Update on management arrangements

29 March 2023

Global Opportunities Trust plc (the "Company")
Legal Entity Identifier: 2138005T5CT5ITZ7ZX58

Update on management arrangements

The Company is pleased to announce that, effective today, Dr Sandy Nairn has been appointed as a full time executive of the Company, having resigned from his executive position with Franklin Templeton. The Company is taking steps to terminate its investment management agreement with Franklin Templeton Investment Management Limited (the "IMA"), such termination currently expected to be effective by mid-May 2023, and the global listed equities portion of the Company's portfolio will be managed by Dr Nairn going forward. The Company thanks Franklin Templeton for its services to date and throughout the Company's transition to a self-managed structure.

The Company is also pleased to announce that it 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, terms have also been agreed with Goodhart to provide investment sub-advisory services to the Company to assist Dr Nairn in managing the global listed equities mandate and the FX arrangements.  

The Board believes that these arrangements will provide a number of benefits for shareholders:

• Dr Nairn's appointment as a full time executive gives clear focus to the Company's management structure.
• The strategic relationship with Goodhart will help to develop significantly the opportunities available to the Company under the part of its portfolio investing in private capital markets and specialist funds.
• It is anticipated that these arrangements will reduce the Company's ongoing charges ratio from 0.9 per cent. to 0.8 per cent. (on the assumption that the Company becomes fully invested when valuations allow and based on both the Company's average monthly net asset value during 2022 and the Company's net asset value as at 28 March 2023).  

Further details are set out below.

Strategic relationship with Goodhart

Following shareholder approval of the changes to the investment objective and policy and the transition to a self-managed structure, the Company has the ability to access a wider range of investment opportunities and investment management expertise, most notably in private capital markets. In particular, the Company now has greater flexibility to take advantage of valuation anomalies that arise in specific niche areas of asset markets where the key to success and accessing these opportunities is specialist knowledge and experience.

Accordingly, the Company has entered into a strategic relationship with Goodhart, through which Goodhart will introduce the Company to investment opportunities in boutique private capital managers; specialist funds (such as the Company's existing investment in the Volunteer Park Capital Fund ("VPC")); and, potentially, co-investments and other unlisted equity investments.

Goodhart is an independent ‘multi-boutique’ asset manager founded in 2009. The heritage of Goodhart lies in two main areas.  First, it has a long and distinguished history in the analysis of asset management companies, with a particular knowledge and skillset in boutique specialist managers.  Second, as a former multi-manager, it has extensive experience in blending different asset classes and managers together to achieve its desired risk-reward profile.  The Board believes that these two areas of expertise can open up opportunities to enhance potential investment returns available to the Company through different investing environments.

The Board is of the view that there are a series of benefits for the Company in partnering with Goodhart on an ongoing basis. In addition to providing the Company with access to investments in high quality, valuable businesses with strong collateral, the Board notes that the arrangements with Goodhart enable the Company to benefit from the specialist knowledge and expertise of Goodhart and the private capital managers that it introduces. The relationship also enables the Company to structure attractive private capital investments with favourable fee arrangements and, notably, can give the Company exposure to greater upside potential in combining investments in specialist funds with stakes in the managers of such funds.

Under these arrangements, in accordance with the Company's investment policy and the asset allocations set out within it, up to 30 per cent. of the Company's total assets (including the Company's existing investment in VPC) may be allocated to Goodhart and its partners, affiliates and managed strategies for sourcing and managing investments in specialist funds and private capital on an ongoing basis.

As disclosed in the Company’s annual report and accounts for the years ended 31 December 2021 and 2022, Dr Nairn is the sole controller of a company which holds a significant minority shareholding in Goodhart. Accordingly, the arrangements with Goodhart constitute a related party transaction under the Listing Rules. Although the arrangements (including the investment sub-advisory services and Dr Nairn's salary arrangements referred to below) do not require shareholder approval (having been determined to be a "smaller related party transaction" in accordance with the class tests under the Listing Rules), the Company has obtained confirmation from its sponsor, Dickson Minto, that the terms of the arrangements with Goodhart and Dr Nairn are fair and reasonable from a shareholder perspective.

Management fees and ongoing costs

Following termination of the IMA, there will be no management fee on the funds previously managed by Franklin Templeton. In consideration for his services to the Company as a full time executive director, Dr Nairn (previously a salaried employee of Franklin Templeton) will receive a salary of £75,000 per annum (the "Executive Salary") in addition to a £25,000 annual fee (in line with the fee paid to the Company’s other directors). 

Given Dr Nairn's interests in Goodhart as set out above, it has been agreed with Dr Nairn that his Executive Salary will be reduced (such reduction equalling the entire Executive Salary if necessary) by his share (through his minority interest in Goodhart) of amounts credited in the same period in respect of (i) any carried interest on co-investments made by the Company alongside Goodhart or Goodhart sponsored-funds and (ii) any partnership profit allocations attributable to Goodhart's net profits on fees earned from the Company (including in respect of the investment sub-advisory services, the Company's existing investment in VPC and any carried interest attributable to such investment in VPC earned by Goodhart or any Goodhart-sponsored vehicle).

Goodhart will receive a 0.12 per cent. annual fee levied on the global listed equities portion of the Company's portfolio (and any cash in respect of which it provides FX assistance) for the provision of investment sub-advisory services. No fixed fee or base period compensation will be payable to Goodhart in respect of the wider strategic relationship, with any fees in respect of individual private market opportunities to be agreed on a case by case basis. The Company notes that the agreement of any such fee shall be subject to Board approval and that the total amount of fees payable to Goodhart in any 12 month period (including in respect of investment sub-advisory services) shall be capped at 1.0 per cent. of the Company's net asset value.

The Company notes that these arrangements are expected to result in a reduction in costs for shareholders irrespective of whether the current asset allocation of the Company's portfolio continues (whereby it maintains a high cash balance). If and when this cash balance is deployed, as Dr Nairn intends to do when valuations allow, the Company's ongoing charges ratio is anticipated to fall, relative to the position under the previous arrangements, from 0.9 per cent. to 0.8 per cent. (on the basis of both the Company's average monthly net asset value during 2022 and the Company's net asset value as at 28 March 2023).

Current Company strategy and market overview

Dr Nairn, Executive Director, commented on the market overview for the Company in the light of these new arrangements:

"We are moving into a world in which free money no longer drives all returns to unjustified heights. I believe that we are in a transition back to one where the traditional investing virtues will once again reign. This is not about value versus growth or other factors such as ‘quality’. It is simply about how much you are willing to pay for the characteristics and future of an asset. We look forward to the day where risk aversion rises to the levels that disregard for risk reached in the recent past. That will be the time that we again see an abundance of attractive investable opportunities. 

In my judgement we are not there yet, but we are getting closer. We will try to remain patient and prudent until that time. Our proposition to shareholders is that, as and when those opportunities present themselves, the Company will be willing and ready to use the flexibility that our investment policy affords us to pursue them to the full. We are tactically, not permanently, bearish. When valuations permit we look forward to being bullish and I believe that our strategic partnership with Goodhart will greatly assist us in sourcing and executing such opportunities as they arise."

Cahal Dowds, Chairman, commented:

"We are pleased to announce both the appointment of Dr Nairn as a full time executive director and the strategic relationship with Goodhart. In addition to the expected reduction in ongoing costs for shareholders, these management arrangements will provide the Company with valuable support in accessing the wide range of investment opportunities and investment management expertise available to it under its expanded investment policy."

For further information, please contact:

Dr Sandy Nairn, Director     0131 270 3800

Juniper Partners Limited, Company Secretary  0131 378 0500

This announcement contains inside information for the purposes of Article 7 of the UK version of Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 and as amended ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.