Half-yearly Report
EP GLOBAL OPPORTUNITIES TRUST PLC
HALF YEARLY REPORT
30 June 2009
The Directors announce the unaudited Half Yearly Report for the period from 1
January 2009 to 30 June 2009 as follows:-
Copies of the Half Yearly Report can be obtained from the following websites:
www.epgot.com and www.edinburghpartners.com.
FINANCIAL SUMMARY
30June2009 31 December 2008 Change
Shareholders' funds £41,256,000 £46,353,000 (11.0)%
Net asset value per ordinary 138.3p 150.4p (8.0)%
share ("NAV")
Share price per ordinary 135.5p 132.5p 2.3%
share
Discount to NAV 2.0% 11.9%
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 stockmarket 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, and 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.
CHAIRMAN'S STATEMENT
Investment performance
Our net asset value per share at the end of June 2009 was 138.3p, and the total
return for the six months from the end of 2008 was minus 6.1 per cent. This
compares with a total return for the FTSE All-World Index of minus 3.9 per
cent, while the FTSE All-Share Index total return was plus 0.8 per cent.
The downward trend in world stock markets in 2008 continued into the opening
months of 2009 as the fear of the recession developing into a full blown
depression gathered force. Governments took increasingly dramatic action in an
attempt to halt the economic slide. Banks were bailed out, interest rates
slashed to virtually zero and emergency stimulative packages introduced.
Finally, some countries, in particular the UK and the USA, introduced a policy
of "quantitative easing", buying in their own government debt and printing the
money to do so.
Equity markets began to recover from their low points in early March 2009 as
the fear of an economic collapse decreased. The most marked recovery in share
prices in developed markets took place where concerns had been greatest, most
notably in the banks and heavily indebted cyclical companies where our
portfolio was under represented. This was the reason why our investment
performance was slightly behind the performance of the FTSE All-World Index for
the six month period. As a result, we gave back a part of the outperformance
achieved in 2008.
Despite the underperformance by the portfolio, the share price gained 2.3 per
cent to 135.5p. The discount to net asset value per share narrowed from 11.9
per cent at the end of the year to 2.0 per cent at the end of June. Your Board
has been concerned that, at times, the discount at which the Company's shares
have traded relative to the net asset value per share has been unsatisfactory.
We have, therefore, implemented a stricter approach to monitoring the level of
any discount and to the buying in of shares with a view to maintaining the
share price at close to the net asset value per share. In the first six months
of 2009, we bought in 996,000 shares.
Investment portfolio
Our defensive investment policy during 2008 limited the damage we suffered in
what was a particularly disappointing year for equity investment. Our
Investment Manager's concern about the economic outlook and view that stock
market valuations of many companies were excessive relative to their prospects
led to an emphasis on healthcare and telecommunications companies, as well as a
higher than usual level of cash. As the markets fell, more attractive
valuations began to appear in other sectors with better growth prospects. In
the second half of 2008 we began to reinvest the cash reserves, taking
advantage of these opportunities. For this reason the exposure to Asian and to
technology companies showed a marked increase. The move into these companies
reflected the increase in their attractiveness caused by prior share price
falls. The consequence of this portfolio shift was to reduce substantially the
defensive orientation of the portfolio. This continued through early 2009 and
we further reduced our investment in healthcare and telecommunications, using
the proceeds to increase the technology exposure. By the end of June, this
evolution of the portfolio had slowed substantially as the recovery in share
prices had largely removed the relative attractiveness between different
sectors.
Revenue account
After four years of rapidly rising revenues per share, the figure for the first
six months of 2009 shows a decline of 41.4 per cent to 1.7p per share, compared
to the same period last year. Since our first year in 2004, our Investment
Manager has consistently been moving the portfolio towards higher yielding
shares as a consequence of where the better investment values have appeared to
be. This trend to higher revenues was further increased last year by the
defensive orientation of the portfolio, including, for part of the year,
holding a substantially greater level of cash than normal. Investing the cash
and moving to less defensive shares with lower yields has been the main cause
of the decline in revenues, while dividend reductions, especially by the banks,
have also contributed.
Our investment policy is based on value. When our Investment Manager perceives
there to be better value in lower yielding shares, as has been the case in the
first half of 2009, we would rather reduce our own dividend than compromise the
investment philosophy. We believe this will produce a better total return over
the longer term.
Outlook
The dramatic fiscal and monetary reflationary stance adopted by governments
worldwide has led to a more optimistic view of the global economic outlook and
this has led to the rally in share prices. Bull markets normally climb a wall
of worry. As the worries gradually disappear, so share prices can rise further.
There certainly still seems to be plenty to worry about. In particular, the
cost of the stimulative packages put in place by some countries and the likely
ongoing structural deficit in their finances look to be unsustainable. The UK
is a particular example of this. In due course, the size of deficit between tax
income and expenditures will have to be addressed by increasing taxation and/or
cutting government spending. The effect this will eventually have on economic
activity makes us now more cautious on markets after the rapid gains seen since
early March.
Teddy Tulloch
Chairman
21 August 2009
DISTRIBUTION OF INVESTMENTS
as at 30 June 2009 (% of net assets)
Sector distribution
%
Financials 23.8
Technology 23.7
Telecommunications 13.7
Healthcare 8.6
Oil & Gas 6.6
Consumer Goods 4.8
Consumer Services 4.4
Industrials 3.8
Utilities 2.8
Unlisted 2.7
Media 2.1
Cash and other net assets* 3.0
100.0
Geographical distribution
%
Europe 37.3
United States 27.0
United Kingdom 14.6
Asia Pacific 13.5
Japan 4.6
Cash and other net assets* 3.0
100.0
* Cash and other net assets includes foreign currency balances of £309,000
(0.7%).
The figures detailed in the geographical distribution represent the Company's
equity exposure to these countries or regional areas.
PORTFOLIO OF INVESTMENTS
as at 30 June 2009
% of
Company Sector Country Valuation Net Assets
£'000
Equity investments
Cisco Systems Technology USA 1,777 4.3
Nokia Technology Finland 1,645 4.0
Sanofi-Aventis Healthcare France 1,496 3.6
Gazprom Oil & Gas Russia 1,387 3.4
Vodafone Telecommunications UK 1,348 3.3
ENI Oil & Gas Italy 1,327 3.2
Baidu.com Technology China 1,279 3.1
Belgacom Telecommunications Belgium 1,276 3.1
Dell Technology USA 1,251 3.0
Sun Hung Kai Property Financials Hong Kong 1,202 2.9
E.ON Utilities Germany 1,159 2.8
Samsung Electronic Technology Korea 1,124 2.7
Bank of America Financials USA 1,124 2.7
HSBC Financials UK 1,111 2.7
Edinburgh Partners Financials UK 1,100 2.7
(unlisted)
TeliaSonera Telecommunications Sweden 1,092 2.7
Aviva Financials UK 1,086 2.6
China Mobile Telecommunications China 1,082 2.6
GlaxoSmithKline Healthcare UK 1,035 2.5
Novartis Healthcare Switzerland 1,032 2.5
Total - 20 largest e 24,933 60.4
quity investments
Other equity 15,081 36.6
investments
Total equity i 40,014 97.0
nvestments
Cash and other net a 1,242 3.0
ssets
Net assets 41,256 100.0
INTERIM MANAGEMENT REPORT AND RESPONSIBILITY STATEMENT
Interim Management Report
The important events that have occurred during the period under review are set
out in the Chairman's Statement. The key factors influencing the financial
statements are also set out in the Chairman's Statement.
The principal risks and uncertainties for the remaining six months of the
financial year are reviewed in the Outlook section of the Chairman's Statement
detailed above and in the Risk Factors detailed below.
Edinburgh Partners Limited, as Investment Manager of the Company, is considered
to be a related party by virtue of its management contract with the Company.
During the six months to 30 June 2009, services with a total value of £181,000
(six months to 30 June 2008: £205,000; year to 31 December 2008: £394,000) were
purchased by the Company from Edinburgh Partners Limited. At 30 June 2009, the
amount due to Edinburgh Partners Limited, included within creditors, was £
93,000 (30 June 2008: £103,000; 31 December 2008: £90,000).
Responsibility Statement
The Directors confirm that to the best of their knowledge:
- the condensed set of financial statements, prepared in accordance with the
Statement on Half Yearly Financial Reports issued by the UK Accounting
Standards Board, give a true and fair view of the assets, liabilities,
financial position and loss of the Company;
- the interim management report includes a fair review of the information
required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of
important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial statements;
and a description of the principal risks and uncertainties for the remaining
six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the Company during that period; and any changes in the related
party transactions described in the last annual report that could do so.
This Half Yearly Report was approved by the Board of Directors on 21 August
2009 and the above responsibility statement was signed on its behalf by Teddy
Tulloch, Chairman.
INCOME STATEMENT (UNAUDITED)
for the six months to 30 June 2009
Six months to 30 Six months to 30 Year to 31
June 2009 June 2008 December 2008
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Losses on 3 - (3,217) (3,217) - (8,091) (8,091) - (10,444) (10,444)
investments
at fair
value
through
profit or
loss
Foreign - (163) (163) - 130 130 - 1,027 1,027
exchange
(losses)/
gains on
capital
items
Income 2 956 - 956 1,432 - 1,432 2,067 - 2,067
Investment (146) - (146) (171) - (171) (325) - (325)
management
fee
Other (126) - (126) (132) - (132) (239) - (239)
expenses
Net return 684 (3,380) (2,696) 1,129 (7,961) (6,832) 1,503 (9,417) (7,914)
before
finance
costs and
taxation
Finance
costs
Interest (1) - (1) - - - (3) - (3)
payable and
similar
charges
Net return 683 (3,380) (2,697) 1,129 (7,961) (6,832) 1,500 (9,417) (7,917)
before
taxation
Taxation 4 (151) - (151) (203) - (203) (275) - (275)
Net return 532 (3,380) (2,848) 926 (7,961) (7,035) 1,225 (9,417) (8,192)
after
taxation
pence pence pence pence pence pence pence pence pence
Return per 5 1.7 (11.0) (9.3) 2.9 (24.7) (21.8) 3.9 (29.7) (25.8)
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 in accordance with
guidance issued 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.
BALANCE SHEET (UNAUDITED)
as at 30 June 2009
30 June 30 June 31 December
2009 2008 2008
Restated*
Note £'000 £'000 £'000
Fixed asset investments
Investments at fair value through 40,014 43,578 43,935
profit or loss
Current assets
Debtors 260 299 251
Cash at bank and short-term 1,290 5,539 2,734
deposits
1,550 5,838 2,985
Current liabilities
Creditors - amounts falling due 308 211 567
within one year
Net current assets 1,242 5,627 2,418
Net assets 41,256 49,205 46,353
Capital and reserves
Called-up share capital 332 340 340
Capital redemption reserve 9 1 1
Share premium account 17,991 17,991 17,991
Special reserve 14,493 17,490 15,795
Capital reserve 7,320 12,157 10,701
Revenue reserve 1,111 1,226 1,525
Total Shareholders' funds 41,256 49,205 46,353
pence pence pence
Net asset value per ordinary share 6 138.3 153.5 150.4
* The special reserve is now shown net of the cost of own shares held in
treasury in accordance with the AIC Statement of Recommended Practice issued in
January 2009.
STATEMENT OF CASH FLOW (UNAUDITED)
for the six months to 30 June 2009
Six months to Six months to Year to
30 June 2009 30 June 2008 31 December
2008
Note £'000 £'000 £'000
Operating activities
Investment income 859 1,405 1,863
received
Bank deposit interest - - 1
received
Investment management (143) (183) (350)
fees paid
Secretarial fees paid (35) (34) (69)
Other cash payments (41) (265) (60)
Net cash inflow from 7 640 923 1,385
operating activities
Serving of finance (1) - (3)
Taxation
Income tax paid (85) (182) (249)
Capital expenditure and
financial investment
Purchases of investments (8,436) (8,316) (20,864)
Sales of investments 8,916 10,599 20,664
Exchange (losses)/gains (19) 18 157
on settlement
Net cash inflow/(outflow) 461 2,301 (43)
from investing activities
Net cash inflow before 1,015 3,042 1,090
equity dividend paid and
financing
Equity dividend paid (946) (743) (743)
Financing
Ordinary shares purchased (1,282) (803) (2,498)
Net cash outflow from (1,282) (803) (2,498)
financing
(Decrease)/increase in (1,213) 1,496 (2,151)
cash
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (UNAUDITED)
for the six months to 30 June 2009
Six months to Six months to Year to
30 June 2009 30 June 2008 31 December
2008
£'000 £'000 £'000
Opening Shareholders' funds 46,353 57,705 57,705
Net return after taxation (2,848) (7,035) (8,192)
Dividends paid (946) (743) (743)
Share purchase costs (1,303) (722) (2,417)
Closing Shareholders' funds 41,256 49,205 46,353
NOTES TO THE FINANCIAL STATEMENTS
For the six months to 30 June 2009
1. Accounting policies
a) Accounting convention
The financial statements are prepared in accordance with the Accounting
Standard Board's ("ASB") Statement on Half Yearly Financial Reports, 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.
b) Financial information
The financial information contained in this report does not constitute full
statutory accounts as defined in Section 434 of the Companies Act 2006. The
financial information for the six months to 30 June 2009 and 30 June 2008 has
not been audited or reviewed by the Company's Auditors.
The information for the year ended 31 December 2008 has been extracted from the
latest published audited annual report and financial statements, which have
been filed with the Registrar of Companies. The report of the Auditors on those
financial statements contained no qualification or statement under Sections 237
(2) or (3) of the Companies Act 1985.
The financial statements are prepared on the basis of the accounting policies
set out in note 1 of the audited annual report and financial statements for the
year ended 31 December 2008.
2. Income
Six months to Six months to Year to
30 June 2009 30 June 2008 31 December 2008
£'000 £'000 £'000
Income from
investments:
UK net dividend income 141 213 317
Overseas dividends 809 1,079 1,528
Fixed interest - 89 132
Deposit funds 6 51 89
956 1,432 2,066
Other income:
Bank interest - - 1
956 1,432 2,067
Total income comprises:
Dividends 956 1,343 1,934
Interest - 89 133
956 1,432 2,067
3. Losses on investments
Six months to Six months to Year to
30 June 2009 30 June 2008 31 December 2008
£'000 £'000 £'000
Realised losses on (1,493) (875) (2,616)
sales
Changes in fair value (1,724) (7,216) (7,828)
of investments
(3,217) (8,091) (10,444)
4. Taxation
The taxation charge for the six months to 30 June 2009 is £151,000 (six months
to 30 June 2008: £203,000; year to 31 December 2008: £275,000).
The taxation charge comprises a corporation tax charge for the six months to 30
June 2009 of £55,000 (six months to 30 June 2008: £65,000; year to 31 December
2008: £104,000) and irrecoverable withholding tax suffered of £96,000 (six
months to 30 June 2008: £138,000; year to 31 December 2008: £171,000).
5. Return per ordinary share
Six months to Six months to Year to
30 June 2009 30 June 2008 31 December 2008
Net Per Net Per Net Per
return share return share return share
£'000 pence £'000 pence £'000 pence
Revenue return after 532 1.7 926 2.9 1,225 3.9
taxation
Capital return after (3,380) (11.0) (7,961) (24.7) (9,417) (29.7)
taxation
Total return (2,848) (9.3) (7,035) (21.8) (8,192) (25.8)
The returns per share for the six months to 30 June 2009 are based on
30,520,619 shares (six months to 30 June 2008: 32,287,741 shares; year to 31
December 2008: 31,758,186 shares) being the weighted average number of ordinary
shares, excluding shares held in treasury, in issue during the period.
6. Net asset value per ordinary share
The net asset value per ordinary share is based on net assets at 30 June 2009
of £41,256,000 (30 June 2008: £49,205,000; 31 December 2008: £46,353,000) and
on 29,828,180 ordinary shares (30 June 2008: 32,053,180; 31 December 2008:
30,824,180) being the number of ordinary shares, excluding shares held in
treasury, at the period end. Net asset values calculated include current period
revenue.
7. Reconciliation of net return before finance costs and taxation to net cash i
nflow from operating activities
Six months to Six months to Year to
30 June 2009 30 June 2008 31 December 2008
£'000 £'000 £'000
Net return before finance (2,696) (6,832) (7,914)
costs and taxation
Net losses on capital 3,380 7,961 9,417
items
Decrease in creditors (24) (172) (165)
(Increase)/decrease in (20) (34) 47
debtors and accrued income
Net cash inflow from 640 923 1,385
operating activities
SHAREHOLDER INFORMATION
Investing in the Company
The Company's ordinary shares are traded on the London Stock Exchange. You can
buy or sell shares through your stockbroker, bank or other professional
investment adviser. Shares in the Company may also be bought and held in an ISA
or Share Plan through the Edinburgh Partners Investment Trust Savings Scheme.
Further information is available on the Company's website: www.epgot.com or on
the Edinburgh Partners' website: www.edinburghpartners.com or by telephone on
0845 850 0181.
Frequency of net asset value ("NAV") publication
The Company's ordinary share net asset value is released weekly to the London
Stock Exchange and published on the Company's website: www.epgot.com and the
Edinburgh Partners' website: www.edinburghpartners.com.
Share price and sources of other information
The Company's ordinary share price is quoted daily in the Financial Times under
"Investment Companies". Previous day closing price, weekly net asset value and
other portfolio information is published on the Company's website:
www.epgot.com and on Edinburgh Partners' website: www.edinburghpartners.com.
Other useful information on investment trusts, such as prices, net asset values
and company announcements, can be found on the websites of the London Stock
Exchange: www.londonstockexchange.com and the Association of Investment
Companies ("AIC"): www.theaic.co.uk.
Share register enquiries
The register for the ordinary shares is maintained by Computershare Investor
Services PLC. In the event of queries regarding your holding, please contact
the Registrar on 0870 889 4069 or email web.queries@computershare.co.uk.
Changes of name and/or address must be notified in writing to the Registrar, at
the address below.
Key dates
Company's year end 31 December
Annual results announced February
Annual General Meeting April
Annual dividend paid May
Company's half year end 30 June
Half yearly results August
announced
In accordance with the Disclosure and Transparency Rules, the Company will be
releasing Interim Management Statements ("IMS") for the quarters ending 31
March and 30 September. These will be released to the London Stock Exchange and
may be viewed on the Company's website.
This document is not a recommendation, offer or invitation to buy, sell or hold
ordinary shares of the Company. If you wish to deal in the ordinary shares of
the Company, you may wish to contact an authorised professional investment
adviser.
RISK FACTORS
An investment in the Company should be regarded as long term and is only
suitable for investors who are capable of evaluating the risks and merits of
such investment and who have sufficient resources to bear any loss which might
result from such investment.
The market value of, and the income derived from, the ordinary shares can
fluctuate. The Company's share price may go down as well as up. Past
performance is not a guide to future performance. There is no guarantee that
the market price of the ordinary shares will fully reflect their underlying net
asset value. Fluctuations in exchange rates will affect the value of overseas
investments held by the Company. Investors may not get back the full value of
their investment. There can be no guarantee that the investment objective of
the Company will be met. The levels of, and reliefs from, taxation may change.
The principal risks facing EP Global Opportunities Trust relating to its
investment activities were set out in detail in the annual report for the year
ended 31 December 2008, with an explanation of the risks and how they are
managed detailed in note 21 and continue to be as set out in that report. These
risks are investment and strategy risk, discount volatility risk, market risk,
liquidity risk, credit risk, interest rate risk, foreign currency risk, gearing
risk, regulatory risk, operational risk and financial risk. In particular, it
should be noted that the Company does not have any benchmark. The Investment
Manager is free to invest in securities on a global basis which it considers to
be undervalued on an absolute basis. This policy is designed to permit the
Investment Manager a large degree of freedom in share selection and as such
investment results are dependent on the success or failure of the Investment
Manager in correctly identifying undervalued securities.
This Half Yearly Report contains "forward looking statements" with respect to
the Company's plans and its current goals and expectations relating to its
future financial condition, performance and results. By their nature, all
forward looking statements involve risk and uncertainty because they relate to
future events that are beyond the Company's control. As a result, the Company's
actual future financial condition, performance and results may differ
materially from the plans, goals and expectations set forth in the Company's
forward looking statements. The Company undertakes no obligation to update the
forward looking statements contained within this Half Yearly Report or any
other forward looking statements it makes.
The Company is a public company. It is registered in Scotland and its shares
are listed on the London Stock Exchange. The Company is not regulated or
authorised by the Financial Services Authority.
Employees of Edinburgh Partners Limited may (subject to applicable laws and
regulations) hold shares in the Company and may buy, sell or offer to deal in
the Company's shares from time to time.
DIRECTORS AND ADVISERS
Directors (all non-executive) Teddy Tulloch (Chairman)
Richard Burns
David Hough
Ian McBean
Secretary and Registered Kenneth J Greig
Office
12 Charlotte Square
Edinburgh EH2 4DJ
Investment Manager Edinburgh Partners Limited
12 Charlotte Square
Edinburgh EH2 4DJ
Auditors Ernst & Young LLP
Ten George Street
Edinburgh EH2 2DZ
Registrar and Transfer Office Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZY
Marketing Adviser G&N Collective Funds Services Limited
14 Alva Street
Edinburgh EH2 4QG
Solicitor and Sponsor Dickson Minto W.S.
16 Charlotte Square
Edinburgh EH2 4DF
Bankers and Custodian The Bank of New York Mellon
One Canada Square
Canary Wharf
London E14 5AL
Registered in ScotlandNo. 259207
An investment company as defined under Section 833of the Companies Act 2006
Enquiries:
Sandy Nairn
Kenneth Greig
Edinburgh Partners
Telephone: 0131 270 3800
21 August 2009
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