The information contained in this announcement is restricted and is not for publication, release or distribution in the United States of America, any member state of the European Economic Area, Canada, Australia, Japan or the Republic of South Africa.

This announcement contains inside information.

5 September 2023

Literacy Capital plc ("Literacy" or the "Company")

Disclosure of information relating to the sale of Butternut Box,

which was initially announced on 29 August 2023

Transaction highlights

·    Sale of another of Literacy's largest assets at a substantial premium; 53.8% above carrying value

·    Literacy sells its entire interest in Butternut Box, receiving £21.8m in cash

·    £7.6m uplift to the asset's 31 March 2023 carrying value

·    The sale delivers a 10.2x return for shareholders, with no carried interest payable by Literacy

·    Cash proceeds will be used to repay Literacy's RCF and recycled into new investments

Portfolio update

Literacy is pleased to announce that Butternut Box, a business providing healthy, fresh dog food on a subscription to dog owners' homes, has finalised a funding round led by General Atlantic and L Catterton. This is to raise further equity to support the continued growth of the business, as well as facilitate the exit of earlier investors.

The transaction values Literacy's stake in Butternut Box at £21.8 million, a 53.8% premium to the most recent carrying value of £14.2 million. Literacy is selling its stake in Butternut Box in full as part of the transaction. As a result, it will receive £21.8 million in cash and have no residual interest in Butternut Box. Literacy's total and final return from this investment is 10.2x cost (IRR: approx. 54%).

On 31 March 2023 (the date of Literacy's most recent quarterly factsheet and NAV update at the time the transaction was agreed), Butternut Box was Literacy's fifth largest investment (equating to 5.1% of NAV).

Had Butternut Box been valued on 31 March 2023 in line with the valuation in this announcement, the Company's estimated net asset value per share would have been 12.7p per share, or 2.6%, higher at 480.0p (31 March 2023: 467.3p as announced on 27 April 2023).

Literacy intends to use the cash proceeds to fully repay the amounts drawn under its Revolving Credit Facility, before recycling these proceeds into new investments. This represents another highly profitable and successful investment for Literacy, demonstrating the growing maturity and interest from large institutional investors in Literacy's portfolio companies. It also shows the Investment Manager's ability to generate strong returns and commitment to actively manage the portfolio to recycle proceeds into new investments in the pipeline.

The growth of the business since Literacy first invested in January 2018, driven by the team's strong performance, has resulted in Butternut Box being another successful investment for Literacy, with this transaction marking a full exit for the fund. Following the transaction involving Kernel Global in March 2023, this is another example of the progress made by a portfolio company since Literacy's investment and the growing interest from larger third-party investors in the fund's assets. This transaction provides further comfort regarding the fund's carrying valuations, with the sale completing at a significant 53.8% premium to the previously reported carrying value. This follows the sale of Kernel in March, which delivered a 48.9% uplift.

As recently announced, the transaction exchanged in August with clearance required from the EU Commission to complete. Completion and the transfer of cash is expected by the end of October.

Richard Pindar, CEO of the Investment Manager and Director of Literacy Capital plc, commented:

"When we first met David and Kevin in 2017, Butternut Box was feeding several hundred dogs. Since then, the progress that the business has made as a result of the focus and calibre of the team, has been remarkable. Their commitment to delivering excellent customer service and products to dog owners, enabling dogs to live healthy and happy lives, has been unwavering.

"We are extremely proud of the heights the team has been able to reach since our investment five and a half years ago, with the business now arguably the leading dog food brand in Europe, and attracting capital from the largest and most respected, global institutional investors.

"The cash proceeds from this transaction will be used to pay down the fund's drawn debt and redeployed into new investments in our pipeline, where we hope to generate similarly strong returns for shareholders. As previously indicated, we expected cash inflows received by the Company in 2023 to be substantially higher than previous years and we anticipate this will continue for the rest of the year and into 2024."

Enquiries

For further information, please contact:

About Literacy Capital:

Literacy Capital (BOOK.L) is an investment trust that was launched in 2017 by Paul Pindar and Richard Pindar, before it listed on the London Stock Exchange's main market in June 2021. The Company focuses on opportunities to invest for the long-term in growing private UK businesses where a clear route to creating additional value can be seen. It also has a unique charitable objective to donate 0.9% of annual NAV to charities focused on improving literacy in UK children. £7.1 million has been donated or reserved for donation to charities since the trust's creation in 2017 up until 30 June 2023. For more information, please visit our website: www.literacycapital.com.

Website:

www.literacycapital.com

LEI: 2549006P3DFN5HLFGR54

A copy of this announcement will be available on the Company's website at www.literacycapital.com.