Annual Financial Report

EP GLOBAL OPPORTUNITIES TRUST PLC ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2011 The full Annual Report and Financial Statements can be accessed via the Company's website at www.epgot.com or by contacting the Company Secretary by telephone on 0131 270 3800. HIGHLIGHTS * At 31 December 2011 our net asset value per share was 169.9p, giving a total return for the twelve months of -8.4 per cent. * The share price closed the year at 167p, which was a 10.6 per cent decline from the price at the end of 2010. At the year end, the share price represented a discount of 1.7 per cent to the net asset value per share compared to 0.7 per cent at the end of 2010. * In March 2011 we merged with Anglo & Overseas and the issue of new shares to Anglo & Overseas shareholders increased the size of the Company by Â£59 million, almost doubling the size of the Company. * The total expense ratio ("TER") reduced to 0.8 per cent in 2011 from 1.3 per cent in 2010, benefiting from the increased size of the Company and a one-off rebate of Â£236,000 of part of the investment management fee as a consequence of the merger. The TER would have been 1.0 per cent if part of the investment management fee had not been waived. * Our revenue return per share increased by 56 per cent to 5.0p on a weighted average basis, and by 47 per cent to 4.7p based on the number of shares in circulation at the year end. The Board is pleased to recommend a 50 per cent increase in the dividend to 4.2p per share. * We continued our policy of buying in shares with a view to maintaining the share price at close to the net asset value per share. During 2011, we bought in a net 3.3 million shares, having issued 1.65 million shares from treasury when the shares were trading at a premium to net asset value. * During 2011 we entered into an agreement with Scotiabank Europe PLC to borrow up to Â£5 million. Subsequent to the merger with Anglo & Overseas, we increased the amount we could draw down to Â£10 million, equating to approximate potential gearing of 10 per cent of net assets. At the year end, the equivalent of Â£4.8 million in Japanese yen and US dollars had been drawn down. FINANCIAL SUMMARY Results for year 31 December 31 December Change 2011 2010 Shareholders' funds Â£95,092,000 Â£51,620,000 84.2% Net asset value per ordinary share 169.9p 188.2p (9.7)% ("NAV") Share price 167.0p 186.8p (10.6)% Share price discount to NAV 1.7% 0.7% Revenue return per ordinary share* 5.0p 3.2p 56.3% Dividend per ordinary share** 4.2p 2.8p 50.0% * Based on the weighted average number of shares in issue during the year excluding own shares held in treasury. ** Proposed dividend for the year. Year to Year to 31 December 2011 31 December 2010 Ordinary share Ordinary share Year's high/low Share price - high 187.3p 186.8p - low 139.5p 159.5p NAV - high 193.9p 193.1p - low 154.4p 162.0p Share price premium /(discount) to NAV - high 2.8% 0.5% - low (10.8)% (6.6)% Cost of running the Company Total expense ratio* 0.8%** 1.3% * Based on total expenses for the year and average monthly net asset value. ** The total expense ratio would have been 1.0 per cent if investment management fees of Â£236,000 had not been waived as a consequence of the merger with Anglo & Overseas. PERFORMANCE RECORD Share Share price Revenue Net asset price discount return Dividend value per per to net per per Shareholders' ordinary ordinary asset ordinary ordinary funds share share value share share Year ended 31 December 2004* Â£26.1m 116.4p 110.5p 5.1% 0.6p 0.4p 2005 Â£52.2m 156.2p 154.5p 1.1% 1.1p 0.8p 2006 Â£58.8m 172.8p 170.0p 1.6% 2.1p 1.8p 2007 Â£57.7m 177.2p 160.0p 9.7% 2.7p 2.3p 2008 Â£46.4m 150.4p 132.5p 11.9% 3.9p 3.1p 2009 Â£50.7m 175.9p 172.0p 2.2% 2.7p 2.4p 2010 Â£51.6m 188.2p 186.8p 0.7% 3.2p 2.8p 2011 Â£95.1m 169.9p 167.0p 1.7% 5.0p 4.2p** * Period 13 November 2003 to 31 December 2004. The Company commenced operations on the admission of its shares to listing on the London Stock Exchange on 15 December 2003. ** Proposed dividend for the year. CHAIRMAN'S STATEMENT Results At the year end, our net asset value per share was 169.9p, giving a total return for the twelve months of -8.4 per cent. We do not have a benchmark against which we monitor the performance of the net asset value and the total return. However, your Board does take note of the investment performance of your Company compared to the major stock market indices. The total return for the FTSE All-World Index was -6.6 per cent and for the FTSE All-Share Index was -3.5 per cent. The share price closed the year at 167p, which was a 10.6 per cent decline from the price at the end of 2010. At the year end, the share price represented a discount of 1.7 per cent to the net asset value per share compared to 0.7 per cent at the end of 2010. We continued our policy of buying in shares with a view to maintaining the share price at close to the net asset value per share. At times, this has been quite challenging because of large intra-day swings in share prices which have become much more frequent. We remain committed to the policy and, during 2011, we bought in a net 3.3 million shares, having issued 1.65 million shares from treasury when the shares were trading at a premium to net asset value. Stock market and investment performance It was a difficult year for equity investors. While stock markets commenced the year on a firm note, they ran out of upward momentum early in 2011. In general, share prices held up during the first half of the year but then fell sharply in the third quarter. The final quarter saw a recovery but it was insufficient to recover earlier losses. There was plenty for investors to worry about as we entered 2011. A rise in food prices was leading to an increase in inflationary pressures. Energy prices were also in an uptrend, as the "Arab Spring" brought into question the reliability of oil supplies from the countries affected. A number of countries, particularly in Asia and Latin America, and, importantly, China had started to raise interest rates to combat these inflationary pressures. The euro crisis was at an early stage with long-term interest rates in Greece rising sharply and contagion spreading to Ireland, Italy, Portugal and Spain, pushing up their borrowing costs. This put pressure on those countries to raise taxes and cut spending. The UK was taking similar measures to start the process of bringing its budget deficit under control. The US stood out as the one major economy still pursuing stimulative economic policies, both fiscal with tax cuts and monetary by buying in its own long-term bonds, commonly known as "quantitative easing". It was the Japanese stock market that was the first to suffer a major setback when the country was hit by the tragic effect of the earthquake and subsequent tsunami in March 2011. By the year end, the Japanese Topix Index was down 18.9 per cent, although the strength of the yen over the period reduced this to a 13.9 per cent fall in sterling terms. The S&P Composite Index in the US was the one major market which recovered its earlier losses in the fourth quarter, ending the year at the same level at which it started. The worst performing region was Europe ex UK which suffered from the on-going crisis over the government finances of the southern European countries. The FTSE All-World European Index was down 18.0 per cent when measured in sterling. Asian markets were also very weak with the FTSE All-World Asia Pacific ex Japan Index declining by 17.4 per cent in sterling terms. Asian shares had done particularly well in 2010 and by the end of that year valuations had been looking a bit stretched. (All index figures stated are capital returns.) In relative terms, we benefited in 2011 from having only a small investment in the regional Asian markets but we were not helped by having around half our assets invested in the Japanese and European markets. The main change to the portfolio during the latter part of the year was to increase our investment in Asia as better value began to appear in the region. A more detailed review of our activities is given in our Investment Manager's report below. Holding in Edinburgh Partners We have been encouraged that our Investment Manager, Edinburgh Partners, has continued to see its profits grow despite a difficult year in equity markets. This led us to revalue our equity stake in Edinburgh Partners by Â£200,000 to Â£1.7 million. Merger with Anglo & Overseas As reported in last year's annual report, we merged with Anglo & Overseas in March 2011. This increased the assets of the Company by Â£59 million, almost doubling the size of the Company. Anglo & Overseas was also managed by Edinburgh Partners and had the same value based investment philosophy as EP Global Opportunities Trust. There was an obvious logic in putting the two together. Your Board believes that increasing the size will improve the marketability of the shares and reduce the annual running costs as a percentage of total assets. The total expense ratio is shown in the Financial Summary above. The total expense ratio did benefit in 2011 from a one off rebate of part of the investment management fee resulting from the merger. Gearing In last year's report, we detailed the introduction of a modest amount of gearing, having entered into a Â£5 million secured multicurrency loan agreement with Scotiabank Europe. At the time this amounted to approximately 10 per cent of our net assets. Subsequent to the merger with Anglo & Overseas, we increased the amount we could draw down to Â£10 million, taking the approximate potential gearing back up to about 10 per cent of net assets. At the year end, the equivalent of Â£4.8 million in Japanese yen and US dollars had been drawn down. Revenue account and dividend The revenue return per share of 5.0p as shown in the Income Statement below is calculated by dividing the revenue after tax by the weighted average number of shares in circulation during the year. This is standard accounting practice. The large increase in the number of shares in circulation as a result of the merger with Anglo & Overseas had a considerable effect on this figure. However, the level of dividend that the Company distributes depends on the total number of shares in circulation at the time the dividend is paid rather than on the weighted average. The revenue return per share based on the total number of shares in circulation at the year end was 4.7p. This is still a 47 per cent uplift on the previous year's figure. Our income account did benefit from a one-off rebate of part of the investment management fee, negotiated at the time of the merger. As in the past, only one dividend will be paid for the year and the Board is pleased to recommend a 50 per cent increase in the dividend to 4.2p per share. Subject to the approval of Shareholders at the Annual General Meeting, the dividend will be paid on 31 May 2012. Last year, the annual dividend was paid earlier as an interim dividend in March. This was done so that both EP Global Opportunities Trust's Shareholders and Anglo & Overseas' shareholders received their dividends before the merger of the two companies. Outlook A number of factors have improved since the dark days last autumn when the euro region seemed to be in permanent crisis. Inflationary pressures have eased. This has enabled countries which had been raising interest rates to start reducing them, creating a healthier environment for equities. The Bank of England commenced a second round of "quantitative easing" and the European Central Bank, while not permitted to follow suit, finally acted decisively to relieve the pressure on European banks by making three-year loans at one per cent available to banks. Meanwhile, the US economy has continued to grow, helped by expansionary monetary and fiscal policies. There will no doubt be further uncomfortable moments in financial markets during 2012. The western world remains over indebted, the future of the euro remains an issue and energy prices could easily spike upwards as pressure is put on Iran over its nuclear ambitions. It appears harder than ever to predict how the year will develop. However, equities remain reasonably attractive, particularly as they yield more than government bonds, especially so in the UK and USA. We will remain fully invested as long as our Investment Manager can identify shares that represent reasonable value. Teddy Tulloch Chairman 7 March 2012 INVESTMENT MANAGER'S REPORT AND PORTFOLIO ANALYSIS In 2011 the Company's net asset total return per share was -8.4 per cent. The backdrop to this was the Japanese earthquake and tsunami followed by the threat of nuclear meltdown at Fukushima. Paralleling this were the uprisings in North Africa and the Middle East, with the potential threat to oil and gas supplies. If this were not enough, we had the appearance of a financial/political breakdown in Europe which could have undermined the entire financial system of the region. Finally, we had the floods in Asia which closed substantial parts of the electronic component supply industry causing ripple effects through the supply chain and hurting manufacturing profitability. This made the US, even with its economic issues and forthcoming Presidential election, appear a relative oasis of calm. It was not surprising that financial markets were characterised by volatility and risk aversion. Investors reacted to the uncertainty by reaching for assets with the greatest perceived safety. Thus, against a backdrop of an unsustainable fiscal position, investors were happy to purchase US Government debt at prices which would only provide positive returns in an environment akin to the Great Depression. The view was presumably that, with the world's reserve currency, investors could at least be guaranteed getting their nominal capital back by investing in US bonds. The question of maintaining long-term purchasing power was clearly subordinated to the requirement to avoid short-term nominal price declines. Similarly, the US equity market proved to be the best performing major market despite the evidence that, on long-term valuation metrics, it is one of the more expensive ones. Although we did make new investments in the US in the period under review, we were relatively opportunistic and in general were reducing exposure as more stocks became expensive. It was mainly the Company's low exposure to the US which contributed to the gap between the Company's net asset total return per share and that of the FTSE All-World Index, which fell by 6.6%. Despite all the turmoil, we ended the year feeling much better about potential returns. There are a number of reasons for this. By our measures the aggregate valuation of the portfolio is attractive and suggests strong future real returns. The number of companies we are finding as potential investments has risen sharply. The areas where we find value are about as out of favour as it is possible to be. During 2011 we almost found the position where we were liable to be mocked for investing in, for example, an Italian bank. Normally one receives a frown or a stern look, but the mocking suggests that, in the words of Sir John Templeton, the "point of maximum pessimism" cannot be far away. This is not to say that we are bullish on the prospects for the global economy. We remain of the view that the outlook is one of anaemic growth characterised by consumer retrenchment in the West and net export declines from the East. The trends of the past thirty years are over and need to be reversed. This is simply a natural part of the economic order but one which sits uncomfortably with policy makers and commentators whose experience is bounded by the period. This applies with even more force to investment professionals. We grew up in an environment where policy in the West consistently favoured consumption and economic stimulus was typically debt-financed encouragement of more consumption. This period has ended. Similarly, the saving and export oriented mercantilist policies of Asia have run their course. The shift of wealth that has occurred will require a concomitant shift in the dynamics of the global economy. This is not a negative, but simply a statement of what we believe is an economic inevitability. It does, though, have profound implications for investment and expenditure patterns globally. It means that consumption facing industries in the West which have had a favourable tailwind now face a much more difficult period. Conversely, the accumulation of savings in the East has to translate into increasing domestic expenditure. In terms of the portfolio, the changes during the year were largely evolutionary in nature, reflecting our view that little had changed despite the volatility which was evident in markets. In some cases, such as Intel, Unilever and Samsung, we both increased and reduced position sizes in response to sharp share price movements. In other cases, such as Intesa Sanpaolo, the Italian bank, we increased the Company's holding as sentiment turned extremely negative. Although the share price has subsequently recovered somewhat, it is not yet at a level where we would be reducing the holding. New positions during the year included Microsoft, whose share price had been languishing for some time but fell below our target purchase price. The risk: reward profile for Microsoft was attractive if looking at the existing balance sheet and revenue stream alone, but significantly enhanced if the forthcoming version of Windows proves to be successful. The investment in Illinois Tool Works followed a similar pattern. Illinois Tool Works is a US industrial conglomerate with an outstanding track record both operationally and in terms of making strategic acquisitions. Concern over domestic growth caused a sharp decline in the share price, which brought the company within our valuation range and allowed a purchase to be made. Japan Tobacco was another new holding introduced during the year. A company with mediocre growth prospects but with enormous cash-flow and the likelihood of a substantial reduction in the number of shares in issue, Japan Tobacco ended up as one of the stronger performers during the year. Similarly, Diageo was purchased around the same time and has also performed well, with strong cash-flow augmented by future growth prospects in emerging markets. The main negative contributors to performance were a number of the Japanese holdings. The earthquake and tsunami damaged near-term operating conditions. This was then subsequently followed by the floods in Thailand which shut down production of a number of key electronic component facilities. As a consequence, the results for the Japanese fiscal year to March 2012 will be very poor. We expect that this will be reversed in 2012/13 and we will see a rebound in many of their share prices. Finally we come to Europe, where political barriers have continued to inhibit clear policy direction to the detriment of the European economy and the integrity of the euro. As a consequence, markets fluctuated back and forth between the hope of resolution and the despair of default and potential break-up. More recent signs suggest that the authorities are stumbling towards a resolution which would allow a resumption of more stable conditions. Given the interplay of politics and economics, it is likely that the stumbling will continue in the meantime and markets are likely to react to this. However, the new Government in Italy is a positive development with supply side and taxation reforms expected to be forthcoming. Important as Greece is on a psychological basis, it is Italy that currently holds the key for the future stability of Europe. As time progresses this may well pass to France where the upcoming elections are not entirely helpful to the reforms that will be required. The recent environment has been characterised by the influence of macro economic and political events. It is expected that this will gradually diminish in the coming years and the focus will shift back to long-term profits growth potential. In this regard the outlook is favourable. The portfolio valuation suggests good real returns can be expected. Equities outside of the US do not look expensive and they certainly compare well on a relative basis to government bonds as an alternative. Despite the subdued economic outlook, we therefore feel optimistic about the potential for appreciation and anticipate that future reports are much more likely to be making reference to encouraging trends than discussing historic negative ones. Dr Sandy Nairn Edinburgh Partners Limited 7 March 2012 PORTFOLIO OF INVESTMENTS as at 31 December 2011 % of Net Company Sector Country Valuation Assets Â£'000 Equity investments 20 largest equity investments Cisco Systems Technology United States 3,616 3.8 Sanofi Health Care France 3,559 3.7 Royal Dutch Shell Oil & Gas United 3,234 3.4 Kingdom Samsung Electronics Technology South Korea 3,233 3.4 China Mobile Telecommunications China 3,167 3.3 Singapore Telecommunications Singapore 3,163 3.3 Telecommunications Diageo Consumer Goods United 3,058 3.2 Kingdom D.R. Horton Consumer Goods United States 3,043 3.2 Vodafone Telecommunications United 3,014 3.2 Kingdom Unilever Consumer Goods Netherlands 3,007 3.2 GlaxoSmithKline Health Care United 2,971 3.1 Kingdom Gazprom Oil & Gas Russia 2,959 3.1 Illinois Tool Works Industrials United States 2,914 3.1 Canon Technology Japan 2,829 3.0 Microsoft Technology United States 2,770 2.9 Tesco Consumer Services United 2,732 2.9 Kingdom Fujitsu Technology Japan 2,646 2.8 Heineken Consumer Goods Netherlands 2,642 2.8 Deutsche Post Industrials Germany 2,558 2.7 ENI Oil & Gas Italy 2,500 2.6 Total - 20 largest equity 59,615 62.7 investments Other equity investments Japan Tobacco Consumer Goods Japan 2,407 2.5 Yamaha Motor Consumer Goods Japan 2,338 2.5 Telecom Italia Telecommunications Italy 2,334 2.4 Mitsubishi Industrials Japan 2,290 2.4 Bridgestone Consumer Goods Japan 2,282 2.4 Petrobras Oil & Gas Brazil 2,204 2.3 Omron Industrials Japan 2,109 2.2 Intesa Sanpaolo Financials Italy 2,089 2.2 Panasonic Consumer Goods Japan 2,030 2.1 Great Wall Motor Consumer Goods China 1,996 2.1 Sony Consumer Goods Japan 1,984 2.1 HSBC Financials United 1,914 2.0 Kingdom DBS Group Financials Singapore 1,858 2.0 Softbank Telecommunications Japan 1,816 1.9 Nokia Technology Finland 1,785 1.9 Edinburgh Partners Financials (unlisted) United 1,700 1.8 Limited Kingdom Swire Pacific Industrials Hong Kong 1,594 1.7 Applied Materials Technology United States 1,527 1.6 Aviva Financials United 1,509 1.6 Kingdom Bank of America Financials United States 1,169 1.2 Total - 40 equity 98,550 103.6 investments Cash and net liabilities (3,458) (3.6) Net assets 95,092 100.0 The geographic distribution is based on each investment's principal stock exchange listing, except in instances where this would not give a proper indication of where its activities predominate. Of the ten largest portfolio investments as at 31 December 2011, the valuations at the previous year end, 31 December 2010, were Cisco Systems Â£1,559,000; Sanofi Â£1,275,000; Royal Dutch Shell Â£1,472,000; Samsung Electronics Â£1,694,000; China Mobile Â£1,127,000; Singapore Telecommunications Â£1,359,000; D.R. Horton Â£1,379,000 and Vodafone Â£1,907,000. Diageo and Unilever were new purchases in the year ended 31 December 2011. DISTRIBUTION OF INVESTMENTS as at 31 December 2011 (% of net assets) Sector distribution % of net assets Consumer Goods 26.1 Technology 19.4 Telecommunications 14.1 Industrials 12.1 Oil & Gas 11.4 Financials 9.0 Health Care 6.8 Consumer Services 2.9 Financials (unlisted) 1.8 Cash and net liabilities* (3.6) 100.0 Geographical distribution % of net assets Europe 24.6 Japan 23.9 United Kingdom 21.2 United States 15.8 Asia Pacific 15.8 Latin America 2.3 Cash and net liabilities* (3.6) 100.0 * Cash and net liabilities include foreign currency balances of Â£624,000 (0.7 per cent), foreign currency loans of Â£4,835,000 (-5.1 per cent) and foreign currency debtors of Â£371,000 (0.4 per cent). The figures detailed in the geographical distribution above represent the Company's equity exposure to these countries or regional areas. The geographic distribution is based on each investment's principal stock exchange listing, except in instances where this would not give a proper indication of where its activities predominate. EXTRACTS FROM THE DIRECTORS' REPORT Business review Status of Company The Company is registered as a public limited company and is an investment company within the terms of section 833 of the Companies Act 2006. Its shares are listed on the premium segment of the Official List of the UK Listing Authority and traded on the main market of the London Stock Exchange. The Company has received approval from HM Revenue & Customs ("HMRC") as an authorised investment trust under section 842 of the Income and Corporation Taxes Act 1988 for the period from inception to 31 December 2009 and under sections 1158 and 1159 of the Corporation Tax Act 2010 for the year to 31 December 2010. This latter approval is subject to there being no subsequent enquiry under corporation tax self-assessment. In the opinion of the Directors, the Company has subsequently directed its affairs so as to enable it to continue to qualify for such approval. New regulations for obtaining and retaining investment trust status have been published by HMRC and came into force on 1 January 2012. An application for approval as an investment trust must be made within 90 days after the end of the first accounting period of the Company following implementation of the new regime. If the application is accepted, the Company will be treated as an investment trust company for that period and for each subsequent accounting period, subject to there being no subsequent serious breaches of the regulations. Activities The principal activity of the Company is to carry on business as an investment trust. A review of the Company's activities during the year is given in the Chairman's Statement and in the Investment Manager's Report and Portfolio Analysis above. Net asset valuation The net asset value per ordinary share ("NAV") at 31 December 2011 was 169.9p (2010: 188.2p). Results The results for the year are set out in the Income Statement and the Reconciliation of Movements in Shareholders' Funds below. Dividends The Directors recommend the payment of a final dividend of 4.2p per ordinary share (2010: interim dividend, in lieu of final dividend, of 2.8p). Only one dividend is paid annually. Subject to the approval by Shareholders at the Annual General Meeting of the Company to be held on 24 April 2012, the final dividend will be payable on 31 May 2012 to Shareholders on the register at the close of business on 4 May 2012. The ex-dividend date will be 2 May 2012. Objective The investment objective of the Company is to provide Shareholders with an attractive real long-term total return by investing globally in undervalued securities. The portfolio is managed without reference to the composition of any stock market index. Investment policy The Company invests in a focused portfolio of approximately 30 to 40 securities of issuers throughout the world, predominantly in quoted equities. The Company may also invest in unquoted securities, which are not anticipated to exceed 10 per cent of the Company's total assets at the time of investment (excluding shares held in Edinburgh Partners). No investment in the Company's portfolio may exceed 15 per cent of the Company's total assets at the time of investment. The Company has no present intention to invest in other investment companies or funds but retains the ability to invest no more than 15 per cent of its gross assets in other listed investment companies (including investment trusts). The Company may also invest a substantial portion of its assets in debt instruments, cash or cash equivalents when the Investment Manager believes market or economic conditions make equity investment unattractive or while seeking appropriate investment opportunities for the portfolio or to maintain liquidity. In addition, the Company may purchase derivatives for the purposes of efficient portfolio management. It is intended that, from time to time, when deemed appropriate, the Company will borrow for investment purposes up to the equivalent of 25 per cent of its total assets. By contrast, the Company's portfolio may from time to time have substantial holdings of debt instruments, cash or short-term deposits. The investment objective and policy are intended to distinguish the Company from other investment vehicles which have relatively narrow investment objectives and which are thus constrained in their decision making and asset allocation. The objective and policy allow the Company to be constrained in its investment selection only by valuation and to be pragmatic in portfolio construction by only investing in securities which the Investment Manager considers to be undervalued on an absolute basis. Investment strategy The Company's portfolio is managed without reference to any stock market index. Investments are selected for the portfolio only after extensive research by the Investment Manager. The process through which an equity must pass in order to be included in the portfolio is rigorous. Only a security where the Investment Manager believes that the price will be significantly higher in the future will pass the selection process. The key to successful stock selection is to identify the long-term value of a company's shares and to have the patience to hold the shares until that value is appreciated by other investors. Identifying long-term value involves detailed analysis of a company's earning prospects over a five year time horizon. Further details of the investment strategy can be found in the Chairman's Statement and the Investment Manager's Report and Portfolio Analysis. The Company's Investment Manager is Edinburgh Partners which is an independent specialist investment manager focusing exclusively on achieving returns for investors based on global investment analysis of the highest quality. The Edinburgh Partners investment team includes experienced investment professionals with strong investment performance records who believe rigorous fundamental research allied to patience is the basis of long-term investment success. Each of the investment professionals has specific responsibilities for sector and regional research in addition to their fund management role. Details of the Investment Management Agreement are set out in the Annual Report and Financial Statements for the year ended 31 December 2011. Principal risks The Board considers that the following are the principal risks associated with investing in the Company: investment and strategy risk, discount volatility risk, market risk (comprising interest rate risk, currency risk and other price risk), liquidity risk, credit risk, interest rate risk, foreign currency risk, gearing risk, regulatory risk, operational risk and financial risk. An explanation of these risks and how they are managed and the policy and practice with regards to financial instruments are contained in note 19 below. Key Performance Indicators At each Board meeting, the Directors consider a number of performance measures to assess the Company's success in achieving its objective. The Key Performance Indicators used to measure progress and performance of the Company over time are established industry measures and are as follows: â— Net asset value per ordinary share. â— Share price. â— Share price premium/(discount) to net asset value per ordinary share. â— Revenue return per ordinary share. â— Total expense ratio. The Financial Summary above provides information for the years ended 31 December 2011 and 31 December 2010 on the Key Performance Indicators noted above. Current and future developments A review of the main features of the year ended 31 December 2011 and the outlook for the coming year can be found in the Chairman's Statement and the Investment Manager's Report and Portfolio Analysis above. The Board's main focus is on the investment return and approach. Attention is paid to the integrity and success of the investment approach and on factors which may have an impact on this approach. Due regard is paid to the promotion of the Company including communication with Shareholders and other external parties. The Board is regularly updated on wider investment trust industry issues. Detailed papers are presented to the Board which lead to extensive discussion on development and strategy. On 10 March 2011 a merger of the assets of the Company and Anglo & Overseas was implemented following Shareholder approval. Further information regarding the merger can be found in the Chairman's Statement above. Gearing The Company has a Â£10 million secured multicurrency revolving credit facility with Scotiabank Europe PLC. As at 31 December 2011 Â£4.8 million had been drawn down under this facility, as detailed in note 19 below. The use of gearing can cause both gains and losses in the net asset value of the Company to be magnified, as explained more fully in note 19 below. Social, environmental and ethical policy EP Global Opportunities Trust plc seeks to invest in companies that are well managed, with high standards of corporate governance. The Directors believe this creates the proper conditions to enhance long-term value for Shareholders. In aiming to achieve a high level of corporate performance the Company adopts a positive approach to corporate governance and engagement with companies in which it invests. In pursuit of the above objective, the Directors believe that proxy voting is an important part of the corporate governance process and considers seriously its obligation to manage the voting rights of companies in which it is invested, for which it has delegated responsibility to its Investment Manager. It is the policy of the Company to vote, as far as it is practicable, at all shareholder meetings of investee companies. The Company follows the relevant applicable regulatory and legislative requirements in the UK, with the guiding principles being to make proxy voting decisions which favour proposals that will lead to maximising Shareholder value while avoiding any conflicts of interest. Voting decisions are taken on a case by case basis, with the key issues on which the Investment Manager focuses being corporate governance, including disclosure and transparency, board composition and independence, control structures, remuneration and social and environmental issues. The Company itself has no employees and all the Directors are non-executive. The day-to-day management of the Company's business has been delegated to the Company's Investment Manager, Edinburgh Partners, which has an Environmental, SRI and Corporate Governance ("ESG") policy in place. The ESG policy statement, which can be found on their website at www.edinburghpartners.com, describes the manner in which the principles of the UK Stewardship Code are incorporated within the investment process. Share capital At 31 December 2011 the Company's issued share capital comprised 64,509,642 ordinary shares of which 8,541,917 ordinary shares were held in treasury. At general meetings of the Company, one vote is attached to each ordinary share in issue. Own shares held in treasury do not carry voting rights. The total voting rights of the Company at 31 December 2011 were 55,967,725 ordinary shares. There are no restrictions on the transfer of the Company's ordinary shares or special rights attached to these shares regarding control. As at 5 March 2012 the Company's issued share capital comprised 64,509,642 ordinary shares, of which 9,441,917 ordinary shares were held in treasury. The total voting rights of the Company at 5 March 2012 were 55,067,725 ordinary shares. Purchase of shares During the year ended 31 December 2011 the Company purchased in the market 4,968,217 ordinary shares (with a nominal value of Â£49,682) for treasury, at a total cost of Â£8,094,000. This represented 15.2 per cent of the issued share capital at 31 December 2010. The total number of own shares held in treasury as at 31 December 2011, including those shares bought back in prior accounting periods, totalled 8,541,917 ordinary shares. The Board has not set a limit on the number of shares that can be held in treasury at any one time. The maximum number of own shares held in treasury during the year was 8,541,917 ordinary shares (with a nominal value of Â£85,419) representing 13.2 per cent of the issued share capital at the time they were held in treasury. Subsequent to the year end and up to 5 March 2012, a further 900,000 ordinary shares (with a nominal value of Â£9,000) have been purchased for treasury representing 1.4 per cent of the issued share capital at 31 December 2011, at a total cost of Â£1,524,000. On 11 October 2005 the Company applied for a block listing of 1,300,000 ordinary shares. As at 31 December 2011 and at the date of this report a balance of 745,830 shares may be issued under this block listing. Issue of shares On 10 March 2011, a total of 31,855,462 new ordinary shares were allotted (with a nominal value of Â£318,555) to Shareholders in Anglo & Overseas who elected or were deemed to elect to roll over their shareholdings in Anglo & Overseas into shares in the Company under the scheme of reconstruction and voluntary winding up of Anglo & Overseas. The price at which these new ordinary shares were treated as being issued was 186.29p per share. The Company received assets comprising of investments in shares of publicly quoted companies worldwide and cash as consideration for the issue of the new ordinary shares. Sale of shares from treasury During the year the Company sold in the market 1,650,000 ordinary shares (with a nominal value of Â£16,500) from treasury, representing 5.1 per cent of the issued share capital at 31 December 2010, for a total consideration of Â£2,926,000. The shares were sold at a premium to the prevailing net asset value. Holding shares in treasury enables a company to issue shares cost effectively that might otherwise have been cancelled. Cancellation of share premium At the general meeting of the Company held on 3 March 2011 a resolution was passed approving the cancellation of the amount standing to the credit of the Company's share premium. The Court confirmed this cancellation on 23 August 2011 and the Court's order has been registered by the Registrar of Companies. Accordingly, an amount of Â£77,307,420 has been transferred from the Company's share premium account to its special reserve account. This amount can be treated as a distributable reserve for all purposes permitted by the Companies Act 2006 (as amended), and will enhance substantially the ability of the Company to buy-back its own shares, either into treasury or for cancellation. The full Annual Report and Financial Statements contains the following statements regarding responsibility for the Annual Report and Financial Statements. MANAGEMENT REPORT AND STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RELATION TO THE ANNUAL REPORT AND FINANCIAL STATEMENTS Management report Listed companies are required by the FSA's Disclosure and Transparency Rules (the "Rules") to include a management report within their annual report and financial statements. The information required to be included in the management report for the purpose of these Rules is included in the Chairman's Statement, the Investment Manager's Report and Portfolio Analysis and the Business Review contained in the Directors' Report. Therefore no separate management report has been included. Statement of Directors' responsibilities in relation to the Annual Report and Financial Statements The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial period. Under that law they have elected to prepare the financial statements in accordance with UK Accounting Standards. The financial statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to: â— select suitable accounting policies and then apply them consistently; â— make judgements and estimates that are reasonable and prudent; â— state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and â— prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006 and include the information required by the Listing Rules of the FSA. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. The Directors, to the best of their knowledge, state that; â— the financial statements, prepared in accordance with UK Accounting Standards, give a true and fair view of the assets, liabilities, financial position and loss of the Company; and â— the Chairman's Statement, the Investment Manager's Report and Portfolio Analysis and the Directors' Report include a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that it faces. The Directors confirm that, so far as they are each aware, there is no relevant audit information of which the Company's Auditor is unaware; and each Director has taken all the steps that ought to have been taken as a Director to make himself aware of any relevant audit information and to establish that the Company's Auditor is aware of that information. Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. On behalf of the Board Teddy Tulloch Chairman 7 March 2012 NON-STATUTORY ACCOUNTS The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 December 2010 and 2011 but is derived from those accounts. Statutory accounts for the year ended 31 December 2010 have been delivered to the Registrar of Companies, and those for the year ended 31 December 2011 will be delivered in due course. The Auditor has reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report and (ii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditor's report can be found in the Company's full Annual Report and Financial Statements at www.epgot.com. INCOME STATEMENT for the year ended 31 December 2011 2011 2010 Revenue Capital Total Revenue Capital Total Note Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 (Losses)/gains on 8 - (12,273) (12,273) - 3,149 3,149 investments at fair value Foreign exchange - (296) (296) - (35) (35) losses on capital items Income 2 3,625 - 3,625 1,635 - 1,635 Investment 3 (432) - (432) (365) - (365) management fee Other expenses 4 (273) - (273) (276) - (276) Net return before 2,920 (12,569) (9,649) 994 3,114 4,108 finance costs and taxation Finance costs Interest payable (99) - (99) - - - and similar charges Net return before 2,821 (12,569) (9,748) 994 3,114 4,108 taxation Taxation 5 (181) - (181) (100) - (100) Net return after 2,640 (12,569) (9,929) 894 3,114 4,008 taxation pence pence pence pence pence pence Return per 7 5.0 (23.9) (18.9) 3.2 11.0 14.2 ordinary share All revenue and capital items in the above statement derive from continuing operations. The total column of this statement is the profit and loss account of the Company. The revenue and capital return columns are prepared under guidance published by the Association of Investment Companies ("AIC"). A separate Statement of Total Recognised Gains and Losses has not been prepared as all such gains and losses are included in the Income Statement. Dividend information A final dividend for the year of 4.2p per ordinary share (2010: interim dividend in lieu of final dividend of 2.8p) has been recommended. Subject to Shareholder approval, this dividend will be payable on 31 May 2012 to Shareholders on the register at the close of business on 4 May 2012. The ex-dividend date will be 2 May 2012. Based on 55,067,725 ordinary shares, being the number of ordinary shares in issue (excluding shares held in treasury) on 5 March 2012, the total dividend payment will amount to Â£2,313,000. In accordance with FRS 21, dividends are accounted for in the period in which they are paid. Further information on dividend distributions can be found in note 6. The notes form part of these financial statements. BALANCE SHEET as at 31 December 2011 2011 2010 Note Â£'000 Â£'000 Fixed asset investments: Investments at fair value through 8 98,550 51,312 profit or loss Current assets: Debtors 10 975 193 Cash at bank and short-term deposits 908 350 1,883 543 Creditors: amounts falling due within one year Creditors 11 506 235 Loans 19 4,835 - 5,341 235 Net current (liabilities)/assets (3,458) 308 Net assets 95,092 51,620 Capital and reserves: Called-up share capital 12 645 327 Capital redemption reserve 14 14 Share premium account 13 - 17,991 Special reserve 82,321 10,486 Capital reserve 8,636 21,205 Revenue reserve 3,476 1,597 Total Shareholders' funds 95,092 51,620 pence pence Net asset value per ordinary share 15 169.9 188.2 These financial statements were approved and authorised for issue by the Board of Directors on 7 March 2012 and were signed on its behalf by: Teddy Tulloch Chairman Registered in Scotland No. 259207 The notes form part of these financial statements. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS for the year ended 31 December 2011 Capital Share Share redemption premium Special Capital Revenue capital reserve account reserve reserve reserve Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Year ended 31 December 2011 At 31 December 327 14 17,991 10,486 21,205 1,597 51,620 2010 Issue of new 318 - 59,025 - - - 59,343 shares on merger with Anglo & Overseas Share purchases - - - (8,094) - - (8,094) for treasury Sale of shares - - 291 2,635 - - 2,926 from treasury Cancellation of - - (77,307) 77,307 - - - share premium Share premium - - - (13) - - (13) cancellation expenses Net return after - - - - (12,569) 2,640 (9,929) taxation for the year Dividends paid - - - - - (761) (761) At 31 December 645 14 - 82,321 8,636 3,476 95,092 2011 Year ended 31 December 2010 At 31 December 327 14 17,991 12,905 18,091 1,384 50,712 2009 Net return after - - - - 3,114 894 4,008 taxation for the year Dividends paid - - - - - (681) (681) Share purchases - - - (2,419) - - (2,419) for treasury At 31 December 327 14 17,991 10,486 21,205 1,597 51,620 2010 The issue of new shares on the merger with Anglo & Overseas of Â£59,343,000 detailed above consisted of the transfer of investments of Â£58,005,000 and cash of Â£1,338,000. The notes form part of these financial statements. CASH FLOW STATEMENT for the year ended 31 December 2011 2011 2010 Note Â£'000 Â£'000 Operating activities: Investment income received 3,449 1,601 Refund of VAT, including interest, on - 138 investment management and administration fees Investment management fees paid (354) (361) Secretarial fees paid (74) (71) Other expenses paid (213) (125) Net cash inflow from operating activities 16 2,808 1,182 Servicing of finance (88) - Taxation (109) (70) Capital expenditure and financial investment: Purchases of investments (25,069) (12,957) Sales of investments 22,903 14,126 Exchange losses on settlement (43) (40) Net cash (outflow)/inflow from investing (2,209) 1,129 activities Net cash inflow before equity dividend 402 2,241 and financing Equity dividend paid 6 (761) (681) Financing: Cash received in relation to merger with 1,338 - Anglo & Overseas Shares sold from treasury 2,926 - Shares purchased for treasury (7,916) (2,419) Expenses incurred on share premium (13) - cancellation Net cash outflow from financing (3,665) (2,419) Decrease in cash 17 (4,024) (859) The notes form part of these financial statements. NOTES TO THE FINANCIAL STATEMENTS at 31 December 2011 1. Accounting policies Accounting convention The financial statements are prepared on a going concern basis in accordance with the Companies Act 2006, UK Generally Accepted Accounting Practice ("UK GAAP") and with the AIC Statement of Recommended Practice issued in January 2009 relating to the Financial Statements of Investment Trust Companies and Venture Capital Trusts. All of the Company's activities are continuing. Income recognition Dividend and other investment income is included as revenue on the ex-dividend date. Deposit interest and underwriting commission receivable is included on an accruals basis. Dividends are accounted for in accordance with Financial Reporting Standard No. 16: Current Taxation on the basis of income actually receivable, without adjustment for the tax credit attaching to the dividends. Dividends from overseas companies are shown gross of withholding tax. Management expenses and finance costs All management expenses and finance costs are accounted for on an accruals basis. All operating expenses and finance costs are charged through the revenue account in the Income Statement except costs that are incidental to the acquisition or disposal of investments, which are charged to the capital account in the Income Statement. Transaction costs are included within the gains and losses on investment sales, as disclosed in the Income Statement. Investments All investments held by the Company are classified as 'fair value through profit or loss'. Investments are initially recognised at cost, being the fair value of the consideration given. After initial recognition, investments are measured at fair value, with changes in the fair value of investments and impairment of investments recognised in the Income Statement and allocated to capital. Realised gains and losses on investments sold are calculated as the difference between sales proceeds and cost. For investments actively traded in organised financial markets, fair value is generally determined by reference to Stock Exchange quoted market bid prices at the close of business on the Balance Sheet date, without adjustment for transaction costs necessary to realise the asset. Unlisted investments will be valued by the Directors at fair value, using the guidelines on valuation published by the International Private Equity and Venture Capital Association. This represents the Directors' view of the amount for which an asset could be exchanged between knowledgeable willing parties in an arm's length transaction. This does not assume that the underlying business is saleable at the reporting date or that its current shareholders have any intention to sell their holding in the near future. Foreign currency The functional and reporting currency of the Company is sterling because that is the currency of the primary economic environment in which the Company operates. Transactions denominated in foreign currencies are converted to sterling at the actual exchange rate as at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the year end are reported at the rate of exchange at the Balance Sheet date. Any gain or loss arising from a change in exchange rate subsequent to the date of the transaction is included as an exchange gain or loss in the capital reserve or the revenue account depending on whether the gain or loss is of a capital or revenue nature. Taxation The charge for taxation is based on the net revenue for the year and takes into account taxation deferred or accelerated because of timing differences between the treatment of certain items for accounting and taxation purposes. Full provision for deferred taxation is made under the liability method, without discounting, on all timing differences that have arisen but not been reversed by the Balance Sheet date, unless such provision is not permitted by Financial Reporting Standard No. 19: "Deferred Tax". This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the financial statements which are capable of reversal in one or more subsequent periods. Dividends payable to Shareholders In accordance with Financial Reporting Standard No. 21: "Events after the Balance Sheet Date", final dividends are recognised as a liability in the period in which they have been approved by shareholders in a general meeting. Interim dividends are recognised as a liability in the period in which they have been declared and paid. Loans All loans are initially recognised at the sterling equivalent cost, being the fair value of the consideration received. After initial recognition, the loans are revalued using exchange rates at the appropriate date, with the gain or loss being recognised in the capital reserve. Own shares held in treasury From time to time the Company buys back shares and holds them in treasury for potential sale at a later date or for cancellation. In accordance with Financial Reporting Standard No. 25: "Financial Instruments: Disclosure and Presentation", the consideration paid and received for these shares is accounted for in Shareholders' funds and, in accordance with the AIC Statement of Recommended Practice issued in January 2009, the cost has been allocated to the Company's special reserve. The cost of shares re-issued from treasury is calculated by taking the average cost of shares held in treasury at the time of re-issue. 2. Income 2011 2010 Â£'000 Â£'000 Income from investments: UK net dividend income 994 486 Overseas dividends 2,627 1,147 Interest on liquidity funds 4 2 3,625 1,635 Total income comprises: Dividends 3,625 1,635 3,625 1,635 3. Investment management fee 2011 2011 Â£'000 Â£'000 Investment management fee 432 365 The investment management fee is paid quarterly in arrears, at the rate of 0.75 per cent per annum of the market capitalisation of the issued ordinary shares (excluding treasury shares) of the Company up to Â£100,000,000 and at a rate of 0.65 per cent per annum of the market capitalisation which exceeds this amount. At 31 December 2011 there was Â£171,000 outstanding (2010: Â£93,000). As detailed in the Directors' Report of the full Annual Report and Financial Statements, the Investment Manager, as part of the Company's merger with Anglo & Overseas, agreed to reduce its management fee payable by the Company on a one-off basis by Â£236,000 in the year ended 31 December 2011. In addition, the Investment Manager received an administration fee of Â£75,000 as detailed in note 4 (2010: Â£72,000). At 31 December 2011 there was Â£19,000 outstanding (2010: Â£18,000). 4. Other expenses 2011 2010 Â£'000 Â£'000 Administration and secretarial fees 75 72 Auditor's remuneration for: Audit 18 18 Directors' remuneration 67 56 Other 113 130 273 276 An amount of Â£35,000 (excluding VAT) was paid to the Auditor, Ernst & Young LLP, for non-audit services in the year ended 31 December 2011 in relation to the merger with Anglo & Overseas. As part of the merger agreement Anglo & Overseas agreed to pay any merger costs incurred by the Company and as a consequence this cost is not detailed within these financial statements. 5. Taxation a) Analysis of charge in year 2011 2010 Revenue Capital Total Revenue Capital Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Current tax: Overseas tax suffered 181 - 181 100 - 100 181 - 181 100 - 100 b) The current taxation charge for the year ended 31 December 2011 is lower than the theoretical rate of Corporation Tax in the UK of 26.5 per cent (2010: 28 per cent) (NB The standard rate of Corporation Tax was 28 per cent to 31 March 2011 and 26 per cent from 1 April 2011). The differences are explained below: 2011 2010 Revenue Capital Total Revenue Capital Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Net return before 2,821 (12,569) (9,748) 994 3,114 4,108 taxation Theoretical tax at UK 748 (3,331) (2,583) 278 872 1,150 Corporation Tax rate of 26.5 per cent per cent (2010: 28 per cent) Effects of: - UK dividends that are (263) - (263) (136) - (136) not taxable - Foreign dividends (518) - (518) (257) - (257) that are not taxable - Accrued income exempt - - - (7) - (7) on receipt - Non-taxable - 3,344 3,344 - (872) (872) investment losses/ (gains) - Unrelieved excess 33 (13) 20 122 - 122 expenses - Overseas tax suffered 181 - 181 100 - 100 181 - 181 100 - 100 At 31 December 2011 the Company had unrelieved management expenses of Â£511,000 (31 December 2010: Â£435,000). It is unlikely that the Company will generate sufficient taxable income in the future to use these expenses to reduce future tax charges and therefore no deferred tax asset has been recognised. In addition, due to the Company's status as an investment trust and the intention to continue meeting the conditions required to obtain approval as an investment trust in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments. 6. Dividends 2011 2010 Declared and paid Â£'000 Â£'000 2010 interim dividend of 2.8p per ordinary share paid in March 2011 (2009: interim dividend of 2.4p paid in March 2010) 761 681 761 681 Net revenue return after taxation 2,640 894 Proposed 2011 final dividend of 4.2p (2010: interim dividend of 2,313 761 2.8p declared) per ordinary share 2,313 761 The Directors recommend a final dividend for the year of 4.2p per ordinary share (2010: interim dividend in lieu of final dividend of 2.8p declared). Subject to approval by Shareholders at the Annual General Meeting to be held on 24 April 2012, this dividend will be payable on 31 May 2012 to Shareholders on the register at the close of business on 4 May 2012. The ex-dividend date will be 2 May 2012. Based on 55,067,725 ordinary shares, being the number of ordinary shares in issue (excluding shares held in treasury) at 5 March 2012, the total dividend payment will amount to Â£2,313,000. 7. Return per ordinary share 2011 2010 Net Ordinary Per Net Ordinary Per return shares* share return shares* share Â£'000 pence Â£'000 pence Revenue return after 2,640 52,641,529 5.0 894 28,149,994 3.2 taxation Capital return after (12,569) 52,641,529 (23.9) 3,114 28,149,994 11.0 taxation Total return (9,929) 52,641,529 (18.9) 4,008 28,149,994 14.2 * Weighted average number of ordinary shares, excluding shares held in treasury, in issue during the year. 8. Investments 2011 2010 Â£'000 Â£'000 Listed investments 96,850 49,812 Unlisted investments 1,700 1,500 98,550 51,312 2011 2010 Unlisted Listed Total Total Â£'000 Â£'000 Â£'000 Â£'000 Analysis of investment portfolio movements Opening book cost 214 47,749 47,963 46,249 Opening investment holding gains 1,286 2,063 3,349 3,005 Opening valuation 1,500 49,812 51,312 49,254 Movements in the year: Purchases at cost - 83,081 83,081 12,056 Sales - proceeds - (23,570) (23,570) (13,147) - realised gains on sales - 282 282 2,805 Increase/(decrease) in investment 200 (12,755) (12,555) 344 holding gains Closing valuation 1,700 96,850 98,550 51,312 Closing book cost 214 107,542 107,756 47,963 Closing investment holding gains/ 1,486 (10,692) (9,206) 3,349 (losses) Closing valuation 1,700 96,850 98,550 51,312 2011 2010 Unlisted Listed Total Total Â£'000 Â£'000 Â£'000 Â£'000 Analysis of capital gains and losses Realised gains on sales - 282 282 2,805 Increase/(decrease) in investment 200 (12,755) (12,555) 344 holding gains Gains/(losses) on investments 200 (12,473) (12,273) 3,149 The purchases at cost of Â£83,081,000 detailed above include investments of Â£58,005,000 transferred to the Company as a result of the merger with Anglo & Overseas at fair value. The unlisted investment is the 71,294 shares in Edinburgh Partners as disclosed in the Chairman's Statement above. Fair value hierarchy In accordance with Financial Reporting Standard No. 29: "Financial Instruments: Disclosures", the Company must disclose the fair value hierarchy of financial instruments. All of the Company's financial instruments fall into level 1, being valued at quoted prices in active markets, except its investment in Edinburgh Partners which falls into level 3 and is valued using an unquoted price that is derived from inputs that are not based on observable market data. A reconciliation of the fair value movements of level 3 investments is shown in the unlisted column of the table above. Transaction costs During the year the Company incurred transaction costs of Â£44,000 (2010: Â£28,000) and Â£28,000 (2010: Â£16,000) on purchases and sales of investments respectively. These amounts are included in (losses)/gains on investments at fair value, as disclosed in the Income Statement above. 9. Significant holdings The Company had no holdings of 3 per cent or more of the share capital of any portfolio companies. 10. Debtors 2011 2010 Â£'000 Â£'000 Due from brokers 667 - Dividends receivable 280 104 Prepayments and accrued income 20 10 Taxation recoverable 8 79 975 193 11. Creditors: amounts falling due within one year 2011 2010 Â£'000 Â£'000 Due to brokers 7 - Other creditors and accruals 499 235 506 235 12. Share capital Number Number of shares 2011 of shares 2010 Ordinary 1p Â£'000 Ordinary 1p Â£'000 Allotted, called up and fully paid: At 1 January 32,654,180 327 32,654,180 327 Issued on merger with 31,855,462 318 - - Anglo & Overseas At 31 December 64,509,642 645 32,654,180 327 Duration of the Company The Company does not have a termination date or the requirement for any periodic continuation vote. 13. Share premium At the General Meeting of the Company held on 3 March 2011 a resolution was passed approving the cancellation of the Company's share premium account. The Court subsequently confirmed this cancellation and an amount of Â£77,307,000 was transferred from the Company's share premium account to its special reserve account. This amount can be treated as a distributable reserve for all purposes permitted by the Companies Act 2006 (as amended), and will enhance substantially the ability of the Company to buy-back its own shares, either into treasury or for cancellation. 14. Own shares held in treasury Details of own shares purchased for and sold from treasury are shown below: 2011 2010 Number of Number of shares shares At 1 January 5,223,700 3,830,000 Shares purchased for treasury 4,968,217 1,393,700 Shares sold from treasury (1,650,000) - At 31 December 8,541,917 5,223,700 During the year ended 31 December 2011, 4,968,217 shares were purchased for treasury at a cost of Â£4,968,000 and 1,650,000 shares were sold from treasury at a cost of Â£2,635,000. The proceeds from the issue of shares from treasury was Â£2,926,000, and the premium of Â£291,000 was recognised in the share premium account, which was subsequently cancelled, as detailed in note 13 above. 15. Net asset value per share The net asset value per share, calculated in accordance with the Articles of Association, is as follows: 2011 2010 pence pence Ordinary share 169.9 188.2 The net asset value per ordinary share is based on net assets of Â£95,092,000 (2010: Â£51,620,000) and on 55,967,725 (2010: 27,430,480) ordinary shares, being the number of ordinary shares, excluding shares held in treasury, in issue at the year end. 16. Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities 2011 2010 Â£'000 Â£'000 Net return before finance costs and taxation (9,649) 4,108 Net gains/(losses) on capital items 12,569 (3,114) Increase in creditors 74 83 (Increase)/decrease in debtors and accrued income (186) 105 Net cash inflow from operating activities 2,808 1,182 17. Reconciliation of net cash flow to movement in net funds 2011 2010 Â£'000 Â£'000 Decrease in cash for the year (4,024) (859) Realised exchange (losses)/gains (253) 23 (4,277) (836) Net funds at 1 January 350 1,186 Net funds at 31 December (3,927) 350 At Exchange At 1 January Cash gains/ 31 December 2011 flows (losses) 2011 Â£'000 Â£'000 Â£'000 Â£'000 Cash at bank 350 468 90 908 Loans - (4,492) (343) (4,835) 350 (4,024) (253) (3,927) At At 1 January Cash Exchange 31 December 2010 flows gains 2010 Â£'000 Â£'000 Â£'000 Â£'000 Cash at bank 1,186 (859) 23 350 1,186 (859) 23 350 18. Analysis of financial assets and liabilities Interest rate and currency profile The interest rate and currency profile of the Company's financial assets and liabilities were: 2011 2010 Cash Cash No flow No flow interest interest interest interest rate rate risk rate rate risk Total exposure exposure Total exposure exposure Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Equity shares Japanese yen 22,729 22,729 - 12,890 12,890 - Euro 20,475 20,475 - 6,179 6,179 - US dollar 20,202 20,202 - 13,291 13,291 - Sterling 20,132 20,132 - 11,240 11,240 - Hong Kong dollar 6,758 6,758 - 1,127 1,127 - Singapore dollar 5,021 5,021 - 1,359 1,359 - South Korean won 3,233 3,233 - 1,694 1,694 - Swiss franc - - - 2,382 2,382 - Norwegian krone - - - 1,150 1,150 - Cash at bank and short-term deposits US dollar 480 - 480 17 - 17 Sterling 284 - 284 333 - 333 Hong Kong dollar 144 - 144 - - - Debtors Japanese yen - - - 8 8 - Euro 278 278 - 46 46 - US dollar 19 19 - 7 7 - Sterling 604 604 - 69 69 - Singapore dollar 70 70 - 30 30 - Swiss franc 4 4 - 29 29 - Norwegian krone - - - 4 4 - Short-term creditors Sterling (499) (499) - (235) (235) - Hong Kong dollar (7) (7) - - - - Loans Japanese yen (2,969) - (2,969) - - - US dollar (1,866) - (1,866) - - - 95,092 99,019 (3,927) 51,620 51,270 350 At 31 December 2011 the Company had no financial liabilities other than the short-term creditors and loans as stated above (2010: Â£nil). All financial assets and liabilities of the Company are held at fair value. 19. Risk analysis Risks The principal risks the Company faces are: - Investment and strategy risk - Discount volatility risk - Market price risk (comprising interest rate risk, currency risk and other price risk) - Liquidity risk - Credit risk - Interest rate risk - Foreign currency risk - Gearing risk - Regulatory risk - Operational risk - Financial risk The Investment Manager monitors the financial risks affecting the Company on an ongoing basis within the policies and guidelines determined by the Board. The Directors receive financial information, which is used to identify and monitor risk, quarterly. The Company may enter into derivative contracts to manage risk but has not done so to date. A description of the principal risks the Company faces is detailed below. Investment and strategy risk There can be no guarantee that the objective of the Company will be achieved. The Investment Manager meets regularly with the Board to discuss the portfolio performance and strategy. The Board receives quarterly reports from the Investment Manager detailing all portfolio transactions and any other significant changes in the market or stock outlooks. Discount volatility risk The Board recognises that it is in the long-term interests of Shareholders to reduce discount volatility and believes that the prime driver of discounts over the longer term is investment performance. The Company is permitted to employ gearing, a process whereby funds are borrowed principally for the purpose of purchasing securities should the Board feel that it is appropriate to do so. The use of gearing can magnify discount volatility. The Board actively monitors the discount at which the Company's shares trade, and is committed to using its powers to allot or repurchase the Company's ordinary shares with a view to maintaining the middle market price at which the shares trade at close to the net asset value most recently published by the Company (taking into account the effect on the net asset value per share of any rights to which the shares are trading ex-dividend). The Board's commitment to allot or repurchase ordinary shares is subject to it being satisfied that any offer to allot or purchase shares is in the best interests of Shareholders of the Company as a whole, the Board having the requisite authority pursuant to the Articles of Association and relevant legislation to allot or purchase shares, and all other applicable legislative and regulatory provisions. During the year ended 31 December 2011 the Company issued 31,855,462 (2010: nil) ordinary shares as a result of the merger with Anglo & Overseas. During the year ended 31 December 2011 the Company sold 1,650,000 (2010: nil) ordinary shares from treasury. During the year ended 31 December 2011 the Company bought back 4,968,217 (2010: 1,393,700) ordinary shares into treasury. Market price risk The Company is exposed to market price risk due to fluctuations in the market prices of its investments. Market price risk arises mainly from uncertainty about future prices of financial instruments used in the Company's business. It represents the potential loss the Company might suffer through holding market positions in the face of price movements. The Investment Manager monitors the prices of financial instruments held by the Company on an ongoing basis. The Investment Manager actively monitors market and economic data and reports to the Board, which considers investment policy on a regular basis. The net asset value per share of the Company is issued daily to the London Stock Exchange and is also available on the Company's website www.epgot.com. Details of the Company's investment portfolio as at 31 December 2011 are disclosed above. If the investment portfolio valuation fell by 1 per cent from the amount detailed in the financial statements as at 31 December 2011 it would have the effect, with all other variables held constant, of reducing the total return before taxation and therefore net assets by Â£986,000 (2010: Â£513,000). An increase of 1 per cent in the investment portfolio valuation would have an equal and opposite effect on the total return before taxation and net assets. Liquidity risk The Company's policy with regard to liquidity is to ensure continuity of funding. Short-term flexibility is achieved through cash management. The Company's assets comprise mainly of readily realisable securities which can be sold freely to meet funding requirements if necessary. Securities listed on a recognised stock exchange have been valued at bid prices and exchange rates ruling at the close of business on 31 December 2011. In certain circumstances, the market prices at which investments are valued may not represent the realisable value of those investments, taking into account both the size of the Company's holding and the frequency with which such investments are traded. Credit risk Credit risk is the risk of financial loss to the Company if the contractual party to a financial instrument fails to meet its contractual obligations. The carrying amounts of financial assets best represent the maximum credit risk exposure at the Balance Sheet date. The Company's listed investments are held on its behalf by The Bank of New York Mellon acting as the Company's custodian. Bankruptcy or insolvency of the custodian may cause the Company's rights with respect to securities held by the custodian to be delayed. The Board monitors the Company's risk by reviewing the custodian's internal controls reports. Investment transactions are carried out with a large number of brokers whose creditworthiness is reviewed by the Investment Manager. Transactions are ordinarily undertaken on a delivery versus payment basis whereby the Company's custodian bank ensures that the counterparty to any transaction entered into by the Company has delivered on its obligations before any transfer of cash or securities away from the Company is completed. Cash is only held at banks and in money market funds that have been identified by the Board as reputable and of high credit quality. The maximum exposure to credit risk as at 31 December 2011 was Â£100,433,000 (2010: Â£51,855,000). The calculation is based on the Company's credit risk exposure as at 31 December 2011 and this may not be representative of the year as a whole. None of the Company's assets are past due or impaired. Interest rate risk The Company's assets and liabilities, excluding short-term debtors and creditors, may comprise financial instruments which include investments in fixed interest securities. Details of the Company's interest rate exposure as at 31 December 2011 are disclosed in note 18 of these financial statements. The majority of the Company's assets were non-interest bearing as at 31 December 2011. Surplus cash is invested in liquidity funds. During the year a Â£10,000,000 secured multicurrency revolving credit facility was entered into with Scotiabank Europe PLC, of which Â£4,835,000 had been drawn down at 31 December 2011, incurring an average interest rate of 1.4743 per cent per annum. If interest rates had reduced by 0.25 per cent (2010: 0.25 per cent) from those obtained as at 31 December 2011 it would have the effect, with all other variables held constant, of increasing the total return before taxation and therefore net assets on an annualised basis by Â£10,000 (2010: reducing the total return before taxation and net assets by Â£1,000 on an annualised basis). If there had been an increase in interest rates of 0.25 per cent (2010: 0.25 per cent) there would have been an equal and opposite effect in the total return before taxation and net assets. The calculations are based on cash at bank, short-term deposits and the revolving credit facility as at 31 December 2011 and these may not be representative of the year as a whole. The maturity profile of the Company's financial liabilities is as follows: As at As at 31 December 31 December 2011 2010 Â£'000 Â£'000 In one year or less 4,835 - In more than one, but not more than two years - - In more than two, but not more than five years - - 4,835 - Foreign currency risk The base currency of the Company is sterling. The international nature of the Company's investment activities gives rise to a currency risk which is inherent in the performance of its overseas investments. The Company's overseas income is also subject to currency fluctuations. It is not the Company's policy to hedge this risk on a continuous basis. Details of the Company's foreign currency risk exposure as at 31 December 2011 are disclosed in note 18 of these financial statements. If sterling had strengthened by 1 per cent against all other currencies on 31 December 2011, with all other variables held constant, it would have the effect of reducing the total return before taxation and net assets by Â£746,000 (2010: Â£402,000). If sterling had weakened by 1 per cent against all other currencies there would have been an equal and opposite effect on the total return before taxation and net assets. Gearing risk Gearing is used to enhance long-term returns to Shareholders. The Company is permitted to employ gearing should the Board feel it appropriate to do so up to a maximum of 25 per cent of total assets. On 14 January 2011 the Company entered into a one-year Â£5,000,000 secured multicurrency revolving credit facility, which was increased to Â£10,000,000 on 4 May 2011 subsequent to the merger with Anglo & Overseas. As at 31 December 2011 Â£4,835,000 had been drawn down under this facility. Interest on any amounts drawn down under this facility was chargeable at a margin of 1.20 per cent per annum above the British Bankers' Association Interest Settlement Rate at the time of draw down. As a result of entering into this facility the Company is exposed to interest rate risk due to fluctuations in the prevailing market rates. The principal financial covenants of the facility are that the adjusted asset coverage shall not be less than 4:1 and net assets shall not fall below Â£25,000,000. The Company has entered into a security deed with Scotiabank Europe PLC, whereby Scotiabank Europe PLC has a full title guarantee and continuing security to the assets of the Company for the discharge of its liabilities. The financial covenants were met in the year ended 31 December 2011. The facility was extended for a further year on 13 January 2012 at a margin of 1.10 per cent per annum above the British Bankers' Association Interest Settlement Rate at the time of draw down. The use of gearing is likely to lead to volatility in the net asset value per share, meaning that a relatively small movement either down or up in the value of the Company's total investments may result in a magnified movement in the same direction of the net asset value per share. The greater the level of gearing, the greater the level of risk and likely fluctuation in the share price. Regulatory risk Failure to qualify under the terms of Sections 1158 and 1159 of the Corporation Tax Act 2010 (formerly Section 842 of the Income and Corporation Taxes Act 1988) may lead to the Company being subject to capital gains tax. A breach of the rules of the London Stock Exchange may result in censure by the Financial Services Authority ("FSA") and/or the Company's suspension from listing. The Board has agreed service levels with the Secretary and Investment Manager which include active and regular review of compliance with these requirements. These checks are reviewed at each Board Meeting. Operational risk There are a number of operational risks associated with the fact that third parties undertake the Company's administration and custody. The main risk is that third parties may fail to ensure that statutory requirements such as Companies Act and London Stock Exchange requirements are met. The Board regularly receives and reviews management information on third parties which the Secretary compiles. In addition, each of the third parties provides a copy of its report on internal controls (ISAE 3402, SSAE 16, SAS 70 or equivalent) to the Board each year. Financial risk Inappropriate accounting policies or failure to comply with current or new accounting standards may lead to a breach of regulations. The Investment Manager employs independent administrators to prepare all financial statements and meets with the independent auditor at least once a year to discuss all financial matters including appropriate accounting polices. The Company is a member of the AIC, a trade body intended to promote investment trusts which also develops best practice for all of its members. The Board undertakes an annual assessment and review of all the risks stated above together with a review of any new risks which may have arisen during the year. These risks are formalised within the Company's risk assessment matrix. 20. Capital management policies The Company's objective is to provide Shareholders with an attractive real long-term total return by investing globally in undervalued securities. The portfolio is managed without reference to the comparison of any stock market index. In pursuing this objective, the Board has a responsibility for ensuring the Company's ability to continue as a going concern. This involves the ability to: issue and buyback share capital within limits set by the Shareholders in general meeting; borrow monies in the short and long-term; and pay dividends to Shareholders out of current year revenue earnings as well as out of brought forward revenue reserves. The Company's capital comprises: 2011 2010 Â£'000 Â£'000 Called-up share capital 645 327 Capital redemption reserve 14 14 Share premium account - 17,991 Special reserve 82,321 10,486 Capital reserve 8,636 21,205 Revenue reserve 3,476 1,597 Total Shareholders' funds 95,092 51,620 The Company's objectives for managing capital are the same as the previous year and have been complied with throughout the year. 21. Transactions with the Investment Manager Information with respect to transactions with the Investment Manager is provided in note 3 of these financial statements and in the Directors' Report in the Annual Report and Financial Statements. ANNUAL GENERAL MEETING The Company's Annual General Meeting will be held at The Bonham Hotel, 35 Drumsheugh Gardens, Edinburgh EH3 7RN on Tuesday, 24 April 2012 at 12.00 noon. DIRECTORS Teddy Tulloch (Chairman) Richard Burns David Hough Ian McBean Giles Weaver INVESTMENT MANAGER Edinburgh Partners Limited 12 Charlotte Square Edinburgh EH2 4DJ National Storage Mechanism A copy of the Annual Report and Financial Statements will shortly be submitted to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at: www.hemscott.com/nsm.do. Enquiries: Sandy Nairn Kenneth Greig Edinburgh Partners Limited Tel: 0131 270 3800 The Company's registered office address is: 12 Charlotte Square Edinburgh EH2 4DJ ENDS Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on this announcement (or any other website) is incorporated into, or forms part of, this announcement.

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