REG - Dunedin Enterprise - Annual Financial Report
18/03/2022 07:00
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RNS Number : 1995F Dunedin Enterprise Inv Trust PLC 18 March 2022
18 March 2022
For release 18 March 2022
Dunedin Enterprise Investment Trust PLC ("the Company")
Year ended 31 December 2021
Dunedin Enterprise Investment Trust PLC, the private equity investment trust,
announces its results for the year ended 31 December 2021.
Financial Highlights:
· Share price total return of 46.3% in the year to 31 December 2021
· Net asset value total return of 39.5% in the year to 31 December 2021
· Realisations of £38.5m in the year
· £26m returned via tender offer in November 2021
· Interim dividends totalling 28.6p per share
· Final dividend of 1.9p per share proposed for the year ended 31
December 2021
· Total of £97.9m has been returned to shareholders since the decision
to wind-up the Trust
Comparative Total Return Performance
Year to 31 December 2021 Net Asset value Share price FTSE
Small Cap
(ex Inv Cos)
Index
One year 39.5% 46.3% 23.0%
Three years 50.7% 64.4% 56.8%
Five years 98.6% 212.3% 67.5%
Ten years 108.5% 262.8% 258.5%
For further information please contact:
Graeme Murray
Dunedin LLP
07813 138367
Chairman's Statement
I am pleased to report further progress in terms of performance and the return
of cash to shareholders.
The total return in the year to 31 December 2021 was 39.5% and 46.3% in terms
of net asset value per share and share price respectively.
Your Company's net asset value per share increased from 413.9p to 558.8p in
the year. This is stated after allowing for the final dividend for 2020 of
2.0p paid in May 2021 and an interim dividend for 2021 of 16.0p paid in
November 2021.
The share price of 473p at 31 December 2021 represented a discount of 15.4% to
the net asset value of 558.8p per share. The share price currently stands at
470p.
In November 2021 a tender offer returned £26m to shareholders. In total
£29.3m was returned to shareholders this year. Since shareholders approved
the decision to wind-up the Trust in May 2016 a total of £97.9m has been
returned to shareholders.
Portfolio
During the year there was one follow-on investment: an additional £0.9m was
invested in Incremental, an IT services provider.
A refinancing at Hawksford, a provider of services to the asset management
sector, was completed in February 2021, generating proceeds of £6.8m. The
realisation of U-POL, the manufacturer of automotive refinish products, was
completed in September 2021, with proceeds of £22.0m. A partial sale of GPS
, a market leader in payment processing technology, was completed in December
2021. Cash proceeds received from the partial realisation amounted to
£14.0m and, in addition, £5.9m has been rolled into a GPS Newco.
In January 2022 the remaining investment in CitySprint, the same day courier,
was realised, generating £1.5m.
Unrealised valuation increases of £21.3m were offset by decreases of £9.1m.
Valuation uplifts were achieved at Red, GPS and Incremental, offset by
reductions in the valuations of FRA, Weldex and Premier Hytemp. Further
details are provided in the Manager's Review.
Cash, Commitments & Liquidity
The original investment periods of all funds to which the Company has made a
commitment have now ended. In future the Company is only required to meet
drawdowns for follow-on investments, management fees and expenses during the
remainder of the life of the funds.
At 31 December 2021 the Company held cash and near cash equivalents totalling
£24.4m. There are outstanding commitments to limited partnership funds of
£9.8m at 31 December 2021, consisting of £9.1m to Dunedin managed funds and
£0.7m to Realza.
Tender offer
A tender offer was approved by shareholders in November 2021 for 27.4% of the
issued share capital at a 1.2% discount to the net asset value at 30 September
2021. Under the tender offer £26m was returned to shareholders.
Dividends
An interim dividend of 16.0p was paid in November 2021 and a second interim
dividend of 12.6p will be paid in March 2022. It is proposed that a final
dividend of 1.9p per share be paid on 13 May 2022. This will distribute to
shareholders the net revenue profit generated by the Company during 2021.
Outlook
Although the extraordinary and deplorable events in Ukraine have clouded the
economic and geo-political outlook, our portfolio companies have been
relatively unaffected.
The disruption created by the pandemic was the main focus for portfolio
companies during the earlier part of the period under review, the generally
strong financial position of portfolio companies has provided resilience.
The Board welcomes the realisations achieved to date this year and will
continue to return capital to shareholders wherever practicable and prudent
following the realisation of investments.
Duncan Budge
Chairman
18 March 2022
Manager's Review
The total net assets return for the year, after taking account of dividends
and capital returned to shareholders, is 39.5%.
The Company's net asset value decreased from £74.9m to £73.4m over the year.
As detailed below this movement is stated following dividend payments
totalling £3.3m and capital of £26.2m returned to shareholders via a tender
offer in November 2021.
£m
Net asset value at 1 January 2021 74.9
Unrealised value increases 21.3
Unrealised value decreases (9.1)
Realised gain over opening valuation 11.2
Net income and capital movements 4.6
Net asset value prior to shareholder distributions 102.9
Dividends paid to shareholders (3.3)
Tender offer (26.2)
Net asset value at 31 December 2021 73.4
Portfolio Composition
The investment portfolio can be analysed as shown in the table below.
Valuation at Additions Disposals Realised Unrealised Valuation at
1 Jan in year in year movement movement 31 Dec
2021 £'m £'m £'m £'m 2021(1)
£'m
£'m
Dunedin managed 57.8 1.5 (38.0) 10.9 11.4 43.6
Third-party managed 4.5 0.1 (0.5) 0.3 0.8 5.2
Investment portfolio 62.3 1.6 (38.5) 11.2 12.2 48.8
AAA rated money market funds 13.7 6.2 (8.1) - - 11.8
76.0 7.8 (46.6) 11.2 12.2 60.6
( )
(1) in addition the Company held net current liabilities of £12.8m
Realisations
In the year to 31 December 2021 a total of £38.5m was realised from the
investment portfolio.
In February 2021 Hawksford, a leading provider of corporate, private client
and fund services, completed its refinancing. Proceeds from the refinancing
amounted to £6.8m, consisting of capital of £6.2m and income of £0.6m.
The investment in Hawksford had been valued at £6.9m at 31 December 2020.
Dunedin Enterprise retains a 3.7% interest in Hawksford which has been valued
at £0.1m at 31 December 2021.
In September 2021 the realisation of U-POL, the manufacturer of automotive
refinish products, including body fillers, coatings, aerosols, polishing
compounds and consumables, was completed. The investment in U-POL was valued
at £9.0m at 31 December 2020. Proceeds from the sale amounted to £22.0m,
consisting of capital of £19.7m and income of £2.3m.
A partial sale of GPS, a market leader in payment processing technology, was
completed in December 2021. The investment was valued at £14.1m at 31
December 2020. Cash proceeds received from the partial realisation amounted
to £14.0m consisting of capital of £12.1m and income of £1.9m. Proceeds
received were net of £4.2m carried interest which was payable by Dunedin
Buyout Fund III LP. In addition, £5.9m has been rolled into GPS Newco which
equates to an interest of 1.5%.
Following the year end in January 2022 the remaining investment in CitySprint,
the same day courier, was realised. The investment in CitySprint has been
valued at the proceeds from the transaction of £1.5m.
Investment activity
In the year to 31 December 2021 a follow-on investment of £0.9m was made in
Incremental, the market-leading IT services provider which designs, implements
and supports clients with ERP/CRM systems and cloud infrastructure. Further
funding was provided to enable Incremental to follow its buy-and-build
strategy with the acquisition of RedSpire. The RedSpire acquisition
increases Incremental's market position in the financial services sector and
makes it one of the largest Microsoft Dynamics partners in the UK.
A further £0.7m was drawn down by Dunedin and third-party managed funds to
meet management fees and ongoing expenses.
Unrealised valuation uplifts
In the year to 31 December 2021 there were valuation uplifts generated from
the following investments: RED (£11.8m), GPS (£2.4m), Incremental (£1.7m),
CitySprint (£1.1m) and Realza (£0.8m).
RED, the provider of SAP contract and permanent staff, has experienced a 95%
increase in maintainable EBITDA during the year. The contract side of the
business in particular is performing strongly as RED recovers from the impact
of COVID. The company has come through the pandemic extremely well with
management prioritising cost control and cash collection and focusing on sales
to well-capitalised customers globally.
Incremental, the market-leading IT services platform which designs, implements
and supports clients with ERP/CRM systems and cloud infrastructure, achieved a
329% increase in EBITDA in the year. The increase in EBITDA was in part
driven by the acquisition of RedSpire in January 2021. Redspire is one of
the leading providers of CRM solutions to financial service companies in the
UK. A further transaction was completed by Incremental in October 2021 with
the acquisition of Adatis which specialises in advanced data analytics, from
data management strategy and consultancy to managed services.
As noted above, CitySprint has been valued at 31 December 2021 at the proceeds
received from a trade sale of the business to DPD which completed in January
2022.
The majority of the valuation uplift at Realza has been generated at Cualin,
the producer of premium tomatoes, which has experienced good harvests and
strong market prices during the year.
In addition, there was a release of the provision for carried interest in
Dunedin Buyout Fund III LP amounting to £3.2m. The majority of this
movement was a result of carried interest released on the partial sale of
GPS.
Unrealised valuation reductions
In the year to 31 December 2021 there were valuation reductions at the
following investments: FRA (£6.0m), Weldex (£1.6m) and Premier Hytemp
(£1.5m).
FRA, the forensic accounting, data analytics and e-discovery business,
experienced a slowdown in large new business wins following the COVID
outbreak. A new CEO joined the company in June 2021. Management's
medium-term view remains positive as they anticipate a wave of new regulatory
investigations to commence in the coming year. The business has retained
core talent, beyond that required for current utilisation levels, in
anticipation of significant project wins in the medium term.
Weldex, the market-leading crawler crane hire business, has experienced delays
in cranes going out for large construction projects and pricing pressure on
rates. The investment continues to be valued on a net assets basis.
Premier Hytemp, the provider of highly engineered components to the oil and
gas industry, has suffered from a weak market in 2021. The business expects
that there will be a market upturn during 2022. The investment continues to be
valued on a net assets basis.
Cash and commitments
The Company had outstanding commitments to limited partnership funds of
£9.8m, consisting of £9.1m to Dunedin managed funds and £0.7m to Realza,
the one remaining European fund.
The original investment periods of all funds to which the Company has made a
commitment have now ended. In future the Company is only required to meet
drawdowns for follow-on investments, management fees and expenses during the
remainder of the life of the funds.
Valuations and Gearing
The average earnings multiple applied in the valuation of the Dunedin managed
portfolio was 9.7x EBITDA (2020: 9.2x). These multiples continue to be applied
to maintainable profits.
Within the Dunedin managed portfolio, the weighted average gearing of the
companies was 3.3x EBITDA (2020: 2.4x).
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
65%
Between 1 and 2 x
EBITDA
-%
Between 2 and 3 x
EBITDA
6%
More than 3 x
EBITDA
29%
Fund Analysis
The chart below analyses the investment portfolio by investment fund vehicle.
Dunedin Buyout Fund II 63%
Dunedin Buyout Fund III 26%
Realza 11%
Portfolio Analysis
Detailed below is an analysis of the head office of the investment portfolio
companies by geographic location as at 31 December 2020.
UK 89%
Rest of Europe 11%
Sector Analysis
Automotive 6%
Consumer products & services 4%
Financial services 11%
Industrials 7%
Support services 72%
Valuation Method
Earnings - provision 4%
Earnings - uplift 66%
Revenue - uplift 11%
Assets basis 16%
Exit value 3%
Year of Investment
In the vintage year chart below, current value is allocated to the year in
which either Dunedin Enterprise or the third-party manager first invested in
each portfolio company.
<1 year -%
1-3 years -%
3-5 years 29%
>5 years 71%
Dunedin LLP
18 March 2022
Ten Largest Investments
(both held directly and via Dunedin managed funds) by value at 31 December
2021
Approx. Percentage
percentage Cost of Directors' of net
of equity investment valuation assets
Company name % £'000 £'000 %
RED 20.1 9,665 20,736 28.2
Weldex 15.1 9,505 6,672 9.1
Incremental 8.2 3,875 5,957 8.1
GPS 1.5 1,994 5,863 8.0
Realza 8.9 4,268 5,199 7.1
FRA 5.2 1,413 3,368 4.6
EV 10.6 8,321 1,864 2.5
Premier Hytemp 23.0 10,136 1,759 2.4
CitySprint 0.6 7,978 1,533 2.1
Hawksford 3.7 - 136 0.2
57,155 53,087 72.3
Income Statement
2021 2020
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment income 4,800 - 4,800 764 - 764
Gains on investments - 23,408 23,408 - (5,993) (5,993)
Total income 4,800 23,408 28,208 764 (5,993) (5,229)
Expenses
Investment management fee (29) (88) (117) (23) (69) (92)
Other expenses (384) (23) (407) (372) (30) (402)
Profit before finance costs and tax 4,387 23,297 27,684 369 (6,092) (5,723)
Finance costs (10) (32) (42) (24) (71) (95)
Profit before tax 4,377 23,265 27,642 345 (6,163) (5,818)
Taxation 272 70 342 - - -
Profit for the year 4,649 23,335 27,984 345 (6,163) (5,818)
Basic return per ordinary share
(basic & diluted) 26.56p 133.33p 159.89p 1.70p (30.37)p (28.67)p
The total column of this statement represents the Income Statement of the
Group, prepared in accordance with the requirements of the Companies Act 2006.
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.
Statement of Changes in Equity
for the year ended 31 December 2021
Year ended 31 December 2021
Capital Capital Capital Special Total
Share redemption Reserve reserve - Distributable Revenue retained earnings Total
capital reserve realised unrealised Reserve account £'000 equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 31 December 2020 4,525 49,850 30,600 (16,357) 1,151 5,153 20,547 74,922
Profit for the year - - 15,356 7,979 - 4,649 27,984 27,984
Cancellation of capital redemption reserve - (49,850) - - 49,850 - 49,850 -
Purchase and cancellation of shares (1,241) 1,241 (26,235) - - - (26,235) (26,235)
Dividends paid - - - - - (3,258) (3,258) (3,258)
At 31 December 2021 3,284 1,241 19,721 (8,378) 51,001 6,544 68,888 73,413
Year ended 31 December 2020
Capital Capital Capital Special Total
Share redemption Reserve reserve - Distributable Revenue retained earnings Total
capital reserve realised unrealised Reserve account £'000 equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 31 December 2019 5,161 49,214 34,258 (3,877) 1,151 5,840 37,372 91,747
Profit for the year - - 6,317 (12,480) - 345 (5,818) (5,818)
Purchase and cancellation of shares (636) 636 (9,975) - - - (9,975) (9,975)
Dividends paid - - - - - (1,032) (1,032) (1,032)
At 31 December 2020 4,525 49,850 30,600 (16,357) 1,151 5,153 20,547 74,922
Balance Sheet
As at 31 December 2021
31 December 31 December
2021 2020
£'000 £'000
Non-current assets
Investments held at fair value 60,588 75,985
Current assets
Other receivables 297 1,057
Cash and cash equivalents 12,616 151
12,913 1,208
Current liabilities
Other liabilities (88) (2,271)
Net assets 73,413 74,922
Capital and reserves
Share capital 3,284 4,525
Capital redemption reserve 1,241 49,850
Capital reserve - realised 19,721 30,600
Capital reserve - unrealised (8,378) (16,357)
Special distributable reserve 51,001 1,151
Revenue reserve 6,544 5,153
Total equity 73,413 74,922
Net asset value per ordinary share (basic and diluted) 558.8p 413.9p
Cash Flow Statement
for the year ended 31 December 2021
31 December 31 December
2021 2020
£'000 £'000
Cash flows from operating activities
Profit / (loss) before tax 27,642 (5,818)
Adjustments for:
(Gains) / losses on investments (23,408) 5,993
Interest paid 42 95
Decrease in debtors 760 16
(Decrease) / increase in creditors (2,183) 105
Net cash inflow from operating activities 2,853 391
Cash flows from investing activities
Purchase of investments (1,550) (2,242)
Drawdown from subsidiary (79) (86)
Purchase of 'AAA' rated money market funds (6,213) (12,683)
Sale of investments 38,547 14,414
Distribution from subsidiary - 187
Sale of 'AAA' rated money market funds 8,100 7,537
Net cash inflows from investing activities 38,805 7,127
Tax
Tax recovered 342 -
Cash flows from financing activities
Tender offer (26,235) (9,975)
Dividends paid (3,258) (1,032)
Interest paid (42) (95)
Net cash outflows from financing activities (29,535) (11,102)
Net increase/(decrease) in cash and cash equivalents 12,465 (3,584)
Cash and cash equivalents at 1 January 151 3,735
Cash and cash equivalents at 31 December 12,616 151
Statement of Directors' Responsibilities in respect of the Annual Report and
the Financial Statements
The Directors are responsible for preparing the Annual Report and financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law they have elected to prepare the financial
statements in accordance with international accounting standards and
applicable law.
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 Company and of its profit or loss for that period. In preparing
these 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 international
accounting standards in conformity with the requirements of the Companies Act
2006;
- assess the Company's ability to continue as a going concern, disclosing,
as applicable, matters related to going concern; and
- use the going concern basis of accounting unless they either intend to
liquidate the Company or to cease operations, or have no realistic alternative
but to do so. As explained in note 2, the Directors do not believe that it
is appropriate to prepare these financial statements on a going concern basis.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that its financial statements comply with the Companies
Act 2006. They are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error, and have general
responsibility for taking such steps as are reasonably open to them to
safeguard the assets of the Company and to prevent and detect fraud and other
irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, 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.
Responsibility statement of the Directors in respect of the annual financial
report
We confirm that to the best of our 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 Strategic Report and Directors' Report includes a fair review of the
development and performance of the business and the position of the Company,
together with a description of the principal risks and uncertainties that it
faces.
We consider the annual report and financial statements taken as a whole, is
fair, balanced and understandable and provides the information necessary for
shareholders to assess the Company's position and performance, business model
and strategy.
Duncan Budge
Chairman
18 March 2022
Notes to the Accounts
1. Preliminary Results
The financial information contained in this report does not constitute the
Company's statutory accounts for the years ended 31 December 2021 or 2020. The
financial information for 2020 is derived from the statutory accounts for 2020
which have been delivered to the Registrar of Companies. The auditor has
reported on those accounts. Their report was (i) unqualified, (ii) did not
include a reference to any matters to which the auditor drew attention by way
of emphasis without qualifying their report and (iii) did not contain a
statement under section 498(2) or (3) of the Companies Act 2006. The audit of
the statutory accounts for the year ended 31 December 2021 is not yet
complete. These accounts will be finalised on the basis of the financial
information presented by the Directors in this preliminary announcement and
will be delivered to the Registrar of Companies following the Company's annual
general meeting.
2. Going Concern
The financial information for 2020 and 2021 has not been prepared on a going
concern basis, since the Company's current objective is to conduct an orderly
realisation of the investment portfolio and return cash to shareholders.
Following the Director's assessment, no adjustments were deemed necessary to
the investment valuations or other assets and liabilities included in the
financial information as a consequence of the change in the basis of
preparation.
3. Dividends
Year to 31 Year to 31
December December
2021 2020
£'000 £'000
Dividends paid in the year 3,258 1,032
A final dividend of 1.9p per share for the year ended 31 December 2021 is
proposed and if approved, will be paid on 13 May 2022 to shareholders on the
register at close of business on 8 April 2022. The ex-dividend date is 7
April 2022.
4. Earnings per share
Year to Year to
31 December 31 December
2021 2020
Revenue return per ordinary share (p) 26.56 1.70
Capital return per ordinary share (p) 133.33 (30.37)
Earnings per ordinary share (p) 159.89 (28.67)
Weighted average number of shares 17,501,856 20,289,587
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 in
the period as shown in the consolidated income statement.
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 2021.
5. Principal Risks and Uncertainties (Strategic Report page
22)
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:
Coronavirus: the profitability of the Company's investments is adversely
impacted due to an adverse economic impact on the UK and world economy from
the Coronavirus. Mitigation: A representative of your Manager, Dunedin LLP,
sits on the Board of each portfolio company. These companies hold regular
board meetings at which the financial position of the company is monitored.
Between board meetings there is an ongoing dialogue between the Manager and
the senior management of the portfolio company. Each portfolio company
monitors all risks pertinent to their businesses including the coronavirus,
the potential impact these risks may have on their businesses, and develop
contingency plans where appropriate. The Board and the Manager keep under
regular review the liquidity available to the Company, including bank
facilities, required to meet the expected outstanding commitments that will be
drawn and the ongoing expenses of the Company. The Board is satisfied that the
liquidity position of the Company is sufficiently strong to mitigate the
threat.
Reduction in overall risk in year
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.
No change in overall risk in year
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.
Increase in overall risk in year
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.
No change in overall risk in year
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. An
emerging economic risk is the conflict in Ukraine. 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. The Manager and
board of each portfolio company is keeping under review the impact of the
conflict in Ukraine and developing contingency plans/mitigating actions where
appropriate.
No change in overall risk in year
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.
No change in overall risk in year
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.
No change in overall risk in year
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.
No change in overall risk in year
6. Related Party Transactions (Notes to the Accounts page 60,
note 21)
The Company has investments in Dunedin Buyout Fund II LP, Dunedin Buyout Fund
III LP and Dunedin Fund of Funds LP. Each of these limited partnerships are
managed by Dunedin. The Company has paid a management fee
of £0.6m (2020: £0.6m) in respect of these limited partnerships. The
total investment management fee payable by the Company to the Manager is
therefore £0.7m (2020: £0.7m).
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 2021 there is a provision made within Investments for
carried interest of £4.3m (2020: £7.5m) relating to Dunedin Buyout Fund
III LP. Current executives of the Manager are entitled to 42% of the carried
interest in Dunedin Buyout Fund III LP.
ENDS
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. END FR BKOBDOBKDANDRecent news on Dunedin Enterprise Investment Trust
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