Duke Capital Regulatory News (DUKE)

6 October 2017

Duke Royalty Limited("Duke Royalty", "Duke" or the "Company")

Duke Royalty enters royalty financing agreement

Duke Royalty Limited (AIM: DUKE) is pleased to announce that it has entered into its second royalty financing agreement (the "Financing") with Lynx Equity (U.K.) Limited ("Lynx UK"), the UK-based subsidiary of Lynx Equity Limited ("Lynx").

Duke has committed GBP 7.0 million, with an initial tranche of GBP 4.5 million to be drawn down immediately, with the additional GBP 2.5 million being drawn down at the completion by Lynx UK of an imminent acquisition, which is expected to be completed in the coming weeks.

The Financing represents the beginning of the relationship with Lynx as a Royalty Partner, as Duke has become Lynx's preferred European capital provider, with the potential to provide a further GBP 8 million of funding equating to GBP 15 million over time.

New Royalty Partner - Lynx Equity

Lynx is a Toronto-based private firm that seeks to acquire, own and operate mature, old-economy businesses in a diverse range of industries. Over its 10-year history, Lynx has made over 40 acquisitions and grown revenue to over C$300 million per annum for its financial year ended 31 July 2017. Lynx has been recognized as one of Canada's Fastest-Growing Companies three years in a row in the PROFIT 500, the definitive ranking published by Canadian Business magazine based on five-year revenue growth.

Led by Brad Nathan, founder and President, Lynx's team of senior managers have a track record of success in acquiring owner-operated businesses with long-standing profitability where the owners are looking to retire after a transition period. Lynx's business model is to own 100% of the acquired companies, but ensures management retention via part-deferred compensation to the owners. Lynx believes their buy and hold philosophy gives them an advantage when approaching companies for sale, since owners know they are becoming part of a large and profitable company with the intention to preserve the legacy of the owners.

Lynx's business model has a proven acquisition formula and a strict set of company characteristics which has resulted in excellent growth and profitability with operations in Canada, the United States, and the United Kingdom. From its base in London, Lynx UK intends to grow operations throughout Western Europe.

About the Financing

As part of the Financing, Duke has become Lynx's preferred European capital provider with the potential to invest up to GBP 15 million in total (the 'Investment Pool'). Duke is looking to provide Lynx with the capital it requires to allow it to roll out its proven and successful North American acquisition strategy across Europe, with the stated potential Investment Pool to be deployed as further profitable acquisitions meet Duke's royalty investment criteria and subject to Duke's due diligence and Lynx UK maintaining a royalty coverage ratio above 2.0x post-acquisition.

Under the terms of the Financing, Duke will initially provide Lynx UK with GBP 4.5 million which will establish Duke as the senior capital provider to Lynx UK and provides the capital necessary for past and future obligations with respect to the acquisition cost of its existing UK businesses, Label Express (founded in 1984) and Signalhome (founded in 1998).

The Financing will entitle Duke to monthly distributions ("Distributions") beginning in November 2017 which total GBP 540,000 per annum, based on the initial drawdown of GBP 4.5 million. The Distributions will be adjusted annually with the first adjustment occurring in August 2018, based on the percentage change in Lynx UK's gross revenues for the fiscal year to July 2017 compared to the prior year. The annual adjustment in the Distributions will be subject to a collar.

Duke and Lynx are currently undergoing due diligence in regard to the acquisition of a third company in Europe which is under exclusive Letter of Intent with Lynx UK and is expected to close in the coming weeks. Duke has committed GBP 2.5 million to Lynx UK for this deal pending completion. This would increase the annual distributions to GBP 840,000 starting the following month.

The Financing has the following benefits to Duke:

· The term of the Financing is perpetual

· Duke has provided Lynx UK with a buyback option but only after the first 5 years

· No currency risk as the Financing is denominated in GBP.

· No withholding taxes, as Duke's UK subsidiary is transacting with Lynx UK.

· Diversifies company-specific risk by consolidating the cashflows from all of Lynx's European companies, now and in the future.

· Senior secured position over all present and after-acquired property and assets of Lynx and shares of the subsidiaries of Lynx UK.

· Provision of a guarantee by Lynx UK's parent company, providing significant downside protection for Duke.

"We were immediately drawn to the structure that Duke presented which will allow us to aggressively expand our European portfolio. This permanent capital is a perfect fit for our buy and hold strategy. Most importantly, the Duke team is made up of fantastic individuals and we look forward to a long and successful relationship with them," commented Brad Nathan, President of Lynx Equity.

"Lynx is an excellent partner for Duke; they are successful operators, their businesses meet our investment criteria and their international operations make them a substantial and profitable partner." said Neil Johnson, CEO of Duke. " Being a Canadian company, Lynx was familiar with the advantages of royalty finance and from the first meeting we felt our businesses were very complementary. We are pleased to assist Brad and his team on their expansion in Europe."

Update on royalty pipeline

In relation to potential future royalty transactions, Duke is pleased to report that it is under exclusivity with one and in advanced discussions with a second royalty opportunity. Both of these opportunities are mature UK industrial businesses that match Duke's investment criteria and, while no assurance can be given that either opportunity will ultimately consummate, Duke is confident that it will have both under exclusivity agreements in the near term.

Further, Duke retains its option to invest an additional €2m into Temarca B.V., and also anticipates that the Lynx UK investment will grow in size from the current GBP 7.0 million up to GBP 15.0 million in due course. As a result of the Financing and further commitment, Duke will have fully deployed the net proceeds of the placing undertaken at admission in March 2017 in accordance with its investing policy.

About Duke Royalty

Headquartered in Guernsey, Duke Royalty Limited provides alternative financing solutions to a diversified range of businesses in Europe and abroad. Duke Royalty's experienced team and exclusive partnership provide financing solutions to private companies that are in need of capital but whose owners wish to maintain equity control of their business. Duke Royalty's royalty investments are intended to provide robust, stable, long term returns to its shareholders.

Duke Royalty is listed on the AIM market under the ticker DUKE. For more information, visit dukeroyalty.com.

About Lynx Equity Limited

With sales in excess of $300M CAD, Lynx Equity Limited is a Toronto-based diversified firm focused on acquiring small and medium-sized businesses from owners looking to retire. Lynx targets acquisitions of companies with EBITDA between $500k and $2M and utilizes a buy and hold strategy.

For further information on Lynx Equity, please visit www.lynxequity.com

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The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

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