(DSG) Dillistone Group

Dillistone Group Plc

("Dillistone" or the "Company")

Notice of General Meeting

14 October 2011

The Company announces that it will today post a circular to the shareholders of the Company convening a general meeting ('GM') to be held on 29 November 2011 at 10.00 a.m. at the offices of the Company at 3rd Floor, 50-52 Paul Street, London EC2A 4LB.

As mentioned in the interim accounts for the six months to 30 June 2011 published in September 2011, this GM is being convened to address a technical issue that has arisen in respect of the dividends (the "Dividends") paid by the Company for the years ended 31 December 2006 through to the year ended 31 December 2010. 

Jason Starr, CEO of Dillistone, commented;

 "The accounting technicalities reported at the time of our interim announcement are expected to be resolved by the upcoming meeting.  They are entirely historical in nature, have no impact on our current trading, nor on our dividend policy going forward.  The Board reconfirms plans to pay an interim dividend of 1.667p per share in November."

In the years 2006 to 2010, the Company paid the Dividends to shareholders in part out of distributable profits generated in the year in which the Dividends were paid, rather than in respect to the distributable reserves available by reference to the last filed annual accounts or relevant Interim Accounts (as defined below).  At all times there were sufficient distributable reserves within the overall group of companies of which the Company is the holding company (the "Group") to facilitate the Dividend payments.  Details of the individual Dividends are set out in the notice of GM ("Notice").

As explained in more detail below, shareholders will be asked at the GM to vote on four resolutions, as set out in the Notice, which rectify and ratify the payment of the Dividends, which were made in breach of the Companies Act 1985 (the "1985 Act") or the Companies Act 2006 (the "2006 Act") (the 1985 Act and the 2006 Act, together the "Acts"), and to release any claims that the Company may have against its shareholders or directors (whether past present or future) in respect of the Dividends paid (the "Resolutions").

Under the Acts, any distribution made by a company to its shareholders must not exceed the amount of distributable reserves reported in the last annual accounts of the company circulated to shareholders.  In the event that the last annual accounts do not show sufficient distributable reserves to pay all or any part of the dividends concerned, then it is a requirement of the Acts that a company prepares unaudited interim accounts demonstrating sufficient distributable reserves prior to payment of such dividend ("Interim Accounts").  In the case of a public company, Interim Accounts need to have been properly prepared and filed with the Registrar of Companies before a dividend is declared or (in the case of an interim dividend) paid.

Whilst the Group did have sufficient distributable reserves at the relevant times to cover the whole amounts of the Dividends at the time that those Dividends were paid, sufficient distributable reserves had not been distributed from the other companies within the Group and paid to the Company by way of intra-group dividends.  Accordingly, although the Group as a whole had sufficient distributable reserves to cover the payment of the Dividends (as shown by the consolidated balance sheets for the Group), the payment of the Dividends by reference to the Company's individual balance sheets has given rise to certain technical breaches of the Acts, which can be remedied by the passing of the proposed Resolutions.

As a result of these breaches, the Company may have claims under the Acts against present and past shareholders who were recipients of the Dividends to recover from each of those shareholders those parts of the Dividends paid to each such shareholder as were technically paid in breach of the Acts.

The Company may also have claims against those past and present directors who participated at the board meetings at which the decisions were taken to pay the Dividends. It is clearly not the Company's intention to make any such claim against either its shareholders or directors.

The Company has been advised by external legal advisers that this matter can be remedied by: (i) the passing of the Resolutions, including the resolutions to waive any rights of the Company against past and present directors who approved the payment of the Dividends (as well as in respect of future directors) and those shareholders who received the Dividends; and (ii) the approval for the Company to enter into deeds of release in favour of such directors (the "Directors' Deed of Release") and shareholders (the "Shareholders' Deed of Release") (the Directors' Deed of Release and the Shareholders' Deed of Release, together the "Releases").  In view of the directors' interest in the Directors' Deed of Release and also the shareholders' interest in the Shareholders' Deed of Release, the Company has been advised by its external legal advisers to seek shareholder approval before entering into the Releases.  Shareholders will, therefore, be asked to vote on Resolutions 1, 2 and 3, which will be proposed as special resolutions at the GM, to rectify and ratify the payment of the Dividends made in breach of the Acts, and to waive the rights the Company may have against the Shareholders; and Resolution 4, which will be proposed as an ordinary resolution, to approve the release of the directors from any claims the Company may have against them as well as authorising the Company to enter in to the Directors' Deed of Release.

The entry in to the Releases will ensure that both shareholders who received the Dividends and the past and present directors who approved the payment of the Dividends will be released to the fullest extent permitted by law from liability for any claims the Company may have to recover the amounts paid by way of the Dividends (to the extent that such amounts technically infringe the Acts).  Draft forms of the Releases are available for inspection..

Interim Accounts for the six months to 30 June 2011 which have been prepared by the Company and have been filed with the Registrar of Companies, show distributable reserves sufficient to allow the appropriation of reserves necessary to rectify the Dividends.

If any non-United Kingdom tax-resident shareholder has any doubt about his or her foreign tax position, he or she should consult his or her own professional adviser.

The directors will not be voting on Resolution 4 or providing a recommendation as to how shareholders should vote on the Resolutions in view of their interest in the subject matter of these proposals. However, the board of directors of the Company unanimously recommend that shareholders exercise their right to vote on the Resolutions to be proposed at the GM.

A copy of the circular containing the Notice, the Form of Proxy and the Interim Accounts being sent to shareholders today are available on the Company's website in accordance with Aim Rule 26.

Enquiries:

Mike Love (Chairman)                                         Dillistone Group Plc                           020 7749 6100

Jason Starr (CEO)                                                 Dillistone Group Plc                           020 7749 6100

Julie Pomeroy (Finance Director)                     Dillistone Group Plc                           020 7749 6100

Emily Staples                       

Derek Crowhurst (Nomad)                                 Religare Capital Markets                   020 7444 0800

Daniel Briggs (Broker)                                        Religare Capital Markets                   020 7444 0500

Tom Cooper                                                          Winningtons Financial PR                 020 3176 4722