Dci Advisors Regulatory News (DCI)

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

Dolphin Capital Investors Limited

("Dolphin" or the "Company")

Continuation Vote,

Revised Investment Management Arrangements

and

Notice of Extraordinary General Meeting

The Board of Dolphin announces proposals to be made to Shareholders in respect of:

· Proposed continuation vote

· New Investing policy and realisation strategy

· New Investment Management Agreement

· Proposed New Memorandum and Articles of Incorporation

· Proposed adoption of electronic communications

· Notice of Extraordinary General Meeting

further details of which are set out in this announcement and in a circular (the "Circular") to be published today.

1 BACKGROUND

The Company was admitted to trading on AIM on 8 December 2005 as a newly incorporated, BVI registered, closed-ended investing company. At the time of Admission, the directors of the Company undertook in the Admission Document that, shortly before the tenth anniversary of Admission, which would have been on 8 December 2015, the Board would convene a Shareholders' meeting at which a resolution would be proposed to determine the future of the Company.

On 5 June 2015, the Shareholders of the Company passed a written resolution adopting a revised strategy for the Company, which envisaged that the Company would continue in existence for at least a further five years and relieved the Board of the obligation to convene a Shareholders' meeting by 8 December 2015.

Notwithstanding the above, the Board indicated in its announcement issued on 3 June 2015 that it was appropriate for Shareholders to have an opportunity to review the life of the Company and, although the Company would have no fixed life, the Board committed to convene and hold an extraordinary general meeting prior to 31 December 2016, at which an ordinary resolution for the continuation of the Company would be proposed.

The Board convened an extraordinary general meeting on 16 December 2016 at which Shareholders voted against the continuation of the Company, as then constituted, and approved a "New Asset Strategy" proposed by the then board of directors with the objective of disposing of all of the Company's assets by 31 December 2019 (the "New Asset Strategy").

On 2 May 2019, the then board of directors convened an extraordinary general meeting at which the divestment period to achieve the New Asset Strategy was extended by two years to 31 December 2021 to facilitate the sale of the Company's assets by that date. The Investment Manager's remuneration structure was also amended during this period.

During the five and a half year period of the New Asset Strategy (including the May 2019 extension), the Company has sold the following investments:

* Dividends received

To date, there have been no distributions from the Company to Shareholders of realisation proceeds because the respective amounts were applied towards reducing the underlying liabilities of the Group and meeting its operating, permitting and development expenses.

The Company (and companies held by the Company) realised €7.2 million of investments during the 2020-2021 period. It is unlikely that the Company will sell any further investments before 31 December 2021. During 2020 and the first half of 2021, the COVID-19 pandemic had a significant negative impact on tourism in Europe and on demand from investors to acquire property for the development of resorts and villas. In Cyprus, demand for property was further depressed by the suspension of the country's citizenship-for-investment programme.

The purpose of the Circular is to explain to Shareholders the rationale and new terms on which the Board proposes that the New Investing Policy and Realisation Strategy is implemented in order to more closely align the interests of the Investment Manager with those of Shareholders and the further steps being proposed by the Board to further reduce the Company's operating costs and improve corporate governance.

At the EGM, Shareholders will be asked to vote on the following Resolutions:

· Resolution 1 - an ordinary resolution, to approve (i) the continuation of the Company; (ii) the new Investing Policy and Realisation Strategy (as defined in paragraph 4 of Part 1 of the Circular); and (iii) the New IMA (as defined in paragraph 5 of Part 1 of the Circular).

· Resolution 2 - an ordinary resolution to approve the adoption of the New Memorandum and Articles (as defined in paragraph 6 of Part 1 of the Circular).

· Resolution 3 - an ordinary resolution, which is conditional upon the passing of Resolution 2, that the Company be authorised, subject to and in accordance with the provisions of the New Memorandum and Articles (as from time to time amended or varied), and any applicable laws and regulation to which the Company may be subject from time to time, to send, convey or supply all types of notices, documents or information to the Shareholders of the Company by means of electronic communication and including by means of electronic equipment for the processing (including, without limitation, by means of digital compression), storage and transmission of data, using wires, radio optical technologies, or any other electromagnetic means, including by making such notices, documents or information available on a website.

2 THE Current portfolio

The current investments held by the Company as at 30 June 2021 and at the date of the Circular comprise the following:

1 as at 30 June 2021

Together, these investments had an aggregate Net Asset Value at 30 June 2021 of €152 million.

Over the past five years, since the New Asset Strategy was approved by Shareholders, the pace of realisation of investments by the Company has been disappointing. The Investment Manager believes that, subject to the continued improvement in the investment environment, the pace of realisation of the Company's investments will accelerate. There is an increasing number of private equity funds and family offices, actively looking to expand their exposure to hospitality assets through the acquisition of properties which are branded and/or managed by operating partners, thus reducing direct operational risks. Moreover, the post-pandemic uplift in global travel and rising proportion of consumer spending on experiences looks set to endure, and this should further support hospitality investment volumes and valuations going forward. The Investment Manager expects that opportunities to acquire newly developed luxury branded residential resorts, such as the One&Only at Kea Island Resort ("OOKI") and the Kilada Hills Golf and Country Resort ("Kilada") near Porto Heli, could be scarce due to the lack of a material development pipeline in Greece. As these projects mature, the Investment Manager expects the Company to be in a position to appeal to a larger investment audience and transact at valuations reflecting the projects' maturities and intrinsic values. It is the target of the Board and the Investment Manager to dispose of all of the Company's remaining assets by the end of 2024. The attention of Shareholders is drawn particularly to Section 2 of the Circular headed "Risk Factors".

Construction activity on the sites of the Company's two key resorts in Greece: OOKI and Kilada, continued throughout 2021 and progress on site in each case remains on target. The Investment Manager and the Board believe that the value of the Company and distributions to Shareholders will be optimised by continuing to hold and develop these resorts, which represent two of the three largest investments in the portfolio, until they become operational. These resorts are fully permitted and funded and are due to become operational in the summer of 2022 and late 2023 respectively. Following encouraging sales at attractive prices during the summer of 2021, the intention is to continue to develop the infrastructure and common facilities and to sell individual hotel rooms and land plots for villas at both sites. The intention is to de-risk the investments by progressing the development of both resorts and repaying the respective construction debt facilities for both projects. As on-site construction progresses and, first, OOKI and, then, Kilada open for business, it is expected that the sales of the entire interests held by the Company in each resort should be feasible at attractive prices. In due course, this will permit the Company to effect material distributions to Shareholders.

The Company's third large investment by value is a 47.9 per cent. minority interest in Aristo. The collapse in tourist arrivals during the COVID-19 pandemic of 2020-21 hit the Cyprus economy particularly hard and the suspension of the country's citizenship-for-investment programme on 1st November 2020 caused an immediate halt to overseas purchases of premium villas and apartments, such as those amongst the product line of Aristo. With tourist numbers recovering in Cyprus and buyers gradually returning to the local holiday property market, there is some room for optimism. The Investment Manager and the Board are working with a view to identifying a sale or re-financing transaction, which would, in due course, enable the Company to realise its investment.

The remaining assets of the Company are development land in Greece, Cyprus and Croatia, where local licences, taxes and planning permissions have been maintained. The Investment Manager will reinvigorate processes to identify potential joint venture partners-operators and/or buyers with a view to accelerating the sale of these individual sites.

3 CONTINUATION OF THE COMPANY

Through the passing of Resolution 1 at the EGM, the Board proposes that Shareholders approve a continuation of the Company without setting a termination date or a date for a further continuation vote in order to provide time to optimise for Shareholders the value that can be realised from the Company's investments by removing potentially commercially prejudicial deadlines from negotiations with potential buyers. In the event that the Investment Manager does not perform in implementing the new Investing Policy and Realisation Strategy (as outlined further below), the Company will have the option of terminating the New IMA on six months' notice from the beginning of 2023.

Notwithstanding the absence of a formal date for Shareholders to consider a continuation of the Company, the Board may, at any time, propose a further continuation vote to Shareholders.

4 The New INVESTING POLICY & REALISATION STRATEGY

With the possible exception of limited follow-on commitments to existing projects in order to protect and/or enhance their value, the Company will not make any further investments without Shareholder approval.

The Board intends to use substantially all net proceeds from the sale of the Company's investments to repay the €15.0 million senior secured loan, which was drawn down in June and July 2021. The outstanding loan balance was €12.8 million as at the date of the Circular. After repaying the loan, all remaining cash held by the Company will be distributed to Shareholders, subject to retaining sufficient funds to meet the Company's liabilities and to cover its reasonable working capital requirements. Given the unpredictable economic recovery, in particular in the tourism and travel sector, the timing of distributions to Shareholders cannot be determined with any certainty.

In order to avoid any ambiguity as to the strategy of the Company, under Resolution 1 at the EGM, Shareholders will be asked to consider approving the following new investing policy and realisation strategy (the "Investing Policy and Realisation Strategy") which will constitute the Company's "investing policy" for the purposes of the AIM Rules:

· The Board and the Investment Manager will aim to realise all of the Company's remaining investments by 31 December 2024.

· The Company currently intends, subject to any sales opportunity arising in the interim which will be considered by the Board on a case-by-case basis, to hold and develop the OOKI and Kilada investments until they become operational in order to maximise their realisation values, thus enabling the Company to effect material distributions to Shareholders, but may dispose of either asset on an opportunistic basis if considered to be in the best interests of Shareholders.

· The Board and the Investment Manager will seek to identify a sale or re-financing transaction for the investment in Aristo which would, in due course, enable the Company to sell its 47.9% interest.

· The Company will not make any new investments without Shareholder approval, except for limited follow-on commitments to existing projects in order to protect and/or enhance their values.

· Following the repayment of the Company's senior secured loan, all remaining cash held by the Company will be distributed to Shareholders, subject to retaining sufficient funds to meet the Company's liabilities and to cover the Company's reasonable working capital requirements.

Following the realisation of all the Company's investments and the distribution of the net proceeds to Shareholders, the Board's intention would be to propose to Shareholders the cancellation of the Company's admission to trading on AIM and the appointment of a liquidator to oversee the formal liquidation of the Company.

5 The New IMA

In order to reduce the loss of value to Shareholders from operating costs as the Company implements the proposed new Investing Policy and Realisation Strategy, the Board and the Investment Manager propose to align the Investment Manager's interests with those of Shareholders and improve and streamline operations to significantly reduce the operating costs and cash outflows of the Company from their previous high levels.

A strategic review undertaken by the Board in consultation with the Investment Manager identified a number of potential improvements and savings. These included:

· reducing the Independent Directors' remuneration;

· negotiating new service and fee terms with most of the Company's service providers;

· appointing FIM Capital Limited to replace the Company's former Jersey based administrator;

· terminating the appointment of the Company's former custodian;

· terminating the appointment of the Company's former public relations adviser; and

· appointing finnCap as the Company's combined Nominated Adviser and Broker to replace the split roles formerly undertaken by Grant Thornton and Panmure Gordon.

Currently, the Company's largest operating cost is the remuneration paid to the Investment Manager.

As the Amended IMA automatically expires on 31 December 2021, the Board has negotiated the New IMA with the Investment Manager which will, if approved by Shareholders through the passing of Resolution 1 at the EGM, enter into effect on 1 January 2022.

The key terms of the New IMA, if approved, will:

· eliminate the annual fixed investment management fees that the Company has been paying to the Investment Manager since the Company was first admitted to trading on AIM. These peaked at €17.9 million in 2011 and currently amount to €3.6 million per annum;

· eliminate the current variable fee arrangement and introduce an incentive fee arrangement payable to the Investment Manager as follows:

o a fee will only accrue when Shareholders receive a distribution from the Company;

o no incentive fees will accrue or be payable until Shareholders have first received aggregate distributions of at least €40.0 million, which approximates to the current market capitalisation of the Company;

o thereafter, an incentive fee payable to the Investment Manager of 15 per cent. will accrue on all distributions paid to Shareholders;

o once €80.0 million has been distributed to Shareholders, a bonus of €1.0 million for every additional €5.0 million of distributions will be payable to the Investment Manager until a total of €100 million has been distributed to Shareholders. This bonus will amount to a maximum of €5.0 million in total;

o in order to permit the Investment Manager to meet its working capital commitments, quarterly advances will be paid to the Investment Manager in the amounts of €2.4 million in total for 2022, €2.3 million for 2023 and €1.3 million for 2024. These advances will be repaid by the Investment Manager to the Company by way of set off against accrued incentive fee entitlements;

o all fees accrued and paid in cash to the Investment Manager with effect from 1 January 2022 under the terms of an asset management agreement entered into between the Investment Manager and the project company for the OOKI investment will also be set off against the accrued incentive fee entitlements; and

o in order to discourage 'cherry picking' through the priority sale of the Company's more attractive investments, 25 per cent. of any incentive fee entitlements payable to the Investment Manager will be held in escrow and released with the last distribution to Shareholders after the last remaining investment has been sold.

No further management, incentive or performance fees will be payable by the Company pursuant to the Amended IMA once it expires on 31 December 2021 with the exception of an amount of €1.3 million of currently accrued and outstanding management fees that DCP has agreed to defer until the Company is able to complete asset sales of at least an equivalent amount.

The New IMA will commence on 1 January 2022 with an initial term of twelve months and, thereafter, may be terminated on six months' notice by either party.

The Independent Directors, having consulted with the Company's Nominated Adviser, finnCap, believe that the terms of the New IMA are fair and reasonable in so far as Shareholders are concerned.

In the event that Resolution 1 is not approved by Shareholders at the EGM, the New IMA will not be adopted and the Board will formulate new proposals to be put to Shareholders as soon as reasonably practicable and, in any event, by 30 June 2022. During this period the Amended IMA will be extended subject to the revised fixed investment management and incentive fee arrangements outlined above.

Shareholders should be aware that the Board is committed to ending, wherever possible, related party transactions and potential conflicts of interest between the Investment Manager, the Company and its subsidiaries, which have arisen periodically during the life of the Company. Details of all ongoing related party transactions and potential conflicts of interest will continue to be disclosed on a regular basis in both the interim and annual report and accounts of the Company.

6 aMENDMENTS TO THE memorandum and articles of association

The Board proposes to improve the rights of Shareholders by adopting the New Memorandum and Articles by the passing of Resolution 2 at the EGM.

The New Memorandum and Articles are intended to more closely align the Company's constitution with the rights offered to shareholders in companies incorporated under the UK Companies Act 2006.

The New Memorandum and Articles contain inter alia a requirement for the Company to hold annual general meetings to approve the annual report and accounts; the re-election of Directors by rotation on a three year cycle; and the ability of Shareholders owning 10 per cent. or more of Common Shares to requisition an EGM at any time.

The objective of the adoption of the New Memorandum and Articles is to improve the Company's corporate governance and the accountability of the Board to Shareholders.

A copy of the New Memorandum and Articles is available for inspection on the Company's website at www.dolphinci.com.

7 related party transaction

Dolphin Capital Partners Ltd is considered to be a related party of the Company for the purposes of the AIM Rules as it is the Investment Manager and Miltos Kambourides is both principal of the Investment Manager and a Director. Therefore, the New IMA is considered to be a "Related Party Transaction" under Rule 13 of the AIM Rules. Accordingly, the Independent Directors consider (having consulted with the Nominated Adviser) that the terms of the New IMA are fair and reasonable insofar as the Shareholders are concerned.

8 electronic communciations with shareholders

Subject to the adoption of the New Memorandum and Articles by the passing of Resolution 2 at the EGM, the Company will, under the terms of the New Memorandum and Articles have the option to provide notices or documents to any Shareholder using electronic communication at an address for the time being notified to the Company by the Shareholder. However, in order to take advantage of this for certain documents, the AIM Rules require compliance with a specific procedure, summarised below.

The AIM Rules provide companies with the option to satisfy the requirement to send certain documents (including the annual report and accounts) to shareholders by electronic communication, subject to the company's constitution and any legal requirements in its jurisdiction of incorporation and subject to the satisfaction of certain requirements. These requirements include the need for shareholder approval in general meeting enabling the company to utilise the ability to communicate with its shareholders via electronic means. This approval will be granted in relation to the Company if Resolution 3 is passed at the EGM.

Resolution 3 is conditional upon the passing of Resolution 2 at the EGM and the adoption of the New Memorandum and Articles.

Under the AIM Rules, the Company cannot use electronic communications (including by means of the Company's website) for certain documents unless the recipient Shareholder has either, (i) given individual consent, or (ii) having been contacted in writing to request such consent, has not objected within 28 days, in which event their consent can be deemed to have been given. If Resolution 3 is passed at the EGM, the Company will contact Shareholders individually in this regard in due course. Where consent is given or deemed given, each Shareholder will be contacted to alert them to the publication of certain documents on the Company's website. A Shareholder, may continue to receive Company communications in hard copy form if they so wish. Moreover, a Shareholder may, in relation to a particular communication, request a hard copy form of that communication. 

9 Notice of EXTRAORDINARY GENERAL MEETING

The EGM will be held at 10:00 a.m. (GMT) on 22 December 2021 at the offices of FIM Capital Limited, 55 Athol St, Douglas, Isle of Man IM1 1LA.

At the EGM the following resolutions will be proposed:

· Resolution 1 - an ordinary resolution, to approve: (i) the continuation of the Company; (ii) the new Investing Policy and Realisation Strategy; and (iii) the New IMA.

· Resolution 2 - an ordinary resolution to approve the adoption of the New Memorandum and Articles.

· Resolution 3 - an ordinary resolution, which is conditional upon the passing of Resolution 2, that the Company be authorised, subject to and in accordance with the provisions of the New Memorandum and Articles (as from time to time amended or varied), and any applicable laws and regulation to which the Company may be subject from time to time, to send, convey or supply all types of notices, documents or information to the Shareholders of the Company by means of electronic communication and including by means of electronic equipment for the processing (including, without limitation, by means of digital compression), storage and transmission of data, using wires, radio optical technologies, or any other electromagnetic means, including by making such notices, documents or information available on a website.

Whether or not Shareholders propose to attend the EGM, they should complete and return the Form of Proxy or Form of Instruction (as appropriate) in accordance with the instructions in Part 3 of the Circular.

The Circular and the new Memorandum and Articles of Association for the Company, which are proposed to be adopted at the EGM, will be uploaded to the Company's website www.dolphinci.com shortly.

10 RECOMMENDATION

The Independent Directors consider Resolution 1 to be in the best interests of all Shareholders as it is aimed at maximising the realisable value of the Company for Shareholders and seeks to align the interests of the Investment Manager and the Shareholders more closely. Accordingly, the Independent Directors recommend that all Shareholders vote FOR Resolution 1 to be proposed at the EGM.

In addition, the Directors consider Resolutions 2 and 3 to be in the best interests of all Shareholders. Accordingly, the Directors recommend that all Shareholders vote FOR Resolutions 2 and 3 to be proposed at the EGM.

Enquiries

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014 as it forms part of UK law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"). For the purposes of MAR, the person responsible for releasing this announcement is Martin Adams.

This announcement may contain "forward-looking statements" with respect to certain of the Company's plans and its current goals and expectations relating to its future financial condition, performance, strategic initiatives, objectives and results. Forward-looking statements sometimes use words such as "aim", "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "seek", "may", "could", "outlook" or other words of similar meaning. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond the control of the Company.

As a result, the actual future financial condition, performance and results of the Company may differ materially from the plans, goals and expectations set forth in any forward-looking statements. Any forward-looking statements made in this announcement by or on behalf of the Company speak only as of the date they are made. The information contained in this announcement is subject to change without notice and except as required by applicable law or regulation, the Company expressly disclaims any obligation or undertaking to publish any updates or revisions to any forward-looking statements contained in this announcement to reflect any changes in the Company's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statements are based.

Neither the content of the Company's website (or any other website) nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into or forms part of this announcement.

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