Global Opportunities Trust plc
Legal
Entity Identifier: 2138005T5CT5ITZ7ZX58
Annual Results for the year ended 31
December 2023
Financial Highlights
CHANGE
IN NET ASSET VALUE PER SHARE
–
cum inc.
0.2%
|
NET ASSET VALUE TOTAL RETURN
(with
dividends added back)*
1.7%
|
SHAREHOLDERS’
FUNDS
£106.4m
|
DISCOUNT TO NET ASSET VALUE*
18.2%
|
|
31
December
2023
|
31
December
2022
|
%
Change
|
Net
assets/shareholders’ funds (£)
|
106,411,000
|
106,144,000
|
0.3
|
Shares in
issue
|
29,222,180
|
29,222,180
|
-
|
Net asset
value per share – cum inc. (pence)*
|
364.1
|
363.2
|
0.2
|
Net asset
value total return (with dividends added back) (%)*
|
1.7
|
15.8
|
n/a
|
Share
price (pence)
|
298.0
|
314.0
|
(5.1)
|
Dividend
per share (pence)
|
5.0
|
5.0
|
–
|
Share
price total return (with dividends added back) (%)*
|
(3.6)
|
9.8
|
n/a
|
Share
price discount to net asset value (%)*
|
(18.2)
|
(13.5)
|
n/a
|
Ongoing
charges ratio (%)*
|
0.9
|
0.9
|
n/a
|
*
Alternative Performance Measure.
CHAIRMAN’S
STATEMENT
Introduction
I am
pleased to present the Company’s Annual Report and Financial
Statements for the year ended 31 December
2023.
The
Company’s year under review is the first completed entirely under
its self-managed status and has also been witness to the transition
to its new management arrangements, as further detailed below.
These changes have been undertaken through a period of volatile
markets, experienced within both equities and bonds, arising from
unstable macroeconomic variables as well as heightened geopolitical
tensions on a global scale.
Management
arrangements
Following
the transition to self-managed status in 2022, the Company
terminated its investment management agreement with Franklin Templeton in May
2023 with the management of the global listed equities
portion of the portfolio now being undertaken directly by Dr Nairn,
Executive Director. As disclosed in the prior year’s Annual Report,
the Company has entered into a strategic relationship with Goodhart
Partners LLP (‘Goodhart’). Goodhart’s role is twofold, both to
introduce private market opportunities to the Company and to act as
a Sub-Advisor in relation to the management of the global listed
equities mandate. Despite being relatively early into the new
arrangements, the Company is benefiting from the combined knowledge
of Dr Nairn and Goodhart and the opportunities this relationship is
presenting. Further information on Goodhart is available via the
website at www.goodhartpartners.com.
Investment
performance
Despite
the challenging market conditions of 2023, the Company’s net asset
value (‘NAV’) grew by 1.7% during the year however its share price
fell by 3.6%, both on a total return basis with dividends assumed
to be reinvested. In comparison, the FTSE All-World Total Return
Index rose by 15.7%, following a strong rally towards the end of
2023 and the heavier weighting given by this index to technology
stocks (dominated by the so called “Magnificent Seven”), including
those buoyed by the rapid growth in artificial intelligence.
Shareholders should note however that the Company has no stated
benchmark against which it seeks to outperform. Its objective is to
achieve real long-term total return through investing in
undervalued global securities.
As at
31 December 2023 the Company had net
assets of £106.4 million. The NAV per ordinary share was 364.1p and
the middle market price per share on the London Stock Exchange was
298.0p, representing a discount to NAV of 18.2%. The Company’s
discount is discussed in more detail under the ‘Share capital’
section that follows.
Further
details on the investment performance of the Company during the
year under review are included in the Executive Director’s
Report.
Share
capital
The
Company’s discount to underlying NAV averaged 14.5% during the
year, on a monthly basis, and at the year-end stood at 18.2%.
Despite operating at a discount throughout the year, the discount
has not been subject to the levels of volatility experienced by
some of the Company’s peers, and at the year-end was comparable to
the average discount of 18.3% in the ‘Flexible Investment’ sector
of the Association of Investment Companies (‘AIC’), of which the
Company is a member. Following the change in investment objective
which was approved by shareholders at the end of 2021 and
subsequent tender offer early in 2022, no share buybacks have been
conducted by the Company, and the buyback policy no longer aims to
keep the share price at close to NAV. The Board however remains of
the opinion that having the option to utilise share buybacks as a
discount control mechanism is important and is therefore requesting
that shareholders approve a renewal to this authority at the
forthcoming Annual General Meeting (‘AGM’).
Earnings
and final dividend
The return
per ordinary share for the year ended 31
December 2023 was 5.9 pence
per share comprising a revenue return of 5.3
pence per share and a capital return of 0.6 pence per share. The Board is proposing a
final dividend of 5.0 pence per share
which, subject to approval by shareholders at the AGM, will be paid
on 31 May 2024 to those shareholders
on the register at the close of business on 3 May 2024. This dividend is fully covered by the
Company’s earnings in the financial year under review and exceeds
the minimum that the Company is obliged to distribute under law to
maintain its investment trust status.
Board
composition
We
welcomed Katie Folwell-Davies to the
Board following her election at the last AGM held in April 2023. David
Ross retired following the AGM’s conclusion. The Board
believes that its size and composition remain appropriate for the
activities of the Company and the Board retains a good balance of
skills and business experience to enable it to operate effectively.
As such, all Directors will be standing for re-election at the
forthcoming AGM.
Annual
General Meeting
This
year’s AGM will be held on 16 May
2024 at the offices of Juniper Partners Limited, 28 Walker
Street, Edinburgh EH3 7HR 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
an 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 appointing me (as Chair of the meeting) as
your proxy to ensure your vote is registered.
Outlook
Whilst
last year we thought that significant market rallies would be
likely in response to falling inflation, these rallies have been
sustained longer than we might have expected. The reason probably
lies in the growth recorded in the US which has given rise to the
hope that there will be a ‘soft landing’ and a meaningful recession
will be avoided. Should this occur, it is just about possible to
make an argument for the current extended equity valuations,
however this would not leave much room for significant returns. If
the global economy were to follow normal historic patterns, then
there will be significant scope for negative corporate profit
outcomes which would quickly puncture the current prevailing
sanguine view of equity markets. Against this backdrop the Company
has retained a broadly similar structure to last year in
anticipation of new opportunities arising.
As noted
earlier, whilst the Company’s NAV rose slightly over the year this
was not reflected in the share price such that the discount widened
further. To address this, efforts have begun to increase investors’
awareness of the Company and these will be intensified during
2024.
Once
again, we would like to thank our shareholders for their continued
support and look forward to the day when the investment landscape
is more attractive. Periodically, investment articles are posted on
the Company’s website when we encounter investment issues worthy of
comment and we would encourage shareholders to sign up to the
website to receive such notifications during the year.
Keep
up to date
Shareholders
can keep up to date on the performance of the portfolio through the
Company’s website at www.globalopportunitiestrust.com where you
will find information on the Company, a monthly factsheet and
regular updates from Dr Nairn.
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
9 April 2024
EXECUTIVE
DIRECTOR’S REPORT
Background
and context
Before
discussing the returns during 2023, and the outlook for 2024, it is
worth recapping on the experience of 2022, and how we felt as 2022
unfolded. The main message in 2022 was the level of overvaluation
that we believed was apparent across all asset classes and markets,
flowing from the extended period of interest rate suppression.
Whilst inflation was thought to be absent from the system it was
possible for markets to believe in a world where excessive debt
carried little consequences, leverage was positive and economic
growth could continue without any setback, safe in the knowledge
that governments would step in whenever necessary. This sanguine
market view was interrupted when post-Covid consumption increases
and the invasion of Ukraine met
supply side bottlenecks, oil prices soared and inflation reared its
head. The net result was that asset markets declined markedly
during 2022, although this was mitigated for sterling-based
investors by the pound’s depreciation.
Prior to
these price moves it was possible to make an unequivocal statement
about the excess valuation in asset markets, requiring as it did a
heroic set of assumptions to provide any meaningful justification.
Once those price moves had taken place, the position was more
nuanced. Many sovereign bonds for example, including UK Gilts and
US Treasuries, had moved to yields which in the event of declines
in inflation would leave them, for the first time in several years,
trading in a historically sustainable range. Whether they
represented good value or not at those levels would be determined
by one’s economic outlook, but they could plausibly be seen as at
least fair value. Equities in the major markets on the other hand
remained, despite the declines, at historically high
valuations.
Cyclically
adjusted price-earnings ratios (Shiller) US equities, even at the
trough in February 2022, were at a
valuation similar to that which existed before the 1929 crash and
only exceeded two other times in a hundred years. To justify such a
valuation required a view that the global economy was at an
economic trough and about to venture into an extended period of
strong growth. This was not our view. We believed that the
normalisation of interest rates would slow growth from the post
Covid sugar high and that economic conditions would tighten. Our
concerns lay with future growth, not inflation. As the year
progressed markets took the view that falling inflation would lead
to interest rate declines and that the equity party could
recommence. As a consequence, there were meaningful rallies in
equity markets globally. In our view this was effectively a
nostalgic desire to go back to a period where interest rates were
suppressed and governments used fiscal policy to try and maintain
growth.
We do not
subscribe to the view that the post ‘Global Financial Crisis’ world
can be recreated. Whilst the US recorded 2.5% real growth in 2023
this was supported by a significant fiscal injection and despite
the backdrop of a debt/GDP position in excess of 100%. The fiscal
arithmetic is such that limits on the extent to which governments
can sustain growth are now very real. Indeed, history suggests that
fiscal retrenchment will be required at some point soon. In other
words, if market rises were predicated on expectations of more of
the same, they are likely to be disappointed.
It is hard
to see how the global economy can survive the accumulated debt
levels and normalisation of interest rates without economic pain. A
repeat can only come about if debt markets become particularly
supine. Despite the fiscal injection, there is evidence of rising
corporate bankruptcy filings (from public companies or private
companies with listed debt) such that in the US, for example, the
level reached in 2023 was the highest since 20101.
Moreover, studies suggest the proportion of listed companies that
can be described as “zombies”, meaning able to generate sufficient
cash, to survive, but unable to grow or make a meaningful profit,
has almost doubled to over 10%2.
For context, 10% would be a level exceeded only once since
2000.
1 S&P
Global Market Intelligence
2 The Rise of
the Walking Dead: Zombie Firms Around the World; Albuquerque, B and
Iyer, R. I IMF WP/23/125, June
2023
Rather
than a rosy economic environment ahead, the storm clouds look to be
gathering. Sovereign bond prices may not suffer too much from here,
but one has to expect credit spreads to widen and for equities
eventually to react to an environment in which profit progression
becomes increasingly difficult. Policymakers should be aware also
of the tail risk of sovereign credit risk becoming a theme the
vulture funds can latch onto. The deterioration in Germany’s
economic position is particularly worthy of note.
The
portfolio
Since our
view on future economic prospects and current valuations in
equities has not changed significantly, the portfolio structure
remains similar to last year. In last year’s Annual Report we
highlighted the characteristics of the portfolio. Specifically, we
set out the four major components and the role that they play in
creating a structure which aims to reduce the absolute downside
whilst retaining some upside potential.
1. The
direct equity portfolio at the end of 2023 accounted for
approximately 40% of the total assets. It had a total return of
9.5%, just over half of that recorded by the MSCI All Country World
Index. This is in line with our expectations given the defensive
nature of the portfolio. Fresenius Medical Care rose by over 30% as
it recovered from previous concerns over US staffing shortages. We
felt that with the rise in direct obesity medicines the market for
diabetes care would eventually be affected and hence we sold the
holding. The rest of the portfolio remained relatively stable with
few new holdings added. This reflected the difficulty, not in
finding companies with good growth prospects but ones that also had
an attractive valuation. In other words, at an individual company
level the evidence on valuations is consistent with what we see at
the aggregate level. Our research efforts are therefore focussed on
creating a reserve list of potential investments where we expect
opportunities to arise. This is part of what will be a transition
to companies where the risk/reward is tilted more towards reward.
This transition is likely to see increased exposure to small and
mid-cap companies. It is likely to be achieved both directly and,
where appropriate, through the use of specialist third party
managers. We are currently conducting research on both.
2. The
investment in the Templeton European Long-Short Equity Fund
provided slightly negative sterling returns over the year
reflecting the sharp rally in equities at the beginning and end of
the year. The negative contribution to the total return of the
overall portfolio was less than 1% which we believe is creditable
when set against the magnitude of the positive returns we achieved
in 2022 when markets fell. We remain strongly of the belief that
this holding performs a vital role in balancing the risk in the
overall portfolio and potentially providing meaningful upside if
markets were to fall. The long-short manager’s view, with which we
concur, was that the losses on the short portfolio were largely
driven by expectations “that central banks would lower rates sooner
and at a steeper slope than previously expected. This led to a
rotation into companies which would benefit from looser policy
(weak balance sheet, persistent cash burners) on the basis that
more capital will become available to tide them over and keep them
alive for longer.” He believes that this will only postpone the
inevitable and that the value destruction will eventually overwhelm
any rates decisions. This is consistent with the study of ‘zombie’
companies cited earlier.
3. The
Volunteer Park Capital Fund rose over 10% in US dollar terms with
the underlying holdings generally hitting their targets. Just as a
reminder, our interest in this investment was driven by a
risk/reward profile which focusses on obtaining significant
downside protection whilst retaining the potential for a
double-digit compounding upside. Such a combination was possible
because of the underserved nature of this market segment. At a
simple level, the underlying investments require significant due
diligence irrespective of the size of the deal. This means that
most players focus on the larger deals to justify the work that is
required. In many cases banks have withdrawn from the space and the
collapse of Silicon Valley Bank removed one of the major remaining
players. The VPC manager anticipates that, given the progress made
by a number of the invested companies, there is the potential for
some distributions later in 2024.
4.
Overall, the cash component of the portfolio was roughly flat
reflecting the strength of sterling over the year. For reference
sterling rose 5.7% against the US dollar and 14% against the
Japanese Yen. We view these moves as simply part of the volatility
of currency markets aided by the view that with inflation in the UK
being more intransigent than in other countries, UK interest rates
would remain higher, giving a higher yield on UK cash. This tends
to be a temporary view which is overtaken by concerns that any
yield pick-up will eventually be overtaken by currency devaluation.
We are comfortable with the distribution of our cash assets as we
wait for investment opportunities to arise.
Reflecting
the individual components discussed above, for the year ended
31 December 2023, the Company’s NAV
total return, including dividends was 1.7%. The comparable figure
for the FTSE All-World Total Return Index was 15.7%; for the
Bloomberg Global Aggregate Bond Index (0.16)%. Over the period, the
Barclays Sterling Overnight Cash index returned 4.86%. While the
portfolio did not track the global equity index higher, nor did it
lose money.
Future
prospects
Asset
markets and equities in particular have proved extremely resilient
and determined to focus on positives almost to the point where,
although it has not been openly articulated, they depend upon the
emergence of some new paradigm of investing. Valuations are close
to historic highs, but so are debt levels, and economic storm
clouds have gathered. There are some arguments that the asset world
has reordered itself such that private valuations are now leading
public ones. The argument runs that public listed companies are not
that expensive since institutional private equity investors have
been willing to pay higher multiples. Of course there is a counter
argument that private equity investors are unable to list their
holdings in public markets at a premium and are therefore forced to
continue to hold or sell to another private holder. I would
subscribe to the latter argument.
The
portfolio remains positioned to take advantage of the ‘great
unwind’ when it comes whilst both protecting investors and
providing some upside at the same time. It is a difficult period
since patience is one of the hardest virtues to sustain,
particularly when constantly confronted with more upbeat
narratives. However, in our view the evidence is still overwhelming
that great caution is required. At the stock level we simply are
not finding many compelling opportunities. We believe it would be a
mistake to be “persuaded” into paying more for stocks than is
consistent with attractive longer-term performance. In the
meantime, we are conscious that the discount to NAV widened during
2023 and we realise it is incumbent upon us to ensure that we reach
the wider audience who we believe will have a genuine interest in
the Company as our thesis is reflected in market performance. This
is a high priority for 2024.
Dr
Sandy Nairn
Executive
Director
9 April 2024
PORTFOLIO
OF INVESTMENTS
as at
31 December 2023
Company
|
Sector
|
Country
|
Valuation
£’000
|
%
of Net assets
|
Templeton
European Long-Short Equity SIF1
|
Financials
|
Luxembourg
|
14,699
|
13.8
|
Volunteer
Park Capital Fund SCSp2
|
Financials
|
Luxembourg
|
8,249
|
7.8
|
TotalEnergies
|
Energy
|
France
|
3,789
|
3.6
|
Samsung
Electronics
|
Information
Technology
|
South
Korea
|
2,961
|
2.8
|
Unilever
|
Consumer
Staples
|
United
Kingdom
|
2,926
|
2.7
|
ENI
|
Energy
|
Italy
|
2,852
|
2.7
|
Sumitomo
Mitsui Trust Holdings
|
Financials
|
Japan
|
2,791
|
2.6
|
Orange
|
Communication
Services
|
France
|
2,379
|
2.2
|
General
Dynamics
|
Industrials
|
United
States
|
2,243
|
2.1
|
Dassault
Aviation
|
Industrials
|
France
|
2,111
|
2.0
|
Panasonic
|
Consumer
Discretionary
|
Japan
|
2,102
|
2.0
|
Lloyds
Banking
|
Financials
|
United
Kingdom
|
2,057
|
1.9
|
Tesco
|
Consumer
Staples
|
United
Kingdom
|
2,054
|
1.9
|
Imperial
Brands
|
Consumer
Staples
|
United
Kingdom
|
2,033
|
1.9
|
Murata
Manufacturing
|
Information
Technology
|
Japan
|
1,995
|
1.9
|
Raytheon
Technologies
|
Industrials
|
United
States
|
1,983
|
1.9
|
Daiwa
House Industry
|
Real
Estate
|
Japan
|
1,910
|
1.8
|
Sanofi
|
Health
Care
|
France
|
1,857
|
1.7
|
Nabtesco
|
Industrials
|
Japan
|
1,721
|
1.6
|
Verizon
Communications
|
Communication
Services
|
United
States
|
1,371
|
1.3
|
Total
investments
|
|
|
64,083
|
60.2
|
Cash
and other net assets
|
|
|
42,328
|
39.8
|
Net
assets
|
|
|
106,411
|
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
Company’s investment objective is to provide real long-term total
return 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
As a
self-managed investment trust, the Board is 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
Company terminated the investment management agreement with
Franklin Templeton on 30 May 2023 and the global listed equities
portion of the portfolio is now managed by Dr Nairn, as a full time
executive of the Company. 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.
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 20 investments, excluding cash
and other net assets as at 31 December
2023, 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 2023
|
1
year (%)
|
3
years (%)
|
5
years (%)
|
Global
Opportunities Trust plc
|
(3.6)
|
10.7
|
9.7
|
AIC
Flexible Investments peer group†
|
(3.3)
|
9.7
|
23.1
|
FTSE
All-World Total Return Index*
|
15.7
|
28.7
|
77.8
|
Net
asset value total return
to
31 December 2023
|
1
year (%)
|
3
years (%)
|
5
years (%)
|
Global
Opportunities Trust plc
|
1.7
|
24.1
|
30.7
|
AIC
Flexible Investments peer group†
|
2.1
|
19.8
|
42.8
|
FTSE
All-World Total Return Index*
|
15.7
|
28.7
|
77.8
|
Share
price discount to net asset value
as
at 31 December
|
2023
(%)
|
2022
(%)
|
2021
(%)
|
Global
Opportunities Trust plc
|
18.2
|
13.5
|
8.5
|
AIC
Flexible Investments peer group†
|
18.3
|
14.4
|
7.0
|
Ongoing
charges ratio
to
31 December
|
2023
(%)
|
2022
(%)
|
2021
(%)
|
Global
Opportunities Trust plc
|
0.9
|
0.9
|
1.1
|
AIC
Flexible Investments peer group†
|
0.9
|
1.0
|
0.9
|
† Source:
theaic.co.uk & Morningstar. The Company is classified by the
Association of Investment Companies in its Flexible Investment
sector. The sector’s performance indicators have been shown for
comparative purposes only.
* 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 2023. The Company has an investment
in the Templeton European Long-Short Equity SIF which uses
derivatives.
Emerging
and Principal 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 at least an annual basis and
ad-hoc by the Audit and Management Engagement Committee when
required.
The
emerging and 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:
Emerging
Risks
|
Mitigation
and Controls
|
Geopolitical
Risk
Heightened
geopolitical tensions, including the ongoing conflict in Ukraine
and emerging conflict in the Middle East, continue to have an
adverse impact on global markets and could adversely impact the
Company’s portfolio.
Risk
has been heightened by increased geopolitical
tensions.
|
The Board
regularly reviews the Company’s portfolio, including geographical
split, and its performance against its stated investment
objective.
Ongoing
discussions between the Executive Director and Sub-Advisor ensures
that the portfolio has exposure to various geographies and
sectors.
|
|
|
Principal
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. The Board would take appropriate action
should the Company’s performance jeopardise the investment
objective.
|
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.
No
change to this risk
|
The Board
frequently considers succession planning. Dr Nairn has day-to-day
responsibility for the investment management of the
Company
and the
Sub-Advisor has a dedicated investment team supporting the Company.
Dr Nairn and the Board are also in regular contact with the
Sub-Advisor (who attends Board meetings upon request), and
underlying fund managers and would be informed of any proposed
changes in their personnel.
|
Financial
and Economic Risk
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.
No
change to this risk
|
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 exchange risk, liquidity risk and
inflationary 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.
If all
price sensitive issues are not disclosed in a timely manner, this
could create a misleading market in the Company’s
shares.
A Small
Registered Alternative Investment Fund Manager does not carry on a
regulated activity in respect of its activities as an Alternative
Investment Fund Manager for an Alternative Investment Fund for
which it is entitled to be registered. It is, however, required to
comply with certain requirements under the Alternative Investment
Fund Managers Directive (‘AIFMD’) (which mainly relate to
reporting).
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 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 Representation
As at
31 December 2023, the Board of
Directors of the Company comprised two male and two female
Directors. 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 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 assists with the day-to-day management of the Company’s
equity investment portfolio. As such, the Sub-Advisor has
responsibility for engaging with investee companies on behalf of
the Company. The Sub-Advisor does so in consideration of the
principles set out in the UK Stewardship Code 2020.
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.
For and on
behalf of the Board
Cahal Dowds
Chairman
9 April 2024
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
9 April 2024
INCOME
STATEMENT
for the
year ended 31 December
2023
|
2023
|
2022
|
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Gains on
investments at fair value through profit or loss
|
–
|
2,271
|
2,271
|
–
|
10,158
|
10,158
|
Foreign
exchange (losses)/gains on capital items
|
–
|
(1,974)
|
(1,974)
|
–
|
3,149
|
3,149
|
Income
|
2,460
|
–
|
2,460
|
2,374
|
-
|
2,374
|
Investment
management fee
|
(49)
|
(114)
|
(163)
|
(101)
|
(235)
|
(336)
|
Other
expenses
|
(653)
|
–
|
(653)
|
(517)
|
–
|
(517)
|
Net
return before finance costs and taxation
|
1,758
|
183
|
1,941
|
1,756
|
13,072
|
14,828
|
Finance
costs
|
|
|
|
|
|
|
Interest
payable and related charges
|
(21)
|
–
|
(21)
|
(51)
|
–
|
(51)
|
Net
return before taxation
|
1,737
|
183
|
1,920
|
1,705
|
13,072
|
14,777
|
Taxation –
overseas withholding tax
|
(192)
|
–
|
(192)
|
(94)
|
–
|
(94)
|
Net
return after taxation
|
1,545
|
183
|
1,728
|
1,611
|
13,072
|
14,683
|
Return
per ordinary share
|
5.3p
|
0.6p
|
5.9p
|
5.3p
|
43.0p
|
48.3p
|
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 2023
|
2023
£’000
|
2022
£’000
|
Fixed
asset investments
|
|
|
Investments
at fair value through profit or loss
|
64,083
|
69,283
|
Current
assets
|
|
|
Debtors
|
374
|
412
|
Cash at
bank and short-term deposits
|
42,105
|
36,629
|
|
42,479
|
37,041
|
Current
liabilities
|
|
|
Creditors
|
(151)
|
(180)
|
|
(151)
|
(180)
|
Net
current assets
|
42,328
|
36,861
|
Net
assets
|
106,411
|
106,144
|
Capital
and reserves
|
|
|
Called-up
share capital
|
645
|
645
|
Share
premium
|
1,597
|
1,597
|
Capital
redemption reserve
|
14
|
14
|
Special
reserve
|
9,760
|
9,760
|
Capital
reserve
|
90,281
|
90,098
|
Revenue
reserve
|
4,114
|
4,030
|
Total
shareholders’ funds
|
106,411
|
106,144
|
Net
asset value per ordinary share
|
364.1p
|
363.2p
|
The
Financial Statements were approved by the Board of Directors on
9 April 2024 and signed on its behalf
by:
Cahal Dowds
Chairman
Registered
in Scotland No. SC259207
STATEMENT
OF CHANGES IN EQUITY
for the
year ended 31 December
2023
Year
ended
31
December 2023
|
Share
capital
£’000
|
Share
premium
£’000
|
Capital
redemption
reserve
£’000
|
Special
reserve1
£’000
|
Capital
reserve1
£’000
|
Revenue
reserve1
£’000
|
Total
£’000
|
At 1
January 2023
|
645
|
1,597
|
14
|
9,760
|
90,098
|
4,030
|
106,144
|
Net return
after taxation
|
–
|
–
|
–
|
–
|
183
|
1,545
|
1,728
|
Dividends
paid
|
–
|
–
|
–
|
–
|
–
|
(1,461)
|
(1,461)
|
At
31 December 2023
|
645
|
1,597
|
14
|
9,760
|
90,281
|
4,114
|
106,411
|
|
|
|
|
|
|
|
|
Year
ended
31
December 2022
|
Share
capital
£’000
|
Share
premium
£’000
|
Capital
redemption
reserve
£’000
|
Special
reserve1
£’000
|
Capital
reserve1
£’000
|
Revenue
reserve1
£’000
|
Total
£’000
|
At 1
January 2022
|
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
|
1 Distributable
reserves total £94,170,000 (2022: £93,259,000). The Capital reserve
comprises realised gains of £80,296,000 (2022: £79,469,000), which
are distributable, and unrealised gains of £9,985,000 (2022:
£10,629,000), which are not distributable.
STATEMENT
OF CASH FLOW
for the
year ended 31 December
2023
|
Year
ended
31
December 2023
|
Year
ended
31
December 2022
|
|
£’000
|
£’000
|
£’000
|
£’000
|
Cash
flows from operating activities
|
|
|
|
|
Net return
on ordinary activities before taxation
|
|
1,920
|
|
14,777
|
Adjustments
for:
|
|
|
|
|
Gains on
investments
|
(2,271)
|
|
(10,158)
|
|
Interest
payable
|
21
|
|
51
|
|
Purchases
of investments*
|
(949)
|
|
(21,645)
|
|
Sales of
investments*
|
8,420
|
|
46,442
|
|
Dividend
income
|
(1,774)
|
|
(2,185)
|
|
Other
income
|
(686)
|
|
(189)
|
|
Dividend
income received
|
1,777
|
|
2,314
|
|
Other
income received
|
723
|
|
147
|
|
Decrease
in receivables
|
1
|
|
7
|
|
Decrease
in payables
|
(29)
|
|
(129)
|
|
Overseas
withholding tax deducted
|
(195)
|
|
(107)
|
|
|
|
5,038
|
|
14,548
|
Net
cash flows from operating activities
|
|
6,958
|
|
29,325
|
Cash
flows from financing activities
|
|
|
|
|
Repurchase
of ordinary share capital
|
-
|
|
(23,201)
|
|
Equity
dividends paid from revenue
|
(1,461)
|
|
(1,461)
|
|
Interest
paid
|
(21)
|
|
(51)
|
|
Net
cash flows from financing activities
|
|
(1,482)
|
|
(24,713)
|
Net
increase in cash and cash equivalents
|
|
5,476
|
|
4,612
|
Cash and
cash equivalents at the start of the year
|
|
36,629
|
|
32,017
|
|
|
|
|
|
Cash
and cash equivalents at the end of the year
|
|
42,105
|
|
36,629
|
|
|
|
|
|
*
Receipts
from the sale of, and payments to acquire, investment securities
have been classified as components of cash flows from operating
activities because they form part of the Company’s dealing
operations.
NOTES
TO THE FINANCIAL STATEMENTS
at
31 December 2023
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 Companies Act 2006 (“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
comparative figures for the Financial Statements are for the year
ended 31 December 2022.
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 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. Interest income and rebate income is included on an
accruals basis.
Expenses
and finance costs
All
management expenses and finance costs are accounted for on an
accruals basis. 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 Equity Fund, fair value is
determined with reference to the assets and liabilities of the fund
valued daily, on any day on which the New York Stock Exchange is
open or any full day on which banks in Luxembourg are open for normal
business.
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”). The fair value of
the Company’s investments in private equity funds is based on its
share of the total net asset value of the fund calculated on a
quarterly basis, being the measurement date. The fair value of the
private equity funds is derived from the value of its underlying
investments using a methodology which is consistent with the IPEV
guidelines. The Company reviews the fair valuation methodology
adopted for the underlying investments of the private equity funds
on a quarterly basis and will adjust where it does not believe the
valuations represent fair value. Where formal valuations are not
completed as at the Balance Sheet date, the last available
valuation is adjusted to reflect any changes in circumstances from
the last formal valuation date to arrive at the estimate of fair
value.
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 – not distributable:
-
net
movement arising from changes in the fair value of investments;
and
-
unrealised
exchange differences of capital nature.
Revenue
reserve
The
revenue reserve represents the surplus of accumulated profits and
is distributable.
2.
Income
|
|
2023
|
|
|
2022
|
|
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Income
from investments
|
|
|
|
|
|
|
UK
dividend income
|
464
|
–
|
464
|
522
|
–
|
522
|
Overseas
dividend income
|
1,310
|
–
|
1,310
|
1,663
|
–
|
1,663
|
Income
from investments
|
1,774
|
–
|
1,774
|
2,185
|
–
|
2,185
|
Total
income comprises
|
|
|
|
|
|
|
Dividend
income
|
1,774
|
–
|
1,774
|
2,185
|
–
|
2,185
|
Bank
interest
|
619
|
–
|
619
|
121
|
–
|
121
|
Rebate
income1
|
67
|
–
|
67
|
68
|
–
|
68
|
|
2,460
|
–
|
2,460
|
2,374
|
–
|
2,374
|
1 Rebate of
management fee from managed investment fund held in the investment
portfolio.
3.
Management fee
|
|
2023
|
|
|
2022
|
|
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Management
fee
|
49
|
114
|
163
|
101
|
235
|
336
|
|
49
|
114
|
163
|
101
|
235
|
336
|
With
effect from 31 May 2023, the Company
appointed Goodhart Partners LLP (“Goodhart”), replacing Franklin
Templeton Investment Management Limited (“FTIML”), as the Company’s
Sub-Advisor. Under the Investment Management Agreement, Goodhart is
entitled to a fee paid quarterly in arrears at the rate of 0.12%
per annum of the market value of equity securities, and 0.12% of
the value of cash and other current assets. No performance fee will
be paid.
The
Company’s investment in the Volunteer Park Capital Fund SCSp is
excluded from the market value of equity securities, prior to
calculation of the management fees payable by the Company to
Goodhart, being an investment in private markets, as prescribed by
the sub-advisory agreement.
Prior to
the appointment of Goodhart as Sub-Advisor, FTIML was entitled to a
management fee paid quarterly in arrears at the rate of 0.35% per
annum of the market value of listed 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.
During the
year ended 31 December 2023, the
management fees payable totalled £163,000 (2022: £336,000). At
31 December 2023, there was £31,000
outstanding payable (2022: £84,000) in relation to management
fees.
During the
year ended 31 December 2023, the
administration fees payable to the Administrator, as detailed in
Note 4, totalled £177,000 (2022: £165,000). At 31 December 2023, there was £15,000 outstanding
payable to the Administrator (2022: £14,000) in relation to
administration fees.
4.
Dividends
|
|
2023
£’000
|
2022
£’000
|
|
Declared
and paid
|
|
|
|
Amounts
recognised as distributions to Ordinary Shareholders in the
year.
|
|
|
|
2022 final
dividend of 5.0p per share paid on 31 May 2023 (2022: year ended 31
December 2021 final dividend of 5.0p paid on 25 May
2022).
|
1,461
|
1,461
|
|
|
1,461
|
1,461
|
|
|
|
|
|
2023
£’000
|
2022
£’000
|
Proposed
|
|
|
Detailed
below is the proposed final dividend per share in respect of the
year ended 31 December 2023, which is the basis on which the
requirements of section 1159 of the Corporation Act 2010 are
considered.
2023 final
dividend of 5.0p per share (2022 final dividend of 5.0p per share
paid on 31 May 2023).
|
1,461
|
1,461
|
|
|
|
|
The
Directors recommend a final dividend of 5.0p per share for the year
ended 31 December 2023
(2022:
final
dividend of 5.0p per share, paid on 31 May
2023). Subject to Shareholder approval at the Annual General
Meeting to be held on 16 May 2024,
the dividend will be payable on 31 May
2024 to Shareholders
on the
register at the close of business on 3 May
2024. The ex-dividend date will be 2
May 2024. Based on 29,222,180 shares, being the number of
shares in issue (excluding shares held in Treasury) at 8 April 2024, 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
|
|
2023
|
|
|
2022
|
|
|
Net
return
£’000
|
Number
of
shares1
|
Per
share pence
|
Net
return
£’000
|
Number
of
shares1
|
Per
share pence
|
Revenue
return after taxation
|
1,545
|
29,222,180
|
5.3
|
1,611
|
30,383,061
|
5.3
|
Capital
return after taxation
|
183
|
29,222,180
|
0.6
|
13,072
|
30,383,061
|
43.0
|
Total
return after taxation
|
1,728
|
29,222,180
|
5.9
|
14,683
|
30,383,061
|
48.3
|
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:
|
2023
pence
|
2022
Pence
|
Share
|
364.1
|
363.2
|
The NAV is
based on net assets of £106,411,000 (2022: £106,144,000) and on
29,222,180 (2022: 29,222,180) shares, being the number of shares,
excluding shares held in Treasury, in issue at the year
end.
7.
Significant holdings
As at
31 December 2023, the Company owned
68.5% (2022: 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 2023, the Company owned
25% (2022: 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 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.
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
10 April 2024