THE GLOBAL SMALLER COMPANIES TRUST PLC - Investor update post a change in benchmark and portfolio composition

The Global Smaller Companies Trust PLC provided an investor update highlighting improving conditions for global small-cap equities, which management believes may be entering a new growth cycle after years of underperformance against large-cap stocks. The trust reported a 20.9% increase in NAV over the last 12 months and a 28.8% share price return, supported by discount narrowing and enhanced shareholder engagement. While performance lagged the benchmark due to a disciplined focus on quality businesses and limited exposure to speculative AI-driven stocks, management remains committed to its long-term investment philosophy centred on high-quality, cash-generative companies trading at attractive valuations. Recent strategic initiatives include benchmark changes, portfolio concentration from 213 to 125 holdings, reduced UK exposure, improved discount management, and refinements to stock selection and risk controls. The portfolio currently exhibits superior profitability, stronger margins, lower leverage, and more attractive valuation metrics than its benchmark, trading at 11.9x EBITDA and 16.8x earnings. Management sees compelling opportunities in sectors such as industrials, consumer businesses and real estate services, while maintaining an underweight position in North America. The trust believes small caps offer investors diversification benefits, inflation resilience and exposure to undervalued growth opportunities, positioning shareholders to benefit from a potential rotation away from highly concentrated US technology stocks and a renewed preference for quality and value investing.