Global Smaller Companies Trust (LSE:GSCT) — Outlook and Opportunities

0:00 Good morning, and welcome to the GLOBAL SMALLER COMPANIES TRUST PLC outlook and opportunities investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the q and a tab situated in the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question received in the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Christine Cantrell, director, head of the investment trust. Good morning.

0:33 Good morning, everybody. Yes. I'm the head of investment trust sales, and we're delighted to be here today. It's actually the first meeting that we've held on this platform since Peter announced his retirement. So it's with a heavy heart that we'll host today and hear his his worth of wisdom. And you may be aware that they... Nish Patel and Peter became joint lead managers at start of this year in January. And then at the end of April, coinciding with the year end of the the company, Nish will then become the lead

1:11 for for the manager. So we'll hear from both of them today, which is great. And, obviously, the main point of this is going through an update of the portfolio, but then hearing from you and getting your questions that both managers will be able to answer. And so... And, obviously, the only other thing I'll mention is that we have slides to go through, and there's obviously a risk slide that you should all look at and... As our compliance team alerted us. But the other thing that we wanted to highlight is there's a fact sheet with all the updated performance with different types of analysis. So please do have a look at that in the handouts section. So with that, I'll hand over first to Peter.

1:59 Thanks very much, Christine, and, good morning, everyone. Thanks for thanks for joining us this morning. I'm very delighted to have got Nish with me today. As Christine has said, Nish will become the lead manager with effect from the start of May, and obviously, we're we're joint lead managers for now, as closely together as we always have done really as part of a team running this fund. And I'm not gonna go on about the history and whatever about this funding in great detail, but just to provide a bit of context for what it is. It really is what it says on the team. It is providing predominantly retail investors with a broad exposure to global smaller companies listed on the world's stock markets aiming to achieve, capital growth with a high, you know, a high total return over the long term. And we take a long term approach to our investments. We always have done that. We run it on a team basis so that, yeah, obviously, my departure is just one person in a... A large team of individuals managing this port... Managing this trust.

2:54 We take a long term approach for investing, and they should talk a little bit more about that in a second. You know, we're looking for high quality businesses. We're looking to buy them at attractive valuations. So we do have a valid evaluation discipline when we we buy into stocks. We delivered strong long term performance over in capital and income. I'm actually very proud of that fifty three years of dividend growth

3:15 that the fund has delivered over the years. Just looking on the right of this slide, you can see the benchmark, which is a blended benchmark of The UK and small... And global smaller companies in the proportions twenty eighty. The UK weighting over the years has gone down in the benchmark and in our fund, but we we currently actually will come on to talk about it, but we're currently quite positive about The UK market in global context. The fund has, you know, is a broadly diversified fund, so over 200 names on the on the portfolio. Again, we're gonna talk about what we've been doing on the portfolio and some of those names as we go through these these slides. Gearing, we use a bit of gearing. The board are keen on using the leverage capabilities of investment trust structure. So we have 5% gearing at the moment. And you can see a discount. This was at the end of January. It's it's... As stated there, quite elevated at the moment. The board... If you see the RNS is the board actively buy shares in on this on this discount most days of the week at the moment and taking an active approach over the long term.

4:18 In my in my tenure, the fund was issuing shares at a premium. It's now buying back shares at at at this discount and in the process enhancing NAV. I'm gonna I'm gonna hand on now to Nish. He's gonna talk a little bit about how we look at picking stocks. Well, good morning, everyone. I'm delighted to be able to to to talk to you. As Peter said, the investment philosophy of of the GLOBAL SMALLER COMPANIES TRUST is is to take a long term conservative approach to buying good quality growing businesses when they become available at an attractive valuation. We are bottom up stock pickers. When we look at a business, we're we're very focused on the fundamentals. We're trying to assess the quality of the business model, the management team, the valuation, and where the risks are likely to come from.

5:11 So what is a good quality business? What does that mean to us? Well, first of all, we have to be able to fully understand the business and have a good idea of what the business might look like in ten years' time, where the risks are likely to come from, and how to value the business. So that automatically rules out large parts of our invest... Our investable universe, where we just don't know what the business, will do in the future. Most of the businesses that we invest in have really strong competitive advantages. So they might be low cost producers of the product, or they might offer a differentiated product or service. Most of the companies that we invest in tend to have good returns, better than peer group margins, and tend to consistently take market share from their competitors.

6:03 We love businesses that generate lots of free cash flow because that is indicative of good accounting quality, and it also creates op... Optionality for the management team to to generate further growth. We think pricing power is really important, and that suggests that a company has a strong competitive position. And we like companies that are operating in industries that have high barriers to entry or that are consolidating. We live... We now live in a world where interest rates are above five percent, and so that means that companies that that we invest in have to have strong balance sheets. So that is important at the moment. And something that is is is specific to smaller companies is diversification.

6:50 We don't want to be involved in companies that are too reliant on one particular customer or one particular product, and we try and avoid those types of situations.

7:02 When it comes to management teams, first and foremost, we have to be partnered with capable operators that deliver very few surprises on a day to day basis from from their operations, that have a history of being good capital allocators, that create lots of shareholder value from from their capital investment decisions. And we love instances where we're we're partnering alongside a management team that have significant skin in the game and that own a large chunk of of of the company's shares. So that's what we think is a good quality business and and a good management team. We're trying to buy these businesses at attractive valuations, and that's not always easy to do because many of these businesses are very well recognized by the investment community and their multiples or their valuations are bid up significantly.

7:57 But we're opportunistic, and we'd like to buy into these businesses when the valuation is attractive and and suggests limited downside and attractive future upside. And we'll use a whole host of different metrics, such as multiples earnings, cash flows, book value, private market valuations.

8:18 So if we're doing our job well, then it will show up in the numbers, and you can see here that the average company in in our portfolio versus the average company in the benchmark,

8:33 The quality metrics really do come through here where the average company in in our portfolio will have a higher gross margin, higher operating margin, higher return on equity than the average company in the benchmark, and it has lower levels of debt as well. On the valuation side, the multiple of 16.4 times for the average company in portfolio is lower than the benchmark multiple just under 20 times, and we're offering a higher dividend yield as well.

9:05 So the portfolio... The the philosophy and process really does work over the long term. You can see here our performance over the last twenty five years. Global smaller companies has appreciated almost elevenfold over the last twenty five years. That's significantly higher than the smaller company indices, which have increased by between seven times and eight times over the same period. And it has significantly outpaced the FTSE one hundred, which has only doubled over the last twenty five years.

9:40 So if I if I could just talk you through where we're positioned, we can start talking about, you know, how we're positioned and and what we're what we've been doing on the portfolio, which I'm sure some of you are interested to hear about. This really shows the position at the end of January where we're positioned. So taking it from the left, you can see the geographic allocation. The first thing to say about this really is that where a company is listed, you know, that... That's what defines where these where these ratings come from. And, you know, quite often, it's mislead... It's a misleading representation of the SKU of the portfolio. So it says 25.1%

10:11 in The UK, and that is 25.1% of the portfolio invested in UK listed companies. But a lot of those UK companies are, you know, very international in scope, so it's probably not as exposed to The UK economy if you're if you're if you're thinking and worried about that. But, ultimately, those those are the weightings. It's it's ultimately an outcome of our stock selection process, which is looking for these high quality companies around the world. That's how we're weighted. In in the last period, the last, in the financial year to date, we're nine months through at this point. The weighting in Japan has gone up a little bit. We put some more money into Japan. And and just very quickly on that, just to make you aware, we are now using... Following the the combination of what was the BMO asset management business with Columbia Thread and Eagle. We are now able to make use of an internal team of people to manage a Japanese portfolio direct holdings alongside one one collective fund for Japan, which we're still holding run run run by Eastspring.

11:08 But that is something we've done in the in the course of the last nine months. We've actually moved to use our internal colleagues to pick some stocks directly in in that market. We might... If have you any questions about that, we can pick those up later. North American weighting's gone down a little bit at the moment. We we do feel that valuations in North America have have, are are higher than elsewhere. I mean, they always are and gross, you know, to be fair, the the potential that the the long term track record in North America has been very strong in small caps. So it's not a market we wanna ever get too underweight to, but at the moment, we do feel that valuations elsewhere maybe on on an aggregate basis look a bit more attractive.

11:44 The the positions against the benchmark, they can see the bottom I won't I won't really dwell on. On the right, it's just worth highlighting that, you know, that what I said earlier, that this is a diversified portfolio. So you can see we're we're spread across the segments of the market. You can see we've got a big weighting in industrials. That is a... That is quite a a spread of different sectors within it actually, but we have put more money into that area of the markets over the over the last nine months because valuations in in this field, we think are attractive. Some companies are being by things

12:15 like destocking and and issues in China, for example. But valuations are attractive in in that in that... In in a number of cases in a number of cases there. And the collective's waiting, you can see there. That is really these fund holdings that we're we're holding on TRUST to give us exposure to emerging markets, Asian markets, now, part of our Japanese exposure is that within that 18%. But, you know, I'm I'm not gonna dwell on that. But ultimately, within within the within the nine months, we have added our exposure in real estate, which we think maybe is a bit... Is a is a beneficiary, hopefully, of the... A lower interest rate trend that we're seeing. We've added a bit to industrials, as I said, and a little bit more into financials as well. And more recently, also finding some ideas in consumer discretionary, where ultimately, there's been some pressure on, individual company valuations, which is creating a lot of opportunity for us. We think, against this backdrop of hopefully a global fall in interest rates.

13:16 Moving on to the next slide, we're gonna just talk about some of the

13:20 individual companies. We're not gonna go through all of these. Don't don't worry. But, Nish, do you wanna pick up a couple of the things we've been doing first? Yeah. Sure. So we have been active in a in in a whole host of different sectors, and we try to pull out some some common themes that that highlight what we've been doing in terms of purchases over the last twelve months. And one area where we have been very active is in quality businesses that we think can grow reliably. Now why why can they grow reliably? Well, first of all, these companies might be exposed to to some secular trends, for example, or they may have a high proportion of their revenues that are recurring in nature, or their end markets just might be very stable.

14:09 So an example might be Domino's, for exam... That's the pizza chain in The UK, which which I'm sure many of you are aware of. They've got an incredibly strong brand. They have very strong scale advantages, particularly in areas like marketing, and that allows Domino's to take market share consistently from these smaller competitors on the high street. And they've got a history of growing even in difficult times. They actually grew in... Even in the financial crisis. So it's a very stable business that can grow extremely reliably. GXO Logistics is an American based contract logistics provider. There is an outsourcing trend in The US and in in other regions as well where companies want to outsource their contract logistics provisions to specialists such as GXO who can do the job cheaper and offer, technology as well that that they wouldn't be able to provide themselves.

15:07 And we were able to buy into this business at a really attractive valuation because higher interest rates led to a derating in in the company's valuation. Peter, perhaps you wanna talk a bit about Foresight trying to cover? Yeah. Foresight is an asset management business, relatively recently listed. It's really exposed to alternatives, such as particularly infrastructure,

15:31 renewables investment, if you think like that, and and also private equity in The UK, regional private equity. And we've met the management on a number of occasions. We've been pretty pretty impressed with the story. It's grown pretty strongly over a long period of time, and we think it's got a really good runway ahead of it. They've acquired a business in Australia, which gives them access to that market. And although at the moment, there's... It's a bit of a more difficult environment for raising funds in infrastructure and and alternatives as a whole with the interest rates having gone up, we do think over the medium term, this

16:02 has very strong growth potential. And and over and above that, it's it's a majority owned by a a founder who could conceivably could look to sell the business onto another mass... Asset management company. We've seen other companies like Crescent House very recently taken over on a much higher multiple than than foresight trades on. I think maybe we'll move to the bottom of the page. Let's talk about a couple of the cyclicals that we've added. So, you know, cyclicals by their nature do come in and out of favor and stocks can get too depressed, we think.

16:32 They might be cyclical, we think, if they are really good businesses, then we don't... We certainly don't want to ignore them. So a couple I've mentioned would be Workspace in The UK. This is a provider of business space, not not offices, really, for to to the SME, business community in London and the Southeast of the of The UK. A very strong, you know, long term track record of of this platform, that they've got, more than 4,000 tenants to Nishu's earlier point, not exposed to single... You know, major single tenants moving out of an office. We think at the moment, valuations in the real estate sector have come under pressure as we've seen interest rates rise up, and that's led to the shares heading down to a big discount to its NAV. And we think going forward that, rental growth is actually currently being pretty strong for the company. They they manage their asset base very well. And we think that dynamic universe of companies they supply as tenant, they serve as tenants, the SMEs in London, You know, that's a much more attractive, tenant base to go after, you know, by nature, the number of them, as compared to if you're trying to let one single office, trying to find one single user for that, that space. And then Lancashire, very different, but that's within insurance reinsurance.

17:45 We are, you know, quite optimistic about returns that this company is gonna deliver in the in the in the shorter term. They produced a very good, update back end of last year where they they announced a special dividend. Ultimately, conditions in the insurance and reinsurance market have moved in their favor because insurance rates have shot up in light of recent years losses in in... Across the sector, and capital has retreated from the sector. So that's that's created a very strong pricing environment for Lancashire. We're expecting them to continue to deliver good shareholder returns in the period forward and and and hopefully get rerated. And then, Nish, do wanna say something about the commodity side? Yep. Before I move on to commodities, perhaps it might be worth touching on body coat because this is this is an example of an industrial, that we bought in the in the last year or so.

18:35 So body coat is a provider of heat treatment services to industrial customers.

18:41 So for example, Rolls Royce will send their, engine blades for their, aircraft engines to body coat, to have them treated so that it improves their strength and their ability to withstand a very harsh environment up in the air,

18:58 where where, you know, the the the movement of the blades can really create a lot of, damage, and and wear and tear. And Bodycoat are specialists in this provision of of of of this heat treatment service, and they run their plants at very high utilization rates. And as a result of that, they are the lowest cost producer of this service. And customers like that. They like to be able to to provide, to use a supplier that can be a specialist and do a better job at a at a cheaper price. The shares were out of favor when we bought into them because industrial production in many regions is extremely depressed, and that's shown by the ISM levels. But we think over the longer term, the ISM will recover, and the shares should rerate as a result of that, and earnings should grow as as as well. So that's a company that we're really excited about.

19:55 Commodity related businesses is something where we have been active. Something that we noticed in talking to many companies and management teams in the commodity space is that the sector has really had a long period of limited capital investment, and therefore, the supply side looks really good in terms of it. It seems quite tight. At the same time, the demand environment is improving for commodities because of investment in areas like infrastructure and electrification. So one company that we were quite excited to to to bind to was Vitesse Energy. This is a owner of of interest in in several wells in the Williston Basin in The US.

20:48 So they're not actually exploring for oil themselves. They have partners that do

20:53 that for them, but they collect royalties as their partners will explore and produce oil. So it's a lower risk way of of of gaining exposure to increasing activity in a shale in in The US.

21:13 Yeah. And, obviously, the problem... After when we when we buy things, obviously, that's to be funded now. You know, I think we have to always hold our hands up and we always try and show things do sometimes go and grow in smaller companies. And now on the left hand side of the top here, you see a number of stocks that we've, we probably got, got got wrong. CMC and Sliga are actually just, won't dwell on them, but, ultimately, they're exposed to hospitality market in UK and, UK, Ireland, and Europe. And both, CMC and Sliga have their own issues, operational issues, and

21:45 issues in terms of the market structure of the market. So those those were stocks that we we sold out of them as we lost confidence in the investment thesis. We did benefit from a number of takeovers in the in the last twelve months. So the restaurant group is the most recent one. That's the owner of Wagamama's the UK. It's something you'd be familiar with. That was taken over, you know, only a couple of months ago. Focus Financial, there was a North American wealth management consolidation vehicle, which was itself consolidated. And I I won't dwell on the... On

22:17 all these names, but ultimately, at at the bottom, you can see a number of stocks where we felt that valuations had, you know, had reached a high level. So Lotus Bakery is an example there. They're a provider of biscuit. They own a brisk off brand of biscuit, which is doing really well, but the valuation of the stock ran very hard. And so we we took took profits in that. And a number of those other names, energy in in The UK market, the the Israeli faith focused oil and gas business, that that we also did put that in, and we we took profits in that. So I won't dwell on that. I think we probably wanna just quickly show you a couple of slides on the individual stocks, but I think in the interest of time, we're not gonna dwell too long on these. But, Nish, you wanna say a quick word about, please?

23:02 Yes. So we we have bought into... Another industrial we bought into in the in in the year is NSC Direct, which is a distributor of products that go into the metalworking industry, and they should continue to take market share from from from smaller competitors because of scale advantages.

23:22 Workspace is is one that Peter had mentioned, and Stabilis in Europe, which is a motion control technology provider that a lot of their products go into cars, for example. So so there there would be motion technology to move the seats and and to to to to to move the doors and and so on and so forth. More of their technology is going into cars, So sort of content per vehicle is growing. And as a result of that, the shares have got a good growth outlook. We wanted to talk a bit about valuations. So smaller companies in general have underperformed significantly relative to larger companies, and the valuations are really attractive.

24:16 If you look at them, the the table at the top... On the top, you can see in the American market, the smaller companies are trading on almost 30% discount on some metrics relative to larger companies.

24:30 The bottom chart is interesting. This is the difference in the PE ratios between larger companies and smaller companies. And if you're below the line there, smaller companies are cheap. And you can see that the relative valuation to smaller companies is back towards the levels in two thousands. And after that period, there was a significant time frame of of outperformance of smaller companies that lasted almost six years. So we think that the opportunity is really good at the moment in terms of valuations, and there could be a potential rerating over a long period of time. And perhaps what might be the catalyst for that? Because this is really well known.

25:16 However, many investors are questioning, well, what... What's gonna cause that to to mean revert? Well, we think one thing that... That's potentially on the horizon is the first interest rate cut. Now the consensus seems to be that there may be the first interest rate cut from the Federal Reserve sometime in the late late part of the first half of of of this year, sort of May, June time frame. All those those probabilities are changing on a daily basis. But what happens after the first interest rate cut is that smaller companies tend to outperform. In the first twelve months after the first interest rate cut, History suggests that the outperformance could be anywhere... Be in excess of 10% relative to larger companies.

26:02 So we are quite excited that that there is a catalyst on the horizon for smaller companies to come back into favor.

26:11 And then if we question why smaller companies have underperformed, I think part of the reason is that there's been a lot of fear about recession. And, generally, in the past, what's happened is that smaller companies have underperformed whenever there has been fear of recession, and then they have outperformed coming out of the recession. And interestingly, during the recession itself, smaller companies have actually been quite resilient. So if you look at the last, six recessions in The US, for example, you can see the Russell two thousand, during the recession itself, the shares... The smaller companies fell by 4%, but the larger companies as represented by the S and P five hundred fell by more.

26:58 They fell by almost 6%. But then coming out of the recession, smaller companies outperformed significantly with the Russell two thousand outperform the S and P five hundred by almost 10 percentage points.

27:16 Yeah. So if we sort of pull that together, then I think we do we do feel, obviously, we're biased because we... We're involved in the in the... Running the fund, but we have... And and the asset class. We do think this is an attractive asset class where active management does does add value over over time. We think you need to take a long term approach to it, a team based approach to it, and really focus on valuations and quality. Got a good, well resourced team, as I discussed earlier, obviously making further use of people within the enlarged Columbia's Red Needle asset management team and and that, you know, that I'm sure will continue on an issues tenure going forward. And, you know, the funds delivered good returns for investors over over the long term. I think I think on that on that sort of note, I'll hand it back to to Christine or Alessandra. Thanks very much.

28:04 And yeah, hopefully, if it was your first time hearing from Mitch, you can be assured that there's a safe fair of hands taking over from May. And obviously, thanks again to to Peter for especially the the strong performance, the leading trust in its sector over the last three years within NAV and share price terms. And and we have had lots of questions. I'm really glad by that, but please keep submitting them, and so we'll try to get to as many as possible. And, actually, in regards to Mitch and if he's an on human related basis on people, there's been one question about Mitch. Can you talk about your background and what your involvement has been with the the GLOBAL SMALLER COMPANIES TRUST till then? Yeah. Sure. So I've actually been involved with the GLOBAL SMALLER COMPANIES TRUST since 2008.

28:53 And my first involvement with the trust was on the on The US portfolio, which is the largest part of the trust at at over 40%, and then with The UK portfolio and later on with the collectives. I've been reporting to the board of the trust since since 2013. So I do have detailed knowledge of the investments that we hold within the trust, and I've also been involved with the client meetings over the last eighteen months or so. And, you know, managing the discount and the cash flows and and all of the other nuances of of of an investment company.

29:40 So I have a lot of experience with the investment side and the administrative side. So that gives you a sense that there'll be an element of continuity. But at the same time, I can offer different perspectives that could potentially improve the proposition even more than it already is.

29:57 So there'll naturally be a a period of transition. Peter's here till the end of June. So we will work together closely to make sure that the transition will be handled very smoothly. Thanks, Mitch. I'll jump in again with a kind of similar question. What do you think will stay the same, and what do you think will change after April when you take over his lead? So I think the things that that will chain... Will... That will stay the same, well, the the team is largely the same. So there is a lot of experience in this team. There's over a hundred years of investment experience. We've been through several market cycles. We've been through pandemics, wars, elections,

30:43 some stock market bubbles. So there is a lot of investment experience here, and and we're happy that that that that the team is is largely intact. We will focus on long term investing, and I think that's really important in an... A market environment that is in... Becoming increasingly short term. Being long term, we think is a competitive advantage. We've always run the trust in a conservative way and focused on minimizing risk. And for... And we do that by focusing on good quality businesses and paying attractive valuations for them. We think that that's an evergreen factor in investment success, so we would like to... For that to continue.

31:27 A dividend is important. The the the his... The history of the trust is that the dividend has grown for fifty three years consecutively, and we want to continue that track record. We are very proactive in managing the discount as well. We think that's really important. So that's something that I think will continue.

31:47 What will change? So we were required... The BMO's asset management business was acquired by Columbia Threadneedle in in 2021. We colocated together in in 2023. And what we realized is that Columbia Threadneedle are very intense when it comes to research, and they invest a lot of of resources into research. And we wanted to... We we realized that, there were lots of people that that that we could, talk to, and we could gain gain ideas from, and we're looking to harness this. So last year, after a long period of deliberation, we decided to, insource, or or 50% of our holdings in Japan, which we were previously using collectives for, to our Japanese team at Columbia Threadneedle who have a really good process that's very similar to the way that we manage money in in other parts of the trust and that have a track record in Japanese equities in general.

32:57 And we're pleased with how far that's going, and and we'll we'll review that. We'll investigate if there are other opportunities to do something similar to make use of our wider resource base.

33:10 It isn't a secret that the trust pressure is extremely out of favor. The the trust sector generally is is is out of favor and small caps in particular. So think... We think it's a good time to look at the asset class because it it is undervalued. It does well after the first interest rate cut, and it will do well as economic growth potentially picks up. So we want to go out and market the fund more to to to tell people about the potential

33:42 opportunity, and we think that will be helpful in potentially closing the discount as well. Yeah. At the last closes, close to 16% discount, so definitely good value there. And I'll read out a question, and it does pick up on one of your points in relation to the stocks that you were going through, the test. I'm interested in future sustainability. I'm wondering in particular how exposed you are to fossil fuel industry, including large banks and insurance companies that directly support them. Also, do you have a sustainability filter to ensure you invest in ethical companies?

34:19 Yeah. Good good questions. I mean, ultimately, this is not an ESG badge fund, but we've always made a point in the annual report of communicating how we how we how we think about ESG issues and sustainability. And you can see some case studies and stuff in in in that sort of talks to that. But we do have exposure in the fossil fuel sector as as Nishu sort of identified. It's a relatively small part of the trust, the the whole energy

34:46 investment side. To be honest with you, over my tenure as manager, you know, it's not tended to be a great place to make money in the small cap market. Ultimately, the big... The very big fossil fuel companies that we we... That you all know of are the ones that make a lot of the money, the smaller cap ones can be quite risky. So it is an area that we've we've tended to, you know, be be skeptical of over the long term. But, Tamisha's comments, I think, at the moment, there's certainly some attractive opportunities in the space at the moment, which we don't want to ignore.

35:17 Christie, the other point that you were making there, I'm just trying to Yeah. Like, how you Oh, the bank. The banks and the insurance. So so, I mean, we we acknowledge... Well, obviously, we don't invest in the large cap banks. We do have exposures. We tend to have exposure to to more niche banks. So in The UK context, companies that niche follows really called, you know, one savings bank, Paragon. Those are sort of businesses that lend to, particularly, to the buy to let market in The UK. They're not really lending all that much money, I don't think, to the fossil fuel sector. But do you want to say anything else on that, Mitch? So we do... This... As Peter mentioned, we're not ESG screened, but we do think that... And assessing ESG risks and opportunities is an important part of assessing the business model in general because the culture of a business has to be so that most of the stakeholders are satisfied

36:12 for the business to be successful over the long term. So we do pay attention to ESG risks and opportunities, but it is not an an ESG screened funding per se. When it comes to banks and and energy,

36:27 most of our banks are are actually specialist lenders that are more commercial banks that would, for example, lend to to to to landlords that are looking to build property portfolios. We don't have any specialist lenders that that that will have a high concentration to the energy industry.

36:49 And if I can add just as a firm, as a whole, Columbia Triangle Investments rate our research intensity as the guys mentioned, but also the responsible investment heritage that we've had, particularly coming from the BMO side. And so it's the... That sense of that ESG integration into all the research of any stock that the portfolio managers are reviewing, and that's very important and quite a a unique selling point for us as a house. And then I'll move on to another question

37:20 about management, and this kinda correlates to the g of the ESG potentially. And smaller company success or failure can, in many cases, be very focused on the management's execution more so than that of large cap. How do you manage this risk element in the portfolio selection?

37:39 We are very focused on management quality, we think that particularly in smaller companies, management is extremely important because many of these smaller companies, they might not have as developed infrastructure as the larger companies and and layers of management. So, the people at the top really dictate the culture of the business.

38:02 We will have regular contact with management teams. We will try and see them as often as possible. The team as a whole is very involved with company meetings. As a team, we do something like in excess of 500 meetings a year with management teams across all all the individuals. We will ask questions about the prospects for the business and any potential risks that we have identified.

38:30 We tend... One of our cell disciplines is if we lose confidence in a management team. So what would cause us to lose confidence in a management team? First of all, if there are continuous operational missteps, if there's really poor capital allocation, for example, acquisitions that don't make strategic sense or that are... Represent poor shareholder value, If there is dishonesty, if there is insider selling, for example. So these are the some of the triggers that we have if we want to sell a position because we've lost faith in the management team. It's something that's really important.

39:16 I'll just add that I think that that I think we've been really impressed with how a lot of the management teams or the companies we're involved with over the last few years have managed the the COVID pandemic and the the war situation,

39:27 rapid inflation, and we've been really impressed with how, you know, a lot of them have managed. And I think, you know, I... From my point of view, I... Well, I mean, companies... We we meet companies of all sizes, and I think, you know, quite often, it's a smaller company management teams, the more entrepreneurial, the more dynamic, you know, they're actually more impressive than the... Yeah. Maybe some of the the larger company management teams who have paid a lot more money. But...

39:49 Great. That's really helpful. Now separately, gross revenues fully recovered post COVID up to and including h one. Are they continuing to grow healthily, and at what sort of rates? We don't have the specific data on on on on revenue growth rate for the whole portfolio as a whole. But one observation I would make is that a lot of the revenue growth that we've seen over the last couple of years has actually been driven more by price than volume because we have been in a more inflationary environment. And as a as a result of that, many companies have been passing through these higher costs to their customers, and thereby, they've been driving a lot of their revenues through through price rather than volume.

40:37 In in many industries, we're yet to see the volume come back towards levels that were there in 2019. So there is still some recovery potential in many industries. Super. And then related to purchases and and sales, what is the turnover of selling and buying investments last year as a percentage of total asset value of the trust, if that's possible, or else we can come back to you with the exact details of the Yeah. We don't... Don't think we have that precise data to hand, but I think in broad terms, I think it's... If if you think about it as a percentage of the the value of the fund, we tend to sort of on the annual basis be buying about 25%, selling 25%.

41:22 So that added together, that's 50 if you like and in terms of the NAV. So,

41:27 you know, some of that activity will be driven by the fact that we're having to buy shares in at the moment. So share buybacks mean, obviously, we need to raise money from the. So you will you will, you know, sometimes turnover days could be distorted, but we... We're we're looking to hold things as we've said really for long periods. And I think our patrolling period, three to four years, would be what we'd probably tend to look at, but we can we can come back with some precise data to the individual who asked that question. Yeah. We can do that. Now I'll combine two questions that are kind of similar, in relation to the market cap range of the small cap company that you're looking at. Somebody's just asking what that is, but or tag on, Does the trust invest in prior IPO stocks like ICG Enterprise?

42:14 So on the market cap, we look at it in market by market. So in the North American market, we'll we'll we'll we'll go up to market cap companies. It's about $10,000,000,000 at the the point of the inception. That may seem like a very big company, but ultimately, in in in The UK sense it is. But in in the North American market, that's actually not a very big company. So we've tended to find that companies 5 to $10,000,000,000 market cap range tend to do pretty well in in in in the North American market if they've got a good model. In The UK, we're we're really looking at the the benchmark, the small company benchmark we we measure against there. Broadly, means we... We'll go up to about 1,500,000,000 sterling market cap at the point of inception. Now if we if we buy a stock and it does really well and it goes through that sort of cutoff, then we don't immediately sell it. If we think the prospects are still good, then we'll continue to run that position. I think most of our... A lot of our long term holdings would have been things that have grown, you know, over a long period of time that we've just we've just held on to.

43:11 I think Graham and Graham is an example that Mitch Mitch Mitch was familiar with in North America that bought a number of years ago an insurance broker business. And I was talking to him the other day about, it getting a bit expensive now? And Mitch just said, well, you know, just... It's a compound where it steadily grows and, you know, don't don't don't panic and set out of it now. So, you know, I think we need to be conscious that this is a smaller company's trust. We don't want people to be owning mega cap comp... We don't wanna be holding a load of mega cap companies within it. But if we've got companies that are still on a good growth trajectory, then we we we want to run our winners. Nish, do you wanna add anything to that? I I think that's true, Peter, that what we found or our observation has been that a small number of companies will drive the majority of the return of of the market over the long term.

43:56 And if we are in a happy situation where we found one of these long term business... Long term growers that that can generate high returns on capital and that has a large run... Long runway of reinvestment opportunities.

44:12 We want to hold on to these businesses provided the valuations don't become egregious. And pre IPO stuff? We we don't do pre IPOs. I mean, this this time, we we have held in, but we have investment to actually... We have a... We have an investment actually in in a company called Mercia Asset Management, which is on The UK portfolio, and they they are a specialist investor in venture capital private equity in The UK regions. And, you know, a little bit like Foresight I mentioned earlier. I mean, Foresight are involved Foresight are involved in in private equity investing. So we get exposure to that through our investments with them, but we're not gonna go out and try and do that ourselves because it... It's another skill set. You need a you need a dedicated team, you know, crawling all over early stage companies really if you're gonna do it successfully, and that's really not our not our skill set.

45:01 But we're happy to invest in the space directly through really good managed... Well managed businesses. Yeah. That makes sense. And so, yeah, we're coming up to a quarter to the hour, we'll wrap up, and I'll hand over to Peter just to make some closing remarks if you want to kind of bid you farewell or if you want to just wish, wish, like, good luck as well. Yeah. No. Absolutely. I think, know, so thanks firstly for everyone for dialing in. Obviously, we're we're we're very keen to keep communicating with you about what we're doing and making sure we'll take that forward going forward and and and make it better because he's he's a younger person who's much more used to this media stuff than I am. But, you know, it's it's been a pleasure it's been a pleasure being the lead manager of the fund, and I I remain that at the moment during a joint basis. It's been a pleasure working with all the people here, and, you know, obviously, I was... I've really enjoyed my involvement with the with the trust.

45:55 I remain a big... I remain an investor in the fund myself and look forward to, you know, seeing it thrive in the future. But, you know, I think just to really just wish wish Nish, as Christine said, all the best in in in the future with it. But I think, you know, the the great thing is it's an attractive asset class and, you know, we do think that there's opportunity in investing in smaller companies that you you don't get in some of these very boring large companies that are on the market. We do think it's it's fundamentally an attractive investment universe to pick stocks from. So, you know, I think, hopefully, it can can continue to do well, but, obviously, we can't make any predictions about what's gonna happen in the future. But, anyway, you know, thank you again for your attention,

46:37 And, you know, I think I've still... We still got some other functions we'll be doing in the in the next couple of months. But so I may may may see some of you or hear... Speak to some of you again before I before I leave. But anyway, that's all I would say, I think, Christine. Perfect. Peter, Nish, Christine, thank you very much for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? This only take a few moments to complete, but I'm sure we'll be greatly valued by the company. On behalf of the management team of the GLOBAL SMALLER COMPANIES TRUST PLC, we'd like to thank you for attending today's presentation, and good morning to you all.