Final Results

Dunedin Income Growth Inv Tst PLC 17 March 2006 DUNEDIN INCOME GROWTH INVESTMENT TRUST PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JANUARY 2006 Highlights • NAV total return with debt at market value 18.4% compared to a total return for the FTSE All-Share Index of 24.0%. • £40m 11 1/2% debenture stock 2016 redeemed on 3 August 2005 • Total dividend to increase by 8.6% from last year to 8.20p per share • Revenue return per share increased by 18.4% to 9.20p - END - For further information, please contact:- Max Ward, Chairman Dunedin Income Growth Investment Trust PLC 0131 220 4167 Chou Chong, Investment Manager Aberdeen Asset Managers Limited 0207 463 6000 Chairman's Statement Year ended 31 January 2006 The year to 31 January 2006 has been an eventful one for our Company. Following the retirement of David Binnie, we have a new investment manager, Chou Chong; we have adopted a fresh investment strategy to release us from the tyranny of our benchmark; and we have changed both the extent and the nature of our gearing. Unfortunately, all this has happened in a year when our results have been disappointing: DIGIT's NAV total return for the year (with debt valued at market) was 18.4%, which is some way short of the notional total return of 24.0% attributable to the FTSE All-Share Index for the period. The principal reasons for the shortfall are covered in the Manager's Review, but the Board is committed to achieving an improvement in performance in the current year. Dividend We are delighted to recommend a final dividend of 5.40p per share to give a total dividend for the year of 8.20p, a rise of 8.6% on last year's 7.55p. For comparison, the rise in the Consumer Price Index, the most widely used measure of inflation, was 2.0% over the same period. Dividend growth across the market has been strong and our revenue return per share rose 18.4% from 7.8p to 9.2p. We have therefore been able to combine a substantial real increase in our dividend with a significant addition to our revenue reserve. A strong revenue reserve is the key to consistent real dividend growth - an important objective for us and one we have met every year since 1990. We should again draw your attention to the benefit to our earnings deriving from our policy of charging to capital 70% of the management fee and interest costs. The Board reviews this policy regularly and is satisfied that it remains appropriate. Investment Management We mentioned in last year's report our decision to encourage our Manager to pursue an investment policy that attached more importance to the investment attractions of individual companies and less importance to their weightings in the FTSE All-Share Index. Our Manager has now made substantial progress in the adoption of this policy and we look forward to seeing the benefits emerge in the months ahead. In keeping with contemporary governance practice, the Board has given careful consideration to the issue of whether Aberdeen Asset Managers Limited should be retained as the Company's Manager. Although performance has been disappointing in the year under review, the Board considers that the Manager's investment record over longer periods and their willingness to address recent disappointments merits their retention. In keeping with best industry practice, the Board has negotiated a phased reduction in the Manager's notice period from one year to six months. Debentures and Gearing We explained the decision to redeem our 11 1/2% debenture stock 2016 in our interim report. The benefits of this decision are evident in a simpler and more flexible balance sheet structure. When we decided, in the second half of our year, to reduce gearing we were able to do this by simply paying down the relevant part of the variable rate loan facility arranged with ING Bank as a partial replacement for the redeemed debenture. At 31 January 2006, our net borrowings amounted to 10.6% of shareholders' funds, which compares with a restated figure of 20.5% a year earlier. We continue to believe that our returns can be enhanced through the judicious use of gearing and the events of recent years have shown the importance of being prepared to change both the nature and extent of our gearing as market conditions change. Discount and Buybacks The discount to net asset value at which our shares trade narrowed slightly during the year from 12.7% (restated) to 11.5%. We have continued to buy back DIGIT's shares when we have been able to do this on terms that provide a tangible benefit to continuing shareholders. During the period we have bought in a total of 900,000 shares. Some of these were cancelled, but more recently we have begun to hold shares in treasury with a view to re-issuing them, at a future date and at a premium to our NAV, if market conditions permit. Whether the shares are cancelled or held in treasury, buying in shares at a discount increases the NAV per share and we shall continue to look for opportunities to do this. Marketing We continue to attach great importance to the marketing of DIGIT shares: we must be in a position to attract new shareholders if our shares are to trade at a fair valuation. Our Manager is in regular contact with financial advisors, investors and potential investors to ensure that they are properly apprised of the attractions of DIGIT shares. We also support the Association of Investment Trust Companies and their active campaigning to attract more retail investors to the industry. The Company's website, www.dunedinincomegrowth.co.uk, gives a great deal of information about DIGIT. It also gives details on how to invest in the shares of DIGIT in a low cost manner, either through regular savings or in a lump sum. People As mentioned above, Chou Chong, who is head of the Manager's Pan European equity team and has 12 years' experience with the firm, has succeeded David Binnie as DIGIT's investment manager. While welcoming Chou and looking forward to his contribution to DIGIT's future success, we should like to thank David for his efforts on behalf of the Company over the last five years, particularly in the difficult markets in the early years of the millennium, and to wish him a long and happy retirement. We also welcome Rory Macnamara as a new director and are already benefiting from his wide experience of the financial world. Robert Douglas Miller, who will be seventy this year, has decided not to stand for re-election. Robert has been a Director since 1989 and has made an enormous contribution to DIGIT over a long period. We thank him for this and wish him well in his retirement. Finally, after five years as chairman, I have decided to step down from the Board after this year's AGM. I am delighted to report that John Scott, who has been a director of the Company since 2001 and Chairman of the Audit Committee since 2004, has been chosen by the Nomination Committee to succeed me as chairman. Outlook The calendar year 2005 saw the UK stock market produce its best annual performance since 1999. Although economic conditions were not especially favourable - domestic demand was slowing and the rise in commodity prices created cost pressures - the corporate sector had a good year. Profits and dividends grew strongly and balance sheets remained very healthy, permitting many companies to buy back their own shares or to make cash acquisitions. The attractiveness of UK equity valuations in an international context was highlighted by a number of cash bids for UK companies from overseas acquirers, a trend that has continued in the early months of 2006. The prospect of further good growth in profits and dividends - albeit at a slower pace than in 2005 - and the continuing enthusiasm of foreign predators provides an encouraging background for UK equities. We should, however, remember that most asset markets have been buoyed over the last year by easy global monetary conditions and that these conditions are not indefinitely sustainable. A move to a more restrictive monetary environment could have uncomfortable implications for all asset markets. We shall be monitoring the situation carefully, but in the meantime we are reassured that our investment manager continues to find interesting opportunities at valuations he considers attractive. The Company's Annual General Meeting takes place in Dundee on 4 May 2006 and I look forward to seeing as many of you there as possible. Max Ward Chairman 16 March 2006 INCOME STATEMENT (AUDITED) Year ended 31 January 2006 Year ended 31 January 2005 (restated) Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Realised gains on investments - 32,278 32,278 - 9,806 9,806 Unrealised gains on investments - 24,835 24,835 - 39,756 39,756 Income 17,314 - 17,314 15,526 - 15,526 Investment management fee (513) (1,197) (1,710) (483) (1,127) (1,610) Administrative expenses (677) - (677) (608) - (608) _________ _________ _________ ________ ________ _________ Net return before finance costs and 16,124 55,916 72,040 14,435 48,435 62,870 taxation Finance costs (1,604) (26,821) (28,425) (2,092) (4,972) (7,064) _________ _________ _________ ________ ________ _________ Return on ordinary activities before 14,520 29,095 43,615 12,343 43,463 55,806 taxation Taxation - - - - - - _________ _________ _________ ________ ________ _________ Return on ordinary activities after 14,520 29,095 43,615 12,343 43,463 55,806 taxation _________ _________ _________ ________ ________ _________ Return per Ordinary share (pence): 9.20 18.43 27.63 7.77 27.38 35.15 _________ _________ _________ ________ ________ _________ The column of this statement headed 'Total' represents the profit and loss account of the Company. The Company had no recognised gains or losses other than those recognised in the income statement. The financial statements for the year to 31 January 2005 have been restated to reflect the changes to accounting practices as set out in the accompanying notes. All revenue and capital items in the above statement derive from continuing operations. BALANCE SHEET (AUDITED) As at As at 31 January 2006 31 January 2005 (restated) £'000 £'000 Fixed assets Investments at fair value through profit or loss 430,986 413,453 ____________ ____________ Current assets Debtors and prepayments 7,249 1,181 AAA Money Market funds 11,150 23,200 Cash and short term deposits 9,496 1,086 ____________ ____________ 27,895 25,467 ____________ ____________ Creditors: amounts falling due within one year Bank loan (25,000) - Other creditors (7,186) (671) ____________ ____________ (32,186) (671) ____________ ____________ Net current (liabilities)/assets (4,291) 24,796 ____________ ____________ Total assets less current liabilities 426,695 438,249 Creditors Amounts falling due after more than one year (28,428) (69,409) ____________ ____________ Net assets 398,267 368,840 ____________ ____________ Capital and reserves Called-up share capital 39,300 39,525 Share premium account 4,543 4,543 Capital redemption reserve 725 500 Capital reserve - realised 253,307 250,838 Capital reserve - unrealised 82,767 57,932 Revenue reserve 17,625 15,502 ____________ ____________ Equity Shareholders' funds 398,267 368,840 ____________ ____________ Net asset value per Ordinary share (pence): 253.24 233.17 ____________ ____________ DUNEDIN INCOME GROWTH INVESTMENT TRUST PLC RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (AUDITED) For the year ended 31 January 2006 Share Capital Capital Capital Share premium redemption reserve - reserve - Revenue capital account reserve realised unrealised reserve Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 January 2005 as 39,525 4,543 500 250,838 57,940 7,518 360,864 originally reported Restatements - - - - (8) 7,984 7,976 _______ _______ _______ _______ _______ _______ _______ Balance at 31 January 2005 as 39,525 4,543 500 250,838 57,932 15,502 368,840 restated Return on ordinary activities after - - - 4,260 24,835 14,520 43,615 taxation Dividends paid - - - - - (12,397) (12,397) Purchase of own shares (225) - 225 (1,791) - - (1,791) _______ _______ _______ _______ _______ _______ _______ Balance at 31 January 2006 39,300 4,543 725 253,307 82,767 17,625 398,267 _______ _______ _______ _______ _______ _______ _______ For the year ended 31 January 2005 Share Capital Capital Capital Share premium redemption reserve - reserve - Revenue capital account reserve realised unrealised reserve Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 January 2004 as 40,013 4,543 12 250,394 18,191 7,114 320,267 originally reported Restatements - - - - (15) 8,003 7,988 _______ _______ _______ _______ _______ _______ _______ Balance at 31 January 2004 as 40,013 4,543 12 250,394 18,176 15,117 328,255 restated Return on ordinary activities after - - - 3,707 39,756 12,343 55,806 taxation Dividends paid - - - - - (11,958) (11,958) Purchase of own shares (488) - 488 (3,263) - - (3,263) _______ _______ _______ _______ _______ _______ _______ Balance at 31 January 2005 39,525 4,543 500 250,838 57,932 15,502 368,840 (restated) CASH FLOW STATEMENT (AUDITED) Year ended Year ended 31 January 2006 31 January 2005 £'000 £'000 £'000 £'000 Net cash inflow from operating activities 14,825 13,193 Servicing of finance Interest paid (5,342) (6,965) Financial investment Purchases of investments (153,224) (45,346) Sales of investments 193,369 55,095 ________ ________ ________ ________ Net cash inflow from financial investment 40,145 9,749 Equity dividends paid (12,397) (11,958) ________ ________ ________ ________ Net cash inflow before use of liquid resources and financing 37,231 4,019 Net cash inflow from management of liquid resources 12,050 400 Financing Redemption/repurchase of Debenture Stock (64,080) (491) Purchase of own shares (1,791) (3,263) Drawdown of loan 25,000 - ________ ________ ________ ________ Net cash outflow from financing (40,871) (3,754) ________ ________ Increase in cash 8,410 665 ________ ________ NOTES 1. Accounting policies (a) Basis of accounting The financial statements have been prepared under the historical cost convention, as modified to include the revaluation of investments and in accordance with the applicable UK Accounting Standards and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' (issued in 2003 and revised in December 2005). They have also been prepared on the assumption that approval as an investment trust will continue to be granted. The financial statements and the net asset value per share figures have been prepared in accordance with UK Generally Accepted Accounting Principles (UK GAAP). The new Financial Reporting Standards, issued as part of the programme to converge UK GAAP with International Financial Reporting Standards (IFRS), were applicable for the accounting period ended 31 January 2006 and the financial statements for the twelve months ended 31 January 2005 have also been restated. The main change arising from these revisions to UK GAAP, in relation to the Company's financial statements, is that dividends to Shareholders declared after the balance sheet date are now shown in the period of payment rather than in the reporting period. Dividends were previously recognised in the statement of total return (now income statement). These are now dealt with as an appropriation of equity and are taken directly through equity in the reconciliation of movements in shareholders' funds. (b) Revenue, expenses and interest payable Income from equity investments (other than special dividends), including taxes deducted at source, is included in revenue by reference to the date on which the investment is quoted ex-dividend. Special dividends are credited to revenue or capital according to the circumstances. Foreign income is converted at the exchange rate applicable at the time of receipt. Interest receivable on short term deposits and expenses are accounted for on an accruals basis. Interest payable is calculated on an effective yield basis. Expenses are charged to capital when they are incurred in connection with the maintenance or enhancement of the value of investments. In this respect, the investment management fee and relevant finance costs are allocated between revenue and capital in line with the Board's expectation of returns from the Company's investments over the long term in the form of revenue and capital respectively. (c) Investments Investments have been designated upon initial recognition as 'fair value through profit or loss'. Investments are recognised and de-recognised at trade date where a purchase or sale is under a contract whose terms require delivery within the timeframe established by the market concerned, and are measured initially at fair value. Subsequent to initial recognition, investments are recognised at fair value through profit or loss. For listed investments, this is deemed to be bid market prices or closing prices for SETS stocks sourced from the London Stock Exchange. SETS is the London Stock Exchange electronic trading service covering most of the market including all FTSE 100 constituents and most liquid FTSE 250 constituents along with some other securities. Gains or losses arising from changes in fair value are included in net profit or loss for the period as a capital item in the income statement and are ultimately recognised in the unrealised capital reserve. (d) Dividends payable Interim and final dividends are recognised in the period in which they are paid. (e) Realised capital reserve Realised gains and losses on realisation of investments held at fair value are recognised in the income statement and are ultimately transferred to the realised capital reserve. In addition, any prior unrealised gains or losses on such investments are transferred from the unrealised capital reserve to the realised capital reserve on disposal of the investment. The capital element of the management fee along with the associated irrecoverable VAT and relevant finance costs are charged to this reserve. Any associated tax relief is credited to this reserve. (f) Unrealised capital reserve Increases and decreases in the valuation of investments held at fair value are recognised in the income statement and are ultimately transferred to the unrealised capital reserve. (g) Deferred taxation Deferred taxation is recognised in respect of all temporary differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more or a right to pay less tax in future have occurred at the balance sheet date measured on an undiscounted basis and based on enacted tax rates. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying temporary differences can be deducted. Temporary differences are differences arising between the Company's taxable profits and its results as stated in the accounts which are capable of reversal in one or more subsequent periods. Owing to the Company's status as an investment trust company, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments. 2. The Directors recommend that a final dividend of 5.40p per Ordinary share be paid, making a total of 8.20p for the year ended 31 January 2006 (2005 - 7.55p). The final dividend will be paid on 8 May 2006 to Shareholders on the register at 7 April 2006. The ex-dividend date is 5 April 2006. 3. The income statement, balance sheet, reconciliation of movements in shareholders' funds and the cashflow statement set out above do not represent full accounts in accordance with Section 240 of the Companies Act 1985. The financial information for the year ended 31 January 2005 has been extracted from the Annual Report and Accounts of the Company which have been filed with the Registrar of Companies and restated where required as a result of the implementation of the new Financial Reporting Standards. The auditors' report on those accounts as originally filed was unqualified. The statutory accounts for 2006 are unqualified and will be delivered to the Registrar of Companies following the Company's Annual General Meeting which will be held at Discovery Point, Dundee on Thursday 4 May 2006 at 12 noon. 4. The management fee includes irrecoverable VAT calculated at 17.5 per cent. 5. The Annual Report and Accounts will be posted to shareholders at the end of March 2006 and copies will be available from the registered office of the investment manager. Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise. Investors may not get back the amount they originally invested. This information is provided by RNS The company news service from the London Stock Exchange

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