Final Results

Dunedin Income Growth Inv Tst PLC 14 March 2005 NEWS RELEASE DUNEDIN INCOME GROWTH INVESTMENT TRUST PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JANUARY 2005 Highlights • NAV total return with debt at market value 18.3% compared to a notional total return for the FTSE All-Share Index of 15.3%. NAV total return with debt at par also 18.3%. • Board moves to valuing debt at market • Total dividend to increase by 4.1% from last year to 7.55p per share • Earnings per share increased by 6.9% to 7.77p - END - For further information, please contact:- Max Ward, Chairman Dunedin Income Growth Investment Trust PLC 0131 220 4167 David Binnie, Investment Manager Edinburgh Fund Managers plc 0131 313 1000 Chairman's Statement I am delighted to report on another year of good progress for your Company. In the year to 31 January 2005, we produced an NAV total return of 18.3% (measured either on the basis of accounting standards or with debt valued at market). This was once again significantly better than the notional total return of 15.3% produced by the FTSE All-Share Index. We have commented in past reports on the two different methods of treating fixed coupon debt in the presentation of investment trust figures: the one with debt valued at its par or redemption value ('the par basis', which is also the accounting standards basis) and the other with debt valued at its market value ('the market basis'). In common with much of the rest of the investment trust industry, we have historically tended to emphasize the par basis. We now accept, however, that the market basis is more appropriate for the purpose of valuing investment trust shares. We have therefore decided to concentrate on the market basis in the discussion of all financial matters in this year's Annual Report. We regret that this creates a discrepancy between the figures required by accounting standards and those in our text, but we find the choice between accounting orthodoxy and realism an easy one. I hope you will let us know your views on the matter. Dividend We are recommending a final dividend of 5.05p per share to give a total dividend for the year of 7.55p, a rise of some 4.1% on last year's 7.25p. For comparison the rise in the CPI, the measure of inflation which is now most widely used, was 1.6% over the same period and the old RPIX measure rose 2.1%. Our earnings per share rose by 6.9% from 7.27p to 7.77p. Thus we have once again been able to add to an already strong revenue reserve. It should be noted, however, that our revenue position benefits substantially 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. Gearing At the end of the period our net gearing was 23.3%, compared to 25.3% the previous year. We continue to believe that some level of gearing will enhance long term returns to shareholders, but we keep the overall level of gearing under constant review. Discount and Share Buybacks It is disappointing to report that, despite our good results, the discount to net asset value at which our shares trade widened over the year from 8.8% to 10.6%. We recognize the importance to shareholders of a share price that is a fair reflection of the underlying value of the Company and are constantly considering whether there is anything we can do to improve our standing in the market. In addition to the pursuit of the optimum investment policy and the maintenance of a concerted marketing effort, of which more below, we are ready to use our powers to buy back shares when this can be accomplished to the benefit of continuing shareholders. During the year we bought back 1.95m shares at an average discount of some 11.5%. We remain alert to the opportunity to add further value through buy-backs. In addition to the purchase of our own shares during the year we also bought in a small amount of one of our debentures. Our aim in doing this was to improve the flexibility of our debt structure and we intend to make further purchases if stock becomes available on suitable terms. Marketing The active marketing of DIGIT shares is an important part of our strategy to persuade the market of their true value. Our managers have a regular programme of visits to financial advisors, investors and potential investors around the country. 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 including its performance and strategy. It also gives details on how to invest in the shares of DIGIT in a low cost manner, either through regular savings or a lump sum. Management In the summer of last year we suffered a blow when David Binnie was badly injured in a hill walking accident. I am glad to report that David is now well on the way to full recovery, but I should also like to pay tribute to Stewart Methven, who made an excellent job of managing the trust in David's absence and who will have a continuing role in helping David with the management of our portfolio. In addition to producing good performance, Edinburgh Fund Managers (EFM) have maintained a high level of service during the year and we believe that it is in shareholders' interests that they should continue as DIGIT's manager. The target we have historically set EFM has been to produce in a low risk way a portfolio performance superior to that of the market, together with an income stream that will permit consistent real growth in our dividend. They have met the target in exemplary fashion, but this achievement has still left our overall performance looking unexciting by comparison with other income growth investment trusts. The board has therefore decided, in the face of clear evidence of EFM's stockpicking skills, to encourage our manager to adopt a less risk-averse approach to portfolio construction without in any way being reckless and without losing sight of the fund's objective of delivering real dividend growth, something we have been able to achieve for the past 10 years. Outlook After the difficulties experienced in the early years of the new millennium, it is something of a relief to look back on a year in which both the economy and the stock market lived up to expectations. Looking ahead, there are still plenty of things to worry about, such as the insecurity of the world's oil supplies and the threat to the stability of the world's financial system posed by the determination of the United States of America to live beyond its means. At a more parochial level, however, the outlook appears encouraging: the UK economy continues to make sound progress, profits and dividends are buoyant, balance sheets are strengthening and the stock market is inexpensive by the standards of the last twenty years or so. The underlying buoyancy of dividends gives us a greater degree of freedom in stock selection than we have been used to and thus provides a particularly good opportunity for us to capitalize on EFM's stockpicking skills. This is the basis of the confidence with which we view the future. The Company's Annual General Meeting takes place in Edinburgh on 27 April and I look forward to seeing as many of you there as possible. Max Ward Chairman 11 March 2005 STATEMENT OF TOTAL RETURN (AUDITED) For the year ended 31 January 2005 2004 Revenue Capital Total Revenue Capital Total £000 £000 £000 £000 £000 £000 Realised gains/(losses) on investments - 9,806 9,806 - (2,413) (2,413) Unrealised gains on investments - 39,749 39,749 - 79,939 79,939 ------ ------ ------ ------ ------ ------ Total capital gains on investments - 49,555 49,555 - 77,526 77,526 Income from investments 14,498 - 14,498 13,810 - 13,810 Interest receivable on short term 1,028 - 1,028 941 - 941 deposits Investment management fee (483) (1,127) (1,610) (441) (1,029) (1,470) Administrative expenses (608) - (608) (584) - (584) ------ ------ ------ ------ ------ ------ Net return before finance costs and 14,435 48,428 62,863 13,726 76,497 90,223 taxation Interest payable and similar charges (2,092) (4,972) (7,064) (2,093) (4,883) (6,976) ------ ------ ------ ------ ------ ------ Return on ordinary activities before 12,343 43,456 55,799 11,633 71,614 83,247 taxation Taxation - - - - - - ------ ------ ------ ------ ------ ------ Return on ordinary activities after 12,343 43,456 55,799 11,633 71,614 83,247 taxation Dividends in respect of equity shares (11,939) - (11,939) (11,602) - (11,602) ------ ------ ------ ------ ------ ------ 404 43,456 43,860 31 71,614 71,645 ------ ------ ------ ------ ------ ------ Return per Ordinary share 7.77p 27.37p 35.14p 7.27p 44.73p 52.00p ------ ------ ------ ------ ------ ------ The revenue column of this statement represents the revenue account of the company All revenue and capital items in the above statement derive from continuing operations BALANCE SHEET (AUDITED) As at 31 January 2005 2004 £000 £000 Fixed assets Investments 413,461 372,618 Current assets Debtors 1,181 2,107 AAA Money Market Funds 23,200 23,600 Cash and short term deposits 1,086 421 ------ ------ 25,467 26,128 Creditors: Amounts falling due within one year (8,655) (8,686) ------ ------ Net current assets 16,812 17,442 ------ ------ Total assets less current liabilities 430,273 390,060 Creditors: Amounts falling due after more than one year (69,409) (69,793) ------ ------ Net assets 360,864 320,267 ------ ------ Capital and reserves Called up share capital - equity 39,525 40,013 Share premium 4,543 4,543 Capital redemption reserve 500 12 Capital reserve - realised 250,838 250,394 Capital reserve - unrealised 57,940 18,191 Revenue reserve 7,518 7,114 ------- ------- Total equity Shareholders' funds 360,864 320,267 ------- ------- Net asset value per Ordinary share 228.13p 199.97p ------- ------- CASH FLOW STATEMENT (AUDITED) For the year ended 31 January 2005 2005 2004 2004 £000 £000 £000 £000 Net cash inflow from operating activities 13,193 12,736 Servicing of finance Interest paid (6,965) (6,962) ------ ------ Net cash outflow from servicing of finance (6,965) (6,962) Financial investment Purchases of investments (45,346) (59,800) Sales of investments 55,095 61,242 ------ ------ Net cash inflow from financial investment 9,749 1,442 Equity dividends paid (11,958) (11,284) ------ ------ Net cash inflow/(outflow) before use of liquid resources and 4,019 (4,068) financing Net cash inflow/(outflow) from management of liquid resources 400 (621) Net cash outflow from financing (3,754) (86) ------ ------ Increase/(decrease) in cash 665 (4,775) ------ ------ Notes: 1. The Directors recommend that a final dividend of 5.05p per Ordinary share be paid, making a total of 7.55p for the year ended 31 January 2005 (2004 - 7.25p). The final dividend will be paid on 29 April 2005 to Shareholders on the register at 29 March 2005. The ex-dividend date is 23 March 2005. 2. The accounts have been prepared under the same accounting policies used for the year ended 31 January 2004. The statutory accounts for 2005 contain an unqualified audit report and will be delivered to the Registrar of Companies following the Company's Annual General Meeting which will be held at Donaldson House, 97 Haymarket Terrace, Edinburgh EH12 5HD. 3. The financial information for the year ended 31 January 2004 has been extracted from the annual report and accounts of the Company which has been filed with the Registrar of Companies and on which the auditors' report was unqualified. 4. The statement of total return (incorporating the revenue account), balance sheet and cash flow statement do not represent full accounts in accordance with Section 240 of the Companies Act 1985. The accounts have been prepared in accordance with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies'. 5. The annual report will be posted to Shareholders in March 2005 and copies will be available from the offices of the Secretary - Edinburgh Fund Managers plc, Donaldson House, 97 Haymarket Terrace, Edinburgh EH12 5HD. 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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