REG - Down MicroCap InvTst - Publication of a Circular

Downing Strategic Micro-Cap Investment TrustAnnouncement

29/01/2025 07:00

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RNS Number : 0329V  Downing Strategic Micro-Cap IT PLC  29 January 2025

Downing Strategic Micro-Cap Investment Trust plc

29 January 2025

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
THE MARKET ABUSE REGULATION (EU) 596/2014 AS IT FORMS PART OF UK DOMESTIC LAW
BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018, AS AMENDED. ON THE
PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS
INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

For immediate release.

 

Downing Strategic Micro-Cap Investment Trust plc (the "Company" or "DSM")

LEI Number: 213800QMYPUW4POFFX69

Publication of Circular

 

The Board of the Company announces that it has today published a circular (the
"Circular") to the Company's shareholders (the "Shareholders") setting out the
recommended proposals for the members' voluntary liquidation of the Company
(the "Proposals"). The Circular also contains the Notice of the General
Meeting of the Company to be held at the offices of Dickson Minto LLP,
Dashwood House, 69 Old Broad Street, London EC2M 1QS on 21 February 2025 at
10.00 a.m. at which Shareholders will be asked to vote upon the special
resolution to approve the Proposals (the "Resolution").

All Shareholders are encouraged to vote in favour of the Resolution to be
proposed at the General Meeting, and if their Shares are not held directly, to
arrange for their nominee to vote on their behalf. Shareholders who hold their
Shares indirectly through a platform are recommended to contact their platform
for further details.

Summary

§ With the Company's portfolio reduced to one listed investment, a secured
loan note and cash, and the special dividends paid, your Board has determined
that it is now the appropriate time to put proposals to Shareholders to
undertake a members' voluntary liquidation of the Company.

§ This requires Shareholder approval of the Resolution, which will be
proposed as a special resolution at the General Meeting to be held on 21
February 2025 at 10.00 a.m.

§ It is proposed that Derek Neil Hyslop and Richard Peter Barker, both
licensed insolvency practitioners of Ernst & Young LLP, be appointed as
joint liquidators of the Company (the "Liquidators").

§ The Board believes it is vital that the Investment Manager's services be
retained during the liquidation period in order to maximise the return of
value to Shareholders whilst ensuring this is done in a timely manner.
Accordingly, the Investment Manager has agreed that, subject to the passing of
the Resolution at the General Meeting, it will continue to manage the
remaining portfolio of the Company on the terms of the current Investment
Management Agreement (adjusted as necessary so as to reflect the fact that the
Company will be in liquidation).

§ It is expected that the Liquidators will be able to make an Initial
Distribution during the week commencing 3 March 2025 of approximately 2.0
pence per Share

Introduction

In the Company's 2023 Half Year Report, which was released on 9 November 2023,
your Board described that it had been a dispiriting time for micro-cap stocks
and, as a result, for the Company, and that your Board had therefore taken a
blunt decision to start a return of capital earlier in 2024 than had
originally been anticipated. It was further reported that, despite modest
buy-back activity, in the 6 month period covered by the 2023 Half Year Report,
the Shares traded at a discount of around 15 per cent. to 17 per cent. to the
Company's NAV per Share, and given the market's continued undervaluation of
both micro-cap stocks and small investment companies (demonstrated, in part,
by the Company's Share price discount to NAV) your Board had concluded that it
would advantage all Shareholders equally and fairly to commence a managed
wind-down of the Company's investment portfolio (the "Managed Wind-Down").

Such a material change to the Company's investment policy required Shareholder
approval and, after consultation with major Shareholders, the Company
published a Shareholder circular on 2 February 2024 that: (i) provided
Shareholders with the background to your Board's decision and the expected
realisation timeframe; and (ii) set out the Managed Wind-Down investment
policy (the "New Investment Policy") in full. The ordinary resolution to adopt
the New Investment Policy was proposed at a general meeting of the Company
held on 28 February 2024 and received overwhelming support from Shareholders,
with 86.58 per cent. of the votes cast (amounting to 41.23 per cent. of the
Company's issued Share capital) voting in favour.

Since the adoption of the New Investment Policy, the realisation of the
Company's portfolio by the Investment Manager has been proceeding well:
Shareholders have already received a series of special dividends of, in
aggregate, 63.9 pence per Share, and the Company's remaining portfolio
comprises just one listed investment in Centaur Media plc, a secured loan note
in Real Good Food plc and cash. As a result, as at 24 January 2025, Company's
NAV was approximately £2.32 million. Seeking to obtain the best achievable
value for Shareholders, the Investment Manager has not yet realised the
Company's investment in Centaur Media plc due to indications of strategic
action by the management team.

Your Board now seeks the most effective way to return cash to Shareholders and
limit further costs. With the Company's portfolio significantly reduced and
the special dividends paid, your Board has determined that it is now the
appropriate time to put proposals to Shareholders to undertake a members'
voluntary liquidation of the Company, which will eliminate certain of the
costs associated with running a listed vehicle.

The Proposals

Summary of the Resolution

Your Board has determined that it would be in the best interests of the
Company and Shareholders as a whole to have the Company enter into members'
voluntary liquidation. This requires the approval of Shareholders by way of
the Resolution at the General Meeting. As the Resolution will be proposed as a
special resolution, it will be passed if at least 75 per cent. of the votes
are cast in favour.

In summary, the Resolution relates to the approval of the Company being wound
up voluntarily and the appointment of the Liquidators for the purpose of the
winding up. It grants the Liquidators authority to make distributions in cash
to Shareholders (after payment of the Company's liabilities and after
deducting the costs of implementation of the Company's winding up), in
proportion to their holdings of Shares in accordance with the provisions of
the Articles. It also grants the Liquidators authority to exercise certain
powers laid down in the Insolvency Act 1986 and determines the remuneration of
the Liquidators by reference to the time spent attending to matters.

Appointment of the Liquidators

As to the Liquidators, it is proposed that Derek Neil Hyslop and Richard Peter
Barker, both licensed insolvency practitioners of Ernst & Young LLP, be
appointed as the Liquidators, whose remuneration shall be determined by the
Company. The appointment of the Liquidators becomes effective immediately upon
the passing of the Resolution at the General Meeting. At this point, the
powers of the Directors will cease and the Liquidators will assume
responsibility for the winding up of the Company, including the realisation of
its remaining assets, the payment of fees, costs and expenses, the discharging
of liabilities of the Company and the distribution of its surplus assets to
Shareholders. The winding up of the Company will be a solvent winding up, in
which it is intended that all creditors will be paid in full. Once the
Company's remaining assets have been realised by the Liquidators (and after
settling the Company's liabilities and providing for the costs of the winding
up), the cash proceeds will be distributed to Shareholders as set out in the
section titled "Distributions to Shareholders" below.

To facilitate the implementation of the Proposals, the Shares will be
suspended from listing on the Official List and from trading on the London
Stock Exchange with effect from 7.30 a.m. on 21 February 2025, being the date
of the General Meeting.

If the Resolution is passed, the Company's Shares are expected to remain
suspended from listing until, at least, after the payment of the Initial
Distribution and, as such, should continue to be "qualifying investments" for
ISA purposes. Shareholders are strongly recommended to consult their
professional advisers regarding their own tax position and their own ISA
provider in advance of the General Meeting.

Continued appointment of Investment Manager

Due to the nature of the Company's remaining investments and the Investment
Manager's expertise and intimate knowledge of such investments, the Board
believes it is vital that the Investment Manager's services be retained during
the liquidation period in order to maximise the return of value to
Shareholders whilst ensuring this is done in a timely manner.

Accordingly, the Investment Manager has agreed that, subject to the passing of
the Resolution at the General Meeting, it will not exercise its right to
terminate the current Investment Management Agreement as a result of the
Company entering into members' voluntary liquidation (which it would otherwise
be entitled to do) and that it will continue to manage the Company on the
terms of the Investment Management Agreement (adjusted as necessary so as to
reflect the fact that the Company will be in liquidation).

What happens if the Resolution is not passed?

If the Resolution is not passed, your Board would assess the options available
to the Company at that time. However, on the basis that the Company will
continue to have distributable reserves, your Board anticipates that
distributions would likely continue by way of dividends. Additionally the
panoply of requirements of running a listed company, such as regulatory costs,
listing fees, the costs of producing and publishing annual reports and audited
financial statements, brokers' fees and directors' fees, amongst others, would
continue. The entire weight and costs of these requirements would ultimately
fall on Shareholders. It is therefore your Board's view that the Proposals
would ensure the value-maximisation of cash returned to Shareholders.

Distributions to Shareholders

The remaining investments in the Company's portfolio are expected to be
realised following the Liquidators' appointment, with the benefit of
continuing advice from the Investment Manager. There can be no guarantee as to
the value, if any, and/or timing of the distribution(s) that may result from
the realisation of these investments. Both of these factors depend on, among
other things, prevailing market conditions.

The Liquidators will retain sufficient funds to meet the current, future and
contingent liabilities of the Company, including the costs and expenses
(inclusive of VAT, if applicable) of the Proposals not already paid at the
point of liquidation and an additional retention of £100,000 for unknown
contingencies (the "Liquidation Fund").

Assuming the Resolution is passed, and notwithstanding the retention of the
Liquidation Fund, it is expected that the Liquidators will be able to make an
initial distribution of the balance of cash currently held by the Company
during the week commencing 3 March 2025 (the "Initial Distribution"). It is
currently expected that the Initial Distribution will be approximately 2.0
pence per Share.

Once the Liquidators, with the assistance of the Investment Manager, have
realised the Company's remaining assets, made the Initial Distribution,
satisfied the claims of creditors of the Company and paid the costs and
expenses of the Proposals, it is expected that the Liquidators will make a
final distribution to Shareholders. The final distribution, if any, will be
made solely at the discretion of the Liquidators.

The final distribution, if any, will not be made until the Liquidators have
completed their statutory duties to seek out, adjudicate and pay creditors'
claims and HMRC has confirmed its agreement to the Company's tax returns and
that it has no objection to the closure of the liquidation. Accordingly, there
can be no certainty as to the timing of the final distribution, if any.

All Shareholders on the Register of Members at 6.00 p.m. on 20 February 2025
(who are not Sanctions Restricted Persons) will be entitled to the
distribution(s) from the Liquidators, including the Initial Distribution.

Nothing in the Proposals shall impose any personal liability on the
Liquidators.

Exchange dealings

The expected last day for dealings in the Shares on the London Stock Exchange
through CREST on a normal rolling two day settlement basis is expected to be
18 February 2025. After that date, dealings should be for cash settlement only
and will be registered in the normal way if the transfer, accompanied by the
documents of title, is received by the Registrar by 6.00 p.m. on 20 February
2025. Transfers received by the Registrar after that time will be returned to
the person lodging them and, if the Resolution is passed, the original holder
will receive any proceeds from distributions made by the Liquidators. After
the liquidation of the Company and the making of the final distribution to
Shareholders (if any), existing certificates in respect of the Shares will
cease to be of value and any existing credit of the Shares in any stock
account in CREST will be redundant.

Following the cancellation of the listing of the Shares on the Official List
and the Shares ceasing to trade on the London Stock Exchange, there will be no
liquidity in the Shares and it will, therefore, be difficult for Shareholders
to realise value from the Shares other than through the liquidation process
over time.

 Expected Timetable
                                                                                2025
 Last day of dealings in the Shares through CREST on a normal rolling two day   18 February
 settlement basis
 Deadline for receipt of Forms of Proxy                                         10.00 a.m. on 19 February
 Close of Register and record date for participation in the members' voluntary  6.00 p.m. on 20 February
 liquidation
 Suspension of Shares from listing on the Official List and from trading on      7.30 a.m. on 21 February
 the London Stock Exchange
 General Meeting                                                                10.00 a.m. on 21 February
 Appointment of Liquidators                                                     21 February
 Initial Distribution to Shareholders*                                          Week commencing 3 March
 *Actual date to be determined by the Liquidators.
 Notes:

 1.     All references to time in this document are to London (UK) time,
 unless otherwise stated.

 2.     The times and/or dates set out in the expected timetable above and
 mentioned throughout this document may be subject to change and, in the event
 of such change, the revised times and/or dates will be notified to
 Shareholders by an announcement through a Regulatory Information Service.

Capitalised terms used and not defined in this announcement have the meanings
given to them in the Circular, which is available on the Company's website at
https://www.downingstrategic.co.uk/ (https://www.downingstrategic.co.uk/) and
will shortly be submitted to the National Storage Mechanism which is located
at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .

For further information please contact:

 

Chairman

Hugh Aldous
tel: 020 7416 7780

 

Dickson Minto Advisers LLP

Douglas Armstrong                        tel: 020 7649
6823

 

IMPORTANT NOTICES

Information regarding forward-looking statements

This announcement and any information incorporated by reference into this
announcement contains statements which are, or may be deemed to be,
"forward-looking statements" which are prospective in nature. All statements
in this announcement other than statements of historical fact are
forward-looking statements. They are based on intentions, beliefs and/or
current expectations and projections about future events, and are therefore
subject to risks and uncertainties which could cause actual results to differ
materially from the future results expressed or implied by the forward-looking
statements. Often, but not always, forward-looking statements can be
identified by the use of a date in the future or forward-looking words such as
"plans", "expects", "is expected", "is subject to", "budget", "scheduled",
"estimates", "forecasts", "intends", "anticipates", "believes", "targets",
"aims", "projects" or words or terms of similar substance or the negative of
those terms, as well as variations of such words and phrases or statements
that certain actions, events or results "may", "could", "should", "would",
"might" or "will" be taken, occur or be achieved. Such statements are
qualified in their entirety by the inherent risks and uncertainties
surrounding future expectations or events that are beyond the Company's
control.

Forward-looking statements include statements regarding the intentions,
beliefs or current expectations of the Company concerning, without limitation:
(a) future capital expenditures, expenses, revenues, earnings, synergies,
economic performance, indebtedness, financial condition, dividend policy,
losses and future prospects; (b) business and management strategies and the
expansion and growth of the Company's operations and assets; and (c) the
effects of global economic conditions on the Company's business.

Such forward-looking statements involve known and unknown risks and
uncertainties that could significantly affect expected results and are based
on certain key assumptions. Many factors may cause the actual results,
performance or achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by the
forward-looking statements. Important factors that could cause the actual
results, performance or achievements of the Company to differ materially from
the expectations of the Company include, amongst other things, general
business and economic conditions globally, industry and market trends,
competition, changes in government and changes in law, regulation and policy,
including in relation to taxation, interest rates and currency fluctuations,
the outcome of any litigation, the impact of any acquisitions or similar
transactions, and IT system and technology failures. Such forward-looking
statements should therefore be construed in the light of such factors.

Neither the Company nor any of its Directors, officers or advisers provides
any representation, assurance or guarantee that the occurrence of the events
expressed or implied in any forward-looking statements in this announcement
will actually occur. You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof.

Forward-looking statements contained in this announcement apply only as at the
date of this announcement. Other than in accordance with its legal or
regulatory obligations (including under the Prospectus Regulation Rules, the
UK Listing Rules, the Disclosure Guidance and Transparency Rules and UK MAR)
the Company is not under any obligation and the Company expressly disclaims
any intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise.

No profit forecast or estimate

No statement in this announcement is intended as a profit forecast or profit
estimate for any period and no statement in this announcement should be
interpreted to mean that earnings, earnings per Share or income, cash flow
from operations or free cash flow for the Company, as appropriate, for the
current or future financial years would necessarily match or exceed the
historical published earnings, earnings per Share or income, cash flow from
operations or free cash flow for the Company, as appropriate.

There is no guarantee that the expected distributions will be able to be
paid.  The Company's ability to make distributions will be dependent on a
number of factors, including in relation to the realisation of the Company's
remaining assets, prevailing market conditions as well as the level of claims
of creditors of the Company.

Presentation of financial information

References to "£", "GBP", "pounds", "pounds sterling", "sterling", "p" and
"pence" are to the lawful currency of the United Kingdom.

Certain financial data has been rounded, and, as a result of this rounding,
the totals of data presented in this announcement may vary slightly from the
actual arithmetic totals of such data.

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