Pre-Annual General Meeting Information • Sep 15, 2011
Pre-Annual General Meeting Information
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If you are in any doubt about the contents of this document or the action you should take, you should consult your stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised under the Financial Services and Markets Act 2000 immediately.
If you have sold or otherwise transferred all of your Ordinary Shares you should send this document and the accompanying Form of Proxy as soon as possible to the purchaser or transferee, or to the stockbroker, bank or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. However such documents should not be distributed, forwarded or transmitted into any jurisdiction in which to do so would constitute a breach of the relevant laws of such jurisdiction. If you have sold or otherwise transferred only part of your holding, you should retain these documents.
UBS Limited is acting as financial adviser to Dunelm in connection with the Waiver Resolutions described in this document and no-one else and will not be responsible to anyone other than Dunelm (whether or not a recipient of this document) for providing the protections afforded to clients of UBS nor for providing advice in relation to the proposals described in this document or any other matter referred to in this document. Persons other than Dunelm are recommended to seek their own financial and other professional advice.
Notice of Annual General Meeting including Adoption of new Articles of Association, Amendment to the Rules of the Dunelm Group 2006 Long-Term Incentive Plan, Authority to Make Market Purchases of its Ordinary Shares and certain other matters
This document should be read as a whole. Your attention is drawn to the letter from the Chairman of Dunelm set out in Part 1 of this document which contains the recommendation by the Directors (excluding W L Adderley for the purposes of the Waiver Resolutions) to Shareholders to vote in favour of the Resolutions to be proposed at the Annual General Meeting, notice of which is set out in Part 4 of this document. Shareholders should read the whole of this document and not rely just on the summarised information set out in the Chairman's letter.
Notice of the Annual General Meeting of Dunelm to be held at The Cheshunt Marriott Hotel, Halfhide Lane, Turnford, Herts, EN10 6NG at 10.30 am on 17 November 2011 is set out at the end of this document. The Form of Proxy for use at the Annual General Meeting accompanies this document and, to be valid, should be completed and returned in accordance with the instructions set out thereon as soon as possible but in any event so as to reach Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6ZX, not later than 10.30 am on 15 November 2011. Shareholders who hold their Ordinary Shares in CREST may appoint a proxy by completing and transmitting a CREST Proxy Instruction to Equiniti so that it is received no later than 10.30 am on 15 November 2011. Completion and return of the Form of Proxy or the transmission of a CREST Proxy Instruction will not preclude Shareholders from attending and voting in person at the Annual General Meeting, should they so wish.
| PART 1 : LETTER FROM THE CHAIRMAN 2 | |
|---|---|
| PART 2 : ADDITIONAL INFORMATION 8 | |
| PART 3 : DEFINITIONS 13 | |
| PART 4 : NOTICE OF ANNUAL GENERAL MEETING 15 |
Your attention is drawn to the Definitions in Part 3 which apply throughout this document and the Form of Proxy unless the context requires otherwise.
(Incorporated and registered in England and Wales with No. 4708277)
Directors: Registered office: W L Adderley ( Executive Deputy Chairman) Fosse Way G I Cooper (Non-Executive Chairman) Syston S Emeny (Independent Non-Executive Director) Leicester M J Sears (Senior Independent Non-Executive Director) Leicestershire D A Stead (Finance Director) LE7 1NF N B E Wharton (Chief Executive)
15 September 2011
The purpose of this letter is to provide you with an explanation of the Resolutions to be proposed at the Annual General Meeting of the Company which will be held at The Cheshunt Marriott Hotel, Halfhide Lane, Turnford, Herts, EN10 6NG at 10.30 am on 17 November 2011 and to seek your approval of them. The notice of Annual General Meeting is set out at pages 15 to 19 of this document.
The Directors believe that the Resolutions to be proposed at the Annual General Meeting are in the best interests of the Company and Shareholders as a whole and accordingly they recommend that you vote in favour of each of the Resolutions at the Annual General Meeting, save that W L Adderley makes no recommendation with regard to the Waiver Resolutions (being Resolutions 15 and 16) as, in accordance with the provisions of the Takeover Code, W L Adderley is considered to be interested in the outcome of the Waiver Resolutions.
All of the Resolutions to be proposed at the Annual General Meeting are explained in further detail below.
The ordinary business of the Annual General Meeting comprises Resolutions 1 to 11 inclusive.
The Directors are required to lay the Directors' Report, the audited annual accounts of the Company and the independent Auditor's Report before Shareholders at the Annual General Meeting. Accordingly, Resolution 1 presents the accounts for the year ended 2 July 2011 and, although not a statutory requirement, proposes the accounts for adoption. A copy of the Annual Report accompanies this document.
Shareholder approval is required for the payment of a final dividend as recommended by the Board. Subject to Shareholder approval this dividend will be paid on 16 December 2011 to Shareholders on the register of members of the Company at the close of business on 25 November 2011.
In accordance with the provisions of the UK Corporate Governance Code, all directors will be retiring and will offer themselves for re-election at the Annual General Meeting.
Biographies of each of these Directors are contained on page 24 of the Annual Report.
The Board believes, following the completion of the annual performance evaluation and appraisal exercise, that the performance of the Directors seeking re-election continues to be effective and that these Directors demonstrate commitment to their roles.
The Board and the Nominations Committee are mindful that both Geoff Cooper and Marion Sears have been on the Board for more than six years. The Board considers that each of these individuals continues to offer valuable leadership and challenge to the Board. In the context of the transition of the Chief Executive role and the ongoing search for an additional Non-Executive Director, the Board consider that their continued presence on the Board outweighs any benefit that might be obtained by seeking to replace them.
Under section 420 of the CA 2006 the Directors must prepare an annual report detailing the remuneration of the Directors and the Company's remuneration policy. Section 439 requires that an ordinary resolution be put to Shareholders each year for their approval of that report. The vote is advisory, however, and the Directors' entitlement to remuneration is not conditional on the Resolution being passed. The remuneration report is on pages 38 to 46 of the Annual Report.
The Company's auditors must offer themselves for reappointment at each general meeting at which accounts are presented. On the advice of the Company's audit committee, the Board proposes that KPMG Audit Plc be reappointed as auditors of the Company.
This resolution gives authority to the Directors to agree the auditors' remuneration.
The special business to be considered at the Annual General Meeting comprises Resolutions 12 to 19 inclusive.
This Resolution gives the Directors authority to allot unissued share capital with a nominal value of up to £671,637, which, as at 14 September 2011, being the latest practicable date prior to the publication of this document, represented approximately one third of the Company's issued Ordinary Share capital of £2,014,911.
This authority will expire at the conclusion of the next annual general meeting of the Company after the passing of this Resolution or, if earlier, on 31 December 2012 unless it is previously renewed, varied or revoked.
The Company held no Ordinary Shares in treasury as at 14 September 2011, being the latest practicable date prior to the publication of this document.
The Directors have no present intention to issue any unissued Ordinary Shares in the Company other than in respect of the exercise of Share Options by employees under the Employee Share Schemes.
This Resolution gives the Directors authority to allot equity securities of the Company (including any Ordinary Shares held which the Company has purchased and elected to hold as treasury shares) for cash other than on a pre-emptive basis as provided by the CA 2006. Other than in connection with a rights or other pre-emptive issue, the authority contained in this Resolution will be limited to issues of Ordinary Shares representing an aggregate nominal value of £100,746, which in turn represents approximately 5 per cent of the issued Ordinary Shares of the Company as at 14 September 2011, being the latest practicable date prior to the publication of this document.
The Directors have no present intention to issue any unissued Ordinary Shares in the Company other than in respect of the exercise of Share Options by employees under the Employee Share Schemes. The Directors do not intend to issue more than 7.5 per cent of the issued share capital of the Company for cash on a pre-emptive basis in any three year period without prior consultation with the Investment Committees of the Association of British Insurers and the National Association of Pension Funds.
This Resolution, which is conditional on the passing of Resolution 15, seeks authority for the Company to buy back its own Ordinary Shares in the market as permitted by the CA 2006. The authority, if granted, limits the number of Ordinary Shares that could be purchased to a maximum of 5,000,000 Ordinary Shares, representing approximately 2.5 per cent. of the Company's issued Ordinary Share capital as at 14 September 2011, and sets the minimum and maximum prices that can be paid. The Company may either retain any of its own Ordinary Shares which it has purchased as treasury shares with a possible re-issue at a future date, or cancel them. Since the Company started a buy back programme of its Ordinary Shares in 2007, it has not cancelled any of the Ordinary Shares that it has bought into treasury. The Company intends to hold any Ordinary Shares that it purchases pursuant to the authority conferred by this Resolution as treasury shares for re-issue to employees exercising Share Options under the Employee Share Schemes, because the Board believes that this gives the Company the ability to cost-effectively fulfill Share Option entitlements, and provides the Company with additional flexibility in the management of its capital base. The Company does not intend to re-issue for sale or cancel any Ordinary Shares that it purchases pursuant to the Authority to Make Market Purchases.
During the period from November 2007 to September 2008 the Company bought 1,322,000 Ordinary Shares into treasury, and during the period from March 2008 to October 2010 all of these Ordinary Shares have been transferred out of treasury to those employees of the Company who have exercised Share Options under the terms of the Employee Share Schemes. During the financial year under review the Company did not utilise the authority to make market purchases conferred at the 2010 annual general meeting. The Company intends on an annual basis to grant Share Options to executive Directors and senior employees pursuant to the LTIP and to employees pursuant to the Dunelm SAYE Scheme.
The total number of options over Ordinary Shares outstanding as at 14 September 2011 was 2,471,183 representing approximately 1.23 per cent. of the issued Ordinary Share capital of the Company as at 14 September 2011. If the authority to buy back shares were utilised in full, the total number of options to subscribe for Ordinary Shares outstanding as at 14 September 2011 would, assuming no further Ordinary Shares are issued, represent approximately 1.26 per cent. of the issued capital of the Company.
A purchase of Ordinary Shares by the Company pursuant to the Authority to Make Market Purchases could increase the percentage of voting rights held by W L Adderley. In certain circumstances (described below) such an increase could trigger an obligation on W L Adderley to make a mandatory offer for the whole of the issued share capital of the Company pursuant to the Takeover Code. Independent Shareholders will be asked, under Resolution 15, to approve the waiver by the Panel of the mandatory offer provisions such that the purchases of Ordinary Shares by the Company pursuant to the Authority to Make Market Purchases will not trigger a requirement for W L Adderley to make a mandatory offer for the entire issued share capital of the Company. Further details of this waiver are set out below.
The Waiver Resolutions, each of which will be proposed as an ordinary resolution to be taken by poll, seek Independent Shareholders' approval of a waiver of the obligation that could arise on W L Adderley to make a general offer for the entire issued share capital of the Company as a result of:
Under Rule 9 of the Takeover Code, when (i) any person acquires, whether by a series of transactions over a period of time or not, an interest in shares which, taken together with shares in which he and persons acting in concert with him are interested, carry 30 per cent. or more of the voting rights of a company subject to the Takeover Code, or (ii) any person who, together with persons acting in concert with him, is interested in shares which in aggregate carry not less than 30 per cent. of the voting rights of a company, but does not hold shares carrying more than 50 per cent. of such voting rights and such person, or any person acting in concert with him, acquires an interest in any other shares which increases the percentage of the shares carrying voting rights in which he is interested, then in either case, that person is normally required to make a general offer in cash for all the remaining equity share capital of the company at the highest price paid by him, or any persons acting in concert with him, for shares in the company within the twelve months prior to announcement of the offer.
The Company has applied to the Panel for a waiver of Rule 9 of the Takeover Code in order to permit:
without triggering an obligation on the part of W L Adderley to make a general offer to Shareholders. The Panel has agreed, subject to Independent Shareholders' approval on a poll, to waive the requirement for W L Adderley to make a general offer to all Shareholders where such an obligation would arise as a result of purchases by the Company of up to 5,000,000 Ordinary Shares and/or the grant (and subsequent vesting and exercise) of Share Options to W L Adderley referred to in (ii) above.
It should be noted that, as disclosed in an announcement by the Company on 14 December 2009, and referred to in the 2010 Notice of Annual General Meeting, the Panel has previously consented to W L Adderley receiving Ordinary Shares as a result of the vesting and exercise of options under the Company's SAYE Scheme and LTIP in the ordinary course. In addition, at the annual general meeting of the Company in 2010, Independent Shareholders approved the issue to and subsequent exercise by W L Adderley of options under the LTIP with a market value at the date of grant of up to 120 per cent of base salary.Therefore the exercise of any Share Options which are held as at the date of this document (as detailed in Part 2 of this document) will not trigger an obligation on the part of W L Adderley to make a general offer to Shareholders.
As W L Adderley is interested in the outcome of Resolutions 15 and 16 he will be precluded from voting on these Resolutions. In addition, since the time of the flotation of the Company, W L Adderley and his parents, Jean and Bill Adderley, have been considered to be acting in concert for the purposes of Rule 9 of the Takeover Code and subsequently Nadine Adderley, The Leicester Foundation and the Paddocks Trust (a private trust relating to the Adderley family) have also become members of the Concert Party. The Concert Party holds and/or is deemed to be interested in 118,353,939 Ordinary Shares representing 58.7 per cent. of the issued share capital of the Company as at 14 September 2011, being the latest practicable date prior to the publication of this document. Accordingly none of these Shareholders are considered to be independent in relation to Resolutions 15 and 16 and they are precluded from voting on these Resolutions.
Following exercise of the Authority to Make Market Purchases (either in whole or in part) and the proposed grant (and subsequent vesting and exercise) of Share Options to W L Adderley, W L Adderley will continue to be interested in shares which carry more than 30 per cent. but will not hold more than 50 per cent. of the Company's voting share capital, and any further increase in the number of shares in which he is interested (other than a further exercise of the Authority to Make Market Purchases) will be subject to the provisions of Rule 9 of the Takeover Code.
Following the appointment of Nick Wharton as an Executive Director of the Company on 1 December 2010, the Company has been seeking to appoint an additional independent Non-Executive Director, to bring the Board back into the balance required by the Corporate Governance Code. This selection process is ongoing and it is hoped that a candidate will be appointed to the Board during the 2011/12 financial year.
Apart from supporting the appointment of an additional Non-Executive Director, W L Adderley is not presently proposing any changes to the Board nor changes to the employment rights of employees of the Company or any re-deployment of the fixed assets of the Company and his intention, following any increase in his shareholding as a result of any repurchase of Ordinary Shares, is that the business of the Company should continue to be run in substantially the same manner as at present. W L Adderley is not intending to purchase any additional Ordinary Shares during the period covered by the Authority to Make Market Purchases.
Pursuant to the Relationship Agreement, each of J Adderley, W Adderley and W L Adderley accepted certain restrictions relating, inter alia, to their relationship with the Dunelm Group and their voting rights for so long as, individually or together, they are entitled to exercise, or to control the exercise of, 30 per cent. or more of the rights to vote at general meetings of the Company or they are able to control the appointment of directors who are able to exercise a majority of votes at board meetings of the Company. W L Adderley joined the business in 1992. He has worked in and is familiar with all major areas of the business and took over the running of the Group as Chief Executive from his father in 1996. In February 2011 he relinquished the role of Chief Executive to Nick Wharton, and became Executive Deputy Chairman.
Under Rule 37 of the Takeover Code, when a company purchases its own voting shares, any resulting increase in the percentage of shares carrying voting rights in which a person or group of persons acting in concert is interested will be treated as an acquisition for the purpose of Rule 9 (although a shareholder who is neither a director nor acting in concert with a director will not normally incur an obligation to make a Rule 9 offer).
W L Adderley is currently beneficially interested in an aggregate of 69,943,939 Ordinary Shares representing 34.7 per cent. of the issued share capital of the Company (and would be beneficially interested in an aggregate of 70,407,671 Ordinary Shares representing 34.9 per cent. of the issued share capital of the Company if all options in which he is interested at the date of this document vest and are exercised). If the Company were to repurchase from persons other than W L Adderley or Nadine Adderley, Ordinary Shares for which it is seeking authority, W L Adderley's percentage interest in the Ordinary Share capital of the Company would (assuming no other allotments of Ordinary Shares) increase to 35.6 per cent. of the issued share capital of the Company (or 35.75 per cent. taking into account the options referred to above) by virtue of such repurchase. Accordingly, an increase in the percentage of the Ordinary Shares carrying voting rights in which W L Adderley is interested, as a result of any exercise by the Company of the Authority to Make Market Purchases, would ordinarily have the effect of triggering Rule 9 of the Takeover Code and result in W L Adderley being under an obligation to make a general offer to all Shareholders.
The interests of the Concert Party are set out in Part 2 of this document.
The purpose of this Resolution is to seek the approval of Independent Shareholders to a waiver of the obligation that might otherwise arise under Rule 9 of the Takeover Code on the exercise of the Authority to Make Market Purchases (Resolution 14).
W L Adderley is currently beneficially interested in an aggregate of 69,943,939 Ordinary Shares representing 34.7 per cent. of the issued share capital of the Company (and would be beneficially interested in an aggregate of 70,407,671 Ordinary Shares representing 34.9 per cent. of the issued share capital of the Company if all options in which he is interested at the date of this document vest and are exercised). The grant (and subsequent vesting and exercise) of further Share Options to W L Adderley would (assuming no other allotments of Ordinary Shares) further increase his interest in the issued share capital of the Company. If the maximum number of shares were repurchased, as described above, all options in which W L Adderley is currently interested vested and were exercised, and options over up to a further 0.4 per cent. of the issued share capital at the time of grant were issued, vest and were exercised, W L Adderley would have an interest representing 35.75 per cent. of the issued share capital of the Company (assuming that the Authority to Make Market Purchases is utilised in full). The increase in W L Adderley's interest in the issued share capital of the Company described above would ordinarily have the effect of triggering Rule 9 of the Takeover Code and result in W L Adderley being under an obligation to make a general offer to all Shareholders.
The purpose of this Resolution is to seek the approval of Independent Shareholders to a waiver of the obligation that might otherwise arise under Rule 9 of the Takeover Code.
The rules of the LTIP provide that no participant may be granted a share option which would, at the date it is granted, have a market value in excess of 120 per cent of the participant's base salary. Following a review of the remuneration of the Executive Directors by the Remuneration Committee, and having consulted with major shareholders, it is proposed that this limit be increased to 150 per cent of a participant's base salary by amending the rules of the LTIP. All future awards granted under the LTIP would therefore be subject to this increased limit. The anti-dilution rules issued by the Association of British Insurers in its Guidelines on Executive Remuneration will be adhered to in revelation to all Share Options issued by the Company. A copy of the rules of the LTIP will be available for inspection at the Company's registered office and at the offices of Gateley LLP at Fleet Place House, 2 Fleet Place, Holborn Viaduct, London, EC4M 7RF during normal business hours from the date of this circular to the date of the Annual General Meeting, and at the place of the Annual General Meeting from at least 15 minutes prior to the meeting.
It should be noted that, although there are subsisting awards pursuant to the LTIP, there is no employee benefit trust in place and therefore the consent of trustees to the making of this amendment (in accordance with Rule 13.1) is not required.
The purpose of this Resolution is to seek approval of shareholders to an amendment of the rules of the LTIP to increase the limit from 120 per cent of base salary to 150 per cent of base salary.
It is proposed in resolution 18 to adopt new Articles of Association ( the 'New Articles') in order to update the Company's current Articles of Association ( the 'Current Articles') primarily to take account of the coming into force of the Shareholders' Rights Regulations, certain amendments to the Uncertificated Securities Regulations 2001, and the implementation of the last parts of the CA 2006.
The principal changes introduced in the New Articles are summarised below. Other changes, which are of a minor, technical or clarifying nature, and also some changes that merely reflect changes made by the CA 2006 ,certain amendments to the Uncertificated Securities Regulations 2001,or the Shareholders' Rights Regulations, have not been noted. A copy of the proposed New Articles and a copy of the Memorandum of Association and Current Articles, marked to show all the changes proposed, will be available for inspection at the Company's registered office and at the offices of Gateley LLP at Fleet Place House, 2 Fleet Place, Holborn Viaduct, London, EC4M 7RF during normal business hours from the date of this circular to the date of the Annual General Meeting, and at the place of the Annual General Meeting from at least 15 minutes prior to the meeting until the conclusion of the meeting.
Prior to 1 October 2009, the provisions regulating the operations of the Company were set out in the Company's Memorandum and Articles of Association. The Company's Memorandum contained, among other things, the objects clause which sets out the scope of the activities the Company is authorised to undertake. This is drafted to give a wide scope. The CA 2006 significantly reduces the constitutional significance of a company's memorandum, providing that a memorandum will record only the names of the subscribers and the number of shares each subscriber has agreed to take in the Company. Under the CA 2006, the objects clause and all other provisions that are contained in a company's memorandum are deemed to be contained in the company's articles of association, but the company can remove these provisions by special resolution.
Further, the CA 2006 states that, unless a company's articles provide otherwise, a company's objects are unrestricted. This abolishes the need for a company to have an objects clause. For this reason, the Company is proposing to remove its objects clause, together with all other provisions of its Memorandum which, by virtue of the CA 2006, are now treated as forming part of its Articles of Association. Resolution 18 confirms the removal of these provisions although, where appropriate, to preserve the status quo, certain Directors' powers that were previously dealt with in the Memorandum have been added back into the New Articles. As the effect of Resolution 18 will also be to remove the statement currently in the Company's Memorandum of Association regarding limited liability, the New Articles also contain an express statement regarding the limited liability of shareholders.
The CA 2006 abolishes the requirement for a company to have an authorised share capital, and the New Articles reflect this. Directors will still be limited as to the number of shares that they can at any time allot because allotment authority continues to be required under the CA 2006, save in respect of employees' share schemes.
Under the Companies Act 1985, if a company wished to issue redeemable shares, it had to include in its articles the terms and manner of redemption, whereas the CA 2006 enables directors to determine such matters themselves, provided that they are authorised to do so by the articles. The New Articles contain such an authorisation for the Directors. The Company has no plans to issue redeemable shares but, if it did so, the Directors would need shareholders' authority to issue new shares in the usual way.
The Current Articles refer to a power for the Company by ordinary resolution to convert its paid up shares into stock. This is no longer possible under the CA 2006 and, accordingly, the provision has been deleted.
The Current Articles permit the Directors to suspend the registration of share transfers. This power has been removed in the New Articles because it is inconsistent with the CA 2006, which requires share transfers to be registered as soon as practicable.
The Shareholders' Rights Regulations amend the CA 2006 to require the Company to give 21 clear days' notice of general meetings unless the Company offers members an electronic voting facility and a special resolution reducing the period of notice to not less than 14 days has been passed. Annual General Meetings must be held on 21 clear days' notice. The New Articles amend the provisions of the Current Articles to be consistent with the new requirements.
Under the CA 2006, as amended by the Shareholders' Rights Regulations, general meetings adjourned for lack of quorum must be held at least 10 clear days after the original meeting. The New Articles amend the provisions of the Current Articles to reflect this requirement.
The New Articles remove the provision in the Current Articles giving the Chairman a casting vote at a general meeting in the event of an equality of votes, as this is no longer permitted by the CA 2006.
The Shareholders' Rights Regulations have amended the CA 2006 so that it now provides that, subject to a company's articles, each proxy appointed by a member has one vote on a show of hands, unless the proxy is appointed by more than one member. In this case the proxy has one vote for and one vote against, if the proxy has been instructed by one or more members to vote for the resolution, and by one or more members to vote against the resolution. The New Articles amend the provisions of the Current Articles to reflect these changes, and to clarify the procedure to be followed if a proxy is appointed by more than one member and is given discretion as to how to vote by one or more of those members.
Under the CA 2006, as amended by the Shareholders' Rights Regulations, the Company must determine the right of members to vote at a general meeting by reference to the Register not more than 48 hours before the time for the holding of the meeting, not taking account of days that are not working days. The CA 2006 also allows companies to set a time limit for the receipt of proxy appointments and related documents that is not more than 48 hours before the time for the holding of the meeting, not taking account of days that are not working days. The New Articles amend the Current Articles to reflect these provisions.
Under the Shareholders' Rights Regulations, proxies are expressly required to vote in accordance with instructions given them by members. For the avoidance of doubt, the New Articles contain a provision stating that the Company is not obliged to check whether a proxy or corporate representative has voted in accordance with the member's instructions.
In line with market practice, the New Articles update the Current Articles to provide that the value of shares issued in connection with a scrip dividend may be determined by ordinary resolution, or by reference to the average middle-market quotation for shares of the same class on the London Stock Exchange Daily Official List for the day on which the shares are first quoted 'ex' dividend, and the four subsequent dealing days. The New Articles also allow the Directors the flexibility at any time before the further shares are allotted to decide that the dividend will be paid in cash instead.
Generally, the opportunity has been taken to bring clearer language into the New Articles and in some areas to conform the language of the New Articles to the language used in the CA 2006.
This Resolution relates to the EU Shareholder Rights Directive which increases the notice period for general meetings of traded companies to 21 days unless certain conditions are met. One of the conditions is that a shareholder resolution, such as Resolution 19, reducing the notice period to 14 clear days is passed on an annual basis.
You will find set out at the end of this document a notice convening the Annual General Meeting of the Company to be held at The Cheshunt Marriott Hotel, Halfhide Lane, Turnford, Herts, EN10 6NG at 10.30 am on 17 November 2011, at which the Resolutions referred to above will be proposed.
A Form of Proxy for use at the Annual General Meeting is enclosed. You are requested to complete the Form of Proxy accompanying this document in accordance with the instructions printed thereon, whether or not you intend to be present at the Annual General Meeting, and return it to the Company's registrar, Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6ZX as soon as possible and in any event so that it is received not later than 10.30 am on 15 November 2011.
Shareholders who hold their Ordinary Shares in CREST may appoint a proxy by completing and transmitting a CREST Proxy Instruction to Equiniti so that it is received not later than 10.30 am on 15 November 2011.
Completion and return of the Form of Proxy or the transmission of a CREST Proxy Instruction will not preclude Shareholders from attending and voting in person at the Annual General Meeting, should they so wish.
Your attention is drawn to the Annual Report and to Part 2 of this document which contain certain additional information in respect of the Company and the Directors' interests. Shareholders are advised to read the whole of this document and the Annual Report and not rely solely on the summary information set out in this letter.
The Board believes the proposals described above regarding the Resolutions to be proposed at the Annual General Meeting to be in the best interests of the Company and Shareholders as a whole, save that W L Adderley makes no recommendation with regard to the Waiver Resolutions (being Resolutions 15 and 16) as, in accordance with the provisions of the Takeover Code, W L Adderley is considered to be interested in the outcome of the Waiver Resolutions. Accordingly the Board, excluding W L Adderley for the purposes of Resolutions 15 and 16, recommends that Shareholders vote in favour of such Resolutions at the Annual General Meeting, as the Directors intend to do in respect of their own beneficial holdings of Ordinary Shares, which amount to 35.1 per cent. of the issued Ordinary Shares, save that W L Adderley will not vote in respect of his holdings of Ordinary Shares, which amount to 34.7 per cent of the issued Ordinary Shares, on either of the Waiver Resolutions, in which he is considered to be interested.
The Independent Directors, who have been so advised by UBS, consider the waiver of the obligation that could arise on W L Adderley to make an offer under Rule 9 of the Takeover Code in relation to the Authority to Make Market Purchases and the grant (and subsequent vesting and exercise) of Share Options to be in the best interests of the Independent Shareholders as a whole. In providing its advice to the Independent Directors, UBS has taken account of the Independent Directors' commercial assessments. Accordingly, the Independent Directors unanimously recommend that Independent Shareholders vote in favour of the Waiver Resolutions to be proposed at the Annual General Meeting, as the Independent Directors intend to do in respect of their own beneficial holdings of Ordinary Shares, which amount to approximately 0.4 per cent. of the issued Ordinary Shares.
Yours sincerely
To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that this is the case), such information is in accordance with the facts and does not omit anything likely to affect the import of such information.
3.1 The Directors intend to continue conducting the business of the Company and its subsidiaries in a similar manner as it is currently conducted and there are currently no plans to introduce any major changes to the business of the Company and its subsidiaries or the terms of engagement of any employees of the Company and its subsidiaries.
| Number of Ordinary Shares | per cent. of the issued Ordinary Share capital | |
|---|---|---|
| W L Adderley* | 69,943,939 | 34.7 |
| D Stead | 529,338 | 0.26 |
| G Cooper | 181,611 | 0.09 |
| M Sears | 101,313 | 0.05 |
| S Emeny | 26,400 | 0.01 |
| N Wharton | 30,000 | 0.01 |
* 2,283,939 Ordinary Shares are registered in the name of Nadine Adderley, W L Adderley's wife.
In addition W L Adderley is deemed to hold a legal interest in 167,250 Ordinary Shares held by The Leicester Foundation and 172,750 Ordinary Shares held by the Paddocks Trust. W L Adderley and Nadine Adderley are the trustees, but not beneficiaries, of The Leicester Foundation and the Paddocks Trust.
Under the Long-Term Incentive Plan:
| Number of options |
Earliest Vesting Date |
|
|---|---|---|
| W L Adderley | 259,459 | Sept 2011 |
| 123,949 | Sept 2012 | |
| 72,614 | Dec 2013 | |
| D Stead | 178,378 | Sept 2011 |
| 85,215 | Sept 2012 | |
| 60,835 | Dec 2013 | |
| N Wharton | 55,666 | Dec 2013 |
| 198,807 | Dec 2015 | |
| Under the Dunelm SAYE Scheme: | Number of options |
Earliest Vesting Date |
|---|---|---|
| W L Adderley | 7,710 | January 2012 |
| D Stead | 7,710 | January 2012 |
If the Company were to repurchase from persons other than W L Adderley all the Ordinary Shares for which it is seeking authority, and W L Adderley were to receive and exercise the maximum number of options to which he might be entitled, as set out in this document, W L Adderley's interest in shares would (assuming no other allotments of Ordinary Shares) increase to 35.75 per cent. of the issued share capital of the Company by virtue of such actions.
4.3 As at the close of business on 14 September 2011 (being the latest practicable date prior to the publication of this document) the interests (all of which are beneficial unless otherwise stated) of each member of the Concert Party in the Ordinary Share capital of the Company as notified to the Company were as follows:
| Number of Ordinary Shares |
per cent. of the issued Ordinary Share capital |
|
|---|---|---|
| W L Adderley1,2 | 67,660,000 | 33.6 |
| N Adderley2 | 2,283,939 | 1.1 |
| W Adderley | 39,400,000 | 19.5 |
| J Adderley | 8,670,000 | 4.3 |
| The Leicester Foundation | 167,250 | 0.1 |
| The Paddocks Trust | 172,750 | 0.1 |
| Total | 118,353,939 | 58.7 |
Notes:
During the period of twelve months immediately prior to the publication of this document the members of the Concert Party have dealt in Ordinary Shares as follows:
If the Company were to repurchase from persons other than members of the Concert Party, Ordinary Shares for which it is seeking authority, the Concert Party's aggregate percentage interest in the Ordinary Share capital of the Company would (assuming no other allotments of Ordinary Shares) increase to 60.2 per cent. of the issued share capital of the Company (or 60.3 per cent. taking into account the options referred to above in relation to W L Adderley) by virtue of such repurchase.
4.4 Save as disclosed above and in paragraph 4.5 below, no Director has any interest in the Ordinary Share capital of the Company or any of its subsidiaries nor does any person connected with the Directors (within the meaning of section 252 of the CA 2006) have any such interests, whether beneficial or non-beneficial.
1. W L Adderley's interests are set out in detail in paragraph 4.2 above.
4.5 As at 14 September 2011 (being the latest practicable date prior to the publication of this document) the total number of voting rights attributable to the issued Ordinary Share capital of the Company was 201,491,096 and (other than the Directors) the following persons had notified the Company in accordance with Rule 5 of the Disclosure and Transparency Rules that they held, directly or indirectly, three per cent. or more of the voting rights attributable to the issued share capital of the Company:
| Number of Ordinary Shares |
per cent. of the issued Ordinary Share capital |
|
|---|---|---|
| W Adderley | 39,400,000 | 19.55 |
| J Adderley | 8,670,000 | 4.30 |
Note: W Adderley is married to J Adderley and they are the parents of W L Adderley.
Since the time of the flotation of the Company, W L Adderley and his parents, Jean and Bill Adderley, have been considered to be acting in concert for the purposes of Rule 9 of the Takeover Code and subsequently Nadine Adderley and The Leicester Foundation and the Paddocks Trust have also become members of the Concert Party. The Concert Party holds and/or is deemed to be interested in 118,353,939 Ordinary Shares representing 58.7 per cent. of the issued share capital of the Company as at 14 September 2011, being the latest practicable date prior to the publication of this document.
Shareholders should note that the Concert Party controls in excess of 50 per cent. of the Ordinary Shares in issue in the Company. Accordingly, the Concert Party, for so long as the members of the Concert Party continue to be treated as acting in concert, may be able to increase its aggregate interests in shares in the Company without incurring any further obligation under Rule 9 of the City Code to make a general offer to all shareholders of the Company to acquire their Ordinary Shares provided that individual members of the Concert Party do not increase their percentage interests in Ordinary Shares such that:
without the consent of the Takeover Panel.
Save as set out above the Directors confirm that they are unaware of any agreements, arrangements or understandings between any of the Directors or Shareholders of the Company acting in concert with any of the Directors.
It is not the Directors' intention to sell any of their shareholdings back to the Company pursuant to the Authority to Make Market Purchases. The Directors also believe that there are no related parties from whom Ordinary Shares are proposed to be purchased and in the event that any Shareholders of the Company come within the definition of related party set out in the UKLA Listing Rules, the Directors confirm that there is no prior understanding, arrangement or agreement between the Company and any related party.
The middle market quotations for the Ordinary Shares of the Company, as derived from the London Stock Exchange Daily Official List, on the first Business Day of each of the six months immediately preceding the date of this document and on 14 September 2011 (being the latest practicable date prior to the publication of this document) were:
| Date | Price per Ordinary Share (p) |
|---|---|
| 14 September 2011 | 427.1p |
| 1 September 2011 | 431.0p |
| 2 August 2011 | 461.5p |
| 1 July 2011 | 399.3p |
| 1 June 2011 | 463.7p |
| 4 May 2011 | 471.8p |
| 1 April 2011 – ex. dividend | 392.0p |
has as at 14 September 2011 (being the latest practicable date prior to the publication of this document) any interest in, right to subscribe in respect of or short position in relation to any relevant securities; and
(e) there are no relevant securities which the Company or any person acting in concert with the Directors has borrowed or lent (excluding any borrowed relevant securities which have either been on lent or sold).
In this paragraph 7.3 reference to:
(6) 'control' means an interest, or aggregate interests, in shares carrying in aggregate 30 per cent. or more of the voting rights of a company, irrespective of whether such interest or interests give de facto control; and
(7) 'dealing' or 'dealt' includes the following:
For the purposes of this paragraph 7.3 a person is treated as 'interested' in securities if he has long economic exposure, whether absolute or conditional, to changes in the price of those securities (and a person who only has a short position in securities is not treated as interested in those securities). In particular, a person is treated as 'interested' in securities if:
whether the right, option or obligation is conditional or absolute and whether it is in the money or otherwise; or
Copies of the following documents may be inspected at the offices of HBJ Gateley Wareing LLP at Fleet Place House, 2 Fleet Place, Holborn Viaduct, London, EC4M 7RF during usual business hours on any weekday (Saturdays, Sundays and public holidays excepted) from the date of this document up to and including the date of the Annual General Meeting and at the Annual General Meeting for at least 15 minutes before and during the Annual General Meeting:
The following definitions apply throughout this document, unless the context otherwise requires:
| 'Annual General Meeting' | the annual general meeting of the Company to be held at The Cheshunt Marriott Hotel, Halfhide Lane, Turnford, Herts, EN10 6NG on 17 November 2011 at 10.30 am, notice of which is set out at the end of this document |
|---|---|
| 'Annual Report' | the annual report and accounts of the Company for the year ended 2 July 2011 a copy of which accompanies this document |
| 'Articles' or 'Articles of Association' or 'Current Articles' |
the articles of association of the Company as at the date of this document |
| 'Authority to Make Market Purchases' | the authority for the Company to make market purchases of Ordinary Shares to be proposed to Shareholders in the terms of Resolution 14 set out in the notice of Annual General Meeting set out in Part 4 of this document |
| 'Board' or 'Directors' | the board of directors of the Company |
| 'Business Day' | any date on which banks are generally open in England and Wales for the transaction of normal banking business other than a Saturday, Sunday or public holiday |
| 'CA 2006' | the Companies Act 2006, as amended |
| 'Company' or 'Dunelm' | Dunelm Group plc |
| 'Concert Party' | W L Adderley, W Adderley, J Adderley, N Adderley, The Leicester Foundation and the Paddocks Trust |
| 'CREST' | the system for the paperless settlement of trades in securities operated by Euroclear in accordance with the CREST Regulations |
| 'CREST Manual' | the current version of the CREST Manual which at the date of this document is available on www.euroclear.co.uk/CREST |
| 'CREST Regulations' | the Uncertificated Securities Regulations 2001 (SI 2001/3755) (as amended) |
| 'Disclosure and Transparency Rules' | the disclosure and transparency rules made by the FSA in exercise of its functions as competent authority pursuant to Part VI of FSMA |
| 'Dunelm SAYE Scheme' | the Dunelm Group Savings Related Share Option Plan |
| 'Employee Share Schemes' | the LTIP, the Dunelm SAYE Scheme and the Dunelm Group Company Share Option Plan |
| 'Equiniti' | a trading name of Equiniti Limited |
| 'Euroclear' | Euroclear UK & Ireland Limited, the operator of CREST |
| 'Form of Proxy' | the form enclosed with this document for use by Shareholders in connection with the Annual General Meeting |
| 'FSA' | the Financial Services Authority |
| 'FSMA' | the Financial Services and Markets Act 2000 |
| 'Group' | the Company and its subsidiary undertakings |
| 'Independent Directors' | the directors of the Company other than W L Adderley, who are deemed not to be interested in the Waiver Resolutions |
| 'Independent Shareholders' | Shareholders other than W L Adderley and members of the Concert Party |
| 'Listing Rules' | the listing rules made by the FSA in exercise of its functions as competent authority pursuant to Part VI of FSMA |
| 'London Stock Exchange' | London Stock Exchange pIc or its successor |
| 'LTIP' | the Dunelm Group Long-Term Incentive Plan |
| 'New Articles' | the new articles of association of the Company that are proposed for adoption by Shareholders pursuant to Resolution 18 |
|---|---|
| 'Official List' | the official list maintained by the UK Listing Authority for the purposes of Part VI of FSMA |
| 'Ordinary Shares' | ordinary shares of 1 pence each in the capital of the Company |
| 'Panel' | the Panel on Takeovers and Mergers |
| 'Registrars' or 'Equiniti' | the registrars of the Company |
| 'Relationship Agreement' | the relationship agreement dated 2 October 2006 and entered into between J Adderley (1), W Adderley (2), W L Adderley (3) and the Company (4) |
| 'Resolutions' | the resolutions set out in the notice of Annual General Meeting at Part 4 of this document |
| 'Shareholder(s)' or 'Ordinary Shareholder(s)' |
(a) holder(s) of Ordinary Shares |
| 'Shareholders' Rights Regulations' | the Companies (Shareholders' Rights) Regulations 2009 |
| 'Share Options' | options to subscribe for and awards over Ordinary Shares under the Employee Share Schemes |
| 'subsidiary undertaking' | shall, unless otherwise stated, be construed in accordance with the CA 2006 (but for these purposes ignoring paragraph 19(1)(b) of Part 1 of Schedule 6A to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008) |
| 'Takeover Code' | the City Code on Takeovers and Mergers |
| 'UBS' | UBS Limited |
| 'UK Listing Authority' or 'UKLA' | the FSA acting in its capacity as the competent authority for listing under Part VI of FSMA and in the exercise of its functions in respect of admission to the Official List |
| 'United Kingdom' or 'UK' | the United Kingdom of Great Britain and Northern Ireland |
| 'Waiver Resolutions' | Resolutions 15 and 16 in the form set out in the notice of Annual General Meeting at the end of this document approving a waiver of the mandatory offer provisions set out in Rule 9 and Rule 37 of the Takeover Code |
All times referred to are London times unless otherwise stated.
(Incorporated and registered in England and Wales with No. 4708277)
NOTICE IS HEREBY GIVEN that the 2011 Annual General Meeting of the Company will be held at The Cheshunt Marriott Hotel, Halfhide Lane, Turnford, Herts, EN10 6NG at 10.30 am on 17 November 2011 for the purpose of considering and, if thought fit, passing the following resolutions, which, in the case of resolutions 13,14 and 18 will be proposed as special resolutions and, in the case of the other resolutions, will be proposed as ordinary resolutions. Resolutions 15 and 16 will be voted on only by the Independent Shareholders of the Company and will be taken by poll. As W L Adderley is interested in the outcome of resolutions 15 and 16 he and all other members of the Concert Party of which he is a member, will be precluded from voting on that resolution.
This authority shall, unless previously varied, revoked or renewed, expire at the conclusion of the next annual general meeting of the Company or, if earlier, on 31 December 2012, except in relation to a purchase of Ordinary Shares the contract for which was concluded before such time and which will or may be executed wholly or partly after such time.
THAT approval is granted for the waiver by the Panel on Takeovers and Mergers of any obligation that could arise, pursuant to Rule 9 of the City Code on Takeovers and Mergers, for W L Adderley to make a general offer for all the ordinary issued share capital of the Company, following any increase in the percentage of shares of the Company carrying voting rights in which W L Adderley is interested resulting from the exercise by the Company of the authority to purchase its own Ordinary Shares granted to the Company pursuant to resolution 14 above provided that such approval shall expire at the conclusion of the next annual general meeting of the Company or on 31 December 2012, whichever is earlier.
Dated: 15 September 2011
Registered Office: Fosse Way Syston Leicester LE7 1NF
By order of the Board D Stead Secretary
and in each case must be received by the Company not less than 48 hours before the time of the Annual General Meeting.
CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the Annual General Meeting and any adjournment thereof by using the procedures described in the CREST Manual available at www.euroclear.com/CREST. CREST personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s) should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.
The revocation notice must be received by Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6ZX no less than 48 hours before the time of the Annual General Meeting.
If you attempt to revoke your proxy appointment but the revocation is received after the time specified then your proxy appointment will remain valid.
to communicate with the Company for any purposes other than those expressly stated.
the Company must publish on its website a statement setting out any matter that such members propose to raise at the Annual General Meeting relating to the audit of the Company's accounts (including the Auditor's Report and the conduct of the audit) that are to be laid before the Annual General Meeting.
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