Annual Financial Report

EPE Special Opportunities plc

Audited Financial Statements for the 12 months ended 31 January 2015

The Board of EPE Special Opportunities plc are pleased to announce the Company's Final Results for the 12 months ended 31 January 2015.

Highlights:

· The Net Asset Value (NAV) at 31 January 2015 amounted to 142.13 pence per share, an increase of 5.0% on the NAV per share of 135.37 as at 31 January 2014;

· The share price for the Company as at 31 January 2015 was 114.00 pence, representing an increase of 31.0% on the share price of 87.00 pence as at 31 January 2014;

· The Company is pleased to confirm that the Company's largest shareholder is the executives of the Investment Advisor, owning 26.5% of the Company between them;

· The portfolio remains conservatively valued with a weighted average Enterprise Value equating to an EBITDA multiple of 5.3x with 35.4% of the portfolio's GAV comprised of yielding loans;

· The underlying portfolio is relatively unleveraged with 1.4x third party net debt to EBITDA;

· The Company retains strong net cash balances of £9.9 million, providing 35.3x per annum coverage on Convertible Loan Note interest. Overall cash in the Company is £14.0 million, providing sufficient capital to invest in new deal opportunities;

· Over the last five years the Company has continued to use its capital resources prudently, retiring 12.4% of the capital base;

· The Company successfully exited Bighead Holdings Limited to management on 19 February 2014 at a premium of 31.4% to its prevailing holding value, generating a total return to ESO 1 LP since September 2010 of 3.6x Money Multiple and a 51.7% IRR;

· The Company successfully exited Indicia Group Limited to Charterhouse Print Management Limited on 24 December 2014 at a premium of 42.4% to its prevailing holding value, generating a total return to ESO 1 LP of 2.2x Money Multiple and a 24.6% IRR;

· The Company successfully exited Driver Require Limited to Chrysalis VCT PLC on 20 January 2015 at a premium of 168.6% to its prevailing holding value, generating a total return to ESO 1 LP of 1.3x Money Multiple and a 7.0% IRR;

· Nexus finished the financial year to 31 December 2014 ahead of budget, driven by strong performance in the UK trade and retail channels, bolstered by strong demand for the Luceco LED lighting ranges;

· Whittard of Chelsea finished the year to 31 December 2014 behind budget, due to a disappointing first half and a shortfall in retail and international/wholesale sales, before reversing course and finishing the year with strong like-for-like growth;

· Process Components finished the year to 30 June 2014 behind an aggressive budget, but significantly ahead of 2013. Growth continues to be driven by investment in sales, marketing and product development;

· Pharmacy2U finished the year to 31 March 2014 ahead of budget, with registration of new NHS practices for the NHS electronic prescription system significantly ahead of budget;

· New investment opportunities are being pursued in light of positive economic conditions. All new investments will be made via ESO 2 LP, in which the Company is the sole investor;

· Mr. Geoffrey Vero, Chairman, commented: "The Board are satisfied with the overall performance of the portfolio and the progress of the Company in the last 12 months. Most notable progress has been made at Nexus and the successful disposal of a number of portfolio assets above their holding values, providing continued validation of the Company's NAV and increasing cash balances to invest in new deal opportunities. We are optimistic that the Company's portfolio will continue to perform and that the Company will continue to explore opportunities to acquire high quality assets at attractive prices to further diversify the current portfolio."

Enquiries:

EPIC Private Equity LLP

Alex Leslie +44 (0) 20 7269 8865

Numis Securities Ltd

Nominated Advisor Stuart Skinner / Hugh Jonathan +44 (0) 20 7260 1000

Corporate Broker Charles Farquhar 

IOMA

Philip Scales +44 (0) 16 2468 1250

Cardew Group

Richard Spiegelberg / Georgina Hall +44 (0) 20 7930 0777

Biographies of the Directors

Profile of Investment Advisor

EPIC Private Equity LLP ("EPE" or the "Investment Advisor") was founded in June 2001 and is independently owned by its Partners. EPE focuses on niche investment opportunities throughout the UK with a focus on special situations, distressed, growth and buyout transactions.

Chairman's Statement

In the twelve months to January 2015, growth in the UK economy continued at an increasing pace. Real GDP in the UK increased by 2.6%, faster than most of the countries in the G7 (apart from the US and Canada) and marking the best performance since 2007. Despite the slowdown in the industrial and construction sectors in the last quarter, growth has been driven by a variety of sectors, in particular consumption of services, as well as the construction sector. Further positive signs of a full-scale recovery are found in the significant decrease in unemployment to 5.7% in the three months to December 2014 (7.2% 2013), and low levels of inflation, with CPI in January 2015 at 0.3%. Although low levels of inflation are inevitably reigniting deflation fears, and fears over oil prices remain, the Board are overall optimistic that economic conditions will continue to improve and yield a sustainable recovery. This is expected to provide favourable conditions for the EPE Special Opportunities plc ("ESO" or the "Company") investment portfolio in the coming year.

The 31 January 2015 Net Asset Value ("NAV") of 142.13 pence per share represents an increase of 5.0% on the NAV per share of 135.37 pence as at 31 January 2014. The share price as at 31 January 2015 for the Company was 114.00 pence, representing an increase of 31.0% on the share price of 87.00 pence as at 31 January 2014. The year proved satisfactory for the portfolio, most notably the Company's largest asset, Nexus Industries ("Nexus"). As in recent years, Nexus traded significantly ahead of budget during 2014, buoyed by accelerating sales of the new LED lighting range. It is expected to continue this strong performance in 2015, with the potential to supplement organic sales and EBITDA growth with acquisitions. Whittard of Chelsea, by contrast, underperformed in the 12 months to 31 December 2014, with its new premium positioning strategy taking longer than expected to deliver returns. Nevertheless, despite a disappointing first half, the business finished the year with strong like-for-like growth.

On 19 February 2014, the Company exited its investment in Bighead Holdings Limited ("Bighead") to management, generating a total return to ESO Investments 1 LP ("ESO 1 LP") of 3.6x Money Multiple and a 51.7% IRR - a 31.4% premium to Bighead's prevailing holding value.

A second disposal was completed with the sale of Indicia Group Limited ("Indicia") to Charterhouse Print Management Limited ("Charterhouse") on 24 December 2014, generating a total return to ESO 1 LP of 2.2x Money Multiple and a 24.6% IRR - a 42.4% premium to Indicia's prevailing holding value.

The Board and the Investment Advisor are currently investigating the possibility of raising additional funds for the Company by way of senior debt, mezzanine finance or bonds. Should the Company decide to raise funds by way of debt or debt-like instruments, it would anticipate that those instruments and any existing Convertible Loan Notes in aggregate would be more than 7.5x covered by the Gross Assets of the Company. Any new funds raised would be used, inter alia, to retire existing Convertible Loan Notes ("CLNs") in light of the December 2015 end date (extendable to December 2016 at the Company's option), buy-in minorities in the existing investments, and support new investments.

The Company did not complete any new acquisitions in the period. Improving economic conditions may however yield investment opportunities and the Company continues to actively source deals. I would like to extend my thanks to the Investment Advisor, EPE, as well as my fellow Directors and professional advisors, for their concerted efforts over the last twelve months. I look forward to once again updating you on continued success at the half-year point.

Geoffrey Vero

Chairman

17 March 2015

Investment Advisor's Report

In the twelve month period since 31 January 2014, the Investment Advisor has focused on maintaining and creating value from within the existing portfolios held by the Company. The Investment Advisor continues to undertake cost saving and revenue improvement measures in investee companies to increase the value of the current portfolio. At the same time, the Investment Advisor has endeavoured to find new opportunities by way of platform or bolt-on investment opportunities. All new investments will be made via ESO Investments 2 LP ("ESO 2 LP"), in which the Company is the sole investor.

Over the course of 2014, the UK economy grew at an increased rate compared to the prior year, benefitting the Company's portfolio. Inflation stood at 0.3% in January 2015 versus 1.9% in January 2014, and the unemployment rate fell to 5.7% in the three months to December, its lowest level for six years. The Investment Advisor will continue to monitor carefully the health of international markets as fears of deflation, particularly contagion from the Eurozone, and geopolitical turmoil remain key issues in 2015.

The underlying portfolio has performed satisfactorily since January 2014. Nexus finished the financial year to 31 December 2014 ahead of budget, driven by very strong performance in the UK trade and retail channels, bolstered by strong demand for the Luceco LED lighting range.

By contrast, Whittard of Chelsea finished the year behind budget in 2014, due to a disappointing first half and a shortfall in retail and international/wholesale sales, before reversing course and finishing the year with strong like-for-like growth. The business continues to show encouraging growth in web activities, both at the sales and gross margin level, compared to the previous year. Together, Nexus and Whittard represent 51.5% of the Company's Gross Asset Value ("GAV").

Process Components finished the year to 30 June 2014 behind an aggressive budget, but significantly ahead of 2013. Growth continues to be driven by investment in sales, marketing and product development.

Pharmacy2U finished the year to 31 March 2014 ahead of budget, with registration of new NHS practices for the NHS electronic prescription system significantly ahead of budget.

On 19 February 2014, the Company disposed of its investment in Bighead to management, generating a total return to ESO 1 LP of 3.6x Money Multiple and a 51.7% IRR. A second disposal was made on 24 December 2014, with the Company exiting its investment in Indicia to Charterhouse, generating a total return to ESO 1 LP of 2.2x Money Multiple and a 24.6% IRR. The disposal of Driver Require Limited to Chrysalis VCT PLC was completed on 20 January 2015, generating a total return to ESO 1 LP of 1.3x Money Multiple and a 7.0% IRR.

All three disposals have had a positive impact on the Company, with Bighead completed at a 31.4% premium to its prevailing holding value, Indicia completed at a 42.4% premium and Driver Require completed at a 168.6% premium. The recent exits above prevailing holding values provides continued validation of the Company's NAV approach. The exits follow the exit of Palatinate at a 31.4% premium to NAV, Pinnacle Regeneration Group at a 5.7% premium to NAV in June 2011, and the disposal of Ryness at a 40.3% premium to NAV in May 2011.

Company highlights

The NAV per share as at 31 January 2015 for the Company was 142.13 pence, calculated on the basis of 27.5 million ordinary shares (versus 30.0 million at issue), representing an increase of 5.0% on the NAV per share of 135.37 pence as at 31 January 2014. The share price as at 31 January 2015 for the Company was 114.00 pence, representing an increase of 31.0% on the share price of 87.00 pence as at 31 January 2014.

Based on the latest NAV, as set out above, Gross Asset Cover for the outstanding CLNs of £6.0 million is now 7.5x. Net cash now stands at £9.9 million with CLN interest coverage of 35.3x per annum. Overall cash in the Company is £14.0 million.

Third party net debt in the Company's portfolio stands at 1.4x EBITDA, whilst arithmetic average Net Debt to EBITDA across the portfolio is 0.7x. The portfolio remains conservatively valued with a weighted average Enterprise Value equating to an EBITDA multiple of 5.3x with 35.4% of the portfolio's GAV comprised of yielding loans (excludes one asset which represents 0.5% or £0.1 million of the GAV). By comparison, listed European Private Equity competitors' weighted average Enterprise Value to EBITDA multiple is 9.3x (sources: latest Report and Accounts for 3i, Better Capital, Dunedin Enterprise, Electra Private Equity, HgCapital Trust, Graphite and Oakley Capital Investments).

Investment highlights from the inception of the Company (16 September 2003) to date include:

· Deployed £66 million of capital;

· Returned over £67 million to the Company in capital and income;

· Generated gross income of £12 million and paid dividends of £5 million;

· The underlying private equity portfolio is valued at a gross 4.1x money multiple and 32.4% IRR.

* Selected Listed European PE Index constituents: 3i, Better Capital, Dunedin Enterprise, Electra Private Equity, HgCapital Trust, Graphite and Oakley Capital Investments. The Index has been constructed by weighting the daily share price of each constituent by its market capitalisation as at 31 January 2015.

Recent developments

· June 2013: sale of Palatinate at 2.4x Money Multiple and 43% IRR.

· July 2013: passed Continuation Vote to extend life of Company to December 2020, five year votes thereafter.

· January 2014: Mark Dunhill, former TM Lewin International Director, appointed new Whittard CEO.

· February 2014: sale of Bighead at 3.6x Money Multiple and 52% IRR.

· December 2014: disposal of Indicia at 2.2x Money Multiple and 24.6% IRR.

· January 2015: disposal of Driver Require at 1.3x Money Multiple and a 7.0% IRR.

Portfolio diversification

The current portfolio is diversified by sector and instrument as follows:

Current portfolio: ESO 1 LP

Nexus Industries

Nexus Industries ("Nexus") is a manufacturer and distributor of electrical accessories in the UK, operating under the brand names Masterplug and British General, supplying both the retail and wholesale markets. The development of the Luceco LED lighting ranges is a major focus for the business. The gathering momentum behind the lighting technology switch to LED provides Nexus with an opportunity to enter and build market share in the category at a point of disruptive transition as traditional solutions are superseded. Nexus is differentiated by its positioning as a Chinese manufacturer, where the Company has built a 250,000 square foot wholly-owned production facility in Jiaxing, with British product quality, brand and service standards supplying into a global market.

Whittard of Chelsea

Whittard of Chelsea ("Whittard") is a retailer of specialty tea, coffee and hot chocolate. Established in 1886, Whittard commands both strong brand recognition and customer loyalty in the UK and abroad. The main channel for the Company is the portfolio of 50 stores across the UK. These stores are positioned in prime locations on the high street, in tourist centres and outlets, with sales generated from both gifting and regular self-purchases. Other channels include the online, wholesale and franchise channels. The Investment Advisor has focussed on developing the Whittard of Chelsea brand towards a more premium stance, which should broaden its appeal both in the UK home market and abroad.

Pharmacy2U

Pharmacy2U ("P2U") is an online pharmacy business, delivering National Health Service and private prescriptions direct to the home using an innovative technology developed in conjunction with the NHS, the Electronic Prescription Service ("EPSr2"). In June 2012, Andy Hornby became Chairman of P2U, bringing with him a strong background in healthcare and of operating FTSE 100 companies via his experience at Alliance Boots. He is mandated to drive the sales and marketing effort necessary to capitalise on the potential growth offered by EPSr2 roll-out.

Current portfolio: ESO Investments (PC) LLP ("ESO (PC) LLP")

Process Components

Process Components ("PCL") is an engineering parts and equipment supplier to the powder processing industries, primarily food, agriculture and pharmaceuticals. Customers are blue chip global manufacturers, and the business has been growing its international supply operations.

Current portfolio: ESO 2 LP

No new investments were made in the period. The Company continues to explore opportunities to acquire high quality assets at attractive prices to further diversify the current portfolio.

Outlook

The Investment Advisor is focussed on consolidation with a view to preserving and creating value in its core investments, as well as on making new investments to increase portfolio diversification and generate attractive returns for shareholders. The Investment Advisor expects to achieve continued cost savings and revenue improvement measures in portfolio companies, especially those in manufacturing and consumer focussed sectors. New investment opportunities are being pursued as positive economic signs continue. All new investments will be made via ESO 2 LP, in which the Company is the sole investor.

Strategic Report

Objectives and opportunities

The Company is an investment company and has been quoted on the Alternative Investment Market ("AIM"). Its objective is to provide long-term return on equity for its shareholders by way of investment in a portfolio of private equity assets. The portfolio is likely to be concentrated, numbering between two and 10 assets at any one time.

Investment policy

The Investment Advisor believes that the current economic environment continues to create a wide range of investment opportunities in UK small and medium sized enterprises ("SMEs"). As a result, the Investment Advisor continues to use proprietary deal sourcing approaches to source these opportunities, as well as engaging actively with the wider restructuring and advisory community to communicate the Company's investment strategy. The Company seeks to target growth and buyout opportunities, as well as special situations and distressed transactions, making investments where it believes pricing to be attractive and the potential for value creation strong. The Company will continue to target the following types of investments:

· Growth, Buyout and Pre-IPO opportunities: leveraging the Investment Advisor's investment experience, contacts and ability. The Company is particularly focussed on making investments in sectors where the opportunity exists to create a unique asset via the consolidation of a number of smaller companies, taking advantage of the lack of liquidity in the SME market and the attraction to secondary buyers of larger operations.

· Special Situations: investment opportunities where the Investment Advisor believes that assets are undervalued due to specific, event-driven circumstances and where asset-backing may be available and the opportunity exists for recovery and significant upside. Target companies may or may not be distressed as a result of the situation. The Investment Advisor will aim to use its restructuring and refinancing expertise to resolve the situation and achieve a controlling position in the target company. The Company seeks to acquire distressed debt, undervalued equity or the assets of target businesses in solvent or insolvent situations.

· Private Investment in Public Equities (PIPEs): the Company may consider making investments in a number of smaller quoted companies, primarily ones whose shares are admitted to AIM. The Company will either seek to acquire and de-list the target company or make an investment in the ordinary equity of a quoted target company. The Company may offer ordinary shares in the Company as all or part of the consideration for such investments.

· Secondary portfolios / LP positions (Secondary or Primary) / EPE Funds: the Company is able, through EPE's Placement business, to invest as a limited partner in various Private Equity funds on substantially improved terms. On occasion, the Company will seek to take advantage of these commitments. The EPE skill-set and experience is well suited to the requirements of co-investing in funds.

The Company will consider most industry sectors, including consumer, retail, manufacturing, financial services, healthcare, support services and media industries. The Company partners with management and entrepreneurs to maximise value by combining financial and operational expertise in each investment.

The Company will seek to invest between £2 million and £10 million in a range of debt and equity instruments with a view to generating returns through both yield (c.5% to 15% per annum) and capital gain. Whilst in general the Company aims to take controlling equity positions, it may seek to develop companies as a minority investor.

Occasionally the Board may authorise investments of less than £2 million. For investments larger than £10 million, the Company may seek co-investment from third parties or additional public market fundraisings.

The Company looks to invest in businesses with strong fundamentals, including defensible competitive advantage, opportunity for strong future cashflow and dynamic management teams.

The Company aims to maintain a concentrated portfolio of between two and 10 assets.

The Investment Advisor

The Investment Advisor to the Company is EPE, which was founded in June 2001 and is an independent investment manager wholly owned by its Partners. Since 2001, EPE has made 45 investments. EPE manages the Company's investments in accordance with guidelines determined by the Directors and as specified in the Limited Partnership Agreement. EPE was appointed as the Investment Advisor in September 2003.

Current and future development

A detailed review of the year and outlook is contained in the Chairman's Statement and the Investment Advisor's Report.

The Board regularly reviews the development and strategic direction of the Company. The Board's main focus continues to be on the Company's long term investment return. It is believed that the Company has foundations in place to build a successful and durable investment vehicle given its supportive shareholder base, with EPE executives owning 26.5% of the Company (excluding awards made under the Joint Share Ownership Plan), and the provision of equity funding until at least December 2020, with five year extensions thereafter, via the passing of the Continuation Vote in July 2013.

The Board and the Investment Advisor are investigating the possibility of raising additional funds for the Company to be used, inter alia, to retire existing Convertible Loan Notes in light of the December 2015 end date (extendable to December 2016 at the Company's behest), buy-in minorities in the existing investments, investment behind key assets such as Nexus, Whittard, Process Components and Pharmacy2U and support new investments.

Performance

A detailed review of performance is contained in the Chairman's Statement and the Investment Advisor's Report. A number of key indicators are considered by the Board and the Investment Advisor in assessing the progress and performance of the Company. These are well established industry measures and are as follows:

· Return on equity over the long term

· Movement in NAV per ordinary share

· Movement in share price

· Realisation of assets above cost and above holding value at NAV

Further details of these key performance indicators can be found on the Investment Advisor's Report.

Risk management

All risks associated with the Company are the responsibility of the Board, which reviews and manages these either directly or through EPE. The main risks which the Company faces are as follows:

Macroeconomic risks

The performance of the Company's underlying portfolio of assets as well as the Company's ability to exit these assets is materially influenced by the macroeconomic conditions, including the current business environment and market conditions, the availability of debt finance, the level of interest rates, as well as the number of active buyers. Considerable effort continues to be taken by the Investment Advisor to position the portfolio companies to cope with the changing macroeconomic climate.

Share price volatility and liquidity

The market price of the shares could be subject to significant fluctuations due to a change in investor sentiment regarding the Company or the industry in which the Company operates or in response to specific facts and events, including positive or negative variations in the Company's interim or full year operating results and business developments of the Company and/or competitors. The market price of the shares may not reflect the underlying value of the Group and it is possible that the market price of the shares will trade at a discount to NAV.

The Board monitors share price to NAV per share discount, and considers the most effective methodologies to keep this at a minimum. These methodologies include a share buyback policy, with Directors continuing to seek shareholder authority on an annual basis to enable them to purchase shares for cancellation when they believe it will be in the best interests of shareholders. To date, this strategy has been used prudently and efficiently to improve shareholder returns, with the Company having retired par value CLNs and ordinary shares over the last five years equating to 12.4% of the capital base.

Long term strategic risks

The Company is subject to the risk that share price performance and long-term strategy fail to meet the expectations of its shareholders. The Board regularly reviews the Objective and Investment Policy in light of prevailing investor sentiment to ensure the Company remains attractive to its shareholders.

Investment risks

The Company operates in a competitive market. Changes in the number of market participants, the availability of investable assets, the pricing of investable assets, or in the ability of EPE to access and execute deals could have a significant effect on the Company's competitive position and on the sustainability of returns.

Adequate sourcing and execution of deals is primarily dependent on the ability of EPE to attract and retain key investment executives with the requisite skills and experience.

Adequate performance of portfolio assets once acquired is primarily dependent on macroeconomic conditions, conditions within each asset's market and the ability of the respective management teams of each asset to execute their business strategy. Any one of these factors could have an impact on the valuation of a portfolio company and upon the Company's ability to make a profitable exit from the investment within the desired timeframe.

The Company may at certain times hold a relatively concentrated investment portfolio of between two and 10 assets. The Company could be subject to significant losses if it, for example, holds a large position in a particular investment that declines in value. Such losses could have a material adverse effect on the performance of and returns achieved by the Company.

A rigorous process is put in place by EPE for managing the relationship with each portfolio company. This includes regular asset reviews, an assessment of concentration of the investment portfolio at any given period and board representation by one or more EPE executives. The Board reviews both the performance of EPE and its incentive arrangements on a regular basis to ensure that both are appropriate to the objectives of the Company.

Gearing risks

Gearing can cause both gains and losses in the asset value of the Company to be magnified. Gearing can also have serious operational impacts on the Company if a breach of its banking covenants occurs. Secondary risks relate to whether the cost of gearing is too high and whether the length of the gearing is appropriate. The Board regularly monitors the headroom available under banking covenants and reviews the impact of the various forms of gearing and their cost to the Company. The Company uses gearing directly via its CLNs and an overdraft facility at ESO 1 LP, and indirectly via gearing in individual portfolio assets.

Foreign exchange risk

The base currency of the Company is Sterling. Certain of the Company's assets may be invested in investee companies which may have operations in countries whose currency is not Sterling and securities and other investments which are denominated in other currencies. Accordingly, the Company will necessarily be subject to foreign exchange risks and the value of its assets may be affected unfavourably by fluctuations in currency rates.

Valuation risks and methodology

The Investment Advisor determines asset values using BVCA and IPEV guidelines and other valuation methods with reference to the valuation principles of IFRS 13: Fair Value Measurement. This determination is subject to many assumptions and requires considerable judgment. As all investments are unquoted, the valuation principles adopted are classified as Level 3 in the IFRS 7 fair value hierarchy. BVCA and IPEV guidelines recommend the use of comparable quoted company metrics and comparable transaction metrics to determine an appropriate enterprise value, to which a marketability discount is applied given the illiquid nature of private equity investments. The Investment Advisor also seeks to confirm value using discounted cash flow and other methods of valuation, and by applying a range approach. The Investment Advisor adopts a conservative approach to valuation with reference to the aforementioned methodology having regard for on-going volatile market conditions.

The Company announces an estimated net asset value per ordinary share on a monthly basis following a review of the valuation of the Company's investments.

Operational risks

The Company's investment management and administration are provided or arranged for the Company by EPE. The Company is therefore exposed to internal and external operational risks at EPE, including regulatory, legal, information technology, human resources and deficiencies in internal controls. The Company monitors the provision of services by EPE to ensure they meet the Company's business objectives.

Sources of funds

The Company considers a number of sources for funds. These include its own cash resources as well as third party funds. Own cash resources originate via income from ESO 1 LP and ESO (PC) LLP and capital from asset realisations and refinancings. The focus on utilising these cash resources allows the Company to minimise dilution from public market fundraisings and provides sufficient capital for small share buybacks and the execution of one to two new investment opportunities per annum.

The Company's own cash resources may be supplemented by additional third party funding. One route of third party funding includes the provision of co-investment capital alongside the Company in ESO 2 LP, either as private investment capital directly into ESO 2 LP or on a deal by deal basis. The Company may also seek opportunistic public market fundraisings, in particular when considering transformational investment opportunities such as the acquisition of the EPIC plc private equity portfolio in 2010. Alternatively, third party debt funding may be sourced, comprising zero dividend preference shares, preference shares, senior and mezzanine debt, such as the £10 million of CLNs raised in 2010 to part-fund the EPIC plc portfolio acquisition.

Board Composition and Succession Plan

Objectives of Plan

· To ensure that the Board is composed of persons who collectively are fit and proper to direct the Company's business with prudence, integrity and professional skills.

· To define the Board Composition and Succession Plan (the "Plan"), which guides the size, shape and constitution of the Board and the identification of suitable candidates for appointment to the Board.

The Plan will be reviewed by the Board annually and at such other times as circumstances may require (e.g. a major corporate development or an unexpected resignation from the Board). The Plan may be amended or varied in relation to individual circumstances at the Board's discretion.

Methodology

The Board is conscious of the need to ensure that proper processes are in place to deal with succession issues and the Board uses a skills matrix to assist in the selection process.

The matrix includes the following elements: finance, accounting and operations; familiarity with the broader concepts of private equity investment, diversity (gender, residency, cultural background); Shareholder perspectives; investment management; multijurisdictional compliance and risk management. In adopting the matrix, the Board acknowledges that it is an iterative document and will be reviewed and revised periodically to meet the Company's on-going needs.

Directors may be appointed by the Board, in which case they are required to seek election at the first AGM following their appointment. In making an appointment the Board shall have regard to the Board skills matrix.

A Director's formal letter of appointment sets out, amongst other things, the following requirements:

· Bringing independent judgment to bear on issues of strategy, performance, resources, key appointments and standards of conduct and the importance of remaining free from any business or other relationship that could materially interfere with independent judgement;

· Having an understanding of the Company's affairs and its position in the industry in which it operates;

· Keeping abreast of and complying with the legislative and broader responsibilities of a Director of a company whose shares are traded on the London Stock Exchange;

· Allocating sufficient time to meet the requirements of the role, including preparation for Board meetings; and

· Disclosing to the Board as soon as possible any potential conflicts of interest.

Geoffrey Vero

Chairman

17 March 2015

Risk and Audit Committee Report

The Risk and Audit Committee is chaired by Clive Spears and comprises all other Directors, all of whom are deemed independent.

The Risk and Audit Committee's main duties are:

· To review and monitor the integrity of the interim and annual financial statements, interim statements, announcements and matters relating to accounting policy, laws and regulations of the Company;

· To evaluate the risks to the quality and effectiveness of the financial reporting process;

· To review the effectiveness of the internal control systems and the risk management policies and procedures of the Company;

· To review the valuation of portfolio investments;

· To review corporate governance compliance;

· To review the nature and scope of the work to be performed by the Auditors, and their independence and objectivity; and

· To make recommendations to the Board as to the appointment and remuneration of the external auditors.

The Risk and Audit Committee has a calendar which sets out its work programme for the year to ensure it covers all areas within its remit appropriately. It met four times during the period under review to carry out its responsibilities and senior representatives of the Investment Advisor attended the meetings as required by the Risk and Audit Committee. In between meetings, the Risk and Audit Committee chairman maintains ongoing dialogue with the Investment Advisor and the lead audit partner.

During the year the Risk and Audit Committee carried out a review of its terms of reference and its own effectiveness. It concluded that the changes were working well and that the Risk and Audit Committee is satisfactorily fulfilling its terms of reference and is operating effectively.

Significant accounting matters

The significant issue considered by the Risk and Audit Committee during the year in relation to the financial statements of the Company is the valuation of unquoted investments.

The Company's accounting policy for valuing unquoted investments is set out in note 11. The Risk and Audit Committee examined and challenged the valuations prepared by the Investment Advisor, taking into account the latest available information on the Company's investments and the Investment Advisor's knowledge of the underlying portfolio companies through their ongoing monitoring. The Risk and Audit Committee satisfied itself that the valuation of investments had been carried out consistently with prior accounting periods, or that any change in valuation basis was appropriate, and was conducted in accordance with published industry guidelines.

The Auditors explained the results of their review of the procedures undertaken by the Manager for the valuation. On the basis of their audit work, no material adjustments were identified by the auditor.

External audit

The Risk and Audit Committee reviewed the audit plan and fees presented by the Auditors, KPMG Audit LLC ("KPMG"), and considered their report on the financial statements. The fee for the audit of the annual report and financial statements of the Company for the period ended 31 January 2015 is £26,200 (2014: £25,200).

The Risk and Audit Committee reviews the scope and nature of all proposed non-audit services before engagement, with a view to ensuring that none of these services have the potential to impair or appear to impair the independence of their audit role. The committee receives an annual assurance from the Auditors that their independence is not compromised by the provision of such services, if applicable. During the period under review, the Auditors did not provide any non-audit services to the Company.

The Auditors have provided details of other relationships they have with the Investment Advisor and confirmed to the Board that in its opinion it is independent of the Investment Advisor. The Risk and Audit Committee has considered the independence and objectivity of the Auditors, and is satisfied that the Auditors remain independent and continue to fulfil their obligations to the Company and its shareholders.

KPMG were appointed as Auditors to the Company for the year ending 31 January 2005 audit. The Risk and Audit Committee will regularly consider the need to put the audit out to tender, the Auditors' fees and independence, alongside matters raised during each audit. The appointment of KPMG has not been put out to tender as the committee, from ongoing direct observation and indirect enquiry of the Investment Advisor, remain satisfied that KPMG continue to provide a high quality audit and effective independent challenge in carrying out their responsibilities. The Company adheres to a five year roll over in relation to the Auditor partner.

Having considered these matters and the effectiveness of the external auditor, the Risk and Audit Committee has recommended to the Board that KPMG be appointed as Auditors for the forthcoming year.

Risk management and internal control

The Company does not have an internal audit function. The Risk and Audit Committee believes this is appropriate as all of the Company's management functions are delegated to the Investment Advisor which has its own internal control and risk monitoring arrangements. A report on these arrangements is prepared by the Investment Advisor and submitted to the Risk and Audit Committee which it reviews on behalf of the Board to support the Directors' responsibility for overall internal control. The Company does not have a whistleblowing policy and procedure in place. The Company delegates this function to the Investment Advisor who is regulated by the FCA and has such policies in place. The Risk and Audit Committee has been informed by the Investment Advisor that these policies meet the industry standards and no whistleblowing took place during the year.

Clive Spears

Chairman of the Risk and Audit Committee

17 March 2015

Report of the Directors

Principal activity

The Company was incorporated in the Isle of Man as an AIM listed public company limited by shares under the Laws with registered number 108834C on 25 July 2003. On 23 July 2012, the Company re-registered under the Isle of Man Companies Act 2006, with registration number 008597V.

The principal activity of the Company and its subsidiaries (together "the Group") and its associates is to arrange income yielding financing for growth, buyout and special situations and holding the investments with a view to exiting in due course at a profit.

Incorporation

The Company was incorporated on 25 July 2003. The Company's registered office is:

IOMA House, Hope Street, Douglas, Isle of Man, IM1 1AP, British Isles.

Details of subsidiaries are provided in note 23.

Results of the financial year

Results for the year are set out in the Consolidated Statements of Comprehensive Income and in the Consolidated Statement of Changes in Equity.

Dividends

The Board does not recommend a dividend in relation to the current year (see note 9 for further details).

Corporate governance principles

As an Isle of Man registered company and under the AIM rules for companies, the Company is not required to comply with the UK Corporate Governance Code published by the Financial Reporting Council ("Code"). The Directors, however, place a high degree of importance on ensuring that the Company maintains high standards of Corporate Governance and have therefore adopted the spirit of the Code to the extent that they consider appropriate, taking into account the size of the Company and nature of its operations. This includes a periodic internal evaluation of board performance.

The Board holds at least four meetings annually and has established audit and investment committees. The Board does not intend to establish remuneration and nomination committees given the current composition of the Board and the nature of the Company's operations. The Board reviews annually the remuneration of the Directors and agrees on the level of Directors' fees.

Composition of the Board

The Board currently comprises four non-executive members, all of whom are independent non-executive Directors. Geoffrey Vero is Chairman of the Company, Clive Spears is Chairman of the Risk and Audit Committee and Nicholas Wilson is Chairman of the Investment Committee.

Risk and Audit Committee

The activities of the Risk and Audit Committee continued, members of which are Clive Spears (Chairman of the Committee) and all the other Directors. The Risk and Audit Committee provides a forum through which the Company's external auditors report to the Board.

The Risk and Audit Committee meets twice a year, at a minimum, and is responsible for considering the appointment and fee of the external auditors and for agreeing the scope of the audit and reviewing its findings. It is responsible for monitoring compliance with accounting and legal requirements, ensuring that an effective system of internal controls in maintained and for reviewing annual and interim financial statements of the Company before their submission for approval by the Board. The Risk and Audit Committee has adopted and complied with the extended terms of reference implemented on the Company's readmission in August 2010.

The Board is satisfied that the Risk and Audit Committee contains members with sufficient recent and relevant financial experience.

Investment Committee

The Board established an Investment Committee, which comprises Nicholas Wilson (Chairman of the Committee) and all the other Directors. The purpose of this committee is to review the portfolio of the Company and evaluate the performance of the Investment Advisor.

The Board is satisfied that the Investment Committee contains members with sufficient recent and relevant financial experience.

Significant holdings

Significant shareholdings are analysed on the section titled schedule of shareholders holding over 3% of issued shares. The Directors are not aware of any other holdings greater than 3% of issued shares.

Directors

The Directors of the Company holding office during the financial year and to date are:

Mr. G.O. Vero (Chairman)

Mr. R.B.M. Quayle

Mr. C.L. Spears

Mr. N.V. Wilson

Secretary

The secretary of the Company holding office for the financial year ended 31 January 2015 was Mr. P.P. Scales.

Staff

At 31 January 2015 the Group employed no staff (2014: none).

Auditors

Our Auditors, KPMG Audit LLC, being eligible, have expressed their willingness to continue in office.

On behalf of the Board

Nicholas Wilson

Director

17 March 2015

Statement of Directors' Responsibilities in respect of the Directors' Report and the Financial Statements

The Directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations. In addition, the Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards ("IFRSs"), as adopted by the European Union ("EU").

The financial statements are required to give a true and fair view of the state of affairs of the Group and of the profit or loss of the Company for that year.

In preparing these financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates that are reasonable and prudent;

· state whether they have been prepared in accordance with International Financial Reporting Standards, as adopted by the EU; and

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Parent Company's transactions and disclose with reasonable accuracy at any time its financial position. 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.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation governing the preparation and dissemination of financial statements may differ from one jurisdiction to another.

Report of the Independent Auditors, KPMG Audit LLC, to members of EPE Special Opportunities plc

We have audited the financial statements of EPE Special Opportunities plc for the year ended 31 January 2015 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statements of Assets and Liabilities, the Consolidated Statements of Changes in Equity, the Consolidated Statement of Cash Flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs), as adopted by the EU.

This report is made solely to the Company's members, as a body. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and Auditor

As explained more fully in the Directors' Responsibilities Statement, the Directors are responsible for the preparation of financial statements that give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements.

Opinion on the financial statements

In our opinion the financial statements:

· give a true and fair view of the state of the Group's affairs as at 31 January 2015 and of the Group's profit for the year then ended; and

· have been properly prepared in accordance with IFRSs, as adopted by the EU.

KPMG Audit LLC

Heritage Court,

41 Athol Street,

Douglas,

Isle of Man, IM99 1HN

17 March 2015

Consolidated Statement of Comprehensive Income

For the year ended 31 January 2015

The total column of this statement represents the Group Statement of Comprehensive Income, prepared in accordance with IFRSs. The Supplementary revenue and capital return columns are prepared in accordance with the Board of Directors' agreed principles. All items derive from continuing activities.

Consolidated Statement of Assets and Liabilities

At 31 January 2015

The financial statements were approved by the Board of Directors on 17 March 2015 and signed on its behalf by:

Clive Spears Nicholas Wilson

Director Director

Consolidated Statement of Changes in Equity

For the year ended 31 January 2015

Consolidated Statement of Cash Flows

For the year ended 31 January 2015

Notes to the Financial Statements

For the year ended 31 January 2015

1 Operations

The Company was incorporated in the Isle of Man as an AIM listed public company limited by shares under the Laws with registered number 108834C on 25 July 2003. On 23 July 2012, the Company re-registered under the Isle of Man Companies Act 2006, with registration number 008597V. The Company raised £30 million by a placing of ordinary shares at 100 pence per share. In 2009 the Company raised an additional £5 million by a placing of ordinary shares at 5 pence per share. During the year ended 31 January 2011, the Company issued a further £2.4 million in share capital.

The Company has four wholly owned subsidiary companies (note 23) and has interests in two partnerships that are accounted for as associates. The partnerships comprise one limited liability partnership and one limited partnership. The Company also has an interest in a third partnership, ESO 2 LP, through which new investments will be made. As at 31 January 2015, ESO 2 LP had made no investments.

The principal activity of the Group and its associates is to arrange income yielding financing for growth, buyout and special situations and holding the investments and its associates with a view to exiting in due course at a profit.

The consolidated financial statements comprise the results of the Group and its associates (see notes 3(a) and 23).

The Company has no employees.

2 Basis of preparation

a. Statement of compliance

The financial statements have been prepared in accordance with International Financial Reporting Standards and interpretations as adopted by the EU and applicable legal and regulatory requirements of Isle of Man law and reflect the following policies, which have been adopted and applied consistently, with the exception of the adoption of the following new standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application of 1 February 2014:

a. Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32.

The adoption of the above new standard has had no significant impact on the Groups measurement of its assets and liabilities, and no impact on the disclosures included in the financial statements.

In the prior year, the Group adopted IFRS13: Fair Value Measurement, which resulted in additional disclosures being included in the financial statements.

b. Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except for financial instruments at fair value through profit or loss which are measured at fair value.

c. Functional and presentation currency

These consolidated financial statements are presented in Sterling, which is the Company's functional currency. All financial information presented in Sterling has been rounded to the nearest pound.

d. Use of estimates and judgements

The preparation of financial statements in conformity with IFRSs requires Directors and the Investment Advisor to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expense. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. The Directors have, to the best of their ability, provided as true and fair a view as is possible. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements made by Directors and the Investment Advisor in the application of IFRSs that have a significant effect on the financial statements and estimates with a significant risk of material adjustments in the next year relate to impairment provisioning in connection with secured loans and valuations of unquoted equity investments held by equity accounted investees.

3 Significant accounting policies

a. Basis of consolidation

Subsidiaries

Subsidiaries are those enterprises controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

The Company holds interests in ESO 1 LP and ESO (PC) LLP, which are managed and controlled by EPE for the benefit of the Company and the other members. The Company has the power to appoint members to the investment committee of ESO 1 LP and ESO (PC) LLP but does not have the ability to direct the activities of ESO 1 LP and ESO (PC) LLP. The Directors consider that ESO 1 LP and ESO (PC) LLP do not meet the definition of subsidiaries. These entities are instead treated as associates and equity accounted.

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Associates

Associates are those enterprises over which the Company has significant influence, and which are neither subsidiaries nor an interest in a joint venture. Significant influence is exerted when the Company has the power to participate in the financial and operating policy decision of the investee, but is not in control or joint control over those policies.

The Company applies the equity method in accounting for associates. The investment is initially measured at cost and the carrying amount is increased or decreased to recognise the Company's share of the associate's profit or loss. Accounting policies of associates are aligned with those of the Group.

b. Segmental reporting

The Directors are of the opinion that the Group is engaged in a single segment of business and geographic area being arranging financing for growth, buyout and special situations in the United Kingdom. Information presented to the Board of Directors for the purpose of decision making is based on this single segment.

c. Income

Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is accounted for when the right to receive such income is established.

d. Expenses

All expenses are accounted for on an accruals basis.

e. Cash and cash equivalents

Cash comprises current deposits with banks. Cash equivalents are short-term highly liquid investments that are readily convertible to known amounts of cash, are subject to an insignificant risk of changes in value and are held for the purposes of meeting short-term cash commitments rather than for investments or other purposes.

f. Financial assets and financial liabilities

i. Classification

Equity and preference share investments, including those held by equity accounted investees, have been designated at fair value through profit and loss.

Financial assets that are designated as loans and receivables comprise loans and accrued interest and other receivables.

ii. Recognition

The Group recognises financial assets and financial liabilities on the date it becomes a party to the contractual provisions of the instrument.

iii. Measurement

Equity and preference share investments, including those held by equity accounted investees, are stated at fair value. Loans and receivables are stated at amortised cost less any impairment losses.

The Investment Advisor determines asset values using BVCA and IPEV guidelines and other valuation methods with reference to the valuation principles of IFRS 13. As all investments are unquoted, the valuation principles adopted are classified as Level 3 in the IFRS 7 fair value hierarchy. BVCA and IPEV guidelines recommend the use of comparable quoted company metrics and comparable transaction metrics to determine an appropriate enterprise value, to which a marketability discount is applied given the illiquid nature of private equity investments. The Investment Advisor also seeks to confirm value using discounted cash flow and other methods of valuation, and by applying a range approach. The Investment Advisor then seeks to determine whether holding the investment at cost is appropriate given the implied value, or whether an adjustment should be made to achieve fair value: whether this be in the form of an impairment or a write-up.

'Fair value' is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantages market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk.

When available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as 'active' if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The Group measures instruments quoted in an active market at mid-price.

If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

The Group recognises transfers between levels of the fair value hierarchy as at the end of the reporting period during which the change has occurred.

The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment. Financial assets that are not carried at fair value though profit and loss are subject to an impairment test. For loans to portfolio companies the impairment test is undertaken as part of the assessment of the fair value of the enterprise value of the related business, as described above. If expected life cannot be determined reliably, then the contractual life is used.

iv. Impairment

Financial assets that are stated at cost or amortised cost are reviewed at each reporting date to determine whether there is objective evidence of impairment. If any such indication exists, an impairment loss is recognised in the profit or loss as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate.

If in a subsequent period the amount of an impairment loss recognised on a financial asset carried at amortised cost decreases, and the decrease can be linked objectively to an event occurring after the write-down, the write-down is reversed through the profit or loss.

v. Derecognition

The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition in accordance with IAS 39.

The Company uses the weighted average method to determine realised gains and losses on derecognition.

A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled or expired.

g. Share capital

Ordinary share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.

Repurchase of share capital (treasury shares)

When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented as a deduction from total equity. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to/from retained earnings.

h. Compound financial instruments

Compound financial instruments issued by the Group comprise convertible loan note instruments that can be converted to share capital at the option of the holder, and the number of shares to be issued does not vary with changes in their fair value.

The liability component of a compound financial instrument is recognised initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognised initially at the difference between fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition.

When convertible loan notes are repurchased, the nominal value of the convertible loan notes repurchased is first deducted from the consideration paid with any gain or loss from the repurchase being recognised in the profit or loss.

Interest, dividends, losses and gains in relation to the financial liability are recognised in profit or loss. Distributions to the equity holders are recognised in equity net of any tax benefits.

i. EPIC Private Equity Employee Benefit Trust ("EBT")

As the Company is deemed to have control of its EBT, the EBT is treated as a subsidiary and consolidated for the purposes of the Group accounts. The EBT's assets (other than investments in the Company's shares), liabilities, income and expenses are included on a line-by-line basis in the Group financial statements. The EBT's investment in the Company's shares is deducted from shareholders' funds in the Group balance sheet as if they were treasury shares (see note 7).

Share based payments

Certain employees (including Directors) of the Group receive remuneration in the form of equity settled share-based payment transactions, through a Joint Share Ownership Plan ("JSOP").

Equity-settled share-based payments are measured at fair value at the date of grant. The fair value is determined based on the share price of the equity instrument at the grant date. The fair value determined at the grant date of the equity-settled share-based payment is expensed on a straight-line basis over the vesting period, based on the Group's estimate of the number of shares that will eventually vest. The instruments are subject to a three year service vesting condition from the grant date, and their fair value is recognised as an employee benefit expense with a corresponding increase in retained earnings within equity over the vesting period.

Contributions received from employees as part of the JSOP arrangement are recognised directly in equity.

j. Future changes in accounting policies

The International Accounting Standards Board ("IASB") and the International Financial Reporting Interpretations Committee ("IFRIC") have issued the following standards and interpretations with an effective date after the date of these financial statements:

The Directors do not expect the adoption of the standards and interpretations to have a material impact on the Group's financial statements in the period of initial application.

4 Interest income

5 Investment advisory, administration and performance fees

Investment advisory fees

ESO

The investment advisory fee payable to EPE was, until 31 August 2010, calculated at 2% of the Group's NAV, with a minimum of £325,000 payable per annum. On 31 August 2010, the Investment Advisor agreed to waive the fee from the Company for a period of two years in return for a priority profit share paid from ESO 1 LP, as detailed below. Consequently, the payment of fees has resumed at a rate of 2% per annum of the Company's NAV (including its share of the Fund) plus VAT. The charge for the current year was £693,244 (2014: £594,952).

ESO 1 LP

On the completion of the creation of ESO 1 LP on 31 August 2010, the Investment Advisor agreed to waive entitlement to management fees from the Company and ESO Investments LLP in exchange for a fixed priority profit share paid by ESO 1 LP of £800,000 per annum for the first two years (a year being calculated as ending on 31 August), £500,000 for the third year and £350,000 for the fourth and fifth years, thereafter in any subsequent period of the ESO 1 LP Partnership, such amount as may be agreed between the Partners.

ESO Investments LLP 

On 31 August 2010 the Investment Advisor agreed to waive the fee from ESO Investments LLP in return for a priority profit share paid from ESO 1 LP as detailed above.

Administration fees

On 30 November 2007 the Group entered into an agreement with IOMA Fund and Investment Management Limited ("IOMA"), for the provision of administration, registration and secretarial services. IOMA delegated the provision of accounting services to EHM International Limited. The fee is payable at a rate of 0.15% per annum of the Group's NAV.

Performance fees

ESO

The Investment Advisory Agreement with EPE as described above also provides for the provision of a performance fee. The fee is payable if the Total Return (taken as NAV plus dividends distributed) is equal to at least 8% per annum from the date of admission of the Company's shares to AIM, based on the funds raised through the placing of shares and compounded annually. No performance fee has accrued for the year ended 31 January 2015 (2014: £nil).

Carried interest in ESO 1 LP

The distribution policy of ESO 1 LP includes a carried interest portion retained for the Investment Advisor such that, for each investor where a hurdle of 8% per annum has been achieved, the carry vehicle of the Investment Advisor is entitled to receive 20% of the increase in that investor's investment. For the period ended 31 January 2015, £793,966 (2014: £3,219,522) has been credited to the carry account of the Investment Advisor in the records of ESO 1 LP.

Carried interest in ESO (PC) LLP

The Investment Advisor is entitled to receive 20% of the profits ESO (PC) LLP where a hurdle of 8% has been achieved over the initial value of the investment. For the period ended 31 January 2015, £251,254 (2014: £163,084) has been credited to the Investment Advisor.

6 Directors' fees

7 Share based payment expense

The cost of equity settled transactions with employees is measured by reference to the fair value at the date on which they are granted. The fair value is determined based on the share price of the equity instrument at the grant date.

The EBT was created to award shares to eligible employees as part of the JSOP. Participants are awarded a certain number of shares ("Matching Shares") which vest after three years. In order to receive their Matching Share allocation participants are required to purchase shares in the Company on the open market ("Bought Shares"). The participant will then be entitled to acquire a joint ownership interest in the Matching Shares for the payment of a nominal amount, on the basis of one joint ownership interest in one Matching Share for every Bought Share they acquire in the relevant award period.

The EBT holds the Matching Shares jointly with the participant until the award vests.

During the year, 250,001 Bought Shares were acquired by eligible participants under the JSOP. The EBT held 1,191,280 matching shares at the year end.

The amount expensed in the income statement has been calculated by reference to the grant date fair value of the equity instrument and the estimated number of equity instruments to be issued after the vesting period, less the nominal amount paid for the joint ownership interest in the Matching Shares. The total expense recognised on the share based payments during the year amounts to £197,631 (2014: £145,520).

8 Taxation

The Company is a tax resident of the Isle of Man. The Company is subject to 0% income tax (2014: 0%).

The Limited Liability Partnerships and Limited Partnerships are transparent for tax purposes.

9 Dividends paid and proposed

No dividends were paid or proposed for the year ended 31 January 2015 (2014: £nil).

10 Non-current assets

Investment in equity accounted investees

The Investment Advisor has applied appropriate valuation methods with reference to BVCA and IPEV guidelines and the valuation principles of IAS 39 Financial Instruments: Recognition and Measurement, with regard to the underlying investments held by the equity accounted investees. See note 11 regarding the assessment of the fair values of the underlying investments.

Investments in equity accounted investees comprise the investment in ESO 1 LP and ESO (PC) LLP (formerly ESO Investments 2 LLP) which are stated at cost plus the share of remaining profit and loss to date. The equity accounted investees have accounted for their equity investments at fair value.

During the year, the Company received £7,275,180 (2014: £5,140,000) from ESO 1 LP. The movements in the equity accounted investees during the year are as follows:

Summary financial information for equity accounted investees as at 31 January 2015 is as follows:

Summary financial information for equity accounted investees as at 31 January 2014 is as follows:

In total, ESO 1 LP has now distributed £31.6 million: £19.9 million to ESO plc and £11.7 million to ESD. At the current portfolio valuation the ESD minority interest equates to £9.0 million via the waterfall, which, together with £11.7 million of distributions received to date by ESD, equates to a £20.7 million total, or 2.1x money multiple.

To date ESD have received distributions representing a 1.2x realised money multiple. Further distributions will therefore continue to be apportioned between the limited partners in the ratio 63% ESO : 37% ESD. This will continue until ESO 1 LP has reached £43.9 million (£31.6 million currently) of distributions (representing £20.0 million of new distributions) and £15.0 million to ESD (1.5x money multiple), at which point the value will be apportioned 75% ESO : 25% ESD.

At the current portfolio valuation ESD has achieved the 2.0x investment hurdle. Further increases in the value of the portfolio will therefore continue to be apportioned between the limited partners in the ratio 82% ESO : 18% ESD.

Controlled investee companies

The Company has control over the following underlying investee companies but these companies have not been consolidated on the basis of the early adoption of the amendments to IFRS 10:

11 Financial assets and liabilities