Final Results

Dunedin Enterprise Inv Trust PLC 19 June 2003 19 June 2002 DUNEDIN ENTERPRISE INVESTMENT TRUST PLC PRELIMINARY RESULTS FOR YEAR ENDED 30 APRIL 2003 Dunedin Enterprise Investment Trust PLC ('Dunedin Enterprise') specialises in the provision of equity finance for management buyouts, management buyins and growing businesses. The Trust is managed by Dunedin Capital Partners Limited, the independent UK private equity house which operates out of offices in Edinburgh and London. • NAV per share outperforms benchmark by 23.1% • NAV per share rose in second half of year by 8.5% • Realisations for the year totalling £28.5 million • Investments during the year of £10.4 million Edward Dawnay, Chairman of Dunedin Enterprise, commented on the results: 'Dunedin Enterprise's net asset value has increased by 8.5% in the second half of the year and has outperformed its benchmark index over the past twelve months. In addition to two new investments, Gardner Group and Jessops, Dunedin Enterprise has also achieved successful exits from its investment portfolio including John Wood Group, Latchways and Clee Hill Plant Holdings. The remaining portfolio is in robust health and the company is well positioned to take advantage of new investment opportunities in the coming year.' For further information please contact: Ross Marshall Dunedin Capital Partners Limited 0131 225 6699 Susan Wood Dunedin Capital Partners Limited 0131 718 2313 / 07711 955984 Lesley Allan Hudson Sandler 020 7796 4133 Wendy Baker Hudson Sandler 020 7796 4133 CHAIRMAN'S STATEMENT Overview Net asset value per share increased by 8.5% in the second half of the year, following a decline of 12.7% in the first half. This result has been achieved through a combination of strong realisations and profit growth across the portfolio. The results for the full year show a decline in net asset value per share of 5.3% (2002: -9.9%). Dunedin Enterprise has had an active year with new investment in unquoted companies of £10.4 million (2002: £11.1 million) and realisations of £28.5 million (2002: £34.2 million). In addition, the portfolio has been given greater focus with the disposal of a number of small investments, the sale of all quoted holdings and a greater proportion of assets committed to the UK buyout market. The share price fell from 247.5p at the start of the year to its low point of 194.5p during March 2003, recovering to 218.5p by the year end and to 236.0p at the time of writing this review. Comparison with Benchmark The year's results have meant that your Company significantly outperformed its benchmark index, the FTSE Small Cap Index (excluding investment companies), for the second successive year. In the year to 30 April 2003, the net asset value per share of Dunedin Enterprise fell by 5.3% (2002: -9.9%) compared to a fall of 28.4% in its benchmark index (2002: -15.2%). The total return to Dunedin Enterprise shareholders, which includes dividends paid in the period, was a reduction of 1.4% (2002: -6.6%) which also compares favourably with a fall of 26.2% (2002: -13.0%) in the total return of its benchmark index. Over the past five years, the total return to shareholders of Dunedin Enterprise has been 9.2% compared with a negative return of 20.0% in its benchmark. Investment Activity In previous statements, I have commented on the slow down in the private equity and M&A markets. This continued during 2002 and the early months of 2003. However, I am pleased to report that Dunedin Enterprise has invested £6.7 million in two new companies, Gardner Group and Jessops. In addition, your Company has invested a further £3.7 million in existing portfolio companies giving total investment of £10.4 million (2002: £11.1 million) in the year. Gardner Group is one of the UK's leading aerospace machining businesses. Dunedin Enterprise supported the £21.5 million management buyout of the company in March 2003 from the receiver of its parent company, L Gardner Group plc. Your Company invested £3.6 million in the transaction. The long term prospects for the aerospace industry remain positive and the company was acquired at a substantial discount to asset value. Early trading has been good and the company is performing in line with expectations. Jessops is the UK's leading specialist photographic retailer with 243 stores throughout the UK. The company was the subject of a £147 million secondary buyout in October 2002 led by ABN Amro Capital. Dunedin Enterprise invested £3.1 million in the company in April 2003. Jessop's growth prospects are supported by strong demand for digital cameras and an ongoing store opening programme. Like Gardner Group, early trading has been good and the company is performing in line with expectations. Realisations I commented last year on the excellent record of Dunedin Enterprise in obtaining exits from its investment portfolio. This has continued in the year under review and as a result, your Company realised £28.5 million of cash. The disposals during the year included your Company's holdings in the John Wood Group, Latchways and Clee Hill Plant Holdings. John Wood Group floated on the London Stock Exchange in May 2002 and Dunedin Enterprise's entire holding was disposed of by August 2002, prior to the stockmarket fall later in the year, for a total of £11.2 million. In addition, Dunedin Enterprise's holding in Latchways, which was also listed on the London Stock Exchange, was disposed of in December 2002 for £5.0 million. Your Company's investment in Clee Hill Plant Holdings, where Dunedin Enterprise had supported the management buyout in 1997, was sold for £2.6 million in a secondary buyout in February 2003. I should draw particular attention to your investment in Latchways. Dunedin Enterprise first invested in Latchways in 1983 and in total invested £1 million. Up to the date of disposal of Dunedin Enterprise's stake in December 2002, your Company had realised £12 million in capital and dividends over the 20 year life of the investment. This represents a 20% annual return on the original investment and demonstrates the long term outperformance that investment in private companies can achieve. Since the year end, your Company has disposed of its shareholding in Thomson Brothers, a distributor of architectural ironmongery. Dunedin Enterprise led the buyout of Thomson Brothers in March 1999 and supported the company's further growth through acquisition. It was sold to Wolseley plc in May 2003 and Dunedin Enterprise realised a profit of £1.6 million over its valuation at 31 October 2002 of £3.4 million. Your Company continues to demonstrate the ability to achieve exits from its portfolio thereby generating cash which will be used to finance future investment activity. Following the disposal of its holdings in John Wood Group and Latchways, and a small number of other quoted investments, your Company now has no listed investments in its portfolio (2002: 6.8%). Portfolio and Net Asset Value Movement The net asset value of your Company fell by £6.3 million during the year. The main components of the reduction were as follows: £'m Unrealised value increase 13.2 Unrealised value decrease (15.7) Realised profit over opening valuation 0.4 Share buy-ins (Note 1) (0.6) Profit attributable to shareholders less expenses charged to capital and exchange movements 0.4 Dividends paid to shareholders (4.0) (6.3) Note 1. During the year, your Board approved the buy-in of 320,000 shares, for a total consideration of £0.6 million, at levels which have enhanced net asset value by 1.1p per ordinary share. Your Board will continue to look for opportunities to buy-in shares where it believes that it is in the best interest of all shareholders. The unrealised value increase in the portfolio has been driven principally by profit growth across a significant number of portfolio companies. This demonstrates that the portfolio is in good health and provides a solid base for future value growth. The unrealised value decrease largely relates to three portfolio companies which have produced disappointing trading results in the year. Over the past five years, your Company has increasingly focused on investing in management buyouts and buyins. At 30 April 2003, 83.3% (2002: 63.4%) of the portfolio was invested directly in this category of company with a further 8.0% (2002: 6.2%) invested in limited partnership funds committed to the buyout market. Only 2.1% (2002: 2.2%) of the portfolio is invested in technology companies through limited partnership funds. The strategy of investing in management buyouts of established, profitable companies has been the main reason why your Company has outperformed its benchmark over the past two years. Revenue and Dividend In the year to 30 April 2003, profit after tax amounted to £3.5 million (2002: £4.1 million). The principal reason for this decrease was the reduction in income from unlisted investments due mainly to the active disposal programme carried out during the past two years. Part of this income was replaced by interest on bank deposits but this has been at a lower yield than was previously earned. Interest rates in the UK have fallen over the past five years to their lowest level in over forty years and there are no indications of an imminent increase. In addition, there is an increasing trend in the private equity market to structure investments to maximise capital growth rather than to generate income. This has meant that the dividend yield on more recent investments is lower than the yield on investments made in the early and mid-1990's and it is expected that this trend will continue. The combination of these two factors is likely to reduce the yield on your Company's unquoted portfolio in future. Under Investment Trust legislation your Company is obliged to distribute at least 85% of its eligible investment income to shareholders by way of dividend. Historically, the high level of income from the portfolio has allowed your Company to pay dividends higher than other investment trusts and shareholders have benefited from this greater level of distribution. However, the primary purpose of Dunedin Enterprise has been expressed for some years as the creation of substantial long term growth in assets through capital gains on its investments. Your Board will continue to focus on investing in companies with strong capital growth prospects and will only seek attractive dividends from new investments when market conditions allow. In the light of the above, your Board felt it appropriate to review your Company's future dividend policy to reflect current and expected market conditions. In particular, it does not consider it prudent to maintain a dividend that would increasingly have to be paid out of retained profits rather than out of current earnings. Your Board declared an interim dividend of 2.85p (2002: 2.85p) per ordinary share in December 2002 and will recommend an unchanged final dividend of 10.0p (2002: 10.0p) per ordinary share giving a total of 12.85p for the year. It is too early to assess the dividend for next year but it is unlikely to be greater than two thirds of the level of the current year. Outlook There does not appear to be any prospect of an increase in M&A activity in the near future and there is low growth forecast for the UK economy over the coming year. Although prices have fallen to some extent, vendors' price expectations remain high and do not reflect the uncertain economic outlook. In addition, transactions are taking longer to complete and this extended timescale adds further uncertainty to the process. Nevertheless, your Manager continues to originate a strong flow of investment opportunities for consideration and your Company has sufficient cash resources to invest in those businesses which will provide an attractive return for shareholders. Shareholders Your Company continues to enjoy the support of over 5,000 shareholders despite the disappointing experience of many investors involved in equity markets in 2002/2003. In the past year, communication with shareholders has been increased by an extension of our website presence at www.dunedin.com, and with updates on new investment and portfolio companies being circulated to both private and institutional shareholders. In addition, a programme of ongoing communication with fund managers interested in private equity is underway. During the year, concerns over corporate governance of other types of investment trust have been much in the news. The impact of initiatives by the Financial Services Authority and the Association of Investment Trust Companies are as yet not fully formulated. Your Board continues to consider these matters and to encourage representations by the Association of Investment Trust Companies and the British Venture Capital Association aimed at producing recommendations appropriate to private equity Investment Trusts. Annual General Meeting The Annual General Meeting will take place at 12 noon on Wednesday 20 August 2003 at The Royal Society of Edinburgh, 22-26 George Street, Edinburgh EH2 2PQ. The Directors of Dunedin Enterprise and of the Manager look forward to meeting you then. Edward Dawnay, Chairman 18 June 2003 MANAGER'S REVIEW Overview The year ended 30 April 2003 was, like 2002, a year of two contrasting halves. The first six months, as described in the interim report to 31 October 2002, saw a net asset value per share fall of 12.7% (2001: -10.2%). This was caused by a combination of a sharp fall in earnings of a small number of portfolio companies and a reduction in the price earnings ratios used to value other portfolio companies, which followed the stock market fall in the second half of 2002. The second six months, to 30 April 2003, produced a net asset value per share increase of 8.5% (2002: 0.4%) through a combination of strong realisations and profit growth in a number of portfolio companies. The results for the full year show a decline of 5.3% in net asset value per share (2002: -9.9%) which compares favourably with a decrease of 28.4% in your Company's benchmark index, the FTSE Small Cap Index (excluding investment companies). The net asset total return to shareholders for the year to 30 April 2003 was - 1.4%, and over five years 9.2% compared with equivalent movements of -26.2% and -20.0% in the FTSE Small Cap Index (excluding investment companies) over the same periods. Your Company achieved a number of important realisations in the year, principally the complete disposal of its interests in John Wood Group and Latchways. Thomson Brothers, in which your Company had a material equity interest, was sold on 31 May 2003. Investment activity during the year included a £3.6 million investment in Gardner Group in March 2003 and a £3.1 million investment in the UK's leading photographic retailer, Jessops, in April 2003. A further £3.7 million of follow-on investments to portfolio companies were made in the period giving total investment of £10.4 million (2002: £11.1 million). The total movement in net assets was as follows: £'m Net Assets as at 30 April 2002 101.8 Unrealised value decreases 13.2 Unrealised value increases (15.7) Realised profit over opening valuation 0.4 Share repurchases (0.6) Profit attributable to shareholders less management fees and loan interest 0.4 charged to capital plus foreign currency movements Dividends paid to shareholders (4.0) Net Assets as at 30 April 2003 95.5 Realisations Realisations and redemptions created the following movements in value during the year to 30 April 2003: Valuation at Proceeds Uplift over value Profit/(loss) Cost 30 April 2002 Received £'m over cost £'m £'m £'m £'m Quoted disposals 2.6 12.3 12.3 - 9.7 Unquoted disposals at a profit 8.1 12.1 12.5 0.4 4.4 over cost Unquoted disposals at a loss 11.1 0.1 0.1 - (11.0) against cost 21.8 24.5 24.9 0.4 3.1 Loan stock redemptions 3.6 3.6 3.6 - - 25.4 28.1 28.5 0.4 3.1 A number of companies were sold at a profit over cost during the year. The major ones were Latchways, John Wood Group and Clee Hill Plant Holdings. Latchways was a small private company when Dunedin Enterprise first invested in it in 1983. During the 1980's, your Company invested further amounts to support Latchways' growth until its flotation on the London Stock Exchange in 1997. Your Company disposed of its residual holding in late 2002. Over twenty years, Dunedin Enterprise received capital and dividends of £12.1 million in return for £1.0 million invested. This represents a multiple of 12 times money invested and an annual return of 20%. Dunedin Enterprise first invested in John Wood Group, the diversified oil services support company, in 1991. The company floated on the London Stock Exchange in May 2002 and Dunedin Enterprise disposed of its shares partly on flotation and during the subsequent three months. Over eleven years, your Company received capital and dividends of £12.1 million in return for £3.8 million invested. This represents a multiple of 3.2 times money invested and an annual return of 27%. Clee Hill Plant Holdings was the subject of a management buyout, led by Dunedin Enterprise, in 1997. The company is one of the UK's leading compaction equipment hire businesses. Dunedin Enterprise disposed of its holding to a secondary buyout in early 2003. Over six years, your Company received capital and dividends of £3.8 million in return for £1.7 million invested. This represents a multiple of 2.3 times money invested and an annual return of 18%. Four companies were sold at a loss against cost during the year. The principal losses were attributable to Ehrmanns, CRT Displays, Deutsche Woolworth and Emtec. Dunedin Enterprise's investment in each of these companies had been fully written down at 30 April 2002 and so their disposal or failure has not affected the net asset value of your Company this year. Ehrmanns is an importer and distributor of wine to a number of major UK retail multiples. The company had traded below business plan and required further investment to support its future growth. A further investment could not be recommended given the increasingly competitive nature of the wine distribution sector. Consequently, your Company disposed of its holding for a nominal sum. As reported in last year's accounts, CRT Displays was placed in receivership in June 2002 following a slowdown in demand for digital projection equipment. The receivership will not result in any recovery for your Company. Deutsche Woolworth and Emtec were investments acquired in the Group Trust portfolio in 2001 and both have been adversely affected by the economic slowdown in Europe. Your Company's investment in each of these businesses has been disposed of for a nominal value. New Investments In the year to 30 April 2003, your Company invested £10.4 million (2002: £11.1 million). In March 2003, your Company invested £3.6 million in the £21.5 million management buyout of Gardner Group, one of the UK's leading aerospace machining businesses with sales of £54 million. The company has three divisions specialising in aero engines, aero structures and specialist aftermarket supply. The company principally supplies the civil aerospace market and customers include Rolls-Royce, BAe Systems, Airbus and Lockheed Martin. The worldwide recession and 2001 terrorist attacks caused a significant and sudden downturn in civil aerospace from which the industry is still suffering. The aerospace industry is known to be cyclical; however, the long term prospects for the sector are positive and Gardner is well placed to capitalise on emerging industry consolidation and outsourcing opportunities. Your Company invested £3.1 million in the £147 million secondary management buyout of Jessops, the UK's leading specialist retailer of photographic equipment and accessories. It is one of the fastest growing retailers in the country, operating in one of the highest growth segments of the retail industry - digital cameras. The number of stores operated by Jessops in the UK in the last five years has more than tripled, to a total of 243. The business has an experienced management team, which has led the company's development of the digital market, grown sales and profitability over the last five years, successfully integrated acquisitions, and managed a new store opening programme. The principal opportunity is to continue the expansion of the business through an ongoing store opening programme supported by the continued growth in the digital photographic market. There was further investment of £1.3 million in a number of portfolio companies including MGE Finances, Goals Soccer Centres and Blaze. Buyout and technology fund drawdowns in the year totalled £2.4 million. Unrealised Value Movements The table below summarises the main components of the unrealised value movement. £'m £'m Value Increases • trading performance 10.4 • price earnings ratio increases 2.0 • other 0.8 13.2 Value Decreases • trading performance (12.4) • price earnings ratio decreases (1.4) • other (1.9) (15.7) Net Unrealised Value Movement (2.5) Valuation increases in the year occurred due to a combination of trading performance, price earnings ratio movements and other factors (including currency movements, fund revaluations and technology fund write downs). Increased profitability at a number of portfolio companies, principally Letts Filofax, Portman and Blaze, added £10.4 million to the value of the portfolio during the year. A further £2.0 million was added by an increase in comparable quoted company price earnings ratio multiples used to derive the value of a number of portfolio companies. The final £0.8 million of unrealised value growth was due to the increase in valuation of the underlying companies in the various buyout funds in which your Company is invested. Poor trading in three portfolio companies accounted for £11.7 million of the £12.4 million value decrease attributable to trading performance. It appears unlikely that any recovery in value will be made in two of these three companies and the value of your Company's investment has been fully written down to reflect this. Decreases in comparable price earnings ratios account for £1.4 million of the net asset value reduction, with a further £1.9 million decrease being due mainly to write downs in the value of the underlying companies in the four technology funds in which your Company is invested. In addition to specific company write downs recommended by the managers of these funds, your Manager thought it was appropriate to recommend further write downs, in line with the fall in technology indices, since the date these funds invested in the underlying companies. This approach may be viewed as conservative but it is consistent with your Manager's prudent approach to portfolio valuation. Portfolio Analysis The table below analyses your Company's portfolio by asset category. At 30 April 2003 2002 No. £'m No. £'m Unquoted companies 47 75.2 61 88.0 Quoted companies - - 6 7.1 Buyout funds 7 6.7 7 6.4 Technology Funds _4 1.7 _4 2.3 58 83.6 78 103.8 As the above table demonstrates that, over the past year, a great deal of work has gone into rationalising the portfolio through the disposal of all quoted stocks and the sale of a significant number of holdings in small unquoted companies. These were in addition to the major realisations described in more detail above. The disposal of old, illiquid stocks, with little or no upside potential, gives more focus to the portfolio. Valuation Basis Your Company's portfolio was valued on the following basis: At 30 April 2003 2002 £'m % £'m % Quoted companies - - 7.1 6.8 Unquoted companies • earnings basis 41.7 49.9 55.4 53.4 • cost 11.9 14.2 9.6 9.3 • imminent sale/flotation 5.4 6.5 12.2 11.7 • written down value 7.1 8.5 7.6 7.3 • 3rd party transaction 5.6 6.7 - - • net asset value 3.5 4.1 3.2 3.1 75.2 89.9 95.1 91.6 Buyout funds 6.7 8.0 6.4 6.2 Technology funds 1.7 2.1 2.3 2.2 83.6 100.0 103.8 100.0 Your Company's portfolio is valued in accordance with the guidelines issued by the British Venture Capital Association. Investments are held at cost for the first year and then are generally valued on an earnings basis using comparable quoted company price earnings ratios, discounted for lack of marketability. The weighted average price earnings multiple used to value your Company's portfolio at 30 April 2003 was 8.6, a discount of 50.9% to the FTSE All Share price earnings multiple of 17.5 on that date. If a portfolio company is performing below plan, or is forecasting lower profits in the current year than it achieved in the previous year, the value of your Company's investment is written down to an appropriate level. When a portfolio company is sold or floated between Dunedin Enterprise's year end and the date on which its results are released, that company will be valued on the basis of the imminent sale or flotation. This was the basis used for Thomson Brothers this year and John Wood Group last year. Investment Category 2003 2002 £'m % £'m % Management buyouts/buyins 69.7 83.3 65.8 63.4 Buyout funds 6.7 8.0 6.4 6.2 Technology funds 1.7 2.1 2.3 2.2 Other 5.5 6.6 29.3 28.2 83.6 100.0 103.8 100.0 Dunedin Enterprise's objective in recent years has been to provide equity finance for management buyouts, management buyins and growing businesses. As a consequence of this, at 30 April 2003, 83.3% of your Company's portfolio was invested directly in management buyout and buyin companies. In addition, through your Company's investment in seven buyout funds representing 8.0% of the portfolio, the total proportion of the portfolio invested in buyouts and buyins is now 91.3% (2002: 69.6%). The British Venture Capital Association Performance Measurement Survey 2002 shows that private equity, as an asset class, has outperformed total UK Pension Fund Assets and the principal stock market indices over one, three, five and ten years. By focusing its investment on management buyouts and buyins, a sub-set of private equity, your Company's net asset performance has also significantly outperformed stock market indices over the same periods. The portfolio is broadly spread across industry sectors with the largest weighting being in construction and building materials. The weighting in this sector was reduced by one third upon the sale of Thomson Brothers one month after your Company's year end. It is your Board's policy to maintain a broadly based portfolio. Portfolio analysed by Industry Sector Aerospace & Defence 5% Automobiles & Parts 1% Construction & Building Materials 16% Electronic & Electrical Equipment 8% General Retailers 4% Household Goods & Textiles 16% Insurance 4% Leisure & Hotels 10% Personal Care & Household Products 4% Software & Computer Services 5% Specialty & Other Finance 13% Support Services 14% 100% Portfolio analysed by age The age of the underlying portfolio companies, from the date of original investment is shown in the following table: < 1 year 8% 1 - 3 years 52% 3 - 5 years 26% > 5 years 14% 100% The active disposal programme over the past two years has resulted in 86% of the portfolio being five years old or less. Your Manager is working with the boards of all portfolio companies to realise value at the appropriate time. Almost 90% of the portfolio is now in companies in which Dunedin Enterprise and other private equity institutions have a controlling stake. As a result, your Manager anticipates a continuing flow of realisations in future. Market Outlook The past three years have seen falling stock markets and slowing economic growth. Merger and acquisition activity has decreased considerably and private equity activity has done likewise. The UK private equity industry has experienced falling investment levels since the peak in 2000. Against this background, your Company has realised a number of investments, made two new commitments and largely preserved the value of the remaining portfolio. Dunedin Enterprise is in a strong position to move forward. The portfolio is in good health, further realisations are probable within the next year and your Company has cash and bank facilities to finance new investment. Despite the general downturn in the market, there was an increase in the number of investment opportunities originated and appraised by your Manager in the year to 30 April 2003. In times of economic uncertainty and stock market turbulence, private equity investments can be made at very attractive prices. Your Company made some extremely profitable investments in these sorts of conditions in the early 1990's. Two factors in particular are preventing more transactions from taking place. Firstly, vendors' price aspirations, particularly of smaller private companies, remain unrealistically high. There are signs that this is changing and this should generate opportunities in the current year. Secondly, the uncertain economic outlook is causing transaction times to lengthen as both purchasers and sellers seek comfort on the current trading of target companies. This may cause the seller to withdraw a company from sale only to remarket it at a lower price several months later. In markets such as these, good investments are made by patient investors who are not prepared to compromise investment quality in order to deploy capital quickly. This is the approach that your Manager is taking. Further Analysis Investors are able to review further information and data relating to Dunedin Enterprise at our web site www.dunedin.com. Dunedin Capital Partners Limited 18 June 2003 DUNEDIN ENTERPRISE INVESTMENT TRUST PLC PRELIMINARY RESULTS FOR YEAR ENDED 30 APRIL 2003 GROUP BALANCE SHEET At 30 April 2003 2002 £'000 £'000 £'000 £'000 Fixed asset investments Unquoted investments 83,569 103,752 AAA rated funds 28,899 - 112,468 103,752 Current assets Debtors 1,092 1,861 Cash at bank 5,587 22,904 6,679 24,765 Current liabilities Creditors: amounts falling due within one year (3,278) (11,677) Net current assets 3,401 13,088 Total assets less current liabilities 115,869 116,840 Creditors: amounts falling due after more than one (20,377) (15,000) year 95,492 101,840 Capital and reserves Called up share capital 7,718 7,798 Share premium account 47,600 47,600 Capital reserves: Capital redemption reserve 208 128 Capital reserve - realised 39,281 39,954 Capital reserve - unrealised (1,380) 3,795 Revenue reserve 2,065 2,565 Total equity shareholders' funds 95,492 101,840 Net asset value per share 309.3p 326.5p DUNEDIN ENTERPRISE INVESTMENT TRUST PLC PRELIMINARY RESULTS FOR YEAR ENDED 30 APRIL 2003 CONSOLIDATED STATEMENT OF TOTAL RETURN For the year ended 30 April 2003 2002 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Losses on investments - (2,694) (2,694) - (8,268) (8,268) Income 5,287 - 5,287 5,544 - 5,544 Investment management fee (651) (1,952) (2,603) (733) (2,200) (2,933) Other expenses (432) (36) (468) (361) - (361) Net return before finance costs and tax 4,204 (4,682) (478) 4,450 (10,468) (6,018) Interest payable and similar charges (314) (941) (1,255) (335) (1,004) (1,339) Return on ordinary activities before tax 3,890 (5,623) (1,733) 4,115 (11,472) (7,357) Tax on ordinary activities (415) 415 - - - - Return attributable to equity shareholders 3,475 (5,208) (1,733) 4,115 (11,472) (7,357) Dividends in respect of equity shares (3,975) - (3,975) (4,005) - (4,005) Transfer to reserves (500) (5,208) (5,708) 110 (11,472) (11,362) Basic return per ordinary share 11.1p (16.7p) (5.6p) 13.5p (37.6p) (24.1p) DUNEDIN ENTERPRISE INVESTMENT TRUST PLC PRELIMINARY RESULTS FOR YEAR ENDED 30 APRIL 2003 GROUP CASH FLOW STATEMENT For the year ended 30 April 2003 2002 £'000 £'000 £'000 £'000 Net cash inflow from operating activities 2,541 1,676 Servicing of finance Interest paid (1,255) (1,619) Taxation Tax paid (203) - Tax recovered 55 452 Net cash (outflow)/inflow from taxation (148) 452 Financial Investment Purchase of investments (10,078) (11,084) Purchase of 'AAA' rated money market funds (28,899) - Sale of investments 28,483 34,184 Net cash (outflow)/inflow from financial investment (10,494) 23,100 Acquisitions Cash consideration on purchase of Group Trust plc - (7,500) Costs incurred on purchase of Group Trust plc (31) (995) (31) (8,495) Equity dividends paid (4,007) (3,772) Net cash (outflow)/inflow before financing (13,394) 11,342 Financing Purchase of ordinary shares (640) (1,302) Currency loan reduction (3,283) - (3,923) (1,302) Cash on short term deposits assumed on purchase of Group Trust plc - 6,317 (Decrease)/increase in cash for the period (17,317) 16,357 Reconciliation of net cash flow to movement in net funds (Decrease)/increase in cash as above (17,317) 16,357 Cash at bank and in hand at 1 May 22,904 6,547 Cash at bank and in hand at 30 April 5,587 22,904 Notes 1. The directors recommend a final dividend of 10.0p per share for the year to 30 April 2003. If approved, the dividend will be paid on 22 August 2003 to shareholders on the register at close of business on 1 August 2003. The ex-dividend date is 30 July 2003. An interim dividend of 2.85p per share was paid on 31 January 2003. 2. The financial information for the year ended 30 April 2002 has been extracted from the annual report and accounts of the company which has been filed with the Registrar of Companies and on which the, auditors' report was unqualified. The accounts have been prepared under the same accounting policies used for the year to 30 April 2002. 3. The statutory accounts for 2003 contain an unqualified audit report and will be delivered to the Registrar of Companies following the company's Annual General Meeting which will take place at 12 noon on Wednesday 20 August 2003 at The Royal Society of Edinburgh, 22-26 George Street, Edinburgh EH2 2PQ. 4. The statement of total return (incorporating the revenue account) and balance sheet set out above do not represent full accounts in accordance with Section 240 of the Companies Act 1985. The accounts have been prepared in accordance with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies'. 5. The annual report will be posted to shareholders in July 2003 and copies will be available to members of the public at the Company's Registered Office, 10 George Street, Edinburgh, EH2 2DW. TEN LARGEST INVESTMENTS The ten largest investments account for 68.7% of the total unquoted portfolio of Dunedin Enterprise as listed below: Company Percentage of Approx total unquoted percentage Cost of Directors' portfolio at of equity investment valuation valuation % £m £m % Letts Filofax Group Limited 41.1 4.0 10.3 12.3 Davenham Group Holdings PLC 34.4 5.0 10.2 12.3 Portman Holdings Limited 16.8 2.5 6.1 7.3 MGE Finances 1.4 3.9 5.6 6.6 CGI International Limited 46.5 1.3 5.2 6.3 Thomson Brothers Limited 44.6 3.5 5.0 6.0 Goals Soccer Centres Limited 39.7 4.8 4.8 5.7 Gardner Group Limited 15.0 3.6 3.6 4.3 Blaze Signs International Limited 40.8 3.8 3.5 4.2 Jessops Limited 4.0 3.1 3.1 3.7 35.5 57.4 68.7 'Approx.Percentage of equity' relates to the ordinary share capital of the relevant company and assumes full exercise of outstanding options, warrants and conversion rights. Notes to Editors 1. Dunedin Enterprise Investment Trust PLC floated in 1987 as Melville Street Investments. 2. Dunedin Enterprise Investment Trust PLC is managed by Dunedin Capital Partners Limited. Dunedin Capital Partners Limited is an independent private equity company owned by its directors. The company specialises in providing equity finance for management buyouts, management buyins and growing businesses with a transaction size of £10 - 25 million. It operates throughout the United Kingdom from its headquarters in Edinburgh and offices in London. Dunedin Capital Partners is itself the result of a management buyout which took place in 1996. This information is provided by RNS The company news service from the London Stock Exchange

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