Pre-Annual General Meeting Information • Oct 16, 2015
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 sell or otherwise transfer or 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 sell or have sold or otherwise transferred only part of your holding, you should retain these documents and consult the stockbroker, bank or other agent through whom the sale or transfer was effected.
(Incorporated and registered in England and Wales with No. 4708277)
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 Resolution) 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 5 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.
UBS Limited is acting as financial adviser to Dunelm in connection with the Waiver Resolution 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 Limited 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.
Apart from the responsibilities and liabilities, if any, which may be imposed on UBS Limited by FSMA or the regulatory regime established thereunder, UBS Limited accepts no responsibility or liability whatsoever for the contents of this document or for any other statement made or purported to be made in connection with the Company or the Waiver Resolution. UBS Limited accordingly disclaims all and any responsibility or liability whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this document or any such statement.
This document includes forward-looking statements concerning the Group. Forward-looking statements are based on current expectations and projections about future events. These forward-looking statements are subject to risks, uncertainties and assumptions about the Group. The Group undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise save to the extent required in accordance with the Company's continuing obligations under the Listing Rules, the Disclosure and Transparency Rules and applicable laws and regulations.
Notice of the Annual General Meeting of Dunelm to be held at Fuller's The Parcel Yard, King's Cross Station, London N1C 4AH at 9.30 am on 24 November 2015 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 6DA, not later than 9.30 am on 20 November 2015. 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 9.30 am on 20 November 2015. 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 | 1 |
|---|---|
| PART 2 : ADDITIONAL INFORMATION | 9 |
| PART 3 : DEFINITIONS | 15 |
| PART 4 : SUMMARY OF THE AGREEMENT TO IMPLEMENT THE JOINING AWARD | 17 |
| PART 5 : NOTICE OF ANNUAL GENERAL MEETING | 19 |
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)
W L Adderley (Chief Executive) J Browett (Chief Executive Designate) M E Doherty (Independent Non-Executive Director) S Emeny (Senior Independent Non-Executive Director) A Harrison (Chairman) W Reeve (Independent Non-Executive Director) P Ruis (Independent Non-Executive Director) M J Sears (Non-Executive Director)
Registered office: Watermead Business Park Syston Leicester Leicestershire LE7 1AD
16 October 2015
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 Fuller's The Parcel Yard, King's Cross Station, London N1C 4AH at 9.30 am on 24 November 2015 and to seek your approval of them. The notice of Annual General Meeting is set out at Part 5 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 Resolution (being Resolution 25) as, in accordance with the provisions of the Takeover Code, W L Adderley is considered to be interested in the outcome of the Waiver Resolution.
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 21 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 4 July 2015 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 27 November 2015 to Shareholders on the register of members of the Company at the close of business on 16 October 2015.
In accordance with the provisions of the UK Corporate Governance Code, all directors will be retiring and will offer themselves for election or re-election at the Annual General Meeting.
In accordance with Listing Rule 9.2.2E R (2), there will be an ordinary resolution and a separate resolution of the Non-Concert Party Shareholders in respect of the appointment of each of the independent Directors of the Company. The Board considers that the following Directors are independent for these purposes: Andy Harrison, Simon Emeny, Liz Doherty, William Reeve and Peter Ruis. Although no longer considered by the Board to be an independent Director due to her tenure of over nine years, Marion Sears will also put herself forward for reappointment by Non-Concert Party Shareholders. No Controlling Shareholder or Associate of a Controlling Shareholder will be eligible to vote in respect of these additional resolutions.
At the date of this document Will Adderley and the other members of the Concert Party are the only Controlling Shareholders, and are precluded from voting on these resolutions.
Biographies of each of the Directors are contained on pages 30 to 32 of the Annual Report, which can be found at http://dunelm.production.investis.com/investor-relations/reports-and-presentations/year-2015.aspx/ and a hard copy is available on request from Dawn Durrant at [email protected].
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.
Further information is given below in relation to the independence of the independent Directors named above:
This is a resolution to approve a revised Remuneration Policy, which is set out on pages 48 to 60 of the Annual Report.
Under Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 (the "Regulations"), the Directors must prepare a binding Remuneration Policy to be put forward for approval by Shareholders at least every three years. Once the Remuneration Policy has been approved, no payment may be paid to a Director or past Director unless it is consistent with the approved policy unless Shareholder approval is sought. The exception to this is if the payment is made pursuant to a contractual obligation that was in force at 27 June 2012.
Shareholders approved a binding Remuneration Policy at the Annual General Meeting on 11 November 2014. An amended policy is now being put forward for approval. A summary of the amendments is set out in the Annual Report, and the proposed revised policy is set out in full in the Annual Report, which accompanies this document. The Shareholder vote will be binding, and if not passed the Board will either retain the existing policy approved in 2014, or amend the proposed new policy and put it forward for approval at a further vote at a specially convened general meeting.
Under Schedule 8 of the Regulations, the Directors must prepare an annual report which sets out how the Remuneration Policy that has been in force during the financial year has been applied during the year, and how the policy will be applied in the coming year. The Annual Report on Remuneration must also be put to Shareholders for approval at the Annual General Meeting, although this vote is advisory. If this vote is not passed, the Company would consult with Shareholders and will be obliged to put the Remuneration Policy back to Shareholders for approval at the Annual General Meeting of the Company in 2016.
This is the resolution to approve the Company's Annual Report on Remuneration, which is set out on pages 61 to 70 of the Annual Report.
The Company's auditors must offer themselves for reappointment at each general meeting at which accounts are presented. The Company proposes that PricewaterhouseCoopers LLP, who have been the Company's auditors since January 2014, be appointed by Shareholders as auditors of the Company.
This resolution, which is conditional on the passing of resolution 20, gives authority to the Directors to agree the auditors' remuneration.
The special business to be considered at the Annual General Meeting comprises Resolutions 22 to 29 inclusive.
This Resolution gives the Directors authority to allot share capital with a nominal value of up to £674,928, which, as at 14 October 2015, 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 £2,024,783.
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 2016 unless it is previously renewed, varied or revoked.
The Company held 355,641 Ordinary Shares in treasury as at 14 October 2015, being the latest practicable date prior to the publication of this document.
This Resolution (which is a Special 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 £202,478, which in turn represents approximately 10 per cent. of the issued Ordinary Shares of the Company as at 14 October 2015, being the latest practicable date prior to the publication of this document.
The Directors intend to adhere to the provisions in the Pre-Emption Group's Statement of Principles, as updated in March 2015, not to allot shares for cash on a non-pre-emptive basis pursuant to the authority in Resolution 23 :(i) in excess of an amount equivalent to 5 per cent. of the total issued Ordinary Share capital of the Company excluding treasury shares; or (ii) in excess of an amount equal to 7.5 per cent. of the total issued Ordinary Share capital of the Company excluding treasury shares in a rolling three year period without prior consultation with Shareholders, in each case other than in connection with an acquisition or specified capital investment which is announced contemporaneously with the allotment or which has taken place in the preceding six-month period and is disclosed in the announcement of the allotment.
In relation to Resolutions 22 and 23, the Directors consider that it is in the best interests of the Company and its shareholders generally that the Company should have the flexibility conferred by the above authorities. This is in line with corporate governance guidelines. However, the Directors have no present intention of exercising any of these authorities or 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, including the proposed award to be made to the incoming Chief Financial Officer Keith Down, referred to in relation to Resolution 27 below. If Resolutions 22 and 23 are passed, both authorities will expire on the earlier of the conclusion of the Annual General Meeting to be held in 2016 and 31 December 2016.
This Resolution (which is a Special Resolution) is conditional on the passing of Resolution 25, and 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 October 2015. 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. 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 currently 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 were transferred out of treasury to those employees of the Company who exercised Share Options under the terms of the Employee Share Schemes.
During the period from October 2013 to June 2014, the Company utilised the authority to make market purchases conferred at the 2012 and 2013 annual general meetings as follows:
2012 authority: 781,810 Ordinary Shares 2013 authority: 924,344 Ordinary Shares Total: 1,706,154 Ordinary Shares
During the period between 30 June 2013 and 14 October 2015 (being the latest practicable date prior to the publication of this document), 1,350,513 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.
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 Group Company Share Option Scheme and the Dunelm SAYE Scheme.
The total number of options over Ordinary Shares outstanding as at 14 October 2015 was 1,659,553, representing approximately 0.82 per cent. of the issued Ordinary Share capital of the Company as at 14 October 2015 (excluding treasury shares). 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 October 2015 would, assuming no further Ordinary Shares are issued and no further options granted, represent approximately 0.84 per cent. of the issued share 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. Non-Concert Party Shareholders will be asked, under Resolution 25, 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 Resolution, which will be proposed as an ordinary resolution to be taken by poll, seeks Non-Concert Party 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 purchases by the Company of Ordinary Shares pursuant to the Authority to Make Market Purchases.
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.
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 purposes 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).
The Company has applied to the Panel for a waiver of Rule 9 of the Takeover Code in order to permit the Authority to Make Market Purchases proposed under Resolution 24 to be exercised by the Board (if such authority is approved by Shareholders) without triggering an obligation on the part of W L Adderley to make a general offer to Shareholders. The Panel has agreed, subject to Non-Concert Party 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.
The Concert Party is currently interested in an aggregate of 111,371,779 Ordinary Shares, representing 55.1 per cent. of the issued share capital of the Company (excluding treasury shares). If the Company were to repurchase from persons other than the Concert Party all the Ordinary Shares for which it is seeking authority, the Concert Party's interest in shares would (assuming no other allotments of Ordinary Shares) increase to 56.40 per cent. of the issued share capital of the Company (excluding treasury shares) by virtue of such actions.
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.
As W L Adderley is interested in the outcome of Resolution 25 he will be precluded from voting on this Resolution. 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 Stoneygate Trust (a private charitable trust of which W L Adderley and Nadine Adderley are trustees), the Paddocks Trust (a private trust relating to the Adderley family) and W A Capital Limited (a private company established by W L Adderley to act as a long term holding company for his beneficial shareholding in the Company) have also become members of the Concert Party. The Concert Party holds and/or is deemed to be interested in 111,371,779 Ordinary Shares representing 55.1 per cent. of the issued share capital of the Company (excluding treasury shares) as at 14 October 2015, 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 Resolution 25 and they are precluded from voting on this Resolution.
Following exercise of the Authority to Make Market Purchases (either in whole or in part) 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.
The interests of the Concert Party are set out in paragraph 2.5 of Part 2 of this document. Shareholders should, in particular, note the commentary around any further increases in the aggregate interests in shares in the Company of the Concert Party.
Apart from supporting the Board's process for continually refreshing its membership, and the Board changes announced (i) on 26 June 2015, being the appointment of John Browett as Chief Executive Designate, to succeed W L Adderley as Chief Executive Officer on 1 January 2016; and (ii) on 9 July 2015, being the appointment of Keith Down as Chief Financial Officer from 7 December 2015, to succeed David Stead who will be retiring from the Board in December 2015); W L Adderley has confirmed to the Company that he has no current intention to change the Company's plans with respect to (i) the future business of the Company; (ii) the continued employment of the employees and management of the Company or its subsidiaries, including any material change in conditions of employment; (iii) its strategic plans for the Company, or their likely repercussions on employment, or the locations of the Company's places of business; (iv) employer contributions into the Company's pension scheme(s), the accrual of benefits for existing members, or the admission of new members; (v) the redeployment of the fixed assets of the Company; or (vi) maintenance of the Company's listing on the London Stock Exchange, as result of the proposals set out in Resolution 25. 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 Deputy Chairman. Following the resignation of Nick Wharton, W L Adderley was re-appointed Chief Executive on 11 September 2014. He will assume his previous role as Deputy Chairman in January 2015, when John Browett becomes Chief Executive.
The Directors intend to maintain the listing of the Ordinary Shares on the Official List for the foreseeable future.
Resolution 26: Approval of amendment of the rules of the Dunelm Group 2014 Long Term Incentive Plan
Resolution 26, which is an ordinary resolution, seeks approval to amend the rules of the Dunelm Group 2014 Long Term Incentive Plan.
The Dunelm Group 2014 Long Term Incentive Plan (the "2014 LTIP") was approved by shareholders at the Annual General Meeting on 11 November 2014. As referred to in the Directors' Remuneration Report, set out in the in the Annual Report, the Company is proposing amendments to its Remuneration Policy, and shareholder approval for a revised Remuneration Policy is sought at the Annual General Meeting as referred to in Resolution18. To reflect the revised Remuneration Policy, it is proposed that amendments are made to the 2014 LTIP. The rules of the 2014 LTIP marked to show the proposed amendments are available for inspection from the date on which this document is sent on the Company's website at http://dunelm.production.investis.com/investor-relations/reports-and-presentations/year-2015.asp, and a hard copy can be obtained from Dawn Durrant at [email protected] and will be available at the place of the Annual General Meeting for at least 15 minutes before and during the meeting.
The principal amendment is to the individual limit on participation, as follows:
Awards may not be granted to a participant under the LTIP over Ordinary Shares with a market value (as determined by the Remuneration Committee) in excess of 150% per cent of salary in respect of any financial year.
It is proposed that the individual limit be expressed as a fixed number of shares, so that awards may not be granted to a participant in respect of any financial year over more than 110,000 Ordinary Shares.
The revised Remuneration Policy will permit the grant of awards to the Chief Executive Officer over up to 110,000 Ordinary Shares in respect of any financial year and awards to the Chief Financial Officer over up to 60,000 Ordinary Shares in respect of any financial year.
Certain other minor amendments are proposed to the rules of the 2014 LTIP, including that the Remuneration Committee may grant awards subject to conditions requiring the retention of shares following vesting. This is to reflect the introduction of the "Lifetime Lock- in", described in the Directors' Remuneration Report, in substitution for the requirement that awards under the LTIP be granted subject to a holding period following the end of the initial performance period.
Resolution 27, which is an ordinary resolution, seeks approval for the proposed Joining Award to be made to Keith Down, the incoming Chief Financial Officer, who is due to commence employment on 7 December 2015.
As described in the Directors' Remuneration Report section of the Annual Report, the Company is proposing to compensate Keith Down for deferred shares earned with his previous employer which have been forfeited when he resigned. This award is in line with the Remuneration Policy approved by Shareholders at the Annual General Meeting on 11 November 2014 and also with the revised Remuneration Policy for which approval is sought at the Annual General Meeting, referred to in relation to Resolution 18. However, shareholder approval for the award is being sought to enable the award to be satisfied with a new issue of Ordinary Shares or treasury shares.
A summary of the principal terms of the proposed award is set out in Part 4.
Resolution 28 is a Special Resolution to adopt new articles of association.
The Directors propose two amendments to our Articles of Association:
A copy of the proposed New Articles of Association is available on the Company's website www.dunelm.com or from the Company Secretary on request.
Resolution 29 is a Special Resolution to increase the notice period for general meetings.
This Resolution relates to the EU Shareholders Rights Regulations which increase 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 29, reducing the notice period to 14 clear days, is passed on an annual basis. The shorter notice period would not be used as a matter of routine for such meetings, but only where the flexibility is merited by the business of the meeting and is thought to be in the best interests of Shareholders as a whole.
The audited consolidated accounts for the periods to 28 June 2014 and 4 July 2015 can be found at www.dunelm.com, and are incorporated into this document by reference. For the avoidance of doubt, the content of the website is not incorporated into and does not form part of this document.
The Directors are not aware of any significant change in the financial or trading position of the Group since 8 October 2015, being the date on which its last interim management statement was published. The interim management statement can be found at www.dunelm.com.
If you require a hard copy of any of the audited consolidated accounts for 2014 or 2015 or the interim management statement, a request should be sent to Dawn Durrant at [email protected] or Dunelm (Soft Furnishings) Limited, Watermead Business Park, Syston, Leicester, LE7 1AD (Tel 01162 644356).
A Form of Proxy for use at the Annual General Meeting is enclosed. Whether or not you intend to be present at the meeting, you are requested to complete, sign and return the Form of Proxy to Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA as soon as possible and in any event so that it is received not later than 9.30 am on 20 November 2015.
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 9.30 am on 20 November 2015.
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, including 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.
In the opinion of the Board, each of the Resolutions to be proposed at the Annual General Meeting is 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 Resolution (being Resolution 25) as, in accordance with the provisions of the Takeover Code, W L Adderley is considered to be interested in the outcome of the Waiver Resolution.
Accordingly the Board, excluding W L Adderley for the purposes of the Waiver Resolution (on the grounds that he is interested in the outcome of the Waiver Resolution), recommends that Shareholders vote in favour of the 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 31.04 per cent. of the issued Ordinary Shares, save that W L Adderley will not vote in respect of his beneficial holdings of Ordinary Shares, which amount to 30.60 per cent. of the issued Ordinary Shares, on the Waiver Resolution, 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 to be in the best interests of the Non-Concert Party 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 Non-Concert Party Shareholders vote in favour of the Waiver Resolution 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 0.44 per cent. of the issued Ordinary Shares.
Yours sincerely
Andy Harrison Chairman
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.
| per cent. of the | ||
|---|---|---|
| Number of | issued Ordinary | |
| Ordinary Shares | Share capital | |
| W L Adderley | 61,961,779* | 30.60 |
| D Stead | 734,628 | 0.36 |
| J Browett | 23,251 | 0.00 |
| M Sears | 101,313 | 0.05 |
| S Emeny | 28,555 | 0.01 |
| L Doherty | 2,500 | 0.01 |
| A Harrison | 0 | 0 |
| W Reeve | 2,500 | 0 |
| P Ruis | 0 | 0 |
Under the Long-Term Incentive Plan (LTIP):
| Number of Options |
Earliest Vesting Date |
|
|---|---|---|
| D Stead | 65,920 | Nov 2015 |
| 49,216 | Oct 2016 | |
| 53,922 | Oct 2019 |
* 61,890,303 Ordinary Shares are registered in the name of W A Capital Limited, a private company established by W L Adderley to act as a long term holding company for his beneficial shareholding in the Company. W L Adderley is the sole director, and he and his wife Nadine Adderley are the sole shareholders of W A Capital Limited.
In addition W L Adderley is deemed to hold a legal interest in 1,167,250 Ordinary Shares held by The Stoneygate Trust (formerly known as 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 Stoneygate Trust and the Paddocks Trust.
If the Company were to repurchase from persons other than the Concert Party the maximum number of Ordinary Shares pursuant to the Authority to Make Market Purchases, W L Adderley's interest in Ordinary Shares would (assuming no other allotments of Ordinary Shares) increase to 31.38 per cent. of the issued share capital of the Company by virtue of such actions.
2.5 As at the close of business on 14 October 2015 (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:
| per cent. of the | ||
|---|---|---|
| Number of Ordinary Shares |
issued Ordinary Share capital |
|
| W L Adderley | 61,961,779 | 30.6 |
| W Adderley | 39,400,000 | 19.5 |
| J Adderley | 8,670,000 | 4.3 |
| The Stoneygate Trust | 1,167,250 | 0.6 |
| The Paddocks Trust | 172,750 | 0.1 |
| Total | 111,371,779 | 55.1 |
Notes: W L Adderley's interests are set out in detail in paragraph 2.4 above.
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:
24 November 2014: Nadine Adderley transferred 11,290,303 Ordinary Shares to W A Capital Limited, in return for shares in W A Capital Limited;
28 November 2014: W L Adderley exercised nil cost options over 71,476 Ordinary Shares pursuant to the LTIP.
If the Company were to repurchase from persons other than members of the Concert Party, Ordinary Shares for which it is seeking Authority to Make Market Purchases, 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 56.40 per cent. of the issued share capital of the Company by virtue of such actions.
| Number of | Earliest | |
|---|---|---|
| Options | Vesting Date | |
| W Adderley | 39,400,000 | 19.5 |
| J Adderley | 8,670,000 | 4.3 |
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, The Stoneygate Trust (formerly known as the Leicester Foundation), the Paddocks Trust and W A Capital Limited have also become members of the Concert Party. The Concert Party holds and/or is deemed to be interested in 111,371,779 Ordinary Shares representing 55.1 per cent. of the issued share capital of the Company as at 14 October 2015, being the latest practicable date prior to the publication of this document, details of which are set out in paragraph 2.5 above.
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 Ordinary Shares in the Company without incurring any further obligation under Rule 9 of the Takeover 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 October 2015 (being the latest practicable date prior to the publication of this document) were:
| Price per | |
|---|---|
| Date | Ordinary Share (p) |
| 14 October 2015 | 942.5 |
| 1 October 2015 | 903.5 |
| 1 September 2015 | 895.5 |
| 3 August 2015 | 897.0 |
| 1 July 2015 | 912.0 |
| 1 June 2015 | 952.0 |
| 1 May 2015 | 902.0 |
| 1 April 2015 - ex. dividend | 853.0 |
has as at 14 October 2015 (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
(d) 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 5.3 reference to:
(iv) in relation to the Company, (a) an organisation which is advising the Company in relation to the Waiver Resolution and/or the Authority to Make Market Purchases; and (b) a corporate broker to the Company;
(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
For the purposes of this paragraph 5.3 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
Information about the Directors' service contracts is set out on pages 50 to 60, 65 and 68 to 70 of the 2015 Annual Report and Accounts, which are incorporated into this document by reference. The Accounts can be found at http: http://dunelm.production.investis.com/investor-relations/reports-and-presentations/year-2015.aspx// and a hard copy is available on request from Dawn Durrant at [email protected].
Service contracts have been entered into with John Browett, the Chief Executive Designate, on 26 June 2015 (with his appointment date being 1 July 2015); and with Keith Down, the incoming Chief Financial Officer on 9 July (with his expected appointment date being 7 December 2015). Letters of appointment were entered into with William Reeve on 26 June 2015 (with his appointment date being 1 July 2015); and with Peter Ruis on 10 September 2015, (being appointed with immediate effect). Andy Harrison's letter of appointment was amended on 28 April 2015 to reflect his change of role to Chairman with effect from 8 July 2015. Increases were made to David Stead's salary and pension, to the car allowance paid to Will Adderley and David Stead, and to the fees paid to the Non-Executive Directors and the Chairman with effect from 1 and 8 July 2015, respectively.
With the exception of these changes, none of the service contracts between the Directors and the Company or any of its subsidiaries have been entered into or amended within the six months prior to the date of this document.
There are no commission or profit sharing arrangements between the Company and any of the Directors. On termination of any Director's service contract, the maximum amount payable by the Company is the value of salary and benefits for the notice period.
Copies of the following documents are available on the Company's website: http://dunelm.production.investis.com/ investor-relations/reports-and-presentations/year-2015.aspx and a hard copy is available on request from Dawn Durrant at [email protected].
The following definitions apply throughout this document, unless the context otherwise requires:
| "Annual General Meeting" or "AGM" | the annual general meeting of the Company to be held at Fuller's The |
|---|---|
| Parcel Yard, King's Cross Station, London N1C 4AH at 9.30 am on 24 | |
| November 2015, 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 4 |
| July 2015 a copy of which accompanies this document | |
| "Articles" | the articles of association of the Company adopted in March 2015, that |
| are in force at the date of this document | |
| "Associate" | in relation to a Controlling Shareholder has the meaning set out in the |
| Listing Rules | |
| "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 24 | |
| set out in the notice of Annual General Meeting set out in Part 5 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 Stoneygate Trust |
| (formerly named the Leicester Foundation), the Paddocks Trust and W A | |
| Capital Limited | |
| "Controlling Shareholder" | has the meaning set out in the Listing Rules |
| "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 Proxy Instruction" | has the meaning in the CREST Manual |
| "CREST Regulations" | the Uncertificated Securities Regulations 2001 (SI 2001/3755) (as |
| amended) | |
| "Directors' Remuneration Report" | the Directors' Remuneration Report set out in the Annual Report, |
| comprising the Letter from the Chair of the Remuneration Committee, | |
| the Policy Report and the Annual Report on Implementation | |
| "Disclosure and Transparency Rules" | the disclosure rules and transparency rules made by the FCA in exercise |
| of its functions as competent authority pursuant to Part VI of FSMA | |
| "Dunelm Group 2014 Long Term Incentive Plan" the Dunelm Group 2014 Long Term Incentive Plan, the amended rules | |
| of which are to be produced to the Annual General Meeting and initialled | |
| by the Chairman of the meeting for the purpose of identification; | |
| "Dunelm Group Company Share Option | the Dunelm Group Company Share Option Scheme, under the 2003 or |
| Scheme" | 2013 rules as the case may be |
| "Dunelm Group 2014 Sharesave Plan" | the Dunelm Group 2014 Sharesave Plan |
| "Dunelm SAYE Scheme" | the Dunelm Group Savings Related Share Option Plan 2005, and / or |
| the Dunelm Group 2014 Sharesave Plan as the case may be | |
| "Employee Share Schemes" | the LTIP, the Dunelm SAYE Scheme, the Dunelm Group Company Share |
| Option Scheme and the Joining Award | |
| "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 | |
| "FCA" | the Financial Conduct 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 Resolution | |
| "Independent Shareholders" | Shareholders other than a Controlling Shareholder and its or their |
| Associates | |
| "Joining Award" | The share award that the Company is proposing to make to Keith |
| Down, its incoming Chief Financial Officer, described in the letter from | |
| the Chairman in Part 1 of this document, the Directors' Remuneration | |
| Report, and in Part 4 of this document | |
| "Listing Rules" | the listing rules made by the FCA 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, under the 2005 or the |
| 2014 rules as the case may be | |
| "New Articles of Association" | the new articles of association, to be produced to the Annual General |
| Meeting and initialled by the Chairman of the meeting for the purpose of | |
| identification; | |
| "Non-Concert Party Shareholders" | Shareholders other than members of the Concert Party |
| "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), to which Nadine Adderley and W A Capital Limited have | |
| become a party, as amended on 10 July 2014; | |
| "Resolution" or "Resolutions" | the resolutions set out in the notice of Annual General Meeting at Part 5 |
| 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 Ordinary Shares pursuant to an award made |
| 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 FCA 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 Resolution" | Resolution 25 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.
A summary of the principal terms of the Agreement pursuant to which a share award may be granted to the incoming Chief Financial Officer, Keith Down (the "Agreement") is set out below.
The award under the Agreement (the "Award") will be in the form of a nil cost option to acquire a number of Ordinary Shares in the Company.
The Award will be divided into two tranches as follows:
The Award will be granted over such number of Ordinary Shares as have a market value (as determined by the Remuneration Committee of the Board) at the date on which the Award is granted of £335,000.
It is proposed that the Award will be granted as soon as practicable following Keith Down's joining the Company, subject to any restrictions on the Company granting share awards.
The Award will be granted over newly issued Ordinary Shares or Ordinary Shares held in treasury. The Award is not transferable (other than on death). No payment will be required for the grant of the Award. The Award will not form part of pensionable earnings.
The Remuneration Committee of the Board may, in its absolute discretion, determine at any time prior to the third anniversary of the date on which tranche of the Award vests (as described in section 6 below) to:
in the following circumstances:
The Remuneration Committee may, in its absolute discretion, determine at any time to take the action referred to in paragraphs (a) to (d) above in the event of Keith Down committing fraud.
Tranche 1 of the Award will vest on 15 September 2016 and Tranche 2 of the Award will vest on 15 September 2017.
Each tranche of the Award will normally be exercisable from the date of vesting until the tenth anniversary of the grant date.
The exercise of the Award will be subject to obtaining any necessary approvals or consents from the UK Listing Authority, the Company's share dealing policy and any other applicable laws or regulations
At any time before or after the point at which the Award has been exercised, but the underlying Ordinary Shares have yet to be delivered, the Remuneration Committee may decide to pay a cash amount equal to the value of the Ordinary Shares that would otherwise have been delivered.
Any Ordinary Shares or cash that are to be delivered or paid (as appropriate) in respect of an exercise of the Award will be delivered or paid (as appropriate) within 30 days of the date of exercise.
If Keith Down leaves the employment of the Company prior to vesting of the Award it will lapse if he leaves due to resignation, or dismissal for misconduct. If he leaves for any other reason it will vest on the normal vesting date and be exercisable for six months, although the Remuneration Committee retains discretion to permit the Award to vest earlier.
In the event of a change of control or winding-up of the Company, the Award will vest to the extent it has not already vested. Alternatively, the Remuneration Committee may permit or, in the case of an internal reorganisation, require the Award to be exchanged for an equivalent award which relates to shares in a different company.
If other corporate events occur such as a demerger, delisting, or other event which, in the opinion of the Remuneration Committee may affect the current or future value of Ordinary Shares, the Remuneration Committee may determine that Awards will vest. The Remuneration Committee will determine in these circumstances the length of time during which the Award can then be exercised.
In the event of a variation of the Company's share capital or a demerger, delisting, special dividend, rights issue or other event, which may, in the Remuneration Committee's opinion, affect the current or future value of Ordinary Shares, the number of Ordinary Shares subject to the Award.
The Remuneration Committee may amend the Agreement at any time, provided that prior approval of the Company's Shareholders in a general meeting will be required for amendments to the advantage of Keith Down relating to the number of Ordinary Shares subject to the Award, the basis for determining the entitlement to, and the terms of, the Ordinary Shares or cash comprised in the Award and the impact of any variation of capital. However, any minor amendment to benefit the administration of the Award, to take into account legislative changes, or to obtain or maintain favourable tax treatment, exchange control or regulatory treatment may be made by the Remuneration Committee without shareholder approval.
No amendment may be made to the material disadvantage of Keith Down without his prior agreement.
The Agreement will be governed in accordance with the laws of England and Wales and be subject to the exclusive jurisdiction of the Courts of England and Wales.
The Agreement will be available for inspection from the date on which this Notice of Annual General Meeting is sent on the Company's website at http://dunelm.production.investis.com/investor-relations/reports-and-presentations/year-2015.asp, and a hard copy can be obtained from Dawn Durrant at [email protected] and will be available at the place of the Annual General Meeting for at least 15 minutes before and during the meeting.
(Incorporated and registered in England and Wales with No. 4708277)
NOTICE IS HEREBY GIVEN that the 2015 Annual General Meeting of the Company will be held at Fuller's The Parcel Yard, King's Cross Station, London N1C 4AH at 9.30 am on 24 November 2015 for the purpose of considering and, if thought fit, passing the following resolutions, which, in the case of resolutions 23, 24, 28 and 29 will be proposed as special resolutions and, in the case of the other resolutions, will be proposed as ordinary resolutions.
Resolutions 7, 9, 11, 13, 15 and 17 will be voted on only by Independent Shareholders as required by the Listing Rules.
Resolution 25 will be voted on only by the Non-Concert Party Shareholders of the Company and will be taken by poll. As W L Adderley is interested in the outcome of Resolution 25 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 2016, 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.
Dated: 16 October 2015
Registered Office: Watermead Business Park Syston Leicester Leicestershire LE7 1AD
By order of the board
D Durrant Secretary
and in each case must be received by the Company not less than 48 hours (excluding non-working days) before the time of the Annual General Meeting.
The revocation notice must be received by Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA no less than 48 hours (excluding non-working days) 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.
Pursuant to section 319A of the Companies Act 2006, the Company must cause to be answered at the Annual General Meeting any question relating to the business being dealt with at the Annual General Meeting which is put by a member attending the meeting, except in certain circumstances, including if it is undesirable in the interests of the Company or the good order of the meeting that the question be answered or if to do so would involve the disclosure of confidential information.
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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