Final Results

EP GLOBAL OPPORTUNITIES TRUST PLC FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2008 The full Annual Report and Accounts can be accessed via the Company's website at www.epgot.com or by contacting the Company Secretary on telephone 0131 270 3800. HIGHLIGHTS ● The Company's net asset value per ordinary share decreased by 15.1 per cent to 150.4p. ● Share price decreased by 17.2 per cent to 132.5p, ending the year at a discount to net asset value of 11.9 per cent, compared to 9.7 per cent at the end of 2007. ● The Board is recommending a 35 per cent increase in the dividend to 3.1p per ordinary share, payable on 18 May 2009. The ex-dividend date will be 15 April 2009 and the record date will be 17 April 2009. ● During the year the Board exercised its powers to buy back 1,734,000 shares to hold in treasury. As at 31 December 2008 the Company held 3,174,000 ordinary shares in treasury resulting in the total number of shares in circulation being 30,824,180. ● 2008 was the most challenging year for the Company since its launch five years ago. Our Investment Manager correctly took a cautious view of equity markets at the start of the year, when we held 13.4 per cent of Shareholders' funds in cash and short-term government bonds. By mid-year, this had been increased to 19.4 per cent. The portfolio was also positioned relatively defensively with an emphasis on shares in healthcare and telecommunication companies. We avoided those areas that had become highly fashionable during 2007, in particular commodity shares and the emerging markets in Asia and elsewhere. The good relative performance compared to the major stock market indices was a result of this strategy. ● Despite the gloom around at the end of 2008 we find ourselves becoming more positive on the outlook for equities. By the year end, our cash reserves had been reduced to 5 per cent of Shareholders' funds and we expect to be moving away from our defensively orientated portfolio as 2009 unfolds. ● The Annual General Meeting of the Company will be held on 30 April 2009. The Directors announce the annual results for the year from 1 January 2008 to 31 December 2008, which were approved by the Directors on 26 February 2009, as follows:- CHAIRMAN'S STATEMENT Results 2008 was the most challenging year for your Company since its launch five years ago. It is the first year that the net asset value per share has declined. At the end of the year, the net asset value was 150.4p, a fall of 15.1 per cent from the value at the end of 2007. This is an uncomfortable message for any Chairman to have to give to Shareholders. However, I cannot but feel some relief that the result was not much worse. Indeed, I am grateful that our Investment Manager avoided many of the pitfalls that were so plentiful in 2008. It was a torrid year for equity investors, with the FTSE All-World Index declining by 21.7 per cent, in sterling terms, and the UK FTSE All-Share Index dropping by 32.8 per cent. Moreover, world equity markets were exceptionally volatile with frequent two or three per cent moves in the major stock market indices in a day and occasionally even greater moves. The share price closed the year at 132.5p, 17.2 per cent below the price at the end of 2007. The slightly greater decline in the share price than in the net asset value per share is a result of the discount to the net asset value widening to 11.9 per cent. During the year we bought in 1,734,000 shares and these are held in treasury. We regard the level of discount as unsatisfactory and, when appropriate, will continue to buy in shares at a discount to the net asset value per share. Stock market performance At the beginning of the year, the main themes in financial markets revolved around inflation, with energy and grain prices rising rapidly. This was despite the development of the sub-prime mortgage crisis in the United States and the collapse of Northern Rock in the UK. What a difference a few months can make. 2008 witnessed a rapid change in perception, from worries about inflation to concerns about recession and even fears of a depression. The financial crisis evolved from the banking sector to the entire world economy. Western governments were forced to construct rescue packages for many of the major banks, house prices dropped sharply and commodity prices collapsed. As a consequence, bank, property and construction shares suffered badly, as did shares in those sectors that had performed best in 2007, such as mining and emerging markets. While a setback in equity prices did not come as a surprise, the speed and magnitude of the setback was more dramatic than even the most negative commentators were expecting. Stock markets were under pressure in the first half of the year but in the second half panic set in. Massive reflationary measures were introduced both in the UK and overseas as governments tried to halt the financial panic and limit the damage done to the economy. There was a real fear that the financial system would collapse under the weight of debt in the system. The increased volatility in financial markets also began to affect the currency markets. Sterling came under pressure as the Bank of England aggressively cut interest rates. It was down 41 per cent against the yen over the year, 28 per cent versus the US dollar and 24 per cent against the euro. For UK investors, the degree of the decline in overseas share prices in 2008 was masked by the fall in the value of the pound. The S&P Composite Index in the United States fell 38.5 per cent but was down only 14.8 per cent when adjusted into sterling and the FTSE AW Europe ex UK Index fell 45.7 per cent in euros but was down 28.6 per cent in sterling terms. Investment performance Our Investment Manager correctly took a cautious view of equity markets at the start of the year, when we held 13.4 per cent of Shareholders' funds in cash and short-term government bonds. By mid-year, this had been increased to 19.4 per cent. The portfolio was also positioned relatively defensively with an emphasis on shares in healthcare and telecommunication companies. Both are sectors where valuations were not stretched and where profits are perceived to be less vulnerable to an economic downturn. We avoided those areas that had become highly fashionable during 2007 and, as a result, were looking increasingly overvalued; in particular, we avoided commodity shares and the emerging markets in Asia and elsewhere. The good relative performance compared to the major stock market indices was a result of this strategy. Performance also benefitted from over 20 per cent of Shareholders' funds being invested in the United States. While US shares suffered in the overall bear market, the strength of the dollar versus sterling mitigated the falls in their share prices when converted into sterling. We did suffer from our holdings in banks. While we reduced our exposure considerably in 2007, the Investment Manager underestimated the depth of the problems in the banking sector. Revenue account The revenue account has again shown a healthy increase. After tax, revenue per share was 3.9p, a 44 per cent rise over the level for the previous year. The Board is pleased to recommend a 35 per cent increase in the dividend to 3.1p per share. Subject to Shareholders' approval at the Annual General Meeting, the dividend will be paid on 18 May 2009. The higher level of income is mainly due to the defensive investment strategy followed during the year, which included the significant holding in cash and short-term fixed interest securities. Income is likely to be at a lower level in 2009. Many companies are likely to reduce their dividend with some, like the banks, paying none at all and any cash held will be earning a much lower rate of return. We also expect to move to a less defensive portfolio during 2009 which is likely to result in us owning shares in companies with a lower average yield than the current portfolio. As we have stated a number of times, our investment policy will be driven by where our Investment Manager perceives the best value to be. This may result in us reducing the dividend at some stage. Holding in Edinburgh Partners In May 2008, we elected to exercise our option on 71,294 shares in Edinburgh Partners, our Investment Manager. This represents 1.79 per cent of the issued ordinary share capital of Edinburgh Partners. The option was exercisable at a price of £3 per share at any time up to 15 December 2008, a total cost of £ 214,000. We exercised early in order to receive Edinburgh Partners' first ever dividend of 50p per share which was paid in September 2008. When the option was exercised, we increased the valuation of our holding in Edinburgh Partners to £1,100,000. We review the valuation regularly and, despite the fall in equity markets, decided to leave the value unchanged at the year end. Edinburgh Partners has performed exceptionally well and funds under management at the end of 2008 were £4.6bn, up from £3.2bn at the end of 2007. This is quite an achievement given the bear market we have experienced. Edinburgh Partners is also in an excellent position to attract new clients as the overall investment performance, since we became its first client five years ago, has been excellent. Outlook There is a very real concern that the excessive level of debt throughout the major world economies will lead to a prolonged period of deflation. However, attempts to rekindle economic growth are greater than they have ever been. Bank bail outs, tax cuts, increased government spending and interest rates reduced to record low levels, even printing more money, are all being applied in an attempt to limit the depth of the economic downturn. Even if the stimulus works, it is likely that both consumers and companies will be much more cautious about the amount of debt that they will be prepared to take on in the future. This would tend to indicate that the potential for economic growth will be at a lower level than it has been in recent years. It is also unclear as to what the longer term consequences of all these stimulative measures will be. Despite the gloom around at the end of 2008 with the papers full of depressing news of companies in trouble and people being laid off, we find ourselves becoming more positive on the outlook for equities. There is plenty to be concerned about but stock markets normally anticipate any improvement in the economic outlook well before that improvement becomes visible. We are certainly seeing much more realistic valuations than were available a year ago. With interest rates on cash deposits virtually at zero and very low yields available on government securities, the relative attraction of equities has become more appealing. By the year end, our cash reserves had been reduced to 5 per cent of Shareholders' funds and we expect to be moving away from our defensively orientated portfolio as 2009 unfolds. Teddy Tulloch Chairman 26 February 2009 MANAGER'S REPORT AND PORTFOLIO ANALYSIS Given the volatility we have seen in equity markets it is with some trepidation that I write this manager's report. Prices and valuations are changing with such rapidity that it is entirely possible that much of any outlook written here may be redundant by the time the report reaches investors' hands. However, there is much to be said both on the positive and the negative side. Reflection on what has happened over 2008 contains most of the negative elements. On the other hand, whilst the economic outlook for 2009 and much of 2010 remains poor, the overwhelmingly positive counterpoint is that we are now finding many more companies on highly attractive valuations than we have for the last five years. However negative we felt throughout 2007 about the lack of attention being paid to risk, experience in 2008 showed that this concern was not enough. Our views on the global economy and the overvalued nature of many equities proved to be broadly correct, but with one critical caveat. This caveat applied to the level of off balance sheet financing being conducted by the financial sector in general and banks in particular. We had substantially reduced our holdings in the banking sector since we felt that for many banks the valuation did not discount the level of bad debts that was sure to arise in the coming recession. We did have some concerns over the transparency of their balance sheets and, as a consequence, were careful to ensure that the portfolio did not become over exposed to this risk. Nevertheless, the past year has revealed how little we had grasped of the magnitude of the potential asset destruction. It is scant consolation that we were not alone in this and that the group also included, amongst others, the management teams of the banks themselves. On a more positive note, the `defensive' portion of the portfolio performed its task well as the year unfolded, so that the negative impact of the decline in some bank share prices was offset by good relative performance in other areas of the portfolio. The performance of the `defensive' segments of the portfolio was most evident in the second half of the year, when markets could no longer remain in denial about the unfolding recession. All of this uncertainty contributed to the extraordinary volatility which characterised the year. As market levels fell, this volatility began to present real investment opportunities. Companies with excellent long-term prospects were periodically hit by concerns over short-term trading conditions. As a consequence, the activity in the portfolio followed two distinct phases. During the first half of the year, we took the opportunities presented by periods of optimism to sell out of holdings where we felt the risk/reward profile had deteriorated sharply. The two most notable holdings in this category were Pulte Homes and Nexity. Pulte Homes is one of the leading house builders in the US. The shares had appreciated by over 50 per cent since the beginning of the year, after a substantial fall in 2007. It was clear that the level of inventory build in the US provided little room for any respite from the downturn and that Pulte was going to face serious profitability problems for an extended period. Nexity is a French house builder which had merged with Credit Foncier to provide a business with a `one stop shop' approach to owning a property. `One stop shop' is normally a term which should strike fear into the hearts of investors and this, combined with the complete lack of transparency in the combined entity generated by the merger, resulted in what we perceived as an unattractive investment. Both holdings were sold. During the second half of the year pessimism grew and many companies saw share price falls, with some particularly badly hit. Many of these shares had been overvalued and the falls only brought them back into a range of more appropriate valuation. As the year progressed some of these valuations became more and more attractive. Technology was one such area. Cisco Systems is a very good example, where an initial holding was purchased when technology stocks fell to a fundamentally attractive long-term valuation level. We were aware that further share price falls could occur, which did indeed happen, and used the opportunity to acquire additional shares, reducing our average purchase price. Cisco Systems is one of the world's largest technology companies whose principal products form the backbone for modern telecommunications and the internet. Whilst it will undoubtedly see slower growth and even sales decline as the recession bites, we remain convinced that the company can grow substantially faster than the global economy for an extended period. With the additions to this investment Cisco Systems is now one of our largest holdings. For an extended period the emerging markets managed to hang on to the `decoupling' myth and share prices remained high as a consequence. When this ended, it did so with a vengeance and price falls of 70-80 per cent were not uncommon. We had thought that this might happen and a number of our analysts had spent 2008 visiting companies to prepare for any opportunities which might present themselves. By the end of the year share prices were coming into range and positions were initiated in companies such as China Mobile and Baidu.com in China. Both companies are set to benefit from rising consumption in China that will come from the sharp contraction of exports which is currently underway. China has been an unbalanced exporting economy for an extended period and the global recession will sharply cut economic growth. The authorities are well aware of this and are set to encourage the natural trend of seeing more of the wealth that has been generated being consumed by the general population. In the case of China Mobile, handset penetration is not yet at saturation and one can expect reasonable sales growth and better still profits growth, once capital expenditure peaks. For Baidu.com, the trends are all favourable. Rising consumption will create more advertising demand. Advertising is proportionately moving to the internet and Baidu.com has the dominant market share in China despite Google's advances. We see more opportunities appearing every day for companies with strong growth prospects. To make room for these opportunities, we are reducing and selling those holdings where growth is mediocre at best and where the market is beginning to attach too high a premium to the security of earnings. Hence, the shareholdings in telecoms and pharmaceuticals are being gradually reduced. We expect that through 2009 these trends will continue and the portfolio will continue to evolve away from its defensive characteristics. As we look at the portfolio now, we see the potential total return characteristics being higher than at any time in the past five years. While the short term looks blighted by economic concerns, the negative sentiment that this is evoking is creating a fertile investment landscape. Dr Sandy Nairn Edinburgh Partners Limited 26 February 2009 FINANCIAL SUMMARY Results for year 31 December 31 December change 2008 2007 Shareholders' funds £46,353,000 £57,705,000 (19.7)% Net asset value per ordinary share 150.4p 177.2p (15.1)% ("NAV") Share price per ordinary share 132.5p 160.0p (17.2)% Discount to NAV 11.9% 9.7% Revenue return per ordinary share* 3.9p 2.7p 44.4% Dividend per ordinary share** 3.1p 2.3p 34.8% * Based on the weighted average number of shares in issue during the year. ** Proposed dividend for the year. Ordinary share Ordinary share Year's high/low Share price - high 158.0p 176.0p - low 112.5p 142.5p NAV - high 174.0p 179.6p - low 124.4p 166.3p Share price (discount)/premium to NAV - high (1.3)% 2.3% - low (18.5)% (13.9)% Cost of running the Company Total expense ratio* 1.1% 1.1% *Based on total expenses for the year and average monthly net asset value. Performance Net asset Revenue Dividend Record value per Share Discount return per price per Shareholders' ordinary per to net ordinary ordinary ordinary asset funds share share value share share Year ended 31 December 2004* £26.1m 116.4p 110.5p 5.1% 0.6p 0.4p 2005 £52.2m 156.2p 154.5p 1.1% 1.1p 0.8p 2006 £58.8m 172.8p 170.0p 1.6% 2.1p 1.8p 2007 £57.7m 177.2p 160.0p 9.7% 2.7p 2.3p 2008 £46.4m 150.4p 132.5p 11.9% 3.9p 3.1p** * Period 13 November 2003 to 31 December 2004. The Company commenced operations on the admission of its shares to listing on the London Stock Exchange on 15 December 2003. ** Proposed dividend for the year. PORTFOLIO OF INVESTMENTS as at 31 December 2008 Company Sector Country Valuation % of net a ssets £'000 Equity Investments Sanofi-Aventis Health Care France 1,843 4.0 Cisco Systems Technology United States 1,778 3.8 Belgacom Telecommunications Belgium 1,744 3.8 Vodafone Telecommunications United 1,599 3.5 Kingdom KPN Telecommunications Netherlands 1,525 3.3 Roche Health Care Switzerland 1,497 3.2 ENI Oil & Gas Italy 1,476 3.2 E.ON Utilities Germany 1,460 3.2 Nokia Technology Finland 1,459 3.1 Unilever Consumer Goods Netherlands 1,458 3.1 Novartis Health Care Switzerland 1,446 3.1 GlaxoSmithKline Health Care United 1,390 3.0 Kingdom Pfizer Health Care United States 1,232 2.7 Deutsche Telekom Telecommunications Germany 1,224 2.6 SK Telecom Telecommunications South Korea 1,197 2.6 TeliaSonera Telecommunications Sweden 1,177 2.5 Fanuc Industrials Japan 1,124 2.4 China Mobile Telecommunications Hong Kong 1,110 2.4 Gazprom Oil & Gas Russia 1,108 2.4 Edinburgh Partners Unlisted United 1,100 2.4 Kingdom Total - 20 largest equity 27,947 60.3 investments Dell Technology United States 1,066 2.3 Yamaha Motor Consumer Goods Japan 1,050 2.3 Baidu.com Technology China 1,041 2.2 Samsung Electronic Technology South Korea 994 2.1 Abercrombie & Fitch Consumer Goods United States 984 2.1 Home Depot Consumer Services United States 977 2.1 UBS Financials Switzerland 959 2.1 Intel Technology United States 949 2.0 Symantec Technology United States 911 2.0 Intesa Sanpaolo Financials Italy 906 2.0 General Electric Industrials United States 900 1.9 Ericsson Technology Sweden 891 1.9 Aviva Financials United 865 1.9 Kingdom Mizuho Financials Japan 734 1.6 Turkiye Is Bankasi Financials Turkey 684 1.5 Bank of America Financials United States 660 1.4 Citigroup Financials United States 489 1.1 LDK Solar Energy China 475 1.0 Royal Bank of Scotland Financials United 453 1.0 Kingdom Total - 39 investments 43,935 94.8 Cash and other net assets 2,418 5.2 Total net assets 46,353 100.0 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. Of the ten largest portfolio investments as at 31 December 2008, the valuations at the previous year end, 31 December 2007, were Sanofi-Aventis £1,943,000; Belgacom £1,635,000; Vodafone £2,160,000; KPN £2,127,000; Roche £1,821,000; ENI £1,507,000; E.ON £1,924,000; and Nokia £1,266,000. The remaining two investments Cisco Systems and Unilever were new purchases during the year ended 31 December 2008. DISTRIBUTION OF INVESTMENTS as at 31 December 2008 (% of net assets of £ 46,353,000) Sector distribution as at 31 December 2008 % of net a ssets Telecommunications 20.7% Technology 19.4% Healthcare 16.0% Financials 12.6% Consumer Goods 7.5% Oil & Gas 5.6% Industrials 4.3% Utilities 3.2% Unlisted 2.4% Consumer Services 2.1% Energy 1.0% Cash, fixed interest and other net assets* 5.2% 100.0% Geographical distribution as at 31 December 2008 % of net a ssets Europe 45.0% United States 21.4% United Kingdom 11.8% Asia Pacific 10.3% Japan 6.3% Cash, fixed interest and other net assets* 5.2% 100.0% * Cash, fixed interest and other net assets includes foreign currency balances of £1,374,000 (3 %). The figures detailed in the geographical distribution represent the Company's equity exposure to these countries or regional areas. BUSINESS REVIEW Status of Company The Company is registered as a public limited company and is an investment company within the terms of Section 833 of the Companies Act 2006. The Company has received approval from HM Revenue & Customs as an authorised investment trust under Section 842 of the Income and Corporation Taxes Act 1988 for the period from inception to 31 December 2007. In the opinion of the Directors, the Company has subsequently directed its affairs so as to enable it to continue to qualify for such approval and the Company will continue to seek approval under Section 842 each year. Activities The principal activity of the Company is to carry on business as an investment trust. A review of the Company's activities is given in the Chairman's Statement and in the Manager's Report and Portfolio Analysis. Net asset valuation The net asset value per ordinary share at 31 December 2008, after deducting the 2.3p dividend paid in May 2008 for the year to 31 December 2007, was 150.4p (2007: 177.2p) Results The results for the year are set out in the Income Statement and the Reconciliation of Movements in Shareholders' Funds. Dividends The Directors recommend the payment of a final dividend of 3.1p per ordinary share. This is subject to the approval of Shareholders at the Annual General Meeting on 30 April 2009 and will be payable on 18 May 2009 to Shareholders on the register at the close of business on 17 April 2009. The ex-dividend date will be 15 April 2009. Objective The investment objective of the Company is to provide Shareholders with an attractive real long-term total return by investing globally in undervalued securities. The portfolio is managed without reference to the composition of any stock market index. Investment policy The Company invests in a focused portfolio of approximately 30 to 40 securities of issuers throughout the world, predominantly in quoted equities. The Company may also invest in unquoted securities, which are not anticipated to exceed 10 per cent of the Company's total assets at the time of investment (excluding shares held in Edinburgh Partners Limited). The Company has no present intention to invest in other investment companies or funds but retains the ability to invest no more than 15 per cent of its gross assets in other listed investment companies (including investment trusts). The Company may also invest a substantial portion of its assets in debt instruments, cash or cash equivalents when the Investment Manager believes market or economic conditions make equity investment unattractive or while seeking appropriate investment opportunities for the portfolio or to maintain liquidity. In addition, the Company may purchase derivatives for the purposes of efficient portfolio management. It is intended that, from time to time, when deemed appropriate, the Company will borrow for investment purposes up to the equivalent of 25 per cent of its total assets. By contrast, the Company's portfolio may from time to time have substantial holdings of debt instruments, cash or short-term deposits. The investment objective and policy are intended to distinguish the Company from other investment vehicles which have relatively narrow investment objectives and which are thus constrained in their decision making and asset allocation. The objective and policy allow the Company to be constrained in its investment selection only by valuation and to be pragmatic in portfolio construction by only investing in securities which the Investment Manager considers to be undervalued on an absolute basis. Investment strategy The Company's portfolio is managed without reference to any stock market index. Investments are selected for the portfolio only after extensive research by the Investment Manager. The process through which an equity must pass in order to be included in the portfolio is rigorous. Only a security where the Investment Manager believes that the price will be significantly higher in the future will pass the selection process. The key to successful stock selection is to identify the long-term value of a company's shares and to have the patience to hold the shares until that value is appreciated by other investors. Identifying long-term value involves detailed analysis of a company's earning prospects over a five year time horizon. Further details of the investment strategy can be found in the Chairman's Statement and the Manager's Report and Portfolio Analysis. The Company's Investment Manager is Edinburgh Partners Limited which is an independent specialist investment manager focusing exclusively on achieving returns for investors based on global investment analysis of the highest quality. The founders of Edinburgh Partners Limited include experienced investment professionals with strong investment performances records and who believe rigorous fundamental research allied to patience is the basis of long-term investment success. Each of the investment professionals has specific responsibilities for sector and regional research in addition to their fund management role. Principal risks The Board considers that the following are the principal risks associated with investing in the Company: investment and strategy, discount volatility, market risk, liquidity risk, interest rate risk, credit risk, foreign currency risk, gearing, regulatory risk, operational risk and financial risk. An explanation of these risks and how they are managed is contained in note 21. Key Performance Indicators At each Board meeting, the Directors consider a number of performance measures to assess the Company's success in achieving its objective. The Key Performance Indicators used to measure progress and performance of the Company over time are established industry measures and are as follows: ● Net asset value per ordinary share. ● Share price per ordinary share. ● Share price discount/premium to net asset value per ordinary share. ● Revenue return per ordinary share. ● Total expense ratio. The Financial Summary provides information for the year ended 31 December 2008 on the Key Performance Indicators noted above. Current and future developments A review of the main features of the year ended 31 December 2008 is to be found in the Chairman's Statement and the Manager's Report and Portfolio Analysis. The Board's main focus is on the investment return and approach. Attention is paid to the integrity and success of the investment approach and on factors which may have an impact on this approach. Due regard is paid to the promotion of the Company including communication with Shareholders and other external parties. The Board is regularly updated on wider investment trust industry issues. Detailed papers are presented to the Board which lead to extensive discussion on development and strategy. EXTRACTS FROM THE DIRECTORS' REPORT Management Agreement The Company's investments are managed by Edinburgh Partners under an Investment Management Agreement dated 21 November 2003. The Investment Manager receives a management fee of 0.75 per cent per annum of the market capitalisation of the issued ordinary shares (excluding treasury shares), payable quarterly in arrears, plus an administration fee (£69,000 for the year ended 31 December 2008), payable quarterly in arrears and adjusted annually in line with changes in the Retail Price Index. The Investment Management Agreement may be terminated by either party giving 12 months' written notice. No additional compensation is payable to Edinburgh Partners on the termination of this agreement other than the fees payable during the 12 month notice period. An option agreement existed between the Company and Edinburgh Partners, dated 21 November 2003, whereby the Investment Manager had granted to the Company an option to subscribe for 71,294 ordinary shares of the Investment Manager. The exercise price of the option was £3 per share and the option was exercisable at any time prior to 15 December 2008. No consideration was paid by the Company to Edinburgh Partners on the grant of the option. The Company exercised its option in April 2008 in order to receive Edinburgh Partners' first ever dividend of 50p per share which was paid in September 2008. Continuing appointment of the Investment Manager The Board keeps the performance of the Investment Manager under review. It is the opinion of the Directors that the continuing appointment of Edinburgh Partners on the terms agreed is in the interests of Shareholders as a whole. The reasons for this view are that the investment performance of the Company is satisfactory relative to that of the markets in which the Company invests and because the remuneration of the Investment Manager is reasonable both in absolute terms and compared to that of managers of comparable investment companies. The Directors believe that by paying the investment management fee calculated on a market capitalisation basis, rather than a percentage of assets basis, the interests of the Investment Manager are more closely aligned with those of Shareholders. MANAGEMENT REPORT AND STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RELATION TO THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS Management Report Listed companies are required by the FSA's Disclosure and Transparency Rules (the "Rules") to include a management report within their annual report and financial statements. The information required to be included in the management report for the purpose of these Rules is included in the Chairman's Statement, the Manager's Report and Portfolio Analysis and the Business Review. Therefore no separate management report has been included. The financial statements have been reviewed by the Company's Auditors. Statement of Directors' Responsibilities in relation to the Annual Report and Financial Statements The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial period. Under that law they have elected to prepare the financial statements in accordance with UK Accounting Standards. The financial statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to: ● select suitable accounting policies and then apply them consistently; ● make judgments 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, 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 profit of the Company; and ● the Chairman's Statement, Manager's Report and Portfolio Analysis and the Directors' Report include a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that it faces. The Directors confirm that, so far as they are each aware, there is no relevant audit information of which the Company's Auditors are unaware; and each Director has taken all the steps that ought to have been taken as a Director to make himself aware of any relevant audit information and to establish that the Company's Auditors are aware of that information. The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Acts 1985 and 2006. 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 Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Teddy Tulloch Chairman 26 February 2009 INDEPENDENT AUDITORS' REPORT The Company's financial statements for the year ended 31 December 2008 have been audited by Ernst & Young LLP. The text of the Auditors' report can be found in the Company's Annual Report and Accounts at www.epgot.com. INCOME STATEMENT for the year ended 31 December 2008 2008 2007 Revenue Capital Total Revenue Capital Total Note £'000 £'000 £'000 £'000 £'000 £'000 (Losses)/gains on 8 - (10,444) (10,444) - 1,083 1,083 investments at fair value Foreign exchange - 1,027 1,027 - (153) (153) gains/(losses) on capital items Income 2 2,067 - 2,067 1,726 - 1,726 Investment 3 (325) - (325) (410) - (410) management fee Other expenses 4 (239) - (239) (254) - (254) Net return before 1,503 (9,417) (7,914) 1,062 930 1,992 finance costs and taxation Finance costs Interest payable (3) - (3) (5) - (5) and similar charges Net return before 1,500 (9,417) (7,917) 1,057 930 1,987 taxation Taxation 5 (275) - (275) (141) - (141) Net return after 1,225 (9,417) (8,192) 916 930 1,846 taxation pence pence pence pence pence pence Return per 7 3.9 (29.7) (25.8) 2.7 2.8 5.5 ordinary share All revenue and capital items in the above statement derive from continuing operations. The total column of this statement is the profit and loss account of the Company. The revenue and capital return columns are prepared under guidance published by the Association of Investment Companies ("AIC"). A separate Statement of Total Recognised Gains and Losses has not been prepared as all such gains and losses are included in the Income Statement. Dividend Information A dividend for the year of 3.1p per ordinary share (2007: 2.3p) is proposed. This is subject to the approval of Shareholders at the Annual General Meeting on 30 April 2009 and will be payable on 18 May 2009 to Shareholders on the register at the close of business on 17 April 2009. The ex-dividend date will be 15 April 2009. Based on 30,824,180 ordinary shares, being the current number of ordinary shares in issue excluding shares held in treasury, the total proposed dividend payment will amount to £956,000. In accordance with FRS 21, final dividends proposed by the Company are accounted for in the period in which the dividend is approved by Shareholders at an Annual General Meeting. Further information on dividend distributions can be found in note 6. BALANCE SHEET as at 31 December 2008 2008 2007 Restated* Note £'000 £'000 Fixed asset investments: Investments at fair value through 8 43,935 53,952 profit or loss Current assets: Debtors 10 251 222 Cash at bank and short-term deposits 2,734 3,931 2,985 4,153 Creditors - amounts falling due within 11 567 400 one year Net current assets 2,418 3,753 Net assets 46,353 57,705 Capital and reserves: Called-up share capital 15 340 340 Capital redemption reserve 1 1 Share premium account 17,991 17,991 Special reserve 16 15,795 18,212 Capital reserve 10,701 20,118 Revenue reserve 1,525 1,043 Total Shareholders' funds 46,353 57,705 pence pence Net asset value per ordinary share 17 150.4 177.2 * The cost of own shares held in treasury is now shown as a deduction from distributable profits in accordance with the AIC Statement of Recommended Practice issued in January 2009. These financial statements were approved and authorised for issue by the Board of Directors on 26 February 2009 and were signed on its behalf by: Teddy Tulloch Chairman RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS for the year ended 31 December 2008 Share Capital Share Special Own Capital Revenue Total shares capital redemption premium reserve held in reserve reserve treasury reserve account £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Year ended 31 December 2008 At 31 December 340 1 17,991 20,506 (2,294) 20,118 1,043 57,705 2007 Transfer of - - - (2,294) 2,294 - - - cost of own shares held in treasury* At 31 December 340 1 17,991 18,212 - 20,118 1,043 57,705 2007 (restated) Net return - - - - - (9,417) 1,225 (8,192) after taxation for the year Dividends paid - - - - - - (743) (743) Share purchase - - - (2,417) - - - (2,417) costs 31 December 340 1 17,991 15,795 - 10,701 1,525 46,353 2008 Year ended 31 December 2007 At 31 December 340 1 17,991 20,506 - 19,188 739 58,765 2006 Net return - - - - - 930 916 1,846 after taxation for the year Dividends paid - - - - - - (612) (612) Share purchase - - - - (2,294) - - (2,294) costs 31 December 340 1 17,991 20,506 (2,294) 20,118 1,043 57,705 2007 * The cost of own shares held in treasury is now shown as a deduction from distributable profits in accordance with the AIC Statement of Recommended Practice issued in January 2009. STATEMENT OF CASH FLOW for the year ended 31 December 2008 2008 2007 Note £'000 £'000 Operating activities: Investment income received 1,863 1,647 Bank deposit interest received 1 1 Investment management fees paid (350) (422) Secretarial fees paid (69) (66) Other cash payments (60) (49) Net cash inflow from operating activities 18 1,385 1,111 Servicing of finance (3) (5) Taxation Income tax paid (249) (177) Capital expenditure and financial investment: Purchases of investments (20,864) (33,463) Sales of investments 20,664 38,168 Exchange gains on settlement 157 15 Net cash (outflow)/inflow from investing (43) 4,720 activities Net cash inflow before equity dividend 1,090 5,649 and financing Equity dividend paid (743) (612) Financing: Ordinary shares purchased and held in (2,498) (2,213) treasury Net cash outflow from financing (2,498) (2,213) (Decrease)/increase in cash 19 (2,151) 2,824 NOTES TO THE FINANCIAL STATEMENTS at 31 December 2008 1. Accounting policies Accounting convention The financial statements are prepared in accordance with UK Generally Accepted Accounting Practice ("UK GAAP") and with the AIC Statement of Recommended Practice issued in January 2009 relating to the Financial Statements of Investment Trust Companies and Venture Capital Trusts. Income recognition Dividend and other investment income is included as revenue when the investments concerned are quoted `ex-dividend'. Income arising on holdings of fixed income securities is recognised on a time apportionment basis so as to reflect the effective interest rate on that security. Deposit interest and underwriting commission receivable is included on an accruals basis. Management expenses and finance costs All expenses are accounted for on an accruals basis. All operating expenses 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. Investments All investments held by the Company are classified as `fair value through profit or loss'. Investments are initially recognised at cost, being the fair value of the consideration given. Interest accrued on fixed interest rate securities at the date of purchase or sale is accounted for separately as accrued income, so that the value or purchase price or sale proceeds is shown net of such items. After initial recognition, investments are measured at fair value, with unrealised gains and losses on investments and impairment of investments recognised in the Income Statement and allocated to capital. Realised gains and losses on investments sold are calculated as the difference between sales proceeds and cost. For investments actively traded in organised financial markets, fair value is generally determined by reference to Stock Exchange quoted market bid prices at the close of business on the Balance Sheet date, without adjustment for transaction costs necessary to realise the asset. Unlisted investments will be valued by the Directors at fair value, using the guidelines on valuation published by the International Private Equity and Venture Capital Association. This represents the Directors' view of the amount for which an asset could be exchanged between knowledgeable willing parties in an arm's length transaction. This does not assume that the underlying business is saleable at the reporting date or that its current shareholders have an intention to sell their holding in the near future. Foreign currency Transactions denominated in foreign currencies are converted to sterling at the actual exchange rate as at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the year end are reported at the rate of exchange at the Balance Sheet date. Any gain or loss arising from a change in exchange rate subsequent to the date of the transaction is included as an exchange gain or loss in the capital reserve or the revenue account depending on whether the gain or loss is of a capital or revenue nature. Taxation The charge for taxation is based on the net revenue for the year. In accordance with Financial Reporting Standard No.16: Current Tax, franked investment income is shown net of the associated tax credit, therefore no tax credits are included within the charge for taxation. The charge for taxation takes into account taxation deferred or accelerated because of timing differences between the treatment of certain items for accounting and taxation purposes. Full provision for deferred taxation is made under the liability method, without discounting, on all timing differences that have arisen but not been reversed by the Balance Sheet date, unless such provision is not permitted by Financial Reporting Standard No. 19: Deferred Tax. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the financial statements which are capable of reversal in one or more subsequent periods. Dividends payable to Shareholders Dividends to Shareholders are recognised as a liability in the period in which they have been declared and paid. The annual dividend is proposed by the Board and is not declared until approved by Shareholders at the Annual General Meeting following the year end. 2. Income 2008 2007 £'000 £'000 Income frominvestments: UK net dividend income 317 414 Overseas dividends 1,528 1,155 Fixed interest 132 21 Deposit funds 89 135 2,066 1,725 Other income: Bank interest 1 1 2,067 1,726 Total income comprises: Dividends 1,934 1,704 Interest 133 22 2,067 1,726 3. Investment management fee 2008 2007 Total Total £'000 £'000 Investment management fee 325 410 The investment management fee is paid quarterly in arrears, at the rate of 0.75 per cent per annum of the market capitalisation of the issued ordinary shares (excluding treasury shares) of the Company. At 31 December 2008 there was £ 73,000 outstanding (2007: £98,000). In addition the Investment Manager received an administrative fee of £69,000 as detailed in note 4 (2007: £67,000). At 31 December 2008 there was £17,000 outstanding (2007: £17,000). 4. Other expenses 2008 2007 £'000 £'000 Administration and secretarial fees 69 67 Auditors' remuneration for: Audit 16 20 Directors' remuneration 56 56 Other 98 111 239 254 The Auditors' remuneration comprises audit fees of £16,000 (2007: £15,000) and expenses of £nil (2007: £5,000). The expenses charge of £5,000 for 2007 includes expenses relating to the 2006 audit and the accrual for expenses relating to the 2007 audit. 5. Taxation a) Analysis of charge in year 2008 2007 £'000 £'000 Current tax: UK Corporation Tax 275 186 Overseas tax suffered 171 141 Double taxation relief (171) (186) 275 141 Deferred tax: Timing differences 4 6 Double taxation relief (4) (6) - - Taxation on ordinary activities 275 141 b) The current taxation charge for the year is lower than the standard rate of Corporation Tax in the UK of 30% to 31 March 2008 and 28% from 1 April 2008. The differences are explained below: 2008 2007 £'000 £'000 Revenue return on ordinary activities before 1,500 1,057 taxation Theoretical tax at UK Corporation Tax effective 427 317 rate of 28.5% (2007: 30%) Effects of: - UK dividends that are not taxable (91) (124) - Brought forward eligible unrelieved foreign tax (61) - utilised - Overseas taxation not recoverable - (45) - Marginal relief adjustment - (7) - Overseas tax suffered 171 - - Double taxation relief (171) - 275 141 The tax charge has been reconciled to the revenue return rather than to the total return as the capital return is not subject to tax. c) Factors that may affect future tax charges After allowing for accrued taxable income at the year end, the Company has no eligible unrelieved foreign tax (2007: £61,000) that is available to offset against tax chargeable on future taxable overseas revenue. No deferred tax asset was recognised in respect of the 2007 amount as it would only be recoverable to the extent that there would be sufficient future taxable overseas revenue, not relieved by future eligible foreign tax suffered. d) The Chancellor of the Exchequer, in his Budget statement on 21 March 2007, announced a number of proposed changes to the tax legislation, including a reduction in the rate of UK Corporation Tax from 30% to 28% with effect from April 2008. 6. Dividends 2008 2007 Declared and paid £'000 £'000 2007 dividend of 2.3p per ordinary share paid in May 2008 (2006: dividend of 1.8p paid in May 2007) 743 612 743 612 Net revenue return after taxation 1,225 916 Proposed 2008 dividend of 3.1p (2007: 2.3p) per ordinary 956 746 share 956 746 A dividend for the year of 3.1p per ordinary share (2007: 2.3p) is proposed. This is subject to the approval of Shareholders at the Annual General Meeting on 30 April 2009 and will be payable on 18 May 2009 to Shareholders on the register at the close of business on 17 April 2009. The ex-dividend date will be 15 April 2009. Based on 30,824,180 ordinary shares, being the current number of ordinary shares in issue excluding shares held in treasury, the total proposed dividend payment will amount to £956,000. 7. Return per ordinary share 2008 2007 Net Ordinary Per Net Ordinary Per return shares* share return shares* share £'000 pence £'000 pence Revenue return after 1,225 31,758,186 3.9 916 33,601,801 2.7 taxation Capital return after (9,417) 31,758,186 (29.7) 930 33,601,801 2.8 taxation Total return (8,192) 31,758,186 (25.8) 1,846 33,601,801 5.5 * Weighted average number of ordinary shares, excluding shares held in treasury, in issue during the year. 8. Investments 2008 2007 £'000 £'000 Listed investments 42,835 53,052 Unlisted investments 1,100 900 43,935 53,952 2008 2007 Unlisted Listed Total Total £'000 £'000 £'000 £'000 Analysis of investment portfolio movements Opening book cost - 52,966 52,966 51,890 Opening unrealised appreciation 900 86 986 5,684 Opening valuation 900 53,052 53,952 57,574 Movements in the year: Purchases at cost 214 20,877 21,091 33,463 Sales - proceeds - (20,664) (20,664) (38,168) - realised (losses)/gains on sales - (2,616) (2,616) 5,781 Changes in fair value of investments (14) (7,814) (7,828) (4,698) Closing valuation 1,100 42,835 43,935 53,952 Closing book cost 214 50,563 50,777 52,966 Closing unrealised appreciation/ 886 (7,728) (6,842) 986 (depreciation) 1,100 42,835 43,935 53,952 2008 2007 Unlisted Listed Total Total £'000 £'000 £'000 £'000 Analysis of capital gains and losses Realised (losses)/gains on sales - (2,616) (2,616) 5,781 Changes in fair value of investments (14) (7,814) (7,828) (4,698) Losses on investments (14) (10,430) (10,444) 1,083 The unlisted investment is in relation to the 71,294 shares in Edinburgh Partners as disclosed in the Chairman's Statement and the Directors' Report. Transaction costs During the year the Company incurred transaction costs of £36,000 (2007: £ 81,000) and £82,000 (2007: £77,000) on purchases and sales of investments respectively. These amounts are included in (losses)/gains on investments at fair value, as disclosed in the Income Statement. 9. Significant holdings The Company had no holdings of 3% or more of the share capital of any portfolio companies. 10. Debtors 2008 2007 £'000 £'000 Dividends receivable 86 61 Prepayments and accrued income 9 81 Taxation recoverable 156 80 251 222 11. Creditors: amounts falling due within one year 2008 2007 £'000 £'000 Due to brokers 227 - Other creditors and accruals 154 319 Purchase of shares held in treasury - 81 Bank overdraft 84 - Corporation Tax 102 - 567 400 The bank overdraft arises as a result of timing differences in the transfer of cash from the liquidity funds. 12. Provision for liabilities and charges No provision for liabilities and charges is considered necessary at the Company's year end (2007: £nil). There were no amounts unprovided in respect of deferred taxation (2007: £nil). 13. Contingent assets Following the judgement that VAT is not chargeable on investment management fees and some administration fees payable by investment trusts such as EP Global Opportunities Trust plc, the Investment Manager has submitted a claim for VAT previously charged to the Company that has not been reclaimed under partial exemption rules. 14. Contingent liabilities At the year end there were no contingent liabilities and no outstanding commitments in respect of investments carrying an obligation for future subscriptions (2007: £nil). 15. Share capital 2008 2007 £'000 £'000 150,000,000 (2007: 150,000,000) ordinary shares of 1p each 1,500 1,500 Allotted, called up and fully paid: 33,998,180 (2007: 33,998,180) ordinary shares of 1p each (includes 3,174,000 (2007: 1,440,000) shares held in 340 340 treasury. See notes 16 and 17) Duration of the Company The Company does not have a termination date or the requirement for any periodic continuation votes. 16. Special reserve From time to time the Company buys in shares and holds them in treasury for re-issue at a later date. In accordance with FRS 25, the consideration paid for these shares held in treasury is presented as a deduction in Shareholders' funds, and in accordance with the AIC Statement of Recommended Practice issued in January 2009, has been allocated to the special reserve. Details of own shares held in treasury are shown below: Number of 2008 Number of 2007 shares £'000 shares £'000 Summary At 1 January 1,440,000 2,294 - - Additions 1,734,000 2,417 1,440,000 2,294 At 31 December 3,174,000 4,711 1,440,000 2,294 Nominal value of own shares held in 32 14 treasury 17. Net asset value per share The net asset value per share, calculated in accordance with the Articles of Association, is as follows: 2008 2007 pence pence Ordinary share 150.4 177.2 The net asset value per ordinary share is based on net assets of £46,353,000 (2007: £57,705,000) and on 30,824,180 (2007: 32,558,180) ordinary shares being the number of ordinary shares, excluding shares held in treasury, in issue at the year end. 18. Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities 2008 2007 £'000 £'000 Net return before finance costs and taxation (7,914) 1,992 Net losses/(gains) on capital items 9,417 (930) (Decrease)/increase in creditors (165) 96 Decrease/(increase) in debtors and accrued income 47 (47) Net cash inflow from operating activities 1,385 1,111 19. Reconciliation of net cash flow to movement in net funds 2008 2007 £'000 £'000 (Decrease)/increase in cash for the year (2,151) 2,824 Realised exchange gains/(losses) 870 (168) (1,281) 2,656 Net funds at 1 January 3,931 1,275 Net funds at 31 December 2,650 3,931 At Cash Exchange At 1 January Flows Gains 31 December 2008 2008 £'000 £'000 £'000 £'000 Cash at bank 3,931 (2,067) 870 2,734 Bank overdraft - (84) - (84) 3,931 (2,151) 870 2,650 At Cash Exchange At 1 January Flows Losses 31 December 2007 2007 £'000 £'000 £'000 £'000 Cash at bank 1,275 2,824 (168) 3,931 1,275 2,824 (168) 3,931 20. Analysis of financial assets and liabilities Interest rate and currency profile The interest rate and currency profile of the Company's financial assets was: 2008 2007 Cash Fair Cash Fair No flow value No flow value interest interest interest interest interest interest rate rate rate rate rate rate risk risk risk risk Total exposure exposure exposure Total exposure exposure exposure £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Equity shares Euro 13,097 13,097 - - 15,820 15,820 - - US dollar 13,765 13,765 - - 17,106 17,106 - - Sterling 5,406 5,406 - - 7,341 7,341 - - Japanese 2,908 2,908 - - 2,089 2,089 - - yen Swiss 3,902 3,902 - - 3,721 3,721 - - franc Swedish 2,069 2,069 - - 2,709 2,709 - - kroner Korean wan 994 994 - - - - - - Turkish 684 684 - - 1,166 1,166 - - lira Hong Kong 1,110 1,110 - - - - - - dollar Gilts Sterling* - - - - 4,000 - - 4,000 Cash at bank and short-term deposits Sterling 1,360 - 1,360 - 1,978 - 1,978 - US dollar - - - - 13 - 13 - Japanese 1,374 - 1,374 - 1,940 - 1,940 - yen Debtors** Euro 48 48 - - 17 17 - - US dollar 90 90 - - 54 54 - - Sterling 52 52 - - 117 117 - - Japanese 21 21 - - 8 8 - - yen Swiss 27 27 - - 15 15 - - franc Danish 6 6 - - 4 4 - - krone 46,913 44,179 2,734 - 58,098 50,167 3,931 4,000 * The maturity date profile of these assets was less than one year and the effective average interest rate was 5%. ** Debtors exclude prepayments which under FRS 25 are not classed as financial assets. At 31 December 2008 the Company had no financial liabilities other than short-term creditors (2007: £nil). All financial assets and liabilities of the Company are held at fair value. 21. Risk analysis Risks The principal risks the Company faces are: ● Investment and strategy ● Discount volatility ● Market risk ● Liquidity risk ● Credit risk ● Interest rate risk ● Foreign currency risk ● Gearing ● Regulatory risk ● Operational risk ● Financial risk The Investment Manager monitors the financial risks affecting the Company on an ongoing basis within the policies and guidelines determined by the Board. The Directors receive financial information, which is used to identify and monitor risk, quarterly. The Company may enter into derivative contracts to manage risk but has not done so to date. A description of the principal risks the Company faces is detailed below. Investment and strategy There can be no guarantee that the objective of the Company will be achieved. The Investment Manager meets regularly with the Board to discuss the portfolio performance and strategy. The Board receives quarterly reports from the Investment Manager detailing all portfolio transactions and any other significant changes in the market or stock outlooks. Discount volatility The Board recognises that it is in the long-term interest 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 for EP Global Opportunities Trust plc, but it does not intend to issue a precise discount target at which shares will be bought back as it believes that the announcement of specific targets is likely to hinder rather than help the successful execution of a buyback policy. Equally the Company will issue shares in order to meet demand as it arises. During the year ended 31 December 2008 the Company bought back 1,734,000 (2007: 1,440,000) ordinary shares into treasury. During the year ended 31 December 2008 the Company issued nil (2007: nil) ordinary shares. Market 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 net asset value per share of the Company is issued weekly to the London Stock Exchange and is also available on the Company's website www.epgot.com. Details of the Company's investment portfolio as at 31 December 2008 are disclosed in these financial statements. If the investment portfolio valuation fell by 1 per cent from the amount detailed in the financial statements as at 31 December 2008 it would have the effect, with all other variables held constant, of reducing the net capital return before taxation by £439,000 (2007: £540,000). An increase of 1 per cent in the investment portfolio valuation would have an equal and opposite effect on the net capital return before taxation. Liquidity risk The Company's policy with regard to liquidity is to ensure continuity of funding. Short-term flexibility is achieved through cash management. The Company's assets comprise mainly of readily realisable securities which can be sold freely to meet funding requirements if necessary. Securities listed on a recognised stock exchange have been valued at bid prices and exchange rates ruling at the close of business on 31 December 2008. In certain circumstances, the market prices at which investments are valued may not represent the realisable value of those investments, taking into account both the size of the Company's holding and the frequency with which such investments are traded. Credit risk Credit risk is the risk of financial loss to the Company if the contractual party to a financial instrument fails to meet its contractual obligations. The carrying amounts of financial assets best represent the maximum credit risk exposure at the Balance Sheet date. The Company's listed investments are held on its behalf by the Bank of New York Mellon acting as the Company's custodian. Bankruptcy or insolvency of the custodian may cause the Company's rights with respect to securities held by the custodian to be delayed. The Board monitors the Company's risk by reviewing the custodian's internal controls reports. Investment transactions are carried out with a large number of brokers whose creditworthiness is reviewed by the Investment Manager. Transactions are ordinarily undertaken on a delivery versus payment basis whereby the Company's custodian bank ensures that the counterparty to any transaction entered into by the Company has delivered in its obligations before any transfer of cash or securities away from the Company is completed. Cash is only held at banks and in money market funds that have been identified by the Board as reputable and of high credit quality. The maximum exposure to credit risk as at 31 December 2008 was £46,920,000 (2007: £58,105,000). The calculation is based on the Company's credit risk exposure as at 31 December 2008 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 2008 are disclosed in note 20 of these financial statements. The majority of the Company's assets were non-interest bearing as at 31 December 2008. There was limited exposure to interest bearing liabilities during the year ended 31 December 2008. Surplus cash is invested in liquidity funds. If interest rates had reduced by 1 per cent from those obtained as at 31 December 2008 it would have the effect, with all other variables held constant, of reducing the net revenue return before taxation on an annualised basis by £ 27,000 (2007: £39,000). If there had been an increase in interest rates of 1 per cent there would have been an equal and opposite effect in the net revenue return before taxation. The calculations are based on cash at bank and short-term deposits as at 31 December 2008 and these may not be representative of the year as a whole. Foreign currency risk The base currency of the Company is sterling. The international nature of the Company's investment activities gives rise to a currency risk which is inherent in the performance of its overseas investments. The Company's overseas income is also subject to currency fluctuations. It is not the Company's policy to hedge this risk on a continuing basis. Details of the Company's foreign currency risk exposure as at 31 December 2008 is disclosed in note 20 of these financial statements. If sterling had strengthened by 1 per cent against all other currencies on 31 December 2008, with all other variables held constant, it would have the effect of reducing the net capital return before taxation by £401,000 (2007: £ 446,000). If sterling had weakened by 1 per cent against all other currencies there would have been an equal and opposite effect on the net capital return before taxation. Gearing Gearing is used to enhance long-term returns to Shareholders. The Company is permitted to employ gearing should the Board feel it appropriate to do so up to a maximum of 25 per cent of total assets. The use of gearing can cause both gains and losses in the asset value of the Company to be magnified. The Company did not have any gearing as at 31 December 2008. Regulatory risk Failure to qualify under the terms of Section 842 of the Income and Corporation Taxes Act 1988 may lead to EP Global Opportunities Trust plc being subject to capital gains tax. A breach of the rules of the London Stock Exchange may result in censure by the Financial Services Authority ("FSA") and/or the Company's suspension from listing. The Board has agreed service levels with the Secretary and Investment Manager which include active and regular review of compliance with these requirements. These checks are reviewed at each Board Meeting. Operational risk There are a number of operational risks associated with the fact that third parties undertake the Company's administration and custody. The main risk is that third parties may fail to ensure that statutory requirements such as Companies Act and London Stock Exchange requirements are met. The Board regularly receives and reviews management information on third parties which the Secretary compiles. In addition each of the third parties provides a copy of its report on internal controls (AAF 01/06 or equivalent) to the Board each year. Financial risk Inappropriate accounting policies or failure to comply with current or new accounting standards may lead to a breach of regulations. The Board employs independent administrators to prepare all financial statements and meets with the independent auditors at least once a year to discuss all financial matters including appropriate accounting polices. The Company is a member of the Association of Investment Companies ("AIC"), a trade body intended to promote investment trusts which also develops best practice for all of its members. The Board undertakes an annual assessment and review of all the risks stated above together with a review of any new risks which may have arisen during the year. This risk is formalised within the Company's risk assessment matrix. Capital management policies The Company's capital management objectives are to ensure that it will be able to continue as a going concern and to provide Shareholders with an attractive real long-term total return in accordance with its investment policy. The Company's capital comprises: 2008 2007 £'000 £'000 Called-up share capital 340 340 Capital redemption reserve 1 1 Share premium account 17,991 17,991 Special reserve 15,795 18,212 Capital reserve 10,701 20,118 Revenue reserve 1,525 1,043 Total Shareholders' funds 46,353 57,705 The Company's objectives for managing capital are the same as the previous year and have been complied with throughout the year. 22. Transactions with the Investment Manager Information with respect to transactions with the Investment Manager is provided in note 3 of these financial statements. 23. Post balance sheet events As 20 February 2009 (being the latest practicable date prior to the publication of this report), the net assets of the Company were £38,754,000, the net asset value per share was 125.7p and the share price was 124.0p. ANNUAL GENERAL MEETING The Company's Annual General Meeting will be held at The Bonham Hotel, 35 Drumsheugh Gardens, Edinburgh EH3 7RN on Thursday, 30 April 2009, at 12.00 noon. The notice of this meeting can be found in the Annual Report and Accounts at www.epgot.com. DIRECTORS Teddy Tulloch Richard Burns David Hough Ian McBean INVESTMENT MANAGER Edinburgh Partners Limited 12 Charlotte Square Edinburgh, EH2 4DJ Enquiries: Sandy Nairn} Kenneth Greig} Edinburgh Partners Limited, telephone: 0131 270 3800

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