Interim Results
EP GLOBAL OPPORTUNITIES TRUST plc
PRELIMINARY ANNOUNCEMENT OF INTERIM RESULTS
The Directors announce the unaudited statement of results for the six months to
30 June 2005 as follows:-
STATEMENT OF TOTAL RETURN
(incorporating the revenue account* of the Company)
1 January 2005 13 November 2003
to 30 June 2005 to 30 June 2004
(restated**)
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains on investments - 2,594 2,594 - 1,643 1,643
Dividends and interest 552 - 552 390 - 390
Investment management fee (99) - (99) (90) - (90)
Other expenses (118) - (118) (141) - (141)
Net return before 335 2,594 2,929 159 1,643 1,802
taxation
Taxation on ordinary (50) - (50) (21) - (21)
activities
Return on ordinary 285 2,594 2,879 138 1,643 1,781
activities after
taxation
Dividend in respect of (91) - (91) - - -
Ordinary shares (note 3)
Transfer to reserves 194 2,594 2,788 138 1,643 1,781
Pence Pence Pence Pence Pence Pence
Return per Ordinary share 1.25 11.41 12.66 0.62 7.37 7.99
***
* The revenue column of this statement is the revenue account of the Company.
** For details of the restatement of the Company's comparative figures please
refer to the notes that accompany this announcement.
*** The revenue return per Ordinary share is based on earnings of £285,000 and
on 22,740,588 Ordinary shares being the weighted number of shares in issue
during the period 1 January 2005 to 30 June 2005.
The capital return per Ordinary shares is based on net capital gains of £
2,594,000 and on 22,740,588 Ordinary shares being the weighted number of shares
in issue during the period 1 January 2005 to 30 June 2005.
All revenue and capital items derive from continuing operations.
BALANCE SHEET
As at As at As at
30 June 2005 31 December 2004 30 June
2004
(restated*) (restated*)
£'000 £'000 £'000
Fixed Assets
Investments at fair value 29,406 25,389 22,067
Current assets
Debtors 151 60 68
Cash at bank 219 826 2,396
370 886 2,464
Creditors - amounts falling due 101 145 849
within one year
Net current assets 269 741 1,615
Total net assets 29,675 26,130 23,682
Capital and Reserves
Called up share capital 231 224 225
Capital redemption reserve 1 1 -
Share premium account 1,842 1,092 1,092
Special reserve 20,506 20,506 20,584
Capital reserve - realised 1,373 393 344
- unrealised 5,397 3,783 1,299
Revenue reserve 325 131 138
Total shareholders' funds 29,675 26,130 23,682
Pence Pence Pence
Net asset value per Ordinary share 128.65 116.41 105.14
including current period revenue
(note 2)
* For details of the restatement of the Company's comparative figures please
refer to the notes that accompany this announcement.
SUMMARISED STATEMENT OF CASH FLOWS
1 January 2005 13 November 2003
to 30 June 2005 to 30 June 2004
£'000 £'000
Net cash inflow from operating activities 195 195
Capital expenditure and financial
investment
Purchases of investments (6,494) (22,525)
Sales of investments 5,026 2,822
Net cash outflow from capital expenditure
and financial investment (1,468) (19,703)
Net cash outflow before financing (1,273) (19,508)
Equity dividends paid (note 3) (91) -
Financing
Proceeds of share issue net of issue 757 21,904
expenses
Net cash inflow from financing 757 21,904
(Decrease)/increase in cash (607) 2,396
Notes to this announcement:
The unaudited interim financial information does not constitute statutory
accounts. This information has been prepared on the basis of the accounting
policies used in the statutory accounts of the Company for the year ended 31
December 2004, with the exception of the changes stated below. The statutory
accounts for the year ended 31 December 2004 received an unqualified audit
opinion.
1. Changes in accounting policies
This Interim Report has been prepared using new accounting standards which have
been issued to begin the process of converging UK standards with International
Financial Reporting Standards ('IFRS'). The small effect on the Net Asset Value
of these changes is laid out in the table in note 2. The first change,
Financial Reporting Standard ('FRS ') 21, is to recognise any dividend payable
as a liability only after it has been declared, (a) in the table. The second,
FRS 25, is to value the portfolio at bid prices rather than at mid market
prices, (b) in the table.
With effect from 1 January 2005, the Company has adopted the following
Financial Reporting Standards :
FRS 21 Events after the balance sheet date
Dividends paid by the Company are accounted for in the period in which the
dividend has been declared. Previously, the Company recognised dividends in the
period in which net revenue, to which those dividends related, was accounted
for.
FRS 25 Financial Instruments: Disclosure and Presentation and FRS 26 Financial
instruments: Measurement
All investments held by the Company are classified as `fair value through
profit and loss'. 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.
Previously all listed investments were valued using closing mid market prices
at the balance sheet date.
2. Net asset value per share
The net asset value per Ordinary share is based on total net assets at 30 June
2005 of £29,675,000 (31 December 2004 £26,130,000, 30 June 2004 £23,682,000)
and on 23,065,339 Ordinary shares (31 December 2004 22,445,339, 30 June 2004
22,525,339) being the issued share capital at that date. These net asset values
have been calculated in accordance with the revised accounting policies set out
in note 1 and include current period revenue.
Reconciliation of changes to net asset values resulting from accounting policy
changes
30 June 2005 31 December 2004 30 June 2004
£'000 pence £'000 pence £'000 pence
Net asset value 29,708 128.80 26,077 116.18 23,719 105.30
(including current period
revenue )
Increase due to dividend - - 90 0.40 - -
accounting change (a)
Reduction due to using bid (33) (0.15) (37) (0.17) (37) (0.16)
prices (b)
Net assets per revised UK GAAP 29,675 128.65 26,130 116.41 23,682 105.14
3. Dividends paid
The Company issued 200,000 Ordinary shares on 9 February 2005 and a further
100,000 on 17 February 2005. These issues were prior to the record date for the
final dividend of the period ended 31 December 2004 and therefore were entitled
to receive that dividend. The total amount paid by the Company was £91,000, £
1,000 higher than the original accrual. See note 1 for details of the Company's
revised policy relating to dividends payable to shareholders.
4. Status of the Company
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.
Chairman's Statement
Investment Performance
This is the second Interim Report of your Company since it commenced operations
in December 2003 and it is pleasing to report another six months of excellent
performance. At the end of June 2005, the net asset value per share had risen
to 128.7p, a gain of 10.5 per cent over the year end figure, which is
fractionally greater than that reported in the Annual Report due to accounting
changes. For comparison, the FT World Index and the FT All-Share Index achieved
total return performances of 7.4 per cent and 8.2 per cent respectively in the
first half of 2005. The share price increased 18.3 per cent to 130.8p. The
substantially greater increase in the share price resulted from a change in the
level of the discount to net asset value. At the end of 2004, the shares were
quoted at a discount of 5 per cent to the net asset value. By the end of June,
this had become a premium of 1. 6 per cent.
As was stated in the annual report, it is your Board's intention 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 per share. Encouragingly,
the discount was eliminated without any shares being bought-in and, in fact, we
were able to place 620,000 new shares during the six months at a small premium
to net asset value.
Revenue Account
The revenue account shows a considerable improvement compared to the same
period last year. The revenue per share is 1.25p, compared to 0.62p in the
period to the end of June 2004. The improvement is the result of investing in a
number of higher yielding shares in the second half of last year. This was not
done with a view to improving the revenue account but is simply a consequence
of where our Investment Manager found the best value in individual shares.
The majority of the revenue is received in the first half of the year, so the
net revenue at the year end may be little different from the level in this
Interim Report. As was the case last year, your Board has not declared an
interim dividend but will wait until the year end, when the amount available
for distribution will be known, before proposing a dividend.
Investment Policy
Edinburgh Partners, our Investment Manager, is committed to a policy of
identifying undervalued shares in global markets. Good stock selection has
maintained its positive contribution to the investment performance in the six
months to the end of June. It was also noteworthy that stock markets have risen
even where economies have demonstrated weakness. The UK exemplified this
feature with a strong stock market performance despite poor performance in
sectors close to the consumer. The Manager continues its relative preference
for Japan, Europe and the UK, because it finds better value in these markets.
Europe, in particular, has afforded several opportunities to invest in
undervalued stocks and these have provided much of the good performance.
Our Manager was cautious of valuations in the American market and Wall Street
proved to be one of the poorer performers in the half year. That caution
generally remains and the Federal Reserve has clearly flagged the need to keep
raising short term interest rates to head off the risk of inflation. Some
segments of the U.S. stock market remain overvalued but exposure may be changed
to reflect the emergence of better value in some American stocks. Within Europe
our Manager continues to find value in corporate restructuring and in the
involvement of companies in Central and Eastern Europe.
Outlook
Equity markets have now been recovering for over two years and that in itself
might be cause to take a more cautious view of the outlook. Also, there have
been signs of a slower rate of growth in economic activity in a number of
countries, no doubt partly caused by the rise in the oil price, which remains
at a high level, as well as the distressing increase in terrorist activity.
There are, however, a number of positive factors, including the relatively
subdued level of inflation, long term interest rates trending lower and the
likelihood that short term interest rates in the UK and elsewhere, with the
probable exception of the United States, have peaked.
The lower long term interest rates are particularly encouraging as this
increases the attractiveness of equities relative to bonds. On balance, we
continue to believe that there remain opportunities to make money in equity
markets.
Teddy Tulloch
Chairman
18 August 2005
Enquiries:
Kenneth Greig
Edinburgh Partners
Telephone: 0131 272 2701
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