Final Results Preliminary Results

JUPITER EUROPEAN OPPORTUNITIES TRUST PLC Preliminary Announcement CHAIRMAN'S STATEMENT It is always a pleasure to report on a year of excellent performance. The Company's net asset value per share rose by 22.3 per cent in the year under review, compared with a 19.3 per cent total return on the FTSE World Europe ex UK Total Return Index, our benchmark. For shareholders the return has been even better, since the discount of the share price to the net asset value per share (the "discount") narrowed from 9.6 per cent to 2.7 per cent (as at the Company's financial year end). Two years ago the discount was 17.7 per cent. The Company's total assets have now risen to above £117 million and, for the first time in your Company's history, a performance fee is payable to the Manager. Although the Company has beaten its benchmark index in every financial year since launch, your Manager has had to wait until now for this reward. Unluckily for them (and indeed for us all) the Company started life just as the most sustained bear market for decades was getting under way. Discount Management In last year's Chairman's Statement I described a newly-available tool in the management of the discount, namely the facility to buy in and hold shares for treasury pending their subsequent reissue or cancellation. At last year's Annual General Meeting we asked for shareholders' permission to use this facility, subject to an undertaking that any shares acquired for treasury would only be reissued if the discount was lower, and the price higher, than at the time of purchase. Moreover, if shares bought for treasury were not reissued within six months, they would automatically be cancelled. I note that mathematicians might argue that the level of the discount is the important element, and that buying at a discount of `x' and reissuing at a discount of less than `x' creates value irrespective of what the share price has done in the meantime. However, our policy remains that any treasury shares held by the Company should be reissued at a higher price than their purchase price. Although no shares were bought into treasury during the past financial year, we came close to doing so and it has been a valuable power to have had available. Accordingly, we are asking for your permission to renew this facility at the forthcoming Annual General Meeting. Plus ça change.... Europe has recently dominated the headlines, although certain European leaders would have preferred that the reasons were other than the principal cause, namely the rejection of the proposed European constitutional treaty by a significant majority of the French and Dutch electorates. There has even been talk of the break-up of the Eurozone, stimulated by the Italian welfare minister's suggestion that his country might abandon the euro in favour of the lira. Italy is arguably in recession, and such a move might rejuvenate the economy just as Britain's sudden (and, by Britain at least, unplanned) ejection from the Exchange Rate Mechanism in 1992 turned out to have been a blessing in disguise. Already the spread between Italian and German 10 year euro-denominated bond yields has widened to its greatest extent in over two years. The writer never expected to find himself agreeing with our current Prime Minister, but the choice for Europe is simply to reform, or wither. The European Central Bank has held the discount rate at 2 per cent since June 2003. There is now a chance that the next move might be downwards. The euro has already slipped, although in sterling terms it is back to where it was a year ago. As regards your Company, the effect on the portfolio should be minimal of itself; our holdings are in companies which should prosper whatever the euro does. However a weaker euro should benefit the profits of European exporters, and this perception has sent European shares higher since the French "Non" vote. A glance at our balance sheet shows that a year ago we had a positive cash balance; now we are geared into what, for the moment at least, looks like a healthy market. It could be that an interesting year lies ahead (and not merely in the Chinese sense). We look forward to reporting on it a year hence. H M Priestley Chairman 25th August 2005 MANAGER'S REVIEW Your Company performed better than the benchmark index during the twelve months under review. Borrowings were maintained at €14.7 million throughout the year. With rising asset values, this added to returns. The trading subsidiary JEOT Securities made a pre tax profit of £0.3 million. After a relatively poor second half of 2004, when the absence of steel and other cyclical stocks in the portfolio hurt performance, there was a marked improvement in the second six months. This was driven by fundamentals as `our' companies, in general, reported good profits progress. Our focus on companies which do not depend unduly on a particular set of economic circumstances obviates, to some extent, the impact of macro factors such as rising oil prices (up by about 50 per cent. in sterling) and currency movements (over the period the US dollar fell by 1.1 per cent. against the euro) and interest rates (rates were lower). We continue to try to identify companies with particular, sustainable characteristics that allow them to take advantage of structural changes and trends. The FTSE World Europe ex UK Index (+15.8 per cent. capital return) again outperformed the FT World Index (+11.1 per cent.). The relatively good performance of European equity markets is instructive. It underlines our view that domestic economic performance (where the European economy is clearly disappointing) is not necessarily the most important determinant of equity performance. Europe is struggling with high unemployment, poor public finances and low consumer demand. Italy is in recession and Germany barely growing at all. (Spain, on the other hand, grew at around 3 per cent. in 2004). Economists expect 1.4 per cent. GDP growth in the Eurozone this year (after 1.8 per cent. in 2004) but if the pattern of recent years is repeated the economists will continue their record of serial over optimism. Yet equities have done well. This apparent paradox is explained in part by the fact that there has been a trend to greater internationalization and so particular economic regions are, in general, having relatively less impact. World trade as a proportion of world GDP has risen from about 19 per cent. at the start of the 1990s to about 28 per cent. now. For companies that have `winning' products and services the opportunity to grow businesses has never been better. The corollary of this is that those companies with `inferior' products and services are likely to find competition ever tougher. In terms of sectors, commodity stocks, notably oils and steel, performed relatively well on the back of strong global demand. Banks too outperformed partly on speculation of merger activity. In fact, this culminated in a big Italian/German banking merger. Ironically this deal was concluded at just the time when the voters across Europe rejected the proposed European Constitution, neatly underlining our view that progress at the corporate level is increasingly divorced from political developments. Sectors which depend more on European consumer demand - retail, food and drinks, automotive and telecommunications - all under-performed reflecting low consumer confidence in Europe. There are a few themes particular to Europe. The new East European members of the European Union (EU) are having a beneficial effect. The possibility of moving operations to Eastern Europe has had the effect of empowering German management teams. And lower tax rates in Eastern Europe have helped put downward pressure on corporate tax rates across the rest of Europe. The difficult background in Europe has spurred European management teams to become both more rigorous and more international. If `fortress Europe' describes the political elite's mentality, the same can not be said of the corporate sector. As interest rates have come down in Europe so Mergers & Acquisitions and private equity activity have increased. There were a number of changes in your Company's portfolio. New positions were taken in a range of companies across different sectors and countries: DIS, the German temporary work agency, BioMerieux, the French `in vitro' diagnostics company, Johnson Matthey, a world leader in catalysis, Barry Callebaut, the world's leading chocolate company, Lonza, the Swiss based pharmaceutical contract manufacturer, Ypsomed, the Swiss company which manufactures medical injection systems, Wienerberger, the world leader in bricks, Indra, the Spanish defence and electronics company, and Vopak, a world leader in the business of storing chemicals and oils. Most purchases reinforced existing holdings: positions in Euler Hermes, Elsevier, Imerys, and Air Liquide were all increased following good results. The principal sales were of Medion (we had concerns about the quality of the business model), FMC (sold on valuation grounds) and Autoliv (tougher trading background). Our holding in RAC was sold following a takeover bid. Investment outlook There is a realistic prospect of significant political progress in Germany (though this does not appear to be the case in France or Italy). Such a development would be welcome. Yet it is not the most important factor shaping our prospects. The main factor is our ability to identify companies with a `winning' franchise, that benefit from structural trends and that can develop new markets. As world trade (globalization) continues to expand, the political and economic backdrop in Europe is ever less important. Just as politicians are frustrated at their inability to control companies through tax, labour laws and other traditional instruments of government, so companies are `liberated' by their ability to sidestep particular governments and, with the benefits of technology, ability to develop new markets. Our objective is to identify those companies whose success depends as far as possible on their own efforts; companies which have strong proprietary characteristics. Such companies can flourish in the current environment. It is this belief that underpins our confidence for the future. Alex Darwall Manager Jupiter Asset Management Limited CONSOLIDATED STATEMENT OF TOTAL RETURN (Incorporating the Revenue Account) for the year ended 31st May 2005 2005 2004 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Realised (losses) / gains on - (488) (488) - 1,575 1,575 investments Increase in unrealised appreciation of - 21,396 21,396 - 17,371 17,371 fixed asset investments ______ ______ ______ ______ ______ ______ Total capital gains on investments - 20,908 20,908 - 18,946 18,946 Foreign exchange (losses) / gains on - (168) (168) - 901 901 loan Other exchange losses - (4) (4) - (62) (62) Income 2,218 - 2,218 2,584 - 2,584 Investment management fee (962) - (962) (811) - (811) Investment performance fee - (1,524) (1,524) - - - Other expenses (376) - (376) (389) - (389) ______ ______ ______ ______ ______ ______ Net return before finance costs 880 19,212 20,092 1,384 19,785 21,169 and taxation Interest payable (312) - (312) (363) - (363) ______ ______ ______ ______ ______ ______ Return on ordinary activities 568 19,212 19,780 1,021 19,785 20,806 before tax Tax on ordinary activities (124) - (124) (297) - (297) ______ ______ ______ ______ ______ ______ Return on ordinary activities after 444 19,212 19,656 724 19,785 20,509 tax ______ ______ ______ ______ ______ ______ Return per Ordinary share 0.55p 23.82p 24.37p 0.89p 24.53p 25.42p The revenue column of this statement is the profit and loss account of the Group. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year. CONSOLIDATED BALANCE SHEET as at 31st May 2005 2005 2004 £'000 £'000 Fixed assets Investments 118,568 93,335 ________ ________ Current assets Investments 1,525 1,070 Debtors 401 1,148 Cash at bank 41 2,821 ________ ________ 1,967 5,039 Creditors: amounts falling due within one year (2,796) (459) ________ ________ Net current (liabilities)/assets (829) 4,580 ________ ________ Total assets less current liabilities 117,739 97,915 Creditors: amounts falling due after more than one year (9,959) (9,791) ________ ________ Net assets 107,780 88,124 Capital and reserves Called up share capital 807 807 Share premium 38,843 38,843 Special reserve 37,597 37,597 Redemption reserve 22 22 Capital reserve - realised (8,044) (6,028) Capital reserve - unrealised 37,519 16,291 Revenue reserve 1,036 592 ________ ________ Total equity shareholders' funds 107,780 88,124 Net asset value per ordinary share 133.61p 109.25p CONSOLIDATED CASH FLOW STATEMENT for the year ended 31st May 2005 2005 2004 £'000 £'000 Operating activities Net cash inflow from operating activities 720 4,487 _______ _______ Servicing of finance Interest paid (312) (390) _______ _______ Net cash outflow from servicing of finance (312) (390) _______ _______ Taxation Net tax paid (127) (411) _______ _______ Capital expenditure and financial investment Purchase of fixed asset investments (41,874) (31,519) Sale of fixed asset investments 38,256 38,391 _______ _______ Net cash (outflow) / inflow from capital expenditure and (3,618) 6,872 financial investment _______ _______ Net cash (outflow) / inflow before financing (3,337) 10,558 _______ _______ Financing Long term loan received - 4,925 Long term loan repaid - (11,210) _______ _______ Net cash outflow from financing - (6,285) _______ _______ (Decrease) / increase in cash (3,337) 4,273 NOTES 1. Income 2005 2004 Group Group £'000 £'000 Income from investments Dividends from United Kingdom companies 346 414 Scrip dividends - 10 Dividends from overseas companies 1,561 1,251 1,907 1,675 Other income Deposit interest 63 52 Profit on dealings by subsidiary 248 857 311 909 Total income 2,218 2,584 Total income comprises Dividends 1,907 1,675 Interest 63 52 Other income 248 857 2,218 2,584 Income from investments Listed in the UK 346 414 Listed overseas 1,561 1,261 1,907 1,675 2. Reconciliation of consolidated operating profit to net cash outflow from operating activities 2005 2004 Group Group £'000 £'000 Net revenue before finance costs and taxation 880 1,384 Increase in prepayments and accrued income (39) - (Increase)/decrease in current asset investments (455) 3,075 Increase in other creditors and accruals 1,858 28 Investment performance fee charged to capital (1,524) - ______ ______ 720 4,487 3. Creditors : amounts falling due after more than one year 2005 2004 Group & Company Group & Company £'000 £'000 Bank loan 9,959 9,791 The Company's bank loan is with Commerzbank AG, London with a loan facility available up to a maximum of 45 per cent. of the Group's total assets but not exceeding £30 million. The amount outstanding at 31st May 2005 was £9.959 million (€14.7 million) (2004: £9.791 million (€14.7 million)). The interest rate is variable and is linked to Euribor plus a margin of 0.8 per cent. p.a. The latest all-in rate being applied to the loan is 2.926 per cent. p.a. (2004: 2.918 per cent.). The Annual General Meeting of the Company has been convened for Tuesday 20th September 2005. The preliminary announcement is prepared on the same basis as set out in the Statutory Accounts for the year ended 31st May 2004 and was approved by the Board of Directors on 25th August 2005. The above financial information does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The Auditors have reported on the Statutory accounts for the year ended 31st May 2005; their report was unqualified, and did not contain statements under s237(2) or (3) Companies Act 1985. Statutory accounts for the year ended 31st May 2005 including an unqualified audit report will be delivered to the Registrar of Companies in due course. The Annual Report and Accounts are expected to be posted to all registered shareholders shortly and copies may be obtained from the registered office of the Company at 1 Grosvenor Place, London SW1X 7JJ.

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