Global Opportunities Trust Plc - Annual Results
Legal Entity Identifier: 2138005T5CT5ITZ7ZX58
Annual Results for the year ended
Financial Highlights
________________________________________________________________ |CHANGE IN NET ASSET VALUE PER SHARE|NET ASSET VALUE TOTAL RETURN| | | | |– cum inc. |(with dividends added back)*| | | | |0.2% |1.7% | |___________________________________|____________________________| |SHAREHOLDERS’ FUNDS |DISCOUNT TO NET ASSET VALUE*| | | | |£106.4m |18.2% | |___________________________________|____________________________|
31 December 31 December % 2023 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 1.7 15.8 n/a added back) (%)* Share price (pence) 298.0 314.0 (5.1) Dividend per share (pence) 5.0 5.0 – Share price total return (with dividends added (3.6) 9.8 n/a back) (%)* 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
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
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
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
Earnings and final dividend
The return per ordinary share for the year ended
Board composition
We welcomed
Annual General Meeting
This year’s AGM will be held on
In addition to the formal business of the meeting,
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
As always, the Board welcomes communication from shareholders and I can be contacted directly through the Company Secretary at cosec@junipartners.com .
Chairman
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
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
Cyclically adjusted price-earnings ratios (Shiller) US equities, even at the trough in
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 2010 1 . 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.
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The Rise of the Walking Dead: Zombie Firms Around the World; Albuquerque, B and Iyer, R. I IMF WP/23/125,
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
3.
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
Reflecting the individual components discussed above, for the year ended
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
Executive Director
PORTFOLIO OF INVESTMENTS
as at
Valuation Company Sector Country % of Net assets £’000 Templeton European Long-Short Equity Financials Luxembourg 14,699 13.8 SIF1 Volunteer Park Financials Luxembourg 8,249 7.8 Capital Fund SCSp2 TotalEnergies Energy France 3,789 3.6 Samsung Electronics Information South Korea 2,961 2.8 Technology Unilever Consumer Staples United Kingdom 2,926 2.7 ENI Energy Italy 2,852 2.7 Sumitomo Mitsui Trust Financials Japan 2,791 2.6 Holdings Orange Communication France 2,379 2.2 Services General Dynamics Industrials United States 2,243 2.1 Dassault Aviation Industrials France 2,111 2.0 Panasonic Consumer Japan 2,102 2.0 Discretionary 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 Japan 1,995 1.9 Technology 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 Communication United States 1,371 1.3 Communications Services Total investments 64,083 60.2 Cash and other net 42,328 39.8 assets Net assets 106,411 100.0
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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
The Company is a self-managed investment company run by its Board and is authorised by the
The Company’s shares are listed on the premium segment of the Official List of the
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
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.
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
The Company terminated the investment management agreement with
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
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 1 year (%) 3 years (%) 5 years (%) to31 December 2023 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 1 year (%) 3 years (%) 5 years (%) to31 December 2023 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 2023 (%) 2022 (%) 2021 (%) as at 31 December Global Opportunities Trust plc 18.2 13.5 8.5 AIC Flexible Investments peer group† 18.3 14.4 7.0
Ongoing charges ratio 2023 (%) 2022 (%) 2021 (%) to 31 December 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
* 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
Emerging and Principal Risks
The Board, through delegation to the
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 | | | |The Board regularly reviews the | |Heightened geopolitical tensions, |Company’s portfolio, including | |including the ongoing conflict in |geographical split, and its performance| |Ukraine and emerging conflict in the |against its stated investment | |Middle East, continue to have an |objective. | |adverse impact on global markets and | | |could adversely impact the Company’s |Ongoing discussions between the | |portfolio. |Executive Director and Sub-Advisor | | |ensures that the portfolio has exposure| |Risk has been heightened by increased |to various geographies and sectors. | |geopolitical tensions. | | |______________________________________|_______________________________________| |Principal Risks |Mitigation and Controls | |______________________________________|_______________________________________| | |The Board meets regularly to discuss | |Investment and Strategy Risk |the portfolio | | | | |There can be no guarantee that the |performance and strategy and to receive| |investment objective of the Company, |investment updates from the Executive | |to provide shareholders with an |Director. The Board receives quarterly | |attractive real long-term total return|reports detailing all portfolio | |by investing globally in undervalued |transactions and any other significant | |asset classes, will be achieved. |changes in the market or stock | | |outlooks. The Board would take | |No change to this risk |appropriate action should the Company’s| | |performance jeopardise the investment | | |objective. | |______________________________________|_______________________________________| |Key Person Risk |The Board frequently considers | | |succession planning. Dr Nairn has | |The Company’s ability to deliver its |day-to-day responsibility for the | |investment strategy is dependent on |investment management of the Company | |the Executive Director, Dr Nairn. | | | |and the Sub-Advisor has a dedicated | |A change in key investment management |investment team supporting the Company.| |personnel who are involved in the |Dr Nairn and the Board are also in | |management of the Company’s portfolio |regular contact with the Sub-Advisor | |could impact on future performance and|(who attends Board meetings upon | |the Company’s ability to deliver on |request), and underlying fund managers | |its investment strategy. |and would be informed of any proposed | | |changes in their personnel. | |No change to this risk | | |______________________________________|_______________________________________| | |The Board receives regular updates on | | |the composition of the Company’s | |Financial and Economic Risk |investment portfolio and market | | |developments from the Executive | |The Company’s investments are impacted|Director. Investment performance is | |by financial and economic factors |continually monitored specifically in | |including market prices, interest |the light of emerging risks throughout | |rates, foreign exchange rates, |the period. | |liquidity and inflation, which could | | |cause losses within the portfolio. |The Board regularly reviews and agrees | | |policies for managing market price | |No change to this risk |risk, interest rate risk, foreign | | |exchange risk, liquidity risk and | | |inflationary 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 | |Discount Volatility Risk |narrow the discount to NAV at which the| | |shares trade. This will be done in | |The Board recognises that it is in the|conjunction with creating new demand | |long-term interests of shareholders to|and being aware of the liquidity of the| |reduce discount volatility and |shares. | |believes that the prime driver of | | |discounts over the longer term is |The Board’s commitment to allot or | |investment performance. An |repurchase shares is subject to it | |inappropriate or unattractive |being satisfied that any offer to allot| |objective and strategy may have an |or purchase shares is in the best | |adverse effect on shareholder returns |interests of shareholders of the | |or cause a reduction in demand for the|Company as a whole, the Board having | |Company’s shares, both of which could |the requisite authority pursuant to the| |lead to a widening of the discount. |Articles of Association and relevant | | |legislation to allot or purchase | |No change to this risk |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. | |______________________________________|_______________________________________| | |Compliance with the Company’s | |Regulatory Risk |regulatory obligations is monitored on | | |an ongoing basis by the Company | |The Company operates in an evolving |Secretary and other professional | |regulatory environment and faces a |advisers as required who report to the | |number of regulatory risks. |Board regularly. | | | | |Failure to qualify under the terms of |The Directors note the corporate | |sections 1158 and 1159 of the CTA may |offence of failure to prevent tax | |lead to the Company being subject to |evasion and believe all necessary steps| |capital gains tax. A breach of the |have been taken to prevent facilitation| |Listing Rules may result in censure by|of tax evasion. | |the FCA and/or the suspension of the | | |Company’s shares from listing. |The Directors are aware of their | | |responsibilities relating to price | |If all price sensitive issues are not |sensitive information and would consult| |disclosed in a timely manner, this |with their advisers if any potential | |could create a misleading market in |issues arose. This includes ensuring | |the Company’s shares. |compliance with the Market Abuse | | |Regulation. | |A Small Registered Alternative | | |Investment Fund Manager does not carry|The Company Secretary would notify the | |on a regulated activity in respect of |Board immediately if it became aware of| |its activities as an Alternative |any disclosure issues. | |Investment Fund Manager for an | | |Alternative Investment Fund for which |The Sub-Advisor has a comprehensive | |it is entitled to be registered. It |market abuse policy and any potential | |is, however, required to comply with |breaches of this policy would be | |certain requirements under the |promptly reported to the Board. | |Alternative Investment Fund Managers | | |Directive (‘AIFMD’) (which mainly |The Board has agreed service levels | |relate to reporting). |with the Company Secretary and | | |Sub-Advisor which include active and | |No change to this risk |regular review of compliance with these| | |requirements. | |______________________________________|_______________________________________| | |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 | |Operational risk |internal controls to the Board each | | |year. | |There are a number of operational | | |risks associated with the fact that |The Company employs the Administrator | |third parties undertake the Company’s |to prepare all financial statements of | |administration and custody functions. |the Company and meets with the Auditor | |The main risk is that third parties |at least once a year to discuss all | |may fail to ensure that statutory |financial matters, including | |requirements, such as compliance with |appropriate accounting policies. | |the Companies Act 2006 and the FCA | | |requirements, are met. |The Company is a member of the AIC, a | | |trade body which promotes investment | |No change to this risk |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
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
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
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,
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
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
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
Chairman
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable
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
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 applicableUK 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
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
Each of the Directors, confirm to the best of their knowledge that:
-- the Financial Statements, prepared in accordance with the applicable set ofUK 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
Chairman
INCOME STATEMENT
for the year ended
2023 2022 Revenue Capital Total Revenue Capital Total £’000 £’000 £’000 £’000 £’000 £’000 Gains on investments at fair – 2,271 2,271 – 10,158 10,158 value through profit or loss Foreign exchange (losses)/gains – (1,974) (1,974) – 3,149 3,149 on capital items 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 1,758 183 1,941 1,756 13,072 14,828 and taxation Finance costs Interest payable and related (21) – (21) (51) – (51) charges Net return before taxation 1,737 183 1,920 1,705 13,072 14,777 Taxation – overseas withholding (192) – (192) (94) – (94) tax 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
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
2023 2022 £’000 £’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
Chairman
Registered in Scotland No. SC259207
STATEMENT OF CHANGES IN EQUITY
for the year ended
Share Capital Year ended Share redemption Special Capital Revenue Total capital premium reserve1 reserve1 reserve1 31 December reserve £’000 2023 £’000 £’000 £’000 £’000 £’000 £’000 At 1 January 645 1,597 14 9,760 90,098 4,030 106,144 2023 Net return after – – – – 183 1,545 1,728 taxation Dividends – – – – – (1,461) (1,461) paid At 31 December 645 1,597 14 9,760 90,281 4,114 106,411 2023 Share Capital Year ended Share redemption Special Capital Revenue Total capital premium reserve1 reserve1 reserve1 31 December reserve £’000 2022 £’000 £’000 £’000 £’000 £’000 £’000 At 1 January 645 1,597 14 32,961 77,026 3,880 116,123 2022 Net return after – – – – 13,072 1,611 14,683 taxation Dividends – – – – – (1,461) (1,461) paid Share purchases – – – (23,201) – – (23,201) for Treasury At 31 December 645 1,597 14 9,760 90,098 4,030 106,144 2022
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
Year ended Year ended 31 December 31 December 2022 2023 £’000 £’000 £’000 £’000 Cash flows from operating activities Net return on ordinary activities before 1,920 14,777 taxation 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 36,629 32,017 year Cash and cash equivalents at the end of the 42,105 36,629 year
* 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
1. Accounting policies
Statement of compliance
The Company’s Financial Statements have been prepared under FRS 102 “The Financial Reporting Standard applicable in the
The comparative figures for the Financial Statements are for the year ended
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
Unquoted investments are valued by the Directors at fair value, using the guidelines on valuation published by the
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
From time to time, the Company buys back shares and holds them in
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
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 Capital Total Revenue Capital Total £’000 £’000 £’000 £’000 £’000 £’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 Capital Total Revenue Capital Total £’000 £’000 £’000 £’000 £’000 £’000 Management fee 49 114 163 101 235 336 49 114 163 101 235 336
With effect from
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
Prior to the appointment of
During the year ended
During the year ended
4. Dividends
2023 2022 £’000 £’000 Declared and paid Amounts recognised as distributions to Ordinary Shareholders in the year. 2022 final dividend of 5.0p per share paid on31 May 2023 (2022: year ended31 December 2021 final dividend of 5.0p paid on 25 May 1,461 1,461 2022). 1,461 1,461 2023 2022 £’000 £’000 Proposed Detailed below is the proposed final dividend per share in respect of the year ended31 December 2023 , which is the basis on which the requirements of section 1159 of the Corporation Act 2010 are considered. 1,461 1,461 2023 final dividend of 5.0p per share (2022 final dividend of 5.0p per share paid on31 May 2023 ).
The Directors recommend a final dividend of 5.0p per share for the year ended
5. Return per share
2023 2022 Net return Number of Per share Net return Number of Per share pence pence £’000 shares1 £’000 shares1 Revenue return 1,545 29,222,180 5.3 1,611 30,383,061 5.3 after taxation Capital return 183 29,222,180 0.6 13,072 30,383,061 43.0 after taxation Total return 1,728 29,222,180 5.9 14,683 30,383,061 48.3 after taxation
1
Weighted average number of ordinary shares, excluding shares held in
6. Net asset value per share
The NAV, calculated in accordance with the Articles of Association, is as follows:
2023 2022 pence 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
7. Significant holdings
As at
As at
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
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:
Company Secretary
e-mail: cosec@junipartners.com