Downing Plan 2011 Downing Planned Exit Vct 2011 -2-
15 Junio 2015 - 12:23PM
UK Regulatory
* no impact on the tax position of Shareholders - existing VCT tax
reliefs carry over and attach to the post- Merger shares for all
Shareholders.
The Merger is comprised of three separate Schemes and will only go ahead
if at least the DP2011 Scheme becomes unconditional. If one or two of
the Schemes become unconditional, then the resulting Enlarged Company
will be commensurately smaller than if all three Schemes become
unconditional with the result that the Enlarged Company will have a
smaller net asset base across which to spread the costs of the Schemes
that do go ahead and the running costs of the Enlarged Company going
forward. In this case, the costs of the Schemes that do go ahead may
take longer to recover than they would if the full four-way Merger was
implemented.
The estimated total costs of this four-way merger are GBP400,000.
Downing has agreed to bear 50% of the costs of the Merger and 100% of
any costs in excess of GBP420,000. After Downing's contribution, and
taking into account Downing's reduced management fees in year one
following the Merger, the net costs of the Merger to be borne by the
Companies are estimated at GBP110,000.
As an illustration, had the Merger been completed on the basis of the
Schemes as set out the Circulars, the number of Consideration Shares
that would be issued for each Target VCT share would be as follows:
Downing FOUR
Number of VCT Voting
Current Shares Net share class Shares/ rights
Current share currently in Asset following Consideration following
company class issue Value* Merger shares merger
Number GBPM Number %
Existing Shares
Ordinary DSO Ordinary
DSO Shares 10,288,157 5.54 Shares 10,288,157 9.02%
DSO A Shares 15,506,488 0.02 DSO A Shares 15,506,488 0.02%
DSO B Shares 19,911,070 13.98 DSO B Shares 19,911,070 23.04%
DSO C Shares 29,926,070 0.03 DSO C Shares 29,926,070 0.04%
DSO D Shares 7,877,527 6.36 DSO D Shares 7,877,527 10.22%
Consideration Shares
DP2011 Gen
DP2011 Gen Ords 15,679,241 11.49 Ords 15,679,241 18.70%
DP2011 Gen A 18,453,789 1.11 DP2011 Gen A 18,453,789 1.94%
DP2011
Structured Structured
DP2011 Ords 10,678,725 8.08 Ords 10,678,725 13.11%
DP2011
Structured Structured
DP2011 A 12,572,817 0.78 A 12,572,817 1.32%
Low Carbon DP2011 Low
DP2011 Ords 8,102,222 6.11 Carbon Ords 7,575,577 10.63%
DP6 DP6 5,355,154 3.42 DP67 5,355,154 5.63%
DP7 DP7 6,006,085 3.81 DP67 6,006,085 6.32%
* The Net Asset Values shown here are the unaudited
figures as at 31 March 2015 for DSO, 30 November 2014
for DP2011 (adjusted for dividends paid since) and
31 January 2015 for DP6 and DP7.
The worked example above is produced for illustrative purposes only and
assumes that all Schemes are approved in full with no dissenting
shareholders from any of the Companies. Voting rights of each share
class following the Merger will be broadly in line with their relative
net assets.
MANAGEMENT AND ADMINISTRATION ARRANGEMENTS
Downing is the investment manager of all of the Companies and also
provides administration and secretarial services to all of the
Companies.
Subject to the completion of the Merger, the Enlarged Company will enter
into revised arrangements with Downing pursuant to which Downing will
receive fees as follows: -
Investment Management Fees are to be calculated according to the
specific share class in which the assets in question are held:
Annual Fee
(Pre and
Company post Merger) Comments
Reduced by 0.2% to 1.3% for the 12 months immediately
DSO 1.5% following the Merger
Reduced by 0.2% to 1.6% for the 12 months immediately
DP2011 1.8% following the Merger
DP6/DP7 1.35%
Downing has agreed to provide running cost caps following the Merger as
follows:
Running Cost
Running Cost Cap post-
Company Cap pre-Merger Merger
DSO 3.5% 3.0%
DP2011 3.5% 3.0%
DP6/ DP7 2.9% 2.9%
THE DSO BOARD
The Boards have considered what the size and future composition of the
DSO Board should be following the Merger and it has been agreed that
subject to completion of the Merger, the Board composition will be
rearranged such that two new directors will be appointed to join the
existing DSO Board.
It is proposed that Sir Aubrey Brocklebank and Russell Catley join the
DSO Board from their current appointments as directors of DP2011. The
appointments of Sir Aubrey Brocklebank and Russell Catley as directors
of DSO are subject to the completion of the Merger, and will ensure that
the board of directors of the Enlarged Company have direct experience of
approximately 90% of the Enlarged Company's portfolio (by value). It is
intended that Sir Aubrey Brocklebank will be appointed as the Senior
Independent Director upon joining the DSO Board.
DSO CHANGES TO ITS ARTICLES, RENEWAL OF SHARE ISSUE AND BUYBACK
AUTHORITIES AND CANCELLATION OF SHARE CAPITAL AND RESERVES
As the structure of DSO will change if the Merger goes ahead, due to the
creation of a number of new classes of shares, there are some structural
changes required to the Articles to ensure the smooth and equitable
running of the Enlarged Company. The proposed changes are as follows:
1. The addition to the Articles of the share rights of the New Share
Classes
In respect of rights to receive dividends and distributions of capital,
these will be identical to the rights in the Target VCT's existing
articles of association and will not affect existing Shareholders of DSO
as they will only be relevant to the segregated assets of each New Share
Class which are transferred to DSO pursuant to the Merger.
2. The introduction of a structured voting rights system for general
meetings
A proposed new voting rights system (described in more detail below)
aims to ensure that, at a general meeting where holders of all types of
shares may be present, the voting power attributable to the various
existing classes and New Share Classes is broadly proportionate to the
relative value those classes represent in the Enlarged Company. This is
achieved by having a base number of votes for each share in a particular
class, based on that class's current Net Asset Value. There is also a
mechanism for increasing or decreasing the number of base votes in the
event that the NAV of a class rises or falls in increments of 25%.
3. The introduction of mechanism to wind up exiting share classes
As certain of the planned exit classes of shares in the Enlarged Company
are approaching the end of their lifecycles, the Board believes this is
an opportune time to introduce a mechanism into the Articles to allow
the Enlarged Company to efficiently wind up share classes in which the
value has been almost entirely distributed to shareholders.
It is proposed that where the Net Asset Value of a particular class
falls below GBP25,000 or the largest shareholder holds shares with a
value of less than GBP20, the Board will have the right to convert the
remaining shares into deferred shares for repurchase by DSO. This will
prevent an almost 'empty' share class, with minimal economic value, from
persisting inefficiently and incurring fixed costs relating, amongst
other things, to maintaining its listing on the London Stock Exchange.
4. The increase to the directors' annual remuneration cap
An increase to the cap on the aggregate sum to which directors of DSO
are entitled by way of remuneration for their services from GBP100,000
to GBP150,000 is proposed in light of the increase in size of the
Enlarged Company and its board.
EXPECTED TIMETABLE FOR THE MERGER 2015
Latest time for the receipt of forms of proxy for 12 noon on 7
the DSO General Meeting July
DSO General Meeting 12 noon on 9
July
Class Meeting of Ordinary Shareholders 12.05 p.m. on 9
July
Class Meeting of A Shareholders 12.10 p.m. on 9
July
Class Meeting of B Shareholders 12.15 p.m. on 9
July
Class Meeting of C Shareholders 12.20 p.m. on 9
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