The Global

Smaller

Companies

Trust PLC

Formerly BMO Global

Smaller Companies PLC

Report and Accounts

30 April 2022

Financial Highlights 3

Chairman’s Statement 4

Strategic Report

Purpose, Strategy and Business Model 8

Key Performance Indicators 11

Lead Manager’s Review 12

Responsible Investment 23

Ten Year Record 27

Promoting Success 29

Principal Risks and Future Prospects 30

Applying the principles of the AIC Code 41

Directors’ Report 43

Report of the Nomination Committee 49

Remuneration Report 50

Report of the Audit and

Management Engagement Committee 53

Statement of Directors’ Responsibilities 57

Independent Auditor’s Report 58

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the action you should take,

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Statement of Changes in Equity 64

Balance Sheet 65

Statement of Cash Flows 66

Notes to the Accounts 67

Notice of Annual General Meeting 83

Other Information

Additional Information for Shareholders 87

Management and Advisers 88

How to Invest 89

25 Year Historical Information 90

2022-23 Financial year events

Annual General Meeting 28 July 2022

Final dividend payable 4 August 2022

Half-yearly results for 2022 announced December 2022

Interim dividend payable January 2023

Final Results for 2023 announced June 2023

The Company is registered in England and Wales with company registration number 28264



Forward-looking statements

This document may contain forward-looking statements with respect to the financial condition, results of operations and business of the Company. Such statements

(3) Total dividend comprises an interim dividend (paid on 28 January 2022) of 0.57 pence and a final dividend for 2022 of 1.27 pence (payable on 4 August 2022), subject to

shareholder approval at the AGM.

(4) Comparative figures for the years prior to 2020 have been restated due to the sub-division of each existing ordinary share of 25p into ten new ordinary shares of 2.5p each on

31 October 2019.

Net Asset Value with

debt at fair value

(“NAV”)

total return

Share price total

of -6.4%.

at 30 April – %

Dividends

– pence per share

When we look at the sector weightings in the pie chart on page 12

and how they have evolved over the last year, the largest increase in

exposure was to Industrials and Consumer staples. Ultimately these

weightings are just the sum of a lot of individual stock decisions,

but we do feel that valuations within the Industrials in general offer

value taking a medium term view, although near term trading for

some of our holdings here is bearing the scars from the supply chain

issues surrounding Covid-19 and China. We have found some new

Consumer staples stocks to invest in over the last year, and we have

also added a little to our exposure to Energy related companies. The

enhance shareholder returns. At the year end the effective gearing

taking account of short-term liquidity was 4.6% compared to 3.8%

twelve months earlier.

I should update shareholders on how the combination of the

BMO investment team with Columbia Threadneedle Investments

('Columbia Threadneedle') is proceeding and what impact it is having

on the way that the Company is being run. The good news from

my perspective is that the philosophy, process and approach that

have been used to manage the Company for many years remain

the same. We now however have additional input from the enlarged

investee companies around ESG issues. Our fundamental research

seeks to identify for each company what the major issues are and

how companies compare to peers. We record these engagements

and regularly discuss them with the Responsible Investment team.

The report on pages 23 to 26 covers this area in more detail and

some of the progress we are seeing on the ESG front across the

portfolio.

While the market background is always important, at the end of the

year it is how the individual companies we hold do that makes the

difference. The regional reports that follow mainly focus on stock

Portfolio Performance -3.5%

Numis UK Smaller Companies (excluding investment companies)

Index

FTSE All-Share Index -3.5%

In overall terms this was a subdued year for UK smaller company

shares, coming after the stellar 2020/21. Larger company shares

did better than small cap this year, with the relative sector tilts the



recovering energy, mining and banking stocks for example. Pleasingly

our portfolio did comfortably better than the Numis UK Smaller

dropped, supporting wage growth, and, following protracted periods

of being locked down, UK consumers proved willing to spend when

they got the chance. Nevertheless, the emergence of the fast-

spreading omicron Covid-19 variant led to the requirement for the re-

introduction of restrictions again late in 2021. Faced with this, a cost

of living squeeze as a result of higher electricity, gas and food prices,

combined with higher personal taxes, it is perhaps not surprising

that consumers have started to tighten their belts. The Bank of

England raised its base rate three times in the year, in an attempt to

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contribution were both offers from North American based larger

peers. Clipper Logistics’

the leading online retail logistics services company attracted a bid

from GXO Logistics at an implied share price more than an 8 times

multiple of the IPO price from 2014, when we had initially invested.

We have also had a holding in wealth management company Brewin

Dolphin for a long time. Management have enhanced the quality of

Two real estate and two healthcare companies were among the other

bids in the second half of the year. Property developer U&I Group

had struggled for a number of years, but a refocused strategy and

holding, electrical products supplier Luceco Group, and a longer

While IPOs can go on to become big winners, we took a generally

cautious approach to participating in them this year on the grounds





the shares dropped 69.3%. Another company whose listing we

backed last year, online retail business In The Style, also had a

poor time, with trading results impacted by lower sales growth and a

worse product mix.

Other holdings which disappointed during the year included Go-

Ahead Group (rail franchise problems), Restaurant Group (cost

pressures) and video games business Team17 Group, which faced

customers in time.

they suffered a de-rating from the move away from growth stocks.

Carasent

technology stock offering cloud software to specialist medical clinics

in Scandinavia, also struggled as they announced a marginally lower

growth rate. Clinics rightly decided to focus on treating patients

during the resurgence of Covid-19 at the expense of installing new

software. Finally, the asset management software company Simcorp

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much traction due to the combination of the length of the sales

cycle and the challenges in having face to face meetings during the

tools and software sold to the fashion, furniture and automotive



of economic activity, yet not had any supply chain issues as yet.

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competitor Gerber, and the shares were up by 31.7%. Alten is a

French listed provider of outsourced R&D staff. Their client list is

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them, we bought our position in November 2020 after the positive

news on the vaccines and the shares have performed well since.

were not only cheap but offered good earnings recovery potential

too. One of our largest holdings Ringkjoebing Landbobank was the

best performer, up by 38.4%. Based in Denmark and dominating the

Jutland region they generated good growth and returns, lifting their

guidance through the year. Sparebank, the Norwegian bank with a

strong position in Rogaland, also had a good year helped by rising

interest rate expectations and a local economy that is leveraged to

the oil price. Finally, Storebrand, the Norwegian life, pensions and

asset management business was another good performer. They also





also won new contracts. Finally, the online ticketing company CTS

Eventim performed well as social restrictions were abandoned

driving an increase in concert attendances.

Portfolio turnover was lower this year following the elevated trading

activity in the previous year that was caused by the opportunities

provided by the pandemic related sell off. Clearly there has been

another bout of weakness in markets, however, thus far we have

stayed mainly on the side-lines as we digest the combination of

While we are clear that we believe a quality orientated portfolio is

For example we are concerned that consumers are facing an

extremely tricky outlook so have trimmed our exposure in this area

by selling out of recreational vehicle products company Dometic,

whilst we have increased exposure to energy by adding two services

businesses Schoeller-Bleckmann and TGS. We have exposure to



that have performed well for us, but we have augmented this further

by adding a holding in Bank of Ireland. We are actively looking

have to pay much of a premium for this exposure.

that encouraging with the prospect of a regional recession looming.

The counter to this is that the European market is now trading on a

relative valuation similar to previous recessionary troughs providing

an appealing entry point.

Portfolio Performance 7.8%

Russell 2000 Index -8.3%

S&P 500 Index 10.2%

The Russell 2000 smaller companies index fell 8.3% over the



index, mirroring the global trend. Our portfolio enjoyed a very strong

year in comparison to the Russell 2000, with a more conservative

investment approach paying off at a time when the more speculative

whilst the worst performing sectors were healthcare, consumer

discretionary and telecommunications. The portfolio’s performance

was largely driven by individual stock selection as opposed to

sector allocation. Our stock-picking in healthcare was the largest

contributor to outperformance, with a focus on attractively valued

and quality healthcare services stocks and a lack of exposure to



consumer staples were other areas where our holdings performed

well.

At the individual stock level, within healthcare, several of our

pharmaceutical sector. Performance was also helped by the

takeover of hospital equipment supplier Hill Rom Holdings by a

larger peer Baxter International. We had only bought into Hill Rom

in the previous year. The portfolio also gained from bids for three

other holdings. Insurance and reinsurance company Alleghany, in

contrast to Hill Rom, has been held in the portfolio for over 15 years.

A long-term track record of solid underwriting and shrewd capital

allocation on the investment side eventually enticed Warren Buffett’s

Berkshire Hathaway to launch a bid at a reasonable premium. Data

centres developer and operator CyrusOne was taken over by private

The largest individual positive stock contribution in the year came

from The Andersons

West, which rose 74.9%. Helped by geopolitical turbulence, markets

appear to be recovering for the trade, renewables and plant nutrient

operations, and management made progress in shedding the

company’s non-core businesses. Earnings at MaxLinear surged

because of strong demand for the company’s home connectivity

and telecommunications infrastructure products, driving the shares

revenue growth. Graphic Packaging (a vertically integrated producer

of paperboard based packaging) demonstrated the resilience of

its business model in the year as revenues were supported by

an ongoing shift to sustainable packaging. Margins outperformed

expectations as the company successfully passed through higher

costs to its customers. LKQ a distributor of automotive parts,



restrictions ended, with earnings also enhanced by higher scrap

steel and precious metal prices. Higher insurance rates helped to

lift earnings at Brown & Brown, an insurance broker that focuses on

As ever not everything worked out as planned. A new position in

the year Cognyte Software, a provider of security software, was

impacted by disruption in the technology hardware supply chain. In

addition, spending decisions by government customers were delayed

following the outbreak of war in Ukraine. Retailer Ollie’s Bargain

Outlet also suffered from supply chain related delays and could not

retain some of the customers that had been won during the worst

of the pandemic. Shares in frozen foods supplier Nomad Foods

fell 36.7% with the company facing challenging comparisons in the

year after a strong 2020. Similarly, shares in Hayward Holdings, a

In the year several high-quality businesses that offer reliable long-

term growth de-rated from elevated valuations as bond yields rose.

This presented the team with opportunities to invest into some

of these companies at attractive valuations. Syneos Health is a

contract research organisation. It offers a broad range of outsourced

services to pharmaceutical companies; growth should come from

contract wins and margin expansion from various initiatives. US

Physical Therapy (an owner and operator of outpatient physical

therapy clinics) has been owned by the portfolio in the past. It is



Another new addition to the portfolio was Prosperity Bancshares.

This is a conservatively managed bank based in Houston that should

see good loan growth because of its exposure to the faster growing



higher interest rates. Plymouth Industrial REIT was added late in

Bristow Group (a provider of helicopter transportation to offshore

Over the year, we trimmed or sold a number of positions, where

the company’s market capitalisation had risen above the normal

smaller company size range and where future valuation upside

appeared less compelling. These included ICON, STERIS, CDW and

CH Robinson. There were instances where shares reached a full

administration are still trying to stimulate the economy.

As discussed elsewhere in the review, the last year has seen an

extreme rotation from growth to value and while the economic

conditions and pandemic situation in the country have been slightly

out of synchronisation with the other markets at times, the Japanese

equity market was no exception to this. The funds that we hold,

managed by abrdn, Baillie Gifford and Eastspring, have different

investment approaches. abrdn select stocks with a quality and high

return on equity bias, Baillie Gifford look for companies with dynamic

seek to invest in undervalued, un-loved stocks where they expect a

re-rating in time. Given the central market dynamic favouring value

stocks, it is no surprise that Eastspring’s performance was strong in

the year, nor that the other two managers underperformed.



underperformers. It also saw some good performance from its



the basis that the growth story remains intact. Perhaps the more

disappointing performance came from abrdn’s fund, where stock

chains once more. The government has sought to support the

economy by reducing capital requirements on the banks, cutting

mortgage rates to help the housing market and by moving to invest

more into infrastructure projects, especially on the renewable energy

front. Other markets not doing so well in the last year included Hong

Kong, under the careful watch of China, and the more technology

orientated markets of Korea and Taiwan, which had done well in the

previous year. Sri Lanka suffered as it ran into a major crisis and

defaulted on its debt obligations.

Elsewhere in Asia, performance was better in some of the other

though Peru and Chile, where there has been some civil unrest

relating to the rising cost of living, have not done as well. Political



with a Brazilian election to come later n the year, the markets may

remain volatile.

Asia, and after a tough few years, pleasingly The Scottish Oriental

Smaller Companies Trust performed well, with the shares up 15.9%.



an overweight stance to India. The board of that investment trust

have also been more proactive in buying back shares to protect the

share rating and will execute a tender offer at a low discount in the

event that the fund underperforms in the medium term. Our other

investment trust, Utilico Emerging Markets Trust, also served

us well, with the focus on relatively more defensive and steady

the relatively buoyant Latin American markets later in the period.

The two of our holdings which underperformed most markedly

make it an economic size – this is a pity as we have held the fund

successfully for a long period of time.

As in Japan, we are considering if we should introduce any new

funds to the portfolio given weaker relative performance in this

part of the portfolio in the last few years. As far as the markets are

concerned, we presently feel quite neutral. On the one hand, China

could bounce back if the authorities become more pragmatic in

relation to Covid-19 ahead of the 2022 party conference in October,

but this is not a certainty. Political tensions with the west remain an

issue given the country’s stance over Ukraine. Valuations however



running hot. It is hard to feel positive about the likelihood of a return

to a normal trading relationship with Russia by the west, so strains

in energy and food markets may well persist for some time placing

pressure on consumers' disposable incomes and risking more civil

unrest in poorer countries. China’s approach to Covid-19 remains a

problem. At the same time, the rolling-back of the globalisation trend,



risk of geo-political or pandemic driven disruptions, appears likely

to gain traction. More local manufacturing sounds appealing but is

triggering a serious downturn or even recession. A scenario of low or



one for equity investors. It is always easy to become too bearish

however. The recovery from the pandemic has been remarkably

smooth and rapid where restrictions have been eased and more jobs

than expected have been created in the last year. Capital investment

is picking up, notably in areas where it needs to, such as renewable

energy. It is also possible that interest rates do not go up as much

as the markets are presently assuming.

In conclusion, we are very conscious of the potential risks that lie

attractively valued in the markets.

Peter Ewins

Lead Manager

17 June 2022

strands. Firstly, there are the Board’s own responsibilities on matters

such as governance. The Company’s compliance with the AIC Code

of Corporate Governance is detailed in the Corporate Governance

Statement on page 39. Secondly, there is the more material impact the

Company can have through the investments that are made on its behalf

can be found on its website at bmogam.com.

As discussed elsewhere, during 2021, Columbia Threadneedle and

BMO GAM (EMEA) combined. Coming together allows us to make use

of complementary strengths in the ESG arena and to create a world

class responsible investment capability. The aim is to drive real-world

change through active ownership and partnering with clients to deliver

approach to stewardship is a strategic priority for the enlarged business.

The Board has carried out a robust review and assessment of the Company’s principal and emerging

risks and the uncertainties that could threaten its future success. The consequences for its strategy,

the country. Detailed reports provided by the Lead Manager have been reviewed by the Board

at each of its meetings. As reported in the Key Performance Indicators on page 11, long-term

performance remains in line with expectations and the dividend for the year, has increased.

This risk is considered unchanged.

Despite actively buying in shares on a regular, ongoing basis in order to address the

The Board’s processes for monitoring the principal risks and identifying

emerging risks are set out on page 54 and in note 23 to the Accounts.

heightened as a result of the war in Ukraine, but the Board cannot

mitigate against such events. The principal risks are largely unchanged

to the assessment of the Company’s future prospects and viability were

Discount/premium –

• Potential illiquidity of the Company’s portfolio.

• Substantial falls in investment values on the ability to meet loan covenant requirements

• 

Five Year Horizon