REG - Down MicroCap InvTst - Result of Meeting & Special Dividend Announcement
03/04/2024 16:45
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RNS Number : 2152J Downing Strategic Micro-Cap IT PLC 03 April 2024
Downing Strategic Micro-Cap Investment Trust plc
3 April 2024
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
Results of General Meeting and Announcement of £13.98 million Special
Dividend
Executive Summary
At the General Meeting of the Company held today, 56.65 per cent. of the votes
cast (including discretionary) were in favour of Resolution 1. As Resolution 1
was proposed as a special resolution (75 per cent.) it was not carried. The
Company cannot, therefore, implement its proposed B Share Scheme in order to
return cash to Shareholders in accordance with its investment objective and
policy.
Other than shares controlled by Milkwood Capital Limited ("Milkwood"), a new
investor opposed to the managed wind-down of the Company, less than 0.28 per
cent. of the votes cast voted against Resolution 1. Given 56.65 per cent. of
the votes cast (including discretionary) were in favour of Resolution 1,
showing continued support from the Shareholders for the managed wind-down of
the Company and the distribution of cash proceeds, the Board has decided today
to declare a special dividend of 30 pence per share (the "First Special
Dividend"), equivalent to £13.98 million, with a further special dividend of
at least £3.7 million (which would equate to 8 pence per share) expected to
be made by 30 June 2024 (together with the First Special Dividend, the
"Special Dividends"). The timing of, and reasons for, the Special Dividends
are set out below.
Chairman Hugh Aldous commented: "As a Board we are committed to doing the
right thing for all our Shareholders. We believe that the B Share Scheme
offered a tax efficient and cost-effective way of giving effect to the wishes
as overwhelmingly expressed by our Shareholders on 28 February. However, given
today's result and the fact that our preferred proposal has been blocked by a
new Shareholder with an agenda of its own, we believe that the correct thing
to do is to press ahead with a dividend to Shareholders which, while not our
preferred route, has the merit of fulfilling the mandate we were given to
wind-down the trust and return cash proceeds forthwith."
Introduction
As set out in the circular to Shareholders dated 8 March 2024 (the
"Circular"), the Resolutions proposed at the General Meeting sought to
facilitate the implementation of a B Share Scheme by the Company in order to
return cash to Shareholders. The B Share Scheme was to be implemented
following the change of the Company's investment policy to that of a managed
wind-down of the Company's investment portfolio and the return of cash
proceeds to Shareholders to invest as they wish. The investment policy was
approved by Shareholders at the general meeting of the Company held on 28
February 2024 (the "February General Meeting") at which approximately 86 per
cent. of the votes cast (amounting to approximately 41 per cent. of the
Company's issued share capital) voted in favour of adopting the investment
policy.
All Resolutions at today's General Meeting were voted on by way of a poll and
the results of the poll are shown below. In summary, Shareholders representing
approximately 58.09 per cent. of the Company's issued share capital cast votes
in respect of Resolution 1, of which 56.65 per cent. were in favour (including
discretionary) and 43.35 per cent were against. Accordingly, although
Resolution 1 received the support of more than 50 per cent. of the
Shareholders who cast votes, as it was proposed as a special resolution (which
requires a majority of 75 per cent. of the votes cast to be cast in favour in
order to pass) it was not carried. Likewise, despite more than 50 per cent. of
the votes cast being in favour of Resolutions 2 and 3, both these Resolutions
failed to carry as ordinary resolutions as their passing was conditional on
the passing of Resolution 1.
In the light of this result, and in order to give immediate effect to the plan
overwhelmingly supported by Shareholders at the February General Meeting to
adopt the managed wind-down investment policy and return cash to
Shareholders, the Board has decided to make a distribution to Shareholders by
way of the First Special Dividend of 30 pence per share, equivalent to £13.98
million, with a further special dividend of at least £3.7 million (which
would equate to 8 pence per share) expected to be made by 30 June 2024.
The First Special Dividend will be paid on 26 April 2024 to Shareholders on
the Company's register of members at close of business on 12 April 2024. The
Company's shares will go ex-dividend on 11 April 2024.
Background
Between the February General Meeting and today's General Meeting two
institutional Shareholders, who were supportive of the Company's managed
wind-down, and who had voted in favour of adopting that investment policy,
sold their holdings to Milkwood, an investor opposed to the managed wind-down,
and hence to the B Share Scheme.
The Board has been made aware that Milkwood is seeking to secure the future
management of the Company's portfolio for itself. Since the February General
Meeting, Milkwood has built up an approximately 28 per cent. shareholding in
the Company which allowed it to block the implementation of the proposed B
Share Scheme. This shareholding compromises the position of the Company's
other Shareholders who had voted in favour of the managed wind-down, but to
whom Milkwood has not offered a cash exit. As a proportion of votes cast at
today's General Meeting (excluding Milkwood's acquired stake), the votes in
favour of returning capital through the B Share Scheme amounted to 99.72 per
cent. This indicates that there remains a significant body of Shareholders who
still wish the Company to return cash to them in accordance with the Company's
investment policy. The Board believes that it has a duty to find a way to
permit those Shareholders to exit for cash and to invest that cash as they
wish.
The Special Dividends
Cash realisation by DSM's Investment Manager has proceeded well. As announced
on 20 March 2024, the level of cash within the Company's portfolio against the
Company's net asset value ("NAV") as at 6 March 2024 (being the NAV referred
to throughout the Circular) had increased to over 40 per cent. Were it not for
the opposition of Milkwood to the B Share Scheme, it had been anticipated that
the Company would have been in a position to undertake an issue and redemption
of B Shares on or around 4 April 2024, and to return cash representing at
least 50 per cent. of the Company's NAV as at 6 March 2024 to Shareholders by
30 June 2024.
Given approximately 86 per cent. of the votes cast at the February General
Meeting voted in favour of adopting the managed wind-down investment policy,
the Board remains committed to act in the interests of all Shareholders which
it believes are best served by returning cash proceeds to Shareholders.
Today's vote means the proposed distribution by way of the B Share Scheme
cannot proceed, and in order to return cash to Shareholders by the most
practicable means the Board has today declared the First Special Dividend.
Further realisations are already in hand, or are anticipated over the
forthcoming quarter, which should allow a further special dividend of at least
8 pence per share by 30 June 2024. Payment of the Special Dividends will
meet the Board's existing projection to return cash representing at least 50
per cent. of the Company's NAV as at 6 March 2024 by 30 June 2024 and should
amount to approximately 60 per cent, of the Company's NAV as at 2 April 2024.
The Board notes that the return of the cash proceeds by means of dividend may
be less tax efficient for certain individual Shareholders who do not hold
their shares in a tax wrapper (for example, a SIPP or an ISA). The Board
encourages Shareholders to consult with their tax adviser to consider what, if
any, steps they should take in advance of the ex-dividend date for the payment
of the Special Dividends.
Following the payment of the Special Dividends, the Board intends to consult
with as many Shareholders as possible in respect of the future of the Company.
Cost reductions
The Board further commits to the following measures to reduce administration
costs in line with the reduction in the size of the Company as cash proceeds
are paid out to Shareholders: (i) a reduction of the size of the Board, with
one Director stepping down; and (ii) a reduction of fees paid to each
remaining Director by £5,000 per annum, both with effect from 1 May 2024. The
Board is committed, in principle, to further reductions in costs as and when
appropriate given the progress of its cash return plan.
The Board has also agreed with the Investment Manager that the Investment
Manager's capital return fee will now be set at 0.5 per cent. of the total
value of distributions made during the Company's managed wind-down, instead of
its former proposed sliding scale. This change will incentivise the Investment
Manager to realise value for Shareholders over the whole of the managed
wind-down period.
Results of General Meeting
Resolution Votes For (including discretionary) % (of votes cast excl. withheld) Votes Against % (of votes cast excl. withheld) Total votes % Votes Withheld
cast (issued
share
capital)
1. To adopt the New Articles of Association in substitution for, and to 15,337,820 56.65 11,738,853 43.35 27,076,673 58.09 43,598
the exclusion of, the existing articles of association of the Company
2. To authorise the Directors to capitalise from time to time any sums 15,346,135 56.66 11,738,853 43.34 27,084,988 58.11 35,283
standing to the credit of any reserve of the Company including the special
reserve and to apply such sums in paying up in full up to 100,000,000 B Shares
3. To authorise the Directors to issue B Shares from time to time up to an 15,337,135 56.63 11,747,853 43.37 27,084,988 58.11 35,283
aggregate nominal amount of £100,000,000 on a pro rata basis to the holders
of Ordinary Shares by way of bonus issues
Shareholders are entitled to one vote per Ordinary Share. Votes withheld are
not a vote in law and are therefore not counted in the calculation of the
percentages of the votes cast for and against a resolution. Where Shareholders
appointed the Chair as their proxy with discretion as to voting, their votes
were cast for all Resolutions and their shares have been included in the
"votes for" column.
The total number of Ordinary Shares in issue is 46,608,486. The Company has
one non-redeemable preference management share of 1 penny in issue. The
non-redeemable preference management share does not carry any voting rights.
Each Ordinary Share carries a right to one vote at a general meeting of the
Company. Therefore, the total number of voting rights in the Company is
46,608,486 votes.
The full text of the Resolutions can be found in the Notice of General Meeting
contained in the Circular. The Circular is available for viewing on the
National Storage Mechanism at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) and on the Company's
website at https://www.downingstrategic.co.uk/
(https://www.downingstrategic.co.uk/) .
Defined terms used in this announcement have the meanings given to them in the
Circular unless the context otherwise requires.
For further information please contact:
Chairman
Hugh Aldous tel: 020
7416 7780
Dickson Minto Advisers LLP
Douglas Armstrong tel: 020 7649 6823
Media Contacts - Garfield Advisory
Andrew Garfield tel: 07974
982337
Jason Nisse tel:
07769 688618
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