Interim Results

Merchants Trust PLC 18 September 2006 For immediate release 18 September 2006 THE MERCHANTS TRUST PLC Announcement of Unaudited Interim Results For the six months ended 31 July 2006 Highlights • Dividends of 9.8p per share declared for the first six months, up 5.4%. • Net Asset Value of 528.1p per share, up 4.8% compared with 2.9% rise in the FTSE 100 Index. • Historic dividend yield of 4.0% net at 484p per share. Interim Results Earnings per share In the first six months of the current year, earnings have risen by 6.7% to 11.85p per share. As in previous years, we expect dividend receipts to have been weighted towards the first half of the current financial year. Interim Dividends The Board has declared a second quarterly dividend of 4.90p per share, payable on 14 November 2006 to shareholders on the register at close of business on 13 October 2006. The total distribution declared for the first half of 2006/7 is 9.80p net, an increase of 5.4% when compared with the same period last year. Net Asset Value The net asset value per ordinary share was 528.1p at 31 July 2006. This represents an increase of 4.8% when compared with the equivalent figure at 31 January 2006 - the end of the last financial year. Before taking account of the impact of the Trust's borrowings, the underlying rise in the Trust's total assets, excluding expenses allocated to capital, was 4.5%. Over the same period the FTSE 100 Index rose by 2.9%, whilst the FTSE 350 Higher Yield Index rose by 1.7% (Capital Return). New Shares On 29 June 2006 1,655,941 new ordinary shares were issued to 320 former members of Allianz Dresdner Income Growth Investment Trust plc, a split capital investment trust which reached the end of its planned life. New Director The Directors are pleased to welcome James Sassoon who was appointed to the Board on 11 July. James is currently The Chancellor's Representative for Promotion for the City at HM Treasury. From 2002 to 2006 he was Managing Director of HM Treasury's Finance and Industry Directorate and a Member of the Treasury Board. Before that, he had worked at UBS Warburg since 1987 where he held a number of positions, including Vice Chairman, Investment Banking. He is a chartered accountant and he will succeed Joe Scott Plummer as Chairman of the Audit Committee. Prospects The direction of future interest rate changes remains uncertain and is likely to have a significant effect on short term stock market sentiment. The uncertainty is driven by the opposing forces of rising inflationary pressures and concern over the sustainability of economic growth. Inflationary pressures seem to be driven largely by rising energy and commodity costs which might be expected to moderate over time although the risk is that these flow through to the wider economy through retail prices or higher wage rises. Set against this is the risk of slower economic growth which would normally counter inflationary pressures. The growth threat seems the greater risk at present as consumers face rising utility bills and taxes and there has been a modest rise in unemployment. However the UK is also benefiting from rising total employment and a robust corporate sector. The progress of the housing market, currently showing some strength, remains key to consumer confidence. Despite the economic uncertainty, the corporate sector looks robust with companies generally having strong balance sheets and reporting good profit and cashflow growth. This is leading to broadly based dividend growth. There are also a number of companies making 'special dividend' payments, especially in the natural resources sector, reflecting buoyant trading conditions in their industries. Although some of these payments may not be sustainable in the longer term, the overall outlook for market dividend growth looks healthy. Market valuations also look supportive for long term investment, especially given the low level of bond yields by historic standards. Takeover activity has continued at a high level, aided by low interest rates and provides some further underpinning to the market. Hugh Stevenson Chairman 155 Bishopsgate London EC2M 3AD THE MERCHANTS TRUST PLC Summary of Unaudited Results INCOME STATEMENT For the six months ended 31 July 2006 2006 Revenue Capital Total Return £'000s £'000s £'000s (Note 2) Net gains on investments held at fair value - 27,002 27,002 Income from investments 14,446 - 14,446 Other income 142 - 142 Investment management fee (468) (869) (1,337) Expenses of administration (291) (3) (294) Net return before finance costs and taxation 13,829 26,130 39,959 Finance costs: interest payable and similar charges (1,699) (3,116) (4,815) Return on ordinary activities before taxation 12,130 23,014 35,144 Taxation - - - Return attributable to Ordinary Shareholders 12,130 23,014 35,144 Return per Ordinary Share (Note 1) (basic and diluted) 11.85p 22.47p 34.32p 2006 BALANCE SHEET as at 31 July 2006 £'000s Investments held at fair value through profit or loss 662,034 Net current liabilities (697) Total Assets Less Current Liabilities 661,337 Creditors - amounts falling due after more than one year (113,375) Total Net Assets 547,962 Called up Share Capital 25,940 Share Premium Account 7,527 Capital Redemption Reserve 56 Capital Reserves: Realised 376,269 Unrealised 115,958 Revenue Reserve 22,212 Equity Shareholders' Funds 547,962 Net Asset Value per Ordinary Share 528.1p The net asset value is based on 103,759,877 Ordinary Shares in issue at 31 July 2006. THE MERCHANTS TRUST PLC Summary of Unaudited Results INCOME STATEMENT For the six months ended 31 July 2005 2005 Revenue Capital Total Return £'000s £'000s £'000s (Note 2) Net gains on investments held at fair value - 36,873 36,873 Income from investments 13,586 - 13,586 Other income 90 - 90 Investment management fee (391) (726) (1,117) Expenses of administration (272) - (272) Net return before finance costs and taxation 13,013 36,147 49,160 Finance costs: interest payable and similar charges (1,682) (3,124) (4,806) Return on ordinary activities before taxation 11,331 33,023 44,354 Taxation - - - Return attributable to Ordinary Shareholders 11,331 33,023 44,354 Return per Ordinary Share (Note 1) (basic and diluted) 11.10p 32.34p 43.44p 2005 BALANCE SHEET as at 31 July 2005 £'000s Investments held at fair value through profit or loss 564,290 Net current assets 8,722 Total Assets Less Current Liabilities 573,012 Creditors - amounts falling due after more than one year (113,336) Total Net Assets 459,676 Called up Share Capital 25,526 Share Premium Account 40 Capital Redemption Reserve 56 Capital Reserves: Realised 335,254 Unrealised 77,972 Revenue Reserve 20,828 Equity Shareholders' Funds 459,676 Net Asset Value per Ordinary Share 450.2p The net asset value is based on 102,103,936 Ordinary Shares in issue at 31 July 2005. THE MERCHANTS TRUST PLC INCOME STATEMENT for the year ended 31 January 2006 2006 Revenue Capital Total Return £'000s £'000s £'000s (Note 2) Net gains on investments held at fair value - 96,792 96,792 Income from investments 24,358 - 24,358 Other income 356 - 356 Investment management fee (824) (1,530) (2,354) Expenses of administration (622) (6) (628) Net return before finance costs and taxation 23,268 95,256 118,524 Finance costs: interest payable and similar charges (3,414) (6,219) (9,633) Return on ordinary activities before taxation 19,854 89,037 108,891 Taxation - - - Return attributable to Ordinary Shareholders 19,854 89,037 108,891 Return per Ordinary Share (Note 1) (basic and diluted) 19.44p 87.20p 106.64p 2006 BALANCE SHEET as at 31 January 2006 £'000s Investments held at fair value through profit or loss 621,948 Net current assets 6,118 Total Assets Less Current Liabilities 628,066 Creditors - amounts falling due after more than one year (113,353) 514,713 Total Net Assets Called up Share Capital 25,526 Share Premium Account 40 Capital Redemption Reserve 56 Capital Reserves: Realised 351,107 Unrealised 118,105 Revenue Reserve 19,879 Equity Shareholders' Funds 514,713 Net Asset Value per Ordinary Share 504.1p The net asset value is based on 102,103,936 Ordinary Shares in issue at 31 January 2006. THE MERCHANTS TRUST PLC RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Called Up Share Capital Capital Capital Share Premium Redemption Reserve Reserve Revenue Capital Account Reserve Realised Unrealised Reserve Total £'000s £'000s £'000s £'000s £'000s £'000s £'000s Six months ended 31 July 2006 Net Assets at 31 January 2006 25,526 40 56 351,107 118,105 19,879 514,713 Revenue Return - - - - - 12,130 12,130 Dividends on Ordinary Shares - - - - - (9,797) (9,797) Capital Return - - - 25,161 (2,147) - 23,014 Shares issued during the year 414 7,487 - 1 - - 7,902 Net Assets at 31 July 2006 25,940 7,527 56 376,269 115,958 22,212 547,962 Six months ended 31 July 2005 Net Assets at 31 January 2005 25,526 40 56 322,240 57,963 18,686 424,511 Revenue Return - - - - - 11,331 11,331 Dividends on Ordinary Shares - - - - - (9,189) (9,189) Capital Return - - - 13,014 20,009 - 33,023 Net Assets at 31 July 2005 25,526 40 56 335,254 77,972 20,828 459,676 Year ended 31 January 2006 Net Assets at 31 January 2006 25,526 40 56 322,240 57,963 18,686 424,511 Adjustment to record - - - - (28) - (28) investments at bid value Revenue Return - - - - - 19,854 19,854 Dividends on Ordinary Shares - - - - - (18,661) (18,661) Capital Return - - - 28,867 60,170 - 89,037 Net Assets at 31 January 2006 25,526 40 56 351,107 118,105 19,879 514,713 THE MERCHANTS TRUST PLC CASH FLOW STATEMENT for the six months ended 31 July 2006 and comparative periods Six Months to 31 Six Months to 31 Year to July 2006 July 2005 31 January 2006 £'000s £'000s £'000s Net cash inflow from operating activities 11,789 11,966 22,806 Servicing of finance Interest paid (4,780) (4,774) (9,557) Dividends paid on Preference Stock (21) (21) (64) Net cash outflow on servicing of finance (4,801) (4,795) (9,621) Financial investment Purchase of fixed asset investments (128,364) (79,751) (139,141) Sale of fixed asset investments 87,429 146,799 124,557 Net cash (outflow) inflow from investing (3,807) 7,678 7,658 activities Equity dividends paid (9,797) (9,189) (18,661) Net cash (outflow) inflow before financing (6,616) 5,660 2,182 Financing Cash transferred from Allianz Dresdner Income 909 - - Growth Investment Trust plc (Decrease) increase in cash (5,707) 5,660 2,182 THE MERCHANTS TRUST PLC TWENTY LARGEST EQUITY HOLDINGS AS AT 31 JULY 2006 Valuation % of Total £'000s Assets* Principal Activities Royal Dutch Shell 62,548 9.46 Oil and Gas Production BP 51,600 7.80 Oil and Gas Production HSBC Holdings 46,996 7.11 Banking GlaxoSmithKline 39,395 5.96 Pharmaceuticals Vodafone 27,110 4.10 Telecommunications Royal Bank of Scotland 26,637 4.03 Banking Barclays 22,922 3.47 Banking HBOS 22,414 3.39 Banking Lloyds TSB 21,782 3.29 Banking BT 19,614 2.97 Telecommunications Anglo American 16,539 2.50 Mining Scottish Power 13,640 2.06 Electricity Scottish & Southern Energy 12,997 1.97 Electricity Lonmin 13,437 2.03 Mining Legal & General 11,185 1.69 Life and General Insurance Tesco 10,390 1.57 Food & Drug Retailer Reed Elsevier 10,003 1.51 Media Rio Tinto 9,818 1.48 Mining Smiths Group 9,776 1.48 Aerospace & Defence Drax 9,029 1.37 Electricity 457,832 69.24 * Total Assets include current liabilities PORTFOLIO ANALYSIS AS AT 31 JULY 2006 UK Other Total % % % Listed equities 100.1 - 100.1 Net current liabilities (0.1) - (0.1) Total Assets 100.0 - 100.0 THE MERCHANTS TRUST PLC NOTES Note 1 The return per Ordinary Share is based on a weighted average number of shares in issue during the period of 102,396,699 shares. (31 July 2005 - 102,103,936 shares; 31 January 2006 - 102,103,936 shares). Note 2 The total column of this statement is the profit and loss account of the Company. All revenue and capital items derive from continuing operations. No operations were acquired or discontinued in the period. A Statement of Total Recognised Gains and Losses is not required as all gains and losses of the Company have been reflected in the Income Statement. Included in the cost of investments are transaction costs on purchases which amounted to £866,297 (31 July 2005 - £492,649; 31 January 2006 - £888,492) and transaction costs on sales which amounted to £203,769 (31 July 2005 - £176,898; 31 January 2006 - £302,257). On 30 June 2006 investments and cash amounting to £7.0m and £0.9m respectively were transferred into the Company following the reconstruction of Allianz Dresdner Income Growth Investment Trust plc, as consideration for 1,655,941 new Ordinary Shares issued at 477.1p Note 3 In accordance with FRS 21 'Events after the Balance Sheet date', the final dividend payable on Ordinary Shares is recognised as a liability when approved by shareholders. Interim dividends are recognised only when paid. Dividends paid on Ordinary Shares in respect of earnings for each period are as follows: Six months to Six months to Year to 31 July 31 July 31 January 2006 2005 2006 £'000s £'000s £'000s Third Interim dividend 4.50p paid 17 February 2005 - 4,594 4,594 Final dividend 4.50p paid 11 May 2005 - 4,595 4,595 First Interim dividend 4.60p paid 18 August 2005 - - 4,697 Second Interim dividend 4.70p paid 10 November 2005 - - 4,799 Third Interim dividend 4.80p paid 17 February 2006 4,901 - - Final dividend 4.80p paid 10 May 2006 4,901 - - Uncollected dividends from prior years (5) - (24) 9,797 9,189 18,661 THE MERCHANTS TRUST PLC NOTES CONTINUED Dividends payable at the period end are not recognised as a liability under FRS 21 'Events after the Balance Sheet date'. Details of these dividends are set out below. Six months to Six months to Year to 31 July 31 July 31 January 2006 2005 2006 £'000s £'000s £'000s Third Interim dividend 4.80p paid 17 February 2006 - - 4,901 Final dividend 4.80p paid 10 May 2006 - - 4,901 First Interim dividend 4.90p payable 16 August 2006 (2005 - 4.60p) 5,084 4,697 - Second Interim dividend 4.90p payable 14 November 2006 (2005 - 4.70p) 5,804 4,799 - The second interim dividend noted above is based on the number of shares at period end. However, the dividend subsequently paid will be based on the number of shares in issue on the record date and will reflect any purchase or cancellations of shares by the Company settled subsequent to the period end. Note 4 The interim statement has been neither audited nor reviewed by the Company's auditors. The financial information for the year ended 31 January 2006 has been extracted from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain a statement under either Section 237(2) or Section 237(3) of the Companies Act 1985. The Interim Report, which will include a Fund Managers' Report, will be sent to Shareholders shortly and made available to the public at the Registered Office of the Company, 155 Bishopsgate, London, EC2M 3AD. For further information, please contact: RCM (UK) Limited Simon White, Head of Investment Trusts Tel: 020 7065 1539 or RCM (UK) Limited Simon Gergel, Fund Manager Tel: 020 7065 1431 This information is provided by RNS The company news service from the London Stock Exchange

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