Dunedin Ent.it. Regulatory News (DNE)

EMBARGOED - 7AM 20 March 2013

For release 07.00am 20 March 2013

Dunedin Enterprise Investment Trust PLC

Year ended 31 December 2012

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 2012.

Financial Highlights:

·; Net asset value total return of 2.3% in the year to 31 December 2012

·; Realisations of £53.1m in the year

·; New investments of £19.3m in the year

·; £50m commitment to Dunedin's next fund

·; Tender offers undertaken for a total of £21.1m

·; Further tender offer of £12.5m to be undertaken in May 2013 at 475p

·; Special dividend of 16p per share paid

·; Final dividend of 6.5p per share proposed

Comparative Total Return Performance

*1 - taken from 30 April for ten years

The Trust's net asset value total return outperformed its benchmark, the FTSE Small Cap (excluding investment companies) over three years, five years and ten years

Shaun Middleton, Managing Partner of Dunedin LLP ("Dunedin"), the UK mid-market private equity house which manages Dunedin Enterprise Investment Trust PLC commented: "We are focused on driving value creation across our portfolio through organic and acquisitive growth. Dunedin-backed businesses made a total of seventeen follow-on acquisitions since 2011, enabling them to accelerate growth on an international level.

We have had a number of strong exits this year including WFEL, Capula and etc.venues. We have also realised Capiton and Egeria which is in line with Dunedin Enterprise's strategy of progressively refocusing the portfolio on UK lower mid-market buyouts where the Company has invested directly or through funds managed by Dunedin."

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Chairman's Statement

Some 15 months ago shareholders approved a change in your Company's strategy, whereby Dunedin Enterprise focussed on UK investments and adopted a clearly defined distribution policy based on realised gains. As a result the sale proceeds of the Trust's European investments and at least 50% of the gain on Dunedin managed investments will be returned to shareholders. One of the principal reasons for this change was to address the substantial discount of the share price to net asset value, which had been as high as 48%.

The effect has been positive. £21.1m has been returned to shareholders by way of tender offers and £4.3m by way of a special dividend.

As at 31 December 2012 the net asset value per share was 532.7p. Taking into account last year's final dividend of 5p and a special dividend of 16p there was a total return to shareholders of 2.3%. The share price total return over the same period is 39.2%. At the time of writing the share price was 417.5p, a discount of 21.6% to net asset value per share.

Subsequent to the year end, the stake in another European fund, Egeria, was sold. The proceeds of this sale, together with the distributable proceeds from the sale of etc.venues in December 2012 and the remaining distributable proceeds from previous realisations, amount in aggregate to £12.5m. It is proposed by the Board that £12.5m is returned to shareholders via a tender offer in May 2013 at 475p per share, as set out in Resolution 12 of the notice of Annual General Meeting. The Board considers that given the size and liquidity of the Trust it is appropriate at this stage to limit distributions to shareholders to 50% of capital gains on Dunedin managed investments. This will be kept under review by the Board. 100% of the proceeds from the European fund investments will be distributed to shareholders.

Although, to date, all sums available for distribution under the Company's distribution policy have been used to fund tender offers, the Board may in future use amounts available for distribution to fund share buy-backs or other returns of capital to shareholders.

A final dividend of 6.5p per share is proposed, payable on 24 May 2013 following the AGM.

In November 2012 shareholders approved a new management performance fee. The performance fee incentivises the Manager to realise the European investments prior to 31 December 2014 and to maximise the price achieved in relation to the valuation placed on the investment by the third party manager of that particular fund.

Portfolio

There has been a substantial change of emphasis over the period under review away from Europe towards the UK. The portfolio at 31 December 2012 consisted of UK investments (direct or Dunedin managed) 56%, European funds 18%, legacy funds 1% and cash 25%. At the year end the Trust had outstanding commitments of £65.8m to Dunedin funds, £18.9m to European funds (excluding Egeria) and cash or near cash of £33.9m. Following the sale of Egeria cash balances increased to £42.3m. In addition the Trust has a 12 month borrowing facility of £20m which expires in August 2013. After taking account of the £12.5m to be distributed to shareholders in May 2013 the Board is comfortable with the balance between uncalled commitments and cash resources given the expected rate of new investment.

With the objective of withdrawing from European funds, the SWIP stake and the investment in Capiton were sold for £14.5m and £3.3m respectively. During the first half of the year the Trust's investments in Capula and WFEL were sold generating distributable profits of £5.1m. The proceeds of the European disposals together with the distributable profits from the two portfolio companies were distributed to shareholders by way of two tender offers. Subsequent to the tender offer approved by shareholders in November 2012, etc.venues was realised on 30 November 2012 generating a distributable profit of £2.4m and the interest in Egeria was realised in February 2013 generating proceeds of £8.4m. The total available for distribution to shareholders is £12.5m.

The Dunedin Buyout Fund II, which the Trust committed £75m to in 2006, is now substantially invested and gross realised returns to date have generated 2.6 times money invested. A commitment of £50m has accordingly been made to the next Dunedin managed buyout fund.

A total of £19.3m was invested during the year of which £11.5m was invested by Dunedin managed funds and £7.8m drawn down by European funds. Disposals amounted to £53.1m. Details are contained in the Manager's Review.

Market conditions and outlook

As mentioned by my predecessor last year, the Board and the Manager firmly believe in the long term future of the private equity sector in the UK. A broadly based developed economy coupled with strong governance, make the UK an attractive market for private equity. The UK is the dominant private equity market in Europe, accounting for 39% by value of buyouts completed in Europe in 2012.

Dunedin operates in this lower mid-market and there has been little change in levels of activity in the period under review. Activity in 2013 is expected to be at similar levels.

The Board continues to monitor closely regulatory developments, in particular the Alternative Investment Fund Managers Directive ("AIFMD") and its potential impact on the Company.

Board changes

At the AGM in May 2012 Edward Dawnay stepped down as Chairman. He was appointed to the Board in 1995 and became Chairman in 1999. On the Board's behalf I would like to record our debt of gratitude for his leadership and commitment over the past 17 years. In April 2012 Duncan Budge was appointed to the Board. He was previously Chief Operating Officer at RIT Capital Partners plc and brings with him a wealth of investment experience.

David Gamble

Chairman

19 March 2013

Manager's Review

In the year to 31 December 2012 the Company's net asset value decreased from £163.0m to £137.2m. This movement is stated following a tender offer of £21.1m and dividend payments totalling £5.7m.

This movement in net assets is explained by:

£m

Net asset value at 1 January 2012 163.0

Unrealised value increases 9.7

Unrealised value decreases (14.6)

Realised profit over opening valuation 1.2

Tender offer to shareholders (excluding costs) (21.1)

Dividends paid to shareholders (5.7)

Other revenue and capital movements 4.7

Net asset value at 31 December 2012 137.2

The net asset value per share has moved from 541p at 31 December 2011 to 532.7p at 31 December 2012. After taking account of a final dividend for 2011 of 5p (paid in 2012) and a special dividend of 16p, the movement in the year equates to an increase of 2.3%.

Tender Offer

In 2012 the Company undertook two tender offers. The first in April 2012 was for 10% of the share capital of the Company at a price of 475p per share which was a 12.2% discount to the most recently published net asset value per share as at 31 December 2011. In November 2012 there was a second tender offer undertaken by the company at a price of 500p per share which represented a discount of 11.7% to the net asset value per share as at 30 June 2012. The total amount returned to shareholders under these tender offers amounted to £21.1m. Following the sale of Egeria in February 2013 there remains £12.5m available for distribution to shareholders under the distribution policy approved by shareholders in November 2011.

Portfolio Composition

Dunedin Enterprise makes investments in unquoted companies through:

• Dunedin managed (funds and direct investments),

• third party managed funds, and

• legacy technology funds.

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

Valuation at Valuation at

1 January Additions Disposals Realised Unrealised 31 December

2012 in year in year movement movement 2012

£'m £'m £'m £'m £'m £'m

Dunedin managed 103.9 11.5 (34.1) 1.0 (5.8) 76.5

Third party managed 19.8 7.8 (3.7) 0.2 0.8 24.9

Legacy technology funds 1.5 - (0.8) - 0.1 0.8

125.2 19.3 (38.6) 1.2 (4.9) 102.2

SWIP 14.5 - (14.5) - - -

139.7 19.3 (53.1) 1.2 (4.9) 102.2

New Investment Activity

A total of £19.3m was invested in the year to 31 December 2012. Of this total, £11.5m was invested in Dunedin managed funds and £7.8m was drawn by European third party funds.

On 30 November 2012 an investment of £8.0m was made in Premier Hytemp through Dunedin Buyout Fund II LP ("DBFII"). DBFII invested a total of £27.0m for a majority stake in the company. Premier Hytemp is a global leader in the manufacture and supply chain management of quality engineered alloy components for the offshore and onshore oil and gas industry. Premier Hytemp is headquartered in Edinburgh with manufacturing facilities in Edinburgh, Sheffield and Singapore. It also has operations in Calgary, Canada and will shortly open a base in Dubai. The company's turnover is in excess of £42m and it has over 200 employees worldwide.

A further £2.5m was invested in existing portfolio companies, Enrich (£1.6m), CGI (£0.7m) and Hawksford (£0.2m). A further £1.0m was drawn down by Dunedin managed funds for management fees.

A total of £7.8m was drawn down by four of the European funds to which the Company has made commitments.

The most significant drawdowns were made by Realza (£2.9m), Egeria (£2.1m), FSN Capital (£1.5m) and Innova (£1.3m). These funds make investments in buyouts in Spain and Portugal, the Netherlands mid-market, the Pan-Nordic mid-market and the Central Eastern European mid-markets respectively. A total of six underlying companies were purchased during the year.

Realisations

In the year a total of £53.1m was generated from portfolio realisations. As reported in last year's annual report the investment in SWIP was realised in February 2012 generating proceeds of £14.5m. Within the Dunedin managed portfolio £33.7m was generated from the realisations of WFEL, Capula and etc.venues.

WFEL was realised in May 2012 generating capital proceeds of £14.0m and income of £3.2m. The investment was sold to KMW, a German land defence systems provider. The sale realised a money multiple of 2.4 times. Capula was also realised in May 2012 generating net capital proceeds of £11.5m and income of £2.3m. The investment was sold to the Dutch quoted company, Imtech and generated a money multiple of 1.7 times. etc.venues was realised in November 2012 generating capital proceeds of £8.2m and income of £0.8m. The investment was sold to a secondary buyout and generated a money multiple of 3.1 times.

Loan stock redemptions from other portfolio companies amounted to £0.4m.

A total of £0.8m was generated from realisations within the legacy technology funds all of which are in the process of being wound up.

A total of £3.7m was generated from realisations from the third party managed European funds. The major element of this was generated from the sale of the Trust's interest in Capiton IV in August 2012 for £3.3m, an uplift of £0.2m on the valuation at 31 December 2011. There were loan stock redemptions totalling £0.4m generated from the other European fund portfolios.

Following the year end in February 2013 the Trust's interest in Egeria Private Equity Fund II was realised for €9.7m and released the Trust from future commitments of €1.9m. The realised value is recognised in the valuation at 31 December 2012.

Cash and commitments

At 31 December 2012 the Company had cash and near cash balances of £33.9m all of which are denominated in sterling. On 1 September 2012 the Company increased its revolving credit facility with Lloyds from £10m to £20m. The term of the facility remains for one year and has been taken to ensure that all commitments to funds can be met by the Company.

During the year a commitment of £50m was made by the Trust to Dunedin's next buyout fund. This will be the third buyout fund raised by the Manager of the Trust and will make investments in the UK lower mid-market over the next five years.

The Company has undrawn commitments to Dunedin managed funds of £65.8m and a further €23.3m (£18.9m) of undrawn commitments to the three remaining European funds following the sale of Egeria.

Unrealised movements in valuations

In the year to 31 December 2012 the largest single uplift in value was generated by Formaplex. Strong trading within the Import Tooling division as well as good performance from the Foxhound, Moulding and Composite divisions delivered profit growth in 2012, generating an increase in valuation of £3.5m. CitySprint also achieved strong trading results in 2012 with a 36% increase in maintainable earnings. This was driven by organic growth through new contract wins in retail fulfilment and healthcare and positive contributions from acquisitions during the year. The valuation of the company has increased by £2.2m in the year.

Positive contributions from acquisitions have also benefitted the valuation of Hawksford which resulted in a valuation increase of £1.0m.

The valuation of OSS has been reduced by £8.6m to £1.0m due to a reduced level of maintainable earnings. Performance of the business in 2012 has been adversely impacted by a marked downturn in its domestic market. The business responded quickly by developing a new export sales channel which has delivered significant sales from May 2012. The Trust has held the investment in OSS since 2000 during which time earnings have been volatile. The Trust has been returned the cost of its investment in OSS via dividends and loan interest receipts and remains supportive of the company.

The postponement of major IT projects by large multi-national companies in the face of the Eurozone crisis has impacted the trading performance of Red Commerce during the year. The reduction in maintainable earnings has led to a reduction in the valuation of the investment by £2.8m. Additional working capital of £1.4m has been made available to Enrich during the year. This has been fully provided against as the company continues to find trading difficult.

Within the Dunedin managed portfolio ten companies are budgeting for increased or flat profits in the current financial year, two are budgeting for lower profits. The valuation of the Dunedin managed investments includes accrued interest of £10.8m (2011: £13.9m).

Valuations and Gearing

The average earnings multiple applied in the valuation of the Dunedin managed portfolio was 7.0x EBITDA (2011: 6.8x), or 8.5x EBITA (2011: 8.1x). These multiples continue to be applied to maintainable profits.

Within the Dunedin managed portfolio, the weighted average gearing of the companies was 2.2x EBITDA (2011: 2.1x) or 2.7x EBITA (2011: 2.5x). Analysing the portfolio gearing in more detail, the percentage of investment value represented by different gearing levels was as follows:

Less than 1 x EBITDA 20%

Between 1 and 2 x EBITDA 20%

Between 2 and 3 x EBITDA 49%

More than 3 x EBITDA 11%

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

Less than one year 14%

Between one and three years 30%

More than 3 years 56%

Portfolio Analysis

Detailed below is an analysis of the investment portfolio by geographic location and cash reserves as at 31 December 2012. When the sale of Egeria is recognised in the analysis the exposure to Europe reduces to 12% and cash reserves increase to 31%. The 2011 comparatives exclude the investment in SWIP which was realised shortly after 31 December 2011.

31 December 31 December

2012 2011

% %

UK 57 70

Rest of Europe 18 14

Cash 25 16

Sector Analysis

The investment portfolio of the Company is broadly diversified. At 31 December 2012 the largest sector exposure of 42% remains to the Support Services sector, a diverse sector in itself. There has been a significant reduction in this sector following the realisations of Capula and etc.venues.

31 December 31 December

2012 2011

% %

Construction and building materials 8 6

Consumer products & services 6 3

Financial services 10 6

Healthcare 5 3

Industrials 24 19

Retail 1 -

Support services 42 60

Technology 4 3

Deal Type

The portfolio of investments continues to be predominantly weighted towards MBO/MBI's.

31 December 31 December

2012 2011

% %

Management buyouts/buyins 99 99

Technology 1 1

Valuation Method

31 December 31 December

2012 2011

% %

Cost 14 8

Earnings - provision 25 15

Earnings - uplift 53 77

Exit price 8 -

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.

31 December 31 December

2012 2011

% %

15 12

1-3 years 44 30

3-5 years 12 9

>5 years 29 49

Dunedin LLP

19 March 2013

Ten Largest Investments

(both held directly and via Dunedin managed funds) by value at 31 December 2012

Consolidated Income Statement

for the year ended 31 December 2012

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 year ended 31 December 2012

Year ended 31 December 2012 (audited)

Year ended 31 December 2011 (audited)

Consolidated Balance Sheet

As at 31 December 2012

Consolidated Cash Flow Statement

for the year ended 31 December 2012

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

David Gamble

Chairman

19 March 2013

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 2011 has been extracted from the latest published audited financial statements. The audited financial statements for the year ended 31 December 2011 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 6.5p for the year ended 31 December 2012 and will be paid on 24 May 2013 to shareholders on the register at close of business on 3 May 2013. The ex-dividend date is 1 May 2013.

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