Dunedin Enterprise Inv Trust PLC Annual Financial Report (8151B)
April 06 2017 - 6:19AM
UK Regulatory
TIDMDNE
RNS Number : 8151B
Dunedin Enterprise Inv Trust PLC
06 April 2017
Dunedin Enterprise Investment Trust PLC (the "Company")
2016 Annual Report
Copies of the annual report and accounts for the year ended 31
December 2016 have been submitted to the National Storage Mechanism
and will shortly be available for inspection at
www.morningstar.co.uk/uk/NSM and on the Company's website
(www.dunedinenterprise.com).
The Disclosure Guidance and Transparency Rules (DTR 6.3.5(2))
require certain information to be disclosed upon publication of the
annual report and accounts. Accordingly, in addition to the
information set out in the announcement of the final results for
the year ended 31 December 2016 on 20 March 2017, the following
disclosures are made. References to page numbers and notes in the
disclosures below are to page numbers and notes to the annual
report and accounts of the Company for the year ended 31 December
2016:
Principal Risks and Uncertainties (Strategic Report pages
25-26)
The principal risks and uncertainties identified by the Board
which might affect the Company's business model and future
performance, and the steps taken with a view to their mitigation,
are as follows:
Investment and liquidity risk: the Company's investments are in
small and medium-sized unquoted companies, which by their nature
entail a higher level of risk and lower liquidity than investments
in large quoted companies. Mitigation: the Manager aims to limit
the risk attaching to the portfolio as a whole by closely
monitoring individual holdings, including the appointment of
investor directors to the board of portfolio companies. The Board
reviews the portfolio, including the schedule of projected exits,
with the Manager on a regular basis with a view to ensuring that
the orderly realisation process is progressing.
Portfolio concentration risk: following the adoption of the
Company's revised investment policy in May 2016 the portfolio will
become more concentrated as investments are realised and cash is
returned to shareholders. This will increase the proportionate
impact of changes in the value of individual investments on the
value of the Company as a whole. The Directors' valuation of the
Company's investments represents their best assessment of the fair
value of the investments as at the valuation date and the amounts
eventually realised from such investments may be more or less than
the Directors' valuation. Mitigation: the Directors and Manager
keep the changing composition of the portfolio under review and
focus closely on those holdings which represent the largest
proportion of total value.
Financial risk: most of the Company's investments involve a
medium to long term commitment and many are relatively illiquid.
Mitigation: the Directors consider it appropriate to finance the
Company's activities through borrowing on a short-term basis.
Accordingly, the Board seeks to ensure that the availability of
cash reserves and bank borrowings match the forecast cash flows of
the Company both on a base and stress case basis given the level of
undraw commitments to limited partnership funds.
Economic risk: events such as economic recession or general
fluctuations in stock markets and interest rates may affect the
valuation of portfolio companies and their ability to access
adequate financial resources, as well as affecting the Company's
own share price and discount to net asset value. Mitigation: the
Company invests in a diversified portfolio of investments spanning
various sectors, and maintains access to sufficient cash reserves
to be able to provide additional funding to portfolio companies
should this become necessary.
Credit risk: the Company holds a number of financial instruments
and cash deposits and is dependent on counterparties discharging
their commitment. Mitigation: the Directors review the
creditworthiness of the counterparties to these investments and
cash deposits and seek to ensure there is no undue concentration of
credit risk with any one party.
Currency risk: the Company is exposed to currency risk as a
result of investing in companies and funds denominated in euros.
The sterling value of these investments can be influenced by
movements in foreign currency exchange rates. Mitigation: Currency
risk is monitored by the Manager on an ongoing basis and on a
quarterly basis by the Board.
Internal control risk: the Company's assets could be at risk in
the absence of an appropriate internal control regime. Mitigation:
the Board regularly reviews the system of internal controls, both
financial and non-financial, operated by the Company and the
Manager. These include controls designed to ensure that the
Company's assets are safeguarded and that proper accounting records
are maintained.
Related Party Transactions (Notes to the Accounts page 59, note
21)
The Company has investments in Dunedin Buyout Fund LP, Dunedin
Buyout Fund II LP, Dunedin Buyout Fund III LP, Dunedin Fund of
Funds LP and Equity Harvest Fund LP. Each of these limited
partnerships are managed by Dunedin. The Company has paid a
management fee of GBP2.2m (2015: GBP2.4m) in respect of these
limited partnerships. The total investment management fee payable
by the Company to the Manager is therefore GBP2.3m (2015:
GBP2.5m).
A Manager's Incentive Scheme ("the Scheme") was introduced from
1 May 1999. Under the terms of the Scheme qualifying directors and
investment executives of Dunedin were entitled to purchase 7.5% of
the equity shares (and, occasionally, other financial instruments)
in each of the directly held investments subscribed for by the
Company. This scheme has now been replaced by the arrangements
noted below.
Since the Company began investing in Dunedin Buyout Funds ("the
Funds") executives of the Manager have been entitled to participate
in a carried interest scheme via the Funds. Performance conditions
are applied whereby any gains achieved through the carried interest
scheme associated with the Funds are conditional upon a certain
minimum return having been generated for the limited partner
investors. Additionally, within Dunedin Buyout Fund II LP and
Dunedin Buyout Fund III LP the economic interest of the Manager is
aligned with that of the limited partner investors by co-investing
in this fund.
As at 31 December 2016 there is a provision made within
Investments for carried interest of GBP1.3m relating to Equity
Harvest Fund LP and GBP0.2m relating to Dunedin Buyout Fund LP.
Current executives of the Manager are entitled to 46% of the
carried interest in Equity Harvest Fund LP and 60% in Dunedin
Buyout Fund LP.
Brian Finlayson has an interest in the carried interest scheme
of Dunedin Buyout Fund LP and received GBPnil from that scheme
during 2016. Brian Finlayson was previously employed by the Manager
and retired in 2002. As at 31 December 2016 the remaining value in
this scheme attributable to Brian Finlayson is GBP3,874.
Enquiries
Graeme Murray Dunedin LLP T: 0131 225 6699
Sue Inglis Cantor Fitzgerald Europe T: 020 7894 8016
This information is provided by RNS
The company news service from the London Stock Exchange
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