Dunedin Ent.it. Regulatory News (DNE)

EMBARGOED - 7AM WEDNESDAY 23 FEBRUARY

For release 07.00am 23 February 2011

Dunedin Enterprise Investment Trust PLC

Annual financial report announcement for the year ended 31 December 2010

Dunedin Enterprise Investment Trust PLC, the private equity investment trust which specialises in investing in mid-market buyouts, announces its results for the year ended 31 December 2010.

Financial Highlights:

·; Net asset value per share increased by 22.2% to 497.3p per share

·; Dividend for the year of 3.8p per share

·; New investment of £38.8m in the year

·; Realisations of £7.7m in the year

Comparative Performance

*1 - taken from 30 April for five and ten years

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Notes to Editors

Dunedin Enterprise Investment Trust PLC ("the Company", or "the Trust") is managed by Dunedin Capital Partners Limited ("Dunedin"). Dunedin Capital Partners Limited is an independent private equity company owned by its directors. It specialises in providing equity finance for management buyouts and management buyins with a transaction size of £20m to £75m. It operates throughout the United Kingdom from its offices in Edinburgh and London. Dunedin Capital Partners is itself the result of a management buyout which took place in 1996.

Dunedin Enterprise's investment objective is to achieve substantial long term growth in its assets through capital gains from its investments. For more information on Dunedin Enterprise, its portfolio and investment approach, please visit our website www.dunedinenterprise.com. Investors can buy shares in the company through regular savings and ISA plans. For further information, call the Aberdeen Asset Managers helpline on 0500 00 00 40 or visit their website at www.dunedinenterprisetrust.co.uk.

Chairman's Statement

I can report that the Trust has made significant progress this year, with a substantial increase in the net asset value and the completion of three new investments in the UK, the first since 2008.

During the year to 31 December 2010, net assets increased by £27.2m from £122.9m to £150.1m, an increase of 22.2%. Of this increase, £8.2m (6.7%) is attributable to the recognition of accrued interest in the valuation of portfolio companies. The share price increased from 266.5p to 300.0p over the same period, an increase of 12.6%. Despite this strong performance, it is disappointing to note that the discount to net asset value remains stubbornly high at 39.7%. The share price at 21 February 2011 was 299.5p a discount of 39.8% to net asset value. It is hoped these strong results will see the discount closing.

I said last year that the focus was firmly on protecting the value of the portfolio, and this has remained the case. The most significant driver of net asset growth has been an improvement in the profitability and prospects of the portfolio companies. For the first time, the value of accrued interest on loans to portfolio companies where there is a strong expectation that the interest will be paid or received when the company is sold has been included in the portfolio valuations. This brings the Trust in to line with market practice and is in accordance with International Private Equity Valuation guidelines.

New investment activity, particularly through Dunedin managed funds in the UK, was the highest for several years. A total of £38.8m was invested, of which £31.3m was invested by Dunedin or in Dunedin managed funds and £7.4m was drawn down by European third party managed funds for investment. The balance of £0.1m was invested in legacy technology funds. The bulk of the new investment was through the Dunedin Buyout Fund II which acquired three new companies, details of which are contained in the Manager's Review.

Portfolio

The portfolio at 31 December 2010 consisted of investments made by the Trust, directly or through Dunedin managed funds 55.7%, listed private equity 16.6%, third party managed funds 8.0%, legacy funds 1.2% and cash or near cash 18.5%. Within the top ten investments by value, nine are managed by Dunedin.

At the year end, the Trust had outstanding commitments of £82.6m to limited partnership funds, split between Dunedin managed funds 46% and European third party managed funds 54%. We remain cautious about the rate of new commitment and no new European funds were added in 2010.

Cash reserves at the end of the year totalled £29.1m. The Trust also had listed private equity holdings of £26.0m. This was divided between £11.6m in four European listed securities and £14.4m in the SWIP Private Equity Fund of Funds II PLC.

We have addressed the funding of new investments through our cash reserves and the sale of European listed securities. By 31 December 2010 we had realised £3.2m from these sales. Since the start of the new financial year we have completed the sale of all of our European listed securities, raising a total of £11.2m, at a value £0.4m less than the 31 December 2010 valuation.

I said last year that banking markets were unattractive and we would not be renewing our facility in April 2010. We did not renew the facility and we are not expecting to do so in the near future.

Both the Board and the Manager are comfortable with the balance between cash resources and uncalled commitments given the expected rate of new investment.

Market conditions and outlook

Against the background of economic difficulty and uncertainty, the Manager continues to work closely with their portfolio companies. The efforts of private equity managers and their direct involvement as active shareholders have been shown to reduce the impact of unfavourable trading conditions on the profitability of their companies, and this is our experience with our own portfolio. Eight out of thirteen Dunedin managed portfolio companies are forecasting to grow profits in the current year.

Our portfolio is conservatively geared and there is a constructive relationship with our banking partners.

In the new business market prices remain high, driven by the large amount of available equity finance. Debt markets remain difficult to access, however, and a higher equity element is required in the structuring of new investments. The main driver of returns will remain improvement in the profitability of portfolio companies.

Realisations were at a lower level in 2010, but with the recovery and growth in portfolio company profits more activity can be expected in the current year.

Dividends

The Company's policy is to pay an annual dividend, calculated at a level to ensure that it meets the requirements of UK tax legislation to maintain its investment trust status.

The proposed single final dividend for 2010 is 3.8p, which will be payable on 20 May 2011 following the AGM.

Board

Simon Miller will retire at the AGM. He has been a director of Dunedin Enterprise Investment Trust for 11 years. As Chairman of Dunedin Capital Partners he will continue his close involvement with the Trust. I also intend to retire from the Board at the AGM in 2012.

Other matters

We continue to monitor the progress being made with the EU directive on Alternative Investment Fund Management. The Board and Managers remain active in ensuring an appropriate outcome is achieved for listed private equity investment trusts.

Edward Dawnay,

Chairman

22 February 2011

Manager's Review

In the year to 31 December 2010 the Company's net asset value increased from £122.9m to £150.1m. This equates to a increase of 22.2% in the net asset value per share from 407.1p to 493.7p. This increase in net assets is explained by:

Portfolio Composition

Dunedin Enterprise makes investments in unquoted companies through:

• Dunedin managed funds (including direct investments),

• third party managed funds,

• European listed private equity (including SWIP Private Equity Fund of Funds), and

• legacy technology funds.

The investment portfolio can be analysed as shown in the table below.

New Investment Activity

A total of £38.8m was invested in the year to 31 December 2010. Of this, £31.3m was invested by Dunedin or in Dunedin managed funds, £7.4m was drawn down by European third party funds, with the balance of £0.1m drawn by legacy technology funds.

As reported at the half year, £9.5m was invested in June 2010 in the secondary buyout of Weldex (International) Offshore Holdings Limited, the largest crawler crane hire company in the UK. Weldex has a strong market position in the offshore wind farm and power generation sectors.

In December 2010, the Trust invested £9.8m in CitySprint (UK) Group Limited to provide acquisition funding to support the company's ongoing buy and build strategy. CitySprint is the UK's market leader in the same day delivery sector with a national network of 31 service centres. The business splits its activities into key services of same day courier, same day logistics and International and UK overnight courier to a number of different sectors including healthcare, retail fulfilment, and parts and stock forwarding.

Also in December 2010, the Trust invested £5.7m in support of the management buyout of U-Pol Group Limited, a UK based international provider of automotive refinish consumable products such as fillers, primers and coatings. The company's products are used in 110 countries. The funding for this investment will be drawn down by Dunedin Buyout Fund II LP in the new financial year.

During the year, further investments were made in portfolio companies Capula Group Limited (£2.7m), Enrich Limited (£1.5m) and WFEL Limited (£0.5m). Of the £2.0m invested in Enrich and WFEL, £1.5m was drawn down by Dunedin Buyout Fund II in 2010 and £0.5m will be drawn in 2011.

In the year to 31 December 2010 Dunedin Enterprise realised a total of £7.7m from investments. The largest of these was £1.9m from the sale of LGC Group Holdings Limited in the first half of the year which resulted in an uplift of £0.9m over the 31 December 2009 valuation.

Three of the four European listed securities continued their share price recoveries during the year. CapMan (+32.8%), DBAg (+24.5%), and GIMV (+11.9%) all performed well. Dinamia (-13.1%) was the exception.

The Company started the realisation of these European listed securities in December 2010 and by the end of the year had realised a total of £3.2m. Sales of these quoted stocks have continued in the new financial year, and the entire holding of European listed securities has now been sold, raising a further £11.2m, at a value £0.4m less than the 31 December 2010 valuation.

Cash and commitments

At 31 December 2010 the Trust had cash and near cash balances of £29.1m. The realisation of the remaining European listed securities in 2011 has generated £11.2m. The effect of this, after deducting the £6.2m draw down from Dunedin Buyout Fund as referred to above, would result in a restated cash balance of £34.1m.

Taking account of the drawdowns noted above, from the original commitment of £75m to Dunedin Buyout Fund II by the Trust undrawn commitments are £30.8m (41%).

No new commitments were made to European funds during the year. The Company has commitments to five funds totalling £58.4m. Drawdowns of committed funds totalled £7.4m in the year to 31 December 2010, taking the total funds drawn to date to £13.8m, leaving undrawn commitments of £44.6m. All of the European funds have now started their investment periods and early indications from the underlying portfolio companies are generally positive

Unrealised movements in valuations

Investment valuations now, for the first time, include the value of accrued interest on loans to portfolio companies where there is a strong expectation that the interest will be paid or received when the company is sold. This brings the Trust in to line with market practice and is in accordance with International Private Equity Valuation guidelines. The total value of interest accrued, and thereby increasing the investment valuations at 31 December 2010 is £8.2m.

In the year to 31 December 2010 the largest single uplift in unrealised value came from OSS Environmental Holdings, where strong trading contributed to an increase in value of £6.4m. The profit growth in this company was highlighted in last year's Manager's Review.

Improved trading also drove value increases at CGI (£3.7m), RSL Steeper (£3.8m), etc.venues (£2.0m), and Capula (£1.8m). The largest single increase attributable to the recognition of accrued interest is £2.9m at Practice Plan.

On the downside, additional funding of £1.5m made available to Enrich has been fully provided against as the company continues to find trading difficult. The Manager remains supportive of this company.

The share value of the SWIP Private Equity Fund of Funds rose from €0.64 to €0.76 over the year, increasing the value of the investment from £12.6m to £14.4m. The commitment period of the fund ended on 31 December 2010 and it has an interest in 72 underlying funds. The geographical allocation is UK (28%), Europe (40%), US (25%) and rest of the world (7%).

Valuations and Gearing

The average earnings multiple applied in the valuation of the Dunedin managed portfolio was 6.4 x EBITDA (2009: 4.7x), or 7.8 x EBITA (2009: 5.8x). These multiples continue to be applied to the lower of historic or forecast profits. The European third party fund programme is not yet sufficiently mature to provide comparative figures.

Within the Dunedin managed portfolio, the weighted average gearing of the companies was 1.7 x EBITDA (2009: 2.3x), or 2.1 x EBITA (2009: 2.8x). Analysing the portfolio gearing in more detail, the percentage of total enterprise value represented by different gearing levels was as follows:

Of the total acquisition debt in the Dunedin managed portfolio companies the scheduled repayments are spread as follows:

Geographic Distribution

At 31 December 2010, 72% of the investment portfolio of £127.4m was based in the UK, with 24% in Continental Europe and 4% elsewhere. The higher exposure to the UK results from the completion of three new investments by Dunedin managed funds during the year. Increased exposure to Europe through the drawdown of third party funds has been offset by the sale of the European quoted stocks referred to above.

Sector Analysis

The investment portfolio of the Company is broadly diversified. At 31 December 2010 the largest sector exposure of 48% remains to the Support Services sector, a diverse sector in itself.

Deal Type

The portfolio of investments continues to be predominantly weighted towards MBO/MBI's. Exposure to technology, life sciences and real estate arises from third party managed funds.

Valuation Method

Year of Investment

In the vintage year table below, value is allocated to the year in which either Dunedin Enterprise or the third party manager first invested in each portfolio company.

Investment Income

As previously advised, the increased use of rolled-up yield in investment structuring and continuing low interest rates mean that current and future income receipts will be lower than in the past.

The dividend policy is to pay such a dividend that allows the Company to maintain compliance with Section 1158 of the Corporation Tax Act 2010.

A single dividend payment of 3.8p will be paid on shareholders' approval of the audited annual accounts.

Dunedin Capital Partners Limited

22 February 2011

Ten Largest Investments

(both held directly and via Dunedin managed funds) by value at 31 December 2010

Consolidated Income Statement

for the year ended 31 December 2010

The total column of this statement represents the Income Statement of the Group, prepared in accordance with International Financial Reporting Standards as adopted by the EU. 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.

Consolidated Statement of Changes in Equity

for the year ended 31 December 2010

Year ended 31 December 2010 (audited)

Year ended 31 December 2009 (audited)

Consolidated Balance Sheet

As at 31 December 2010

Consolidated Cash Flow Statement

for the year ended 31 December 2010

Statement of Directors' Responsibilities in respect of the Annual Report and the Financial Statements

The Directors are responsible for preparing the Annual Report and the Group and Parent Company financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and Parent Company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the Parent Company financial statements on the same basis.

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 Group and Parent Company and of their profit or loss for that period. In preparing each of the Group and Parent Company 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 IFRSs as adopted by the EU; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the parent company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the Parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a 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.

Under the Disclosure and Transparency Rules the Directors confirm that to the best of their 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 Directors' Report includes a fair review of the development and performance of the business and the position of the issuer together with a description of the principal risks and uncertainties that it faces.

By Order of the Board

Edward Dawnay

Chairman

22 February 2011

Notes to the Accounts

1. Preliminary Results

The financial information contained in this report does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006 and has not been delivered to the Registrar of Companies. The information for the year ended 31 December 2009 has been extracted from the latest published audited financial statements. The audited financial statements for the year ended 31 December 2009 have been filed with the Registrar of Companies. The report of the auditors on those accounts contained no qualification or statement under the Companies Act 2006.

2. Dividends

The final dividend of 3.8p for the year ended 31 December 2010 and will be paid on 20 May 2011 to shareholders on the register at close of business on 15 April 2011. The ex-dividend date is 13 April 2011.

3. Earnings per share

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/(loss) in the period as shown in the consolidated income statement.

4. Principal risks

The Company's investing activities expose it to types of risk that are associated with the financial instruments and the market in which it invests. The most important types of financial risk to which the Company is exposed are market risk, interest rate risk, credit risk, liquidity risk and currency risk. The nature and extent of the financial instruments outstanding at the balance sheet date and the risk management policies employed by the Company are discussed below.

Market risk - the risk that the value of a financial instrument will change as a result of changes to market prices is one that is fundamental to the Company's objective. The portfolio is continually monitored to ensure an appropriate balance of risk and reward in order to achieve the Company's objective. Some of the risks can be mitigated by diversifying the portfolio across business sectors, asset classes and regions.

Interest rate risk - some of the Company's financial assets are interest bearing, at both fixed and variable rates. As a result the Company is subject to exposure to fair value interest rate risk due to fluctuations in the prevailing levels of market interest rates.

The fixed rate assets comprise fixed rate lendings to investee companies. Fixed rate lendings have a weighted average interest rate of 9% per annum (2009: 9%) and a weighted average life to maturity of 4.6 years (2009: 4.3 years). The floating rate assets consist of cash and "AAA" rated cash OEIC's. The nil interest rate bearing assets represent the equity content of the investment portfolio. Interest rate risk is managed on an ongoing basis by the Manager and on a quarterly basis by the Board.

Due to the relatively short period to maturity of the fixed rate investments held within the portfolio, it is considered that an increase or decrease of 25 basis points in interest rates as at the reporting date would not have had a significant effect on the Group's net assets or total return for the period.

Credit risk - credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Investment in unquoted companies either directly, via Dunedin managed funds or via third party managed funds (both limited partnership funds and quoted stocks) is by its nature subject to potential credit losses. The Company's exposure to any one entity is carefully monitored. The Company complies with the Section 1158 Corporation Tax Act 2010 requirement for investment trusts not to invest more than 15% of the portfolio in the securities of any one company at the time of initial or subsequent investment. The unquoted investment portfolio is further diversified by asset class, sector and region. Liquid assets (cash deposits and AAA rated cash OEIC's) are divided between a number of different financial institutions, each of whose credit rating is assessed. Credit risk is monitored by the Manager on an ongoing basis and on a quarterly basis by the Board.

Liquidity risk - the Company has significant investments in unquoted companies which are inherently illiquid. As a result, the Company may not be able to liquidate quickly some of its investments in these companies at an amount close to its fair value in order to meet its liquidity requirements. The Company manages its liquid investments to ensure sufficient cash is available to meet contractual commitments and also seeks to have cash or readily convertible investments available to meet other short term financial needs. Liquidity risk is monitored by the Manager on an ongoing basis and on a quarterly basis by the Board.

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 movement's in foreign currency exchange rates. Currency risk is monitored by the Manager on an ongoing basis and on a quarterly basis by the Board.

ENDS