Dunedin Ent.it. Regulatory News (DNE)

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16 October 2012

DUNEDIN ENTERPRISE INVESTMENT TRUST PLC

tender offer and new performance FEE

On 31 August 2012, the Board announced that it was proposing to return, in accordance with the Company's distribution policy, approximately £6.8 million in cash resulting from the sales of the Company's investments in Capula, WFEL and Capiton IV (one of the European Fund investments) to Shareholders via a tender offer for up to 5 per cent. of the Shares currently in issue, at a price of 500p per Share, equivalent to an 11.7 per cent. discount to the NAV per Share (adjusted for the special dividend paid on 28 September 2012) of 566.2p as at 30 June 2012 and a premium of 30.5 per cent. to the closing mid-market price on 12 October 2012. 

The sale of Capiton IV represented another step in enacting the change of the Company's strategy to focus on investments in the lower tier of the UK mid-market managed by its Investment Manager, which was approved by Shareholders in November 2011. The Directors believe that selling the European Fund investments ahead of their maturity (and the release from the associated undrawn original commitments) should have two important benefits, namely:

·; expediting the refocusing of the Company's portfolio on investments that fall within the UK lower mid-market, which represents Dunedin's core expertise; and

·; a material and sustained reduction in the Company's unfunded commitments in the longer term.

Accordingly, to align the Investment Manager's interests with those of Shareholders with regard to completing the Company's exit from its European Fund investments ahead of their maturity (and release of associated undrawn original commitments), the Board is proposing to introduce a simple one-off performance-related realisation fee that:

·; recognises that secondary market transactions in interests of existing private equity funds typically take place at a discount to their net asset value; and

·; takes into account the loss of management fees and potential for carried interest that the Investment Manager would have benefitted from if the European Fund investments were held to maturity.

Following the sale of Capiton IV, the Company has four remaining European Fund investments with an aggregate carrying value of £17.8 million as at 30 June 2012 and associated undrawn original commitments of £26.2 million. The Performance Fee will be calculated by reference to the consideration received on sales of European Fund investments during the period commencing on 1 July 2012 and ending on 31 December 2014 (or, if earlier, following the sale of the last of the European Fund investments) relative to their then carrying values and the release of associated undrawn original commitments. The Performance Fee is intended to provide an incentive for the Investment Manager to realise the remaining European Fund investments over the Performance Period at the best possible price, with an additional incentive to do so earlier in the period. The key terms of the Performance Fee are as follows:

·; no Performance Fee will be payable if, at the end of the Performance Period, the Aggregate Gross Proceeds from the sales of European Fund investments during the Performance Period is equal to or less than 85 per cent. of the Aggregate Carrying Values of such investments at the times of the respective sales;

·; subject to the cap referred to below, the Performance Fee will be calculated on a sliding scale basis, commencing at the rate of 0.5 per cent. if the Aggregate Gross Proceeds exceed 85 per cent. of the Aggregate Adjusted Carrying Values and increasing on a straight line sliding scale to a maximum rate of 1.5 per cent. if the Aggregate Gross Proceeds equal (or exceed) 100 per cent. of the Aggregate Adjusted Carrying Values;

·; the actual amount of the Performance Fee will be calculated by applying the relevant rate to the aggregate of the following:

- 100 per cent. of the Aggregate Gross Proceeds from the sales of European Fund investments completed between 1 July 2012 and 31 December 2013 (both dates inclusive) plus 100 per cent. of the aggregate amount of the associated undrawn original commitments from which the Company is released as a result of such sales; and

- 80 per cent. of the Aggregate Gross Proceeds from the sales of European Fund investments completed in the calendar year 2014 plus 80 per cent. of the aggregate amount of the associated undrawn original commitments from which the Company is released as a result of such sales; and

·; the Performance Fee will be capped at 1.0 per cent. of the Company's NAV (before accruing for the Performance Fee) as at the latest date in respect of which the Company has published its NAV per Share prior to payment of the Performance Fee.

The proposed Performance Fee constitutes a related party transaction between the Company and its Investment Manager, and is classified as a smaller related party transaction for the purposes of the Listing Rules. Subject to certain information, confirmations and undertakings being given to the FSA in advance of the listed company entering into the transaction, smaller related party transactions do not require shareholder approval under the Listing Rules. Although the Performance Fee is a smaller related party transaction and no other changes are being made to the fees payable by the Company to the Investment Manager, the Directors believe that it is good corporate governance for the Performance Fee to be approved by Shareholders. Accordingly, the Directors have elected to comply with the Listing Rules' requirement that certain alterations to investment management fee arrangements be approved by an ordinary resolution passed at a general meeting of the Company (with only Independent Shareholders being entitled to vote on that resolution).

A circular to Shareholders setting out the terms and conditions, and explaining the mechanics, of the Tender Offer and explaining the background to, and providing details of, the Performance Fee and convening a general meeting of the Company to seek Shareholder approval of the Tender Offer and the Performance Fee will be despatched to Shareholders later today. A copy of that circular will also be submitted to the National Storage Mechanism later today and will be available for inspection at www.hemscott.com/nsm.do.

The expected timetable for the Tender Offer is as follows:

2012

Latest date and time for receipt of Forms of Directionfor General Meeting 5.00 p.m. on Thursday, 1 November

Latest time and date for receipt of Forms of Proxy andappointments of proxies utilising CREST electronic proxyappointment service for General Meeting 10.00 a.m. on Tuesday, 6 November

General Meeting 10.00 a.m. on Thursday, 8 November

Latest time and date for receipt of Tender Forms andTTE Instructions in CREST for Tender Offer 3.00 p.m. on Thursday, 8 November

Record date for Tender Offer close of business on Thursday, 8 November

Result of Tender Offer announced Friday, 9 November

Payments through CREST made in respect of Sharesheld in uncertificated form successfully tendered Monday, 12 November

CREST accounts settled in respect ofunsold tendered Shares held in uncertificated form Monday, 12 November

Cheques despatched in respect of Shares held in certificatedform successfully tendered by Thursday, 15 November

Balancing certificates despatched in respect ofunsold tendered Shares held in certificated form by Wednesday, 21 November

Enquiries

Notes

Words and expressions defined in the circular to Shareholders dated 16 October 2012 have the same meanings when used in this announcement.

Cantor Fitzgerald Europe, which is authorised and regulated in the United Kingdom by the FSA, are acting solely for Dunedin Enterprise Investment Trust plc and for no one else, in connection with the Proposals and will not be responsible to anyone other than Dunedin Enterprise Investment Trust plc for providing the protections afforded to clients of Cantor Fitzgerald Europe or for affording advice in relation to the Proposals.

Nplus1 Brewin LLP, which is authorised and regulated in the United Kingdom by the FSA, are acting solely for Dunedin Enterprise Investment Trust plc and for no one else, in connection with the Proposals and will not be responsible to anyone other than Dunedin Enterprise Investment Trust plc for providing the protections afforded to clients of Nplus1 Brewin LLP or for affording advice in relation to the Proposals.