The Global
Smaller
Companies
Trust PLC
Company Number: 28264
Report and Accounts
for the year ended
30 April 2023
Report and Accounts 2023 | 1
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
Strategic Report
Company Overview 2
Financial Highlights 3
Chairman’s Statement 4
Lead Manager’s Review 8
Investment Manager’s Investment Philosophy
and Process 17
Investment Case Studies 19
Responsible Investment 22
Thirty Largest Holdings 26
List of Investments 28
Ten Year Record 31
Purpose, Strategy and Business Model 33
Promoting Success 36
Principal Policies 37
Key Performance Indicators 39
Principal and Emerging Risks 40
Governance Report
Directors 42
Directors’ Report 43
Chairman’s Statement on Corporate Governance 49
Applying the principles of the AIC Code 50
Report of the Audit and
Management Engagement Committee 52
Report of the Nomination Committee 56
Directors' Remuneration Report 57
Statement of Directors’ Responsibilities 60
Independent Auditor’s Report 61
Contents
Financial Report
Income Statement 66
Statement of Changes in Equity 67
Balance Sheet 68
Statement of Cashflows 69
Notes to the Accounts 70
Notice of Annual General Meeting 86
Other Information
Management and Advisers 90
Additional Information for Shareholders 91
How to Invest 92
25 Year Historical Information 93
Alternative Performance Measures 95
Glossary of Terms 97
Analysis of Ordinary Shareholders 99
2023-24 Financial year events
Annual General Meeting 28 July 2023
Final dividend payable 4 August 2023
Half-yearly results for 2023 announced December 2023
Interim dividend payable January 2024
Final Results for 2024 announced June 2024
2 | The Global Smaller Companies Trust PLC
The Global Smaller Companies Trust PLC (the ‘Company’) was founded in 1889 with an initial capital of
£1m. The Company’s net assets had a value of more than £859m as at 30 April 2023.
Objective
To invest in smaller companies worldwide in order to secure a high total return.
Investment team
A well resourced and experienced investment management team at Columbia Threadneedle Investments
aims to identify the best smaller company opportunities listed on global stock markets.
Investment approach
A focus on quality. We look for high quality, well managed companies delivering strong returns with a
track record of profitability.
Price matters. Portfolio holdings should be attractively valued both in absolute terms and compared to
peers.
The benefits of diversification. We seek to create a well spread and balanced portfolio avoiding over
exposure to any one company, sector or market.
A dividend hero
By investing in a portfolio of growing, high quality listed companies, the Company’s own dividend has risen
for 53 consecutive years.
The Company is suitable for retail investors in the UK, professionally advised private clients and
institutional investors who seek growth over the long term and who understand and are willing to accept
the risks, as well as the rewards, of exposure to smaller companies.
Visit our website at globalsmallercompanies.co.uk
The Company is registered in England and Wales with company registration number 28264
Legal Entity Identifier: 2138008RRULYQP8VP386
Company Overview
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
involve risk and uncertainty because they relate to future events and circumstances that could cause actual results to differ materially from those expressed or
implied by forward-looking statements. The forward-looking statements are based on the Directors’ current view and on information known to them at the date of this
document. Nothing should be construed as a profit forecast.
DIVIDEND
HERO
Report and Accounts 2023 | 3
Overview
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
(1) See Alternative Performance Measures on pages 95 and 96.
(2) See Glossary of terms on page 97 for explanation of ‘Benchmark’.
(3) Total dividend comprises an interim dividend (paid on 6 January 2023) of 0.63 pence and a final dividend for 2023 of 1.67 pence (payable on 4 August 2023), subject to shareholder
approval at the forthcoming 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.
Financial Highlights year to 30 April 2023
Dividend
(3)
of 2.30
pence (2022: 1.84p),
the 53rd consecutive
annual increase,
up by 25.0% (2022:
up by 5.1%).
2.30p
The Company's
shares ended the
year at a discount
(1)
to NAV of 12.7%
(2022: 9.6%).
-12.7%
Net Asset Value with
debt at fair value
(1)
(‘NAV’)
total return
(1)
of -2.9%
(2022: -0.2%) versus
-2.1% from the
Benchmark (2022: -3.2%).
The NAV fell to 165.7p from 172.8p.
-2.9%
Share price total
return
(1)
of -6.2%
(2022: -6.4%).
The share price ended the year
at 144.6p (2022: 156.2p).
-6.2%
NAV
(1),(4)
per share at 30 April – pence
Mid-market price
(4)
per share at 30 April – pence
Source: Columbia Threadneedle Investments
0p
20p
40p
60p
80p
100p
120p
140p
160p
180p
200p
2023202220212020201920182017201620152014
0p
20p
40p
60p
80p
100p
120p
140p
160p
180p
2023202220212020201920182017201620152014
Source: Columbia Threadneedle Investments
Share price premium/(discount)
(1)
at 30 April – %
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
2023202220212020201920182017201620152014
Source: Columbia Threadneedle Investments
Dividends
(3),(4)
– pence per share
0.0p
0.2p
0.4p
0.6p
0.8p
1.0p
1.2p
1.4p
1.6p
1.8p
2.0p
2.2p
2.4p
2023202220212020201920182017201620152014
Source: Columbia Threadneedle Investments
Delivering high total returns over the long term
The dividend has increased every year for the past 53 years and over the last ten years is up 13.5%
compound per annum, compared with inflation (RPI) of 4.1% compound per annum.
Potential investors are reminded that the value of investments and the income from dividends may go down as well as up and investors
may not receive back the full amount invested. Tax benefits may vary as a result of statutory changes and their value will depend on
individual circumstances.
In the last ten years the Company has turned a £1,000 investment, with dividends reinvested, into £2,108,
a compound annual total return of 7.7%.
4 | The Global Smaller Companies Trust PLC
Dear Shareholder,
For equity investors, the year under review has been challenging.
Inflation and the consequent need for monetary policy tightening were
dominant influences through the year, with the devastating war in Ukraine
continuing to cast a heavy shadow, adding to the already tense geo-
political climate.
The World Health Organisation's declaration of the COVID pandemic as
“no longer a global public health concern” and the easing of pandemic
restrictions in China in early 2023 lifted investor sentiment somewhat,
before this was to be shaken once again by the emergence of problems
across the banking sector in March.
The interest rate environment has been unhelpful for stock market
sentiment and, given their greater economic sensitivity, higher rates
are especially bad for smaller companies. Unsurprisingly, small caps
struggled relative to larger counterparts in most parts of the world, with
the main exception being within Asia, where they held up better.
Performance and the discount
Against a difficult global market backdrop, especially for more growth
orientated stocks, the Company’s Net Asset Value (‘NAV’) total return
(with long-term borrowings at fair value) over the twelve months was
-2.9% ending the year at 165.7p per share. While negative returns are
never welcome, the second six months of the year actually delivered a
modest recovery, helped by hopes that the period of rising interest rates
might be coming to an end.
In the Company's Half Year Report, the Manager highlighted that
investment trust discounts had widened out given increased caution
around the economic outlook and that smaller company funds in
particular had been impacted by this trend. Starting 2022/23 at 9.6%,
the Company’s discount reached 14.1% at the end of October 2022 and
closed the financial year at 12.7%, significantly wider than the Board’s
sub 5% target. The wider discount meant that the share price fell by 7.4%
over the year to 144.6p, or by 6.2% on a total return basis.
While recognising that share buybacks may not have much impact on
our discount in an environment where other investment trust discounts
are widening, the Board continues to believe that a consistently applied
buyback approach is in shareholders’ best interests, providing liquidity
for those in need of an exit along with NAV accretion to remaining
holders. Over the year, some 24.6m shares which represented 4.5%
of the starting share capital (2022: 26.2m), were repurchased across
some 196 trading days, enhancing the NAV by 0.4% in the process.
The chart on the next page illustrates the Company’s discount (and
premium) over the last 10 years and that of the wider investment trust
sector, providing a reminder that discounts/premiums in the investment
trust space are cyclical.
During the course of the year, the Manager has stepped up marketing
activity over a number of channels and is working to enhance the
messaging around the core investment proposition, highlighting the
investment management team’s approach to stock selection, which
focuses on quality and valuation discipline across a diversified smaller
company portfolio. Generating more interest in the Company's shares
from both existing and new investors, together of course with good
investment performance, will be key in helping to address the discount in
the medium term.
The Benchmark
In April the Board announced a change to the Company’s Benchmark
with effect from 1 May 2023 for the new financial year. The Benchmark
return has been calculated from the blended returns from UK and
international small cap indices, with the former and latter having a
30% and 70% weighting respectively. Over the years, the share of
“The Manager is continuing to find opportunities in the markets, helped by
the pullback in valuations and by the increased depth of investment research
capabilities within the enlarged Columbia Threadneedle Investments business. Now
that the prolonged period of low interest rates and “easy money” has come to an
end, your Manager’s focus on quality companies with strong balance sheets is
starting to pay off. As a result of good operational performance from the portfolio,
the Board is pleased to recommend a 25% increase in the annual dividend
payment, marking a 53rd consecutive year of progression.”
Anja Balfour, Chairman
Chairman’s Statement
Report and Accounts 2023 | 5
Chairman’s Statement
Costs and management fee
Ongoing charges were up over the year, moving from 0.75% to 0.79%,
mainly reflecting the lower average daily net asset level. These remain
low compared to many smaller company funds in the market.
The Manager has been paid a management fee of 0.55% per annum of
the Company’s net asset value, which is reduced to 0.275% in respect
of the market value of investments held in third party collective funds.
Following constructive discussions with the Manager, the Board has
agreed to introduce a tiered element to the management fee. With
effect from 1 May 2023, net assets outside of collectives in excess
of £750m will be charged at a reduced rate of 0.5% per annum, with
any investments made in third party collective investment schemes
remaining subject to a charge of 0.275% per annum of the month end
market value of those investments.
Dividends
Although capital growth has been harder to come by in more recent
times, income returns have been much more positive. Revenue returns
per share for the year rose by no less than 28.6% as income from both
UK and overseas based holdings grew strongly, helped by a post-
pandemic profit bounce-back. Following on from the 10.5% increase in
the interim dividend, the Board has decided to recommend the payment
of a final dividend of 1.67p, meaning the full year payment will be up
by 25.0% to 2.30p. This will be paid to shareholders on 4 August and
will be the 53rd consecutive increase in the Company’s dividend. At
a time when inflation remains elevated, it is pleasing that the payout
is well up in real terms and this is also a good sign of the confidence
that investee company management teams have in the future of their
businesses.
the Company’s portfolio invested in domestically listed stocks has
been on the decline, reflecting the evolution of the global investment
universe. Essentially the UK market has become a smaller part of the
total world stock market capitalisation with other markets, particularly
in Asia, now offering a wider set of opportunities in the smaller quoted
arena than historically. The weighting in the Benchmark calculation
therefore has been adjusted, making the new Benchmark: 20% Numis
UK Smaller Companies (excluding investment companies) Index/80%
MSCI All Country World ex UK Small Cap Index. To take account of the
withholding taxes that the Company pays on some overseas dividends,
the calculation of the MSCI index returns will now be measured on a net
of tax basis (previously gross returns have been used).
The returns from the Benchmark used for 2022/23 were -2.1%. Longer-
term cumulative performance total returns from the NAV, Benchmark and
share price are shown in the table below. The compound annualised
NAV and share price returns over the last 25 years are 9.2% and 9.6%
respectively, well ahead of the 3.4% Retail Prices Index annual increase
over the same time-frame.
Performance: Total returns over the long-term
1 year
%
3 years
%
5 years
%
10 years
%
25 years
%
Company NAV
total return
-2.9 43.3 28.2 144.6 811.1
Benchmark
total return
-2.1 46.1 29.3 137.2 665.2
Company
share price
total return
-6.2 35.3 11.8 110.8 897.5
Source: Columbia Threadneedle Investments
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
The Global Smaller Companies Trust
(period mean)
Premium/(Discount) to NAV (%)
-25
-20
-15
-10
-5
0
5
2023
2013 2014 2015 2016 2017 2018 202120202019
UK Investment Companies (Ex 3i)
(period mean)
The Global Smaller Companies TrustUK Investment Companies (Ex 3i)
2022
(Discount)/premium compared to UK Investment Companies (ex 3i) over 10 years
Source: Columbia Threadneedle Investments
6 | The Global Smaller Companies Trust PLC
Market and portfolio performance
The Manager’s review starting on page 8 covers the year's performance
in more detail. This year we have included another section which outlines
the core tenets of the Manager’s investment philosophy and approach,
illustrated with some individual case studies.
It is fair to say that the environment for investing has changed
considerably in the last couple of years, with the period of ultra-low
interest rates seemingly behind us for a while. Inflationary pressures –
initially stemming from higher commodity prices, supply chain problems
in relation to the pandemic and the war – have been augmented as
a result of tight labour markets in much of the developed world. The
process of consequent interest rate normalisation is clearly creating
issues at both a sector and company level, as evidenced by the recent
collapse of a number of US banks. Highly leveraged businesses have
found themselves facing significantly more expensive finance costs and
loss-making or more speculative businesses are finding support from
both equity and debt markets less forthcoming. In essence, market
conditions are increasingly favouring higher quality and lower risk
businesses. Merger and takeover activity has slowed in the past year
in the face of the higher interest rates, but a number of the Company’s
holdings were still the subject of approaches this year.
The table above shows how our regional portfolios performed in the year
compared with the relevant local smaller company indices. As mentioned
above, smaller companies were not immune to the impact of higher
interest rates and slower global growth data. Relative to the local small
cap market returns, we were a little behind in North America though it
should be recalled that this followed a stellar year here in 2021/22 and
indeed during the second half of 2022/23, the portfolio outperformed
significantly after having had a more difficult period last summer. We
were more meaningfully behind in the UK and Europe as stock selection
proved challenging. The best returns by far came from our holdings in
Geographical performance (total return sterling adjusted) for the year ended 30 April 2023
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
Rest of
World*
JapanUSAEuropeUK
Source: Columbia Threadneedle Investments
Portfolio
Local smaller companies index (see Lead Manager’s Review)
-6.3%
-3.0%
-2.1%
0.3%
-4.2%
-3.8%
9.1%
7.7%
-2.1%
-7.4%
-1.5%
Latin
America
Pacific
ex Japan
*Performance of the Rest of World portfolio is shown here against both the Asian and Latin American smaller company indices.
Japan, where our largest fund holding managed by Eastspring performed
very well. In the Rest of World portfolio of collective funds, we were
pleasingly ahead of the Asian small cap index return which is where most
of our exposure in this part of the portfolio is orientated. The Manager’s
Review highlights some changes being made to the comparator smaller
company indices for North America and Europe with effect from the new
financial year.
Asset Allocation
Regional allocation made a small positive contribution towards the
overall relative performance of the Company in the year. Over the course
of the year, there were no dramatic changes to the geographic weightings
of the portfolio, though the exposure to North American listed stocks fell
back in the second half as the Manager became less optimistic on the
outlook there, in part due to the possibility for a pull-back in the US dollar.
North America 41.7% (43.4%)
UK 25.3% (26.8%)
Rest of World 12.4% (12.2%)
Europe 12.1% (10.8%)
Japan 8.5% (6.8%)
Geographical distribution of the investment portfolio
as at 30 April 2023
Source: Columbia Threadneedle Investments
The percentages in brackets are as at 30 April 2022
Report and Accounts 2023 | 7
Chairman’s Statement
The table below shows the weightings of the portfolio against the new
Benchmark.
Geographical weightings of the por tfolio and the revised Benchmark
Portfolio weight (%) Benchmark weight (%)
UK 25.3 20.0
Europe 12.1 10.5
North America 41.7 45.5
Japan 8.5 8.7
Rest of World 12.4 15.3
Source: Columbia Threadneedle Investments
Gearing Policy
Although equity market performance has been uninspiring more recently,
the Board remains of the view that making use of borrowing powers
over the long term will serve to enhance shareholder returns. At the
end of the year, effective gearing was 5.2% compared to 4.6% a year
earlier. Borrowings were made up of £35m of 2.26% sterling loan notes
maturing in 2039 and £17m equivalent drawings in US dollars, yen and
euros under our revolving credit facility. The fair value of the loan notes
fell by £10.4m in the year, reflecting the rise in market yields, with the
2.26% rate now looking highly attractive compared to prevailing market
rates.
Environmental, Social and Governance (‘ESG’)
While your Company is not an ESG badged fund, the fund management
team take close account of ESG factors in making their stock selections.
Over the course of the last year input in this regard from the Manager’s
Responsible Investment team has continued to be helpful, with regular
updates provided to the fund managers on specific topics of interest
and new ESG developments. Engagement with the management teams
of companies held in the portfolio is continuous and once again some
practical illustrations of this work are outlined in the Responsible
Investment report on pages 22 to 25.
Composition of the board and committees
The Board comprises five directors and maintains plans for orderly
succession, ensuring that the right balance of skills, experience,
knowledge, independence and diversity are in place for the Board to
operate effectively, as a whole. It currently meets the FCA diversity
requirements relating to gender diversity and is committed to meeting
the target of at least one director being from a minority ethnic
background in the course of 2023.
David Stileman will stand down from the Board in October this year. On
behalf of the Board I would like to thank him for his contribution since his
appointment in 2015 and we wish him well for the future. The process to
recruit his successor is underway.
Annual General Meeting
The Annual General Meeting will take place at The Chartered
Accountants Hall, 1 Moorgate Place, London EC2R 6EA on Friday,
28 July 2023 at 12.00 noon. We hope as many shareholders as
possible will attend. The Lead Manager will, as usual, give a review
of the year together with his view on the outlook. We will also be
streaming the meeting live on the internet so that those shareholders
who cannot attend in person will be able to view the proceedings.
The live stream can be accessed by registering here: https://www.
investormeetcompany.com/the-global-smaller-companies-trust-plc/
register-investor
Voting at this year’s AGM will be conducted by way of a poll and,
therefore, you are requested to lodge your votes ahead of the meeting
by completing your Form of Proxy or Form of Direction in accordance
with the instructions shown thereon. Their completion and return will
not preclude you from attending the meeting and voting in person.
Shareholders who are unable to attend the AGM are requested to submit
any questions they may have with regard to the resolutions proposed at
the AGM or the performance of the Company, in advance of the meeting
to gscagm@columbiathreadneedle.com. Following the AGM, the Lead
Manager’s presentation will be available on the Company’s website
globalsmallercompanies.co.uk.
Outlook
As always it’s hard to predict how markets will perform looking ahead,
but it seems likely that the path of inflation and interest rates in the next
few months will have a large bearing on equity market trends. The lagged
impact of previous rate hikes will be a headwind in the coming period
for the global economy. Having said this, the Manager is continuing to
find opportunities in the markets, helped by the pullback in valuations
and by the increased depth of investment research capabilities within
the enlarged Columbia Threadneedle Investments business. The
Board remains confident in the medium term returns prospects for
your Company given the underlying dynamism within the global smaller
company sphere. Now that the prolonged period of low interest rates
and “easy money” has come to an end, your Manager’s focus on quality
companies with strong balance sheets is starting to pay off.
Anja Balfour
Chairman
22 June 2023
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
8 | The Global Smaller Companies Trust PLC
A year ago I expressed the hope that the conflict in Ukraine could
be short-lived, but very sadly this has turned into a protracted war
of attrition, so the global economy has had to adjust to this reality.
In fact, the speed with which Europe has moved to diversify its
supply-chain in relation to gas has been impressive and a fortunately
mild winter helped to prevent a more serious economic impact. The
progressive ending of restrictions on activity following the lengthy
pandemic also served to support the growth outlook. Ultimately,
however, the surging cost of food, energy and knock-on impact to
labour costs made for a challenging year on a global basis.
The performance of equity markets was somewhat disappointing,
with the Benchmark and NAV falling by 2.1% and 2.9% respectively,
the second year in a row that both have been in negative territory.
After beating the Benchmark last year, it is disappointing to be
reporting slight underperformance this time, but we take some
comfort from the fact that our performance was better than the
average global smaller company investment trust performance and
many open ended peers over the year. As was the case last year,
our investment income was strong, growing well past pre-pandemic
levels and allowing the Board to recommend an inflation beating
25.0% increase in the annual dividend.
The main debate in financial markets over the year was around the
likely longevity of the period of higher inflation and the consequent
outlook for interest rates. The speed and extent to which rates
have moved up in the US surpassed expectations from a year ago.
This normalisation of monetary policy combined with a move to
quantitative tightening in the US has squeezed liquidity in financial
markets and forced other central banks to react in a similar fashion.
Rising interest rates pressured valuations of more speculative
stocks in the markets and companies with high leverage were also
out of favour as they faced more expensive debt servicing costs.
Takeover activity slowed in comparison to last year as private equity
companies faced higher financing costs and we saw less of our
holdings acquired in the year with just 6 taken over compared to 17
last year.
At the individual company level, it was a complicated year for
management teams to navigate. Uncertainty over consumer
behaviour, given cost of living strains, volatile ordering patterns as
distortions in relation to the pandemic fed through and rising costs
placing pressure on margins were all factors contributing to a more
uncertain corporate earnings picture. It is perhaps not surprising
therefore that we have seen more profit warnings come through in
recent months in the portfolio and across the markets as a whole.
The performance table on page 9 shows that this was a challenging
year for us in stock selection terms within the UK, European and North
American portfolios. In relation to North America, we did however
deliver a much stronger relative performance in the second half of the
year after a tough time in summer 2022. More positively, we posted
outperformance in Japan and more meaningfully so on the Rest of
Lead Manager’s Review
Industrials 21.0% (19.4%)
Collective investments 20.9% (19.0%)
Consumer discretionary 11.6% (11.2%)
Financials 9.4% (11.5%)
Technology 8.5% (8.2%)
Healthcare 7.3% (7.7%)
Basic materials 6.6% (7.6%)
Consumer staples 5.5% (6.1%)
Real estate 4.3% (3.8%)
Energy 3.7% (2.3%)
Telecommunications 0.8% (2.2%)
Utilities 0.4% (1.0%)
Source: Columbia Threadneedle Investments
The percentages in brackets are as at 30 April 2022
Industrial classification of the investment portfolio
as at 30 April 2023
“The last couple of years have taught us a lot about the fundamental resilience
and quality of individual company’s business models, which have been given
a proper examination by the pandemic and the re-emergence of meaningful
inflation. On the whole, we have been impressed by how the management teams
of our holdings have coped.”
Peter Ewins, Lead Manager
Report and Accounts 2023 | 9
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
Strategic Report
World portfolio when compared to the Asian small cap index, the
region to which this portfolio is most exposed. More detail around
what drove the relative performance of all the portfolios in the year
appears in the coming pages, but taking a longer term view, it is good
to see that, over 15 years, all parts of the portfolio are ahead of the
local benchmarks.
In relation to benchmarking, the Chairman's statement covers the
change announced to the overall Benchmark index for the new
financial year. As part of our regular review of comparator indices, we
have also decided this year to change the benchmarks we use to
compare our North American and European portfolio performance.
In both cases we are moving to use MSCI indices, to bring the
sub-portfolios into line with the global element of the Company’s
Benchmark. For North America, we will now compare ourselves
against the MSCI North American Small Cap Index, while for Europe
it will be the MSCI Europe ex UK Small Cap Index. In all cases for the
international markets we will use net returns indices rather than gross
returns. Net returns indices incorporate the impact of withholding tax
on dividends from companies in the index.
Over the year, our exposure to Europe and Japan increased at
the expense of North America. Europe appears to have avoided a
deep recession and Japan is not facing the higher interest rates of
elsewhere. The US banking sector turmoil has hopefully ended, but
we think that it is possible that the protracted period of dollar strength
could have run its course while the risks of a US recession in late
2023 have risen.
The sector weightings in the pie chart on page 8 are essentially the
result of individual stock selections, but we have felt that valuations
of many industrials stocks have become attractive, notwithstanding
pressure on near-term earnings forecasts from the global slowdown
and de-stocking effects. We have added to energy related investments
Currency strengthening against Sterling
Currency weakening against Sterling
Apr
22
Aug
22
Dec
22
Apr
23
105
110
115
90
100
120
95
Japanese Yen EuroUS Dollar
Currency movements relative to sterling in the year ended 30 April 2023
Source: Columbia Threadneedle Investments
Table of total returns (sterling)
1 year 3 years 5 years 10 years 15 years
Fund Benchmark Fund Benchmark Fund Benchmark Fund Benchmark Fund Benchmark
UK -6.3% -3.0% 34.0% 40.0% 8.1% 8.0% 146.6% 87.7% 315.6% 208.3%
Europe -2.1% 0.3% 29.5% 43.6% 23.0% 28.6% 134.8% 169.8% 252.4% 216.5%
North America -4.2% -3.8% 51.0% 40.6% 54.6% 34.3% 199.3% 164.8% 569.3% 378.6%
Japan 9.1% 7.7% 16.8% 15.0% -1.3% 5.0% 104.2% 103.8% 246.0% 240.2%
Rest of World* -2.1% -7.4% 38.3% 52.1% 20.7% 26.1% 50.1% 78.4% 208.5% 135.9%
*Rest of World performance is compared against the MSCI All Countries Asia Pacific ex Japan Small Cap Index
Source Columbia Threadneedle Investments
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Chairman’s StatementOverview Auditor’s Report
in the year as we feel that there will be a period of higher investment
in that space to take account of the geopolitical situation and past
under-investment. We cut exposure to financials and materials stocks
in the year. Some of this was profit taking following strong relative
performance of a number of holdings.
Gearing was maintained during the year in line with the Board’s policy
to make use of borrowings through the cycle to enhance shareholder
returns. At the year end the effective gearing, taking account of short-
term liquidity, was 5.2% compared to 4.6% twelve months earlier. The
Company benefits from a competitive cost of borrowing as a result of
the 20 year £35m private placing undertaken in 2019 at 2.26%.
In the regional reviews that follow, performance numbers in relation to
the portfolio and indices are all expressed in sterling total return terms,
while individual company performance is shown in local currency terms.
10 | The Global Smaller Companies Trust PLC
UK Review One year
Portfolio Performance -6.3%
Numis UK Smaller Companies (excluding investment companies)
Index
-3.0%
FTSE All-Share Index 6.0%
This was a difficult period for our UK portfolio with domestic smaller
company shares falling in value for the second consecutive year and
we underperformed against the Numis index for only the second
time in the last 13 years. As in the previous year, larger stocks did
considerably better, helped by a greater exposure to international
markets at a time when the UK economy faced notable headwinds.
While higher inflationary pressures were not just a UK phenomenon,
the more material impact from higher energy and food prices and a
tight labour market have meant that UK consumers have felt more of
a cost of living squeeze. The need to address inflationary pressures
required the Bank of England to raise its base rate from 0.75% to
4.25% over the year.
While the year clearly had challenges, we had a lot of strong
performers on the portfolio. In support services we were helped
by bids at large premiums for consultancy business RPS Group
and waste management company Biffa, with the former being the
best overall contributor to performance in the year. A new holding
in Ashtead Technology, which provides specialist equipment and
services into the offshore energy and renewables sectors, did
excellently in its first year. This is a strong business in an attractive
niche area, with good visibility for the next couple of years as the
UK and other countries invest heavily in energy transition and the
company is further profiled on page 20. It was also pleasing to see
that the purchase in the previous year of a holding in Ricardo Group
paid off with a 64.8% share price rise. This company is also exposed
to the energy transition dynamic, alongside other environmental
consultancy areas.
In the media arena, we benefited from Euromoney Institutional
Investor’s takeover by private equity. Shares in promotional products
company 4Imprint Group had an outstanding year, up 65.2% as new
marketing initiatives paid off. Moneysupermarket.com shares rose
56.6% as consumers' use of the platform increased. Elsewhere,
Kitwave Group, a wholesale supplier of confectionery and other
food and beverages products into the independent convenience
store channel, rose 76.0% as it managed to beat expectations and
successfully executed a couple of bolt-on acquisitions, gaining
more investor attention as a result. In a tough market for industrial
companies given de-stocking and margin pressures Vesuvius, the
materials technology company serving the steel and foundries
sectors, delivered a robust profits performance due to its strong
management and pricing power.
Stock selection was disappointing in some of the consumer facing
sectors. While the cost of living pressures were bound to create
issues, a number of holdings produced results much worse than we
had expected. Revolution Beauty, which targets the mass market
beauty and personal care products market, slumped after revealing
accounting and trading issues and we exited but not before taking
a large loss. We also exited online fashion business In The Style
Group as its sales and margin performance significantly undershot
expectations. Hotel Chocolat shares fell steeply as the company
decided to pull back from international expansion and focus back
on its core UK operations. While this may be the right call, for us
it undermined a core part of the original investment case and we
decided to sell this holding too.
Within financials, Molten Ventures fell by 59.6% as concerns grew
around the valuation outlook for the company’s portfolio of unlisted
technology orientated businesses. Fellow venture capital and asset
management company Mercia Asset Management dropped 23.9%
for the same reason, despite reporting good results, with growth in
assets under management and some positive realisations achieved.
Our holdings in real estate were inevitably hurt by the impact of
higher interest rates on capital values, with CLS Holdings, Sirius
Real Estate and Warehouse REIT all falling by more than 20%. We
see value in the sector after its period of weakness and added a
new holding in Workspace Group; this company, which we have held
previously, provides flexible leasehold space for small businesses in
London and the South East and is presently delivering near double
digit underlying rental growth on the back of strong occupancy levels.
In terms of other stocks which struggled in the year, CMO Group,
the online business serving the building materials sector, was
impacted by slower than expected top line growth as building activity
moderated. Food and beverages ingredients business Treatt saw
sales growth slow last summer, hurting its share rating, although
more recent trading news has been better. Media consultancy
business Next 15 Group has been a strong performer for us in
recent periods but suffered a de-rating this year, in common with
many other growth stocks, despite producing good results. Shares
in consumer health products company Alliance Pharma dropped
44.1% as historic issues and more recent lacklustre trading
undermined sentiment.
The year saw us add quite a lot of new holdings to the portfolio. Our
general approach has been to look to increase the quality of the
portfolio given the relatively tough economic backdrop. A number
of the new holdings we have actually held before, including heat
treatment company Bodycote, specialist plastics supplier Victrex,
media business Ascential, pet products retailer Pets at Home and
Lancashire Holdings in insurance. Other new holdings offering what
we think is attractive medium term growth potential include accesso
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Technology Group which sells specialist ticketing and queueing
software services into the global leisure sector and hospital group
Spire Healthcare, benefiting from the backlog of operations following
the pandemic. Shares in optical components supplier Gooch and
Housego and, within the building materials sector, Marshalls and
SIG Group offer scope for recovery as demand levels recover.
European Review One year
Portfolio Performance -2.1%
Euromoney Smaller Europe Ex UK Index 0.3%
FTSE All-World Developed Europe ex UK Index 13.1%
While performance improved later in the year, our European portfolio
underperformed the benchmark, principally due to the rotation
away from growth stocks. As in the UK, in aggregate terms smaller
companies underperformed their larger counterparts by a wide
margin as liquidity conditions tightened.
In addition to the style rotation headwind, some of our holdings that
had performed well through the COVID pandemic suffered from weak
demand. While we had expected a more difficult environment for
these companies, the challenging comparables ultimately proved
overwhelming. This was particularly the case for our consumer
related holdings, with our worst contributors being Thule Group,
which develops products for active lifestyles and MIPS, the helmet
technology business, which fell 14.8% and 21.8% respectively.
Trading has been disappointing because of high inventories at
cycling retailers, the main route to market for both companies.
Encouragingly, the first quarter of 2023 reports for both companies
pointed towards an improving situation in this regard and sales
should therefore recover over time. Fluidra, the swimming pool
equipment company, faced a similar problem. A booming pool market
in recent years, coupled with global supply chain problems, saw both
retailers and pool constructors over-order equipment. We are starting
to see a stabilisation in the end market and would therefore expect
to see better profit momentum from here.
One of our larger positions, Karnov Group, the legal information
provider also had a difficult year. While operational performance
was reasonable, share price weakness can be explained by the
market’s concern over the company’s relatively high financial
leverage, given higher interest rates. Other poor performers of note
were in industrials. Norma Group, the German auto parts supplier,
underperformed after another disappointment on profit margins.
We no longer believe that they will return to the previous profit
levels, so have sold our position. Sdiptech, the Swedish industrial
consolidator, also had a challenging time falling 31.8% in the year.
Operational performance was slightly weaker than expected with
one of their recently acquired companies, Rolec, an EV charging
business, undershooting expectations.
While, in aggregate, our technology and healthcare holdings
performed well, we also had some isolated disappointments. Of note
was STRATEC, the diagnostics equipment supplier, which released
very poor results demonstrating a lack of ability to pass on higher
Strategic Report
Theme parks around the world use accesso Technology Group's virtual queuing
technology, enhancing customer experience and driving increased spend.
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12 | The Global Smaller Companies Trust PLC
costs and as a result we cut our holding. Nordic Semiconductor,
the leading low power blue tooth chip supplier, fell 39.9%, hurt by a
profit warning citing a disappointing consumer electronics outlook.
We had expected a softer market to be offset by recently announced
customer wins, but this proved too optimistic. We are, however,
holding on given that Nordic’s technology and market position
remains strong.
Turning to positive performers, two of our healthcare holdings,
Gerresheimer, the pharmaceutical packaging company, and Tecan
Group, the diagnostics workflow equipment producer, stood out.
Gerresheimer has done well as investors have warmed to the
strategy to invest into more profitable, faster growing areas and the
shares rose 48.6%. Strong results from Tecan and an upgrade to
guidance saw the shares re-rate later in the period to end up 31.2%
despite weakness earlier on given the general style rotation.
Our technology holdings also delivered well. Within IT services,
both Alten, the French listed outsourced R&D supplier, and Atea,
the Scandinavian value-added IT reseller, performed strongly after
delivering encouraging operational results; the former on the back
of improvements in industrial output in Europe and the latter on the
continued corporate investments in digitalisation, a long-term theme
we are happy to back. Within semiconductors, both the equipment
suppliers, ASM International and BE Semiconductor Industries
(a new holding) did well. Investments in semiconductor equipment
are growing due to a combination of demand from a proliferation
of connected devices and more localisation of production due to
geopolitical concerns.
While our performance in financials was mixed, our banking exposure
was a plus point. Long standing holding, and one of our largest
positions, Ringkjoebing Landbobank, had another good year as it
delivered better than expected results. It was also gratifying to see
another of our newer positions, Bank of Ireland Group, delivering
a 61.6% rise, the best performance in the portfolio. A combination
of an attractive valuation, a strong position in a consolidated Irish
market with an encouraging local economic backdrop, leverage to
improving interest rates and strong operational results, saw the
shares move up nicely.
Good consumer staples franchises were generally in favour given
the macro-economic situation. In our portfolio, Lotus Bakeries, the
Biscoff brand operator, and two new holdings, Viscofan, the global
leading producer of synthetic sausage skins, and Glanbia, the
Irish listed sports nutrition and nutritional ingredients company, all
outperformed by a good margin. Within industrials we also saw good
performance from our bottle manufacturing companies Verallia and
Vidrala, the Italian hydraulics and high-pressure pump producer,
Interpump Group and the leading combi-steamer oven brand
business Rational.
It was a relatively busy year for idea generation. In aggregate, our
new holdings performed strongly. We used the market volatility to
buy into the industrial businesses Engcon and Kardex and the
Kardex's materials handling technology is used widely in
automated warehouses, a growth market as logistics operators
seek to control spiralling labour costs.
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Strategic Report
drinks companies Davide Campari and Remy Cointreau. Engcon
is the leading tiltrotator producer globally. Tiltrotators sit between
an excavators’ arm and the bucket, allowing greater productivity
for the operator. While highly penetrated in the company’s home
market of Sweden, the attachment rate elsewhere is limited, leaving
the potential for significant long-term growth. Kardex is a leading
intra-logistics automation company, providing efficiency solutions to
manufacturers through better management and retrieval of stock.
Campari and Remy are fantastic long-term brands with unique
heritages, which are penetrating deeper into markets outside their
home geographies.
North American Review One year
Portfolio Performance -4.2%
Russell 2000 Index -3.8%
S&P 500 Index 2.7%
The Russell 2000 smaller companies index fell 3.8% over the
financial year and underperformed the broader market indices, with
the environment of rapidly rising interest rates from the Federal
Reserve favouring perceived lower risk stocks. Over the year, the
best performing sectors within the US market were industrials,
healthcare and utilities, whilst the worst performing sectors
were real estate, financials and technology. The portfolio slightly
underperformed over the year, although it was a year of two halves
with weakness in the first six months almost made up in the second
half. Good stock selection in financials, industrials and consumer
discretionary was offset by adverse selection in consumer staples,
telecommunications and healthcare.
The largest individual positive stock contribution came from Eagle
Materials, a producer of construction materials such as cement
and gypsum wallboard, with the shares up 20.2%. The company
delivered strong earnings growth as materials price increases
exceeded expectations and volumes remained resilient because
of strong infrastructure project related demand. Long-term holding
LKQ Corp, a distributor of automotive parts, demonstrated the
resilience of its business in a challenging environment and rose
16.3%. Earnings and cashflow were supported by better than
expected demand, strong cost control and astute management
of working capital. The Ensign Group (an operator of nursing and
rehabilitative care facilities) reported better than expected earnings
as it maintained high levels of patient occupancy and continued to
find underperforming assets to buy to turn around. Our longstanding
involvement with this Company is discussed on page 21. A late year
rally in the gold price, on hopes that interest rates might be close to
peaking and on safe haven grounds, lifted our holding in precious
metals streaming company Wheaton Precious Metals by 10.1%.
While the level of takeover activity faded somewhat, Focus Financial
Partners, a consolidator in the wealth management industry, found
itself the subject of a bid late in the year from private equity. While
the price was underwhelming, we have sold out as the transaction
is set to go through. Graphic Packaging, a producer of paperboard-
based packaging rose 13.1% as a result of strong demand as
customers switched to more environmentally friendly packaging
substitutes, with price increases also exceeding expectations.
Contract logistics provider GXO Logistics benefited from wider
investor recognition as its technology enabled platform drove new
contract wins. Kirby, an owner and operator of tank barges, was
helped by the much talked about ‘re-shoring’ trend as utilisation and
day rates climbed in the company’s inland barge business. Amdocs,
a provider of customer care and billing systems saw an acceleration
in growth from 5G telecommunications related activity.
There were inevitably some disappointments. In the consumer area,
Spectrum Brands shares fell 21.8%, as the company faced a period
of destocking, supply chain challenges and regulatory related delays
in the closing of the sale of its hardware and home improvement
business. While exposed to tailwinds from health and wellness
trends, healthier foods company Real Good Foods and dieting
networks business Medifast both underperformed as business
levels failed to meet expectations.
Infinera (a manufacturer of optical telecommunications equipment)
faced a challenging spending environment for its customers,
making it difficult for the company to achieve its margin expansion
objectives. Viavi Solutions, a provider of communications network
testing equipment was similarly hurt by sluggish demand from
customers. MaxLinear, which produces semiconductors for the
broadband communications industry, suffered from an inventory
correction in the area of home connectivity products. Technology
spend weakness also hurt our holding in security software services
company Cognyte Software, where revenues booked in 2022 proved
weak, though they have improved more recently.
Within healthcare, two holdings suffered in the year. Contract
research organisation Syneos Health saw a deterioration in sales
as the company’s commercial strategy failed to gain traction and
the funding environment for biotech customers worsened. The
company has agreed a takeover from private equity in May. Catalent,
a provider of drug delivery technology faced some manufacturing
challenges, saw the departure of its CFO and reduced earnings
guidance in its biologics business, driving the shares down 44.7%.
Elsewhere, GrafTech International, a producer of graphite electrodes
for steel production was forced to temporarily suspend operations at
its Monterrey plant for environmental reasons and the company was
also adversely affected by a cyclical decline in graphite electrode
prices. SSR Mining experienced some operational challenges at its
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14 | The Global Smaller Companies Trust PLC
mine in Turkey. Bristow Group, a provider of helicopter transportation
to offshore locations such as oil rigs suffered from weakness in
the UK North Sea sector. Finally, Webster Financial, a Connecticut
based bank was caught up in the wider sell-off in US regional banks
following the collapse of SVB Financial Group.
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. Curtiss-Wright holds
sole source positions in mission critical products such as valves,
actuation systems and electronics; barriers to entry into these niche
businesses are very high. Growth can come from a continuation of
the aerospace cycle, increased spending on defence and retrofitting
and build out of nuclear power plants. GXO Logistics, mentioned
previously, was also added as we see it as well placed to gain more
market share and benefit from the ongoing e-commerce trend. Our
constructive stance on commodity exposed names is predicated on
a long period of limited supply growth, new-found capital discipline
from industry incumbents and the prospect of improving demand
from long-term demand drivers such as energy transition and the
upgrading of infrastructure. We added two energy related companies
to the portfolio: Kosmos Energy and Vitesse Energy. The former
owns and operates attractive oil and liquified natural gas assets
in the Gulf of Mexico and West Africa with very good production
growth prospects and a strengthening balance sheet. Vitesse
Energy was spun out of current portfolio holding Jefferies Financial
Group; management has a good track record of investing in high
return projects in the US and returning the resulting cashflow to
shareholders.
Sales in the year included CommVault Systems (data management
software) and Haynes International (specialty alloys) with shares
in both cases reaching a full valuation. In the logistics industry we
switched from CH Robinson Worldwide to GXO Logistics as we
believed the latter would offer superior growth. We concluded that
the investment thesis was broken for Infinera as the company’s
significant spending on research and development had failed to lead
to an acceleration in organic revenue growth.
Japanese Review One year
Portfolio Performance 9.1%
MSCI Japan Small Cap Index 7.7%
Topix Index 6.2%
The Japanese small cap market led the way this year, delivering
a strong showing in comparison both to the other international
markets and to the larger company universe within the country’s
stock market. Pleasingly, our portfolio outperformed.
While Japan has been less in the news than other parts of the
world, this has been a year of some significant developments for the
country. A cautious approach to the pandemic was eventually eased
with the borders re-opened, allowing the resumption of business
travel and the important tourist trade. China’s belated re-opening
too is an important boost to the Japanese economy, which may now
Curtiss-Wright is a critical components supplier to
the nuclear power industry with the picture showing
the Company's Reactant Coolant Pump Test facility.
Source: Curtiss-Wright
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grow faster than the US and Europe in 2023. While not reaching
the heights of elsewhere, Japan has seen a return to meaningful
inflation, something that the authorities have been seeking to create
for many years to end the damaging cycle of deflation. Perhaps more
interestingly, wage inflation has at last also picked up pace, in the
face of persistent labour shortages.
The move into a period of higher inflation has inevitably raised
questions about the Bank of Japan’s monetary policy approach
which has, up to now, involved maintaining interest rates at -0.1%
and targeting 10 year Japanese government bond yields at no more
than 0.5%. In a world where other central banks have raised interest
rates significantly, the yen has unsurprisingly been weak for a long
time. However, there are signs that under a recently appointed new
Governor of the Bank, there could be some evolution to policy. Our
view is not to expect too much change in practice as it is not yet
clear how sustained the increases in prices and wages will be in the
country, which has lived with deflation for so long.
As a consequence of the lack of movement in local interest rate
policy, the stock market was not undermined like others by a
rising cost of capital and corporate earnings as a whole have been
supported by the weak yen as far as the exporters are concerned.
The other interesting equity market related development to
highlight in the year was the move by the Tokyo Stock Exchange to
encourage reform at companies valued at less than book value.
Such companies are encouraged to communicate their specific
plans to enhance return on capital, one way of which could be to
buy in shares using surplus cash on balance sheets. We are already
seeing evidence of a higher level of share buybacks and increased
dividend distributions. Around 40% of small cap companies trade at
below book value still however, illustrating the value that there is in
the small cap end of the market, notwithstanding the fact that some
of these companies will be value traps. There is more activity in the
market from activist investors looking to force recalcitrant companies
to advance shareholder value friendly actions.
Perhaps unsurprisingly, lower valued stocks have therefore been in
demand more recently with financials, including the banks, doing
well on hopes of some movement at last in interest rates. There
have also been tentative signs of more international interest in the
market, including from Warren Buffett.
Looking at the performance of our portfolio, we continue to hold
three funds managed by Eastspring, abrdn and Baillie Gifford,
with different investment approaches from value to quality growth
through to high growth. The combination provides a balanced
approach to the market. Unsurprisingly given the commentary
above, Eastspring’s fund, which is our largest holding, performed
well in a market environment favouring value names, with a sterling
total return of 19.3%. Attribution data highlights stock selection
as the main reason for the fund’s strong year but there was also
a contribution from sector positioning, with a lower exposure to
healthcare and technology and higher allocations to some of the
more cyclical areas, including the financials and industrials proving
helpful. Given the market backdrop we added to our holding in this
fund. abrdn in contrast had a difficult year, with disappointing stock
selection in particular in healthcare and industrials. The focus on
higher valuation holdings also worked against them at a time when
such stocks saw a de-rating. Baillie Gifford’s performance was
perhaps unsurprisingly also negatively affected, with the general
global pattern for investors to favour near term earnings more highly
compared to profits further into the future, impacting on the value of
some of the disruptive technology names held in this fund.
Rest of World Review One year
Portfolio Performance -2.1%
MSCI All Country Asia Pacific ex Japan Small Cap Index -7.4%
MSCI EM Latin American Small Cap Index -1.5%
The Rest of World in the context of the Company mainly revolves
around Asia, incorporating both developed and emerging markets.
Over the year, returns were better than this region’s small cap
index, helped by the fact that we also had some exposure to Latin
American markets, which proved more resilient in the year.
Historically, the performance of Asian and broader global emerging
markets has tended to be negatively impacted at times of US dollar
strength. Recent times have unsurprisingly been difficult therefore
and with US interest rates rising, there were concerns about
how this and tighter global liquidity conditions would affect these
markets. Given the breadth of countries we are talking about, there
are bound to be exceptions, but in general terms we have been
positively surprised by the relative lack of problems arising in the
foreign exchange or stock markets of Asia and Latin America. In part,
this was due to the fact that many countries had already moved their
interest rates higher before the West’s central banks made their
moves. It is also fair to say that emerging markets' governments are
already far more familiar with dealing with inflationary issues.
Given China’s growing power in the regional and global context,
what happens here sets the tone for Asian markets as a whole. As
a result, the cautious approach by the authorities in China to the
pandemic, with repeated local lockdowns and disruption to supply
chains, understandably took its toll on the region. Rising geopolitical
tension between the US and China in relation to the Ukraine conflict
and subsequently around Taiwan, also impacted investor sentiment,
as did further regulatory interventions into specific sectors such
as education. Presently China is an outlier globally and regionally
with local inflation close to zero, which is allowing easier monetary
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16 | The Global Smaller Companies Trust PLC
policy moves as the government seeks to stimulate job creation and
stabilise the property market.
Outside of China, many of the other Asian economies have been
doing better, with India in particular moving forward and benefiting
from greater inward investment from multi-national companies
seeking to diversify their supply chains away from China. The
removal of most pandemic restrictions helped to stimulate better
consumer spending across the region, although higher food prices
have created significant local cost of living challenges. The best
performing markets in the year included Singapore, Indonesia and
Thailand, the latter helped by a return to tourist activity.
In Brazil, a messy and hard-fought election ended in victory for the
left wing. To date, investors have been relatively relaxed about this
and the Brazilian currency, the real, enjoyed a strong year versus the
US dollar, supported by interest rates being raised to 13.75%. While
there has been unrest in some neighbouring countries and metals
commodity prices, which are important to Latin America’s economy,
have fallen, a reduction in inflationary pressures may allow central
banks in Latin America to ease policy, especially if the US is heading
in the same direction. Latin America remains a critical supplier
of commodities important to the energy transition process and
countries like Mexico are benefiting from near-shoring moves by US
companies seeking to cut their dependence on China.
In terms of our portfolio of funds, there were two good performers
in the year. The Scottish Oriental Smaller Companies Trust rose
4.6% on the back of excellent stock selection within China, Taiwan,
India and Indonesia. Being overweight to high quality consumer
businesses helped as the re-opening process post pandemic led
to better trading conditions for these companies and more investor
interest. Selection in other sectors, including industrials and
technology, was also positive.
Utilico Emerging Markets Trust also made a positive total return.
A focus on more defensive infrastructure and utility investments
helped at a time of general economic slowdown but stock selection,
even taking aside this boost, was encouraging. The Company's
portfolio, well managed by an experienced team of specialist
investors, continues to benefit from structural trends towards more
investment into infrastructure assets in emerging markets, throwing
off an increased dividend to its shareholders.
Not all the funds performed well however and we decided to focus
the portfolio down onto four core positions, by selling out of funds
managed by abrdn and HSBC during the year, both of which had
been underperforming.
Outlook
The last couple of years have taught us a lot about the fundamental
resilience and quality of individual company’s business models,
which have been given a proper examination by the pandemic
and the re-emergence of meaningful inflation. On the whole, we
have been impressed by how the management teams of our
holdings have coped. Performance of the portfolio in 2022/23 was
respectable particularly in comparison to peer funds, but it’s fair
to say that we were disappointed by the results from a number of
holdings, necessitating the sometimes tough to make decisions to
exit these names.
Looking ahead, the impact from higher interest rates will continue to
impact upon economic activity, as it percolates through the system.
High quality companies with strong balance sheets and cashflow
remain best placed in this environment. At some point however, the
long-awaited peak in US rates will become evident, and this could
well lead to a change in sector leadership. We are looking to add
cautiously to cyclically depressed stocks where we have a positive
view around the individual business models, managements and
market positions.
Over the last year, the integration of the former BMO GAM EMEA
investment operations into Columbia Threadneedle Investments has
made good progress, with a major step in this process to co-locate
in one core location in London imminent. The team involved day
to day in the management of The Global Smaller Companies Trust
remains the same, but we are now able to interact with a broader
pool of equity fund managers and central research analysts, which
is helping with idea flow for new investments and in relation to
our understanding of key new developments around AI (artificial
intelligence) and climate change for example. We have also made
progress in understanding the internal capabilities now in-house in
relation to Japan, Asia and the emerging markets. We will continue to
look to consider the optimal structure for the portfolio in the coming
year and remain enthused as a team about the opportunities for the
portfolio, notwithstanding the present economic challenges.
Peter Ewins
Lead Manager
22 June 2023
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Investment Manager's
Investment Philosophy and Process
One of the attractions of the Company’s investment mandate is the
breadth of opportunities in global smaller companies, with many
thousands of listed companies to choose from. This is a large,
diversified universe of exciting opportunities and is not necessarily well
researched or understood properly. This leads to ‘market inefficiency’
that we, as disciplined stock pickers, can take advantage of to aim to
deliver superior investment performance over the long term. By having a
large and experienced team of smaller company fund managers within
Columbia Threadneedle Investments we are well placed to seek out
exceptional investment opportunities.
Our philosophy towards investing is based around our belief that
investing in high quality companies, run by strong management teams,
where the price we pay for our investment is attractive, will generate
above average returns for our shareholders. We want to take a long-
term approach towards all our investment decisions and do not look to
engage in short-term trading.
We look at each potential investment through the same lens. The
starting point is an assessment of the core quality of the business
franchise. This will usually be ascertained through face to face
meetings or calls with management, sometimes involving visits to
business operations. We want to understand the business’s product
or service offering and where it has competitive advantages over peers.
Understanding the industry that potential investments operate in is
also important as this will help us to recognise how much pricing power
the business has – this is particularly important in the current higher
inflationary world. We want companies that we invest in to have positive
cashflow characteristics as this indicates good accounting quality,
reduces the risk of funding difficulties and creates optionality for further
growth. This also means that we will generally avoid conceptual and
speculative companies without a track record of profitability. We like
our holdings to have strong balance sheets as this promotes financial
resilience. An appreciation of the Environmental Social and Governance
(‘ESG’) risks and opportunities around any potential investment is also
a key part of our analytical work.
Assessing the quality of the management teams we back is a critical
part of the overall investment process. Management teams of
smaller companies have a huge role to play in the evolution of their
businesses. How they are motivated, rewarded and allocate capital is
crucial in a company’s development, for better or for worse. We want
to invest in management teams who make good long-term decisions
with a track record of success and are rewarded for doing so. We
also want management teams to be open communicators with the
financial markets. There will often be short-term challenges for smaller
companies but those management teams which clearly identify the
issues that they are facing, and how they are addressing them, will earn
greater support over the long term.
While we believe the evolution of a company’s profits and cash
generation will ultimately be the principal determinant of shareholder
returns, the fact is that many high quality businesses with good
management teams may become overvalued in the stock market. We
The fund management team consists of back row, left to right; Gordon Happell, Bradley Walsh, Patrick Newens,
Nish Patel, Sam Cosh and Catherine Stanley, front row; Lucy Morris and Peter Ewins (Lead Manager).
18 | The Global Smaller Companies Trust PLC
therefore need to assess carefully the price at which it makes sense
for us to invest. We do this by looking at a number of different metrics
including historic multiples that the company and its peers have traded
at in the stock market, the prospective growth rate for the business
and recently negotiated acquisitions of similar businesses. In addition,
looking at projected cashflows and profits informs a view around the
price that we should be happy to pay for the investment now.
Maintaining valuation discipline is crucial to long-term returns and
often requires patience. Companies that reach our quality hurdle but
do not appear attractively valued are placed on our watch list. This
allows us to execute quickly when the opportunity presents itself.
We have also had many cases in the past where we have sold a
stock on valuation grounds and then re-purchased it at a later stage
when the shares have derated. The experience of the team in terms
of monitoring many potential investments means that we are able
to keep refreshing the investment portfolio when existing holdings
reach or exceed our assessed valuations.
Ultimately this approach should lead to a portfolio of higher quality
smaller companies with the following characteristics:
• Proven business models that have scale advantages, a superior
product or offering, valuable brands or intellectual property
• Management teams that have the right balance of
entrepreneurial flair, consistent operational delivery and rational
capital allocation track records
• Higher growth rates, margins and returns on capital than the
market
• Superior cashflow generation and strong balance sheets that
provide resilience and opportunity for value added capital
deployment
While individual stock decisions are obviously key, we spend a lot
of time too considering the balance of the investment portfolio both
on an overall basis and across the regional portfolios. While clearly,
we want to skew investment towards faster growing areas where
returns will be best, we also want the Company to provide investors
with a well-diversified portfolio. Previous periods, such as around the
year 2000 and in the last year or two, have shown us the risks that
can arise when investors become too focused on favoured sectors,
such as technology. Investing in the best opportunities within slower
growing or more mature industries can often prove more lucrative.
The Company provides geographic diversification by investing in
more than 40 countries. We monitor the weightings of our portfolio
against the Benchmark index, but the location of where a company
is listed does not always provide a true indication of where it is
exposed. From time to time a particular macro-economic issue may
provoke us to change geographic allocations, though individual stock
idea flow will tend to be more important in driving exposure changes.
As you will have seen in the Chairman’s Statement, the weighting of
the UK market within the Benchmark has been reduced, reflecting
the evolution of global markets. This is not expected to lead to any
short-term changes in the portfolio.
In relation to our approach to investment in Japan and the Rest of
World (Asia, Latin America and some other smaller markets outside
of the main regions) we have, for many years, used third party
managed collective funds to gain exposure to these markets. With a
greater degree of investment resource towards these markets within
Columbia Threadneedle Investments compared to previously under
BMO or F&C, we will keep this approach under review.
• Well articulated model
• Competitive advantages
• Free cashflow generative
• Pricing power/scale
• Favourable industry structure/
conditions
• Financial strength
• Diversified customer/supplier/
product set
• ESG and Sustainability
• Capable operators
• Rational
• Good capital allocators
• Aligned interests
• Prudent
• Transparent with shareholders
• Trends in metrics important
• Range of valuation measures
used
• Repeatability of returns
• Conviction in value appreciation
We’re clear in what we believe
constitutes a quality company and
there are key areas we look to assess
High quality
business
Attractive
price
Strong
management
Source: Columbia Threadneedle Investments
Report and Accounts 2023 | 19
Strategic Report
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
With its roots in Irish dairy farming, Glanbia is a European holding that
we first took a position in during 2010. After the financial crisis, Irish
stocks were shunned by investors, which left a pool of attractively
valued opportunities for those who were prepared to look. When we first
invested, Glanbia was a vertically integrated dairy products business.
With a history in Irish milk production, it had evolved the business
through acquisition and organic investment into cheese manufacturing
and specialist products that had synergies with its dairy heritage. This
included being the large scale, low-cost producer of mozzarella cheese
for pizzas in Europe and American cheese in the US and, through the
acquisition of Optimum Nutrition, the leading brand in whey protein
powder. This product formed the base of the Company’s Global
Performance Nutrition ('GPN') business. The stock was lowly valued
and we could see profit recovery in the core business coming from
improving dairy prices, which at the time were depressed. Ireland has a
competitive advantage in dairy due to its low-cost, year-round production
of milk. We could also see structural growth starting to come through in
the GPN business from the increasing trend to health and wellness and
market share gains in their cheese division. The shares consequently
performed very well as profits rose strongly and the shares re-rated. We
sold our position at the end of 2017 after making handsome profits.
This was not the end of the story, however. The company remained on
our watch list, but the shares started to underperform as profit growth
slowed. Arguably, the company had grown too quickly and needed a
period of investment in the business structure, whilst the competitive
environment had evolved to become more challenging, with a change,
for example, in the sales channel mix of the GPN business, away from
traditional bricks and mortar speciality retail towards online, driving
margins lower in the process.
Eventually, the valuation pull-back prompted us to take a more
detailed look again at the prospects for Glanbia. In 2022 we met
the management team and it was clear that the company had made
significant progress in recent years. They had exited their Irish dairy
business, whilst utilising their intellectual property to build-up an
impressive specialist ingredients business ('Glanbia Nutritionals').
This sells its products and know-how across a wide spectrum of food
and beverages customers and has grown its share of Group profits
successfully by way of bolt-on acquisitions. The company has become
less capital intensive and the GPN business supply chain has been
enhanced through a process of manufacturing footprint rationalisation,
while there is now a broader spread of performance and lifestyle
nutrition brands and a better go-to-market strategy. Optimum Nutrition
is now the established global market leader at the premium end of the
whey powder market, with new product formats being developed to build
further on this position. Valuation is lower than when we sold out of the
stock in 2017 and looks very attractive relative to the broader consumer
branded products peer group. Performance has been good since we
reinvested in the company last year, but we think there is plenty to go
for from here.
Investment Case Study - Glanbia
20 | The Global Smaller Companies Trust PLC
Every listed company effectively has to start as an Initial Public Offering
(‘IPO’), but fund managers, ourselves included, tend to be wary of new
issues. This is because, often, the businesses being brought to market
come to see us when the original owner feels it is the optimal time
to sell out. Sometimes the historical information given out is limited
and we do not get much time to assess the potential of the business,
while often the business will have been starved of investment under a
leveraged private equity-backed ownership structure.
We met the management of Ashtead Technology in 2021, ahead of the
company’s formal IPO and were immediately impressed by what we
saw. This is a business which rents equipment and people for subsea
environmental, geo-physical and testing work. The company’s asset
base or fleet is a mix of specialist robotics and mechanical equipment.
Essentially, the equipment is used in Inspection Maintenance and
Repair (‘IMR’) services for core offshore energy infrastructure through
its lifecycle, in the process enhancing cost and production out-turns.
The company operates in more than 80 countries around the world,
providing a nice level of diversification in terms of customers.
Ashtead Technology’s origin was in the offshore oil and gas industry,
but management have been actively developing a renewables business,
which is now the fastest growing part of the group. Renewables now
represent up to around a third of the group in terms of revenues and
a target of over 50% has been set for this over the medium term. This
should be achievable looking at current growth rates, which would widen
its appeal to ESG investors. Acquisitions may be used to accelerate
progress to this goal and it operates in fragmented markets with plenty
of potential bolt on targets. The management have executed this
strategy well to date and have also made a clear strategic commitment
to supporting successful energy transition. On the oil and gas side,
the business is focused on IMR and decommissioning more than
new field development, though more recently they have seen some
new field work restarting. The safety and environmental stability of
existing infrastructure is clearly critical and the current focus on energy
diversification and security for governments around the world supports
the extension of life of existing fields plus an acceleration of investment
in offshore wind-farms.
This is a recent small company IPO, so ESG disclosure needs to be
developed further, but it does have a published sustainability policy
mapped to UN Sustainable Development Goals (‘SDGs’). It is benefiting
from a structural shift in its sector from energy operators owning their
own assets towards renting from specialists like Ashtead. This is
something we have seen in other equipment markets, due to a lack of
domain knowledge and capital expenditure focus on larger items within
the customer base, with low investment in recent years in the industry
leading to ageing fleets and challenges in accessing equipment.
Management are maintaining discipline, prioritising sustainable service
pricing over short-term volume and the business has not yet returned
to peak prices, so there is further to go there. Order sizes have been
increasing which has helped to optimise fleet use. While it does not
have extended visibility, its customers do have strong backlogs at
present. Very pleasingly, the company’s shares have risen significantly
since the IPO on the back of a series of upgrades to profit forecasts and
we remain positive on the outlook.
Investment Case Study - Ashtead Technology
Report and Accounts 2023 | 21
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
Strategic Report
The Ensign Group is a leading provider of skilled nursing, assisted living
and other rehabilitation related services across thirteen US states. The
group has excellent relationships with managed care insurers which in
the US context play a key role in determining where patients are treated.
This enables the creation of strong partnerships across multiple states,
delivering superior health outcomes for patients.
Following a local leadership strategy has allowed Ensign to expand
beyond the skilled nursing industry to provide a broader range of
senior care services. The group, under a strong and experienced
senior management team, has also demonstrated an ability to
acquire underperforming competitors and make rapid improvements
to both occupancy and patients' outcomes by deploying a disciplined
and repeatable operating model across their operations. Their long-
term success has been built on a culture of local leadership and
accountability, with a passion for growth and delivering the best
possible care embedded across the organisation. Ensign have taken a
prudent and disciplined approach to their geographic growth, focusing
on those states with attractive financial terms and market structures in
the sector.
Ageing demographics continue to put strain on healthcare systems and
the US is no exception, with the number of over-65s expected to double
by 2060. In-patient acute care services remain the most expensive
setting. Insurers and government customers continue to make efforts
to reduce the length of stay in these settings, preferring patients move
into lower cost settings for the rehabilitation phase of care. Ensign have
consistently increased their scope of services over several years, taking
on more complex rehabilitation services, as well as providing innovative
services like mobile dialysis and x-rays. Ongoing budget pressures
should continue to drive attractive growth for more cost effective
healthcare models delivering high quality care.
Acquisition activity often comes with a real estate component and
Ensign has created additional value by actively managing its real estate
footprint. The group currently owns more than 100 properties but
actively seeks to maximise value through sale and leaseback, spin-offs
and outright sales to optimise shareholder returns.
We initially invested in Ensign back in 2015. To date the investment has
delivered more than a fourfold return, taking into account the spin-off of
The Pennant Group in 2019. We have been impressed by how well the
Company managed through the COVID pandemic, a period when the
sector suffered from falling occupancy, reflecting the risk of becoming
infected in a healthcare facility. Ensign have also demonstrated a skill in
managing labour in recent years at a time when the availability of skilled
nursing staff has been a major issue. This underlines the quality of the
overall business within the sector.
Investment Case Study - The Ensign Group
22 | The Global Smaller Companies Trust PLC
Our approach
Environmental, Social and Governance (‘ESG’) issues can present both
opportunities and threats to the long-term investment performance
we aim to deliver to shareholders. The Board is committed to taking a
responsible approach to ESG matters, for which there are two 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 49.
Secondly, there is the more material impact the Company can have
through the investments that are made on its behalf by the Manager,
which has long been at the forefront of responsible investment. It has
one of the longest established and largest teams within the asset
management industry focused on ESG and engages actively with the
management of investee companies to encourage the application of the
highest standards of ESG practice. The Manager is a signatory of the
UK Stewardship Code and its statement of compliance can be found on
its website at columbiathreadneedle.com.
2022 has been a year of advancement with the integration of the
business formerly known as BMO GAM (EMEA). The acquisition
enabled the Manager to combine complementary strengths to create
a responsible investment capability based on creating value through
research intensity, driving real-world change through active ownership
to contribute to sustainable long-term value creation aligned with our
shareholders' expectations, and delivering innovative responsible
investment solutions.
Responsible ownership
Engaging actively with companies on significant ESG matters, to reduce
risk, improve performance, encourage best practice and underpin
long-term investor value, forms a fundamental part of the Manager’s
approach to responsible investment.
The Manager’s Corporate Governance Guidelines set out its
expectations of the management of investee companies in terms
of good corporate governance. This includes the affirmation of
responsibility for reviewing internal business ethics policies and
ensuring that there is an effective mechanism for the internal reporting
of wrongdoing, whether within the investee company itself, or involving
other parties, such as suppliers, customers, contractors or business
partners.
Climate change presents potentially systemic risks and opportunities
to our investment universe. The Manager published a 2022 climate
change report, which details how it manages climate-related risks and
opportunities, in line with the recommendations of the Taskforce on
Climate-related Financial Disclosures (TCFD). Critical to its role as an
active manager, the Manager actively engages with the companies
it invests in to help them manage the transition and deliver for their
stakeholders. It also has a commitment to move toward net zero
emissions, as a signatory to the Net Zero Asset Managers Initiative.
This report includes some of the metrics recommended by the TCFD.
Looking forward, we will publish further data for the Company’s assets,
in line with the Financial Conduct Authority’s guidance on TCFD
reporting, in line with regulatory timescales.
ESG and the investment process
The Manager's Responsible Investment team works closely with the
investment team managing the Company’s assets to ensure that
those performing the work on individual investment opportunities are
well informed in what to look for in relation to the ESG aspects of their
analysis. Specialism within the Responsible Investment team allows
the fund managers to talk to those who understand the key ESG issues
relating to a particular sector. Where possible, internal research is cross-
referenced against external sources, for example MSCI ESG research,
though smaller companies may not always be covered well or at all by
external ESG ratings services.
The Responsible Investment team once again over the last year
hosted internal workshops for the investment teams, covering new
developments across a wide range of topics in areas such as its net
zero investment methodology, climate change engagement expectations
and ESG materiality rating, to ensure that the fund managers are aware
of the key issues to cover when they interact with companies.
Responsible Investment
As stewards of more than £859m of net assets, we support our Manager as a leader in responsible
investment and in bringing about positive change.
Report and Accounts 2023 | 23
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
Engagement
Climate Change 21.0%
Environmental Stewardship 9.0%
Human Rights 11.0%
Labour Standards 29.0%
Public Health 4.0%
Corporate Governance 25.0%
Business Conduct 2.0%
issues raised at
36 companies
across 8
countries
101
During the year ended 30 April 2023, the Responsible Investment team
engaged with the management of 36 companies in the Company’s
portfolio, across 8 countries. The most common topics for discussion
were labour standards and corporate governance. Examples of this
engagement follow.
The investment process used by the fund management team
incorporates the assessment of sustainability issues for each stock
being reviewed. Scores for the E, S and G performance elements of
potential investments are taken into account in the derivation of the
fair value of existing and potential new investments. In addition, this
analysis forms an important part of the quality scoring of companies
and overall risk assessment. The investment team always seek to
explore ESG areas of concern as a part of their regular interactions with
companies under consideration.
In relation to sustainability, the fund management team will note
if individual investments are aligned explicitly with any of the UN
Sustainable Development Goals. Details of these goals can be found at
un.org/sustainabledevelopment/sustainable-development-goals/. The
fund management and Responsible Investment team’s research work
is used to initiate specific ESG related discussions with companies,
clarify understanding of the issues involved, create a dialogue or
encourage higher standards where appropriate. In this the Manager
may occasionally join with other major investors in order to be a more
powerful force to drive change.
Portfolio case study: Genuit Group
Genuit Group is a company which we have held for some time on
the UK portfolio. Coming from a heritage of being the leader in
plastic plumbing and drainage solutions under the Polypipe name,
the company has grown into a number of other end markets central
towards a greener policy transition including commercial ventilation,
underfloor heating, green roofs, residential plumbing and water
management solutions. Sustainability is core to the company’s whole
commercial strategy. In doing so, Genuit aim to address some of
today’s key challenges in relation to climate change and biodiversity.
The trend towards urbanisation and rising temperatures/rainfall
is creating more challenges around flash flooding, and Genuit’s
products are increasingly used to help to reduce the impact of this.
Management are focused on using more recycled plastic within the
company’s operations, targeting a 62% use of recycled materials by
the year 2025. The use of plastic in many of the company’s products
also serves to reduce full cycle carbon emissions when compared
to alternative legacy materials such as cast iron, with transportation
costs also being lower.
Strategic Report
Genuit's Polysync system installed in green roofing projects
stores rainwater below the planted surface, reducing the need
for potable water in hot periods and cutting the volume of
surface run-off, lowering flood risks at times of heavy rain.
24 | The Global Smaller Companies Trust PLC
As noted previously, the Manager’s Corporate Governance Guidelines
set out your Company’s expectations of the boards of investee
companies in terms of good corporate governance. The Board expects
to be informed by the Manager of any sensitive voting issues involving
the Company’s investments and receives an annual record of votes
against, or abstentions on, management resolutions at investee
annual meetings. In the absence of explicit instructions from the
Board, the Manager is empowered to exercise discretion in the use
of the Company’s voting rights and votes on all investee company
resolutions. The Manager is a signatory to the UK Stewardship Code
2020 and, as required by the FRC, has reported on how it has applied
the Code in its Stewardship Report 2022. This report is available
at columbiathreadneedle.com. We expect the Company’s shares
to be voted on all holdings where possible. During the year, the
Manager voted at 156 meetings of investee companies held in the
Company’s portfolio. The Manager did not support management’s
recommendations on at least one resolution at approximately 54% of all
meetings. With respect to all items voted, the Manager supported over
90% of all management resolutions. One of the most contentious voting
issues remained remuneration. Either by voting against or abstaining,
the Manager did not support approximately 33% of all management
resolutions relating to pay, often due to either poor disclosure or a
misalignment of pay with long-term performance.
Engagement examples in the year:
Topic Engagement
Plastic Waste Tecan Group
One of our holdings Tecan Group, is a leader in automation equipment and liquid handling solutions for the diagnostics and life
sciences market. We followed up on last year’s engagement on waste reduction and recycling: we expect the company to set at least
one measurable target in the next 2 years. The results of Tecan’s survey on waste-related issues, including the processing of pipette
tips, are pending. We were encouraged to learn that the results will prompt action plans. Furthermore, the company is looking into
the possibility of a waste takeback scheme. Finally, we were informed that My Green Lab certification, which is considered the gold
standard for laboratory sustainability best practices globally, is underway for the laboratory where Tecan tests its equipment, sending a
positive signal to the company’s customers.
Climate change
and environmental
stewardship
Breedon Group
Breedon Group is a construction materials company headquartered at Breedon on the Hill, Leicestershire, England. The Cement
division is responsible for roughly 90% of the company’s Scope 1 and 2 emissions and of that a large portion is heating the kilns to
produce clinker
(1)
.
We have had two conversations with Breedon since August 2022, as well as a site visit to its Kinnegad cement plant in Ireland
during November 2022. The Company is focusing on the ‘short-term’ wins that can be made by investing in alternative fuels, clinker
replacement and recycling of materials. It became obvious on the plant visit that the employees have bought into the net-zero
strategy. A topic of our core engagement has been to work with Breedon on improving its disclosure, such as reporting to the Carbon
Disclosure Project (CDP). Without improved reporting it fails to express to investors the valuable initiatives it is taking to decarbonise
its operations.
Breedon’s broad ESG approach – net zero aside – adds to its competitive advantage. Its customers increasingly include ESG metrics as
part of the due diligence process. However, challenges abound for cement decarbonisation, and we will continue to push Breedon to
improve on disclosure, targets, and action.
Labour standards WEX
WEX is a US based global B2B payment services provider with over 5,500 employees. We reached out to WEX in line with our
cross-sector engagement supporting best practice approaches to human capital management including diversity and inclusion. We
encouraged targeted programmes to advance ethnic minorities into senior positions, the publishing of an ethnicity and pay gap report,
disclosure of employee engagement survey results and participation in the Workforce Disclosure Initiative. We also provided best
practice examples on the topics mentioned above.
While the company has a good proportion of gender representation, it faces greater challenges of increasing ethnic minorities in
senior-level positions (5% of executive management are people of colour), partly due to the location of its offices. WEX has made
progress here and appointed a new Chief Diversity Officer to consolidate its approach to D&I. It focuses on employee resource groups
to foster greater inclusivity and to increase the exposure of underrepresented minorities. We recommended targeted programmes and
skills training to advance these individuals to more senior-level positions.
Voting on portfolio investments
(1)
A key material in cement.
Report and Accounts 2023 | 25
Strategic Report
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
Climate change
Of all the ESG issues, climate change is one of the most important, both
in terms of the scale of potential impact and in how widespread this
could be across sectors and regions. It is important that considerations
around climate change risks and opportunities are incorporated into the
investment management process. For the fourth year, we are disclosing,
as best we can, the portfolio weighted carbon intensity
(1)
of the
Company’s investments, in line with the recommendations of the Task
Force on Climate-related Financial Disclosures (‘TCFD’). This is based
on the greenhouse gas emissions produced by each investee company,
per US$1m of revenue, and aggregated for the Company as a whole. We
aim to use the information for analysis and for benchmark comparisons,
but do not set targets based on it. There are constraints on the analysis
of the carbon intensity of the total portfolio as data sources are limited,
especially for smaller companies. Coverage is improving however, and
this year data was available for 79.8% of the UK, European and North
American portfolios by weight. The weighted average carbon intensity
for these regional portfolios was 154.2 vs the combined relevant
benchmarks carbon intensity of 171.4.
To remain consistent with previous disclosure we continue to report
on carbon intensity at a regional level. For UK, European and North
American regions at the end of April 2023, the carbon intensity of the
holdings was 12% less, 45% less and 59% more respectively against
the relevant benchmark. The variation across regions is influenced
to a degree by the stocks excluded by the analysis, but also by the
nature of the holdings and sector positioning. The pattern of these
intensity results is similar to those calculated last year. The Company’s
UK and European portfolios still have relatively limited exposure to
sectors which have a high emissions intensity in comparison to the
local small cap indices. However, the North American portfolio’s carbon
intensity score remains higher than its benchmark mainly due to the
high emissions from three particular stocks, that are among its biggest
holdings; Eagle Materials, Martin Marietta Materials and Bristow Group.
Since the last report, we have intensified our focus on the materials
and building supplies industry, given this sector’s contribution to the
overall carbon intensity of the Company’s assets. This included the site
visit to Breedon outlined above, and two calls with the CEO, CFO and
sustainability team at US materials firm Martin Marietta. The company
was open to engagement, but still has some way to go to catch up with
sector leaders in terms of its target setting. We published research on
the challenges of net zero cement, and some of the potential solutions,
and this will inform our engagement with the sector going forward.
We are pleased to see better coverage of smaller companies in this
year’s carbon intensity analysis. However, we are mindful that the data
does not provide a full picture of climate risks as it does not capture
the innovation that companies may be undertaking to find solutions
and to enhance their future emissions. Due to the company specific
complexities of understanding individual company emissions profiles,
engagement is a key pillar of Columbia Threadneedle’s approach. We
set a clear expectation for companies to align their business strategies
with the Paris Agreement.
(1)
Carbon intensity – this is measured in tons of CO2 equivalent (i.e. including the basket of six Kyoto Protocol gases) of Scope 1 and 2 emissions, divided by $1million of sales at a
company level. This is aggregated to portfolio level using a weighted average (by holding).
2023
Last year, the Russian invasion of Ukraine and extreme weather events reinforced the importance of creating a more resilient future. Climate
change, biodiversity loss and human rights are all issues that require urgent action. It is these areas that engagement focused on in 2022 and
will continue to be of focus in 2023.
26 | The Global Smaller Companies Trust PLC
Thirty Largest Holdings
30 April
2023
30 April
2022
% of total
investments
Value
£m
1 1
Eastspring Investments Japan Smaller Companies Fund Japan
Fund providing exposure to Japanese smaller companies.
4.4 39.6
2 2
Pinebridge Asia ex Japan Small Cap Fund Rest of World
Fund providing exposure to Asian smaller companies.
3.5 31.5
3 3
abrdn SICAV I Japanese Sustainable Smaller Companies Fund Japan
Fund providing exposure to Japanese smaller companies.
3.3 29.5
4 6
Schroder ISF Global Emerging Markets Smaller Companies Fund Rest of World
Fund providing exposure to Emerging Markets smaller companies.
3.2 29.2
5 4
The Scottish Oriental Smaller Companies Trust Rest of World
Investment company providing exposure to Asian smaller companies.
3.2 28.8
6 5
Utilico Emerging Markets Trust Rest of World
Investment company focusing on utility and infrastructure companies in emerging markets.
2.4 22.1
7 7
Eagle Materials United States
A US producer of construction materials, including cement, aggregates, concrete, gypsum wallboard and recycled
paperboard.
1.8 16.6
8 9
LKQ Corp United States
A distributor of alternative car parts.
1.7 15.7
9 15
The Ensign Group United States
Operator of skilled nursing facilities, rehabilitative care facilities, also provides home health and assisted living
services mainly for post-acute care.
1.5 13.4
10 13
Kirby United States
Operator of a fleet of inland barges in the US, also a provider of repair services to marine and other end markets.
1.4 13.0
11 11
Wheaton Precious Metals United States
A precious metals streaming company.
1.4 12.7
12 8
The Andersons United States
Diversified US agribusiness that merchandises grain, produces ethanol and distributes fertiliser.
1.4 12.4
13 17
Graphic Packaging United States
A vertically integrated producer of printed paperboard cartons for food and beverage products.
1.3 12.1
14 19
Brown & Brown United States
Insurance broker, now the fifth largest global independent company in the market.
1.2 10.8
15 24
Martin Marietta Materials United States
Aggregates and cement producer that serves the construction industry.
1.0 9.2
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Other Information
Chairman’s StatementOverview Auditor’s Report
30 April
2023
30 April
2022
% of total
investments
Value
£m
16 31
Amdocs United States
Outsourced IT services provider to telecommunications sector.
1.0 9.1
17 12
Molina Healthcare United States
This is a managed care business providing health insurance in the US under government programs.
1.0 9.0
18 16
Avnet United States
Distributor of computer products, semiconductors and electronic components.
1.0 8.8
19 35
WSP Global Canada
Canadian based leading global engineering consultancy business.
1.0 8.7
20 20
Lundin Mining Canada
Diversified base metals mining company with its largest exposure being to copper.
0.9 8.2
21 37
WEX United States
An operator of a fuel card payment network.
0.9 8.2
22 18
Spectrum Brands United States
A global consumer products company that through its subsidiaries sells residential locks, personal care items,
household appliances, specialty pet supplies and lawn and garden products.
0.9 8.2
23 45
Baillie Gifford Japanese Smaller Companies Fund Japan
Fund providing exposure to Japanese smaller companies.
0.9 7.7
24 30
Encompass Health United States
Leading US provider of post acute care in facility and home based settings.
0.9 7.6
25 -
Curtiss-Wright United States
Producer of mission critical components, serving the aerospace, defence and power industries in particular.
0.8 7.6
26 22
Boot Barn Holdings United States
US retailer of western and work wear.
0.8 7.5
27 42
Essential Properties Realty Trust United States
US based real estate company focused on service sector based tenants.
0.8 7.3
28 48
Genpact United States
IT services outsourcing business operating across a number of industries.
0.8 7.2
29 32
American Vanguard United States
US based agricultural chemicals supplier.
0.8 7.2
30 -
Kosmos Energy United States
International oil and gas exploration and production company focused on US and West African assets.
0.8 7.1
The value of the thirty largest equity holdings represents 46.0% (30 April 2022: 41.9%) of the Company’s total investments.
28 | The Global Smaller Companies Trust PLC
List of Investments
30 April 2023
Quoted investments Holding
Value
£’000s
On the Beach Group 1,389,295 1,828
OSB Group 1,169,110 5,806
PageGroup 513,816 2,331
Paragon Banking Group 400,565 2,011
PayPoint 366,411 1,609
Pebble Group 3,902,614 4,098
Pets At Home 776,255 2,993
Qinetiq Group 1,082,207 4,017
Quixant 1,590,453 2,736
Rathbones Group 166,800 3,256
Redde Northgate 1,047,592 3,934
Restaurant Group 6,234,457 2,522
Ricardo 726,022 4,356
RWS Holdings 588,974 1,501
Shaftesbury Capital 4,200,000 4,948
Shanta Gold 19,600,184 2,205
SIG 5,946,457 2,640
Sirius Real Estate 4,418,667 3,542
Spire Healthcare 778,559 1,779
Spirent Communications 882,714 1,588
Team17 Group 853,832 3,074
Telecom Plus 111,427 2,012
TI Fluid Systems 1,331,119 1,406
TP ICAP Group 1,467,466 2,496
Treatt 524,920 3,501
Trifast 2,225,393 1,562
TT Electronics 1,461,272 2,475
Tullow Oil 3,642,395 1,018
Tyman 1,139,353 2,803
Uniphar 804,713 2,044
Vesuvius 736,326 2,984
Victrex 140,927 2,361
Warehouse REIT 2,158,477 2,357
Watches of Switzerland 280,114 2,329
Workspace Group 782,000 3,733
Xaar 1,402,431 2,419
XP Power 91,179 2,006
Zotefoams 900,678 3,414
TOTAL UNITED KINGDOM 228,771
EUROPE
AUSTRIA
Schoeller-Bleckmann 43,198 2,159
Total Austria 2,159
BELGIUM
Lotus Bakeries 538 2,958
Total Belgium 2,958
30 April 2023
Quoted investments Holding
Value
£’000s
UNITED KINGDOM
4Imprint Group 121,185 5,465
accesso Technology Group 362,073 2,466
Alfa Financial Software 2,006,897 2,820
Alliance Pharma 3,792,141 2,412
Anpario 426,139 1,065
Ascential 1,541,196 3,930
Ashtead Technology 1,153,662 3,911
Auction Technology 308,392 2,162
Baltic Classifieds Group 1,904,712 3,009
Begbies Traynor Group 2,525,609 3,283
Bodycote 300,383 2,073
Boku 1,508,391 2,187
Breedon Group 5,365,722 3,681
Bytes Technology 606,761 2,522
Clarkson 85,259 2,643
CLS Holdings 2,558,766 3,454
CMO Group 2,286,279 457
Crest Nicholson 1,036,395 2,784
Dalata Hotel Group 741,952 2,828
Elementis 1,888,534 2,368
Energean 274,094 3,391
Essentra 1,208,501 2,489
FDM Group 379,630 2,555
Future 220,309 2,483
Gateley Holdings 1,335,777 2,271
Genuit 844,976 2,535
Genus 83,899 2,253
Globaldata 190,833 2,347
Gooch & Housego 398,667 2,049
Hollywood Bowl Group 1,303,507 3,122
Hostelworld Group 1,731,353 2,138
Just Group 3,990,000 3,523
Kier Group 3,588,789 2,749
Kitwave Group 2,033,333 5,409
Lancashire Holdings 505,000 3,091
Loungers 1,443,107 2,857
Luceco 1,745,363 1,948
Marshalls 681,078 2,047
Mattioli Woods 439,688 2,638
Mercia Asset Management 13,450,000 3,362
Molten Ventures 435,887 1,219
Moneysupermarket.com 1,016,099 2,784
Morgan Advanced Materials 1,224,471 3,747
National Express Group 1,924,943 2,337
Next 15 Group 500,955 4,213
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Other Information
Chairman’s StatementOverview Auditor’s Report
30 April 2023
Quoted investments Holding
Value
£’000s
Total Spain 8,938
SWEDEN
Avanza 82,850 1,401
Coor Service Management 472,630 2,449
Engcon 273,300 1,901
Hexpol 219,633 2,055
Indutrade 92,062 1,753
Karnov 812,322 3,472
MIPS 51,797 2,215
Sdiptech 103,685 1,895
Thule Group 108,921 2,488
Total Sweden 19,629
SWITZERLAND
Kardex 11,481 2,073
Siegfried Holding 3,628 2,225
SIG Group 179,148 3,818
Tecan Group 11,176 3,874
V Zug 2,291 164
Total Switzerland 12,154
TOTAL EUROPE 108,810
NORTH AMERICA
CANADA
Lundin Mining 1,363,400 8,238
SSR Mining 493,273 5,605
WSP Global 83,600 8,740
Total Canada 22,583
UNITED STATES
Amdocs 125,485 9,106
American Vanguard 466,925 7,151
Avnet 268,208 8,802
Boot Barn Holdings 129,259 7,452
Bristow Group 357,401 6,350
Brown & Brown 210,453 10,780
Catalent 74,378 2,966
CDW 46,758 6,310
Cognyte Software 1,014,382 3,349
Columbia Sportswear 50,104 3,330
Curtiss-Wright 56,107 7,581
Dine Brands Global 52,108 2,692
Eagle Materials 141,137 16,642
Encompass Health 149,250 7,622
Essential Properties Realty Trust 372,137 7,331
FB Financial 103,054 2,410
Genpact 201,944 7,158
GrafTech International 877,634 3,282
Grand Canyon Education 62,565 5,905
30 April 2023
Quoted investments Holding
Value
£’000s
DENMARK
Ringkjoebing Landbobank 29,560 3,306
Royal Unibrew 39,982 2,829
Total Denmark 6,135
FRANCE
Alten 25,073 3,383
Lectra 91,475 2,370
Remy Cointreau 11,460 1,579
Verallia 80,210 2,594
Total France 9,926
GERMANY
CTS Eventim 57,228 2,988
Gerresheimer 36,835 3,171
Rational 3,565 2,046
STRATEC 19,352 1,050
Symrise 36,485 3,507
Total Germany 12,762
IRELAND
Bank of Ireland Group 323,624 2,663
Glanbia 134,265 1,620
Total Ireland 4,283
ITALY
Azimut 102,448 1,821
Carel Industries 74,266 1,552
Davide Campari 169,907 1,743
Interpump 91,861 4,073
Technoprobe 230,047 1,303
Total Italy 10,492
NETHERLANDS
ASM International 11,407 3,286
BE Semiconductor Industries 24,257 1,729
IMCD 25,456 3,043
Total Netherlands 8,058
NORWAY
Atea 368,567 3,977
Carasent 262,214 305
Nordic Semiconductor 173,692 1,487
Sparebank 174,663 1,618
Storebrand 422,487 2,578
TGS 108,931 1,351
Total Norway 11,316
SPAIN
Fluidra 171,481 2,339
Merlin Properties 200,784 1,412
Vidrala 32,995 2,759
Viscofan 44,450 2,428
30 | The Global Smaller Companies Trust PLC
30 April 2023
Quoted investments Holding
Value
£’000s
JAPAN
abrdn SICAV I Japanese Sustainable Smaller
Companies Fund 2,801,954 29,483
Baillie Gifford Japanese Smaller Companies Fund 202,817 7,681
Eastspring Investments Japan Smaller Companies
Fund 2,206,160 39,625
TOTAL JAPAN 76,789
REST OF WORLD
Pinebridge Asia ex Japan Small Cap Fund
51,345 31,518
Schroder ISF Global Emerging Markets Smaller
Companies Fund 221,600 29,185
The Scottish Oriental Smaller Companies Trust 2,418,586 28,781
Utilico Emerging Markets Trust 10,039,096 22,086
TOTAL REST OF WORLD 111,570
TOTAL QUOTED INVESTMENTS 902,257
Unquoted investments
AUSTRALIA
Australian New Horizons Fund 2,715,704 93
TOTAL UNQUOTED INVESTMENTS 93
TOTAL INVESTMENTS 902,350
The number of investments in the portfolio is 194 (2022:190).
30 April 2023
Quoted investments Holding
Value
£’000s
Graphic Packaging 616,525 12,096
GXO Logistics 140,559 5,942
Hayward Holdings 507,038 4,857
Healthcare Realty Trust 367,457 5,783
Jefferies Financial Group 159,689 4,067
Kirby 227,704 13,013
Kosmos Energy 1,401,147 7,134
LKQ Corp 341,545 15,685
Martin Marietta Materials 31,832 9,198
MaxLinear 232,843 4,466
MDC Holdings 130,649 4,258
Medifast 25,226 1,839
Molina Healthcare 38,105 9,030
MSC Industrial Direct 50,581 3,653
Nomad Foods 352,800 5,280
Plymouth Industrial REIT 394,962 6,360
PRA Group 228,543 6,591
Prosperity Bancshares 116,118 5,781
QuidelOrtho 66,280 4,743
Real Good Foods 587,125 1,775
Spectrum Brands 155,275 8,215
Stericycle 90,886 3,300
Syneos Health 119,635 3,737
The Andersons 348,037 12,380
The Ensign Group 173,282 13,377
U.S. Physical Therapy 79,592 6,728
United Bankshares 182,869 4,825
Vail Resorts 22,562 4,316
Viavi Solutions 528,109 3,761
Vitesse Energy 266,058 3,889
Webster Financial 217,002 6,438
WEX 58,340 8,231
Wheaton Precious Metals 324,652 12,747
World Fuel Services 213,754 4,020
Total United States 353,734
TOTAL NORTH AMERICA 376,317
Report and Accounts 2023 | 31
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Other Information
Chairman’s StatementOverview Auditor’s Report
All Company data are based on assets, liabilities, earnings and expenses as reported in accordance with the Company’s accounting policies
and are unaudited but derived from the audited Accounts or specified third-party data providers.
Assets
at 30 April
£’000s 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Net assets (before debt) 350,090 441,086 555,092 591,602 767,979 872,704 904,220 761,515 1,051,029 1,000,086 911,462
Debenture and loans 10,000 10,000 – – – 24,000 34,052 35,000 43,521 54,782 52,027
Convertible Unsecured Loan Stock – – 38,129 38,410 34,697 21,873 15,549 – – – –
Net assets 340,090 431,086 516,963 553,192 733,282 826,831 854,619 726,515 1,007,508 945,304 859,435
NAV per share
at 30 April
pence 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
NAV with debt at par per share
(i)
75.6 84.2 97.3 99.8 128.3 138.4 141.7 120.3 175.0 172.0 163.7
NAV with debt at fair value per share n/a n/a n/a n/a n/a n/a n/a 119.7 174.9 172.8 165.7
NAV (diluted) per share
(i)
n/a n/a 97.0 99.5 126.4 136.9 140.6 n/a n/a n/a n/a
NAV total return % – 5 years 28.2
NAV total return % – 10 years 144.6
Share Price
at 30 April
pence 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Middle market price per share
(i)
76.5 84.0 98.0 100.1 127.3 137.5 134.6 111.0 168.6 156.2 144.6
Share price high
(i)
77.9 88.0 102.5 102.4 129.9 141.5 149.5 150.0 168.6 177.0 162.2
Share price low
(i)
55.4 74.5 78.5 85.9 94.7 126.5 122.0 78.8 104.2 142.6 122.4
Share price total return % – 5 years 11.8
Share price total return % – 10 years 110.8
Revenue return after tax
for the year ended 30 April
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Available for ordinary shares – £’000s 3,044 4,461 5,659 6,452 7,839 9,448 10,623 10,493 7,416 10,241 12,620
Return per share
(i)
0.71p 0.93p 1.09p* 1.18p* 1.38p* 1.59p* 1.76p* 1.73p 1.26p 1.82p 2.34p
Dividends per share
(i)
0.65p 0.80p 0.97p 1.07p 1.23p 1.44p 1.65p 1.70p 1.75p 1.84p 2.30p
(ii)
* diluted
(i)
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.
(ii)
Subject to approval of the final dividend of 1.67p at the 2023 AGM.
Ten Year Record (unaudited)
32 | The Global Smaller Companies Trust PLC
Performance
(rebased to 100 at 30 April 2013)
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
NAV per share 100 111.4 128.3* 131.6* 167.2* 181.1* 186.0* 158.4** 231.4** 228.6** 219.2 **
Middle market price per share 100 109.8 128.1 130.8 166.4 179.7 175.9 145.1 220.4 204.2 189.0
Revenue return per share 100 131 153.5 166.2 194.4 223.9 247.9 243.7 177.5 256.3 329.6
Dividends per share 100 123.1 148.5 164.6 188.5 221.5 253.8 261.5 269.2 283.1 353.8
(1)
RPI 100 102.5 103.4 104.8 108.5 112.1 115.5 117.3 120.7 134.1 149.4
* diluted
** NAV with debt at fair value
(1)
Subject to approval of the final dividend of 1.67p at the 2023 AGM.
Costs of running the Company (ongoing charges/TER)
for the year ended 30 April
Expressed as a percentage of average net assets 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Ongoing charges*
excluding performance fees 0.85% 0.76% 0.79% 0.85% 0.84% 0.83% 0.79% 0.75% 0.78% 0.75% 0.79%
including performance fees 1.49% 0.78% 1.08% 0.85% 0.86% 0.83% 0.79% 0.75% 0.78% 0.75% 0.79%
Total expense ratio
excluding performance fees 0.71% 0.50% 0.53% 0.51% 0.62% 0.60% 0.59% 0.59% 0.58% 0.58% 0.60%
including performance fees 1.22% 0.50% 0.74% 0.76% 0.62% 0.60% 0.59% 0.59% 0.58% 0.58% 0.60%
Gearing
at 30 April 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Effective gearing (2.3%) (1.3%) 4.8% 4.7% 3.4% 5.1% 4.6% (0.6%) 3.8% 4.6% 5.2%
Fully invested gearing 2.9% 2.2% 7.4% 6.9% 4.7% 5.6% 5.8% 4.8% 4.3% 5.8% 6.1%
Note: definitions of Alternative Performance Measures and a Glossary of Terms are provided on pages 97 to 99.
Report and Accounts 2023 | 33
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Other Information
Chairman’s StatementOverview Auditor’s Report
Purpose, values and culture
Our purpose is to provide an investment vehicle which meets the needs
of investors, whether large or small, who seek long-term investment
returns from global smaller companies in an accessible, cost effective
way. Our investment objective is to invest in smaller companies
worldwide in order to secure a high total return.
To ensure that the Company’s purpose, values, strategy and culture
are aligned, the Board comprises Directors with a breadth of relevant
skills and experience acting with professional integrity who contribute
in an open boardroom culture that both supports and challenges the
investment management company and its other third party suppliers.
Investment and business strategy
Our investment strategy is designed to produce outperformance of the
Benchmark and increases in dividends over the longer term. We select
well-managed publicly listed smaller companies with growth potential
and market capitalisations that fall into the generally accepted local
definition of a smaller company.
Business model
The Directors have a duty to promote the success of the Company. As
an investment company with no employees, we believe that the best
way to do this and to achieve our objective is to have an effective and
strong working relationship with our appointed manager, Columbia
Threadneedle Investment Business Limited (the ‘Manager’). Within
policies set and overseen by the Board of Directors, our Manager has
been given overall responsibility for the management of the Company’s
assets, including asset allocation, gearing, stock and sector selection
as well as risk management and engagement on Environmental, Social
and Governance matters. The Board remains responsible for the
matters listed on page 50.
In most parts of the world, smaller company equities have historically
delivered strong longer term returns to investors ahead of overall
equity market returns. As an investment trust company, the Company
is particularly well suited to long-term investment in these smaller, less
liquid companies.
Our Manager’s focus is on individual company opportunities. Exposure
to the different geographic markets is adjusted within specific ranges in
light of the attraction of local valuations and the outlook for currencies,
but stock selection is generally the main driver of the Company’s
overall returns. Further information regarding the Manager's Investment
Philosophy and Process are outlined on pages 17 to 21 and a full list of
investments appears on pages 28 to 30.
Furthermore, as a closed-end listed investment company we are not
constrained by asset sales to meet redemptions. Our share capital
structure gives us the flexibility to take a longer term view and stay
invested while taking advantage of volatile market conditions. Having
the ability to borrow to invest gives us a significant advantage over a
number of other investment fund structures.
Alignment of values and culture
It is important that the values, expectations and aspirations of those
charged with managing the assets align with those of our own. The
Board has reviewed the Manager’s culture and values as part of the
annual assessment of its performance and in determining whether
its reappointment is in the interests of shareholders. Columbia
Threadneedle is an organisation committed to helping establish a more
sustainable financial system. It is one of the earliest adopters of the
United Nations Principles for Responsible Investment (‘UNPRI’) and
has achieved the maximum rating of A+ for key areas of its responsible
investment approach, including strategy and governance, and
Environmental, Social and Governance (‘ESG’) incorporation and active
ownership in listed equities. The management company has a culture of
diversity and inclusion anchored by shared values and industry-leading
employee engagement in keeping with the Board’s own expectations
and beliefs.
Responsible investment and ESG impact
Our Responsible Investment policies are aligned towards the delivery
of sustainable investment performance over the longer term. The direct
impact of the Company’s activities is minimal as it has no employees,
premises, physical assets or operations either as a producer or a
provider of goods or services, while its shareholders are effectively its
customers. Consequently, it does not directly generate any greenhouse
gas or other emissions or pollution. The Company’s indirect impact
occurs through the investments that it makes and this is mitigated
by the Manager's Responsible Investment approach as explained on
pages 22 to 25.
Purpose, Strategy and Business Model
34 | The Global Smaller Companies Trust PLC
Manager evaluation
Investment performance and responsible ownership are fundamental to
delivering a sustainable high total return for our shareholders over the
longer term and, therefore, an important responsibility of the Directors
is exercising a robust annual evaluation of our Manager’s performance
capabilities and resources. This is an essential element in the mitigation
of risk, as outlined under Principal and Emerging Risks on page 40, and
the strong governance that is carried out by the Board of Directors, all of
whom are independent and non-executive.
The process for the evaluation of our Manager for the year under review
and the basis on which the reappointment decision was made are
set out on page 46. The management fee is based on the value of
the Company’s net assets, thus aligning the Manager’s interests with
shareholders'.
Managing risks and opportunities
We look to make good use of our corporate structure and the
investment opportunities that produce a high total return for our
shareholders over the longer term. Like all businesses, these
opportunities do not come without risks and so the performance of
our Manager is monitored at each Board meeting on a number of
levels. In addition to managing the investments, the ancillary functions
of administration, company secretarial, accounting and marketing
services are all carried out by the Manager. It reports on the investment
portfolios; the wider portfolio structure; risks; compliance with borrowing
covenants; income, dividend and expense forecasts; errors; internal
control procedures; marketing; shareholder and other stakeholder
issues, including the Company’s share price discount or premium to
NAV; and accounting and regulatory updates.
Shareholders can assess the Company's financial performance from
the Key Performance Indicators that are set out on page 39 and, on
page 40, see what the Directors consider to be the Principal and
Emerging Risks that it faces. The risk of not achieving the Company’s
objective of delivering a high total return for our shareholders over
the longer term, or of consistently under-performing its Benchmark
or competitors, may arise from any or all of poor stock selection,
inappropriate asset allocation, weak market conditions, badly timed
employment of gearing, poor cost control, loss of assets and service
provider governance issues.
In addition to monitoring our Manager’s performance, capabilities,
available resources and its systems and controls, the Directors also
review the services provided by other principal suppliers. These include
the Custodian and Depositary in their duties towards the safeguarding
of the assets.
The principal policies that support our investment and business
strategy are set out on page 37, whilst the Lead Manager’s Review of
activity in the year can be found on page 8. In the light of the Company’s
strategy, investment processes and control environment (relating to
both the oversight of its service providers and the effectiveness of the
risk mitigation activities), we have set out on page 41 our reasonable
expectation that the Company will continue in operation for at least the
next five years.
Lead Manager and the management of the assets
Peter Ewins, as Lead Manager on behalf of our Manager, is responsible
for the allocation of the assets on a regional basis and for the
construction of the investment portfolio including the selection of
any smaller company investment funds utilised. Our Manager has a
team of smaller company investment managers that support the Lead
Manager in the selection of stocks for the North American, UK and
European stock markets. The Lead Manager is also assisted by other
colleagues within the management company in relation to the selection
of managed funds used to gain exposure to other global markets.
Marketing
With a large proportion of our shareholders being retail investors and
savings or execution-only platforms representing a significant and
growing element of our shareholder base, we remain focused with our
Manager on the optimal communication of the Company’s investment
proposition. This year, we have been working with the Manager to
enhance the public profile of the Company across different media.
This has included a PR campaign with an external consultancy firm,
greater use of video content on the Company’s website alongside
several podcasts and webinars. The use of webinars in particular
allows direct interaction with engaged retail investors and the Investor
Meets Company platform was again used in the year for this purpose.
Columbia Threadneedle Investments have continued to actively market
their full range of investment trusts during the year and the Manager
has also been on a number of regional roadshows to meet wealth
managers, both existing and potential new holders.
Key stakeholders
Whilst we hold our Manager to account in the management of our
assets, we also recognise that relationship as being fundamental from
a stakeholder perspective and as a working partnership in forming
and developing our strategy. Our own engagement with our Manager is
continuous, particularly through our regular Board meetings and, not
least, the annual meeting that we dedicate to the review of strategic
matters. The debate at our strategy meeting in March included a review
of the areas critical to the future success of the Company including
investment strategy, branding and marketing. The Board also keeps
under review the appropriateness of the Company's Benchmark index
and, with effect from 1 May 2023, the Benchmark blend has changed.
More information about the change can be found on pages 4 to 5. The
Report and Accounts 2023 | 35
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Other Information
Chairman’s StatementOverview Auditor’s Report
relationships that our Manager has with the companies in which we
invest are of key importance and we outline our approach on pages 17
to 21.
Albeit not in the traditional sense, we see our shareholders as
customers who we hope will stay with us and reap the benefits of
investing over the longer term. Many of our underlying shareholders
are young and hold their shares through their parents in the Manager's
Child Trust Fund and Junior ISAs. The Child Trust Funds have now
begun to mature, meaning that, as each child turns 18, they have full
control over their holdings. Now that many Child Trust Fund accounts
have reached maturity, our focus is on keeping as many of these
young investors with us as possible. The Manager writes to parents
ahead of their account maturity dates explaining the options and
opportunities available to them. In due course we will be able to judge
how successful this initiative has been, but retention rates are currently
in line with expectations.
With regard to our shareholders more generally, we engage by reporting
our activities and performance through the publication of our half year
and annual reports. Most shareholders and Savings Plan investors
prefer not to receive such detailed information. To avoid them losing
this essential line of communication, we instead make available a short
notification summary covering the main highlights of our half year and
annual results. Shareholders and savings plan investors can access
the full information on our website as shown on page 2. Through our
Manager, we also ensure that savings plan investors are encouraged
to participate at shareholder meetings in addition to those members
who hold their shares directly on the main shareholder register. Details
of the proxy voting results on each resolution are published on the
website where there is also a link to the daily publication of our NAV
and our monthly factsheet.
The Manager seeks to foster good relations with wealth managers
and underlying investors in promoting the Company’s investment
proposition and over the year a number of meetings, both virtual and
in-person, were held with existing and prospective investors. These
meetings are reported on regularly to the Board. The Chairman and
Senior Independent Director are always available to meet with major
shareholders.
Our lenders are important stakeholders whom we keep informed
through our monthly covenant compliance reporting in the first
instance. None of the financial covenants has been threatened and we
had no issues over liquidity or cause to engage with the lenders in this
regard during the year.
36 | The Global Smaller Companies Trust PLC
Promoting Success
Section 172 Statement
The Directors have continued to act to promote the success of the
Company for the benefit of its shareholders as a whole. In so doing,
they have had regard to the matters set out in section 172(1) of the
Companies Act 2006 (the ‘Act’). This includes the likely consequences
of their decisions in the longer term and how they have taken wider
stakeholders’ needs into account.
As noted on page 33, we have no employees, premises, assets or
operations. Details of our key stakeholders are noted on pages 34 and
35. Our main working relationship is with the Manager. Recognising
that sustainability is fundamental to achieving longer term success,
we have continued to work closely with our Manager to develop further
our investment strategy and underlying policies. This is not simply to
achieve the Company’s investment objective but to make sure it is
done in an effective, responsible and sustainable way in the interests
of shareholders, future investors and society at large. The portfolio
activities undertaken by our Manager and the impact of decisions
taken are set out in the Lead Manager’s Review on pages 8 to 16.
On pages 22 to 25 we have again reported in greater detail on our
approach towards responsible investment. We are very supportive
of the Manager’s approach, which focuses on engagement with the
investee companies on ESG issues and how these link with the United
Nations Sustainable Development Goals (‘SDGs’).
We use gearing to enhance returns, but this will have a negative
impact at times of market shocks. We maintained a moderate level of
gearing throughout the year. At the end of the year we had drawn down
€6.8m, ¥557.5m and $9.8m (in total, the equivalent of £17.0m) of our
£35m multi-currency revolving credit facility. The blended rate on this
facility and the £35m private placement notes 2039 is 2.8%, which
leaves us well placed to enhance investment returns over the long
term and build on our performance record.
One of our Key Performance Indicators is dividend growth. This year
has seen our investment income grow to a new record level, allowing
us to once again increase the dividend significantly. This extends our
record to 53 years of consecutive annual increases.
We bought back 24.6m shares in the year with the discount being over
5% throughout the period. We would only re-issue shares from treasury
if the share price returns to a premium to NAV. This policy is not only
accretive to the NAV per share, it also helps moderate the absolute
level and volatility of the discount and provides liquidity in the shares.
As long-term investors we always look to the future and to the success
of the Company in that context. We believe that the Company provides
a clear investment choice, not only for investors large or small but also
for those starting their investment journey. We continue to promote the
Company through marketing and work towards the optimal delivery of
the Company’s investment proposition and to promote the success
of the Company for the benefit of all shareholders, stakeholders and,
through its valuable role as an investment vehicle, the community at
large.
Report and Accounts 2023 | 37
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
Strategic Report
Investment
Our publicly stated Investment Policy is designed to help shareholders,
prospective investors and stakeholders understand the scope of our
investment remit and constraints imposed under it. Any material changes
to the stated policy can only be made with shareholder approval.
Our remit is global. Risk diversification is achieved through geographic
asset allocation and industry sector and stock selection across a wide
range of markets. Within the general policy of maintaining a diversified
portfolio, there are no specific geographic or industry sector exposure
limits for the publicly listed equities.
Investment is made mainly in publicly listed equities, including those
on the Alternative Investment Market. Investment can also be made in
other types of securities or assets, including collective investment funds.
Under the Financial Conduct Authority’s Listing Rules, no more than 10%
of the Company’s total assets may be invested in other listed closed-
ended investment companies, unless such investment companies have
themselves published investment policies to invest no more than 15% of
their total assets in other closed-ended investment companies, in which
case the limit is 15%. Investments in unlisted securities require prior
Board approval. No transaction can be made which would increase the
value of any holding of the Company to exceed 10% of the value of the
total portfolio.
Derivative instruments, such as futures, options, and warrants, may be
used for efficient portfolio management up to a maximum of 10% of the
NAV at any one time. The Board, with advice from the Manager, considers
the foreign exchange outlook, as this can affect both the asset allocation
and borrowing strategy, and can hedge the portfolio against currency
movements. No such hedging has been undertaken in the year under
review.
At every Board meeting, the Lead Manager reports on portfolio activity
and investment performance and confirms adherence to the investment
restrictions and limitations set by the Board. The Lead Manager’s
Review on pages 8 to 16 provides an overview of the outcome from the
application of the Investment Policy and the underlying policies during
the course of the year under review.
Borrowing
The Company has the flexibility to borrow over the longer term and
to use short-term borrowings by way of loans. Borrowings, which can
be taken out in either sterling or foreign currency, would normally
be expected to fall within a range of 0-20% of shareholders’ funds.
In normal circumstances, the Board believes that structural gearing
through the investment cycle is appropriate for the enhancement of
shareholder returns. Borrowing levels and covenant headroom are
monitored on an ongoing basis and reported on at each Board meeting.
Dividend
Our revenue account is managed with a view to delivering a rising
income stream in real terms for shareholders. Prudent use of revenue
reserves established over many decades is made whenever necessary
to help meet any revenue shortfall.
The Board applies due diligence and determines dividend payments
by taking account of income forecasts, brought forward distributable
reserves, prevailing inflation rates, the Company’s dividend payment
record and Corporation Tax rules governing investment trust status.
Risks to the Company’s dividend policy have been considered as part
of the Principal and Emerging Risks reviews noted on page 40. The
consistent application of this policy has enabled the payment of an
increased dividend every year for the past 53 years.
Discount/Premium
The Board operates a share buyback policy under an authority given
by shareholders. Under this policy the Company buys back shares for
the benefit of shareholders when it sees value and, importantly, with a
view to moderating discount volatility and to keeping the discount at no
more than 5%, in normal market conditions. Shares are bought back
at a discount to the NAV per share and are either cancelled or held in
treasury, the effect of which is an accretion to the NAV per share. The
levels within which the policy operates are kept under review.
Shareholders have also authorised the Board to issue shares when
trading at a premium to the NAV per share, with a view to moderating
the premium and any associated volatility. As with share buybacks, such
issues are only made when accretive to the NAV.
Principal Policies
The Board has overall responsibility for the Company’s principal policies, which support its
investment and business strategies in securing a high total return for our shareholders.
38 | The Global Smaller Companies Trust PLC
Board diversity and inclusion
Our policy towards the appointment of non-executive directors to the
Board is based on its belief in the benefits of having a diverse range of
experience, skills, length of service and backgrounds, including gender
and contributions from an international perspective. The policy is
always to appoint the best person for the role and, by way of this policy
statement, we confirm that there is no discrimination on the grounds of
gender, race, ethnicity, religion, sexual orientation, age or disabilities.
The overriding aim of the policy is to ensure that the Board is composed
of the best combination of people to deliver the Company’s objective. We
apply the policy for the purpose of appointing individuals that, together
as a Board, will continue to achieve that aim as well as ensuring optimal
promotion of the Company’s investment proposition in the marketplace.
At 30 April 2023, which shall be used as the reference date for the
disclosures in accordance with the Listing Rules 9.8.6R (9), the Board
comprised two women and three men, therefore, meeting the requirement
for at least 40% of directors to be women. Both the Chairman of the
Board and the Senior Independent Director are women. As an externally
managed investment trust company, the Company does not have the
roles of Chief Executive Officer or Chief Financial Officer and considers the
role of Chairman of the Audit and Management Engagement Committee
to be a senior board position. This role is also currently held by a woman.
The Board does not currently meet the target of at least one Director
being from a minority ethnic background, however, the Board has engaged
an external search firm to identify a suitable candidate to replace David
Stileman and this diversity requirement will be taken into consideration in
the recruitment process.
Number
of board
members
Percentage of
board members
Number of senior
positions on the
board
Men 3 60% 0
Women 2 40% 2
Not Specified
/Prefer not to say
N/A 0% 0
Number
of board
members
Percentage of
board members
Number of senior
positions on the
board
White British or other
White (including
minority white groups)
5 100% 2
Mixed/Multiple
Ethnic Groups
N/A 0% 0
Asian/Asian British N/A 0% 0
Black/African/
Caribbean/Black
British
N/A 0% 0
Not Specified/Prefer
not to say
N/A 0% 0
Taxation
As an investment trust company, it is essential that the Company retains its
tax status by complying at all times with Section 1158 of the Corporation
Tax Act 2010 (‘Section 1158’) such that UK Corporation Tax is not
suffered on its capital gains. It also ensures that correct taxation returns
are submitted annually and any taxation due is settled promptly. Where
possible, all taxes suffered in excess of taxation treaty rates on non-UK
dividend receipts are claimed back in a timely manner. The Board’s policy
towards taxation is one of full commitment to complying with applicable
legislation and statutory guidelines. In applying due diligence towards the
retention of Section 1158 status and adhering to its tax policies, the Board
receives regular reports from the Manager. The Company has received
approval from HMRC as an investment trust under Section 1158 and has
since continued to comply with the eligibility conditions.
Modern Slavery Act 2015
Our own supply chain consists predominately of professional advisers
and service providers in the financial services industry, which is highly
regulated. We therefore believe that the potential for acts of modern slavery
or human trafficking in our own working environment is extremely low.
The values we hold, our culture and the rationale for the appointment of
our Manager are explained on page 33. The management company is an
organisation committed to respecting human rights and stands against
all forms of slavery and human trafficking. It is recognised as a leading
pioneer in responsible investment and works with policymakers worldwide
to deliver market-wide improvements in standards and regulations. In
the year under review, over 24% of engagements across the companies
in which the management company invests for its clients raised social
themes, including human rights, public health and labour standards. There
was a continued focus on labour standards in the supply chain as well
as on inclusion and diversity in the workforce. The Manager is an investor
signatory to the Workforce Disclosure Initiative (‘WDI’), which aims at
enhancing relevant and material workforce related disclosure on a wide
range of workforce issues, covering companies’ direct operations and
supply chains. We are very supportive of the Manager’s approach and
whose formal statement can be found on its website.
Integrity and business ethics
We apply a strict anti-bribery and anti-corruption policy insofar as it applies
to the Directors of the Company and employees of any organisation with
which we conduct business, including the Manager. The Board ensures
that adequate procedures are in place and followed in respect of third-party
appointments, acceptance of gifts and hospitality and similar matters.
On behalf of the Board
Anja Balfour
Chairman
22 June 2023
Report and Accounts 2023 | 39
Strategic Report
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
(1) See Alternative Performance Measures on pages 95 and 96
(2) See Glossary of terms on page 97 for explanation of Benchmark
Dividend growth
1 Year % 3 Years % 5 Years %
The Board aims to continue its progressive dividend policy
Dividends 25.0 35.3 59.7
This compares the Company’s dividend growth rate to the rate of inflation.
Retail Prices Index 11.4 27.4 33.3
Source: Columbia Threadneedle Investments and Refinitiv Eikon
Ongoing charges
(1)
(as a percentage of average net assets)
At 30 April
% (excluding
performance fees)
% (including
performance fees)
The Board’s policy is to control the costs of running the Company
2023
0.79 0.79
This measures the running costs of the Company (including where applicable the
performance fees incurred in underlying funds) as a percentage of the average net assets.
2022
0.75 0.75
2021
0.78 0.78
2020
0.75 0.75
2019
0.79 0.79
Source: Columbia Threadneedle Investments
Premium/(discount)
(1)
(including current period income)
At 30 April %
The Board’s premium/discount policies are to moderate the level of share price
premium/discount and related volatility
2023
(12.7)
This is a measure of the divergence between the share price and the NAV per share. The
Company issues shares whilst the share price is at a premium and buys back shares when it
is at a discount, in the latter case with the aim that it does not exceed 5% in normal market
conditions.
2022
(9.6)
2021
(3.6)
2020
(7.3)
2019
(4.3)
Source: Columbia Threadneedle Investments and Refinitiv Eikon
Performance: Total return
(1)
1 Year % 3 Years % 5 Years % The Board’s policy is to secure a high total return
NAV total return
(2.9) 43.3 28.2
This measures the Company’s NAV and share price total returns, which assume dividends paid
by the Company have been reinvested, relative to the Company’s Benchmark.
Benchmark
(2)
total return
(2.1) 46.1 29.3
Share price total return
(6.2) 35.3 11.8
Source: Columbia Threadneedle Investments and Refinitiv Eikon
The Board assesses its performance in meeting the Company’s objective against
four key measures: Performance, Premium/Discount, Ongoing Charges and Dividend
Growth, as well as regional performance against local benchmarks set out on pages
13 to 15. Detailed commentary on these measures can be found in the Chairman’s
Statement and Lead Manager’s Review. A 25 year historical record of these indicators
(excluding Ongoing Charges) is shown on pages 93 and 94.
Key Performance Indicators
40 | The Global Smaller Companies Trust PLC
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. This includes near-term risks
such as those posed by the integration of BMO GAM with Columbia
Threadneedle and longer-term risks, such as climate change. The
consequences for its strategy, business model, liquidity, future
prospects, long term viability and its commitment to transition the
portfolio to net zero carbon emissions by 2050, at the latest, form an
integral part of this review.
The Board’s processes for monitoring the principal risks and identifying
emerging risks are set out on page 40 and in note 23 to the Accounts.
Any emerging risks that are identified and that are considered to be of
significance are included on the Company’s risk assessment together
Principal Risks Mitigation by strategy Actions taken on Principal Risks in the year
Service providers and systems security – Errors, fraud or control
failures at service providers or loss of data through business
continuity failure or cyber attacks could damage reputation or
investors’ interests or result in loss. Cyber risks remain heightened.
The ancillary functions of administration, company secretarial,
accounting and marketing services are all carried out by the
Manager. Custody and depositary services are provided by third
party suppliers.
The Board monitors the effectiveness and efficiency of service
providers’ processes through internal efficiency KPIs.
The Audit and Management Engagement Committee and the Board have regularly reviewed
the Company’s risk management framework with the assistance of the Manager. Regular
control reports are provided by the Manager which cover risk, compliance and oversight
of third-party service providers, including IT security and cyber-threats. Reports from the
Depositary, which is liable for the loss of any of the Company’s securities and cash held in
custody unless resulting from an external event beyond its reasonable control, were reviewed.
The Board is satisfied that the continuity arrangements of all key suppliers continued to work
well and as such, this risk is unchanged.
Investment performance – Inappropriate business strategy or
policy, or ineffective implementation, could result in poor returns for
shareholders. Failure to access the targeted market or meet investor
needs or expectations, including Responsible Investment and climate
change in particular, leading to significant pressure on the share price.
Political risk factors could also impact performance as could market
shocks such as those experienced in relation to Covid-19 and the war
in Ukraine.
Under our Business Model, a manager is appointed with the
capability and resource to manage the Company’s assets, asset
allocation, gearing, stock and sector selection and risk. The
individual regional investment portfolios are managed to provide in
combination a well-diversified, lower volatility and lower risk overall
portfolio structure. The Board holds a separate strategy meeting
each year and considers investment policy review reports from the
Manager at each Board meeting.
The performance of the Company relative to its Benchmark,
its peers and inflation is a KPI measured by the Board on an
ongoing basis and is reported on page 39.
Columbia Threadneedle has been retained as Manager and continues to deliver on the
Company’s objective. It operates within a responsible investment culture under a corporate
commitment to four key Sustainability Principles: Social Change, Financial Resilience,
Community Building and Environmental Impact. Through the Manager, the Company has
the flexibility to innovate, adapt and evolve as Responsible Investment necessities and
expectations change. Marketing and investor relations campaigns continued throughout the
year, including presentations by the Lead Manager to wealth managers across the country.
Detailed reports provided by the Lead Manager have been reviewed by the Board at each of
its meetings. Strong operational performance from the investment portfolio over the year has
resulted in the dividend for the year increasing by 25%. In overall terms, this risk is considered
unchanged.
Discount/premium – A significant share price discount or premium
to the Company’s NAV per share, or related volatility, could lead to
high levels of uncertainty or speculation and the potential to reduce
investor confidence. Increased uncertainty in markets due to an event
such as Covid-19 or the significant rise in inflation could lead to falls
and volatility in the Company’s NAV.
The Board has established share buyback and share issue policies,
together with a dividend policy, which aim to moderate the level
and volatility of the share price discount or premium to the NAV
per share and it seeks shareholder approval each year for the
necessary powers to implement those policies.
The discount/premium to NAV at which the Company's shares
trade is a KPI measured by the Board on an ongoing basis and is
reported on page 39.
Despite actively buying in shares on a regular, ongoing basis in order to address the
imbalance between the supply and demand of the Company's shares, the discount has
remained wider than desired. During the course of the year, the Manager has stepped up
marketing activity over a number of channels and is working to enhance the messaging
around the core investment proposition. This activity aims to stimulate demand for the
Company’s shares from existing and new investors. Given the higher prevailing discount level
the risk is considered to have increased during the year.
with any mitigations. These principal and emerging risks are reviewed
regularly by the Audit and Management Engagement Committee and
by the Board. There is a risk that the current high levels of inflation
will be sustained and of course geo-political risk has been heightened
as a result of the war in Ukraine. The principal risks are largely
unchanged from those reported in the prior year. Those identified as
most relevant to the assessment of the Company’s future prospects
and viability were those relating to the potential impact from sustained
high inflation, inappropriate business strategy, potential investment
portfolio under-performance and its effect on the Company’s share
price discount/premium and dividends, as well as threats to security
over the Company’s assets. Our risk evaluation forms an inherent part
of our strategy determination described on page 34.
Principal and Emerging Risks
Unchanged throughout the year.
Unchanged throughout the year.
Risk has increased during the year.
Report and Accounts 2023 | 41
Strategic Report
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
Principal Risks Mitigation by strategy Actions taken on Principal Risks in the year
Service providers and systems security – Errors, fraud or control
failures at service providers or loss of data through business
continuity failure or cyber attacks could damage reputation or
investors’ interests or result in loss. Cyber risks remain heightened.
The ancillary functions of administration, company secretarial,
accounting and marketing services are all carried out by the
Manager. Custody and depositary services are provided by third
party suppliers.
The Board monitors the effectiveness and efficiency of service
providers’ processes through internal efficiency KPIs.
The Audit and Management Engagement Committee and the Board have regularly reviewed
the Company’s risk management framework with the assistance of the Manager. Regular
control reports are provided by the Manager which cover risk, compliance and oversight
of third-party service providers, including IT security and cyber-threats. Reports from the
Depositary, which is liable for the loss of any of the Company’s securities and cash held in
custody unless resulting from an external event beyond its reasonable control, were reviewed.
The Board is satisfied that the continuity arrangements of all key suppliers continued to work
well and as such, this risk is unchanged.
Investment performance – Inappropriate business strategy or
policy, or ineffective implementation, could result in poor returns for
shareholders. Failure to access the targeted market or meet investor
needs or expectations, including Responsible Investment and climate
change in particular, leading to significant pressure on the share price.
Political risk factors could also impact performance as could market
shocks such as those experienced in relation to Covid-19 and the war
in Ukraine.
Under our Business Model, a manager is appointed with the
capability and resource to manage the Company’s assets, asset
allocation, gearing, stock and sector selection and risk. The
individual regional investment portfolios are managed to provide in
combination a well-diversified, lower volatility and lower risk overall
portfolio structure. The Board holds a separate strategy meeting
each year and considers investment policy review reports from the
Manager at each Board meeting.
The performance of the Company relative to its Benchmark,
its peers and inflation is a KPI measured by the Board on an
ongoing basis and is reported on page 39.
Columbia Threadneedle has been retained as Manager and continues to deliver on the
Company’s objective. It operates within a responsible investment culture under a corporate
commitment to four key Sustainability Principles: Social Change, Financial Resilience,
Community Building and Environmental Impact. Through the Manager, the Company has
the flexibility to innovate, adapt and evolve as Responsible Investment necessities and
expectations change. Marketing and investor relations campaigns continued throughout the
year, including presentations by the Lead Manager to wealth managers across the country.
Detailed reports provided by the Lead Manager have been reviewed by the Board at each of
its meetings. Strong operational performance from the investment portfolio over the year has
resulted in the dividend for the year increasing by 25%. In overall terms, this risk is considered
unchanged.
Discount/premium – A significant share price discount or premium
to the Company’s NAV per share, or related volatility, could lead to
high levels of uncertainty or speculation and the potential to reduce
investor confidence. Increased uncertainty in markets due to an event
such as Covid-19 or the significant rise in inflation could lead to falls
and volatility in the Company’s NAV.
The Board has established share buyback and share issue policies,
together with a dividend policy, which aim to moderate the level
and volatility of the share price discount or premium to the NAV
per share and it seeks shareholder approval each year for the
necessary powers to implement those policies.
The discount/premium to NAV at which the Company's shares
trade is a KPI measured by the Board on an ongoing basis and is
reported on page 39.
Despite actively buying in shares on a regular, ongoing basis in order to address the
imbalance between the supply and demand of the Company's shares, the discount has
remained wider than desired. During the course of the year, the Manager has stepped up
marketing activity over a number of channels and is working to enhance the messaging
around the core investment proposition. This activity aims to stimulate demand for the
Company’s shares from existing and new investors. Given the higher prevailing discount level
the risk is considered to have increased during the year.
Through a series of stress tests ranging from moderate to extreme scenarios, including the
impact of market shocks and based on historical information, but forward looking over the five
years commencing 1 May 2023, the Board assessed the risks of:
• Sustained high levels of inflation.
• Potential illiquidity of the Company’s portfolio.
• Substantial falls in investment values on the ability to meet loan covenant requirements and to
repay and re-negotiate funding.
• Significant falls in income on the ability to continue paying steadily-rising dividends and
maintaining adequate revenue reserves.
The Board also took into consideration the operational robustness of its principal service
providers and the effectiveness of business continuity plans in place, potential effects of
regulatory changes and the potential threat from competition. The Board’s conclusions are set
out under ‘Five Year Horizon’.
Resilience
The Board is cognisant of the Brydon Report’s proposal for companies to make a resilience
statement, which will address resilience to risks over the short, medium and long term. The
Department for Business, Energy & Industrial Strategy has taken forward this proposal, amongst
others, with a consultation that will result in changes in regulation. Whilst the regulations resulting
from the consultation are still awaited, it is likely that the Board will be required to include a
resilience statement, encompassing the Company’s ability to continue as a going concern, its
medium term viability and what it considers to be its key long-term challenges, and how those are
being addressed, in future. It is likely that the Company will also be required to adopt and publish
an “Audit and Assurance Policy” which will include, amongst other things, an explanation of the
independent assurance it proposes to obtain for the resilience statement and the effectiveness of
the internal controls framework. It is proposed that the policy should cover a three-year period and
be subject to an annual advisory vote by shareholders.
Based on its assessment and evaluation
of the Company’s future prospects, the
Board has a reasonable expectation that
the Company will be able to continue in
operation and meet its liabilities as they
fall due over the coming five years. This
period has been chosen because it is
consistent with the advice provided by
many investment advisers, that investors
should invest in equities for a minimum
of five years. The Company’s business
model, strategy and the embedded
characteristics listed below have helped
define and maintain the stability of the
Company over many decades. The
Board expects this to continue and
will continue to assess viability over
subsequent five year rolling periods.
• The Company has a long-term
investment strategy under which it
invests mainly in readily realisable,
publicly listed securities and which
restricts the level of borrowings.
• The Company’s business model and
strategy are not time limited and, as
a global investment trust company,
are unlikely to be adversely impacted
as a direct result of Brexit and other
political uncertainties.
• The Company is inherently structured
for long-term outperformance, rather
than short-term opportunities, with five
years considered as a sensible time-
frame for measuring and assessing
long-term investment performance.
• The Company is able to take
advantage of its closed-end
investment trust structure, such
as having borrowing arrangements
in place and the ability to secure
additional finance in excess of five
years.
• There is rigid monitoring of the
headroom under the Company’s bank
borrowing financial covenants.
• Regular and robust review of
revenue and expenditure forecasts
is undertaken throughout the year
against a backdrop of large revenue
and capital reserves.
• The Company retains title to all assets
held by the Custodian which are
subject to further safeguards imposed
on the Depositary.
Five Year Horizon
42 | The Global Smaller Companies Trust PLC
Directors
Anja Balfour
Chairman
Appointed to the Board on 1 June 2015 and as Chairman on 30 July
2020. She is also chairman of the Nomination Committee.
Experience and contribution: Anja brings in-depth investment
knowledge, expertise and experience in international investment
management as well as leadership skills, most notably from her other
non-executive director and chairmanship roles. Previously she spent
over 20 years as a fund manager, running Japanese and International
Equity portfolios for Stewart Ivory, Baillie Gifford and latterly, Axa
Framlington.
Other appointments: Anja is a non-executive director of AVI Global
Trust PLC and a non-executive Director of Scottish Friendly Assurance,
where she chairs the Investment Committee and is a member of the
Finance & Corporate Services Committee of Carnegie UK Trust. She
was formerly chair of Schroder Japan Trust plc.
Nick Bannerman
Appointed to the Board on 1 October 2019.
Experience and contribution: Nick brings a combination of investment,
operational and management experience as well as a wider business
perspective from his current and past business roles across multiple
geographies. He is a chartered accountant and was chairman of Baillie
Gifford Japan Trust PLC until December 2019.
Other appointments: Nick is an executive director of James Johnston &
Co of Elgin Ltd and Johnston GmBH.
Josephine (Jo) Dixon
Senior Independent Director and Chairman of the Audit and
Management Engagement Committee.
Appointed to the Board on 11 February 2015 and as Senior
Independent Director on 30 July 2020.
Experience and contribution: Jo is a qualified accountant and has a
strong accounting and financial background. She also brings leadership
skills from her other non-executive director and chairmanship roles.
Jo took over as Senior Independent Director following Jane Tozer’s
retirement on 30 July 2020. She was formerly chairman of JPMorgan
European Growth & Income plc.
Other appointments: Jo is a non-executive director of Strategic Equity
Capital PLC, Alliance Trust PLC, BB Healthcare Trust PLC and Ventus VCT
PLC.
Graham Oldroyd
Appointed to the Board on 1 October 2019.
Experience and contribution: Graham brings to the Board in-depth
investment knowledge, expertise and experience in international
investment management from his present and past positions as a
director of listed and unlisted European businesses across multiple
sectors and geographies.
Other appointments: Graham is non-executive chairman of Ideal
Standard International NV (Belgium) and of MCF Limited and he is
a non-executive director of Tunstall Integrated Healthcare Holdings
Limited.
David Stileman
Appointed to the Board on 1 June 2015.
Experience and contribution: David brings a wider business
perspective to the Board both from his current and past business
and advisory roles as well as his extensive knowledge in international
banking and specialty finance.
Other appointments: David is an Advisory Board Member, Emeritus, of
Corsair Capital LLP and Honorary Trustee of the Royal Academy of Arts.
All the Directors are members of the Audit and Management Engagement Committee and the Nomination Committee. No Director has a
shared directorship elsewhere with other Directors.
The Board of Directors comprise: back row, left to right Anja Balfour, David Stileman and Graham Oldroyd,
front row, left to right Nick Bannerman and Jo Dixon.
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Other Information
Chairman’s StatementOverview Auditor’s Report
of investments, provided it complies at all times with Section 1158.
Dividends received from investee companies domiciled outside the UK
are subject to taxation in those countries in accordance with relevant
double taxation treaties.
Prevention of the facilitation of tax evasion
The Board is committed to compliance with the UK’s Criminal Finance
Act 2017, designed to prevent tax evasion in the jurisdictions in which
the Company operates. The policy is based on a risk assessment
undertaken by the Board and professional advice is sought as and
when deemed necessary.
Greenhouse Gas Emissions
The Company is managed by a third party manager, it has no employees
and all of its Directors are non-executive, with the day to day activities
being carried out by third parties. The Company has no premises,
consumes no electricity, gas or diesel fuel directly and consequently
does not have a measurable carbon footprint. Therefore, it qualifies as
a low energy user and is exempt from reporting under the Streamlined
Energy & Carbon Reporting requirements. Further information on the
Company's approach to Climate change can be found on page 22.
Accounting and going concern
The financial statements, starting on page 66, comply with current
UK Financial Reporting Standards, supplemented by the Statement
of Recommended Practice ‘Financial Statements of Investment Trust
Companies and Venture Capital Trusts’ (‘SORP’). The significant
accounting policies of the Company are set out in note 2 to the
Accounts. The unqualified auditors’ opinion on the Financial Statements
appears on page 61. Shareholders will be asked to approve the
adoption of the Report and Accounts at the AGM (Resolution 1).
The Directors believe that, in light of the controls and monitoring
processes that are in place, the Company has adequate resources to
continue in operational existence for at least twelve months from the
date of approval of the financial statements. In considering this, the
Directors took into account the diversified portfolio of readily realisable
Statement regarding the Annual Report and Accounts
The Directors consider that, following advice from the Audit and
Management Engagement Committee, the Report and Accounts,
taken as a whole, are fair, balanced and understandable and provide
the information necessary for shareholders to assess the Company’s
position and performance, business model and strategy. The Audit and
Management Engagement Committee has reviewed the draft Report
and Accounts for the purposes of this assessment. The market outlook
for the Company can be found on pages 7 and 16. Principal risks can
be found on page 40 with further information on financial risks in note
23 to the Accounts. There are no instances where the Company is
required to make disclosures in respect of Listing Rule 9.8.4R.
Results and dividends
The results for the year are set out in the attached accounts. Subject
to shareholder approval at the AGM (Resolution 4), the recommended
final dividend of 1.67 pence per share is payable on 4 August 2023
to shareholders on the register as at the close of business on 7 July
2023. This, together with the interim dividend of 0.63 pence per share,
makes a total dividend of 2.30 pence per share and represents an
increase of 25.0% over the comparable 1.84 pence per share paid in
respect of the previous year. See note 9 to the Accounts.
Company status
The Company is registered as a public limited company and is an
investment company as defined by Section 833 of the Act. The
Company is registered in England and Wales with company registration
number 28264 and is subject to the Financial Conduct Authority’s
(‘FCA’) Listing Rules, Disclosure Guidance and Transparency Rules
(‘DTRs’) and other applicable legislation and regulations including
company law, financial reporting standards, taxation law and its own
articles of association.
Taxation
As set out on page 38 and in note 7 to the Accounts, the Company is
exempt from UK Corporation Tax on its worldwide dividend income and
from UK Corporation Tax on any capital gains arising from the portfolio
The Directors submit the Report and Accounts of the Company for the year ended 30 April 2023.
Applying the principles of the AIC Code, the Chairman’s Statement on corporate governance, the
Directors’ biographies, the Reports of the Nomination and Audit and Management Engagement
Committees and the Directors' Remuneration Report all form part of this Directors’ Report.
Directors’ Report
Governance Report
44 | The Global Smaller Companies Trust PLC
securities which can be used to meet short-term funding commitments
and the ability of the Company to meet all of its liabilities and ongoing
expenses. For this reason, the Directors continue to adopt the going
concern basis in preparing the financial statements.
Statement as to disclosure of information to the auditors
Each of the Directors confirms that, to the best of their knowledge and
belief, there is no information relevant to the preparation of the Report
and Accounts of which BDO LLP (‘BDO’ or the ‘auditors’) is unaware
and they have taken all the steps a Director might reasonably be
expected to have taken to be aware of relevant audit information and to
establish that BDO is aware of that information.
Reappointment of auditors
BDO have indicated their willingness to continue in office as auditors
to the Company and a resolution proposing their reappointment and
authorising the Audit and Management Engagement Committee
to determine their remuneration for the ensuing year will be put to
shareholders at the AGM (Resolutions 10 and 11). Further information
in relation to their reappointment can be found on page 55.
Capital structure
Following a ten for one share split on 31 October 2019, each ordinary
share of 25p was replaced with ten new ordinary shares of 2.5p each.
As at 30 April 2023 there were 620,533,770 ordinary shares of 2.5p
each (‘ordinary shares’) in issue, of which 95,625,622 were held in
treasury. As at 19 June 2023 (being the latest practicable date before
publication of this report) the number of ordinary shares held in treasury
was 98,062,648.
All ordinary shares rank equally for dividends and distributions and
carry one vote each. There are no restrictions concerning the transfer
of securities in the Company, no special rights with regard to control
attached to securities, no agreements between holders of securities
regarding their transfer known to the Company and no agreement which
the Company is party to that affects its control following a takeover bid.
Details of the capital structure can be found in Note 15 to the Accounts.
The revenue profits of the Company (including accumulated revenue
reserves) are available for distribution by way of dividends to the holders
of the ordinary shares. Upon a winding-up, after meeting the liabilities of
the Company, the surplus assets would be distributed to shareholders
pro rata to their holdings of ordinary shares. Full details are set out in
the Company’s articles of association.
Issue and buyback of shares
At the annual general meeting held on 28 July 2022, shareholders
authorised the Board to issue new ordinary shares or to sell shares
from treasury up to 10% of the number of shares then in issue.
Shareholders also renewed the Board’s authority to purchase up to
14.99% of its own issued ordinary shares (excluding any shares held in
treasury) at a discount to NAV per share.
No shares were issued during the year under review or have been
issued between 30 April 2023 and 19 June 2023, being the latest
practicable date before the publication of this report. In accordance with
the policy of aiming to keep the discount at no more than 5% in normal
market conditions, a total of 24,565,694 shares with a nominal value
of £614,142 were bought back by the Company during the year, to be
held in treasury, at prices between 125.46 pence and 172.20 pence and
at an average price of 148.83 pence for a total consideration, including
stamp duty and commissions, of £35,804,000. The shares bought back
represented 4.47% of the shares in issue (calculated exclusive of any
shares held in treasury) at 30 April 2022. The share buybacks enhanced
the NAV per share by approximately 0.62 pence. A further 2,437,026
shares have been bought back and placed into treasury since the year
end.
Voting rights and proportional voting
As at 19 June 2023 there were 620,533,770 ordinary shares in issue,
of which 98,062,648 shares were held in treasury. Therefore the total
voting rights in the Company as at that date were 522,471,122.
Ordinary shareholders are entitled to vote on all resolutions which
are proposed at general meetings of the Company. Each ordinary
shareholder is entitled to one vote on a show of hands and, on a poll, to
one vote for every ordinary share held.
Approximately 55% of the Company’s share capital is held on behalf
of non-discretionary clients through the Manager’s Savings Plans. For
those planholders who do not return their voting directions, the nominee
company will vote their shares in proportion to the directions of those
who do (‘proportional voting’). Implementation of this arrangement is
subject to a minimum threshold of 5% of the shares held in the savings
plans being voted. A maximum limit of 718,000 shares that any one
individual investor can vote, being approximately 5% of the minimum
threshold, also applies. Any shares voted by an investor in excess of
the maximum limit remain valid, but do not form part of the proportional
voting basis. Planholders have the right to exclude their shares from the
proportional voting arrangement.
Substantial interests in the Company’s share capital
As at 30 April 2023 and since that date no notifications of significant
voting rights have been received under the FCA’s Disclosure Guidance
and Transparency Rules.
Borrowings
The Company has a one-year £35 million multi-currency revolving credit
facility with The Royal Bank of Scotland International Limited. At the year-
end, €6.8m, ¥557.5m and $9.8m (in total, the equivalent of £17.0m)
Report and Accounts 2023 | 45
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Chairman’s StatementOverview Auditor’s Report
Governance Report
were drawn down. The Company also has in issue £35 million fixed rate
20-year unsecured private placement notes at a coupon of 2.26% which
mature in August 2039. An overdraft arrangement is available from the
Custodian for settlement of investment trades if necessary. Further
information is provided in notes 12 and 14 to the Accounts.
Remuneration Report
The Directors’ Remuneration Report, which can be found on pages 57
to 59 provides detailed information on the remuneration arrangements
for Directors of the Company. Shareholders are asked to approve the
Remuneration Policy and the Directors' Remuneration Report annually.
There have been no changes to the Remuneration Policy since it was
last approved by shareholders in 2022. Remuneration is set at a
level commensurate with the skills and experience necessary for the
effective stewardship of the Company and the expected contribution of
the Board as a whole in continuing to achieve the investment objective
(Resolutions 2 and 3).
Appointments to the Board
Under the articles of association of the Company, the number of
Directors on the Board may be no more than twelve. Directors may
be appointed by the Company by ordinary resolution or by the Board.
All new appointments require prior Board approval and are subject
to election by shareholders at the next annual general meeting.
Institutional shareholders are given the opportunity to meet any newly
appointed Director if they wish. An induction process is in place for new
appointees and all Directors are encouraged to attend relevant training
courses and seminars.
Removal of Directors
The Company may by special resolution remove any Director before the
expiration of their term of office and may by ordinary resolution appoint
another person who is willing to act to be a Director in their place. The
provisions under which a Director would automatically cease to be a
Director are set out in the Company’s articles of association.
Contribution and independence of Directors
The Board is composed solely of independent non-executive Directors.
The Nomination Committee has considered each Director and the
Board has concurred with its assessment that each Director continues
to make a valuable and effective contribution and remains committed
in their respective roles. Furthermore, no Director has a past or
current connection with the Manager and each remains independent
in character and judgement, with no relationships or circumstances
relating to the Company that are likely to affect that judgement. The
Board has therefore concurred with the Nomination Committee’s
assessment that all Directors are independent of the Manager and of
the Company itself.
The following table sets out the Directors’ meeting attendance in the
year under review. The Board held a separate meeting in March 2023
to consider strategic issues and also met regularly in private sessions,
without any representation from the Manager.
Directors’ attendance
Board
Audit and
Management
Engagement
Committee
Nomination
Committee
No. of meetings
6 3 1
Anja Balfour
6 3 1
Nick Bannerman 6 3 1
Jo Dixon 6 3 1
Graham Oldroyd 6
3
1
David Stileman 5 3 1
Re-Election of Directors
The names of the Directors of the Company, along with their
biographical details, are set out on page 42 and are incorporated into
this report by reference. The skills and experience each Director brings
to the Board for the long-term sustainable success of the Company
are also set out. All Directors held office throughout the year under
review and all will stand for re-election by shareholders at the AGM in
accordance with the requirements of the AIC Code (Resolutions 5 to 9).
Directors’ interests and indemnification
There were no contracts to which the Company was a party and in
which a Director is, or was, materially interested during the year. There
are no agreements between the Company and its Directors concerning
compensation for loss of office.
The Company has granted a deed of indemnity to the Directors in
respect of liabilities that may attach to them in their capacity as
Directors of the Company. This covers any liabilities that may arise to a
third party for negligence, default or breach of trust or duty. This deed
of indemnity is a qualifying third-party provision (as defined by section
234 of the Act) and has been in force throughout the year under review
and remains in place as at the date of this report. It is available for
inspection at the Company’s registered office during normal business
hours and at the AGM. The Company also maintains directors’ and
officers’ liability insurance.
Safe custody of assets
The Company’s listed investments are held in safe custody by JPMorgan
Chase Bank (the ‘Custodian’). Operational matters with the Custodian
are carried out on the Company’s behalf by the Manager in accordance
with the provisions of the investment management agreement. The
46 | The Global Smaller Companies Trust PLC
Custodian is paid a variable fee dependent on the number of trades
transacted and location of the securities held.
Depositary
JPMorgan Europe Limited (the ‘Depositary’) acts as the Company’s
Depositary in accordance with the Alternative Investment Fund
Manager’s Directive (‘AIFMD’). The Depositary’s responsibilities, which
are set out in an Investor Disclosure Document on the Company’s
website, include: cash monitoring; ensuring the proper segregation
and safe keeping of the Company’s financial instruments that are held
by the Custodian; and monitoring the Company’s compliance with
investment and leverage limits requirements. The Depositary receives
for its services a fee of one basis point per annum, based on the
Company’s net assets, payable monthly in arrears.
Although the Depositary has delegated the safekeeping of all assets
held within the Company’s investment portfolio to the Custodian, in the
event of loss of those assets that constitute financial instruments under
the AIFMD, the Depositary will be obliged to return to the Company
financial instruments of an identical type, or the corresponding amount
of money, unless it can demonstrate that the loss has arisen as a result
of an external event beyond its reasonable control, the consequences
of which would have been unavoidable despite all reasonable efforts to
the contrary.
The Manager’s fee
The Manager has been paid a management fee of 0.55% per annum of
the Company’s net asset value, which is reduced to 0.275% in respect
of the market value of investments held in third party collective funds.
The fee is calculated and paid monthly in arrears. The amount paid in
the year under review was £4,329,000, a decrease of 13.5% from the
£5,004,000 paid in the previous year, reflecting the decrease of the
Company’s average net assets during the year. Following constructive
discussions with the Manager, the Board has agreed to introduce a
tiered element to the management fee. With effect from 1 May 2023,
net assets outside of collectives in excess of £750m will be charged
at a reduced rate of 0.5% per annum, with any investments made
in third party collective investment schemes remaining subject to a
charge of 0.275% per annum of the month end market value of those
investments. Note 4 to the Accounts shows the apportionment of the
management fee between capital and revenue.
Manager evaluation process
The Manager’s performance is considered by the Board at every
meeting with a formal evaluation by the Audit and Management
Engagement Committee each year. For the purposes of its ongoing
monitoring, the Board receives detailed reports and views from the
Lead Manager on investment policy, asset allocation, gearing and risk,
including formal presentations on the North American, UK, European,
Japanese and Rest of World portfolios at least annually. In evaluating
the Manager’s performance, the Board considers a range of factors
including the investment performance of the portfolio as a whole,
performance of the various regional sub-portfolios and the skills,
experience and depth of the team involved in managing the Company’s
assets. The Board measures the overall relative success of the
Company against the Benchmark, with each regional sub-portfolio being
measured against relevant local small capitalisation indices. It also
considers the resources and commitment of the Manager in all areas
of its responsibility, including the marketing and administrative services
provided to the Company. Portfolio performance, which is relevant in
monitoring the Manager, is set out on pages 8 to 16.
Manager reappointment
The annual evaluation that took place in April 2023 included
presentations from the Lead Manager and the Manager’s Head of
Investment Trusts. This focused primarily on investment performance
and the services provided to the Company more generally. With regard
to performance, the Company’s NAV total return was ahead of the
Benchmark over the ten years to 30 April 2023.
The Audit and Management Engagement Committee met in closed
session following the presentation and, in light of the long-term
investment performance of the Manager and the quality of the overall
service provided, it concluded that in its opinion the continuing
appointment of the Manager on the terms agreed is in the interests of
shareholders as a whole. The Board ratified this recommendation.
AGM and online shareholder meeting
The Company’s AGM will be held at The Chartered Accountants Hall, 1
Moorgate Place, London EC2R 6EA, on Friday, 28 July 2023 at 12.00
noon. The meeting will also be streamed live on the internet so that
those shareholders who cannot attend in person will be able to view the
proceedings. The broadcast can be viewed by registering here: https://
www.investormeetcompany.com/theglobal-smaller-companies-trust-plc/
register-investor.
We encourage shareholders to lodge their votes to arrive by the
deadline stated in the notice of meeting, appointing the chairman of the
meeting as your proxy. Voting on all resolutions will be held on a poll,
the results of which will be announced via a regulatory announcement
and will be shown on the Company’s website following the meeting.
Authority to allot shares and sell shares from treasury
(Resolutions 12 and 13)
By law, directors are not permitted to allot new shares (or to grant rights
over shares) unless authorised to do so by shareholders. In addition,
directors require specific authority from shareholders before allotting
new shares (or granting rights over shares) for cash or selling shares
out of treasury without first offering them to existing shareholders in
proportion to their holdings.
Report and Accounts 2023 | 47
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Chairman’s StatementOverview Auditor’s Report
Resolution 12 gives the Directors the necessary authority to allot
securities up to an aggregate nominal amount of £1,306,177
(52,247,112 ordinary shares), being equivalent to approximately 10% of
the Company’s issued share capital (calculated exclusive of the shares
held in treasury) as at 19 June 2023, being the latest practicable date
before the publication of the Notice of AGM. The authority and power
will expire at the conclusion of the annual general meeting to be held in
2024 or, if earlier, 15 months from the passing of the resolution.
Resolution 13 empowers the Directors to allot such securities for cash,
other than to existing shareholders on a pro-rata basis and also to sell
treasury shares without first offering them to existing shareholders
in proportion to their holdings up to an aggregate nominal amount of
£1,306,177 (representing approximately 10% of the issued ordinary
share capital of the Company at 19 June 2023, calculated exclusive of
the shares held in treasury).
These authorities provide the Directors with a degree of flexibility to
increase the assets of the Company by the issue of new shares or
the sale of treasury shares, in accordance with the policies set out on
pages 37 and 38 or should any other favourable opportunities arise to
the advantage of shareholders.
The Directors expect that they will mainly use these authorities to satisfy
demand from participants in the Manager’s Savings Plans when they
believe it is advantageous to the Company’s shareholders to do so.
Under no circumstances would the Directors issue new shares or sell
treasury shares at a price which would result in a dilution of the NAV per
ordinary share.
Authority for the Company to purchase its own shares
(Resolution 14)
At the annual general meeting held in 2022 the Company was
authorised to purchase up to approximately 14.99% of its own shares
for cancellation or to be held in treasury. The number of shares
remaining under that authority as at 30 April 2023 was 57,426,095
shares or 10.94% of the issued share capital exclusive of the number
of shares held in treasury. Resolution 14 will authorise the renewal of
such authority enabling the Company to purchase in the market up to a
maximum of 78,318,421 ordinary shares (equivalent to approximately
14.99% of the issued share capital exclusive of treasury shares) and
sets out the minimum and maximum prices at which they may be
bought, exclusive of expenses, reflecting the requirements of the Act
and the Listing Rules.
The Directors will continue to use this authority in accordance with
the policy set out on pages 37 and 38. Under the Act, the Company
is permitted to hold its own shares in treasury following a buyback,
instead of cancelling them. This gives the Company the ability to reissue
treasury shares quickly and cost-effectively (including pursuant to the
authority under Resolution 13, see above) and provides the Company
with additional flexibility in the management of its capital base. Such
shares may be resold for cash but all rights attaching to them, including
voting rights and any right to receive dividends, are suspended whilst
they are held in the treasury. If the Board exercises the authority
conferred by Resolution 14, the Company will have the option of either
holding in treasury or of cancelling any of its shares purchased pursuant
to this authority and will decide at the time of purchase which option
to pursue. Purchases of ordinary shares under the authority will be
financed out of realised revenue and/or capital reserves and funded
from the Company’s own cash resources or, if appropriate, from short-
term borrowings. The authority to purchase ordinary shares will continue
until the conclusion of the annual general meeting in 2024 or 27
October 2024, whichever is the earlier. The Board intends to seek the
renewal of such authority at subsequent annual general meetings.
Notice period for meetings (Resolution 15)
The Act and the Company’s articles of association provide that
all general meetings (other than annual general meetings) can be
convened on 14 days’ notice. However, one of the requirements of the
Shareholder Rights Directive is that all general meetings must be held
on 21 clear days’ notice, unless shareholders agree to a shorter notice
period. The Board is of the view that it is in the Company’s interests to
have a shorter notice period which complies with the provisions of the
Act and the Company’s articles to allow all general meetings (other than
an annual general meeting) to be called on 14 clear days’ notice. The
passing of resolution 15 would constitute shareholders’ agreement for
the purposes of the Shareholder Rights Directive (which agreement is
required annually) and would therefore preserve the Company’s ability
to call general meetings (other than an annual general meeting) on
14 clear days’ notice. The Board would utilise this authority to provide
flexibility when merited and would not use it as a matter of routine. The
Board intends to seek the renewal of such authority at subsequent
annual general meetings.
Form of proxy for AGM voting
If you are a registered shareholder you will find enclosed a form of proxy
for use at the AGM. You will also have the option of lodging your proxy
vote electronically at eproxyappointment.com. For shares held through
CREST, proxy appointments may be submitted via the CREST proxy
voting system. Please either complete, sign and return the form of proxy
in the envelope provided as soon as possible in accordance with the
instructions or, alternatively, lodge your proxy vote via the Internet or the
CREST proxy voting system.
All shareholders are strongly encouraged to vote in advance of the AGM
and, to do so, all proxy appointments must be returned not later than
48 hours before the time appointed for holding the AGM.
Governance Report
48 | The Global Smaller Companies Trust PLC
Form of direction and proportional voting
If you are an investor in any of the Manager’s Savings Plans you will
have received a form of direction for use at the AGM and you will also
have the option of lodging your voting directions using the Internet. The
Manager operates a proportional voting arrangement, which is explained
on page 44.
All forms of direction should be submitted as soon as possible in
accordance with the instructions thereon and, in any event, not later
than 12.00 noon on 21 July 2023, so that the nominee company can
submit a form of proxy before the deadline for registered shareholders.
Voting recommendation
Your Board considers that the resolutions to be proposed at the AGM
are in the best interests of the shareholders as a whole. It therefore
recommends that shareholders vote in favour of each resolution, as is
the intention of the Directors in respect of their own beneficial holdings.
By order of the Board
Columbia Threadneedle Investment Business Limited
Company Secretary
22 June 2023
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Governance Report
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
Chairman’s Statement
on corporate governance
Composition of the board and committees
The Board comprises five directors and maintains plans for orderly
succession, ensuring that the right balance of skills, experience,
knowledge, independence and diversity are in place for the Board to
operate effectively, as a whole. The Board currently meets the FCA
diversity requirements relating to gender diversity and is committed to
meeting the target of at least one director being from a minority ethnic
background in the course of 2023. Further information on the Board’s
plans regarding diversity and inclusion can be found on page 38.
All Directors are members of the Audit and Management Engagement
Committee and the Nomination Committee and this is noted under the
Directors’ biographies on the following page, while the respective terms
of reference can be found on the Company’s website. Further detail
is given in respect of the composition of the Audit and Management
Engagement Committee on page 52.
Compliance with the AIC Code of Corporate Governance
(the ‘AIC Code’)
We have considered the Principles and Provisions of the AIC Code.
The AIC Code addresses the Principles and Provisions set out in the
UK Corporate Governance Code (the ‘UK Code’), as well as setting out
additional Provisions on issues that are of specific relevance to the
Company. The Board considers that reporting against the Principles and
Provisions of the AIC Code, which has been endorsed by the Financial
Reporting Council, provides more relevant information to shareholders.
The Board considers that the Company has complied with the
recommendations of the AIC Code, noting that provisions relating to the
role of the Chief Executive, executive directors’ remuneration, the need for
an internal audit function and workforce engagement are not relevant to
the Company, being an externally managed investment trust company. In
particular, all of the Company’s day to day management and administrative
functions have been delegated to the Manager. As a result, the Company
has no executive directors, employees or internal operations. Therefore,
with the exception of the need for an internal audit function, which is
addressed on page 49, we have not reported further in respect of these
provisions. Copies of the UK Code and AIC Code can be found on their
respective websites: frc.org.uk and theaic.co.uk.
Anja Balfour
Chairman
22 June 2023
Dear Shareholder,
On page 42 you will find brief details of the Directors responsible for the
governance of your Company, including mine as your Chairman. Details
are also available on the website as shown on page 2. The Company
invests in a wide range of companies and, as a Board, we believe that
good governance creates value and expect the companies in which we
invest to apply high standards. In maintaining the confidence and trust
of our own investors, we set out to adhere to the very highest standards
of corporate governance, business and ethics transparency. We remain
committed to doing so.
Governance overview
The Board has established an Audit and Management Engagement
Committee and a Nomination Committee. The role and responsibilities
of these committees are set out in their respective reports which
follow. As the Board has no executive directors and no employees,
and is comprised entirely of independent non-executive directors, it
does not have a Remuneration Committee. Detailed information on the
remuneration arrangements for the Directors of the Company can be
found in the Remuneration Report on pages 50 to 52 and in note 5 to
the Accounts.
The Company has appointed the Manager to manage the investment
portfolios as well as to carry out the day to day management and
administrative functions. An explanation of the reporting arrangements
from the Manager is set out in the Strategic Report on page 34 and
in the Report of the Audit and Management Engagement Committee
in respect of risk management and internal control on page 53.
Explanations concerning the Board’s appointment of the Manager,
including reference to the strength of their resources, measurement of
performance and alignment with the values of the Board can be found
on page 33.
The Board has direct access to the company secretarial advice and
services of the Manager which, through the Company Secretary, is
responsible for ensuring that Board and committee procedures are
followed and applicable regulations are complied with. The proceedings
at all Board and other meetings are fully recorded through a process
that allows any Director’s concerns to be recorded by the Company
Secretary in the minutes. The Board has the power to appoint or
remove the Company Secretary in accordance with the terms of the
investment management agreement.
50 | The Global Smaller Companies Trust PLC
Company purpose
Information relating to the Company’s purpose, values and culture can
be found on page 33.
Board leadership
The Board is responsible for the effective stewardship of the Company’s
affairs and has in place a schedule of matters that it has reserved for
its decision, which are reviewed periodically. These are categorised and
reviewed under strategy, policy, finance, risk, investment restrictions,
performance, marketing, appointments, the Board and public
documents. It has responsibility for all corporate strategic issues,
principal policies (set out on pages 22, 37 and 38) and corporate
governance matters which are all reviewed regularly.
At each meeting the Board reviews the Company’s investment
performance and considers financial analyses and other reports
of an operational nature. The Board monitors compliance with the
Company’s objectives and is responsible for setting investment and
gearing limits within which the Lead Manager has discretion to act, and
thus supervises the management of the investment portfolio which is
contractually delegated to the Manager. The Board has responsibility for
the approval of any unlisted investments.
Division of Board responsibilities
As an externally managed investment trust company, there are no
executive Directors; all Directors are non-executive. The Chairman
is responsible for the leadership and management of the Board and
promotes a culture of openness, challenge and debate. The Chairman
sets the agenda for all Board meetings under a regular programme of
items in conjunction with the Company Secretary.
The Board has a strong working relationship with the management
company, whose personnel, including the Lead Manager, attend and
report to the Board at every meeting. Discussions at all levels are held
in a constructive and supportive manner with appropriate challenge
and strategic guidance and advice from the Board whenever necessary,
consistent with the culture and values.
Jo Dixon, as Senior Independent Director, acts as an experienced
sounding board for the Chairman and an intermediary for other Directors
and shareholders. She leads the annual evaluation of the Chairman.
In order to enable them to discharge their responsibilities, all Directors
have full and timely access to relevant information. Directors are able
to seek independent professional advice at the Company’s expense in
relation to their duties. No such advice was taken during the year under
review.
Composition and succession
The Report of the Nomination Committee sets out on page 56 its role
and key responsibilities. The composition of the Board and Committee
members is set out in the Directors’ details on page 42. The Company’s
diversity policy is set out on page 38.
Board evaluation and effectiveness
Each year the Board undertakes an evaluation of the effectiveness
of individual Directors, the Board and its Committees. The Board
and Committee evaluation for the year under review was carried out
by an independent third party, Lintstock Limited, which has no other
connection with the Company or the Directors. The process included
confidential unattributable questionnaires between the facilitator and
each Director. The performance of the Chairman was covered as part of
the process and led separately by the Senior Independent Director. The
findings of the external evaluation were discussed with the Chairman
and reviewed by the Board.
There were no significant issues arising from the evaluation process
and it was agreed that the Board and its Committees were functioning
effectively. All Directors make an effective contribution to the Board
commensurate with their experience and skills.
Audit, risk management and internal control
The Board has established an Audit and Management Engagement
Committee, the report of which is set out on pages 52 to 55. The report
includes the rationale for the Company not having established its own
internal audit function; how the independence and effectiveness of
the external auditor is assessed; and how the Board satisfies itself on
the integrity of the Company’s financial statements. The report covers
the process under which the Board satisfied itself that the Report and
Accounts presents a fair, balanced and understandable assessment of
the Company’s position and prospects. There is an explanation of the
procedures under which risk is managed and how the Board oversees
the internal control framework and determines the nature and extent of
Applying the principles of the AIC code
Report and Accounts 2023 | 51
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Other Information
Chairman’s StatementOverview Auditor’s Report
Governance Report
the principal risks the Company is willing to take in order to achieve its
long-term strategic objectives. Further information on the Company’s
risk and control framework can be found on page 53.
Relations with shareholders and stakeholders
The Company’s stakeholders, and the engagement undertaken with
them in the year under review, are set out on pages 34 to 35.
Remuneration
The Board’s remuneration policy is explained on page 57. As non-
executive Directors, fees are set at a level commensurate with the skills
and experience necessary for the effective stewardship of the Company
and the contribution towards the delivery of the investment objective.
The Company has no executive Directors or employees. The fees paid
to the Manager are charged at a competitive rate on the Company’s
net assets and are therefore aligned with the Company’s purpose, its
values, the successful delivery of its long-term strategy and the interests
of its shareholders.
By order of the Board
Columbia Threadneedle Investment Business Limited
Company Secretary
22 June 2023
52 | The Global Smaller Companies Trust PLC
• The performance of the Company’s third party service providers
and administrators, other than the Manager, and the fees
charged in respect of those services;
• The performance of the Manager and their fees; and
• The Committee’s terms of reference for approval by the Board.
Comprehensive papers relating to each of these matters were
prepared for discussion. These were debated by the Committee and
any recommendations were fully considered if there was a judgement
to be applied in arriving at conclusions. Recommendations were then
made to the Board as appropriate.
The Board retains ultimate responsibility for all aspects relating to
external financial statements and other significant published financial
information as is noted in the Statement of Directors’ Responsibilities
on page 60. On broader control policy issues, the Committee has
reviewed, and is satisfied with, Columbia Threadneedle’s Code
of Conduct and the Anti-Bribery and Anti-Corruption Operating
Directive (the ‘Directive’) to which Columbia Threadneedle and its
employees are subject. The Committee has also reviewed Columbia
Threadneedle’s Whistleblowing Policy that has been put in place
under which its directors and staff may, in confidence, raise concerns
about possible improprieties in financial reporting or other matters.
The necessary arrangements are in place for communication by the
Manager to this Committee where matters might impact the Company
with appropriate follow-up action. In the year under review there were
no such concerns raised with the Committee.
Composition of the Committee
The Board recognises the requirement for the Committee as a whole
to have competence relevant to the sector in which the Company
operates and for at least one member to have recent and relevant
financial experience. All Directors of the Company are members of
the Committee, including the Chairman of the Board. In accordance
with the AIC Code and given the size of the Board it is considered
appropriate for the Chairman of the Board to be a member of the
Committee. All Committee members are independent non-executive
Directors. Jo Dixon, Chairman of the Committee, is a Chartered
Role of the Committee
The primary responsibilities of the Committee are to ensure the integrity
of the financial reporting and statements of the Company; to oversee
the preparation and audit of the annual accounts, the preparation of
the half-yearly accounts and the internal control and risk management
processes; and to assess the performance of the Manager and review
the fees charged. The Committee met on three occasions during
the year with Columbia Threadneedle’s Trust Accountant, Head of
Investment Trusts, Risk Managers and the Lead Manager in attendance.
A representative of the Company’s independent auditor, BDO, attended
the year end and half year meetings and met in private session with the
Committee.
Specifically, the Committee considered, monitored and reviewed the
following matters:
• The audited annual results statement and annual report and
accounts and the unaudited half-yearly report and accounts,
including advice to the Board as to whether the annual
report and accounts taken as a whole are fair, balanced and
understandable;
• The accounting policies of the Company;
• The principal and emerging risks faced by the Company and the
effectiveness of the Company’s risk management and internal
control environment, including consideration of the assumptions
underlying the Board’s ‘Five Year Horizon’ statement on viability;
• How the Company has applied the principles of and complied
with the provisions of the AIC Code;
• The effectiveness of the external audit process and the current
independence and objectivity of BDO;
• The appointment, remuneration and terms of engagement of the
independent auditor;
• The policy on the engagement of the external auditor to supply
non-audit services and approval of any such services;
• Whether to change the Company’s current policy by establishing
its own Internal Audit function;
• The ISAE/AAF and SSAE16 reports or their equivalent from the
Manager, the Custodian, Depositary and a due diligence report
from the Company’s Share Registrars;
Report of the Audit and
Management Engagement Committee
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Chairman’s StatementOverview Auditor’s Report
Accountant and she is currently audit committee chairman of other
listed companies. The other members of the Committee have a
combination of financial, investment and business experience through
the senior posts held throughout their careers. The majority have a wide
experience of the investment trust sector. Details of the members can
be found on page 42 and the Committee’s terms of reference can be
found on the website as shown on page 2.
Management of risk
The Manager's Business Risk department provides regular control
report updates to the Committee covering risk and compliance, while
any significant issues of direct relevance to the Company are required to
be reported to the Committee and Board immediately.
A key risk ‘radar’ summary is produced by the Manager in consultation
with the Board to identify the risks to which the Company is exposed,
the controls in place and the actions being taken to mitigate them. The
Board has a robust process for considering the resulting risk matrix at
each of its meetings and dynamically reviews the significance of the
risks and the reasons for any changes.
The Company’s Principal and Emerging Risks are set out on page
40 with additional information given in note 23 to the Accounts. The
Committee noted the robustness of the Board’s review of principal
risks, and the identification of emerging risks, and participated as Board
members themselves. The integration of these risks into the analyses
underpinning the ‘Five Year Horizon’ Statement on viability on page 41
was fully considered and the Committee concluded that the Board’s
statement was soundly based. The period of five years was also agreed
as remaining appropriate for the reasons given in the viability statement.
Risk management and internal control
The Board has overall responsibility for the Company’s system of
risk management and internal control, for reviewing its effectiveness
and ensuring that risk management and internal control processes
are embedded in the day-to-day operations which are managed by
the Manager. The Committee has reviewed and reported to the
Board on those controls, which aim to ensure that the assets of the
Company are safeguarded, proper accounting records are maintained
and the financial information used within the business and for
publication is reliable. Control of the risks identified, covering financial,
operational, compliance and overall risk management, is exercised
by the Committee through regular reports provided by the Manager.
The reports cover investment performance, performance attribution,
compliance with agreed and regulatory investment restrictions,
financial analyses, revenue estimates, performance of the third-party
administrators of the Columbia Threadneedle Savings Plans and other
relevant management issues.
The system of risk management and internal control is designed
to manage rather than eliminate risk of failure to achieve business
objectives and can only provide reasonable, but not absolute,
assurance against material misstatement, or loss or fraud. Further
to the review by the Committee, the Board has assessed the
effectiveness of the Company’s system of risk management and
internal control. The assessment included a review of the Columbia
Threadneedle risk management infrastructure and the report on
policies and procedures in operation and tests for the year to 31
October 2022 (the ‘ISAE/AAF Report’) and subsequent confirmation
from Columbia Threadneedle that there had been no material changes
to the control environment in the period to 19 June 2023. The ISAE/
AAF Report had been prepared by Columbia Threadneedle for all of its
investment trust clients to the International Standard on Assurance
Engagement (ISAE) No. 3402 and to the standards of the Institute of
Chartered Accountants in England and Wales Technical Release AAF
(01/06). The ISAE/AAF Report from independent reporting accountants
PwC sets out Columbia Threadneedle’s control policies and
procedures with respect to the management of clients’ investments
and maintenance of their financial records. The effectiveness of those
controls is monitored by the Manager's Group Audit and Compliance
Committee, which receives regular reports from its Internal Audit
department. Procedures are also in place to capture and evaluate any
failings and weaknesses within the Manager's control environment
and those extending to any outsourced service providers to ensure
that action would be taken to remedy any significant issues. Any errors
or breaches relating to the Company are reported at each Committee
and Board meeting by the Manager, including those relating to the
administration of their savings plans and related complaint levels. No
failings or weaknesses material to the overall control environment and
financial statements were identified in the period under review. The
Committee also reviewed the internal control reports of the Custodian,
the Depositary and the Share Registrar’s due diligence report and were
satisfied that there were no material exceptions.
Through the reviews noted above and by direct enquiry of the Manager
and other relevant parties, the Committee and the Board have satisfied
themselves that there were no material control failures or exceptions
affecting the Company’s operations during the year under review nor to
the date of this Report.
Based on the processes and controls in place within the Manager, the
Committee has concluded, and the Board has concurred, that there
is no current need for the Company to have a separate internal audit
function.
Governance Report
54 | The Global Smaller Companies Trust PLC
External audit process and significant issues considered
by the Committee
In carrying out its responsibilities, the Committee has considered the
planning arrangements, scope, materiality levels and conclusions of
the external audit for the year under review. The table below describes
the significant judgements and issues considered by the Committee in
conjunction with BDO in relation to the financial statements for the year
and how these issues were addressed. The Committee also included
in their review the areas of judgements, estimates and assumptions
referred to in note 2(c)(xi) to the Accounts. Likewise, the Committee
reviewed the disclosure and description of Alternative Performance
Measures provided on page 95 and is satisfied that the disclosure is
fair and relevant. Procedures for investment valuation and existence and
recognition of income were the main areas of audit focus and testing.
The Committee met in June 2023 to discuss the final draft of the
Report and Accounts, with representatives of BDO and the Manager in
attendance. BDO submitted their year-end report and confirmed that
they had no reason not to issue an unqualified audit report in respect
of the Report and Accounts. The Committee established that there were
no material issues or findings arising which needed to be brought to the
attention of the Board.
The Committee recognises the importance of continually improving
non-financial reporting and the increased focus on the Strategic Report
by investors and regulators. The Committee has carefully considered
the disclosures made in the Report and Accounts particularly in relation
to the disclosures under section 172(1) of the Act including how wider
stakeholder interests have been taken into account by the Directors
while performing their duties and related disclosures with regard to
ESG issues. The Committee has also had regard to the non-financial
reporting requirements in the Act, which is an area of reporting that will
evolve further in coming years.
Consequently, the Committee recommended to the Board that the
Report and Accounts were in its view, fair, balanced and understandable
in accordance with accounting standards, regulatory requirements and
best practice.
Significant Judgements and Issues considered by the Committee for the year ended 30 April 2023
Matter Action
Investment Portfolio Valuation
Although the Company’s portfolio of investments
is predominantly invested in highly liquid
securities quoted on recognised stock exchanges,
errors in the valuation could have a material
impact on the Company’s NAV per share.
The Board reviewed the full portfolio valuation twice in the year and the Committee also reviewed the
valuation of the unquoted portfolio.
The Committee reviewed the annual audited internal control report from Columbia Threadneedle. This report
indicated that the relevant systems and controls surrounding daily pricing, cash and holdings reconciliations
and security valuation had operated satisfactorily.
Misappropriation of Assets
Misappropriation of the Company’s investments
or cash balances could have a material impact
on its NAV per share.
The Committee reviewed the annual audited internal control reports of Columbia Threadneedle and the
Custodian. Neither of these reports indicated any failures of controls over the existence and safe custody of
the Company’s investments and cash balances. The Company’s Depositary reported quarterly on the safe
custody of the Company’s investments and the operation of controls over the movement of cash in settlement
of investment transactions. Through these reports the Committee is satisfied that the assets remained
protected throughout the year.
Income Recognition
Incomplete controls over, or inaccurate
recognition of, income could result in the
Company misstating its revenue receipts
and associated tax, with consequences for
overall performance, payment of dividends to
shareholders, and compliance with taxation
rules.
The Committee’s review of Columbia Threadneedle’s annual audited controls report indicated that there
were no control failures in the year. The Committee reviewed and approved at the interim and final accounts
reporting meetings, all dividend receipts deemed to be capital (special) in nature by virtue of their payment
out of investee company restructuring rather than ordinary business operations. In addition, the Committee
reviewed that all special dividends had been correctly treated in accordance with the Company’s accounting
policy.
Report and Accounts 2023 | 55
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Other Information
Chairman’s StatementOverview Auditor’s Report
The Independent Auditors’ report, which sets out the unqualified audit
opinion, the scope of the audit and the areas of focus, in compliance
with applicable auditing standards, can be found on pages 61 to 65.
Auditor assessment, independence and appointment
The Committee reviews the reappointment of the auditor every year
and has been satisfied with the effectiveness of BDO’s performance
on their audit of the Company’s accounts. BDO have confirmed that
they are independent of the Company and have complied with relevant
auditing standards. In evaluating BDO, the Committee has taken into
consideration the skills and experience of the firm and of the audit
team. From direct observation and indirect enquiry of management,
the Committee is satisfied that BDO will continue to provide effective
independent challenge in carrying out their responsibilities. Their fee
was £42,000, excluding VAT (2022: £36,000).
The Company has a duty to consider carefully the audit for value and
effectiveness and, as part of its annual review, considers the need for
putting the audit out to tender for reasons of quality, independence or
value. The Company is required to carry out a tender every ten years
with the next due no later than 2029.
Non-audit services
The Committee regards the continued independence of the external
auditors to be a matter of the highest priority. The Company’s policy
with regard to the provision of non-audit services by the external auditor
ensures that no engagement will be permitted if:
• the provision of the services would contravene any regulation or
ethical standard;
• the auditors are not considered to be expert providers of the non-
audit services;
• the provision of such services by the auditor creates a conflict of
interest for either the Board or the Manager; and
• the services are considered to be likely to inhibit the auditor’s
independence or objectivity as auditors.
In particular, the Committee has a policy that the accumulated costs of
all non-audit services sought from the auditors in any one year should
not exceed 30% of the likely audit fees for that year and not exceed 70%
cumulatively over three years. There were no non-audit services for the
year ended 30 April 2023.
Committee Evaluation
The activities of the Committee were considered as part of the Board
evaluation process as noted on page 50. The evaluation found that the
Committee continued to function well, with an appropriate balance of
skills and experience.
Jo Dixon
Chairman
Audit and Management Engagement Committee
22 June 2023
Governance Report
56 | The Global Smaller Companies Trust PLC
Role of the Committee
The primary role of the Nomination Committee is to review and make
recommendations with regard to Board structure, size and composition,
the balance of knowledge, experience, skill ranges and diversity and
consider succession planning and tenure policy. All of the Committee’s
responsibilities have been carried out in the year under review and
to date. The Committee met once during the year and specifically
considered, monitored and reviewed the following matters:
• the structure and size of the Board and its composition particularly
in terms of succession planning and the experience and skills of
the individual Directors and diversity across the Board as a whole;
• tenure policy;
• the criteria for future Board appointments and the methods of
recruitment, selection and appointment;
• the appointment of new Directors and the reappointment of those
Directors standing for re-election at annual general meetings;
• the attendance and time commitment of the Directors in fulfilling
their duties, including the extent of their other directorships;
• each Director’s independence; and
• the authorisation of each Director’s situational conflicts of
interests in accordance with the provisions of the Act and the
policy and procedures established by the Board in relation to
these provisions.
Composition of the Committee
As the Board has no executive directors or employees and is comprised
entirely of independent non-executive directors, all Directors are
members of the Committee, the terms of reference of which can be
found on the website as shown on page 2.
Diversity and tenure
The Board’s diversity policy, objective and progress in achieving it are set
out on page 38. Director searches are undertaken in accordance with
this objective and policy with the recruitment process open to a diverse
range of candidates.
Report of the Nomination Committee
The Board is of the view that length of service will not necessarily
compromise the independence or contribution of directors of an
investment trust company or, indeed, its chairman. This is because
continuity and experience can add significantly to the strength of
investment trust company boards where the characteristics and
relationships tend to differ from those of other companies. Therefore,
while the Chairman and Directors are normally expected to serve for no
more than a nine-year term, this may be adjusted for reasons of flexibility
and continuity. Currently none of the Directors has served beyond nine
years.
Succession planning
David Stileman will be retiring in October 2023 and the Committee is
currently in the process of recruiting his replacement. It is the current
intention that Jo Dixon will stand down from the Board at the conclusion
of the 2024 AGM, thus continuing the process of refreshment and
achieving a better spread of Directors' tenure whilst ensuring continuity.
Committee evaluation
The activities of the Nomination Committee were considered as part of
the Board evaluation process as reported on page 50.
Anja Balfour
Nomination Committee Chairman
22 June 2023
Governance Report
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Other Information
Chairman’s StatementOverview Auditor’s Report
Governance Report
Directors’ Remuneration Policy
The Board’s policy is to set Directors’ remuneration at a level
commensurate with the skills and experience necessary for the
effective stewardship of the Company and the expected contribution
of the Board as a whole in continuing to achieve the investment
objective. Time committed to the Company’s business and the
specific responsibilities of the Chairman, Senior Independent Director,
Chairman of the Audit and Management Engagement Committee
and the Directors and their retention are taken into account. The
policy aims to be fair and reasonable in relation to comparable
investment trust companies. This includes provision for the Company’s
reimbursement of all reasonable travel and associated expenses
incurred by the Directors in attending Board and committee meetings,
including those treated as a benefit in kind subject to tax and national
insurance. This policy was approved by shareholders at the Company’s
annual general meeting in 2022 when 91.64% of the total votes
received were cast in favour of the resolution, 8.36% were against
and 1.65% were withheld. The Board has not subsequently received
any views from shareholders in respect of the level of Directors’
remuneration. The Board seeks approval of the policy annually and it
will therefore be put to shareholders for approval at the forthcoming
AGM.
The Company’s articles of association limit the aggregate fees payable
to the Board to a total of £300,000 per annum. Within that limit, it is
the responsibility of the Board as a whole to determine and approve
the Directors’ fees, following a recommendation from the Chairman
and, in her case, from the Senior Independent Director. The fees are
fixed and are payable in cash, quarterly in arrears. Directors are not
eligible for bonuses, pension benefits, share options or long-term
incentive schemes or other benefits. The Directors’ fees are reviewed
annually and have been increased with effect from 1 May 2023 to the
levels shown in the table opposite.
The Board is composed solely of non-executive Directors, none of
whom has a service contract with the Company, and therefore no
remuneration committee has been appointed. Each Director has
signed a terms of appointment letter with the Company, in each case
including one month’s notice of termination by either party. There
is no provision for compensation for loss of office. The letters of
appointment are available for inspection by emailing the Company
Secretary at GlobalSmallersCoSec@columbiathreadneedle.com.
The dates on which each Director was appointed to the Board are
set out under their biographies on page 42. Under the terms of their
respective letters of appointment, each Director is subject to election
at the first annual general meeting following their appointment and
thereafter will continue subject to re-election at each subsequent
annual general meeting in accordance with the provisions of the AIC
Code. All Directors were last re-elected at the annual general meeting
held on 28 July 2022 and will stand for re-election at the AGM to be
held on 28 July 2023.
The fees for specific responsibilities are set out in the table below. No
fees are payable for membership of the Nomination Committee.
Annual fees for Board Responsibilities
Year ended 30 April
2024
£’s
2023
£’s
Chairman of the Board 49,000 47,500
Chairman of the Audit and Management
Engagement Committee 39,000 38,000
Director 31,000 30,000
*The Senior Independent Director is paid an additional £1,500 per annum.
The following table sets out the annual percentage change in
Directors’ fees:
Annual Percentage Change in Directors’ Remuneration
Directors’ Name
% change for the
year to 30 April
2023
% change for the
year to 30 April
2022
% change for the
year to 30 April
2021
Anja Balfour
(1)
4.4
3.4 47.4
Nick Bannerman
(2)
7.1
4.0 70.9
Jo Dixon
(3)
11.3
7.6 3.5
Graham Oldroyd
(2)
7.1
4.0 70.9
David Stileman 7.1
4.0 –
Anthony Townsend
(4)
–
– (75.0)
Jane Tozer
(4)
–
– (75.1)
(1) Appointed Chairman 31 July 2020.
(2) Appointed a Director 1 October 2019
(3) Appointed Senior Independent Director 31 July 2020
(4) Retired 30 July 2020
Directors' Remuneration Report
58 | The Global Smaller Companies Trust PLC
Fees for services to the Company
Fees
£’000s (audited)
Taxable Benefits
(1)
£’000s (audited)
Total
£’000s (audited)
Year ended 30 April 2023 2022 2023 2022 2023 2022
Director
Anja Balfour
(2)
47.5 45.4 3.1 3.3 50.6 48.7
Nick Bannerman 30.0 28.0 3.9 3.1 33.9 31.1
Jo Dixon 40.5 34.5 0.7 2.5 41.2 37.0
Graham Oldroyd 30.0 28.0 1.2 1.0 31.2 29.0
David Stileman 30.0 28.0 0.9 0.8 30.9 28.8
Total 178.0 163.9 9.8 10.7 187.8 174.6
(1) Comprises amounts reimbursed for expenses incurred in carrying out business for the Company, which have been grossed up to include PAYE and NI contributions.
(2) Highest paid Director.
The information in the table above for the years ended 30 April 2022 and 2023 has been audited. The amounts paid by the Company to the
Directors were for services as non-executive Directors.
Directors’ interests in the Company
There is no requirement in the Company’s Articles of Association
for the Directors to hold shares in the Company. The beneficial
shareholdings of the Directors who held office at the year end are as
follows:
Directors’ share interests (audited)
Year ended 30 April 2023 2022
Anja Balfour 51,696 51,602
Nick Bannerman 30,000 26,000
Jo Dixon 20,000 20,000
Graham Oldroyd 27,597 27,465
David Stileman 30,000 30,000
Total 159,293 155,067
On 5 May 2023, Nick Bannerman purchased an additional 4,000
shares. As at the latest practical date before the publication of
this report, there have been no other changes to the Directors’
shareholdings. The Directors have no other share interests or share
options in the Company. As at 19 June 2023 the Lead Manager held
277,202 ordinary shares in the Company.
Policy implementation
The Directors’ Remuneration Report is subject to an annual advisory
vote and therefore an ordinary resolution for its approval will be put to
shareholders at the forthcoming AGM. At the 2022 AGM, shareholders
approved the Remuneration Report in respect of the year ended 30 April
2022, with 93.02% of the votes received cast in favour of the resolution,
6.98% against and 3% withheld.
Directors’ emoluments for the year
The Directors who served during the year received the following
amounts for services as non-executive Directors as well as
reimbursement for expenses necessarily incurred:
The table below is shown to enable shareholders to assess the relative
expenditure on Directors’ remuneration, excluding taxable benefits,
compared to the shareholder distributions of dividends and share
buybacks.
Actual expenditure
Year ended 30 April
2023
£’000s
2022
£’000s
%
Change
Aggregate Directors’
Remuneration
178.0 163.9 8.6
Aggregate Dividends paid to
shareholders
10,305.0 10,032.0 2.7
Aggregate cost of ordinary
shares repurchased
35,804.0 42,910.0 (16.6)
Report and Accounts 2023 | 59
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Other Information
Chairman’s StatementOverview Auditor’s Report
Company performance
A graph showing the Company’s share price total return compared with
the return on its Benchmark over the required ten year period is set out
below. From 1 May 2023, the weighting in the Benchmark calculation
has been adjusted, making the new Benchmark: 20% Numis UK
Smaller Companies (excluding investment companies) Index and 80%
MSCI All Country World ex UK Small Cap Index. The calculation of the
MSCI index returns is now measured on a net of tax basis.
On behalf of the Board
Anja Balfour
Chairman
22 June 2023
20232013 2014 20222015 2016 2017 2018 2019 2020 2021
90
110
130
150
170
190
210
230
250
270
Shareholder total return vs Benchmark total return over ten years
The Global Smaller Companies Trust share price total return
Benchmark total return (MSCI All Country World ex UK Small Cap Index (70%)
and the Numis UK Smaller Companies (excluding investment companies)
Index (30%)).
Source: State Street
Governance Report
60 | The Global Smaller Companies Trust PLC
The Directors are responsible for preparing the Report and Accounts
in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors have prepared
the financial statements in accordance with United Kingdom
Accounting Standards, comprising FRS 102 ‘The Financial Reporting
Standard applicable in the UK and Republic of Ireland’.
Under company 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 accounting 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 respectively; 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 confirm that they have complied with the above
requirements in preparing the financial statements. Further details
can be found in note 2 to the Accounts.
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 the
financial statements comply with the Act. 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,
Directors’ Remuneration Report and Statement of Corporate
Governance that comply with that law and those regulations.
The Report and Accounts is published on the Company's website,
as shown on page 2, which is maintained by the Manager. The
Directors are responsible for the maintenance and integrity of the
Company’s website. The work undertaken by the auditor does
not involve consideration of the maintenance and integrity of the
website and, accordingly, the auditor accepts no responsibility for
any changes that have occurred to the financial statements since
they were initially presented on the website. Visitors to the website
need to be aware that legislation in the United Kingdom governing
the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Each of the Directors, whose names and functions are listed in the
Directors’ Report, confirm to the best of their knowledge that:
• the financial statements, prepared in accordance with applicable
accounting standards, give a true and fair view of the assets,
liabilities, financial position and loss of the Company;
• the Strategic Report includes a fair review 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 it faces; and
• in the opinion of the Directors the annual report and financial
statements, taken as a whole, are fair, balanced and
understandable and provide the information necessary for
shareholders to assess the Company’s position and performance,
business model and strategy.
On behalf of the Board
Anja Balfour
Chairman
22 June 2023
Statement of Directors’ Responsibilities
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Other Information
Chairman’s StatementOverview Auditor’s Report
Independent auditor’s report to the
members of The Global Smaller
Companies Trust PLC
Opinion on the financial statements
In our opinion the financial statements:
• give a true and fair view of the state of the Company’s affairs as at
30 April 2023 and of its loss for the year then ended;
• have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the
Companies Act 2006.
We have audited the financial statements of The Global Smaller
Companies Trust PLC (the ‘Company’) for the year ended 30 April 2023
which comprise the Income statement, Statement of Changes in Equity,
the Balance sheet, Statement of Cashflows and notes to the financial
statements, including a summary of significant accounting policies. The
financial reporting framework that has been applied in their preparation
is applicable law and United Kingdom Accounting Standards, including
Financial Reporting Standard 102 The Financial Reporting Standard
applicable in the UK and Republic of Ireland (United Kingdom
Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of
our report. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion. Our
audit opinion is consistent with the additional report to the audit and
management engagement committee.
Independence
Following the recommendation of the audit and management
engagement committee, we were appointed by the Board of Directors
on 25 July 2019 to audit the financial statements for the year ending
30 April 2020 and subsequent financial periods. The period of total
uninterrupted engagement including retenders and reappointments
is four years, covering the year ended 30 April 2020 to 30 April
2023. We remain independent of the Company in accordance
with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical Standard
as applied to listed public interest entities, and we have fulfilled our
other ethical responsibilities in accordance with these requirements.
The non-audit services prohibited by that standard were not provided
to the Company.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our evaluation
of the Directors’ assessment of the Company’s ability to continue to
adopt the going concern basis of accounting included:
• Evaluating the appropriateness of the Directors’ method of
assessing going concern in light of market volatility by reviewing
the information used by the Directors in completing their
assessment;
• Assessing the liquidity of the investment portfolio, which
underpins the ability to meet the future obligations and operating
expenses for a period of 12 months from the date of approval of
these financial statements;
• Assessing the appropriateness of the Directors’ assumptions
and judgements made in their base case and stress tested
forecasts including consideration of the available cash resources
relative to forecast expenditure and commitments; and
• Reviewing the loan agreements to identify the covenants and
assessing the likelihood of them being breach based on the
Directors’ forecast and sensitivity analysis.
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Company’s ability to continue as a going concern for a period of
at least twelve months from when the financial statements are
authorised for issue.
In relation to the Company’s reporting on how it has applied the
UK Corporate Governance Code, we have nothing material to add
or draw attention to in relation to the Directors’ statement in the
financial statements about whether the Directors considered it
appropriate to adopt the going concern basis of accounting.
62 | The Global Smaller Companies Trust PLC
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified, including those which had the greatest
effect on: the overall audit strategy, the allocation of resources in
the audit, and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Key audit matter How the scope of our audit addressed the key audit matter
Valuation and ownership of quoted
investments (Note 10 on Page 76)
There is a risk that the prices used for the listed
investments held by the Company are not reflective
of fair value and the risk that errors made in the
recording of investment holdings result in the incorrect
reflection of investments owned by the Company.
Therefore we considered the valuation and ownership
of quoted investments to be the most significant audit
area as the quoted investments also represent the
most significant balance in the financial statements
and underpin the principal activity of the entity.
For these reasons and the materiality of the balance
in relation to the financial statements as a whole, we
considered this to be a key audit matter.
We responded to this matter by testing the valuation and ownership of the whole portfolio of quoted
investments. We performed the following procedures:
• Confirmed the year-end bid price was used by agreeing to externally quoted prices:
• Assessed if there were contra indicators, such as liquidity considerations, to suggest bid price was not the
most appropriate indication of fair value by considering the realisation period for individual holdings;
• Obtained direct confirmation of the number of shares held per equity investment from the custodian
regarding all investments held at the balance sheet date; and
• Recalculated the valuation by multiplying the number of shares held per the statement obtained from the
custodian by the valuation per share.
Key observations:
Based on our procedures performed we did not identify any matters to suggest that the valuation and
ownership of quoted investments was not appropriate.
Revenue Recognition: (Note 3 on Page 73)
Income arises from dividends is a key factor in
demonstrating the performance of the portfolio.
As such there may be an incentive to recognise
income as revenue where it is more appropriately of a
capital nature.
Additionally, judgement is required by management
in determining the allocation of dividend income to
revenue or capital for certain corporate actions or
special dividends.
For this reason, we considered revenue recognition to
be a key audit matter.
We performed the following procedures:
• For investments, we derived an independent expectation of total expected income based on the investment
holding and records of distributions from independent sources and compared to that recognised. We also
cross checked the portfolio against corporate actions and special dividends and challenged if these had
been appropriately accounted for as income or capital by reviewing the underlying reason for issue of the
dividend and whether it could be driven by a capital event.
• We analysed the whole population of dividend receipts to identify any unusual items that could indicate a
capital distribution, for example where a dividend represented a particularly high yield and investigated the
rationale of those distributions. In these instances we performed a combination of inquiry with management
and our own independent research, including inspection of financial statements of investee companies, to
ascertain whether the underlying event was indeed of a capital nature.
Key observations:
Based on our procedures performed we found the judgements made by management in determining the
allocation of income to revenue or capital to be appropriate.
Our responsibilities and the responsibilities of the Directors with
respect to going concern are described in the relevant sections of
this report.
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the Company
and its environment, including the Company’s system of internal
control, and assessing the risks of material misstatement in the
financial statements. We also addressed the risk of management
override of internal controls, including assessing whether there was
evidence of bias by the Directors that may have represented a risk of
material misstatement.
Overview 2023 2022
Key audit matters Valuation and ownership of quoted investments
Revenue Recognition
Materiality Company financial statements as a whole
£8.5m (2022: £9.4m) based on 1% (2022: 1%) of Net assets
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Other Information
Chairman’s StatementOverview Auditor’s Report
Our application of materiality
We apply the concept of materiality both in planning and performing
our audit, and in evaluating the effect of misstatements. We consider
materiality to be the magnitude by which misstatements, including
omissions, could influence the economic decisions of reasonable
users that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any
misstatements exceed materiality, we use a lower materiality level,
performance materiality, to determine the extent of testing needed.
Importantly, misstatements below these levels will not necessarily
be evaluated as immaterial as we also take account of the nature of
identified misstatements, and the particular circumstances of their
occurrence, when evaluating their effect on the financial statements
as a whole.
Based on our professional judgement, we determined materiality for
the financial statements as a whole and performance materiality as
follows:
Company financial statements 2023 (£m) 2022 (£m)
Materiality 8.5 9.4
Basis for determining materiality 1% of Net Assets 1% of Net Assets
Rationale for the benchmark applied As an investment trust, the net asset value is the key
measure of performance for users of the financial
statements.
As an investment trust, the net asset value is the key
measure of performance for users of the financial
statements.
Performance materiality 6.4 7.0
Basis for determining performance
materiality
75% of materiality 75% of materiality
Rationale for the percentage applied
for performance materiality
The level of performance materiality applied was set
after having considered a number of factors including the
expected total value of known and likely misstatements
and the level of transactions in the year.
The level of performance materiality applied was set
after having considered a number of factors including the
expected total value of known and likely misstatements
and the level of transactions in the year.
Specific materiality
We also determined that for items impacting revenue return, a
misstatement of less than materiality for the financial statements as
a whole, specific materiality, could influence the economic decisions
of users. As a result, we determined materiality for these items to
be £690,000 (2022: £578,000) based on 5% (2022: 5%) of revenue
return before tax. We further applied a performance materiality level
of 75% (2022: 75%) of specific materiality to ensure that the risk of
errors exceeding specific materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit and Management Engagement Committee
that we would report to them all individual audit differences in excess
of £170,000 (2022: £188,000) for the financial statements as a
whole and £34,000 (2022: £29,000) for differences in transactions
and balances that impact revenue return. We also agreed to report
differences below these thresholds that, in our view, warranted
reporting on qualitative grounds.
Other information
The directors are responsible for the other information. The other
information comprises the information included in the Report and
Accounts other than the financial statements and our auditor’s report
thereon. Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly stated
in our report, we do not express any form of assurance conclusion
thereon. Our responsibility is to read the other information and,
in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained
in the course of the audit, or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether this
gives rise to a material misstatement in the financial statements
themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
64 | The Global Smaller Companies Trust PLC
Responsibilities of Directors
As explained more fully in the statement of Directors’ responsibilities,
the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view,
and for such internal control as the Directors determine is necessary
to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible
for assessing the Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the Directors either
intend to liquidate the Company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level
of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement
Corporate governance statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate
Governance Statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance
Statement is materially consistent with the financial statements or our knowledge obtained during the audit.
Going concern and longer-term
viability
• The Directors' statement with regards to the appropriateness of adopting the going concern basis of accounting and any material
uncertainties identified set out on page 70; and
• The Directors’ explanation as to their assessment of the Company’s prospects, the period this assessment covers and why the
period is appropriate set out on page 41.
Other Code provisions • Directors' statement on fair, balanced and understandable set out on page 60;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 40;
• The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out
on page 53; and
• The section describing the work of the audit and management engagement committee set out on page 52.
Strategic report and Directors’
report
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic report and the Directors’ report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
• the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not
identified material misstatements in the strategic report or the Directors’ report.
Directors’ remuneration In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the
Companies Act 2006.
Matters on which we are
required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
• adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not
visited by us; or
• the financial statements and the part of the Directors’ remuneration report to be audited are not in agreement with the accounting
records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act
2006 and ISAs (UK) to report on certain opinions and matters as described below.
Report and Accounts 2023 | 65
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Other Information
Chairman’s StatementOverview Auditor’s Report
when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
Extent to which the audit was capable of detecting irregularities,
including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud is
detailed below:
Non-compliance with laws and regulations
We gained an understanding of the legal and regulatory framework
applicable to the Company and the industry in which it operates, and
considered the risk of acts by the Company which were contrary to
applicable laws and regulations, including fraud. We considered the
significant laws and regulations to be the Companies Act 2006, the
FCA listing and Disclosure Guidance and Transparency Rules, the
principles of the AIC Code of Corporate Governance, industry practice
represented by the AIC SORP, the applicable accounting framework,
and the Company’s qualification as an Investment Trust under UK tax
legislation as any non-compliance of this would lead to the Company
losing various deductions and exemptions from corporation tax.
We focused on laws and regulations that could give rise to a material
misstatement in the Company financial statements. Our tests included:
• agreement of the financial statement disclosures to underlying
supporting documentation;
• enquiries of management and those charged with governance
relating to any instances of non-compliance with laws and
regulations;
• review of minutes of board meetings throughout the period for
instances of non-compliance with laws and regulations;
• obtaining an understanding of the control environment in
monitoring compliance with laws and regulations; and
• reviewing the calculation in relation to the Company’s Investment
Trust compliance to check that the Company was meeting its
requirements to retain its Investment Trust Status.
Fraud
We assessed the susceptibility of the financial statement to material
misstatement including fraud and considered the fraud risk areas
to be management override of controls and the classification of the
dividend income.
Our tests included:
• The procedures set out in the Key Audit Matters section above;
• Recalculating investment management fees in total;
• Obtaining independent confirmation of bank balances; and
• Testing journals which met a defined risk criteria by agreeing to
supporting documentation and evaluating whether there was
evidence of bias by the Investment Manager and Directors that
represented a risk of material misstatement due to fraud.
We also communicated relevant identified laws and regulations and
potential fraud risks to all engagement team members who were
all deemed to have appropriate competence and capabilities and
remained alert to any indications of fraud or non-compliance with laws
and regulations throughout the audit.
Our audit procedures were designed to respond to risks of material
misstatement in the financial statements, recognising that the risk
of not detecting a material misstatement due to fraud is higher than
the risk of not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery, misrepresentations
or through collusion. There are inherent limitations in the audit
procedures performed and the further removed non-compliance with
laws and regulations is from the events and transactions reflected in
the financial statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members as a body, for
our audit work, for this report, or for the opinions we have formed.
Peter Smith (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
22 June 2023
BDO LLP is a limited liability partnership registered in England and
Wales (with registered number OC305127).
66 | The Global Smaller Companies Trust PLC
Income Statement
for the year ended 30 April
Revenue
£’000s
Capital
£’000s
2023
Total
£’000s
Revenue
£’000s
Capital
£’000s
2022
Total
£’000s
10
Losses on investments – (50,067) (50,067) – (16,127) (16,127)
21
Foreign exchange (losses)/gains (6) 115 109 16 517 533
3
Income 16,214 1,656 17,870 13,418 581 13,999
4
Management fee (1,082) (3,247) (4,329) (1,251) (3,753) (5,004)
5
Other expenses (1,070) (29) (1,099) (955) (22) (977)
Net return before finance costs and taxation 14,056 (51,572) (37,516) 11,228 (18,804) (7,576)
6
Finance costs (269) (808) (1,077) (233) (699) (932)
Net return on ordinary activities before taxation 13,787 (52,380) (38,593) 10,995 (19,503) (8,508)
7
Taxation on ordinary activities (1,167) – (1,167) (754) – (754)
Net return attributable to equity shareholders 12,620 (52,380) (39,760) 10,241 (19,503) (9,262)
8
Return per share (basic and diluted) – pence 2.34 (9.73) (7.39) 1.82 (3.46) (1.64)
The total column of this statement is the profit and loss account of the Company.
All revenue and capital items in the above statement derive from continuing operations.
A statement of total comprehensive income is not required as all income and expenses of the Company have been reflected in the above statement.
The notes on pages 70 to 85 form an integral part of the financial statements.
Notes
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Other Information
Chairman’s StatementOverview Auditor’s Report
Statement of Changes in Equity
for the year ended 30 April 2023
Notes
Share
capital
£’000s
Share
premium
account
£’000s
Capital
redemption
reserve
£’000s
Capital
reserves
£’000s
Revenue
reserve
£’000s
Total
shareholders’
funds
£’000s
Balance at 30 April 2022 15,513 212,639 16,158 685,538 15,456 945,304
Movements during the year ended 30 April 2023
9
Dividends paid – – – – (10,305) (10,305)
15
Shares repurchased by the Company and held in
treasury
– – – (35,804) – (35,804)
Net return attributable to equity shareholders
– – – (52,380) 12,620 (39,760)
Balance at 30 April 2023 15,513 212,639 16,158 597,354 17,771 859,435
for the year ended 30 April 2022
Notes
Share
capital
£’000s
Share
premium
account
£’000s
Capital
redemption
reserve
£’000s
Capital
reserves
£’000s
Revenue
reserve
£’000s
Total
shareholders’
funds
£’000s
Balance at 30 April 2021 15,513 212,639 16,158 747,951 15,247 1,007,508
Movements during the year ended 30 April 2022
9
Dividends paid – – – – (10,032) (10,032)
Shares repurchased by the Company and held in
treasury
– – – (42,910) – (42,910)
Net return attributable to equity shareholders – – – (19,503) 10,241 (9,262)
Balance at 30 April 2022
15,513 212,639 16,158 685,538 15,456 945,304
The notes on pages 70 to 85 form an integral part of the financial statements.
Financial Report
68 | The Global Smaller Companies Trust PLC
Balance Sheet
at 30 April
Notes
2023
£’000s
2022
£’000s
Fixed assets
10
Investments 902,350 987,083
Current assets
11
Debtors 10,720 3,604
23
Cash and cash equivalents 2,292 13,354
Total current assets 13,012 16,958
Creditors: amounts falling due within one year
12, 21
Bank loans (17,027) (19,782)
13
Creditors (3,900) (3,955)
Total current liabilities (20,927) (23,737)
Net current liabilities (7,915) (6,779)
Total assets less current liabilities 894,435 980,304
Creditors: amounts falling due after more than one year
14, 21
Loan notes (35,000) (35,000)
Net assets 859,435 945,304
Capital and reserves
15
Share capital 15,513 15,513
16
Share premium account 212,639 212,639
17
Capital redemption reserve 16,158 16,158
18
Capital reserves 597,354 685,538
18
Revenue reserve 17,771 15,456
Total shareholders’ funds 859,435 945,304
19
Net asset value per share (debt at par value) – pence 163.73 172.04
The notes on pages 70 to 85 form an integral part of the financial statements.
The financial statements were approved by the Board of Directors on 22 June 2023 and signed on its behalf by
Anja Balfour, Chairman
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Other Information
Chairman’s StatementOverview Auditor’s Report
Financial Report
Statement of Cashflows
for the year ended 30 April
Notes
2023
£’000s
2022
£’000s
20
Cashflows from operating activities before dividends received and interest paid (4,787) (5,849)
Dividends received 15,308 12,545
Interest paid (1,038) (926)
Cash inflows from operating activities 9,483 5,770
Investing activities
Purchases of investments (191,230) (214,337)
Sales of investments 219,670 256,951
Transaction costs – (472)
Other capital charges – (22)
Cash inflows from investing activities 28,440 42,120
Cash inflows before financing activities 37,923 47,890
Financing activities
Ordinary dividends paid (10,305) (10,032)
Cashflows from share buybacks for treasury shares (36,034) (43,168)
21
Repayment of bank loans (10,287) –
21
Drawdown of bank loans 7,870 11,297
Cash outflows from financing activities (48,756) (41,903)
21
Net movement in cash and cash equivalents (10,833) 5,987
Cash and cash equivalents at the beginning of the year 13,354 6,870
21
Effect of movement in foreign exchange (229) 497
Cash and cash equivalents at the end of the year 2,292 13,354
Represented by:
Cash at bank 979 2,179
Short-term deposits less than 3 months 1,313 11,175
Cash and cash equivalents at the end of the year 2,292 13,354
The notes on pages 70 to 85 form an integral part of the financial statements.
70 | The Global Smaller Companies Trust PLC
1. General information
The Global Smaller Companies Trust PLC is an investment company incorporated in the United Kingdom with a premium listing on the London Stock
Exchange. The Company registration number is 28264 and the registered office is Exchange House, Primrose Street, London, EC2A 2NY, England.
The Company has conducted its affairs so as to qualify as an investment trust under the provisions of Section 1158 of the Corporation Tax Act
2010. Approval of the Company under Section 1158 has been received. The Company intends to conduct its affairs so as to enable it to continue
to comply with the requirements. Such approval exempts the Company from UK Corporation Tax on gains realised in the relevant year on its portfolio
of fixed asset investments.
There have been no significant changes to the Company’s accounting policies during the year ended 30 April 2023, as set out in note 2 below.
2. Significant accounting policies
(a) Going concern
The Company’s investment objective, strategy and policy are subject to a process of regular Board monitoring and are designed to ensure
that the Company is invested mainly in readily realisable, listed securities and that the level of borrowings is restricted. The Company retains
title to all assets held by the Custodian and agreements cover its borrowing facilities. Cash is held with banks approved and regularly
reviewed by the Manager.
The Company has net current liabilities shown on the Balance Sheet but this has no effect on its ability to continue on a going concern
basis.
The Directors believe that: the Company’s objective and policy continue to be relevant to investors; the Company operates within a robust
regulatory environment; and the Company has sufficient resources to continue operating within its stated policy for the 12 month period
commencing from the date of this report. Accordingly, the financial statements have been drawn up on the basis that the Company is a going
concern for the reasons set out above as well as on pages 40 and 41.
(b) Basis of accounting
The accounts of the Company have been prepared on a going concern basis under the historical cost convention, modified to include fixed
asset investments at fair value, and in accordance with the Companies Act 2006, Financial Reporting Standard (FRS) 102 applicable in the
United Kingdom and with the Statement of Recommended Practice ‘Financial Statements of Investment Trust Companies and Venture Capital
Trusts’ (‘SORP’) issued in July 2022.
The functional and presentation currency of the Company is pounds sterling because that is the currency of the primary economic
environment in which the Company operates.
In accordance with the SORP, the Income Statement has been analysed between a revenue account (dealing with items of a revenue nature)
and a capital account (relating to items of a capital nature). Revenue returns include, but are not limited to, dividend income and operating
expenses and tax (insofar as the expenses and tax are not allocated to capital, as described in note 2(c) below). Net revenue returns are
allocated via the revenue account to the revenue reserve, out of which interim and final dividend payments are made. Capital returns include,
but are not limited to, realised and unrealised profits and losses on fixed asset investments and currency profits and losses on cash and
borrowings. The Company’s Articles prohibit the distribution of net capital returns by way of dividend. Such returns are allocated via the
capital account to the capital reserves. Dividends paid to equity shareholders are shown in the Statement of Changes in Equity.
Notes to the Accounts
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(c) Principal accounting policies
The policies set out below have been applied consistently throughout the year.
(i) Financial instruments
Financial instruments include fixed asset investments, long-term debt instruments, cash and short-term deposits, debtors and creditors.
Accounting standards recognise a hierarchy of fair value measurements for financial instruments measured at fair value on the Balance Sheet
which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to
unobservable inputs (level 3). The classification of financial instruments depends on the lowest significant applicable input, as follows:
Level 1 – The unadjusted quoted price in an active market for identical assets or liabilities that the Company can access at the measurement
date.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data) for the asset or liability,
either directly or indirectly.
Level 3 – Inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability.
(ii) Fixed asset investments
As an investment trust, the Company measures its fixed asset investments at ‘fair value through profit or loss’ and treats all transactions on the
realisation and revaluation of investments as transactions on the capital account. All purchases and sales are accounted for on a trade date
basis.
Quoted investments are valued at bid value at the close of business on the relevant date on the exchange on which the investment is quoted.
Investments which are not quoted or which are not frequently traded are stated at Directors’ best estimate of fair value. In arriving at their
estimate, the Directors make use of recognised valuation techniques and may take account of recent arm’s length transactions in the same or
similar investment instruments.
(iii) Debt instruments
Interest-bearing loans and overdrafts are recorded initially at the proceeds received, net of issue costs, irrespective of the duration of the
instrument. No debt instruments held during the year required hierarchical classification.
The fair value of the borrowings are set out in notes 12 and 14.
Finance charges, including interest, are accrued using the effective interest rate method and are added to the carrying amount of the instrument
to the extent that they are not settled in the period. See (vi) on next page for allocation of finance charges within the Income Statement.
(iv) Foreign currency
Monetary assets, monetary liabilities and equity investments denominated in a foreign currency are expressed in sterling at rates of exchange
ruling at the balance sheet date. Purchases and sales of investment securities, dividend income, interest income and expenses are translated
at the rates of exchange prevailing at the respective dates of such transactions.
Foreign exchange profits and losses on fixed asset investments are included within the changes in fair value in the capital account. Foreign
exchange profits and losses on other currency balances are separately credited or charged to the capital account except where they relate to
revenue items when they are credited or charged to the revenue account.
(v) Income
Income from equity shares is brought into the revenue account (except where, in the opinion of the Directors, its nature indicates it should be
recognised within the capital account) on the ex-dividend date or, where no ex-dividend date is quoted, when the Company’s right to receive
payment is established. Fixed returns on non-equity shares and debt securities are recognised on a time apportionment basis so as to reflect
the effective yield on the investment.
Dividends are accounted for in accordance with FRS 102 on the basis of income actually receivable, without adjustment for the tax credit
attaching to the dividends. Dividends from overseas companies are shown gross of withholding tax.
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Where the Company has elected to receive its dividends in the form of additional shares rather than in cash (scrip dividends), the amount of the
cash dividend foregone is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend foregone
is recognised in the capital account.
Underwriting commission is recognised when the Company’s right to receive payment is established. Deposit interest is accounted for on an
accruals basis.
(vi) Expenses, including finance charges
Expenses are charged to the revenue account of the Income Statement, except as noted below:
– expenses which are incidental to the acquisition or disposal of fixed asset investments are recognised immediately in the capital
return of the income statement and are thus charged to capital reserve – arising on investments sold via the capital account;
– 75% of management fees and 75% of finance costs are allocated to capital reserve – arising on investments sold via the capital
account, in accordance with the Board’s long-term expected split of returns from the investment portfolio of the Company.
– all expenses are accounted for on an accruals basis.
(vii) Taxation
Taxation currently payable is calculated using tax rules and rates in force at the year end, based on taxable profit for the year, which differs from
the net return before tax. Note 7(b) sets out those items which are not subject to UK Corporation Tax.
Deferred tax is provided on an undiscounted basis on all timing differences that have originated but not reversed by the balance sheet date,
based on the tax rates that have been enacted at the balance sheet date and that are expected to apply in the period when the liability is
settled or the asset is realised. 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 timing differences can be deducted. In line with the recommendations of the SORP, the allocation method used
to calculate the tax relief on expenses charged to capital is the ‘marginal’ basis. Under this basis, if taxable income is capable of being offset
entirely by expenses charged through the revenue account, then no tax relief is transferred to the capital account.
(viii) Share premium
The surplus of net proceeds received from the issue of new ordinary shares over the nominal value of such shares, less any directly attributable
costs in relation to that share issue, is credited to this account which is non-distributable. The nominal value of the shares issued is recognised
in share capital.
(ix) Capital redemption reserve
The nominal value of ordinary share capital purchased and cancelled is transferred out of called-up share capital and into the capital redemption
reserve, which is a non-distributable reserve, on the trade date.
(x) Capital reserves
These are distributable reserves which may be utilised for the repurchase of share capital.
Capital reserve – arising on investments sold
The following are accounted for in this reserve:
– 75% of management fees and finance costs as set out in note 2(c)(vi);
– gains and losses on the realisation of fixed asset investments and derivative financial instruments;
– foreign exchange differences of a capital nature;
– costs of professional advice, including related irrecoverable VAT, relating to the capital structure of the Company;
– other capital charges and credits charged or credited to this account in accordance with the above policies; and
– costs of purchasing ordinary share capital.
Capital reserve – arising on investments held
The following are accounted for in this reserve:
– increases and decreases in the valuation of fixed asset investments held at the year end.
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(xi) Use of judgements, estimates and assumptions
The presentation of the financial statements in accordance with accounting standards requires the Board to make judgements, estimates and
assumptions that affect the accounting policies and reported amounts of assets, liabilities, income and expenses. Estimates and judgements
are continually evaluated and are based on perceived risks, historical experience, expectations of plausible future events and other factors.
Actual results may differ from these estimates.
The areas requiring the most significant judgement in the preparation of the financial statements are recognising and classifying unusual or
special dividends received as either revenue or capital in nature.
There are no significant estimates used in preparation of these financial statements.
Dividends received which appear to be unusual in size or circumstance are assessed on a case-by-case basis, based on interpretation of the
investee companies’ relevant statements, in order to make a judgement to determine their allocation in accordance with the SORP to either the
Revenue Account or Capital Reserves. Dividends which have clearly arisen out of the investee company’s reconstruction or reorganisation are
usually considered to be capital in nature and allocated to Capital Reserves. Investee company dividends which appear to be paid in excess
of current year profits will still be considered as revenue in nature unless evidence suggests otherwise. The value of dividends received in the
year treated as capital in nature, as disclosed in notes 3 and 18 to the Accounts, was not material in relation to capital reserves or the revenue
account. The value of special dividends receivable in any period cannot be foreseen as such dividends are declared and paid by investee
companies and funds without prior reference to the Company.
3. Income
2023
£’000s
2022
£’000s
Income from investments
Dividends from quoted investments 15,072 12,474
Special dividends
(1)
601 579
15,673 13,053
Other Income
Management fee rebates from collectives 271 348
Interest on cash and short-term deposits 270 14
Underwriting income – 3
541 365
Total income recognised as revenue 16,214 13,418
Special dividends recognised as capital
(2)
1,656 581
Total income 17,870 13,999
(1) Special dividends classified as revenue in nature in accordance with note 2(c)(xi).
(2) Special dividends classified as capital in nature in accordance with note 2(c)(xi).
4. Management fees
Revenue
£’000s
Capital
£’000s
2023
Total
£’000s
Revenue
£’000s
Capital
£’000s
2022
Total
£’000s
Management fee 1,082 3,247 4,329 1,251 3,753 5,004
The Manager, Columbia Threadneedle Investment Business Limited, provides investment management, marketing and general administrative
services to the Company. Up to 30 April 2023, the management fee was an amount equal to 0.55% per annum, payable monthly in arrears, of
net assets managed by the Manager at the calculation date. Investments made by the Company in third party collective investment schemes
are subject to a management fee, payable monthly in arrears to the Manager, of 0.275% per annum of the month end market value of those
investments. With effect from 1 May 2023, net assets outside of collectives in excess of £750m will be charged at a reduced rate of 0.5% per
annum, with any investments made in third party collective investment schemes remaining subject to a charge of 0.275% per annum of the
month end market value of those investments. The management agreement may be terminated upon six months’ notice given by either party.
The fees have been allocated 75% to capital reserve in accordance with accounting policies.
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74 | The Global Smaller Companies Trust PLC
5. Other expenses
2023
£’000s
2022
£’000s
Other revenue expenses
Auditors’ remuneration:
Audit services
(1)
46 39
Directors’ fees for services to the Company
(2)
178 164
Marketing 271 200
Printing and postage 86 91
Custody fees 45 53
Depositary fees 97 111
Professional fees 17 26
Loan commitment and arrangement fees
(3)
95 101
Sundry expenses 235 170
Total other revenue expenses 1,070 955
Capital expenses 29 22
Total other expenses 1,099 977
All expenses are stated gross of irrecoverable VAT, where applicable.
(1) Auditors’ remuneration payable to BDO for the audit of the Company financial statements, exclusive of VAT, amounts to £42,000 (2022: £36,000).
(2) See the Directors’ Remuneration Report on page 58.
(3) Under loan facility agreements (see note 12) the Company pays commitment fees on any undrawn portions of the facilities.
6. Finance costs
Revenue
£’000s
Capital
£’000s
2023
Total
£’000s
Revenue
£’000s
Capital
£’000s
2022
Total
£’000s
Loan interest 269 808 1,077 233 699 932
Total finance costs 269 808 1,077 233 699 932
Finance costs have been allocated 75% to capital reserve in accordance with accounting policies.
7. Taxation on ordinary activities
(a) Analysis of tax charge for the year
Revenue
£’000s
Capital
£’000s
2023
Total
£’000s
Revenue
£’000s
Capital
£’000s
2022
Total
£’000s
Corporation tax payable at 19.0% (2022: 19.0%) – – – – – –
Overseas taxation 1,167 – 1,167 754 – 754
Total tax charge for the year (note 7(b)) on ordinary activities 1,167 – 1,167 754 – 754
The tax assessed is lower than the standard rate of Corporate Tax in the UK (2022: lower).
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(b) Factors affecting the current tax charge for the year
Revenue
£’000s
Capital
£’000s
2023
Total
£’000s
Revenue
£’000s
Capital
£’000s
2022
Total
£’000s
Net return on ordinary activities before taxation 13,787 (52,380) (38,593) 10,995 (19,503) (8,508)
Return on ordinary activities multiplied by the standard rate of corporation tax of 19.0%
(2022: 19.0%)
2,619 (9,952) (7,333) 2,089 (3,706) (1,617)
Effects of:
Dividends* (2,877) – (3,081) (2,547) – (2,547)
Expenses not deductible for tax purposes 26 – 26 19 – 19
Overseas tax in excess of double taxation relief 1,167 – 1,167 754 – 754
Expenses not utilised in the year 232 776 1,212 439 850 1,289
Capital returns* – 9,176 9,176 – 2,856 2,856
Total tax charge for the year (note 7(a)) 1,167 – 1,167 754 – 754
* The Company is not subject to corporation tax on capital gains or on dividend income. It therefore has unutilised expenses of £71.7m (2022: £66.8m). This results in a
deferred tax asset of £17.9m based on the rate of 25% from 1 April 2023 (2022: £12.7m at a rate of 19%). This asset has not been recognised as the Directors believe it is
unlikely that the Company will have sufficient taxable profits in future to utilise it. Of this amount £18.5m (2022: £17.9m) relates to revenue expenses and £53.2m (2022:
£48.9m) to capital expenses.
8. Return per ordinary share
Earnings for the purpose of basic earnings per share is the profit/loss for the year attributable to ordinary shareholders and based on the
following data.
Revenue Capital
2023
Total Revenue Capital
2022
Total
Net return attributable to equity shareholders – £’000s 12,620 (52,380) (39,760) 10,241 (19,503) (9,262)
Return per share – pence 2.34 (9.73) (7.39) 1.82 (3.46) (1.64)
Both the revenue and capital returns per share are based on a weighted average of 538,327,319 ordinary shares in issue during the year (2022: 563,637,141).
9. Dividends
Dividends on ordinary shares Register date Payment date
2023
£’000s
2022
£’000s
Interim for the year ended 30 April 2023 of 0.63 pence 30 December 2022 26 January 2023 3,369 –
Final for the year ended 30 April 2022 of 1.27 pence 01 July 2022 04 August 2022 6,936 –
Interim for the year ended 30 April 2022 of 0.57 pence 07 January 2022 28 January 2022 – 3,185
Final for the year ended 30 April 2021 of 1.20 pence 16 July 2021 16 August 2021 – 6,847
10,305 10,032
The Directors have proposed a final dividend in respect of the year ended 30 April 2023 of 1.67 pence per share, payable on 4 August
2023 to all shareholders on the register at close of business on 7 July 2023. The recommended final dividend is subject to approval by
shareholders at the Annual General Meeting.
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76 | The Global Smaller Companies Trust PLC
The attributable revenue and the dividends paid and proposed in respect of the financial year ended 30 April 2023 for the purposes of the
income retention test for Section 1159 of the Income and Corporation Tax Act 2010, are set out below:
2023
£’000s
Revenue attributable to equity shareholders 12,620
Interim for the year ended 30 April 2023 of 0.63 pence (3,369)
Proposed final for the year ended 30 April 2023 of 1.67 pence
(1)
(8,725)
Amount transferred to revenue reserve for Section 1159 purposes
(2)
526
(1) Based on 522,471,122 shares in issue at 19 June 2023.
(2) Represents 2.9% of total income of £17,870,000 (see note 3)(2022: 0.8%).
10. Investments
Level 1*
£’000s
Level 3*
£’000s
2023
Total
£’000s
Level 1*
£’000s
Level 3*
£’000s
2022
Total
£’000s
Cost brought forward 770,920 304 771,224 730,481 1,774 732,255
Gains/(losses) brought forward 216,002 (143) 215,859 310,943 2,057 313,000
Valuation brought forward 986,922 161 987,083 1,041,424 3,831 1,045,255
Movements in the year:
Purchases at cost 191,408 – 191,408 210,402 – 210,402
Sales proceeds (226,576) – (226,576) (251,449) (1,470) (252,919)
Gains on investments sold in year 21,511 – 21,511 81,486 – 81,486
Losses on investments held at year end (71,008) (68) (71,076) (94,941) (2,200) (97,141)
Fair value of investments at 30 April 902,257 93 902,350 986,922 161 987,083
Analysed at 30 April
Cost at 30 April 757,263 304 757,567 770,920 304 771,224
Gains/(losses) at 30 April 144,994 (211) 144,783 216,002 (143) 215,859
Fair value of investments at 30 April 902,257 93 902,350 986,922 161 987,083
* The hierarchy of investments is described in note 2(c)(i) and below. No investments held in 2023 or 2022 were valued in accordance with Level 2.
Level 1 includes investments listed on any recognised stock exchange or quoted on AIM in the UK.
Level 2 includes investments for which the quoted price has been suspended.
Level 3 includes unquoted investments, which are held at Directors’ valuation.
The level 3 investment consists of Australian New Horizons Fund. This is valued based on the NAV as calculated at the balance sheet date. No
adjustments have been deemed necessary to the NAV as it reflects the fair value of the underlying investments, as such no specific unobservable
inputs have been identified.
A full list of investments is set out on pages 28 to 30.
Losses on investments
2023
£’000s
2022
£’000s
Gains on investments sold during the year 21,511 81,486
Losses on investments held at year end (71,076) (97,141)
Transaction costs (502) (472)
Total losses on investments (50,067) (16,127)
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Substantial interests
At 30 April 2023 the Company held more than 3% of the following undertaking held as an investment which, in the opinion of the Directors,
did not represent a participating interest:
Investment and share class
Country of registration,
incorporation and
operation
Number of
unit/shares held Holding
*
Australian New Horizons Fund Australia 2,715,704 39.94%
*The company neither has a controlling interest nor participates in the management of this undertaking. This holding is held as part of the Investment portfolio. The
registered office is: Level 5, 30 Collins Street, Melbourne 3000.
11. Debtors
2023
£’000s
2022
£’000s
Investment debtors 7,994 1,088
Overseas taxation recoverable 596 748
Prepayments and accrued income 2,130 1,768
10,720 3,604
12. Creditors: amounts falling due within one year
Bank loans
Non-instalment debt payable on demand or within one year
2023
£’000s
2022
£’000s
Euro loan EUR 6.8 million repayable May 2023 5,973 –
Yen loan JPY 557.5 million repayable May 2023 3,257 –
Yen loan USD 9.8 million repayable May 2023 7,797 –
Yen loan EUR 18.0 million repayable May 2022 – 15,125
Euro loan JPY 757.5 million repayable May 2022 – 4,657
17,027 19,782
In September 2022 the Company entered into a new £35m revolving credit facility expiring September 2023, replacing the previous facility. As at
30 April 2023 EUR6.8m, JPY557.5m and USD9.8m were drawn down to 10 May 2023. The interest rate on the amounts drawn down are based
on the commercial terms agreed with the bank. Commitment fees are payable on undrawn amounts at commercial rates. The Directors consider
that the carrying value of the loan is equivalent to its fair value. No overdraft was outstanding at the year end.
13. Creditors: amounts falling due within one year
2023
£’000s
2022
£’000s
Investment creditors 2,892 2,713
Interest accrued on bank loans 225 186
Share buybacks outstanding 259 488
Management fee accrued 346 385
Accruals and deferred income 178 183
3,900 3,955
14. Creditors: amounts falling due after more than one year
Loan notes
2023
£’000s
2022
£’000s
Loan notes £35 million repayable August 2039 35,000 35,000
In August 2019 the Company issued fixed rate 2.26% senior unsecured notes of £35 million sterling denominated loan notes expiring in August 2039.
The fair value of the long-term loan at 30 April 2023 was £24,586,000 (2022: £30,672,000) based on the equivalent reference benchmark gilt.
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15. Share capital
Equity share capital
Shares held in
treasury
Number
Shares entitled
to dividend
Number
Total shares in
issue
Number
Issued and
fully paid
nominal
£’000s
Ordinary shares of 2.5p each
Balance at 30 April 2022 71,059,928 549,473,842 620,533,770 15,513
Shares repurchased by the Company and held in treasury 24,565,694 (24,565,694) – –
Balance carried forward 95,625,622 524,908,148 620,533,770 15,513
During the year, 24,565,694 ordinary shares of 2.5p each were repurchased and held in treasury, incurring a cost of £35,804,000. Since the year end, and up to
19 June 2023, a further 2,437,026 ordinary shares have been repurchased and held in treasury.
16. Share premium account
2023
£’000s
2022
£’000s
Balance brought forward and carried forward 212,639 212,639
17. Capital redemption reserve
2023
£’000s
2022
£’000s
Balance brought forward and carried forward 16,158 16,158
18. Other reserves
Capital reserve arising
on investments sold
£’000s
Capital reserve arising
on investments held
£’000s
Capital reserves
– total
£’000s
Revenue
reserve
£’000s
Movements in the year
Gains on investments sold in year (see note 10) 21,511 – 21,511 –
Losses on investments held at year end (see note 10) – (71,076) (71,076) –
Transaction costs (502) – (502) –
Dividends charged to capital 1,656 – 1,656 –
Foreign exchange gains 115 – 115 –
Repurchase of shares (35,804) – (35,804) –
Management fee charged to capital (see note 4) (3,247) – (3,247) –
Other expenses charged to capital (see note 5) (29) – (29) –
Finance costs charged to capital (see note 6) (808) – (808) –
Net revenue after tax for the year – – – 12,620
Net return attributable to ordinary shareholders (17,108) (71,076) (88,184) 12,620
Dividends paid in the year (see note 9) – – – (10,305)
(17,108) (71,076) (88,184) 2,315
Balance brought forward 469,679 215,859 685,538 15,456
Balance carried forward 452,571 144,783 597,354 17,771
Included within the capital reserve movement for the year are £417,000 (2022: £362,000) of transaction costs on purchases of investments, £85,000 (2022: £110,000) of
transaction costs on sales of investments and £1,656,000 (2022: £581,000) of distributions received recognised as capital.
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19. Net asset value per ordinary share
2023 2022
Basic with debt at par value
Net assets attributable at the year end – £’000s 859,435 945,304
Number of ordinary shares in issue at the year end, excluding shares held in treasury 524,908,148 549,473,842
Net asset value per share – pence 163.73 172.04
2023 2022
Basic with debt at fair value
Net assets attributable at the year end – £’000s 859,435 945,304
Add back: Debt at par – £'000s 52,027 54,782
Deduct: Debt at fair value (see notes 12 and 14) – £'000s (41,613) (50,454)
Net assets with debt at fair value – £'000s 869,849 949,632
Number of ordinary shares in issue at the year end, excluding shares held in treasury 524,908,148 549,473,842
Net asset value per share – pence 165.71 172.83
20. Reconciliation of total return before finance costs and taxation to net cashflows from operating activities
2023
£’000s
2022
£’000s
Net return on ordinary activities before taxation (38,593) (8,508)
Adjustments for returns from non-operating activities
Losses on investments 50,067 16,127
Foreign exchange gains (109) (533)
Non-operating expenses of a capital nature 29 22
Return from operating activities 11,394 7,108
Adjustments for non-cashflow items, dividend income and interest expense
Decrease/(increase) in prepayments and accrued income 11 (27)
(Decrease)/increase in creditors (41) 26
Dividends receivable (15,673) (13,053)
Interest payable 1,077 932
Overseas taxation (1,024) (835)
Transaction costs (502) –
Other capital charges (29) –
Cash used in operating activities before dividends received and interest paid (4,787) (5,849)
21. Analysis of changes in net debt
Cash
£’000s
Bank loans
£’000s
Loan notes
£’000s
Total
£’000s
Opening net debt at 30 April 2022 13,354 (19,782) (35,000) (41,428)
Cashflows:
Repayment of bank loans – 10,287 – 10,287
Drawdown of bank loans – (7,870) – (7,870)
Net movement in cash and cash equivalents (10,833) – – (10,833)
Non-cash:
Effect of foreign exchange movements (229) 338 – 109
Closing net debt at 30 April 2023 2,292 (17,027) (35,000) (49,735)
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22. Transactions with related parties and the Manager
The following are considered related parties: the Board of Directors (the ‘Board’), the Manager (including fellow members of the management
company).
There are no transactions with the Board, who are the key management personnel of the Company, other than: aggregated remuneration
for services as Directors as disclosed in the Remuneration Report on page 58, and as set out in note 5; and the beneficial interests of the
Directors in the ordinary shares of the Company as disclosed on page 58. There are no outstanding balances with the Board at the year end.
There were no transactions with the Ameriprise Group other than those detailed in note 4 on management fees, note 10, where investments
managed by Columbia Threadneedle Investments are disclosed and note 13, where accrued management fees are disclosed.
23. Financial Risk Management
The Company is an investment company, listed on the London Stock Exchange, and conducts its affairs so as to qualify in the United
Kingdom (UK) as an investment trust under the provisions of Section 1158. In so qualifying, the Company is exempted in the UK from
corporation tax on capital gains on its portfolio of fixed asset investments.
The Company invests in smaller companies worldwide in order to secure a high total return. In pursuing the objective, the Company is
exposed to financial risks which could result in a reduction of either or both of the value of the net assets and the profits available for
distribution by way of dividend. These financial risks are principally related to the market (currency movements, interest rate changes and
security price movements), liquidity and credit. The Board, together with the Manager, is responsible for the Company’s risk management.
The Directors’ policies and processes for managing the financial risks are set out in (a), (b) and (c) below.
The accounting policies which govern the reported Balance Sheet carrying values of the underlying financial assets and liabilities, as well as
the related income and expenditure, are set out in note 2 to the Accounts. The policies are in compliance with UK accounting standards and
include the valuation of financial assets and liabilities at fair value, except as noted in (d) below. The Company does not make use of hedge
accounting rules.
(a) Market risks
The fair value of equity and other financial securities held in the Company’s portfolio fluctuates with changes in market prices. Prices
are themselves affected by movements in currencies and interest rates and by other financial issues, including the market perception of
future risks. The Board sets policies for managing these risks within the Company’s objective and meets regularly to review full, timely and
relevant information on investment performance and financial results. The Manager assesses exposure to market risks when making each
investment decision and monitors ongoing market risk within the portfolio.
The Company’s other assets and liabilities may be denominated in currencies other than sterling and may also be exposed to interest rate
risks. The Manager and the Board regularly monitor these risks. The Company aims to be fully invested, only holding cash to cater for short-
term trading and business requirements. Borrowings are limited to amounts and currencies commensurate with the portfolio’s exposure
to those currencies, thereby limiting the Company’s exposure to future changes in exchange rates. Gearing may be short or long-term, in
sterling and foreign currencies, and enables the Company to take a long-term view of the countries and markets in which it is invested
without having to be concerned about short-term volatility.
The Board regularly monitors the effects on net revenue of interest earned on deposits and paid on gearing.
Currency Exposure
The principal currencies to which the Company was exposed, and the relevant exchange rates against sterling, are analysed below:
2023 2022
At 30 April 2023 Average for the year At 30 April 2022 Average for the year
US dollar 1.2569 1.2083 1.2555 1.3543
Euro 1.1385 1.1553 1.1901 1.1766
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Based on the financial assets and liabilities held and the exchange rates applying at the balance sheet date, a weakening or strengthening
of sterling against each of the principal currencies by 10% would have the following approximate effect on returns attributable to equity
shareholders and on the net asset value (‘NAV’) per share:
Weakening of sterling by 10%
2023 2022
US$
£’000s
€
£’000s
US$
£’000s
€
£’000s
Net revenue return attributable to equity shareholders 541 129 415 101
Net capital return attributable to equity shareholders 46,039 5,887 52,004 5,331
Net total return attributable to equity shareholders 46,580 6,016 52,419 5,432
Net asset value per share (basic) – pence 8.87 1.15 9.54 0.99
Strengthening of sterling by 10%
2023 2022
US$
£’000s
€
£’000s
US$
£’000s
€
£’000s
Net revenue return attributable to equity shareholders (443) (105) (339) (82)
Net capital return attributable to equity shareholders (37,669) (4,816) (42,549) (4,362)
Net total return attributable to equity shareholders (38,112) (4,921) (42,888) (4,444)
Net asset value per share (basic) – pence (7.26) (0.94) (7.81) (0.81)
These analyses are presented in sterling and are representative of the Company’s activities although the level of the Company’s exposure
to currencies fluctuates in accordance with the investment and risk management processes. This level of change is considered to be a
reasonable illustration based on observation of current market conditions.
The values of the Company’s assets and liabilities at 30 April by currency are shown below:
2023
Short-term
debtors
£’000s
Cash at bank
and short-term
deposits
£’000s
Short-term
creditors
£’000s
Loan notes
£’000s
Unsecured
Loans
£’000s
Net monetary
(liabilities)/
assets
£’000s
Investments
£’000s
Net exposure
£’000s
Sterling 2,129 920 (1,397) (35,000) – (33,348) 326,757 293,409
US dollar 6,981 733 – – (7,797) (83) 414,437 414,354
Euro 1,053 639 (2,503) – (5,973) (6,784) 59,764 52,980
Other 557 – – – (3,257) (2,700) 101,392 98,692
Total 10,720 2,292 (3,900) (35,000) (17,027) (42,915) 902,350 859,435
2022
Short-term
debtors
£’000s
Cash at bank
and short-term
deposits
£’000s
Short-term
creditors
£’000s
Loan notes
£’000s
Unsecured
Loans
£’000s
Net monetary
(liabilities)/
assets
£’000s
Investments
£’000s
Net exposure
£’000s
Sterling 1,768 6,295 (2,630) (35,000) – (29,567) 361,628 332,061
US dollar – 5,249 (1,133) – – 4,116 463,919 468,035
Euro 1,836 1,810 (192) – (15,125) (11,671) 59,647 47,976
Other – – – – (4,657) (4,657) 101,889 97,232
Total 3,604 13,354 (3,955) (35,000) (19,782) (41,779) 987,083 945,304
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82 | The Global Smaller Companies Trust PLC
Interest rate exposure
The exposure of the financial assets and liabilities to interest rate movements at 30 April were:
Within
one year
£’000s
More than
one year
£’000s
2023
Net
Total
£’000s
Within
one year
£’000s
More than
one year
£’000s
2022
Net
Total
£’000s
Exposure to floating rates – cash 2,292 – 2,292 13,354 – 13,354
Exposure to fixed rates – loans (17,027) (35,000) (52,027) (19,782) (35,000) (54,782)
Net exposure (14,735) (35,000) (49,735) (6,428) (35,000) (41,428)
Exposures vary throughout the year as a consequence of changes in the make-up of the net assets of the Company arising out of the
investment and risk management processes.
Interest received on cash balances, or paid on bank overdrafts and borrowings, is at ruling market rates. The interest rate applied on the
Loans is set out in notes 12 and 14. There were no holdings in fixed interest investment securities during the year or at the year end.
The Company’s total returns and net assets are sensitive to changes in interest rates on cash and borrowings.
Based on the financial assets and liabilities held, and the interest rates ruling, at each balance sheet date, a decrease or increase in interest
rates of 2% would have the following approximate effects on the income statement revenue and capital returns after tax and on the NAV:
Increase
in rate
£’000s
2023
Decrease
in rate
£’000s
Increase
in rate
£’000s
2022
Decrease
in rate
£’000s
Revenue return 46 (46) 267 (267)
Capital return – – – –
Total return 46 (46) 267 (267)
NAV per share – pence 0.01 (0.01) 0.05 (0.05)
The calculations in the table above which are based on the financial assets and liabilities held at each balance sheet date, are not
representative of the year as a whole, nor are they reflective of future market conditions.
Other market risk exposures
The Company did not enter into derivative transactions in managing its exposure to other market risks (2022: same). The portfolio of
investments, valued at £902,350,000 at 30 April 2023 (2022: £987,083,000 is therefore exposed to market price changes. The Manager
assesses these exposures at the time of making each investment decision. The Board reviews overall exposures at each meeting against
indices and other relevant information. An analysis of the portfolio by geographical region and major industrial sector is set out on pages 6
and 8.
Based on the portfolio of investments held at each balance sheet date, and assuming other factors remain constant, a decrease or increase
in the fair values of the portfolio by 20% would have had the following approximate effects on the net capital return attributable to equity
shareholders and on the NAV:
Increase
in value
£’000s
2023
Decrease
in value
£’000s
Increase
in value
£’000s
2022
Decrease
in value
£’000s
Capital return 180,470 (180,470) 197,417 (197,417)
NAV per share – pence 34.38 (34.38) 35.93 (35.93)
This level of change is considered to be a reasonable illustration based on observation of current market conditions.
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Chairman’s StatementOverview Auditor’s Report
(b) Liquidity risk exposure
The Company is required to raise funds to meet commitments associated with financial instruments and share buybacks. These funds may
be raised either through the realisation of assets or through increased borrowing. The risk of the Company not having sufficient liquidity at
any time is not considered by the Board to be significant, given: the large number of quoted investments held in the Company’s portfolio, 193
at 30 April 2023 (2022: 189); the liquid nature of the portfolio of investments; and the industrial and geographical diversity of the portfolio.
Cash balances are held with reputable banks, usually on overnight deposit. The Company does not normally invest in derivative products.
The Manager reviews liquidity at the time of making each investment decision. The Board reviews liquidity exposure at each meeting.
The Company has a £35 million unsecured revolving floating rate credit facility available until September 2023. In August 2019 the Company
issued senior unsecured notes of £35 million which expire in August 2039.
The remaining contractual maturities of the financial liabilities at each balance sheet date, based on the earliest date on which payment can
be required, were as follows:
2023
Three months
or less
£’000s
More than three
months but less
than one year
£’000s
More than
one year
£’000s
Total
£’000s
Current liabilities:
Creditors 3,675 – – 3,675
Loans 17,027 – – 17,027
Interest payable on Loans 66 – – 66
Loan notes – – 35,000 35,000
Interest payable on Loan notes – 791 12,261 13,052
20,768 791 47,261 68,820
2022
Current liabilities:
Creditors 3,769 – – 3,769
Loans 19,782 – – 19,782
Interest payable on Loans 12 – – 12
Loan notes – – 35,000 35,000
Interest payable on Loan notes – 791 13,052 13,843
23,563 791 48,052 72,406
(c) Credit risk and counterparty exposure
The Company is exposed to potential failure by counterparties to deliver securities for which the Company has paid, or to pay for securities
which the Company has delivered. Such transactions must be settled on the basis of delivery against payment (except where local market
conditions do not permit).
Responsibility for the approval, limit setting and monitoring of counterparties is delegated to the Manager. Counterparties are selected based
on a combination of criteria, including credit rating, balance sheet strength and membership of a relevant regulatory body. The rate of default
in the past has been negligible. Cash and deposits are held with reputable banks.
The Company has an ongoing contract with its Custodian for the provision of custody services. The contract was reviewed and updated in
2017. Details of securities held in custody on behalf of the Company are received and reconciled monthly. The Custodian has a lien over
the securities in the account, enabling it to sell or otherwise realise the securities in satisfaction of charges due under the agreement. The
Depositary has regulatory responsibilities relating to segregation and safekeeping of the Company’s financial assets, amongst other duties,
as set out in the Directors’ Report. The Board has direct access to the Depositary and receives regular reports from it via the Manager.
Financial Report
84 | The Global Smaller Companies Trust PLC
To the extent that the Manager carries out management and administrative duties (or causes similar duties to be carried out by third parties)
on the Company’s behalf, the Company is exposed to counterparty risk. The Board assesses this risk continuously through regular meetings
with the management company (including the Lead Manager) and with its Risk Management function. In reaching its conclusions, the Board
also reviews the Manager's annual Audit and Assurance Faculty Report.
The Company had no credit-rated bonds or similar securities or derivatives in its portfolio at the year end (2022: none) and does not normally
invest in them. None of the Company’s financial liabilities are past their due date or impaired.
(d) Fair values of financial assets and liabilities
The assets and liabilities of the Company are, in the opinion of the Directors, reflected in the Balance Sheet at fair value, or at a reasonable
approximation thereof, except for the loan notes which are carried at amortised cost.
The fair value of the loan notes is set out in note 14.
The fair value of investments quoted on active markets is determined directly by reference to published price quotations in those markets.
Unquoted investments are valued based on professional assumptions and advice that is not wholly supported by prices from current market
transactions or by observable market data. The Directors make use of recognised valuation techniques and may take account of recent
arm’s length transactions in the same or similar investments.
(e) Capital risk management
The structure of the Company’s capital is described in note 15 on page 78 and details of the Company’s reserves are shown in the Statement of
Changes in Equity on page 67.
The objective of the Company is stated as investing in smaller companies worldwide in order to secure a high total return. In pursuing this
long-term objective, the Board has a responsibility for ensuring the Company’s ability to continue as a going concern. It must therefore maintain
an optimal capital structure through varying market conditions. This involves the ability to: issue and buy back share capital within limits set by
the shareholders in general meeting; borrow monies in the short and long term; and pay dividends to shareholders out of current year revenue
earnings as well as out of brought forward revenue reserves and capital reserves.
The Company’s objectives, policies and procedures for managing capital are unchanged from last year.
There were no breaches by the Company during the year of the financial covenants put in place in respect of the revolving credit facility provided to
the Company, or in respect of the loan notes issued by the Company in August 2019.
These requirements are unchanged since last year and the Company has complied with them at all times.
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Other Information
Chairman’s StatementOverview Auditor’s Report
24. AIFMD
In accordance with the AIFMD, information in relation to the Company’s leverage and the remuneration of the Company’s AIFM is required to be
made available to investors. Detailed regulatory disclosures including those on the AIFM’s remuneration policy and costs are available on the
Company’s website or from Columbia Threadneedle Investments on request.
The Company’s maximum and actual leverage levels at 30 April 2023 and 30 April 2022 are shown below:
30 April 2023 30 April 2022
Leverage exposure
Gross
method
Commitment
method
Gross
method
Commitment
method
Maximum permitted limit 200% 200% 200% 200%
Actual 105% 105% 106% 106%
The Leverage limits are set by the AIFM and approved by the Board and are in line with the maximum leverage levels permitted in the
Company’s articles of association. The AIFM is also required to comply with the gearing parameters set by the Board in relation to
borrowings. Further information on the AIFMD can be found on page 91.
25. Securities financing transactions (‘SFT’)
The Company has not, in the year to 30 April 2023 (2022: same), participated in any: repurchase transactions; securities lending or borrowing;
buy-sell back transactions; margin lending transactions; or total return swap transactions (collectively called SFT). As such, it has no disclosure to
make in satisfaction of the UK regulations on transparency of SFT, issued in November 2015.
26. Events after the End of the Reporting Period
There were no events after the end of the reporting period.
Financial Report
86 | The Global Smaller Companies Trust PLC
the passing of this resolution and expiring at the conclusion of the annual
general meeting of the Company in 2024 or on the expiry of 15 months
from the passing of this resolution (whichever is earlier), unless previously
revoked, varied or extended by the Company in a general meeting (the
‘relevant period’); save that the Company may at any time prior to the
expiry of this authority make offers or enter into agreements which would or
might require relevant securities to be allotted after the expiry of the relevant
period and notwithstanding such expiry the Directors may allot relevant
securities in pursuance of such offers or agreements.
Special Resolutions:
To consider and, if thought fit, pass the following resolutions as special
resolutions:
13. Disapplication of pre-emption rights
THAT, subject to the passing of resolution 12 above and in substitution
for any existing authority, but without prejudice to the exercise of any such
authority prior to the date hereof, the Directors be and they are hereby
empowered, pursuant to sections 570 and 573 of the Act, to allot equity
securities (within the meaning of section 560 of the Act) either pursuant
to the authority conferred by resolution 12 for cash or by way of a sale of
treasury shares as if section 561(1) of the Act did not apply to any such
allotment or transfer, provided this power shall be limited to:
a) the allotment of equity securities in connection with an offer of equity
securities:
(i) to ordinary shareholders in proportion (as nearly as may be
practicable) to their existing holdings; and
(ii) to holders of other equity securities as required by the rights of
those securities or as the Directors otherwise consider necessary,
and so that the Directors may impose any limits or restrictions and make
any arrangements which they consider necessary or appropriate to deal
with any treasury shares, fractional entitlements or securities represented
Notice is hereby given that the one hundred and thirty fourth Annual
General Meeting of the Company will be held at The Chartered
Accountants Hall, 1 Moorgate Place, London EC2R 6EA on Friday,
28 July 2023 at 12.00 noon for the following purposes:
Ordinary Resolutions:
To consider and, if thought fit, pass the following resolutions 1 to 12 as
ordinary resolutions:
1. To receive and adopt the Directors’ report and accounts for the year
ended 30 April 2023.
2. To approve the Directors’ Remuneration Policy.
3. To approve the Directors’ Annual Remuneration Report.
4. To declare a final dividend of 1.67 pence per share.
5. To re-elect Nick Bannerman as a Director.
6. To re-elect Graham Oldroyd as a Director.
7. To re-elect Anja Balfour as a Director.
8. To re-elect Josephine Dixon as a Director.
9. To re-elect David Stileman as a Director.
10. To reappoint BDO LLP as auditors to the Company.
11. To authorise the Audit and Management Engagement Committee to
determine the remuneration of the auditors.
12. Authority to allot shares.
THAT, in substitution for any existing authority, but without prejudice to
the exercise of any such authority prior to the date hereof, the Directors
be and they are hereby generally and unconditionally authorised, in
accordance with section 551 of the Companies Act 2006 (the ‘Act’), to
exercise all the powers of the Company to allot shares in the Company
and to grant rights to subscribe for, or convert any security into, shares
in the Company (together being ‘relevant securities’) up to an aggregate
nominal amount of £1,306,177 (representing approximately 10% of
the issued share capital of the Company (excluding treasury shares) at
the date of this notice), during the period commencing on the date of
Notice of Annual General Meeting
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the action you should take,
you are recommended to seek your own independent financial advice from your stockbroker, bank manager, solicitor, accountant or other
independent financial adviser authorised under the Financial Services and Markets Act 2000 if you are in the United Kingdom or, if not, from
another appropriately authorised financial adviser. If you have sold or otherwise transferred all your ordinary shares in the Company please
forward this document, together with the accompanying documents, immediately to the purchaser or transferee or to the stockbroker, bank
or agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. If you have sold or otherwise
transferred only part of your holding of shares, you should retain these documents.
Report and Accounts 2023 | 87
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
Notice of Meeting
by depositary receipts, record dates, legal, regulatory or practical
problems in, or under the laws of, any territory or the requirements of
any regulatory body or stock exchange or any other matter; and
b) the allotment (otherwise than under paragraph (a) of this Resolution
13) of equity securities up to an aggregate nominal amount of
£1,306,177 and shall expire at the conclusion of the next annual
general meeting of the Company after the passing of this resolution
or on the expiry of 15 months from the passing of this resolution
(whichever is the earlier), unless extended by the Company in a general
meeting (‘the relevant period’) save that the Company may at any time
prior to the expiry of this authority make offers or enter into agreements
which would or might require equity securities to be allotted or
transferred after the expiry of the relevant period and notwithstanding
such expiry the Directors may allot or transfer equity securities in
pursuance of such offers or agreements.
14. Share buyback authority
THAT, in substitution for any existing authority, but without prejudice to the
exercise of any such authority prior to the date hereof, the Company be
and is hereby generally and unconditionally authorised, pursuant to and
in accordance with section 701 of the Act, to make market purchases
(within the meaning of section 693(4) of the Act) of fully paid ordinary
shares on such terms and in such manner as the Directors may from
time to time determine, provided that:
a) the maximum number of ordinary shares hereby authorised to be
purchased shall be 78,318,421 or, if less, 14.99% of the number of
ordinary shares in issue (excluding treasury shares) as at the date of
the passing of this resolution;
b) the minimum price (exclusive of expenses) which may be paid for an
ordinary share shall be 2.5p;
c) the maximum price (exclusive of expenses) which may be paid for
an ordinary share is the higher of (i) an amount equal to 105% of the
average of the middle market quotations for an ordinary share (as
derived from the London Stock Exchange Daily Official List) for the five
business days immediately preceding the date on which the ordinary
share is contracted to be purchased, and (ii) an amount equal to the
higher of the price of the last independent trade for an ordinary share
and the highest current independent bid for an ordinary share on the
trading venues where the purchase is carried out;
d) the authority hereby conferred shall expire at the conclusion of the
next annual general meeting of the Company after the passing of
this resolution or on the expiry of 15 months from the passing of
this resolution (whichever is earlier), unless such authority is varied,
revoked or renewed prior to such time by the Company in general
meeting by special resolution; and
e) the Company may at any time prior to the expiry of such authority enter
into a contract or contracts to purchase ordinary shares under such
authority which will or may be completed or executed wholly or partly
after the expiration of such authority and the Company may purchase
ordinary shares pursuant to any such contract or contracts as if the
authority conferred hereby had not expired.
15. General Meeting Notice
THAT the Company be and is hereby generally and unconditionally
authorised to hold general meetings (other than annual general meetings)
on 14 clear days’ notice, such authority to expire at the conclusion of the
next annual general meeting of the Company.
By Order of the Board
Columbia Threadneedle
Investment Business Limited
Company Secretary
29 June 2023
Registered office:
Exchange House
Primrose Street
London EC2A 2NY
Registered number: 28264
Notes:
Shareholders intending to attend the AGM are asked to register
their intention as soon as practicable by email to the following
dedicated address: gscagm@columbiathreadneedle.com.
Shareholders who are not able or do not wish to attend the
meeting in person will be able to watch a live webcast of the
meeting. This will include the formal business of the meeting,
the Manager’s presentation and questions and answers.
The webcast will not enable shareholders to participate in
the meeting or to vote. However, shareholders can submit
questions in advance of the meeting by email to
gscagm@columbiathreadneedle.com. Questions of a similar
nature may be grouped together to ensure the orderly running
of the AGM.
1. A member is entitled to appoint one or more proxies to exercise
all or any of the member’s rights to attend, speak and vote at
the meeting. A proxy need not be a member of the Company but
must attend the meeting for the member’s vote to be counted. If
a member appoints more than one proxy to attend the meeting,
each proxy must be appointed to exercise the rights attached to a
different share or shares held by that member.
2. Any person holding 3% or more of the voting rights in the Company
who appoints a person other than the Chairman as his proxy will
need to ensure that both he and such person complies with their
respective disclosure obligations under the Disclosure Guidance
and Transparency Rules.
3. A Form of Proxy is provided with this notice for members. If a
member wishes to appoint more than one proxy and so requires
additional proxy forms, the member should contact Computershare
Investor Services PLC on 0370 889 4088. To be valid, the Form of
Proxy and any power of attorney or other authority under which it
is signed (or a notarially certified copy of such authority) must be
received by post or (during normal business hours only) by hand
at the Company’s registrars, Computershare Investor Services
88 | The Global Smaller Companies Trust PLC
members registered on the register of members of the Company
at 11 p.m. on 26 July 2023 (the ‘Specified Time’) (or, if the meeting
is adjourned to a time more than 48 hours after the Specified
Time, by 11 p.m. on the day which is two days prior to the time
of the adjourned meeting) shall be entitled to attend and vote at
the meeting in respect of the number of shares registered in their
name at that time. If the meeting is adjourned to a time not more
than 48 hours after the Specified Time, that time will also apply for
the purpose of determining the entitlement of members to attend
and vote (and for the purposes of determining the number of votes
they may cast) at the adjourned meeting. Changes to the register
of members after the relevant deadline shall be disregarded in
determining the rights of any person to attend and vote at the
meeting.
9. CREST members who wish to appoint a proxy or proxies through
the CREST electronic proxy appointment service may do so for the
meeting and any adjournment(s) thereof by using the procedures
described in the CREST Manual. CREST Personal Members or other
CREST sponsored members, and those CREST members who have
appointed a voting service provider(s), should refer to their CREST
sponsor or voting service provider(s), who will be able to take the
appropriate action on their behalf.
10. In order for a proxy appointment or instruction made using the
CREST service to be valid, the appropriate CREST message
(a ‘CREST Proxy Instruction’) must be properly authenticated
in accordance with Euroclear UK & International Limited’s
specifications and must contain the information required for
such instruction, as described in the CREST Manual (available
via euroclear.com/CREST). The message, regardless of whether
it constitutes the appointment of a proxy or is an amendment to
the instruction given to a previously appointed proxy must, in order
to be valid, be transmitted so as to be received by the issuer’s
agent (ID number 3RA50) by the latest time(s) for receipt of proxy
appointments specified in notes 3 and 4 above. For this purpose,
the time of receipt will be taken to be the time (as determined by
the time stamp applied to the message by the CREST Application
Host) from which the issuer’s agent is able to retrieve the message
by enquiry to CREST in the manner prescribed by CREST. After this
time, any change of instructions to proxies appointed through CREST
should be communicated to the appointee through other means.
11. CREST members and, where applicable, their CREST sponsors
or voting service provider(s) should note that Euroclear UK &
International Limited does not make available special procedures
in CREST for any particular messages. Normal system timings and
limitations will therefore apply in relation to the input of CREST Proxy
Instructions. It is the responsibility of the CREST member concerned
to take (or, if the CREST member is a CREST personal member or
sponsored member or has appointed a voting service provider(s), to
procure that his CREST sponsor or voting service provider(s) take(s))
such action as shall be necessary to ensure that a message
is transmitted by means of the CREST system by any particular
time. In this connection, CREST members and, where applicable,
their CREST sponsors or voting service provider(s) are referred,
in particular, to those sections of the CREST Manual concerning
practical limitations of the CREST system and timings
(euroclear.com/CREST).
PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY, not less
than 48 hours before the time of the holding of the meeting or any
adjournment thereof. Completion and return of a Form of Proxy will
not preclude members from attending and voting at the meeting
should they wish to do so. Amended instructions must also be
received by the Company’s registrars by the deadline for receipt of
Forms of Proxy.
4. Alternatively, members may register the appointment of a
proxy for the meeting electronically, by accessing the website
eproxyappointment.com where full instructions for the procedure
are given. The Control Number, Shareholder Reference and PIN as
printed on the Form of Proxy will be required in order to use the
electronic proxy appointment system. This website is operated
by Computershare Investor Services PLC. The proxy appointment
and any power of attorney or other authority under which the proxy
appointment is made must be received by Computershare Investor
Services PLC not less than 48 hours before the time for holding
the meeting or adjourned meeting or (in the case of a poll taken
otherwise than at or on the same day as the meeting or adjourned
meeting) for the taking of the poll at which it is to be used. If you
want to appoint more than one proxy electronically please contact
Computershare Investor Services PLC on 0370 889 4088.
5. Investors holding shares in the Company through the Columbia
Threadneedle ISA, Junior ISA, Child Trust Fund, General Investment
Account and/or Junior Investment Account should ensure that
forms of direction are returned to Computershare Investor Services
PLC not later than 12.00 noon on 21 July 2023. Alternatively, voting
directions can be submitted electronically at eproxyappointment.com
by entering the Control Number, Shareholder Reference Number and
PIN as printed on the form of direction. Voting directions must be
submitted electronically no later than 12.00 noon on 21 July 2023.
6. Any person receiving a copy of this notice as a person nominated
by a member to enjoy information rights under section 146 of
the Act (a ‘Nominated Person’) should note that the provisions in
notes 1, 3 and 4 above concerning the appointment of a proxy or
proxies to attend the meeting in place of a member do not apply to
a Nominated Person as only shareholders have the right to appoint
a proxy. However, a Nominated Person may have a right under
an agreement between the Nominated Person and the member
by whom he or she was nominated to be appointed, or to have
someone else appointed, as a proxy for the meeting. If a Nominated
Person has no such proxy appointment right or does not wish to
exercise it, he/she may have a right under such an agreement to
give instructions to the member as to the exercise of voting rights at
the meeting.
7. Nominated Persons should also remember that their main point of
contact in terms of their investment in the Company remains the
member who nominated the Nominated Person to enjoy information
rights (or, perhaps, the custodian or broker who administers the
investment on their behalf). Nominated Persons should continue to
contact that member, custodian or broker (and not the Company)
regarding any changes or queries relating to the Nominated
Person’s personal details and interest in the Company (including
any administrative matter). The only exception to this is where the
Company expressly requests a response from a Nominated Person.
8. Pursuant to Regulation 41(1) of the Uncertificated Securities
Regulations 2001 (as amended) and for the purposes of section
360B of the Act, the Company has specified that only those
Report and Accounts 2023 | 89
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
12. The Company may treat as invalid a CREST Proxy Instruction in the
circumstances set out in Regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001 (as amended).
13. Any corporation which is a member can appoint one or more
corporate representatives who may exercise on its behalf all of its
powers as a member provided that, if it is appointing more than one
corporate representative, it does not do so in relation to the same
shares. It is therefore no longer necessary to nominate a designated
corporate representative.
14. Under section 527 of the Act, members meeting the threshold
requirements set out in that section have the right to require the
Company to publish on a website a statement setting out any matter
relating to:
a) the audit of the Company’s accounts (including the auditors’
report and the conduct of the audit) that are to be laid before
the meeting; or
b) any circumstances connected with an auditor of the Company
ceasing to hold office since the previous meeting at which
annual accounts and reports were laid in accordance with
section 437 of the Act.
15. The Company may not require the members requesting any such
website publication to pay its expenses in complying with sections
527 or 528 of the Act. Where the Company is required to place
a statement on a website under section 527 of the Act, it must
forward the statement to the Company’s auditor not later than the
time when it makes the statement available on the website. The
business which may be dealt with at the meeting includes any
statement that the Company has been required under section 527
of the Act to publish on a website.
16. Any member attending the meeting has the right to ask questions.
However, members should note that no answer need be given in the
following circumstances:
a) if to do so would interfere unduly with the preparation of
the meeting or would involve a disclosure of confidential
information;
b) if the answer has already been given on a website in the form
of an answer to a question; or
c) if it is undesirable in the interests of the Company or the good
order of the meeting that the question be answered.
17. As at 19 June 2023, being the last practicable date prior to the
printing of this notice, the Company’s issued capital (excluding the
shares held in treasury) consisted of 522,471,122 ordinary shares
of 2.5 pence each carrying one vote each. Therefore, the total voting
rights in the Company as at 19 June 2023 are 522,471,122.
18. This notice, together with information about the total number of
shares in the Company in respect of which members are entitled
to exercise voting rights at the meeting as at 19 July 2023, being
the latest practicable date prior to the printing of this notice and,
if applicable, any members’ statements, members’ resolutions or
members’ matters of business received by the Company after the
date of this notice, will be available at globalsmallercompanies.
co.uk.
19. Any electronic address provided either in this notice or in any
related documents (including the Form of Proxy) may not be used to
communicate with the Company for any purposes other than those
expressly stated.
20. Copies of the letters of appointment between the Company and
its Directors; the register of Directors’ holdings; and a deed poll
relating to Directors’ indemnities will be available for inspection at
the registered office of the Company during usual business hours
on any weekday (Saturdays, Sundays and Bank Holidays excluded)
until the date of the meeting and also on the date and at the place
of the meeting from 15 minutes prior to the commencement of the
meeting to the conclusion thereof.
21. No Director has a service agreement with the Company.
22. Under sections 338 and 338A of the Act, members meeting the
threshold requirements in those sections have the right to require
the Company:
a) to give, to members of the Company entitled to receive notice
of the meeting, notice of a resolution which may properly be
moved and is intended to be moved at the meeting, and/or
b) to include in the business to be dealt with at the meeting
any matter (other than a proposed resolution) which may be
properly included in the business.
A resolution may properly be moved or a matter may properly be
included in the business unless:
a) (in the case of a resolution only) it would, if passed, be
ineffective (whether by reason of inconsistency with any
enactment or the company’s constitution or otherwise),
b) it is defamatory of any person or
c) it is frivolous or vexatious.
Such a request may be in hard copy form or in electronic form and
must identify the resolution of which notice is to be given or the
matter to be included in the business, must be authorised by the
person or persons making it, must be received by the Company not
later than 16 June 2023, being the date six clear weeks before the
meeting, and (in the case of a matter to be included in the business
only) must be accompanied by a statement setting out the grounds
for the request.
Notice of Meeting
90 | The Global Smaller Companies Trust PLC
The Management Company
The Global Smaller Companies Trust PLC
is managed by Columbia Threadneedle
Investment Business Limited ('CTIBL'),
a wholly-owned subsidiary of Columbia
Threadneedle Asset Management (Holdings)
PLC which is ultimately owned by Ameriprise
Financial, Inc. CTIBL is appointed under an
investment management agreement with the
Company, setting out its responsibilities for
investment management, administration and
marketing. It is authorised and regulated by
the Financial Conduct Authority.
The Manager also acts as the Alternative
Investment Fund Manager.
Peter Ewins, Lead Manager. Responsible
for the allocation of the assets on a
regional basis and for the construction
of the investment portfolio. He joined the
management company in 1996.
Jonathan Latter Represents the Manager
as Company Secretary and is responsible
for the Company’s statutory and regulatory
compliance. He joined the management
company in January 2021.
Marrack Tonkin Head of Investment Trusts
with responsibility for the management
company's relationship with the Company. He
joined the management company in 1989.
Company Secretary and Registered
Office
Columbia Threadneedle Investment
Business Limited
Exchange House
Primrose Street
London EC2A 2NY
Telephone: 020 7628 8000
Website: globalsmallercompanies.co.uk
Email: globalsmallerscosec@
columbiathreadneedle.com
Independent Auditors
BDO LLP
(‘BDO’ or the ‘auditors’)
55 Baker Street
London W1U 7EU
Custodian
JPMorgan Chase Bank (the ‘Custodian’)
25 Bank Street
Canary Wharf
London E14 5JP
Depositary
JPMorgan Europe Limited (the ‘Depositary’)
25 Bank Street
Canary Wharf
London E14 5JP
Share Registrars
Computershare Investor Services PLC
(the ‘Registrar’)
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Telephone: 0370 889 4088
Authorised and regulated in the UK by the
Financial Conduct Authority.
Solicitors
Dickson Minto WS
Broadgate Tower
20 Primrose Street
London EC2A 2EW
Stockbroker
Stifel Nicolaus Europe Limited
150 Cheapside
London EC2V 6ET
Management and Advisers
Report and Accounts 2023 | 91
Other Information
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
Key Information Document
The Key Information Document relating to the Company’s shares
can be found on its website as shown on page 2. This document
has been produced in accordance with the EU’s Packaged Retail and
Insurance-based Investment Products Regulations.
Net asset value and share price
The Company’s net asset value is released daily, on the working day
following the calculation date, to the London Stock Exchange. The
current share price of The Global Smaller Companies Trust PLC is
shown in the investment trust section of the stock market page in
most leading newspapers.
UK capital gains tax (‘CGT’)
An approved investment trust company does not pay tax on capital
gains. UK resident individuals may realise net capital gains of up to
£6,000 in the tax year ending 5 April 2024 without incurring any tax
liability.
A rate of CGT of 10% will apply where taxable income and gains do
not exceed the income tax higher rate threshold (£37,700 in 2023-
24 tax year). A higher rate of 20% will apply to those whose income
and gains exceed this figure.
Income tax
The final dividend of 1.67 pence per share is payable on 4
August 2023. Since April 2018 the annual tax-free allowance to
UK residents on dividend income received in their entire share
portfolios is £2,000. From 6 April 2023 this decreased to £1,000,
with a further reduction from 6 April 2024 to £500. Dividend income
received in excess of this amount will be taxed at rates of 7.5%
(basic rate taxpayers), 32.5% (higher rate taxpayers) or 38.1%
(additional rate taxpayers).
Unclaimed dividends
The Company has engaged the services of Georgeson (a subsidiary
of Computershare) to locate shareholders, or their beneficiaries, who
have lost track of or are unaware of their investments. The service
is provided at no cost to the Company; Georgeson retain 10% of
unclaimed dividends from the shareholder on completion of each
successful claim. Alternatively, shareholders are given the option of
contacting the Registrar themselves, thereby incurring no charges.
Alternative Investment Fund Managers Directive
The Company is an ‘alternative investment fund’ (‘AIF’) for the
purposes of the AIFMD and has appointed its Manager, Columbia
Threadneedle Investment Business Limited, to act as its Alternative
Investment Fund Manager (‘AIFM’). The Manager is authorised and
regulated by the United Kingdom Financial Conduct Authority as a
‘full scope UK AIFM’.
The Company is required to make certain disclosures available to
investors in accordance with the AIFMD. Those disclosures that are
required to be made pre-investment are included within the Investor
Disclosure Document (‘IDD’) which can be found on the Company’s
website, globalsmallercompanies.co.uk. There have not been any
material changes to the disclosures contained within the IDD since it
was last updated in September 2022.
The Company and AIFM also wish to make the following disclosures
to investors:
• the investment strategy, geographic and sector investment focus
and principal stock exposures are included in the strategic report. A
list of the thirty largest listed holdings is included on pages 26 and
27;
• none of the Company’s assets is subject to special arrangements
arising from their illiquid nature;
• the strategic report and note 23 to the Accounts set out the risk
profile and risk management systems in place. There have been no
changes to the risk management systems in place in the year under
review and no breaches of any of the risk limits set, with no breach
expected;
• there are no new arrangements for managing the liquidity of the
Company or any material changes to the liquidity management
systems and procedures that it employs;
• all authorised Alternative Investment Fund Managers are required to
comply with the AIFMD Remuneration Code in respect of the AIFM’s
remuneration. The relevant disclosures required are within the IDD;
and
• information in relation to the Company’s leverage is contained within
the IDD.
Following completion of an assessment of the application of the
proportionality principle to the FCA’s AIFM Remuneration Code, the
AIFM has disapplied the pay-out process rules with respect to it
and any of its delegates. This is because the AIFM considers that it
carries out non-complex activities and is operating on a small scale.
Additional Information for Shareholders
92 | The Global Smaller Companies Trust PLC
Charges
Annual management charges and other charges apply according to the type of
plan.
Annual account charge
ISA/LISA: £60+VAT
GIA: £40+VAT
JISA/JIA/CTF: £25+VAT
You can pay the annual charge from your account, or by direct debit (in addition to
any annual subscription limits).
Dealing charges
£12 per fund (reduced to £0 for deals placed through the online Columbia
Threadneedle Investor Portal) for ISA/GIA/LISA/JIA and JISA. There are no dealing
charges on a CTF.
Dealing charges apply when shares are bought or sold but not on the reinvestment
of dividends or the investment of monthly direct debits. Government stamp duty of
0.5% also applies on the purchase of shares (where applicable).
The value of investments can go down as well as up and you may not get back
your original investment. Tax benefits depend on your individual circumstances
and tax allowances and rules may change. Please ensure you have read the full
Terms and Conditions, Privacy Policy and relevant Key Features documents before
investing. For regulatory purposes, please ensure you have read the Pre-sales
Cost & Charges disclosure related to the product you are applying for, and the
relevant Key Information Documents (KIDs) for the investment trusts you want to
invest into.
How to Invest
To open a new Columbia Threadneedle Investments plan, apply online at
ctinvest.co.uk. Online applications are not available if you are transferring an
existing plan with another provider to Columbia Threadneedle Investments, or if
you are applying for a new plan in more than one name but paper applications are
available at ctinvest.co.uk/documents or by contacting Columbia Threadneedle
Investments.
New Customers:
Call: 0800 136 420** (
8:30am – 5:30pm, weekdays)
Email: invest@columbiathreadneedle.com
Existing Plan Holders:
Call: 0345 600 3030** (
9:00am – 5:00pm, weekdays)
Email: investor.enquiries@columbiathreadneedle.com
By post: Columbia Threadneedle Management Limited
PO Box 11114
Chelmsford CM99 2DG
You can also invest in the trust through online dealing platforms for private
investors that offer share dealing and ISAs. Companies include: Barclays
Stockbrokers, EQi, Halifax, Hargreaves Lansdown, HSBC, Interactive Investor, Lloyds Bank,
The Share Centre
One of the most convenient ways to invest in The Global Smaller Companies Trust PLC is through one of the savings plans run by Columbia
Threadneedle Investments.
© 2022 Columbia Threadneedle Investments. Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies. Financial promotions are issued for marketing and information
purposes by Columbia Threadneedle Management Limited, authorised and regulated in the UK by the Financial Conduct Authority. 195600 (06/22) UK
CT Individual Savings Account (ISA)
You can use your ISA allowance to make an annual tax
efficient investment of up to £20,000 for the current tax year
with a lump sum from £100 or regular savings from £25 a
month. You can also transfer any existing ISAs to us whilst
maintaining the tax benefits.
CT Junior Individual Savings Account (JISA)*
A tax efficient way to invest up to £9,000 per tax year for
a child. Contributions start from £100 lump sum or £25 a
month. JISAs or CTFs with other providers can be transferred
to Columbia Threadneedle Investments.
CT Lifetime Individual Savings Account (LISA)
For those aged 18-39, a LISA could help towards purchasing
your first home or retirement in later life. Invest up to £4,000
for the current tax year and receive a 25% Government bonus
up to £1,000 per year. Invest with a lump sum from £100 or
regular savings from £25 a month.
CT General Investment Account (GIA)
This is a flexible way to invest in our range of Investment
Trusts. There are no maximum contributions, and investments
can be made from £100 lump sum or £25 a month.
CT Junior Investment Account (JIA)
This is a flexible way to save for a child in our range of
Investment Trusts. There are no maximum contributions, and
the plan can easily be set up under bare trust (where the
child is noted as the beneficial owner) or kept in your name
if you wish to retain control over the investment. Investments
can be made from a £100 lump sum or £25 a month per
account. You can also make additional lump sum top-ups at
any time from £100 per account.
How to Invest
*The CTF and JISA accounts are opened by parents in the child’s name
and they have access to the money at age 18. **Calls may be recorded or
monitored for training and quality purposes.
CT Child Trust Fund (CTF)*
If your child already has a CTF, you can invest up to £9,000
per birthday year, from £100 lump sum or £25 a month.
CTFs with other providers can be transferred to Columbia
Threadneedle Investments.
To find out more, visit ctinvest.co.uk
0345 600 3030, 9.00am – 5.00pm, weekdays, calls may be recorded or
monitored for training and quality purposes.
Report and Accounts 2023 | 93
Other Information
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
All data is based on figures as reported in accordance with the Company’s accounting policies and is unaudited but derived from the audited
Accounts.
at 30 April
Net assets
£’000s
Net asset value
per share
pence
(i)
Closing
share price
pence
(i)
Premium/
(discount)
%
Revenue return
per share
pence
(i)
Dividend per
share
pence
(i)
Dividend
growth
%
Inflation
(RPI)
%
1998 261,706 25.0 20.6 (17.4) 0.39 0.300 15.4 4.0
1999 265,440 25.5 20.4 (20.3) 0.53 0.336 12.0 1.6
2000 313,128 32.5 25.5 (21.5) 0.42 0.375 11.6 3.0
2001 274,930 29.2 24.3 (16.9) 0.42 0.395 5.3 1.8
2002 246,300 26.6 21.9 (17.5) 0.39 0.402 1.8 1.5
2003 167,945 18.3 14.7 (19.7) 0.36 0.415 3.2 3.1
2004 235,390 27.7 22.4 (19.1) 0.40 0.424 2.2 2.5
2005 264,398 31.1 26.9 (13.7) 0.46 0.440 3.8 3.2
2006 227,652 47.1 43.5 (7.6) 0.45 0.453 3.0 2.6
2007 239,574 51.2 47.3 (7.6) 0.48 0.469* 3.5 4.5
2008 188,100 42.8 38.5 (8.6) 0.55 0.483 3.0 4.2
2009 150,994 36.0 32.5 (7.4) 0.57 0.489 1.2 (1.2)
2010 208,384 51.8 46.1 (9.6) 0.49 0.500 2.2 5.3
2011 241,604 60.3 58.4 (2.1) 0.51 0.510 2.0 5.2
2012 246,776 59.6 58.8 (0.4) 0.69 0.563 10.4 3.5
2013 340,090 75.6 76.5 1.6 0.71 0.650 15.5 2.9
2014 431,086 84.2 84.0 (0.1) 0.93 0.800 23.1 2.5
2015 516,963 97.0 98.0 1.0 1.09 0.965 20.6 0.9
2016 553,192 99.5 100.1 0.7 1.18 1.070 10.9 1.3
2017 733,282 126.4 127.3 0.8 1.38 1.225 14.5 3.5
2018 826,831 136.9 137.5 0.5 1.59 1.440 17.6 3.4
2019 854,619 140.6 134.6 (4.3) 1.76 1.650 14.6 3.0
2020 726,515 119.7 111.0 (7.3) 1.73 1.700 3.0 1.5
2021 1,007,508 174.9 168.6 (3.6) 1.26 1.75 3.0 2.9
2022 945,304 172.8 156.2 (9.6) 1.82 1.840 5.1 11.1
2023 859,435 165.7 144.6 (12.7) 2.34 2.300
(2)
25.0 11.4
* Excludes special dividend of 0.1p also paid
(i)
(i)
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.
(2)
Subject to approval of the final dividend of 1.67p at the 2023 AGM.
25 Year Historical Information
94 | The Global Smaller Companies Trust PLC
Net asset value and share price performance vs Benchmark over 25 years
0
100
200
300
400
500
600
700
800
900
1000
1,100
1,200
Apr 2023Apr 2018Apr 2013Apr 2008Apr 2003Apr 1998
Source: Columbia Threadneedle Investments & Refinitiv Eikon
(Rebased to 100 at 30 April 1998)
The Global Smaller Companies Trust share price (total return)The Global Smaller Companies Trust NAV (total return) Benchmark (total return)
Revenue return and dividend per share vs inflation over 25 years
0
100
200
300
400
500
600
700
800
Apr 2023Apr 2018Apr 2013Apr 2008Apr 2003Apr 1998
Source: Columbia Threadneedle Investments & Refinitiv Eikon
(Rebased to 100 at 30 April 1998)
Revenue return per share Dividend per share
Inflation (RPI)
Report and Accounts 2023 | 95
Other Information
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
Alternative Performance Measures
The Company uses the following Alternative Performance Measures (‘APMs’) throughout the annual report, financial statements and notes to
the financial statements. The APMs are reconciled to the financial statements through the narrative detailed below. The Board believes that each
of the APMs, which are typically used within the investment trust sector, provide additional useful information to the shareholders in order to
assess the Company’s performance between reporting periods and against its peer group.
Discount or Premium – the share price of an Investment Trust is derived from buyers and sellers trading their shares on the stock market. This
price is not identical to NAV per share of the underlying assets less liabilities of the Company. If the share price is lower than the NAV per share,
the shares are trading at a discount. Shares trading at a price above NAV per share are said to be at a premium. The Board of the Company tries
to ensure that the shares trade, in normal market conditions, at around the value of the net assets. This is done by means of buying shares
from sellers at the below-NAV price (and placing them in treasury or cancelling them) or selling new shares to shareholders at a premium to NAV.
The Board’s policy is set out on page 37.
30 April 2023
pence
30 April 2022
pence
Net Asset Value per share (a) 165.71 172.83
Share price per share (b) 144.60 156.20
(Discount)/Premium (c= (b-a)/a) (c) (12.7)%
(9.6)%
Gearing – this is the ratio of the borrowings of the Company to its net assets. Borrowings have a ‘prior charge’ over the assets of a company,
ranking before ordinary shareholders in their entitlement to capital and/or income. They may include: preference shares; debentures; overdrafts
and short and long-term loans from banks; and derivative contracts. If the Company has cash assets, these may be assumed either to net off
against borrowings, giving a ‘net’ or ‘effective’ gearing percentage, or to be used to buy investments, giving a ‘gross’ or ‘fully invested’ gearing
figure. Where cash assets exceed borrowings, the Company is described as having ‘net cash’. The Company’s maximum permitted level of
gearing is set by the Board and is described within the Strategic Report and Directors’ Report.
30 April 2023
£'000
30 April 2022
£'000
Loan notes 35,000 35,000
Loans 17,027 19,782
(a) 52,027
54,782
Less Cash and cash equivalents (2,292) (13,354)
Less Investment debtors (7,994) (1,088)
Add Investment creditors 2,892 2,713
Total (b) 44,633 43,053
Net Asset Value (c) 859,435 945,304
Effective gearing (d= b/c) (d) 5.2% 4.6%
Fully invested gearing (e= a/c) (e) 6.1% 5.8%
Net Asset Value (NAV) – the assets less liabilities of the Company, as set out in the Balance Sheet, all valued in accordance with the
Company’s Accounting Policies (see note 2 to the Accounts) and UK Accounting Standards. The net assets correspond to Total Shareholders’
Funds, which comprise the share capital account, capital redemption reserve and capital and revenue reserves. (See calculation in note 19 to
the Accounts.)
96 | The Global Smaller Companies Trust PLC
Net Asset Value (NAV) with Debt at Fair Value – the Company’s debt is valued in the Balance Sheet (on page 68) at cost, which is
equivalent to the repayment value of the debt on the assumption that it is held to maturity. This is often referred to as ‘Debt at Par’. The current
replacement or fair value of the debt, which assumes it is repaid and renegotiated under current market conditions, is often referred to as the
‘Debt at Market Value’ or ‘Debt at Fair Value’. See calculation in note 19 to the Accounts.
Ongoing Charges – all operating costs expected to be regularly incurred and that are payable by the Company or suffered within underlying
investee funds, expressed as a proportion of the average net assets of the Company over the reporting year (see Ten Year Record). The costs of
buying and selling investments and derivatives are excluded, as are interest costs, taxation, non-recurring costs and the costs of buying back or
issuing ordinary shares.
Ongoing Charges calculation
30 April 2023
£'000
30 April 2022
£'000
Management fees 4,329 5,004
Other expenses 1,099 977
Less loan commitment/arrangement fees and one off costs (110) (107)
Underlying costs of collective investments 1,680 1,686
Total (a) 6,998 7,560
Average daily net assets (b) 888,724 1,008,882
Ongoing Charges (c= a/b) (c) 0.79% 0.75%
Total Expense Ratio (‘TER’) – an alternative measure of expenses to Ongoing Charges. It comprises all operating costs incurred in the
reporting period by the Company (see notes 4 and 5 (pages 73 and 74) to the Accounts), calculated as a percentage of the average net
assets in that year (see Ten Year Record). Operating costs exclude costs suffered within underlying investee funds, costs of buying and selling
investments and derivatives, interest costs, taxation and the costs of buying back or issuing ordinary shares.
TER calculation
30 April 2023
£'000
30 April 2022
£'000
Management fees 4,329 5,004
Other expenses 1,099 977
Less loan commitment/arrangement fees and one off costs (110) (107)
Total (a) 5,318 5,874
Average daily net assets (b) 888,724 1,008,882
TER (c= a/b) (c) 0.60% 0.58%
Total Return – the theoretical return to shareholders calculated on a per share basis by adding dividends paid in the period to the increase
or decrease in the Share Price or NAV in the period. The dividends are assumed to have been re-invested in the form of shares or net asset,
respectively, on the date on which the shares were quoted ex-dividend.
NAV Share price
NAV/Share Price per share at 30 April 2022 (pence) 172.83 156.20
NAV/Share Price per share at 30 April 2023 (pence) 165.71 144.60
Change in the year (4.1)% (7.4)%
Impact of dividend reinvestments 1.2% 1.2%
Total return for the year (2.9)% (6.2)%
NAV Share price
NAV/Share Price per share at 30 April 2021 (pence) 174.86 168.60
NAV/Share Price per share at 30 April 2022 (pence) 172.83 156.20
Change in the year (1.2)% (7.4)%
Impact of dividend reinvestments 1.0% 1.0%
Total return for the year (0.2)% (6.4)%
Report and Accounts 2023 | 97
Other Information
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
AAF Report – Report prepared in accordance with Audit and Assurance Faculty guidance issued by the Institute of Chartered Accountants in
England and Wales.
Administrator – The administrator is State Street Bank and Trust Company to which Columbia Threadneedle has outsourced trade processing,
valuation and middle office tasks and systems.
AIFMD – the Alternative Investment Fund Managers Directive that requires investment vehicles in the European Union to appoint a Depositary
and an Alternative Investment Fund Manager.
AIFM – the Alternative Investment Manager appointed by the Board of Directors in accordance with the AIFMD is the Company’s Manager, as
defined below.
Ameriprise – Ameriprise Financial Inc. which is the parent company of Columbia Threadneedle Asset Management (Holdings) PLC which in turn
owns Columbia Threadneedle Investment Business Limited.
APMs – Alternative Performance Measures are financial measures of historical or future financial performance, financial position, or cashflows,
other than financial measures defined or specified in the applicable accounting framework. Guidelines published by the European Securities and
Markets Authority aim to improve comparability, reliability and comprehensibility by way of APMs.
Columbia Threadneedle – Columbia Threadneedle Investment Business Limited, the Manager.
Columbia Threadneedle Savings Plans – previously the BMO savings plans, these comprise the Columbia Threadneedle General Investment
Account, Columbia Threadneedle Junior Investment Account, Columbia Threadneedle Investment Trust ISA, Columbia Threadneedle Junior ISA
and Columbia Threadneedle Child Trust Fund operated by Columbia Threadneedle Investment Business Limited, a company authorised by the
Financial Conduct Authority.
Benchmark – a blend of two Indices, namely the MSCI All Country World ex UK Small Cap Index (70%) and the Numis UK Smaller Companies
(excluding investment companies) Index (30%). This Benchmark, against which the increase or decrease in the Company’s net asset value
is compared, measures the performance of a defined selection of smaller companies listed in stock markets around the world and gives an
indication of how those companies have performed in any period. Divergence between the performance of the Company and the Benchmark is
to be expected as: the investments within this Index are not identical to those of the Company; the Index does not take account of operating
costs; and the Company’s strategy does not entail replicating (tracking) this Benchmark. From 1 May 2023 the weighting of the indices in the
Benchmark is changing to 80% MSCI All Country World ex UK Small Cap Index and 20% Numis UK Smaller Companies (excluding investment
companies). The MSCI index will also be measured on a net basis rather than a gross basis going forward.
Carbon intensity – this is measured in tons of CO2 equivalent (i.e. including the basket of six Kyoto Protocol gases) of Scope 1 and 2 emissions,
divided by $1million of sales at a company level. This is aggregated to portfolio level using a weighted average (by holding).
Closed-ended company – a company, including an Investment Company, with a fixed issued ordinary share capital the shares of which are traded
on an exchange at a price not necessarily related to the net asset value of the company and which can only be issued or bought back by the
company in certain circumstances.
Glossary of Terms
98 | The Global Smaller Companies Trust PLC
Cum-dividend – shares are classified as cum-dividend when the buyer of a security is entitled to receive a dividend that has been declared, but
not paid. Shares which are not cum-dividend are described as ex-dividend.
Custodian – The Custodian is JP Morgan Chase Bank. The Custodian is a financial institution responsible for safeguarding, worldwide, the listed
securities and certain cash assets of the Company, as well as the income arising therefrom, through provision of custodial, settlement and
associated services.
Depositary – The Depositary is JPMorgan Europe Limited. Under AIFMD rules, the Company must appoint a Depositary, whose duties in respect
of investments, cash and similar assets include: safekeeping; verification of ownership and valuation; and cash monitoring. Under the AIFMD
rules, the Depositary has strict liability for the loss of the Company’s financial assets in respect of which it has safe–keeping duties. The
Depositary’s oversight duties will include but are not limited to oversight of share buybacks, dividend payments and adherence to investment
limits.
Distributable Reserves – Reserves distributable by way of dividend or for the purpose of buying back ordinary share capital (see notes 2, 16, 17
and 18 to the Accounts). Company Law requires that Share Capital and the Capital Redemption Reserve may not be distributed. The Company’s
articles of association allow distributions by way of dividend out of Capital Reserves. Dividend payments are currently made out of Revenue
Reserve. The cost of all share buybacks is deducted from Capital Reserves.
Dividend Dates – Reference is made in announcements of dividends to three dates. The ‘record’ date is the date after which buyers of the
shares will not be recorded on the register of shareholders as qualifying for the pending dividend payment. The ‘payment’ date is the date that
dividends are credited to shareholders’ bank accounts. The ‘ex-dividend’ date is normally the business day prior to the record date (most ex-
dividend dates are on a Thursday).
GAAP – Generally Accepted Accounting Practice. This includes UK Financial Reporting Standards (‘FRS’) and International GAAP (IFRS or
International Financial Reporting Standards applicable in the European Union).
Hampton-Alexander Review – The independent review body which aims to increase the number of women on FTSE 350 Boards.
Investment Company (Section 833) – UK Company Law allows an Investment Company to make dividend distributions out of realised
distributable reserves, even in circumstances where it has made Capital losses in any year, provided the Company’s assets remaining after
payment of the dividend exceed 150% of the liabilities. An Investment Company is defined as investing its funds in shares, land or other assets
with the aim of spreading investment risk.
Investment Trust taxation status (Section 1158) – UK Corporation Tax law allows an Investment Company (referred to in Tax law as an Investment
Trust) to be exempted from tax on its profits realised on investment transactions, provided it complies with certain rules. These are similar to
Section 833 Company law rules but further require that the Company must be listed on a regulated stock exchange and that it cannot retain
more than 15% of income received. The Directors Report contains confirmation of the Company’s compliance with this law and its consequent
exemption from taxation on capital gains.
ISAE Report – Report prepared in accordance with the International Standard on Assurance Engagements.
Leverage – as defined under AIFMD rules, leverage is any method by which the exposure of an AIF (being an investment vehicle under the AIFMD)
is increased through borrowing of cash or securities or leverage embedded in derivative positions. Leverage is broadly equivalent to gearing
but is expressed as a ratio between the assets (excluding borrowings) and the net assets (after taking account of borrowings). Under the gross
method, exposure represents the sum of the Company’s positions after deduction of cash balances, without taking account of any hedging or
netting arrangements. Under the commitment method, exposure is calculated without the deduction of cash balances and after certain hedging
and netting positions are offset against each other.
Manager (AIFM) – Columbia Threadneedle Investment Business Limited, a subsidiary of Columbia Threadneedle Asset Management (Holdings)
PLC, which in turn is wholly owned by Ameriprise Financial Inc.. Its responsibilities and fees are set out in the Business Model, Directors’ Report
and note 4 to the Accounts.
Report and Accounts 2023 | 99
Other Information
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
Non-executive Director – a Director who has a contract for services, rather than a contract of employment, with the Company. The Company does
not have any executive Directors.
Open-ended Fund – a collective investment scheme which issues shares or units directly to investors, and redeems directly from investors, at a
price that is linked to the net asset value of the fund.
Section 172(1) – Section 172(1) of the Companies Act 2006 requires a director of a company to act in the way he considers, in good faith, to 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 to matters specified
in that section. The directors are required to report on this in the Strategic Report section of the Report and Accounts each year.
SORP – Statement of Recommended Practice. The accounts of the Company are drawn up in accordance with the Investment Trust SORP, issued
by the AIC, as described in note 2 to the Accounts.
Special Dividends – dividends received from investee companies which have been paid out of capital reconstructions or reorganisations of
the investees are sometimes referred to as Special Dividends and may be allocated to Capital Reserves in accordance with the Company’s
accounting policies and the SORP. Dividends which are unusually large in terms of the investee companies’ annual earnings or normal payment
pattern are also sometimes referred to as special but are treated as revenue in nature unless evidenced otherwise.
Treasury shares – ordinary shares previously issued by the Company that have been bought back from shareholders on the open market and
kept in the Company’s own treasury. Such shares may, at a later date, be re-issued for sale on the open market or cancelled if demand is
insufficient. Treasury shares carry no rights to dividends and have no voting rights and hence are not included within calculations of earnings per
share or net asset value per share.
UK Code of Corporate Governance (UK Code 2018) – the standards of good practice in relation to board leadership and effectiveness,
remuneration, accountability and relations with shareholders that all companies with a Premium Listing on the London Stock Exchange are
required to report on in their annual report and accounts.
The United Nations Sustainable Development Goals (SDGs) – These goals are the blueprint to achieve a better and more sustainable future for
all. They address global challenges including those related to poverty, inequality, climate change, environmental degradation, peace and justice.
The 17 Goals are all interconnected and the aim is to achieve them all by 2030.
The United Nations-supported Principles for Responsible Investment (UNPRI) – The six principles for Responsible Investment are a voluntary
and aspirational set of investment principles that offer a menu of possible actions for incorporating ESG issues into investment practice. In
implementing them, signatories contribute to developing a more sustainable global financial system.
Analysis of Ordinary Shareholders
(unaudited)
Category Holding % at 30 April 2023 Holding % at 30 April 2022
Columbia Threadneedle Savings Plans 55.1 54.0
Institutions 11.2 13.5
Direct Individuals and Nominees 33.7 32.7
100.0 100.0
Source: Columbia Threadneedle Investments.
100 | The Global Smaller Companies Trust PLC
Warning to Shareholders – Beware of Share Fraud.
Fraudsters use persuasive and high-pressure tactics to lure investors into scams. They may offer to sell to you shares that turn out to be worthless or
non-existent, or to buy your shares at an inflated price in return for an upfront payment following which the proceeds are never received.
If you receive unsolicited investment advice or requests:
• Check the Financial Services Register from fca.org.uk to see if the person or firm contacting you is authorised by the FCA
• Call the Financial Conduct Authority (‘FCA’) on 0800 111 6768 if the firm does not have contact details on the Register or you are told they are
out of date
• Search the list of unauthorised firms to avoid at fca.org.uk/scams
• Consider that if you buy or sell shares from an unauthorised firm you will not have access to the Financial Ombudsman Service or Financial
Services Compensation Scheme
• Think about getting independent financial and professional advice
If you are approached by fraudsters please tell the FCA by using the share fraud reporting form at fca.org.uk/scams where you can find out more
about investment scams. You can also call the FCA Consumer Helpline on 0800 111 6768. If you have already paid money to share fraudsters you
should contact Action Fraud on 0300 123 2040.
Contact us
Registered office:
Exchange House, Primrose Street, London EC2A 2NY
020 7628 8000 Fax: 020 7628 8188
globalsmallercompanies.co.uk
invest@columbiathreadneedle.com
Registrars:
Computershare Investor Services PLC
The Pavilions, Bridgwater Road
Bristol BS99 6ZZ
0370 889 4088 Fax: 0870 703 6143
computershare.com
web.queries@computershare.co.uk
The Global Smaller
Companies Trust PLC
Report and Accounts
for the year ended
30 April 2023
To find out more visit columbiathreadneedle.com
© 2023 Columbia Threadneedle Investments. Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.