Regulatory Story
Go to market news section View chart   Print

Annual Financial Report

Released 07:00 15-Mar-2018

Annual Financial Report

EP GLOBAL OPPORTUNITIES TRUST PLC

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2017

The full Annual Report and Financial Statements can be accessed via the Company’s website at www.epgot.com or by contacting the Company Secretary by telephone on 0131 270 3800.

HIGHLIGHTS

FINANCIAL SUMMARY

Results for year 31 December 2017           31 December 2016  Change   

Shareholders’ funds

£148,818,000     

£143,757,000      

3.5%

Net asset value per ordinary share (“NAV”)1


337.7p   


300.2p    


12.5%

NAV total return1,2

14.4% 

26.9%   

Share price

320.0p   

292.0p    

9.2%

Share price discount to NAV1

5.2%  

2.4%   

Revenue return per ordinary share1

5.3p   

5.3p    

-   

Final dividend per ordinary share

5.3p³  

4.3p    

Special dividend per ordinary share

0.0p   

1.0p    

Total dividend per ordinary share

5.3p³  

5.3p    

-   

   

1 For definitions, see glossary in the full Annual Report and Financial Statements.
2 The NAV total returns are sourced from Edinburgh Partners and include dividends reinvested.
3 Proposed dividend for the year.

   

Year to     
31 December 2017     
Ordinary share     
Year to    
31 December 2016    
Ordinary share    
Year’s high/low
Share price - high 320.0p          293.0p   
- low 283.5p          205.8p   
NAV - high 338.1p          304.1p   
- low 299.4p          213.5p   
Share price discount to NAV
- low (7.8)%        (9.5)% 
- high (1.8)%        (0.4)% 
Cost of running the Company
Ongoing charges* 0.9%         1.0%  

   

* Based on total expenses, excluding finance costs, transaction costs and certain non-recurring items for the year as a percentage of the average monthly net asset value.

Past performance is not a guide to future performance.

 

PORTFOLIO OF INVESTMENTS
as at 31 December 2017


Company

Sector

Country

Valuation
£’000
% of
Net Assets
Equity investments
20 largest equity investments
Royal Dutch Shell A Oil & Gas Netherlands 6,555 4.4
Panasonic Consumer Goods Japan 5,446 3.7
Novartis Health Care Switzerland 5,194 3.5
AstraZeneca Health Care United Kingdom 4,610 3.1
Bank Mandiri Financials Indonesia 4,412 3.0
BP Oil & Gas United Kingdom 4,321 2.9
HSBC Financials United Kingdom 4,303 2.9
Commerzbank Financials Germany 4,276 2.9
Shanghai Fosun Pharmaceutical H Health Care China 4,197 2.8
Sumitomo Mitsui Financial Financials Japan 4,127 2.8
Sumitomo Mitsui Trust Financials Japan 4,040 2.7
Galaxy Entertainment Consumer Services Hong Kong 3,990 2.7
Tesco Consumer Services United Kingdom 3,940 2.6
Mitsubishi Industrials Japan 3,931 2.6
Synchrony Financial Financials United States 3,891 2.6
Ubisoft Entertainment Consumer Goods France 3,890 2.6
Bangkok Bank* Financials Thailand 3,863 2.6
Baidu Technology China 3,737 2.5
Roche** Health Care Switzerland 3,696 2.5
PostNL Industrials Netherlands 3,666 2.5

Total – 20 largest equity investments

86,085

57.9
Other equity investments
Credicorp Financials Peru 3,495 2.3
Edinburgh Partners Emerging
       Opportunities Fund Financials Other 3,474 2.3
BNP Paribas Financials France 3,426 2.3
Goodbaby International Consumer Goods China 3,316 2.2
Sanofi Health Care France 3,314 2.2
East Japan Railway Consumer Services Japan 3,273 2.2
Japan Tobacco Consumer Goods Japan 3,258 2.2
DNB Financials Norway 3,102 2.1
Apache Oil & Gas United States 3,070 2.1
Nomura Financials Japan 3,052 2.1
Bayer Basic Materials Germany 3,050 2.1
Celgene Health Care United States 3,005 2.0
Total Oil & Gas France 2,944 2.0
Swire Pacific A Industrials Hong Kong 2,763 1.9
CK Hutchison Industrials Hong Kong 2,748 1.8
Telefonica Telecommunications Spain 2,528 1.7
Nokia Technology Finland 2,357 1.6
Whirlpool Consumer Goods United States 2,304 1.5
Alps Electric Industrials Japan 2,141 1.4
Edinburgh Partners Financials - unlisted United Kingdom 1,782 1.2
Gemalto Technology Netherlands 176 0.1
Total – 41 equity investments 144,663 97.2
Cash and other net assets 4,155 2.8
Net assets 148,818 100.0

   

* The investment is in non-voting depositary receipts.
** The investment is in non-voting shares.

Of the ten largest portfolio investments as at 31 December 2017, the valuations at the previous year end, 31 December 2016, were Royal Dutch Shell A £5,915,000, Panasonic £4,566,000, Novartis £4,905,000, AstraZeneca £3,994,000, Bank Mandiri £4,106,000, BP £4,213,000, HSBC £3,686,000, Commerzbank £3,574,000, Shanghai Fosun Pharmaceutical H £nil and Sumitomo Mitsui Financial £3,992,000.

DISTRIBUTION OF INVESTMENTS
as at 31 December 2017 (% of net assets)

Sector distribution
% of
investments
Financials 31.8
Health Care 18.2
Consumer Goods 12.2
Industrials 10.2
Oil & Gas 11.4
Consumer Services 7.5
Technology 4.2
Telecommunications 1.7
Cash and other net assets 2.8
100.0

Geographical distribution
% of
investments
Europe 32.5
Japan 19.7
Asia Pacific 19.5
United Kingdom 12.7
United States 8.2
Latin America 2.4
Other 2.2
Cash and other net assets 2.8
100.0

The figures detailed in the geographical distribution table represent the Company’s exposure to these countries or regional areas.

The geographical distribution is based on each investment’s principal stock exchange listing, except in instances where this would not give a proper indication of where its activities predominate.
 

STRATEGIC REPORT

CHAIRMAN’S STATEMENT

Results

At 31 December 2017, our NAV was 337.7p, an increase of 12.5 per cent in the year. With dividends re-invested, this resulted in a total return of 14.4 per cent for the year. Although your Company has no official benchmark, it was ahead of the total return from the FTSE All-World Index of 13.8 per cent and the FTSE All-Share Index of 13.1 per cent.

The share price at the end of the year was 320p, an increase of 9.2 per cent over the share price at the end of 2016. With dividends re-invested, this resulted in a total return of 11.2 per cent for the year. At 31 December 2017, the share price stood at a discount of 5.2 per cent to the NAV.

Economic and stock market review and investment performance

The year to 31 December 2017 was a positive period for global equity market investors. The best returns, after adjusting for currency movements, were obtained from the Asia Pacific and European regions and from Japan. Good returns were also obtained in the UK and US equity markets. After the extreme currency volatility witnessed in 2016, when sterling weakness was a particular feature, sterling strengthened in 2017 by 6 per cent against the Japanese yen and 9 per cent against the US dollar, although it was down by 3 per cent against the euro.

In the US, the inauguration of Donald Trump as President in January 2017 proved to be a positive for the US equity market. The US economy was already on a steadily improving footing and, as the year progressed, investor confidence continued to grow, helped by a rebound in consumer demand and increased business investment. Optimism about the outlook for economic growth was also helped by the President’s promise to reduce taxes. In January 2018, the US government finally approved a reduction in the corporate tax rate from 35 per cent to 20 per cent. Personal tax rates were also reduced.

The growth rate in the Japanese economy is expected to be more muted than in some other major economies. However, our Investment Manager remains positive on the outlook for Japanese equities due to the focus on improving profitability and corporate governance in Japanese companies, with returns to shareholders being given an increased priority.

In Europe, the accommodative policies being pursued by the European Central Bank have boosted economic growth and should support continuing growth in corporate earnings. Some of the political uncertainties at the start of year have dissipated, both in the Netherlands, where a centrist government was elected, and in France, where the election of President Macron in May 2017 has provided a more stable political backdrop. In the UK, the General Election in May 2017 saw the Conservative party remaining in power, despite there being a reduction in the number of seats it obtained. This has resulted in increased economic and political uncertainty and a reduction in economic forecasts. Brexit continues to create considerable uncertainty, as it is still far from clear on what terms the UK will exit the European Union.

The Asia Pacific region is anticipated to see strong growth in 2018, with the main driver of both regional and global growth expected to come from emerging economies, with both China and India expected to grow by over 6 per cent. This should lead to a positive impact throughout the region and partly explains our increased exposure in 2017.

In our portfolio, the best performing shares were broadly spread geographically, with the most significant contributions coming from Ubisoft Entertainment in France, Commerzbank in Germany, Galaxy Entertainment in Hong Kong, Shanghai Fosun Pharmaceutical in China and Panasonic in Japan. Strong performances were also seen in Bangkok Bank and Bank Mandiri in Asia, PerkinElmer in the US and in Royal Dutch Shell and HSBC. In contrast, the poorest performing stocks in the portfolio were Apache, Celgene and Whirlpool in the US, Japan Tobacco, Swire Pacific in Hong Kong and Nokia in Finland. Our Investment Manager continues to believe the investment case remains intact for all of these shares and in three of them, Apache, Celgene and Swire Pacific, we added to our existing holdings.

Portfolio activity

There were eight new purchases added to the portfolio in 2017 and seven sales. Of the 33 stocks that were in the portfolio at both the 2016 and 2017 year ends, we realised profits on some holdings and added to others when opportunities arose. Changes to the portfolio are made by our Investment Manager when the share prices of our holdings have reached valuation levels that are no longer considered to be attractive and are replaced by holdings perceived to offer better long-term value. From a geographical perspective, this led to an increase in the portfolio’s Asia Pacific and European exposure.

In the Asia Pacific region, there was net investment of £2.6 million and our exposure increased from 13.7 per cent to 19.5 per cent of net assets. Our Investment Manager acquired three China-based stocks – Baidu, the leading Chinese language internet search provider, Goodbaby International, the Chinese group which manufactures and distributes children’s products, including prams, buggies and car seats, and Shanghai Fosun Pharmaceutical, a leading healthcare provider. We increased our investment in Swire Pacific, the Hong Kong-based investment holding company. These investments were partly offset by the disposal of some of our shares in Galaxy Entertainment in Hong Kong and Bank Mandiri in Indonesia, which had performed well. We completely disposed of our holding in the South Korean stock, SK Hynix, on valuation grounds.

In Europe, there was net investment of £1.1 million and our exposure increased from 28.5 per cent to 32.5 per cent of net assets. New names added were the Norwegian bank, DNB, and the French oil company, Total. We also acquired a holding in the Dutch company, Gemalto, a leading financial technology company focused on transaction processing software and data encryption. Subsequent to a takeover bid, we started to dispose of this investment, with the sale of a small residual holding being completed in January 2018.

We reduced our level of investment in both the US and Japan. The most significant reduction was in the US where there was a net disinvestment of £9.5 million and our exposure almost halved from 15.9 per cent to 8.2 per cent of net assets. The stocks that were completely disposed of were Alphabet, the holding company for Google, Harman, following a takeover by the South Korean company, Samsung, and PerkinElmer. These reductions were partially offset by an increase in our investments in Apache, Celgene and Synchrony Financial. From a valuation perspective, our Investment Manager continues to find it difficult to identify many undervalued companies in the US.

Although we continue to believe there is a positive outlook for the Japanese corporate sector, there was a reduction in the Company’s investment in Japan, with a net disinvestment of £10.0 million, reducing our investment from 25.8 per cent to 19.7 per cent of net assets. The stocks completely disposed of were NTT, Takashimaya and Toyota. The sales were partially offset by the addition of a new holding in Alps Electric, an electronic components manufacturer.

Overall, there was small increase in the UK, which increased from 11.0 per cent to 12.7 per cent of net assets, accounted for by an increase in our investment in Tesco. We initiated an investment in Latin America with the purchase of Creditcorp in Peru and at the year end this represented 2.4 per cent of net assets.

Revenue account and dividend

The revenue per share for the year ended 31 December 2017 was 5.3p, the same as the previous year. Our dividend income was boosted by dividend growth from the investment portfolio and an increasing bias to shares with a higher dividend yield, particularly from our investments in oil shares. However, this was offset by the absence of a dividend from our holding in our Investment Manager, Edinburgh Partners. In 2016, we received a large special dividend from Edinburgh Partners and, in recognition that this would not be repeated, we declared a final dividend of 4.3p plus a special dividend of 1p.

The Board has decided to recommend a final dividend of 5.3p per share, subject to Shareholders’ approval at the Annual General Meeting to be held on 25 April 2018. The dividend will be payable on 25 May 2018.

As has been stated in my previous Chairman’s Statements, the level of dividend paid to Shareholders will fluctuate from year to year, as our Investment Manager selects shares on the basis of where it finds the best value, rather than based on achieving a dividend that will grow steadily over time. The Board continues to believe that this strategy will produce a better long-term performance as our Investment Manager is able to fully implement its value-based investment philosophy, without any restrictions being imposed by having to achieve a specific income target.

Shares held in treasury

The Company continued with its policy of buying in shares with a view to maintaining the share price at close to the NAV. During the year, we purchased 3,825,000 shares for treasury, at a total cost of £11,678,000. This represented 8.0 per cent of shares in circulation at the start of the year. Shares that have been bought back under the Company's buy back policy are retained by the Company as treasury shares rather than cancelled.

At the Annual General Meeting held in April 2017, Shareholders passed a resolution permitting the Company to continue to sell shares held in treasury at a weighted average discount of not more than 2.0 per cent to the prevailing NAV. In addition, the resolution provided that any sale of treasury shares would not result in a dilution greater than 0.2 per cent in aggregate in the period between annual general meetings. While no shares were sold from treasury during the year under review, the Board is recommending that Shareholders approve a similar resolution at this year’s Annual General Meeting, as the Board believes that having the ability to sell shares from treasury at a small discount should help improve the liquidity in the Company’s shares when demand for our shares is once again sufficient for sales to be made. In 2015, 2,035,000 shares were sold from treasury.

Investment Manager

Subsequent to the year end, on 17 January 2018, Franklin Resources, Inc. announced the acquisition of Edinburgh Partners Limited, our Investment Manager. The acquisition is subject to certain customary conditions, including the approval of the Financial Conduct Authority in the UK. It is expected that the acquisition will be completed in the first half of 2018, and in the meantime an adjustment has been made to the carrying value of the Company’s holding in Edinburgh Partners Limited, which was our smallest holding by value. This was announced on 17 January 2018 and has been reflected in this Annual Report and Financial Statements, although the Board does not consider the adjustment to be material to the Company's net asset value. The Board may make further adjustments to the carrying value of the holding before the sale actually completes (for example to reflect the satisfaction of conditions). The acquisition is a positive move for Edinburgh Partners given the complementary investment styles based on value investing. Importantly, the individuals responsible for the investment management of your Company will remain the same.

Annual General Meeting

The Annual General Meeting will be held at 12.00 noon on at The Bonham Hotel, 35 Drumsheugh Gardens, Edinburgh EH3 7RN on Wednesday, 25 April 2018. The Board looks forward to meeting Shareholders who are able to attend.

Outlook

The global economy ended the year on an improving trend. Should this be sustained in 2018, inflation may become a more prominent feature of the economic landscape as labour markets start to tighten. Bond yields have been rising from very low levels and in some countries the rise has accelerated. This is particularly true in the US as the fiscal stimulus from tax cuts and plans for infrastructure spending is being applied when the economy is already in a cyclical upturn. As bond yields rise, so competition with equities will increase and, in due course, we are likely to witness the removal of some of the valuation anomalies that have been seen in equity markets in recent years.

As highlighted in the portfolio activity section above, our Investment Manager is finding difficulty in identifying undervalued companies in the US and continues to see valuations there as elevated in comparison with the rest of the world. As a consequence, we anticipate that we will maintain our higher weightings in Asia Pacific, European and Japanese stocks.

After a period of strong stock market performance, including that of the year under review, valuations are reasonably full. Growth stocks have been particularly strong in recent years, with value-based shares tending to lag. However, we are encouraged that our value-based investing performed better in 2017 and the economic environment may well increasingly favour the approach of our Investment Manager, which has maintained its disciplined approach of only investing in securities which it considers to be undervalued on an absolute basis.

Teddy Tulloch
Chairman
14 March 2018

Past performance is not a guide to future performance.
 

INVESTMENT MANAGER’S REPORT

The Company’s NAV total return for the year ended 31 December 2017 was 14.4 per cent, reflecting a year of robust gains across all major global equity markets, with the best performances being derived from the European and Asia Pacific regions.

The strong gains in equity markets in 2017 were supported by a strengthening, widening and deepening of the now largely synchronised global economic upswing. Over time, and in the absence of a major geopolitical misstep, we would expect economic momentum to squeeze any remaining excess capacity and produce a further tightening of labour markets. A stronger inflationary outlook is expected to emerge in future years. Major central banks should continue to scale back the current ultra-loose monetary policy in 2018, with further interest rate rises and a reduction in asset purchases by central banks. As this occurs, artificially-inflated bond prices should fall, yield curves should normalise and associated valuation anomalies in equity markets should be removed. The liquidity withdrawal is expected to be slow and phased globally and the process is likely to continue for a number of years. This is vitally important because of the distorting effects the previous environment has had, both on the quality of credit decisions and the valuation of assets.

This scenario is a poor environment for bonds but less damaging for “real” assets, such as equities. We believe equity markets are currently slightly overvalued, but opportunities are easier to identify outside the US, the most expensive major market. Nevertheless, we do not start from a position where equities are undervalued and, therefore, anticipate an increasing focus on risk and potentially greater liquidity in the portfolio.

We continue to believe that the premiums being paid for the appearance of “safety” and “growth” remain elevated and expect this to reduce over time. We believe we are entering a sustained period where valuation rather than momentum will drive share prices and therefore do not envisage making major changes at this stage to our investment strategy or portfolio structure. Although it is early days, part of the impact of bond markets beginning to move to more normal yields should be seen in the outperformance of so called “value stocks”. We thus continue to retain a cyclical focus, avoiding expensive segments of the market such as “growth” stocks, and have positioned the portfolio in sectors where we see value combined with a wider supportive investment case – banks, health care and oil.

The banking sector is now in much better condition with stronger capital and funding. The portfolio ended the year with a 23.6 per cent exposure to banking stocks, which was well spread across most regions, except the US, where more elevated valuations were a deterrent. Indeed, the strongest performance from the banks came from a wide cross-section of stocks, such as, Commerzbank, Bangkok Bank, Bank Mandiri and HSBC. We have largely maintained this high exposure, as we believe the banks will be direct beneficiaries of improving economic conditions. Furthermore, as quantitative easing comes to an end and interest rates rise, the profitability of the banks will be boosted. After the strong price appreciation in 2017, valuations are no longer distressed, which led us to trim some holdings. However, we remain comfortable with our positioning in this sector, albeit conscious of the longer-term disruption which is likely to come from outside the traditional banking sector.

Our exposure to health care rose last year to 18.2 per cent, and we added a new holding, Shanghai Fosun Pharmaceutical. We continue to believe that the key differentiator in this sector is the strength of the product pipeline, underpinned by genuine innovation and quality research and development. Pressure on health spending will continue to weigh on pricing for generic drugs, whereas new treatments which target unmet needs can deliver good returns.

The oil sector should benefit from the recent recovery in the oil price which we expect to be maintained. Cash flow is improving and strong relative shareholder returns are anticipated. The sector lagged last year after performing strongly in 2016 and current valuations do not yet fully reflect the recovery of the oil price. We took advantage of the weakness in the Apache share price to add to the position. We also initiated a holding in Total.

European stocks represent the portfolio’s largest geographic exposure with 32.5 per cent invested in the region, with major positions in the aforementioned sectors. The portfolio has a 19.5 per cent exposure to the Asia Pacific region; however, it is worth noting that this represents more than 30 per cent of the portfolio when looked at through the lens of end demand. US exposure has been reduced further to 8.2 per cent as we sold out of Alphabet, which we considered to be fully valued and as we saw better value in other equity markets.

Overall, we remain cautious on the potential returns from equities, despite our view that economic growth will continue and governments and central banks will not wish to risk damaging economic activity prematurely by tightening monetary policy too rapidly as they need economic growth to reduce large fiscal deficits. The consequence of monetary policies, such as quantitative easing, has been to leave other asset classes looking demonstrably expensive, with a knock-on effect to those related elements in equity markets, such as “bond-like equities”. Whilst the stocks we own look better value, in aggregate, the portfolio valuation is not “cheap” and, as a consequence, it is possible that cash balances will rise as we dispose of stocks which achieve their valuation targets. That said, we believe the current investment backdrop provides a beneficial environment for investors in value-based stocks.

Dr Sandy Nairn
Edinburgh Partners
14 March 2018

Past performance is not a guide to future performance.
 

OTHER STATUTORY INFORMATION

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 stock market index.

Strategy and business model

Investment policy
The Company’s investment policy is set out in the full Annual Report and Financial Statements.

The Investment Manager's compliance with the limits set out in the investment policy is monitored by the Board and the AIFM.

Investment strategy
The Company’s portfolio is managed without reference to any stock market index. Investments are selected for the portfolio only after extensive research by the Investment Manager. The process through which an equity must pass in order to be included in the portfolio is rigorous. Only a security where the Investment Manager believes that the price will be significantly higher in the future will pass the selection process. The key to successful stock selection is to identify the long-term value of a company’s shares and to have the patience to hold the shares until that value is appreciated by other investors. Identifying long-term value involves detailed analysis of a company’s earning prospects over a five-year time horizon. Further details of the investment strategy can be found in the Chairman’s Statement and the Investment Manager’s Report above.

Business and status of the Company
The Company is registered as a public limited company and is an investment company within the terms of section 833 of the Companies Act 2006 (the “Act”). The Company has been approved by HM Revenue & Customs as an authorised investment trust under sections 1158 and 1159 of the Corporation Tax Act 2010 (the “CTA”), subject to there being no subsequent serious breaches of the regulations. In the opinion of the Directors, the Company is directing its affairs so as to enable it to continue to qualify for such approval.

The Company's shares are listed on the premium segment of the Official List of the UK Listing Authority and traded on the main market of the London Stock Exchange.

Portfolio analysis
A detailed review of how the Company’s assets have been invested is contained in the Chairman’s Statement and the Investment Manager’s Report above. A list of all the Company’s investments is contained in the Portfolio of Investments above. At 31 December 2017, the Company held 41 investments, excluding cash and other net assets, with the largest representing 4.4 per cent of net assets, thus ensuring that the Company has a suitable spread of investment risk. A sector and geographical distribution of investments is shown above.

Results and dividends

The results for the year are set out in the Income Statement and in the Reconciliation of Movements in Shareholders’ Funds below.

For the year ended 31 December 2017, the net revenue return attributable to Shareholders was £2.5 million (2016: £2.6 million) and the net capital return attributable to Shareholders was £16.8 million (2016: £27.9 million). Total Shareholders’ funds increased by 3.5 per cent to £148.8 million (2016: £143.8 million).

A final dividend of 5.3p per ordinary share for the year ended 31 December 2017 (2016: final dividend of 4.3p and special dividend of 1.0p, a total of 5.3p), has been recommended by the Board. Subject to the approval of Shareholders at the Annual General Meeting to be held on 25 April 2018, the final dividend will be payable on 25 May 2018 to Shareholders on the register at the close of business on 4 May 2018. The ex-dividend date will be 3 May 2018.

Key performance indicators

At each Board meeting, the Directors consider a number of performance measures to assess how the Company is achieving its objective. The key performance indicators used to measure the progress and performance of the Company over time are established industry measures and are as follows:

Net asset value
In the year to 31 December 2017, the NAV increased by 12.5 per cent from 300.2p to 337.7p. After taking account of the total dividends paid in 2017 of 5.3p, relating to the year ended 31 December 2016, the net asset value total return was 14.4 per cent. This compares with the total return of 13.8 per cent from the FTSE All-World Index, adjusted to sterling.

The NAV total return since the launch of the Company on 15 December 2003 to 31 December 2017 was 303.9 per cent. The total return from the FTSE All-World Index, adjusted to sterling, was 302.7 per cent for the same period.

Share price
In the year to 31 December 2017, the Company’s share price increased by 9.2 per cent from 293p to 320p. The share price total return was 11.2 per cent, after taking account of the 5.3p dividend paid in 2017 relating to the year ended 31 December 2016.

Share price discount to NAV
The share price discount to NAV widened from 2.4 per cent to 5.2 per cent in the year to 31 December 2017.

Revenue return per ordinary share
Revenue per ordinary share was unchanged in the year to 31 December 2017 at 5.3p.

Dividends per ordinary share
The Directors are recommending a final dividend of 5.3p per ordinary share. This compares to a prior year final dividend of 4.3p and a special dividend of 1.0p, a total of 5.3p.

Ongoing charges
In the year to 31 December 2017, the ongoing charges ratio reduced from 1.0 per cent to 0.9 per cent.

The longer-term records of the key performance indicators are shown in the Performance Record below.

Management Agreement

In order to comply with the Alternative Investment Fund Managers’ Directive (“AIFMD”), the Company appointed Edinburgh Partners AIFM Limited as its AIFM with effect from 16 July 2014. Edinburgh Partners AIFM Limited has been approved as an AIFM by the UK’s Financial Conduct Authority (“FCA”). With the approval of the Directors of the Company, the AIFM appointed Edinburgh Partners as Investment Manager to the Company pursuant to a delegation agreement.

The AIFM receives a management fee of 0.75 per cent per annum (payable monthly in arrears) of the month-end market capitalisation of the issued ordinary shares (excluding treasury shares) up to £100 million and 0.65 per cent above £100 million. No performance fee will be paid. The AIFM receives an administration fee of £130,000 per annum (payable monthly in arrears), which is adjusted annually in line with changes in the Retail Price Index. The Company also pays the Investment Manager £25,000 per annum in respect of marketing-related services.

The Company has a holding in the Edinburgh Partners Emerging Opportunities Fund, which is managed by Edinburgh Partners, as detailed in notes 8 and 9 of the Financial Statements below. No management fee was charged by the AIFM to the Company in relation to its investment in the Edinburgh Partners Emerging Opportunities Fund during the year ended 31 December 2017 (2016: nil).

The Management Agreement may be terminated by either party giving 12 months’ written notice. No additional compensation is payable to the AIFM on the termination of this agreement other than the fees payable during the notice period. Further details relating to the Management Agreement are detailed in note 3 of the Financial Statements below.

Continuing appointment of the AIFM

The Board keeps the performance of the AIFM under continual review. As the AIFM has delegated the investment management function to Edinburgh Partners, the performance of the Investment Manager is also regularly reviewed. The Board, through delegation to the Audit and Management Engagement Committee (the “Committee”), has considered the performance of the AIFM and the terms of its engagement. It is the opinion of the Directors that the continuing appointment of the AIFM on the terms agreed is in the interests of Shareholders as a whole. The reasons are that the long-term investment performance has been satisfactory and the investment strategy remains convincing. The remuneration of the AIFM is fair both in absolute terms and compared to that of managers of comparable investment companies. The Directors believe that by paying the management fee calculated on a market capitalisation basis, rather than a percentage of assets basis, the interests of the AIFM are more closely aligned with those of Shareholders.

AIFM remuneration disclosures

In accordance with the AIFMD, information in relation to the remuneration of the Company’s AIFM, Edinburgh Partners AIFM Limited, is required to be made available to investors. The AIFM’s remuneration policy is incorporated within a group policy which is available at www.edinburghpartners.com. The disclosure also includes those remuneration disclosures in respect of the AIFM’s staff and ‘Identified Staff’ for the reporting period.

Risk management by the AIFM

As required under the AIFMD, the AIFM has established and maintains a permanent and independent risk management function to ensure that there is a comprehensive and effective risk management policy in place and to monitor compliance with risk limits. This risk policy covers the risks associated with the management of the investment portfolio, and the AIFM reviews and approves the adequacy and effectiveness of the policy on at least an annual basis, including the risk management processes and controls and limits for each risk area.

The AIFM sets risk limits that take into account the risk profile of the Company’s investment portfolio, as well as its investment objectives and strategy. The AIFM monitors the risk limits, including leverage, and periodically assesses the portfolio’s sensitivity to key risks on a regular basis.

Leverage

Leverage is defined in the AIFMD as any method by which the Company increases its exposure, whether through borrowing of cash or securities, or leverage embedded in derivative positions or by any other means. The Company did not have any borrowings and did not use derivative instruments for currency hedging during the year ended 31 December 2017.

In accordance with the detailed requirements of the AIFMD, leverage has been measured in terms of the Company’s exposure, and is expressed as a ratio of net asset value. The AIFMD requires this ratio to be calculated in accordance with both the Gross Method and the Commitment Method. Details of these methods of calculation can be found by referring to the AIFMD. In summary, these methods express leverage as a ratio of the exposure of debt, non-sterling currency, equity or currency hedging and derivatives exposure against the net asset value. The principal difference between the two methods is that the Commitment Method enables derivative instruments to be netted off to reflect hedging arrangements and the exposure is effectively reduced, while the Gross Method aggregates the exposure.

The AIFMD introduced a requirement for the AIFM to set maximum levels of leverage for the Company. The Company’s AIFM has set a maximum limit of 1.25 for both the Gross and Commitment Methods of calculating leverage. However, the AIFM anticipates that the figures are likely to be lower than this under normal market conditions. At 31 December 2017, the Company’s Gross ratio was 1.00 and its Commitment ratio was 1.00. In accordance with the AIFMD, any changes to the maximum level of leverage set by the Company will be communicated to Shareholders.

Principal risks and uncertainties

The Board considers that the following are the principal risks associated with investing in the Company: investment and strategy risk, key manager risk, discount volatility risk, market risk, foreign currency risk and regulatory risk. Other risks associated with investing in the Company are liquidity risk, credit risk, interest rate risk, gearing risk, operational risk and financial risk. An explanation of these risks and how they are managed and the policy and practice with regards to financial instruments are contained in note 16 of the Financial Statements below.

The Board, through delegation to the Committee, has undertaken a robust annual assessment and review of all the risks stated above, together with a review of any new risks which may have arisen during the year, including those that would threaten the Company’s business model, future performance, solvency or liquidity. These risks are formalised within the Company’s risk assessment matrix.

Internal financial control

In accordance with guidance issued to directors of listed companies by the Financial Reporting Council (“FRC”), the Directors confirm that they have carried out a review of the effectiveness of the systems of internal financial control during the year ended 31 December 2017, as set out in the Corporate Governance Statement in the full Annual Report and Financial Statements. There were no matters arising from this review that required further investigation and no significant failings or weaknesses were identified.

Depositary agreement

The Board has appointed Northern Trust Global Services Limited to act as its depositary (the “Depositary”). The Depositary is authorised by the Prudential Regulation Authority (“PRA”) and regulated by the FCA and the PRA. Custody services are provided by The Northern Trust Company (as a delegate of the Depositary). A fee of 0.01 per cent per annum of the net assets of the Company, plus fees in relation to safekeeping and other activities undertaken to facilitate the investment activity of the Company, are payable to the Depositary. The Company and the Depositary may terminate the Depositary Agreement at any time by giving six months’ written notice. The Depositary may only be removed from office when a new depositary is appointed by the Company.

Main trends and future development

A review of the main features of the year ended 31 December 2017 and the outlook for the current year can be found in the Chairman’s Statement and the Investment Manager’s Report above. The Board’s main focus is on the investment return and strategy, with attention paid to the integrity and success of the investment approach and on the factors which may have an impact on this.

Key Information Document

In accordance with the Packaged Retail and Insurance-based Investment Products Regulation, a Key Information Document was made available on the Company’s website from January 2018.

Employees, human rights and community issues

The Board recognises the requirement under the Act to detail information about human rights, employees and community issues, including information about any policies it has in relation to these matters and the effectiveness of these policies. These requirements do not apply to the Company as it has no employees, all the Directors are non-executive and it has outsourced all its functions to third party service providers. The Company has therefore not reported further in respect of these provisions.

The Company is not within the scope of the Modern Slavery Act 2015 because it has not exceeded the turnover threshold and therefore, no further disclosure is required in this regard.

Gender diversity

As at 31 December 2017, the Board of Directors of the Company comprised four male Directors. The appointment of any new Director is made on the basis of merit, with the aid of an experienced consultant.

Social, environmental and ethical policy

The Company seeks to invest in companies that are well managed with high standards of corporate governance. The Board believes this creates the proper conditions to enhance long-term value for Shareholders. The Company adopts a positive approach to corporate governance and engagement with companies in which it invests.

In pursuit of the above objective, the Board believes that proxy voting is an important part of the corporate governance process and considers seriously its obligation to manage the voting rights of companies in which it is invested. It is the policy of the Company to vote, as far as is practicable, at all shareholder meetings of investee companies. The Company follows the relevant applicable regulatory and legislative requirements in the UK, with the guiding principles being to make proxy voting decisions which favour proposals that will lead to maximising shareholder value while avoiding any conflicts of interest. To this end, voting decisions are taken on a case-by-case basis, with the key issues on which the AIFM focuses being corporate governance, including disclosure and transparency, board composition and independence, control structures, remuneration and social and environmental issues.

The day-to-day management of the Company’s investment portfolio has been delegated by the AIFM to the Company’s Investment Manager, Edinburgh Partners, which has an Environmental, Socially Responsible Investing and Corporate Governance (“ESG”) policy in place. The ESG policy statement, which can be found on the website at www.edinburghpartners.com, describes the manner in which the principles of the UK Stewardship Code are incorporated within the investment process.

The assessment of the quality of investee companies in relation to environmental considerations, socially responsible investment and corporate governance is embedded in the Investment Manager’s stock selection process.

Approval

This Strategic Report has been approved by the Board and signed on its behalf by:

Teddy Tulloch
Chairman
14 March 2018

Past performance is not a guide to future performance.
 

EXTRACTS FROM THE DIRECTORS’ REPORT

Share capital

At 31 December 2017, the Company’s issued share capital comprised 64,509,642 ordinary shares of one pence each, of which 20,446,917 ordinary shares were held in treasury.

At general meetings of the Company, one vote is attached to each ordinary share in issue. Shares held in treasury do not carry voting rights. The total voting rights of the Company at 31 December 2017 were 44,062,725.

Issue of shares

On 11 October 2005, the Company applied for a block listing of 1,300,000 ordinary shares. As at 31 December 2017, and at the date of signing this report, a balance of 745,830 shares may be issued under this block listing.

No shares were issued during the year or since the year end.

Purchase of shares

During the year ended 31 December 2017, the Company purchased in the stock market 3,825,000 ordinary shares (with a nominal value of £38,250) for treasury, at a total cost of £11,678,000. This represented 5.9 per cent of the issued share capital at 31 December 2016. During the year ended 31 December 2017, no shares were purchased for cancellation.

Subsequent to the year end of 31 December 2017 and up to 14 March 2018, the date of signing this report, the Company purchased in the stock market 475,000 ordinary shares (with a nominal value of £4,750) for treasury, at a total cost of £1,513,000, representing 0.74 per cent of the issued share capital as at 31 December 2017.

The share purchases were made with a view to reducing discount volatility and maintaining the middle market price at which the shares traded at close to the NAV.

Sale of shares from treasury

No shares were sold from treasury during the year ended 31 December 2017 or since the year end.

Shares held in treasury

Holding shares in treasury enables a company to issue shares cost effectively that might otherwise have been cancelled. The total number of own shares held in treasury as at 31 December 2017, including those shares bought back in prior accounting periods, was 20,446,917 ordinary shares. The Board has not set a limit on the number of shares that can be held in treasury at any one time. The maximum number of own shares held in treasury during the year was 20,446,917 ordinary shares (with a nominal value of £204,469.17) representing 31.7 per cent of the issued share capital at the time they were held in treasury.

Going concern

The Company’s business activities, together with the factors likely to affect its future development, performance and position, are set out in the Strategic Report above. In addition, notes 16 and 17 of the Financial Statements below include the Company’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments; and its risk exposure. The Company’s principal risks are set out in the Strategic Report above. The Company’s assets consist principally of a diversified portfolio of listed equity shares, which in most circumstances are realisable within a short period of time and exceed its liabilities by a significant amount.

After due consideration, the Directors have concluded that the Company has adequate resources to continue in operational existence for the next year. For this reason, they have adopted the going concern basis in preparing the Financial Statements.

Long-term viability statement

The Directors have assessed the prospects of the Company over a period longer than one year. The Board considers that, for a company with an investment objective to provide Shareholders with an attractive real long-term return by investing globally in undervalued securities, a period of five years is an appropriate period to consider for the purpose of the Long-term Viability Statement. Furthermore, five years is the time period used for identifying long-term value, as detailed in the Strategic Report in the investment strategy section above.

In making its assessment, the Board considered a number of factors, including those detailed below:

The Board’s assessment was based on the following assumptions:

The Board considers that, following its assessment, there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the five-year period of their assessment.
 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Financial Statements for each financial period. Under that law, they have elected to prepare the Financial Statements in accordance with UK Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”. Under company law, the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing these Financial Statements, the Directors are required to:

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its Financial Statements comply with the Act and include the information required by the Listing Rules of the FCA. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors’ Report, Directors’ Remuneration Report and Corporate Governance Statement that comply with that law and those regulations.

The Directors, to the best of their knowledge, state that:

The Annual Report and Financial Statements, taken as a whole, are considered by the Board to be fair, balanced and understandable and provide the information necessary for Shareholders to assess the Company’s position and performance, business model and strategy.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. The work carried out by the Auditor does not include consideration of these matters and, accordingly, the Auditor accepts no responsibility for any changes that may have occurred to the Financial Statements since they were initially presented on the website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

On behalf of the Board

Teddy Tulloch
Chairman
14 March 2018
 

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company’s statutory accounts for the years ended 31 December 2016 and 31 December 2017 but is derived from those accounts. Statutory accounts for the year ended 31 December 2016 have been delivered to the Registrar of Companies, and those for the year ended 31 December 2017 will be delivered in due course. The Auditor has reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Act. The text of the Auditor’s report can be found in the Company’s full Annual Report and Financial Statements at www.epgot.com.

INCOME STATEMENT
for the year ended 31 December 2017



Note

Revenue 
£’000 
2017 
Capital 
£’000 

Total
£’000 

Revenue 
£’000 
2016
Capital
£’000

Total 
£’000 
Gains on investments at fair value
8


17,318 

17,318 


27,190 

27,190 
Foreign exchange gains on capital items

(551)

(551)


827 

827 
Foreign currency forward contract loss




(75)

(75)
Income 2 4,014  4,014  4,096  4,096 
Management fee 3 (982) (982) (873) (873)
Other expenses 4 (376) (376) (376) (376)
Net return before finance costs and taxation
2,656 

16,767 

19,423 

2,847 

27,942 

30,789 
Finance costs
Interest payable and related charges





Net return before taxation 2,656  16,767  19,423  2,847  27,942  30,789 
Taxation 5 (202) (202) (250) (250)
Net return after taxation 2,454  16,767  19,221  2,597  27,942  30,539 
pence  pence  pence  pence  pence  pence 
Return per ordinary share 7 5.3  36.3  41.6  5.3  57.4  62.7 

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 columns are prepared under guidance published by the AIC.

There were no items of other comprehensive income in the year and therefore the profit for the year is also the total comprehensive income for the year.

Dividend information

A final dividend for the year ended 31 December 2017 of 5.3p per ordinary share (2016: final dividend of 4.3p and special dividend of 1.0p, a total of 5.3p) has been recommended by the Board. Subject to shareholder approval, this dividend will be payable on 25 May 2018 to Shareholders on the register at the close of business on 4 May 2018. The ex-dividend date will be 3 May 2018. Based on 43,587,725 ordinary shares, being the number of ordinary shares in issue (excluding shares held in treasury) on 14 March 2018, the date of signing this report, the total dividend payment will amount to £2,310,000. Dividends are accounted for in the period in which they are paid. Further information on dividend distributions can be found in note 6 of these Financial Statements.

The notes form part of these Financial Statements.
 

BALANCE SHEET
as at 31 December 2017


Note
2017
£’000
2016
£’000
Fixed asset investments
     Investments at fair value through profit or loss 8 144,663 139,466
Current assets
     Debtors 10 513 224
     Cash at bank and short-term deposits 4,298 4,384
4,811 4,608
Current liabilities
     Creditors 11 656 317
656 317
Net current assets 4,155 4,291
Net assets 148,818 143,757
Capital and reserves
Called-up share capital 12 645 645
Share premium 1,597 1,597
Capital redemption reserve 14 14
Special reserve 54,952 66,630
Capital reserve 87,435 70,668
Revenue reserve 4,175 4,203
Total Shareholders’ funds 148,818 143,757
pence pence
Net asset value per ordinary share 14 337.7 300.2

These Financial Statements were approved and authorised for issue by the Board of Directors of EP Global Opportunities Trust plc on 14 March 2018 and were signed on its behalf by:

Teddy Tulloch
Chairman

Registered in Scotland No. 259207

The notes form part of these Financial Statements.
 

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
for the year ended 31 December 2017




Note

Share
capital
£’000

Share
premium
£’000
Capital
redemption
reserve
£’000

Special 
reserve 
£’000 

Capital
reserve
£’000

Revenue 
reserve 
£’000 


Total  
£’000 
Year to 31 December 2017
At 31 December 2016 645 1,597 14 66,630  70,668 4,203  143,757 
Net return after taxation
-

-

-


16,767

2,454 

19,221 
Dividends paid 6 - - - - (2,482) (2,482)
Share purchases for treasury
13

-

-

-

(11,678)

-


(11,678)
At 31 December 2017 645 1,597 14 54,952  87,435 4,175  148,818 
Year to 31 December 2016
At 31 December 2015 645 1,597 14 70,245  42,726 3,130  118,357 
Net return after taxation
-

-

-

-  

27,942

2,597 

30,539 
Dividends paid 6 - - - -   - (1,524) (1,524)
Share purchases for treasury
13

-

-

-

(3,615)

-

-  

(3,615)
At 31 December 2016 645 1,597 14 66,630  70,668 4,203  143,757 

The notes form part of these Financial Statements.
 

NOTES TO THE FINANCIAL STATEMENTS
at 31 December 2017

1. Accounting policies

Statement of compliance

EP Global Opportunities Trust plc is a company incorporated in Scotland. The Company is registered as a public limited company and is an investment company within the terms of section 833 of the Act. The registered office is detailed below. The nature of the Company’s operations and its principal activities are set out in the Strategic Report above.

The Company’s Financial Statements have been prepared under FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” and in accordance with the Act and with the Statement of Recommended Practice issued by the AIC in November 2014 (the “AIC SORP”). The Company meets the requirements of section 7.1A of FRS 102 and therefore has elected not to present the Statement of Cash Flows for the year ended 31 December 2017.

The comparative figures for the Financial Statements are for the year ended 31 December 2016.

Going concern

As detailed in the Directors’ Report above, the financial statements are prepared on a going concern basis, being a period of at least 12 months from the date this Annual Report is approved and on the basis that approval as an investment company continues to be met. All of the Company’s activities are continuing.

Segmental reporting

The Directors are of the opinion that the Company is engaged in a single segment of business, being investment business. The Company primarily invests in listed companies.

Income recognition

Dividend and other investment income is included as revenue on the ex-dividend date, the date the Company’s right to receive payment is established. Dividends from overseas companies are shown gross of withholding tax. Deposit interest receivable is included on an accruals basis.

Expenses and finance costs

All management expenses and finance costs are accounted for on an accruals basis. All operating expenses and finance costs are charged through the revenue account in the Income Statement except costs that are incidental to the acquisition or disposal of investments, which are charged to the capital account in the Income Statement. Finance costs are debited using the effective interest rate method. Transaction costs are included within the gains and losses on investments, as disclosed in the Income Statement.

Investments

In accordance with FRS 102, Sections 11 and 12, all investments held by the Company are designated as held at fair value upon initial recognition and are measured at fair value through profit or loss in subsequent accounting periods. Investments are initially recognised at cost, being the fair value of the consideration given.

After initial recognition, investments are measured at fair value, with changes in the fair value of investments recognised in the Income Statement and allocated to capital. Realised gains and losses on investments sold are calculated as the difference between sales proceeds and cost.

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, without adjustment for transaction costs necessary to realise the asset. Unlisted investments will be valued by the Directors at fair value, using the guidelines on valuation published by the International Private Equity and Venture Capital Association (“IPEVC Valuation Guidelines”). This represents the Directors’ view of the amount for which an asset could be exchanged between knowledgeable willing parties in an arm’s length transaction.

Foreign currency

The Financial Statements have been prepared in sterling, rounded to the nearest £’000, which is the functional and reporting currency of the Company. Sterling is the currency of the primary economic environment in which the Company operates.

Transactions denominated in foreign currencies are converted to sterling at the actual exchange rate as at the date of the transaction. Assets and liabilities denominated in foreign currencies at the year end are reported at the rate of exchange at the Balance Sheet date. Any gain or loss arising from a change in exchange rate subsequent to the date of the transaction is included as an exchange gain or loss in the capital reserve or the revenue account depending on whether the gain or loss is of a capital or revenue nature.

Taxation

The charge for taxation is based on the net revenue for the year and takes into account taxation deferred or accelerated because of timing differences between the treatment of certain items for accounting and taxation purposes. Full provision for deferred taxation is made under the liability method, without discounting, on all timing differences between taxable profits and total comprehensive income that have arisen but not been reversed by the Balance Sheet date, unless such provision is not permitted by FRS 102. Deferred tax assets are only recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company’s taxable profits and its results as stated in the Financial Statements which are capable of reversal in one or more subsequent periods.

Cash at bank and short-term deposits

Cash at bank and short-term deposits comprise cash at bank and short-term deposits with an original maturity date of three months or less.

Short-term debtors and creditors

Debtors and creditors with no stated interest rate and receivable within one year are recorded at transaction price. Any losses arising from impairment are recognised in the Income Statement in other operating expenses.

Dividends payable to Shareholders

Final dividends are recognised as a liability in the period in which they have been approved by Shareholders in a general meeting. Interim dividends are recognised as a liability in the period in which they have been declared and paid.

Loans

All interest-bearing loans and borrowings which are basic financial instruments are initially recognised at the sterling present value of cash payable to the bank (including interest). After initial recognition, they are measured at amortised cost using the effective interest rate method. The effective interest rate amortisation is included in finance costs in the Income Statement. Loans are revalued to the sterling equivalent using exchange rates at the appropriate date, with the gain or loss being charged through the revenue account in the Income Statement.

Borrowings that are payable within one year shall be measured at the undiscounted amount of the cash or other consideration expected to be paid.

Own shares held in treasury

From time to time, the Company buys back shares and holds them in treasury for potential sale at a later date or for cancellation. The consideration paid and received for these shares is accounted for in Shareholders’ funds and, in accordance with the AIC SORP, the cost has been allocated to the Company’s special reserve. The cost of shares sold from treasury is calculated by taking the average cost of shares held in treasury at the time of sale. Any difference between the proceeds from shares sold from treasury and the average cost is taken to share premium.

Judgements and key sources of estimation uncertainty

The preparation of the financial statements requires the Company to make judgements, estimates and assumptions that affect amounts reported for assets and liabilities as at the Balance Sheet date and the amounts reported for revenues and expenses during the year. The nature of estimation means that the actual outcomes could differ from those estimates, possibly significantly. The judgements relate to the unlisted investment where there is no appropriate market price, as detailed in note 8.

Reserves

Capital reserve
The following are accounted for in this reserve:

Share premium
This reserve records the amount above the nominal value received for shares sold, less transaction costs.

Special reserve
The special reserve was created by a reduction in the share premium account by order of the High Court. It can be used for the repurchase of the Company’s ordinary shares.

In accordance with the AIC SORP, the consideration paid for shares bought into and held in treasury is shown as a deduction from the special reserve. The average cost of shares sold from treasury is shown as an increase to the special reserve, with any consideration in excess of average cost being held in the share premium reserve.

Capital redemption reserve
The capital redemption reserve accounts for amounts by which the issued capital is diminished through the repurchase and cancellation of the Company’s own shares.

Revenue reserve
The revenue reserve represents the balance of revenue retained within the Company after the payment of any dividends.

2. Income

2017
£’000
2016
£’000
Income from investments
UK net dividend income* 695 1,338
Overseas dividend income 3,294 2,758
Income from investments 3,989 4,096
Total income comprises
Dividends 3,989 4,096
Bank interest 7 -
Interest on withholding tax reclaim 18 -
4,014 4,096

* Includes income of £nil (2016: £642,000) from the unlisted investment in Edinburgh Partners.

3. Management fee

2017
£’000
2016
£’000
Management fee 982 873
982 873

With effect from 16 July 2014, the Company appointed Edinburgh Partners AIFM Limited as the Company’s AIFM. Under the Management Agreement, the AIFM is entitled to a fee paid monthly in arrears at the rate of 0.75 per cent per annum of the equity market capitalisation of the Company to £100,000,000 and at a rate of 0.65 per cent per annum of the equity market capitalisation which exceeds this amount. The equity market capitalisation is based on shares in circulation which excludes shares held in treasury. No performance fee will be paid.

No management fee is payable in relation to the Company’s investment in Edinburgh Partners Emerging Opportunities Fund, which is managed by Edinburgh Partners. Details relating to this investment are set out in notes 8 and 9.

During the year ended 31 December 2017, the management fees payable to the AIFM totalled £982,000 (2016: £873,000). At 31 December 2017, there was £164,000 outstanding payable to the AIFM (2016: £84,000) in relation to management fees.

During the year ended 31 December 2017, the administration fees payable to the AIFM, as detailed in note 4, totalled £130,000 (2016: £127,000). At 31 December 2017, there was £22,000 outstanding payable to the AIFM (2016: £11,000) in relation to administration fees.

During the year ended 31 December 2017, the Company paid Edinburgh Partners £25,000 (2016: £25,000) for marketing-related services. At 31 December 2017, there was £6,000 outstanding to Edinburgh Partners (2016: £6,000) in relation to marketing-related services. The fees for marketing-related services are included within other expenses as detailed in note 4.

4. Other expenses

2017
£’000
2016
£’000
Administration fee 130 127
Auditor’s remuneration (excluding VAT) for:
        Audit 20 19
        Non-audit services -
Directors’ remuneration 83 147
Other 143 142
376 376

Directors’ remuneration and outstanding amounts are shown in the Directors’ Remuneration Report in the full Annual Report and Financial Statements.

5. Taxation

a) Analysis of charge in year
Revenue
£’000
2017
Capital
£’000

Total
£’000

Revenue
£’000
2016
Capital
£’000

Total
£’000
Current tax
Overseas tax suffered 202 - 202 250 - 250
202 - 202 250 - 250

b) The current taxation charge for the year ended 31 December 2017 is lower than the theoretical rate of corporation tax in the UK of 19 per cent (2016: 20 per cent) (NB The standard rate of corporation tax has been 19 per cent from 1 April 2017. Previously it had been 20 per cent from 1 April 2015). The differences are explained below:


Revenue 
£’000 
2017 
Capital 
£’000 

Total 
£’000 

Revenue 
£’000 
2016 
Capital 
£’000 

Total 
£’000 
Net return before taxation 2,656  16,767  19,423  2,847  27,942  30,789 
Theoretical tax at UK corporation tax rate of 19.25 per cent (2016: 20.00 per cent)


511 



3,228 



3,739 



569 



5,588 



6,157 
Effects of:
- UK dividends that are not taxable
(133)


(133)

(267)

-  

(267)
- Foreign dividends that are not taxable
(634)

 -

(634)

(552)

-  

(552)
- Non-taxable investment gains
-

(3,228)

(3,228)

-  

(5,588)

(5,588)
- Unrelieved excess expenses
256 


256 

250 

-  

250 
- Overseas tax suffered 202  202  250  -   250 
202  202  250  -   250 

At 31 December 2017, the Company had no unprovided deferred tax liabilities (2016: £nil). At that date, based on current estimates and including the accumulation of net allowable losses, the Company had unrelieved losses of £7,389,000 (2016: £6,057,000) that are available to offset future taxable revenue. A deferred tax asset of £1,256,000 (2016: £1,030,000) based on the corporation tax rate of 17 per cent effective from 1 April 2020, has not been recognised because the Company is not expected to generate sufficient taxable income in future periods in excess of the available deductible expenses and accordingly, the Company is unlikely to be able to reduce future tax liabilities through the use of existing surplus losses.

Deferred tax is not provided on capital gains and losses arising on the revaluation or disposal of investments because the Company meets (and intends to continue for the foreseeable future to meet) the conditions for approval as an Investment Trust company.

6. Dividends

2017 
£’000 
2016
£’000
Declared and paid
2016 final dividend of 4.3p and a special dividend of 1.0p, total 5.3p per ordinary share paid in May 2017 (2015: interim dividend of 3.1p paid in March 2016)
2,482 

1,524
Net revenue return after taxation 2,454  2,597
Proposed
2017 final dividend of 5.3p
(2016: final dividend of 4.3p and a special dividend of 1.0p, a total of 5.3p) per ordinary share


2,310 


2,506

The Directors recommend a final dividend, for the year ended 31 December 2017 of 5.3p per ordinary share (2016: final dividend of 4.3p and a special dividend of 1.0p, a total of 5.3p). Subject to shareholder approval at the Annual General Meeting to be held on 25 April 2018, this dividend will be payable on 25 May 2018 to Shareholders on the register at the close of business on 4 May 2018. The ex-dividend date will be 3 May 2018. Based on 43,587,725 ordinary shares, being the number of ordinary shares in issue (excluding shares held in treasury) at 14 March 2018, the date of signing this report, the total dividend payment will amount to £2,310,000.

7. Return per ordinary share


Net
return
£’000
2017
Ordinary
Shares*

Per
share
pence

Net
return
£’000
2016
Ordinary
shares*

Per
share
pence
Revenue return after taxation
2,454

46,234,011

5.3

2,597

48,679,555

5.3
Capital return after taxation
16,767

46,234,011

36.3

27,942

48,679,555

57.4
Total return after taxation
19,221

46,234,011

41.6

30,539

48,679,555

62.7

* Weighted average number of ordinary shares, excluding shares held in treasury, in issue during the year.  There was no dilution of returns.

8. Investments

2017 
£’000 
2016 
£’000 
Listed investments 142,881  138,441 
Unlisted investments 1,782  1,025 
144,663  139,466 

Unlisted 
£’000 

Listed 
£’000 
2017  
Total  
£’000 
2016 
Total 
£’000 
Analysis of investment portfolio movements
Opening bookcost 214  111,865  112,079  102,318 
Opening investment holdings gains 811  26,576  27,387  4,571 
Opening valuation 1,025  138,441  139,466  106,889 
Movements in the year:
Purchases at cost 24,373  24,373  26,034 
Sales - proceeds (36,494) (36,494) (20,647)
          - realised gains on sales 13,140  13,140  4,374 
Increase in investment holding gains 757  3,421  4,178  22,816 
Closing valuation 1,782  142,881  144,663  139,466 
Closing bookcost 214  112,884  113,098  112,079 
Closing investment holding gains 1,568  29,997  31,565  27,387 
Closing valuation 1,782  142,881  144,663  139,466 

Within the listed investments detailed above, there is included the Company’s investment in the Edinburgh Partners Emerging Opportunities Fund, a sub-fund of Edinburgh Partners Opportunities Fund plc, an Irish domiciled open-ended investment company listed on the Dublin Stock Exchange as detailed in note 9, which was valued at £3,474,000 at 31 December 2017 (2016: £2,954,000). As at 30 September 2017, the most recent year end of the Edinburgh Partners Emerging Opportunities Fund, the aggregate amount of capital and reserves was US$12,701,000. For the year to 30 September 2017 the profit for the year after tax and distributions was US$2,229,000.

The unlisted investment detailed above is 71,294 (2016: 71,294) shares in Edinburgh Partners. Additional information on this investment is detailed in the Chairman’s Statement above and in note 20.


Unlisted
£’000

Listed
£’000
2017
Total
£’000
2016 
Total 
£’000 
Analysis of capital gains and losses
Realised gains on sales - 13,140 13,140 4,374
Changes in fair value of investments 757 3,421 4,178 22,816
757 16,561 17,318 27,190

Fair value hierarchy

In accordance with FRS 102, the Company must disclose the fair value hierarchy of financial instruments.

The different levels of the fair value hierarchy are as follows:

  1. The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date.
  1. Inputs other than quoted prices included within Level 1 that are observable (developed using market data) for the asset or liability, either directly or indirectly.
  1. Inputs are unobservable (for which market data is unavailable) for the asset or liability.

All of the Company’s financial instruments fall into level 1, except its investment in Edinburgh Partners which falls into level 3 and is fair valued using an unquoted price that is derived from significant assumptions underlying any valuation models and techniques used where the fair value has been determined using generally accepted valuation techniques and models, taking into account transactions in the shares subsequent to the balance sheet date, as detailed in the Chairman’s Statement above and in note 20. A reconciliation of the fair value movements of level 3 investments is shown in the unlisted column of the table above.

Transaction costs

During the year, the Company incurred transaction costs of £45,000 (2016: £53,000) and £43,000 (2016: £22,000) on purchases and sales of investments respectively. These amounts are included in gains on investments at fair value, as disclosed above in the Income Statement of these Financial Statements.

9. Significant holdings

As detailed in the Strategic Report above and in note 8, as at 31 December 2017, the Company owned 36.5 per cent (2016: 44.3 per cent) of the net assets of the Edinburgh Partners Emerging Opportunities Fund, a sub-fund of Edinburgh Partners Opportunities Fund plc, which is an Irish domiciled open-ended investment company listed on the Dublin Stock Exchange. The registered office of Edinburgh Partners Opportunities Fund plc is 25/28 North Wall Quay, International Financial Services Centre, Dublin 1, Ireland.

The Company had no other holdings of 3.0 per cent or more of the share capital of any portfolio companies.

10. Debtors

2017
£’000
2016
£’000
Dividends receivable 96 79
Due from brokers on sales 190 -
Prepayments and accrued income 20 22
Taxation recoverable 207 123
513 224

11. Creditors: amounts falling due within one year

2017
£’000
2016
£’000
Due to brokers on shares purchased for treasury 404 -
Other creditors and accruals 252 317
656 317

   

12. Share capital Number
of shares
Ordinary 1p

2017
£’000
Number 
of shares 
Ordinary 1p

2016
£’000
Allotted, called-up and fully paid:
At 1 January 64,509,642 645 64,509,642  645
At 31 December 64,509,642 645 64,509,642  645

The voting rights attached to the Company’s shares are detailed in the extracts from the Directors’ Report above.

Duration of the Company

The Company does not have a termination date or the requirement for any periodic continuation vote.

13. Own shares held in treasury

Details of own shares purchased for and sold from treasury are shown below:

2017
Number of
shares
2016
Number of
shares
At 1 January 16,621,917 15,161,917
Shares purchased for treasury 3,825,000 1,460,000
At 31 December 20,446,917 16,621,917

During the year ended 31 December 2017, 3,825,000 shares (2016: 1,460,000) were purchased for treasury at a total cost of £11,678,000 (2016: £3,615,000) and no shares were sold from treasury (2016: none). Please see the Chairman’s Statement above for details of share buy backs.

14. Net asset value per ordinary share

The NAV, calculated in accordance with the Articles of Association, is as follows:

2017
pence
2016
pence
Ordinary share 337.7 300.2

The NAV is based on net assets of £148,818,000 (2016: £143,757,000) and on 44,062,725 (2016: 47,887,725) ordinary shares, being the number of ordinary shares, excluding shares held in treasury, in issue at the year end.

15. Analysis of financial assets and liabilities

Interest rate and currency profile

The interest rate and currency profile of the Company’s financial assets and liabilities were:




No 
interest 
rate 
exposure 
£’000 
2017

Cash
flow
interest
rate risk
exposure
£’000






Total 
£’000 



No 
interest 
rate 
exposure 
£’000 
2016

Cash
flow
interest
rate risk
exposure
£’000






Total 
£’000 
Equity shares
Euro 33,015  - 33,015  29,357  - 29,357 
Japanese yen 29,268  - 29,268  37,202  - 37,202 
US dollar 22,976  - 22,976  25,856  - 25,856 
Sterling 22,123  - 22,123  18,840  - 18,840 
Hong Kong dollar 17,014  - 17,014  9,710  - 9,710 
Swiss franc 8,890  - 8,890  8,568  - 8,568 
Indonesian rupee 4,412  - 4,412  4,106  - 4,106 
Thailand baht 3,863  - 3,863  3,044  - 3,044 
Norwegian krone 3,102  - 3,102  -
South Korean won - 2,783  - 2,783 
Cash at bank and short-term deposits
US dollar 4,230 4,230  4,331 4,331 
Sterling 68 68  53 53 
Debtors
Euro 100  - 100  31  - 31 
Japanese yen 57  - 57  55  - 55 
Sterling 210  - 210  22  - 22 
Swiss franc 146  - 146  92  - 92 
South Korean won

-


24 

-

24 
Short-term creditors
Euro (190) - (190) -
Sterling (466) - (466) (317) - (317)
144,520  4,298 148,818  139,373  4,384 143,757 

At 31 December 2017, the Company had no financial liabilities other than the short-term creditors as stated above (2016: £nil). The carrying amount on the Balance Sheet approximates the fair value of all financial assets and liabilities.

The following exchange rates were used to convert investments, assets and liabilities to the functional currency of the Company which is sterling.

Foreign Exchange rates against sterling 2017 2016      Change    
Euro 1.13 1.17 (3)%
Japanese yen 152.39 144.12 6% 
US dollar 1.35 1.24 9% 
Hong Kong dollar 10.57 9.58 10% 
Swiss franc 1.32 1.26 5% 
Indonesian rupee 18353.44 16647.30 10% 
Thailand baht 44.09 44.25 (0)%
Norwegian krone 11.06 10.64 4% 
South Korean won 1448.19 1492.42 (3)%

16. Risk analysis

Principal risks

The principal risks the Company faces are:

The Board undertakes an annual assessment and review of all the risks stated above together with a review of any new risks which may have arisen during the year. These risks are formalised within the Company’s risk assessment matrix.

The Investment Manager monitors the financial risks affecting the Company on an ongoing basis within the policies and guidelines determined by the Board. The Directors receive financial information, which is used to identify and monitor risk, quarterly. The Company may enter into derivative contracts to manage risk. A description of the principal risks the Company faces is set out below.

Investment and strategy risk

There can be no guarantee that the objective of the Company, to provide Shareholders with an attractive real long-term total return by investing globally in undervalued securities, will be achieved.

The Investment Manager meets regularly with the Board to discuss the portfolio performance and strategy. The Board receives quarterly reports from the Investment Manager detailing all portfolio transactions and any other significant changes in the market or stock outlooks.

Key manager risk

A change in key investment management personnel who are involved in the management of the Company’s portfolio could impact on future performance and the Company’s ability to deliver on its investment strategy.

The Investment Manager frequently considers succession planning. The Board is in regular contact with the Investment Manager and would be informed of any proposed change in the lead manager.

Discount volatility risk

The Board recognises that it is in the long-term interests of Shareholders to reduce discount volatility and believes that the prime driver of discounts over the longer term is investment performance. The Company is permitted to employ gearing, a process whereby funds are borrowed principally for the purpose of purchasing securities, should the Board feel that it is appropriate to do so. The use of gearing can magnify discount volatility.

The Board actively monitors the discount at which the Company’s shares trade, and is committed to using its powers to allot or repurchase the Company’s ordinary shares with a view to maintaining the middle market price at which the shares trade at close to the net asset value most recently published by the Company (taking into account the effect on the NAV of any rights to which the shares are trading ex-dividend).

The Board’s commitment to allot or repurchase ordinary shares is subject to it being satisfied that any offer to allot or purchase shares is in the best interests of Shareholders of the Company as a whole, the Board having the requisite authority pursuant to the Articles of Association and relevant legislation to allot or purchase shares, and all other applicable legislative and regulatory provisions.

Details of the shares purchased into treasury during the year are set out in note 13.

Market risk

The Company is exposed to market risk due to fluctuations in the market prices of its investments. Market risk arises mainly from uncertainty about future prices of financial instruments used in the Company’s business. It represents the potential loss the Company might suffer through holding market positions in the face of price movements. The Investment Manager monitors the prices of financial instruments held by the Company on an ongoing basis.

The Investment Manager actively monitors market and economic data and reports to the Board, which considers investment policy on a regular basis. The NAV of the Company is issued daily to the London Stock Exchange and is also available on the Company’s website at www.epgot.com.

Details of the Company’s investment portfolio as at 31 December 2017 are disclosed in the Portfolio of Investments above.

If the investment portfolio valuation fell by 1.0 per cent from the amount detailed in the Financial Statements as at 31 December 2017, it would have the effect, with all other variables held constant, of reducing the total return before taxation and therefore net assets by £1,447,000 (2016: £1,395,000). An increase of 1.0 per cent in the investment portfolio valuation would have an equal and opposite effect on the total return before taxation and net assets.

Foreign currency risk

The functional currency of the Company is sterling. The international nature of the Company’s investment activities gives rise to a currency risk which is inherent in the performance of its overseas investments. The Company’s overseas income is also subject to currency fluctuations.

It is not the Company’s policy to hedge this risk on a continuous basis.

Details of the Company’s foreign currency risk exposure as at 31 December 2017 are disclosed in note 15.

If sterling had strengthened by 1.0 per cent against all other currencies on 31 December 2017, with all other variables held constant, it would have the effect of reducing the total return before taxation and net assets by £1,269,000 (2016: £1,252,000). If sterling had weakened by 1.0 per cent against all other currencies, there would have been an equal and opposite effect on the total return before taxation and net assets.

Regulatory risk

The Company operates in an evolving regulatory environment and faces a number of regulatory risks.

Relevant legislation and regulations which apply to the Company include the Act, the CTA, the Listing Rules and the Disclosure Guidance and Transparency Rules of the FCA, the AIFMD and the Markets in Financial Instruments Directive II. In accordance with the Packaged Retail and Insurance-based Investment Products Regulation, a Key Information Document was made available on the Company’s website from January 2018.

Failure to qualify under the terms of sections 1158 and 1159 of the CTA may lead to the Company being subject to capital gains tax. A breach of the rules of the UK Listing Authority may result in censure by the FCA and/or the suspension of the Company’s shares from listing.

The Company is also required to comply with the AIFMD. On 16 July 2014, the Company announced that it had appointed Edinburgh Partners AIFM Limited as its AIFM and the AIFM is responsible for ensuring compliance with the AIFMD.

The Directors note the new corporate offence of failure to prevent tax evasion and believe all necessary steps have been taken to prevent facilitation of tax evasion.

If all price sensitive issues are not disclosed in a timely manner, this could create a misleading market in the Company’s shares. The Directors are aware of their responsibilities relating to price sensitive information and would consult with their advisers if any potential issues arose. This includes ensuring compliance with the Market Abuse Regulation which came into effect in the UK on 3 July 2016. The AIFM would notify the Board immediately if it became aware of any disclosure issues.

The Investment Manager has a comprehensive market abuse policy and any potential breaches of this policy would be promptly reported to the Board.

The Board has agreed service levels with the Company Secretary and Investment Manager which include active and regular review of compliance with these requirements.

Other risks

Other risks the Company faces are:

A description of these other risks is set out below.

Liquidity risk

The Company’s policy with regard to liquidity is to ensure continuity of funding. Short-term flexibility is achieved through cash management.

The Company’s assets comprise mainly of readily realisable securities which can be sold freely to meet funding requirements if necessary. Securities listed on a recognised stock exchange have been valued at bid prices and exchange rates ruling at the close of business on 31 December 2017. In certain circumstances, the market prices at which investments are valued may not represent the realisable value of those investments, taking into account both the size of the Company’s holding and the frequency with which such investments are traded.

The maturity profile of the Company’s financial liabilities, including creditors, is as follows:

As at
31 December
2017
£’000
As at
31 December
 2016
£’000
In one year or less 656 317
656 317


Credit risk

Credit risk is the risk of financial loss to the Company if the contractual party to a financial instrument fails to meet its contractual obligations.

The carrying amounts of financial assets best represent the maximum credit risk exposure at the Balance Sheet date.

Investment transactions are carried out with a large number of brokers whose creditworthiness is reviewed by the Investment Manager. Transactions are ordinarily undertaken on a delivery versus payment basis whereby the Company’s custodian bank ensures that the counterparty to any transaction entered into by the Company has delivered on its obligations before any transfer of cash or securities away from the Company is completed.

Cash is only held at banks and in liquidity funds that have been identified by the Board as reputable and of high credit quality. As at 31 December 2017, The Northern Trust Company London Branch had a long-term rating from Standard and Poors of AA-.

The maximum exposure to credit risk as at 31 December 2017 was £4,811,000 (2016: £4,608,000). The calculation is based on the Company’s credit risk exposure, being cash and debtors, as at 31 December 2017 and this may not be representative of the year as a whole.

None of the Company’s assets are past due or impaired.

Interest rate risk

The Company’s assets and liabilities, excluding short-term debtors and creditors, may comprise financial instruments which include investments in fixed interest securities.

Details of the Company’s interest rate exposure as at 31 December 2017 are disclosed in note 15.

The majority of the Company’s assets were non-interest bearing as at 31 December 2017. Surplus cash is invested in liquidity funds.

If interest rates had reduced by 0.25 per cent (2016: 0.25 per cent) from those obtained as at 31 December 2017 it would have the effect, with all other variables held constant, of decreasing the total return before taxation and therefore net assets on an annualised basis by £11,000 (2016: £11,000). If there had been an increase in interest rates of 0.25 per cent (2016: 0.25 per cent) there would have been an equal and opposite effect in the total return before taxation and net assets. The calculations are based on cash at bank and short-term deposits as at 31 December 2017 and these may not be representative of the year as a whole.

Gearing risk

Gearing can be used to enhance long-term returns to Shareholders. The Company is permitted to employ gearing should the Board feel it appropriate to do so up to a maximum of 25 per cent of total assets.

The use of gearing is likely to lead to volatility in the NAV, meaning that a relatively small movement either down or up in the value of the Company’s total investments may result in a magnified movement in the same direction of the NAV. The greater the level of gearing, the greater the level of risk and likely fluctuation in the share price.

At the year end, the Company had no gearing (2016: nil).

Operational risk

There are a number of operational risks associated with the fact that third parties undertake the Company’s administration and custody. The main risk is that third parties may fail to ensure that statutory requirements, such as Companies Act and the UK Listing Authority requirements, are met.

The Board regularly receives and reviews management information on third parties which the Company Secretary compiles. In addition, each of the third parties provides a copy of its report on internal controls (ISAE 3402, SSAE 16 or equivalent) to the Board each year.

Other financial risk

If the Company utilises inappropriate accounting policies or fails to comply with current or new accounting standards, the main risk is that this may lead to a breach of regulations.

The AIFM employs independent administrators to prepare all financial statements and meets with the independent auditor at least once a year to discuss all financial matters including appropriate accounting policies.

The Company is a member of the AIC, a trade body intended to promote investment trusts which also develops best practice for all of its members.

17. Capital management policies

The Company’s objective 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 stock market index. In pursuing this objective, the Board has a responsibility for ensuring the Company’s ability to continue as a going concern. This involves the ability to: issue and buy back share capital within limits set by the Shareholders in general meeting; borrow monies in the short and long term; and pay dividends to Shareholders out of current year revenue earnings as well as out of brought-forward revenue reserves.

The Company’s capital comprises:

2017
£’000
2016
£’000
Called-up share capital 645 645
Share premium 1,597 1,597
Capital redemption reserve 14 14
Special reserve 54,952 66,630
Capital reserve 87,435 70,668
Revenue reserve 4,175 4,203
Total Shareholders’ funds 148,818 143,757

The Company’s objectives for managing capital are the same as the previous year and have been complied with throughout the year.

18. Transactions with the AIFM and the Investment Manager

Information with respect to transactions with the AIFM and the Investment Manager is detailed in note 3 and in the Strategic Report above.

19. Related party transactions

Details in respect of the Directors’ remuneration are set out in note 4 and in the Directors’ Remuneration Report in the full Annual Report and Financial Statements. Under the AIC SORP, an investment manager is not considered to be a related party of the Company. There were no other transactions with related parties in the year ended 31 December 2017.

20. Post Balance Sheet events

As disclosed in the Chairman’s Statement above, subsequent to the year end, on 17 January 2018, Franklin Resources Inc. announced the acquisition of Edinburgh Partners Limited, the Company’s Investment Manager. The acquisition is subject to certain regulatory approvals, including the approval of the Financial Conduct Authority in the United Kingdom. It is expected that the acquisition will be completed in the first half of 2018. As disclosed in note 8, an adjustment has been made to the carrying value of the Company’s holding in Edinburgh Partners Limited in this Annual Report and Financial Statements.

As disclosed in the Extracts from the Directors’ Report above, subsequent to the year end and up to 14 March 2018, the date of signing this report, the Company bought back 475,000 ordinary shares into treasury at a total cost of £1,513,000.

PERFORMANCE RECORD


Shareholders’  
funds   
Net asset 
value per 
ordinary 
share 
Share 
price per 
ordinary 
share 
Share   price   
discount to   
net asset   
value   
Revenue  
return per  
ordinary  
share  

Dividend  
per ordinary  
share  

     Ongoing       
charges       
ratio4         
Year ended
31 December
20041 £26.1m 116.4p 110.5p 5.1% 0.6p              0.4p       1.7%5    
2005 £52.2m 156.2p 154.5p 1.1% 1.1p 0.8p       1.5%5    
2006 £58.8m 172.8p 170.0p 1.6% 2.1p 1.8p       1.2%5    
2007 £57.7m 177.2p 160.0p 9.7% 2.7p 2.3p       1.1%5    
2008 £46.4m 150.4p 132.5p 11.9% 3.9p 3.1p       1.1%5    
2009 £50.7m 175.9p 172.0p 2.2% 2.7p 2.4p       1.0%5, 6
2010 £51.6m 188.2p 186.8p 0.7% 3.2p 2.8p       1.3%5    
2011 £95.1m 169.9p 167.0p 1.7% 5.0p 4.2p       0.8%7    
2012 £91.8m 183.1p 175.5p 4.2% 3.9p               3.9p      1.1%    
2013 £112.6m 233.6p 230.0p 1.5% 2.7p   2.7p       1.1%    
2014 £112.1m 236.0p 234.6p 0.6% 3.7p 3.3p       1.1%    
2015 £118.4m 239.8p 234.5p 2.2% 3.1p 3.1p       1.0%    
2016 £143.8m 300.2p 293.0p 2.4% 5.3p 5.3p     1.0%
2017 £148.1m 337.7p 320.0p 5.2% 5.3p 5.3p³      0.9%

1 Period 13 November 2003 to 31 December 2004. The Company commenced operations on the admission of its shares to trading on the London Stock Exchange on 15 December 2003.

2 Includes a special dividend of 1.0p.

3 Proposed dividend for the year.

4 Ongoing charges ratio based on total expenses, excluding finance costs, transaction costs and certain non-recurring items for the year as a percentage of the average monthly net asset value.

5 Total expense ratio based on total expenses for the year as a percentage of the average monthly net asset value.

6 Total expense ratio 1.3 per cent excluding VAT refund.

7 The total expense ratio would have been 1.0 per cent if investment management fees of £236,000 had not been waived as a consequence of the merger with Anglo & Overseas Plc.

Past performance is not a guide to future performance.
 

ANNUAL GENERAL MEETING

The Company’s Annual General Meeting will be held at The Bonham Hotel, 35 Drumsheugh Gardens, Edinburgh EH3 7RN on Wednesday, 25 April 2018 at 12.00 noon.

DIRECTORS

Teddy Tulloch (Chairman)
David Hough
David Ross
Giles Weaver

All of the Directors are non-executive and independent of the AIFM and the Investment Manager.

ALTERNATIVE INVESTMENT FUND MANAGER

Edinburgh Partners AIFM Limited
27-31 Melville Street
Edinburgh
EH3 7JF

INVESTMENT MANAGER

Edinburgh Partners Limited
27-31 Melville Street
Edinburgh
EH3 7JF

National Storage Mechanism

A copy of the full Annual Report and Financial Statements will shortly be submitted to the National Storage Mechanism (“NSM”) and will be available for inspection at the NSM, which is situated at: www.morningstar.co.uk/uk/NSM

Enquiries:

Dr Sandy Nairn
Kenneth J Greig

Edinburgh Partners AIFM Limited
Tel: 0131 270 3800

The Company’s registered office address is:

27-31 Melville Street
Edinburgh
EH3 7JF

END

Neither the contents of the Company’s website nor the contents of any website accessible from hyperlinks on this announcement (or any other website) is incorporated into, or forms part of, this announcement.

LEI: 2138005T5CT5ITZ7ZX58


Close


London Stock Exchange plc is not responsible for and does not check content on this Website. Website users are responsible for checking content. Any news item (including any prospectus) which is addressed solely to the persons and countries specified therein should not be relied upon other than by such persons and/or outside the specified countries. Terms and conditions, including restrictions on use and distribution apply.

 


Annual Financial Report - RNS