Final Results

Dunedin Income Growth Inv Tst PLC 27 March 2008 DUNEDIN INCOME GROWTH INVESTMENT TRUST PLC ('DIGIT') PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JANUARY 2008 Highlights • Total dividend to increase by 11.1% to 10.0p per share, (subject to shareholder approval.) • Revenue return per share increased by 5.4% to 10.58p, allowing for a further strengthening of revenue reserves. • NAV total return with debt at market value was -11.2%, while the total return for the share price was -10.9%. The FTSE All-Share Index fell by 3.6% on a total return basis over the same period. For further information, please contact:- John Scott, Chairman Dunedin Income Growth Investment Trust PLC 0131 528 4156 Stewart Methven, Investment Manager Aberdeen Asset Managers Limited 0131 528 4000 Chairman's Statement After an excellent performance in the twelve months to 31 January 2007, the past year has been a difficult one for the higher yielding shares in which this Company tends to invest. Against this background, your Company has seen its net asset value (measured on a total return basis) fall by 11.2% in the year to 31 January 2008, which is greater than the fall in the FTSE All-Share index of 3.6%. We have in past years commented that comparison with this benchmark, when undertaken at annual intervals, can either flatter our performance (as happened in 2006/7), or do the opposite - and for the past year the latter is the case. Given the income bias of this fund and our wish to continue increasing distributions to shareholders while achieving capital growth, the Manager has been underweight in mining and other resource stocks as part of its strategy to deliver superior long-term returns. Your Board supports the Manager in taking a long-term approach, though recognises that the short-term cost has been underperformance relative to a benchmark in which resource stocks have performed strongly in the period under review. The Manager's report covers these aspects in more detail. This is perhaps a good moment to remind ourselves that DIGIT continues to meet its principal objectives: our shares provide an above average-yield (4.6% considering the share price as at 25 March 2008 and a dividend of 10.00p) at the time of writing), we have achieved excellent real dividend growth in recent years and the Company's longer-term investment performance generally compares favourably with the index which we have adopted as our benchmark - both our 5-year and 10-year numbers show this very clearly. So, while we look back on what has undoubtedly been a disappointing year, your Board draws considerable comfort from the longer perspective. Dividend Despite the shortfall in performance, the underlying holdings have generally been performing well at an operational level, and this has been reflected in robust dividend growth. As such we are pleased to be able to recommend a final dividend of 6.50p per share, taking the full year dividend to 10.00p per share and representing growth of 11.1% in comparison with last year. If approved by shareholders, this will be the 15th consecutive year of dividend increases. It is proposed that the final dividend will be paid on 23 May 2008 to Shareholders on the register on 25 April 2008. Dividend growth across the market has been strong, and your Company's revenue return per share rose from 10.04p to 10.58p for the year to 31 January 2008. We have therefore been able to accommodate an increase in the dividend at the same time as adding modestly to an already strong revenue reserve, increasing this to £21.8 million. A strong revenue reserve is important in being able to provide the commitment of real dividend growth, as it provides the buffer during those times when dividend growth within the market weakens. It should be noted that our reserve position benefits from our long-established policy of charging to capital 70% of the management fee and interest costs. The Board reviews this policy regularly and is satisfied it remains appropriate. Gearing The Company's borrowings are provided by a combination of fixed rate debenture stock and a variable rate loan facility. The flexibility offered by the latter allows the Manager to adjust the level of borrowings as market conditions change. Since the interim period, the amount drawn down under the variable rate facility has been reduced from £22m to £18m at the end of the financial year and, subsequent to this, has been reduced by a further £5m, reflecting the increased level of uncertainty within financial markets. We continue to believe that gearing will enhance long-term returns to shareholders and your Board keeps the overall level of borrowings under constant review. Discount and Buybacks Against a volatile background for equities, the Company, like many other investment trusts, saw the discount to Net Asset Value ('NAV') at which the shares trade fluctuate over the period and, having traded at a wider discount for much of the year, closed the year at a discount of 5.8% compared to 6.3% as at 31 January 2007. We have continued to buy back shares in DIGIT when we have been able to do so on terms that enhance value to continuing shareholders through increasing the NAV of the Company's shares. The shares bought back are initially held in treasury, which provides the opportunity to re-issue them at a future date at a price which will not be a discount to NAV. As part of prudent housekeeping, and to prevent a significant accumulation of shares held in treasury, the Board took the decision to cancel half of this balance during the year. The remainder will be subject to review ahead of the Annual General Meeting. Marketing We continue to attach great importance to ensuring that the share price reflects the underlying value of the Company. Alongside share buybacks and investment performance, another of the levers available to the Board is the active marketing of the Trust, in order to attract new shareholders. During the year, the Board significantly increased its expenditure on marketing to assist the Manager in its efforts to promote what we see as an attractive investment product for those seeking an income bias. To this end, our Manager has a regular programme of visits to financial advisors, investors and potential investors around the country, to ensure that the market place understands and is aware of the attractions of the Company. Board During the period we announced with great sadness the death of Ruaridh Budge. Ruaridh was appointed to the Board in 2000 and contributed enormously with his understanding, experience and investment knowledge. He is greatly missed. On a brighter note, we are delighted to welcome John Carson to the Board. John is a chartered accountant and is a former partner of Baillie Gifford, where he headed the department responsible for client servicing and marketing. His knowledge and experience of the financial world are already proving to be of great value to us in our deliberations and we look forward to his continuing contributions. VAT on Management Fees In 2004 the Association of Investment Companies (AIC) and JPM Claverhouse Investment Trust plc launched a case against HM Revenue & Customs (HMRC) in which they claimed that investment management fees charged to UK investment trusts should be exempt from VAT. On 28 June 2007, the European Court of Justice found in favour of the AIC and Claverhouse position in respect of the specific questions referred to it by the UK VAT Tribunal. HMRC announced its decision to withdraw its appeal in November 2007, and we are now in the process of reaching agreement with the Manager to secure the recovery of amounts of VAT which have been paid by the Company since 2001. Recent legal developments have opened the prospect of further VAT recoveries, perhaps dating back to 1990. As of 1 November 2007, VAT is no longer being charged on investment management fees. Investment Manager Chou Chong, the lead manager of Dunedin Income Growth Investment Trust PLC ('DIGIT'), will be returning to Aberdeen Asset Managers' Singapore office in the first half of this year. The board of DIGIT would like to thank him for his contribution to the investment performance of the Company and wish him well for the future. Chou will be succeeded as lead manager of DIGIT by Stewart Methven. Stewart, a senior investment manager in Aberdeen's Pan European equity team, has been deputy fund manager of DIGIT for four years. He will be supported by David Boyle and the rest of the Pan European equity team. Outlook Stockmarkets around the world have been volatile as the ripples emanating from the sub-prime crisis in the US have fed through to a sharp tightening in the credit markets. In an attempt to stave off some of the potentially recessionary impacts of this rationing of credit, the US has cut interest rates aggressively. In the UK, where financial imbalances also exist, the Bank of England is more constrained in its ability to reduce interest rates, given the current inflationary pressures within the system. This points to a more difficult economic environment. Against this backdrop, the UK stockmarket has already witnessed sharp divergences in performance amongst the various constituent companies that make up the market. Many of these companies are now trading on lower valuations than has been evident for a number of years and, as such, although volatility is expected to remain high, our Manager believes there are opportunities for the longer-term investor in this environment. Subject to conditions not deteriorating significantly, it is our intention to continue raising our own dividend above the rate of inflation. As a matter of prudence, however, gearing has been reduced in the Trust. The Company's Annual General Meeting takes place in Dundee, on 19 May 2008, and I look forward to seeing as many of you there as possible. John Scott Chairman 26 March 2008 INCOME STATEMENT Year ended 31 January 2008 Year ended 31 January 2007 (Unaudited) (Audited) Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 (Losses)/gains on investments - (61,378) (61,378) - 67,387 67,387 Currency gains/(losses) - 16 16 - (4) (4) Income 18,717 - 18,717 17,988 - 17,988 Investment management fee (597) (1,393) (1,990) (551) (1,285) (1,836) Administrative expenses (791) - (791) (633) - (633) ________ ________ ________ ________ ________ ________ Net return before finance costs and 17,329 (62,755) (45,426) 16,804 66,098 82,902 taxation Finance costs (1,081) (2,520) (3,601) (1,049) (2,447) (3,496) ________ ________ ________ ________ ________ ________ Return on ordinary activities before 16,248 (65,275) (49,027) 15,755 63,651 79,406 taxation Taxation (85) - (85) (54) - (54) ________ ________ ________ ________ ________ ________ Return on ordinary activities after 16,163 (65,275) (49,112) 15,701 63,651 79,352 taxation ________ ________ ________ ________ ________ ________ Return per Ordinary share (pence): 10.58 (42.74) (32.16) 10.04 40.71 50.75 ________ ________ ________ ________ ________ ________ The column of this statement headed 'Total' represents the profit and loss account of the Company. A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement. All revenue and capital items in the above statement derive from continuing operations. BALANCE SHEET As at As at 31 January 2008 31 January 2007 £'000 (Unaudited) £'000 (Audited) Non-current assets Investments at fair value through profit or loss 425,578 501,706 _____________ _____________ Current assets Debtors and prepayments 5,404 1,553 AAA money market funds - 950 Cash and short term deposits 3,004 1,313 _____________ _____________ 8,408 3,816 _____________ _____________ Creditors: amounts falling due within one year Bank loan (18,000) (20,000) Other creditors (852) (1,014) _____________ _____________ (18,852) (21,014) _____________ _____________ Net current liabilities (10,444) (17,198) _____________ _____________ Total assets less current liabilities 415,134 484,508 Creditors: amounts falling due after more than one year (28,454) (28,441) _____________ _____________ Net assets 386,680 456,067 _____________ _____________ Capital and reserves Called-up share capital 38,919 39,412 Share premium account 4,543 4,543 Capital redemption reserve 1,106 613 Capital reserve 320,332 391,503 Revenue reserve 21,780 19,996 _____________ _____________ Equity Shareholders' funds 386,680 456,067 _____________ _____________ Adjusted net asset value per Ordinary share (pence): 254.74 296.10 _____________ _____________ RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (Unaudited) For the year ended 31 January 2008 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 2007 as 38,492 4,543 1,533 278,829 112,674 19,996 456,067 previously stated Reclassification of Reserves - - - 112,674 (112,674) - - Prior year adjustment 920 - (920) - - - - ______ _______ _______ _______ _______ _______ _______ Balance at 31 January 2007 39,412 4,543 613 391,503 - 19,996 456,067 (restated) Return on ordinary activities after - - - (65,275) - 16,163 (49,112) taxation Dividends paid - - - - - (14,379) (14,379) Purchase of own shares - - - (5,896) - - (5,896) Cancellation of Treasury shares (493) - 493 - - - - ______ _______ _______ _______ _______ _______ _______ Balance at 31 January 2008 38,919 4,543 1,106 320,332 - 21,780 386,680 ______ _______ _______ _______ _______ _______ _______ For the year ended 31 January 2007 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 2006 as 39,300 4,543 725 253,307 82,767 17,625 398,267 previously stated Reclassification of Reserves - - - 82,767 (82,767) - - Prior year adjustment 112 - (112) - - - - ______ _______ _______ _______ _______ _______ _______ Balance at 31 January 2006 39,412 4,543 613 336,074 - 17,625 398,267 (restated) Return on ordinary activities after - - - 63,651 - 15,701 79,352 taxation Dividends paid - - - - - (13,330) (13,330) Purchase of own shares - - - (8,222) - - (8,222) ______ _______ _______ _______ _______ _______ _______ Balance at 31 January 2007 39,412 4,543 613 391,503 - 19,996 456,067 (restated) ______ _______ _______ _______ _______ _______ _______ CASH FLOW STATEMENT Year ended Year ended 31 January 2008 31 January 2007 (Unaudited) (Audited) £'000 £'000 £'000 £'000 Net cash inflow from operating activities 16,405 15,276 Servicing of finance Interest paid (3,504) (3,486) Taxation Overseas withholding tax paid (85) (54) Financial investment Purchases of investments (76,795) (122,359) Sales of investments 86,979 118,796 _________ _________ _________ _________ Net cash inflow/(outflow) from financial investment 10,184 (3,563) Equity dividends paid (14,379) (13,330) _________ _________ Net cash inflow/(outflow) before use of liquid resources and 8,621 (5,157) financing Net cash inflow from management of liquid resources 950 10,200 _________ _________ Net cash inflow before financing 9,571 5,043 Financing Repayment of loans (2,000) (5,000) Purchase of own shares (5,896) (8,222) _________ _________ _________ _________ Net cash outflow from financing (7,896) (13,222) _________ _________ Increase/ (decrease)in cash 1,675 (8,179) _________ _________ Reconciliation of net cash flow to movements in net funds Increase/ (decrease) in cash as above 1,675 (8,179) Exchange movements 16 (4) _________ _________ Movement in net funds in the period 1,691 (8,183) Opening net funds 1,313 9,496 _________ _________ Closing net funds 3,004 1,313 _________ _________ 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 have been prepared on a going concern basis. The financial statements and the net asset value per share figures have been prepared in accordance with UK Generally Accepted Accounting Practice (UK GAAP). The ordinary share capital on the Balance Sheet relates to the number of shares in issue and in Treasury. Only when the shares are cancelled, either from Treasury or directly, should a transfer be made to the capital redemption reserve. Therefore, capital redemption reserve balances as at 31 January 2006 and 2007 have been restated to take account of this correction; this does not affect the net assets of the Company. (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 AAA rated money market funds and short term deposits and expenses are accounted for on an accruals basis. Income from underwriting commission is recognised as earned. 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- All Share constituents and most liquid AIM constituents. 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) Capital reserve Gains or losses on realisation of investments and changes in fair values of investments which are readily convertible to cash, without accepting adverse terms, are transferred to the capital reserve. The capital element of the management fee along with any associated irrecoverable VAT and relevant finance costs are charged to this reserve. Any associated tax relief is also credited to this reserve. (f) 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, 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. (g) Foreign currency The Company receives a small proportion of its investment income in foreign currency. These amounts are translated at the rate ruling on the date of receipt. Assets and liabilities in foreign currencies are translated at the rates of exchange ruling on the Balance Sheet date. 2. The Directors recommend that a final dividend of 6.50p per Ordinary share be paid, making a total of 10.00p for the year ended 31 January 2008 (2007 - 9.00p). The final dividend will be paid on 23 May 2008 to Shareholders on the register at 25 April 2008. The ex-dividend date is 23 April 2008. 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 2007 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 audit for 2008 is not complete. We expect to deliver statutory accounts to the Registrar of Companies following the Company's Annual General Meeting which will be held at The Discovery Point, Dundee on Monday 19 May 2008 at 12 noon. 4. The Annual Report and Accounts will be posted to shareholders at the start of April 2008 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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