Annual Financial Report

EP GLOBAL OPPORTUNITIES TRUST PLC
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2019

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 2019, the net asset value per share was 320.8p, an increase of 3.9% over the year. With dividends re-invested, the net asset value total return was 6.0%.

The share price discount to net asset value per share was 3.4%, compared to 2.3% at the prior year end. With dividends re-invested, the share price total return was 5.0%.

The revenue return was 8.1p per share, an increase of 17.4%.

Proposed final dividend of 6.0p per share and special dividend of 1.5p per share, a total of 7.5p per share, an increase of 15.4%.

Annualised share price total return of 8.8% since the launch of the Company on 15 December 2003 up to the end of 2019. The annualised UK Retail Price Inflation rate was 2.9% over the same period.
Cash balances at over 8% at the year end were increased in January ad February to 18%.

FINANCIAL SUMMARY

Results for year	31 December 2019	31 December 2018	Change
Shareholders’ funds	£132,009,000	£131,799,000	0.2%
Net asset value per share (“NAV”)¹	320.8p	308.8p	3.9%
NAV total return^1,2,5	6.0%	(7.1)%
Share price	310.0p	301.5p	2.8%
Share price total return^1,2,5	5.0%	(4.2)%
Share price discount to NAV⁵	3.4%	2.3%
Revenue return per share^1,3	8.1p	6.9p	17.4%
Final dividend per share	6.0p⁴	5.5p
Special dividend per share	1.5p⁴	1.0p
Total dividend per share	7.5p⁴	6.5p	15.4%

¹	See glossary in the full Annual Report and Financial Statements.
²	The NAV and share price total returns are sourced from Edinburgh Partners and include dividends reinvested.
³	Based on the weighted average number of shares in issue, excluding shares held in treasury, during the year.
⁴	Proposed dividends for the year.
⁵	Alternative performance measure – see the full Annual Report and Financial Statements.

		Year to 31 December 2019	Year to 31 December 2018
Year’s high/low

Share price	- high	319.0p	330.0p
	- low	290.0p	289.0p

NAV	- high	335.0p	349.1p
	- low	310.2p	306.3p

Share price discount to NAV²
	- low	3.2%	1.1%
	- high	8.7%	9.6%

Cost of running the Company
Ongoing charges^1,2		1.0%	0.9%

¹	Based on total expenses, excluding finance costs and certain non-recurring items for the year as a percentage of the average monthly net asset value.
²	Alternative performance measure – see the full Annual Report and Financial Statements.

Past performance is not a guide to future performance.

PORTFOLIO OF INVESTMENTS
as at 31 December 2019

Company	Sector	Country	Valuation £000	% of Net Assets
Equity investments
20 largest equity investments
Roche¹	Health Care	Switzerland	5,033	3.8
AstraZeneca	Health Care	United Kingdom	4,310	3.3
Novartis	Health Care	Switzerland	4,217	3.2
Vodafone	Communication Services	United Kingdom	4,093	3.1
Sanofi	Health Care	France	3,945	3.0
Verizon Communications	Communication Services	United States	3,879	2.9
Tesco	Consumer Staples	United Kingdom	3,827	2.9
Sony	Consumer Discretionary	Japan	3,689	2.8
Singapore Telecommunications	Communication Services	Singapore	3,643	2.8
Galaxy Entertainment	Consumer Discretionary	Hong Kong	3,513	2.7
Sumitomo Mitsui Trust	Financials	Japan	3,495	2.6
BNP Paribas	Financials	France	3,408	2.6
Sumitomo Mitsui Financial	Financials	Japan	3,392	2.6
ING	Financials	Netherlands	3,384	2.6
Royal Dutch Shell A	Energy	Netherlands	3,317	2.5
Edinburgh Partners Emerging Opportunities Fund	Financials	Other	3,268	2.5
Total	Energy	France	3,229	2.4
Orange	Communication Services	France	3,218	2.4
East Japan Railway	Industrials	Japan	3,110	2.4
Astellas Pharma	Health Care	Japan	3,101	2.3

Total – 20 largest equity investments			73,071	55.4

Other equity investments
ENI	Energy	Italy	2,987	2.3
China Mobile	Communication Services	China	2,966	2.2
BP	Energy	United Kingdom	2,916	2.2
Bayer	Health Care	Germany	2,848	2.2
Swire Pacific A	Real Estate	Hong Kong	2,836	2.1
Panasonic	Consumer Discretionary	Japan	2,803	2.1
Fresenius Medical Care	Health Care	Germany	2,764	2.1
Commerzbank	Financials	Germany	2,708	2.1
Apache	Energy	United States	2,693	2.0
Samsung SDI	Information Technology	South Korea	2,663	2.0
Bangkok Bank²	Financials	Thailand	2,631	2.0
Comsys	Industrials	Japan	2,612	2.0
BBVA	Financials	Spain	2,519	1.9
Shanghai Fosun Pharmaceutical H	Health Care	China	2,362	1.8
Japan Tobacco	Consumer Staples	Japan	2,314	1.7
Telefonica	Communication Services	Spain	2,244	1.7
CK Hutchison	Industrials	Hong Kong	2,135	1.6
Nokia	Information Technology	Finland	2,096	1.6
Rohm	Information Technology	Japan	628	0.5


Total – 39 equity investments			120,796	91.5


Cash and other net assets			11,213	8.5

Net assets			132,009	100.0

¹	The investment is in non-voting shares.
²	The investment is in non-voting depositary receipts.

Of the ten largest portfolio investments as at 31 December 2019, the valuations at the previous year end, 31 December 2018, were Roche £5,245,000, AstraZeneca £4,408,000, Novartis £3,942,000, Vodafone £3,450,000, Sanofi £3,521,000, Verizon Communications £3,693,000, Tesco £2,851,000, Singapore Telecommunications £3,237,000 and Galaxy Entertainment £3,141,000. Sony was purchased during the year.

DISTRIBUTION OF INVESTMENTS as at 31 December 2019 (% of net assets)

Sector distribution	% of Net assets
Health Care	21.7
Financials	18.9
Communication Services	15.1
Energy	11.4
Consumer Discretionary	7.6
Industrials	6.0
Consumer Staples	4.6
Information Technology	4.1
Real Estate	2.1
Cash and other net assets	8.5
	100.0

The figures detailed in the sector distribution table represent the Company’s exposure to those sectors.


Geographical distribution	% of Net assets
Europe	36.4
Japan	19.0
Asia Pacific	17.2
United Kingdom	11.5
United States	4.9
Other	2.5
Cash and other net assets	8.5
	100.0

The figures detailed in the geographical distribution table represent the Company’s exposure to these countries or regional areas.

The geographical 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.

CHAIRMAN’S STATEMENT

Results
At 31 December 2019, our NAV was 320.8p, an increase of 3.9% in the year. With dividends re-invested, this resulted in a total return of 6.0% for the year.

The share price at the end of the year was 310.0p, an increase of 2.8% from the share price at the end of 2018 of 301.5p. With dividends re-invested, this resulted in a total return of 5.0% for the year. At 31 December 2019, the share price stood at a discount of 3.4% to the NAV, which compared to 2.3% at the prior year end.

As detailed below, the 17.4% increase in revenue per share has enabled your Board to propose a total dividend of 7.5p per share, 15.4% higher than last year. While stock markets around the world rose strongly last year, the 5.0% share price total return has provided a real return, contributing to the 8.8% annualised share price total return since the launch of the Company on 15 December 2003 up to the end of 2019. The annualised UK Retail Price Inflation rate was 2.9% over the same period.

Stock market review and investment performance
After a prolonged period of very low interest rates, there were signs of the start of normalisation of rates in 2018, led by the US. In the final quarter of that year, equity markets fell sharply in response to the rising rates and in late December, the US Federal Reserve announced a halt to its tightening policy, setting the stage for a strong recovery in share prices in 2019. Once again the US Federal Reserve had acted to limit the damage to asset prices, providing the short-term reassurance that there was likely to be an accommodative fiscal and monetary policy in the run-up to the US presidential election in November 2020.

Equity valuations continued to rise during 2019, despite sluggish corporate earnings and a reduction in growth forecasts worldwide, the latter, in part, impacted by the trade tensions between the US and China. The US equity market enjoyed its third largest rise of the past 20 years, driven largely by valuation expansion. The two previous largest rises were both preceded by significant declines in equity markets, following the terrorist attack on New York in September 2001 and the global financial crisis in 2008. The share prices of “growth” companies were the main beneficiaries of this re-rating in 2019, particularly US technology shares. The portfolio of more defensive lower-rated “value” shares held by your Company achieved a much more modest gain.

Our Investment Manager, Edinburgh Partners, has a consistent, long-term approach to investing which is focused on company valuations. Through disciplined and intensive research, Edinburgh Partners identifies stocks which it considers are undervalued. It is Edinburgh Partners’ belief that such undervaluation arises because the stock market investment horizon is too short. They buy and hold stocks based on valuation and not by reference to an index weighting. As long-term investors, with a time horizon of five years or more, they stress the need for patience in investing. This has resulted in a high conviction approach, with a concentrated portfolio of 39 holdings at 31 December 2019. Whilst this approach does not guarantee investment success, Edinburgh Partners continues to invest in accordance with its stated investment philosophy. The Investment Manager’s Report contains detailed commentary on the portfolio and the performance for the year.

Revenue account and dividend
We have enjoyed a significant increase in revenue for the year ended 31 December 2019. The revenue per share was 8.1p, an increase of 17.4% on the prior year figure of 6.9p. Many of the portfolio’s holdings have high dividend payments, principally in the communication services, energy and financials sectors. A reduction in overseas taxation due to portfolio changes also contributed to the increase in the revenue per share.

As a consequence of this increase in revenue per share, the Board is pleased to recommend a final dividend of 6.0p per share and a special dividend of 1.5p per share, a total of 7.5p per share, subject to Shareholders’ approval at the Annual General Meeting to be held on 22 April 2020. The dividends will be payable on 29 May 2020. The proposed total dividend of 7.5p per share represents an increase of 15.4% when compared to the prior year total dividend of 6.5p per share, which consisted of a final dividend of 5.5p per share and a special dividend of 1.0p per share.

As we have stated in previous years’ Annual Reports, the level of revenue generated from the portfolio will vary from year to year. As a result, any dividend paid to Shareholders is likely to fluctuate from year to year. Within an investment strategy focussed on value investing, our Investment Manager selects stocks based on where it finds the best value. This may at times result in a focus on shares with lower dividend yields. The Board has therefore not imposed any restrictions on the Investment Manager having to achieve a specific income and dividend target.

Shares held in treasury
The Company continued with its policy of buying back shares with a view to maintaining the share price at close to the NAV. During the year, we purchased 1,540,000 shares to be held in treasury, at a total cost of £4,697,000. This represented 3.6% of the shares in circulation at the start of the year. Shares that have been bought back under the Company's buy back policy are retained by the Company as treasury shares rather than cancelled.

At the most recent Annual General Meeting of the Company, which was held in April 2019, Shareholders passed a resolution permitting the Company to sell shares held in treasury at a weighted average discount of not more than 2.0% to the prevailing NAV and providing that any sale of treasury shares would not result in a dilution greater than 0.2% in aggregate in the period between annual general meetings. While no shares were sold from treasury during the year under review, the Board is recommending that Shareholders approve a similar resolution at this year’s Annual General Meeting. The Board believes that having the ability to sell shares from treasury at a small discount should help improve the liquidity in the Company’s shares when demand for our shares is once again sufficient for sales to be made. In 2015, a total of 2,035,000 shares were sold from treasury.

Change of Auditor
Ernst & Young LLP has been the Auditor since the launch of the Company in 2003. A competitive audit tender had been undertaken in October 2016, following which Ernst & Young LLP was re-appointed as the Company’s Auditor. In accordance with the legislation in respect of the mandatory rotation of audit firms, the Company is required to rotate the Auditor following the audit of the 2023 financial statements.

However, in view of the recent developments in the market for audit services, the Audit and Management Engagement Committee considered it appropriate to re-tender for statutory audit services for the year ending 31 December 2020. Ernst & Young LLP informed the Directors that it would not participate in the audit tender process due to commercial considerations and will cease to hold office on 22 April 2020, the date of the Annual General Meeting. A copy of Ernst & Young LLP’s letter to the Directors is enclosed with this Annual Report. On behalf of Shareholders, I should like to thank Ernst & Young LLP for its services to the Company since launch in 2003.

In the first quarter of 2020, the Audit and Management Engagement Committee carried out an external audit tender process. Following a transparent and competitive tender, including written submissions, presentations and discussions with the candidate firms, the Audit and Management Engagement Committee recommended to the Board that Johnston Carmichael LLP, whose high quality audit team have experience in auditing investment companies, be appointed to replace Ernst & Young LLP as the Auditor of the Company with effect from the conclusion of the Annual General Meeting on 22 April 2020. Accordingly, the appointment of Johnston Carmichael LLP is recommended to Shareholders for approval at the Annual General Meeting.

New Website and Factsheet
The Board reviewed the Company’s website and factsheet and decided both should be updated, with a view to improving access to, and clarity of, shareholder communications. Operating in conjunction with Edinburgh Partners, their client reporting service provider and a website developer, both projects are nearing completion. The updated website, including the upgraded monthly factsheets, will be available at www.epgot.com.

Annual General Meeting
The Annual General Meeting will be held at 12.00 noon at The Bonham Hotel, 35 Drumsheugh Gardens, Edinburgh EH3 7RN on Wednesday, 22 April 2020. The Board looks forward to meeting Shareholders who are able to attend.

The Board
As detailed in last year’s Annual Report, there were some Board and Committee changes in 2019. Tom Walker was appointed as a Director and member of the Audit and Management Engagement Committee, with effect from 1 April 2019. Giles Weaver retired from the Board immediately after the Annual General Meeting held on 24 April 2019. Following his retiral, David Ross became Chairman of the Audit and Management Engagement Committee.

The Board regularly considers succession planning, including the identification of the skills and experience required to meet the challenges and future opportunities facing the Company. The Board is aware of the benefits of diversity, including gender and ethnicity, and will take these into account when making any new Director appointments.

Outlook
The perception of limited equity market downside caused asset price inflation in the year under review and this continued into early 2020, with the US equity market reaching new highs. The world economy continues to grow but the growth rate has been moderating despite ultra-low interest rates, even negative rates in some countries.

A number of countries, including the UK, are resorting to further fiscal stimulus in spite of their overall indebtedness. Lower interest rates and fiscal stimulus have historically been good for equities but it does risk creating a speculative surge in share prices to levels that are unsustainable. To some extent this happened in 2019, particularly in US technology shares. Such events can continue for a surprisingly long time but never end well.

The realisation that the outbreak of coronavirus in China and its spread to other countries could turn into a pandemic with severe consequences for the global economy led to a dramatic reversal in investor confidence. Share prices fell sharply in February. Governments and central banks have already announced measures to try and limit the financial and economic damage but given the uncertainty created, further volatility in share prices is likely.

Our Investment Manager’s focus is on limiting risk and with this in mind cash balances of over 8% at the year end were increased in January and February to 18%. This puts the Company in a good position to take advantage of investment opportunities as they occur.

Teddy Tulloch

Chairman
10 March 2020

Past performance is not a guide to future performance.

INVESTMENT MANAGER’S REPORT

The end of 2018 witnessed a period during which concerns over a potential rise in interest rates caused a sharp sell-off in asset markets. Central banks and policy makers reacted to this in unequivocal terms, through easing both monetary and fiscal policy, effectively signalling that they would underwrite asset prices. This was not a new response; we have periodically had the ‘Greenspan put’, the ‘Bernanke put’ and now the ‘Powell put’. As on previous occasions, markets reacted positively with global equity market indices rising by over 20% in 2019. It should be noted that the market rises were driven by higher valuations, rather than by earnings growth. For market participants, the belief that there is a floor under share prices makes bidding-up prices the logical course of action.

The policy of underpinning asset prices in response to the global financial crisis in 2008 was rooted in the analysis of the Great Depression by Ben Bernanke, the then chairman of the US Federal Reserve. One can argue that this was a legitimate policy which avoided the implosion of the financial system and a second great depression. It is not at all clear that the same policy continues to be appropriate. Labour markets have recovered and many economies have close to full employment. Asset markets have been buoyant for an extended period and the banking system has seen reserves grow and leverage decrease. An extended period of growth and a repaired financial system are not obvious triggers for the continued suppression of interest rates.

On the fiscal side, despite an extended period of economic growth, the US debt/GDP ratio has continued to rise to such an extent that it is now at its highest level since the immediate post World War II peak. The underlying reason for this rise is the pro-cyclical tax-cutting fiscal policy which resulted in a budget deficit of 4.6% in the year to 30 September 2019. The obvious problem of a pro-cyclical budget is the constraint it places on policy on any subsequent slowdown in economic growth.

The cynic might suggest that policy makers have become addicted to the idea that expansionary measures carry no consequences and asset prices can be controlled by policy. If this were true, it would be political nirvana, but it would also run directly contrary to financial history. It could also be that there remains an underlying concern over conditions in the economy against the backdrop of the debt overhang, making it a requisite to maintain growth at any cost.

If it is the case that the fundamental laws of economics have not dissolved, then there is a downside to a policy of continually inflating/supporting asset prices. Almost inevitably the distortion of risk/reward will have caused a misallocation of resources. It was mispricing of risk in the US housing market and the subsequent bad debt write-downs that destroyed the balance sheets of banks and ultimately led to the global financial crisis in 2008. Seldom does history repeat itself exactly, but this does not mean that there have been no distortions caused by the prolonged period of interest rate suppression. The demand for yield has not diminished and it has only been satisfied by the willingness to take on additional risk. Rather than the housing market, this void has been filled by the private equity and debt markets. There is ample evidence of debt issuance unsupported by assets, referred to as covenant-light, at yields that appear inappropriate to the underlying risk. In many instances, the quality of the cash-flow supporting this type of debt issuance has deteriorated, leading to significant leverage both in terms of what is declared and the true underlying position. Low-yielding, high-risk debt is unlikely to prosper under stressed economic conditions. The debt does not appear to reside within the banks this time but has been bundled into funds owned by the public as well as endowment funds, insurance companies and pension funds. Those who have a liability structure which requires offsetting yield have, because of the policy of interest rate suppression, literally been forced into these investments to retain solvency. The authorities are not unaware of the risks in the financial system and have been providing warnings, but the paradox is that the warnings are coupled with a desire to continue with the policy of underpinning asset prices.

Where does all this leave us? The cost of money has been suppressed for over 10 years and asset markets have responded accordingly. Against this backdrop, it is perhaps not surprising that we are finding it very difficult to identify ‘cheap’ assets in which to invest. One of the reasons that the assets of the Company are not measured against any benchmark is to ensure we can invest according to where value may be found, rather than being tied to the composition of any particular equity market index. Equally, we are not forced to invest when we are unable to identify value. We are prepared to build cash as a reserve to take advantage of the opportunities that we expect to arise. This is not a comfortable position when equity markets are rising and frothy, but we strongly believe it is the logical and appropriate course of action. In many ways, this is similar to the situation we found ourselves in 2007, when we reduced our investment exposure and cash levels built up. In other words, we find ourselves back in a similar position where the backdrop in risk/reward favours capital preservation. This lies behind the current structure of the portfolio.

Over calendar year 2019, the exposure to cyclical stocks was reduced, with the sale of Mitsubishi, the Japanese trading company, and Alps Electric, the electronic components business. Both were approaching our share price sell targets. New additions to the portfolio included Sony, where we believed the entertainment and content assets were being undervalued by investors, and Samsung SDI, one of the leading battery companies based in South Korea.

The exposure to the Communication Services sector increased to over 15% with the purchase of Orange and the top up of the shareholding in Vodafone when the share price dipped post the dividend cut. While the growth rate for telecommunication companies is pedestrian but stable, there is a strong supporting dividend yield. The Energy sector is normally similar, in the sense that there is a substantial dividend yield which can be maintained even with oil prices 10-15% lower than those seen at the end of 2019. However, the breakdown in relations between Saudi Arabia and Russia over oil production quotas, with Saudi Arabia responding through increased production has led to a 30% fall in the price of crude oil. Whilst this is not considered sustainable in the long term, it may continue long enough to cause the major oil companies to reset their dividends. Accompanying share price falls may then provide investment opportunities, as the share prices of energy companies will fluctuate with sentiment over energy demand. There is the obvious issue of carbon emissions and most of the major energy companies are diversifying into sustainable energy sources and working on carbon offsets. However, the fact remains that they are primarily hydrocarbon companies. We believe it is important that the major energy companies seek to minimise their environmental impact during the extended transition to reduce carbon emissions. Our assessment of the quality of potential portfolio holdings in the areas of environmental, social and governance issues, forms an integral part of our investment analysis process. Environmental, social and governance scores are assessed as part of the production of the Edinburgh Partners' research for each stock. We also seek to engage with companies on issues of concern where appropriate. We believe the global economy will continue to rely on fossil fuels for some time to come and resolution on emissions lies at government level. Therefore, we continue to invest in the major energy companies, subject to the caveats on their efforts to minimise the impact of their operations on the environment.

The portfolio also has significant exposure to the Health Care sector. Again, the companies in this sector have stable revenue growth and cash-flows which underpin their dividends. We are cognisant that this is a US Presidential election year and health care typically becomes a political football. We will therefore monitor position sizes carefully to take advantage of any volatility which may emerge.

Approximately 50% of the portfolio is invested in the three sectors of Communication Services, Energy and Health Care, where we see the cash-flow and dividend characteristics providing some resilience if equity markets begin to unwind. The exposure to banking stocks remains meaningful at around 15%. Clearly, if an economic downturn were to unfold, then the banks would not be immune. However, they already have low valuations, even with depressed margins, and any improvement in market conditions could see a significant rise in their share prices. The banking exposure is spread geographically between Europe and Asia and we are monitoring the positions closely.

On a geographic basis, the most noteworthy point is the exceptionally low exposure to the US equity market, which has been one of the best performing markets for an extended period. Our issue with the US equity market is that we struggle to find cheap stocks against a backdrop of an economy where growth has been boosted by unsustainable tax cuts. We did hold the Apple component supplier, Cirrus Logic, but sold it as the share price appreciated to our price target. Similarly, with Synchrony Financial, the credit card company, the share price rallied to a point where we no longer saw the risk/reward as attractive.

In conclusion, the risks in the global economy are significant. Prolonged suppression of the cost of money to mitigate the effects of the banking crisis and avoid a depression have worked with global economy recovery and a recapitalised banking sector. However, the patient now seems addicted to medicine with any attempt to remove it causing withdrawal symptoms. We believe prolonging inappropriate treatment will cause the side effects to worsen and eventually this will become apparent, impacting a range of asset prices. The portfolio is being run to mitigate this impact and preserve capital in order that we can take advantage of the opportunities that we anticipate will arise. The economic slowdown that will be induced by the coronavirus will amplify these risks, irrespective of the policy responses by both central banks and governments.

Dr Sandy Nairn

Edinburgh Partners
10 March 2020

Past performance is not a guide to future performance.

OTHER STATUTORY INFORMATION

Principal activity and status of the Company
The principal activity of the Company is to carry on business as an investment trust.

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 (the “Act”). The Company has been approved by HM Revenue & Customs as an authorised investment trust under sections 1158 and 1159 of the Corporation Tax Act 2010 (the “CTA”), subject to there being no subsequent serious breaches of the regulations. In the opinion of the Directors, the Company is directing its affairs so as to enable it to continue to qualify for such approval.

The Company's 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 is a member of the AIC, a trade body which promotes investment companies and also develops best practice for its members.

Purpose, business model and strategy
The Board is responsible for the overall management of the Company, and by the AIC Code to establish the Company’s purpose, values and strategy, and to report to Shareholders on the detail of how this is achieved.

As an investment company, the Company’s purpose is expressed in its investment objective, which is to provide Shareholders with an attractive real long-term total return by investing globally in undervalued securities. As a closed-ended investment company whose shares are traded on the main market of the London Stock Exchange, the Company can pursue its investment objective by taking long-term investment decisions without being constrained by the need to sell investments to meet redemptions, as other investment funds such as open-ended investment companies may need to do. The strategy applied by the Company in this context is contained in the Company’s investment policy, as set out in the full Annual Report and Financial Statements.

In order to achieve its investment objective, the Board has decided it is appropriate to appoint third party providers with the necessary capability and established track records to deliver the required service requirements to the Company. The AIFM and the Investment Manager have the responsibility of investing and managing the assets of the Company in accordance with the investment objective and for managing its activities on a daily basis. The Company also appoints the Depositary to have responsibility for the safekeeping and monitoring of its assets and the Registrar to maintain Shareholder records.

The Board retains responsibility for decisions regarding corporate strategy, corporate governance, risk and internal control assessment and determining the overall limits under which the AIFM, the Investment Manager and other service providers operate. To ensure that the Company’s service providers continue to deliver the required level of service, the Board receives regular reports, evaluates their control environments and formally assesses their appointment on an annual basis.

The Board maintains a close working relationship with all of its service providers, in particular with the AIFM and Investment Manager, and monitors their performance closely. Further details of the service providers and of how their activities are monitored is detailed in the Corporate Governance Statement in the full Annual Report and Financial Statements.

Investment 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’s investment policy is set out in the full Annual Report and Financial Statements.

The Investment Manager's compliance with the limits set out in the investment policy is monitored by the Board and the AIFM.

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 earnings 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 above.

Portfolio analysis
A detailed review of how the Company’s assets have been invested is contained in the Chairman’s Statement and the Investment Manager’s Report above. A list of all the Company’s investments is contained in the Portfolio of Investments above. The portfolio consisted of 39 investments, excluding cash and other net assets, as at 31 December 2019, thus ensuring that the Company has a suitable spread of investment risk. A sector and geographical distribution of investments is shown above.

Directors’ duties and stakeholder engagement
Section 172 of the Act requires directors to act in a way that he/she considers, in good faith, would be most likely to promote the success of a company. In doing so, directors must take into consideration the interests of the various stakeholders of the Company, the impact of the Company’s operations on the community and the environment, take a long-term view on consequences of the decisions they make as well as aim to maintaining a reputation for high standards of business conduct and fair treatment between the members of the Company.

In complying with the requirements of section 172 of the Act, the Directors should be able to ensure that all decisions are made in a responsible and sustainable way for the benefit of all stakeholders. In accordance with the requirements of the Companies (Miscellaneous Reporting) Regulations 2018, the Company explains below how the Directors have discharged their duty under section 172. This section serves as the Company’s Section 172 Statement.

A company’s stakeholders are normally considered to comprise of its shareholders, its employees, its customers, its suppliers as well as the wider community in which the company operates and impacts. The Company is different in that as an investment trust it has no employees and, significantly, its customers are synonymous with its Shareholders. In terms of suppliers, the Company receives professional services from a number of different providers, principal among them being the AIFM and the Investment Manager. The Board believes the wider community in which the Company operates encompasses its portfolio of investee companies and the communities in which they operate.

Details of how the Board seeks to understand the needs and priorities of the Company’s stakeholders and how these are taken into account during all its discussions and as part of its decision-making are set out below:

Shareholders
Communication and regular engagement with Shareholders is given a high priority by both the Board and the AIFM. The Directors seek to maintain regular contact with major Shareholders and are always available to enter into dialogue with all Shareholders. A regular dialogue is maintained with the Company’s institutional Shareholders and private client asset managers through the AIFM, which regularly reports to the Board on any such contact, the views of Shareholders and any changes to the composition of the share register. All Shareholders are encouraged to attend and vote at the Annual General Meeting and at any general meetings, during which the Board and the AIFM are available to discuss issues affecting the Company. Shareholders wishing to communicate directly with the Board should contact the Company Secretary at the registered office address. The Chairman is available throughout the year to respond to Shareholders, including those who wish to speak with him in person.

Copies of the Annual and Half-Yearly Reports are dispatched to Shareholders by mail and are also available, along with the monthly factsheets, for downloading from the Company’s website at www.epgot.com. The Company also releases portfolio updates to the market on a monthly basis.

AIFM and Investment Manager
The Board believes that maintaining a close and constructive working relationship with the AIFM and the Investment Manager is crucial to promoting the long-term success of the Company in an effective and responsible way. This ensures the interests of all current and potential stakeholders and society at large are properly taken into account when decisions are made. Representatives of the AIFM and the Investment Manager attend Board meetings and provide reports on investments, performance, marketing, operational and administrative matters. An open discussion regarding such matters is encouraged, both at Board meetings and by way of ongoing communication between the Board, the AIFM and the Investment Manager. Board members are encouraged to share their knowledge and experience with the AIFM and the Investment Manager and where appropriate, the Board adopts a tone of constructive challenge in its discussions with the AIFM and the Investment Manager. The Board keeps the ongoing performance of the AIFM and the Investment Manager under continual review and conducts an annual appraisal of both the parties. Details regarding the continuing appointment of the AIFM are set out below. This review includes the performance of an administrator whose services are provided under contract to the AIFM, rather than directly to the Company.

Other service providers
The Company’s day-to-day operational functions are delegated to a number of third-party service providers, each engaged under separate contracts. In addition to the AIFM and the Investment Manager, the Company’s principal service providers include the Depositary, the Registrar and the Auditor. The Company, through the AIFM, engages with the service providers to develop and maintain positive and productive relationships, and to ensure that they are well informed in respect of all relevant information about the Company’s business and activities. The Board, through its Audit and Management Engagement Committee, keeps the ongoing performance of these service providers under continual review and conducts an annual appraisal of all the third-party service providers.

Portfolio of investee companies
The day-to-day management of the Company’s investment portfolio has been delegated by the AIFM to the Investment Manager. As such, the Investment Manager has primary responsibility for engaging with investee companies on behalf of the Company. The Investment Manager does so in accordance with the United Nations Principles for Responsible Investment, the UK Stewardship Code and is a signatory to both regimes. The Investment Manager’s approach to engagement in this context is detailed in its Engagement Policy, an Environmental, SRI and Corporate Governance (“ESG”) Policy Statement and a Proxy Voting Policy. Copies of the Investment Manager’s Engagement Policy and ESG Policy Statement can be found on its website at www.edinburghpartners.com, together with a summary of all votes cast by the Investment Manager as proxy on behalf of its clients. Further details regarding the approach to ESG matters can be found below.

The Board recognises the importance of engagement with investee companies, both in the context of ESG matters and more generally. The Board is aware of evolving expectations in this regard and is committed to working with the Investment Manager in relation to future engagement on behalf of the Company.

The above methods for engaging with stakeholders are kept under review by the Directors and discussed on a regular basis at Board meetings to ensure that they remain effective.

In addition to the above, certain key decisions taken by the Board during the year also serve as examples of how the needs and priorities of the Company’s stakeholders are taken into account by the Board as part of its decision-making process. Key decisions made during the year include:

the appointment of a new Director, Mr Tom Walker, on 1 April 2019, to replace Mr Giles Weaver, who retired at the Annual General Meeting held on 24 April 2019. This included consultation with the major shareholders of the Company. The Board continues to consider future succession planning and the need for the requisite skills and experience required to meet the challenges and future opportunities facing the Company, as well as the benefits of diversity, including gender and ethnicity;

in view of the recent developments in the market for audit services, the decision to undertake a re-tender for statutory audit services for the year ending 31 December 2020. Following the re-tender process, Johnston Carmichael LLP will be proposed as auditor of the Company at the Annual General Meeting to be held on 22 April 2020; and

the Board reviewed the Company’s website and factsheet and decided both should be updated, with a view to improving access to, and clarity of, shareholder communications.

Culture
The Chairman leads the Board and is responsible for its overall effectiveness in directing the Company. He demonstrates objective judgement, promotes a culture of openness and debate, and facilitates effective contributions by all Directors. In liaison with the Company Secretary, he ensures that the Directors receive accurate, timely and clear information. The Directors are required to act with integrity, lead by example and promote this culture within the Company.

The Board seeks to ensure the alignment of the Company’s purpose, values and strategy with the culture of openness, debate and integrity through ongoing dialogue, and engagement with Shareholders, the AIFM, the Investment Manager and the Company’s other service providers. As detailed in the Corporate Governance Statement in the full Annual Report and Financial Statements, the Company has adopted a number of policies, practices and behaviours to facilitate a culture of good governance and ensure that this is maintained.

The culture of the Board is considered as part of the annual performance evaluation process which is undertaken by each Director. The culture of the Company’s service providers is also considered by the Board during the annual review of their performance and while considering their continuing appointment. In the context of the Investment Manager, particular attention is paid to the Investment Manager’s environmental, social and governance, engagement and proxy voting policies. Additional information on the Board’s approach to environmental, social and governance matters is detailed below.

Results and dividends
The results for the year are set out in the Income Statement and in the Reconciliation of Movements in Shareholders’ Funds below.

For the year ended 31 December 2019, the net revenue return attributable to Shareholders was £3.4 million (2018: £3.0 million) and the net capital return attributable to Shareholders was £4.2 million (2018: minus £13.4 million). Total Shareholders’ funds, after taking account of those returns, the dividend payment relating to the prior year of £2.7 million, and share buybacks of £4.7 million, increased by 0.2% to £132.0 million (2018: £131.8 million).

A final dividend of 6.0p per share and a special dividend of 1.5p per share, a total of 7.5p per share, for the year ended 31 December 2019 (2018: final dividend of 5.5p per share and a special dividend of 1.0p per share, a total of 6.5p per share), has been recommended by the Board. Subject to the approval of Shareholders at the Annual General Meeting to be held on 22 April 2020, the final dividend will be payable on 29 May 2020 to Shareholders on the register at the close of business on 11 May 2020. The ex-dividend date will be 7 May 2020.

Key performance indicators
At each Board meeting, the Directors consider a number of performance measures to assess how the Company is achieving its objective. The key performance indicators used to measure the progress and performance of the Company over time are established industry measures and are as follows:

Net asset value
In the year to 31 December 2019, the NAV increased by 3.9% from 308.8p to 320.8p. After taking account of the 5.5p per share final dividend and 1.0p per share special dividend, a total of 6.5p per share, paid on 24 May 2019 relating to the year ended 31 December 2018, the NAV total return was 6.0% (2018: minus 7.1%). The UK Retail Price Inflation rate was 2.2% (2018: 2.7%) over the same period.

The annualised NAV total return since the launch of the Company on 15 December 2003 to 31 December 2019 was 9.2%. The annualised UK Retail Price Inflation rate was 2.9% over the same period.

Share price
In the year to 31 December 2019, the Company’s share price increased by 2.8% from 301.5p to 310.0p. After taking account of the 5.5p per share final dividend and 1.0p per share special dividend, a total of 6.5p per share, paid on 24 May 2019 relating to the year ended 31 December 2018, the share price total return was 5.0% (2018: minus 4.2%). The UK Retail Price Inflation rate was 2.2% (2018: 2.7%) over the same period.

The annualised share price total return since the launch of the Company on 15 December 2003 to 31 December 2019 was 8.8%. The annualised UK Retail Price Inflation rate was 2.9% over the same period.

For information, in the year to 31 December 2019, the total return from the FTSE All-World Index, adjusted to sterling, was 22.3% (2018: minus 3.4%). Since the launch of the Company on 15 December 2003 to 31 December 2019, the annualised total return on the FTSE All-World Index, adjusted to sterling, was 10.2%.

Share price discount to NAV
In the year to 31 December 2019, the share price discount to NAV increased from 2.3% to 3.4%.

Revenue return per share
In the year to 31 December 2019, the revenue per share increased by 17.4% from 6.9p to 8.1p.

Dividends per share
The Directors are recommending a final dividend of 6.0p per share and a special dividend of 1.5p per share, a total of 7.5p per share. This represents an increase of 15.4% when compared to the prior year final dividend of 5.5p per share and a special dividend of 1.0p per share, a total of 6.5p per share.

Subject to approval by Shareholders at the Annual General Meeting to be held on 22 April 2020, the final and special dividends will be payable on Friday, 29 May 2020 to all Shareholders on the register at the close of business on Monday, 11 May 2020. The ex-dividend date will be Thursday, 7 May 2020.

Ongoing charges
In the year to 31 December 2019, the ongoing charges ratio was 1.0% (2018: 0.9%). The ongoing charges ratio is based on total expenses, excluding finance costs and certain non-recurring items for the year as a percentage of the monthly net asset value.

The longer-term records of the key performance indicators are shown in the Performance Record below.

Management Agreement
In order to comply with the Alternative Investment Fund Managers’ Directive (“AIFMD”), the Company appointed Edinburgh Partners AIFM Limited as its Alternative Investment Fund Manager with effect from 16 July 2014. Edinburgh Partners AIFM Limited has been approved as an Alternative Investment Fund Manager by the FCA. With the approval of the Directors, the AIFM appointed Edinburgh Partners as Investment Manager to the Company pursuant to a delegation agreement.

The AIFM receives a management fee of 0.75% per annum (payable monthly in arrears) of the month-end market capitalisation of the issued shares (excluding treasury shares) up to £100 million and 0.65% above £100 million. No performance fee is payable. The AIFM receives an administration and secretarial fee of £139,000 per annum (payable monthly in arrears), which is adjusted annually in line with changes in the Retail Price Index. The Company also pays the Investment Manager £25,000 per annum in respect of marketing-related services.

The Company has a holding in the Edinburgh Partners Emerging Opportunities Fund, which is managed by Edinburgh Partners, as detailed in notes 8 and 9 of the Financial Statements below. No management fee was charged by the AIFM to the Company in relation to its investment in the Edinburgh Partners Emerging Opportunities Fund during the year ended 31 December 2019 (2018: £nil).

The Management Agreement may be terminated by either party giving 12 months’ written notice. No additional compensation is payable to the AIFM on the termination of this agreement other than the fees payable during the notice period. Further details relating to the Management Agreement are detailed in note 3 of the Financial Statements below.

Continuing appointment of the AIFM
The Board keeps the performance of the AIFM under continual review. As the AIFM has delegated the investment management function to Edinburgh Partners, the performance of the Investment Manager is also regularly reviewed. The Investment Manager adopts a consistent, long-term approach to investing which is focused on company valuations. This results in a high conviction approach, with a concentrated portfolio and low turnover. The Board, through delegation to the Audit and Management Engagement Committee, has considered the performance of the AIFM and the terms of its engagement. It is the opinion of the Directors that the continuing appointment of the AIFM on the terms agreed is in the interests of Shareholders as a whole. The reasons are that the long-term real return has been satisfactory and the investment strategy remains convincing. The remuneration of the AIFM is fair both in absolute terms and compared to that of managers of comparable investment companies. The Directors believe that by paying the management fee calculated on a market capitalisation basis, rather than a percentage of assets basis, the interests of the AIFM are more closely aligned with those of Shareholders.

AIFM remuneration disclosures
In accordance with the AIFMD, information in relation to the remuneration of the Company’s AIFM, Edinburgh Partners AIFM Limited, is made available to investors as part of a group policy which is available at www.edinburghpartners.com. The disclosure also includes those remuneration disclosures in respect of the AIFM’s staff and ‘Identified Staff’ for the reporting period.

Risk management by the AIFM
As required under the AIFMD, the AIFM has established and maintains a permanent and independent risk management function to ensure that there is a comprehensive and effective risk management policy in place and to monitor compliance with risk limits. This risk policy covers the risks associated with the management of the investment portfolio and the AIFM reviews and approves the adequacy and effectiveness of the policy on at least an annual basis, including the risk management processes and controls and limits for each risk area.

The AIFM sets risk limits that take into account the risk profile of the Company’s investment portfolio, as well as its investment objectives and strategy. The AIFM monitors the risk limits, including leverage, and periodically assesses the portfolio’s sensitivity to key risks on a regular basis.

Leverage
Leverage is defined in the AIFMD as any method by which the Company increases its exposure, whether through borrowing of cash or securities, or leverage embedded in derivative positions or by any other means. The Company did not have any borrowings and did not use derivative instruments for currency hedging during the year ended 31 December 2019.

In accordance with the detailed requirements of the AIFMD, leverage has been measured in terms of the Company’s exposure, and is expressed as a ratio of net asset value. The AIFMD requires this ratio to be calculated in accordance with both the Gross Method and the Commitment Method. Details of these methods of calculation can be found by referring to the AIFMD. In summary, these methods express leverage as a ratio of the exposure of debt, non-sterling currency, equity or currency hedging and derivatives exposure against the net asset value. The principal difference between the two methods is that the Commitment Method enables derivative instruments to be netted off to reflect hedging arrangements and the exposure is effectively reduced, while the Gross Method aggregates the exposure.

The AIFMD introduced a requirement for the AIFM to set maximum levels of leverage for the Company. The Company’s AIFM has set a maximum limit of 1.25 for both the Gross and Commitment Methods of calculating leverage. However, the AIFM anticipates that the figures are likely to be lower than this under normal market conditions. At 31 December 2019, the Company’s Gross ratio was 1.00 and its Commitment ratio was 1.00. In accordance with the AIFMD, any changes to the maximum level of leverage set by the Company will be communicated to Shareholders.

Principal risks and uncertainties
The Board considers that the following are the principal risks associated with investing in the Company: investment and strategy risk, key manager risk, discount volatility risk, price risk, foreign currency risk and regulatory risk. Other risks associated with investing in the Company include, but are not limited to, liquidity risk, credit risk, interest rate risk, gearing 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 16 of the Financial Statements below.

The Board, through delegation to the Committee, has undertaken a robust annual assessment and review of all the risks stated above, together with a review of any new and emerging risks which may have arisen during the year, including those that would threaten the Company’s business model, future performance, solvency or liquidity. These risks are formalised within the Company’s risk assessment matrix.

Those risks identified by the Board are not exhaustive and various other risks may apply to an investment in the Company. Potential investors may wish to obtain independent financial advice.

Internal financial control
In accordance with guidance issued to directors of listed companies by the Financial Reporting Council (“FRC”), the Directors confirm that they have carried out a review of the effectiveness of the systems of internal financial control during the year ended 31 December 2019, as set out in the Corporate Governance Statement in the full Annual Report and Financial Statements. There were no matters arising from this review that required further investigation and no significant failings or weaknesses were identified.

Depositary agreement
The Board appointed Northern Trust Global Services Limited to act as its depositary (the “Depositary”) with effect from 18 July 2014. On 3 April 2018, Northern Trust Global Services Limited was re-registered under the Act as a public limited company under the name of Northern Trust Global Services PLC. Northern Trust Global Services PLC subsequently converted to a Societas Europaea on 8 October 2018 and its name was changed to Northern Trust Global Services SE (“NTGS SE”). On 1 March 2019, NTGS SE transferred its corporate headquarters from the UK to Luxembourg. As a result of the re-domicile, NTGS SE is now an authorised credit institution in Luxembourg under Chapter 1 of Part 1 of the Luxembourg law of 5 April 1993 on the financial sector. It is authorised by the European Central Bank (“ECB”) and subject to the prudential supervision of the ECB and the Luxembourg Commission de Surveillance du Secteur Financier. The UK offices of NTGS SE have become a UK branch of NTGS SE and the branch continues to be regulated by the UK Financial Conduct Authority in the conduct of its UK depositary activities.

Custody services are provided by The Northern Trust Company (as a delegate of the Depositary). A fee of 0.01% per annum of the net assets of the Company, plus fees in relation to safekeeping and other activities undertaken to facilitate the investment activity of the Company, are payable to the Depositary. The Company and the Depositary may terminate the Depositary Agreement at any time by giving six months’ written notice. The Depositary may only be removed from office when a new depositary is appointed by the Company.

Main trends and future development
A review of the main features of the year ended 31 December 2019, the outlook for the current year and the factors likely to affect the future development performance and position of the business, can be found in the Chairman’s Statement and the Investment Manager’s Report above. The Board’s main focus is on the investment return and strategy, with attention paid to the integrity and success of the investment approach and on the factors which may have an impact on this.

Forward-looking statements
This Strategic Report contains “forward-looking statements” with respect to the Company’s plans and its current goals and expectations relating to its future financial condition, performance and results. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events that are beyond the Company’s control. Factors that could cause actual results to differ materially from those estimated by the forward-looking statements include, but are not limited to:

global economic conditions and equity market performance and prices;
changes in government policies and monetary and interest rate policies worldwide;
changes to regulations and taxes worldwide;
currency exchange rates;
use of gearing; and
the Company’s success in managing its assets and business to mitigate the impact of the above factors.

As a result, the Company’s actual future condition, performance and results may differ materially from the plans set out in the Company’s forward-looking statements. The Company undertakes no obligation to update the forward-looking statements contained within the Strategic Report or any other forward-looking statements it makes.

Environmental, human rights and community issues
The Board recognises the requirement under the Act to detail information about human rights, employees and community issues, including information about any policies it has in relation to these matters and the effectiveness of these policies. These requirements do not apply to the Company as it has no employees, all the Directors are non-executive and it has outsourced all its functions to third party service providers. The Company has therefore not reported further in respect of these provisions.

The Company is not within the scope of the Modern Slavery Act 2015 because it has not exceeded the turnover threshold and therefore, no further disclosure is required in this regard.

Gender diversity
As at 31 December 2019, the Board of Directors of the Company comprised four male Directors. The appointment of any new Director is made in accordance with the Company’s diversity policy as detailed in the Corporate Governance Statement in the full Annual Report and Financial Statements.

Environmental, social and governance policy
The Company seeks to invest in companies that are well managed with high standards of corporate governance. The Board believes this creates the proper conditions to enhance long-term value for Shareholders. The Company adopts a positive approach to corporate governance and engagement with companies in which it invests.

In pursuit of the above objective, the Board believes 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. It is the policy of the Company to vote, as far as 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. To this end, voting decisions are taken on a case-by-case basis, with the key issues on which the AIFM focuses being corporate governance, including disclosure and transparency, board composition and independence, control structures, remuneration and social and environmental issues.

The day-to-day management of the Company’s investment portfolio has been delegated by the AIFM to the Company’s Investment Manager, Edinburgh Partners, which has an ESG policy in place. The ESG policy statement, which can be found on the website at www.edinburghpartners.com, describes the manner in which the principles of the UK Stewardship Code are incorporated within the investment process.

The assessment of the quality of investee companies in relation to environmental considerations, socially responsible investment and corporate governance is embedded in the Investment Manager’s stock selection process.

Approval
This Strategic Report has been approved by the Board and signed on its behalf by:

Teddy Tulloch
Chairman

10 March 2020

Past performance is not a guide to future performance.

EXTRACTS FROM THE DIRECTORS’ REPORT

Share capital
At 31 December 2019, the Company’s issued share capital comprised 64,509,642 shares of one pence each, of which 23,361,917 shares were held in treasury.

At general meetings of the Company, on a show of hands every Shareholder who is present in person or by proxy shall have one vote and on a poll every Shareholder present in person shall have one vote for every share held. Shares held in treasury do not carry voting rights. The total voting rights of the Company at 31 December 2019 were 41,147,725.

Issue of shares
On 11 October 2005, the Company applied for a block listing of 1,300,000 shares on the main market of the London Stock Exchange. As at 31 December 2019, and at the date of signing this report, a balance of 745,830 shares may be issued under this block listing.

No shares were issued during the year or since the year end.

Purchase of shares
During the year ended 31 December 2019, the Company purchased in the stock market 1,540,000 shares (with a nominal value of £15,400) to be held in treasury, at a total cost of £4,697,000. This represented 2.4% of the issued share capital at 31 December 2018. During the year ended 31 December 2019, no shares were purchased for cancellation.

Subsequent to the year end of 31 December 2019 and up to 10 March 2020, the date of signing this report, the Company purchased in the stock market 810,000 shares (with a nominal value of £8,100.00) for treasury, at a total cost of £2,435,000, representing 2.0% of the issued share capital as at 31 December 2019.

The share purchases were made with a view to reducing discount volatility and maintaining the middle market price at which the shares traded at close to the NAV.

Sale of shares from treasury
No shares were sold from treasury during the year ended 31 December 2019 or since the year end.

Shares held in treasury
Holding shares in treasury enables a company to cost effectively issue shares that might otherwise have been cancelled. The total number of own shares held in treasury as at 31 December 2019, including those shares bought back in prior accounting periods, was 23,361,917 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 23,361,917 shares (with a nominal value of £233,619.17) representing 36.2% of the issued share capital at the time they were held in treasury.

Going concern
The Company’s business activities, together with the factors likely to affect its future development, performance and position, are set out in the Strategic Report above. In addition, notes 16 and 17 of the Financial Statements below include the Company’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments; and its risk exposure. The Company’s principal risks are set out in the Strategic Report above. The Company’s assets consist principally of a diversified portfolio of listed equity shares, which in most circumstances are realisable within a short period of time and exceed its liabilities by a significant amount.

After due consideration of the above factors, the principal and emerging risks facing the Company and the information detailed in the long-term viability statement below, the Directors have concluded that the Company has adequate resources to continue in operational existence for the next year. For this reason, they have adopted the going concern basis in preparing the Financial Statements.

Long-term viability statement
The Directors have assessed the prospects of the Company over a period longer than one year. The Board considers that, for a company with an investment objective to provide Shareholders with an attractive real long-term return by investing globally in undervalued securities, a period of five years is an appropriate period to consider for the purpose of the long-term viability statement. Furthermore, five years is the time period used for identifying long-term value, as detailed in the Strategic Report in the investment strategy section above.

In making its assessment, the Board considered a number of factors, including those detailed below:

the Company’s current financial position;

the principal risks the Company faces, as detailed in note 16 of the Financial Statements below;

that the portfolio comprises principally of investments traded on major global stock markets and that there is a satisfactory spread of investments. There is no expectation that the nature of the investments held within the portfolio will be materially different in the future;

that the expenses of the Company are predictable and modest in comparison with the assets and there are no capital commitments foreseen which would alter that position;

that the Company has no employees. All of the Directors are non-executive and consequently do not have any employment-related liabilities or responsibilities; and

that, should performance be less than the Board considers to be acceptable, it has appropriate powers to replace the AIFM.

The Board’s assessment was based on the following assumptions:

that investors will still wish to have an exposure to global equity portfolios;

that there will continue to be a demand for closed-ended investment trusts from investors; and

that regulation will not increase to a level that makes the running of the Company uneconomical in comparison to other competitive products.

The Board considers that, following its assessment, there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the five-year period of their assessment.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and 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 (United Kingdom Generally Accepted Accounting Practice), including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”. Under company law, the Directors must not approve the Financial Statements unless they are satisfied that they 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:

select suitable accounting policies and then apply them consistently;

make judgements and estimates that are reasonable and prudent;

state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Financial Statements; and

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 Act and include the information required by the Listing Rules of the FCA. 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.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors’ Report, Directors’ Remuneration Report and Corporate Governance Statement that comply with that law and those regulations.

The Directors, to the best of their knowledge, state that:

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

the Strategic Report 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 Annual Report and Financial Statements, taken as a whole, are considered by the Board to be fair, balanced and understandable and provide the information necessary for Shareholders to assess the Company’s position and performance, business model and strategy.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. The work carried out by the Auditor does not include consideration of these matters and, accordingly, the Auditor accepts no responsibility for any changes that may have occurred to the Financial Statements since they were initially presented on the 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

10 March 2020

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company’s statutory accounts for the years ended 31 December 2018 and 31 December 2019 but is derived from those accounts. Statutory accounts for the year ended 31 December 2018 have been delivered to the Registrar of Companies, and those for the year ended 31 December 2019 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 (iii) did not contain a statement under Section 498 (2) or (3) of the Act. 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 2019

	Note	Revenue £000	2019 Capital £000	Total £000	Revenue £000	2018 Capital £000	Total £000
Gains/(losses) on investments at fair value	8	-	4,737	4,737	-	(13,994)	(13,994)
Foreign exchange (losses)/gains on capital items		-	(491)	(491)	-	576	576
Income	2	5,032	-	5,032	4,676	-	4,676
Management fee	3	(903)	-	(903)	(950)	-	(950)
Other expenses	4	(429)	-	(429)	(406)	-	(406)

Net return before finance costs and taxation		3,700	4,246	7,926	3,320	(13,418)	(10,098)

Finance costs
Interest payable and related charges		(10)	-	(10)	-	-	-

Net return before taxation		3,690	4,246	7,936	3,320	(13,418)	(10,098)

Taxation	5	(310)	-	(310)	(330)	-	(330)

Net return after taxation		3,380	4,246	7,626	2,990	(13,418)	(10,428)

		pence	pence	pence	pence	pence	pence
Return per share	7	8.1	10.1	18.2	6.9	(31.0)	(24.1)

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 columns are prepared under guidance published by the AIC.

There were no items of other comprehensive income in the year and therefore the return for the year is also the total comprehensive income for the year.

Dividend information
A final dividend for the year ended 31 December 2019 of 6.0p per share and a special dividend of 1.5p per share, a total of 7.5p per share (2018: final dividend of 5.5p per share and a special dividend of 1.0p, a total of 6.5p, paid on 24 May 2019) has been recommended by the Board. Subject to Shareholders' approval, this dividend will be payable on 29 May 2020 to Shareholders on the register at the close of business on 11 May 2020. The ex-dividend date will be 7 May 2020. Based on 40,337,725 shares, being the number of shares in issue (excluding shares held in treasury) on 10 March 2020, the date of signing this report, the total dividend payment will amount to £3,025,000. Dividends are accounted for in the period in which they are paid. Further information on dividend distributions can be found in note 6 below.

The notes form part of these Financial Statements.

BALANCE SHEET
as at 31 December 2019

	Note	2019 £000	2018 £000
Fixed asset investments
Investments at fair value through profit or loss	8	120,796	116,969

Current assets
Debtors	10	607	503
Cash at bank and short-term deposits		10,911	14,473

		11,518	14,976

Current liabilities
Creditors	11	305	146

		305	146

Net current assets		11,213	14,830

Net assets		132,009	131,799

Capital and reserves
Called-up share capital	12	645	645
Share premium		1,597	1,597
Capital redemption reserve		14	14
Special reserve		45,965	50,662
Capital reserve		78,263	74,017
Revenue reserve		5,525	4,864

Total Shareholders’ funds		132,009	131,799


		pence	pence
Net asset value per share	14	320.8	308.8

These Financial Statements were approved and authorised for issue by the Board of Directors of EP Global Opportunities Trust plc and were signed on its behalf by:

Teddy Tulloch
Chairman

10 March 2020

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 2019

	Note	Share capital £000	Share premium £000	Capital redemption reserve £000	Special reserve £000	Capital reserve £000	Revenue reserve £000	Total £000

Year to 31 December 2019
At 31 December 2018		645	1,597	14	50,662	74,017	4,864	131,799

Net return after taxation		-	-	-	-	4,246	3,380	7,626
Dividends paid	6	-	-	-	-	-	(2,719)	(2,719)
Share purchases for treasury	13	-	-	-	(4,697)	-	-	(4,697)

At 31 December 2019		645	1,597	14	45,965	78,263	5,525	132,009

Year to 31 December 2018
At 31 December 2017		645	1,597	14	54,952	87,435	4,175	148,818

Net return after taxation		-	-	-	-	(13,418)	2,990	(10,428)
Dividends paid	6	-	-	-	-	-	(2,301)	(2,301)
Share purchases for treasury	13	-	-	-	(4,290)	-	-	(4,290)

At 31 December 2018		645	1,597	14	50,662	74,017	4,864	131,799

The notes form part of these Financial Statements.

NOTES TO THE FINANCIAL STATEMENTS
at 31 December 2019

1. Accounting policies

Statement of compliance
EP Global Opportunities Trust plc is a company incorporated in Scotland. The Company is registered as a public limited company and is an investment company within the terms of section 833 of the Act. The registered office is detailed below. The nature of the Company’s operations and its principal activities are set out in the Strategic Report above.

The Company’s Financial Statements have been prepared under FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” and in accordance with the Act and with the Statement of Recommended Practice issued by the AIC in November 2014 (the “AIC SORP”). The Company meets the requirements of section 7.1A of FRS 102 and therefore has elected not to present the Statement of Cash Flows for the year ended 31 December 2019.

The comparative figures for the Financial Statements are for the year ended 31 December 2018.

Going concern
As detailed in the extract from the Directors’ Report above, the Financial Statements are prepared on a going concern basis, being a period of at least 12 months from the date this Annual Report is approved and on the basis that approval as an investment company continues to be met. All of the Company’s activities are continuing.

Segmental reporting
The Directors are of the opinion that the Company is engaged in a single segment of business, being investment business. The Company primarily invests in listed companies.

Income recognition
Dividend and other investment income is included as revenue on the ex-dividend date, the date the Company’s right to receive payment is established. Dividends from overseas companies are shown gross of withholding tax. Deposit interest receivable is included on an accruals basis.

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. Finance costs are debited using the effective interest rate method. Transaction costs are included within the gains and losses on investments, as disclosed in the Income Statement. Research costs are included within other expenses, as disclosed in the Income Statement.

Investments
In accordance with FRS 102, Sections 11 and 12, all investments held by the Company are designated as held at fair value upon initial recognition and are measured at fair value through profit or loss in subsequent accounting periods. 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 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 (“IPEVC Valuation Guidelines”). 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.

Foreign currency
The Financial Statements have been prepared in sterling, rounded to the nearest £000, which is the functional and reporting currency of the Company. Sterling 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. 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 income statement in the capital or the revenue column, 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 between taxable profits and total comprehensive income that have arisen but not been reversed by the Balance Sheet date, unless such provision is not permitted by FRS 102. Deferred tax assets are only 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.

Cash at bank and short-term deposits
Cash at bank and short-term deposits comprise cash at bank and short-term deposits with an original maturity date of three months or less.

Short-term debtors and creditors
Debtors and creditors with no stated interest rate and receivable within one year are recorded at transaction price. Any losses arising from impairment are recognised in the Income Statement in other operating expenses.

Dividends payable to Shareholders
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 interest-bearing loans and borrowings which are basic financial instruments are initially recognised at the sterling present value of cash payable to the bank (including interest). After initial recognition, they are measured at amortised cost using the effective interest rate method. The effective interest rate amortisation is included in finance costs in the Income Statement. Loans are revalued to the sterling equivalent using exchange rates at the appropriate date, with the gain or loss being charged through the revenue account in the Income Statement.

Borrowings that are payable within one year shall be measured at the undiscounted amount of the cash or other consideration expected to be paid.

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. The consideration paid and received for these shares is accounted for in Shareholders’ funds and, in accordance with the AIC SORP, the cost has been allocated to the Company’s special reserve. The cost of shares sold from treasury is calculated by taking the average cost of shares held in treasury at the time of sale. Any difference between the proceeds from shares sold from treasury and above average cost is taken to share premium.

Judgements and key sources of estimation uncertainty
The preparation of the Financial Statements requires the Company to make judgements, estimates and assumptions that affect amounts reported for assets and liabilities as at the Balance Sheet date and the amounts reported for revenues and expenses during the year. The nature of estimation means that the actual outcomes could differ from those estimates, possibly significantly. The judgements related to the Company’s previous unlisted investment in Edinburgh Partners Limited, which was acquired by Franklin Resources Inc. in May 2018, as detailed in note 8.

Reserves

Capital reserve
The following are accounted for in this reserve:

gains and losses on the realisation of investments;

realised exchange differences of a capital nature;

net movement arising from changes in the fair value of investments; and

expenses, together with related taxation effect, charged to this account in accordance with the above policies.

Share premium
This reserve records the amount above the nominal value received for shares sold, less transaction costs.

Special reserve
The special reserve was created by a reduction in the share premium account by order of the High Court. It can be used for the repurchase of the Company’s shares.

In accordance with the AIC SORP, the consideration paid for shares bought into and held in treasury is shown as a deduction from the special reserve. The average cost of shares sold from treasury is shown as an increase to the special reserve, with any consideration in excess of average cost being accounted for in the share premium reserve.

Capital redemption reserve
The capital redemption reserve accounts for nominal amounts by which the issued capital is diminished through the repurchase and cancellation of the Company’s own shares.

Revenue reserve
The revenue reserve represents the balance of revenue retained within the Company after the payment of any dividends.

2. Income

	2019 £000	2018 £000
Income from investments
UK net dividend income	660	649
Overseas dividend income	4,298	4,004

Income from investments	4,958	4,653

Total income comprises
Dividends	4,958	4,653
Bank interest	74	23

	5,032	4,676

3. Management fee

	2019 £000	2018 £000

Management fee	903	950

	903	950

With effect from 16 July 2014, the Company appointed Edinburgh Partners AIFM Limited as the Company’s AIFM. Under the Management Agreement, the AIFM is entitled to a fee paid monthly in arrears at the rate of 0.75% per annum of the equity market capitalisation of the Company to £100,000,000 and at a rate of 0.65% per annum of the equity market capitalisation which exceeds this amount. The equity market capitalisation is based on shares in circulation which excludes shares held in treasury. No performance fee will be paid.

No management fee is payable in relation to the Company’s investment in Edinburgh Partners Emerging Opportunities Fund, which is managed by Edinburgh Partners. Details relating to this investment are set out in notes 8 and 9.

During the year ended 31 December 2019, the management fees payable to the AIFM totalled £903,000 (2018: £950,000). At 31 December 2019, there was £79,000 outstanding payable to the AIFM (2018: £78,000) in relation to management fees.

During the year ended 31 December 2019, the administration fees payable to the AIFM, as detailed in note 4, totalled £139,000 (2018: £135,000). At 31 December 2019, there was £12,000 outstanding payable to the AIFM (2018: £11,000) in relation to administration fees.

During the year ended 31 December 2019, the Company paid Edinburgh Partners £25,000 (2018: £25,000) for marketing-related services. At 31 December 2019, there was £6,000 outstanding to Edinburgh Partners (2018: £6,000) in relation to marketing-related services. The fees for marketing-related services are included within marketing and website costs as detailed in note 4.

As a consequence of the new MiFID II regulations which became effective on 3 January 2018, research costs must be unbundled from trading commission on the purchase and sale of investments and charged in accordance with MiFID II. During the year ended 31 December 2019, the Company made no contribution to research costs incurred by the Investment Manager (2018: £8,000), the Investment Manager having agreed to pay the research costs from 1 January 2019.

4. Other expenses

	2019 £000	2018 £000

Audit fees and expenses (net of VAT) for:
Audit	25	20
Non-audit services	-	-

Directors’ remuneration	97	91
Directors’ national insurance	5	5
Directors’ expenses	1	-

Administration fee	139	135
Marketing and website costs	41	25
Depositary and custodian fees	38	37
Legal and professional fees	17	13
London Stock Exchange and FCA fees	15	15
Registrar fees	11	13
AIC membership fee	10	11
Other expenses	30	41

	429	406

Directors’ remuneration and outstanding amounts are detailed in the Directors’ Remuneration Report in the full Annual Report and Financial Statements.

5. Taxation

a) Analysis of charge in year	Revenue £000	2019 Capital £000	Total £000	Revenue £000	2018 Capital £000	Total £000
Current tax
Overseas tax suffered	310	-	310	330	-	330

	310	-	310	330	-	330

b) The current taxation charge for the year ended 31 December 2019 is higher than the standard rate of corporation tax in the UK of 19% (NB The standard rate of corporation tax has been 19% from 1 April 2017. Previously it had been 20% from 1 April 2015). The differences are explained below:

	Revenue £000	2019 Capital £000	Total £000	Revenue £000	2018 Capital £000	Total £000

Net return before taxation	3,690	4,246	7,936	3,320	(13,418)	(10,098)

Theoretical tax at UK corporation tax rate of 19% (2018: 19%)	701	807	1,508	631	(2,549)	(1,918)
Effects of:
- UK dividends that are not taxable	(125)	-	(125)	(123)	-	(123)
- Foreign dividends that are not taxable	(815)	-	(815)	(761)	-	(761)
- Non-taxable investment losses/(gains)	-	(807)	(807)	-	2,549	2,549
- Unrelieved excess expenses	239	-	239	253	-	253
- Overseas tax suffered	310	-	310	330	-	330

	310	-	310	330	-	330

At 31 December 2019, the Company had no unprovided deferred tax liabilities (2018: £nil). At that date, based on current estimates and including the accumulation of net allowable losses, the Company had unrelieved losses of £9,980,000 (2018: £8,722,000) that are available to offset future taxable revenue. A deferred tax asset of £1,696,000 (2018: £1,483,000) has not been recognised because the Company is not expected to generate sufficient taxable income in future periods in excess of the available deductible expenses and accordingly, the Company is unlikely to be able to reduce future tax liabilities through the use of existing surplus losses.

Deferred tax is not provided on capital gains and losses arising on the revaluation or disposal of investments because the Company meets (and intends to continue for the foreseeable future to meet) the conditions for approval as an investment trust company, pursuant to sections 1158 and 1159 of the CTA.

6. Dividends

	2019 £000	2018 £000
Declared and paid
2018 final dividend of 5.5p per share and a special dividend of 1.0p per share, a total of 6.5p per share, paid on 24 May 2019 (2018: year ended 31 December 2017 final dividend of 5.3p per share, paid on 25 May 2018).	2,719	2,301

Net revenue return after taxation	3,380	2,990

Proposed
2019 final dividend of 6.0p per share and a special dividend of 1.5p per share, a total of 7.5p per share (2018 final dividend of 5.5p per share and a special dividend of 1.0p per share, a total of 6.5p per share, paid on 24 May 2019).	3 ,025	2,719

The Directors recommend a final dividend of 6.0p per share and a special dividend of 1.5p per share, a total of 7.5p per share, for the year ended 31 December 2019 (2018: final dividend of 5.5p per share and a special dividend of 1.0p per share, a total of 6.5p per share). Subject to shareholder approval at the Annual General Meeting to be held on 22 April 2020, the dividends will be payable on 29 May 2020 to Shareholders on the register at the close of business on 11 May 2020. The ex-dividend date will be 7 May 2020. Based on 40,337,725 shares, being the number of shares in issue (excluding shares held in treasury) at 10 March 2020, the date of signing this report, the total dividend payment will amount to £3,025,000. The proposed dividend will be paid from the revenue reserve.

7. Return per share

	Net return £000	2019 Number of shares¹	Per share pence	Net return £000	2018 Number of shares¹	Per share pence

Revenue return after taxation	3,380	41,857,001	8.1	2,990	43,335,274	6.9
Capital return after taxation	4,246	41,857,001	10.1	(13,418)	43,335,274	(31.0)
Total return after taxation	7,626	41,857,001	18.2	(10,428)	43,335,274	(24.1)

¹ Weighted average number of shares, excluding shares held in treasury, in issue during the year.

8. Investments

	2019 £000	2018 £000

Listed investments	120,796	116,969

	120,796	116,969

	2019 £000	2018 £000
Analysis of investment portfolio movements
Opening bookcost	113,751	113,098
Opening investment holdings gains	3,218	31,565

Opening valuation	116,969	144,663
Movements in the year:
Purchases at cost	28,325	40,091
Sales - proceeds	(29,235)	(53,791)
- realised gains on sales	746	14,353
Changes in fair value of investments	3,991	(28,347)

Closing valuation	120,796	116,969

Closing bookcost	113,587	113,751
Closing investment holding gains	7,209	3,218

Closing valuation	120,796	116,969

Within the listed investments detailed above, there is included the Company’s investment in the Edinburgh Partners Emerging Opportunities Fund, a sub-fund of an Irish domiciled open-ended investment company, Edinburgh Partners Opportunities Fund plc, listed on Euronext Dublin, as detailed in note 9, which was valued at £3,268,000 at 31 December 2019 (2018: £3,070,000). As at 30 September 2019, the most recent year end of the Edinburgh Partners Emerging Opportunities Fund, the aggregate amount of capital and reserves was US$11,903,000 (2018: US$11,440,000). For the year to 30 September 2019 the loss for the year after tax and distributions was US$674,000 (2018: US$1,098,000).

The Company held shares in an unlisted investment, Edinburgh Partners Limited, the Company’s Investment Manager, which was acquired by Franklin Resources Inc. in May 2018. In addition to the proceeds received in 2018, the Company may receive further proceeds, the maximum of which will not exceed 0.25% of the Company’s net assets as at 31 December 2019.

	2019 £000	2018 £000
Analysis of capital gains and losses
Realised gains on sales	746	14,353
Changes in fair value of investments	3,991	(28,347)

	4,737	(13,994)

Fair value hierarchy
In accordance with FRS 102, the Company must disclose the fair value hierarchy of financial instruments.

The different levels of the fair value hierarchy are as follows:

The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date.
Inputs other than quoted prices included within Level 1 that are observable (developed using market data) for the asset or liability, either directly or indirectly.
Inputs are unobservable (for which market data is unavailable) for the asset or liability.

All of the Company’s financial instruments fall into level 1. The Company’s previous investment in Edinburgh Partners Limited, which was acquired by Franklin Resources Inc. in May 2018, fell into level 3 and was fair valued using an unquoted price that is derived from significant assumptions underlying any valuation models and techniques used where the fair value has been determined using generally accepted valuation techniques and models.

Transaction costs
During the year, the Company incurred transaction costs of £42,000 (2018: £61,000) and £26,000 (2018: £46,000) on purchases and sales of investments respectively. These amounts are included in gains/(losses) on investments at fair value, as disclosed above in the Income Statement of these Financial Statements.

Research costs
As a consequence of the new MiFID II regulations which became effective on 3 January 2018, research costs must be unbundled from trading commission on the purchase and sale of investments and charged in accordance with MiFID II. During the year ended 31 December 2019, the Company made no contribution to research costs incurred by the Investment Manager (2018: £8,000), the Investment Manager having agreed to pay the research costs from 1 January 2019.

9. Significant holdings
As detailed in the Strategic Report above and in note 8, as at 31 December 2019, the Company owned 33.4% (2018: 36.9%) of the net assets of the Edinburgh Partners Emerging Opportunities Fund, a sub-fund of an Irish domiciled open-ended investment company, Edinburgh Partners Opportunities Fund plc, listed on Euronext Dublin. The registered office of Edinburgh Partners Opportunities Fund plc is 25/28 North Wall Quay, International Financial Services Centre, Dublin 1, Ireland.

The Company had no other holdings of 3.0% or more of the share capital of any portfolio companies.

10. Debtors

	2019 £000	2018 £000

Dividends receivable	247	204
Prepayments and accrued income	24	29
Taxation recoverable	336	270

	607	503

11. Creditors: amounts falling due within one year

	2019 £000	2018 £000

Due to brokers on shares purchased for treasury	121	-
Other creditors and accruals	184	146

	305	146

12. Share capital	Number of shares Ordinary 1p	2019 £000	Number of shares Ordinary 1p	2018 £000
Allotted, called-up and fully paid:
At 1 January	64,509,642	645	64,509,642	645

At 31 December	64,509,642	645	64,509,642	645

The voting rights attached to the Company’s shares are detailed in the extracts from the Directors’ Report above.

Duration of the Company
The Company does not have a termination date or the requirement for any periodic continuation vote.

13. Own shares held in treasury
Details of own shares purchased for and sold from treasury are shown below:

	2019 Number of shares	2018 Number of shares

At 1 January	21,821,917	20,446,917
Shares purchased for treasury	1,540,000	1,375,000

At 31 December	23,361,917	21,821,917

During the year ended 31 December 2019, 1,540,000 shares (2018: 1,375,000) were purchased for treasury at a total cost of £4,697,000 (2018: £4,290,000) and no shares were sold from treasury (2018: none). Please see the Chairman’s Statement and the extracts from the Directors’ Report above for details of share buy backs.

14. Net asset value per share
The NAV, calculated in accordance with the Articles of Association, is as follows:

	2019 pence	2018 pence
Share	320.8	308.8

The NAV is based on net assets of £132,009,000 (2018: £131,799,000) and on 41,147,725 (2018: 42,687,725) shares, being the number of shares, excluding shares held in treasury, in issue at the year end.

15. 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:

	No interest rate exposure £000	2019 Cash flow interest rate risk exposure £000	Total £000	No interest rate exposure £000	2018 Cash flow interest rate risk exposure £000	Total £000

Equity shares
Euro	38,402	-	38,402	30,759	-	30,759
Japanese yen	25,144	-	25,144	21,754	-	21,754
Sterling	15,413	-	15,413	14,051	-	14,051
Hong Kong dollar	13,811	-	13,811	14,625	-	14,625
US dollar	9,839	-	9,839	15,379	-	15,379
Swiss franc	9,250	-	9,250	9,187	-	9,187
Singapore dollar	3,643	-	3,643	3,237	-	3,237
South Korean won	2,633	-	2,633	-		-
Thailand baht	2,631	-	2,631	3,182	-	3,182
Indonesian rupee	-	-	-	2,513	-	2,513
Norwegian Krone	-	-	-	2,282	-	2,282

Cash at bank and short-term deposits
US dollar	-	10,861	10,861	-	14,423	14,423
Sterling	-	50	50	-	50	50

Debtors
Euro	83	-	83	96	-	96
Japanese yen	66	-	66	-	-	-
Sterling	131	-	131	113	-	113
Swiss franc	232	-	232	219	-	219
Singapore dollar	74	-	74	75	-	75
Norwegian krone	21	-	21	-	-	-

Short-term creditors
Sterling	(305)	-	(305)	(146)	-	(146)

	121,098	10,911	132,009	117,326	14,473	131,799

At 31 December 2019, the Company had no financial liabilities other than the short-term creditors as stated above (2018: £nil). The carrying amount on the Balance Sheet approximates the fair value of all financial assets and liabilities.

The following exchange rates were used to convert investments, assets and liabilities to the functional currency of the Company which is sterling.

Foreign Exchange rates against sterling	2019	2018	Change

Euro	1.18	1.11	6%
Japanese yen	143.91	139.90	3%
Hong Kong dollar	10.32	9.98	3%
US dollar	1.32	1.27	4%
Swiss franc	1.28	1.25	3%
Singapore dollar	1.78	1.74	3%
South Korean won	1,528.98	1,419.28	8%
Thailand baht	39.41	41.27	(5)%
Indonesian rupee	18,384.60	18,325.88	0%
Norwegian krone	11.64	11.03	6%

16. Risk analysis

Principal risks

The principal risks the Company faces are:

Investment and strategy risk

Key manager risk

Discount volatility risk

Market risk

Foreign currency risk

Regulatory risk

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.

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. A description of the principal risks the Company faces is set out below.

Investment and strategy risk
There can be no guarantee that the investment objective of the Company, to provide Shareholders with an attractive real long-term total return by investing globally in undervalued securities, 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.

Key manager risk
A change in key investment management personnel who are involved in the management of the Company’s portfolio could impact on future performance and the Company’s ability to deliver on its investment strategy.

The Investment Manager frequently considers succession planning. The Board is in regular contact with the Investment Manager and would be informed of any proposed change in the lead manager.

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 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 NAV of any rights to which the shares are trading ex-dividend).

The Board’s commitment to allot or repurchase 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.

Details of the shares purchased into treasury during the year are set out in note 13.

Price risk
The Company is exposed to market 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 NAV of the Company is issued daily to the London Stock Exchange and is also available on the Company’s website at www.epgot.com.

Details of the Company’s investment portfolio as at 31 December 2019 are disclosed in the Portfolio of Investments above.

If the investment portfolio valuation fell by 1.0% from the amount detailed in the Financial Statements as at 31 December 2019, it would have the effect, with all other variables held constant, of reducing the total return before taxation and therefore net assets by £1,208,000 (2018: £1,170,000). An increase of 1.0% in the investment portfolio valuation would have an equal and opposite effect on the total return before taxation and net assets.

Foreign currency risk
The functional 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 2019 are disclosed in note 15.

If sterling had strengthened by 1.0% against all other currencies on 31 December 2019, with all other variables held constant, it would have the effect of reducing the total return before taxation and net assets by £1,167,000 (2018: £1,177,000). If sterling had weakened by 1.0% against all other currencies, there would have been an equal and opposite effect on the total return before taxation and net assets.

Regulatory risk
The Company operates in an evolving regulatory environment and faces a number of regulatory risks.

Relevant legislation and regulations which apply to the Company include the Act, the CTA, the Listing Rules and the Disclosure Guidance and Transparency Rules of the FCA, the AIFMD, the GDPR, the Foreign Account Tax Compliance Act and the Common Reporting Standard.

Failure to qualify under the terms of sections 1158 and 1159 of the CTA may lead to the Company being subject to capital gains tax. A breach of the rules of the UK Listing Authority may result in censure by the FCA and/or the suspension of the Company’s shares from listing.

The Directors note the new corporate offence of failure to prevent tax evasion and believe all necessary steps have been taken to prevent facilitation of tax evasion.

The implementation of GDPR provides for greater data privacy. While the risk to the Company is deemed to be low, the impact of fines should they occur could be significant. The Directors are satisfied that all necessary steps have been taken to prevent any breach of GDPR, including ensuring that all third party service providers have appropriate GDPR policies in place.

If all price sensitive issues are not disclosed in a timely manner, this could create a misleading market in the Company’s shares. The Directors are aware of their responsibilities relating to price sensitive information and would consult with their advisers if any potential issues arose. This includes ensuring compliance with the Market Abuse Regulation which came into effect in the UK on 3 July 2016. The AIFM would notify the Board immediately if it became aware of any disclosure issues.

The Investment Manager has a comprehensive market abuse policy and any potential breaches of this policy would be promptly reported to the Board.

Although not considered to be a principal risk for the Company, the Board continues to monitor developments around the UK’s departure from the European Union. Many of the Company’s holdings, particularly those in European and UK equities, will be exposed to the outcome of the Brexit negotiation, positively or negatively. We believe that overall the Company’s portfolio has a relatively modest exposure to the UK economy, but the Board and Investment Manager remain alert to developments at both macro-economic level and a stock-specific level.

The Board has agreed service levels with the Company Secretary and Investment Manager which include active and regular review of compliance with these requirements.

Other risks
Other risks the Company faces are:

Liquidity risk

Credit risk

Interest rate risk

Gearing risk

Operational risk

A description of these other risks is set out below.

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, it is believed, 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 2018. 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.

The maturity profile of the Company’s financial liabilities, including creditors, is as follows:

	As at 31 December 2019 £000	As at 31 December 2018 £000
In one year or less	305	146

	305	146

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.

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 liquidity funds that have been identified by the Board as reputable and of high credit quality. As at 31 December 2019, The Northern Trust Company London Branch had a long-term rating from Standard and Poors of AA-.

The maximum exposure to credit risk as at 31 December 2019 was £11,518,000 (2018: £14,976,000). The calculation is based on the Company’s credit risk exposure, being cash at bank and short-term deposits and debtors, as at 31 December 2019 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 2019 are disclosed in note 15.

Surplus cash is invested in liquidity funds.

If interest rates had reduced by 0.25% (2018: 0.25%) from those obtained as at 31 December 2019 it would have the effect, with all other variables held constant, of decreasing the total return before taxation and therefore net assets on an annualised basis by £27,000 (2018: £36,000). If there had been an increase in interest rates of 0.25% (2018: 0.25%) 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 and short-term deposits as at 31 December 2019 and these may not be representative of the year as a whole.

Gearing risk
Gearing can be 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% of total assets.

The use of gearing is likely to lead to volatility in the NAV, 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 NAV. The greater the level of gearing, the greater the level of risk and likely fluctuation in the share price.

At the year end, the Company had no gearing (2018: nil).

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 the UK Listing Authority requirements, are met.

The Board regularly receives and reviews management information on third parties which the Company Secretary compiles. In addition, each of the third parties provides a copy of its report on internal controls (ISAE 3402, SSAE 16 or equivalent) to the Board each year.

The AIFM employs Link Alternative Fund Administrators Limited to prepare all financial statements of the Company and meets with the Auditor at least once a year to discuss all financial matters including appropriate accounting policies.

The Company is a member of the AIC, a trade body which promotes investment trusts and also develops best practice for its members.

17. Capital management policies
The Company’s investment 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 composition 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 buy back 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:

	2019 £000	2018 £000
Called-up share capital	645	645
Share premium	1,597	1,597
Capital redemption reserve	14	14
Special reserve	45,965	50,662
Capital reserve	78,263	74,017
Revenue reserve	5,525	4,864

Total Shareholders’ funds	132,009	131,799

The Company’s objectives for managing capital are the same as the previous year and have been complied with throughout the year.

18. Transactions with the AIFM and the Investment Manager
Information with respect to transactions with the AIFM and the Investment Manager is detailed in note 3 and in the Strategic Report above.

19. Related party transactions
Details in respect of the Directors’ remuneration are set out in note 4 and in the Directors’ Remuneration Report in the full Annual Report and Financial Statements. Under the AIC SORP, an investment manager is not considered to be a related party of the Company. There were no other transactions with related parties in the year ended 31 December 2019.

20. Post Balance Sheet events
As disclosed in the extracts from the Directors’ Report above, subsequent to the year end and up to 10 March 2020, the date of signing this report, the Company bought back 810,000 shares into treasury at a total cost of £2,435,000.

PERFORMANCE RECORD
	Shareholders’ funds	Net asset value per ordinary share	Share price per ordinary share	Share price discount to net asset value	Revenue return per ordinary share	Dividend per ordinary share	Ongoing charges ratio ⁵
Year ended 31 December

2004¹	£26.1m	116.4p	110.5p	5.1%	0.6p	0.4p	1.7%⁶
2005	£52.2m	156.2p	154.5p	1.1%	1.1p	0.8p	1.5%⁶
2006	£58.8m	172.8p	170.0p	1.6%	2.1p	1.8p	1.2%⁶
2007	£57.7m	177.2p	160.0p	9.7%	2.7p	2.3p	1.1%⁶
2008	£46.4m	150.4p	132.5p	11.9%	3.9p	3.1p	1.1%⁶
2009	£50.7m	175.9p	172.0p	2.2%	2.7p	2.4p	1.0%^6,7
2010	£51.6m	188.2p	186.8p	0.7%	3.2p	2.8p	1.3%⁶
2011	£95.1m	169.9p	167.0p	1.7%	5.0p	4.2p	0.8%⁸
2012	£91.8m	183.1p	175.5p	4.2%	3.9p	3.9p	1.1%
2013	£112.6m	233.6p	230.0p	1.5%	2.7p	2.7p	1.1%
2014	£112.1m	236.0p	234.6p	0.6%	3.7p	3.3p	1.1%
2015	£118.4m	239.8p	234.5p	2.2%	3.1p	3.1p	1.0%
2016	£143.8m	300.2p	293.0p	2.4%	5.3p	5.3p²	1.0%
2017	£148.8m	337.7p	320.0p	5.2%	5.3p	5.3p	0.9%
2018	£131.8m	308.8p	301.5p	2.3%	6.9p	6.5p²	0.9%
2019	£132.0m	320.8p	310.0p	3.4%	8.1p	7.5p^3,4	1.0%

¹ Period 13 November 2003 to 31 December 2004. The Company commenced operations on the admission of its shares to trading on the London Stock Exchange on 15 December 2003.
² Includes a special dividend of 1.0p.
³ Includes a special dividend of 1.5p.
⁴ Proposed dividend for the year.
⁵ Ongoing charges ratio based on total expenses, excluding finance costs, transaction costs and certain non-recurring items for the year as a percentage of the average monthly net asset value.
⁶ Total expense ratio based on total expenses for the year as a percentage of the average monthly net asset value.
⁷ Total expense ratio 1.3 per cent excluding VAT refund.
⁸ The total expense ratio would have been 1.0 per cent if investment management fees of £236,000 had not been waived as a consequence of the merger with Anglo & Overseas Plc.

Past performance is not a guide to future performance.

ANNUAL GENERAL MEETING
The Company’s Annual General Meeting will be held at The Bonham Hotel, 35 Drumsheugh Gardens, Edinburgh EH3 7RN on Wednesday, 22 April 2020 at 12.00 noon.

DIRECTORS
Teddy Tulloch (Chairman)
David Hough
David Ross
Tom Walker

All of the Directors are non-executive and independent of the AIFM and the Investment Manager.

ALTERNATIVE INVESTMENT FUND MANAGER
Edinburgh Partners AIFM Limited
27-31 Melville Street
Edinburgh
EH3 7JF

INVESTMENT MANAGER
Edinburgh Partners Limited
27-31 Melville Street
Edinburgh
EH3 7JF

National Storage Mechanism
A copy of the full 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.morningstar.co.uk/uk/NSM

Enquiries:
Dr Sandy Nairn
Kenneth J Greig

Edinburgh Partners AIFM Limited
Tel: 0131 270 3800

The Company’s registered office address is:

27-31 Melville Street
Edinburgh
EH3 7JF

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.

LEI: 2138005T5CT5ITZ7ZX58

END

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