Final Results

Merrill Lynch Greater Europe IT PLC 18 October 2005 MERRILL LYNCH GREATER EUROPE INVESTMENT TRUST plc Preliminary announcement of results for the period from launch on 20 September 2004 to 31 August 2005 • Net asset value per share on a total return basis increased by 29.9%, compared with a rise in the FTSE World Europe ex UK Index of 24.0%. • Earnings per share amounted to 1.82p for the period. • The Directors recommend the payment of a final dividend of 1.60p per ordinary share payable on 28 November 2005 to shareholders on the register on 28 October 2005. • The discount to net asset value was 3.8% as at 31 August 2005, compared to a peer group average of 7.3%. For further information please contact: Jonathan Ruck Keene 020 7743 2178 James Macmillan 020 7743 2289 Nigel Webb 020 7743 5938 Merrill Lynch Investment Managers Or William Clutterbuck 020 7379 5151 The Maitland Consultancy The Chairman, John Walker-Haworth, comments: 'I have great pleasure in presenting to shareholders in Merrill Lynch Greater Europe Investment Trust the first preliminary results, which cover the period from 20 September 2004 to 31 August 2005. During this period, the Company's net asset value per share on a total return basis increased by 29.9% (compared with a rise in the FTSE World Europe ex UK Index of 24.0%) and the share price increased by 23.0% from its issue price of 100p. 'Earnings per share for the relevant period were 1.82p. As set out in the Company's prospectus, the Board expects to pay a final dividend once a year and is recommending a dividend of 1.60p. 'The Company's first semi-annual tender offer was made on 31 May 2005. The offer was for up to 20% of the shares in issue, at the prevailing net asset value less 2%. In the event 14.8% of the shares were tendered and cancelled at a price of 113.29p. 'On 16 August 2005 the Board announced that the next semi-annual tender, to take place on 30 November 2005, would again be for up to 20% of shares in issue at the prevailing net asset value less 2%. 'The Directors recognise the importance to investors of maintaining any discount of the Company's share price to its underlying net asset value per share at as low a level as possible. The semi-annual tender offers have been designed to help to achieve this. The discount was 3.8% at 31 August 2005, compared with the peer group average of 7.3%. 'The Investment Manager has had a very successful period and continues to view the prospects for the European share market in 2006 with confidence and optimism.' Commenting upon the outlook for the Company, James Macmillan of Merrill Lynch Investment Managers, the Investment Manager, notes: 'The outlook for European equity markets is promising on a number of grounds. Firstly alternative assets, such as bonds and cash offer less attractions than stocks which at current levels provide a higher yield. There is little prospect of the European Central Bank raising short term interest rates to levels that would provide a competing yield. Other measures of valuation also point to the attractions of equities, notably the price earnings ratio which is at the low end of its historical range and the price to book ratio which is moderate especially considering the high return on equity that many European companies are currently generating. 'Corporate results are very healthy by historical standards, fuelled by low financing costs and high operating margins due to the strong global economic cycle. Earnings growth for European corporates is likely to be less strong in 2006 than was the case this year but it should still be in high single digits in the absence of an external shock to global growth. Consumption has not been one of the levers of growth in recent years and we are not expecting this to change in 2006 given the high levels of unemployment prevalent in the major economies of Europe. Corporate investment and merger and acquisition activity are expected to be stronger forces next year as companies look to boost the sustainable growth rate of their business. 'The expectations for returns in Emerging Europe are positive. Above average economic growth, ongoing economic liberalisation and inexpensive valuations should continue to support equity markets in the region. We believe European equities should remain on an upward trajectory.' REVENUE ACCOUNT & STATEMENT OF TOTAL RETURN for the period from 20 September 2004 to 31 August 2005 Revenue Capital Total 2005 2005 2005 £'000 £'000 £'000 Gains on investments - 43,425 43,425 Income (Note 3) 4,836 - 4,836 Investment management fee (Note 4) (77) (307) (384) Operating expenses (Note 5) (617) - (617) ---------- ---------- ---------- Net return before finance costs and taxation 4,142 43,118 47,260 Interest payable and similar charges (25) (100) (125) ---------- ---------- ---------- Return on ordinary activities before taxation 4,117 43,018 47,135 Taxation on ordinary activities (1,235) 122 (1,113) ---------- ---------- ---------- Return on ordinary activities after taxation 2,882 43,140 46,022 Dividends in respect of equity shares (2,247) - (2,247) ---------- ---------- ---------- Transfer to reserves 635 43,140 43,775 ====== ====== ====== Return per ordinary share 1.82p 27.22p 29.04p ====== ====== ====== Dividend per ordinary share 1.60p - 1.60p ====== ====== ====== The revenue column of this statement is 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. BALANCE SHEET as at 31 August 2005 31 August 2005 £'000 (audited) Fixed assets Listed investments at mid-market valuation 186,794 Unlisted investments at directors' valuation 5,820 ---------- 192,614 Current assets Debtors 3,801 Creditors - amounts falling due within one year (16,296) ---------- Net current liabilities (12,495) Total assets less current liabilities 180,119 Provision for liabilities and charges (27) ---------- Net assets 180,092 ======= Capital and reserves Share capital 140 Capital redemption reserve 24 Special reserve 136,153 Capital reserve - realised 18,753 Capital reserve - unrealised 24,387 Revenue reserve 635 ----------- Total equity shareholders' funds 180,092 ======= Net asset value per ordinary share 128.26p ======= CASH FLOW STATEMENT for the period ended 31 August 2005 Period ended 31 August 2005 £'000 (audited) Net cash inflow from operating activities 3,518 Servicing of finance (125) Taxation recovered 3 Capital expenditure and financial investment: Purchase of fixed asset investments (226,920) Proceeds from the sale of fixed asset investments 213,280 Exchange loss on foreign currency transactions (216) ----------- Net cash outflow from capital expenditure and financial investment (13,856) ----------- Net cash outflow before financing (10,460) ----------- Financing: Issue of ordinary shares 30,555 Issue expenses paid (548) Purchase of ordinary shares (27,673) Tender offer costs (239) ---------- Net cash inflow from financing 2,095 ---------- Decrease in cash in the period (8,365) ====== RECONCILIATION OF NET RETURN BEFORE FINANCE COSTS AND TAXATION TO NET CASH FLOW FROM OPERATING ACTIVITIES Period ended 31 August 2005 £'000 (audited) Net return before finance costs and taxation 4,142 Investment management fee charged to capital (307) Increase in prepayments and accrued income (157) Increase in creditors 754 Tax on investment income included within gross income (914) ---------- Net cash inflow from operating activities 3,518 ====== NOTES TO THE PRELIMINARY RESULTS 1. Principal activity The principal activity of the Company is that of an investment trust company within the meaning of section 842 of the Income and Corporation Taxes Act 1988. 2. Basis of preparation The Company's financial accounts have been prepared under the historical cost convention, modified to include the revaluation of investments, and are in accordance with section 230 of, and schedule 4 to, the Companies Act 1985 and with applicable accounting standards and the Statement of Recommended Practice ('SORP'), 'Financial Statements of Investment Trust Companies' issued in January 2003. 3. Income Period ended 31 August 2005 £'000 (audited) Income from investments Dividends: - Overseas listed 4,691 Interest receivable and other income: - Deposit and cash fund interest 145 --------- Total income 4,836 ===== 4. Investment management fee 2005 Revenue Capital Total £'000 £'000 £'000 Investment management fee 67 269 336 Irrecoverable VAT thereon 10 38 48 ----- ----- ----- 77 307 384 === === === The investment management fee is levied quarterly, based on the value of the market capitalisation on the last day of each month. Management fees for the period amounted to £884,000 excluding VAT, of which the Manager has waived the first £548,000. This waiver fully offsets the Company's launch costs. For the first year any performance fee is based on outperformance of the Company's share price relative to the FTSE Europe (ex UK) Index for the period from launch to 31 August 2005. In the second year the performance will be assessed over the period from launch to 31 August 2006. Thereafter any performance fee will be based on outperformance of the Index on a three year rolling basis. 5. Operating expenses Period ended 31 August 2005 £'000 (audited) Custody fee 69 Auditor's remuneration: - audit services 21 - non-audit services 17 Directors' emoluments 64 Registrars' fees and other operating expenses 446 ------- 617 ==== 6. Dividend The Directors are recommending a final dividend of 1.60p per share. The dividend will be paid on 28 November 2005 to the shareholders on the register of members at the close of business on 28 October 2005. The shares will be quoted ex-dividend on 26 October 2005. 7. Ordinary shares 31 August 2005 Actual number of ordinary shares in issue at the period end: 140,414,347 Weighted average number of ordinary shares in issue during the period: 158,469,040 Share price 123.00p 8. Reconciliation of movements in equity shareholders' funds Period ended 31 August 2005 £'000 (audited) Issue of shares at launch 164,848 Issue costs at launch (600) Issue costs written back 52 Capital gains for the period before tax relief 43,018 Taxation relief on expenses charged to capital 122 Purchase and cancellation of ordinary shares (27,673) Tender offer costs paid and payable (310) Revenue profits available for distribution 2,882 Proposed final dividend (2,247) ---------- Closing shareholders' funds 180,092 ====== 9. Publication of non-statutory accounts The financial information contained in this announcement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The 2005 annual report and financial statements will be filed with the Registrar of Companies after the Annual General Meeting. 10. The figures set out above have been reported upon by the auditor. The report of the auditor for the year ended 31 August 2005 contains no qualification or statement under section 237(2) or (3) of the Companies Act 1985. 11. Copies of the annual report will be sent to members shortly and will be available from the registered office, c/o The Company Secretary, Merrill Lynch Greater Europe Investment Trust plc, 33 King William Street, London EC4R 9AS. This report will also be available on the Merrill Lynch Investment Manager's website at www.mlim.co.uk/its 12. The Annual General Meeting of the Company will be held at Clothworkers' Hall, Dunster Court, Mincing Lane, London EC3R 7AH on Tuesday 22 November 2005 at 2.30 p.m. 33 King William Street London EC4R 9AS 18 October 2005 This information is provided by RNS The company news service from the London Stock Exchange

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