TIDMDCI
RNS Number : 7594Q
Dolphin Capital Investors Limited
02 December 2016
2 December 2016
DOLPHIN CAPITAL INVESTORS LIMITED
("DCI" or "Dolphin" or the "Company",
together with its subsidiaries, the "Group")
Continuation Vote, Proposed New Asset Strategy and Proposed
Amendments to Investment Management Agreement
Posting of Circular to Shareholders and notice of Extraordinary
General Meeting ("EGM")
1 Introduction
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 the initial admission of the Company's share capital
to trading on AIM (8 December 2015), the Board would convene a
Shareholders' meeting at which a resolution (requiring more than 50
per cent. of Common Shares voting at an extraordinary general
meeting of the Company) 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 (the "June 2015 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 such a Shareholders meeting by 8
December 2015.
Notwithstanding the above, the Board indicated in the circular
to Shareholders 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 a Shareholders' meeting prior
to 31 December 2016 at which an ordinary resolution for the
continuation of the Company would be proposed.
Accordingly, the Board is pleased to convene an EGM Notice of
the Company to be held at 8:00 a.m. (UK Time) on 19 December 2016
at the offices of Grant Thornton at 30 Finsbury Square, London EC2P
2YU at which the Continuation Resolution is being proposed in
accordance with this commitment.
The purpose of this announcement is to explain in detail the
Proposals and inform the Company's Shareholders about the EGM at
which the Resolutions necessary to implement the Proposals will be
proposed.
The circular, containing details of the Proposals and the
respective Resolutions (the "Circular"), is today being posted to
Shareholders. The Form of Proxy and Form of Instruction for use at
the EGM accompany the Circular which is available on the Company's
website: www.dolphinci.com.
Defined terms used in this announcement shall have the same
meanings as in the Circular.
2 THE JUNE 2015 STRATEGY
The June 2015 Strategy involved a package of measures aiming to
give a clear direction in terms of the achievement of a refocused
strategy to deliver faster returns to Shareholders and reduce the
discount to Net Asset Value per Share at which the Common Shares
trade.
The conclusion of the strategic review that resulted in the June
2015 Strategy was that the investments of the Company should be
categorised either as Core Projects or Non-Core Assets. The Core
Projects were the Company's existing developments known as Amanzoe,
Kilada Hills and the Kea Resort (in Greece), Playa Grande Club
& Reserve (Dominican Republic) and Pearl Island (Panama) being
the most mature and advanced developments of the Company. The
remainder of the Company's investments were categorised as Non-Core
Assets.
In respect of the Core Projects, the Board and DCP had concluded
that it would be in the best interests of Shareholders to continue
to develop these assets and complete the main infrastructure and
leisure facilities of the first phases (where not already complete)
in accordance with the then new strategy, in order to become
completed large scale leisure integrated residential resorts with a
view to generating significant returns for Shareholders.
With regard to the Non-Core Assets represented by real estate
assets, the Board and DCP had concluded that, given their
respective stages of development, it would be in the best interests
of Shareholders to seek the sale thereof as part of an orderly
sales process. In the meantime, the Company would continue to
advance their development potential and maximise realisable
proceeds by continuing investment in zoning, branding, designing
and permitting activities.
3 the continuation resolution
The Continuation Resolution is being proposed as an ordinary
resolution at the EGM.
The Board does not believe that continuation of the Company as
presently constituted (being the implementation of the June 2015
Strategy and no fixed life) is in Shareholders' best interests and
is recommending that Shareholders vote AGAINST the continuation of
the Company as presently constituted and FOR the New Asset
Strategy.
In the event that the Continuation Resolution is passed, the
Company will continue as presently constituted and the Company will
continue to be managed in accordance with the existing investing
policy set out in the Admission Document and in line with the June
2015 Strategy. If the Continuation Resolution is passed, the New
Asset Strategy Resolution (details of which are set out below) will
not be put to Shareholders at the EGM.
The Board recommends Shareholders vote AGAINST the Continuation
Resolution and FOR the New Asset Strategy Resolution which is set
out below.
4 THE NEW ASSET STRATEGY RESOLUTION
In the event that the Continuation Resolution is not passed, and
conditional on the approval of the New Asset Strategy Resolution at
the EGM, the Board proposes to pursue the New Asset Strategy which
comprises changes to the Company's investing policy, distribution
policy and the remuneration structure for the Investment
Manager.
Change of Investing Policy
In March 2016, the newly constituted Board, working together
with Houlihan Lokey, continued with a review of the Company's
strategic options to maximise value for Shareholders over the
medium term. The conclusion was that such value creation could best
be achieved through an orderly sale of both the Core Projects and
the Non-Core Assets rather than the continued application of the
June 2015 Strategy. Consistent with this investing policy, a Core
Project and a Non-Core Asset were divested as previously notified
to Shareholders. Subject to Shareholder consent at the EGM, it is
proposed that the Company will adopt the New Asset Strategy
whereby:
-- the distinction between Core Projects and Non-Core Assets is
no longer considered relevant other than for the purposes of
calculating the existing performance fee under the Existing IMA.
All the Company's remaining assets will be marketed by the Company
in a controlled, orderly and timely manner in order to realise
their value;
-- the Board and DCP, working with the Company's advisers, will
explore the best manner in which this can be achieved on an asset
by asset basis, in the light of prevailing market conditions and
circumstances, in order to maximise returns to Shareholders;
-- the Board's objective is to dispose of all of the Company's
assets by 31 December 2019 (the "Divestment Period"); and
-- the allocation of any additional capital investment into any
of the Company's projects will be substantially sourced from joint
venture agreements with third party capital providers and project
level debt and with the sole objective of enhancing the respective
asset's realisation potential and value within the Divestment
Period.
The Board is encouraged by the recent disposals of a Core
Project and a Non-Core Asset and anticipates that the
implementation of the Company's proposed New Asset Strategy on the
above basis will enable the Company to dispose of its investment
portfolio within the Divestment Period and generate cash
distributions for Shareholders.
Shareholders will be provided with the opportunity to assess the
New Asset Strategy and consider the future of the Company at the
end of the Divestment Period. Accordingly, providing that there are
any assets remaining in the Company's portfolio, shortly before the
end of the Divestment Period, the Board will convene a
Shareholders' meeting at which appropriate resolutions will be
proposed.
Distribution Policy
The Board expects to return the proceeds from asset sales to
Shareholders as the orderly realisation of the Company's investment
portfolio progresses. Although the exact quantum and timing of
returns of capital to Shareholders will be at the discretion of the
Board following receipt by the Company of the net proceeds from
realisations of asset sales, the Board intends to distribute to
Shareholders at least 50 per cent. of the net proceeds
approximately three months after the completion of each disposal,
subject to consideration of the Company's outstanding liabilities
(including any borrowings) and general working capital
requirements. The Board will not build up substantial cash reserves
other than to meet such liabilities and working capital
requirements and may make additional distributions depending on the
Company's circumstances.
Remuneration structure for the Manager
The Existing IMA was put in place in June 2015 to match the
previous strategy which involved the development of the Core
Projects. Given the proposed change of strategy involving the
removal of the distinction between Core Projects and Non-Core
assets and the orderly sale of all assets within the Divestment
Period, the Board believe that the current arrangement stands as a
disincentive to sell assets.
In order to further align the interests of Shareholders and DCP
in terms of the achievement of the New Asset Strategy, the Company
and the Manager have, conditionally upon the approval of the New
Asset Strategy Resolution at the EGM, entered into the Amended IMA
which amends the fees payable to the Manager.
Subject to the New Asset Strategy Resolution below becoming
effective, with retroactive effect from 1 July 2016, the Amended
AMF will comprise two components as follows:
i. Fixed Management Fee
The AMF for the second half of 2016 will be retrospectively
reduced from EUR8.5 million to EUR6.5 million per annum and will
then be set to a fixed declining annual amount equal to EUR6
million for 2017, EUR5 million for 2018 and EUR4 million for
2019.
Additionally, the term of the IMA will be reduced and will
expire at the earlier of the end of the Divestment Period rather
than August 2020 as under the current terms of the Existing IMA.
There will be no fixed management fee due for 2020.
ii. Variable Management Fee
In order to incentivise the Manager to sell assets in a timely
manner and at the highest value to maximize proceeds to the
Company, a variable management fee will be introduced which will
become payable solely upon the execution of each asset divestment
by the Company. The variable management fee would be equal to a
percentage of the enterprise value (i.e. the equity value of the
asset plus any loans or other liabilities assumed by its purchaser)
of any asset disposed by the Company during the Divestment Period
at a valuation at or in excess of 50 per cent. of its latest
reported NAV.
The variable management fee percentage will be equal to 3 per
cent. for divestments executed within H2 2016 and will reduce to
2.5 per cent., 2.0 per cent. and 1.3 per cent. for those concluded
in 2017, 2018 and 2019 respectively for disposals completed at 50
per cent. of latest reported NAV. The variable management fee will
increase in respect of transactions executed at sales prices
exceeding 50 per cent. of their NAV.
The variable management fee will become payable to the Manager
three months from the completion of the respective disposal.
Specifically in relation to the Playa Grande disposal, EUR1 million
of the variable management fee will be paid upon the completion of
the disposal and the balance will become payable at the earlier of
the date when the Company makes a distribution of proceeds from
asset sales to Shareholders or nine months from the completion of
the Playa Grande disposal.
DCP is entitled to a performance fee payable under the terms of
the current IMA. There will be no change to this entitlement.
However, any performance fees earned under this arrangement will be
fully deducted from any future AMF and variable management fee
payable over the term of the IMA.
Pursuant to the Amended IMA, DCP will fully waive any rights
under the DCP Awards that it is entitled to under the terms of the
Existing IMA and the Company's share incentive plan.
The proposed amendments are expected to result in a reduction in
the fixed compensation payable to the Manager over the remaining
term of the Amended IMA ranging from 18 per cent. to 25 per cent as
compared to the Existing IMA. The disposals-related variable
management fee depends on the pricing and timing of each
divestment.
The Manager has estimated that over the Divestment Period, the
Company may be capable of realizing gross cash proceeds ranging
between approximately EUR190 million to EUR310 million based on
asset sales prices ranging between 50 per cent. to 100 per cent. of
NAV as at 30 June 2016. After deduction of estimated annual
management fees (of which variable management fee ranging from
EUR11 million to EUR28 million depending on sale prices), operating
and financing expenses, this would equate to approximately EUR135
million to EUR235 million being available for distribution to
Shareholders.
The aggregate of the variable management fee and the AMF payable
to the Investment Manager may exceed the amount that could be
payable under the terms of the Existing IMA. The Board believes
that the revised terms of the Amended IMA are appropriate to
provide a suitable level of incentivisation to the Investment
Manager to expedite the pace of disposals and maximise sales
prices.
These figures are illustrative estimates only. Due to various
risks and uncertainties, actual events or results or the actual
performance of the Company or any investment, these figures may
differ materially from those reflected in such illustrative
estimates. Any projections, market outlooks or illustrative
estimates are forward-looking statements and are based upon certain
assumptions. Other events which were not taken into account may
occur and may significantly affect the performance of the Company
or any investment. Any outlooks and assumptions should not be
construed to be indicative of the actual events which will
occur.
The Directors, other than Miltos Kambourides by virtue of his
role with DCP, having consulted with the Nominated Adviser, believe
the entry into the Amended IMA is fair and reasonable insofar as
the Shareholders are concerned.
5 RECOMMENDATION
The Board considers that voting against the Continuation
Resolution is in the best interests of the Company and its
Shareholders as a whole. Therefore, the Board recommends all
Shareholders to vote AGAINST the Continuation Resolution which is
being proposed at the EGM.
If the Continuation Resolution is passed, the New Asset Strategy
Resolution will not be put to Shareholders at the EGM.
In the event that the Continuation Resolution fails, the Board
considers the New Asset Strategy Resolution to be proposed at the
EGM to be in the best interests of Shareholders as a whole.
Accordingly, if the Continuation Resolution is not passed, the
Board recommends all Shareholders to vote FOR the New Asset
Strategy Resolution to be proposed at the EGM.
In the event that the Continuation Resolution and the New Asset
Strategy Resolution both fail, the Board will formulate new
proposals to be put to Shareholders as soon as reasonably
practicable and, in any event, within six months of the date of the
EGM.
The Company has received undertakings from Directors and
indications of support from Shareholders controlling in excess of
50% of the common shares in aggregate to vote AGAINST the
Continuation Resolution and FOR the New Asset Strategy
Resolution.
For further information, please contact:
Dolphin Capital Investors
Andrew M Coppel, CBE +44 (0) 7785 577023
Dolphin Capital Partners
Miltos E Kambourides miltos@dolphincp.com
Panmure Gordon
(Broker)
Richard Gray / Dominic Morley
/ Andrew Potts +44 (0) 20 7886 2500
Grant Thornton
(Nominated Adviser)
Philip Secrett +44 (0) 20 7383 5100
Instinctif
(PR Communications Adviser)
Mark Garraway +44 20 7457 2007
This information is provided by RNS
The company news service from the London Stock Exchange
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December 02, 2016 02:01 ET (07:01 GMT)