Downing Strate. Regulatory News (DSM)

RNS Number: 9321S

Downing Strategic Micro-Cap Investment Trust plc

18 June 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

Receipt of Requisition Notice

On 17 June 2024, the board of directors of DSM (the "Board") received a letter from Vidacos Nominees Limited acting as nominee of Milkwood Capital Limited ("Milkwood"), seeking to requisition a general meeting of the Company (the "Requisition"). 

The Board is in the process of reviewing the legal validity of the Requisition with its advisers and will make further announcements regarding the convening of a general meeting in due course.

Shareholders should take no action at this time.

In summary, the Requisition proposes that shareholders be asked to consider:

§ ordinary resolutions to: (i) remove Hugh Aldous and Robert Legget (and any person appointed as a director of the Company subsequent to the date of the letter and before the requisitioned general meeting) as directors of the Company; and (ii) appoint Rhys Summerton, Andre Tonkin and Paul Shackleton as directors of the Company; and

§ a special resolution to direct that the Board do not declare any dividend, return of capital or other distribution on or prior to the requisitioned general meeting of the Company, and that the second special interim dividend of 12 pence per share declared on 28 May 2024 by the Company (the "Second Special Interim Dividend") and any dividend, return of capital or other distribution declared or announced but not paid or made immediately prior to the requisitioned general meeting be cancelled (the "Special Resolution").

As previously announced, the Board is aware that Milkwood is attempting to get control of the Board of DSM without making a bid for the Company and is thereby seeking to secure the future management of the Company's portfolio for itself and, to this end, built up an approximately 28 per cent. shareholding in the Company. That shareholding allowed Milkwood to block the implementation of the Company's proposed B share scheme in April 2024 which would have allowed the Company to make a tax efficient capital return to all shareholders at next to NAV. Milkwood's shareholding has, therefore, allowed it to compromise the position of the Company's other shareholders who had voted in favour of the Company's managed wind-down in February 2024, but to whom Milkwood has not offered a cash exit. 

The Board remains committed to doing the right thing for all shareholders, and is mindful of the other shareholders' vote at the general meeting of the Company held in February 2024 that overwhelmingly wished a return of cash proceeds. To this end, earlier today the Board declared a third special interim dividend of 17.5 pence per share, equivalent to, in aggregate, £8.0 million (the "Third Special Interim Dividend") which will be paid to shareholders on 18 July 2024, taking the total aggregate of the dividends paid or declared by the Company since it entered into managed wind-down to 59.5 pence per share, being equivalent to 90.2 per cent. of the Company's NAV as at 28 February 2024. In the event that the Company deems the Requisition to be valid, and in accordance with the requirements of the Companies Act 2006 and the Company's articles of association, the Company expects to hold the requisitioned general meeting in late July - early August 2024. Notwithstanding the terms of the Special Resolution, the Board does not expect that the Second Special Interim Dividend or Third Special Interim Dividend will be affected by the Requisition if it is deemed valid.

The Board considers that Milkwood's decision to lodge the Requisition is wholly self-interested and disruptive when the Company and the Investment Manager are focused on returning cash to shareholders.

Further announcements will be made as appropriate.

Hugh Aldous, chairman of Downing Strategic Micro-Cap Investment Trust, said:

"The shareholders in our Company have overwhelmingly voted to wind down the trust, and return capital as fast as practicable, which is precisely what we have done. To date we have returned 30 pence per share, on 21 June 2024 will return another 12 pence per share, and on 18 July 2024 a further 17.5 pence per share will be distributed. That works out at a return of actual cash, which investors can dispose of as they wish, of £27.4 million. So far, all Milkwood has done is to try and thwart the process that shareholders have voted for. Calling for a general meeting in order to attempt to gain control of the Board, so soon after losing their previous attempt to frustrate shareholders wishes, will only provide a further distraction for the Board and impose additional unnecessary costs and hassle on shareholders.

"As we have said to Milkwood repeatedly, if they want to take control of the Company and run it in their own specific interests, then they should table a realistic offer that is fair to all shareholders and it will receive due consideration. In the meantime, we urge shareholders to ensure they protect their own interests by rejecting this unwarranted further attempt by Milkwood to acquire control of your Company and its assets on the cheap."

For further information, please contact:

The person responsible for arranging for the release of this announcement on behalf of the Company is ISCA Administration Services Limited, the Company Secretary.