Smaller Companies Value Trust PLC
Smaller Companies Value Trust plc
Annual report and financial statements for the year ended 30 April 2008
Contents
Objectives
Financial Highlights
Directors, Investment Manager and Others
Chairman's Statement
Investment Manager's Review
Fifty Largest Holdings
Sector Distribution
Directors' Report
Statement of Directors' responsibilities in
relation to the Company financial statements
Corporate Governance
Directors' Remuneration Report
Independent Auditors' Report
Income Statement
Balance Sheet
Reconciliation of Movements in Shareholders' Funds
Cash Flow Statement
Notes to the Financial Statements
Notice of Meeting
Form of Proxy
Financial Calendar
Investment Manager Information
Trust Information
Smaller Companies Value Trust plc is registered in England and Wales no. 4388908
and is an investment company within the meaning of Part 23 of the Companies Act
2006.
Registered office:
10 Fleet Place
London EC4M 7RH
This document is important and requires your immediate attention.
If you are in any doubt about the action to be taken you should consult an
independent financial adviser immediately. If you have sold or otherwise
transferred all of your shares in Smaller Companies Value Trust plc, this
document should be passed to the purchaser or transferee or to the person
through whom the transfer was effected for transmission to the purchaser or
transferee.
Objectives - Smaller Companies Value Trust plc
The Company invests in a diversified portfolio of quoted UK smaller companies
with the objective of providing income shareholders with a dividend yield,
together with the potential for dividend growth and capital shareholders with
the benefit of geared capital growth.
The Board seeks to balance the interests of the holders of the income shares and
capital shares at all times and the investment policy is such that the Company
will be a qualifying investment trust under the Income and Corporation Taxes Act
1988 (as amended).
Information about the duration of the Company may be found in the Directors'
Report on page 8.
Financial Highlights
Year ended Year
ended
30-Apr 30-Apr
2008 2007
Net asset value per package
unit (Articles basis)* 189.49p 274.53p
Share price per package
unit** 176.50p 248.25p
Discount per package unit 6.86% 9.57%
Net asset value per capital
share (Articles basis) 132.00p 218.57p
Share price per capital
share** 109.50p 183.50p
Discount per capital share 17.05% 16.05%
Net asset value per income
share (Articles basis) 57.49p 55.96p
Share price per income
share** 61.00p 64.75p
Premium per income share 6.11% 15.70%
Hoare Govett Smaller Companies Index
(excluding investment
companies)*** 7,589.10 9,401.67
Total (loss)/return on ordinary activities
before and after taxation
(�'000) -16,716 8,066
Dividend per income share 6.75p 5.47p
Net asset total (loss)/return
per package unit (74.77p) 45.17p
* A package unit comprises one capital share and one income share
** Source: Bloomberg
*** Source: Datastream
In the report and accounts, the net asset value has been calculated on both an
Articles basis and Accounts basis (see Note 13).
Comparison of the total return of Smaller Companies Value Trust plc with the
Hoare Govett Smaller Companies Index (excluding investment companies)
(Graphic Omitted)
Directors
Anthony Bushell
Anthony Bushell, aged 75, the chairman, joined the Bank of England in 1956 and
was its chief investment manager from 1978 until 1992. He is Chairman of
Eclectic Investment Trust plc. Until 2002 he was chairman of GT Japan Investment
Trust plc and a director of Aberdeen Asset Management plc and, until March 2005,
was a member of the advisory committee of the Pan European Smaller Companies
Fund of the Scottish Widows Investment Partnership Investment Funds ICVC.
Bernard Clark
Bernard Clark, aged 66, is currently non-executive chairman of Litho Supplies
plc, a non-executive director of TR European Growth Trust plc and a director of
Edwina Investments Limited. Previously, he was a director of Lloyds Merchant
Bank Limited and Lloyds Investment Managers Limited.
Nigel Pearson
Nigel Pearson, aged 64, qualified as a solicitor in Scotland and, until 2002,
was general counsel for Rabobank International, London. He held various
positions within Deutsche Bank Group between 1986 and 1998 including head of the
legal and compliance departments of Deutsche Bank AG, London. He was chief legal
adviser and company secretary of European Arab Bank Limited, London and then
group legal counsel between 1979 and 1986. He has also occupied the position of
company secretary and legal adviser to Arab Swiss Consultants Limited and Bank
of America International Limited, London.
John Poulter
John Poulter, aged 65, was chairman of Spectris plc until May 2008. He was chief
executive of Spectris plc from 1991 to 2001. He is also the non-executive
chairman of Filtronic plc and a director of a number of private companies. His
previous directorships include Kidde plc, RAC plc and the London Metal Exchange
Limited. Previously he was responsible for a group of UK and US manufacturing
businesses within BTR plc.
All of the Directors are members of the Nominations Committee and the Audit and
Management Engagement Committee.
Investment Manager and Others
Company Secretary and registered office
Scottish Widows Investment Partnership Limited
10 Fleet Place
London EC4M 7RH
020 7203 3000
Auditors
Ernst & Young LLP
10 George Street
Edinburgh EH2 2DZ
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Broker
Landsbanki Securities (UK) Limited
Beaufort House
15 St Botolph Street
London EC3A 7QR
Banker
Lloyds TSB Scotland plc
120 George Street
Edinburgh EH2 4TS
Investment Manager
Scottish Widows Investment Partnership Limited
Edinburgh One
Morrison Street
Edinburgh EH3 8BE
Chairman's Statement
Review
This has been a challenging period for UK equities, and particularly for those
investing in smaller companies. While the total return for the FTSE 100 index
fell by just over 2% during the period under review, the comparable figure for
the smaller companies market, as measured by the Hoare Govett Smaller Companies
Index (excluding investment companies) fell by 19.3%. During this time, the
total return of the Smaller Companies Value Trust's capital shares fell 22.9%.
The leverage through the fixed bank loan inevitably had a detrimental effect on
the capital shares.
Volatility has been a key feature of the market. Investors have been
particularly concerned that difficulties associated with US subprime lending
would affect global growth prospects. As a result, risk-adverse investors took
shelter in the perceived safety of large-capitalisation stocks, and smaller
companies were neglected. Deteriorating economic conditions also affected
performance, since smaller companies tend to rely more heavily than their larger
counterparts on a favourable domestic economic environment.
The other major impediment, of course, has been the credit crisis and its impact
on the banking sector. Inevitably, sentiment has been driven by events in the
US, with concerns over the financial health of Bear Stearns precipitating a
share price collapse in March. Though the mood recovered somewhat in the wake of
a large cut in US interest rates and encouraging news elsewhere within the
sector, investors have retained a cautious outlook.
The market's preference for large-capitalisation stocks has left many smaller
companies at their most attractive valuations in years. While the Trust's
performance lagged its benchmark during this difficult period, I remain
confident of the manager's ability to identify these opportunities.
Dividend
A second interim dividend for the year ended 30 April 2008 was paid on 14 May
2008, making a total for the year of 6.75p per income share. As the balance of
undistributed income for the year is small, the Board decided, as intimated in
the announcement made on 24 April 2008, not to pay a final dividend.
Future of the Company
The attention of Shareholders is drawn to the paragraph on page 8 on the options
available to the Board with the approach of 30 April 2009, by which date the
future of the Company must be determined.
Outlook
In spite of the turmoil on the financial markets, the UK economy has held up
remarkably well, but it is now slowing. In the short term, equities are likely
to remain volatile amid the continued uncertainty over the impact of the credit
crunch in financial markets. Investors will also be keen to see if the strength
of the emerging economies is sustained. Rampant growth in the world's developing
nations will continue to affect both the UK economy and the general direction of
equity markets in the months to come.
The performance of smaller companies relative to their larger counterparts
depends to a considerable extent on how much further the credit crisis has to
run. The key for many firms is not only if the Bank of England's monetary policy
committee is prepared to reduce interest rates again, but the extent to which
financial institutions are prepared to pass such cuts on to the corporate sector
and to consumers or even at a later stage should the Bank of England decide to
lift rates.
Anthony Bushell
Chairman
27 June 2008
Investment Manager's Review
Global and market background
The UK equity market traced a downward path over the twelve months. For much of
the review period two concerns dominated investor sentiment: the economic
outlook for the US and the knock-on effects of the credit crisis. Investors in
the UK and elsewhere have been gripped by fears that the slowing American
economy will tip into recession, and that the effects of the fallout from US
subprime lending would begin to affect the wider economy. With this in mind, it
is hardly surprising that the financial stresses affecting US activity have
worked through to other major developed countries.
At the same time, though, the performance of the global economy has remained
relatively robust. Industrial production has been holding up, and the developing
world, headed by China and India, is still performing relatively well. Indeed,
the big winners in the market over the review period proved to be mining stocks,
propelled not only by the sustained growth in demand from emerging markets but
by merger activity as well. The oil & gas sector, boosted by record prices for
crude oil, was another strong performer. In contrast, many sectors of the market
in which smaller companies play a prominent role, such as support services,
struggled.
Other developments, such as the increasingly gloomy outlook for UK consumer
spending and the slowing UK economy, had a detrimental effect on the share price
of many smaller companies. Those with earnings linked to the public sector were
adversely affected by an anticipated downturn in government spending. March's
budget statement, in which the chancellor of the exchequer was forced to admit
that the UK economy was likely to grow more slowly than previously expected,
heralded a reduction in government revenue and an increase in borrowing.
The other source of concern continues to be the credit crisis, which among other
things prompted central banks around the world to arrange fresh injections of
cash in an effort to keep the wheels of the financial system turning. While
markets generally responded favourably to such intervention, banks remain wary
of lending to each other, and it is likely to be some time before their
confidence is fully restored.
Toward the end of 2007, a slowdown in the UK economy became apparent, prompting
a change in the outlook for interest rates. On three occasions (December 2007,
February 2008 and April 2008), the Bank of England's monetary policy committee
lowered the base figure by 0.25 percentage points, largely in response to
slowing growth prospects and tighter credit conditions. At the same time,
though, consumers have been faced with escalating utility bills, mortgage
payments and food prices. The bank has thus been faced with the difficult task
of balancing the risk to growth with that of domestic inflation, which threatens
to rise above its targeted level. On the whole, though, the UK economy has held
up remarkably well, with little downturn in business activity and companies
still spending fairly healthily.
Portfolio activity
In a difficult environment for smaller companies, the Trust's performance was
disappointing. The issues surrounding Carter & Carter and Erinaceous Group, both
now in administration, left their mark on performance and prompted us to dispose
of our holding in each. We also disposed of Mapeley, a commercial property
company, and Paragon, a provider of buy-to-let mortgages, amid the gloomy
outlook for the property sector. Retailers also struggled against waning
consumer confidence, and this was reflected in our holdings in Topps Tiles and
Land of Leather.
The price of oil, which reached record levels during the period, was another
negative factor affecting performance. Investors' enthusiasm for this sector
meant that the Trust's underweight position relative to its benchmark detracted
from performance. There is, however, considerable geopolitical risk associated
with this area of the market, which we felt was not appropriate for the Trust to
take.
The best performing stock during the period was Hilton Food Group, a specialist
meat-packaging operator. Since its flotation, the highly cash-generative company
has performed consistently well and numbers Tesco among its key customers. Other
positive contributions came from Babcock International and VT Group, both of
whom won a substantial number of defence contracts, and seem well-placed to do
so in future. Fenner, an engineering company which purchased Prodesco, a US
competitor, during the period, also performed well.
There were no significant shifts in the focus of the portfolio during the
period. Transactions reflected our favourable view of healthcare and other
defensive areas of the market where profits will be less affected by slowing
economic growth. We participated in the float of CVS Group, a veterinary
services provider, which proved one of the strongest performers in the
portfolio, and established a holding in Southern Cross Healthcare, the UK's
largest provider of care homes. We also favour companies with strong links to
emerging market infrastructure, such as Morgan Crucible which was another of the
Trust's strongest performers. Disposals, such as Pendragon, the UK's largest car
dealer, and Workspace Group, a commercial property provider, were indicative of
our cautious economic outlook.
Outlook
Growth in the UK now looks likely to slow quite sharply this year as residential
investment falls, consumers turn more cautious and business investment stops
growing.
The more competitive level of sterling may give some boost to exports, but
growth in GDP is likely to slow substantially.
From a global perspective, the reluctance of financial institutions to lend both
to each other and to consumers will inevitably lead to slowing growth. In the
short term, financial markets are likely to remain volatile amid concerns over
the economic outlook for the US and the difficulties in the credit markets.
Recent comments from the Bank of England and elsewhere suggesting the worst of
the credit crisis may be over need to be taken with caution. Our outlook for
consumer-related sectors remains guarded, something which is reflected in the
position of the portfolio.
While the short-term economic outlook in the UK is far from favourable, many
small and medium-sized firms are trading at their most attractive valuations in
several years. Their share prices, though, may be susceptible to ongoing
economic concerns.
Gregor Macdonald
Scottish Widows Investment Partnership Limited
27 June 2008
Fifty Largest Holdings at 30 April 2008
Investment 30 April 2008 30 April 2007 Percentage of Business
valuation valuation total assets activity
�000 �000 less net
current
liabilities
%
----- ------------------------------ --------------- --------------- --------------- ---------------
1 Interserve Support
1,551 1,741 5.97 Services
----- ------------------------------ --------------- --------------- --------------- ---------------
2 Babcock International Group Support
1,479 1,435 5.69 Services
----- ------------------------------ --------------- --------------- --------------- ---------------
3 Intermediate Capital General
1,398 807 5.39 Financial
----- ------------------------------ --------------- --------------- --------------- ---------------
4 Fenner Industrial
1,395 1,269 5.38 Engineering
----- ------------------------------ --------------- --------------- --------------- ---------------
5 Hilton Food Group 1,377 # 5.31 Food Producers
----- ------------------------------ --------------- --------------- --------------- ---------------
6 Senior Industrial
1,371 # 5.28 Engineering
----- ------------------------------ --------------- --------------- --------------- ---------------
7 Dignity General
1,350 1,245 5.20 Retailers
----- ------------------------------ --------------- --------------- --------------- ---------------
8 Axon Group Software &
Computer
1,217 1,742 4.69 Services
----- ------------------------------ --------------- --------------- --------------- ---------------
9 Atkins WS Support
1,193 # 4.60 Services
----- ------------------------------ --------------- --------------- --------------- ---------------
10 Cranswick 1,184 1,436 4.56 Food Producers
----- ------------------------------ --------------- --------------- --------------- ---------------
Top ten investments 13,515 52.07
----- ------------------------------ --------------- --------------- --------------- ---------------
11 VT Group Aerospace &
1,153 4.44 Defence
----- ------------------------------ --------------- --------------- --------------- ---------------
12 Morgan Crucible Co Electronic &
Electrical
1,108 4.27 Equipment
----- ------------------------------ --------------- --------------- --------------- ---------------
13 Shaftesbury 1,101 4.24 Real Estate
----- ------------------------------ --------------- --------------- --------------- ---------------
14 ROK Construction &
Building
1,075 4.14 Materials
----- ------------------------------ --------------- --------------- --------------- ---------------
15 CVS Group General
1,073 4.14 Retailers
----- ------------------------------ --------------- --------------- --------------- ---------------
16 Kier Group Construction &
Building
1,051 4.05 Materials
----- ------------------------------ --------------- --------------- --------------- ---------------
17 Caretec Holdings Health Care
Equipment &
1,034 3.98 Service
----- ------------------------------ --------------- --------------- --------------- ---------------
18 Beazley Group Non Life
1,029 3.97 Insurance
----- ------------------------------ --------------- --------------- --------------- ---------------
19 S I G Support
984 3.79 Services
----- ------------------------------ --------------- --------------- --------------- ---------------
20 Taylor Nelson Sofres Media &
972 3.75 Entertainment
----- ------------------------------ --------------- --------------- --------------- ---------------
21 Savills 870 3.35 Real Estate
----- ------------------------------ --------------- --------------- --------------- ---------------
22 Cineworld Group Travel &
867 3.34 Leisure
----- ------------------------------ --------------- --------------- --------------- ---------------
23 Highway Insurance Holdings Non Life
862 3.32 Insurance
----- ------------------------------ --------------- --------------- --------------- ---------------
24 Unite Group 858 3.31 Real Estate
----- ------------------------------ --------------- --------------- --------------- ---------------
25 BSS Group Support
856 3.30 Services
----- ------------------------------ --------------- --------------- --------------- ---------------
26 Aberdeen Asset Management General
851 3.28 Financial
----- ------------------------------ --------------- --------------- --------------- ---------------
27 Headlam Group Household Goods
840 3.24 & Textiles
----- ------------------------------ --------------- --------------- --------------- ---------------
28 Spectris Electronic &
Electrical
840 3.24 Equipment
----- ------------------------------ --------------- --------------- --------------- ---------------
29 Michael Page International Support
837 3.23 Services
----- ------------------------------ --------------- --------------- --------------- ---------------
30 Mouchel Group Support
833 3.21 Services
----- ------------------------------ --------------- --------------- --------------- ---------------
31 Elementis 825 3.18 Chemicals
----- ------------------------------ --------------- --------------- --------------- ---------------
32 Mitie Group Support
806 3.11 Services
----- ------------------------------ --------------- --------------- --------------- ---------------
33 Bovis Homes Group Household Goods
756 2.91 & Textiles
----- ------------------------------ --------------- --------------- --------------- ---------------
34 Tullett Prebon General
736 2.84 Financial
----- ------------------------------ --------------- --------------- --------------- ---------------
35 Ricardo Support
707 2.72 Services
----- ------------------------------ --------------- --------------- --------------- ---------------
36 Venture Production Oil & Gas
700 2.70 Producers
----- ------------------------------ --------------- --------------- --------------- ---------------
37 Southern Cross Heathcare Group Health Care
Equipment &
695 2.68 Service
----- ------------------------------ --------------- --------------- --------------- ---------------
38 Clarkson Industrial
682 2.63 Transportation
----- ------------------------------ --------------- --------------- --------------- ---------------
39 Croda International 670 2.58 Chemicals
----- ------------------------------ --------------- --------------- --------------- ---------------
40 Hansard Global 624 2.40 Life Insurance
----- ------------------------------ --------------- --------------- --------------- ---------------
41 Rathbone Brothers General
610 2.35 Financial
----- ------------------------------ --------------- --------------- --------------- ---------------
42 Regus Group Support
521 2.01 Services
----- ------------------------------ --------------- --------------- --------------- ---------------
43 Luminar Group Holdings Travel &
513 1.98 Leisure
----- ------------------------------ --------------- --------------- --------------- ---------------
44 Fidessa Group Software &
Computer
510 1.97 Services
----- ------------------------------ --------------- --------------- --------------- ---------------
45 Genus Pharmaceuticals
&
501 1.93 Biotechnology
----- ------------------------------ --------------- --------------- --------------- ---------------
46 Melrose Industrial
474 1.83 Engineering
----- ------------------------------ --------------- --------------- --------------- ---------------
47 Greene King Travel &
464 1.79 Leisure
----- ------------------------------ --------------- --------------- --------------- ---------------
48 Topps Tiles General
432 1.66 Retailers
----- ------------------------------ --------------- --------------- --------------- ---------------
49 Halfords Group General
351 1.35 Retailers
----- ------------------------------ --------------- --------------- --------------- ---------------
50 Imperial Energy Corporation Oil & Gas
340 1.31 Producers
----- ------------------------------ --------------- --------------- --------------- ---------------
44,526 171.59
----- ------------------------------ --------------- --------------- --------------- ---------------
Other Equities (3) 583 2.25
----- ------------------------------ --------------- --------------- --------------- ---------------
Net Current Liabilities (19,161) (73.84)
----- ------------------------------ --------------- --------------- --------------- ---------------
Total assets less net current
liabilities 25,948 100.00
----- ------------------------------ --------------- --------------- --------------- ---------------
# Not held at 30 April 2007.
Sector Distribution
United Kingdom
Total Total
2008 2007
---------------------------------------------------------
Sector classification % %
---------------------------------------------------------
Resources 4.01 3.46
Oil & Gas Producers 4.01 3.46
---------------------------------------------------------
---------------------------------------------------------
Basic Industries 13.95 7.87
Construction & Building Materials 8.19 5.16
Chemicals 5.76 2.71
---------------------------------------------------------
---------------------------------------------------------
General Industrials 24.44 14.46
Engineering & Machinery 12.49 8.12
Electronic & Electrical Equipment 7.51 4.62
Aerospace & Defence 4.44 1.72
---------------------------------------------------------
---------------------------------------------------------
Cyclical Consumer Goods 6.15 3.37
Household Goods & Textiles 6.15 3.37
Non-Cyclical Consumer Goods 18.57 4.59
Food Producers & Processors 9.87 2.25
Health 6.66 2.34
Pharmaceuticals & Biotechnology 2.04 -
---------------------------------------------------------
---------------------------------------------------------
Cyclical Services 64.38 36.27
Support Services 37.63 20.24
Transport 2.63 1.46
Leisure & Hotels 8.02 4.63
General Retailers 12.35 6.09
Media & Entertainment 3.75 3.85
---------------------------------------------------------
---------------------------------------------------------
Financials 34.45 20.90
Real Estate 10.90 7.51
Insurance 7.29 3.36
Life Assurance 2.40 2.72
General Financial 13.86 7.31
---------------------------------------------------------
---------------------------------------------------------
Information Technology 7.89 7.80
Software & Computer Services 7.89 7.80
---------------------------------------------------------
---------------------------------------------------------
Net current (liabilities)/assets (73.84) 1.28
---------------------------------------------------------
Total assets less net
current liabilities/assets 100.00 100.00
---------------------------------------------------------
Sector Distribution
(Graphic Omitted)
1 Resources 4.01%
2 Basic Industries 13.95%
3 General Industrials 24.44%
4 Cyclical Consumer Goods 6.15%
5 Non-Cyclical Consumer Goods 18.57%
6 Cyclical Services 64.38%
7 Financials 34.45%
8 Information Technology 7.89%
Net current liabilities (73.84%)
By Sector as a Percentage
(Graphic Omitted)
Directors' Report
Future of the Company
The Directors are obliged to convene a general meeting of the Company to be held
on 30 April 2009 (the "Planned Winding Up Date") at which an ordinary resolution
will be proposed to wind up the Company voluntarily. The Directors may be
exempted from this obligation by a special resolution of the Company and
separate extraordinary resolutions of the holders of the Income Shares and the
holders of the Capital Shares in each case passed after 30 April 2008. In the
event that such special resolution is to be considered no earlier than 1 April
2009 and it contains proposals that would result in the Income Shareholders
receiving not later than the Planned Winding Up Date 60p in cash (in addition to
any entitlement to any undistributed revenue reserve) for each Income Share held
then the Income Shareholders shall not be entitled to vote upon the special
resolution and a separate extraordinary resolution of the Income Shareholders
shall not be required.
All votes cast on the winding up resolution at the extraordinary general meeting
on the Planned Winding Up Date shall be deemed to be cast in favour of the
resolution to wind up. A winding up will enable Capital Shareholders to realise
the residual capital value of their investment after the payment of the
creditors, liquidation costs and the capital and dividend entitlement of the
Income Shareholders.
The capital structure of the Company is outlined in Note 12 on page 26. Full
details of the rights of both the Income and Capital Shares are given in the
Company's memorandum and articles of association.
The Board is reviewing the options available in relation to the future of the
Company, including the possibility of recommending to Shareholders that the
Directors may be exempted from the obligation to put an ordinary resolution to
wind up the Company voluntarily on 30 April 2009. The Directors consider that it
would be premature to make a final decision in relation to the future of the
Company at this time, but on the basis that the articles of association provide
for a mechanism whereby the Company may continue in existence beyond 30 April
2009, in certain circumstances, the Directors consider that it is appropriate to
prepare the 2008 report and accounts on a going concern basis.
Shareholders' attention is also drawn to Note 19 on page 31.
Status of the Company
The Company carries on the business of an investment trust as defined in section
842 of the Income and Corporation Taxes Act 1988, as amended (ICTA), and has
gained approval as such for the period ended 30 April 2007. The Company has
subsequently conducted its affairs so as to enable it to continue to seek such
approval. The Company is an investment company as defined by Part 23 of the
Companies Act 2006. The Company is not a close company according to the
definition in ICTA, and there has been no change in this respect since the end
of the financial year.
Results and dividends
The total loss after taxation for the year was �16,716,000 (2007: return of
�8,066,000).
During the year, an interim dividend of 3.00p per income share (2007: 1.95p) was
paid. A second interim dividend of 3.75p per income share (2007: nil) was paid
on 14 May 2008. In 2007 a final dividend of 3.52p per income share was
recommended by the Directors and paid on 13 September 2007. No further dividends
will be paid in respect of the year ended 30 April 2008.
Business review
(i) Review of the business and future developments
The Company is a split capital investment trust which invests principally in
smaller UK listed companies. The Company is managed by Scottish Widows
Investment Partnership Limited, one of the largest UK based active fund managers
with approximately �94 billion (Source: SWIP) of assets under management as at
30 April 2008.
The Company has two classes of shares: income shares and capital shares, each of
which is listed on the Official List of the UK Listing Authority and traded on
the main market of the London Stock Exchange.
The Company has been established with the objective of providing income
shareholders with a significant dividend yield together with the potential for
dividend growth, and capital shareholders with the benefit of geared capital
growth in the underlying portfolio during the planned life of the Company.
In addition to the original shareholders' capital, the Company is geared with a
bank loan of �8,126,824 (2007: �8,126,824). The loan is subject to a Facilities
Agreement with Lloyds TSB Scotland plc which is detailed further in Note 10 of
the financial statements. The interest rate on the loan was fixed at 6.22% when
the Facilities Agreement was finalised. Currently, the amount of �8,126,824 has
been drawn down. Changes in the level of gearing may arise from movements in the
total assets of the Company. The Company may effectively reduce the gearing
level by holding cash.
(ii) Investment policy
The Company's investment universe comprises the constituents of the Hoare Govett
Smaller Companies Index (excluding investment companies) (the HGSC Index (XIC).
This index represents the bottom 10% of the UK equity market by market
capitalisation. While the Directors expect the bulk of the Company's portfolio
to be within the investment universe, the Company may invest in companies traded
on the Alternative Investment Market (AIM) of the London Stock Exchange (and any
successor market to it) whose market capitalisation falls within the range of
the HGSC Index (XIC) or companies which the Directors believe, because of
movements in their market capitalisations, may be considered appropriate for
investment. In addition, the Company may retain an investment in any company
that was within the appropriate range of market capitalisation when the
investment was made but which has subsequently moved out of the investment
universe as a result of changes in its market capitalisation relative to the
rest of the investment universe. Typically, the Company's portfolio will consist
of approximately 50 securities.
The investment manager's approach favours a value bias, which is to identify
undervalued companies in all sectors of the Company's investment universe.
Considerable emphasis is placed on identifying companies which are well managed,
have high levels of cash generation and enjoy real pricing power. The investment
manager considers those attributes to be key components of a strong market
position.
Subject to the prior approval of the board of directors, the Company may use
derivative instruments, such as financial futures and options, but only for the
purposes of efficient portfolio management.
In accordance with the requirements of section 842 ICTA, to which the Company
adheres, no holding in another Company may exceed 15% of the value of the
investment trust's portfolio. This test is applied when the investment is first
acquired and subsequently, when additions are made to the holding.
The Company also distributes a minimum of 85% of its investment income so as to
conform with the requirements of section 842 ICTA, which permits the Company to
retain its investment trust status.
A breakdown of the risks to which the Company is subject and how they are
mitigated is detailed in Note 17 to the financial statements.
(iii) Principal risks and uncertainties
As an investment trust, the main risk facing the Company is market price risk
which arises from uncertainty about the future prices of investments held by the
Company. This is described in more detail in Note 17 on pages 28 to 30 and in
the Investment Manager's Review on pages 4 and 5.
The Company invests in UK smaller companies and is, therefore, susceptible to
domestic factors in the UK economy such as inflation, interest rate movements
and consumer spending. These are described in detail in the Investment Manager's
Review on pages 4 and 5.
(iv) Implementation
During the year under review, the assets of the Company were invested in
accordance with the Company's investment policy. Further details of the
performance of the Company and the extent to which the Company's objectives were
achieved are detailed in the Chairman's Statement and Investment Manager's
Review on pages 3 to 5.
The Company's portfolio consisted of 53 investments as at 30 April 2008 and is
detailed further on page 6. The sector distribution of the portfolio is provided
on page 7. As at 30 April 2008, the portfolio only held investments issued in
the United Kingdom. The top 10 holdings comprise 52.07% of total assets less net
current liabilities/assets (2007: 24.7%).
The Company's gearing stood at 17.43% as at 30 April 2008 (2007: 12.71%).
(v) Key performance indicators (KPIs)
The Directors have agreed KPIs with the Investment Manager that allow the
effective measurement of the performance and financial position of the Company.
The KPIs are monitored on a quarterly basis by the Directors at board meetings.
As the Company is a split capital trust, separate KPIs have been selected to
evaluate the performance of the capital and income shares. See below (c) for
further details.
(a) Investment return
Performance of the net asset value against the Company's benchmark has been
chosen as the most appropriate indicator of performance. During the year to 30
April 2008 the Company's net asset value underperformed the benchmark.
Investment Returns
Net Asset Value (Total Return) Absolute (22.90%)
HGSC Index (XIC) (Total Return) Absolute (19.28%)
Under-Performance (3.62%)
Smaller Companies Value Trust Capital Shares Performance
(Graphic Omitted)
(b) Income yield
Net yield of the income shares and package units has been used to evaluate
income performance. A yield of over 7% for the income shares is notably better
than the benchmark.
Yield Returns Yield
Net Yield (Income Shares) 11.07%
Net Yield (Packaged Units) 3.82%
Hoare Govett Sector 3.23%
(c) Other key performance indicators
Other KPIs relevant to an investment trust's performance are gearing and
discount /premium to net asset value against industry average.
Income Share Capital Share Package Unit
Premium/(Discount) to Net Asset Value 6.11% (17.05%) (6.86%)
*AIC UK Smaller Companies Discount to Net
Asset Value (%) - - 15.60%
Gearing (%) - - 17.43%
*AIC UK Smaller Companies Gearing (%) - - 7.00%
All figures are for the year ended 30 April 2008 unless otherwise stated.
Please also refer to the Investment Manager's Review on pages 4 and 5 for a
detailed discussion of the performance of the portfolio.
*Association of Investment Companies
Investment management fees
Scottish Widows Investment Partnership Limited (SWIP) provides investment
management, administrative and company secretarial services to the Company.
The Audit and Management Engagement Committee has reported to the Board on the
continued appointment of SWIP as the Investment Manager in the light of the
performance of the portfolio. The Directors concurred with the view that there
are significant advantages to both the Company and the shareholders as a whole
by having SWIP manage the assets of the Company and provide various
administrative and secretarial services. It is SWIP's size, its expertise in the
smaller companies sector and its ownership by Lloyds TSB Group plc, which give
the Board confidence that the objectives of the Company are being met. Following
a review of the terms of the investment management agreement, which are detailed
on page 23, the Audit and Management Engagement Committee confirmed that it was
content with the continued appointment of the investment manager. The Directors
are of the opinion that the continuing appointment of SWIP as manager on the
terms agreed is in the interests of shareholders as a whole. The investment
management agreement may be terminated by either party giving six months' notice
or, in certain circumstances, by the Company giving less than six months'
notice, with compensation for early termination being calculated by reference to
a formula based on the gross assets and the number of days by which the notice
period falls short of six months.
Substantial share interests
At the date of this report, the register of substantial interests in shares
shows that the Company has been notified of the following interests, being 3% or
more of the issued share capital:
Number of Percentage of Number of Percentage of
income shares income shares capital shares capital shares
Nicholas Howard Lewis 6,683,502 32.9 - -
Royal London Asset
Management 1,860,000 9.16 1,860,000 9.16
Royal & Sun Alliance
Insurance Group 1,671,702 8.23 1,671,702 8.23
RSA Life & Pensions
Fund - - 1,011,702 4.98
Rensburg Sheppards
Investment
Management Limited 1,763,000 8.68 - -
Lloyds TSB Group and
Scottish Widows
Group 1,216,602 5.98 10,600,418 52.17
(in respect of
managed funds)
BFS Special
Opportunities Trust
Plc 800,000 3.93 - -
JPMorgan Elect
(Managed Income) Plc 750,000 3.69 - -
Directors
The names of the present Directors, all of whom served throughout the year, are
shown on page 2.
As stated in the corporate governance report on pages 12 to 14, the Board has
considered the question of retirement by rotation of the Directors, acting on
advice from the Nominations Committee, with particular reference to the articles
of association and the recommendations of the Combined Code on Corporate
Governance issued by the Financial Reporting Council.
The articles of association currently provide for one third of the Directors to
retire by rotation each year, rather than for all Directors to retire at
intervals of no more than three years, which is accepted best practice under the
Combined Code. The Board, has, therefore, chosen to go beyond that which is
required by the current articles of association and proposes that two Directors
will retire each year. Accordingly, Mr Bushell and Mr Poulter will retire at the
forthcoming annual general meeting. Both Directors, being eligible, offer
themselves for re-appointment at the meeting. Following the evaluation of the
performance of the Board, its committees and individual Directors, it is
considered that the performance of Mr Bushell and Mr Poulter continues to be
effective and that they have demonstrated commitment to their role. The
interests, all beneficial, of the Directors in the shares of the Company were:
Income shares of 1p each
At 30 April 2008 At 1 May 2007
---------------------------------------------------------------------
A F Bushell - -
B C Clark 13,766 13,766
N W Pearson - -
J W Poulter 10,000 10,000
Capital shares of 1p each
At 30 April 2008 At 1 May 2007
---------------------------------------------------------------------
A F Bushell 40,382 40,382
B C Clark 13,766 13,766
N W Pearson - -
None of the Directors had any other interest in the income or capital shares of
the Company at the beginning or end of the year. There have been no changes in
these interests between 30 April 2008 and 27 June 2008. No Director had a
material interest at any time during the year in any contract of significance
with the Company. No Director has a contract of service with the Company.
Purchase of own shares
The current authority of the Company to make market purchases of up to 14.99% of
its income and capital shares expires at the conclusion of this year's annual
general meeting. Whilst no shares were purchased under this authority during the
financial year, resolution 7 will be proposed as a special resolution at the
annual general meeting to renew the authority. The renewed authority will
authorise the Company to make market purchases of up to 3,045,527 income shares
and up to 3,045,527 capital shares (being 14.99% of each class of share in issue
on 27 June 2008). The price payable for shares will not be less than 1p per
capital share (or income share, as relevant) (being the nominal value of such
shares) nor more than 5% above the average middle market quotations of those
shares as derived from the Daily Official List of the London Stock Exchange for
the five business days before the shares are repurchased. Purchases of shares
will be made within guidelines established from time to time by the Board but
the Board will only exercise this authority if, in its opinion, it would enhance
the net asset value per share of the remaining capital shares and income shares
(as appropriate) and if it would be in the interests of the Company to do so.
The Board has no current intention of exercising its authority to purchase
shares. The Directors intend, at the current time, that any shares purchased
under this authority will be treated as cancelled. If shares purchased by the
Company were to be cancelled rather than held in treasury, the number of shares
in issue would be reduced accordingly. This authority to purchase shares will
expire at the conclusion of the Company's annual general meeting in 2009 or, if
earlier, on 4 December 2009.
Disapplication of pre-emption rights
Section 89 of the Companies Act 1985 gives all shareholders the right to
participate on a pro-rata basis in all issues of equity shares for cash unless
they agree that this right should be set aside. Resolution 8 will, if passed,
authorise the Directors to allot new shares up to an aggregate nominal amount of
�20,317 (being 5% of the Company's total issued share capital as at 27 June
2008) for cash without first offering such shares to existing shareholders or
otherwise in connection with a pro-rata issue of shares to shareholders. This
authority will continue in effect until the conclusion of the Company's annual
general meeting in 2009 or, if earlier, on 4 December 2009. The Directors will
only allot new shares pursuant to this authority if they believe it is
advantageous to the Company's shareholders to do so and in no circumstances
would they allot new shares if it would result in a dilution of net asset value
per share. The Directors have no current intention to exercise their authority
to issue shares.
Statement of disclosure of information to auditors
Each Director in office at the date of this report confirms that, so far as the
Director is aware, there is no relevant audit information of which the Company's
auditors are unaware, and the Director has taken all the steps that he ought to
have taken as a Director in order to make himself aware of any relevant audit
information and to establish that the Company's auditors are aware of that
information. This confirmation is given, and should be interpreted, in
accordance with the provisions of section 234ZA of the Companies Act 1985.
Suppliers payment policy
The Company's suppliers payment policy is to agree terms of payment before
business is transacted, to ensure suppliers are aware of those terms and to
settle bills in accordance with them. The Company did not have any trade
creditors at the year end.
Financial instruments
The Company's financial instruments comprise its investment portfolio, income
shares, cash balances, bank loan and short term debtors and creditors that arise
directly from the Company's operations. Details of the financial instruments
held and the risk profile of the Company are provided in Note 17.
Auditors
Ernst & Young LLP has indicated its willingness to continue in office and
resolutions concerning its re-appointment as auditors and authorising the
Directors to set its remuneration will be submitted to the annual general
meeting.
On behalf of the Board
Scottish Widows Investment Partnership Limited
Company Secretary
27 June 2008
Statement of Directors' responsibilities in relation to the Company financial
statements
The Directors are responsible for preparing the Annual Report and the Company
financial statements in accordance with applicable United Kingdom law and UK
Generally Accepted Accounting Principles (GAAP).
The Directors are required to prepare Company financial statements for each
financial year which present fairly the financial position of the Company and
the financial performance and cash flows of the Company for that period.
In preparing those Company financial statements the Directors are required to:
* select suitable accounting policies in accordance with FRS 18: Accounting
Policies and then apply them consistently;
* present information, including accounting policies, in a manner that provides
relevant, reliable, comparable and understandable information;
* provide additional disclosures when compliance with the specific requirements
in UK GAAP is insufficient to enable users to understand the impact of
particular transactions, other events and conditions on the Company\'s financial
position and financial performance; and
* state that the Company has complied with UK GAAP, subject to any material
departures disclosed and explained in the financial statements.
The Directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that the Company financial statements comply
with the Companies Act 1985. 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.
Corporate Governance
The UK Listing Authority requires all listed companies to disclose how they have
applied the principles and complied with the provisions of the Combined Code on
Corporate Governance ("the Code") published in July 2003 and revised in June
2006. The Association of Investment Companies ("AIC"), of which the Company is a
member also published its Code of Corporate Governance for Investment Companies
(the AIC Code�) in July 2003 and revised that Code in February 2006 and May
2007. The AIC has also published the Corporate Governance Guide for Investment
Companies (the "Guide") in June 2007 which incorporates the code, the AIC code�
and certain Listing Rules requirements. The following statements are, therefore,
included to comply with the Code, the Guide and the AIC Code�.
The Board
The Company is led and controlled by a Board comprising four non-executive
directors, all of whom have wide experience and are considered to be
independent. The Chairman does not have a full-time role in any other
organisation. The Board, therefore, remains satisfied that he has sufficient
time available to discharge fully his responsibilities as Chairman. The Board
believes that it is in the best interests of shareholders for the Chairman to be
the point of contact for all matters relating to the governance of the Company
and so no other Director has been nominated as the senior independent
non-executive Director for the purposes of the Codes.
The appointment of Directors is considered by the Board following
recommendations from the Nominations Committee. The Directors were appointed for
an initial period of three years (subject to re-appointment at the first annual
general meeting following their appointment) and each Director's appointment may
be renewed for further periods if that Director and the Board agree at that
time. The Articles of Association stipulate that one third, or the number
nearest to but not exceeding one-third, of the Directors shall retire and offer
themselves for re-appointment at each annual general meeting, but the Board has
chosen to adopt best practice in relation to the retirement by rotation of
Directors over the Articles of Association and thus, as stated in the Directors'
report, two Directors will retire by rotation at the annual general meeting in
2008. Mr Bushell was last re-appointed by the shareholders in 2006 and Mr
Poulter was re-appointed in 2005. Shareholders, therefore, have the opportunity
to consider each Director's continuing involvement with the Company at least
every third year. The Nominations Committee met and recommended to the Board
that the performance of the Directors who are to retire by rotation and offer
themselves for re-appointment continue to be effective and that they have
demonstrated commitment to their role. The Board concurred with that view.
Copies of the current Directors' letters of appointment are available for
inspection on request to the Company Secretary.
During the year the Board reviewed its performance and composition, together
with that of its committees, the structure of meetings and the quality and
quantity of information produced to enable it to discharge its duties, by the
consideration of a number of discussion points with the Investment Manager
(Scottish Widows Investment Partnership Limited ("SWIP")) and SWIP in its
capacity as the Company Secretary, based on guidance issued by the AIC on board
evaluation. The Directors made suggestions but confirmed that they were content.
The composition of the Board is kept under constant review to ensure that there
is a suitable mix of skills and experience represented to enable the Board to
discharge its duties.
The Board meets quarterly, with additional meetings should it be considered
appropriate to discuss specific matters.
The investment management agreement between the Company and SWIP sets out the
matters over which the manager has authority and the limits above which Board
approval must be sought. Other matters reserved for the approval of the Board,
which are set out in a formal schedule, include approval of the report and
accounts, communications with shareholders and decisions on strategy. At each
meeting the Board receives information about the Company's portfolio, its
gearing, gearing strategy and the Company's financial performance.
Regular reports are also made to the Board by SWIP about changes to industry
best practice in the areas of corporate governance, company law, investment
practice and accounting matters. The Directors have access to the advice and
services of the Company Secretary, which is responsible to the Board for
ensuring that Board procedures are followed and that it complies with applicable
rules and regulations. Where it might be reasonably required, in relation to
their responsibilities, the Directors may seek independent professional advice
at the expense of the Company. During the year, the Company has maintained
appropriate insurance cover in respect of legal action against the Directors.
Committees
The Board has an Audit and Management Engagement Committee and a Nominations
Committee, which comply with the provisions of the Codes. Copies of the terms of
reference of both committees are available on request to the Company Secretary.
The Board does not have a Remuneration Committee for the reasons set out on page
15.
The Nominations Committee meets annually to discuss the Board composition and
balance, having regard to both the present and future needs of the Company and
also, as stated above, to nominate two directors to retire by rotation at the
annual general meeting and seek re-appointment if appropriate. As part of this
review, the Committee receives information, from the Company Secretary, about
industry best practice in relation to Board composition and also about the
boards of the Company's peer group, comparing similar size investment trusts or
those with similar investment policies or share structures.
The Nominations Committee is also tasked with nominating new Directors for
appointment by the Board when it is appropriate to do so. During the year under
review, the Committee has not met for this purpose.
The Audit and Management Engagement Committee currently meets twice a year to
consider and make recommendations to the Board in relation to the annual report
and accounts and the half-yearly report. It reviews the scope and results of the
audit and makes recommendations regarding the remuneration of the auditor and
assesses the external auditor's independence. It also considers, on an annual
basis, the performance of SWIP and the terms and conditions of its appointment,
by reviewing the performance of the Trust against the Company's benchmark and
peer group and the terms of the agreement against industry best practice and
similar investment management agreements. The Committee makes recommendations to
the Board, following this review, about SWIP's continued appointment and
remuneration. The Committee is also charged with reviewing the internal controls
of the Company and SWIP and this review is explained in further detail below.
The following table sets out the number of Board and committee meetings held
during the year and the number attended by each Director.
Director Board Audit and Management Nominations
Engagement Committee Committee
--------------------------------------------------------------------------------------------------------------------
Held Attended Held Attended Held Attended
A F Bushell 7 7 2 2 1 1
B C Clark 7 6 2 2 1 1
N W Pearson 7 7 2 2 1 1
J W Poulter 7 7 2 2 1 1
One board meeting dealt solely with a discussion of strategic issues affecting
the Company and the investment trust sector as a whole.
Relations with shareholders
In conjunction with the Board, SWIP keeps under review the register of members
of the Company. It has identified the largest shareholders, to whom it makes
regular presentations. Potential investors are also contacted by SWIP. In
addition, the Board received regular reports from SWIP about the result of such
presentations and contact.
All shareholders are encouraged to participate in the Company's annual general
meeting. All Directors normally attend the annual general meeting, at which
shareholders have the opportunity to ask questions and discuss matters with the
Directors and SWIP.
It is recognised that the Codes require notice of annual general meetings to be
despatched at least 20 working days before the meeting. The Company intends to
comply with the provisions of the Codes in this respect in 2008.
Accountability and audit
a) Statement of going concern
See Notes 1a and 19 below.
b) Internal control
The Directors acknowledge that they are responsible for establishing and
maintaining the Company's system of internal control and reviewing its
effectiveness. Internal control systems are designed to manage rather than
eliminate the failure to achieve business objectives and can only provide
reasonable and not absolute assurance against material misstatement or loss.
They have therefore established an ongoing process designed to meet the
particular needs of the Company in managing the risks to which it is exposed,
consistent with the guidance provided by the Turnbull Committee. Such review
procedures have been in place throughout the full financial year and up to the
date of approval of the financial statements and the Board is satisfied with
their effectiveness.
This process involves a review by the Audit and Management Engagement Committee
and the Board of SWIP's latest internal control report and a report covering
specific internal controls operated by SWIP to ensure the Company's requirements
are met.
The Board has delegated certain aspects of the management and administration of
the Company to SWIP.
SWIP maintains its own systems of internal controls, on which it has reported to
the Board. The Company, in common with other investment companies, does not have
an internal audit function. The Board has considered the need for an internal
audit function but, because of the internal control system in place at SWIP, has
decided to place reliance on SWIP's systems and internal audit procedures.
iii) Internal control
The systems are designed to ensure effective and efficient operations, internal
control and compliance with laws and regulations. In establishing the systems of
internal control regard is paid to the materiality of relevant risks; the
likelihood of costs being incurred and costs of control. It follows therefore
that the system of internal control can only provide reasonable but not absolute
assurance against the risk of material misstatement or loss.
There are well established budgeting and forecasting procedures in place and
reports are presented to the Board detailing variance against budget and prior
year and other performance data. The effectiveness of the internal control
system is reviewed annually by the Board and the Audit and Management Engagement
Committee. The Audit and Management Engagement Committee has a discussion
annually with the auditors to ensure that there are no issues of concern in
relation to the audit opinion on the accounts and, if necessary, representatives
of SWIP would be excluded from that discussion.
Institutional investors
SWIP employs highly experienced personnel and maintains a continuous training
programme for fund managers. The fund managers are constantly monitoring the
portfolio and over the past twelve months they have met all the companies in
which the Company has invested.
Under the terms of the management agreement, SWIP decides whether and in what
manner all rights conferred by any investment shall be exercised. However, the
Directors may, at any time, instruct SWIP as to the exercise of the voting and
other rights attached to the Company's investments and they regularly review the
voting decisions taken by SWIP.
Institutional investors
The corporate governance of companies is one of the several elements taken into
consideration by SWIP when making investment decisions.
Statements of compliance
The Directors believe that the Company has complied with the provisions of the
Code and the AIC Code�, where appropriate, and that it has complied throughout
the year with the provisions where the requirements are of a continuing nature,
except that there is no designated senior independent Director (Code provision
A3.3 and AIC Code� Principle 1) and a remuneration committee has not been
established (Code Provision B2.1 and AIC Code� Principle 8). The reason why the
Company does not comply in respect of Code provision A3.3 and AIC Code�
Principle 1 is explained above and in the remuneration report on pages 15 and 16
in respect of Code provision B2.1 and AIC Code� Principle 8.
The Board has prepared this report, in accordance with the requirements of
Schedule 7A to the Companies Act 1985. An ordinary resolution for the approval
of this report will be put to members at the forthcoming annual general meeting.
The law requires your Company's auditors to audit certain of the disclosures
provided. Where disclosures have been audited, they are indicated as such. The
auditors' opinion is included in their report on page 17.
Remuneration committee
The Board consists solely of non-executive Directors and, as such, it is
permitted, by provision B.2.3 of the Combined Code on Corporate Governance to
determine the remuneration of the Directors within the limits set out in the
articles of association. The determination of the Directors' fees is, therefore,
a matter dealt with by the whole Board, which it considers on the basis of
information provided by the investment manager, comparing fees payable by other
similar investment trusts.
Policy on Directors' fees
The Board's policy is that the remuneration of non-executive Directors should
reflect the experience of the Board as a whole, be fair and comparable to that
of other investment trusts that are similar in size, have a similar capital
structure and have similar investment objectives. There is no present intention
to change this policy.
The Company's articles of association limit the aggregate fees payable to the
Board of Directors to a total of �85,000 per annum.
The fees for the non-executive Directors are determined within the limits set
out in the articles of association and Directors are not eligible for bonuses,
pension benefits, share options, long term incentive schemes or other benefits.
Directors' service contracts
None of the Directors has a service contract. However, each Director has entered
into a letter of appointment with the Company for an initial period of service.
Additionally, the terms of appointment of the Directors provide that each shall
retire and be subject to re-appointment at the first annual general meeting
following their appointment and at least every three years after that. Directors
may be removed from office summarily for any of the reasons set out in the
articles of association of the Company and compensation will not be payable to
the Director.
The following Directors held office during the year:
Date of
Date of letter of Last Due date for
Director appointment appointment re-appointment re-appointment*
--------------------------------------------------------------------------------------------------------------------
A F Bushell 21 March 2002 25 March 2002 AGM 2006 AGM 2008
B C Clark 21 March 2002 25 March 2002 AGM 2007 AGM 2009
N W Pearson 21 March 2002 25 March 2002 AGM 2007 AGM 2009
J W Poulter 21 March 2002 25 March 2002 AGM 2005 AGM 2008
* assuming the Company's continued existence after 30 April 2009
Company performance
Smaller Companies Value Trust share price performance vs Hoare Govett Smaller
Companies Index (excluding investment companies)
(Graphic Omitted)
This chart compares the performance of the Company's share price with the Hoare
Govett Smaller Companies Index (excluding investment companies) on a total
return basis (assuming all dividends are reinvested) which has been used as the
Company's benchmark.
Source: Internal
Remuneration (audited)
The Directors received the following remuneration:
From 1 May 2007 From 1 May 2006
to 30 April 2008 to 30 April 2007
Director � �
--------------------------------------------------------------------------------
A F Bushell 28-May-46 28-Feb-42
B C Clark 15-Feb-33 11-Feb-30
N W Pearson 15-Feb-33 11-Feb-30
J W Poulter 12,100 11,000
C P T Vaughan-Johnson* - 4,600
53,250 53,000
No other payments are made to Directors other than the reimbursement of
reasonable out-of-pocket expenses incurred in connection with attending the
Company's business.
The amounts above do not include national insurance contributions of �5,000
(2007: �5,000).
* Mr Vaughan-Johnson retired as a Director on 8 September 2006.
On behalf of the Board
Scottish Widows Investment Partnership Limited
Company Secretary
27 June 2008
Independent Auditors' Report to the Members of Smaller Companies Value Trust plc
We have audited the financial statements of Smaller Companies Value Trust plc
for the year ended 30 April 2008 which comprise the Income Statement, the
Balance Sheet, the Reconciliation of Movements in Shareholders' Funds, the Cash
Flow Statement and the related notes 1 to 19. These financial statements have
been prepared under the accounting policies set out therein. We have also
audited the information in the Directors' Remuneration Report that is described
as having been audited.
This report is made solely to the Company's members, as a body, in accordance
with Section 235 of the Companies Act 1985. 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 auditors' 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.
Respective responsibilities of Directors and auditors
The Directors' responsibilities for preparing the Annual Report, the Directors'
Remuneration Report and the financial statements in accordance with applicable
United Kingdom law and Accounting Standards (United Kingdom Generally Accepted
Accounting Practice) are set out in the Statement of Directors'
Responsibilities.
Our responsibility is to audit the financial statements and the part of the
Directors' Remuneration Report to be audited in accordance with relevant legal
and regulatory requirements and International Standards on Auditing (UK and
Ireland).
We report to you our opinion as to whether the financial statements give a true
and fair view and whether the financial statements and the part of the
Directors' Remuneration Report to be audited have been properly prepared in
accordance with the Companies Act 1985. We also report to you whether in our
opinion the information given in the Directors' Report is consistent with the
financial statements.
In addition we report to you if, in our opinion, the Company has not kept proper
accounting records, if we have not received all the information and explanations
we require for our audit, or if information specified by law regarding
directors' remuneration and other transactions is not disclosed.
We review whether the Corporate Governance Statement reflects the Company's
compliance with the nine provisions of the 2006 Combined Code specified for our
review by the Listing Rules of the Financial Services Authority, and we report
if it does not. We are not required to consider whether the board's statements
on internal control cover all risks and controls, or form an opinion on the
effectiveness of the company's corporate governance procedures or its risk and
control procedures.
We read other information contained in the Annual Report and consider whether it
is consistent with the audited financial statements. The other information
comprises only Objectives, Financial Highlights, Directors, Investment Manager
and Others, Chairman's Statement, Investment Manager's Review, Fifty Largest
Holdings, Sector Distribution, Directors' Report, Corporate Governance, the
unaudited part of the Directors' Remuneration Report, Notice of Meeting, Form of
Proxy, Financial Calendar and Investment Manager's Information. We consider the
implications for our report if we become aware of any apparent misstatements or
material inconsistencies with the financial statements. Our responsibilities do
not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements and the part of the Directors'
Remuneration Report to be audited. It also includes an assessment of the
significant estimates and judgements made by the directors in the preparation of
the financial statements, and of whether the accounting policies are appropriate
to the company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
and the part of the Directors' Remuneration Report to be audited are free from
material misstatement, whether caused by fraud or other irregularity or error.
In forming our opinion we also evaluated the overall adequacy of the
presentation of information in the financial statements and the part of the
Directors' Remuneration Report to be audited.
Opinion
In our opinion:
* the financial statements give a true and fair view, in accordance with United
Kingdom Generally Accepted Accounting Practice, of the state of the Company's
affairs as at 30 April 2008 and of its net return for the year then ended;
* the financial statements and the part of the Directors' Remuneration Report to
be audited have been properly prepared in accordance with the Companies Act
1985; and
* the information given in the Directors' Report is consistent with the
financial statements.
In forming our opinion on the financial statements, which is not qualified, we
have considered the adequacy of the disclosure made in note 1 to the financial
statements concerning the basis of preparation. The company's ability to
continue as a going concern is dependent on the board developing viable
proposals for the continuation of the company beyond 30 April 2009 and for these
proposals to be approved by shareholders. These conditions, along with the other
matters explained in note 1 to the financial statements, indicate the existence
of a material uncertainty which may cast significant doubt about the company's
ability to continue as a going concern. The financial statements do not include
the adjustments that would result in the event that viable proposals were not
presented to shareholders or that they were not approved.
Ernst & Young LLP
Registered Auditor
Edinburgh
23 July 2008
Income Statement
For the year ended 30 April 2008
2008 2007
Revenue Capital Total Revenue Capital Total
Note �'000 �'000 �'000 �'000 �'000 �'000
(Losses)/gains on
investments
(Losses)/gains on
investments 8 - (15,918) (15,918) - 9,186 9,186
Transaction costs 8 - (342 (342) - (330) (330)
- (16,260) (16,260) - 8,856 8,856
Income and expenses
Income 2 1,835 - 1,835 1,510 - 1,510
Investment management fee+ 3 (25) (76) (101) (138) (412) (550)
Other expenses 4 (158) - (158) (135) - (135)
Net return/(loss) before
finance
costs and taxation 1,652 (16,336) (14,684) 1,237 8,444 9,681
Finance costs
Interest payable 5 (127) (380) (507) (126) (378) (504)
Income share dividends
and other appropriations 5 (1,525) - (1,525) (1,111) - (1,111)
Total finance costs 5 (1,652) (380) (2,032) (1,237 (378) (1,615)
(Loss)/return on ordinary
activities before taxation - (16,716) (16,716) - 8,066 8,066
Taxation on ordinary
activities 6 - - - - - -
(Loss)/return on ordinary
activities after taxation - (16,716) (16,716) - 8,066 8,066
(Loss)/return per capital
share 7 (82.28p) 39.70p
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. No operations were acquired or discontinued in the year.
A Statement of Recognised Gains and Losses is not required as all gains and
losses of the Company have been reflected in the above statement.
The notes on pages 22 to 31 form part of these financial statements.
+ The investment management fee for the year is lower than in previous years due
to a reclaim of VAT (previously suffered on management fees) due to be refunded
to the Company. This follows an announcement by HM Revenue & Customs that
management fees paid by investment trusts, which were previously subject to VAT,
are now exempt. This exemption has a retrospective effect.
Balance Sheet
As at 30 April 2008
2008 2007
Note �'000 �'000
Non current assets
Investments at fair value through profit or loss 8 45,109 63,085
Current assets
Debtors 9 1,471 1,505
Cash at bank and in hand 3,456 432
Total current assets 4,927 1,937
Current liabilities
Creditors: amounts falling due within one year 10 (11,538) (1,119)
Income shares 10 (12,550) -
Total current liabilities (24,088) (1,119)
Net current (liabilities)/assets (19,161) 818
Total assets less net current liabilities 25,948 63,903
Creditors: amounts falling due after more than one year
Bank loan 11 - (8,127)
Income shares 11 - (13,112)
- (21,239
Total net assets 25,948 42,664
Capital and reserves: equity interests
Called-up share capital 12 203 203
Special reserve 19,408 19,408
Capital reserve 6,337 23,053
Shareholders' funds 25,948 42,664
Net asset value per share (Accounts basis):
Income share 13 61.77p 64.54p
Capital share 13 127.72p 209.99p
Approved and authorised for issue by the Board on 27 June 2008 and signed on its
behalf by:
A F Bushell
Chairman
The notes on pages 22 to 31 form part of these financial statements.
Reconciliation of Movements in Shareholders' Funds
For the year ended 30 April 2007
Issued Special Capital
Capital Reserve Reserve Total
�'000 �'000 �'000 �'000
Shareholders' funds at 1 May 2006 203 19,408 14,987 34,598
Return on ordinary activities after
taxation - - 8,066 8,066
Shareholders' funds at 30 April 2007 203 19,408 23,053 42,664
For the year ended 30 April 2008
Issued Special Capital
Capital Reserve Reserve Total
�'000 �'000 �'000 �'000
Shareholders' funds at 1 May 2007 203 19,408 23,053 42,664
Loss on ordinary activities after
taxation - - (16,716) (16,716)
Shareholders' funds at 30 April 2008 203 19,408 6,337 25,948
Cash Flow Statement
For the year ended 30 April 2008
2008 2007
Note �'000 �'000
Operating activities
Investment income received 1,587 1,418
Other income received 2 14
Deposit interest received 91 80
Investment management fees paid (509) (535)
Other cash payments (102) (150)
Net cash inflow from operating activities 14 1,069 827
Servicing of finance
Interest paid on bank loan (507) (504)
Dividends paid on income shares (1,325) (965)
Net cash outflow from servicing of finance (1,832) (1,469)
Investing activities
Purchases of investments (39,567) (37,445)
Disposals of investments 43,229 38,203
Net cash inflow from investing activities 3,662 758
Increase in cash 15 2,899 116
Reconciliation of net cash flow to movement in
net debt
Increase in cash in the year 2,899 116
Decrease/(increase) in income share liability 562 (146
Opening net debt (20,807) (20,777)
Closing net debt 15 (17,346) (20,807)
The notes on pages 22 to 31 form part of these financial statements.
Notes to the Financial Statements
1 Accounting policies
A summary of the principal accounting policies is set out below.
a) Basis of preparation
The financial statements have been prepared in accordance with UK Generally
Accepted Accounting Practice (GAAP) on a going concern basis and with the
Statement of Recommended Practice ("SORP") 'Financial Statements of Investment
Trust Companies' issued in December 2005. The financial statements have been
prepared on a going concern basis, which assumes that the Company will continue
in operational existence for the foreseeable future and be able to meet its
liabilities as they fall due. There are uncertainties that the Directors have
had to consider in deciding to prepare the financial statements on this basis,
which are set out below.
Under the Articles of Association the Directors are obliged to convene a general
meeting of the Company on 30 April 2009 at which an Ordinary Resolution will be
proposed to wind up the Company voluntarily. The Directors may be exempted from
this obligation by a special resolution of the Company and separate
extraordinary resolutions of the holders of the Income shares and the holders of
the Capital shares in each case passed after 30 April 2008.
In the event that such special resolution is to be considered no earlier than 1
April 2009 and it contains proposals that would result in the Income
Shareholders receiving not later than the Planned Winding Up Date 60p in cash
(in addition to any entitlement to any undistributed revenue reserve) for each
Income Share held then the Income Shareholders shall not be entitled to vote
upon the special resolution and a separate extraordinary resolution of the
Income Shareholders shall not be required.
The validity of the going concern basis depends upon the Board developing
proposals for the continuation of the Company beyond 30 April 2009 and for these
proposals to be approved by shareholders on or prior to 30 April 2009.
However, any proposals recommended by the Directors would have to be made in
response to market conditions at the time and, accordingly, it would not be
appropriate for the Directors to consider the available options until a time
nearer to that date. Whilst the Directors believe that continuation currently
remains a viable option, the Board cannot be certain that this will be the case
in 2009.
Notwithstanding the above, the Directors consider that it is reasonable to
prepare the financial statements on a going concern basis and not to provide for
costs of liquidation until such time as the future of the Company is more
certain. Further details are provided on page 8.
Were proposals not presented to shareholders, or should such proposals not be
approved, adjustments would be required to reduce the balance sheet values to
their recoverable amounts, reclassify non-current assets as current, and provide
for further liabilities that might arise including the liquidation costs
referred to in note 19.
A summary of the accounting policies, which have been consistently applied
throughout the year, is set out below.
b) Income
Dividends receivable on equity shares are taken to the revenue column of the
Income Statement on an ex-dividend basis. If special dividends are identified as
being a return of capital, they are taken to the capital reserve - realised.
Fixed returns on debt securities are recognised on a time apportionment basis so
as to reflect their effective yield. Interest from short-term deposits and other
income is accounted for on an accruals basis.
c) Expenses
All expenses are accounted for on an accruals basis and are charged through the
revenue column of the Income Statement except where (i) they directly relate to
the acquisition or disposal of an investment, and (ii) expenses are charged to
the capital column of the Income Statement where a connection with maintenance
or enhancement of the value of investments can be demonstrated. In this respect,
the investment management fee and finance costs of debt have been allocated 75%
to capital and 25% to revenue.
d) Finance costs
Finance costs are accounted for on an accruals basis. Finance costs of debt,
insofar as they relate to the financing of the Company's investments or to
financing activities aimed at maintaining or enhancing the value of the
Company's investments, are allocated 75% to the capital column of the Income
Statement and 25% to the revenue column of the Income Statement, in line with
the Board's expected long-term split of returns, in the form of capital gains
and revenue respectively, from the investment portfolio of the Company. Finance
costs arising from dividends on shares classified as financial liabilities are
allocated 100% to revenue.
e) Taxation
Deferred taxation is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date where transactions or
events that result in an obligation to pay more, or the right to pay less tax in
future have occurred at the balance sheet date.This is subject to deferred
taxation assets only being recognised if it is considered more likely than not
that there will be suitable profits from which the future reversal of the
underlying timing differences can be deducted. Timing differences are
differences between the Company's taxable profits and its results as stated in
the financial statements which are capable of reversal in one or more subsequent
periods. Deferred taxation is measured on an undiscounted basis and by reference
to enacted tax rates.
f) Investments
Investments are recognised and derecognised on the trade date where a purchase
or sale is under a contract whose terms require delivery within the timeframe
established by the market concerned, and are initially measured at fair value.
Investments are classified as at fair value through profit or loss. As the
Company's business is investing in financial assets with a view to profiting
from their total return in the form of interest, dividends or increases in fair
value, listed equities and fixed income securities are designated as fair value
through profit or loss on initial recognition. The Company manages and evaluates
the performance of these investments on a fair value basis in accordance with an
investment strategy.
Financial assets designated as fair value through profit or loss are measured at
subsequent reporting dates at fair value, which is either the bid price or the
last traded price, depending on the convention of the exchange on which the
investment is quoted.
Where securities are designated upon initial recognition as fair value through
profit or loss, gains and losses arising from changes in fair value are included
in the capital column of the Income Statement for the period and transaction
costs on acquisition or disposal of the security are expensed as a capital item.
Realised gains and losses on assets are calculated as the difference between the
net sale proceeds and the original cost and are recognised in the capital column
of the Income Statement in the period in which they arise, within gains on
investments at fair value through profit or loss.
Unrealised gains and losses on assets are calculated as the difference between
the current valuation of the asset at the balance sheet date and the original
cost. Movements in unrealised gains and losses are recognised in the capital
column of the Income Statement in the period in which they arise, within gains
on investments at fair value through profit or loss. The movement in the
unrealised gains and losses recognised in the year also includes the reversal of
unrealised gains and losses recognised in earlier accounting periods in respect
of asset disposals in the current period.
Foreign exchange gains or losses for fair value through profit or loss
investments are included within the changes in their fair value.
g) Income shares
When shares are issued, any component that creates a financial liability of the
Company is presented as a liability in the balance sheet measured initially at
fair value net of transaction costs and thereafter at amortised cost until
extinguished on redemption. The corresponding dividends relating to the
liability component are charged as finance costs in the Income Statement.
2 Income
Year Year
ended ended
30-Apr-08 30-Apr-07
�'000 �'000
Income from investments:
UK dividend income 1,736 1,414
Other income:
Deposit interest 97 82
Underwriting commission 2 14
-------------------
Total income 1,835 1,510
-------------------
3 Investment management fee
Year ended 30 April Year ended 30 April 2007
2008
----------------------------------------------------------------------------------------------------------
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
Investment management fee 106 319 425 117 350 467
VAT on management fee 5 16 21 21 62 83
VAT reclaim on past
management fees (86) (259) (345) - - -
--------------------------------------------------------------
25 76 101 138 412 550
--------------------------------------------------------------
The investment management fee (excluding VAT) is payable quarterly in arrears to
Scottish Widows Investment Partnership Limited (SWIP) the investment manager, at
the rate of 0.95% per annum on the first �25m of gross assets, 0.85% per annum
on gross assets between �25m and �35m and 0.625% per annum on gross assets above
�35m.
The arrangement may be terminated at any time by either party giving 6 months'
notice or less in certain circumstances (detailed further on page 10).
As a result of the successful outcome of the JPMorgan Claverhouse Investment
Trust plc and the Association of Investment Companies' case against HM Revenue &
Customs (HMRC) regarding the charging of VAT on management fees, SWIP (on behalf
of the Company) has applied to reclaim VAT suffered on these fees. The reclaim
for the amount of �345,000 has been recognised in the current year. �49,000 was
received by the Company during the year from SWIP. �296,000 remains outstanding
as at 30 April 2008 from HMRC (see Note 9). This will be paid directly to SWIP,
who will then pass this reimbursement to the Company.
Additionally, following the outcome of the above case, VAT is no longer charged
on investment management fees.
4 Other expenses
2 Income
Year ended Year ended
30-Apr-08 30-Apr-07
�'000 �'000
Directors' fees* 58 58
Auditors' remuneration for
audit 17 15
Other expenses 83 62
158
* The Directors' fees include national insurance contributions.
5 Finance costs
Year ended 30 April 2008 Year ended 30 April 2007
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
Interest payable:
Bank loan 127 380 507 126 378 504
Dividends and appropriations
Dividends on income shares
Interim of 3.00p per share (2007 - 1.95p) 610 - 610 396 - 396
Second interim of 3.75p per share 762 - 762 - - -
Final (2007) of 3.52p share (2006 - 2.80p)715 - 715 569 - 569
Net return for the year* (562) - (562) 146 - 146
------------------------------------------- ----------------------------------
1,525 - 1,525 1,111 - 1,111
------------------------------------------- ----------------------------------
Total finance costs 1,652 380 2,032 1,237 378 1,615
------------------------------------------- ----------------------------------
* Net return after payment of dividends detailed above.
A second interim dividend was declared on 24 April 2008. No such dividend was
declared in the year ended 30 April 2007.
6 Taxation on ordinary activities
Year ended 30 April Year ended 30 April
2008 2007
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
Taxation on
ordinary
activities - - - - - -
A reconciliation of the current taxation charge is set out below:
2 Income
Year Year
ended ended
30-Apr-08 30-Apr-07
�'000 �'000
-----------------------------------------------------------------------
�'000 �'000
Net return before finance costs and taxation 1,652 1,237
Return on ordinary activities at the UK standard
rate
of corporation tax 30% (2007: 30%) 496 371
Non-taxable UK dividend income -521 -424
Interest payable -38 -38
Movement in unutilised management expenses 63 91
-----------------------------------------------------------------------
- -
-----------------------------------------------------------------------
Capital returns are not included in the above analysis since, as an investment
trust, the Company's capital gains are not taxable.
As at 30 April 2008, the Company had unutilised management expenses and loan
relationship losses of �5,329,000 (2007: �4,660,000).
7 Return per share
Year ended 30 April 2008 Year ended 30 April 2007
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
-------------------------------------------------------------------------------------------------------------
Net return for the
year (562) (16,716) (17,278) 146 8,066 8,212
Add dividends in
respect
of income shares 2,087 - 2,087 965 - 965
--------------------------------------------------------------------------------------
Return for the year 1,525 (16,716) (15,191) 1,111 8,066 9,177
--------------------------------------------------------------------------------------
Return per share 7.51p (82.28p) (74.77p) 5.47p 39.70p 45.17p
The return per income share is based on the revenue return on ordinary
activities after taxation and on 20,317,060 (2007: 20,317,060) income shares
being the weighted average number of shares in issue during the year.
The return per capital share is based on the capital return on ordinary
activities after taxation and on 20,317,060 (2007: 20,317,060) capital shares
being the weighted average number of shares in issue during the year.
8 Investments
Year Year
ended ended
-------------------------------------------------------------------------------- --------
30-Apr-08 30-Apr-
07
�'000 �'000
Total investments listed on the London Stock Exchange 45,109 63,085
--------- --------
Opening book cost 47,778 41,871
Opening unrealised appreciation 15,307 13,058
--------- --------
Opening valuation 63,085 54,929
Movements in year
Acquisitions during the year at cost 40,762 37,895
Sales: Proceeds (42,820) -38,925
Realised (losses)/gains (1,729) 6,937
(Decrease)/increase in unrealised appreciation (14,189) 2,249
--------- --------
Closing valuation 45,109 63,085
--------- --------
Closing book cost 43,991 47,778
Closing unrealised appreciation 1,118 15,307
45,109 63,085
Realised (losses)/gains on sales (1,729) 6,937
(Decrease)/increase in unrealised appreciation (14,189) 2,249
--------- --------
(Losses)/gains on investments (15,918) 9,186
--------- --------
Transaction costs of �255,000 (2007: �245,000) were incurred during the period
on the acquisition of investments and transaction costs of �87,000 (2007:
�85,000) were incurred during the period on the disposal of investments.
9 Debtors
Year Year
ended ended
30-Apr-08 30-Apr-07
�'000 �'000
VAT reclaim on past management fees (see Note 3) 296 -
Prepayments and accrued income 510 345
Amounts due from brokers 665 1,160
-------------------
1,471 1,505
-------------------
10 Creditors: amounts falling due within one year
Year Year
ended ended
30-Apr-08 30-Apr-07
�'000 �'000
Bank loan repayable on 30 April 2009 8,127 -
Income shares 12,550 -
Other creditors 134 180
Dividend payable 762 -
Amounts due to brokers 2,390 939
Bank overdraft 125 -
24,088 1,119
The Company has entered into a Facilities Agreement with Lloyds TSB Scotland plc
under which it is entitled to draw down an aggregate principal amount of up to
the lower of 25 per cent of the gross proceeds of the issue (excluding the bank
loan) and �20 million, at a rate calculated by reference to the Bank's seven
year lending fixed rate together with a margin of 55 basis points (6.22%) (2007:
6.22%).
11 Creditors: amounts falling due after more than one year
Year ended Year ended
30-Apr-08 30-Apr-07
�'000 �'000
--------------------------------------- --------------- -----------
Bank loan repayable on 30 April 2009 - 8,127
Income shares - 13,112
--------------- -----------
- 21,239
--------------- -----------
12 Called-up share capital
Year ended Year ended
30-Apr-08 30-Apr-07
�'000 �'000
--------------------------------------- ----------- -------------
Authorised:
50,000,000 Income shares of 1p each 500 500
55,000,000 Capital shares of 1p each 550 550
----------- -------------
1,050 1,050
----------- -------------
Allotted, called-up and fully
paid
20,317,060 Income shares of 1p each 203 203
20,317,060 Capital shares of 1p each 203 203
----------- -------------
406 406
----------- -------------
Share capital and control
The Company has two classes of share: Income Shares and Capital Shares. Both
classes are separately listed and the Company has an equal number of Income
Shares and Capital Shares in issue.
There are no restrictions on the transfer of shares in the Company other than as
set out in the articles of association and certain restrictions which may from
time to time be imposed by law, regulation or the UK Listing Authority's listing
rules.
The Company is not aware of any agreements between shareholders that may result
in restrictions on the transfer of securities and/or voting rights.
Information about significant direct or indirect holdings of shares in the
Company may be found in the Directors' report.
The Directors have authority to allot and issue shares and to make market
purchases of shares in accordance with the articles of association. The
authority for the Company to purchase, in the market, 3,045,527 Income Shares
and 3,045,527 Capital Shares, expires at the annual general meeting.
Shareholders will be asked, at the annual general meeting, to give a similar
authority. The authority for the Directors to allot shares was renewed by
shareholders in 2006 and will expire on 7 September 2011.
The principal characteristics of each class of share are set out below:
Income Shares
All net income earned by the Company is attributable to the Income Shares. The
Income Shares were issued with an initial capital entitlement upon a winding up
of 30p per Income Share which increases daily, from the date of issue, on a
straight line basis over the whole of the planned life of the Company at such a
rate as will give a final entitlement of 60p at the Planned Winding Up Date (as
defined in the Directors' report in the section "Future of the Company"). In the
event that the Company is not wound up on the Planned Winding Up Date, the
capital entitlement of the Income Shares will continue at a pro rata amount of
60p (up to a maximum of 60p). The Income Shares rank after repayment of the bank
loan and other liabilities of the Company but before any payment on the Capital
Shares.
Income Shareholders are entitled to vote at general meetings of the Company and,
on a poll, to one vote for every Income Share held. In addition, the separate
approval of Income Shareholders as a class is required for certain proposals
which would be likely to affect their position. The rights of Income
Shareholders to vote on certain resolutions in relation to the winding up,
reconstruction or reorganisation of the Company are subject to the restrictions
set out in the articles of association.
Capital Shares
The Capital Shares have a return which is entirely in the form of capital and
they have no entitlement to income. Capital Shareholders will be entitled to all
the Company's remaining net assets at the Planned Winding Up Date after
providing for payment in full of the final capital entitlement of 60p per Income
Share.
Capital Shareholders are entitled to vote at general meetings of the Company
and, on a poll, to one vote for every Capital Share held, except that Capital
Shareholders have no entitlement to vote on any resolution declaring a dividend
on the Income Shares. In addition, the separate approval of Capital Shareholders
as a class is required for certain proposals which would be likely to affect
their position.
The Capital Shares rank for repayment after repayment of the bank loan and the
entitlements of the Income Shares.
In accordance with Financial Reporting Standard 25: Presentation ("FRS 25"), the
Income Shares have been accounted for as a liability as the Company has a
contractual obligation to repay income shareholders on 30 April 2009 the amount
of 60p per share (see Note 11).
13 Net asset value
The net asset values per share shown on the balance sheet have been calculated
in accordance with FRS 25. The shareholders' funds attributable to each class of
share have also been calculated in accordance with the articles of association.
The difference between these figures relates to the rights, under the articles
of association, of the shareholders on a return of assets, which gives rise to
an adjustment in the finance costs of those shares. A reconciliation is given
below:
Year ended Year ended
30 April 20 April
2008 2007
Net assets Net asset Net assets Net asset
attributable value per attributable value per
�'000 share (p) �'000 share (p)
Income Shares
Final capital entitlement of 60p per share 12190 60 12190 60
Retained revenue reserves 360 1.77 922 4.54
------------ --------- ------------ ---------
Net asset value on an accounts basis 12550 61.77 13112 64.54
---------
Finance cost adjustment (870) (4.28) (1743) (8.58)
------------ --------- ------------ ---------
Net asset value on an articles basis 11680 57.49 11369 55.96
------------ --------- ------------ ---------
As at 30 April 2008, 20,317,060 income shares were in issue (2007: 20,317,060 shares).
Year ended Year ended
30 April 30 April
2008 2007
Net assets Net asset Net assets Net asset
attributable value per attributable value per
�'000 share (p) �'000 share (p)
Capital Shares
Net asset value on an accounts basis 25948 127.72 42664 209.99
Finance cost adjustment 870 4.28 1743 8.58
------------ --------- ------------ ---------
Net asset value on an articles basis 26818 132 44407 218.57
------------ --------- ------------ ---------
The capital shareholders are entitled to all other net assets of the Company
after the rights of the income shareholders have been satisfied.
As at 30 April 2008, 20,317,060 capital shares were in issue (2007: 20,317,060
shares).
14 Reconciliation of net revenue before finance costs and taxation to net cash
inflow from operating activities
Year ended Year ended
30 April 2008 30 April 2007
�'000 �'000
-------------------------------------------- ------------- -------------
(Loss)/return on ordinary activities before
finance costs and taxation (14,684) 9,681
Losses/(gains) on investments 15,918 (9,186)
Expenses incurred in acquiring or disposing
of investments 342 330
Decrease in creditors (46) -
(Increase)/decrease in debtors (461) 2
------------- -------------
1,069 827
------------- -------------
15 Analysis of changes in net debt
At 1 May At 30 April
2007 Cash flows 2008
�000 �'000 �'000
-------------------------------------------- ------------- ------------- -----------
Cash at bank and in hand 432 3,024 3456
Bank overdraft - (125) (125)
Loans repayable 30 April 2009 (8,127) - (8,127)
Income Shares (13,112) 562 (12,550)
------------- ------------- -----------
(20,807) 3461 (17,346)
------------- ------------- -----------
16 Related parties
Investment management and administrative services are provided to the Company by
Scottish Widows Investment Partnership Limited (SWIP). The monthly fee under
this contract is payable in arrears at the rate of 0.95% per annum for the first
�25 million of the gross assets, 0.85% per annum on the gross assets between �25
million and �35 million and 0.625% per annum on gross assets above �35 million.
This arrangement may be terminated at any time by either party giving 6 months'
notice. The total fees paid for the year ended 30 April 2008 were �446,000
(2007: �550,000) of which �86,000 (2007: �148,000) was still outstanding at the
year-end.
The VAT reclaim (detailed in Note 3) totals �345,000 (2007: nil), of which
�49,000 (2007: nil) has been received by the Company during the year from SWIP.
The remaining �296,000 (2007: nil) was still outstanding at the year-end. This
will be paid directly to SWIP from HM Revenue & Customs, who will then pass this
reimbursement to the Company.
Share registration services were provided to the Company by Lloyds TSB
Registrars, whose acquisition by Advent International was completed on 30
September 2007 and which now trades as Equiniti Limited. As Equiniti Limited, it
is no longer deemed to be a related party to the Company as it is no longer
subject to control from a common source. The charge for services provided to 30
September 2007 amounted to �1,000 (2007: �6,000) of which �1,000 (2007: �4,000)
was still outstanding at the year-end.
A Facilities Agreement was entered into by the Company with Lloyds TSB Scotland
plc on 7 May 2002. The Company has drawn down �8,126,824 (2007: �8,126,824).
Interest paid/payable for the year ended 30 April 2008 was �507,000 (2007:
�504,000). Lloyds TSB Group and Scottish Widows Group (in respect of managed
funds) held 52.18% (2007: 52.17%) of the capital shares of the Company and 5.99%
(2007: 5.98%) of the income shares of the Company as at 30 April 2008.
Fees (including national insurance contributions) earned by the Directors of the
Company during the year were �58,000 (2007: �53,000) of which �5,000 (2007:
�4,000) was still outstanding at the year-end.
Deposit interest disclosed in Note 3 includes amounts received from SWIP Global
Liquidity Fund plc. The total income received amounts to �97,000 (2007:
�82,000), with �9,000 (2007: �3,000) outstanding at the year end.
17 Financial instruments
a) Management of risk
The Company's financial instruments comprise:
- Equity shares of UK listed companies;
- Cash and short term debtors and creditors that arise directly from the
Company's operations;
- Fixed interest bank loan; and
- Non-equity shares in the form of income shares which are issued by the Company
in accordance with the Company's investment objectives.
The main risks arising from the Company's financial instruments are detailed
below. The Board of Directors regularly reviews and agrees policies for managing
each of these risks and they are summarised below. These policies have remained
unchanged since the inception of the Company. It is, and has been throughout the
period under review, the Company's policy that no trading in derivative
financial instruments shall be undertaken, see pages 8 and 9.
b) Market risk
Market risk is the risk of fair value changes in the value of assets and
liabilities from fluctuations in market prices (price risk), market interest
rates (interest rate risk) and foreign exchange rates (currency risk), whether
such changes are caused by factors specific to the individual instrument or its
issuer or factors affecting all instruments traded in the market. The Board of
Directors reviews and agrees policies for managing these risks, whose policies
have remained substantially unchanged from those applying in the year ended 30
April 2007. The investment manager assesses the exposure to market risk when
making each investment decision, and monitors the overall level of market risk
on the whole of the investment portfolio on an ongoing basis.
(i) Price risk
The Company's exposure to price risk relates to financial assets whose value
fluctuates as a result of changes in market prices other than from interest and
foreign exchange fluctuations. It is the Board's policy to hold an appropriate
spread of investments in the portfolio in order to reduce both the statistical
risk and the risk arising from factors specific to a particular industry sector.
Stock selection covering a range of market capitalisations within the small to
medium companies sector in line with the Hoare Govett Smaller Companies Index
(excluding investment companies), also acts to reduce price risk. The fund
manager actively monitors market prices throughout the year and reports to the
Board, which meets regularly in order to consider investment strategy.
The majority of the investments' value is in UK companies. Accordingly, there is
a concentration of exposure to the UK, though it is recognised that an
investment's country of domicile or listing does not necessarily equate to its
exposure to the economic conditions in that country.
The sensitivity analysis below illustrates how the fair value of future
cashflows in respect of equities would fluctuate because of changes in market
prices at the reporting date, assuming all other variables remain constant.
Impact on profit and
equity for the year
30 April 2008 30 April 2007
�'000 �'000
5% increase in equity prices 2,234 3,135
5% decrease in equity prices (2,234) (3,135)
The 5% increase/decrease illustrates the possible effect of the possible change
in market prices over the next 12 months. A positive number indicates an
increase in the profit and equity, if equity prices rise. A negative number
indicates a decrease in the profit and equity, if equity prices fall.
The management fee is a percentage based fee, calculated on the value of gross
assets in the Company. The management fee would increase by �13,962 (2007:
�19,594) if equity prices increased by 5%. The management fee would decrease by
�13,962 (2007: �19,594) if equity prices decrease by 5%.
Except for those financial liabilities measured at cost detailed below, the fair
values of the financial assets and financial liabilities, are either carried in
the balance sheet at their fair value (investments), or the balance sheet amount
is a reasonable approximation of fair value (short-term debtors, cash at bank
and in hand, short-term creditors).
30 April 2008 30 April 2007
Balance sheet Balance sheet
Fair value amount Fair value amount
�'000 �'000 �'000 �'000
Financial liabilities measured at cost
- Bank loan 8,110 8,127 8,141 8,127
- Income shares 12,393 12,550 13,155 13,112
----------- --------------- -------------- ---------------
Total financial liabilities 20,503 20,677 21,296 21,239
----------- --------------- -------------- ---------------
(ii) Interest rate risk
The Company finances its operations through retained revenues arising from
operations. The Board imposes borrowing limits to ensure gearing levels are
appropriate to market conditions and reviews these on a quarterly basis.
Currently, the articles of association restrict any borrowings to an amount
equal to two times the sum of the amount paid up on the issued share capital of
the Company plus the amount standing to the credit of the reserves of the
Company. The Company has no intention of entering into any other debt agreements
either fixed or floating other than the existing bank loan.
The interest rate profile of the Company is as follows:
Weighted
Non-interest Weighted average period
Total (as per Floating bearing average for which rate
balance sheet) rate Fixed rate assets interest rate is fixed
Type �'000 �'000 �'000 �'000 % Years
------------------------ --------------- ------------- -------------- ---------------- ---------------- ---------------
Assets
30 April 2008
Equities 45,109 - - 45,109 - -
Cash at bank - sterling 3,456 3,456 - - 5.58 -
--------------- ------------- -------------- ----------------
48,565 3,456 - 45,109
--------------- ------------- -------------- ----------------
30 April 2007
Equities 63,085 - - 63,085 - -
Cash at bank - sterling 432 432 - - 4.70 -
--------------- ------------- -------------- ----------------
63,517 432 - 63,085
--------------- ------------- -------------- ----------------
Liabilities and Shares
30 April 2008
Bank overdraft 125 125 - - 7.14 -
Bank loan - sterling 8,127 - 8,127 - 6.22 1.00
Income shares 12,550 12,550 - - 8.71 -
--------------- ------------- -------------- ----------------
20,802 12,675 8,127 -
--------------- ------------- -------------- ----------------
30 April 2007
Bank loan - sterling 8,127 - 8,127 - 6.22 2.00
Income shares 13,112 13,112 - - 9.52 -
--------------- ------------- -------------- ----------------
21,239 13,112 8,127
--------------- ------------- -------------- ----------------
All other debtors and creditors (as per Notes 9 and 10) incur no interest rate
risk.
Should market interest rates change, there would be no impact on the profit or
loss of the Company from the loan as the interest rate is fixed until it matures
on 30 April 2009.
The Company does not normally hold significant cash balances. Any excess cash is
held in the SWIP Global Liquidity Fund plc and interest is earned on this
holding. The following table illustrates the sensitivity of the profit after
taxation for the period from this holding should market interest rates change,
assuming all other variables remain constant.
Impact on profit and
equity for the year
30 April 2008 30 April 2007
�'000 �'000
-------------------------------------------- --------------- --------------------
50 basis points increase in market interest
rates 17 2
50 basis points decrease in market interest
rates (17) (2)
The 50 basis points increase/decrease illustrates the effect of the possible
change in market interest rates over the next 12 months. A positive number
indicates an increase in the profit and equity if market interest rates rise. A
negative number indicates a decrease in the profit and equity if market interest
rates fall.
(iii) Currency risk
The Company is not exposed to any currency risk as all assets are denominated in
British Pounds Sterling.
c) Credit risk
Credit risk is the risk that one counterparty to a financial instrument will
fail to discharge an obligation and cause the Company to incur a financial loss.
The following table sets out details of those financial instruments which bear
credit risk:
30 April 2008 30 April 2007
�'000 �'000
------------------------------------------------ --------------- -------------
Non-current Assets
Investments at fair value through profit or loss 45,109 63,085
Current Assets
Debtors (amounts due from brokers, dividends
receivable and accrued income) 1,471 1,505
Cash at bank and in hand 3,456 432
--------------- -------------
50,036 65,022
--------------- -------------
�3,441,000 (2007: �419,000) of the cash at bank and in hand was held in the SWIP
Global Liquidity Fund plc which is a AAA-rated money market fund. Aside from
this asset, the Company has no significant concentrations of credit risk as the
investments at fair value through profit or loss are mainly held in equity
securities issued in the UK. In order to qualify as an investment trust, the
Company is not permitted to hold more than 15% of its investments in any one
company. None of the Company's financial assets are secured by collateral or
other credit enhancements. Additionally, no financial assets are past due or
impaired.
d) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in raising
funds to meet its cash commitments as they fall due. Liquidity risk may result
from either the inability to sell financial assets quickly at their fair values
or from a counterparty defaulting on repayment of a contractual obligation or
from the inability to generate cash inflows as required.
The Company's assets comprise mainly readily realisable equity securities which
can be sold to meet funding commitments if necessary. The Company's current
liabilities all have a remaining contractual maturity of less than 3 months with
the exception of the Facilities Agreement with Lloyds TSB Scotland plc. This is
due to mature on 30 April 2009. Further detailsof this facility can be found in
Note 10. Additionally, the Company's Income shareholders are due to be repaid
60p per Income Share on 30 April 2009. Further details can be found in Notes 10
and 12.
18 Capital management policies and procedures
The Company's capital management objectives are to provide income shareholders
with a dividend yield, together with the potential for dividend growth and
capital shareholders with the benefit of geared capital growth.
The Company's capital comprises:
30 April 2008 30 April 2007
�'000 �'000
------------------------------------------------ --------------- -------------
Non-current liabilities
- Bank loan - 8,127
- Income shares - 13,112
Capital and reserves
- Called up share capital 203 203
- Special reserve 19,408 19,408
- Capital reserve 6,337 23,053
--------------- -------------
25,948 63,903
--------------- -------------
The Board, with the assistance of the Investment Manager monitors and reviews
the broad structure of the Company's gearing on an ongoing basis. This review
includes the gearing of the Company and the extent to which revenue in excess of
that which is required to be distributed should be retained.
The Company's objectives, policies and processes for managing capital are
unchanged from the preceding accounting period.
The Company's articles of association state that gearing undertaken by the
Company may not exceed the lower of 20 per cent of the gross proceeds of the
issue (excluding the bank loan) and �20 million.
The Company is subject to some externally imposed capital requirements:
- As a public company, the Company must have a minimum share capital of �50,000.
- In order to be able to pay dividends out of profits available for distribution
by way of dividends, the Company has to be able to meet one of the two capital
restriction tests imposed on investment companies by company law.
These requirements are unchanged since last year, and the Company has complied
with them.
19 Going concern
As explained in the accounting policies on page 22 there is uncertainty
regarding the continuance of the Company beyond 30 April 2009.
The Board has had preliminary discussions on this matter and considers that it
would be premature to make a firm decision about the duration and future
direction of the Company, especially in view of the turbulence in the markets at
this time and the longer term impact of the credit crunch, both on companies and
investors. The Board is keeping the situation under review and will write to
shareholders in due course, setting out its proposals in this regard.
In the event of the Company being wound up on 30 April 2009 (or on any earlier
date), liquidation costs will be incurred. These are estimated to amount to
�231,000.
Notice of Meeting
Notice is hereby given that the annual general meeting of Smaller Companies
Value Trust plc ("the Company") will be held at the offices of Scottish Widows
Investment Partnership Limited at 10 Fleet Place (off Limeburner Lane), London
EC4M 7RH on Thursday 4 September 2008 at 12.30 p.m. to consider and, if thought
fit, to pass the following resolutions, of which resolutions 1 to 6 will be
proposed as ordinary resolutions and resolutions 7 and 8 will be proposed as
special resolutions:
Ordinary resolutions
1. That the accounts and the reports of the Directors and of the auditors for
the year ended 30 April 2008 be received.
2. That the Directors' remuneration report for the year ended 30 April 2008 be
approved.
3. That Mr A F Bushell, a retiring Director, be re-appointed as a Director of
the Company.
4. That Mr J W Poulter, a retiring Director, be re-appointed as a Director of
the Company.
5. That Ernst & Young LLP be re-appointed as auditors of the Company until the
conclusion of the next general meeting at which accounts are laid before the
Company.
6. That the Directors be authorised to set the remuneration of the auditors.
Special resolutions
7. That the Company be and is hereby generally and unconditionally authorised
for the purposes of section 166 of the Companies Act 1985 (as amended) (the
"Act") to make market purchases (within the meaning of section 163(3) of the
Act) on the London Stock Exchange of income shares of 1 pence each and/or
capital shares of 1 pence each (together "Shares") in the capital of the Company
provided that:
(a) the maximum aggregate number of Shares hereby authorised to be purchased
is 3,045,527 income shares of 1 pence each and 3,045,527 capital shares of 1
pence each;
(b) the minimum price which may be paid for a Share is 1 pence;
(c) the maximum price which may be paid for a Share is an amount equal to
105% of the average of the middlemarket quotations (as derived from the
Daily Official List of the London Stock Exchange) for the relevant class of
Share for the five business days immediately preceding the date on which the
relevant Share is contracted to be purchased (exclusive of associated
expenses); and
(d) unless previously varied, revoked or renewed, the authority hereby
conferred shall expire at the conclusion of the Company's next annual
general meeting to be held in 2009 or, if earlier, on 4 December 2009 save
that the Company may prior to such expiry enter into a contract or
arrangement to purchase Shares under this authority which will or may be
executed wholly or in part after the expiry of this authority and may make a
purchase of Shares pursuant to any such contract or arrangement as if the
authority hereby conferred had not expired.
8. That in substitution for any existing power under section 95 of the Companies
Act 1985 (as amended) (the "Act") but without prejudice to the exercise of any
such power prior to the passing of this resolution, the Directors be and are
hereby empowered pursuant to section 95 of the Act to allot equity securities
(within the meaning of section 94(2) to section 94 (3A) of the Act) wholly for
cash pursuant to any existing authority given in accordance with section 80 of
the Act as if section 89(1) of the Act did not apply to any such allotment,
provided that this power shall be limited to the allotment of equity securities:
(a) in connection with an offer of such securities by way of rights to
holders of income shares of 1 pence each and capital shares of 1 pence each
in the capital of the Company in proportion (as nearly as may be
practicable) to their respective holdings of such shares, but subject to
such exclusions or other arrangements as the Directors may deem necessary or
expedient in relation to treasury shares, fractional entitlements or any
legal or practical problems arising in connection with the laws of any
territory, or the requirements of any regulatory body or stock exchange; and
(b) otherwise than pursuant to sub-paragraph (a) above up to an aggregate
nominal value of �20,317;
and shall expire at the conclusion of the Company's next annual general meeting
to be held in 2009 or, if earlier, on 4 December 2009, save that the Company may
before such expiry make an offer or agreement which would or might require
equity securities to be allotted after such expiry and the Directors may allot
equity securities in pursuance of any such offers or agreements notwithstanding
that the power conferred by this resolution has expired.
This power applies in relation to a sale of shares which is an allotment of
equity securities by virtue of section 94(3A) of the Act as if in the first
paragraph of this resolution the words "pursuant to any existing authority given
in accordance with section 80 of the Act" were omitted.
By order of the Board
Scottish Widows Investment Partnership Limited
Company Secretary
27 June 2008
Notes
1. A member entitled to attend and vote is entitled to appoint a proxy or
proxies to attend, speak and vote instead of that member.
A member may appoint more than one proxy in relation to the meeting, provided
that each proxy is appointed to exercise the rights attached to a different
share or shares held by the member. Lodgement of the form of proxy will not
prevent members from attending and voting at the meeting. A proxy need not be a
member of the Company.
The right to appoint a proxy does not apply to persons whose shares are held on
their behalf by another person and who have been nominated to receive
communications from the company in accordance with section 146 of the Companies
Act 2006 ("nominated persons"). Nominated persons may have a right under an
agreement with the registered shareholder who holds the shares on their behalf
to be appointed (or to have someone else appointed) as a proxy. Alternatively,
if nominated persons do not have such a right, or do not wish to exercise it,
they may have a right under such an agreement to give instructions to the person
holding the shares as to the exercise of voting rights.
Proxy appointments may be revoked by written notice to Equiniti Limited, Aspect
House, Spencer Road, Lancing, West Sussex BN99 6ZL, and must be received by
11.30 a.m. on 4 September 2008. Proxy instructions may be amended by notice
received by the company in accordance with the provisions of the Companies Act
2006.
2. Forms of proxy must be delivered to the Company's registrar not later than
12.30 p.m. on 2 September 2008 in accordance with the instructions printed on
the proxy form.
3. Pursuant to regulation 41 of the Uncertificated Securities Regulations 2001,
the Directors have specified that only those shareholders registered on the
register of members of the Company at 6 p.m. on 2 September 2008 or, in the
event that the meeting is adjourned, on the register of members 48 hours before
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. Changes to entries on the register of members after 6 p.m. on 2 September
2008 shall be disregarded in determining the right of any person to attend and
vote at the meeting, notwithstanding any provision in any enactment, the
articles of association of the Company, or other instrument to the contrary.
CREST members may give instructions to revoke or amend by CREST message but only
if the message is received by Equiniti Limited by 12.30 p.m. on 4 September
2008.
4. In order to facilitate voting by corporate representatives at the meeting,
arrangements will be put in place at the meeting so that (i) if a corporate
shareholder has appointed the chairman of the meeting as its corporate
representative to vote on a poll in accordance with the directions of all of the
corporate representatives for that shareholder at the meeting, then on a poll
those corporate representatives will give voting directions to the chairman and
the chairman will vote (or withhold a vote) as corporate representative in
accordance with those directions; and (ii) if more than one corporate
shareholder has not appointed the chairman of the meeting as its corporate
representative, a designated corporate representative will be nominated, from
those corporate representatives who attend, who will vote on a poll and the
other corporate representatives will give voting directions to that designated
corporate representative. Corporate shareholders are referred to the guidance
issued by the Institute of Chartered Secretaries and Administrators on proxies
and corporate representatives (www.icsa.org.uk) for further details of this
procedure. The guidance includes a sample form of representation letter if the
chairman is being appointed as described in (i) above.
5. As at 27 June 2008 (the date on which this notice was approved) the total
number of shares issued by the Company with rights to vote are 20,317,060
capital shares of 1p each, which have the right to vote in all circumstances
except in relation to the declaration of dividends, and 20,317,060 income shares
of 1p each which have the right to vote in all circumstances.
Form of Proxy
I/We
Block letters please
of
appoint the Chairman of the meeting, or the following person or (see notes
below)
as my/our proxy to attend, speak and vote at the annual general meeting of the
Company to be held on 4 September 2008 and at any adjournment of that meeting.
* Please tick here if this proxy appointment is one of multiple appointments
being made. For further information please see below and refer to note 1 of the
notice of meeting.
I/We wish this proxy to be used in connection with the resolutions listed below
and any other business transacted at the meeting.
Please indicate with an "X" in the boxes below how you wish the proxy to vote.
The proxy will vote at his or her discretion, or abstain from voting, on any
resolution listed below if no instruction is given in respect of that resolution
and on any other business transacted at the meeting. Please note that a vote
withheld is not a vote in law and will not be counted in the calculation of the
proportion of the votes for or against a resolution.
Vote
Ordinary Resolutions For Against withheld Discretion
1. Receipt of the annual report and accounts for the year ended 30 April 2008 * * * *
2. Approval of the Directors' remuneration report * * * *
3. Re-appointment of Mr A F Bushell as a Director * * * *
4. Re-appointment of Mr J W Poulter as a Director * * * *
5. Re-appointment of Ernst & Young LLP as auditors * * * *
6. Authorisation of the Directors to set the remuneration of the auditors * * * *
Special Resolutions
7. Renewal of the authority for the Company to purchase its shares * * * *
8. Renewal of the authority for the Directors to disapply pre-emption rights * * * *
Signature
Date 2008
Notes:
You may, if you wish, delete the words "Chairman of the meeting" and insert the
name(s) of a proxy of your choice, who need not be a member. Please initial that
alteration.
To appoint more than one proxy, (an) additional proxy form(s) may be obtained by
contacting the Company's registrar, Equiniti on 0871 384 2648* or you may
photocopy this form. Please indicate in the box next to the proxy holder's name
the number of shares in relation to which the proxy is authorised to act as your
proxy. Please also indicate, by ticking the box provided, if the proxy
instruction is one of multiple instructions being given. All forms must be
signed and returned to the address overleaf.
This form (and if relevant, the power of attorney or other authority under which
it is signed, or a notarially certified copy of the power of attorney) must be
received by Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex,
BN99 6ZL not less than 48 hours before the time appointed for holding the
meeting or adjourned meeting.
If the member is a corporation, the form of proxy should be executed under its
common seal or signed on its behalf by an officer or attorney, duly authorised.
For joint holders, the signature of any one of them will suffice, but the names
of all joint holders should be shown. The vote of the senior joint holder who
tenders a vote, whether in person or by proxy, will be accepted to the exclusion
of the votes of the other joint holders and for this purpose seniority shall be
determined by the order in which the names stand in the register of members in
respect of the joint holding.
*Calls to this number are charged at 8p per minute from a BT landline. Other
telephony provider costs may vary.
Financial Calendar
Announcements, income share dividend payments and the issue of the annual and
interim reports may normally be expected in the months shown below:
January - Interim dividend paid
June - Preliminary figures announced
July - Annual report and accounts published
September - Annual general meeting
December - Interim figures and interim dividend announced
- Half-yearly report and accounts published
Investment Manager Information
Scottish Widows Investment Partnership Limited ("SWIP") is one of the largest
asset management companies in the UK. They actively manage funds across a broad
range of asset types and are major investors in global and pan-European equity
markets, as well as property, fixed interest and cash.
The global nature of SWIP's business is reflected not just in the markets they
invest in, but also in their client base and the geographical spread of their
business operations, which encompass the United States, Europe and the Far East.
SWIP manages money for a large number of investors with a wide variety of
investment objectives. The investor's needs can be met by investing in SWIP's
diverse fund range or through a bespoke portfolio.
SWIP's flexible investment style also enables them to meet their client
objectives in all market conditions. They have a rigorous investment process,
which emphasises their own independent fundamental research. This gives them a
depth of information and insight that is not available to the market generally.
With �94.0 billion*, as at 30 April 2008, of funds under management and the
backing of their parent company, Lloyds TSB Group plc, clients can have
confidence in their stability and position of strength. Their size and market
leadership have also allowed them to attract and retain one of the UK's
strongest and most experienced investment teams.
SWIP believes that the expertise of their investment teams and the comprehensive
research that they conduct is key to providing consistently superior returns for
their clients.
*Source: SWIP
Smaller Companies Value Trust plc
10 Fleet Place
London EC4M 7RH
43913 07/08
Grafico Azioni Smaller Companies Value Trust (LSE:SVLC)
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