Final Results

JUPITER EUROPEAN OPPORTUNITIES TRUST PLC Preliminary Announcement CHAIRMAN'S STATEMENT The net asset value of your Company's Ordinary Shares rose by 25.4 per cent. in the year under review. The total return on the Company's benchmark index, the FTSE World Europe ex UK Total Return Index, was 26.2 per cent. over the same period. In the UK the FTSE All Share index rose by only 18.8 per cent., justifying our shareholders' decision to hold at least part of their investment portfolios in Europe. Given the Company's minimal exposure during the year under review to mining shares and to Eastern Europe - two of the strongest areas in 2005 and 2006 in spite of a late sell-off - these results will, we hope, be regarded as satisfactory. The Company's position has continued to improve since the financial year end and, as at 31st August 2006, the last practicable date prior to publication of this report, your Company's total assets had increased to £159 million and the net asset value per Ordinary Share had increased to 173.16p. This represents an increase in the net asset value per Ordinary Share since 31 May 2006 of 3.4 per cent., which compares with a rise in the Company's benchmark index of 3.4 per cent. over the same period. Over the five years to 31 May 2006 the net asset value of the Company's Ordinary Shares has risen by 87.6 per cent., which compares well with the 25.9 per cent. total return on the benchmark index over the same period. The discount between the middle market price of the Company's Ordinary Shares on the London Stock Exchange and their net asset value widened slightly during the year from 2.7 per cent. at 31 May 2005 to 3.6 per cent. at the year end. At no point was the discount sufficiently wide as to encourage your Board to exercise their powers to buy Ordinary Shares for treasury or for cancellation. In May and June of this year equity markets became unusually volatile, a sharp slide being succeeded by a partial recovery. The reasons for the sudden weakness may not become apparent for several months, but one likely cause was the less accommodative monetary stance taken by the Japanese authorities back in March which impacted adversely on the so-called "carry trade", whereby investors borrow inexpensive yen in order to finance investments elsewhere. Reduced liquidity will have caused such investors to cut positions, notably in higher- risk areas such as emerging markets. Fears of rising inflation, and higher interest rates in the U.S., China and in Europe itself, also dented confidence. However the subsequent recovery has helped European markets. Your Manager's Review comments in greater detail on performance and on the major background influences which affected it. As he notes, performance was enhanced by judicious use of gearing. Since the year end we have renegotiated our borrowing facilities on terms more advantageous to your Company. Corporate Governance We had expected that this year's Report and Accounts would include an Operating and Financial Review (`OFR') but the Chancellor abolished this item last November. He expected plaudits, but the City had decided that an OFR was basically a Good Thing, since it gave shareholders a better idea of what their company was aiming to achieve and how far it was succeeding in the achievement thereof. It also forced directors of companies to think about strategy and to consider the attendant risks - another Good Thing. Hence the adoption of the Business Review - effectively an OFR in all but name. You are welcome to question us on it at the Annual General Meeting. Shareholder power is set to increase. This autumn will see changes in company law, designed to make company directors more accountable, enshrined in a Bill and, next year, in an Act of Parliament. The general intention is laudable, but execution may prove tricky unless the initial proposals are amended to some degree. For example, directors will be required to promote the "success" of a company, success being defined as "enlightened shareholder value", which itself involves assessing the long term consequences of any decision. Meanwhile shareholders will be entitled to sue directors for negligence, default, breach of duty or breach of trust. Presumably, therefore, they can be penalised for getting short term decisions wrong; Lord Keynes pointed out, after all, that "the long term is a succession of short terms and in the long term we are all dead". In short, directors will be damned if they do a thing and damned if they don't. It is to be hoped that such anomalies will be ironed out in the drafting process, otherwise the cost of D & O ("Directors & Officers") liability insurance will rise dramatically, lawyers will do quite well, and it will be harder to persuade individuals to serve on company boards. Investment Trusts In the retail marketplace it is generally accepted that investment trusts, as a sector, have generally not grown at the rate achieved by open-ended funds such as unit trusts and OEICs. This is largely because independent financial advisers have often found it easier to sell products which generate commission for themselves out of the money invested rather than to sell products which do not. Many of the institutional supporters of investment trusts, such as insurance companies, pension funds and private client stockbrokers, have begun to divert some of their traditional equity market asset allocation to `alternative' investments such as hedge funds, private equity (what used to be called `unquoted investments', beloved of actuaries as their prices do not change much and are theoretically not volatile), property and even commodities. However, we firmly believe that the plus points for investment trusts such as your Company remain as powerful as ever. The advantages of the closed ended structure include the ability to sell when markets are high without the need to invest a flood of new money from subscribers and, equally, to buy at the bottom when open-ended funds are forced to sell stock in order to meet redemption requests from investors. Moreover, investment trusts can manage their gearing to take advantage of market opportunities and, thanks to the introduction of treasury shares, they can seek to manage the market rating of their shares too. Investment trusts are inexpensive to run and their expense ratios are low compared with open ended funds such as unit trusts, hedge funds and private equity funds. Investment trusts with a particular sectoral or geographical specialisation will continue to earn inclusion in a well diversified portfolio for both retail and institutional investors, always provided that they generate top-class investment performance. We believe that your Company has been a success story since launch, will continue to deliver shareholder value, and will more than hold its own against the investment alternatives out there in the market place today. H.M. Priestley Chairman 7th September 2006 MANAGER'S REVIEW The net asset value of the Company's Ordinary Shares rose by 25.4 per cent. during the twelve months to 31 May 2006. Borrowings were gradually increased over the summer of 2005 from €14.7m at the beginning of the financial year to €22.2m in September. Borrowings were further increased to €28.9m in March 2006. With rising asset values, the Company's use of bank debt to gear its investment portfolio has added to returns. The Company's trading subsidiary, JEOT Securities Limited, made a pre- tax profit of £102,000. Equity markets around the world performed well in the year under review, driven by strong economic growth, particularly in China, India and other emerging markets. For sterling investors, the FTSE World index rose by 18.4 per cent. and European equities once again outperformed, doing better than both the US (up 7.5 per cent.) and UK (up 22.8 per cent.) markets. Of the major equity markets, Japan, up around 33 per cent. during the period, was the strongest performer as overseas investors priced in the end of deflation and the early stages of an economic upturn. The financial year started with the rejection of the EU constitution by French and Dutch voters but, despite the political headlines, the impact on the portfolio was minimal. Even as the `No' votes were being counted, Unicredito and HVB Group announced Europe's biggest ever cross-border bank merger. This shows that, despite political problems in Europe, the corporate sector is making its own way. We have always mitigated the effects of European political intransigence by focusing on businesses that are not overly dependent on the eurozone's economy or its politicians. This is an approach which has produced consistent results. European stock markets rose strongly during the period under review, supported by a number of factors: economic activity picked up; companies reported earnings growth that was better than expected; the IFO index of German business confidence (a good leading indicator of German GDP growth) rose to its highest level since reunification in 1991. Underpinning all these factors were low interest rates. `Cheap' money created an appetite for risk and fuelled an extraordinary boom in private equity and M&A activity. A combination of low borrowing costs and strong company cash flows has encouraged private equity to raise large amounts of leveraged financing in the region. Europe's largest ever leveraged buy-out to date occurred in November when a private equity consortium agreed to pay €12bn in cash for TDC - Denmark's leading telecoms company. Our performance was hampered by underweight positions in strong performing sectors, notably the banking sector, oils, commodities and other cyclicals. These are all areas where we tend to be underweight as they contain relatively few businesses which meet our investment criteria. These sectors performed well variously because of private equity interest and because of a surge in profitability on the back of strong global growth. Nevertheless, we are confident that our policy of investing in structural, long term `winners' will lead to outperformance over a reasonable period. Results from our main holdings confirmed our confidence that these businesses will deliver sustainable progress. Since the year end Associated British Ports, the portfolio's largest holding as at the year end, was taken over at 9.10p per share which has raised proceeds of £15.039 million for your Company. As a result of this transaction your Company's exposure to UK listed companies has reduced from 22.2 per cent. to 14 per cent. Novozymes, the world leader in industrial enzymes, reported good results. Of particular interest was the strong growth seen in demand for its enzymes to produce bioethanol. This market has been growing strongly and will receive a further boost if the US is serious in its aims to reduce dependence on Middle Eastern oil. Neopost announced results well above expectations. This mail systems and logistics company remains very cash generative, raising its dividend by 47 per cent. while announcing an exceptional dividend and further share buybacks. Novo Nordisk, the market-leading diabetes care and biopharmaceuticals group, reported full-year figures with both sales and profits up 16 per cent.. The company's insulin production now accounts for half of all insulin sold globally. Essilor International, the world's leading manufacturer and distributor of ophthalmic lenses, reported another year of very good results as margins continued to increase. Besides outperforming its rivals in mature markets, Essilor's long-term growth prospects remain excellent, particularly in emerging markets such as India and China. DNB, the Norwegian bank, reported good results. Its substantial dividend increase was indicative of management's confidence in the future outlook for growth. DNB can be regarded as an indirect play on the strong oil price as Norway, an oil-based economy, is getting richer and the benefits of this are flowing back to the banking sector. Syngenta, the crop protection group, also delivered good results. This business continues to take market share from competitors. New positions were taken in a number of companies across a broad range of business activities: Carphone Warehouse, the UK mobile phone retailer and provider of `triple play' telecomm services; Deutsche Postbank, the largest German retail bank; Quick Restaurants, a Franco-Belgian fast food chain and Geophysique, a world leader in seismic data and equipment. Most purchases were additions to existing holdings: Euler Hermes (credit insurance), Lonza (contract manufacture of complex bio-pharmacological drugs), Vopak, (world leader in oil and chemicals storage at major ports). The position in Reed Elsevier was increased. We regard the latter as a fundamentally strong business even if the publishing industry is currently out of fashion. One of the main disposals from the portfolio was the German temporary work agency DIS which was taken over by the Swiss company Adecco. Other sales were of Coloplast (healthcare reforms affect competitive landscape), Celesio (profit taking after this German pharmacy chain signalled a move to acquisition strategy), Techem (valuation) and a reduction in Fimalac (after 20 per cent. disposal of its ratings agency Fitch). Another sale was that of Adidas following their takeover of Reebok. We considered that the valuation reflected undue optimism. Investment Outlook No matter what metric one chooses, for many of the most successful businesses, company profitability, as a share of GDP, has rarely been higher. Typically, we should expect a reversion to the mean, yet there are some good reasons why strong profitability will continue. Productivity is still improving. This phenomenon is inextricably linked with the benefits of the application of technologies (mainly digital), itself part of ever increasing globalisation. Against this background `world class' European companies have a great opportunity. Within Europe companies are able to rationalize effectively; the enlargement of the European Union to include Central and East European countries has been an important factor in empowering management teams. Companies in core eurozone states now outsource to these new entrants more cheaply than to Asia, as they offer cheaper and faster transportation of many goods and tax `competition' between European countries is to the benefit of many companies. Your Company's returns will depend on the ability to identify well-managed companies with a `winning franchise', that benefit from structural trends and their ability to enter new markets. In an environment where rapid technological advances help good companies selling leading products in a global marketplace to thrive, we remain confident of our ability to locate an attractive selection of long-term winners. For many European companies there has never been a better time to be in business. Alex Darwall Jupiter Asset Management Limited 7th September 2006 CONSOLIDATED INCOME STATEMENT for the year ended 31 May 2006 2006 2005 (Restated) Revenue Capital Total Revenue Capital Total return return return return return return £'000 £'000 £'000 £'000 £'000 £'000 Gains on investments at fair value - 27,113 27,113 - 20,848 20,848 through profit or loss Foreign exchange losses on loan - (195) (195) - (168) (168) Other exchange gains / (losses) - - - - (4) (4) ______ _____ _____ _____ _____ _______ - 26,918 26,918 - 20,676 20,676 Investment income 2,765 - 2,765 1,970 - 1,970 Dealing profits of subsidiary 59 - 59 253 - 253 Foreign exchange gains/ (losses) by subsidiary 14 - 14 (5) - (5) ______ _____ _____ _____ _____ _______ Total income 2,838 26,918 29,756 2,218 20,676 22,894 ______ _____ _____ _____ _____ _______ Investment management fee (1,243) - (1,243) (962) - (962) Investment performance fee - - - (1,524) (1,524) Other expenses (290) - (290) (376) - (376) ______ _____ _____ _____ _____ _______ Total expenses (1,533) - (1,533) (1,338) (1,524) (2,862) ______ _____ _____ _____ _____ _______ Profit before finance costs and tax 1,305 26,918 28,223 880 19,152 20,032 Finance costs (514) - (514) (312) - (312) ______ _____ _____ _____ _____ _______ Profit before taxation 791 26,918 27,709 568 19,152 19,720 Taxation (337) - (337) (124) - (124) ______ _____ _____ _____ _____ _______ Profit after taxation 454 26,918 27,372 444 19,152 19,596 ______ _____ _____ _____ _____ _______ Return per Ordinary Share 0.56p 33.37p 33.93p 0.55p 23.74p 24.29p The total column of this statement is the income statement of the Group. The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of Investment Trust Companies (`AITC'). 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 31 May 2006 2006 2005 (Restated) £'000 £'000 Non current assets Investments held at fair value through profit or loss 154,390 118,508 _______ _______ Current assets Investments 3,194 1,525 Receivables 2,221 401 Cash and cash equivalents - 41 _______ _______ 5,415 1,967 _______ _______ Total assets 159,805 120,475 _______ _______ Current liabilities (4,878) (2,796) _______ _______ Total assets less current liabilities 154,927 117,679 Non current liabilities Bank loan (19,835) (9,959) _______ _______ Net Assets 135,092 107,720 ======= ====== 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 Retained earnings 57,823 30,451 _______ _______ Total equity 135,092 107,720 ======= ====== Net asset value per Ordinary Share 167.47p 133.54p Approved by the Board of Directors and authorised for issue on 7th September 2006. H.M. Priestley Chairman CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share Share Special Redemption Retained Capital Premium Reserve Reserve Earnings Total £'000 £'000 £'000 £'000 £'000 £'000 For the year ended 31 May 2006 31 May 2005 807 38,843 37,597 22 30,451 107,720 Net profit for the year - - - - 27,372 27,372 ______ _____ _____ ______ _______ _______ Balance at 31 May 2006 807 38,843 37,597 22 57,823 135,092 ______ _____ _____ ______ _______ _______ For the year ended 31 May 2005 31 May 2004 807 38,843 37,597 22 10,855 88,124 Net profit for the year - - - - 19,596 19,596 ______ _____ _____ ______ _______ _______ Balance at 31 May 2005 807 38,843 37,597 22 30,451 107,720 ______ _____ _____ ______ _______ _______ CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 May 2006 2006 2005 (Restated) £'000 £'000 Cash flows from operating activities Purchases of investments (65,276) (41,874) Sales of investments 55,201 38,256 Realised losses on foreign currency - (4) Investment income received 2,737 1,885 Deposit interest received 17 60 Investment management fee paid (1,116) (666) Sales less purchases of dealing subsidiary (2,120) (202) Other cash receipts 73 - Other cash expenses (1,794) (357) _______ _______ Net cash outflow from operating activities (12,278) (2,902) before finance costs and taxation Finance costs (446) (312) Taxation (452) (127) _______ _______ Net cash outflow from operating activities (13,176) (3,341) _______ _______ Financing activities Long term loan received 9,681 - _______ _______ Decrease in cash (3,495) (3,341) _______ _______ Decrease in cash and cash equivalents (3,495) (3,341) Cash and cash equivalents at start of year (520) 2,821 _______ _______ Cash and cash equivalents at end of year (4,015) (520) _______ _______ NOTES 1. Income 2006 2005 Group Group £'000 £'000 Income from investments Dividends from United Kingdom companies 604 346 Dividends from overseas companies 2,148 1,561 2,752 1,907 Other income Deposit interest 13 63 Profit on dealings by subsidiary 73 248 86 311 Total income 2,838 2,218 Total income comprises Dividends 2,752 1,907 Interest 13 63 Other income 73 248 2,838 2,218 Income from investments Listed in the UK 604 346 Listed overseas 2,148 1,561 2,752 1,907 2. Reconciliation of profit before finance costs and taxation to net cash outflow from operating activities 2006 2005 Group Group (Restated) £'000 £'000 Profit before finance costs and taxation 28,223 20,032 Gains on fixed asset investments (27,113) (20,848) Foreign exchange losses on loan 195 168 Purchases of investments (65,276) (41,874) Sales of investments 55,201 38,256 Increase in prepayments and accrued income (182) (39) Increase in current asset investments (1,969) (455) (Decrease) /increase in other creditors and accruals (1,357) 1,858 ______ ______ Net cash outflow from operating activities before interest and taxation (12,278) (2,902) 3. Non current liabilities 2006 2005 Group and Company Group and Company £'000 £'000 Bank loan 19,835 9,959 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 £20 million. The amount outstanding at 31 May 2006 was £19.835 million (€28.9 million) (2005: £9.959 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 3.6006 per cent. p.a. (2005: 2.926 per cent.). These are the first annual accounts to be prepared in accordance with International Financial Reporting Standards (IFRS). Previously the accounts were prepared in accordance with UK General Accepted Accounting Practice (UK GAAP) including the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies'. UK GAAP differs in certain respects from IFRS. When preparing the accounts to 31 May 2006, the Directors have amended certain accounting and valuation methods applied in the UK GAAP accounts to comply with IFRS as follows: Investments valued at fair value (bid price) rather than mid-market value; No equity dividend accrued unless declared; Transaction costs are expensed as they are incurred rather than carried as part of the cost of investment. The Annual General Meeting of the Company has been convened for Tuesday 3rd October 2006. As per the Company's stated policy there will be no dividend paid. The preliminary announcement is prepared on the same basis as set out in the Statutory Accounts for the year ended 31st May 2006 and was approved by the Board of Directors on 7th September 2006. 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 2006; 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 2006 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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