Proposal Re-Investment Policy

Dunedin Enterprise Inv Trust PLC
10 April 2008



10 April 2008



DUNEDIN ENTERPRISE INVESTMENT TRUST PLC (the 'Company')


Recommended proposals regarding the Company's investment policy and new
management fee and incentive arrangements

The Board has today published a circular in respect of proposals to adopt an
amended investment policy and revised management fee and incentive arrangements
with Dunedin Capital Partners Limited ('Dunedin' or the 'Manager') (the '
Proposals'). Terms used in the circular have the same meaning as this
announcement.

In summary, the Proposals will involve an increase over time in the overall
proportion of private equity investments which are held through third party
managed funds specialising predominantly in small and medium sized buyouts in
Europe. As part of the Proposals, the current level of management fees will be
reduced and new profit sharing arrangements will be entered into between the
Company and the Executives of Dunedin, its investment manager. In addition, the
notice period of the existing Dunedin Enterprise Management Agreement will be
reduced after an initial period of 2 years.

The Proposals are conditional upon approval of Shareholders at a General
Meeting.


Introduction

The Company has been investing in unquoted companies throughout the 34 years of
its existence, the last 20 of which as a company listed on the London Stock
Exchange. Over this time the strategy has proven to be highly successful. In the
last 20 years its assets have grown from approximately £26m to approximately
£160m (as at 31st December 2007).

Throughout those 20 years, the investment strategy of the Company has continued
to evolve in line with developments in the wider market for unquoted investments
and as the venture capital and private equity industry has matured.  At all
times during that period the Board has sought to develop the investment strategy
of the Company to continue to deliver long term capital growth to shareholders.

Since 2000, the Company has increased its concentration on smaller and medium
size buyouts based in the UK through increasing its commitments to the buyout
funds managed by the Manager. At the same time, the Company has made commitments
to funds managed by private equity groups other than Dunedin and in 2007 the
Company gained exposure to unquoted investments outside the UK by purchasing
shares in listed private equity companies in Europe.

The Company's investments were categorised as follows at 31 December 2007:

Type of Investment                            Value (£m)             proportion of net assets
Direct investments                            40.7                  25 per cent.
Dunedin managed funds                         21.4                  13 per cent.
Third party managed funds                     9.4                   6 per cent.
Listed private equity                         33.1                  21 per cent.
Cash                                          55.4                  35 per cent.
Debtors/creditors                             (0.1)                 0 per cent.
Total                                         159.9


The Company intends to continue investing in the above investment categories but
to increase the proportion of investments made in Europe, predominately through
commitments to funds managed by third party private equity managers.

The Board, aware that the broader European private equity market has been
growing rapidly in recent years, believes that the Company's growth can be
enhanced by accessing this market and in particular by accessing the market for
small and medium sized buyouts similar in nature to those successfully
undertaken by Dunedin in the UK.

The Board believes that the most appropriate way to implement this strategy to
increase the Company's access to a wider pool of investment opportunities is for
the Company to make commitments to, and direct co-investments alongside, funds
managed by leading local private equity managers across Europe which invest in
small and medium sized buyouts. The consequence of the new investment policy
will be a greater focus on private equity managers based in Europe which
specialise in investing in smaller buyouts, the area of Dunedin's specific
expertise in the UK.

Implementing this strategy will, in the opinion of the Board, give the Company
access to attractive investment opportunities in the European private equity
market and also differentiate the strategy of the Company from that adopted by
those private equity investment trusts which also invest in large and mega
buyout funds.

The Board believes that this strategy will, over time, utilise the current cash
balance built up by Dunedin Enterprise through successful investment disposals
and will ultimately move the Company to a modestly geared position. Financial
gearing as a result of this strategy will not exceed 40 per cent. of the
Company's gross asset value.

The Proposals

The Company's overall investment objective will remain unchanged, that is to
achieve substantial long term growth in Shareholder assets through capital gains
from its investments.

The Proposal under consideration would mean that a higher proportion of the
Company's assets will be invested outside the UK through third party funds not
managed by Dunedin.

The Company has stated previously that as a result of private equity
transactions being more commonly structured with yield being rolled up and paid
when the investment in the underlying company is sold, the trend towards a lower
dividend paid to Shareholders will be gradual but inevitable. Implementing the
Proposals will reinforce this trend.

Conditional upon approval of Shareholders at the General Meeting, the investment
policy of the Company will be as follows.

Investment Policy

The Company's investment objective will be achieved by investing in a portfolio
of unquoted companies either directly, via private equity funds or via quoted
private equity companies. Investments will be structured to deliver capital
growth for the Company.

The mix of investments by the Company among each of these principal investment
categories will vary from time to time. It is expected that, in the medium to
long term, the allocation of direct investment and investment into quoted
private equity companies as a proportion of the total portfolio will decrease as
indirect investment through private equity funds increases. The Board, in
conjunction with the Manager, has discretion as to asset allocation and can at
any time determine that up to 100 per cent. of the Company's assets may be
invested in any particular investment category.

In implementing the revised investment policy Dunedin Enterprise will seek to
diversify its current portfolio of investments principally by making commitments
to private equity funds managed by leading private equity fund managers across
Europe. Commitments will be predominantly to buyout funds specialising in small
and medium sized buyouts in Europe.

The European buyout funds to which the Company will seek to make commitments
will be managed by experienced private equity fund managers. The funds will
normally be structured as limited partnerships similar to the Dunedin Buyout
Funds, and have a life of between 10 and 15 years. Such funds typically make
investments over a five year period and realise these investments over a further
five years. Given the timings of the various cashflows the net amounts of cash
drawn down by each partnership is expected to be significantly less than the
total commitment.

The Company will also make a small number of co-investments principally
alongside the private equity funds in Europe to which it makes a commitment.
Co-investment activity is anticipated to be a smaller part of the overall
programme albeit one that offers the Company the prospect of enhanced returns.

The Board believes that implementing the proposed programme will allow the
Company, over time, to utilise the cash balances built up as a result of the
successful exits of previous investments. The nature of fund structures
typically with five year investment periods means that the Company can undertake
a modest level of 'over-commitment' in its investment strategy. The Proposals
would mean a maximum 'over-commitment' position of less than 50 per cent. of net
asset value. This 'over-commitment' strategy is more conservative than
strategies adopted by other private equity investment trusts investing in
private equity funds.  The aim of this 'over-commitment' strategy is to increase
further returns made on investments made by the Company.

In addition to the above, Dunedin Enterprise will retain the ability to continue
a policy of investing in European listed private equity companies and to make
substantial commitments to funds managed by Dunedin.

The Manager actively monitors the Company's portfolio of investments and
attempts to mitigate risk primarily through diversification.  By investing in a
diversified portfolio of private equity funds, the Company will be exposed to
numerous underlying investments in individual companies. As these investments
will most likely be denominated in currencies other than Sterling, the Board
will seek to ensure that the Manager manages any currency risk appropriately and
the Board will be responsible for setting the Company's hedging policy. Not more
than 15 per cent. of Net Asset Value, at the date of investment, will be
invested in any single investment. For the avoidance of doubt, if the Company
invests into a limited partnership fund, this limitation shall be applied
individually to each of the underlying companies invested into by that fund.

In common with most investment companies, the Company may borrow to finance
further investment. Although the Company is permitted by its Articles of
Association to borrow an amount equal to the amount paid up on the issued share
capital and the total amounts standing to the credit of the capital and revenue
reserves of the Company, financial gearing will not exceed 40 per cent. of gross
asset value.  The Company currently has a borrowing facility of £39 million.

New Management Fee and Incentive Arrangements

To reflect the revised investment policy, the Board has concluded that changes
should be made to the fee and incentive arrangements with the Manager to bring
them into line with terms and conditions that prevail in the marketplace.

Due to the nature of the proposed revision to the investment policy of the
Company, the Board has taken advice from the independent remuneration
consultants MM&K as to the appropriateness of the proposed fee and incentive
arrangements with the Manager. MM&K has researched the management fee and
incentive arrangements of other private equity investment trusts with an
investment policy similar to that outlined in these proposals in confirming the
appropriateness of the proposed arrangements.

Dunedin Enterprise currently holds assets in five broad categories. These are:


1) direct investments in individual companies;

2) investments in limited partnership funds managed by Dunedin;

3) investments in limited partnership funds not managed by Dunedin;

4) investments in listed private equity companies; and

5) cash.

Currently the Manager is remunerated through an annual management fee of 2 per
cent. of the total gross assets of the Company. This fee is paid quarterly in
advance. Where the Company has invested in other investment vehicles controlled
by Dunedin there is a fee offset mechanism in place. The Manager also benefits
from a co-investment scheme on certain investments whereby Executives can invest
up to 7.5 per cent. of the equity on a deal by deal basis.

The proposed changes to the investment policy would see the introduction of two
new investment classes within the overall assets of the Company, namely a
limited partnership which will make commitments predominantly to European buyout
funds (the 'Fund of Funds Limited Partnership') and a limited partnership which
will make co-investments (the 'Co-Investment Limited Partnership') principally
alongside funds where Dunedin Enterprise is, or is seeking to become, an
investor.

The proposed arrangements would see differing fees charged on the various asset
pools within the Company.  These fees would, as before, be paid quarterly in
advance.  The new proposals for the annual management fee are shown in the table
below.

Dunedin Enterprise Revised Annual Management Fees

Vehicle                                            Fee

Fund of Funds Limited Partnership                  1.5 per cent. on the value of investments plus
                                                   0.5 per cent. on undrawn commitments to third
                                                   party funds
Co-Investment Limited Partnership                  1.5 per cent. on the value of investments
Direct investments in individual companies         1.5 per cent. on the value of investments
Dunedin Managed Funds                              Same fees as paid by third party investors in
                                                   such Funds
Third party managed funds                          1.5 per cent. on value of investments
Listed private equity funds                        1.5 per cent. on value of investments
Cash                                               0.5 per cent. on cash balances not committed
                                                   to third party funds through the Fund of Funds
                                                   Limited Partnership



These new proposals reflect the fact that Dunedin will be actively seeking out
and making commitments to leading private equity funds across Europe.  A
management fee of 0.5 per cent. will be payable on undrawn commitments to third
party funds to reflect the work carried out to identify, appraise and gain
access to suitable funds. The revised arrangements will mean that management
fees paid to the Manager, as a percentage of gross assets, will reduce in the
future.

Given that this proposal represents a material change in the structure of the
fee arrangements and to support the Manager in recruiting a team with the
appropriate experience to implement this revised investment policy, the Board
feels it fair and reasonable to allow the Manager a two year transition period
where the existing fee basis will remain in place. This period matches the
length of the notice period in the current contract held by Dunedin to manage
the Company. The Manager is confident that it will be able to attract a team
with the requisite skills and experience.

Furthermore, to align the interests of the Manager with the Shareholders, in
line with current market practice, the executives of the Manager (the '
Executives') will be entitled to a share of the profits on the performance of
the assets held within the Fund of Funds Limited Partnership and the
Co-investment Limited Partnership.

In respect of the Fund of Funds Limited Partnership, it will be structured as a
series of annual Sub-Funds, each of which will have a one year Commitment Period
(other than the first Sub-Fund which will have a Commitment Period expiring on
31st December 2008). The value of the investments of each Sub-Fund will be
calculated after three years from the end of the Commitment Period and then
annually thereafter. The Executives will be entitled to a carried interest, i.e.
a share of profits, equal to 10 per cent. of the growth in the value of the
investments of the Sub-Fund provided that the growth is above a hurdle set at
the amount of outstanding loan commitments made by the Company to the Fund of
Funds Limited Partnership in respect of the Relevant Sub-Fund plus interest at 8
per cent. per annum (compounded quarterly) on such amounts, and provided that
the value of the investments of the Sub-Fund is above a 'high watermark' set as
the highest previous value of the investments of the Sub-Fund. The carried
interest profit share earned will be paid into an escrow account and may only be
released once, and then only to the extent that, the value of the escrow account
exceeds 10 per cent. of the amount of any outstanding exposure that Dunedin
Enterprise has to the Sub-Fund. Finally, a 'clawback' mechanism will be in place
within each Sub-Fund to seek to ensure that no more than 10 per cent. of the
profits of each Sub-Fund are distributed by way of the carried interest profit
share to the Executives.

As regards the Co-Investment Partnership, the Executives will be entitled to a
carried interest profit share of 10 per cent. of the realised profits of each
co-investment made by the Co-investment Limited Partnership so long as the
profits from each co-investment exceed a hurdle of 8 per cent. per annum
compounded quarterly on the capital invested.  In addition, the Executives will
co-invest 1 per cent. of the Company's commitment alongside the Company in each
investment made by the Co-Investment Limited Partnership.

Extraordinary General Meeting






The implementation of the Proposals will require the approval of Shareholders.
The General Meeting of the Company will be held at The Merchants' Hall, 22
Hanover Street, Edinburgh EH2 2EP on 13 May 2008 at 12.30 p.m. (or immediately
following the Annual General Meeting). The Resolutions will be proposed at the
General Meeting to approve the Proposals.

Related Party

The proposed new management incentive arrangements involve the Company and
Dunedin.  Under the UKLA Listing Rules, an investment manager is deemed to be a
related party of the investment company it manages and, accordingly, Dunedin is
a related party of the Company.  The consequence of this is that the proposed
new management fee and incentive arrangements are required to be approved by
Shareholders. Furthermore, the Board must receive advice from an independent
adviser that the proposed arrangements are fair and reasonable as far as the
Shareholders are concerned.

No member of the Dunedin Group is a shareholder in the Company and, therefore,
Dunedin (as the related party) has no right to vote at the General Meeting.

One of the directors of the Company, Simon Miller, is a director of, and
shareholder in, the holding company of Dunedin. Mr Miller has not taken part in
the Board's consideration of the Proposals and will abstain from voting at the
General Meeting in respect of his shareholding in the Company.

Expected Timetable
                                                                                                       2008


Latest time and date for receipt of Forms of Direction from Plan                           12.30pm on 8 May
Participants for General Meeting


Latest time and date for receipt of Forms of Proxy for General                            12.30pm on 11 May
Meeting


General Meeting                                                       12.30pm (or immediately following the
                                                                   conclusion of the AGM of the Company) on
                                                                                                     13 May


Proposed Effective Date for Proposals                                    As soon as practical following the
                                                                       General Meeting and not later than 1
                                                                                                       June
Enquiries

Edward Dawnay - 020 7409 5699
Chairman

Angus Gordon Lennox - 020 7588 2828
JPMorgan Cazenove








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