Dunedin Enterprise Inves... Share Discussion Threads

[kramch] 10/5/2016 16:02

I have e-mailed the chairman with the following questions for the AGM tomorrow;

I am sorry not to be able to attend the AGM tomorrow but would like to ask these questions (as if from the floor);

We are pleased you are proposing to wind the trust up, given the discount to net asset value the company’s shares trade at and the relatively poor performance.
We are concerned that you are still making new investments which will extend the life of the trust out to c 7 years despite shareholders wishes to wind up in a timely manner.
We understand you have legal commitments, however will you use your best endeavours to limit these further investments and seek to sell or minimise the commitments to further invest, where you can do so without significant financial penalty?
What are your proposals to reduce the ongoing management charges now the trust is starting to wind up and new investments do not need to be found and evaluated?

Thank you.

I can see that you have had at least one other e-mail on this and I will be posting a copy of this on the ADVFN public share discussion board.

[spectoacc] 10/5/2016 07:00

Reads well @Sky, hope you have more luck than me when I contacted them.

[skyship] 10/5/2016 06:36

Sent an email to the chairman - will report back should I receive a reply!
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ATTN: Duncan Budge, Chairman

PROPOSED CHANGES TO INVESTMENT OBJECTIVE AND POLICY

I most likely missed it; but nowhere in the Circular could I find any reference to ongoing fees.

In this respect, within the document you liken yourselves to two other Private Equity trusts - Northern Investors and Mithras - see bottom of this email.

Before looking at the performance of those trusts and whether they merit the charges applied; I first looked at the management charges of DNE and its peers. Stats taken from Morningstar and your own commissioned research by Edison:

# SVG Capital.......0.95%
# S. Life Euro PE...0.97%
# ICG...............1.35%
# Mithras...........1.40%
# F&C PE: ..........1.43%
# Northern Inv......2.00%
# Aberdeen PE.......2.01%
# DNE...............2.63%!!!

As for performance:

.................1yr.......3yrs.........5yrs.......10yrs

DNE............(1.7%)....(1.2%)........30.9%.......56.1%

Peers...........7.2%.....21.2%........52.7%.......157.3%

To put Northern Investors 2.0% fee into context, it is worth noting their 5yr performance - UP 117%.

Now just why the two Scottish trusts should be charging much higher fees than everyone else; and why those fees should be charged at all for lamentable performance is no doubt something that must concern you, as you've presided over this state of affairs since your appointment to the Board in 2012.

To finally wave the white flag and opt to put the dog out of its misery is a blessed relief. However you surely should be making a substantial reduction in fees as you are now only concerned with an orderly realisation of assets - no longer looking for any reinvestment.

Also, to talk of a 7 year programme is an absolute absurdity; it smacks of extending your fee earning opportunity at the expense of shareholders' best interests for a rapid resolution.

You really must address this iniquity; as not to do so will surely result in poor publicity for the whole Dunedin LLP set-up.

I look forward to reading your comments on this matter - both the fees and the 7yr itch.

=====================================================

"In your Board's opinion, the more mature investments offer the prospect of good realisations in the short to medium term. Based on our belief that there is significant inherent value in the underlying investments in the Company's portfolio, the Board has concluded that the best way to maximise value for Shareholders would be to implement a plan that allows the Company's investments to be realised in an orderly manner over a period of time and cash to be returned to Shareholders progressively. Similar plans have been followed successfully by other private equity investment trusts, such as Northern Investors Company plc and Mithras Investment Trust PLC."
=======================================================

[eeza] 09/5/2016 19:31

"buying the wrong sectors."

Lol !!!!!!!!!!!!

Have a look at their record over 1yr, 5yrs, 10 yrs. They are certainly consistent.

[topvest] 09/5/2016 19:06

I think that's a bit harsh to be honest. They have just been buying the wrong sectors. Looks an interesting value play at the moment. Is it good value or another Candover style value trap?

[eeza] 09/5/2016 14:42

They'll string it out as long as they possibly can. There is ZERO chance of any of this useless, hapless crew getting another job.

2.9% on-going theft.

[spectoacc] 09/5/2016 14:32

@Sky - will they keep some back for commitments tho? They've been particularly vague about wind-up, except to say "At least 7 years".

[skyship] 09/5/2016 13:28

This Wednesday is the EGM for approval of the wind-up.

CIRCULAR:



The biggest wind-up is of course the continuation of the fees to Dunedin!

Still, the shares @ 316p are at a 35.5% discount to the possible Ex-divi April NAV of 490p.

SEE P.7 of the Circular: With 56% of the portfolio in Direct Invs or Funds with an End-of-Life date by end 2016; and a further 18% no later than Nov'19, progressive Tender payouts skew the stats markedly in our favour.

It is quite likely that the GRY here is North of 15%pa; so, provided no more asset markdowns the share price should begin to reflect the upside as the attraction becomes recognised and serious commentators run the figures.

[spectoacc] 28/4/2016 11:19

332p bid yesterday, 309p bid today - glad I didn't try to play the XD :)

[jhan66] 28/4/2016 09:18

I expected that to be the position but couldn't see any confirmation in price adjustment on advfn. It's why I was checking the release. Thanks

[eeza] 28/4/2016 08:56

No.

XD this morning @ 0759. That is why the Bid is down 16p at the moment.

If you buy now you will not get the Div.

[jhan66] 28/4/2016 08:53

An interim dividend for the year ended 31 December 2016 will be paid on 18 May 2016 to shareholders on the register at close of business on 29 April 2016. The ex-dividend date is 28 April 2016

16p xd tonight.

[spectoacc] 20/4/2016 08:39

A rising tide lifting all boats - and they've underperformed for so long, maybe they're due some successes? ;)

[eeza] 15/4/2016 11:22

Excellent reward - for failure.

[pvb] 15/4/2016 10:49

It isn't true that they don't mention the high running costs. They do indeed mention them. A whopping '2.9% Ongoing charges', same as in 2014.

On the company's consolidated income statement the investment management fee itself came in at £380,000 on net assets of £104,427,000. about 0.36%. Along with other charges of £599,000 these total a very reasonable £979,000 or 0.94%. In 2015 the company's revenue was £196,000 with gains on investment of £853,000 giving a Total income of £1,049,000.

From Note 22 Related party transactions:

"The Company has investments in Dunedin Buyout Fund LP, Dunedin Buyout Fund II LP, Dunedin Buyout Fund III LP and Equity Harvest Fund LP. Each of these limited partnerships are managed by Dunedin. The Company has paid a management fee of £2.1m (2014: £2.2m) in respect of these limited partnerships. The total investment management fee payable by the Company to the Manager is therefore £2.2m (2014: £2.6m)."

Hence 2.9%

That's before we get to the carried interest schemes for management.

[rambutan2] 10/4/2016 01:37

SpectoAcc, the norm for a non liquid trust going into wind-up mode is to, at the minimum, give an outline of how costs will be kept under control as the trust shrinks. This could take the form of ratchetting down management fees at specific nav sizes, or fixed fees for set periods etc etc. Of course, the bulk of the fees are the fund fees, which are fixed and not in the control of the board. However, this makes it even more important that the board shows it's independence and keeness to get best value for shareholders whilst the process plays out. DNE reports never mention the (high) running costs and it looks as though that is set to continue...

[rambutan2] 10/4/2016 01:37

Duplicate.

[spectoacc] 09/4/2016 21:13

@rambutan2 - I asked them why they weren't incentivised to wind the trust up for as much as possible as fast as possible - "We're not getting any increase in fees, if that's what you mean". Er, no, it wasn't - not remaining incentivised to keep the trust running for as long as possible was what I meant.

Nice work if you can get it.

[rambutan2] 09/4/2016 16:06

I also spoke to them and expressed my dismay that not one mention of costs or fees in the circular. Hadn't seemed to have occured to them that they should! Which to my mind rather sums up why DNE has been such a poor trust over the years.

[eeza] 08/4/2016 14:54

Yes, woeful performance.

Very much doubt anyone will be fighting to poach any of the BOD - so they will be stringing it out as along as possible.

[spectoacc] 08/4/2016 14:28

Had a chat with them earlier today, now understand why there's no Plan B: "We've spoken to the 5 largest shareholders and it's highly unlikely it won't get voted through". So it's a fait accompli.

Some possibility of things getting sold rather than waiting until the bitter end, but it won't wind up "..In the next 3 or 4 years..". Nothing that isn't in the RNS, but I'd have preferred more urgency.

Happy to hold, but can see little point in adding, unless there's movement up in the NAV or down in the shareprice. Difficult to estimate returns when final NAV largely unquantifiable 7+ years hence, duration of costs uncertain, timetable of returns impossible to know. But at least it's highly likely there'll be returns, with the current discount to NAV.

Mind you - money in the bank has guaranteed returns, which even at low interest rates would have been a better home for the money over 1, 3, 5 and even 10 years:

Comparative Total Return Performance
(NAV - Shareprice - FTSE Smallcap index)
One year 0.0% -7.5% 13.0%
Three years 0.0% -16.4% 58.2%
Five years 12.0% 23.0% 82.9%
Ten years 39.6% -6.4% 75.7%

[eeza] 08/4/2016 12:31

Lol !!!

328p bid - that'll soon get sold.

Edit: Lol !!!! 30 seconds.

[spectoacc] 07/4/2016 13:20

I wonder what Plan B is if shareholders vote against? There seems little incentive for fast realisations, unlike in some previous wind-ups.

Clearly they'll be holding on to quite a bit of realised cash to cover the large outstanding commitments, but if they could just sell the interest in no.3..

I'd vote for that, not that it's given as an option.

[eeza] 07/4/2016 10:59

As said by the BOD earlier.

"The investment portfolio is relatively mature and a number of our investee companies offer interesting prospects for realisation ."

It'll be 'interesting' to see whether they can make a better fist of the disposals than their management of the assets have achieved so far.

[nk104] 07/4/2016 10:46

Looking at this, it seems there's a chance of getting money back relatively quickly from Buyout Fund 2 which on course to end in September 2016 - currently the largest single investment.

However buyout fund 3 is still in the build-up phase until November 2017 and has potentially £27.8m of outstanding commitment. This fund is due to run to November 2022.