Annual Financial Report

RNS Number : 4337Y

Dunedin Enterprise Inv Trust PLC

01 March 2012

 

EMBARGOED - 7AM THURSDAY 1 MARCH 2012

For release                                                          07.00am                                               1 March 2012

Dunedin Enterprise Investment Trust PLC

Annual financial report announcement for the year ended 31 December 2011

Dunedin Enterprise Investment Trust PLC, the private equity investment trust which specialises in investing in mid-market buyouts in the UK, announces its results for the year ended 31 December 2011.

Financial Highlights:

·     Net asset value per share increased by 8.8% to 541.0p per share

·     Dividend for the year of 5.0p per share

·     New investment of £17.2m in the year

·     Realisations of £18.4m in the year

Comparative Total Return Performance

Periods to 31 December 2011	Net Asset value*1	Share price	FTSE Small Cap (ex Inv Cos) Index	FTSE All Share (ex Inv Cos) Index
One year	9.6	5.7	-15.2	-3.3
Three years	33.8	66.3	56.4	43.6
Five years	10.7	-20.7	-36.8	0.8
Ten years	113.0	79.9	11.7	58.0

^*1 - taken from 30 April for five and ten years

Shaun Middleton, Managing Partner of Dunedin Capital Partners Limited ("Dunedin"), the UK mid-market private equity house which manages Dunedin Enterprise Investment Trust PLC commented: "We are focused on driving value creation across our portfolio through organic and acquisitive growth.  Dunedin backed businesses made a total of eleven follow-on acquisitions in 2011 enabling them to accelerate growth on an international level. Operational improvements, strong trading and positive contributions from acquisitions, have meant that a number of our portfolio companies have experienced valuation uplifts as reported in the year end results."

For further information please contact:

Claire McCorquodale Dunedin Capital Partners Limited           0131 225 6699 0131 718 2313   07740 912043

Jane Kirby / Corinna Osborne Equity Dynamics Limited 07825 326 441/ 440 [e-mail] / [e-mail]

Notes to Editors

Dunedin Enterprise Investment Trust PLC ("the Company", or "the Trust") is managed by Dunedin. Dunedin is an independent private equity company owned by its directors and employees. It specialises in providing equity finance for management buyouts and management buyins with a transaction size of £20m to £75m. It operates throughout the United Kingdom from its offices in Edinburgh and London.  Dunedin is itself the result of a management buyout which took place in 1996.

Dunedin Enterprise's investment objective is to achieve substantial long term growth in its assets through capital gains from its investments.  For more information on Dunedin Enterprise, its portfolio and investment approach, please visit our website www.dunedinenterprise.com.  Investors can buy shares in the company through regular savings and ISA plans.  For further information, call the Alliance Trust Savings helpline on 01382 573737 or visit their website at www.alliancetrustsavings.co.uk.

Chairman's Statement

I can once again report an uplift in net asset value for the year to 31 December 2011.  During the year net assets increased from £150.1m to £163.0m, an increase of 8.8% per share.  The share price moved from 300.0p to 313.5p over the same period and was 381p at the time of writing.  The discount to net asset value, which had been as high as 48.5%, has fallen to 42.1% by the year end and 29.6% at the time of writing this statement.

A single final dividend of 5.0p per share (2010: 3.8p) is proposed, payable on 25 May 2012 following the AGM.

The need to address the substantial discount of the share price to net asset value was one of the principal reasons for sending out proposals to shareholders in early November 2011. Shareholders approved a change in the strategy of the Company to focus on investments managed by Dunedin in the UK as well as returning cash to Shareholders.

As a first step in enacting this new policy, and subsequent to the year end, the stake in SWIP was sold in February 2012. This has enabled the process of returning money to shareholders to begin and as I said in my letter to shareholders on the 1 November 2011, this will continue.

In September 2011, the savings plan schemes, which had for some years been run by Aberdeen Asset Managers, were transferred to the Alliance Trust Savings. These schemes can be accessed via the Dunedin Enterprise website at www.dunedinenterprise.com.

Portfolio

The portfolio at 31 December 2011 consisted of investments made by the Trust directly or through Dunedin managed funds 64%, listed private equity (the stake in SWIP) 9%, third party managed funds 12%, legacy funds 1%, and cash or near cash 14%.  At the year end the Trust had outstanding commitments of £60.3m to limited partnership funds, split between Dunedin managed funds 38% and European Funds 62% and cash and near cash resources of £23.5m.  In September 2011 the Trust put in place a £10m facility with Lloyds Bank for a period of one year. This is designed to give some leeway should the anticipated drawdown of commitments take place earlier than expected.  Both the Board and the Manager are comfortable with the balance between uncalled commitments and cash resources given the expected rate of new investment.

Subsequent to the year end, the SWIP investment was sold at an 8% discount to the net asset value of the investment at 30 September 2011 (the then most recently published net asset value) generating proceeds of £14.5m.  The proceeds of this realisation are to be returned to shareholders via a tender offer.  It is envisaged that the Tender Offer will be to purchase up to 10% of the ordinary shares in issue at a price of 475p per share.  Full details will be sent out to shareholders shortly with realisation proceeds receivable after 6 April 2012.

A total of £17.2m was invested during the year of which £9.9m was invested by Dunedin managed funds and £7.3m was drawn down by European and other third party managed funds. Details are contained in the Managers' Review.

In order to continue to deliver on the strategy approved by Shareholders on 28 November 2011 the Trust has committed £25m to the UK lower mid-market through Dunedin.

Market conditions and outlook

The Board and the Manager firmly believe in the long term future of the private equity sector in the UK.  Over the past decade private equity funds have developed into an important element of UK and European capital markets.  They provide a vehicle for institutions and increasingly private investors to access companies which are not subject to the vicissitudes of the quoted market.  Ironically, companies in private ownership can often take a longer term view than their quoted counterparts and take strategic decisions without fear of short term criticism.

The ability to drive operational improvements in a company, primarily due to private equity investors having a controlling or major stake in a company, differentiates private equity investors from public equity investors.  As such they are able to engage management more effectively when the environment becomes difficult.

During 2011 UK private equity buyouts decreased by a third to approximately £12bn.  With the exception of 2009, when these amounted to approximately £5bn, this represents the lowest annual figure since 1997.  None of this can be considered surprising given the nature of the UK, European and world economies.  That said, the lower mid-market, where your Company operates, was the exception with buyouts rising from a total value of £2.3bn in 2010 to £2.7bn in 2011, in contrast to the upper mid-market, which fell from a total value of £7.4bn in 2010 to £4.5bn in 2011.

Notwithstanding the economic gloom, the UK lower mid-market experienced a strong last quarter in 2011.  It is nigh impossible to predict the outcome for 2012, but against a very uncertain backdrop there are some cautious signs for optimism.

Board changes

I will step down as Chairman following the AGM. I have been on the Board since 1995 and Chairman since 1999. David Gamble, who is currently Senior Independent Director, will take over.  Liz Airey will become the Senior Independent Director.  The search for another Director is underway.

Edward Dawnay

Chairman

29 February 2012

Manager's Review

In the year to 31 December 2011 the Company's net asset value increased from £150.1m to £163.0m. This equates to an increase of 8.8% in the net asset value per share from 497.3p to 541.0p. This increase in net assets is explained by:

	£'m
Net asset value at 1 January 2011	150.1
Unrealised value increases	21.6
Unrealised value decreases	(8.1)
Realised profit over opening valuation	-
Other revenue and capital movements	0.5
Dividends paid to shareholders	(1.1)
Net asset value at 31 December 2011	163.0

Portfolio Composition

Dunedin Enterprise makes investments in unquoted companies through:

• Dunedin managed funds (including direct investments),

• third party managed funds,

• European listed private equity (including SWIP Private Equity Fund of Funds), and

• legacy technology funds.

The investment portfolio can be analysed as shown in the table below.

	Valuation	Additions	Disposals	Realised	Unrealised	Valuation
	at 01-01-11	in year	in year	movement	movement	at 31-12-11
	£'m	£'m	£'m	£'m	£'m	£'m
Dunedin managed	87.2	9.9	(5.3)	(0.3)	12.4	103.9
Third party managed	12.5	7.2	(1.8)	0.6	1.3	19.8
European listed private equity	11.6	-	(11.2)	(0.4)	-	-
Legacy technology funds	1.7	0.1	(0.1)	0.1	(0.3)	1.5
	113.0	17.2	(18.4)	-	13.4	125.2
SWIP Private Equity Fund of Funds	14.4	-	-	-	0.1	14.5
	127.4	17.2	(18.4)	-	13.5	139.7

New Investment Activity

A total of £17.2m was invested in the year to 31 December 2011. Of this total, £9.9m was invested in Dunedin managed funds, £7.2m was drawn by European third party funds, with the balance of £0.1m drawn by legacy technology funds.

On 2 July 2011 an investment of £8.0m was made in Red Commerce through Dunedin Buyout Fund II LP ("DBFII"). DBFII invested a total of £27.0m for a majority stake in the company. Red Commerce is a global supplier of SAP experts to international corporations and consultancies. It was founded in 2000, and now has a global footprint with access to over 20,000 SAP experts in 80 countries and offices in the UK, Germany, France, Scandinavia, Switzerland and the US.

A further £1.9m was invested in existing portfolio companies, Enrich (£0.8m) and RSL Steeper (£0.2m) and to meet management fees for DBFII (£0.9m).

A total of £7.2m was drawn down by the five European funds to which the Company has made commitments. The most significant drawdowns were made by Capiton (£3.0m), FSN Capital (£2.6m) and Innova (£1.1m). These funds make investments in buyouts in the German mid-market, the Pan-Nordic mid-market and the Central Eastern European mid-markets respectively. A total of six underlying companies were purchased during the year.

Realisations

In the year a total of £18.4m was generated from portfolio realisations. As reported in last year's annual report the European listed securities were realised in January 2011 generating proceeds of £11.2m, £0.4m below their value at 31 December 2010. Within the Dunedin managed portfolio £4.5m was generated from the repayment of loan stock by Practice Plan and other loan stock redemptions generated £0.8m.

A refinancing of a portfolio company within FSN Capital generated proceeds of £1.6m and a capital gain of £0.6m. Other realisations generated £0.3m for the Company during the year.

Cash and commitments

At 31 December 2011 the Company had cash and near cash balances of £23.5m. On 1 September 2011 the Company entered into a £10m revolving credit facility with Lloyds. The term of the facility is for one year and has been taken to ensure that all commitments to funds can be met by the Company. Following the year end the investment in SWIP Private Equity Fund of Funds was realised at €0.79 per share generating proceeds of €17.4m. The investment has been valued at this level as at 31 December 2011. The proceeds from the sale are to be distributed to shareholders in accordance with the general meeting vote in November 2011.

No new commitments have been made to funds during the year. The Company has undrawn commitments to Dunedin managed funds of £22.9m and a further £37.4m of undrawn commitments to the five European funds.

Unrealised movements in valuations

In the year to 31 December 2011 the largest single uplift in unrealised value was generated by Capula. A high level of orders generated in 2010 resulted in strong profit growth at the company during 2011 enabling an increase in valuation of £7.0m. WFEL has also achieved a strong trading performance in 2011 and when combined with good cash generation has enabled the company to repay all its bank debt. The valuation of the company has increased by £5.0m in the year.

Good trading conditions and positive contributions from acquisitions have benefited the valuation of Practice Plan (£2.3m) and CitySprint (£1.1m). The recently acquired Red Commerce has achieved a record number of contracted staff on site leading to a valuation uplift of £1.6m.

On the downside, additional funding of £0.8m made available to Enrich has been fully provided against as the company continues to find trading difficult. The Manager remains supportive of the company. Weldex is experiencing pressure on the rates at which it can hire cranes in to the market at present and this has led us to make a provision of £1.4m against this investment. The valuation of the investment in OSS has been reduced by £1.4m due to a higher level of bank debt in the business to fund acquisitions. The prospects for the company remain positive.  Spending contraints within the NHS have impacted margins at RSL leading to a reduction of £1.7m in valuation.

The European funds provided an overall increase in valuation of £1.3m. The principal contributors to this increase were Realza and Egeria. As was reported at the half year, one portfolio company within the Realza fund benefitted from a significant de-gearing leading to a valuation increase. The Egeria fund made a number of investments during 2010 which have now been valued above cost.

Valuations and Gearing

The average earnings multiple applied in the valuation of the Dunedin managed portfolio was 6.8x EBITDA (2010: 7.0x), or 8.1x EBITA (2010: 8.5x). These multiples continue to be applied to maintainable profits.

Within the Dunedin managed portfolio, the weighted average gearing of the companies was 2.1x EBITDA (2010: 2.5x) or 2.5x EBITA (2010: 3.0x).  Analysing the portfolio gearing in more detail, the percentage of investment value represented by different gearing levels was as follows:

Less than 1 x EBITDA	43%
Between 1 and 2 x EBITDA	5%
Between 2 and 3 x EBITDA	38%
More than 3 x EBITDA	14%

Of the total acquisition debt in the Dunedin managed portfolio companies the scheduled repayments are spread as follows:

Less than one year	13%
Between one and three years	25%
More than 3 years	62%

All portfolio companies are currently in compliance with banking covenants.

The analysis of the portfolio detailed below excludes the investment in SWIP since this was realised shortly following the year end.

Geographic Distribution

At 31 December 2011, 84% of the investment portfolio of £125.2m was based in the UK, with the remaining 16% in Continental Europe. The higher exposure to the UK reflects the investment made in Red Commerce, valuation uplifts in UK based companies and the sale of the SWIP investment. SWIP had a worldwide investment remit.

	31 December 2011 %	31 December 2010 %
UK	84	72
Rest of Europe	16	24
USA	-	4

Sector Analysis

The investment portfolio of the Company is broadly diversified. At 31 December 2011 the largest sector exposure of 60% remains to the Support Services sector, a diverse sector in itself.

	31 December 2011 %	31 December 2010 %
Construction and building materials	6	5
Consumer products & services	3	5
Financial services	6	5
Healthcare	3	5
Industrials	19	22
Pharma, medical, biotech	-	3
Real Estate	-	2
Support services	60	48
Technology	3	5

Deal Type

The portfolio of investments continues to be predominantly weighted towards MBO/MBI's. Exposure to technology, life sciences and real estate arises from third party managed funds.

	31 December 2011 %	31 December 2010 %
Management buyouts/buyins	99	90
Technology	1	5
Life Sciences	-	3
Real Estate	-	2

Valuation Method

	31 December 2011 %	31 December 2010 %
Cost	8	15
Earnings - provision	15	13
Earnings - uplift	77	52
Bid price	-	20

Year of Investment

In the vintage year table below, value is allocated to the year in which either Dunedin Enterprise or the third party manager first invested in each portfolio company.

	31 December 2011 %	31 December 2010 %
<1 year	12	26
1-3 years	30	15
3-5 years	9	22
>5 years	49	37

Dunedin Capital Partners Limited

29 February 2012

Ten Largest Investments     

(both held directly and via Dunedin managed funds) by value at 31 December 2011

	Approx.			Percentage
	percentage	Cost of	Directors'	of net
	of equity	investment	valuation	assets
Company name	%	£'000	£'000	%
SWIP Private Equity Fund of Funds II PLC	4.0	15,025	14,520	8.9
WFEL Holdings Limited	23.2	6,870	12,152	7.5
Capula Group Limited	37.5	8,417	11,479	7.0
Practice Plan Holdings Limited	26.2	5,602	11,265	6.9
CitySprint (UK) Group Limited	11.9	9,838	11,043	6.8
Red Commerce Limited	19.3	8,010	9,649	5.9
OSS Environmental Holdings Limited	40.2	5,951	9,549	5.9
Weldex (International) Offshore Holdings Limited	15.1	9,505	8,414	5.2
etc.venues Group Limited	27.9	3,388	8,066	4.9
C.G.I. Group Holdings Limited	41.4	8,509	5,657	3.5
		81,115	101,794	62.5

Consolidated Income Statement

for the year ended 31 December 2011

	Audited			Audited
	2011			2010
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Investment income	2,102	-	2,102	2,401	-	2,401
Gains on investments	-	13,404	13,404	-	27,325	27,325
Total Income	2,102	13,404	15,506	2,401	27,325	29,726
Expenses
Investment management fees	(345)	(1,036)	(1,381)	(265)	(794)	(1,059)
VAT on investment management fee	185	556	741	-	-	-
Other expenses	(677)	(111)	(788)	(641)	-	(641)
Profit before finance costs and tax	1,265	12,813	14,078	1,495	26,531	28,026
Finance costs	(38)	(114)	(152)	(22)	(66)	(88)
Profit before tax	1,227	12,699	13,926	1,473	26,465	27,938
Taxation	80	195	275	(348)	241	(107)
Profit for the year	1,307	12,894	14,201	1,125	26,706	27,831
Earnings per ordinary share (basic & diluted)	4.3p	42.8p	47.1p	3.7p	88.5p	92.2p

The total column of this statement represents the Income Statement of the Group, prepared in accordance with International Financial Reporting Standards as adopted by the EU. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations.

All income is attributable to the equity shareholders of Dunedin Enterprise Investment Trust PLC.

Consolidated Statement of Changes in Equity

for the year ended 31 December 2011

Year ended 31 December 2011 (audited)

	Share capital £'000	Share premium £'000	Capital redemption reserve £'000	Capital Reserve realised £'000	Capital reserve - unrealised £'000	Revenue account £'000	Total retained earnings £'000	Total equity £'000
At 31 December 2010	7,544	47,600	382	96,460	(8,109)	6,206	94,557	150,083
Profit/(loss) for the year	-	-	-	(5,167)	18,061	1,307	14,201	14,201
Purchase and cancellation of shares	(14)	-	14	(181)	-	-	(181)	(181)
Dividends paid	-	-	-	-	-	(1,147)	(1,147)	(1,147)
At 31 December 2011	7,530	47,600	396	91,112	9,952	6,366	107,430	162,956

Year ended 31 December 2010 (audited)

	Share capital £'000	Share premium £'000	Capital redemption reserve £'000	Capital Reserve realised £'000	Capital reserve - unrealised £'000	Revenue account £'000	Total retained earnings £'000	Total equity £'000
At 31 December 2009	7,544	47,600	382	102,651	(41,006)	5,685	67,330	122,856
Profit/(loss) for the year	-	-	-	(6,191)	32,897	1,125	27,831	27,831
Dividends paid	-	-	-	-	-	(604)	(604)	(604)
At 31 December 2010	7,544	47,600	382	96,460	(8,109)	6,206	94,557	150,083

Consolidated Balance Sheet

As at 31 December 2011

	Audited 2011 £'000	Audited 2010 £'000
Non-current assets
Investments held at fair value	148,167	152,312
Current assets
Other receivables	359	241
Cash and cash equivalents	14,961	4,177
	15,320	4,418
Current liabilities
Other liabilities	(428)	(6,270)
Current tax liabilities	(103)	(377)
	(531)	(6,647)
Net current assets / (liabilities)	14,789	(2,229)
Net assets	162,956	150,083
Capital and reserves
Share capital	7,530	7,544
Share premium	47,600	47,600
Capital redemption reserve	396	382
Capital reserve - realised	91,112	96,460
Capital reserve - unrealised	9,952	(8,109)
Revenue reserve	6,366	6,206
Total equity	162,956	150,083
Net asset value per ordinary share (basic and diluted)	541.0p	497.3p

Consolidated Cash Flow Statement

for the year ended 31 December 2011

	Audited 2011 £'000	Audited 2010 £'000
Net cash (outflow)/inflow from operating activities	(5,286)	912
Servicing of finance
Finance costs	(152)	(88)
Investing activities
Purchase of investments	(17,197)	(32,520)
Purchase of 'AAA' rated money market funds	(22,398)	(7,616)
Sale of investments	18,367	7,746
Sale of 'AAA' rated money market funds	38,778	31,828
Net cash inflow/(outflow) from investing activities	17,550	(562)
Taxation
Tax paid	-	(101)
Financing activities
Purchase of ordinary shares	(181)	-
Dividends paid	(1,147)	(604)
Net increase/(decrease) in cash and cash equivalents	10,784	(443)
Cash and cash equivalents at the start of the year	4,177	4,620
Net increase/(decrease) in cash and cash equivalents	10,784	(443)
Cash and cash equivalents at the end of the year	14,961	4,177

Statement of Directors' Responsibilities in respect of the Annual Report and the Financial Statements

The Directors are responsible for preparing the Annual Report and the Group and Parent Company financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and Parent Company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the Parent Company financial statements on the same basis.

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Parent Company and of their profit or loss for that period. In preparing each of the Group and Parent Company financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgments and estimates that are reasonable and prudent;

• state whether they have been prepared in accordance with IFRSs as adopted by the EU; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the parent company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the Parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Under the Disclosure and Transparency Rules the Directors confirm that to the best of their knowledge:

• the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

• the Directors' Report includes a fair review of the development and performance of the business and the position of the issuer together with a description of the principal risks and uncertainties that it faces.

By Order of the Board

Edward Dawnay

Chairman

29 February 2012

Notes to the Accounts

1. Preliminary Results

The financial information contained in this report does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006 and has not been delivered to the Registrar of Companies.  The information for the year ended 31 December 2010 has been extracted from the latest published audited financial statements. The audited financial statements for the year ended 31 December 2010 have been filed with the Registrar of Companies. The report of the auditors on those accounts contained no qualification or statement under the Companies Act 2006.

2. Dividends

	2011 £'000	2010 £'000
Dividends paid in the year	1,147	604

The final dividend of 5.0p for the year ended 31 December 2011 and will be paid on 25 May 2012 to shareholders on the register at close of business on 4 May 2012.  The ex-dividend date is 2 May 2012.

3. Earnings per share

	2011 £'000	2010 £'000
Revenue return per ordinary share (p)	4.3	3.7
Capital return per ordinary share (p)	42.8	88.5
Earnings per ordinary share (p)	47.1	92.2
Weighted average number of shares	30,173,462	30,177,380

The earnings per share figures are based on the weighted average numbers of shares set out above. Earnings per share is based on the revenue profit/(loss) in the period as shown in the consolidated income statement.

4.  Principal risks

The Company's investing activities expose it to types of risk that are associated with the financial instruments and the market in which it invests.  The most important types of financial risk to which the Company is exposed are market risk, interest rate risk, credit risk, liquidity risk and currency risk.  The nature and extent of the financial instruments outstanding at the balance sheet date and the risk management policies employed by the Company are discussed below.

Market risk - the risk that the value of a financial instrument will change as a result of changes to market prices is one that is fundamental to the Company's objective.  The portfolio is continually monitored to ensure an appropriate balance of risk and reward in order to achieve the Company's objective.  Some of the risks can be mitigated by diversifying the portfolio across business sectors, asset classes and regions.

Interest rate risk - some of the Company's financial assets are interest bearing, at both fixed and variable rates.  As a result the Company is subject to exposure to fair value interest rate risk due to fluctuations in the prevailing levels of market interest rates.

The fixed rate assets comprise fixed rate lendings to investee companies. Fixed rate lendings have a weighted average interest rate of 9% per annum (2010: 9%) and a weighted average life to maturity of 4.1 years (2010: 4.6 years). The floating rate assets consist of cash and "AAA" rated cash OEIC's. The nil interest rate bearing assets represent the equity content of the investment portfolio. Interest rate risk is managed on an ongoing basis by the Manager and on a quarterly basis by the Board.

Due to the relatively short period to maturity of the fixed rate investments held within the portfolio, it is considered that an increase or decrease of 25 basis points in interest rates as at the reporting date would not have had a significant effect on the Group's net assets or total return for the year.

Credit risk - credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Investment in unquoted companies either directly, via Dunedin managed funds or via third party managed funds (both limited partnership funds and quoted stocks) is by its nature subject to potential credit losses. The Company's exposure to any one entity is carefully monitored. The Company complies with the Section 1158 Corporation Tax Act 2010 requirement for investment trusts not to invest more than 15% of the portfolio in the securities of any one company at the time of initial or subsequent investment. The unquoted investment portfolio is further diversified by asset class, sector and region. Liquid assets (cash deposits and AAA rated cash OEIC's) are divided between a number of different financial institutions, each of whose credit rating is assessed. Credit risk is monitored by the Manager on an ongoing basis and on a quarterly basis by the Board.

Liquidity risk - the Company has significant investments in unquoted companies which are inherently illiquid. As a result, the Company may not be able to liquidate quickly some of its investments in these companies at an amount close to its fair value in order to meet its liquidity requirements. The Company manages its liquid investments to ensure sufficient cash is available to meet contractual commitments and also seeks to have cash or readily convertible investments available to meet other short term financial needs. Liquidity risk is monitored by the Manager on an ongoing basis and on a quarterly basis by the Board.

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 movement's in foreign currency exchange rates. Currency risk is monitored by the Manager on an ongoing basis and on a quarterly basis by the Board.

ENDS

 

END

 

 

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