Annual Results for the year ended 31 December 2022
29/03/2023 07:00
Global Opportunities Trust plc
Legal Entity Identifier: 2138005T5CT5ITZ7ZX58
Annual Results for the year-ended 31 December 2022
Financial Highlights
NET ASSET VALUE PER SHARE – cum inc. (pence)* +14.2% NET ASSET VALUE TOTAL RETURN ( with dividends added back)* +15.8%
SHAREHOLDERS’ FUNDS £106.1 m DISCOUNT TO NET ASSET VALUE* 13.5%
31 December 2022 31 December 2021 % Change
Net assets/shareholders’ funds (£) 106,144,000 116,123,000 (8.6)
Shares in issue 29,222,180 36,527,725 (20.0)
Net asset value per share – cum inc. (pence)* 363.2 317.9 14.2
Net asset value total return (with dividends added back) (%)* 15.8 5.1
Share price (pence) 314.0 291.0 7.9
Dividend per share (pence) 5.0 5.0 –
Share price total return (with dividends added back) (%)* 9.8 4.6
Share price discount to net asset value (%)* (13.5) (8.5)
Ongoing charges ratio (%)* 0.9 1.1
* Alternative Performance Measure.
Cahal Dowds, Chairman - “This is the first full year of the Company
operating under its expanded investment policy. As was articulated in the
shareholder circular which preceded the changes, the Board felt strongly that
such were the excessive conditions in asset markets, greater flexibility was
required in order to protect shareholder capital. I am pleased to report that
the results for 2022 have supported this view, with the NAV total return of
the Company appreciating by 15.8% and the total return to shareholders of the
share price, with dividends reinvested, rising by 9.8%. This was against a
backdrop of synchronised declines in almost all asset classes. Shareholders
should note that a substantial component of the positive return relates to the
decline of sterling. However, even without the currency effect, the assets of
the Company would have appreciated.
Whilst the Company’s NAV rose substantially over the period, the share price
movement lagged and the discount to NAV widened as a consequence. The Board
believes that the Company now represents a unique proposition for investors
and the Company will be increasing its efforts to raise awareness, which we
believe will attract new investors and help address the question of the
discount. We would like to thank shareholders for their patience and support
over the period and we look to the future with optimism.”
Dr Sandy Nairn, Executive Director – “The extended period of negative real
interest rates that followed the financial crisis of 2008 resulted in a more
extreme and generalised overvaluation of asset classes than I have seen in
living memory. It extended from equities to bonds, property and alternatives
and to both listed and unlisted markets. This is what I, and others, have
referred to as the ‘Everything Bubble’ and we know now that it reached a
climax and finally popped at the end of 2021.
We are moving into a world in which free money no longer drives all returns to
unjustified heights. I believe that we are in a transition back to one where
the traditional investing virtues will once again reign. This is not about
value versus growth or other factors such as ‘quality’. It is simply about
how much you are willing to pay for the characteristics and future of an
asset. We look forward to the day where risk aversion rises to the levels that
disregard for risk reached in the recent past. That will be the time that we
again see an abundance of attractive investable opportunities.
In my judgement we are not there yet, but the time is coming. We will try to
remain patient and prudent until that time. Our proposition to shareholders is
that, as and when those opportunities present themselves, the Company will be
willing and ready to use the flexibility that our investment policy creates to
pursue them to the full. We are tactically, not permanently, bearish. We will
seek to keep shareholders informed of our views as they evolve via the website
and shareholders can also opt in there to receive these views electronically,
should they wish to do so.”
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CHAIRMAN’S STATEMENT
I am pleased to present the Company’s Annual Report and Financial Statements
for the year ended 31 December 2022.
Introduction
The year under review has been one of significant change for the Company. As
you will read below, the Board has overseen the Company’s transition to a
self-managed investment company at the same time as global economies quickly
entered a downturn with many countries including the United Kingdom (‘UK’)
facing recession. We all gave a sigh of relief when the world’s battle with
the Covid pandemic appeared to have been won and looked forward to a positive
future, however little did we know that markets were about to enter a roller
coaster period battling inflation, rising interest rates, and the ongoing
aftermath of Russia’s invasion of Ukraine. In the UK, we also witnessed a
tumultuous political period, with the appointment of two Prime Ministers
within a matter of weeks, the latter appointment following a disastrous budget
statement endorsed by the then Prime Minister Liz Truss which caused market
turmoil.
Transition to Self-Managed Investment Company
As previously detailed in the Half-Yearly Report for the six months ended 30
June 2022, the Company successfully transitioned to a self-managed investment
company on 8 June 2022 and is registered as a Small Registered Alternative
Investment Fund Manager by the Financial Conduct Authority (‘FCA’). The
Board is now fully responsible for the management of the Company and all
required reporting to the FCA in respect of the safeguarding of the
Company’s assets.
Following receipt of approval from the FCA, several changes were made to the
Company’s service providers. The agreement with Franklin Templeton
Investment Trust Management Limited in respect of its appointment as
Alternative Investment Fund Manager was terminated, as was the Depositary
Agreement with Northern Trust Investor Services Limited. A new service
agreement was entered into with our Executive Director, Dr Sandy Nairn, to
manage the investment portfolio, with Franklin Templeton Investment Management
Limited (‘Franklin Templeton’) appointed as Sub-Advisor to assist with the
management of the Company’s direct equity holdings. In addition, J.P. Morgan
Chase Bank N.A. was appointed as Custodian, with Juniper Partners Limited
appointed as Administrator and Company Secretary to the Company.
I am delighted to report that the transition to a self-managed investment
company ran smoothly with no disruption to the management of the investment
portfolio. All the new service providers are now fully embedded in the
Company’s operations and the new arrangements are functioning well.
Finally, you will have noted that with effect from 9 June 2022, the Company
changed its name to Global Opportunities Trust plc.
Update on Management Arrangements
I am pleased to announce that Dr Nairn a full time executive of the Company,
having resigned from his executive position with Franklin Templeton.
The Company will be serving notice to terminate its investment management
agreement with Franklin Templeton and the global listed equities portion of
the Company’s portfolio will be managed by Dr Nairn going forward. The
Company thanks Franklin Templeton for its services to date and throughout the
Company’s transition to a self-managed structure.
The Company has also entered into a strategic relationship with Goodhart
Partners LLP (‘Goodhart’) through which Goodhart will introduce
opportunities in the private markets to the Company. As part of this strategic
relationship, Goodhart has also been appointed to provide investment
sub-advisory services to the Company to assist Dr Nairn in managing the global
listed equities mandate.
The Board believes that these arrangements provide a number of benefits for
shareholders:
* Dr Nairn’s appointment as a full time executive gives clear focus to the
Company’s management structure.
* The strategic relationship with Goodhart will help to develop significantly
the opportunities available to the Company under the part of its portfolio
investing in private capital markets and specialist funds.
* It is anticipated that these arrangements will reduce the Company’s
ongoing charges ratio from 0.9 per cent. to 0.8 per cent. (based on the
Company’s net asset value as at 24 March 2023 and on the assumption that the
Company becomes fully invested when valuations allow).
Investment Performance
As at 31 December 2022 the Company had net assets of £106.1 million, the net
asset value (‘NAV’) per ordinary share (‘share’) was 363.2p and the
middle market price per share on the London Stock Exchange was 314.0p,
representing a 13.5% discount to NAV.
This is the first full year of the Company operating under its expanded
investment policy. As was articulated in the shareholder circular which
preceded the changes, the Board felt strongly that such were the excessive
conditions in asset markets, greater flexibility was required in order to
protect shareholder capital. I am pleased to report that the results for 2022
have supported this view, with the NAV total return of the Company
appreciating by 15.8% and the share price total return, with dividends
reinvested, rising by 9.8%. This was against a backdrop of synchronised
declines in almost all asset classes. Shareholders should note that a
substantial component of the positive return relates to the decline of
sterling. However, even without the currency effect, the assets of the Company
would have appreciated.
Further details on the investment performance of the Company can be found in
the Executive Director’s Report.
Association of Investment Companies (‘AIC’) Peer Group
As a result of the changes to the Company’s investment policy, with effect
from November 2022, the Company’s AIC peer group changed from the Global
Sector to the Flexible Investment Sector.
Final Dividend
A resolution to declare a final dividend of 5.0p per share will be proposed at
the Annual General Meeting (‘AGM’) on 26 April 2023. If approved by
shareholders, the dividend will be payable on 31 May 2023 to shareholders on
the register of members on 12 May 2023. The ex-dividend date is 11 May 2023.
The cost of this dividend is covered by the Company’s distributable revenues
during the financial year under review and exceeds the minimum that the
Company is obliged to distribute under applicable law to maintain its status
as an investment trust.
Succession Planning
David Ross recently advised the Board of his intention to retire as a Director
of the Company. David has served as a Director of the Company since 1 June
2014 and will retire following the conclusion of this year’s AGM.
On behalf of the Board, I would like to thank David for his significant
contribution to the Company during his tenure and wish him well for the
future.
Following David informing the Board of his intention to retire, the Nomination
Committee undertook a search for a replacement non-executive Director. Having
considered several exceptional candidates, the Nomination Committee
recommended that Katie Folwell-Davies be appointed as a non-executive Director
of the Company.
The Board has approved Katie’s appointment in principle subject to
shareholders electing her as a Director of the Company at the 2023 AGM.
Other than David, all remaining Directors are offering themselves for
re-election at the forthcoming AGM.
Annual General Meeting
This year’s AGM will be held at The Bonham Hotel, 35 Drumsheugh Gardens,
Edinburgh EH3 7RN on 26 April 2023 at 12 noon.
In addition to the formal business of the meeting, Dr Nairn will provide a
short presentation to shareholders on the performance of the Company over the
past year as well as an outlook for the future.
The AGM is a great opportunity for shareholders to ask questions of both the
Board and of the Executive Director, and as always, the Board would welcome
your attendance.
If you are unable to attend the AGM in person, I would encourage you to vote
in favour of all resolutions by Form of Proxy and to appoint me as chair of
the meeting to ensure your vote counts.
Outlook
Whilst it is highly likely that there will be significant rallies in asset
prices as inflation falls in response to monetary policy, the world should
continue to be viewed with caution. The probability of a prolonged recession
appears much more likely than markets currently seem to be discounting, and as
such the primary investment focus of the Company remains one of capital
preservation. In times of economic stress, pessimism sets in and liquidity
tends to evaporate. However, notwithstanding this, the new investment
flexibility enjoyed by the Company will allow it to take any opportunities
that may appear along this path.
Whilst the Company’s NAV rose substantially over the period, the share price
movement lagged and the discount to NAV widened as a consequence. The Board
believes that the Company now represents a unique proposition for investors
and the Company will be increasing its efforts to raise awareness, which we
believe will attract new investors and help address the question of the
discount. We would like to thank shareholders for their patience and support
over the period and we look to the future with optimism.
Keep in Touch
Shareholders can keep up to date on the performance of the portfolio through
the Company’s monthly factsheet which can be accessed via the website at
www.globalopportunitiestrust.com. The Company’s website has recently been
refreshed and updated and I would encourage shareholders to visit the new
site.
As always, the Board welcomes communication from shareholders and I can be
contacted directly through the Company Secretary at cosec@junipartners.com.
Cahal Dowds
Chairman
28 March 2023
EXECUTIVE DIRECTOR’S REPORT
Background
This is the first full year for the Company following receipt of shareholder
approval to change the investment objectives and policy. The Company’s
original investment objective and policy were set in 2003 and reflected
investment conditions that prevailed at that time. The intention back in 2003
was explicitly to avoid constraints that could periodically undermine the
performance of a portfolio when on valuation grounds it became difficult to
identify attractively priced public equity securities. For this reason, the
Company has always had the ability to own cash, bonds and make some limited
investments in unlisted equity securities, where appropriate.
The extended period of negative real interest rates that followed the
financial crisis of 2008 resulted in a more extreme and generalised
overvaluation of asset classes than I have seen in living memory. It extended
from equities to bonds, property and alternatives and to both listed and
unlisted markets. This is what I, and others, have referred to as the
‘Everything Bubble’ and we know now that it reached a climax and finally
popped at the end of 2021.
As a consequence of these extreme valuations the Company held significant
levels of cash, cash being the only practical way to protect downside risk
under the existing policy, but with the drawback that cash generated negative
real returns. It was for this reason that I proposed, and the Board agreed,
that more flexibility in the investment policy was both necessary and
desirable if the Company was to simultaneously preserve shareholder capital
and take advantage of opportunities that existed, or would emerge over time.
The additional degree of freedom that the new investment policy has given us
since it was approved by shareholders in December 2021 has proved invaluable
in enabling the Company to deliver a positive double digit NAV return in a
year when both equities and bonds have witnessed declines of more than 10%. As
previously mentioned in the Chairman’s Statement on page 4, at the AIC’s
suggestion, the Company has changed its peer group from the Global to the
Flexible Investment sector. However it may be worth emphasising that in normal
market conditions we remain firm believers in the value of publicly listed
equities as generators of portfolio wealth.
The Portfolio
Against this background, the portfolio has been structured to significantly
reduce absolute downside risk as we wait for the ‘Everything Bubble’ to
deflate or burst. Since the change of investment policy, the volatility of the
portfolio has fallen to around half that of the broad global equity market. It
now comprises four ‘levers’ that are carefully calibrated to try and
create a coherent exposure for current market conditions:
* The first is a direct equity portfolio that is positioned defensively. At
the beginning of the year, the largest concentrations were in areas such as
telecoms and health care where cash-flow and earnings were reasonably
predictable and valuations were not excessive. Through the year, we added to
energy and defence as tensions grew in eastern Europe. Despite the signals
coming out of Russia, most market participants seemed to ignore the threat of
the invasion of Ukraine. Whilst it was plausible that Russia could simply have
been making heavy threats to gain a negotiated advantage, it was instructive
that markets focussed on the most optimistic outcome. This was yet another
sign of the prevailing complacency in asset markets. As a consequence, we felt
it prudent to make some portfolio changes to mitigate the potential risks. We
have avoided the temptation to invest in optically cheaper companies with
lower long-term earnings visibility, more cyclicality, or balance sheet risks.
The time to add this type of risk will come, but now is too early in our
opinion.
* The second lever is an investment in the Templeton European Long-Short
Equity Fund (‘European Long-Short Fund’). The portfolio now has
approximately 15% of its assets invested in this fund. At initial investment
the proportion was around 10%, but appreciation has caused this to increase.
The strategy deployed by this fund is unusual and distinctive. It primarily
generates returns from the ‘spread’ between high and low quality European
listed smaller companies, with very little overall market exposure. It
operates with a relatively high gross exposure and is run by a portfolio
manager with a strong track record as a short-seller. The strategy is
volatile, but has the potential to produce outsized returns during adverse
markets. This type of strategy became unfashionable after the 2008 financial
crisis because low interest rates made it relatively easy for low quality
businesses to refinance themselves. As interest rates normalise at higher
levels, however, we believe the upside opportunity is very significant and it
diversifies the market exposure embedded in the direct equity portfolio well.
* The third lever is an exposure to private equity assets through the
Volunteer Park Capital Fund (‘VPC Fund’). We are very wary about the
valuation of private assets, so it is perhaps counter-intuitive that the
Company should now have invested in a private equity fund. However, the VPC
Fund is not a straight investment in private companies. Instead, it invests in
the General Partner of private capital fund management businesses. These
businesses benefit from very long term ‘contractual’ revenues on the
private capital funds that they manage. The manager of the VPC Fund seeks to
structure its investments to capture the upside of this long term and highly
visible revenue with very little downside risk. The market opportunity here
lies in the small deal size which means there is little competition to VPC
from larger players for whom potential deals lie below their threshold of
interest. In terms of risk/return the exposure fits neatly between the direct
equity portfolio and the European Long-Short Fund. Its objective is to
generate positive absolute returns regardless of market direction.
* The final lever is cash. This exposure has grown progressively over recent
years as the ever-rising level of asset valuations caused the opportunity set
of undervalued assets to shrink. For most of the year cash has been held in
currencies other than sterling, reflecting the difficult economic issues we
believed faced the UK. Once the currency reacted to the ‘Truss government
debacle’ and sterling fell sharply towards parity, the Company converted
some of its US dollar exposure back to sterling. We expect to continue to hold
a high cash position until we can clearly see value emerge in other assets.
The current risk in the portfolio is that if equity markets were to rise
sharply, any gains in the portfolio would lag significantly, and in an extreme
set of conditions could actually decline. However, we continue to see the
risks in asset markets to be asymmetric to the downside and the portfolio is
designed to preserve capital and hence allow the maximum ability to take
advantage of the opportunities that will emerge once the markets have fully
normalised again. Historical experience underlines the extraordinary extent of
the asset price bubble which more than a decade of continued financial
repression has produced, so it will most likely take more than one year of
market falls to restore something like the traditional equilibrium.
Performance
The Company’s performance over the year was in line with its objectives. The
portfolio tended to lag in weeks when markets were rising but still provided a
positive absolute return. When markets were falling the portfolio reassuringly
proved its defensive qualities, often not falling at all. In doing so the
portfolio outperformed broad equity markets by a comfortable margin. It is
notable that 2022 proved to be a very difficult year for bond markets as well,
given the impact of rising interest rates. The positive correlation between
bonds and equities undermined the ability of traditional balanced funds to
diversify away any of their equity exposure, something that the portfolio was
able to do as a result of the timely change in its investment policy. If we
look at the ‘levers’ discussed above the performance of each was as
follows:
* Direct equities: returned just over 12%.
* European Long-Short Fund: appreciated by over 60%.
* Private Equity: since initial investment in the VPC Fund, which took place
just prior to the end of 2021, the value of the holding has appreciated by 14%
against the purchase price of December 2021.
* Cash: the return was approximately 12%, the appreciation reflecting that the
majority was held in US dollars over the period.
When considering these figures it is critical to remember that the underlying
instruments/investments have been selected and blended to try and achieve a
risk/reward profile appropriate to conditions as we see them. Putting this in
simpler terms, as an example, when markets fall we expect to see the private
capital exposure and cash remain stable, with the long-short holding
appreciating. Under these circumstances we anticipate the equity holdings may
also decline, but by significantly less than the market and for this to be
offset by the other exposures. It also needs to be remembered that sterling
was weak through much of 2022, which had a meaningfully positive impact on the
returns.
The result of this, for calendar year 2022, was that the Company’s NAV total
return, including dividends, was 15.8%. The comparable figure for the MSCI AC
World index was -7.6%; for the Bloomberg Global Aggregate Bond index -5.9%.
Over the period, the Barclays Sterling Overnight Cash index returned 1.4%.*
*Sources: Refinitiv Datastream, Bloomberg
Future Prospects
Given the undoubted economic difficulties facing the world, it may seem
paradoxical that I find myself more excited about the investing future than
for some considerable time. Sir John Templeton, whose wisdom and experience I
was able to observe at first hand as an employee early in my career, was
always adamant that high valuations were inimical to strong investment
performance in anything but the short term. It has been dispiriting to have
had to spend the last few years observing how governments and central banks
have combined to create the conditions in which speculation, the antithesis of
sound money management principles, has been able to run riot, creating a
classic investment bubble not just in equities, but – almost uniquely in
financial history – across virtually all asset classes at the same time.
My renewed sense of confidence rests on what feels like an inexorable trend
back towards normality in valuations. Normality in valuation means an
investing environment in which prices of assets are based on their fundamental
qualities rather than on other extraneous factors. Whilst the trend may be
inexorable, history suggests that the process of adjustment back to normality
will contain powerful bear market rallies. These are likely to be fuelled by a
hope that inflation can fall back to pre-bear market levels without any
meaningful adverse economic consequences and that we can return to a world in
which interest rates remain indefinitely at negligible levels.
Unfortunately, it stretches credibility to think that we can have a gentle
glide path to normality after such an extended period in which almost the
entire focus was on reward while scant attention was paid to risk. The new
environment is more likely to see a reversal of this balance. The gilts market
crisis in the autumn last year, the bankruptcy of FTX, the cryptocurrency
exchange, and the more recent troubles at Silicon Valley Bank and Credit
Suisse, should not be seen as isolated incidents but as symptoms of the
profound if until now largely hidden risks embedded in the global financial
system.
Against the backdrop of global economic weakness the excesses generated by a
decade of easy money will continue to be revealed. Interim rallies of the kind
we have seen in equity markets since the autumn can prove very dangerous for
investors unless they are based on improvements in fundamental factors, such
as profitability, earnings and balance sheet strength. There is as yet no
evidence to support such a view.
In short, we are moving into a world in which free money no longer drives all
returns to unjustified heights. I believe that we are in a transition back to
one where the traditional investing virtues will once again reign. This is not
about value versus growth or other factors such as ‘quality’. It is simply
about how much you are willing to pay for the characteristics and future of an
asset. We look forward to the day where risk aversion rises to the levels that
disregard for risk reached in the recent past. That will be the time that we
again see an abundance of attractive investable opportunities.
In my judgement we are not there yet, but the time is coming. We will try to
remain patient and prudent until that time. Our proposition to shareholders is
that, as and when those opportunities present themselves, the Company will be
willing and ready to use the flexibility that our investment policy creates to
pursue them to the full. We are tactically, not permanently, bearish. We will
seek to keep shareholders informed of our views as they evolve via the website
and shareholders can also opt in there to receive these views electronically,
should they wish to do so.
Dr Sandy Nairn
Executive Director
28 March 2023
PORTFOLIO OF INVESTMENTS
as at 31 December 2022
Company Sector Country Valuation £’000 % of Net assets
Templeton European Long-Short Equity SIF (1) Financials Luxembourg 14,298 13.5
Volunteer Park Capital Fund SCSp (2) Financials Luxembourg 7,708 7.3
TotalEnergies Energy France 3,682 3.5
Unilever Consumer Staples United Kingdom 3,220 3.0
Sumitomo Mitsui Trust Holdings Financials Japan 2,685 2.5
ENI Energy Italy 2,528 2.4
Raytheon Technologies Industrials United States 2,503 2.4
Imperial Brands Consumer Staples United Kingdom 2,330 2.2
Nabtesco Industrials Japan 2,281 2.1
Novartis Health Care Switzerland 2,277 2.1
Samsung Electronics Information Technology South Korea 2,256 2.1
General Dynamics Industrials United States 2,256 2.1
Orange Communication Services France 2,187 2.1
Barrick Gold Materials Canada 2,036 1.9
Lloyds Banking Financials United Kingdom 1,958 1.8
Antofagasta Materials United Kingdom 1,932 1.8
Dassault Aviation Industrials France 1,902 1.8
Sanofi Health Care France 1,898 1.8
Panasonic Consumer Discretionary Japan 1,896 1.8
Murata Manufacturing Information Technology Japan 1,660 1.6
Tesco Consumer Staples United Kingdom 1,586 1.5
Daiwa House Industry Real Estate Japan 1,541 1.5
Verizon Communications Communication Services United States 1,509 1.4
Fresenius Medical Care Health Care Germany 1,154 1.1
Total investments 69,283 65.3
Cash and other net assets 36,861 34.7
Net assets 106,144 100.0
(1) Luxembourg Specialised Investment Fund
(2) Luxembourg Special Limited Partnership
STRATEGIC REVIEW
Introduction
The purpose of this report is to provide shareholders with details of the
Company’s strategy, objectives and business model as well as the principal
and emerging risks and challenges the Company has faced during the year under
review. It should be read in conjunction with the Chairman’s Statement, the
Executive Director’s Report and the portfolio information, which provide a
review of the Company’s investment activity and outlook.
The Board is responsible for the stewardship of the Company, including overall
strategy, investment policy, dividends, corporate governance procedures and
risk management. The Board assesses the performance of the Company against its
investment objective at each Board meeting by considering its key performance
indicators.
Business and Status
The principal activity of the Company is to carry on business as an investment
trust.
The Company is registered in Scotland as a public limited company and is an
investment company within the meaning of section 833 of the Companies Act
2006. 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
and the ongoing requirements for approved companies as detailed in Chapter 3
of Part 2 of the Investment Trust (Approved Company) (Tax) Regulations 2011.
In the opinion of the Directors, the Company has conducted its affairs so as
to enable it to continue to maintain its status as an investment trust.
The Company is a self-managed investment company run by its Board and is
authorised by the FCA as a small registered alternative investment fund
manager.
The Company’s shares are listed on the premium segment of the Official List
of the FCA and traded on the main market of the London Stock Exchange.
The Company is a member of the AIC, a trade body which promotes investment
companies and develops best practice for its members.
Investment Objective
The Company’s investment objective is to provide shareholders with an
attractive real long-term total return by investing globally in undervalued
asset classes. The portfolio is managed without reference to the composition
of any stock market index.
Investment Policy
The Company invests in a range of assets across both public and private
markets throughout the world. These assets include both listed and unquoted
securities, investments and interests in other investment companies and
investment funds (including limited partnerships and offshore funds) as well
as bonds (including index linked securities) and cash as appropriate.
Any single investment in the Company’s portfolio may not exceed 15% of the
Company’s total assets at the time of the relevant investment (the ‘Single
Investment Limit’).
The Company may invest in other investment companies or funds and may appoint
one or more sub-advisors to manage a portion of the portfolio if, in either
case, the Board believes that doing so will provide access to specialist
knowledge that is expected to enhance returns. The Company will gain exposure
to private markets directly and indirectly through investments and interest in
other investment companies and investment funds (including limited
partnerships and offshore funds). The Company’s investment directly and
indirectly in private markets (including through investment companies and
investment funds) shall not, in aggregate, exceed 30% of the Company’s total
assets, calculated at the time of the relevant investment.
The Company will invest no more than 15% of its total assets in other
closed-ended listed investment companies (including investment trusts).
The Company may also invest up to 50% of its total assets in bonds, debt
instruments, cash or cash equivalents when the Board believes extraordinary
market or economic conditions make equity investment unattractive or while
seeking appropriate investment opportunities for the portfolio or to maintain
liquidity. The Single Investment Limit does not apply to cash or cash
equivalents in such circumstances. In addition, the Company may purchase
derivatives for the purposes of efficient portfolio management.
From time to time, when deemed appropriate and only where permitted in
accordance with the UK Alternative Investment Fund Managers Regulations 2013,
the Company may borrow for investment purposes up to the equivalent of 25% of
its total assets. By contrast, the Company’s portfolio may from time to time
have substantial holdings of debt instruments, cash or short-term deposits.
The investment objective and policy are intended to ensure that the Company
has the flexibility to seek out value across asset classes rather than being
constrained by a relatively narrow investment objective. The objective and
policy allow the Company to be constrained in its investment selection only by
valuation and to be pragmatic in portfolio construction by only investing in
assets which the Executive Director considers to be undervalued on an absolute
basis.
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 Executive Director. The Executive Director’s approach is
long-term and focused on absolute valuation. Dr Nairn aims to identify and
invest in undervalued asset classes, and to have the patience to hold them
until they achieve their long-term earnings potential or valuation.
Dividend Policy
The Company does not have a stated dividend policy.
The rather than income growth. As a result, the level of revenue generated
from the portfolio will vary from year to year, and any dividend paid to
shareholders is likely to fluctuate.
The Board is mindful that in order for the Company to continue to qualify as
an investment trust, the Company is not permitted to retain more than 15% of
eligible investment income arising during any accounting period. Accordingly,
the Board will ensure that any declared dividend is sufficient to enable the
Company to maintain its investment trust status.
Management Arrangements
Following receipt of approval from the FCA on 8 June 2022, the Company
successfully transitioned to become a self-managed investment company.
As a result of the transition, the management agreement with Franklin
Templeton Investment Trust Management Limited was terminated. As a
self-managed investment trust, the Board is now fully responsible for the
management of the Company and all required reporting to the FCA in respect of
the safeguarding of the Company’s assets. The Depositary Agreement between
Northern Trust Global Services Limited and the Company was also terminated,
and the Company’s custodian has been changed to JP Morgan Chase Bank, NA.
The Executive Director, Dr Nairn, has overall responsibility for the
day-to-day management of the investment portfolio with Franklin Templeton
Investment Management Limited (‘Sub-Advisor’) appointed to assist with the
management of the Company’s direct equity holdings. As at 31 December 2022,
the Sub- Advisor was responsible for managing 44.5% of the Company’s assets.
As part of the transition, the Board appointed Juniper Partners Limited
(‘Juniper’) as the Company’s administrator and company secretary.
Update on Management Changes
Details of management changes which have taken place post year-end are
provided in the Chairman’s Statement, and the Principal Decisions Taken
During the Year section.
Change of Name
On 9 June 2022, the Company changed its name from EP Global Opportunities
Trust plc to Global Opportunities Trust plc. The Company’s stock exchange
ticker code was subsequently changed from EPG to GOT.
Change of Registered Office
Following the appointment of Juniper, the registered office of the Company has
changed to 28 Walker Street, Edinburgh EH3 7HR.
Portfolio Performance
Full details on the Company’s activities during the year under review are
contained in the Chairman’s Statement and Executive Director’s Report. The
portfolio consisted of 24 investments, excluding cash and other net assets as
at 31 December 2022, thus ensuring that the Company has a suitable spread of
investment risk.
Key Performance Indicators
At each Board meeting, the Directors consider key performance indicators to
assess whether the Company is meeting its investment objective.
The key performance indicators used to measure the performance of the Company
over time are as follows:
Share price total return to 31 December 2022 1 year (%) 3 years (%) 5 years (%)
Global Opportunities Trust plc 9.8 8.5 9.1
AIC Flexible Investments peer group† (6.2) 13.8 23.5
FTSE All-World Total Return Index* (7.3) 25.7 48.4
Net asset value total return to 31 December 2022 1 year (%) 3 years (%) 5 years (%)
Global Opportunities Trust plc 15.8 21.5 19.2
AIC Flexible Investments peer group† (3.5) 23.4 39.2
FTSE All-World Total Return Index* (7.3) 25.7 48.4
Share price discount to net asset value as at 31 December 2022 (%) 2021 (%) 2020 (%)
Global Opportunities Trust plc 13.5 8.5 7.9
AIC Flexible Investments peer group† 14.4 7.0 11.0
Ongoing charges ratio to 31 December 2022 (%) 2021 (%) 2020 (%)
Global Opportunities Trust plc 0.9 1.1 1.0
AIC Flexible Investments peer group† 1.0 0.9 0.9
† Source: theaic.co.uk & Morningstar.
* The Company does not formally benchmark its performance against a specific
index, the FTSE All-World Total Return Index (in sterling) has been shown for
comparative purposes only.
Gearing
The Company did not have any borrowings and did not use derivative instruments
for currency hedging during the year ended 31 December 2022. The Company has
an investment in the Templeton European Long-Short Equity SIF which uses
derivatives.
Principal and Emerging Risks
The Board, through delegation to the Audit and Management Engagement
Committee, has undertaken a robust annual assessment and review of all the
risks facing the Company, together with a review of any new and emerging risks
which may have arisen during the year, including rising levels of inflation
and heightened geopolitical events following the invasion of Ukraine. These
risks are formalised within the Company’s risk assessment matrix which is
formally reviewed on a regular basis.
The principal risks and uncertainties facing the Company, together with a
summary of the mitigating actions and controls in place to manage these risks,
and how these risks have changed over the period are set out below:
Risks Mitigation and Controls
Investment and Strategy Risk There can be no guarantee that the investment objective of the Company, to provide shareholders with an attractive real long-term total return by investing globally in undervalued asset classes, will be achieved. No change to this risk The Board meets regularly to discuss the portfolio performance and strategy and to receive investment updates from the Executive Director. The Board receives quarterly reports detailing all portfolio transactions and any other significant changes in the
market or stock outlooks.
Key Person Risk The Company’s ability to deliver its investment strategy is dependent on the Executive Director, Dr Nairn. 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. Increased risk due to the Company’s transition to a self managed investment company The Board frequently considers succession planning. Dr Nairn, has day-to-day responsibility for the investment management of the Company. Dr Nairn is also in regular contact with the Sub-Advisor and underlying fund managers and would be informed of any
proposed changes in their personnel.
Financial and Economic The Company’s investments are impacted by financial and economic factors including market prices, interest rates, foreign exchange rates, liquidity and inflation which could cause losses within the portfolio. Risk has been heightened by inflationary increases and geopolitical events, including the invasion of Ukraine The Board receives regular updates on the composition of the Company’s investment portfolio and market developments from the Executive Director. Investment performance is continually monitored specifically in the light of emerging risks throughout the
period. The Board regularly reviews and agrees policies for managing market price risk, interest rate risk, foreign currency risk, liquidity risk and credit risk.
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. An inappropriate or unattractive objective and strategy may have an adverse effect on shareholder returns or cause a reduction in demand for the Company’s shares, both of which could lead to a widening of the discount. No change to this risk 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 shares. The Board may use share buybacks, when appropriate, to narrow the discount to NAV at which the
shares trade. This will be done in conjunction with creating new demand and being aware of the liquidity of the shares. The Board’s commitment to allot or repurchase 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. The Board reviews changes to the shareholder register regularly and considers shareholder views and developments in the market place.
Regulatory Risk The Company operates in an evolving regulatory environment and faces a number of regulatory risks. 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 Listing Rules may result in censure by the FCA and/or the suspension of the Company’s shares from listing. The implementation of GDPR provides for greater data privacy. While the risk to the Company is deemed to be low, the impact of fines should they occur could be significant. If all price sensitive issues are not disclosed in a timely manner, this could create a misleading market in the Company’s shares. No change to this risk Compliance with the Company’s regulatory obligations is monitored on an ongoing basis by the Company Secretary and other professional advisers as required who report to the Board regularly. The Directors note the corporate offence of failure to prevent
tax evasion and believe all necessary steps have been taken to prevent facilitation of tax evasion. The Directors are satisfied that all necessary steps have been taken to prevent any breach of GDPR, including ensuring that all third party service
providers have appropriate GDPR policies in place. 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. The Company Secretary would notify the Board immediately if it became aware of any disclosure issues. The Sub-Advisor 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 Sub-Advisor which include active and regular review of compliance with these requirements.
Operational risk There are a number of operational risks associated with the fact that third parties undertake the Company’s administration and custody functions. The main risk is that third parties may fail to ensure that statutory requirements, such as compliance with the Companies Act 2006 and the FCA requirements, are met. No change to this risk The Board regularly receives and reviews management information on third parties which the Company Secretary compiles. In addition, each of the third parties, where available, provides a copy of its report on internal controls to the Board each year. The
Company employs the Administrator to prepare all financial statements of the Company and meets with the 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 which promotes investment trusts and also develops best practice for its members. The Executive Director and the Company’s third party suppliers have contingency plans to ensure the continued operation of the business in the event of disruption.
Culture
The Chairman leads the Board and is responsible for its overall effectiveness
in directing the Company. He demonstrates objective judgement, promotes a
culture of openness and debate, and facilitates effective contributions by all
Directors. In liaison with the Company Secretary, the Chairman ensures that
the Directors receive accurate, timely and clear information. The Directors
are required to act with integrity, lead by example and promote this culture
within the Company.
The Board seeks to ensure the alignment of the Company’s purpose, values and
strategy with the culture of openness, debate and integrity through ongoing
dialogue, and engagement with shareholders, the Executive Director and the
Company’s other service providers. The Company has adopted a number of
policies, practices and behaviours to facilitate a culture of good governance
and ensure that this is maintained.
The culture of the Board is considered as part of the annual performance
evaluation process which is undertaken by each Director. The culture of the
Company’s service providers is also considered by the Board during the
annual review of their performance and while considering their continuing
appointment. In the context of the Executive Director and Sub-Advisor,
particular attention is paid to environmental, social and governance,
engagement and proxy voting policies.
Directors and Gender Diversity
As at 31 December 2022, the Board of Directors of the Company comprised three
male and one female Director. The appointment of any new Director is made in
accordance with the Company’s diversity policy.
Employees and Human Rights
The Board recognises the requirement under the Companies Act 2006 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. The Company has one employee, Executive
Director Dr Nairn. All the remaining Directors are non-executive. The Company
has outsourced all its functions to third party service providers. The Company
has therefore not reported further in respect of these provisions.
Modern Slavery Statement
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.
Greenhouse Gas Emissions
The Company has no greenhouse gas emissions to report from its operations, nor
does it have responsibility for any other emission-producing sources under the
Companies Act 2006 (Strategic Report and Directors’ Report) Regulations
2013.
Environmental, Social and Governance (‘ESG’)
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 possible, 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. Voting decisions are taken on a case-by-case basis by the
Sub-Advisor on behalf of the Company. The Sub-Advisor makes use of an external
agency, Institutional Shareholders Services, a recognised authority on proxy
voting and corporate governance to assist on voting procedures. The key issues
on which the Sub-Advisor focuses are corporate governance, including
disclosure and transparency, board composition and independence, control
structures, remuneration, and social and environmental issues.
The Executive Director and Sub-Advisor consider a wide range of factors when
making investment decisions including an investee company’s ESG credentials.
In making fund investment decisions, the Executive Director’s assessment
includes analysing the fund manager’s ESG cultural buy-in, its ESG process,
procedures and reporting, its engagement with underlying portfolio companies
and an operational due diligence review of the relevant manager and fund.
Duty to Promote the Success of the Company
Under section 172 of the Companies Act 2006, the Directors have a duty to act
in the way they consider, in good faith, would be most likely to promote the
success of the Company for the benefit of its members as a whole, and in doing
so have regard (amongst other matters) to:
* the likely consequences of any decision they make in the long term;
* the need to foster the Company’s business relationships with its
stakeholders, which includes the shareholders, the Executive Director and
Sub-Advisor and other relevant parties as listed below;
* the need to act independently by exercising reasonable skill and judgement;
* the impact of the Company’s operations on the community and the
environment;
* the requirement to avoid a conflict of interests;
* the desirability of the Company maintaining a reputation for high standards
of business conduct;
* the need to act fairly between members of the Company; and
* the need to declare any interests in proposed transactions.
The Company has one employee, its Executive Director, Dr Nairn. As an
investment trust, the Company has no customers or physical assets; the primary
stakeholders are the shareholders, the Executive Director, Sub- Advisor, and
other third-party service providers. The Company also engages with its
investee companies where appropriate.
Stakeholder Engagement
Shareholders
Communication and regular engagement with shareholders are given a high
priority by the Board. The Executive Director seeks to maintain regular
contact with major shareholders and is always available to enter into dialogue
with all shareholders. A regular dialogue is also maintained with the
Company’s institutional shareholders and private client asset managers
through the Executive Director, who regularly reports to the Board on
significant contact, the views of shareholders and any changes to the
composition of the share register.
All shareholders are encouraged, if possible, to attend and vote at the AGM
and at any other general meetings of the Company (if any), during which the
Board is available to discuss issues affecting the Company. Shareholders
wishing to communicate directly with the Board should contact the Company
Secretary. The Chairman is available throughout the year to respond to
shareholders, including those who wish to speak with him in person. Copies of
the Annual and Half-Yearly Reports are currently issued to shareholders and
are also available, along with the monthly factsheets for downloading from the
Company’s website at www.globalopportunitiestrust.com. The Company also
releases portfolio updates to the market on a monthly basis.
Executive Director and Sub-Advisor
The non-executive Directors believe that maintaining a close and constructive
working relationship with the Executive Director and Sub-Advisor is crucial to
promoting the long-term success of the Company in an effective and responsible
way. This ensures the interests of all current and potential stakeholders are
properly taken into account when decisions are made. The Executive Director
attends all Board meetings and provides reports on investments, performance,
marketing, operational and administrative matters. The Sub-Advisor is
available to attend Board meetings upon request. An open discussion regarding
such matters is encouraged, both at Board meetings and by way of ongoing
communication between the Board, the Executive Director and Sub-Advisor. Board
members are encouraged to share their knowledge and experience with the
Executive Director and Sub-Advisor, and where appropriate, the Board adopts a
tone of constructive challenge. The Board keeps the ongoing performance of the
Executive Director and Sub-Advisor under continual review and conducts an
annual appraisal of both the parties.
Service Providers
The Company’s day-to-day operational functions are delegated to several
third-party service providers, each engaged under separate contracts. In
addition to the Sub-Advisor, the Company’s principal third-party service
providers include the Administrator, Auditor, Company Secretary, Custodian and
Registrar. The Board engages with its service providers to develop and
maintain positive and productive relationships, and to ensure that they are
well informed in respect of all relevant information about the Company’s
business and activities. The Board, through its Audit and Management
Engagement Committee, keeps the ongoing performance, fees and continuing
appointment of these service providers under continual review and conducts an
annual appraisal of all third-party service providers.
Investee Companies
The Sub-Advisor is responsible for the day-to-day management of the
Company’s equity investment portfolio. As such, the Sub-Advisor has primary
responsibility for engaging with investee companies on behalf of the Company.
The Sub-Advisor does so in accordance with the United Nations Principles for
Responsible Investment, and the UK Stewardship Code 2020, and is a signatory
to both regimes.
The Board recognises the importance of engagement with investee companies. The
Board is aware of evolving expectations in this regard and is committed to
working with the Executive Director and Sub-Advisor, in relation to future
engagement on behalf of the Company.
The above methods for engaging with stakeholders are kept under review by the
Directors and discussed on a regular basis at Board meetings to ensure that
they remain effective.
Principal Decisions Taken During the Year
The Board is mindful of its responsibilities to the Company’s stakeholders
when making material decisions on behalf of the Company.
The principal decisions taken by the Board during the year under review (and
post year-end) are as follows:
Transition to Self- Managed Investment Company
Following a review of the strategic direction of the Company, the Board
informed shareholders that it intended to change the Company’s management
arrangements by becoming a self-managed investment company. As part of this
change Dr Nairn was appointed as an Executive Director of the Company and now
has overall responsibility for investment management of the investment
portfolio. The Board’s rationale for becoming a self-managed investment
company, was that it believed that the Company would be able to access a wider
range of investment management expertise, particularly in the private capital
market, and that there would be greater flexibility to use specialist third
party managers where appropriate.
At the general meeting held on 17 December 2021 shareholders approved the
Board’s proposal for the Company to become a self-managed investment
company. Following receipt of approval from the Financial Conduct Authority on
8 June 2022, the Company successfully transitioned to a self-managed
investment company.
The Board is now fully responsible for the management of the Company and all
required reporting to the FCA in respect of the safeguarding of the
Company’s assets.
Post Year-End Management Changes
As previously detailed in the Chairman’s Statement, the Board have approved
a number of changes to the management structure of the Company.
Following his resignation as an executive of Franklin Templeton, Dr Nairn is
now a full time executive of the Company.
The Company will be serving notice to terminate its investment management
agreement with Franklin Templeton Investment Management Limited and the global
listed equities portion of the Company’s portfolio will be managed by Dr
Nairn going forward.
In addition, the Company has entered into a strategic relationship with
Goodhart Partners LLP (‘Goodhart’) through which Goodhart will introduce
opportunities in the private markets to the Company. As part of this strategic
relationship, Goodhart has also been appointed to provide investment
sub-advisory services to the Company to assist Dr Nairn in managing the global
listed equities mandate.
The Board believes that these arrangements will provide a number of benefits
for shareholders going forward (as detailed in the Chairman’s Statement),
including a reduction in the ongoing costs of the Company.
Tender Offer
Shareholder approval was granted for the Company to repurchase up to 20% of
its issued share capital by way of a tender offer at the general meeting held
on 17 December 2021.
On 28 February 2022, the Company announced that a total of 7,305,545 ordinary
shares (20% of the Company’s issued share capital) were repurchased by the
Company to be held in treasury. The ordinary shares were repurchased at
313.2501 pence per share which represented a discount of approximately 3.5% to
the NAV per share as at 24 February 2022.
Change of Service Providers
As part of the transition to a self-managed investment company several changes
were made to the Company’s third party service providers. Juniper Partners
Limited was appointed as Company Secretary and Administrator and J.P. Morgan
Chase Bank N.A. was appointed as Custodian to the Company.
The Board maintains a strong working relationship with its key third-party
service providers. The regular interaction enables issues and requirements to
be dealt with efficiently and collegiately. The Board conducted detailed due
diligence on the proposed providers prior to their appointment to ensure they
were appropriate for the Company in its new form. All new service providers
are now well established in their new roles and they continue to operate in
line with agreed service levels.
Succession Planning
Tom Walker retired as a non-executive Director of the Company following the
conclusion of the Annual General Meeting held on 27 April 2022.
As previously noted in the ‘Transition to Self-Managed’ section, Dr Nairn
was formally appointed as an Executive Director of the Company at the Annual
General Meeting held on 27 April 2022.
David Ross informed the Board of his intention to retire as a Director of the
Company following the conclusion of the 2023 AGM. As detailed in the
Chairman’s Statement, having considered a number of exceptional candidates,
the Nomination Committee recommended that Katie Folwell-Davies be appointed as
a non-executive Director of the Company.
Katie qualified as a chartered accountant with Touche Ross gaining experience
in both audit and forensic services before a twenty-year career in corporate
finance advisory. She has international experience across financial and
business services having operated in the private sector and for government.
She became a member of the corporate finance advisory executive with
responsibilities including chief talent officer and retired as a Deloitte
senior partner in 2020 taking up the role of investment partner at Twenty 20
Capital, an internationally focussed private capital investment fund.
She has held a number of board positions as well as representing Deloitte as a
CBI Council Member, chairing the City Women’s club in London and is
currently chair of the annual international TALiNT industry awards recognising
excellence across the recruitment industry.
As a result of Katie’s extensive accounting and audit experience, and
subject to shareholders electing her to the Board, it is proposed that she be
appointed as Chair of the Audit and Management Engagement Committee.
The Board has approved Katie’s appointment in principle subject to
shareholders electing her as a non-executive Director of the Company at the
2023 AGM.
Final Dividend
Having considered income receipts and forecast revenue, the Board, on the
recommendation of the Audit and Management Engagement Committee, have proposed
that shareholders approve the payment of a final dividend of 5.0p per ordinary
share for the financial year ended 31 December 2022. Although the Company’s
investment objective is to provide real long-term total return, the Board is
aware that certain investors also seek income from their portfolio of
investments. In addition, the Board is mindful of the need to distribute any
excess income to maintain the Company’s status as an investment trust.
For and on behalf of the Board
Cahal Dowds
Chairman
28 March 2023
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the
Financial Statements in accordance with applicable UK law and regulations.
The Companies Act 2006 (the ‘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 the 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:
* select suitable accounting policies and then apply them consistently;
* make judgements and estimates that are reasonable and prudent;
* state whether applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the Financial
Statements; and
* prepare the Financial Statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
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 Law and
include the information required by the Listing Rules of the Financial Conduct
Authority. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, Directors’ Report, Remuneration Report and
Corporate Governance Statement that comply with that law and those
regulations.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company’s website,
www.globalopportunitiestrust.com. 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.
Each of the Directors, confirm to the best of their knowledge that:
* the Financial Statements, prepared in accordance with the applicable set of
UK Accounting Standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company;
* the Annual Report includes a fair view of the development and performance of
the business and the position of the Company together with a description of
the principal risks and uncertainties that the Company faces; and
* in the opinion of the Board, the Annual Report and Financial Statements
taken as a whole, is fair, balanced and understandable and provides the
information necessary to assess the Company’s performance, business model
and strategy.
On behalf of the Board
Cahal Dowds
Chairman
28 March 2023
INCOME STATEMENT
for the year ended 31 December 2022
2022 2021
Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000
Gains on investments at fair value through profit or loss – 10,158 10,158 – 3,878 3,878
Foreign exchange gains/(losses) on capital items – 3,149 3,149 – (557) (557)
Income 2,374 – 2,374 2,741 802 3,543
Investment management fee (101) (235) (336) (229) (533) (762)
Other expenses (517) – (517) (520) – (520)
Net return before finance costs and taxation 1,756 13,072 14,828 1,992 3,590 5,582
Finance costs
Interest payable and related charges (51) – (51) (77) – (77)
Net return before taxation 1,705 13,072 14,777 1,915 3,590 5,505
Taxation – overseas withholding tax (94) – (94) (270) – (270)
Net return after taxation 1,611 13,072 14,683 1,645 3,590 5,235
Return per ordinary share 5.3p 43.0p 48.3p 4.4p 9.7p 14.1p
All revenue and capital items in the above statement derive from continuing
operations.
The total column of this statement is the profit and loss account of the
Company.
The revenue and capital return columns are prepared under guidance issued by
the Association of Investment Companies.
A separate Statement of Comprehensive Income has not been prepared as all
gains and losses are included in the Income Statement.
BALANCE SHEET
as at 31 December 2022
2022 £’000 2021 £’000
Fixed asset investments
Investments at fair value through profit or loss 69,283 83,922
Current assets
Debtors 412 493
Cash at bank and short-term deposits 36,629 32,017
37,041 32,510
Current liabilities
Creditors (180) (309)
(180) (309)
Net current assets 36,861 32,201
Net assets 106,144 116,123
Capital and reserves
Called-up share capital 645 645
Share premium 1,597 1,597
Capital redemption reserve 14 14
Special reserve 9,760 32,961
Capital reserve 90,098 77,026
Revenue reserve 4,030 3,880
Total shareholders’ funds 106,144 116,123
Net asset value per ordinary share 363.2p 317.9p
The Financial Statements were approved by the Board of Directors on 28 March
2023 and signed on its behalf by:
Cahal Dowds
Chairman
Registered in Scotland No. 259207
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2022
Year ended 31 December 2022 Share capital £’000 Share premium £’000 Capital redemption reserve £’000 Special reserve £’000 Capital reserve £’000 Revenue reserve £’000 Total £’000
At 31 December 2021 645 1,597 14 32,961 77,026 3,880 116,123
Net return after taxation – – – – 13,072 1,611 14,683
Dividends paid – – – – – (1,461) (1,461)
Share purchases for treasury – – – (23,201) – – (23,201)
At 31 December 2022 645 1,597 14 9,760 90,098 4,030 106,144
Year ended 31 December 2021 Share capital £’000 Share premium £’000 Capital redemption reserve £’000 Special reserve £’000 Capital reserve £’000 Revenue reserve £’000 Total £’000
At 31 December 2020 645 1,597 14 38,945 73,436 4,458 119,095
Net return after taxation – – – – 3,590 1,645 5,235
Dividends paid – – – – – (2,223) (2,223)
Share purchases for treasury – – – (5,984) – – (5,984)
At 31 December 2021 645 1,597 14 32,961 77,026 3,880 116,123
NOTES TO THE FINANCIAL STATEMENTS
at 31 December 2022
1. Accounting policies
Statement of compliance
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 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 (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 2022.
The comparative figures for the Financial Statements are for the year ended 31
December 2021.
Going concern
The financial statements have been prepared on a going concern basis and on
the basis that approval as an investment trust company will continue to be
met.
The Directors have made an assessment of the Company’s ability to continue
as a going concern and are satisfied that the Company has adequate resources
to continue in operational existence for a period of at least 12 months from
the date when these financial statements were approved.
The Directors have noted that the Company, holding a portfolio consisting
principally of liquid listed investments and cash balances, is able to meet
the obligations of the Company as they fall due, any future funding
requirements and finance future additional investments. The Company is a
closed end fund, where assets are not required to be liquidated to meet
day-to-day redemptions.
The Directors have completed stress tests assessing the impact of changes and
scenario analysis to assist them in determination of going concern. In making
this assessment, the Directors have considered plausible downside scenarios
that have been financially modelled. These tests apply to any set of
circumstances in which asset value and income are significantly impaired. The
conclusion was that in a plausible downside scenario, the Company could
continue to meet its liabilities. Whilst the economic future is uncertain, and
the Directors believe that it is possible the Company could experience further
reductions in income and/or market value, the opinion of the Directors is that
this should not be to a level which would threaten the Company’s ability to
continue as a going concern.
The Directors and other service providers have put in place contingency plans
to minimise disruption. Furthermore, the Directors are not aware of any
material uncertainties that may cast significant doubt on the Company’s
ability to continue as a going concern, having taken into account the
liquidity of the Company’s investment portfolio and the Company’s
financial position in respect of its cash flows and investment commitments.
Therefore, the financial statements have been prepared on the going concern
basis.
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. Where
the Company has elected to receive scrip dividends in the form of additional
shares rather than in cash, the amount of the cash dividend foregone is
recognised as income. Any excess or shortfall compared to the cash dividend is
recognised as capital. Special dividends are reviewed on an individual basis
to determine whether they should be accounted for as revenue or capital.
Income from private equity holdings is recognised upon notification of
irrevocable income distribution by the general partner. Deposit and fixed
income receivable is included on an accruals basis.
Expenses and finance costs
All management expenses and finance costs are accounted for on an accruals
basis. From 1 January 2021 the Company charges 30% of management fees and
finance costs related to borrowings to revenue in the Income Statement and 70%
to capital in the Income Statement. All other operating expenses and finance
costs are charged to revenue in the Income Statement, except costs that are
incidental to the acquisition or disposal of investments, which are charged to
capital in the Income Statement. 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. For the European Long-Short
Fund, fair value is determined with reference to its daily NAV published on
the London Stock Exchanges’ Electronic Trading Service (SETS). Unquoted
investments are valued by the Directors at fair value, using the guidelines on
valuation published by the International Private Equity and Venture Capital
Association (“IPEV”).
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 Income Statement, in the capital
or the revenue column, 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
Dividends payable are accounted for when they become a liability of the
Company. Final dividends are recognised in the period in which they have been
approved by Shareholders in a general meeting. Interim dividends are
recognised in the period in which they have been declared and 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 above
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 the application of policies
and reported amounts in the financial statements. The estimates and associated
assumptions are based on historical experience and various other factors that
are believed to be reasonable under the circumstances, the results of which
form the basis of making judgements about carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates.
The areas requiring judgement and estimation in the preparation of the
financial statements are: the valuation of unquoted investments; and
recognising and classifying unusual or special dividends received as either
revenue or capital in nature.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future period if the revision affects both current and
future periods.
Reserves
Share premium
The share premium account represents the accumulated premium paid for shares
issued in previous periods above their nominal value less issue expenses.
This is a reserve forming part of the non-distributable reserves. The
following items are taken to this reserve:
* costs associated with the issue of equity; and
* premium on the issue of shares.
Capital redemption reserve
The capital redemption reserve represents non-distributable reserves that
arise from the purchase and cancellation of shares.
Special reserve
The Special Reserve was created by a reduction in the share premium account by
order of the High Court. The costs of share buy backs, including shares
acquired through the tender offer, and any related stamp duty and transaction
costs, if applicable, are charged to the Special Reserve. The Special Reserve
is distributable.
Capital reserve
The following are taken to the capital reserve through the capital column in
the Income Statement:
Capital reserve – other, forming part of the distributable reserves:
* gains and losses on the realisation of investments;
* realised exchange differences of a capital nature;
* 70% of management fees and finance costs related to borrowings; and
* expenses, together with related taxation effect, charged to this account in
accordance with the above policies.
Capital reserve – investment holding gains, not distributable:
net movement arising from changes in the fair value of investments.
Revenue reserve
The revenue reserve represents the surplus of accumulated profits and is
distributable.
2. Income
2022 2021
Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000
Income from investments
UK dividend income 522 – 522 622 802 1,424
Overseas dividend income 1,663 – 1,663 2,089 – 2,089
Fixed income – – – 13 – 13
Income from investments 2,185 – 2,185 2,724 802 3,526
Total income comprises
Dividend income 2,185 – 2,185 2,711 802 3,513
Rebate income (1) 68 – 68 17 – 17
Bank interest 121 – 121 – – –
Fixed income – – – 13 – 13
2,374 – 2,374 2,741 802 3,543
(1)Rebate of management fee from managed investment fund held in the
investment portfolio.
3. Management fee
2022 2021
Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000
Management fee 101 235 336 229 533 762
101 235 336 229 533 762
With effect from 8 June 2022, the Company appointed Franklin Templeton
Investment Management Limited (“FTIML”) as the Company’s Sub-Advisor.
Under the Investment Management Agreement, the Sub-Advisor is entitled to a
fee paid quarterly in arrears at the rate of 0.35% per annum of the market
value of equity securities, 0.05% per annum of the market value of bonds and
other debt instruments and 0.02% of the value of cash and cash equivalents. No
performance fee will be paid.
In December 2021, the Company invested in the Templeton European Long-Short
Equity SIF, a Luxembourg Specialised Investment Fund managed by an affiliate
of the Sub-Advisor, Franklin Templeton International Services S.a r.l.
(“FTIS”). The Company benefits from a management fee rebate payable by
FTIS in respect of the Company’s investment in the SIF and to avoid any
double charging in respect of the remaining management fees payable to
FTIS, the value of the Company’s investment in the SIF is excluded from the
market value of equity securities, prior to calculation of the management fees
payable by the Company to the Sub-Advisor. The Company’s investment in the
Volunteer Park Capital Fund SCSp is also excluded from the market value of
equity securities, prior to calculation of the management fees payable by the
Company to the Sub-Advisor.
Prior to the appointment of FTIML as Sub-Advisor, Franklin Templeton
Investment Trust Management Limited was the Company’s AIFM and was entitled
to a management fee paid monthly in arrears at the rate of 0.75% per annum of
the equity market capitalisation of the Company to £100,000,000 and at a rate
of 0.65% per annum of the equity market capitalisation which exceeded this
amount. The equity market capitalisation was based on shares in circulation
which excluded shares held in treasury. No performance fee was paid.
During the year ended 31 December 2022, the management fees payable totalled
£336,000 (2021: £762,000). At 31 December 2022, there was £84,000
outstanding payable (2021: £124,000) in relation to management fees.
During the year ended 31 December 2022, the administration fees payable to the
Administrator, £165,000 (2021: £144,000). At 31 December 2022, there was
£14,000 outstanding payable to the Administrator (2021: £24,000) in relation
to administration fees. Juniper Partners Limited succeeded Link Alternative
Fund Administrators Limited as Administrator on 8 June 2022.
During the year ended 31 December 2022, the Company paid Edinburgh Partners
£11,000 (2021: £25,000) for marketing-related services. At 31 December 2022,
there was £nil outstanding to Edinburgh Partners (2021: £6,000) in relation
to marketing-related services.
4. Dividends
2022 £’000 2021 £’000
Declared and paid
Amounts recognised as distributions to Ordinary Shareholders in the year.
2021 final dividend of 5.0p per share paid on 25 May 2022 (2021: year ended 31 December 2020 final dividend of 6.0p paid on 28 May 2021). 1,461 2,223
1,461 2,223
2022 £’000 2021 £’000
Proposed
Detailed below is the proposed final dividend per share in respect of the year ended 31 December 2022, which is the basis on which the requirements of section 1159 of the Corporation Act 2010 are considered. 2022 final dividend of 5.0p per share (2021 final dividend of 5.0p per share paid on 25 May 2022). 1,461 1,461
The Directors recommend a final dividend of 5.0p per share for the year ended
31 December 2022 (2021: final dividend of 5.0p per share, paid on 25 May
2022). Subject to Shareholder approval at the Annual General Meeting to be
held on 26 April 2023, the dividend will be payable on 31 May 2023 to
Shareholders on the register at the close of business on 12 May 2023. The
ex-dividend date will be 11 May 2023. Based on 29,222,180 shares, being the
number of shares in issue (excluding shares held in treasury) at 24 March
2023, being the latest practical date prior to the publication of this report,
the total dividend payment will amount to £1,461,000. The proposed dividend
will be paid from the revenue reserve.
5. Return per share
2022 2021
Net return £’000 Number of shares (1) Per share pence Net return £’000 Number of shares (1) Per share pence
Revenue return after taxation 1,611 30,383,061 5.3 1,645 37,096,274 4.4
Capital return after taxation 13,072 30,383,061 43.0 3,590 37,096,274 9.7
Total return after taxation 14,683 30,383,061 48.3 5,235 37,096,274 14.1
(1)Weighted average number of ordinary shares, excluding shares held in
treasury, in issue during the year.
6. Net asset value per share
The NAV, calculated in accordance with the Articles of Association, is as
follows:
2022 pence 2021 pence
Share 363.2 317.9
The NAV is based on net assets of £106,144,000 (2021: £116,123,000) and on
29,222,180 (2021: 36,527,725) shares, being the number of shares, excluding
shares held in treasury, in issue at the year end.
7. Significant holdings
As at 31 December 2022, the Company owned 67.4% (2021: 67.4%) of the net
assets of the Templeton European Long-Short Equity SIF, a Luxembourg
Specialised Investment Fund, a sub-fund of Franklin Templeton Specialised
Investment Funds, a Luxembourg investment company with variable capital –
specialised investment fund. The registered office of Franklin Templeton
Specialised Funds is 8A, rue Albert Borschette, L-1246 Luxembourg, Grand Duchy
of Luxembourg.
As at 31 December 2022, the Company owned 25% (2021: 25%) of the net assets of
the Volunteer Park Capital Fund SCSp, a Luxembourg Special Limited
Partnership. The registered office of Volunteer Park Capital Fund SCSp is
412F, route d’Esch, L-1471 Luxembourg, Grand Duchy of Luxembourg.
The Company had no other holdings of 3.0% or more of the share capital of any
portfolio companies.
8. Related party transactions
Under the AIC SORP, the Sub-Advisor is not considered to be a related party of
the Company.
Dr Sandy Nairn is the lead Executive Director of the Company and is a
substantial shareholder. The Company has invested in Volunteer Park Capital
Fund SCSp (“VPC”). The Alternative Investment Fund Manager of VPC is
Goodhart Partners LLP (“Goodhart”). Goodhart Partners S.a.r.l. is the
general partner to VPC and is 100% owned by Goodhart. Dr Nairn is the sole
controller of a company which holds a significant shareholding (25.83%) in
Goodhart and will be a beneficiary of the management fees and carried interest
payable to Goodhart related companies. Under the Class Tests Rules of the UK
Listing Rules the transaction was a small transaction and was therefore not
classified as a related party transaction requiring shareholder approval.
Prior to the investment in VPC, the Directors undertook appropriate due
diligence to confirm that they considered the investment to be in the best
interests of shareholders.
9. Post Balance Sheet events
Management fees and ongoing costs
As previously noted in the Chairman’s Statement, Dr Nairn has been appointed
as a full time executive of the Company, having resigned from his executive
position with Franklin Templeton.
The Company will be serving notice to terminate its investment management
agreement with Franklin Templeton and the global listed equities portion of
the Company’s portfolio will be managed by Dr Nairn going forward.
The Company has also entered into a strategic relationship with Goodhart
through which Goodhart will introduce opportunities in the private markets to
the Company. As part of this strategic relationship, Goodhart has also been
appointed to provide investment sub-advisory services to the Company to assist
Dr Nairn in managing the global listed equities mandate.
Following termination of the arrangements with Franklin Templeton, there will
be no management fee on the funds previously managed by Franklin Templeton. In
consideration for his services to the Company as a full time executive
director, Dr Nairn (previously a salaried employee of Franklin Templeton) will
receive a Salary of £75,000 per annum (the ‘Executive Salary’) in
addition to a £25,000 annual fee (in line with the fee paid to the
Company’s other directors).
Given Dr Nairn’s interests in Goodhart, it has been agreed with Dr Nairn
that his Executive Salary will be reduced (such reduction equalling the entire
Executive Salary if necessary) by his share (through his minority interest in
Goodhart) of amounts credited in the same period in respect of (i) any carried
interest on co-investments made by the Company alongside Goodhart and (ii) any
partnership profit allocations attributable to Goodhart’s net profits on
fees earned from the Company (including the Company’s existing investment in
the Volunteer Park Capital Fund (“VPC”) and any carried interest
attributable to VPC earned by Goodhart or any Goodhart-sponsored vehicle).
Goodhart will receive a 0.12 per cent. annual fee levied on the global listed
equities portion of the Company’s portfolio for the provision of investment
sub-advisory services. No fixed fee or base period compensation will be
payable to Goodhart in respect of the wider strategic relationship, with any
fees in respect of individual private market opportunities to be agreed with
the Company on a case by case basis. The Company notes that the agreement of
any such fee shall be subject to Board approval and that the total amount of
fees payable to Goodhart in any 12 month period (including in respect of
investment sub-advisory services) shall be capped at 1.0 per cent. of the
Company’s net asset value.
The Company notes that these arrangements are expected to result in a
reduction in costs for shareholders. Should the Company become fully invested,
it is anticipated these arrangements will reduce the Company’s ongoing
charges ratio from 0.9 per cent. to 0.8 per cent. (based on the Company’s
net asset value as at 24 March 2023).
10. Availability of Annual Report and Financial Statements
The Annual Report and Financial Statements will shortly be available to view
on the Company's website at www. globalopportunitiestrust.com. where up to
date information on the Company, including daily NAV and share prices,
factsheets and portfolio information can also be found.
A copy of the Annual Report and Financial Statements will shortly be submitted
to the Financial Conduct Authority’s National Storage Mechanism and will be
available for inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
For further information please contact:
Juniper Partners Limited
Company Secretary
e-mail: cosec@junipartners.com
28 March 2023
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