Dunedin Ent.it. Regulatory News (DNE)

For release 13 September 2019

Dunedin Enterprise Investment Trust PLC

Half year ended 30 June 2019

Dunedin Enterprise Investment Trust PLC, the private equity investment trust which specialises in investing in UK mid-market buyouts, announces its results for the half year ended 30 June 2019.

Financial Highlights:

·; Net asset value total return: 3.6% in the six months to 30 June 2019

·; Share price total return: 20.9% in the six months to 30 June 2019

·; Net asset value per share at 30 June 2019: 400.9p (412.9p at 31/12/18), after 2.0p dividend and 25p return of capital

·; Share price at 30 June 2019: 368p (328p at 31/12/18)

·; Realisations: £7.3m in the half year

·; £5.2m returned to shareholders via B shares in June 2019

·; £114m returned to shareholders since 2012

Comparative Total Return Performance (%)

For further information please contact:

Chairman's Statement

The total return in the half year to 30 June 2019 was 3.6% and 20.9% in terms of net asset value per share and share price respectively. This is stated after allowing for a return of capital in June 2019 of 25p per share and a final dividend for 2018 of 2.0p paid in May 2019. Your Company's net asset value per share decreased from 412.9p to 400.9p in the half year.

The share price of 368p at 30 June 2019 represents a discount of 8.2% to the net asset value of 400.9p per share.

Portfolio

During the half year there were two follow-on investments. An additional £1m was invested in GPS, the payments processing business, and £0.3m in EV, the provider of high performance video cameras for the oil and gas industry.

From within the Realza fund portfolio, Litalsa, a Spanish printing company, was realised generating £3.9m and a return of 2.9 times original cost. There were also re-financings undertaken at Kingsbridge and FRA generating proceeds of £3.2m and £1.8m respectively.

Overall the trading performance of the portfolio has improved during the half year. Unrealised valuation increases of £6.5m were partially offset by value decreases of £4.1m. Valuation uplifts were achieved at Red, FRA, Formaplex, EV and U-POL offset by a reduction in the valuation of CitySprint. Further details are provided in the Manager's Review.

Commitments & Liquidity

The Company had outstanding commitments to limited partnership funds of £22.2m at 30 June 2019. The outstanding commitment position consisted of £21.4m to Dunedin managed funds and £0.8m to Realza. Assuming these funds are held to maturity, it is estimated that only some £7.2m of this total outstanding commitment will be drawn over the remaining life of the funds to meet follow-on investments and ongoing expenses.

The Company has a revolving credit facility with Lloyds Bank of £5m which was undrawn at 30 June 2019 and is available until 31 May 2020. This facility was reduced from £10m to £5m at 31 May 2019 and the Board will keep under review the need to retain a credit facility depending upon the timing of further realisations from the portfolio.

B shares

In June 2019 £5.2m was returned to shareholders via a further issue of B Shares of 1p each. This follows the re-financings at FRA and Kingsbridge, the realisation of Litalsa and the renewal of the banking facility. These B Shares were paid up from capital and issued to all shareholders by way of a bonus issue pro-rata to their holding of Ordinary Shares on the basis of 25 B Shares for every one Ordinary Share held at the record date of 6.00pm on 11 June 2019. The B Shares were issued on 12 June 2019 and immediately redeemed at 1p each. The proceeds from the redemption of the B Shares were sent to shareholders on 26 June 2019, either through CREST to uncertificated shareholders or via cheque to certificated shareholders.

Following this fourth return of capital a total of £114m has been returned to shareholders since 2012 via dividends and returns of capital.

The Board regularly reviews the possibility of further returns of capital.

Dividends

A final dividend of 2.0p per share relating to the year ended 31 December 2018 was paid to shareholders in May 2019 amounting to £0.4m.

Outlook

There remains significant uncertainty regarding the final outcome of Brexit. While the Board does not expect there to be any significant impact from Brexit on the operations of the Company itself, each of our portfolio companies has developed plans to cater for a variety of outcomes which will be continually reviewed as the course of Brexit negotiations become clearer.

More generally, the Board welcomes the continued strong trading performance of a number of portfolio companies and the returns which have been delivered for shareholders by the underlying investment performance of the portfolio and the returns of capital.

Duncan Budge

12 September 2019

Manager's Review

Results for the six months to 30 June 2019

In the six months to 30 June 2019, Dunedin Enterprise's net asset value per share total return was 3.6%, after taking account of dividends paid for 2018 of 2.0p per share (paid in May 2019) and an issue and redemption of B shares equivalent to 25p per share (paid in June 2019). This compares with an increase in the FTSE Small Cap Index (ex Inv. Cos) over the same period of 6.1%.

In the six months to 30 June 2019 Dunedin Enterprise invested a total of £1.7m and realised £7.3m from investments.

Net asset and cash movements in the half year to 30 June 2019

The movement in net asset value is summarised in the table below: -

Cash movements in the half year to 30 June 2019 can be summarised as follows: -

Portfolio composition and movements

Dunedin Enterprise holds investments in unquoted companies through: -

- Dunedin managed funds, and

- Third party managed funds.

The portfolio movements can be analysed as shown in the table below: -

Investment activity

During the six months to 30 June 2019 a follow-on investment of £1.0m was made in GPS, the payments processing business, to facilitate further investment in GPS's payments processing platform. There was also a follow-on investment made in EV, the provider of high performance ruggedised video cameras for the oil and gas industry, to support the ongoing development of EV's camera fleet.

A further £0.4m was drawn down by Dunedin and third-party managed funds to meet management fees and ongoing expenses.

Realisations

In the half year a total of £7.3m was realised from the portfolio of investments.

In January 2019 Litalsa, an investment held within the Realza portfolio, was realised. Litalsa is a leading independent provider of printing and varnishing services for metal can and closure manufacturers in Spain. Total proceeds from the sale amounted to £3.9m (€4.5m). The original cost of the investment in Litalsa was £1.4m (€1.9m) and, over its life, a total of £3.9m (€4.5m) will have been received by Dunedin Enterprise representing a 2.9 times return.

During the half year there were two re-financings undertaken of portfolio companies following a period of strong trading. In January 2019 a re-financing of FRA, the provider of forensic accounting, data analytics and e-discovery expertise, was completed. A total of £1.8m was received by Dunedin Enterprise consisting of £1.1m capital and £0.7m income. In February 2019 a re-financing of Kingsbridge, the provider of insurance services to contractors, was completed. A total of £3.2m was received by Dunedin Enterprise consisting of £2.3m capital and £0.9m income.

Following the half year end in August 2019 there was a further realisation from the Realza portfolio. Quimi Romar, the manufacturer of household cleaning and personal care products, was realised generating proceeds of £1.5m which represent a return of 1.2x original cost. At 30 June 2019 Quimi Romar has been valued at the realised proceeds received in August 2019.

Unrealised movements in valuations

Unrealised valuation increases in the half year amounted to £6.5m. There were valuation uplifts at Red (£2.4m), FRA (£1.3m), Formaplex (£0.9m), EV (£0.8m) and U-Pol (£0.7m).

Red, the supplier of SAP software experts on both a contract and permanent basis, has performed strongly in the half year with a 36% increase in maintainable EBITDA (maintainable EBITDA being EBITDA for the last twelve months adjusted for exceptional items). The contracting division continues to perform well in the UK, Germany and US markets. New business written in the current year is 20% up on the same period last year.

FRA has achieved an 11% increase in maintainable EBITDA in the half year. The company continues to experience a strong demand for its services with a robust pipeline of new projects. During 2019 FRA has opened an office in Stockholm further expanding its global footprint.

Formaplex, the provider of tooling and lightweight component solutions, has seen profits recover strongly in the half year. This has been achieved by winning new contracts in the components division and improved cost control. The sales pipeline is strong with 80% of 2019/20 sales covered by confirmed orders. The improved maintainable EBITDA has allowed Formaplex to be valued on an earnings basis rather than a net assets basis.

EV, has achieved a 29% increase in maintainable EBITDA in the half year. The company has benefitted from a stable oil price and a tight control over costs.

U-Pol, the manufacturer of automotive refinish products including body fillers, coatings, aerosols, polishing compounds and components, has achieved an 8% increase in maintainable EBITDA during the half year. Performance in the half year has been boosted by a new UK sales team and sales to two significant US retailers.

The principal valuation reduction was at CitySprint (£3.0m), the same day courier. Increased competition in a low growth market and the loss of a significant customer has impacted EBITDA which reduced by 18% in the half year. Both the company's management team and the institutional investors are proactively taking steps to manage costs within the business and return CitySprint to historic levels of profitability.

The average earnings multiple applied to the valuation of the Dunedin managed portfolio was 9.4x EBITDA (31 December 2018: 9.6x). These multiples are applied to the maintainable earnings of portfolio companies. Within the Dunedin managed portfolio, the weighted average gearing of the companies was 3.2x EBITDA (31 December 2018: 2.7x).

The portfolio continues to be valued in accordance with the International Private Equity Venture Capital valuation guidelines (www.privateequityvaluation.com).

Dunedin LLP

12 September 2019

Ten Largest Investments

by value at 30 June 2019

Total return of ten largest investments

at 30 June 2019

*1 - dividends and capital

Top ten investments (held via funds and direct investments)

FRA

FRA is an international consultancy business that provides forensic accounting, data analytics and e-discovery expertise, helping businesses respond to major regulatory investigations in an increasingly regulated global environment.

FRA works on some of the largest and most complex regulatory investigations globally. Its clients are typically blue-chip multinational corporates seeking advice to help navigate regulatory scrutiny, effect compliant cross border data transfer, and manage risk. It opened an office in Stockholm in June 2019, adding to its offices in London, Providence (Rhode Island), Paris, Dallas, New York, Helsinki and Washington DC. It also runs data centres near each office location as well as in Montreal and Zurich.

In January 2019 a re-financing of the business was undertaken with Dunedin Enterprise receiving proceeds of £1.8m.

Percentage of equity held 5.4%

Cost of Investment £4.9m

Directors' valuation £13.0m

Percentage of net assets 15.7%

Hawksford

Hawksford is a leading international provider of corporate, private client and funds services. The business offers a comprehensive range of services to, and solutions for, trusts, companies, foundations, partnerships, family offices and investment funds.

During 2018 Hawksford completed the acquisitions of P&P, a Hong Kong based trust business; and the corporate services division of audit and accountancy practice SH Landes. The P&P acquisition increased Hawksford's Asian presence, giving the company new representation in China and Japan, building on its existing presence in Singapore and Hong Kong. Hawksford's international clients now have access to a greater depth of services across Asia, while P&P clients are able to utilise Hawksford's wider services in other locations. As a result of the SH Landes acquisition, Hawksford can now provide specialist corporate services from its central London offices.

To date Hawksford has completed six major acquisitions in Jersey, the Middle East and the Far East and further extended the company's global reach in the Far East by opening an office in Hong Kong in 2015. These acquisitions have further enhanced Hawksford's market leading-position through additional high-quality people and clients. The focus of the business remains on providing excellent service and increasing client choice by growing the international footprint.

Percentage of equity held 17.8%

Cost of Investment £6.7m

Directors' valuation £11.2m

Percentage of net assets 13.5%

Weldex

Weldex is a market-leading crawler crane hire business in the UK, with the tenth largest lifting capacity globally. It serves the offshore wind, oil & gas, commercial construction and infrastructure markets. Its cranes, including two of the largest in the UK, have been used in a number of significant construction projects including Heathrow Terminal 5, the iconic arch at the Wembley Stadium, the 2012 Olympic site and Crossrail. More recent projects include erecting a Mitsubishi wind turbine at the offshore test facility at Hunterston, North Ayrshire, and refurbishing the blast furnace at the Tata steel works in Scunthorpe.

Weldex has grown into the UK's largest crawler crane hire company. The company employs over 100 staff and operates nationwide and overseas from its headquarters in Inverness and its depot at Alfreton. The company provides its customers with an established team of fully accredited operators, site managers and service engineers and also supplies associated lifting equipment including wheeled cranes, forklifts, lorry loaders and trailers.

Percentage of equity held 15.1%

Cost of Investment £9.5m

Directors' valuation £9.6m

Percentage of net assets 11.6%

GPS

Global Processing Services ("GPS") is a UK headquartered payments processing business providing customers with leading edge payment processing and ancillary services. Customers include new emerging fintech or challenger banks, offering a significantly differentiated proposition for their clients; as well as specialist payment firms serving the travel, insurance and foreign exchange markets. It offers a best in class, scalable payment processing platform with flexibility, innovative features and an accelerated speed to market for new market entrants. It has over 100 clients, including many UK fintech and challenger banks, and is seeing significant growth opportunities from emerging overseas challenger banks as they seek to disrupt their own domestic banking markets.

GPS has demonstrated rapid growth, driven by market and customer demand for its market leading technical functionality and speed in getting customers' new products to market. The addressable international market for GPS is large, serving innovative and emerging fintech/challenger bank offerings and gaining traction with traditional providers. The Company has circa 150 employees based in London and Newcastle.

Percentage of equity held 8.2%

Cost of Investment £7.3m

Directors' valuation £7.3m

Percentage of net assets 8.9%

RED

RED is a global supplier of SAP contract and permanent staff to international corporations and consultancies. SAP is the market leader in ERP software (Enterprise Resource Planning), which enables companies of all sizes and industries to operate more efficiently, including many of the world's largest organisations.

Red, which was founded in 2000, now has a global footprint with access to over 200,000 candidates in 80 countries, and has offices in the UK, Germany, Switzerland and the USA.

Percentage of equity held 20.1%

Cost of Investment £9.7m

Directors' valuation £6.9m

Percentage of net assets 8.4%

Kingsbridge

Kingsbridge is a market leading FCA regulated specialist insurance intermediary which operates through two core divisions; a contractor insurance division and a corporate brokerage division. Founded in 2007, the business offers various insurance products specifically designed for the contractor market and has enjoyed strong growth. Kingsbridge completed the acquisitions of Larsen Howie, a specialist online provider of insurance and IR35 and tax related services, in 2018 and in 2019 acquired InsurTech pioneer, Dinghy.

There is a significant and growing market opportunity for contractor insurance, with contractors becoming an increasingly prevalent component of the UK workforce. Long-term growth in demand points towards a broad-based workforce shift as more people embrace flexible working. Kingsbridge is a high growth, high margin, cash generative and innovative insurance services firm with an impressive financial growth track record. Kingsbridge Contractor Insurance is the clear market leader in the specialist provision of insurance for contractors and freelancers.

In February 2019 a re-financing of the business was undertaken with Dunedin Enterprise receiving proceeds of £3.2m.

Percentage of equity held 12.4%

Cost of Investment £1.9m

Directors' valuation £6.0m

Percentage of net assets 7.3%

Realza Capital

Realza Capital FCR is a Spanish private equity fund making investments in Spain and Portugal. The fund is limited to investing 15% of commitments in Portugal. Dunedin Enterprise's investment is held via Dunedin Fund of Funds LP.

The fund invests in companies with leading market positions and attractive growth prospects either through organic growth or through merger & acquisition activity. Realza seeks to invest in companies with an enterprise value normally ranging from €20m to €100m. The fund's typical equity investment ranges from €10m to €25m.

Following the sale of Quimi Romar the fund has two investments remaining: -

·; a manufacturer of water pumps for the automotive industry; and

·; a producer of premium tomatoes

Percentage of equity held 8.9%

Cost of Investment £5.4m

Directors' valuation £6.0m

Percentage of net assets 7.2%

U-POL

U-POL is a leading independent manufacturer of automotive refinish products including body fillers, coatings, aerosols, polishing compounds and consumables. Included in the product range is RAPTOR™, a tough protective coating product which can be used over a multitude of surfaces. Sales of RAPTOR™ continue to grow steadily and the business is exploring opportunities to sell this product into adjacent sectors.

From its UK manufacturing base in Wellingborough, U-POL exports a range of products to 120 countries worldwide. The company has a strong market position in the UK and a growing position in other large markets such as the USA, the Far East, the Middle East, Africa and Russia.

In August 2016 a re-financing of the business was undertaken with Dunedin Enterprise receiving proceeds of £2.6m.

Percentage of equity held 5.0%

Cost of Investment £5.7m

Directors' valuation £4.3m

Percentage of net assets 5.2%

CitySprint

CitySprint is the UK's largest national time-critical and same day distribution network. It benefits from an asset-light business model with over 3,000 self-employed couriers, making the business both highly flexible and scalable. It operates from 40 service centres in the UK and handles over ten million critical same day deliveries a year.

CitySprint offers a range of services including SameDay Courier, UK Overnight and International courier services, as well as more complex logistics services. It services a number of different sectors, including healthcare, online retail fulfilment and parts fulfilment such as outsourced supply chain services for engineering and servicing companies. During the period of Dunedin's investment, CitySprint has completed 29 acquisitions. CitySprint now has the UK's largest same day healthcare courier network.

In February 2016 the investment in CitySprint was partially realised in a sale to LDC. On completion Dunedin Enterprise received proceeds totalling £26.1m of which £22.8m was capital and £3.3m was 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 was 2.8 times the original investment of £9.8m over five years.

Percentage of equity held 5.2%

Cost of Investment £7.3m

Directors' valuation £3.4m

Percentage of net assets 4.1%

EV

EV is the global market leader in high definition visualisation technology for the oil and gas industry, producing cameras and other 'big data' sensors for diagnosing and analysing problems in oil and gas wells.

In April 2016, EV acquired Epidote, a software company specialising in presenting and analysing oil and gas well integrity data. This move has enabled EV to diagnose problems in oil and gas wells faster and more effectively. The acquisition has allowed EV to enhance its technological offer, with the aim of reducing costs and improving results for its clients.

Based in Aberdeen, Houston and Norwich, EV continues to expand, and currently serves blue-chip clients in more than 35 countries across Europe, Canada, the USA, West Africa, the Middle East, Asia and Australasia. With a significant technological competitive edge, the company operates in a predominantly untapped global market, where there is opportunity to broaden its products and services.

Percentage of equity held 10.6%

Cost of Investment £8.3m

Directors' valuation £3.3m

Percentage of net assets 3.9%

Overview of Portfolio

Fund Analysis

Dunedin Buyout Fund II 51%

Dunedin Buyout Fund III 38%

Equity Harvest Fund (Dunedin managed) 3%

Realza 8%

Geographic Location

UK 92%

Rest of Europe 8%

Valuation Method

Cost/written down 13%

Earnings - provision 28%

Earnings - uplift 44%

Assets basis 15%

Sector Analysis

Automotive 3%

Consumer products & services 4%

Financial services 31%

Industrials 16%

Support services 46%

Year of Investment

4%

1-3 years 26%

3-5 years 13%

>5 years 57%

Statement of Comprehensive Income (unaudited)

for the six months ended 30 June 2019

The Total column of this statement represents the Income Statement of the Company, 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 income is attributable to the equity shareholders of Dunedin Enterprise Investment Trust PLC.

Statement of Changes in Equity (unaudited)

for the six months ended 30 June 2019

Six months ended 30 June 2019

Six months ended 30 June 2018

Year ended 31 December 2018

Balance Sheet (unaudited)

As at 30 June 2019

 Cash Flow Statement (unaudited)

for the six months ended 30 June 2019

Statement of Principal Risks and Uncertainties

The Directors have an ongoing process for identifying, evaluating and managing principal risks, emerging risks and uncertainties of the Company. The principal risks faced by the Company related to the Company's investment activities and these are set out below: -

·; Brexit

·; investment and liquidity risk

·; portfolio concentration risk

·; financial risk

·; economic risk

·; credit risk

·; currency risk

·; internal control risk

Information on each of these risks, and an explanation of how they are managed, is on pages 24 to 25 of the Company's Annual Report for the year ended 31 December 2018.

The Company's principal risks, emerging risks and uncertainties have not changed materially since the date of the Annual Report and are not expected to change materially for the remaining six months of the Company's financial year.

Responsibility statement of the Directors

in respect of the half-yearly financial report

We confirm that to the best of our knowledge:

- the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' and give a true and fair view of the assets, liabilities, financial position and profit of the Company;

- the Chairman's Statement and Manger's Review (together constituting the Interim Management Report) include a fair review of the information required by the Disclosure and Transparency Rules ('DTR') 4.2.7R, being an indication of the important events that have occurred during the first six months of the financial year and their impact on the financial statements;

- the Statement of Principal Risks and Uncertainties shown above is a fair review of the information required by DTR 4.2.7R; and

- the condensed set of financial statements include a fair review of the information required by DTR 4.2.8R, being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or performance of the Company during the period, and any changes in the related party transactions described in the last Annual Report that could do so.

On behalf of the Board,

Duncan Budge

Chairman

12 September 2019Notes to the Accounts

1. Unaudited Interim Report

The comparative financial information contained in this report for the year ended 31 December 2018 does not constitute the Company's statutory accounts but is derived from those accounts. Statutory accounts for the year ended 31 December 2018 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 financial statements for the six months ended 30 June 2018 and 30 June 2019 have not been audited.

2. Basis of Preparation

These condensed set of financial statements for the six months ended 30 June 2019 have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority (FCA) and IAS 34 'Interim Financial Reporting'. They do not include all the information required by International Financial Reporting Standards (IFRS) in full annual financial statements and should be read in conjunction with the Annual Report and Accounts for the year ended 31 December 2018.

In May 2016 shareholders approved a change in the investment policy of the Company. The Company's new investment objective is to conduct an orderly realisation of its relatively illiquid assets, to be effected in a manner that seeks to achieve a balance between maximising the value of its assets and progressively returning cash to shareholders. As it is likely this process, which is expected to have a duration of several years, will ultimately lead to the liquidation of the Company, these financial statements have not been prepared on a going concern basis. No adjustments were necessary to the investment valuations or other assets and liabilities included in the financial statement as a consequence of the change in the basis of preparation.

.

3. Income

4. Dividends

5. Investments

All investments are designated fair value through profit or loss at initial recognition, therefore all gains and losses that arise on investments are designated at fair value through profit or loss. Given the nature of the Company's investments the fair value gains recognised in these financial statements are not considered to be readily convertible to cash in full at the balance sheet date and therefore the movement in these fair values are treated as unrealised.

Fair value hierarchy

The Company measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:

• Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.

• Level 2: Valuation techniques based on observable inputs, either directly (i.e., as prices) or indirectly (i.e., derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.

• Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

The table below analyses financial instruments, measured at fair value at the end of the reporting period, by the level in the fair value hierarchy into which the fair value measurement is categorised:

The Company recognises transfers between the levels of the fair value hierarchy as of the end of the reporting period during which the transfer occurred. There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the six months ended 30 June 2019.

Level 3 fair values

Details of the determination of Level 3 fair value measurements and the movements in Level 3 fair values during the six months ended 30 June 2019 are set out below:-

Details of the determination of Level 3 fair value measurements and the movements in Level 3 fair values during the six months ended 30 June 2018 are set out below:-

Details of the determination of Level 3 fair value measurements and the movements in Level 3 fair values during the year ended 31 December 2018 are set out below:-

Valuation of investments

Unquoted investments are fair valued by the Directors in accordance with the following rules, which are consistent with the International Private Equity and Venture Capital Valuation Guidelines:

·; Investments are only valued at cost for a limited period after the date of acquisition, otherwise investments are valued on one of the other basis detailed below. Generally the earnings multiple basis of valuation will be used.

·; When valuing on an earnings basis, the maintainable earnings of a company are multiplied by an appropriate multiple.

·; An investment may be valued by reference to the value of its net assets. This is appropriate for businesses whose value derives mainly from the underlying value of its assets rather than its earnings.

·; When investments have obtained an exit (either by listing or trade sale) after the valuation date but before finalisation of the relevant accounts (interim or final), the valuation is based on the exit valuation.

·; Accrued interest on loans to portfolio companies is included in valuations where there is an expectation that the interest will be received.

IFRS 13 requires disclosure, by class of financial instrument, if the effect of changing one or more inputs to reasonably possible alternative assumptions would result in a significant change to the fair value measurement. The information used in determination of the fair value of Level 3 investments is chosen with reference to the specific underlying circumstances and position of the investee company. On that basis the Board believe that the impact of changing one or more of the inputs to reasonably possible alternative assumptions would not change the fair value significantly.

The Directors consider the carrying value of financial instruments in the financial statements to represent their fair value.

6. 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.

7. Related party transactions

There have been no material changes to the related party transactions described in the last annual report.

ENDS