EPG.L Regulatory News (EPG)

18 Feb 2005 10:43

EP GLOBAL OPPORTUNITIES TRUST plc18 February 2005PRELIMINARY ANNOUNCEMENT OF ANNUAL RESULTSHIGHLIGHTS * 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) forthe 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 commenceoperations 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 andon 22,365,329 Ordinary shares being the weighted average number of Ordinaryshares 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 numberof 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 policiesset out in the Listing Particulars, which have been delivered to the Registrarof Companies, and in accordance with applicable accounting standards and withthe Statement of Recommended Practice 2003 regarding the Financial Statementsof Investment Trust Companies.It 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.The above financial information does not constitute statutory financialstatements as defined in Section 240 of the Companies Act 1985.Chairman's StatementResultsI am delighted to report that your Company has had an excellent first year. Theperiod under review to 31 December 2004 is slightly over 12 months, as theTrust commenced operations on 15 December 2003. By the end of 2004, the netasset value per share had risen by 16.2 per cent from the initial issue priceto 116.2p. This is a particularly satisfactory result as, before moving intoprofitable territory, performance had to recover the initial launch costs ofthe Trust of 3p per share. So, while the initial issue price was 100p, theopening net asset value, after issue costs, was 97p and the increase in netasset value per share on this basis was almost 20 per cent.Investment PerformanceFor comparison purposes, the FT All-Share Index gained 9.2 per cent in calendar2004, while the FT World Index was up 6.0 per cent. This was the second year ofrecovery for world equity markets after the shake out that followed the end ofthe so-called "bubble" in equity markets that peaked in late 1999/early 2000.Virtually all equity markets enjoyed a profitable year, although the rate ofgain was more moderate than in 2003, the first year of recovery. The bestperformance came from some of the regional Asian markets and the FT Asia exJapan Index rose by 13.5 per cent. The poorest performing major market was theUS, 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 thefall in the value of the dollar. Indeed, the steady decline in the US dollarduring the year against the other major currencies was one of the main featuresof financial markets in 2004.While it is of interest to compare your Company's investment performance withthat of the major stockmarket indices, I should make it clear that EP GlobalOpportunities Trust does not have a benchmark. This is a fundamental policy ofthe Trust. Most investment trusts have a specific benchmark against which theirinvestment performance is measured. However, the Board does not wish yourinvestment manager, Edinburgh Partners, to be under any pressure, eitherdirectly or subconsciously, to weight the Trust's portfolio towards a specificgeographical or sector distribution, an almost inevitable consequence of abenchmark.The investment policy followed by Edinburgh Partners is based on investing incompanies in major global markets that Edinburgh Partners regard as beingclearly undervalued on an absolute basis. This is the policy that was laid outin the Prospectus. It is a policy that does not fit with any index-basedbenchmark and the Board wishes to ensure that your investment manager adheresto this policy.Share Price and DiscountThe share price at the year end was 110.5p. This was a discount to the netasset value per share of 4.9 per cent.Share prices of investment trusts are determined by the balance of supply anddemand for their shares. Your Board considers it a matter of importance thatthis balance should result in the shares of your Company trading at either avery small discount or at a premium to net asset value. Accordingly, weencourage demand for the shares by actively marketing them to potentialinvestors. In addition, during the year, approval was obtained for the Trust tobuy-in its own shares and a total of 80,000 shares were bought-in. As wasrequired 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 generalmeeting and a special resolution will be proposed at the annual general meetingto renew this authority. Until recently, companies that purchased their shareswere required to cancel them immediately. However, new regulations allowcompanies to hold up to 10% of their issued shares in treasury rather thancancel them. The special resolution will give the Directors the flexibility ofeither cancelling the purchased shares or holding them in treasury.Purchases of Ordinary shares will be made within guidelines established by theBoard but the Board will only exercise the authority if, in its opinion, itwould enhance the net asset value per share of the remaining Ordinary sharesand 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 toallot 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 theirexisting holdings. The Directors will only allot new shares or sell shares outof treasury if they believe it would be in the best interests of the Companyand 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, atotal of 1,083,259 were issued in three separate tranches during the period to31 December 2004. Since then, a further 300,000 shares have been issued. Eachof these issues was done at a premium to the net asset value and so added asmall amount of value for existing Shareholders.It is your Board's intention to use the powers to buy-in shares in the openmarket and to issue shares to limit, as far as possible, the divergence of theshare price and the net asset value, so that the performance of your Company'sassets is largely reflected in the share price performance.DividendThe revenue account shows that the after tax income for the period to 31December 2004 was 0.59p per share. The revenue account reflects a high initiallevel of cash, as the proceeds of the initial offering were invested graduallyover the first few months after the launch of the Trust. The Board is proposinga 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 generalmeeting, the dividend will be paid on 5 May 2005.If the income estimate for 2005 is achieved, it should be possible to at leastmaintain 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 duringthe year. Just as the Board does not wish the investment manager to berestricted by the imposition of a benchmark, so too it does not wish theinvestment policy to be restricted in any way by setting a target for the levelof income. The income derived from the portfolio will be as a consequence ofwhat shares Edinburgh Partners identifies as being undervalued.While the initial launch costs of the Trust were all charged to capital andwere written off, all the expenses of running the Trust have been charged tothe income account. We intend to continue to charge all running expenses to theincome account.Investment ManagerEdinburgh Partners is a new investment management company which was set up in2003 and your Trust was its first client. In order to provide the breadth andlevel of experience to manage a trust with a global mandate such as ours, asubstantial initial investment had to be made by Edinburgh Partners. It isimportant for the continued success of the Trust that Edinburgh Partners isalso 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 wasgranted to the Trust, at no cost, in recognition of the Trust's support inbecoming the first client. The option has a five-year life from December 2003and 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, hasenjoyed a successful 2004. All the funds it manages had a good investmentperformance in 2004 and funds under management doubled over the course of theyear.OutlookAfter two years of good performance, it would not be surprising for the majorstockmarkets, at least in terms of their indices, to have a more subdued yearin 2005. While China and India continue to provide the backbone for growth inAsia, the outlook for Western economies is more muted. UK short-term interestrates may have been raised far enough to halt the boom in house prices and mayalready be at or near their peak level. However, the Federal Reserve, in theUnited States, has made it clear that further increases in US interest ratesare to be expected. The effect of the higher level of energy costs and thehigher interest rates can be expected to lead to a slower rate of economicgrowth. While this may hold back stockmarkets, there remain many shares thatare priced on attractive valuations. 2005 is likely to be a year that favoursinvestors with the ability to recognise those companies whose share pricerepresents genuine value.Enquiries:Sandy Nairn}Kenneth Greig}Arthur Copple } Edinburgh Partners Limited, telephone: 0131 270 5570END