Dunedin Ent.it. Regulatory News (DNE)

6 April 2017

DUNEDIN ENTERPRISE INVESTMENT TRUST PLC

PROPOSED INTRODUCTION OF B SHARE SCHEMEAND NOTICE OF GENERAL MEETING

Introduction

The Company is pleased to announce further details of the proposals to introduce a mechanism to enable surplus cash to be returned to Shareholders in due course through a compulsory procedure involving a bonus issue, on a pro rata basis, of B Shares followed by the redemption of such B Shares at the option of the Company. 

The introduction of the B Share Scheme requires Shareholder approval, which will be sought at a general meeting of the Company to be held at 11.10 a.m. (or such later time as the AGM concludes) on 11 May 2017. Subject to such approval being obtained at the General Meeting, the Company will be able to make future capital returns through the issue and redemption of B Shares without the need for further Shareholder approval. This will be a less costly way of returning capital than tender offers and can be achieved more quickly. It also ensures that all Shareholders are treated equally as capital is returned to all Shareholders on a pro rata basis. The Board has been advised that, for tax purposes, returns of capital through a B share Scheme should be treated as a capital, rather than an income, receipt in the hands of the recipients.

Background to, and Details of, the B Share Scheme

In May 2016, Shareholders approved a change in investment strategy whereby the Company ceased making new investments and began a managed wind-down. The Company's objective is to conduct an orderly realisation of its assets over a period of time, to be effected in a manner that seeks to achieve a balance between maximising the value of the Company's investments and progressively returning cash to Shareholders.

After consideration, the Board believes that one of the fairest and most efficient ways of returning cash to Shareholders is by adopting a B Share Scheme whereby the Company will be able to issue redeemable B Shares to Shareholders and to redeem them on each Redemption Date without further action being required by Shareholders.

The quantum and timing of Returns of Capital to Shareholders following receipt by the Company of the net proceeds of realisations of investments will be dependent on the Company's liabilities (including any outstanding bank borrowings), its uncalled fund commitments and general working capital requirements. In particular, the net cash proceeds from realisations of investments, after settlement of and provision for liabilities of the Company, will normally be applied to the repayment of any outstanding bank borrowings prior to returning capital to Shareholders. Accordingly, the quantum and timing of Returns of Capital are at the discretion of the Board, which will announce details of each Return of Capital, including the relevant Record Date, Redemption Price and Redemption Date, through an RIS Announcement, a copy of which will be posted to Shareholders.

The adoption of a B Share Scheme will not limit the ability of the Company to return cash to Shareholders by using other mechanisms and, if the B Share Scheme is adopted, the Board will continue to review its tax effectiveness and cost efficiency over time. The Board's proposal to adopt a B Share Scheme at this point in time should not be taken as any indication as to the likely timing or quantum of any future returns of cash to Shareholders and Shareholders should not conclude that returns of capital over the next few months are likely.

Advantages of Returning Surplus Cash via B Shares

The advantages of returning capital via the B Share Scheme rather than via a tender offer (a mechanism that has previously been used by the Company) are that:

· it reduces costs for the Company, as there should be no need to prepare further circulars to give effect to future Returns of Capital as is the case with tender offers. Details of each Return of Capital would be notified to Shareholders through an RIS Announcement (a copy of which would be posted to Shareholders) and, subject to any change in existing United Kingdom tax law (and in contrast to a tender offer where stamp duty at the rate of 0.5 per cent. of the tender price is payable), no stamp duty would be payable;

· all Shareholders would be able to participate in the redemption process and they would be treated equally;

· subject to the Resolutions being passed at the General Meeting, Shareholders should not be required to take any further action to give effect to the B Share Scheme; and

· there would be greater certainty for the Company regarding the rate of returns of capital to Shareholders (unlike tender offers, capital returns under the B Share Scheme would be mandatory and would apply to all Shareholders on a pro rata basis).

However, for some Shareholders, there may be some disadvantages in returning capital via the B Share Scheme, relating to the timing and mandatory nature of the scheme. Unlike a tender offer, Shareholders would not be given a choice as to whether or not to participate in a Return of Capital and, for those Shareholders who hold Shares through a number of different vehicles, they would not be given the choice as to which of their vehicles should participate in a Return of Capital. This could potentially lead to adverse tax consequences for Shareholders as they may not be able to structure their returns in the most tax efficient manner.

Circular to Shareholders

A circular containing further detail of the proposed B Share Scheme and the notice convening the General Meeting will be posted to Shareholders today. Copies of that circular have been submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/nsm and on the Company's website (www.dunedinenterprise.com).

Enquiries

Definitions

In this announcement, unless the context otherwise requires, the following expressions bear the following meanings: