The Global
Smaller
Companies
Trust PLC
Company Number: 28264
Annual Report and
Financial Statements
for the year ended
30 April 2024
Strategic Report
Company Overview 1
Financial Highlights 2
Chairman’s Statement 3
Lead Manager’s Review 8
Investment Manager’s Investment Philosophy
and Process 18
Investment Case Studies 20
Responsible Investment 23
Thirty Largest Holdings 27
List of Investments 29
Ten Year Record 32
Purpose, Strategy and Business Model 34
Promoting Success 37
Principal and Emerging Risks 38
Key Performance Indicators 40
Principal Policies 41
Governance Report
Directors 44
Directors’ Report 46
Chairman’s Statement on Corporate Governance 52
Applying the principles of the AIC Code 54
Report of the Audit and
Management Engagement Committee 56
Report of the Nomination Committee 60
Directors' Remuneration Report 62
Statement of Directors’ Responsibilities 65
Independent Auditor’s Report 66
Contents
Financial Report
Income Statement 72
Statement of Changes in Equity 73
Balance Sheet 74
Statement of Cashflows 75
Notes to the Financial Statements 76
Notice of Annual General Meeting 92
Other Information
Management and Advisers 97
Additional Information for Shareholders 98
How to Invest 99
25 Year Historical Information 100
Alternative Performance Measures 102
Glossary of Terms 105
Analysis of Ordinary Shareholders 107
2024-25 Financial year events
Annual General Meeting 13 August 2024
Final dividend payable 20 August 2024
Half-yearly results for 2024 announced December 2024
Interim dividend payable January 2025
Final Results for 2025 announced June 2025
Report and Financial Statements 2024 | 1
Overview
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 £870.1m as at 30 April 2024 (2023: £859.4m).
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 54 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
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
2 | The Global Smaller Companies Trust PLC
(1) See Alternative Performance Measures on pages 102 and 104.
(2) See Glossary of terms on page 105 for explanation of “Benchmark”.
(3) Total dividend comprises an interim dividend (paid on 25 January 2024) of 0.68 pence and a final dividend for 2024 of 2.13 pence (payable on 20 August 2024), subject to
shareholder approval at the AGM.
(4) Comparative figures for the years prior to 2020 have been restated due to the sub-division of each existing ordinary share of 25p into ten new ordinary shares of 2.5p each on
31 October 2019.
Financial Highlights year to 30 April 2024
Total Dividend
Total Dividend
(3)
of 2.81
pence (2023: 2.30p), the
54th consecutive annual
increase, up by 22.2%
(2023: up by 25.0%).
2.81p
Discount
The Company's shares
ended the year at a
discount
(1)
to NAV of
10.0% (2023: 12.7%).
-10.0%
Net Asset Value (‘NAV’) total
return
NAV with debt at fair value
(1)
total return
(1)
of 9.0% (2023:
-2.9%) versus 11.3% for the
Benchmark (2023: -2.1%).
The NAV with debt at fair value rose
to 178.1p from 165.7p.
9.0%
Share price total return
Share price total
return
(1)
of 12.7% (2023:
-6.2%).
The share price ended the year
at 160.2p (2023: 144.6p).
12.7%
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
2024202320222021202020192018201720162015
0p
20p
40p
60p
80p
100p
120p
140p
160p
180p
2024202320222021202020192018201720162015
Source: Columbia Threadneedle Investments
Share price premium/(discount)
(1)
at 30 April – %
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
2024202320222021202020192018201720162015
Source: Columbia Threadneedle Investments
Dividends
(3),(4)
– pence per share
0.0p
0.5p
1.0p
1.5p
2.0p
2.5p
3.0p
2024202320222021202020192018201720162015
Source: Columbia Threadneedle Investments
Delivering high total returns over the long term
The dividend has increased every year for the past 54 years and over the last ten years is up 13.4%
compound per annum, compared with inflation (RPI) of 4.2% 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 from 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
£2,144, a compound annual total return of 7.9%.
Report and Financial Statements 2024 | 3
Chairman’s Statement
Dear Shareholder,
It was pleasing to see equity markets bounce back during the
financial year under review. Foremost in investors' minds was
the outlook for inflation and interest rates. While inflation fell
significantly in most parts of the world, tight labour markets
meant that it remained higher than central bank targets and as
a consequence authorities delayed cutting interest rates. As
the year progressed it became increasingly evident that within
developed economies consumers were operating at two different
speeds: spending by higher income earners was supported by
rising asset prices and interest income whilst consumption by the
lower income cohort was hampered by higher costs of living that
were not sufficiently covered by wage increases. Despite this mixed
consumer environment, the global economy continued to grow and
performed significantly better than had been feared at the start
of the year. Sadly, geopolitical tensions continued to rise in the
year with conflict breaking out in the Middle East, exacerbating an
already tense backdrop with the war in Ukraine showing no sign of
ending soon and unease between China and the US growing.
Given these uncertainties, it was only natural that investors
gravitated towards the safety that larger companies offer and
smaller companies lagged as a consequence. In the US, market
returns were driven by a handful of larger companies that were in
some way exposed to the fast-growing areas of Artificial Intelligence
(‘AI’) and cloud computing. On the whole, developed market
equities performed well, particularly in North America and Japan.
A sense of optimism returned to Japan with corporations adopting
more shareholder-friendly policies and the country moving from
deflation to inflation. It was very encouraging to see Japanese
smaller companies deliver earnings growth well in excess of other
major developed markets in this financial year. China was laden by
a slowdown in its domestic economy, which appears to be working
through a downturn in its real estate sector. Outside of China,
emerging markets showed strength, especially in the case of India.
Four years on from the onset of the COVID 19 pandemic, several
industries were still adjusting to a new environment, with some
suffering from normalisation in activity levels and others benefitting
from recovery. On the bright side, this did create opportunities for
your Company to purchase interests in high quality businesses with
good long term prospects at attractive valuations. As businesses
and investors became more confident that interest rates had
peaked, capital markets transactions picked up, resulting in
increased takeover activity and it was pleasing that your Company
was a beneficiary of this. The Company has several holdings that
have been owned for many years, initially bought when they were
much smaller businesses. Many of them delivered another year of
shareholder value creation. In the Lead Manager’s Review you will
“The Manager has put together a portfolio of investments in high quality businesses
that are attractively valued and we look forward with optimism.”
Anja Balfour, Chairman
Chairman’s Statement
May
21
May
22
May
23
Mar
24
4.0
6.0
10.0
2.0
12.0
8.0
0.0
-2.0
US UK
Europe Japan China India
Inflation by country (% change in CPI year on year)
Source: Columbia Threadneedle Investments
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
4 | The Global Smaller Companies Trust PLC
geopolitical outlook. There have been outflows from UK based
equity funds in general and smaller company funds have been hurt
even more than larger company funds by this trend. Starting the
financial year at 12.7%, your Company’s discount reached 17.7%
in July 2023 before closing at 10.0%, still some way from the
Board’s target of less than 5%. The narrower discount meant that
the share price rose by 10.8% over the year, or by 12.7% on a total
return basis, ahead of the Benchmark.
The Board continue to believe that a consistently applied share
buyback approach is in shareholder’s best interests, providing
liquidity for those in need of an exit along with NAV accretion to
remaining holders. The pace of buybacks stepped up compared
to previous years with some 30.2m shares bought back,
representing 5.8% of the starting share capital (2023: 24.6m
shares) repurchased across some 214 trading days, enhancing
the NAV by 0.6% in the process. The chart above 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 sector tend to
be cyclical. Good investment performance, share repurchases
and increased interest in the shares from both existing and new
investors will be key in helping to address the discount in the
medium term.
Given the attractive relative and absolute valuations on offer in
equities of smaller companies, marketing activity over a number
of channels increased significantly over the course of the year.
In order to seek to maximise the effectiveness of our marketing
initiatives, the Board engaged a specialist third party marketing
agency to sharpen the Company’s principal selling points. The
Global Smaller Companies Trust offers a simple, lower risk way
to access the faster growth potential of the world’s most exciting
be pleased to learn that we have added to this cohort of long term
winners; companies that we think will be instrumental in generating
future returns for your Company.
Performance and the Discount
Having fallen by 6.3% in the first half of the financial year, the
Company’s Net Asset Value (‘NAV’) total return (with long term
borrowings at fair value) recovered well in the second half to end
the financial year up 9.0%.
The total return from the Company’s Benchmark, a blend of two
indices, the MSCI All Country World ex UK Small Cap Index net
(80%) and the Deutsche Numis UK Smaller Companies (excluding
investment companies) Index (20%) for the year to 30 April 2024
was 11.3%. Longer term total returns from the NAV, Benchmark and
share price are shown in the following table, highlighting the strong
returns that the asset class has delivered to patient investors.
Performance: Total returns over the long-term
1 year
%
3 years
%
5 years
%
10 years
%
25 years
%
Company NAV
total return
9.0 5.5 34.6 136.6 859.8
Benchmark
total return
11.3 5.6 39.8 135.0 717.6
Company
share price
total return
12.7 -1.0 27.2 114.4 1,016.9
Source: Columbia Threadneedle Investments
Over the last few years UK investment trust company discounts
have widened, given increased caution around the economic and
The Global Smaller Companies Trust
(period mean)
Premium/(Discount) to NAV (%)
-20
-15
-10
-5
0
5
2024
2014 2015 2016 2017 2018 2019 202220212020
UK Investment Companies (Ex 3i)
(period mean)
The Global Smaller Companies TrustUK Investment Companies (Ex 3i)
2023
(Discount)/premium compared to UK Investment Companies (ex 3i) over 10 years
Source: Columbia Threadneedle Investments
Report and Financial Statements 2024 | 5
Chairman’s Statement
smaller companies; it uses a long-term approach to investing in
high quality businesses that are undervalued and this has resulted
in a track record of delivering strong total returns to shareholders
with lower levels of volatility.
Dividends
It was another positive year on the income front. Revenue returns
per share rose by a healthy 21.4% (2023: 28.6%) as income from
both UK and overseas based holdings grew strongly. Following
on from the 7.9% increase in the interim dividend, the Board has
decided to recommend the payment of a final dividend of 2.13p,
meaning the full year payment will be up by 22.2% to 2.81p. This
will be paid to shareholders on 20 August 2024 and will be the
54th consecutive increase in the Company’s dividend.
Costs
Ongoing charges (excluding performance fees from collective
holdings) for the year reduced slightly over the year moving from
0.79% to 0.78%. Ongoing charges including performance fees from
collective holdings were 0.80% (2023: 0.79%). These remain low
compared to many smaller company funds in the market.
Performance by Region
The Lead Manager’s Review starting on page 8 covers the year
from a market and portfolio view in detail.
The chart above shows how our regional portfolios performed in
the year compared to their relevant local smaller company indices.
Relative to the local small cap market returns, we were behind in
North America and the UK, while in Europe we were ahead. After
careful consideration and following extensive discussions with the
Board, the Manager insourced approximately half of the Company’s
exposure to Japanese equities, making further use of the additional
Geographical performance (total return sterling adjusted) for the year ended 30 April 2024
0
5
10
15
20
Rest of
World*
JapanNorth AmericaEuropeUK
Source: Columbia Threadneedle Investments
Portfolio
Local smaller companies index (see Lead Manager’s Review)
5.2%
7.2%
4.5%
4.1%
10.3%
13.4%
10.1%
8.6%
10.8%
16.9%
14.5%
Latin
America
Asia Pacific
ex Japan
*Performance of the Rest of World portfolio is shown here against both the Asian and Latin American smaller company indices.
resources available at Columbia Threadneedle Investments. This
is covered in more detail in the Lead Manager’s Review. It was
pleasing to see early results from this change with the Japanese
portfolio on the whole outperforming its benchmark in the year. The
Rest of World portfolio of collectives was behind its benchmark, hurt
by widening discounts on the two investment trust companies held.
Asset Allocation
Asset allocation positioning hurt relative performance in the year,
largely reflecting the fact that we were overweight the UK and
underweight North America. Over the course of the year, there were
some movements in absolute geographic weightings. Our exposure
to Asian markets increased at the expense of North America,
the UK and Europe. The Manager believes that smaller company
valuations are more attractive in the UK, Europe and Japan in
comparison to North America and this is reflected in our year- end
positioning.
North America 40.8% (41.7%)
UK 24.7% (25.3%)
Rest of World 13.5% (12.4%)
Europe 11.5% (12.1%)
Japan 9.5% (8.5%)
Geographical distribution of the investment portfolio
as at 30 April 2024
Source: Columbia Threadneedle Investments
The percentages in brackets are as at 30 April 2023
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Other Information
Chairman’s StatementOverview Auditor’s Report
6 | The Global Smaller Companies Trust PLC
The following table shows the weightings of the portfolio versus the
Benchmark at the end of the financial year.
Geographical weightings of the portfolio and the Benchmark
Portfolio weight (%) Benchmark weight (%)
UK 24.7 20.0
Europe 11.5 9.6
North America 40.8 46.4
Japan 9.5 8.4
Rest of World 13.5 15.6
Source: Columbia Threadneedle Investments
Gearing Policy
The Board remains of the view that making use of our borrowing
powers over the long term will serve to enhance shareholder
returns as markets rise over time. At the end of the financial
year, effective gearing was 4.7% compared to 5.2% a year
earlier. Borrowings were made up of £35m 2.26% sterling loan
notes maturing in 2039 and £16.5m of drawings in US dollars,
Yen and Euros under our revolving credit facility. Reflecting the
predominantly fixed rate nature of the debt, our borrowing costs
remain low, although they have risen as interest rates have moved
up.
Environmental, Social and Governance (‘ESG’)
While your Company is not an ESG labelled fund, the investment
management team carefully considers ESG factors in making
their stock selections. Analysis in this regard from the Manager’s
Responsible Investments team has continued to be useful, with
regular input 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 has
continued and some examples of this work are outlined in the
Responsible Investment report on pages 23 to 26.
Board Changes
As reported in the Half-Year Report, having followed a formal
recruitment process, the Company was pleased to appoint two
new non-executive Directors, Bulbul Barrett and Randeep Grewal,
with effect from 1 December 2023. On 11 December 2023,
David Stileman retired from the Board and Jo Dixon will also
retire following the conclusion of the forthcoming Annual General
Meeting. Jo is the Chairman of the Audit and Management
Engagement Committee and the Senior Independent Director and
following her retirement Nick Bannerman and Graham Oldroyd will
fulfil these roles respectively.
David and Jo were appointed in 2015, and both have contributed
significantly to the Company, bringing their wide-ranging experience
to the Board. We record our appreciation and gratitude to David and
Jo for their dedicated service to the Company and wish them well for
the future.
Retirement of Peter Ewins
Peter Ewins stepped down as joint Lead Manager on 1 May 2024
and will retire from Columbia Threadneedle Investments this
summer. Since he became Lead Manager of the portfolio in August
2005 he and his team produced excellent returns for shareholders.
In fact, the NAV total return was 517.6%, virtually matched by a
share price total return of 517.0% over his tenure. This was achieved
with lower volatility than a number of other smaller company
investment vehicles over this period. We are extremely grateful for
Peter’s dependable contribution and dedicated service and for his
mentorship of Nish Patel, our new Lead Manager. We wish Peter a
long and happy retirement.
Annual General Meeting
The Annual General Meeting will take place at The Chartered
Accountants Hall, 1 Moorgate Place, London EC2R 6EA on Tuesday,
13 August 2024 at 12.00 noon. We hope as many shareholders
as possible will attend. Nish Patel, the Lead Manager, will 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.
Voting on all resolutions at the AGM will be conducted by way
of a poll, the results of which will be announced and posted on
the Company’s website following the meeting. You are therefore
encouraged to lodge your votes prior to the meeting by completing
your form of proxy or form of direction in accordance with the
instructions shown. Their completion and return will not preclude you
from attending the meeting or from shareholders 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 at globalsmallercompanies.co.uk.
Outlook
In the near term investors are likely to continue to pay particular
attention to the direction of inflation and labour markets in major
economies as well as geopolitical developments more widely. Our
Manager will continue to focus on identifying companies that will do
Report and Financial Statements 2024 | 7
well regardless of what happens in the wider economy. The fund
management team are still finding such opportunities within our
very extensive investment universe and the Board has confidence
in the Manager’s lengthy experience in investing in this asset class.
Despite the recent underperformance of smaller companies
relative to larger companies, it remains an attractive asset class
over the long term. Smaller companies have the potential to
deliver faster earnings growth as well as valuation expansion as
they are more widely recognised. Furthermore, it is an area where
active management can genuinely add value. The Manager has
constructed a portfolio of investments in high quality businesses
that are attractively valued and we look forward with optimism.
Anja Balfour
Chairman
25 June 2024
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
Chairman’s Statement
8 | The Global Smaller Companies Trust PLC
Having worked with Peter Ewins and the wider team on the
management of the Company’s assets since 2007, I am
honoured to write to you for the first time as the Company’s
Lead Manager following Peter Ewins retirement and am excited
by the opportunity of building on the Company’s impressive
long-term performance record.
Performance
The Company’s NAV total return and share price total return
were 9.0% and 12.7% respectively in the financial year. This
compared to an 11.3% rise in the Benchmark. Whilst the NAV
total return lagged the Benchmark, performance improved as
the year progressed: the Company’s NAV underperformed in
the first half of the financial year but was ahead in the second
half. Pleasingly, a narrowing in the discount to NAV meant
that the share price total return for the year was ahead of the
Benchmark.
As of the end of the financial year the Company’s NAV has
outperformed its global smaller company investment trust
peers over 3 years. As has been the case in recent financial
years our investment income was strong again, allowing the
Board to recommend an inflation-beating 22.2% increase in
the annual dividend. The Company’s dividend per share has
grown by 13.4% compounded over the last 10 years, one of
the fastest rates of growth across the investment trust market.
This reflects the financial success of the companies held in our
portfolio.
Economy and Market Backdrop
The 12 months ended 30 April 2024 was another year of
surprises in the financial markets. The world economy remained
remarkably resilient despite a rapid rise in global interest rates
over the last two years. In the developed markets a resolute
consumer was helped by a tight labour market, excess savings
and an easing of inflation in goods prices. Inflation in services
prices has been slower to come down than expected, especially
in the US, and as a result central banks delayed the cutting of
interest rates.
From an equity market perspective the financial year was a
story of two halves. From the beginning of May until the end of
October the market struggled, especially smaller companies
as stubborn inflation led to interest rate increases from
central banks. Furthermore, geopolitical tensions escalated
with conflict breaking out in the Middle East. At the start of
the second half of the year, lower than expected inflation
data created enthusiasm over potential cuts in interest rates.
Expectations rose that inflation could be tamed without a
meaningful economic downturn and this propelled markets
higher. The stock market remained strong at the end of the
financial year, even as the probability of multiple interest rate
cuts receded. As investor sentiment improved, we saw a return
to favour of the more speculative parts of the market such as
Lead Manager’s Review
Industrials 25.3% (21%)
Collective investments 18.5% (20.9%)
Consumer discretionary 11.7% (11.6%)
Financials 10.5% (9.4%)
Technology 9.3% (8.5%)
Healthcare 6.5% (7.3%)
Real estate 4.7% (4.3%)
Basic materials 4.4% (6.6%)
Consumer staples 4.1% (5.5%)
Energy 3.8% (3.7%)
Telecommunications 0.8% (0.8%)
Utilities 0.4% (0.4%)
Source: Columbia Threadneedle Investments
The percentages in brackets are as at 30 April 2023
Industrial classification of the investment portfolio
as at 30 April 2024
“We are optimistic that in time equity market returns will broaden to include the
faster growing area of smaller companies and that our shareholders will benefit
from this.”
Nish Patel, Lead Manager
Report and Financial Statements 2024 | 9
Strategic Report
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
profitless, early stage companies – the sorts of businesses that
we avoid.
As an investment theme, AI burst on the scene in 2023.
This technology, which allows computers and machines to
simulate human intelligence and problem-solving capabilities,
partly led to narrow stock market performance in the year
with the information technology sector producing the largest
gains in many markets, especially the US. Other sectors that
did well in most markets were industrials and energy. On the
other hand the more defensive parts of the market such as
telecommunications, utilities and healthcare lagged.
Over the year, optimism grew that the US economy would
enjoy a ‘soft landing.’ The UK economy remained sluggish and
briefly entered a slight technical recession in early 2024 as
consumers grappled with a higher cost of living and interest
sensitive sectors such as housing slowed. The UK equity
market continues to see outflows from retail and institutional
investors and the valuation discounts that this has created
have not gone unnoticed, as evidenced by a rise in takeover
activity, share repurchases and foreign listings. European
growth decelerated as the year went on because of a slowdown
in Germany, where higher energy costs hampered the country’s
important industrial sector. On the other hand, Spain and some
other southern European countries were helped by a buoyant
tourism industry. Thirty four years after Japan’s asset bubble
burst, the Nikkei 225 index finally surpassed its prior all time
high set in 1989. Japan has benefitted from optimism over
corporate reform, the lower yen has helped exporters and
inflation has returned to and stayed at a level greater than 2%.
Consequently, the Bank of Japan recently ended its negative
interest rate policy.
Currency strengthening against Sterling
Currency weakening against Sterling
Apr
23
Aug
23
Dec
23
Apr
24
90
95
100
85
105
Japanese Yen EuroUS Dollar
Currency movements relative to sterling in the year ended 30 April 2024
Source: Columbia Threadneedle Investments
Table of total returns (sterling)
1 year 3 years 5 years 10 years 15 years
Regional
Portfolio
Regional
Benchmark
Regional
Portfolio
Regional
Benchmark
Regional
Portfolio
Regional
Benchmark
Regional
Portfolio
Regional
Benchmark
Regional
Portfolio
Regional
Benchmark
UK 5.2% 7.2% -4.8% -3.8% 15.8% 19.8% 104.8% 63.5% 545.0% 333.0%
Europe 4.5% 4.1% -14.1% -2.7% 23.6% 36.4% 102.1% 117.3% 451.9% 359.2%
North America 10.3% 13.4% 13.9% 0.1% 49.7% 37.8% 196.2% 170.4% 582.8% 486.5%
Japan 10.1% 8.6% 3.3% 6.3% 20.4% 21.1% 135.2% 144.2% 282.9% 265.0%
Rest of World 10.8% 16.9% 12.8% 13.1% 32.6% 53.9% 82.1% 125.1% 326.6% 298.2%
The regional benchmarks used are Deutsche Numis UK Smaller Companies (excluding investment companies) Index (UK), MSCI Europe Ex UK Small Cap Index net
(Europe), MSCI North American Small Cap Index net (North America), MSCI Japan Small Cap Index net (Japan) and MSCI All Country Asia Pacific ex Japan Small Cap
Index net (Rest of World).
Source Columbia Threadneedle Investments
The expected recovery in economic activity in China after the
COVID related reopening did not really materialise. In addition
the local property market continued to suffer from oversupply.
Strong consumer spending, investment in infrastructure and
burgeoning export and manufacturing sectors led to a year of
strong growth in India and other parts of Asia such as Vietnam,
The Philippines and Indonesia. Latin America managed to shrug
off slower demand from China for its commodities. The region’s
spirits were lifted by political change, lower interest rates and
potential growth from the relocation of manufacturing facilities
away from China.
Many of our companies that were exposed to spending by
governments on infrastructure did well, especially those with a
10 | The Global Smaller Companies Trust PLC
North American footprint. Some of our holdings also benefitted
from increased defence budgets, the ongoing recovery in the
aerospace market and work related to energy transition. These
industries seem to be areas of growth for years to come and
the Company has good exposure here. It was very pleasing to
see further development of several of our longer-term holdings
in companies that have strong competitive positions with long
runways for growth. These winners in the year were from a wide
range of industries including retail, online platforms, insurance
and distribution. On a similar note, in emerging markets,
through our collective fund holdings, we were beneficiaries of
the greater acceptance of consumer brands by a growing middle
class, particularly in India. The adoption of AI helped some
of our companies in the year, although there were also some
perceived losers from this as well. As takeover activity resumed
post a potential peak in interest rates, we saw trade and private
equity interest in our holdings with seven investments that we
held receiving takeover bids in the year.
Despite the passing of the pandemic, businesses still suffered
from knock-on effects. Demand normalisation and de-stocking
persisted in several sectors such as electronics, chemicals,
life sciences, leisure goods and luxury. The valuations of some
high-quality businesses in these sectors fell to attractive
levels and as a result we initiated some new holdings in these
areas. Real estate has been hindered by higher interest rates,
with the outlook for office assets deteriorating because of
changed working practices after COVID 19. However valuations
in the sector are now looking more attractive, especially for
companies exposed to more resilient sub-sectors such as
industrial, healthcare and leisure assets. Several businesses
have highlighted the negative effect that depleted savings and a
higher cost of living is having on lower income consumers. After
a long period of contraction because of inventory reduction,
supply chain issues and rising costs, the industrial sector is
showing signs of stabilisation and given the favourable long-
term prospects for this sector, along with attractive valuations,
we increased our exposure here.
Regional Portfolio Performance
The North American and UK portfolios continue to represent
around two thirds of the Company’s assets and they have
delivered very good performance over the long term. In terms
of stock selection, this year was more challenging for both
of them. After a very difficult first half, it was encouraging to
see performance pick up meaningfully in these markets in
the last four months of the financial year. The Rest of World
portfolio also lagged in the year, not helped by the widening
of discounts seen in the investment trust market. Positively,
our European portfolio had a good year and our Japanese
holdings outperformed. More detail around what drove relative
performance of all the portfolios in the year follows in the next
few pages.
Asset Allocation Changes
Asset allocation for the Company is largely the end result of
our bottom-up stock selection and reflects where we are finding
attractive investment opportunities. Similar to the last financial
year, we remain overweight to the UK and Europe, where in
recent years we have found many attractive investments that
we still think are not fairly valued by the stock market. The
Company’s exposure to Japan and the Rest of the World rose
in the year in absolute terms and relative to the benchmark.
There are more appealing investments in these parts of
the world than in North America where the region’s stronger
economic performance is largely reflected in share prices and,
consequently, valuations look more demanding.
Our weighting in industrials grew in the year. As mentioned
previously, the sector was out of favour but we think the long
term prospects are good because of trends such as near-
shoring, increased fiscal spending and automation. With a
potential peak in interest rates, the prospects for interest rate
sensitive companies changed in the year and so our exposure
to the financials and real estate sectors was increased. Profits
were taken in basic materials and consumer staples.
Gearing
The Company's gearing level 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
4.7%, compared to 5.2% twelve months earlier. The Company
benefits from a competitive cost of borrowing through the 20
year private placing undertaken in 2019 at 2.26%. In the future,
if the right market conditions and many attractive investment
opportunities present themselves, the Company would consider
using a small amount of tactical gearing.
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In the regional reviews that follow, performance figures 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.
North American Review One year
Portfolio Performance 10.3%
MSCI North American Small Cap Index (net) 13.4%
S&P 500 Index 23.3%
In the financial year, the North American portfolio
underperformed the MSCI North American Small Cap Index.
Good stock selection in healthcare and materials was offset by
adverse stock selection in information technology, energy and
consumer discretionary.
Construction materials companies had another good year and
it was good to see Eagle Materials, a producer of cement and
gypsum wallboard, deliver the largest positive stock contribution
in the portfolio for the second year running. Its shares were up
70%. Martin Marietta Materials, a business more focused on
aggregates, also contributed strongly. Both of these companies
reported strong earnings growth because of price increases on
their products. The outlook for construction of US infrastructure
is bright because of the passage of the ‘Infrastructure and
Investment and Jobs Act’ in 2021. A recovery in housing
construction might lead to further earnings growth from these
companies.
Kirby is an owner and operator of tank barges that transport
commodities along the US inland and coastal waterways. The
company delivered very good earnings growth as rising demand
led to greater industry capacity utilisation and as a result of
higher spot rates; the share price climbed 52% in the year. In
addition, the supply of barges appears tight and the company’s
power generation business is growing rapidly. Curtiss-Wright
is a manufacturer of niche, mission-critical components for
the aerospace, industrial, defence and power verticals. Most
of its businesses are progressing well because of supportive,
long-term trends such as increased spending on defence and
growth in the production of commercial aircraft. Boot Barn
Holdings operates a retail chain that specialises in western
and work wear. The company faces challenging comparatives in
the first half of this calendar year. Nevertheless, optimism rose
that revenues and earnings would surpass expectations due to
improvement in demand – this led to a rerating of the shares.
CDW is a value-added reseller of technology products. The
company’s market share is growing in this fragmented industry
because of significant scale advantages. It is also benefitting
from good demand and growth in its higher margin cloud,
cybersecurity and services businesses. Brown & Brown, a US
insurance broker to small and medium sized businesses, rallied
28%. It delivered solid organic growth as insurance prices
climbed in the year, higher interest rates helped investment
income and good progress was made on its acquisition
strategy. Takeover bids at appropriate valuations are always
welcome and MDC Holdings, a Denver based housebuilder,
received a bid from Japanese housebuilder Sekisui House at a
19% premium.
As ever, there were disappointments in the portfolio. Earnings
of LKQ Corp, a distributor of car parts, were hurt by a slowdown
Boot Barn’s attractively presented stores continue to be rolled out across North America.
12 | The Global Smaller Companies Trust PLC
in organic revenue growth because of fewer insurance funded
car repairs, lower scrap metal prices and weakness in the
recreational vehicle market. In addition, a labour strike in
Germany affected profitability negatively, and the share price fell
back 24%. Unfortunately, SSR Mining, a precious metals mining
company, suffered from a landslide at one of its largest mines
in Turkey, leading to a sharp fall in the share price. De-stocking
affected many industries in the year: American Vanguard, a
producer of crop protection chemicals, was not immune to this
and an industry inventory reduction led to a decline in sales
and earnings. Shares of GrafTech International, a vertically
integrated producer of graphite electrodes, were affected by
the cyclical downturn in the steel industry in Europe, increased
competition in North America and a technical overhang caused
by the sale of a large shareholding. QuidelOrtho develops
and manufactures diagnostic tests. Post COVID, the company
endured a harsher slowdown than expected in its respiratory
business. PRA Group purchases and collects charged off credit
card receivables. Lower collections from customers and higher
expenses disappointed the stock market. Investors shunned
Genpact (a business process outsourcer) as they worried about
potential disruption to some of its businesses because of AI
and the shares declined 30%. With customers slower to start
projects, the company’s expectations for 2024 underwhelmed
investors. Like many other real estate businesses, Healthcare
Realty Trust was affected by the outlook for higher for longer
interest rates. Furthermore it took longer than expected to
integrate a recent acquisition.
Over the last couple of years the industrial sector has been
adversely affected by de-stocking, supply chain related delays
and higher costs. We think that the sector is close to bottoming
and accordingly we have increased our exposure here. MSC
Industrial Direct, a distributor of metal working related products
to the manufacturing sector in the US, is an example of a
company to which we have added. We also initiated a holding
in Standex International, a manufacturer of niche industrial
products such as connectors, sensors and magnets for a
diverse range of end markets. The company’s strong innovation
culture and focus on offering its customer a compelling value
proposition has led to market leading positions. Earnings
growth can come from continued product development,
particularly in higher growth industries such as renewables,
automation and space as well as entry into adjacent markets.
We have closely monitored the progress of Skechers USA for
some time. The company has a very well recognised brand
that is based on comfort, design and affordability and it
has the opportunity to develop new products and enter into
new markets over the coming years. A short term earnings
disappointment created an opportunity to buy the shares
at an attractive valuation. Over the year, bond yields were
volatile and this created opportunities to purchase interest
rate sensitive quality cyclical stocks at attractive valuations.
Frontdoor is a very well managed provider of home warranty
plans in the US through its well known ‘American Home Shield’
brand. Sales have slowed along with housing transactions,
however this should reverse as mortgage rates fall and market
penetration of home warranty plans in general rises. We took
the opportunity to add on weakness to our holdings in the
aforementioned Healthcare Realty Trust and PRA Group.
Following a cyclical recovery, diversified agricultural business
The Andersons reached our estimate of intrinsic value so we
sold our position. Profits were taken in Eagle Materials, Martin
Marietta Materials and The Ensign Group (an operator of
nursing and rehabilitative care facilities). We lost our confidence
in the management team of Lundin Mining (a copper miner) as
a poor health and safety culture culminated in a fatality at one
of its mines, hence we sold our holding.
UK Review One year
Portfolio Performance 5.2%
Deutsche Numis UK Smaller Companies (excluding investment
companies) Index
7.2%
FTSE All-Share Index 7.3%
UK equities mirrored the pattern seen elsewhere in the world,
with smaller company stocks, as measured by the Deutsche
Numis index shown above, lagging the FTSE All-Share Index
total return. Our portfolio underperformed, although we regained
some relative performance in the second half of the year.
A weaker underlying economic backdrop following a period
of rising interest rates was bound to impact upon the trading
of companies. Consumer spending slowed and video game
developer Team17 Group saw a slowdown in demand in
common with the sector, after a pandemic-driven boom. Shares
in Treatt, the natural ingredients supplier to the food and
beverages market, fell by 26% as customer de-stocking took
a toll on sales. Luxury watch and jewellery retailer Watches
of Switzerland fell in the second half of the year following a
slowdown in business levels, especially in the UK. Furthermore,
concerns grew that there would be a curtailment of supply of
Rolex watches to Watches of Switzerland after Rolex bought
watch retailer Burcherer. There will always tend to be individual
stock specific issues in any year and, as reported in the half
year review, our decision to back the float of payments services
company CAB Payments back-fired, as the business produced
a major profit warning shortly afterwards prompting us to sell.
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Some of the more cyclical companies in the portfolio saw an
understandable weakness in their results. XP Power shares
fell as the company reported weaker demand from their large
semiconductor customers, necessitating a share placing
to address a weaker balance sheet position. We supported
this fund raise given the potential we see for a recovery in
profitability as the customer de-stocking phase comes to an
end. SIG shares fell too, as the company faced a challenging
backdrop in both commercial and residential construction
markets, leading to downgraded profit forecasts. Specialist
IT staffing and consultancy business FDM Group shares fell
by 40% as the company experienced weaker than expected
demand, meaning that the utilisation of its consultant team was
reduced. In the real estate sector, property valuations came
under pressure from the rise in interest rates and bond yields.
Worst hit was CLS Holdings, the pan European office specialist,
with the company seeing higher vacancy rates and with valuers
taking a cautious approach to the value of less prime office
assets on shorter leases amid the evolution of work practices
post the pandemic.
More positively, the portfolio contained a number of strong
performers. Top of the list was a company which we highlighted
in a case study last year; Ashtead Technology, with the shares
more than doubling, up 140%. This company, which supplies
specialist equipment and services into global offshore energy
and renewables markets, benefitted from a strong backdrop in
both sectors, while profits were also enhanced by an accretive
and sensible acquisition. Kitwave Group, the wholesale
supplier of confectionery and other food and beverages
products into the independent convenience store channel,
continued its strong performance from the previous year,
with its gradual expansion on an organic basis supported by
sensible acquisitions continuing to drive better than expected
profits and the shares rose 49%. Promotional products
company 4imprint Group, featured on page 21 in a case study,
was another winner in the year, up by 49% as its successful
marketing approach continued to deliver excellent results.
While construction markets have been more difficult, Kier
Group shares rose 77%. The company continued to benefit
from its exposure to major infrastructure projects, supporting
a strong order book. This provided good forward visibility, with
the company’s positive cash flow performance over the year
leading to further de-leveraging, allowing for a return to dividend
payments. Shares in building products supplier Genuit were
also up, with the new strategy put in place by the recently hired
CEO bearing fruit and self-help on efficiencies off-setting some
of the volume challenges. The other strong performer in the
sector was door and windows hardware supplier Tyman. The
company announced a recommended offer from a US peer late
in the year. On the subject of takeovers, our performance in
the second half also benefitted from a bid from private equity
for wealth and asset management business Mattioli Woods,
following on from the first half offer for The Restaurant Group.
While we are sad to see high quality smaller companies like
these leave the UK market, their exit is symptomatic of the
valuation attractions within the UK stock market at present.
Other strong performers worthy of mention in the year include
Hollywood Bowl Group, Baltic Classifieds Group, Luceco and
Mercia Asset Management. The former’s results gained as
Hostelworld’s position as the leading travel portal in the global
hostel market is driving strong growth in revenues and profits.
14 | The Global Smaller Companies Trust PLC
trading remained firm and management articulated a longer
term growth plan highlighting more clearly the potential in
the Canadian market for the business. Baltic Classifieds
Group continued to benefit from the growth in demand across
its leading advertising portals in the Baltic states. Lighting
products supplier Luceco rose 53% as management was able
to increase its profit guidance with the de-stocking phase in its
sector coming to an end. Finally, Mercia Asset Management
shares responded well to news that the company had won
significant new regional private equity mandates from the
British Business Bank.
Portfolio activity was driven partly by adding to cyclical stock
holdings where share prices had fallen too far, including Crest
Nicholson and Marshalls in the building sectors, insurer
Lancashire Holdings, specialty chemicals supplier Elementis,
recruiter PageGroup and property company Warehouse REIT.
We always seek new opportunities to keep the portfolio fresh,
and this year we started 10 new holdings. Within financials
we started holdings in alternatives asset manager Foresight
Group, where we see attractive medium term potential for
growth in assets under management as infrastructure and
renewables investment trends continue to look favourable,
and JTC, the fund administration and services group which
continues to execute on building its global footprint. A holding
in NIOX Group was initiated in the year. This is a very well
managed healthcare company that sells FENO (fractional
exhaled nitric oxide) testing devices and consumables. The
business has limited competition and is highly profitable. It
can grow over the long term through further penetration of its
products amongst respiratory specialists.
European Review One year
Portfolio Performance 4.5%
MSCI Europe Ex UK Small Cap Index (net) 4.1%
FTSE All-World Developed Europe ex UK Index 9.5%
The European portfolio had a solid year and outperformed its
benchmark due to good stock selection in the technology and
consumer discretionary sectors. This was partially offset by
adverse stock selection in industrials.
Strong performers within the portfolio included ASM
International and BE Semiconductor Industries, which offer
critical products in the manufacturing chain for semiconductors,
and their shares soared 83% and 57% respectively. Results have
been strong, assuaging fears of these companies being caught
up in the industry-wide slowdown in semiconductor demand
and both were clear beneficiaries of the growth of AI and cloud
computing.
A number of consumer facing companies did well. CTS
Eventim is the world leader in providing ticketing services for
events such as concerts and will be the provider for the Paris
Olympics. Results have shown very good growth following the
difficult period during the COVID 19 related lockdowns. Lotus
Bakeries has seen strong growth for its ‘Biscoff’ related
products such as cookies, especially in the US. They also
successfully passed on higher costs to their customers through
price increases.
In financials, Storebrand benefits from a concentrated
insurance and asset management market in Scandinavia.
This helps client retention (leading to low marketing costs).
Higher interest rates and better solvency enabled Storebrand
to return more cash to shareholders. Long held Ringkjoebing
Landbobank also operates in a concentrated market with only
a small number of competitors in Danish banking. Results
have been very strong and the quality of the loan book is
excellent, enabling high returns on tangible equity. Within
industrials, Accelleron, recently spun out of ABB, rallied 47%.
It has a leading market position in the design and production
of turbochargers that improve engine fuel efficiency. The OMT
acquisition brings them into the fuel injection market, offering
the company another exciting growth avenue. Swimming pool
supplies company Fluidra announced better than expected
results despite de-stocking in the sector, with cost savings also
supporting profits.
On the negative side, the French cognac producer Remy
Cointreau faced a perfect storm last year. We purchased
our holding in early 2023 knowing that the US business was
facing a near-term slowdown but appreciating that China
could pick up the slack. Since purchase, the US continued to
deteriorate and in China growth failed to materialise, with the
company facing the additional headwind of the imposition of
tariffs on imports. Whilst disappointing so far, we believe that
end markets can recover given the quality of the company’s
products and brands. The valuation is also depressed and
so we have kept our holding. Shares of high-pressure pumps
and hydraulic equipment company Interpump fell 18%. The
company suffered from customer de-stocking and challenging
prior year comparisons. Similarly, inventory reduction and
weak bicycle markets thwarted MIPS, the Swedish producer of
helmet safety technology. Coor, the Swedish listed integrated
facilities manager suffered from two contract losses and
margin pressure as they struggled to pass on higher costs to
their clients; the stock was down 41%. SIG Group, the food
and beverage packaging specialist, reported subdued trading
conditions in the Americas. Growth elsewhere however, was
encouraging, especially in the Asia Pacific region. Switzerland
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Surgical Science Sweden equipment is used by clinicians to practice surgical procedures such as a laparoscopy.
based life sciences equipment producer Tecan Group was held
back by the wider funding pressures seen in the biotechnology
industry. Carel Industries, which specialises in components and
technology for air conditioners and refrigerators, suffered from
lower demand in its heat pump and refrigeration businesses.
Schoeller-Bleckmann, the Austrian-based oil field drilling
equipment producer, delivered good results but the market
seems a little concerned about the sustainability of these trends
given increasing competition.
During the year we purchased a holding in Elis, the European
leader in textile rental. The company has strong scale and
local density advantages. It can grow through acquisitions and
continued outsourcing by the industries it serves. In Germany
we invested in Stabilus, the auto component supplier. It is
transforming its end market exposure and now has a meaningful
presence in the fast growing industrial automation sector but
the improved quality of the business does not yet appear to be
recognised by the stock market. A strong brand, good technology
and competitive prices is helping Nordnet (a share trading
platform in Scandinavia) to win new customers. The shares were
bought at an attractive valuation. Surgical Science Sweden,
a market leader in surgical simulation software generates
recurring revenues and high margins. It should see continued
growth from the increased adoption of robotic assisted surgery.
The aforementioned Lotus Bakeries has been a very successful
investment for us. Following good results and positive coverage
from the investment community, the valuation became too
stretched for our liking and so we exited. We also sold Alten,
the French IT consulting business, as demand seems to be
weakening and results showed worryingly high costs. Verallia,
the French glass bottle manufacturer which supplies the wine
trade, has a strong business model but its market backdrop has
become more challenging and we decided to sell. We retained
our holding in its peer Vidrala, where the valuation looked more
attractive. We also recently sold Merlin Properties, reflecting
our concerns about the outlook for the office sector in Spain,
reinvesting the proceeds in Argan, an industrial and logistics
property developer, where the outlook seems brighter.
Japanese Review One year
Portfolio Performance 10.1%
MSCI Japan Small Cap Index (net) 8.6%
Topix Index 18.6%
The Japanese portfolio was ahead of the MSCI Japan Small Cap
Index. Similar to other markets, small caps underperformed
large caps. In the financial year we came to the decision to
sell our holdings in the abrdn SICAV I - Japanese Smaller
Companies Sustainable Equity Fund and the Baillie Gifford
Japanese Smaller Companies Fund. These funds had not
performed well for some time. Following extensive due diligence,
we decided to use the proceeds from these sales to invest in
a portfolio of around 30 individual Japanese smaller company
equities. We have been able to select these stocks directly,
16 | The Global Smaller Companies Trust PLC
drawing on the skills of fund managers focusing on Japanese
equities within Columbia Threadneedle Investments, who have a
strong record of performance in this market. In addition to being
a demonstration of the depth of the investment team within
Columbia Threadneedle Investments, this change of approach
will lower the cost of the management of the Company’s
exposure to Japan as the fee payable to Columbia Threadneedle
Investments is lower than what was being incurred by holding
the two funds which have been sold. We continue to hold
our position in the Eastspring Investments Japan Smaller
Companies Fund which represents just over half of our
Japanese exposure now.
The new Japanese portfolio outperformed its benchmark from
inception in September 2023 through to the financial year end.
Good stock selection in the industrials, consumer discretionary
and real estate sectors was partially offset by adverse stock
selection in the information technology, materials and health
care sectors.
The market warmed to the prospect of a semiconductor
industry-led recovery in earnings at Ebara, a manufacturer of
pneumatic and hydraulic pumps. Niterra manufactures spark
plugs for the auto industry. Its shares did well as the company
continued to win market share. Sanwa Holdings, a producer
of building products, reported strong domestic profit and order
growth. Negative real interest rates in Japan helped the real
estate sector and Tosei was a beneficiary of this. Diversified
trading house Sojitz announced an ambitious medium term
plan that is more shareholder friendly. It also raised its dividend
guidance. Regional banks such as Gunma Bank and Nishi-
Nippon Financial Holdings delivered good results due to benign
credit losses and the monetisation of non-core assets.
The slowdown in China made it a difficult period for Rohto
Pharmaceutical, a manufacturer of pharmaceutical and
cosmetics products. There were concerns over the balance
sheet of INFRONEER Holdings, a provider of infrastructure
construction services after the company made a large
acquisition. Daiwabo Holdings distributes technology products.
The company faced challenging comparatives this year and
found it difficult to maintain the same level of activity as in
the prior year. QOL Holdings (a pharmacy chain operator) and
JustSystems (application software) released disappointing
earning figures, with declines in profit margins in both
businesses. Contracted medical services Solasto found it
difficult to pass on higher IT and labour costs to its customers.
Recent purchases included pharmaceutical wholesale
distributor Toho Holdings. The company has a strong
competitive advantage as a consequence of scale and superior
technology and this should lead to further market share
gains. Kinden designs and builds infrastructure. It provides
end-to-end services to its customers and has a strong project
execution track record. Decarbonisation and rising spending
on infrastructure projects can support earnings growth at
this company. Both of these companies are becoming more
shareholder friendly by increasing distributions. We thought the
investment theses no longer applied for Solasto and personal
care products business MTG so both of those holdings were
sold.
Our holding in Eastspring Investments Japan Smaller
Companies Fund (which represents just over half of our
exposure to Japan) had another good year with value as a style
outperforming growth by a wide margin. The fund outperformed
its benchmark thanks to good stock selection in the
industrials and financials sectors and by avoiding companies
in the technology sector that were impacted by inventory
rationalisation. Mis-pricings still exist in the Japanese market
and the managers have been recently finding good opportunities
within the technology sector and some of the more defensive
parts of the market.
The Company’s combined Japanese portfolio is attractively
valued and well positioned to benefit from the trend of
improving corporate governance in Japan.
Rest of World Review One year
Portfolio Performance 10.8%
MSCI All Country Asia Pacific ex Japan Small Cap Index (net) 16.9%
MSCI EM Latin American Small Cap Index 14.5%
The Rest of World portfolio in the context of the Company
mainly revolves around Asia, incorporating both developed and
emerging markets, although we also have some exposure to
Latin America and other regions outside of the main developed
markets. In the year, returns from Asian small caps were
somewhat better than larger stocks, pleasingly bucking the
global trend, although our portfolio lagged.
We use third party managed collectives to gain exposure to
these markets. Over the year, the best performer of our four
holdings was The Scottish Oriental Smaller Companies Trust.
This delivered a share price return of 11.2%, which would have
been better had the discount not widened quite considerably.
Performance was helped by its large exposure to India, where
share prices have been supported by strong economic growth
and increased investor interest in the stock market. The team
have taken selective profits in this market following the run-up
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in valuations. Stock selection was also good, particularly in the
consumer and real estate sectors. However, the company's
overweight positions in Indonesia and underweight positions in
information technology and Taiwan worked against it in the year.
It continues in the main to provide us with a good exposure
to fast growing and high quality consumer businesses in Asia,
which should compound steadily over the years.
Utilico Emerging Markets Trust’s NAV outperformed emerging
markets and utilities indices but lagged the MSCI Emerging
Markets Small Cap Index in the year. The company has holdings
in several port operators that saw good volume growth in their
markets. Operational performance from its investments in
various electricity, water and telecommunication assets was
also encouraging and exposure to data centre assets has been
built up. An unlisted investment in an electric vehicle-related
business took a write-down and this did impact negatively
on performance. This remains a well-managed portfolio of
infrastructure assets that should continue to benefit from
increased investment in the years to come. This should result
in rising dividends for shareholders over the medium term. As
with The Scottish Oriental Smaller Companies Trust, a widening
in discount held back the share price return for us in the
year under review. Positively, both companies are buying back
shares.
The Pinebridge Asia ex Japan Small Cap Fund delivered good
stock selection in the year. However, this was more than offset
by the fund's overweight and underweight positions in China
and India respectively, which worked against it on a relative
to benchmark basis. This positioning reflects the Pinebridge
investment team’s view that there are many more attractively
valued opportunities presently in China compared to India.
Performance improved as the year progressed and long term
performance remains ahead of benchmark and peers.
The Schroder ISF Global Emerging Markets Smaller
Companies Fund benefited from solid stock selection in Korea,
China and the materials sector in the year. However, the fund
was underweight to the outperforming Indian and Taiwanese
markets and faced individual stock challenges in the technology
sector, leading to portfolio returns that lagged the market.
We continue to keep other funds under review for the Rest
of World portfolio but would want to retain only a short list of
holdings to avoid over-diversification.
Outlook
With economic growth expected to continue at a solid rate,
inflation slowly subsiding towards levels targeted by central
banks and potential cuts in interest rates, the environment for
stock markets looks constructive. Over the last few years, we
have seen global equity market returns driven by the US and
larger companies, particularly in the technology sector. This
has created better relative opportunities in other regions and
sectors and smaller companies in general. We have seen this
sort of behaviour in the past and history tells us that leadership
of markets tends to trend in cycles. We are optimistic that, in
time, equity market returns will broaden to include the faster
growing area of smaller companies and that our shareholders
will benefit from this.
At the same time, the world economy and markets face several
cross-currents and there are many uncertainties. ‘Soft landings’
have historically been difficult to engineer and we do not yet
know if central banks have been successful in this regard.
Inflation may prove persistent because of longer term factors
such as deglobalisation and the increasing bargaining power
of labour and there may still be knock-on effects from a period
of higher interest rates. In addition, upcoming elections create
uncertainty and geopolitical tensions may be here to stay.
Against this backdrop of uncertainty, complacency has crept
into pockets of the equity markets and in some cases investors
are not being adequately compensated for the risks that they
are bearing.
In the past the Company successfully applied the investment
philosophy of taking a long term and conservative approach
to investing in high quality businesses when they became
available at attractive valuations. With the change in Lead
Manager, shareholders should take comfort that this approach
will not change. In the current environment where there is a
wide range of possible outcomes, we are convinced that this
investment philosophy is the right one to follow. In the future,
following on from the partial in-sourcing of the Japanese
portfolio, we will continue to look for opportunities to further
leverage the additional investment capabilities available to us
within Columbia Threadneedle Investments. In a gradual and
pragmatic way, it is also our intention to look to slightly reduce
the number of holdings in the portfolio in order to achieve the
right balance between conviction and sufficient diversification.
We have confidence that over the coming years our diversified
portfolio of businesses is well positioned to successfully
navigate the obstacles that will inevitably appear and to create
additional value for our shareholders.
Nish Patel
Lead Manager
25 June 2024
18 | The Global Smaller Companies Trust PLC
Investment Manager's
Investment Philosophy and Process
One of the attractions of the Company’s investment mandate is
the breadth of opportunities in the listed global smaller companies
market, 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. This can present
anomalies between price and value that we, as disciplined stock
pickers, can take advantage of to deliver superior investment
performance over the long term. Columbia Threadneedle
Investments has significant assets under management and a large
and experienced team of smaller company focused fund managers
with significant support from globally located research analysts. As
a result of this scale, we have excellent corporate access and are
well placed to find exceptional investment opportunities.
Our philosophy towards investing is based on a belief that
investing in high quality smaller companies, run by strong
management teams, where the price we pay for our investment is
attractive, will generate respectable risk adjusted returns for our
shareholders. The team take a long-term, conservative approach
to investing in this faster growth but higher risk asset class.
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 rigorous
analysis of the investee company and face to face meetings or
calls with the management team, sometimes involving visits to
business operations. We want to fully understand the business’s
product or service offering and whether it has sustainable
competitive advantages over peers. In addition, we seek to
understand the industry that potential investments operate in and
the bargaining power of the company’s customers and suppliers.
Evaluation of these factors help us to determine if the company’s
financial returns are durable and if the business has pricing
power; this is particularly important in an environment of higher
inflation. We want companies that we invest in to have good cash
flow characteristics as this indicates superior 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 partner with
is a critical part of the overall investment process. Management
teams of smaller companies have a crucial role to play in the
evolution of their businesses. How they are motivated, rewarded
and allocate capital is key to a company’s development, for
better or for worse. We want to invest alongside management
teams who make good long-term decisions with a track record of
operational 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 therefore need to carefully assess 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 of the business and recently negotiated
transactions of similar businesses in the public or private markets.
In addition, looking at projected cash flows 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 act quickly to buy in 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 de-rated. The depth and
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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 cash flow 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 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 Trust to provide investors
with a well-diversified portfolio. Previous periods of time such as
around the year 2000 and in recent years 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 in both developed and emerging markets.
We monitor the geographic 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 or geopolitics
may provoke us to change geographic allocations, though
individual stock idea flow will tend to be more important in driving
exposure changes.
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 collectives to gain exposure to these markets. As
mentioned earlier in the report, during the last year and following
an extensive period of due diligence, we decided to allocate a part
of our Japanese market allocation to a team of portfolio managers
focussed on Japanese equities within Columbia Threadneedle
Investments. In the year ahead we will continue to keep the
approach to investing in collectives under review and at the same
time monitor the range of alternative funds that could be used
within the portfolio.
• Well articulated model
• Competitive advantages
• Free cash flow generative
• Pricing power/scale
• Favourable industry structure/
conditions
• Financial strength
• Diversified customer/supplier/
product set
• ESG and Sustainability
• Trends in metrics important
• Range of valuation measures
used
• Repeatability of returns
• Conviction in value appreciation
High
Quality
Business
Attractive
Price
Strong
Management
Source: Columbia Threadneedle Investments
Quality
• Capable operators
• Rational
• Good capital allocators
• Aligned interests
• Prudent
• Transparent with shareholders
20 | The Global Smaller Companies Trust PLC
WEX was founded in Maine in 1983, it is a leading provider
of niche payment processing services for commercial and
government customers in the transportation, health benefits and
travel industries. The company’s fuel payment cards enable over
600,000 customers with large vehicle fleets to closely monitor
and reduce their expenditure on fuel.
WEX has invested heavily in technology and it has a long track
record of successfully managing complex payment networks for
its customers. Customers find WEX’s technology platform easy to
use and value the data and analytics that it produces. The trust
that WEX has built with its customers over the years means that a
high proportion of the company’s revenues are recurring in nature.
The business’s very high profit margins have persisted over time
and this is testament to its strong competitive position and the
significant barriers that exist for a would-be rival to enter into this
industry.
We initially met the company on a research trip in the US in 2010
when WEX was a smaller but highly cash generative business
with ambitions to replicate their initial success in fuel payment
cards in other verticals with similar characteristics, such as the
administration and payment of employee health benefits and
corporate travel expenses.
Investment Case Study - WEX (North America)
When we invested in WEX almost ten years ago, the quality of
the business model was very apparent, however, at the time we
believed that the stock market had underappreciated the growth
opportunity ahead of the company and that the shares were
undervalued as a consequence. The management team had
a strong track record and its strategy to bolt new geographies
and sectors on to the company’s already established technology
infrastructure seemed sensible and likely to work. We invested in
the company at a 6% free cash flow yield, which we thought was
attractive given the durability of the business model and the long
term growth prospects on offer.
Since our initial investment, WEX’s revenues and EPS have
more than tripled. The electronic payments industry is growing
at the expense of legacy manual processes and this provides
a tailwind for WEX for years to come. Over the long term WEX’s
mobility business should continue to grow at a mid single
digit percentage rate from the addition of new customers and
products. Newer areas such as health benefits and travel offer
faster organic growth as these areas are more complex and are
underpenetrated. WEX also has the opportunity to acquire smaller
competitors in the company’s current markets.
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4imprint Group is mostly a US business that happens to be listed
on the London Stock Exchange; it was founded in 1985 as Nelson
Marketing in Indiana. It is a supplier of branded promotional
products that are given away by companies to employees and
potential or existing customers. These could be flasks, sweatshirts
or screwdriver sets branded with their customer’s logo. 4imprint
Group designs, markets and sells the products, however the
products themselves are manufactured, branded and distributed
by third party suppliers.
4imprint Group is by far the market leader in selling to SMEs and
has consistently grown its market share over time because of the
company’s very strong competitive advantages that are mostly
related to scale. The business offers a wider range of products
to its customers than its peers. Additionally, because of the
company’s significant purchasing power in a fragmented supply
chain it can sell these products at very competitive prices. It is
also the only business in its industry large enough to advertise
on national television. Despite this strong position, the company’s
market share is only 5% in this very fragmented industry, leaving
plenty of runway for further gains. In contrast to many high growth
businesses that consume cash, 4imprint Group’s capital light
model has a history of generating free cash flow growth in excess
of sales growth. The long tenured management team have a
strong track record of operational execution and capital allocation.
We have owned the shares since 2015. When we initiated our
holding in 4imprint Group, we believed that the shares were out
of favour and undervalued because based on the company’s
history there was a misperception that it was a cyclical business
with an onerous pension scheme. However, we discovered that
the business had largely addressed these concerns. A shift in
the marketing mix away from paper catalogues meant that the
company could now be much more responsive in cutting costs if it
saw a deterioration in demand. In addition, the management team
used the company’s prodigious cash generation to strengthen
its pension position. Since purchase the company’s sales have
compounded at over 13% pa, well in excess of the industry.
With more focussed marketing, profit margins have expanded
significantly. Dividends have grown and the company’s valuation
has rerated to a more appropriate level. 4imprint Group has
rewarded us with a total return over 800% over the last 9 years.
We think there are plenty of growth opportunities left for the
company to pursue in the years ahead.
Investment Case Study - 4imprint Group (UK)
22 | The Global Smaller Companies Trust PLC
Acceleron Industries was originally part of the Swiss industrial
company ABB and was spun out through an IPO in October 2022.
It develops, produces and services turbochargers and related
components for engines in several off-highway sectors including
marine, power, oil and gas and rail. The company’s products are
good for the environment in that they lead to lower usage of fossil
fuels and a reduction in engine emissions.
Acceleron Industries pioneered turbocharger technology in 1924
and ever since then has continued to invest in research and
development to further improve its offering and lower overall
engine running costs for its customers. With approximately 40%
to 60% market shares across the range from low to medium
speed and high speed gasoline verticals, Acceleron Industries
is by far the leader in the off-highway market. This is a lower
volume, but more customised segment of the turbocharger
industry. The business has highly visible and recurring revenues
from its installed base of 180,000 turbocharger units that require
regular servicing through the company’s global service network.
The quality of Acceleron Industries' business model shows up in
consistently high profit margins and returns as well as strong cash
flow generation.
The shares were undervalued at the time of our purchase because
of technical factors as ABB shareholders sold their holdings in
Acceleron Industries following the IPO. Given the company serves
the fossil fuel powered engines industry, we believe there were
also some investor misconceptions about the growth potential of
the business and we were able to buy a holding at an attractive
multiple of cash flow.
Decarbonisation and regulations related to energy efficiency
create reliable growth tailwinds behind the company. In addition,
management have an ambitious growth strategy that involves
entering into the adjacent high speed diesel market, geographic
expansion, development of new products and services and
opportunistic acquisitions. As management execute on these
exciting growth initiatives we have a high level of confidence that
the company will be more valuable in the future.
Investment Case Study - Acceleron Industries (Europe)
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Our approach
We believe that good financial outcomes are more likely to be
achieved if we fully understand the risks and opportunities that
relate to the markets in which we invest. Integrating material ESG
considerations into our investment research and stewardship can
help inform our investment decision-making. We need to ensure
the companies we invest in have a robust approach to managing
financially material environmental and social risks. We also expect
good governance practices which we believe better positions
issuers to manage risks, identify opportunities, and deliver
sustainable growth.
There are two strands to the Board’s approach to responsible
investment:
• The Company’s own responsibilities on matters such as
governance; and
• The impact the Company has through the investments that are
made on its behalf by its Manager.
The Company’s compliance with the AIC Code of Corporate
Governance is detailed in the Corporate Governance Statement
on pages 52 to 53. In addition, the Principal Policies statement
on pages 41 to 43 notes the Company’s policies towards board
diversity and inclusion, integrity and business ethics and the
Modern Slavery Act 2015.
The Board recognises that the most material way in which the
Company can have an impact is through responsible ownership of
its investments. The Company has not set out to be an investment
trust with any ESG or sustainable characteristics, however the
Manager engages actively with the management of investee
companies to encourage high standards of ESG practice.
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 towards responsible investment. Engagement
in the first instance rather than simply divesting or excluding
investment opportunities is also part of this approach.
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 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. The Manager is a signatory to the United
Nations Principles for Responsible Investment (‘UNPRI’) under
which signatories contribute to the development of a more
sustainable global financial system. As a signatory the Manager
aims to incorporate the consideration of financially material ESG
factors into its investment processes.
ESG and the Investment Process
During 2023, as part of the integration of the Manager's business
with Columbia Threadneedle Investments, the Manager undertook
an extensive project to join all investment teams together on a
single Order Management System (‘OMS’). This was completed
in October 2023 and helped to expand the availability of the
Manager's ESG integration tools, through the combined OMS.
These tools use data from many sources to enhance and inform
the integration of ESG considerations into investment research,
portfolio construction and risk monitoring, by giving a clear picture
of the ESG considerations that are financially relevant to different
investment opportunities. Key tools include:
• ESG materiality ratings;
• Sustainable Development Goals (‘SDG’) mapping tool;
• Net Zero Framework;
• Good governance model;
• Exclusions framework; and
• Controversy rating.
These tools mark a starting point for the Manager’s ESG
assessment and the Responsible Investment team at the
Manager hosted training sessions on them as well as thematic
Responsible Investment
We believe investing responsibly is fundamental to long-term wealth creation. The Company has not set
out to be an investment trust with any ESG or sustainability characteristics, however we have a Manager
that integrates the consideration of financially material environmental, social, and governance (‘ESG’)
factors into its research and investment process and encourages stronger ESG practices to be adopted by
issuers through its engagement and voting activities.
24 | The Global Smaller Companies Trust PLC
Engagement
Corporate Governance 44.74%
Labour Standards 26.31%
Climate Change 11.84%
Human Rights 9.21%
Business Conduct 3.95%
Environmental Stewardship 3.95%
issues raised at
50 companies
across 7
countries
76
During the year ended 30 April 2024, the Responsible Investment
team engaged with the management of 50 companies in the
Company's portfolio, across 7 countries. The most common topics
for discussion were corporate governance, labour standards and
climate change. Examples of this engagement follow.
ESG topics. The Fund Manager works with the Responsible
Investment analysts to ensure that those performing the work
on individual investment opportunities for the Company 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.
Portfolio case study: Bodycote
Where numerous industrial companies have now moved into the
role of middlemen, in our view better energy management can
be a valuable differentiator from competitors. We expect that
this will become gradually more noteworthy as customers look
to decarbonise their supply chain as GHG (Greenhouse Gases)
emissions targets extend to consider Scope 3. In some cases
companies will therefore opt to outsource energy inefficient parts
of their processes.
Bodycote is a priority company for stewardship on
decarbonisation. It has a valuable role to play in the industrial
transition story. Bodycote offers third-party heat treatment
services for customers in the energy, general industrial and
aerospace and defence sectors. Bodycote reports that it can
deliver its clients 10-40% reductions in emissions compared
to if the customers had performed the process themselves.
As regulatory pressures and stakeholder expectations around
decarbonisation grow, we expect that companies will increasingly
assess their supply chains for chances to reduce emissions.
In our view service providers like Bodycote, which can evidence
emissions reductions through their offerings, could find
themselves well-positioned to capitalize on this.
Thermal spray coating of a component in a Bodycote
facility.
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Engagement examples in the year:
Engagement
Martin Marietta Materials
Martin Marietta Materials is a natural resource-based building materials company that supplies aggregates through its network of quarries and distribution yards
and also provides cement and downstream products like mixed concrete and paving services.
The Manager spoke to the CEO of Martin Marietta Materials about its climate strategy. The company has recently published its first scope 2 emissions targets,
disclosed its Carbon Disclosure Project water and climate statistics for the first time, and set an ambition to be net-zero emissions overall. These are clear steps
in the right direction from the management. The Manager also discussed the implications of the sale of the Hunter cement plant to CRH, which now leaves the
company with only one cement asset in Texas. The Manager was curious to hear that Martin Marietta Materials say it is a marginal environmental positive to no
longer hold the Hunter asset; as it will make the net-zero implementation more straight forward.
The Manager encouraged more transparency around how the business is aligning its capital strategy at its last Texas cement plant with its net-zero trajectory. The
Manager also suggested setting water targets.
Encompass Health
Encompass Health is an owner and operator of inpatient rehabilitation hospitals in the United States. The Manager spoke with Encompass’ General Counsel and
Chief Investor Relations about a number of ESG topics.
The Manager first asked whether the company would consider conducting a double materiality assessment to give more structure to its ESG strategy, to which
the company informed us they will not. The company confirmed they will update their sustainability disclosures in the next few months. We reiterated it is normal
practice to release an annual sustainability report, rather than ad-hoc updates and the company stated it will take this into consideration.
The Manager commended the company’s disclosure on DEI, in particular the comparison between its workforce diversity and the communities they serve. Overall,
Encompass’ staff match the demographics it serves, which the Manager views as positive. The company also shared that they will disclose their first EEO-1 form
this year - something the Manager has engaged with the company on in previous conversations and we congratulated them on this step. Finally, the company
also shared that its employee engagement results have significantly outperformed the healthcare benchmark, which we view as positive.
Genus
Genus is a UK-based animal genetics company – Genus supplies cattle and pig farmers with breeding animals that possess desirable characteristics, enabling
them to produce quality meat and milk. The Manager spoke to Genus' CFO and Global Lead Environment and Sustainability Manager on a number of social
topics.
The Manager encouraged the company to disclose its policy on antimicrobial resistance (AMR) – while the company is very restrictive when it comes to
prescribing antibiotics (e.g. they do not use growth antibiotics) the Manager considers it important for them to be more transparent on this point given the
significant health threat it represents.
The company also shared more information on its employee surveys and efforts on DEI. The Manager encouraged the company to provide stakeholders with more
high-level information on employee satisfaction in light of the materiality of human capital management in high-skilled sectors such as Genus'. The Manager
also encouraged the company to increase efforts on inclusion and equity as we believe that the company could benefit from additional DEI targets across
different levels of the organization beyond its target for women in management.
Finally, the Manager discussed the company's human rights due diligence process with regard to modern slavery, which is a high risk area in agriculture. The
company hires farm staff directly and not through hiring agencies and in the Manager's view has adequate processes in place to check for modern slavery and
human trafficking. The Manager considered this call very constructive with the company receptive of our feedback.
26 | The Global Smaller Companies Trust PLC
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 fifth 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 continues to improve, and this year data was available for
92% of the UK, European and North American portfolios by weight.
The weighted average carbon intensity for these regional portfolios
was 161.58 vs the combined relevant benchmarks carbon intensity
of 117.08.
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 2024, the carbon intensity of
the holdings was 27% less, 48% less and 80% 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; Eagle Materials, Martin
Marietta Materials and Kirby.
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
calls with Martin Marietta Materials as outlined earlier above.
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.
In 2024 the Manager will continue focusing on its priority
engagement themes: climate change; environmental stewardship;
public health; labour standards; human rights; corporate governance
and business conduct. The Manager will identify and prioritise
companies for engagement based on a number of financially
material factors including: the impact of ESG factors; the investment
team’s and research analysts’ judgement and expertise; previous
engagement track record and level of exposure.
As noted previously, the Manager’s Corporate Governance
Guidelines set out 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 2023. This report is available at
www.columbiathreadneedle.com. We expect the Company’s shares
to be voted on all holdings where possible. During the year, the
Manager voted at 196 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
45% of all meetings. With respect to all items voted, the Manager
supported over 91% of all management resolutions.
One of the most contentious voting issues remained
compensation. Either by voting against or abstaining, the
Manager did not support approximately 16% of all management
resolutions relating to pay, often due to either poor disclosure or a
misalignment of pay with long-term performance.
Voting on portfolio investments
(1) Carbon intensity – this is measured in tons of CO2 equivalent (i.e. including the basket of six Kyoto 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).
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Thirty Largest Holdings
30 April
2024
30 April
2023
% of total
investments
Value
£m
1 1
Eastspring Investments Japan Smaller Companies Fund Japan
Fund providing exposure to Japanese smaller companies.
5.0 45.5
2 2
Pinebridge Asia ex Japan Small Cap Fund Rest of World
Fund providing exposure to Asian smaller companies.
3.8 34.4
3 4
Schroder ISF Global Emerging Markets Smaller Companies Fund Rest of World
Fund providing exposure to Emerging Markets smaller companies.
3.7 33.3
4 5
The Scottish Oriental Smaller Companies Trust Rest of World
Investment company providing exposure to Asian smaller companies.
3.5 32.0
5 6
Utilico Emerging Markets Trust Rest of World
Investment company focusing on utility and infrastructure companies in Emerging Markets.
2.5 22.8
6 7
Eagle Materials United States
A US producer of construction materials, including cement, aggregates, concrete, gypsum wallboard and recycled
paperboard.
2.1 19.1
7 10
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.
2.1 18.9
8 9
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.
1.4 12.8
9 13
Graphic Packaging United States
A vertically integrated producer of printed paperboard cartons for food and beverage products.
1.4 12.7
10 11
Wheaton Precious Metals United States
A precious metals company receiving production royalties from mines operated by third parties.
1.4 12.6
11 8
LKQ Corp United States
A distributor of alternative car parts.
1.3 11.8
12 14
Brown & Brown United States
Insurance broker, now the fifth largest global independent company in the market.
1.3 11.7
13 25
Curtiss-Wright United States
Producer of mission critical components, serving the aerospace, defence and power industries.
1.2 11.4
14 26
Boot Barn Holdings United States
US retailer of western and work wear.
1.2 11.0
15 15
Martin Marietta Materials United States
Aggregates and cement producer that serves the construction industry.
1.2 10.7
28 | The Global Smaller Companies Trust PLC
30 April
2024
30 April
2023
% of total
investments
Value
£m
16 18
Avnet United States
Distributor of computer products, semiconductors and electronic components.
1.2 10.5
17 19
WSP Global Canada
Canada based global engineering consultancy business.
1.1 10.1
18 24
Encompass Health United States
Leading US provider of post acute care in facility and home based settings.
1.1 9.9
19 21
WEX United States
An operator of payment networks.
1.1 9.8
20 22
Spectrum Brands United States
A global consumer products company that through its subsidiaries sells personal care items, household appliances,
specialty pet supplies and lawn and garden products.
1.0 9.3
21 36
CDW United States
Information technology products and services provider.
1.0 9.0
22 16
Amdocs United States
Outsourced IT services provider to telecommunications sector.
0.9 8.4
23 27
Essential Properties Realty Trust United States
US based real estate company focused on service sector based tenants.
0.9 7.8
24 17
Molina Healthcare United States
Managed care business providing health insurance in the US under government programs.
0.9 7.8
25 44
Kitwave Group United Kingdom
Wholesaler and distributor of packaged food products.
0.8 7.7
26 33
Webster Financial United States
A Connecticut, USA based mid sized bank that focuses on commercial lending.
0.8 7.6
27 35
Bristow United States
Provider of helicopter services for global energy and air sea rescue markets.
0.8 7.5
28 63
Ashtead Technology United Kingdom
Oil field services equipment sales and rentals.
0.8 7.0
29 43
4imprint Group United Kingdom
Supplier of imprinted promotional merchandise.
0.7 6.7
30 47
Hayward Holdings United States
Producer of residential swimming pool related equipment, systems and components.
0.7 6.6
The value of the thirty largest equity holdings represents 46.9% (30 April 2023: 46.0%) of the Company’s total investments.
Report and Financial Statements 2024 | 29
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
List of Investments
30 April 2024
Quoted investments Holding
Value
£’000s
NIOX 3,343,470 2,340
On The Beach Group 1,363,764 1,969
OSB Group 1,147,625 4,712
PageGroup 603,167 2,691
Paragon Banking Group 393,204 2,811
Pebble Group 3,830,895 2,184
Pets At Home 646,295 1,888
Qinetiq Group 902,829 3,102
Rathbones Group 142,139 2,328
Redde Northgate 809,593 3,113
Ricardo 712,680 3,236
RWS Holdings 778,861 1,343
Shaftesbury Capital 4,122,816 5,553
SIG 2,919,953 764
Sirius Real Estate 3,686,284 3,585
Spire Healthcare 956,976 2,354
Team17 Group 838,141 2,137
Telecom Plus 201,303 3,495
Treatt 545,102 2,652
Trifast 2,587,636 1,993
TT Electronics 1,434,418 2,560
Tyman 1,118,415 4,216
Vesuvius 722,794 3,473
Victrex 138,337 1,751
Warehouse REIT 2,653,795 2,120
Watches of Switzerland 257,182 871
Workspace Group 835,492 4,157
Xaar 1,376,658 1,611
XP Power 163,561 1,796
YouGov 215,695 1,877
Zotefoams 884,126 3,448
TOTAL UNITED KINGDOM 225,000
EUROPE
AUSTRIA
Schoeller-Bleckmann 54,152 2,116
Total Austria 2,116
DENMARK
Ringkjoebing Landbobank 25,975 3,509
Royal Unibrew 44,968 2,726
Total Denmark 6,235
FRANCE
Argan 17,537 1,102
Elis 187,412 3,380
Lectra 91,800 2,501
Planisware 82,714 1,447
Remy Cointreau 18,320 1,399
30 April 2024
Quoted investments Holding
Value
£’000s
UNITED KINGDOM
4imprint Group 107,345 6,741
accesso Technology Group 355,419 2,346
Ascential 1,512,873 4,732
Ashtead Technology 858,357 7,013
Auction Technology 436,315 2,177
Baltic Classifieds Group 1,869,709 4,347
Begbies Traynor Group 2,479,195 2,678
Bodycote 349,543 2,429
Boku 1,794,329 3,104
Breedon Group 1,053,423 3,813
Bytes Technology 595,610 2,908
Clarkson 57,337 2,225
CLS Holdings 2,079,829 1,724
Crest Nicholson 1,554,833 2,889
Dalata Hotel Group 728,317 2,608
Dominos Pizza Group 925,027 3,014
Dowlais 1,833,225 1,498
Elementis 2,425,670 3,415
Essentra 1,186,292 2,095
FDM Group 504,173 1,739
Foresight Group Holdings Ltd 597,024 2,621
Gateley Holdings 1,311,229 1,573
GB Group 1,071,059 3,080
Genuit 829,448 3,621
Genus 108,368 1,942
Globaldata 1,337,952 2,823
Gooch & Housego 391,341 2,152
Hilton Food Group 232,636 2,131
Hollywood Bowl Group 1,279,552 4,363
Hostelworld Group 1,699,536 2,736
Ithaca Energy 1,678,910 1,988
JTC 288,947 2,468
Just Group 3,916,675 4,058
Keller Group 81,153 896
Kier Group 3,522,837 4,728
Kitwave Group 1,995,966 7,684
Lancashire Holdings 754,371 4,602
Loungers 1,416,587 3,400
Luceco 2,030,173 3,354
Marshalls 755,233 2,028
Mercia Asset Management 13,202,826 4,357
Moneysupermarket.com 827,539 1,779
Morgan Advanced Materials 1,201,969 3,774
Next 15 Group 543,512 4,875
Nexteq 1,561,225 2,342
Strategic Report
30 | The Global Smaller Companies Trust PLC
30 April 2024
Quoted investments Holding
Value
£’000s
Total Sweden 19,415
SWITZERLAND
Accelleron 87,901 2,743
Inficon Holding 1,185 1,327
Kardex 11,579 2,460
Siegfried Holding 3,402 2,613
SIG Group 109,855 1,760
Tecan Group 8,465 2,410
Total Switzerland 13,313
TOTAL EUROPE 104,099
NORTH AMERICA
CANADA
SSR Mining 55,457 236
WSP Global 83,600 10,129
Total Canada 10,365
UNITED STATES
Amdocs 125,485 8,408
American Vanguard 466,925 4,251
Avnet 268,208 10,459
Boot Barn Holdings 129,259 10,990
Bristow Group 357,401 7,510
Brown & Brown 179,953 11,719
Catalent 74,378 3,316
CDW 46,758 9,032
Cognyte Software 1,014,382 5,509
Curtiss-Wright 56,107 11,361
Dine Brands Global 52,108 1,836
Eagle Materials 95,179 19,057
Encompass Health 149,250 9,940
Essential Properties Realty Trust 372,137 7,828
FB Financial 129,998 3,803
Frontdoor 106,657 2,613
Genpact 201,944 4,956
GrafTech International 1,760,902 2,405
Grand Canyon Education 62,565 6,497
Graphic Packaging 616,525 12,728
GXO Logistics 140,559 5,575
Hayward Holdings 609,143 6,606
Healthcare Realty Trust 568,140 6,452
Jefferies Financial Group 159,689 5,492
Kirby 216,913 18,905
Kosmos Energy 1,401,147 6,345
LKQ Corp 341,545 11,775
Martin Marietta Materials 22,911 10,747
MaxLinear 232,843 3,862
Molina Healthcare 28,553 7,799
30 April 2024
Quoted investments Holding
Value
£’000s
Total France 9,829
GERMANY
CTS Eventim 56,408 4,003
Gerresheimer 31,137 2,680
Rational 4,228 2,878
Stabilus 48,972 2,438
Symrise 31,454 2,698
Total Germany 14,697
IRELAND
Bank of Ireland Group 364,208 3,124
Glanbia 152,435 2,322
Total Ireland 5,446
ITALY
Azimut 131,695 2,784
Carel Industries 141,031 2,281
Davide Campari 195,807 1,573
Interpump 81,493 2,856
Total Italy 9,494
NETHERLANDS
ASM International 5,087 2,586
BE Semiconductor Industries 11,706 1,255
IMCD 16,419 1,994
Total Netherlands 5,835
NORWAY
Atea 216,511 2,205
Nordic Semiconductor 188,946 1,675
Storebrand 409,702 3,159
TGS 146,762 1,346
Tomra Systems 121,265 1,204
Total Norway 9,589
SPAIN
Fluidra 162,118 2,747
Vidrala 40,737 3,423
Viscofan 38,453 1,960
Total Spain 8,130
SWEDEN
Avanza 85,094 1,484
Engcon 247,889 1,627
Hexpol 245,260 2,247
Indutrade 105,927 1,985
Karnov 611,685 2,938
MIPS 50,416 1,385
Nordnet 136,095 1,961
Sdiptech 132,369 2,730
Surgical Science Sweden 129,490 1,475
Thule Group 69,231 1,583
Report and Financial Statements 2024 | 31
Strategic Report
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
30 April 2024
Quoted investments Holding
Value
£’000s
QOL Holdings 131,200 1,183
Riken Keiki 33,800 667
Rohto Pharmaceutical 53,500 836
Sangetsu 86,100 1,464
Sankyo 155,000 1,350
Sanwa Holdings 71,800 943
SK Electronics 20,700 340
Sojitz 93,200 1,915
Sundrug 57,700 1,344
SWCC 38,200 809
Toho Holdings 40,600 775
Tokyo Steel 146,300 1,241
TOMY 131,200 1,682
Tosei 150,000 1,873
WingArc1st 96,400 1,311
TOTAL JAPAN 86,896
REST OF WORLD
Pinebridge Asia ex Japan Small Cap Fund 51,345 34,412
Schroder ISF Global Emerging Markets Smaller
Companies Fund 221,600 33,335
The Scottish Oriental Smaller Companies Trust 2,418,586 32,046
Utilico Emerging Markets Trust 10,101,596 22,830
TOTAL REST OF WORLD 122,623
TOTAL INVESTMENTS 910,498
The number of investments in the portfolio is 213 (2023:194).
30 April 2024
Quoted investments Holding
Value
£’000s
MSC Industrial Direct 69,031 5,030
Nomad Foods 352,800 5,086
Plymounth Industrial REIT 394,962 6,583
PRA Group 302,849 5,752
Prosperity Bancshares 116,118 5,747
QuidelOrtho 66,280 2,146
Skechers USA 94,545 4,987
Spectrum Brands 142,545 9,320
Standex International 41,870 5,778
Stericycle 90,886 3,245
The Ensign Group 135,153 12,775
U.S. Physical Therapy 79,592 6,452
United Bankshares 206,665 5,357
Vail Resorts 22,562 3,414
Viavi Solutions 528,109 3,332
Vitesse Energy 266,058 4,709
Webster Financial 217,002 7,592
WEX 58,340 9,850
Wheaton Precious Metals 302,025 12,574
World Kinect 213,754 4,010
Total United States 361,515
TOTAL NORTH AMERICA 371,880
JAPAN
Amano 79,000 1,522
Daiwabo Holdings 104,200 1,451
Eastspring Investments Japan Smaller Companies
Fund 2,206,160 45,533
Ebara 23,900 1,588
Fujikura 183,700 1,363
Gunma Bank 219,400 1,068
Hosiden 133,200 1,332
INFRONEER Holdings 58,300 413
Justsystems 50,200 705
Kinden 52,400 801
Kokuyo 143,400 1,960
Macnica Holdings 21,700 775
Nichias 35,900 790
Nifco 27,200 527
Nippon Television Holdings 39,400 460
Nishi-Nippon Financial Holdings 199,800 2,021
Niterra 80,000 2,099
Nomura Real Estate Holdings 88,600 1,992
NSD 95,800 1,500
PAL Group Holdings 131,100 1,263
32 | The Global Smaller Companies Trust PLC
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 Financial Statements or specified third-party data providers.
Assets
at 30 April
£’000s 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Net assets (before debt) 441,086 555,092 591,602 767,979 872,704 904,220 761,515 1,051,029 1,000,086 911,462 921,525
Debenture and loans 10,000 – – – 24,000 34,052 35,000 43,521 54,782 52,027 51,463
Convertible Unsecured Loan Stock – 38,129 38,410 34,697 21,873 15,549 – – – – –
Net assets 431,086 516,963 553,192 733,282 826,831 854,619 726,515 1,007,508 945,304 859,435 870,062
NAV with debt at par per share
(i)
at 30 April
pence 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
NAV with debt at par per share
(i)
84.2 97.3 99.8 128.3 138.4 141.7 120.3 175.0 172.0 163.7 175.9
NAV with debt at fair value per share n/a n/a n/a n/a n/a n/a 119.7 174.9 172.8 165.7 178.1
NAV (diluted) per share
(i)
n/a 97 99.5 126.4 136.9 140.6 n/a n/a n/a n/a n/a
NAV total return % – 5 years 34.6
NAV total return % – 10 years 136.6
Share Price
at 30 April
pence 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Mid-market price per share
(i)
84.0 98.0 100.1 127.3 137.5 134.6 111.0 168.6 156.2 144.6 160.2
Share price high
(i)
88.0 102.5 102.4 129.9 141.5 149.5 150.0 168.6 177.0 162.2 160.8
Share price low
(i)
74.5 78.5 85.9 94.7 126.5 122.0 78.8 104.2 142.6 122.4 129
Share price total return % – 5 years 27.2
Share price total return % – 10 years 114.4
Revenue return after tax
for the year ended 30 April
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Available for ordinary shares – £’000s 4,461 5,659 6,452 7,839 9,448 10,623 10,493 7,416 10,241 12,620 14,560
Return per share
(i)
0.93p 1.09p* 1.18p* 1.38p* 1.59p* 1.76p* 1.73p 1.26p 1.82p 2.34p 2.84p
Dividends per share
(i)
0.80p 0.97p 1.07p 1.23p 1.44p 1.65p 1.70p 1.75p 1.84p 2.30p 2.81p
(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 2.13p at the 2024 AGM.
Ten Year Record (unaudited)
Report and Financial Statements 2024 | 33
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
Strategic Report
Performance
(rebased to 100 at 30 April 2014)
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
NAV per share 100 115.2* 118.2* 150.1* 162.6* 167.0* 142.2** 207.7** 205.2** 196.8 ** 211.5**
Mid-market price per share 100 116.7 119.2 151.5 163.7 160.2 132.1 200.7 186.0 172.1 190.7
Revenue return per share 100 117.2 126.9 148.4 171.0 189.2 186.0 135.5 195.7 251.6 305.4
Dividends per share 100 121.3 133.8 153.8 180.0 206.3 212.5 218.8 230.0 287.5 351.3
(1)
RPI 100 100.9 102.2 105.8 109.4 112.7 114.4 117.8 130.9 145.8 150.6
* diluted
** NAV with debt at fair value
(1)
Subject to approval of the final dividend of 2.13p at the 2024 AGM.
Costs of running the Company (ongoing charges/TER)
for the year ended 30 April
Expressed as a percentage of average net assets 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Ongoing charges*
excluding performance fees 0.76% 0.79% 0.85% 0.84% 0.83% 0.79% 0.75% 0.78% 0.75% 0.79% 0.78%
including performance fees 0.78% 1.08% 0.85% 0.86% 0.83% 0.79% 0.75% 0.78% 0.75% 0.79% 0.80%
Total expense ratio
excluding performance fees 0.50% 0.53% 0.51% 0.62% 0.60% 0.59% 0.59% 0.58% 0.58% 0.60% 0.61%
including performance fees 0.50% 0.74% 0.76% 0.62% 0.60% 0.59% 0.59% 0.58% 0.58% 0.60% 0.61%
Gearing
at 30 April 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Effective gearing (1.3%) 4.8% 4.7% 3.4% 5.1% 4.6% (0.6%) 3.8% 4.6% 5.2% 4.7%
Fully invested gearing 2.2% 7.4% 6.9% 4.7% 5.6% 5.8% 4.8% 4.3% 5.8% 6.1% 5.9%
Note: definitions of Alternative Performance Measures and a Glossary of Terms are provided on pages 102 to 107.
34 | The Global Smaller Companies Trust PLC
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 Manager 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 54.
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 18 to 22 and a full list of investments appears
on pages 29 to 31.
Furthermore, as a listed closed-end investment company we are
not constrained by asset sales to meet redemptions and therefore
the Company is particularly well suited to long-term investment in
smaller, less liquid companies. 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 re-appointment is in the interests
of shareholders. Columbia Threadneedle Investments 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 in
2023, across each reporting module, it scored in line or above
the investment management median. The Manager 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 23
to 26.
Purpose, Strategy and Business Model
Report and Financial Statements 2024 | 35
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
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 38, 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 re-appointment decision was
made are set out on page 50. The management fee is based on
the value of the Company’s net assets, thus aligning the Manager’s
interests with those of shareholders.
Managing Risks and Opportunities
We seek 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 portfolio; 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
40 and, on page 38, 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 use 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 pages 41 to 43, 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 39 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
From the start of August 2005, Peter Ewins was the Lead
Manager on behalf of our Manager, 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. Peter will retire this summer
and with effect from 1 May 2024 Nish Patel succeeded Peter
as the Lead Manager. Nish was appointed joint Lead Manager,
alongside Peter with effect from 1 January 2024 and has worked
closely with Peter for a long period of time, managing assets for
the Company for more than 15 years. 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,
European and Japanese 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
on the optimal communication of the Company’s investment
proposition. This year, we have continued to work with the
Manager to enhance the public profile of the Company across
different media channels. 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 has continued to actively market its 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 for the management of our
assets, we also recognise that relationship as being fundamental
from a stakeholder perspective and as a working partnership in
Strategic Report
36 | The Global Smaller Companies Trust PLC
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 February included a review of the areas critical to the
future success of the Company including investment strategy
and marketing. The relationships that our Manager has with the
companies in which we invest are of key importance and we
outline our approach on pages 18 to 22.
Albeit not in the traditional sense, we see our shareholders
as clients 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 savings plans and the Child Trust Fund
and Junior ISA accounts. The Child Trust Funds have now begun to
mature, meaning that, as each child turns 18, they have full control
over their holdings. As these accounts reach 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.
Once 18, the young investor receives communications on options
available to them, and then quarterly reminded with their valuation
statement. 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 1. 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 Company's 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.
Report and Financial Statements 2024 | 37
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Chairman’s StatementOverview Auditor’s Report
Promoting Success
Section 172 Statement
Section 172(1) of the Companies Act 2006 (‘Section 172’)
requires that a Director must act in the way that they consider, in
good faith, would be most likely to promote the success of the
Company for the benefit of its members (i.e. shareholders) as
a whole and, in doing so, have regard (amongst other matters)
to the likely consequences of any decision in the long-term; the
interests of the Company’s shareholders; the need to foster the
Company’s business relationships with suppliers, customers
and others; the impact of the Company’s operations on the
community and the environment; the desirability of the Company
maintaining a reputation for high standards of business conduct;
and the need to act fairly as between members of the Company.
The Directors have continued to act to promote the success of
the Company for the benefit of its shareholders as a whole and in
so doing, they have had regard to the matters set out in Section
172. 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 34, we have no employees, premises, assets
or operations. Details of our key stakeholders are noted on pages
35 and 36. 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 17. On
pages 23 to 26 we have again reported 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 £16.5m) of our £35m multi-currency revolving credit
facility. The blended rate on this facility and the £35m private
placement notes 2039 is 3.1%, 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 again seen our investment income grow, allowing us to
once again increase the dividend significantly. This extends our
record to 54 years of consecutive annual increases.
We bought back 30.2m shares in the year with the discount
being over 5% throughout this period. We would only re-issue
shares from treasury if the share price is at 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 or
premium 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.
38 | 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 recent integration of the Manager's
business with Columbia Threadneedle Investments and longer-
term risks, such as climate change. The consequences for the
Company's strategy, business model, liquidity, future prospects
and long term viability 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 57 and in note 23
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 reviews and monitors the services provided and the
effectiveness of service providers’ processes through the review
of internal controls reports and 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
its own 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 resources 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 40.
Columbia Threadneedle Investments 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,
private clients and institutions 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 22.2%. 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 buy-back 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 40.
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 although it did fall during the period. During the course of the
year, the Manager has continued to increase marketing activity over a number of channels
and has enhanced 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 continued higher prevailing discount level the risk is considered to have remained
heightened during the year.
to the financial statements. Any emerging risks that are identified
and that are considered to be of significance are included on
the Company’s risk assessment together with any mitigations.
These principal and emerging risks are reviewed regularly by
the Audit and Management Engagement Committee and by the
Board. Russia's invasion of Ukraine and increased conflict in the
Middle East have added to the continuing economic and market
uncertainty and political instability, with elections in the UK and
US also on the horizon. 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
Principal and Emerging Risks
Unchanged throughout the year.
Unchanged throughout the year.
Unchanged throughout the year but
this risk has remained heightened.
Report and Financial Statements 2024 | 39
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Chairman’s StatementOverview Auditor’s Report
and viability were those relating to 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 35.
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 2024, 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 ‘Long-Term Viability: Five Year Horizon’.
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 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.
Long-Term Viability: Five Year Horizon
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 reviews and monitors the services provided and the
effectiveness of service providers’ processes through the review
of internal controls reports and 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
its own 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 resources 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 40.
Columbia Threadneedle Investments 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,
private clients and institutions 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 22.2%. 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 buy-back 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 40.
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 although it did fall during the period. During the course of the
year, the Manager has continued to increase marketing activity over a number of channels
and has enhanced 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 continued higher prevailing discount level the risk is considered to have remained
heightened during the year.
40 | The Global Smaller Companies Trust PLC
The Board uses a number of performance measures to assess its performance in meeting
the Company’s objective of securing a high total return. This is driven by NAV and share price
performance, the Premium/Discount to NAV, Ongoing Charges and Dividend Growth, as well as
regional performance against local benchmarks set out on page 9. Detailed commentary on
these measures can be found in the Chairman’s Statement and Lead Manager’s Review. The key
performance indicators are set out below.
Key Performance Indicators
(1) See Alternative Performance Measures on pages 102 and 104
(2) See Glossary of terms on page 105 for explanation of Benchmark
Dividend growth
1 Year % 3 Years % 5 Years %
The Board aims to continue its progressive dividend policy
Dividends 22.2 60.6 70.3
This compares the Company’s dividend growth rate to the rate of inflation.
Retail Prices Index 3.3 27.9 33.6
Source: Columbia Threadneedle Investments and Refinitiv Eikon
Ongoing charges
(1)
(as a percentage of average net assets)
At 30 April
% (excluding
performance fees of
underlying funds)
% (including
performance fees of
underlying funds)
The Board’s policy is to control the costs of running the Company
2024
0.78 0.80
This measures the running costs of the Company (including the ongoing costs of underlying
funds and where applicable their performance fees) as a percentage of the average net
assets.
2023
0.79 0.79
2022
0.75 0.75
2021
0.78 0.78
2020
0.75 0.75
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
2024
(10.0)
This is a measure of the divergence between the share price and the NAV per share. The
Company issues shares or sells shares from treasury 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.
2023
(12.7)
2022
(9.6)
2021
(3.6)
2020
(7.3)
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
9.0 5.5 34.6
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
11.3 5.6 39.8
Share price total return
12.7 (1.0) 27.2
Source: Columbia Threadneedle Investments and Refinitiv Eikon
Report and Financial Statements 2024 | 41
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Chairman’s StatementOverview Auditor’s 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 change to the investment policy of the Company
can only be made with the prior approval of shareholders by way of
an ordinary resolution at a general meeting.
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.
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 17 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.
Investment Objective
The Company’s investment objective is to invest in smaller
companies worldwide in order to secure a high total return.
Investment Policy
The Company pursues this investment objective by investing in a
large number of stocks in various industry sectors and geographic
locations. There are no specific sector or geographical exposure
limits. Whilst the Company has a global orientation, its objective is
to find attractively valued investment opportunities wherever they
may be and it is therefore not constrained to mandatory weightings
per geographic region.
The Company invests mainly in quoted equities, including those
quoted on the Alternative Investment Market. It is able to invest
in other types of securities or assets, including collective funds.
Investments in unquoted securities can be made with the prior
approval of the Board. No transaction can be made which would
result in a holding of the Company exceeding 10% of the value of
the total portfolio. Derivative instruments, such as futures, options,
and warrants, can be used for efficient portfolio management up
to a maximum of 10% of the NAV at any one time.
The Company can borrow in either sterling or foreign currencies.
Effective gearing is limited, in normal circumstances, to a
maximum of 20% of shareholders’ funds. The Company’s portfolio
can also be hedged for currency movements.
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%.
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.
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.
42 | The Global Smaller Companies Trust PLC
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 38. The consistent application of this
policy has enabled the payment of an increased dividend every
year for the past 54 years.
Discount/Premium
The Board operates a share buy-back 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 they are trading at a premium to the NAV per share, with a
view to moderating the premium and any associated volatility. As
with share buy-backs, such issues are only made when accretive
to the NAV.
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 Board is conscious of the diversity targets set
out in the FCA Listing Rules and the Board complies with the AIC
Code of Corporate Governance in appointing appropriately diverse,
independent non-executive Directors who set the operational
and moral standards of the Company. 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, physical ability, educational, professional or socio-economic
background. The Board is committed to maintaining the highest
levels of corporate governance in terms of independence and
would normally expect the Directors to serve for a nine-year
term, although this may be adjusted for reasons of flexibility and
continuity. As each of the Audit and Management Engagement
Committee and Nomination Committee comprise all of the
Directors, the diversity policy applied to the Board generally
applies equally to each of the Company's Committees.
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.
In accordance with Listing Rule 9.8.6R (9), (10) and (11) the Board
is required to disclose on a ‘comply or explain’ basis whether it
has met the following targets: (i) at least 40 per cent. of the Board
should be women; (ii) at least one of the senior board positions
should be held by a woman; and (iii) at least one member of the
Board should be from a minority ethnic background. The Board
has provided the information set out in the following tables in
relation to diversity; the data for which has been obtained through
the completion of questionnaires by the individual Directors. As is
shown, the Company has met the targets.
Board Gender as at 30 April 2024
(1)
Number
of board
members
Percentage of
board members
Number of senior
positions on the
Board
(3)
Men 3 50% –
Women 3 50%
(2)
2
(4)
Not Specified
/Prefer not to say
– – –
(1) The Company has opted not to disclose against the number of Directors in executive
management as this is not applicable for an investment trust which does not have the
roles of CEO or CFO.
(2) This meets the Listing Rules target of 40%.
(3) The senior positions on the Board consist of the Chairman and the Senior Independent
Director. The position of the Chairman of the Audit and Management Engagement
Committee is held by a woman however this is not currently defined as a senior
position under the Listing Rules.
(4) This meets the Listing Rules target of at least one of the senior positions on the Board
being held by a woman.
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Chairman’s StatementOverview Auditor’s Report
Board Ethnic Background as at 30 April 2024
(1)
Number
of board
members
Percentage
of board
members
Number of senior
positions on the
Board
(3)
White British or other
White (including
minority white groups)
4 66.6% 2
Mixed/Multiple
Ethnic Groups
1 16.7%
(2)
–
Asian/Asian British 1 16.7%
(2)
–
Black/African/
Caribbean/Black
British
– – –
Other ethnic group,
including Arab
– – –
Not Specified/Prefer
not to say
– – –
(1) The Company has opted not to disclose against the number of Directors in executive
management as this is not applicable for an investment trust which does not have
the roles of CEO or CFO.
(2) This meets the Listing Rules target that at least one board member should be from a
non-white ethnic background.
(3) The senior positions on the Board consist of the Chairman and the Senior
Independent Director.
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 34. The
Manager is an organisation committed to respecting human rights
and stands against all forms of slavery and human trafficking. In
the year under review, 35.5% of engagements with the companies
in the Company's portfolio raised social themes, including human
rights and labour standards. 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
25 June 2024
44 | The Global Smaller Companies Trust PLC
Directors
The Board of Directors comprise left to right: Anja Balfour, Graham Oldroyd, Nick Bannerman, Bulbul Barrett, Randeep Grewal and Jo Dixon
Report and Financial Statements 2024 | 45
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Chairman’s StatementOverview Auditor’s Report
Governance Report
All the Directors are members of the Audit and Management Engagement Committee and the Nomination Committee. With the
exception of Jo Dixon and Randeep Grewal who are both non-executive directors of Bellevue Healthcare Trust PLC, no other Director
has a shared directorship elsewhere with other 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 and was formerly chair of Schroder
Japan Trust plc until December 2022.
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.
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 MCF
Limited and he is a non-executive director of Tunstall Integrated
Healthcare Holdings Limited and Videndum 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.
Bulbul Barrett
Appointed to the Board on 1 December 2023.
Experience and contribution: Bulbul was previously Head of the
Equities Product Group at DBS Bank Ltd London Branch and
has over 30 years’ experience with corporates and investment
managers, having formerly been Head of Sales, MD Asian
Equities at HSBC, Executive Director, Asian Equities at Goldman
Sachs, Director of Asian Equities at UBS and Associate Director,
Asian Equities at WI Carr.
Other appointments: Bulbul is a Governor of Bradford College.
Randeep Grewal
Appointed to the Board on 1 December 2023.
Experience and contribution: Randeep has extensive experience
as a fund manager and analyst, having held the roles of Portfolio
Manager at Trium Multi-Strategy Hedge Fund, Senior Portfolio
Manager at F&C Asset Management, Analyst at ICAP Equities
and Senior Analyst and Portfolio Manager at Tudor Capital. Prior
to the above, Randeep was an NHS Doctor, having trained as a
vascular surgeon.
Other appointments: Randeep is a non-executive director
and chairman of Bellevue Healthcare Trust plc and is a non-
executive director of The Monks Investment Trust PLC and Hox
Therapeutics Limited.
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 chartered accountant and
has a strong accounting and financial background. She also
brings leadership skills from her other non-executive director
and chairmanship roles. She was formerly chairman of JPMorgan
European Growth & Income plc.
Other appointments: Jo is a non-executive director of Alliance
Trust PLC and Bellevue Healthcare Trust PLC.
46 | The Global Smaller Companies Trust PLC
Articles of Association may only be amended by the passing of a
special resolution at a general meeting of the Company.
Taxation
As set out on page 43 and in note 7 to the financial statements,
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 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.
UK Financial Sanctions and Prevention of the
Facilitation of Tax Evasion
The Board is fully committed to complying with all legislation,
regulation and relevant guidelines including those relating to the
UK financial sanctions regime in the context of the Company's
business and also the UK’s Criminal Finance Act 2017, designed
to prevent tax evasion in the jurisdictions in which the Company
operates. Professional advice is sought as and when deemed
necessary.
Greenhouse Gas Emissions and Taskforce for Climate-
Related Financial Disclosures ('TCFD')
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 23.
In accordance with the regulations set by the Financial Conduct
Authority, a disclosure specific to the Company’s portfolio will
be published on the Manager’s website. This report will provide
Statement Regarding the Annual Report and Financial
Statements
The Directors consider that, following a detailed review and advice
from the Audit and Management Engagement Committee, the
Annual Report and Financial Statements, taken as a whole, is
fair, balanced and understandable and provides 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
Annual Report and Financial Statements for the purposes of this
assessment. The market outlook for the Company can be found
on pages 6, 7 and 17. Principal and emerging risks can be found
on page 38 with further information on financial risks in note 23
to the financial statements. 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 financial
statements. Subject to shareholder approval at the Annual
General Meeting (‘AGM’) (Resolution 4), the recommended final
dividend of 2.13 pence per share is payable on 20 August 2024
to shareholders on the register as at the close of business on 12
July 2024. This, together with the interim dividend of 0.68 pence
per share, makes a total dividend of 2.81 pence per share and
represents an increase of 22.2% over the comparable 2.30 pence
per share paid in respect of the previous year. See note 9 to the
financial statements.
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. The Company's
The Directors submit the Annual Report and Financial Statements of the Company for the year ended
30 April 2024. Applying the principles of the AIC Code, the Chairman’s Statement on corporate
governance, the Directors’ biographies, the Reports of the Nomination Committee and Audit and
Management Engagement Committee and the Directors' Remuneration Report all form part of this
Directors’ Report.
Directors’ Report
Report and Financial Statements 2024 | 47
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
data on the portfolio’s carbon footprint and the largest individual
contributors to it by individual issuer and sector as well as the
overall net zero alignment of the portfolio.
Under Listing Rule 15.4.29(R), the Company, as a listed closed-
end investment company, is exempt from complying with the TCFD.
Accounting and Going Concern
The financial statements, starting on page 72, 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 financial statements. The unqualified
auditor’s opinion on the financial statements appears on page 66.
Shareholders will be asked to approve the adoption of the Report
and Financial Statements 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 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
Auditor
Each of the Directors confirms that, to the best of their knowledge
and belief, there is no information relevant to the preparation of
the Annual Report and Financial Statements of which BDO LLP
(‘BDO’ or the ‘auditor’) 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.
Re-appointment of Auditor
BDO has indicated its willingness to continue in office as auditor
to the Company and a resolution proposing its re-appointment and
authorising the Audit and Management Engagement Committee
to determine its remuneration for the ensuing year will be put
to shareholders at the AGM (Resolutions 10 and 11). Further
information in relation to its re-appointment can be found on
page 59.
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 2024 there were 620,533,770
ordinary shares of 2.5p each (‘ordinary shares’) in issue, of which
125,835,954 were held in treasury. As at 20 June 2024 (being the
latest practicable date before publication of this report) the number
of ordinary shares held in treasury was 133,195,494.
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 financial statements. 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 Buy-back of Shares
At the annual general meeting held on 28 July 2023, 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 2024 and 20 June 2024, 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 30,210,332 shares with
a nominal value of £755,258 were bought back by the Company
during the year, to be held in treasury, at prices between 129.11
pence and 161.12 pence and at an average price of 148.22 pence
for a total consideration, including stamp duty and commissions, of
£44,777,000. The shares bought back represented 5.76% of the
shares in issue (calculated exclusive of any shares held in treasury)
at 30 April 2023. The share buybacks in the year enhanced the
NAV per share by approximately 0.91 pence. A further 7,359,540
shares have been bought back and placed into treasury since the
year end.
Governance Report
48 | The Global Smaller Companies Trust PLC
Voting Rights and Proportional Voting
As at 20 June 2024 there were 620,533,770 ordinary shares
listed, of which 133,195,494 shares were held in treasury.
Therefore the total voting rights in the Company as at that date
were 487,338,276.
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 54% 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 668,000 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 2024 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 £16.5m) 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.
Further information is provided in notes 12 and 14 to the financial
statements.
Remuneration Report
The Directors’ Remuneration Report, which can be found on
pages 62 to 64 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
at the AGM on 28 July 2023. 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 recent 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. It is noted that
Randeep Grewal, who was appointed to the Board on 1 December
2023, and Jo Dixon have an overlapping external directorship as
both are non-executive directors of Bellevue Healthcare Trust plc,
another listed company. Jo Dixon will retire at the conclusion of
the Company's forthcoming AGM. The Nomination Committee
has assessed this and concluded that neither this, nor any other
external directorships held by the Directors, present a conflict or
impacts their independence. 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
February 2024 to consider strategic issues and also met regularly
in private sessions, without any representation from the Manager.
In addition to its scheduled annual meeting, the Nomination
Committee met on several other occasions as part of the process
to recruit two new Directors.
Report and Financial Statements 2024 | 49
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
Directors’ attendance
Board
Audit and
Management
Engagement
Committee
Nomination
Committee
No. of meetings
6 3 1
Anja Balfour
(1)
5 2 1
Nick Bannerman 6 3 1
Bulbul Barrett
(2)
3 2 n/a
Jo Dixon 6 3 1
Randeep Grewal
(2)
3 2 n/a
Graham Oldroyd
(1)
6
3
1
David Stileman
(3)
4 2 1
(1) From 8 November 2023 until 18 February 2024, Graham Oldroyd was the interim
chairman in place of Anja Balfour
(2) Appointed on 1 December 2023
(3) Retired on 11 December 2023
Election/Re-Election of Directors
The names of the Directors of the Company, along with their
biographical details, are set out on page 45 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.
With the exception of Bulbul Barrett and Randeep Grewal, who
were both appointed on 1 December 2023 and David Stileman
who retired on 11 December 2023, all Directors held office
throughout the year under review.
In accordance with the Company’s Articles of Association, any
Director appointed by the Board shall hold office only until the next
Annual General Meeting and shall then be eligible for election.
Accordingly, Bulbul Barrett and Randeep Grewal will retire at the
AGM, being the first such meeting following their appointment and,
being eligible, offer themselves for election (Resolution 7 and 8).
In accordance with the AIC Code, the Board has agreed that all
Directors will retire annually. Jo Dixon is not standing for re-election
and will retire at the conclusion of the forthcoming Annual General
Meeting. Accordingly, Anja Balfour, Nick Bannerman and Graham
Oldroyd will retire at the AGM and, being eligible, offer themselves
for re-election. (Resolutions 5, 6 and 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 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
With effect from 1 May 2023, a tiered element to the management
fee was introduced. The Manager is paid a management fee at the
rate of 0.55% per annum of the Company’s net asset value up to
£750m, excluding any investments made in third party collective
funds and at the rate of 0.5% per annum (up to 30 April 2023:
0.55%) of the Company’s net asset value in excess of £750m,
Governance Report
50 | The Global Smaller Companies Trust PLC
excluding any investments made in third party collective funds.
Any investments made in third party collective funds are subject
to a charge of 0.275% per annum of their market value. The
management fee is calculated and paid monthly in arrears.
The amount charged in the year under review was £4,198,000, a
decrease of 3% from the £4,329,000 charged in the year to 30
April 2023.
Note 4 to the financial statements 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 and its peers, 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 17.
Manager Re-appointment
The annual evaluation that took place in April 2024 included
presentations from the Joint Lead Managers 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
2024.
In light of the long-term investment performance of the Manager
and the quality of the overall service provided, the Audit and
Management Engagement Committee 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 Viewing
The Company’s AGM will be held at The Chartered Accountants
Hall, 1 Moorgate Place, London EC2R 6EA, on Tuesday 13 August
2024 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/the-
global-smaller-companies-trust-plc/register.
We encourage shareholders who cannot attend 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.
Resolution 12 gives the Directors the necessary authority to allot
securities up to an aggregate nominal amount of £1,218,345.68
(48,733,827 ordinary shares), being equivalent to approximately
10% of the Company’s issued share capital (calculated exclusive of
the shares held in treasury) as at 20 June 2024, 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 2025 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 £1,218,345.68 (representing approximately
10% of the issued ordinary share capital of the Company as at
20 June 2024, 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 41 to 43 or should any other favourable opportunities
arise to the advantage of shareholders. 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.
Report and Financial Statements 2024 | 51
Governance Report
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
Authority for the Company to Purchase its Own Shares
(Resolution 14)
At the annual general meeting held on 28 July 2023 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 2024
was 52,654,956 shares or 10.64% 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 73,052,007
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 policies set out on pages 41 to 43. Under the Act, the
Company is permitted to hold its own shares in treasury following
a buy-back, 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) 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 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. This authority will expire at the conclusion of the
annual general meeting to be held in 2025 or, if earlier, 15 months
from the passing of the resolution. 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 receive a form of proxy
for use at the AGM. You will also have the option of lodging your
proxy vote electronically at www.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.
Form of Direction and Proportional Voting
If you are an investor in any of the Manager’s Savings Plans you
will receive 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 48.
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 6 August 2024, 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
25 June 2024
52 | The Global Smaller Companies Trust PLC
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.
Composition of the Board and Committees
The Board comprises six 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
diversity targets set out in the FCA Listing Rules as shown on
page 42.
All Directors are members of the Audit and Management
Engagement Committee and the Nomination Committee and this
is noted under the Directors’ biographies on page 45, 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 57.
The Board considers that, given its size, it would be unnecessarily
burdensome to establish separate committees which did not
include the entire Board and believes that this enables all
Directors to be kept fully informed of any issues that arise.
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. Also, there are two main differences.
In the AIC Code, both the nine year limit on chair tenure and the
restriction on the chair of the Board being a member of the Audit
Committee have been removed.
Anja Balfour, the Chairman, was appointed to the Board on 1 June
2015 and then as Chairman on 30 July 2020 and at the date
of this report has now served for more than nine years. As set
Dear Shareholder,
On page 45 you will find summary 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 1. 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 62 to 64 and in note 5 to the financial
statements.
The Company has appointed the Manager to manage the
investment portfolio 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 35 and in the Report of the Audit
and Management Engagement Committee in respect of risk
management and internal control on page 57. 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 35.
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
Chairman’s Statement
on corporate governance
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Governance Report
out in the Report of the Nomination Committee, a succession
plan for the Board is in place to ensure continuity of corporate
knowledge and culture of the Board. The tenure policy relating to
the Directors, which includes the Chairman, is set out on page 60.
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. By reporting against the AIC Code, the Company
meets its obligations in relation to the UK Code (and associated
disclosure requirements under paragraph 9.8.6 of the Listing
Rules) and as such does not need to report further on issues
contained in the UK Code which are not relevant to it as an
externally managed investment company.
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. As
explained in the Report of the Audit and Management Engagement
Committee, the Chairman of the Board is also a member of this
Committee, as permitted by the AIC code. Therefore, with the
exception of the need for an internal audit function, which is
addressed on pages 57 and 58, 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
25 June 2024
54 | The Global Smaller Companies Trust PLC
Company Purpose
Information relating to the Company’s purpose, values and culture
can be found on page 34.
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 41 to 43) 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 Manager,
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.
Currently, Jo Dixon is the Senior Independent Director and 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. Jo Dixon will retire following
the conclusion of the forthcoming AGM on 13 August 2024
and Graham Oldroyd has agreed to fulfil this role, following her
retirement.
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 60 its
role and key responsibilities. The composition of the Board and
Committee members is set out in the Directors’ details on page
45. The Company’s diversity policy is set out on page 42.
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 using a questionnaire and was followed by one-to-one
discussions between the Chairman and each of the Directors. The
performance of the Chairman was included as part of the process
and led separately by the Senior Independent Director. The findings
of the evaluations were reviewed and discussed 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 56 to 59.
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
Applying the principles of the AIC code
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satisfied itself that the Annual Report and Financial Statements
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 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 pages 57 and 58.
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 35 to 36.
Remuneration
The Board’s remuneration policy is explained on page 62. 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
25 June 2024
Governance Report
56 | The Global Smaller Companies Trust PLC
• Whether to change the Company’s current policy by
establishing its own Internal Audit function;
• The ISAE/AAF Report from the Manager and similar
controls reports from the Custodian and the Company’s
Share Registrar;
• 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.
Following the change of ownership of the Manager in November
2021, the integration with Columbia Threadneedle Investments
is now almost complete, but the Audit and Management
Engagement Committee has continued to monitor it from a
risk management and internal control perspective. A critical
milestone was the move to a new order management system
(‘OMS’), Aladdin, which was successfully completed in October
2023. The Audit and Management Engagement Committee has
received confirmation from the Manager that the systems of
risk management and internal control have operated effectively
throughout the year under review and thereafter to the date of this
report.
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 65. On broader control policy issues,
the Committee has considered, and is satisfied with, the Code of
Conduct and the Anti-Bribery and Anti-Corruption Policy to which
the Manager and its employees are subject. The Committee has
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
financial statements, the preparation of the half-yearly financial
statements 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 representatives from the Manager, including
the trust accountant, Head of Investment Trusts, Operational
Risk Management and the Joint Lead Managers 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 financial statements and the unaudited half-yearly report
and financial statements, including advice to the Board as to
whether the annual report and financial statements 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 ‘Long-Term Viability:
Five Year Horizon’ statement;
• 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;
Report of the Audit and
Management Engagement Committee
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also considered the Manager’s Whistleblowing Policy, 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 Accountant and she is currently audit
committee chairman of other listed companies. Jo Dixon will retire
following the conclusion of the forthcoming AGM and it is intended
that Nick Bannerman, who is also a Chartered Accountant, will
then become Chairman of the Committee. The other members of
the Committee have a combination of financial, investment and
business experience through the senior posts held throughout
their careers and all have a wide experience of the investment
trust sector. Details of the members can be found on page 45
and the Committee’s terms of reference can be found on the
Company's website as shown on page 1.
Management of Risk
The Manager's Operational Risk Management team 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
without delay.
A key risk 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 Committee and Board has a robust process
for considering the resulting risk matrix at 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
38 with additional information given in note 23 to the financial
statements. 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 ‘Long-Term
Viability: Five Year Horizon’ Statement on page 39 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 administrator
of the Manager's 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 Manager's risk management infrastructure and
Report on Internal Controls for the period to 1 October 2023 (the
‘ISAE/AAF Report’). The Committee also received confirmation
from the Manager that, subsequent to this date, on 2 October
2023, the move to the Aladdin OMS was completed and there
had been no other significant changes to the control environment.
The ISAE/AAF Report had been prepared by the Manager for
all of its investment trust clients in accordance with ISAE No.
3402 and AAF 01/20. The ISAE/AAF Report from independent
service auditor KPMG LLP sets out the Manager’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
Audit and Compliance Committee, which received regular
internal audit reports. 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
Governance Report
58 | The Global Smaller Companies Trust PLC
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 its 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 and the Registrar and were satisfied that there were no
material exceptions.
Through the reviews and reporting arrangements set out 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.
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 financial statements. Likewise, the Committee
reviewed the disclosure and description of Alternative Performance
Measures provided on page 102 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 2024 to discuss the final draft of the
Annual Report and Financial Statements, 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
Significant Judgements and Issues considered by the Committee for the year ended 30 April 2024
Matter Action
Investment Portfolio Valuation
Although the Company’s portfolio of investments
is predominantly invested in listed 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.
The Committee reviewed the Manager's ISAE/AAF Report on internal controls which is reported on by
an independent external service Auditor. 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 Manager's ISAE/AAF Report, as previously referred to, and the Custodian's
semi-annual report on internal controls which are reported on by independent external service Auditors.
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 the Manager’s ISAE/AAF Report, as previously referred to, indicated that there
were no control failures in the year. The Committee reviewed and approved at the interim and annual
accounts reporting meetings, any 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.
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an unqualified audit report in respect of the Annual Report and
Financial Statements. 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 Annual Report and
Financial Statements 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 is expected to evolve further in coming years.
Consequently, the Committee recommended to the Board that
the Annual Report and Financial Statements were in its view, fair,
balanced and understandable in accordance with accounting
standards, regulatory requirements and best practice.
The Independent Auditor’s 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 66 to 71.
Auditor Assessment, Independence and Re-appointment
The Committee reviews the re-appointment of the auditor every
year and has been satisfied with the effectiveness of BDO’s
performance on its audit of the Company’s financial statements.
BDO has 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 the Manager, the Committee is
satisfied that BDO will continue to provide effective independent
challenge in carrying out its responsibilities. Its fee was £47,000,
excluding VAT (2023: £42,000).
Following professional guidelines, the Senior statutory auditor
rotates at least every five years. Following an audit tender process
in 2019, BDO was subsequently appointed as Auditor for the year
ended 30 April 2020. Peter Smith, the current senior statutory
auditor was engaged for the first time during the year ended 30
April 2020, which was BDO’s first year as Auditor. Accordingly,
the year ended 30 April 2024 represents Peter Smith’s fifth and
final year as the Senior Statutory auditor and BDO’s fifth year as
Auditor.
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.
The Committee confirms that the Company is in compliance
with the requirements of the Statutory Audit Services for Large
Companies Market Investigation (Mandatory Use of Competitive
Tender Processes and Audit Committee Responsibilities) Order
2014. This order relates to the frequency and governance of
tenders for the appointment of the external auditor and the setting
of the policy on the provision of non-audit services.
Non-audit Services
The Committee regards the continued independence of the
external auditor 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 auditor is 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 auditor.
In particular, the Committee has a policy that the accumulated
costs of all non-audit services sought from the auditor 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 2024.
Committee Evaluation
The activities of the Committee were considered as part of the
Board evaluation process as noted on page 54. 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
25 June 2024
Governance Report
60 | 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. It takes into account the ongoing requirements of the
Company and the need to have a balance of knowledge, experience,
skill ranges, diversity (including gender, race, ethnicity, religion, sexual
orientation, age, physical ability, educational, professional and socio-
economic background) and independence and considers 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 election/re-election
of those Directors standing for election/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 and it is chaired by Anja
Balfour. The terms of reference of the Committee can be found on
the Company's website.
Diversity and Tenure
The Board’s policy on diversity and inclusion, including the diversity
targets set out in the Listing Rules, is set out on page 42. Director
Report of the Nomination Committee
searches are undertaken in accordance with this objective and
policy with the recruitment process open to a diverse range of
candidates.
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. Anja
Balfour and Jo Dixon were both appointed to the Board in 2015 and
at the date of this report have now served for more than nine years.
Two new Directors were appointed during the financial year to 30
April 2024 as part of the Board's succession plan to enable future
retirements while ensuring continuity of corporate knowledge and
culture of the Board. The Board is committed to maintaining the
highest levels of corporate governance in terms of independence
and, once the Board's current succession plan is complete, would
expect that in future the Chairman and Directors will serve for no
more than a nine-year term, but this may be adjusted for reasons of
flexibility and continuity.
Appointments and Succession Planning
Appointments of all new non-executive Directors are made on a
formal basis, using professional search consultants as appropriate,
with the Nomination Committee agreeing the selection criteria and
the method of recruitment, selection and appointment.
During the year a search for new non-executive Directors was
undertaken. An external search agency, Cornforth Consulting
(‘Cornforth’) which has no connection to the Company or the
Directors, was engaged to assist with the process. The search
took place with clearly defined candidate criteria produced by the
Committee based on merit and objective criteria. The selection
process was thorough and took into consideration the applications
that came through Cornforth and interviews with the shortlisted
candidates. The services provided by Cornforth were for the sole
purpose of recruiting the eventual appointees and there were no
other business relationships in place with that company. Following
the recruitment process, it was agreed to appoint Bulbul Barrett
and Randeep Grewal to the Board with effect from 1 December
2023.
Report and Financial Statements 2024 | 61
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
Governance Report
David Stileman and Jo Dixon were both appointed to the Board
in 2015. David Stileman retired with effect from 11 December
2023 and Jo Dixon will retire at the conclusion of the Company's
forthcoming AGM on 13 August 2024. The Board approved a
recommendation from the Committee that following the retirement
of Jo Dixon, Nick Bannerman will become the Chairman of the Audit
and Management Engagement Committee and Graham Oldroyd,
the Senior Independent Director.
Committee evaluation
The activities of the Nomination Committee were considered as
part of the Board evaluation process as reported on page 54.
Anja Balfour
Nomination Committee Chairman
25 June 2024
62 | The Global Smaller Companies Trust PLC
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 last approved by shareholders at the Company’s
annual general meeting held on 28 July 2023 when 92.88% of
the total votes received were cast in favour of the resolution and
7.12% were against. 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 (Resolution 2).
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 2024 to the levels shown
in the following table.
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 at the
Company's registered office during normal business hours and
will be available for inspection at the Annual General Meeting.
The Company also maintains Directors' and officers' liability
insurance.
The dates on which each Director was appointed to the Board are
set out under their biographies on page 45. 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. With the exception of Bulbul Barrett
and Randeep Grewal, who were appointed with effect from 1
December 2023, the Directors were last re-elected at the annual
general meeting held on 28 July 2023 and, with the exception of
Jo Dixon, will stand for election or re-election at the AGM to be
held on 13 August 2024. David Stileman retired as a Director with
effect from 11 December 2023.
Annual Statement
As Chairman of the Board, I confirm that effective 1 May 2023,
for the year to 30 April 2024, the amounts paid to Directors
increased by £1,500 per annum for the Chairman, £1,000 per
annum for the Audit and Management Engagement Committee
Chairman and £1,000 per annum for each of the other Directors.
Future Policy Table
Following a review of the level of Directors’ fees for the year to
30 April 2025, the Board concluded that the amounts paid to
Directors would increase by £1,500 per annum for the Chairman
and the Audit and Management Engagement Committee
Chairman and £1,000 per annum for the other Directors.
Based on this, Directors’ fees for specific responsibilities for the
financial year to 30 April 2025 are set out in the following table.
No additional fees are payable for membership of the Nomination
Committee.
Directors' Remuneration Report
Report and Financial Statements 2024 | 63
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
Annual fees for Board Responsibilities
Year ended 30 April
2025
£’s
2024
£’s
2023
£’s
Chairman of the Board 50,500 49,000 47,500
Chairman of the Audit and Management
Engagement Committee 40,500 39,000 38,000
Director 32,000 31,000 30,000
*The Senior Independent Director is paid an additional £1,500 per annum.
Annual Percentage Change
The following table sets out the annual percentage change in
Directors’ fees for each Director who served in the financial
year under review:
Annual Percentage Change in Directors’ Remuneration for the
years to 30 April
Directors’ Name 2024 2023 2022 2021 2020
Anja Balfour
(1)(5)
-7.6 4.4 3.4 47.4 -7.5
Nick Bannerman
(2)
3.3 7.1 4.0 70.9 n/a
Bulbul Barrett
(3)
n/a n/a n/a n/a n/a
Jo Dixon 2.5 11.3 7.6 3.5 7.7
Randeep Grewal
(3)
n/a n/a n/a n/a n/a
Graham Oldroyd
(2)(5)
20.3 7.1 4.0 70.9 n/a
David Stileman
(4)
n/a 7.1 4.0 0.0 0.0
(1) Appointed as Chairman of the Board with effect from 31 July 2020
(2) Appointed to the Board on 1 October 2019
(3) Appointed to the Board on 1 December 2023
(4) Retired from the Board on 11 December 2023
(5) From 8 November 2023 until 18 February 2024, Graham Oldroyd was the interim
chairman in place of Anja Balfour.
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 2024 2023
Anja Balfour 51,816 51,696
Nick Bannerman 34,000 30,000
Bulbul Barrett 12,406 n/a
Jo Dixon 20,000 20,000
Randeep Grewal 6,213 n/a
Graham Oldroyd 40,134 27,597
Total 164,569 159,293
As at the latest practical date before the publication of this report,
there have been no changes to the Directors’ shareholdings. The
Directors have no other share interests or share options 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 AGM
held on 28 July 2023, shareholders approved the Remuneration
Report in respect of the year ended 30 April 2023, with 92.28% of
the votes cast in favour of the resolution and 7.72% against.
Relative Importance of Spend on Pay
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
2024
£’000s
2023
£’000s
%
Change
Aggregate Directors’
Remuneration
196.4 178.0 10.3
Aggregate Dividends paid
to shareholders
12,186.0 10,305.0 18.3
Aggregate cost of ordinary
shares repurchased
44,777.0 35,804.0 25.1
Governance Report
64 | The Global Smaller Companies Trust PLC
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. From 1 May 2023, the weighting in the Benchmark
calculation has been adjusted, making the new Benchmark: 20%
Deutsche 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.
20242014 2015 20232016 2017 2018 2019 2020 2021 2022
90
110
130
150
170
190
210
230
250
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 net
(80%) and the Deutsche Numis UK Smaller Companies (excluding invest-
ment companies) Index (20%)).
Source: State Street
Fees for services to the Company
Fees
£’000s (audited)
Taxable Benefits
(1)
£’000s (audited)
Total
£’000s (audited)
Anticipated
fees
(2)
Year ended 30 April 2024 2023 2024 2023 2024 2023 2025
Director
Anja Balfour
(3)
43.9 47.5 13.7 3.1 57.6 50.6 50.5
Nick Bannerman 31.0 30.0 7.6 3.9 38.6 33.9 38.1
Bulbul Barrett
(4)
13.0 n/a 0.4 n/a 13.4 n/a 32.0
Jo Dixon 40.5 40.5 6.9 0.7 47.4 41.2 12.1
Randeep Grewal
(4)
13.0 n/a 0.4 n/a 13.4 n/a 32.0
Graham Oldroyd 36.1 30.0 4.9 1.2 41.0 31.2 33.1
David Stileman
(5)
18.9 30.0 5.2 0.9 24.1 30.9 n/a
Total 196.4 178.0 39.1 9.8 235.5 187.8 197.7
(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) Fees expected to be paid to the Directors during the year ended 30 April 2025. Taxable benefits are also anticipated but are not currently quantifiable.
(3) Highest paid Director.
(4) Appointed to the Board on 1 December 2023.
(5) Retired from the Board on 11 December 2023.
The information in the table above for the years ended 30 April 2023 and 2024 has been audited. The amounts paid by the Company to
the Directors were for services as non-executive Directors.
On behalf of the Board
Anja Balfour
Chairman
25 June 2024
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:
Report and Financial Statements 2024 | 65
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
The Directors are responsible for preparing the Annual Report
and Financial Statements 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 financial statements.
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 Annual Report and Financial Statements is published
on the Company's website, as shown on page 1, 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 return 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
25 June 2024
Governance Report
Statement of Directors’ Responsibilities
66 | The Global Smaller Companies Trust PLC
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 2024 and of its profit 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 2024 which comprise the Income Statement, the Statement
of Changes in Equity, the Balance Sheet, the Statement of
Cash Flows 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 committee.
Independence
Following the recommendation of the audit committee, we were
appointed by the Board of Directors on 25 July 2019 to audit
the financial statements for the year ended 30 April 2020 and
subsequent financial periods. The period of total uninterrupted
engagement including retenders and reappointments is 5
years, covering the years ended 30 April 2020 to 30 April
2024. 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 the going concern in light of market volatility and
the present uncertainties in economic recovery created by the
current economic environment of high inflation and interest
rates, 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.
• Reviewing the loan agreements to identify the covenants and
assessing the likelihood of them being in 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.
Our responsibilities and the responsibilities of the Directors with
respect to going concern are described in the relevant sections of
this report.
Report and Financial Statements 2024 | 67
Independent Auditor’s Report
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
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,
Key audit matter How the scope of our audit addressed the key audit matter
Valuation and ownership of quoted investments (Note 10 on
Page 83)
The investment portfolio at the year-end comprised of listed equity
investments held at fair value through profit or loss.
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 bid price 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 80)
Revenue is a key indicator of performance of the Company, as such
there may be an incentive to recognise income as revenue where it is
more appropriately of a capital nature. Judgement may be 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 assessed the treatment of dividend income from 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 items for further
discussion that could indicate a capital distribution, for example where a dividend
represents a particularly high yield. 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.
In addition, we formed our own expectation of dividend income for the whole portfolio
using the entity’s investment holdings and dividend announcements from independent
sources. We vouched a sample of dividend receipts to bank.
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.
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 2024 2023
Key audit matters Valuation and ownership of quoted investments
Revenue Recognition
Materiality Company financial statements as a whole
£8.7m (2023: £8.5m) based on 1% (2023: 1%) of Net assets.
68 | The Global Smaller Companies Trust PLC
and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
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 2024 (£m) 2023 (£m)
Materiality 8.7 8.5
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 6.5 6.4
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 several 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 several 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 Revenue return before tax,
a misstatement of less than materiality for the financial
statements as a whole, specific materiality, could influence the
economic decisions of users as it is a measure of the Company’s
performance of income generated from its investments after
expenses. As a result, we determined materiality for these items
to be £794,000 (2023: £690,000), based on 5% of Revenue
return before tax (2023: 5% of Revenue return before tax). We
further applied a performance materiality level of 75% (2023:
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 £174,000 (2023: £170,000) for the
financial statements as a whole and £40,000 (2023: £34,000)
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
annual report & financial statements 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.
Report and Financial Statements 2024 | 69
Independent Auditor’s Report
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities
statement, 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.
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 76; 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 39.
Other Code provisions • Directors' statement on fair, balanced and understandable set out on page 65;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 38;
• The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out
on page 57; and
• The section describing the work of the audit committee set out on page 56.
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.
70 | The Global Smaller Companies Trust PLC
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 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
Based on:
• Our understanding of the Company and the industry in which
it operates.
• Discussion with the investment manager and those charged
with governance and the Audit and Management Engagement
Committee; and
• Obtaining an understanding of the Company’s policies and
procedures regarding compliance with laws and regulations.
We considered the significant laws and regulations to be
Companies Act 2006, the FCA listing and DTR 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.
Our procedures in respect of the above included:
• Agreement of the financial statement disclosures to underlying
supporting documentation.
• Enquiries of the investment manager and those charged with
governance relating to the existence of any non-compliance
with laws and regulations.
• Reviewing minutes of meetings of those charged with
governance throughout the period for instances of non-
compliance with laws and regulations; and
• Reviewing the calculation in relation to Investment Trust
compliance to check that the Company was meeting its
requirements to retain their Investment Trust Status. This
included a review of other qualitative factors and ensuring
compliance with these.
Fraud
We assessed the susceptibility of the financial statement to
material misstatement including fraud.
Our risk assessment procedures included:
• Enquiry with the administrator and those charged with
governance regarding any known or suspected instances of
fraud.
• Review of minutes of meeting of those charged with
governance for any known or suspected instances of fraud;
and
• Discussion amongst the engagement team as to how and
where fraud might occur in the financial statements.
Based on our risk assessment, we considered the area most
susceptible to fraud to be management override of controls and
the classification of dividends between revenue and capital.
Our procedures in respect of the above included:
• In addressing the risk of management override of control, we:
• Performed a review of estimates and judgements applied
by management in the financial statements to assess their
appropriateness and the existence of any systematic bias;
• Considered the opportunity and incentive to manipulate
accounting entries and tested relevant adjustments made
in the period end financial reporting process;
• Performed the procedures covered in the ‘key audit matter’
section related to the revenue recognition classification;
• Reviewed for significant transactions outside the normal
course of business; and
• Performed a review of unadjusted audit differences, if any,
for indicators of bias or deliberate misstatement.
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
Report and Financial Statements 2024 | 71
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Chairman’s StatementOverview Auditor’s Report
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
25 June 2024
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
72 | The Global Smaller Companies Trust PLC
Income Statement
For the year ended 30 April 2024 For the year ended 30 April 2023
Revenue
£’000s
Capital
£’000s
Total
£’000s
Revenue
£’000s
Capital
£’000s
Total
£’000s
10
Gains/(losses) on investments – 57,049 57,049 – (50,067) (50,067)
21
Foreign exchange (losses)/gains (10) 335 325 (6) 115 109
3
Income 18,597 – 18,597 16,214 1,656 17,870
4
Management fee (1,050) (3,148) (4,198) (1,082) (3,247) (4,329)
5
Other expenses (1,267) (34) (1,301) (1,070) (29) (1,099)
Net return before finance costs and taxation 16,270 54,202 70,472 14,056 (51,572) (37,516)
6
Finance costs (391) (1,172) (1,563) (269) (808) (1,077)
Net return on ordinary activities before taxation 15,879 53,030 68,909 13,787 (52,380) (38,593)
7
Taxation on ordinary activities (1,319) – (1,319) (1,167) – (1,167)
Net return attributable to equity shareholders 14,560 53,030 67,590 12,620 (52,380) (39,760)
8
Return per share (basic and diluted) – pence 2.84 10.33 13.17 2.34 (9.73) (7.39)
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 76 to 91 form an integral part of the financial statements.
Notes
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for the year ended 30 April 2024
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 2023 15,513 212,639 16,158 597,354 17,771 859,435
Movements during the year ended 30 April 2024
9
Dividends paid – – – – (12,186) (12,186)
15
Shares repurchased by the Company and held in
treasury
– – – (44,777) – (44,777)
Net return attributable to equity shareholders
– – – 53,030 14,560 67,590
Balance at 30 April 2024 15,513 212,639 16,158 605,607 20,145 870,062
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)
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
The notes on pages 76 to 91 form an integral part of the financial statements.
Statement of Changes in Equity
74 | The Global Smaller Companies Trust PLC
Notes
At 30 April
2024
£’000s
At 30 April
2023
£’000s
Fixed assets
10
Investments 910,498 902,350
Current assets
11
Debtors 6,446 10,720
21
Cash at bank and in hand 11,021 2,292
Total current assets 17,467 13,012
Creditors: amounts falling due within one year
12, 21
Bank loans (16,463) (17,027)
13
Creditors (6,440) (3,900)
Total current liabilities (22,903) (20,927)
Net current liabilities (5,436) (7,915)
Total assets less current liabilities 905,062 894,435
Creditors: amounts falling due after more than one year
14, 21
Loan notes (35,000) (35,000)
Net assets 870,062 859,435
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 605,607 597,354
18
Revenue reserve 20,145 17,771
Total shareholders’ funds 870,062 859,435
19
Net asset value per share (debt at par value) – pence 175.88 163.73
The notes on pages 76 to 91 form an integral part of the financial statements.
The financial statements were approved by the Board of Directors on 25 June 2024 and signed on its behalf by
Anja Balfour, Chairman
Balance Sheet
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Notes
For the year
ended 30 April
2024
£’000s
For the year
ended 30 April
2023
£’000s
20
Cashflows used in operating activities before dividends received and interest paid (6,022) (4,787)
Dividends received 17,270 15,308
Interest paid (1,593) (1,038)
Cash inflows from operating activities 9,655 9,483
Investing activities
Purchases of investments (147,474) (191,230)
Sales of investments 202,370 219,670
Cash inflows from investing activities 54,896 28,440
64,551 37,923
Financing activities
Ordinary dividends paid (12,186) (10,305)
Cashflows from share buybacks for treasury shares (43,397) (36,034)
Repayment of bank loans – (10,287)
Drawdown of bank loans – 7,870
Cash outflows from financing activities (55,583) (48,756)
21
Net movement in cash at bank and in hand 8,968 (10,833)
Cash at bank and in hand at the beginning of the year 2,292 13,354
21
Effect of movement in foreign exchange (239) (229)
Cash at bank and in hand at the end of the year 11,021 2,292
Represented by:
Cash at bank 613 979
Short-term deposits less than 3 months 10,408 1,313
Cash at bank and in hand at the end of the year 11,021 2,292
The notes on pages 76 to 91 form an integral part of the financial statements.
Statement of Cashflows
76 | The Global Smaller Companies Trust PLC
1. General information
The Global Smaller Companies Trust PLC is a public company limited by shares incorporated in England and Wales with a premium listing
on the London Stock Exchange. The Company is an investment company within the meaning of section 833 of the Companies Act 2006
and carries on business as an investment trust. The Company registration number is 28264 and the registered office is Cannon Place,
78 Cannon Street, London, EC4N 6AG, 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 2024, 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 as the value of its investments, which are readily realisable, exceeds the Company's liabilities by a significant
margin.
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 38 and 39.
(b) Basis of accounting
The financial statements 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
Notes to the Financial Statements
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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. Following approval at the 2020 AGM, the Company's
Articles of Association no longer prohibit the distribution of realised capital profits 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.
(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 and short-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.
Financial Report
78 | The Global Smaller Companies Trust PLC
(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.
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 or held 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.
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(x) Capital reserves
These are distributable reserves which may be utilised for the repurchase of share capital. Following approval at the 2020 AGM, the
Company's Articles of Association no longer prohibit the distribution of realised capital profits by way of dividend.
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.
(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 financial statements, 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.
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80 | The Global Smaller Companies Trust PLC
3. Income
2024
£’000s
2023
£’000s
Income from investments
Dividends from quoted investments 16,597 15,072
Special dividends
(1)
1,137 601
17,734 15,673
Other Income
Management fee rebates from collective investment schemes 335 271
Interest on cash and short-term deposits 528 270
863 541
Total income recognised as revenue 18,597 16,214
Special dividends recognised as capital
(2)
– 1,656
Total income 18,597 17,870
(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
2024
Total
£’000s
Revenue
£’000s
Capital
£’000s
2023
Total
£’000s
Management fee 1,050 3,148 4,198 1,082 3,247 4,329
The Manager, Columbia Threadneedle Investment Business Limited, provides investment management, marketing and general
administrative services to the Company. With effect from 1 May 2023, net assets, after deduction of third party collective investment
schemes, in excess of £750m are charged a management fee at a rate of 0.5% per annum and net assets less than £750m are
charged at an amount equal to 0.55% per annum. 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.
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
were 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.
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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5. Other expenses
2024
£’000s
2023
£’000s
Other revenue expenses
Auditors’ remuneration:
Audit services
(1)
51 46
Directors’ fees for services to the Company
(2)
196 178
Marketing 266 271
Printing and postage 110 86
Custody fees 46 45
Depositary fees 91 97
Professional fees 95 17
Loan commitment and arrangement fees
(3)
100 95
Sundry expenses 312 235
Total other revenue expenses 1,267 1,070
Capital expenses 34 29
Total other expenses 1,301 1,099
All expenses are stated gross of irrecoverable VAT, where applicable.
(1) Auditors’ remuneration payable to BDO for the audit of the Company's financial statements, exclusive of VAT, amounts to £47,000 (2023: £42,000). No non-audit
services were provided during the year (2023: none).
(2) See the Directors’ Remuneration Report on page 64.
(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
2024
Total
£’000s
Revenue
£’000s
Capital
£’000s
2023
Total
£’000s
Loan interest 391 1,172 1,563 269 808 1,077
Total finance costs 391 1,172 1,563 269 808 1,077
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
2024
Total
£’000s
Revenue
£’000s
Capital
£’000s
2023
Total
£’000s
Corporation tax payable at 25% (2023: 19%) – – – – – –
Overseas taxation 1,319 – 1,319 1,167 – 1,167
Total tax charge for the year (note 7(b)) on ordinary activities 1,319 – 1,319 1,167 – 1,167
The tax assessed is lower than the standard rate of Corporate Tax in the UK (2023: lower).
Financial Report
82 | The Global Smaller Companies Trust PLC
(b) Factors affecting the current tax charge for the year
Revenue
£’000s
Capital
£’000s
2024
Total
£’000s
Revenue
£’000s
Capital
£’000s
2023
Total
£’000s
Net return on ordinary activities before taxation 15,879 53,030 68,909 13,787 (52,380) (38,593)
Return on ordinary activities multiplied by the standard rate of corporation tax of 25%
(2023: 19%)
3,970 13,257 17,227 2,619 (9,952) (7,333)
Effects of:
Dividends* (4,131) – (4,131) (2,877) – (2,877)
Expenses not deductible for tax purposes 33 – 33 26 – 26
Overseas tax in excess of double taxation relief 1,319 – 1,319 1,167 – 1,167
Expenses not utilised in the year 128 1,089 1,217 232 776 1,008
Capital returns* – (14,346) (14,346) – 9,176 9,176
Total tax charge for the year (note 7(a)) 1,319 – 1,319 1,167 – 1,167
* The Company is not subject to corporation tax on capital gains or on dividend income. It therefore has unutilised expenses of £76.6m (2023: £71.7m). This results in a
deferred tax asset of £19.1m (2023: £17.9m). 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 £19.0m (2023: £18.5m) relates to revenue expenses and £57.6m (2023: £53.2m) 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
2024
Total Revenue Capital
2023
Total
Net return attributable to equity shareholders – £’000s 14,560 53,030 67,590 12,620 (52,380) (39,760)
Return per share – pence 2.84 10.33 13.17 2.34 (9.73) (7.39)
Both the revenue and capital returns per share are based on a weighted average of 513,545,620 ordinary shares in issue during the year (2023: 538,327,319).
9. Dividends
Dividends on ordinary shares Register date Payment date
2024
£’000s
2023
£’000s
Final for the year ended 30 April 2022 of 1.27 pence 1 July 2022 4 August 2022 – 6,936
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 2023 of 1.67 pence 7 July 2023 4 August 2023 8,714 –
Interim for the year ended 30 April 2024 of 0.68 pence 29 December 2023 25 January 2024 3,472 –
12,186 10,305
The Directors have proposed a final dividend in respect of the year ended 30 April 2024 of 2.13 pence per share, payable on
20 August 2024 to all shareholders on the register at close of business on 12 July 2024. The recommended final dividend is
subject to approval by shareholders at the Annual General Meeting.
The attributable revenue and the dividends paid and proposed in respect of the financial year ended 30 April 2024 for the
purposes of the income retention test for Section 1159 of the Income and Corporation Tax Act 2010, are set out below:
2024
£’000s
Revenue attributable to equity shareholders 14,560
Interim for the year ended 30 April 2024 of 0.68 pence (3,472)
Proposed final for the year ended 30 April 2024 of 2.13 pence
(1)
(10,380)
Amount transferred to revenue reserve for Section 1159 purposes
(2)
708
(1) Based on 487,338,276 shares in issue at 20 June 2024.
(2) Represents 3.8% of total income of £18,597,000 (see note 3)(2023: 2.9%).
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10. Investments
Level 1*
£’000s
Level 3*
£’000s
2024
Total
£’000s
Level 1*
£’000s
Level 3*
£’000s
2023
Total
£’000s
Cost brought forward 757,263 304 757,567 770,920 304 771,224
Gains/(losses) brought forward 144,994 (211) 144,783 216,002 (143) 215,859
Valuation brought forward 902,257 93 902,350 986,922 161 987,083
Movements in the year:
Purchases at cost 148,564 – 148,564 191,408 – 191,408
Sales proceeds (197,691) (54) (197,745) (226,576) – (226,576)
Gains/(losses) on investments sold in year 9,132 (250) 8,882 21,511 – 21,511
Gains/(losses) on investments held at year end 48,236 211 48,447 (71,008) (68) (71,076)
Fair value of investments at 30 April 910,498 – 910,498 902,257 93 902,350
Analysed at 30 April
Cost at 30 April 717,268 – 717,268 757,263 304 757,567
Gains/(losses) at 30 April 193,230 – 193,230 144,994 (211) 144,783
Fair value of investments at 30 April 910,498 – 910,498 902,257 93 902,350
Investments sold during the year have been revalued over time since their original purchase, and until they were sold any unrealised gains/losses were included in the fair
value of the investments.
* The hierarchy of investments is described in note 2(c)(i) and below. No investments held in 2024 or 2023 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 consisted of the holding in The Australian New Horizons Fund. This was fully liquidated in the year to 30
April 2024.
A full list of investments is set out on pages 29 to 31.
Gains/(losses) on investments
2024
£’000s
2023
£’000s
Gains on investments sold during the year 8,882 21,511
Gains/(losses) on investments held at year end 48,447 (71,076)
Transaction costs (280) (502)
Total gains/(losses) on investments 57,049 (50,067)
11. Debtors
2024
£’000s
2023
£’000s
Investment debtors 3,369 7,994
Overseas taxation recoverable 549 596
Prepayments and accrued income 2,528 2,130
6,446 10,720
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12. Creditors: amounts falling due within one year
Bank loans
Non-instalment debt payable on demand or within one year
2024
£’000s
2023
£’000s
EUR 6.8 million repayable May 2024 5,807 –
JPY 557.5 million repayable May 2024 2,829 –
USD 9.8 million repayable May 2024 7,827 –
EUR 6.8 million repayable May 2023 – 5,973
JPY 557.5 million repayable May 2023 – 3,257
USD 9.8 million repayable May 2023 – 7,797
16,463 17,027
In September 2023 the Company renewed its £35m revolving credit facility with The Royal Bank of Scotland International Limited which
expires in September 2024. As at 30 April 2024 EUR6.8m, JPY557.5m and USD9.8m were drawn down for the period to 22 May
2024. 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
2024
£’000s
2023
£’000s
Investment creditors 3,982 2,892
Interest accrued on bank loans 195 225
Share buybacks outstanding 1,639 259
Management fee accrued 355 346
Accruals and deferred income 269 178
6,440 3,900
14. Creditors: amounts falling due after more than one year
Loan notes
2024
£’000s
2023
£’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 2024 was £24,145,000 (2023: £24,586,000) based on the equivalent
reference benchmark gilt.
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 2023 95,625,622 524,908,148 620,533,770 15,513
Shares repurchased by the Company and held in treasury 30,210,332 (30,210,332) – –
Balance at 30 April 2024 125,835,954 494,697,816 620,533,770 15,513
During the year, 30,210,332 ordinary shares of 2.5p each were repurchased and held in treasury, incurring a cost of £44,777,000. Since the year end, and up to
20 June 2024, a further 7,359,540 ordinary shares have been repurchased and held in treasury.
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16. Share premium account
2024
£’000s
2023
£’000s
Balance brought forward and carried forward 212,639 212,639
17. Capital redemption reserve
2024
£’000s
2023
£’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) 8,882 – 8,882 –
Gains on investments held at year end (see note 10) – 48,447 48,447 –
Transaction costs (280) – (280) –
Foreign exchange gains 335 – 335 –
Repurchase of shares (44,777) – (44,777) –
Management fee charged to capital (see note 4) (3,148) – (3,148) –
Other expenses charged to capital (see note 5) (34) – (34) –
Finance costs charged to capital (see note 6) (1,172) – (1,172) –
Net revenue after tax for the year – – – 14,560
Net return attributable to ordinary shareholders (40,194) 48,447 8,253 14,560
Dividends paid in the year (see note 9) – – – (12,186)
(40,194) 48,447 8,253 2,374
Balance brought forward 452,571 144,783 597,354 17,771
Balance carried forward 412,377 193,230 605,607 20,145
Included within the capital reserve movement for the year are £188,000 (2023: £417,000) of transaction costs on purchases of investments, £92,000 (2023: £85,000) of
transaction costs on sales of investments and £nil (2023: £1,656,000) of distributions received recognised as capital.
19. Net asset value per ordinary share
2024 2023
Basic with debt at par value
Net assets attributable at the year end – £’000s 870,062 859,435
Number of ordinary shares in issue at the year end, excluding shares held in treasury 494,697,816 524,908,148
Net asset value per share – pence 175.88 163.73
2024 2023
Basic with debt at fair value
Net assets attributable at the year end – £’000s 870,062 859,435
Add back: Debt at par – £'000s 51,463 52,027
Deduct: Debt at fair value (see note 15) – £'000s (40,608) (41,613)
Net assets with debt at fair value – £'000s 880,917 869,849
Number of ordinary shares in issue at the year end, excluding shares held in treasury 494,697,816 524,908,148
Net asset value per share – pence 178.07 165.71
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86 | The Global Smaller Companies Trust PLC
20. Reconciliation of total return before finance costs and taxation to net cashflows from operating activities
2024
£’000s
2023
£’000s
Net return on ordinary activities before taxation 68,909 (38,593)
Adjustments for returns from non-operating activities
(Gains)/losses on investments (57,049) 50,067
Foreign exchange gains (325) (109)
Non-operating expenses of a capital nature 34 29
Return from operating activities 11,569 11,394
Adjustments for non-cashflow items, dividend income and interest expense
(Increase)/decrease in prepayments and accrued income (14) 11
Increase/(decrease) in creditors 101 (41)
Dividends receivable (17,734) (15,673)
Interest payable 1,563 1,077
Overseas taxation (1,193) (1,024)
Transaction costs (280) (502)
Other capital charges (34) (29)
Cash used in operating activities before dividends received and interest paid (6,022) (4,787)
21. Analysis of changes in net debt
Cash
£’000s
Bank loans
£’000s
Loan notes
£’000s
Total
£’000s
Opening net debt at 30 April 2023 2,292 (17,027) (35,000) (49,735)
Cash-flows:
Net movement in cash and cash equivalents 8,968 – – 8,968
Non-cash:
Effect of foreign exchange movements (239) 564 – 325
Closing net debt at 30 April 2024 11,021 (16,463) (35,000) (40,442)
22. Transactions with related parties and the Manager
The Board of Directors is defined as a related party. Under the FCA Listing Rules, the Manager is also defined as a related party.
However, under the Investment Trust SORP issued by the AIC, in accordance with these financial statements are prepared, the
Manager is not considered to be a related party for accounting purposes.
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 64, 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 63. 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,
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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 financial statements. 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:
2024 2023
At 30 April 2024 Average for the year At 30 April 2023 Average for the year
US dollar 1.2522 1.2577 1.2569 1.2083
Euro 1.1711 1.1614 1.1385 1.1553
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%
2024 2023
US$
£’000s
€
£’000s
US$
£’000s
€
£’000s
Net revenue return attributable to equity shareholders 519 149 541 129
Net capital return attributable to equity shareholders 47,479 5,755 46,039 5,887
Net total return attributable to equity shareholders 47,998 5,904 46,580 6,016
Net asset value per share (basic) – pence 9.70 1.19 8.87 1.15
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88 | The Global Smaller Companies Trust PLC
Strengthening of sterling by 10%
2024 2023
US$
£’000s
€
£’000s
US$
£’000s
€
£’000s
Net revenue return attributable to equity shareholders (424) (122) (443) (105)
Net capital return attributable to equity shareholders (38,847) (4,709) (37,669) (4,816)
Net total return attributable to equity shareholders (39,271) (4,831) (38,112) (4,921)
Net asset value per share (basic) – pence (7.94) (0.98) (7.26) (0.94)
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 fair values of the Company’s assets and liabilities at 30 April by currency are shown below:
2024
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 2,527 1,423 (3,170) (35,000) – (34,220) 325,243 291,023
US dollar – 9,149 (3,270) – (7,827) (1,948) 429,260 427,312
Euro 1,714 176 – – (5,807) (3,917) 55,712 51,795
Other 2,205 273 – – (2,829) (351) 100,283 99,932
Total 6,446 11,021 (6,440) (35,000) (16,463) (40,436) 910,498 870,062
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
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
2024
Net
Total
£’000s
Within
one year
£’000s
More than
one year
£’000s
2023
Net
Total
£’000s
Exposure to floating rates – cash 11,021 – 11,021 2,292 – 2,292
Exposure to fixed rates – loans (16,463) (35,000) (51,463) (17,027) (35,000) (52,027)
Net exposure (5,442) (35,000) (40,442) (14,735) (35,000) (49,735)
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.
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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
2024
Decrease
in rate
£’000s
Increase
in rate
£’000s
2023
Decrease
in rate
£’000s
Revenue return 220 (220) 46 (46)
Capital return – – – –
Total return 220 (220) 46 (46)
NAV per share – pence 0.04 (0.04) 0.01 (0.01)
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 (2023: same). The portfolio
of investments, valued at £910,498,000 at 30 April 2024 (2023: £902,350,000) 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 5 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
2024
Decrease
in value
£’000s
Increase
in value
£’000s
2023
Decrease
in value
£’000s
Capital return 182,100 (182,100) 180,470 (180,470)
NAV per share – pence 36.81 (36.81) 34.38 (34.38)
This level of change is considered to be a reasonable illustration based on observation of current market conditions.
(b) Liquidity risk exposure
The Company is required to raise funds to meet commitments associated with financial instruments and share buy-backs. 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, 213 at 30 April 2024 (2023: 193); 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 2024. 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:
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90 | The Global Smaller Companies Trust PLC
2024
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 6,245 – – 6,245
Loans 16,463 – – 16,463
Interest payable on Loans 66 – – 66
Loan notes – – 35,000 35,000
Interest payable on Loan notes – 791 11,470 12,261
22,774 791 46,470 70,035
2023
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
(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. 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.
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 Manager (including the Lead Manager) and with its Risk Management function. In reaching its
conclusions, the Board also reviews the Manager's AAF Report.
The Company had no credit-rated bonds or similar securities or derivatives in its portfolio at the year end (2023: 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.
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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 84 and details of the Company’s reserves are shown in the
Statement of Changes in Equity on page 73.
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.
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 2024 and 30 April 2023 are shown below:
30 April 2024 30 April 2023
Leverage exposure
Gross
method
Commitment
method
Gross
method
Commitment
method
Maximum permitted limit 200% 200% 200% 200%
Actual 106% 106% 105% 105%
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 98.
25. Securities financing transactions (‘SFT’)
The Company has not, in the year to 30 April 2024 (2023: 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.
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92 | The Global Smaller Companies Trust PLC
10. To re-appoint BDO LLP as auditor of the Company to hold office
from the conclusion of the annual general meeting until the
conclusion of the next annual general meeting of the Company.
11. To authorise the Audit and Management Engagement Committee
to determine the remuneration of the Company's auditor.
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 passing of this
resolution, the directors of the Company (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 ordinary shares of 2.5 pence
each in the capital of the Company (‘Shares’) and to grant rights
to subscribe for, or convert any security into, Shares (‘Rights’), up
to an aggregate nominal amount of £1,218,345.68 (representing
approximately 10% of the issued share capital of the Company
(excluding treasury shares) as at the date of this notice), generally
from time to time on such terms as the Directors may determine, such
authority to expire at the conclusion of the annual general meeting
of the Company in 2025 or on the date which is 15 months after
the date on which this resolution is passed (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 Shares to be allotted
or Rights to be granted after the expiry of the relevant period and
notwithstanding such expiry the Directors may allot Shares or grant
Rights in pursuance of such offers or agreements.
Notice is hereby given that the one hundred and thirty fifth Annual
General Meeting of the Company will be held at The Chartered
Accountants Hall, 1 Moorgate Place, London EC2R 6EA on Tuesday,
13 August 2024 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 audited financial statements of the
Company for the financial year ended 30 April 2024 and the
reports of the directors and the auditor on those financial
statements.
2. To approve the Directors’ Remuneration Policy, the full text of
which appears in the Directors’ Remuneration Report for the
financial year ended 30 April 2024 on page 62 of the Annual
Report and Financial Statements for the financial year ended
30 April 2024.
3. To receive, adopt and approve the Directors’ Remuneration
Report for the financial year ended 30 April 2024 which
appears on pages 62 to 64 of the Annual Report and Financial
Statements for the financial year ended 30 April 2024 (other
than the Directors’ Remuneration Policy which appears on page
62 of the Annual Report and Financial Statements).
4. To declare a final dividend of 2.13 pence per ordinary share in
respect of the financial year ended 30 April 2024 payable on
20 August 2024 to holders of ordinary shares on the register
of members as at the close of business on 12 July 2024.
5. To re-elect Anja Balfour as a Director.
6. To re-elect Nick Bannerman as a Director.
7. To elect Bulbul Barrett as a Director.
8. To elect Randeep Grewal as a Director.
9. To re-elect Graham Oldroyd as a Director.
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 Financial Statements 2024 | 93
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
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 set out in the notice
of the 2024 annual general meeting (‘Resolution 12’) and in
substitution for any existing authority, but without prejudice to the
exercise of any such authority prior to the passing of this resolution,
the directors of the Company (the ‘Directors’) be and they are
hereby generally and unconditionally empowered, pursuant to
sections 570 and 573 of the Companies Act 2006 (the ‘Act’), to
allot, or make offers or agreements to allot, equity securities (within
the meaning of section 560 of the Act) for cash pursuant to the
authority conferred by Resolution 12, and/or by way of a sale of
treasury shares for cash, as if section 561(1) of the Act did not
apply to any such allotment or sale, provided this power:
(a) shall be limited to the allotment of equity securities and the
sale of treasury shares up to an aggregate nominal amount of
£1,218,345.68 (representing approximately 10 per cent. of the
issued share capital of the Company (excluding treasury shares)
as at 20 June 2024); and
(b) shall expire at the conclusion of the next annual general meeting
of the Company held after the passing of this resolution or, if
earlier, on the date which is 15 months after the date on which
this resolution is passed (unless previously renewed, varied
or revoked by the Company in general meeting), save that the
Company may before such expiry make offers and enter into
agreements which would or might require equity securities to
be allotted or treasury shares to be sold after such expiry and
the Directors may allot equity securities or sell treasury shares
in pursuance of such an offer or agreement as if the power
conferred by this resolution had not expired.
14. Share buyback authority
THAT, in substitution for any existing authority, but without prejudice
to the exercise of any such authority prior to the passing of
this resolution, the Company be and is hereby generally and
unconditionally authorised, pursuant to and in accordance with
section 701 of the Companies Act 2006 (the ‘Act’), to make market
purchases (within the meaning of section 693(4) of the Act) of
its ordinary shares of 2.5 pence each on such terms and in such
manner as the directors of the Company may from time to time
determine (either for cancellation or for retention as treasury shares
for future re-issue, resale, transfer or cancellation) provided that:
a) the maximum aggregate number of ordinary shares hereby
authorised to be purchased is 73,052,007 or, if less, the
number being 14.99% of the issued ordinary share capital
of the Company (excluding ordinary shares held in treasury)
immediately prior to the passing of this resolution;
b) the minimum price (exclusive of expenses) which may be paid for
an ordinary share purchased pursuant to this authority shall be
2.5p;
c) the maximum price (exclusive of expenses) which may be paid
for an ordinary share purchased pursuant to this authority 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 of
an ordinary share and the highest current independent bid for
such a share on the London Stock Exchange at the time the
purchase is carried out;
d) the authority hereby conferred shall expire at the conclusion of
the next annual general meeting of the Company held after the
passing of this resolution or on the date which is 15 months after
the date on which this resolution is passed (whichever is earlier),
unless such authority is varied, revoked or renewed prior to such
time by the Company in general meeting; 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
25 June 2024
Registered office:
Cannon Place
78 Cannon Street
London EC4N 6AG
Registered number: 28264
Notice of Meeting
94 | The Global Smaller Companies Trust PLC
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 6 August
2024. Alternatively, voting directions can be submitted
electronically at www.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 6 August
2024.
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 members registered on the register of members of
the Company at 11 p.m. on 9 August 2024 (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
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 and access details are set out on the Form of Proxy, Form
of Direction and related Email Communications. 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 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
www.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
Report and Financial Statements 2024 | 95
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
(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).
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 20 June 2024, being the last practicable date prior to the
printing of this notice, the Company’s issued capital (excluding
133,195,494 ordinary shares held in treasury) consisted of
487,338,276 ordinary shares of 2.5 pence each carrying one
vote each. Therefore, the total voting rights in the Company as
at 20 June 2024 are 487,338,276.
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 20 June
2024, 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
Notice of Meeting
96 | The Global Smaller Companies Trust PLC
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 2 July 2024, 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.
Report and Financial Statements 2024 | 97
Other Information
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
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.
Nish Patel, 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 November
2007.
Ian Ridge Represents the Manager as
Company Secretary and is responsible for
the Company’s statutory and regulatory
compliance. He joined the management
company in May 2005.
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
Cannon Place
78 Cannon Street
London EC4N 6AG
Telephone: 0207 464 5000
Website: globalsmallercompanies.co.uk
Email: globalsmallerscosec@
columbiathreadneedle.com
Independent Auditor
BDO LLP
(‘BDO’ or the ‘auditor’)
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 LLP
Dashwood House
69 Old Broad Street
London EC2M 1QS
Stockbroker
Stifel Nicolaus Europe Limited
150 Cheapside
London EC2V 6ET
Management and Advisers
98 | The Global Smaller Companies Trust PLC
Additional Information for Shareholders
Key Information Document
The Key Information Document relating to the Company’s shares
can be found on its website as shown on page 1. 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.
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 June 2024.
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 27 and 28;
• none of the Company’s assets is subject to special
arrangements arising from their illiquid nature;
• the strategic report and note 23 to the Financial Statements
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.
Report and Financial Statements 2024 | 99
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
Other Information
Charges
Annual management charges and other charges apply according to the type
of Savings Plan, these can be found on the relevant product Presales Cost &
Charges disclosure on our website www.ctinvest.co.uk.
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 in, these can be found at www.ctinvest.co.uk/documents.
How to Invest
To open a new Columbia Threadneedle Savings Plan, apply online at
www.ctinvest.co.uk Online applications are not available if you are transferring an
existing Savings Plan with another provider to Columbia Threadneedle Investments,
or if you are applying for a new Savings Plan in more than one name but paper
applications are available at www.ctinvest.co.uk/documents or by contacting
Columbia Threadneedle Investments.
New Customers:
Call: 0345 600 3030** (
9.00am – 5.00pm, weekdays)
Email: invest@columbiathreadneedle.com
Existing Savings 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.
Capital at risk. The material relates to an investment trust and its Ordinary Shares are traded on the main market of the London Stock Exchange. The Investor Disclosure Document, Key Information Document (KID), latest annual or interim
reports and the applicable terms & conditions are available from Columbia Threadneedle Investments Cannon Place, 78 Cannon Street, London EC4N 6AG, your financial advisor and/or on our website www.columbiathreadneedle.com.
Please read the Investor Disclosure Document before taking any investment decision. This material should not be considered as an offer, solicitation, advice or an investment recommendation. This communication is valid at the date of
publication and may be subject to change without notice. Information from external sources is considered reliable but there is no guarantee as to its accuracy or completeness. In the UK: Issued by Columbia Threadneedle Management
Limited, No. 517895, registered in England and Wales and authorised and regulated in the UK by the Financial Conduct Authority. © 2024 Columbia Threadneedle Investments. WF560250 (01/24) UK. Expiration Date: 31/01/2025
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.
Financial Promotion
100 | The Global Smaller Companies Trust PLC
All data is based on figures as reported in accordance with the Company’s accounting policies and is unaudited but derived from
the audited financial statements.
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)
%
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 1.750 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 25.0 11.4
2024 870,062 178.1 160.2 (10.0) 2.84 2.81
(2)
22.2 3.3
* 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 2.13p at the 2024 AGM.
25 Year Historical Information
Report and Financial Statements 2024 | 101
Other Information
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
Net asset value and share price performance vs Benchmark over 25 years
0
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
Apr 2024Apr 2019Apr 2014Apr 2009Apr 2004Apr 1999
Source: Columbia Threadneedle Investments & Refinitiv Eikon
(Rebased to 100 at 30 April 1999)
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
900
Apr 2024Apr 2019Apr 2014Apr 2009Apr 2004Apr 1999
Source: Columbia Threadneedle Investments & Refinitiv Eikon
(Rebased to 100 at 30 April 1999)
Revenue return per share Dividend per share
Inflation (RPI)
102 | The Global Smaller Companies Trust PLC
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 42.
30 April 2024
pence
30 April 2023
pence
Net Asset Value per share (a) 178.07 165.71
Share price per share (b) 160.20 144.60
(Discount)/Premium (c= (b-a)/a) (c) (10.0)%
(12.7)%
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 2024
£'000
30 April 2023
£'000
Loan notes 35,000 35,000
Loans 16,463 17,027
(a) 51,463
52,027
Less Cash and cash equivalents (11,021) (2,292)
Less Investment debtors (3,369) (7,994)
Add Investment creditors 3,982 2,892
Total (b) 41,055 44,633
Net Asset Value (c) 870,062 859,435
Effective gearing (d= b/c) (d) 4.7% 5.2%
Fully invested gearing (e= a/c) (e) 5.9% 6.1%
Report and Financial Statements 2024 | 103
Other Information
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
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 financial statements) and UK Accounting Standards. The net assets correspond to
Total Shareholders’ Funds, which comprise the share capital account, share premium account, capital redemption reserve and capital
and revenue reserves. (See calculation in note 19 to the financial statements.)
Net Asset Value (NAV) with Debt at Fair Value – the Company’s debt is valued in the Balance Sheet (on page 74) 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 financial statements.
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 2024
£'000
30 April 2023
£'000
Management fees 4,198 4,329
Other expenses 1,301 1,099
Less loan commitment/arrangement fees and one off costs (218) (110)
Underlying costs of collective investments excluding performance fee 1,424 1,680
Underlying costs of collective investments - performance fee
(a)
208 –
Total including performance fee (b) 6,913 6,998
Total excluding performance fee (b-a) (c) 6,705 6,998
Average daily net assets (d) 858,025 888,724
Ongoing Charges including performance fee (e= b/d) (e) 0.80% 0.79%
Ongoing Charges excluding performance fee (f= c/d) (f) 0.78% 0.79%
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 80 and 81) to the financial statements), 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 2024
£'000
30 April 2023
£'000
Management fees 4,198 4,329
Other expenses 1,301 1,099
Less loan commitment/arrangement fees and one off costs (218) (110)
Total (a) 5,281 5,318
Average daily net assets (b) 858,025 888,724
TER (c= a/b) (c) 0.61% 0.60%
104 | The Global Smaller Companies Trust PLC
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 assets, respectively, on the date on which the shares were quoted ex-dividend.
NAV Share price
NAV/Share Price per share at 30 April 2023 (pence) 165.71 144.60
NAV/Share Price per share at 30 April 2024 (pence) 178.07 160.20
Change in the year 7.5% 10.8%
Impact of dividend reinvestments 1.5% 1.9%
Total return for the year 9.0% 12.7%
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)%
Report and Financial Statements 2024 | 105
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 certain
functions.
AIFMD – the UK version of 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.
Benchmark – from 1 May 2023, a blend of two Indices, namely the MSCI All Country World ex UK Small Cap Index (80% (net)) and the
Deutsche Numis UK Smaller Companies (excluding investment companies) Index (20%). 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. Prior to 1 May 2023 the weighting of the indices in the Benchmark was 70% MSCI All Country
World ex UK Small Cap Index and 30% Deutsche Numis UK Smaller Companies (excluding investment companies). The MSCI index
was also measured on a gross basis rather than a net 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.
Columbia Threadneedle Investments Savings Plans – these comprise the General Investment Account, Junior Investment Account,
ISA, Junior ISA and Child Trust Fund operated by Columbia Threadneedle Investments.
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.
Glossary of Terms
106 | The Global Smaller Companies Trust PLC
Custodian – The Custodian is JPMorgan 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 financial statements). 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).
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 financial statements.
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.
Report and Financial Statements 2024 | 107
Other Information
Strategic Report Governance Report Financial Report Notice of Meeting
Other Information
Chairman’s StatementOverview Auditor’s Report
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.
Scope 1, 2 and 3 emissions – Scope 1 emissions are those direct emissions that are owned or controlled by a company, whereas
Scope 2 and 3 indirect emissions are a consequence of the activities of the company but occur from sources not owned or controlled
by it.
Section 172(1) – Section 172(1) of the Companies Act 2006 requires a director of a company to act in the way he/she 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 Financial Statements 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 Financial Statements.
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 financial statements.
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 2024 Holding % at 30 April 2023
Columbia Threadneedle Investments Savings Plans 54.4 55.1
Institutions 10.3 11.2
Direct Individuals and Nominees 35.3 33.7
100.0 100.0
Source: Columbia Threadneedle Investments.
108 | 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:
Cannon Place, 78 Cannon Street, London EC4N 6AG
020 7464 5000
globalsmallercompanies.co.uk
invest@columbiathreadneedle.com
Registrars:
Computershare Investor Services PLC
The Pavilions, Bridgwater Road
Bristol BS99 6ZZ
0370 889 4088
computershare.com
web.queries@computershare.co.uk
To find out more visit columbiathreadneedle.com
© 2024 Columbia Threadneedle Investments. Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.
The Global Smaller
Companies Trust PLC
Annual Report and
Financial Statements
for the year ended
30 April 2024