Interim Results

Dunedin Income Growth Inv Tst PLC 08 September 2005 DUNEDIN INCOME GROWTH INVESTMENT TRUST PLC INTERIM RESULTS FOR THE 6 MONTHS ENDED 31 JULY 2005 The objective of Dunedin Income Growth Investment Trust is to achieve growth of income and capital from a portfolio invested in the United Kingdom. Highlights • NAV total return with debt at market value 5.5% compared to a total return for the FTSE All-Share Index of 10.4%. • Interim dividend increased by 12.0% to 2.8p per share (2004 - 2.5p). Final dividend to be at least 5.1p (2005 - 5.05p). • £40m 111/2% debenture redeemed on 3 August 2005. • Rory Macnamara was appointed a director on 7 September 2005. For further information, please contact:- David Binnie / Stewart Methven Edinburgh Fund Managers plc 0131 313 1000 Chairman's Statement Stock markets enjoyed good gains in the six months to 31 July 2005, with the FTSE All-Share rising to its highest level for almost four years and producing a total return for the period of 10.4%. Our own equity portfolio also appreciated in value, but its performance fell disappointingly short of that of the index with a total return of 6.8%. Our NAV total return for the period was 5.5%, some 1% less than it would have been if the market value of our fixed interest debt had not increased. There was no single factor upon which our difficulties can be blamed, but stock selection has been more of a problem for us than sector allocation and the defensive bias within our portfolio has been unhelpful. Our managers are monitoring the situation carefully, but consider it too early to make radical changes within the portfolio given that most of the underperformance occurred in the single month of July. We are declaring an interim dividend of 2.8p, an increase of 12% from last year's 2.5p. Part of this increase aims to reduce the disparity between interim and final payments. We nevertheless expect to declare a final dividend of at least 5.1p. Economic and Market Background Economic growth has slowed since the turn of the year with the consumer sector exhibiting particular weakness. The slowdown led first to the anticipation and then to the reality of a cut in interest rates. Together with robust profits growth and strong dividend growth, this has provided an encouraging background to the market. The big story in all financial markets was the strength of commodity prices in general and the oil price in particular, which led to a strong performance from resource company shares. Mergers and takeovers have also been a prominent feature of the market and, together with share buybacks, have provided good technical support for share prices. Among the sectors left behind by the market were banks and retailers. The strength of bond markets was a further source of support for equity prices but caused an unhelpful increase in the value of our fixed rate debt. This was one of the factors that led us to re-examine the nature of our gearing. After careful consideration, we decided that the burden of our fixed rate debt had reached a level at which it was impairing our flexibility and leaving us uncomfortably vulnerable to any further fall in bond yields. We therefore set in motion the repayment of the bigger of our two debentures, which was accomplished in the early days of August. We have maintained the effective level of our gearing at 15.8% by taking out a flexible bank loan as a partial replacement for the redeemed debenture. Investment Strategy During the period we have been moving towards a method of portfolio construction that attaches greater weight to the attractions of individual companies than to the weightings of their shares in the FTSE All-Share Index. This has involved reducing our exposure to such large index constituents as BP, HSBC and Vodafone in favour of somewhat smaller companies with prospects our managers consider more exciting. We have also rationalised many of the smaller positions in the portfolio, selling out of some and adding to others. The net effect of these moves has been to reduce the number of our holdings from 92 to 79 and we see scope for a further modest reduction. Board We are delighted to welcome Rory Macnamara to the board. Rory has had a long and distinguished career in investment banking. His knowledge and experience of the financial world will be of great value to us in our deliberations and we look forward to his contribution. Outlook The strength of the equity market has been greater than many expected at the beginning of the year and raises the question of how much scope there is for further progress. Although the economy has slowed down, profits are still growing at a satisfactory rate and dividends, boosted by the strength of corporate balance sheets, are doing better still. As always, political uncertainties abound in the international arena and the consequences of much higher commodity prices are hard to divine, but we see little reason at the moment to disturb long term holdings in good businesses. Max Ward Chairman STATEMENT OF TOTAL RETURN Six months ended 31 July 2005 (unaudited) Revenue Capital Total £000 £000 £000 Realised gains on investments - 8,888 8,888 Unrealised gains on investments - 7,601 7,601 _______ _______ _______ TOTAL CAPITAL GAINS ON INVESTMENTS - 16,489 16,489 Income from investments 9,590 - 9,590 Interest receivable on short term deposits 741 - 741 Other income 20 - 20 Investment management fee (258) (603) (861) Administrative expenses (284) - (284) _______ _______ _______ NET RETURN BEFORE FINANCE 9,809 15,886 25,695 COSTS AND TAXATION Interest payable and similar charges (1,040) (2,701) (3,741) _______ _______ _______ RETURN ON ORDINARY 8,769 13,185 21,954 ACTIVITIES BEFORE TAXATION Taxation - - - _______ _______ _______ RETURN ATTRIBUTABLE TO EQUITY SHAREHOLDERS 8,769 13,185 21,954 _______ _______ _______ RETURN PER ORDINARY SHARE 13.89p _______ The total column of this statement represents the profit and loss account of the company. All revenue and capital items in the above statement are derived from continuing operations. STATEMENT OF TOTAL RETURN Six months ended 31 July 2004 (restated) (unaudited) Revenue Capital Total £000 £000 £000 Realised gains on investments - 3,835 3,835 Unrealised losses on investments - (3,544) (3,544) _______ _______ _______ TOTAL CAPITAL GAINS ON INVESTMENTS - 291 291 Income from investments 8,370 - 8,370 Interest receivable on short term deposits 382 - 382 Other income 1 - 1 Investment management fee (239) (559) (798) Administrative expenses (321) - (321) _______ _______ _______ NET RETURN BEFORE FINANCE 8,193 (268) 7,925 COSTS AND TAXATION Interest payable and similar charges (1,046) (2,442) (3,488) _______ _______ _______ RETURN ON ORDINARY 7,147 (2,710) 4,437 ACTIVITIES BEFORE TAXATION Taxation - - - _______ _______ _______ RETURN ATTRIBUTABLE TO EQUITY SHAREHOLDERS 7,147 (2,710) 4,437 _______ _______ _______ RETURN PER ORDINARY SHARE 2.78p _______ The total column of this statement represents the profit and loss account of the company. All revenue and capital items in the above statement are derived from continuing operations. STATEMENT OF TOTAL RETURN Year ended 31 January 2005 (restated) (audited) Revenue Capital Total £000 £000 £000 Realised gains on investments - 9,806 9,806 Unrealised gains on investments - 39,756 39,756 _______ _______ _______ TOTAL CAPITAL GAINS ON INVESTMENTS - 49,562 49,562 Income from investments 14,498 - 14,498 Interest receivable on short term deposits 1,028 - 1,028 Other income - - - Investment management fee (483) (1,127) (1,610) Administrative expenses (608) - (608) _______ _______ _______ NET RETURN BEFORE FINANCE 14,435 48,435 62,870 COSTS AND TAXATION Interest payable and similar charges (2,092) (4,972) (7,064) _______ _______ _______ RETURN ON ORDINARY 12,343 43,463 55,806 ACTIVITIES BEFORE TAXATION Taxation - - - _______ _______ _______ RETURN ATTRIBUTABLE TO EQUITY SHAREHOLDERS 12,343 43,463 55,806 _______ _______ _______ RETURN PER ORDINARY SHARE 35.15p _______ The total column of this statement represents the profit and loss account of the company. All revenue and capital items in the above statement are derived from continuing operations. BALANCE SHEET (Restated) (Restated) At 31 July At 31 January At 31 July 2005 2005 2004 £000 £000 £000 FIXED ASSETS Investments 410,167 413,453 370,986 _______ _______ _______ CURRENT ASSETS Debtors 1,613 1,181 2,056 AAA Money Market Funds - 23,200 17,800 Cash and short term deposits 41,896 1,086 1,677 _______ _______ _______ 43,509 25,467 21,533 CREDITORS: Amounts falling due within one year (2,444) (671) (686) _______ _______ _______ NET CURRENT ASSETS 41,065 24,796 20,847 _______ _______ _______ TOTAL ASSETS LESS CURRENT LIABILITIES 451,232 438,249 391,833 CREDITORS: Amounts falling due after more than one year (68,422) (69,409) (69,800) _______ _______ _______ 382,810 368,840 322,033 _______ _______ _______ CAPITAL AND RESERVES Called up share capital - equity 39,525 39,525 39,613 Other reserves 343,285 329,315 282,420 _______ _______ _______ SHAREHOLDERS' FUNDS 382,810 368,840 322,033 _______ _______ _______ Net asset value per 25p ordinary share 242.13p 233.29p 203.24p _______ _______ _______ STATEMENT OF CHANGES IN EQUITY Share Capital Capital Capital Share premium redemption reserve reserve Revenue capital account reserve - realised - unrealised reserve Total Six months ended 31 July 2005 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 January 2005 (restated) 39,525 4,543 500 250,838 57,932 15,502 368,840 Net profit on ordinary activities - - - 5,584 7,601 8,769 21,954 after taxation Dividends paid (Second interim 2005- - - - - - (7,984) (7,984) 5.05p) Balance at 31 July 2005 39,525 4,543 500 256,422 65,533 16,287 382,810 Share Capital Capital Capital Share premium redemption reserve reserve Revenue capital account reserve - realised - unrealised reserve Total Six months ended 31 July 2004 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 January 2004 (restated) 40,013 4,543 12 250,394 18,176 15,117 328,255 Net profit / (loss) on ordinary - - - 834 (3,544) 7,147 4,437 activities after taxation Dividends paid (Second interim 2004 - - - - - - (8,004) (8,004) 5.00p) Buyback of Ordinary shares (400) - 401 (2,656) - - (2,655) Balance at 31 July 2004 39,613 4,543 413 248,572 14,632 14,260 322,033 Share Capital Capital Capital Share premium redemption reserve reserve Revenue capital account reserve - realised - unrealised reserve Total Year ended 31 January 2005 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 January 2004 (restated) 40,013 4,543 12 250,394 18,176 15,117 328,255 Net profit on ordinary activities - - - 3,707 39,756 12,343 55,806 after taxation Dividends paid (Second interim 2004 - - - - - - (11,958) (11,958) 5.00p, Interim 2005 - 2.50p) Buyback of Ordinary 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 CASHFLOW STATEMENT Six months Six months Year ended ended ended 31 July 31 July 31 January 2005 2004 2005 £000 £000 £000 Revenue before finance costs and taxation 9,809 8,193 14,435 Increase in accrued income (423) (413) (155) Increase in other debtors (9) (3) (1) (Decrease)/increase in creditors (39) 21 41 Management fees charged to capital (603) (559) (1,127) ________ _______ _______ Net cash inflow from operating activities 8,735 7,239 13,193 Net cash outflow from servicing of finance (3,472) (3,481) (6,965) Net cash inflow from financial investment 21,607 2,356 9,749 Equity dividends paid (7,984) (8,003) (11,958) _______ _______ _______ Net cash inflow/(outflow) before financing 18,886 (1,889) 4,019 Net cash inflow management of liquid resources 23,200 5,800 400 Net cash outflow from financing (1,276) (2,656) (3,754) _______ _______ _______ Increase in cash 40,810 1,255 665 _______ _______ _______ Notes: 1. The accounts have been prepared under the historical cost convention, modified to include the revaluation of investments and in accordance with applicable Accounting Standards and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies'. They have also been prepared on the assumption that approval as an investment trust will continue to be granted. The Board has elected to continue to adopt UK Generally Accepted Accounting Principles ('UK GAAP') and therefore to comply with the new Financial Reporting Standards issued as part of the programme to converge UK GAAP with IFRS. Figures for the 6 months ended 31 July 2004 and the year ended 31 January 2005 have been restated accordingly. 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. The same accounting policies used for the year ended 31 January 2005 have been applied with the following exceptions: (a) Investments - Investments are measured initially at cost and are recognised at trade date. 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 stocks sourced from The London Stock Exchange. SETS is the London Stock Exchange's electronic trading service for UK blue chip securities including all the FTSE 100 constituents and the most liquid FTSE 250 along with some others. Movements in fair value are recognised in the statement of total return. (b) Dividends payable - Interim and final dividends are recognised in the period in which they are paid. 2. The interim dividend will be paid on 23 September 2005 to shareholders on the register at the close of business on 16 September 2005. The ex-dividend date is 14 September 2005. 3. The unrevised 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. The auditors' report on those accounts was unqualified. The statement of total return and balance sheet do not represent full accounts in accordance with section 240 of the Companies Act 1985. 4. The Interim Report will be posted to shareholders mid September 2005 and copies will be available from 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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