EET Euro Equity

RNS Number:4302M
European Equity Tranche Income Ltd.
24 January 2008

For release on 24 January 2008

        European Equity Tranche Income Limited ("EETI" or the "Company")

                               Investment Update

In its investment update in May 2007 EETI reported that retrospective changes in
the law in Italy had significantly reduced the prepayment penalties for
mortgages.  At that time, a charge of Eur 2.7 million was taken to the aggregate
book value of the Company's Italian investments. While the impact of the change
on the future level of prepayments was uncertain, in the last quarter
prepayments increased significantly and as a consequence EETI received no cash
flow from its Italian investments. If prepayment rates continue at the levels
experienced in the last quarter, it is estimated that EETI would receive no cash
flow from these investments for a period of approximately 3 years.  On just two
quarter's data it is very difficult to assess how much this retrospective change
in legislation is going to impact consumer behaviour in Italy.  It is clear that
prepayment rates are likely to increase more than had been originally
anticipated, but it is not at all certain whether this last quarter is a
temporary spike or part of a long term trend.

For the purpose of estimating the financial effect on the Company, if the
prepayment rates stay at these current high levels, the Company's Investment
Manager estimates that the change will result in a reduction in the region of
Eur 15 million to the aggregate book value of these investments.  In addition,
the Company's earnings would be reduced by approximately Eur 0.5 million per
quarter. The impact of the reduction in cash flow is not expected to prevent the
Company from covering its costs and paying dividends. EETI expects to announce
its quarterly dividend for the 3 months ended 31 December 2007 and its net asset
value as at that date in the week commencing 28 January 2008.

The Company has also reviewed the remainder of its portfolio and other than the
Italian investments referred to above, all are within model expectations.
Accordingly, EETI can see no reason, in the light of prepayments or default
trends, to make any changes to the book value of its other investments.

It is clearly regrettable that such ill-thought out legislation should have been
passed in the Italian parliament.  However, there is very little the Company can
do about this and even if it were to pursue legal steps, the likelihood is it
would take many years to settle.


Enquiries:

Ocean Capital Associates LLP
Edouard Bridel               020 7307 0880

Arbuthnot Securities Limited
Alastair Moreton             020 7012 2138

Anson Fund Managers Limited
Company Secretary            01481 722260




                      This information is provided by RNS
            The company news service from the London Stock Exchange

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