Final Results
EP GLOBAL OPPORTUNITIES TRUST plc
18 February 2005
PRELIMINARY ANNOUNCEMENT OF ANNUAL RESULTS
HIGHLIGHTS
* In the Company's first full year net asset value per Ordinary share
increased by 16.2 per cent from the issue price to 116.2p
* From the opening net asset value of 97p per Ordinary share, after deducting
initial issue costs, net asset value increased by almost 20 per cent
* The first annual general meeting of the Company will be held on 27 April
2005
* The Board is recommending a final dividend of 0.40p per Ordinary share,
payable on 5 May 2005. The ex-dividend date will be 6 April 2005 and the
record date will be 8 April 2005.
* During the year, the Board exercised its powers both to issue new shares at
a premium to net asset value and to buy-in shares for cancellation,
resulting in a net increase of over one million shares in issue
The Directors announce the annual results (subject to audit finalisation) for
the period from 13 November 2003* to 31 December 2004 as follows:-
STATEMENT OF TOTAL RETURN (UNAUDITED)
(incorporating the revenue account**) of the Company
13 November 2003
to 31 December 2004
Revenue Capital Total
£'000 £'000 £'000
Gains on investments - 4,274 4,274
Foreign exchange losses on capital items - (61) (61)
Dividends and interest 571 - 571
Investment management fee (173) - (173)
Other expenses (230) - (230)
Net return before and after finance costs and 168 4,213 4,381
before taxation
Taxation on ordinary activities (37) - (37)
Return on ordinary activities after taxation
for the
period 131 4,213 4,344
Dividend in respect of Ordinary shares (90) - (90)
Transfer to reserves 41 4,213 4,254
Return per Ordinary share *** 0.59p 18.84p 19.43p
* While the Company was incorporated on 13 November 2003, it did not commence
operations until 15 December 2003.
** The revenue column of this statement is the revenue account of the Company.
*** The revenue return per Ordinary share is based on earnings of £131,000 and
on 22,365,329 Ordinary shares being the weighted average number of Ordinary
shares in issue during the period.
The capital return per Ordinary share is based on net capital gains of £
4,213,000 and on 22,365,329 Ordinary shares being the weighted average number
of Ordinary shares in issue during the period.
All revenue and capital items derive from continuing operations.
BALANCE SHEET (UNAUDITED)
As at
31 December 2004
£'000
Fixed assets
Investments 25,426
Current assets
Debtors 60
Cash at bank 826
886
Creditors - amounts falling due within one 235
year
Net current assets 651
Total net assets 26,077
Capital and reserves
Called up share capital 224
Capital redemption reserve 1
Share premium account 1,092
Special reserve 20,506
Capital reserve - realised 393
unrealised 3,820
Revenue reserve 41
Total Shareholders' funds 26,077
Net asset value per Ordinary share 116.2p
SUMMARISED STATEMENT OF CASHFLOW (UNAUDITED)
13 November 2003
to 31 December 2004
£'000
Net cash inflow from operating activities 153
Capital expenditure and financial
investment
Purchases of investments (26,503)
Sales of investments 5,414
Exchange losses on settlement (61)
Net cash outflow from capital expenditure
and financial investment (21,150)
Net cash outflow before financing (20,997)
Financing
Proceeds of share issues 22,547
Expenses of share issues (646)
Purchase of shares for cancellation (78)
Net cash inflow from financing 21,823
Increase in cash 826
The above financial information has been prepared using the accounting policies
set out in the Listing Particulars, which have been delivered to the Registrar
of Companies, and in accordance with applicable accounting standards and with
the Statement of Recommended Practice 2003 regarding the Financial Statements
of Investment Trust Companies.
It is the intention of the Directors to conduct the affairs of the Company so
that they satisfy the conditions for approval as an investment trust company
set out in Section 842 of the Income and Corporations Taxes Act 1988.
The above financial information does not constitute statutory financial
statements as defined in Section 240 of the Companies Act 1985.
Chairman's Statement
Results
I am delighted to report that your Company has had an excellent first year. The
period under review to 31 December 2004 is slightly over 12 months, as the
Trust commenced operations on 15 December 2003. By the end of 2004, the net
asset value per share had risen by 16.2 per cent from the initial issue price
to 116.2p. This is a particularly satisfactory result as, before moving into
profitable territory, performance had to recover the initial launch costs of
the Trust of 3p per share. So, while the initial issue price was 100p, the
opening net asset value, after issue costs, was 97p and the increase in net
asset value per share on this basis was almost 20 per cent.
Investment Performance
For comparison purposes, the FT All-Share Index gained 9.2 per cent in calendar
2004, while the FT World Index was up 6.0 per cent. This was the second year of
recovery for world equity markets after the shake out that followed the end of
the so-called 'bubble' in equity markets that peaked in late 1999/early 2000.
Virtually all equity markets enjoyed a profitable year, although the rate of
gain was more moderate than in 2003, the first year of recovery. The best
performance came from some of the regional Asian markets and the FT Asia ex
Japan Index rose by 13.5 per cent. The poorest performing major market was the
US, where the S & P Composite Index measured in US dollars gained 9 per cent,
but measured in sterling increased only 1.6 per cent, as a consequence of the
fall in the value of the dollar. Indeed, the steady decline in the US dollar
during the year against the other major currencies was one of the main features
of financial markets in 2004.
While it is of interest to compare your Company's investment performance with
that of the major stockmarket indices, I should make it clear that EP Global
Opportunities Trust does not have a benchmark. This is a fundamental policy of
the Trust. Most investment trusts have a specific benchmark against which their
investment performance is measured. However, the Board does not wish your
investment manager, Edinburgh Partners, to be under any pressure, either
directly or subconsciously, to weight the Trust's portfolio towards a specific
geographical or sector distribution, an almost inevitable consequence of a
benchmark.
The investment policy followed by Edinburgh Partners is based on investing in
companies in major global markets that Edinburgh Partners regard as being
clearly undervalued on an absolute basis. This is the policy that was laid out
in the Prospectus. It is a policy that does not fit with any index-based
benchmark and the Board wishes to ensure that your investment manager adheres
to this policy.
Share Price and Discount
The share price at the year end was 110.5p. This was a discount to the net
asset value per share of 4.9 per cent.
Share prices of investment trusts are determined by the balance of supply and
demand for their shares. Your Board considers it a matter of importance that
this balance should result in the shares of your Company trading at either a
very small discount or at a premium to net asset value. Accordingly, we
encourage demand for the shares by actively marketing them to potential
investors. In addition, during the year, approval was obtained for the Trust to
buy-in its own shares and a total of 80,000 shares were bought-in. As was
required by company law, these shares were cancelled.
The current authority of the Company to make market purchases of up to 14.99%
of its Ordinary shares expires at the conclusion of this year's annual general
meeting and a special resolution will be proposed at the annual general meeting
to renew this authority. Until recently, companies that purchased their shares
were required to cancel them immediately. However, new regulations allow
companies to hold up to 10% of their issued shares in treasury rather than
cancel them. The special resolution will give the Directors the flexibility of
either cancelling the purchased shares or holding them in treasury.
Purchases of Ordinary shares will be made within guidelines established by the
Board but the Board will only exercise the authority if, in its opinion, it
would enhance the net asset value per share of the remaining Ordinary shares
and if it would be in the interests of the Company to do so.
A special resolution will also be proposed to renew the Directors' authority to
allot new shares and to allow the sale of shares out of treasury, for cash,
without first offering such shares to existing shareholders pro rata to their
existing holdings. The Directors will only allot new shares or sell shares out
of treasury if they believe it would be in the best interests of the Company
and would not result in a dilution of net asset value per share.
Subsequent to the initial placing of shares on the 15th of December 2003, a
total of 1,083,259 were issued in three separate tranches during the period to
31 December 2004. Since then, a further 300,000 shares have been issued. Each
of these issues was done at a premium to the net asset value and so added a
small amount of value for existing Shareholders.
It is your Board's intention to use the powers to buy-in shares in the open
market and to issue shares to limit, as far as possible, the divergence of the
share price and the net asset value, so that the performance of your Company's
assets is largely reflected in the share price performance.
Dividend
The revenue account shows that the after tax income for the period to 31
December 2004 was 0.59p per share. The revenue account reflects a high initial
level of cash, as the proceeds of the initial offering were invested gradually
over the first few months after the launch of the Trust. The Board is proposing
a dividend of 0.40p per share for the year. No interim dividend was paid;
instead it was decided to pay out all the dividends in a single payment.
Subject to Shareholders' approval of the dividend at the annual general
meeting, the dividend will be paid on 5 May 2005.
If the income estimate for 2005 is achieved, it should be possible to at least
maintain the dividend next year. This is not a profit forecast and, of course,
the actual outcome in 2005 will depend on changes made to the portfolio during
the year. Just as the Board does not wish the investment manager to be
restricted by the imposition of a benchmark, so too it does not wish the
investment policy to be restricted in any way by setting a target for the level
of income. The income derived from the portfolio will be as a consequence of
what shares Edinburgh Partners identifies as being undervalued.
While the initial launch costs of the Trust were all charged to capital and
were written off, all the expenses of running the Trust have been charged to
the income account. We intend to continue to charge all running expenses to the
income account.
Investment Manager
Edinburgh Partners is a new investment management company which was set up in
2003 and your Trust was its first client. In order to provide the breadth and
level of experience to manage a trust with a global mandate such as ours, a
substantial initial investment had to be made by Edinburgh Partners. It is
important for the continued success of the Trust that Edinburgh Partners is
also successful. Your Trust has a further interest in our investment manager,
as we hold an option over 71,294 shares in Edinburgh Partners. This option was
granted to the Trust, at no cost, in recognition of the Trust's support in
becoming the first client. The option has a five-year life from December 2003
and is exercisable at £3 per share. If the Trust were to exercise its option,
it would own 1.81 per cent of the equity of Edinburgh Partners.
It is reassuring to report that Edinburgh Partners, like your Trust, has
enjoyed a successful 2004. All the funds it manages had a good investment
performance in 2004 and funds under management doubled over the course of the
year.
Outlook
After two years of good performance, it would not be surprising for the major
stockmarkets, at least in terms of their indices, to have a more subdued year
in 2005. While China and India continue to provide the backbone for growth in
Asia, the outlook for Western economies is more muted. UK short-term interest
rates may have been raised far enough to halt the boom in house prices and may
already be at or near their peak level. However, the Federal Reserve, in the
United States, has made it clear that further increases in US interest rates
are to be expected. The effect of the higher level of energy costs and the
higher interest rates can be expected to lead to a slower rate of economic
growth. While this may hold back stockmarkets, there remain many shares that
are priced on attractive valuations. 2005 is likely to be a year that favours
investors with the ability to recognise those companies whose share price
represents genuine value.
Enquiries:
Sandy Nairn}
Kenneth Greig}
Arthur Copple } Edinburgh Partners Limited, telephone: 0131 270 5570
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