Dunedin Ent.it. Regulatory News (DNE)

18 March 2016

For release 18 March 2016

Dunedin Enterprise Investment Trust PLC ("the Company")

Year ended 31 December 2015

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 2015.

Financial Highlights:

· Net asset value total return flat in the year to 31 December 2015

· Realisations of £3.3m in the year

· New investment of £14.5m in the year

· Proposals put to shareholders for managed wind-down

· Realisation of CitySprint post year end at 2.75 times cost

· New investment post year end of £7.0m in Alpha

· Interim dividend of 16p per share for the year ended 31 December 2016

Comparative Total Return Performance

*1 - taken from 31 October 2005 for ten years

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Chairman's Statement

In the year to 31 December 2015 your Company's net asset value per share was largely unchanged at 505.8p. After allowing for last year's final dividend of 4.7p, the total return to shareholders was 0.0%, while the share price total return was -7.5%. This represents another period of disappointing performance.

On 8 February 2016 we announced the successful realisation of our largest investment, CitySprint, the same-day delivery business, for 2.75x our original investment. Further details of this transaction appear below. At the same time we announced that the Board had decided that it would be in the interests of shareholders for your Company to be wound down in an orderly process over time. This decision was taken after consulting the largest shareholders and our professional advisers. A separate circular will be posted to shareholders with the Annual Report containing further information on these proposals, on which shareholders will be asked to vote.

Following this combined announcement, the share price reacted positively, increasing by some 14% to 335p. The share price at 17 March 2016 stands at 331p, a discount of 35% to the net asset value of 505.8p per share.

Portfolio

There was one new investment during the year. An investment of £4.9m was made in Blackrock Programme Management which provides independent expert witness and construction consulting services for large, international projects. Follow-on investments were also made into RED, Premier Hytemp and Steeper.

Trading performance of the portfolio has again been mixed. Valuation uplifts were achieved by CitySprint, Hawksford, the fiduciary services business, and Kee Safety, the provider of safety equipment. Each of these businesses is trading well as a result of growth, achieved both organically and by acquisition. As EV and Premier Hytemp supply services to the oil industry, trading at both has been significantly impacted by the reduction in the price of oil. Both are actively reducing their cost base to align this more closely to market conditions. Pyroguard has been impacted by production difficulties during the year at its French site, which have now been resolved.

Since the year end the Company has made a significant realisation as well as a new investment.

On 18 February 2016 the Company achieved a partial realisation of CitySprint through a sale to LDC. On completion Dunedin Enterprise received proceeds totalling £26.1m of which £22.8m is capital and £3.3m is loan interest. A total of £7.3m has been rolled into a CitySprint "Newco" alongside LDC for a 5% interest, resulting in net cash proceeds received of £18.8m by Dunedin Enterprise. The overall return to Dunedin Enterprise at 18 February 2016 was 2.75 times the original investment of £9.8m over five years.

On 5 February 2016 a new investment of £7.0m was made in Alpha Financial Markets. Alpha is the leading global asset and wealth management consulting firm. Founded in London in 2003, Alpha has grown rapidly and is now the global market leader in providing specialist consultancy services to blue chip asset managers and their third party administrators.

Dividends

In the year to 31 December 2015 income received by the Company fell as a result of there being no significant realisations. It is therefore proposed not to pay a final dividend for the year ended 31 December 2015. However, following the partial realisation of CitySprint in February 2016, which generated a receipt of £3.3m of income, it is proposed that an interim dividend for the year ended 31 December 2016 of 16p per share be paid on 18 May 2016.

Share Buy-back

As reported at the half year, a share buy-back was undertaken for 1.1% of the Company's share capital. The share buy-back cost £0.7m and was undertaken at 309.8p, a 39% discount to the latest announced net asset value per share, following weakness in the share price as a result of the Company's removal from the FTSE All-Share Index due to a reduction in its market capitalisation. This required shareholders who were index tracker funds to dispose of their shares. Cantor, the Company's broker, was able to place the majority of these shares in the market with the Company undertaking a share buy-back for the balance.

Board changes

As already set out in the Interim Report, I am pleased that Angela Lane has joined the Board. She was appointed to the Board on 1 June 2015. Angela has worked in private equity for a number of years and her skills and experience will be of great benefit to the Board.

Liz Airey, having been a member of the Board since 1 January 2005, will retire from the Board at the AGM in May 2016. In addition to being a Director of the Company, Liz Airey has also chaired the Audit Committee since 2009 and has been the Senior Independent Director since 2012. I should like to thank her, on behalf of shareholders, for her very substantial contribution to the Company over the years. We have been fortunate to have had access to her expertise and wish her well for the future.

Angela Lane will chair the Audit Committee with effect from 17 March 2016. Federico Marescotti will take over the duties of Senior Independent Director with effect from the AGM in May 2016.

Outlook

Proposals regarding a managed wind-down of the Company will be posted to shareholders with the Annual Report and voted upon at a General Meeting following the Annual General Meeting.

Subject to the shareholder vote, your Company will begin a new phase with the winding down of its activities and the realisation of its assets over time, aiming to maximise value for shareholders.

The June vote on the UK's membership of the EU is likely to lead to a period of uncertainty. However, the environment continues to be favourable for realising good private equity assets and particularly those which offer the potential for strong profit growth. The investment portfolio is relatively mature and a number of our investee companies offer interesting prospects for realisation.

Duncan Budge

Chairman

17 March 2016

Manager's Review

In the year to 31 December 2015 the net asset value per share has declined from 510.6p to 505.8p. After taking account of a final dividend for 2014 of 4.7p (paid in 2015), the movement in the year equates to a total return of 0.0%.

The Trust's net asset value decreased from £106.6m to £104.4m over the year. This movement is stated following a share buyback of £0.7m and dividend payments totalling £1.0m.

This movement in net assets can be explained as follows:

*1 - there were drawdowns totalling £2.3m made during the year by Dunedin managed funds for management fees and operating expenses.

Share Buy-back

In June 2015 Dunedin Enterprise no longer qualified for inclusion in the FTSE All-Share Index due to a reduction in the market capitalisation of the Company. This resulted in a number of tracker funds being required to dispose of their shareholding within a short period of time, resulting in downward pressure on the share price. The majority of these shares were placed with the assistance of the Company's brokers. The balance of shares remaining (£0.7m) were bought back by the Company at a price of 309.8p, a discount of 39% to the net asset value as at 31 December 2014.

Portfolio Composition

Dunedin Enterprise makes investments in unquoted companies through Dunedin either directly or via its managed funds. In the past the Company has made commitments to funds managed by third parties. The last such commitment was made in 2009 and, following the policy change in November 2011, no further commitments will be made to funds managed by third parties.

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

New Investment Activity

A total of £14.5m was invested in the year to 31 December 2015. Of this total, £10.3m was invested in Dunedin managed funds and £4.2m was drawn down by European third party funds.

In March 2015 an investment of £4.9m was made in Blackrock Programme Management ("Blackrock PM"). Blackrock PM is a professional services firm that provides independent expert witness and construction consulting services for large, international construction projects. The company is headquartered in London and is widely recognised as a market leader, employing individual directors who are experts in their field. Blackrock PM has worked on an extensive range of projects around the globe including airports, roads, railways, power stations, process plants, manufacturing facilities, health and educational facilities and commercial buildings.

During the year three follow-on investments were made. A further investment of £2.5m was made in RED, the IT staffing business, to assist with working capital and a re-setting of bank covenants. There was a follow-on investment of £0.3m made in Premier Hytemp, the provider of components to the oil and gas industry. Premier Hytemp's products are utilised in oil exploration. This area of the oil sector has been hit particularly hard by the reduction in the price of oil and the company required additional funding to support ongoing working capital requirements. Your Manager is working closely with the management of Premier to ensure that the cost base of the company matches expected future revenues.

A further £0.3m was invested in Steeper, the provider of prosthetic, orthotic and assistive technology products and services, to assist with a factory improvement programme. The company, which operates from factories in Leeds, was subsequently hit by the recent flooding in the north west of England causing significant damage to the operating capabilities of the business. The company is currently re-evaluating its strategic options but in the meantime is being assisted by insurance payments covering both damage to property and plant & machinery as well as business interruption.

Following the year end, in February 2016 an investment of £7.0m was made in Alpha Financial Markets ("Alpha"). Founded in London in 2003, Alpha has grown rapidly and is now the global market leader in providing specialist consultancy services to blue chip asset and wealth managers and their third party administrators. Alpha has over 200 consultants deployed across six major financial centres (London, Paris, New York, Boston, The Hague & Luxembourg), working on behalf of more than 130 top asset and wealth management clients. Alpha currently advises three quarters of the top 50 global asset managers.

Within the European funds, £2.7m was drawn down by Realza Capital and £1.5m by Innova/5.

Realza made two new investments in the year. In March 2015 an investment of £1.4m was made in Litalsa, a provider of packaging finishes. Realza also invested £1.3m in Cualin Quality, a leading producer of premium tomatoes.

Innova made one new investment in the year. In December 2015 an investment of £1.2m was made in Pekaes S.A. Pekaes is one of the leading integrated logistics operators in Poland. Its services are delivered through a fully outsourced fleet.

Realisations

During the year a total of £3.3m was generated from portfolio realisations. £1.7m was realised from Enrich following the successful outcome of the court case against the vendor of the business.

A total of £1.0m was returned from Innova/5. This was primarily the result of a successful IPO of the internet portal service provider Wirtualna Polska on the Polish stock exchange with a partial realisation of the stock on flotation. A further distribution of £0.4m was made by Realza as a result of strong cash generation by GTT, the provider of management services to local public entities in Spain.

Following the year end, in February 2016, the investment in CitySprint was partially realised. On completion Dunedin Enterprise received proceeds totalling £26.1m of which £22.8m is capital and £3.3m is loan interest. A total of £7.3m has been rolled into a CitySprint Newco alongside LDC, resulting in net cash proceeds received of £18.8m by Dunedin Enterprise. Dunedin Enterprise retains a 5% interest in the Newco. The overall return to Dunedin Enterprise at 18 February 2016 was 2.75 times the original investment of £9.8m over five years.

Cash and commitments

As at 31 December 2015 the Company had cash and near cash balances of £0.6m all of which are denominated in Sterling. The Company has a revolving credit facility with Lloyds of £20m of which £4.7m was drawn at the year end. The net cash position of the Company at the year end was therefore overdrawn by £4.1m. During the year the availability of the £20m facility from Lloyds was extended to 31 May 2018.

Following the sale of CitySprint and after taking account of the investment in Alpha, other follow-on investments and operating expenses, the Company has net cash of £4.6m.

At 31 December 2015 the Company had undrawn commitments totalling £50.2m. Following the investment activity in 2016 noted above, as at the date of this report the Company had undrawn commitments to Dunedin managed funds of £35.7m and a further €6.0m (£4.4m) of undrawn commitments to the two remaining European funds. It is expected that £21m of the total outstanding commitments will ultimately be drawn over the remaining life of the funds.

Unrealised movements in valuations

In the year to 31 December 2015 there were valuation uplifts generated from the following investments: CitySprint (£7.2m), Hawksford (£4.2m) and Kee Safety (£2.1m).

The valuation of CitySprint has been based upon the value of the transaction completed in February 2016.

The maintainable earnings of Hawksford have increased by 6% during the year and net external debt has been reduced by £3.4m. The EBITDA multiple applied to the valuation has been increased from 7x to 8.5x to reflect recent transactions in the sector, where multiples of 9x - 10x have been paid.

The maintainable earnings of Kee Safety have increased by 25% during the year, generated from both organic growth and the bolt-on acquisition of five companies based in the UK, Ireland Holland and the US. The acquisitions have resulted in an increase in net bank debt of £5.4m.

The most significant valuation reductions in the year to 31 December 2015 were at EV (£4.9m), Premier Hytemp (£2.7m) and Pyroguard (£1.5m).

The maintainable earnings of both EV and Premier Hytemp have been impacted by the reduced oil price and the consequent reduced level of demand and lower margins. Premier Hytemp supplies the oil exploration sector whilst EV primarily supplies the production side of the oil industry. Both companies have taken actions to significantly reduce their cost base in light of the prevailing market conditions. EV has been valued on an earnings basis whilst Premier Hytemp is valued on a discounted net assets basis.

The maintainable earnings of Pyroguard have decreased by 19% during the year. The company has experienced production difficulties at its French operation which resulted in reworking/wastage costs and product discounting. The production problems in France have now been resolved.

The majority of portfolio companies are budgeting an increase in maintainable earnings during 2016.

A provision of £1.4m has also been established during the year for carried interest arising in the Equity Harvest Fund. This 2002 limited partnership fund has a hurdle rate of 7% which was achieved during the year following a period of valuation growth of its investment portfolio.

Included within portfolio company valuations is accrued interest of £11.6m (£9.1m), of which £3.2m relates to CitySprint.

Valuations and Gearing

The average earnings multiple applied in the valuation of the Dunedin managed portfolio was 8.4x EBITDA (2014: 7.6x), or 9.8x EBITA (2014: 9.3x). These multiples continue to be applied to maintainable profits.

The basis for the valuation of Weldex has been changed from an earnings to an assets basis. In deriving a valuation for Weldex the assets of the company have been valued at book value. An assets basis of valuation is commonly used to value plant hire businesses.

Within the Dunedin managed portfolio, the weighted average gearing of the companies was 2.3x EBITDA (2014: 2.2x) or 2.6x EBITA (2014: 2.7x). Analysing the portfolio gearing in more detail, the percentage of investment value represented by different gearing levels was as follows:

Between 1 and 2 x EBITDA 58%

Between 2 and 3 x EBITDA 15%

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

Between one and two years 33%

Between two and three years 9%

Fund Analysis

The table below analyses the investment portfolio by investment fund vehicle.

Portfolio Analysis

Detailed below is an analysis of the investment portfolio by geographic location as at 31 December 2015.

Sector Analysis

The investment portfolio of the Company is broadly diversified. At 31 December 2015 the largest sector exposure of 43% remains to the Support Services sector, a diverse sector in itself.

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.

Dunedin LLP

17 March 2016

Ten Largest Investments

(both held directly and via Dunedin managed funds) by value at 31 December 2015

 Consolidated Income Statement

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 2015

Year ended 31 December 2015

Year ended 31 December 2014

Consolidated Balance Sheet

As at 31 December 2015

Consolidated Cash Flow Statement

for the year ended 31 December 2015

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 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.

Under the Disclosure and Transparency Rules the Directors confirm that to the best of their knowledge:

- that the financial statements have been prepared in accordance with the applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

- that in the opinion of the Directors, the Annual Report and Accounts taken as a whole, is fair, balanced and understandable and it provides the information necessary to assess the Company's performance, business model and strategy; and

- the Strategic Report and Directors' Report include a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

On behalf of the Board

Duncan Budge

Chairman

17 March 2016

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 2015 or 2014. The financial information for 2014 is derived from the statutory accounts for 2014 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 2015 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. Dividends

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.

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 in the period as shown in the consolidated income statement.

4. Contingent assets

Following the repayment of VAT on management fees received in 2011 discussions are ongoing with HMRC regarding the payment of interest on a compound basis relating to the reclaim of VAT on management fees. The amount and timing of any recovery remains uncertain and accordingly no amount has been provided for in the financial statements.

ENDS