Final Results

Edinburgh New Income Trust plc 16 July 2007 News Release 16 July 2007 EDINBURGH NEW INCOME TRUST PLC PRELIMINARY RESULTS FOR THE YEAR TO 31 MAY 2007 Edinburgh New Income Trust's investment objective is to provide ordinary shareholders with an attractive level of income, together with the potential for capital and income growth and its zero dividend preference shareholders with a pre-determined capital entitlement on 31 May 2011. • Fourth interim dividend of 3.0p per ordinary share payable on 24 August 2007, making a total dividend for the year of 6.6p, an increase of 10% • Net asset value rose by 30.1% on a total return basis For further information, please contact: Stewart Methven, Investment Manager, Edinburgh Fund Managers plc Tel: 0131 313 1000 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. CHAIRMAN'S STATEMENT Against a backdrop of supportive financial markets, I am pleased to be able to report another year of progress for the Company. The year to 31 May 2007 has been a good one for shareholders, with total assets less current liabilities rising to £48.7m and the net asset value per ordinary share to 154.1p, an increase in total return terms of 30.1%. Although the Trust does not have a benchmark, this compares favourably to the corresponding total return of 21.7% in the FTSE All-Share index. The ordinary share price rose from 107.25p to 138.5p, providing a total return of 36.7%. Dividends The Board is pleased to announce a fourth interim dividend of 3.0p which will be paid on 24 August 2007 to shareholders on the register on 27 July 2007. This brings the total dividend to 6.6p, the amount that was anticipated at the interim stage, and reflects an increase of 10% on the previous year. Dividend growth within the market has been strong, and as such our revenue return per ordinary share for the year to 31 May 2007 was 7.47p, enabling some further strengthening of our revenue reserves. Performance Despite some high profile market corrections, it has been a strong year for the UK equity market. This was set against a backdrop of rising interest rates, which led to a degree of rotation in terms of stockmarket leadership. This rise in interest rates did not dampen the degree of corporate activity witnessed in the market, however, and the fund benefited from a number of takeover approaches to companies held within the portfolio. Within the total NAV performance of 30.1%, it was pleasing to note that the total return on the equity portfolio was 24.8% compared to a return of 21.7% on the FTSE All-Share index. Against this rising net asset value, the ordinary share price increased by 36.7%. This represents a narrowing of the discount to NAV at which the ordinary shares trade, from 11.7% to 10.1%. The zero dividend preference (ZDP) share price rose to 116.5p, a premium of 3.7% over its underlying net asset value of 112.3p. As the total assets of the Trust have risen, this as had the effect of increasing the capital cover of the ZDPs from 1.91x at the end of May 2006 to 2.26x at the end of May 2007. Gearing The Trust has significant structural capital gearing through its zero dividend preference shares, and while this has benefited the Trust over the last year, a time of rising equity markets, the effect of gearing will be to exacerbate the downside in falling markets. At the end of May 2007, equity investments totalled £44.4m, which resulted in the ratio of total equity investments to shareholders' funds of 140.5%. Total potential gearing, which compares total assets to ordinary shareholders funds, was 153.9%, the difference between the two measures being the amount of cash held within the portfolio. While not currently an issue, the Board is conscious that gearing levels rise automatically in falling markets unless protective action is taken, and it has controls in place to ensure that gearing should never exceed 190%. Board It was with sadness that during the period we reported on the death of Frank Malcolm. Frank had been a director of the Trust since it was launched in May 2005 and before that of Edinburgh Income and Value Trust, and he contributed greatly with his understanding, experience and knowledge. We shall miss his clear and well reasoned contributions to our Board deliberations, always presented in his own inimitable style. Outlook The strength of the equity market over the past twelve months has been set against a backdrop of rising interest rates and rising bond yields, but it has only been more recently that these have featured in market thinking. So far, higher financing costs have not affected the level of corporate activity which we have seen, and which has been one of the supporting factors in past months. However, the Manager does expect that the monetary tightening now being seen, will moderate activity here and abroad and will constrain the rate of corporate profit and dividend growth. While equity market valuations do not appear stretched, and corporations generally remain soundly financed, the Managers have nevertheless increased cash levels as a precautionary measure. This should be seen in the context of the Trust remaining highly geared. We shall be monitoring this situation carefully. Annual General Meeting The Company's Annual General Meeting takes place at 40 Princes Street, Edinburgh on 25 September 2007, and I look forward to seeing as many of you there as possible. David Ritchie Chairman INCOME STATEMENT (audited) Year ended 31 May 2007 Revenue Capital Total £'000 £'000 £'000 Gains on investments 7,651 7,651 Income 1,862 1,862 Investment management fee (176) (176) (352) Administration expenses (154) (154) ________ ________ ________ Net return on ordinary activities before finance costs and taxation 1,532 7,475 9,007 Finance costs of ZDP Shareholders - (964) (964) ________ ________ ________ Net return on ordinary activities before and after taxation 1,532 6,511 8,043 ________ ________ ________ Return per Ordinary share (pence) 7.47 31.73 39.20 ________ ________ ________ ______________________________________________________________________________________ Period ended 31 May 2006 Revenue Capital Total £'000 £'000 £'000 Gains on investments - 4,930 4,930 Income 1,778 - 1,778 Investment management fee (149) (149) (298) Administration expenses (182) (18) (200) ________ ________ ________ Net return on ordinary activities before finance costs and taxation 1,447 4,763 6,210 Finance costs of ZDP Shareholders - (907) (907) ________ ________ ________ Net return on ordinary activities before and after taxation 1,447 3,856 5,303 ________ ________ ________ Return per Ordinary share (pence) 7.05 18.79 25.84 ________ ________ ________ The total column of this statement represents the profit and loss account of the Company. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the period. A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement. BALANCE SHEET (audited) As at As at 31 May 2007 31 May 2006 £'000 £'000 Non-current assets Investments at fair value through profit or loss 44,413 38,489 __________ __________ Current assets Debtors and prepayments 264 185 AAA Money Market funds 3,750 - Cash and short term deposits 364 2,532 __________ __________ 4,378 2,717 Creditors: amounts falling due within one year (132) (204) __________ __________ Net current assets 4,246 2,513 __________ __________ Total assets less current liabilities 48,659 41,002 Creditors: amounts falling due in more than one year (17,038) (16,074) __________ __________ Net assets 31,621 24,928 __________ __________ Share capital and reserves Called-up share capital 205 205 Special reserve 20,035 20,035 Capital reserve - realised 1,979 648 Capital reserve - unrealised 8,392 3,208 Revenue reserve 1,010 832 __________ __________ Ordinary Shareholders' Funds 31,621 24,928 __________ __________ Net asset value per Ordinary share (pence) 154.1 121.5 __________ __________ RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (audited) For the year ended 31 May 2007 Capital Capital Share Special reserve reserve Revenue capital reserve realised unrealised reserve Total £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 May 2006 205 20,035 648 3,208 832 24,928 Expenses of share issue - - 4 - - 4 Return on ordinary activities after - - 1,327 5,184 1,532 8,043 taxation Dividends paid - - - - (1,354) (1,354) _______ _______ _______ _______ _______ _______ Balance at 31 May 2007 205 20,035 1,979 8,392 1,010 31,621 _______ _______ _______ _______ _______ _______ For the period ended 31 May 2006 Share Capital Capital Share premium Special reserve reserve Revenue capital account reserve realised unrealised reserve Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 Issue of Ordinary shares 205 20,314 - - - - 20,519 Expenses of share issue - (279) - - - - (279) Cancellation of share premium account - (20,035) 20,035 - - - - Return on ordinary activities after - - - 648 3,208 1,447 5,303 taxation Dividends paid - - - - - (615) (615) _______ _______ _______ _______ _______ _______ _______ Balance at 31 May 2006 205 - 20,035 648 3,208 832 24,928 _______ _______ _______ _______ _______ _______ _______ CASHFLOW STATEMENT (audited) Year ended Period ended 31 May 2007 31 May 2006 £'000 £'000 £'000 £'000 Net cash inflow from operating activities 1,266 1,235 Financial investment Purchases of investments (8,170) (12,675) Sales of investments 9,840 6,974 ________ ________ Net cash inflow/(outflow) from financial investment 1,670 (5,701) Equity dividends paid (1,354) (615) ________ ________ Net cash inflow/(outflow) before financing 1,582 (5,081) Financing Share issue proceeds - 7,892 Share issue expenses - (279) ________ ________ Net cash inflow from financing - 7,613 Net cash outflow from management of liquid resources (3,750) ________ ________ (Decrease)/increase in cash (2,168) 2,532 ________ ________ Reconciliation of net cash flow to movements in net debt (Decrease)/increase in cash as above (2,168) 2,532 Net change in liquid resources 3,750 - Net change in debt due in more than one year (964) (16,074) ________ ________ Movement in net debt in the year 618 (13,542) Net debt as at 1 June (13,542) - ________ ________ Net debt at 31 May (12,924) (13,542) ________ ________ Notes: 1. Accounting policies (a) Basis of accounting The financial statements have been prepared on a going concern basis and in accordance with applicable UK Generally Accepted Accounting Practice ('UK GAAP') and with the Statement of Recommended Practice for ' Financial Statements of Investment Trust Companies' (December 2005). They have also been prepared on the assumption that approval as an investment trust will be granted. (b) Valuation of investments Investments have been designated upon initial recognition as fair value through the 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 time frame established by the market concerned, and are initially measured as fair value. Subsequent to initial recognition, investments are valued at fair value. For listed investments, this is deemed to be bid market prices or closing prices for SETS (London Stock Exchange's electronic trading service) stocks sourced from The London Stock Exchange. Gains and 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 reserve. (c) Income Income from investments, including taxes deducted at source, is included as a revenue item in the Income Statement (other than special dividends) by reference to the date on which the investment is quoted ex dividend. Special dividends are credited to capital or revenue in the Income Statement, according to the circumstances. Short term deposit interest is dealt with on an accruals basis. (d) Expenses All expenses are accounted for on an accruals basis. Expenses are charged through the revenue column of the Income Statement except as follows: - transaction costs incurred on the purchase and disposal of investments are recognised as a capital item in the Income Statement. - the Company charges 50% of investment management fees to capital, in accordance with the Board's expected long term return in the form of capital gains and income respectively from the investment portfolio of the Company. (e) Taxation Deferred tax 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 Financial Statements which are capable of reversal in one or more subsequent periods. Due 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. (f) Capital reserves Realised Gains or losses on investments realised in the year that have been recognised in the Income Statement are 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 realised capital reserve on disposal of the investment. Unrealised Increases and decreases in the fair value of investments are recognised in the Income Statement and are then transferred to the unrealised capital reserve. (g) Compound growth entitlement of the Zero Dividend Preference ('ZDP') Shares The increase in the annual compound growth entitlement of the ZDP shares is accrued on a daily basis as a finance cost through the capital column of the Income Statement and allocated to the capital reserve. 2. The fourth interim dividend of 3.0p per share will be paid on 24 August 2007 to shareholders on the register at the close of business on 27 July 2007. The ex-dividend date is 25 July 2007. 3. The income statement, balance sheet, reconciliation of movement in shareholders' funds and the cashflow statement set out above do not represent full financial statements in accordance with Section 240 of the Companies Act 1985 and are based on the financial statements for the year ended 31 May 2007. The statutory financial statements for 2007 are unqualified and will be delivered to the Registrar of Companies. 4. The Annual Report and Accounts will be posted to shareholders in July 2007 and copies will be available from the investment manager. For Edinburgh New Income Trust plc Edinburgh Fund Managers plc, Company Secretary END This information is provided by RNS The company news service from the London Stock Exchange

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