Risk warnings

Principal Risks, Risk Management and Regulatory Environment. The Board believes that the principal risks faced by the Trust are:

• Investment and strategic – an inappropriate strategy, poor asset allocation or consistent weak investment selection might lead to under performance and poor returns to shareholders. Therefore the Trust’s investment strategy is periodically reviewed by the Board which considers at each meeting the performance of the investment portfolio.
• Economic risk – events such as an economic recession or movement in stock markets and interest rates would affect portfolio company valuations and their ability to access capital for their business.
• Liquidity risk – the Trust’s investments may be difficult to realise. The majority of investments are in unquoted companies which by their nature are not readily realisable assets.
• Currency risk – a movement in exchange rates could affect portfolio company valuations and the sterling cost of future euro drawdowns. The current policy of the Board is not to hedge euro currency risk due to the uncertainty of the timing of euro realisations and drawdowns.
• People risk – key employees leaving Dunedin.
• Loss of approval as an Investment Trust – the Company must comply with Section 1158 of the Corporation Tax Act 2010 which allows it to be exempted from capital gains on investment gains. Any breach of these rules may lead to the Company losing its approval as an Investment Trust and losing its exemption from corporation tax on capital gains. The Company must also comply with the Investment Trust (Approved Company) (Tax) Regulations 2011.
• Regulatory – the Company is required to comply with the Companies Act, the rules of the UK Listing Authority and United Kingdom Accounting Standards. Breach of any of these might lead to suspension of the Company’s Stock Exchange listing, financial penalties or a qualified audit report.
• Reputational – inadequate or failed controls might result in breaches of regulations or loss of shareholder trust.
• Operational – failure of the Manager’s accounting systems or disruption to its business might lead to an inability to provide accurate reporting and monitoring.
• Financial – inadequate controls might lead to misappropriation of assets. Inappropriate accounting policies might lead to misreporting or breaches of regulations.

The Board seeks to mitigate the internal risks by setting policy, regular review of performance, enforcement of contractual obligations and monitoring progress and compliance. In the mitigation and management of these risks, the Board applies rigorously the principles detailed in the Turnbull guidance.