Final Results

Preliminary announcement of final results for the year ended 31 December 2005(audited) The directors recommend a final dividend of 5.95p per share making a total for the year of 9.05p. Subject to the approval of shareholders, the final dividend will be paid on 19 April 2006 to holders on the register on the record date of 17 March 2006.The preliminary statement has been prepared in accordance with International Financial Reporting Standards. Group income statement for the year ended 31 December 2005 2004 Revenue Capital Total Revenue Capital Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 '000 UK dividends 9,213 - 9,213 8,021 - 8,021 UK Special 135 - 135 159 - 159 dividends Overseas dividends 1,442 - 1,442 1,482 - 1,482 Overseas special 13 - 13 - - - dividends Interest from 138 - 138 299 - 299 securities 10,941 - 10,941 9,961 - 9,961 Bank deposit 1,068 - 1,068 646 - 646 interest Trustee and other 23,208 - 23,208 **19,892 - **19,892 related fees Other income 107 - 107 54 - 54 Total revenue 35,324 - 35,324 30,553 - 30,553 Net gain on - 64,339 64,339 - 30,461 30,461 investments held at fair value through profit or loss Gross income and 35,324 64,339 99,663 30,553 30,461 61,014 capital gains Cost of sales (6,994) - (6,994) **(4,983) - **(4,983) Administrative (12,682) (297) (12,979) (11,936) (203) (12,139) expenses Operating profit 15,648 64,042 79,690 13,634 30,258 43,892 Finance costs Interest payable (2,471) - (2,471) (2,456) - (2,456) Profit before 13,177 64,042 77,219 11,178 30,258 41,436 taxation Taxation (1,404) - (1,404) (1,148) - (1,148) Profit for year 11,773 64,042 75,815 10,030 30,258 40,288 Return per ordinary 64.72 34.41 share (pence)* Diluted return per 64.72 34.41 ordinary share (pence) *No dilutive effect ** Restated to include recoverable legal fees as revenue and cost of sales Statement of total recognised income and expense for the year ended 31 December Revenue Capital Total Revenue Capital Total 2005 2005 2005 2004 2004 2004 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Return for the financial 11,773 64,042 75,815 10,030 30,258 40,288 year Foreign exchange 250 - 250 (177) - (177) Pension actuarial gains/ 20 - 20 (1,766) - (1,766) (losses) Taxation on pensions (6) - (6) 529 - 529 Total incomeand expense 12,037 64,042 76,079 8,616 30,258 38,874 relating to the year Financial summary Highlights 31 December 31 December Change 2005 2004 % pence pence Share price 288.75 232.50 24.2 NAV per share 289.93 232.85 24.5 NAV per share 283.98 228.10 24.5 After proposed dividend Earnings per share - investment trust 5.73 5.06 13.2 - trustee and related 4.32 3.51 23.1 services Group earnings per share 10.05 8.57 17.3 Dividends per share 9.05 7.55 19.9 Performance 2005 2004 % % Share price 24.2 4.8 NAV total return 28.5 16.7 FTSE Actuaries All-Share 22.0 12.8 Index total return Chairman's statement Performance Over the year to 31 December 2005, our net asset value total return was 28.5% compared to a total return of 22.0% for the FTSE Actuaries All-share Index. Our gross revenue increased over the year by 15.6% from Â£30.6 million to Â£35.3 million. Profit attributable to shareholders was Â£11.8 million, an increase of 17.4% over the previous year as a result of a 13.2% improvement in the investment trust and a 23.3% improvement in trustee and related services. Improved company dividends increased the return from the investment trust and all our trustee related services businesses performed well. Earnings and dividends Earnings per share for the year to 31 December 2005 were 10.05p, an increase of 17.3% from last year. The board is recommending a final dividend of 5.95p per ordinary share (2004: 4.75p), which, together with the interim dividend of 3.10p (2004: 2.80p) gives a total dividend of 9.05p (2004: 7.55p), an increase of 19.9%. The final dividend will be paid, subject to shareholder approval, on 19 April 2006 to holders on the register on the record date of 17 March 2006. The policy of the company continues to be to seek growth in both capital and income Investment trust Our portfolio has been managed throughout the year by James Henderson who has an independent value based approach to investment. During the year the total return on the portfolio, excluding trustee services profits and the impact of gearing, was 24.5%, ahead of the FTSE All-Share Index. We continue to select investments on the basis of what appears most attractive in the conditions of the time. We will not pay unrealistically high prices but hope to be able to buy growth shares on reasonable terms. Our policy is to try to select attractive investments without regard to any investment style or fashion. We do not feel obliged to hold shares of any particular type of company or industry or market. We aim to achieve a better return than the FTSE All-Share Index by good stock picking. We believe that, in the long term, returns on equities will exceed the cost of our long term borrowing. Consequently we take on a level of gearing which we believe balances risk with the objective of increasing the return to shareholders Growth in the global economy has been reasonably strong, with favourable implications for company profits and stock markets. Higher energy and commodity prices did not create the inflationary pressures that might have been expected and company profits continued to improve. In the UK, many companies have been benefiting from improved profitability and dividend growth has been strong. Trustee and related services Our trustee and related services business increased revenue by 16.9% and profit before tax by 22.9%. Most areas of the business have seen continued growth. The commercial trust division had a busy year and a number of high profile appointments. Our pension trustee business has seen growth from new and existing relationships and expects the Pensions Act 2004 to continue to provide opportunities. Corporate services continue to grow significantly and service of process is benefiting from the links between London, New York and Hong Kong. The New York trust business has achieved a profit for the first time and continues to develop its business in niche markets. Hong Kong has significantly improved its results and achieved a profit. Channel Islands developed its position as an independent provider of trustee and corporate services resulting in a significant increase in income and profit. In recent years, the deficit of our defined benefit pension scheme has increased as a result, mainly, of members living longer and lower bond yields. During the year the decision was taken to keep the scheme open but lower the group's exposure by reducing future benefits and introducing employee contributions. The group paid a special contribution of Â£885,000 in 2005 and has paid a further special contribution of Â£1,615,000 in 2006. Staff The trustee and related services businesses performed strongly during the year and made a significant contribution to our income. Their success is dependent upon the professionalism and commitment of our people, whom I should like to thank for their hard work during the year. Douglas McDougall Group Balance sheet as at 31 December Group 2005 2004 Â£000 Â£000 Assets Non current assets Property, plant and equipment 739 855 Intangible assets 113 193 Investments held at fair value through 380,747 304,100 profit or loss Other assets 5 7 Deferred tax assets 2,106 2,239 Total non current assets 383,710 307,394 Current assets Trade and other receivables 7,368 5,624 Other accrued income and prepaid 2,419 1,680 expenses Other current assets 46 49 Cash and cash equivalents 19,295 24,333 Total current assets 29,128 31,686 Total assets 412,838 339,080 Current liabilities Trade and other payables 7,912 5,667 Short term borrowings 5,696 144 Corporation tax payable 548 736 Other taxation including social 433 162 security Deferred income 4,326 4,240 Total current liabilities 18,915 10,949 Non current liabilities Long term borrowings 39,230 39,204 Retirement benefit obligations 6,443 7,348 Deferred tax - 47 Deferred income 8,626 9,018 Total non current liabilities 54,299 55,617 Total net assets 339,624 272,514 Equity Called up share capital 5,882 5,875 Share premium 7,231 7,026 Capital redemption 8 8 Shared based payments 114 63 Own shares (963) (927) Capital reserves 309,075 245,033 Retained earnings 18,204 15,613 Foreign exchange reserve 73 (177) Total equity shareholders' funds 339,624 272,514 Group cash flow statement for the year ended 31 December 2005 2004 Operating activities Â£000 Â£000 Cash generated from operating activities 14,948 14,412 Taxation (1,315) (236) Interest paid (2,471) (2,456) Pension special contribution (885) - Operating cash flow 10,277 11,720 Investing activities Capital expenditure (46) (37) Expenditure on intangible assets (4) (20) Purchase of investments (71,592) (49,917) Sale of investments 59,508 56,444 Sale of property, plant and equipment 37 1 Cash flow from investing activities (12,097) 6,471 Financing activities Dividends paid (9,196) (8,238) Proceeds of increase in share capital 212 507 Purchase of own shares (36) (360) Net cash flow from financing activities (9,020) (8,091) Net (decrease) / increase in cash and cash (10,840) 10,100 equivalents Cash and cash equivalents at beginning of 24,189 14,266 period Exchange gains / (losses) on cash and cash 250 (177) equivalents Cash and cash equivalents at end of period 13,599 24,189 Cash and cash equivalents comprise Cash and cash equivalents at beginning of 19,295 24,333 period Bank loans and overdrafts (5,696) (144) 13,599 24,189 Segmental Analysis Investment trust Trustee services Total 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 2005 2004 2005 2004 2005 2004 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Segment revenue 10,941 9,961 23,208 19,892* 34,149 29,853* Other income 61 54 46 - 107 54 Cost of sales - - (6,994) (4,983)* (6,994) (4,983)* Administration costs (1,684) (1,487) (10,998) (10,449) (12,682) (11,936) 9,318 8,528 5,262 4,460 14,580 12,988 Interest (net) (2,411) (2,450) 1,008 640 (1,403) (1,810) Return, including profit 6,907 6,078 6,270 5,100 13,177 11,178 on ordinary activities before taxation Taxation (197) (153) (1,207) (995) (1,404) (1,148) Return, including profit 6,710 5,925 5,063 4,105 11,773 10,030 attributable to shareholders Return per ordinary share 5.73 5.06 4.32 3.51 10.05 8.57 Assets 384,362 309,001 28,476 30,079 412,838 339,080 Liabilities (55,579) (50,088) (17,635) (16,478) (73,214) (66,566) Total net assets 328,783 258,913 10,841 13,601 339,624 272,514 *Restated to include recoverable legal fees as revenue and costs of sales Changes in geographical distribution Valuation Purchases Dealing Sales Appreciation/ Investments costs on 31 Â£000 acquisitions Proceeds (depreciation) 31 December December Â£000 Â£000 Â£000 2005 2004 Â£000 Â£000 United Kingdom 223,569 40,256 (219) (31,111) 41,387 273,882 North America 18,942 16,331 (25) (14,631) 3,249 23,866 Europe 32,797 9,263 (41) (13,660) 9,350 37,709 Japan 9,367 5,742 (12) - 4,536 19,633 Other Pacific 19,425 - - (106) 6,338 25,657 304,100 71,592 (297) (59,508) 64,860 380,747 This preliminary announcement does not comprise statutory accounts within the meaning of Section 240 of the Companies Act 1985. The statutory accounts for the year ended 31 December 2005 will be filed with the Registrar of Companies in due course together with the auditors' report thereon. The information for the year ended 31 December 2004 is an extract from the statutory accounts to that date (amended to reflect the change to International Financial Reporting Standards ) which has been filed with the Registrar of Companies. Those accounts included an audit report which was unqualified and which did not contain a statement under section 237(2) or (3) of the Companies Act 1985. By order of the board Law Debenture Corporate Services Limited Secretary 28 February 2006 Copies of the annual report will be available from the Corporation's registered office. The Law Debenture Corporation p.l.c. www.lawdeb.com

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