Final Results

Merchants Trust PLC 07 March 2006 For Immediate Release 7 March 2006 THE MERCHANTS TRUST PLC ANNOUNCEMENT OF PRELIMINARY RESULTS For the year ended 31 January 2006 Highlights • Total return was 25.6%, compared with 22.8% for the FTSE 100 index. • The Net Asset Value per share rose by 21.2% compared with a rise of 18.7% in the FTSE 100 Index. • Net dividends were 18.90p per share in 2005/06, an increase of 5.0%, the twenty-fourth consecutive annual increase. • Ordinary shares yield 4.1% at 459p, compared with 3.1% on the FTSE 100 Index at the close of business on 6 March 2006. Net Asset Value The Net Asset Value per ordinary share at 31 January 2006 was 504.1p compared with 415.8p* at 31 January 2005, an increase of 21.2%. This compares with an increase of 18.7% recorded by the FTSE 100 Index and one of 17.9% recorded by the FTSE 350 Higher Yield Index. Before allowance is made for the impact of borrowings and costs, the capital return on the Company's portfolio was 18.2%. Ordinary Dividend The Board has declared a final dividend of 4.80p per share, payable on 10 May 2006 to holders of record at the close of business on 7 April 2006. This gives a total of 18.90p for the year ended 31 January 2006, an increase of 5.0% when compared with the total distribution of 18.00p paid in respect of the previous year. The Trust has now recorded an unbroken record of dividend increases over the last twenty-four years. Total Return and Earnings The Net Asset Value total return, reflecting both the increase in capital values and dividends paid to Ordinary Shareholders in the last financial year, was 25.6%. The equivalent return recorded by the FTSE 100 index was 22.8%. Net earnings per share rose from 17.58p* to 19.44p or by 10.6%. *restated (refer to Note 5) Page 2 Annual General Meeting The Annual General Meeting of the Company will be held at 20 Moorgate, London EC2R 6DA on Tuesday 9 May 2006 at 12.00 noon. Share Buy Backs The Board has decided to recommend to shareholders that the Company takes renewed powers to buy back its Ordinary Shares. Full details will be sent to shareholders in the forthcoming Annual Report and Accounts. Investment Manager From the end of May 2006 Nigel Lanning will be retiring from RCM and stepping down as the principal fund manager for Merchants. He will be succeeded by Simon Gergel, who has previously managed UK equity income funds at Phillips & Drew and HSBC. Both Nigel and Simon will be attending the forthcoming AGM on 9 May. Prospects Many of the factors which drove shares higher in 2005/6 are still in place. In particular take-over activity has re-asserted itself, especially in the FTSE100 segment of the UK market. Corporate profits and cash flows remain strong although, after such an extended period of economic expansion, there is a risk that forecasts may prove to be too optimistic. There are encouraging signs for further growth in dividends and demand for higher yielding quality UK shares is likely to remain strong. By Order of the Board K J Salt Secretary 155 Bishopsgate London EC2M 3AD For further information, please contact: RCM (UK) Ltd Simon White Head of Investment Trusts RCM (UK) Limited Tel: 020 7065 1539 Page 3 Unaudited preliminary results for the year ended 31 January 2006 were approved for immediate release as undernoted: RESULTS INCOME STATEMENT for the year ended 31 January 2006 2006 (£000s) (£000s) (£000s) Revenue Capital Total Return (Note 3) Net gains on investments at fair value - 96,792 96,792 Income 24,714 - 24,714 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) 19.44p 87.20p 106.64p (basic and diliuted) BALANCE SHEET as at 31 January 2006 2006 (£000s) Investments at fair value 621,948 Net Current Assets 6,118 628,066 Creditors : Amounts falling due after more than one year (113,353) Total Net Assets 514,713 Called up Share Capital 25,526 Share Premium Account 40 Capital Redemption Reserve 56 Capital Reserves : Realised 351,108 : Unrealised 118,104 Revenue Reserve 19,879 Equity Shareholders' Funds 514,713 Net asset value per Ordinary Share (Note 2) 504.1p Page 4 RESULTS INCOME STATEMENT for the year ended 31 January 2005 2005 (£000s) (£000s) (£000s) Revenue Capital Total Return (restated) (restated) (restated) (Note 3) Net gains on investments at fair value - 65,860 65,860 Income 22,674 - 22,674 Investment management fee (722) (1,342) (2,064) Expenses of administration (594) - (594) Net return before finance costs and taxation 21,358 64,518 85,876 Finance costs : interest payable and similar charges (3,408) (6,210) (9,618) Return on ordinary activities before taxation 17,950 58,308 76,258 Taxation - - - Return attributable to Ordinary Shareholders 17,950 58,308 76,258 Return per Ordinary Share (Note 1) 17.58p 57.11p 74.69p (basic and diluted) BALANCE SHEET as at 31 January 2005 2005 (£000s) (restated) Investments at fair value 535,095 Net Current Assets 2,735 537,830 Creditors : Amounts falling due after more than one year (113,319) Total Net Assets 424,511 Called up Share Capital 25,526 Share Premium Account 40 Capital Redemption Reserve 56 Capital Reserves : Realised 322,240 : Unrealised 57,963 Revenue Reserve 18,686 Equity Shareholders' funds 424,511 Net asset value per Ordinary Share (Note 2) 415.8p Page 5 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS For the year ended 31 January 2006 (£000s) (£000s) (£000s) (£000s) (£000s) (£000s) (£000s) (£000s) Called up Share Preference Capital Capital Capital Revenue Total Share Premium Share Redemption Realised Unrealised Reserve Capital Account Capital Reserve Reserve Reserve Net Assets at 31 25,526 40 1,178 56 331,129 (9,234) 9,925 358,620 January 2004 as previously published Reclassification of - - (1,178) - - - - (1,178) 3.65% Preference Stock as a long term creditor Dividends on Ordinary - - - - - - 9,189 9,189 Shares not recognised as a current liability Net Assets at 31 25,526 40 - 56 331,129 (9,234) 19,114 366,631 January 2004 (restated) Revenue Return - - - - - - 17,950 17,950 Dividends on Ordinary - - - - - - (18,378) (18,378) Shares Capital Return - - - - (8,889) 67,197 - 58,308 Net Assets at 31 25,526 40 - 56 322,240 57,963 18,686 424,511 January 2005 (restated) (£000s) (£000s) (£000s) (£000s) (£000s) (£000s) (£000s) (£000s) Called up Share Preference Capital Capital Capital Revenue Total Share Premium Share Redemption Realised Unrealised Reserve Capital Account Capital Reserve Reserve Reserve Net Assets at 31 25,526 40 1,178 56 322,240 57,963 9,497 416,500 January 2005 as previously published Reclassification of - - (1,178) - - - - (1,178) 3.65% Preference Stock as a long term creditor Dividends on Ordinary - - - - - - 9,189 9,189 Shares not recognised as a current liability Net Assets at 31 25,526 40 - 56 322,240 57,963 18,686 424,511 January 2005 (restated) Adjustment to record - - - - - (28) - (28) investments at bid value Revenue Return - - - - - - 19,854 19,854 Dividends on Ordinary - - - - - - (18,661) (18,661) Shares Capital Return - - - - 28,868 60,169 - 89,037 Net Assets at 31 25,526 40 - 56 351,108 118,104 19,879 514,713 January 2006 Page 6 CASH FLOW STATEMENT For the years ended 31 January 2006 and 2005 2006 2006 2005 (£000s) (£000s) (£000s) Net cash inflow from operating activities 22,806 22,381 Servicing of Finance Interest paid (9,557) (9,543) Dividends on Preference Stock (64) (43) Net cash outflow on servicing of finance (9,621) (9,586) Investing Activities Payments to acquire fixed asset investments (139,141) (142,790) Proceeds on disposal of fixed asset investments 146,799 145,334 Net cash inflow from investing activities 7,658 2,544 Equity dividends paid (18,661) (18,379) Increase (decrease) in cash 2,182 (3,040) Page 7 Note 1 The Returns per Ordinary Share have been calculated using a weighted average number of shares in issue during the year of 102,103,936 shares (2005 - 102,103,936). Note 2 The net asset value is based on 102,103,936 Ordinary Shares in issue at the year-end (2005 - 102,103,936). Note 3 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 year. 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. Note 4 The financial information set out in this announcement does not constitute the Company's statutory accounts for the years ended 31 January 2006 or 31 January 2005. The financial information for the year ended 31 January 2005 has been extracted from the audited statutory accounts for that year and this information has now been restated to reflect changes in certain accounting policies (refer Note 5). The auditors report on those accounts was unqualified before this restatement and did not contain a statement under either Section 237(2) or Section 237(3) of the Companies Act 1985. The statutory accounts for the year ended 31 January 2006 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. Page 8 Note 5 The accounts have been prepared using the following changes in accounting policies. FRS 21: 'Events after the Balance Sheet date' requires that final dividends are recognised as a liability when approved by shareholders. Interim dividends are recognised only when paid. FRS 25: 'Financial Instruments: Presentation and Disclosure' requires the reclassification of the Company's 3.65% Cumulative Preference Stock as a financial liability rather than as share capital (non-equity interests in the balance sheet). Preference dividends are now to be treated as an interest expense and shown accordingly in the profit and loss account. FRS 26: 'Financial Instruments: Measurement' requires that fixed asset investments held for trading are measured at their fair value which is deemed to be the bid value of those investments held at the close of business on the accounting date. Previous policy measured fixed asset investments at their mid-market value. The Company however has taken advantage of paragraph 108D of FRS 26, which allows exemption from restating the previous periods' fixed asset investments to bid values. Note 6 Dividends payable on Ordinary Shares in respect of earnings for each period are as follows: 2006 2005 £'000s £'000s Prior period unclaimed (24) - dividends First interim 4.6p 4,697 4.5p 4,595 Second interim 4.7p 4,799 4.5p 4,595 Third interim 4.8p* 4,901 4.5p* 4,595 Final 4.8p* 4,901 4.5p* 4,594 18.9p 19,274 18.0p 18,379 *These dividends are not recognised as a liability under FRS 21 (see Note 5). This information is provided by RNS The company news service from the London Stock Exchange

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