EPG.L Regulatory News (EPG)

28 Feb 2006 17:13

EP GLOBAL OPPORTUNITIES TRUST plc28 February 2006PRELIMINARY ANNOUNCEMENT OF ANNUAL RESULTSHIGHLIGHTS* The Company's net asset value per Ordinary share increased by 34.2 per centto 156.2p* Share price increased 39.8 per cent to 154.5p, ending the year at a discountto net asset value slightly over one per cent, compared to approximately 5 percent at the end of 2004* The Board is recommending a doubling of the final dividend to 0.8p perOrdinary share, payable on 5 May 2006. The ex-dividend date will be 5 April2006 and the record date will be 7 April 2006* In November 2005 the Company issued 10,181,930 new Ordinary Shares at a priceof 151.5p via a placing and offer for subscription* During the year, the Board also exercised its powers to issue new shares at apremium to net asset value, resulting in a further increase of over 800,000 newshares in issue* At 31 December 2005 shareholders' funds had increased to ‚£52.2 million from ‚£26.1 million at the end of the previous year* The second annual general meeting of the Company will be held on 19 April2006The Directors announce the annual results for the year from 1 January 2005 to31 December 2005, which were approved by the Directors on 28 February 2006, asfollows:-INCOME STATEMENT (UNAUDITED) 1 January 2005 to 13 November 2003 to 31 December 2005 31 December 2004 (restated)* Revenue Capital Total Revenue Capital Total ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Gains on - 9,906 9,906 - 4,237 4,237 investments Foreign exchange - (94) (94) - (61) (61)losses on capital items Dividends and 824 - 824 571 - 571 interest Investment (241) - (241) (173) - (173)management fee Other expenses (242) - (242) (230) - (230) Net return before 341 9,812 10,153 168 4,176 4,344 taxation Taxation (68) - (68) (37) - (37) Return after 273 9,812 10,085 131 4,176 4,307 taxation Return per Ordinary 1.13p 40.57p 41.70p 0.59p 18.67p 19.26p share ** * For details of the restatement of the Company's comparative figures pleaserefer to the notes that accompany this announcement.** The revenue return per Ordinary share is based on earnings of ‚£273,000(2004: ‚£131,000) and on 24,186,688 (2004: 22,365,329) Ordinary shares being theweighted average number of Ordinary shares in issue during the period. Thecapital return per Ordinary share is based on net capital gains of ‚£9,812,000(2004: ‚£4,176,000) and on 24,186,688 (2004: 22,365,329)Ordinary shares beingthe weighted average number of Ordinary shares in issue during the period.All revenue and capital items derive from continuing operations.The total column of this statement is the profit and loss account of theCompany.A separate Statement of Recognised Gains and Losses has not been prepared asall such gains and losses are included in the Income Statement.BALANCE SHEET (UNAUDITED) As at As at 31 December 2005 31 December 2004 (restated)* ‚£'000 ‚£'000 Fixed assets Investments 49,812 25,389 Current assets Debtors 112 60 Cash at bank 2,479 826 2,591 886 Creditors - amounts falling due within one 162 145 year Net current assets 2,429 741 Total net assets 52,241 26,130 Capital and reserves Called up share capital 334 224 Capital redemption reserve 1 1 Share premium account 17,099 1,092 Special reserve 20,506 20,506 Capital reserve - realised 5,439 393 - unrealised 8,549 3,783 Revenue reserve 313 131 Total Shareholders' funds 52,241 26,130 Net asset value per Ordinary share 156.2p 116.4p * For details of the restatement of the Company's comparative figures pleaserefer to the notes that accompany this announcement.RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (UNAUDITED) Note I January 2005 13 November 2003 to 31 December to 31 December 2005 2004 ‚£'000 ‚£'000 Opening shareholders' funds (as 26,077 - originally stated) Restatements 2 53 - Opening shareholders' funds 26,130 - (restated) Issue of shares 110 225 Premium on issue of shares 16,350 22,322 Expenses of share issue (343) (646) Net gains on realisation of 2,858 454investments Unrealised appreciation on 7,048 3,783investments Exchanges losses on capital items (94) (61) Purchase of shares for cancellation - (78) Net revenue return after taxation 273 131for the year Dividends paid and declared 3 (91) - Closing shareholders' funds 52,241 26,130SUMMARISED STATEMENT OF CASH FLOW (UNAUDITED) 1 January 2005 13 November 2003 to 31 December 2005 to 31 December 2004 ‚£'000 ‚£'000 Net cash inflow from operating 278 153 activities Investing activities Purchases of investments (32,538) (26,503) Sales of investments 17,975 5,414 Exchange losses on settlement (94) (61) Net cash outflow from investing (14,657) (21,150)activities Net cash outflow before financing (14,379) (20,997) Financing Proceeds of share issues 16,460 22,547 Expenses of share issues (337) (646) Purchase of shares for cancellation - (78) Equity dividends paid (91) - Net cash inflow from financing 16,032 21,823 Increase in cash 1,653 826 Notes to this announcement:The above financial information does not constitute statutory financialstatements as defined in Section 240 of the Companies Act 1985. Thisinformation has been prepared on the basis of the accounting policies used inthe statutory accounts of the Company for the year ended 31 December 2004, withthe exception of the changes stated below. The statutory accounts for the yearended 31 December 2004 received an unqualified audit opinion.The Company has adopted the Statement of Recommended Practice revised December2005 regarding the Financial Statements of Investment Trust Companies.The results for the year ended 31 December 2005 will be circulated toshareholders in the form of an Annual Report, copies of which will be availableat the Company's registered office, and which will be filed with the Registrarof Companies.1. Changes in accounting policiesThese Financial Statements have been prepared using new accounting standardswhich have been issued to converge UK accounting standards with InternationalFinancial Reporting Standards ('IFRS'). The small effect on the net asset valueof these changes is laid out in the table in note 2. The first change,Financial Reporting Standard ('FRS ') 21, is to recognise any dividend payableas a liability only after it has been declared, (a) in the table in note 2. Thesecond, FRS 26, is to value the portfolio of investments at bid prices ratherthan at mid market prices, (b) in the table in note 2.2. Net asset value per shareThe net asset value per Ordinary share is based on total net assets at 31December 2005 of ‚£52,241,000 (2004: ‚£26,130,000) and on 33,444,010 Ordinaryshares (2004: 22,445,339) being the issued share capital at that date. Thesenet asset values have been calculated in accordance with the revised accountingpolicies set out in note 1 and include current period revenue.Reconciliation of changes to net asset values resulting from accounting policychanges: 31 December 2004 ‚£'000 pence Net asset value as originally stated 26,077 116.2 Increase due to dividend accounting change 90 0.4(a) Reduction due to using bid prices (b) (37) (0.2) Net assets per revised UK GAAP 26,130 116.43. Dividends paidThe Company issued a total of 300,000 Ordinary shares prior to the record datefor the final dividend for the period ended 31 December 2004 and thereforethese shareholders were entitled to receive that dividend. The total amountpaid by the Company was ‚£1,000 higher than the original proposed dividend of ‚£90,000. See note 1 for details of the Company's revised policy relating todividends payable to shareholders.4. Status of the CompanyIt is the intention of the Directors to conduct the affairs of the Company sothat they satisfy the conditions for approval as an investment trust companyset out in Section 842 of the Income and Corporations Taxes Act 1988.Chairman's StatementResultsThis is the second Annual Report of EP Global Opportunities Trust and it ispleasing to be able to report another year of excellent performance, indeed aneven better performance than was achieved in the first year. The net assetvalue per share increased by 34.2 per cent to 156.2p at the end of December2005 from an adjusted 116.4p at the end of the previous year. The net assetvalue per share for the end of 2004 was adjusted due to accounting changes.These changes are a requirement to comply with new accounting standards.The share price increased by 39.8 per cent to 154.5p. The greater percentageincrease in the share price resulted in it ending the year at a smallerdiscount to the net asset value per share than it had been at the end of 2004.The discount at the end of 2005 was slightly over one per cent while, at theend of 2004, the shares were quoted at a discount of approximately five percent and at various times during the year the shares stood at a small premiumto net asset value.Investment performanceIt was a good year for equity investment. The FT All-Share Index gained 18.1per cent in 2005 (total return 22.0 per cent), while the FT All-World Index wasup 22.2 per cent (total return 24.9 per cent). The Company does not have abenchmark based on these indices. They are mentioned for comparison purposesonly.It is an important feature of the Company that it does not have any benchmark.This permits Edinburgh Partners, our investment manager, the freedom to investin those shares that in its view offer the best value, without any concern forthe composition of an index. In 2005, this led to a portfolio with geographicalweightings very different from those of the FT All-World Index.The investment policy led to an emphasis on shares in Japan and Europe combinedwith only a small investment in the United States. This proved very beneficial.The best performing of the major equity markets was Japan, where the TopixIndex rose 39.3 per cent, while the FT Europe ex UK Index gained 20.6 per cent,both in sterling terms. The poorest performing major market, for the secondyear running, was the US stock market, where the S & P Composite Index,measured in dollars, was up only 3.0 per cent. However, one of the features offinancial markets in 2005 was the strength of the US dollar. After decliningsteadily for three years, the dollar rallied in 2005. As a result, whenconverted into sterling, the S & P Composite Index was up 15.2 per cent. Thiswas still the poorest performing major market but the 15 per cent capitalreturn demonstrates what an excellent year it was for equities generally.Share price and discountThe share price at the end of 2005 was at a level of approximately one per centbelow the net asset value per share. It is your Board's intention to buy-inshares in the open market and to issue shares to limit, as far as possible, thedivergence of the share price from the net asset value per share. During theyear, 816,741 new shares were issued in addition to the November share issuedescribed below. A further 175,000 new shares have been issued since the end ofthe year. The new shares were only issued when demand was such that they couldbe issued at a small premium to the net asset value. It is also the Company'spolicy to buy in shares if, in the Board's opinion, there is an excess supplyof shares in the market place and such purchases would not dilute the net assetvalue per share of the remaining ordinary shares. No shares were bought-in in2005. The current authority for the Company to make market purchases of itsordinary shares expires at the conclusion of this year's annual generalmeeting. A special resolution will be proposed at the annual general meeting torenew the authority.Share issueIn November, we issued a prospectus for a placing and offer of new shares.Applications were received for 10,181,930 shares and this number of new shareswas duly issued. This increased the number of shares in issue to 33,444,010.The new shares were priced at a three per cent premium to the net asset value.This premium was used to pay the expenses of the issue, which included feespaid to the placing agent and the sponsor of the issue. The small surplus thatremained ensured that the issue of new shares did not dilute the asset value ofthe existing shares.The benefit of the new issue has been to increase the size of the Company. Atthe year end the total net assets were ‚£52.2 million. In the first two years,the small capitalisation of the Company has sometimes made it difficult forboth buyers and sellers to complete their orders at a reasonable price. Thelack of liquidity in the stock market for the shares resulted in the spreadbetween the bid and offer price quoted in the stock market being relativelylarge compared to many larger Trusts. Moreover, your Board was aware that anumber of Independent Financial Advisers were recommending the shares for theirclients but were frustrated by the size of the Company. In some cases theadvisers had reached the limit of the percentage of the Company that theirin-house rules permitted them to hold. Typically, advisers limit the percentagethat they will hold for all their clients to below 10 per cent; above thatlevel the reporting requirements become rather onerous.A further benefit of increasing the size of the Company is to reduce theexpense ratio. This is the annual cost of running the Company as a percentageof the total net assets. In the first year the expense ratio was 1.7 per cent.The expense ratio in 2005 was 1.5 per cent. Reducing the expense ratio is not aone-off benefit but is an ongoing benefit for each year in the future.DividendThe revenue account shows a considerable increase in income over the previousyear. Net revenue after tax more than doubled to ‚£273,000. This increase wasalmost entirely the result of investing in a number of higher yielding shares,rather than the result of the increase in the size of the Company in November.The greater number of shares at the year end does reduce the income per sharefor the year from what it would have been if there had been no share issue.However, existing shareholders were fully compensated for this in the pricethat the new shares were issued at, which included the amount of theaccumulated income at the time of the issue. Despite the greater number ofshares, the income per share is still greater than it was in 2004 and yourBoard is pleased to recommend a doubling of the annual dividend to 0.8p pershare. Subject to shareholders approval at the annual general meeting, thedividend will be paid on 5 May 2006.Option in Edinburgh PartnersAt its foundation your Company was given an option over 71,294 shares inEdinburgh Partners, our investment manager. No charge was made for this optionin recognition of the Company's support in becoming Edinburgh Partners' firstclient. The option has a five year life from December 2003, is exercisable at ‚£3 per share and if exercised would represent 1.8 per cent of the equity ofEdinburgh Partners.In order to calculate the net asset value per share for the November shareissue, your Board applied a value to the option of ‚£255,000, adding 1.1p pershare to the Company's net asset value prior to the November 2005 Placing andOffer of new shares. There is no hard and fast rule as to how to value theshares of an unquoted investment management company. However, it is generallyrecognised that a percentage of funds under management is one of the keyfactors. In deciding the value, the Board considered the financial position ofEdinburgh Partners, the level of funds under management, the type of fundsunder management and the growth rate in those funds under management.Edinburgh Partners has made excellent progress since its foundation in 2003. Bythe end of 2005, funds under management had increased six-fold during the yearto over ‚£300 million. In July, Edinburgh Partners was awarded the mandate for asecond investment trust, Anglo & Overseas plc, with assets of just under ‚£100million. With two strong years of performance, Edinburgh Partners isincreasingly being asked to make presentations for potential new fundmanagement contracts. It is important for your Company that our investmentmanager continues to thrive and its progress over the last twelve months hasbeen very reassuring.OutlookWhile we started the year with an optimistic view for 2005, the overall resultachieved was well ahead of expectations. It follows that shares in general aremore fully priced than they were a year ago. There is the usual list of thingsto be concerned about that could cause equities to give back some of the stronggains of the last three years; foremost amongst these is a further rise in theoil price. That said, the economic outlook does not look unduly threatening forequity valuations. Despite the higher oil price, inflation remains relativelysubdued and there appears to be less pressure for an increase in short terminterest rates, at least in the UK and US. The increase in rates in 2005provides room for the central banks to reduce rates again if economic growthfalters. Meanwhile, Asia is benefiting from the rapid growth being enjoyed byChina and India, coupled with an improvement in the Japanese economy after aprolonged period of poor economic performance. Overall, we approach 2006 with acautiously optimistic view of equity markets.Teddy TullochChairman28 February 2006Enquiries:Sandy Nairn}Kenneth Greig} Edinburgh Partners Limited, telephone: 0131 270 3800ENDEP GLOBAL OPPORTUNITIES TRUST PLC