RNS Number:2103I
Digital Animations Group PLC
03 March 2003

Digital Animations Group plc (the "Company")



Proposed Capital Reduction



Introduction



Further to the announcement on 17 February 2003, the Company has today
dispatched a circular to shareholders the purpose of which is to provide further
details of the initial stage of the process required to effect the proposed
return of surplus cash to shareholders, namely the creation of a potentially
distributable reserve through the cancellation of the Company's share premium
account, and to seek the necessary approval from shareholders to implement the
process ("the Proposal").



The Proposal



As at 30 September 2002, the date of the last published financial statements of
the Digital Animations Group, both the Group and the Company had cash reserves
of approximately #9.2 million. As stated in the Company's announcement of 17
February 2003, pursuant to an internal financial review conducted by the
Company, #3 million of the Company's cash resources are currently considered to
be surplus to the requirements of the Company and the Board has therefore
decided that an amount of up to #3 million should be returned to shareholders.
The provisions of the Companies Act, 1985 require that any such distribution to
shareholders, regardless of the specific method adopted by the Company to effect
the distribution, be made out of distributable profits of the Company.
Currently, the Company does not have sufficient distributable profits to effect
a distribution.



The Company currently has approximately #11.81 million standing to the credit of
its share premium account.  This represents the premium paid over the nominal
value (10p each) of the ordinary shares of the Company and is an undistributable
reserve.  In order to increase the potentially distributable reserves of the
Company, it is proposed that the share premium account be cancelled. This will
have the effect of reducing the Company's undistributable reserves and treating
the amount presently in the share premium account as realised profits.  Such
realised profits would be potentially distributable, subject to compliance with
the provisions of the Companies Act that require the Company to maintain
adequate protection for creditors, and would give the Company the necessary
flexibility to return cash to shareholders.  The Board believes that the
remaining cash balances of the Company, following the proposed distribution,
will provide a strong balance sheet and a prudent level of cash resources, both
to achieve the Group's business plan and provide for contingencies in the near
to medium term.



The Board is currently working with the Company's advisers to structure the most
time and cost efficient mechanism to effect the return of surplus cash to
shareholders following completion of the Court confirmation process described
below.  Specific details of this proposal will be communicated in due course.



Extraordinary General Meeting



It is necessary to convene an Extraordinary General Meeting of the Company which
will be held on 27 March 2003, at which a special resolution will be proposed to
cancel the share premium account.



Confirmation by the Court



The proposed cancellation of the share premium account is conditional upon
confirmation by the Court of Session in Edinburgh (the "Court").  In seeking the
Court's confirmation, it will be necessary for the Company to satisfy the Court
that the interests of its creditors are not prejudiced by the Proposal.  The
Company does not foresee any objections to the Proposal from its creditors and
expects to meet the requirements of the Court for the protection of creditors.
Assuming that the Court does make an order confirming the cancellation of the
share premium account, the proposed cancellation will become effective as soon
as a copy of the order is registered by the Registrar of Companies.  An
appropriate announcement will be made by the Company once registration has
occurred, expected to be in June 2003.



Recommendation and voting intentions



The Board considers that the Proposal described in the circular is in the best
interests of shareholders and the Company as a whole.  Accordingly, the Board
unanimously recommends shareholders to vote in favour of the resolution.



Two of the major shareholders of the Company, namely 3i Group plc and New Media
Spark plc have indicated to the Company that they intend to vote in favour of
the resolution in respect of their own beneficial holdings of ordinary shares
amounting in aggregate to 6,749,824 ordinary shares representing approximately
21.55 per cent of the current issued ordinary share capital of the Company.
Further, the directors of the Company intend to vote in favour of the resolution
in respect of their own beneficial holdings of ordinary shares amounting in
aggregate to 3,534,377 ordinary shares representing approximately 11.28 per cent
of the current issued ordinary share capital of the Company.





Enquiries



Rob Walker, Chairman

Mike Antliff, CEO

Paul McCaffrey, Finance Director                                  0141 582 0600


                      This information is provided by RNS
            The company news service from the London Stock Exchange
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