valued at $5.9m as of November 2019) is IIU Inc., which sells medical insurance for travellers and has experienced an almost total collapse in its revenues in recent weeks. It is likely, given the far-reaching impact of the pandemic, that valuations across Craven's portfolio will be significantly impaired.

In addition to its investment holdings, Craven held c.$4.7m in current assets as of 31 March 2020 (which almost exclusively comprises loans to subsidiary companies which are subject to disposal as outlined below) and $3.6m in liabilities, $3.0m of which were amounts owing to subsidiaries and related parties (the Investment Manager or directors).

Please click on the following link:  to view Craven House Capital PLC's current corporate structure.

 http://www.rns-pdf.londonstockexchange.com/rns/6636L_1-2020-5-1.pdf

Stage 2: Issue of Dividend in Specie and preparatory matters

Having taken the advice of external accountants and advisors including Rotherham Taylor Chartered Accountants and the Company's auditors, RBK, it is proposed the accounting treatment for the Dividend in Specie be undertaken as follows;

As reported in the interim accounts, the Company has transferred $25m in capital from its share premium account to its profit and loss reserve and has also cancelled its deferred shares which has added a further $10.2m to the Company's distributable reserves. In the event that the Dividend in Specie is approved by shareholders, the following transactions will also be undertaken prior to issue of the dividend;

·      All intercompany loan accounts (comprising c.$4.7m of receivables and c.$2.4m in payables) will be assigned to CIH.

·      All outstanding loans and fees owing to the Investment Manager (c.$540,000 as of March 2020) will be assigned to CIH.

·      The outstanding $500,000 convertible loan note payable by Craven to GEM Investments America LLC will be assigned to CIH (the note holder has consented to this assignment).

The result of the above mentioned transactions will be that the balance sheet of Craven Industrial Holdings Plc immediately following the Dividend in Specie will closely resemble the balance sheet of Craven House Capital Plc immediately prior to the Dividend in Specie, with the exception of the e-commerce business assets which will remain on the Craven House Capital Plc balance sheet and the intercompany loan balance existing between Craven Industrial Holdings and Craven House Capital. As of 31 March 2020, CIH was owed $379k by Craven House; this will become a payable to Craven of c.$7.1m (as outlined below).

If shareholder approval for the Dividend in Specie is received and completion of the transactions outlined above occur, Craven will have distributable earnings of c.$14.6m while the value of the Dividend in Specie (shares in CIH) will be c.$22.1m. Immediately following issue of the Dividend in Specie, Craven will therefore retain an intercompany receivable of c.$7.1m, this being the difference in value between the value of the Dividend in Specie and distributable earnings which be recorded as consideration payable by CIH for the value of the dividend not covered by distributable earnings, less an amount of $379k currently payable by Craven to CIH. This $7.1m loan will be written off immediately following the issue of the Dividend in Specie. It is anticipated that Craven will have limited cash on its balance sheet immediately following completion, however working capital requirements will be met via intercompany loan / dividend payments from its subsidiary companies. The Board have confirmed that sufficient working capital will be available to the Company to meet its requirements.

The forecast balance sheet of Craven before and immediately following the issue of the Dividend in Specie is as follows;

It is anticipated that the transactions outlined above will be completed within one week of receipt of shareholder approval for the Dividend in Specie and the dividend will be issued to shareholders with a record date of 22^nd May 2020. Persons who own Ordinary Shares as at the Record Date but sell prior to the Ex-date, must pass their entitlement to the Dividend in Specie on to the buyer of those shares. Any person who acquires Ordinary Shares in the Company prior to the Ex-date is entitled to receive the Dividend in specie. Ordinary shareholders of shares in Craven House Capital Plc will receive one ordinary share in Craven Industrial Holdings Plc for each ordinary share in Craven that they own. It is anticipated that the Dividend in Specie will be issued on or around the 29^th May 2020.

Stage 3: Company structure post-issue of dividend

Immediately following issuance of the Dividend in Specie, the register of ordinary shareholders of Craven and CIH will therefore be identical, with each ordinary shareholder owning one ordinary share in Craven House Capital Plc and one ordinary share in Craven Industrial Holdings Plc. The respective structures of these two companies immediately following the payment of the dividend will be as follows;

Please click on the following link: to view Craven House Capital PLC's corporate structure post the proposed Dividend in Specie

http://www.rns-pdf.londonstockexchange.com/rns/6636L_1-2020-5-1.pdf

The Board and management structure of the respective companies will remain unchanged immediately following the payment of the dividend however the Investment Manager, Desmond Holdings Ltd, has confirmed that it will no longer receive any management fees from Craven House Capital Plc. Desmond Holdings Ltd will continue to manage the assets of Craven Industrial Holdings under a revised Management Service Agreement ("MSA"); the only change between this and the existing MSA in place with Craven House Capital Plc will be that the Investment Manager will not receive any annual performance fee.

The Board of Craven Industrial Holdings Plc comprises Mark Pajak and Ms. Tamra Spink. Ms. Spink is currently Company Secretary of Craven House Capital Plc and CFO of DLC Holdings Corp, listed on the Toronto Stock Exchange.

In the even that the Dividend in Specie is approved by Shareholders, the Investing Policy of Craven House Capital Plc will be amended as set out below. Desmond Holdings Ltd will continue to manage the Company's investment portfolio and be responsible for day-to-day administration.

As announced at the time of acquisition; the portfolio of e-commence businesses are presently loss-making although their cost bases are low and there is minimal committed future expenditure. This offers considerable flexibility regarding the future strategies of the respective businesses which are each focused on becoming financially self-sustaining and generating surpluses within the short- to medium-term; We have already announced the launch of pan-European sales strategies by Rosedog Ltd whilst joint venture marketing plans are currently being negotiated by Garimon Ltd and Onebas.Com Ltd with the aim of driving growth in subscriber numbers for the Magazinos.com ad Onebas.com websites. Delivering on short-term targets of increasing revenue and subscriber numbers across the portfolio of e-commerce business will lead to transparent and reportable metrics which the Board believe will in turn drive the future valuations of the portfolio and Craven House Capital Plc.  

Amendment to Investing Policy

Conditional on the approval of the Dividend in Specie by Shareholders, the Board proposes amending the Company's Investing Policy such that it is more aligned with the e-commerce strategy being pursued by the recently acquired businesses whose existing holdings will remain under ownership of the Company post-issuance of the Divided in Specie. The proposed revised Investing Policy is set out below. In accordance with the AIM Rules, Shareholders are required to approve the adoption of a new Investing Policy. Craven House shareholders are invited to approve the adoption of the proposed revised Investing Policy by voting in favour of Resolution 2 set out below. 

Shareholders should note that Resolution 1 and 2 are conditional upon each other; i.e. in the event that Resolution 1 is not approved by shareholders then Resolution 2 will not be proposed and in the event that Resolution 2 is not approved by shareholders then Resolution 1 will not be formally carried.

Craven has already made successful investments which would be in accordance the proposed new Investing Policy utilising the skills and experience of both the Board and the Investment Manager. The Company has established a network of independent external e-commerce and technology consultants to support the Board in appraising and monitoring its e-commerce investments and opportunities. The Company intends to continue to engage with these third party consultants where appropriate in further implementing the proposed new Investing Policy.

Proposed Revised Investment Policy:

The Company's Investing Policy is primarily to invest in or acquire a portfolio of companies, partnerships, joint ventures, businesses or other assets participating in the e-Commerce sector.

The investments or acquisitions may be funded wholly by cash, the issue of new shares or debt, or a mix thereof, as the Board deems appropriate. The proposed investments may be either quoted or unquoted, although will likely be unquoted in the majority of cases.

The Company will specifically target investments which the Board believes offer high growth opportunities or steady cash flows and where the exit will be a liquidity event, such as a trade sale or IPO.

However, the Company's investments may also take the form of private placements in companies that are already listed on an international exchange but are seeking additional capital to expand operations or make acquisitions. It is anticipated that the investments will be held for the short to medium term.  The Board will place no minimum or maximum limit on the length of time that any investment may be held. The Company intends to deliver Shareholder returns through capital growth with the aspiration of implementing a dividend policy when appropriate.

The Company intends to be an involved and active investor. Accordingly, where necessary, the Company may seek through board representation in an entity in which the Company invests with a view to seeking to improve the performance and use of its assets in order to grow the business. The Investment Manager may appoint consultants or independent industry experts or other representatives to represent the Company in managing the investments it makes and/or their business operations.

As an active investor, the Company may be involved in such activities as reverse takeover transactions, formation or identification of capital pool companies, going private transactions, advisory services (to assist companies with the identification, assessment and "spin-in" of products and/or subsidiaries, which may be strategic to building their businesses), and financial restructuring. Advisory fees may be charged at the Company's discretion.

The Directors consider that as investments are made, and new opportunities arise, further funding of the Company will be required.

Investment Process

The following list details qualifying criteria for companies and assets the Company would consider as potential investments, although the list is not intended to be exhaustive and the Investment Manager will exercise discretion where necessary when submitting a potential investment for consideration by the Board:

•              The key consideration will be the quality of the investee company or asset with growth and income potential will be the key determinant above any specific geography

•              Strong operational management team

•              The Company may choose to invest in newly formed or early stage companies without any track record

Investment Type:  The following list details potential investment types which the Company would consider although the list is not indented to be exhaustive:

•              The Company may invest in distressed assets, rescues, turnarounds or special situations where the board believes there exists a quick and significant uplift in value

•              The Company may also consider private placements in companies that are already listed on an international exchange but are seeking additional capital to expand operations or make acquisitions

•              The Company may consider transactions which would constitute a Reverse Takeover for the purposes of the AIM Rules (the Company recognises that taking a controlling stake or completing a reverse takeover may change its status as an investing company for the purposes of the AIM Rules).

Recommendation

The Board believes that the resolutions to be put to the General Meeting are in the best interests of the Shareholders as a whole and, accordingly, recommends that Shareholders vote in favour of the resolutions.

Yours sincerely

Mark Pajak

for and on behalf of the Board of Craven House Capital Plc

~ Ends ~

For further information please contact:

About Craven House Capital

The Company's Investing Policy is to invest in or acquire a portfolio of companies, partnerships, joint ventures, businesses or other assets globally in any geographic jurisdiction. The company will invest in both developed and developing markets providing long term patient capital and is often involved in special situations, restructuring, expansion and turn around investments in crisis and transitioning economies.