![img-0.jpeg](img-0.jpeg) # The Henderson Smaller Companies Investment Trust plc Investing in the growth potential of smaller UK companies **Annual Report 2026** MANAGED BY **Janus Henderson** INVESTORS --- # Contents # Strategic Report 1 About the Company 2 At a glance 3 Why invest in UK smaller companies? 4 Approach to UK smaller companies 5 Manager: Janus Henderson Investors 6 Performance summary 8 Chair's Statement 12 Fund Managers' Report 19 Portfolio 22 Case studies 24 Business model 27 Principal risks and uncertainties 29 Measuring the Company's performance 31 Section 172 Statement 33 Board decision making 34 ESG Report 38 Viability Statement # Governance 40 Directors and Fund Managers 43 Corporate Governance Report 49 Audit and Risk Committee Report 52 Nomination Committee Report 55 Management Engagement Committee Report 56 Directors' Remuneration Report 59 Directors' Report 62 Statement of Directors' Responsibilities # Financial Statements 64 Independent Auditor's Report 70 Statement of Comprehensive Income 71 Statement of Changes in Equity 72 Balance Sheet 73 Statement of Cash Flows 74 Notes to the Financial Statements # Additional Information 91 Glossary 93 Alternative performance measures 95 General shareholder information 96 Historical record # AGM Notice 98 Notice of Annual General Meeting 105 Corporate information www.hendersonsmallercompanies.com # Keeping in touch Scan the QR code to receive the latest Company updates, market insights, event invitations and more. Please send any general enquiries about the Company to itsecretariat@janushenderson.com. ![img-1.jpeg](img-1.jpeg) # Annual General Meeting (AGM) The Board welcomes shareholders to attend the AGM at 11.30 am on 6 October 2026 either in person or online. Scan the QR code for more details and to register your attendance. ![img-2.jpeg](img-2.jpeg) A video in which the Fund Manager discusses the Company's results and performance during the year will be available from 30 July 2026 at www.hendersonsmallercompanies.com. --- Strategic Report Governance Financial Statements Additional Information AGM Notice Smaller companies are where innovation, entrepreneurship and growth often come together. Across the UK market, many smaller businesses are developing new technologies, disrupting established industries or building leading positions in specialist niches. The Company invests in a carefully selected portfolio of high-quality smaller businesses, seeking to identify those with the potential to become the next generation of UK success stories. Through a long-term, actively managed approach, it aims to recognise these opportunities early and deliver attractive long-term value for shareholders. ### About the Company Your Company is managed by Janus Henderson Investors. The Manager aims to capture the growth potential of the UK's smaller listed companies. Smaller companies grow into larger companies, and those which grow tend to have a blend of a good business model and a strong management team. The Fund Managers use a combination of company meetings, economic analysis and detailed research to build a diverse portfolio of growing businesses in the UK. The Fund Managers' goal is to use these unique insights to take advantage of the information gap for smaller companies – where there is relatively little professional analysis available – to produce investment growth for shareholders over the long term. ### Purpose The Company's purpose is to provide shareholders with long-term growth through investing in UK smaller companies and making this form of investment accessible to investors, both large and small. See p.24 Business model “ *The long-term drivers of UK small caps are still very much intact. Small caps exhibit faster organic growth than large caps, tend to have higher operating leverage, offer exposure to new technologies and services, and historically have benefitted from inbound mergers and acquisitions. Regardless of the direction of interest rates, we believe good smaller companies with resilient business models that demonstrate a combination of strong earnings momentum and attractive valuations can generate superior returns.* See p.12 Fund Managers' Report ### Awards ![img-3.jpeg](img-3.jpeg) ![img-4.jpeg](img-4.jpeg) **Indri van Hien** **Cassie Herlihy** ![img-5.jpeg](img-5.jpeg) The Henderson Smaller Companies Investment Trust plc Annual Report 2026 1 --- # At a glance ## The Henderson Smaller Companies Investment Trust plc ### Investment Objective The Company aims to maximise shareholders' total returns (capital and income) by investing in smaller companies that are quoted in the United Kingdom. #### Portfolio holdings **83** (2025: 96) ➔ See p.20 Portfolio holdings #### Investment focus **Total return** #### Regional focus **UK** ### The UK's most dynamic smaller companies Seeking opportunities for capital and dividend growth at the right price across UK small and mid-caps. ![img-6.jpeg](img-6.jpeg) | Industrials | 34.7% | Basic Materials | 5.1% | | --- | --- | --- | --- | | Consumer Discretionary | 19.2% | Energy | 3.9% | | Financials | 15.5% | Real Estate | 3.4% | | Technology | 10.4% | Telecommunications | 0.8% | | Health Care | 6.2% | Consumer Staples | 0.8% | ➔ See p.19 Analysis of portfolio by subsector #### Ongoing charges$^{1}$ KPI **0.53%** As at 31 May 2026 2025: 0.45% #### Net assets **£559m** As at 31 May 2026 2025: £634m #### Dividend yield$^{2}$ **3.2%** As at 31 May 2026 2025: 3.3% ➔ See p.6 Performance summary MANAGED BY **Janus Henderson** INVESTORS 1 This is an 'alternative performance measure', calculated using the Association of Investment Companies methodology, and explained on page 93. It is also a 'KPI', which is a key performance indicator. KPIs are used to measure the success of your Company in meeting its objective, and by the directors to evaluate the performance of the Manager. See pages 29-30 2 Based on the dividends paid or recommended for the year and the share price at the year end, being the interim of 7.5p and final dividend of 21.5p. See also alternative performance measures on page 94 Sources: Janus Henderson. A glossary of terms and alternative performance measures are included on pages 91-94 2 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 --- Strategic Report Governance Financial Statements Additional Information AGM Notice # Why invest in UK smaller companies? ## A whole new playing field Many of the UK's smaller businesses operate in fields untouched by larger entities. Whether in whole sectors, subsectors or niches, investors can gain exposure to different areas of the economy through investing in smaller companies. This opportunity is reflected in the number of UK smaller companies taken over by larger businesses. ## Runway for growth Historically, smaller companies have outperformed their larger peers. Since 2001 (to 30 June 2026), smaller companies have generated an annualised total return of 7.8%, while the wider UK market has generated 5.8%¹. This reflects the potential pace of growth at this early stage. A third of today's largest UK companies began life as quoted smaller companies within the last 20 years. However, this opportunity can come with greater possible downside risk, meaning that smaller companies are generally considered a longer-term investment. ## Supportive business environment For our smaller businesses, operating in the world's fifth-largest economy provides a solid foundation, from a standout corporate governance regime to the world's central timezone. They also benefit from an autonomous monetary policy, established professional services and a robust legal framework. ## Small but mighty Smaller companies are often associated with risky start-ups, but many of the UK's smaller businesses are household names. From high street retailers to online review providers, these businesses are leaders in their niches. Their smaller size gives them the flexibility to respond to changing market conditions. ## Innovation without the (ad)venture While smaller listed companies offer a different proposition to venture capital, it is still possible to invest in innovation through their equity. Whether it's cloud-services for industry niches, animal genetics or precision accuracy tools used in semi-conductor manufacturing, UK-listed companies are at the cutting edge. ## The data behind UK smaller companies Since 2001, UK listed smaller companies have outperformed the wider market by: **+2.03%** annualised¹ ## Faster growing Mid-cap companies have recorded faster organic growth than larger companies since 2002, based on earnings per share² Earnings grew: **6.5%** in the FTSE 100 **6.9%** in the FTSE 250¹,³ ## Takeover targets UK smaller companies are popular takeover targets for businesses around the world. The average proportion (by market capitalisation) of the UK small cap index acquired each year shows this: **6.9%** of the FTSE Small Cap **5.6%** of the FTSE 250 **1.2%** of the FTSE 100² 1 Source: Bloomberg, Janus Henderson Investors as at 30 June 2026. Reflects annualised performance of Deutsche Numis Smaller Companies Index vs FTSE All-Share 2002 to July 2026 2 Measured on the basis of the compound annual growth rate of earnings per share. Calculated from reported annual corporate earnings beginning in 2002. 2026 is an estimate based on prior trends 3 Source: Bloomberg, Janus Henderson Investors, from 31 Dec 2000 to 30 June 2026 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 3 --- # The Fund Managers' approach to UK smaller companies ![img-7.jpeg](img-7.jpeg) ## Characterising a good investment Our deep experience with smaller companies has informed our understanding of what makes a 'good' company. This has resulted in a simple formula: a good business model plus a strong management team can lead to earnings momentum. A good business model could include high recurring revenues (like subscriptions) or a hard-to-substitute product. Our in-house research capabilities enable us also to assess non-financial metrics including governance, a company's peers and its competitors. When this complete picture is coupled with a reasonable price, we may be willing to invest. ![img-8.jpeg](img-8.jpeg) ## Narrowing the universe From a universe of over a thousand companies, we exclude those that are too small (with a market capitalisation below £150 million), unprofitable, excessively leveraged, or poorly managed, as they do not meet our investment criteria. This process leaves us with around 200 potential stocks for the portfolio on which we undertake fundamental analysis using our 4Ms process. We don't look at companies through the lens of sector themes, as we don't think this works for smaller companies that often operate in unique niches. ![img-9.jpeg](img-9.jpeg) ## Meeting companies and making visits A core element of our process is getting to know the companies in which we invest. Compared to larger companies, there is very little investment analysis available for smaller companies. To plug this gap, we conduct over 300 company meetings per year, including repeated meetings with some. This enables us to build our own perspective on a company, the confidence of its management and the reality of, for example, its factory-floor operations. ![img-10.jpeg](img-10.jpeg) ## Building a portfolio Having followed these steps, we end up with a portfolio of around 80 companies. We seek diversity across the industries in which we invest and companies with revenues sourced from all over the world. Our aim is to focus on the companies where we have the highest conviction, while avoiding becoming too large a shareholder or being penned in by a stock that is difficult to sell. ![img-11.jpeg](img-11.jpeg) ## Keeping a close eye While we typically aim to hold stocks for multi-year periods, we monitor our portfolio holdings closely. This includes conducting ongoing company meetings with management and tracking competitors. Smaller companies are often more sensitive to the macroeconomic backdrop – our in-house research and economic expertise help us keep on top of these changes. ![img-12.jpeg](img-12.jpeg) ## Knowing when to sell Should a company meeting or our own analysis reveal a deterioration in our investment case, we will sell the holding as efficiently as market conditions allow. Equally, when market conditions shift significantly, we will rebalance the portfolio as needed. 4 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 --- Strategic Report Governance Financial Statements Additional Information AGM Notice # Janus Henderson Investors ## The Manager The Henderson Smaller Companies Investment Trust plc is managed by Janus Henderson Investors. Janus Henderson is a global asset manager with over 350 investment professionals and 27 offices globally, employing over 2,000 people and managing £363.7bn of client assets. ### A deep history in UK smaller companies Janus Henderson Investors has extensive experience of investing in UK smaller companies. It has managed Henderson Smaller Companies Investment Trust since 1992, when Henderson acquired Touche Remnant. Before then, Touche Remnant, and firms from which it evolved, managed the trust since its creation in 1887. The fund management team benefits from the insights of around 70 analysts across different sectors and regions, including European counterparts, and health and technology sector specialists. The team's long-held philosophy focuses on finding future growth potential at a reasonable price. This philosophy is embedded in the team's culture. Across their funds, the fund management team invests around £1bn into UK smaller companies. ### Investment trusts, understood Janus Henderson has been involved in investment trusts since Henderson's foundation in 1934. It is one of the largest investment trust asset managers in the UK, and currently manages nine investment trusts. As a result, Henderson Smaller Companies Investment Trust benefits from the support of a dedicated investment trust team, including specialised company secretarial, accounting, marketing and sales support. ### Assets Under Management £363.7bn ### Employees +2,000 ### Offices globally 27 ### Investment professionals 350+ Source: Janus Henderson Investors at 31 March 2026 ## The Henderson Smaller Companies Investment Trust plc's history 1887 Incorporated as The Trustees, Executors and Securities Insurance Corporation 1917 Name changed to The Trustees Corporation 1974 Appointed Touche, Remnant & Co. as managers 1982 Began specialising in smaller companies. Renamed TR Trustees Corporation PLC 1992 Touche, Remnant & Co. acquired by Henderson 1997 Name changed to The Henderson Smaller Companies Investment Trust plc 1999 Mandate refined to focus solely on UK smaller companies 2017 Henderson merged with Janus Capital The Henderson Smaller Companies Investment Trust plc Annual Report 2026 5 --- # Performance summary Year to 31 May 2026 ## Performance See p.12 Fund Managers' Report NAV total return¹ 11.8% (2025: -5.1%) Share price total return² 12.6% (2025: -2.3%) NAV per share at year end 1,004.8p (2025: 926.2p) Share price at year end 917.0p (2025: 841.0p) Discount at year end³ KPI 8.7% (2025: 9.2%) KPI This indicates a key performance indicator ("KPI"). KPIs are used to measure the success of your Company in meeting its objective and by the directors to evaluate the performance of the Manager. See pages 29-30. ## Total return performance Total return performance to 31 May 2026 | | 1 year % | 3 years % | 5 years % | 10 years % | | --- | --- | --- | --- | --- | | NAV¹ | 11.8 | 21.4 | -13.9 | 75.1 | | Benchmark⁴ | 12.3 | 39.3 | 17.9 | 87.2 | | Average sector NAV⁵ | 10.1 | 26.0 | 10.9 | 89.2 | | Share price² | 12.6 | 29.0 | -17.1 | 95.4 | | AIC sector share price⁶ | 13.1 | 26.5 | 9.6 | 93.2 | Total return performance for 10 years to 31 May 2026 ![img-13.jpeg](img-13.jpeg) 1 NAV per ordinary share total return with income reinvested 2 Share price total return using mid-market closing price with income reinvested 3 Calculated using the NAV and mid-market share price at year end 4 Deutsche Numis Smaller Companies Index (excluding investment companies) total return 5 Average NAV total return of the Association of Investment Companies ("AIC") UK Smaller Companies sector 6 Average share price total return of the AIC UK Smaller Companies sector A glossary of terms and explanations of alternative performance measures are included on pages 91-94 Sources: Morningstar Direct, Janus Henderson, LSEG Datastream 6 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 --- Strategic Report Governance Financial Statements Additional Information AGM Notice # Performance summary continued # Dividend performance Dividend total¹ Per share for the year 29.0p (2025: 28.0p) Dividend yield² At the end of the year 3.2% (2025: 3.3%) Revenue reserve³ £18.5m (2025: £20.1m) Dividend growth⁴ For the year 3.6% (2025: 3.7%) Over 10 years 61% Years of consecutive growth 23 Dividend for the years ended 31 May⁴ ![img-14.jpeg](img-14.jpeg) Dividend growth Annual dividend income (without reinvestment) an investor would have received in each financial year based on an initial £1,000 investment in the Company on 31 May 2003. ![img-15.jpeg](img-15.jpeg) Source: Janus Henderson 1 This represents an interim dividend of 7.5p and a proposed final dividend of 21.5p. See page 9 for more details 2 Based on the ordinary dividends paid and payable for the year and the mid-market share price at year end 3 Revenue reserves at 31 May 2026 excluding payment of the recommended final dividend for 2026 4 This represents the interim and final ordinary dividends paid or recommended The Henderson Smaller Companies Investment Trust plc Annual Report 2026 7 --- ## Chair's Statement ### Refreshing your company ![img-16.jpeg](img-16.jpeg) **Penny Freer,** Chair #### Highlights of the year ##### NAV total return **+11.8%** ##### Share price total return **+12.6%** ##### Dividend growth for the year **+3.6%** #### Dear Shareholder, ##### Performance The year under review was marked by political upheaval in the UK and conflict overseas, unsettling expectations for interest rate cuts and broader easing in global financial conditions. Against this challenging backdrop, the Company delivered strong positive absolute returns and outperformed most of its sector peers. The Company's net asset value ("NAV") per ordinary share total return rose by 11.8% and the share price total return rose by 12.6% in the year to 31 May 2026. This compared with a rise of 12.3% in the Deutsche Numis Smaller Companies Index (excluding investment companies) (the "benchmark") and a rise of 10.1% in the AIC UK Smaller Companies sector average NAV total return. The Company therefore marginally underperformed its benchmark by 0.5% over the year, while outperforming the peer group sector average by 1.7%. A detailed review of portfolio performance, including the principal contributors to, and detractors from, returns, is set out in the Fund Managers' Report. Since the year end to 27 July 2026 the Company's NAV per ordinary share total return rose by 3.2% and the share price total return rose by 3.6%. This compares with a rise of 4.2% for the benchmark and a rise of 1.6% in the AIC UK Smaller Companies sector average NAV total return. This marks the first year in which Indri van Hien has led the fund management team for the Company. Following a protracted period of underperformance, the Fund Managers have refined the investment process to strengthen stock selection, while preserving the Company's core philosophy of investing in growth at the right price. These refinements are now embedded, and the Board has monitored their implementation, the team's selling discipline and the consistency of the investment approach throughout the year. Although elevated bond yields have continued to weigh on funds with a growth bias, the Board is encouraged by the marked improvement in stock selection, alongside the benefits of gearing and NAV accretion from share buybacks. The Board will continue to monitor progress closely. Further detail on performance and the outlook for markets can be found in the Fund Managers' Report within this Annual Report. " *Against this challenging backdrop, the Company delivered strong positive absolute returns and outperformed most of its sector peers.*" 8 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 --- Strategic^{}[] Report Governance Financial^{}[] Statements Additional^{}[] Information AGM Notice ## Chair's Statement continued ### Dividend and earnings Total revenue from the Company's portfolio declined from £23.1m to £18.5m, while earnings per share ('EPS') fell from 27.9p to 26.1p. The decline in total revenue was driven primarily by the Company's ongoing share buyback programme and also reflected, to a lesser extent, changes in portfolio composition and the continued preference among many UK companies for share buybacks over dividend growth or special dividends. The movement in EPS is also impacted by the accounting treatment of EPS, which is based on the weighted average number of shares in issue during the year rather than the period-end share count. The Board is pleased to recommend an increased final dividend of 21.5p per share, which, together with the interim dividend of 7.5p paid in March 2026, takes the total dividend for the year to 29.0p per share – a 3.6% increase on the 28.0p paid in 2025. Subject to shareholder approval at the AGM, the final dividend will be paid on 23 October 2026 to shareholders on the register at 2 October 2026, with the shares quoted ex-dividend on 1 October 2026. EPS is calculated using the weighted average number of shares in issue during the year, while the dividend is paid on the smaller number of shares actually in issue at the record date as a result of the share buyback programme. The recommended distribution is therefore supported by current year earnings together with a modest contribution from the Company's substantial revenue reserves. This will be the 23rd consecutive year of growth in the annual dividend, reaffirming the Company's status as an AIC Dividend Hero. ### Ongoing charge ratio For the year ended 31 May 2026, the ongoing charge increased to 0.53% (2025: 0.45%). Much of this increase was due to the 16% decline in our average net assets, but it also reflected the 42% increase in 'other expenses' due mainly to an increase in marketing spend. The Board is committed to marketing the Company and raising the Company's profile, but this inevitably had a short-term impact on the ongoing charge for the year. Notwithstanding our ongoing charge remains materially lower than the peer group's average of 0.99%. See page 30 for more detail. ### Share rating and buybacks The Company's share price discount to NAV fluctuated during the year between 7.4% and 11.5%, averaging 9.2% and closing the year at 8.7%. The share price moved from 841.0p at the start of the year to 917.0p at 31 May 2026, with the share price total return of 12.6% modestly ahead of the NAV per share total return of 11.8%, reflecting a small narrowing of the discount over the year. The Company's discount remained consistently narrower than the weighted peer group average throughout the year. The Board kept the discount under active review and instructed buybacks when it considered these to be in the best interests of shareholders as a whole and where shares could be acquired at a meaningful discount to NAV, thereby enhancing NAV per share for remaining shareholders. Market conditions for UK smaller companies and for the investment trust sector remained difficult, and discounts across the sector continued to reflect weak investor demand for UK small-cap equities. The Company bought back 12,899,062 shares during the year, representing 18.8% of issued share capital (excluding Treasury shares). These buybacks enhanced NAV by 1.7%. In light of the elevated rate of repurchase, the Board convened a general meeting on 4 March 2026, at which shareholders approved the renewal of the authority to repurchase up to 14.99% of issued share capital. The Board's view remains that buybacks are an important tool for managing the discount, but that they cannot, on their own, address the underlying drivers of investor demand. Sustained re-rating will depend on improved investment performance, renewed confidence in UK equities, a recovery in flows into the smaller companies asset class, and an effective marketing programme. *This will be the 23rd consecutive year of growth in the annual dividend, reaffirming the Company's status as an AIC Dividend Hero.* The Henderson Smaller Companies Investment Trust plc Annual Report 2026 9 --- ## Chair's Statement continued ### Capital structure Following authority granted by shareholders at the 2025 AGM, the Board completed the buyback and cancellation of the legacy preference stock during the year. The Company's capital comprised 74,385,131 ordinary shares of 25p each, each at the year end (of which 18,796,219 were held in Treasury). Further information can be found on page 59. ### Fund management changes Neil Hermon retired from asset management in September 2025 after 23 years as the Company's Fund Manager. The Board thanks Neil for the long-term value he created for shareholders. Indri van Hien, who had served as Co-Manager since January 2025, and previously Deputy Fund Manager since 2016, assumed sole responsibility as Fund Manager. She has continued and refined the long-standing investment philosophy. Working with the Board, the Manager recruited Cassie Herlihy as Deputy Fund Manager, with effect from November 2025. ### Board succession planning Victoria Sant retired from the Board at the conclusion of the 2025 AGM, as reported last year. The Board now comprises five directors, all of whom are independent of the Manager. The Nomination Committee keeps the Board's composition, balance of skills, experience, independence and diversity under regular review, together with succession planning for both directors and the chairs of the Board and its committees. Further information is set out in the Nomination Committee Report on page 52. ### Articles of association At the AGM in October 2026, shareholders will be asked to approve, by special resolution, the adoption of new articles of association. The existing articles have not been comprehensively refreshed for some years and, following a review by the Company's legal advisers and consideration by the Board, the opportunity has been taken to align them with current market practice for UK-listed closed-ended investment companies. The principal changes modernise the articles by permitting fully virtual general meetings (in addition to physical and hybrid meetings), making electronic dividend payments the default, and updating the untraced shareholder provisions in line with the UK Dormant Assets Scheme while preserving the rights of long-lost shareholders to reclaim their money. The opportunity has also been taken to remove provisions that are no longer relevant to a closed-ended investment trust, including references to directors' pensions and gratuities, and to reduce the maximum permitted size of the Board from 15 to 10. The new articles also entrench the Company's status as an investment trust (so that any formal move away from that status would itself require shareholder approval by special resolution), introduce a backstop mechanism to ensure continuity in the event that retiring directors are not re-elected at an annual general meeting, require proposed Directors to disclose certain information about themselves to shareholders before a vote is held on their election and include a new power enabling the Company to obtain information needed to comply with US securities laws and other regulatory requirements. More information on the changes to the Articles can be found in the explanation of AGM resolutions on pages 101-102. ### Annual General Meeting We are pleased to invite shareholders to attend the AGM in person at our registered office at 11.30 am on Tuesday, 6 October 2026. The AGM is an important opportunity for shareholders to meet the Board and members of the fund management team, including the Fund Manager, Indri van Hien and the Deputy Fund Manager, Cassie Herlihy. The fund management team will present on the year under review and the outlook for UK smaller companies. Shareholders unable to join in person will be able to attend by videoconference. Further details can be found in the Notice of AGM on page 98-99. *Indri van Hien has continued to refine the long-standing investment philosophy.* 10 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 --- Strategic^{}[] Report Governance Financial^{}[] Statements Additional^{}[] Information AGM Notice ## Chair's Statement continued ### Outlook The outlook for financial markets remains complex. Geopolitical tensions, most notably in the Middle East, continue to cloud the inflation and interest rate outlook, while the disruptive potential of artificial intelligence is prompting investors to reassess the durability of business models across a range of sectors. In the UK, the Government faces the difficult task of restoring growth while maintaining fiscal discipline; the recent change in Prime Minister is likely to prolong fiscal uncertainty, delaying important policy choices and further undermining confidence among businesses and consumers. Together, this reinforces the growing emphasis on portfolio diversification our Fund Managers are so focused on. In navigating these challenging conditions, the Company's portfolio retains a clear quality bias and holds companies with robust business models that are able to forge their own paths. These companies are soundly financed and are being run by management teams whose incentives are aligned with our own. The attractive valuations in this part of the market are well-documented. These claims are increasingly being recognised by continued in-bound merger and acquisition ('M&A') activity and ongoing share buyback programmes being sanctioned by boards. Over the long term, the Company seeks to capture the well-established small-cap premium: that is, the long-term outperformance of small caps over large caps driven by factors such as higher growth prospects in this under researched part of the market. While the small-cap factor has proved elusive in the UK over the past decade, we continue to see high-quality businesses whose valuations have been depressed by broader market weakness rather than company-specific concerns. There is opportunity in this, but to unlock this the market needs to see an alleviation of the acute technical pressure this part of the market has suffered from in terms of asset outflows. Clarity over the political situation in the UK is an important step. Smaller companies may underperform larger companies in periods of economic dislocation as investors flock to larger and more liquid asset classes, but history suggests that they rebound most strongly after such periods. Global investors remain heavily exposed to the US, with relatively modest allocations to markets outside US equities when compared with the composition of the MSCI All Country World Index. While much market commentary remains focused on elevated US valuations, we are reminded of the compelling opportunities available in UK smaller companies, which offer both diversification and long-term growth potential. A broadening of market returns is long overdue, and the Company's asset class would be a clear beneficiary of such a shift. We believe UK smaller companies continue to offer exciting opportunities for long-term investors, and remain confident in the ability of our Fund Managers to apply their consistent and disciplined investment approach to generate significant long-term value. ### Penny Freer Chair of the Board 29 July 2026 *We believe UK smaller companies continue to offer exciting opportunities for long-term investors.* The Henderson Smaller Companies Investment Trust plc Annual Report 2026 11 --- # Fund Managers' Report ![img-17.jpeg](img-17.jpeg) **Indri van Hien** and Cassie Herlihy, Fund Managers ## Summary - Building on the Company's long-established investment philosophy, the team has continued to refine the portfolio, focusing on higher-conviction opportunities and a more disciplined approach to stock selection, risk management and capital allocation, helping to deliver positive returns in the year. - While market conditions favoured value stocks over growth stocks, many holdings continued to deliver robust operational performance and earnings growth. - The Fund Managers remain excited by the long-term opportunity in UK smaller companies, where attractive valuations, ongoing takeover activity and improving fundamentals create compelling opportunities for active investors. ## Fund performance The Company delivered positive returns during the period under review. The share price rose by 12.6% and the NAV by 11.8% on a total return basis. This compared with an increase of 12.3% in the Company's benchmark total return. The marginal underperformance came from a combination of negative contribution from investment performance and expenses offset by a positive contribution from gearing and ongoing share buybacks. Stock selection was a positive contributor in the period, while our growth style was a headwind and contributed to relative investment performance being negative overall. From a macro perspective geopolitical escalation between the US, Israel and Iran interrupted the disinflation narrative and rate-cut expectations, triggering a rotation back towards value stocks and away from growth stocks. At a micro level the underlying performance of our portfolio companies has been robust, and we continue to see upgraded forecast sales and earnings growth in aggregate. Despite it being a mixed year for performance, the long-term record of the Company remains strong, materially outperforming its benchmark during the tenure of the strategy dating back to 2002. ## Performance attribution | | Year ended 31 May | | | --- | --- | --- | | | 2026 % | 2025 % | | NAV total return | 11.8 | -5.1 | | Benchmark total return | 12.3 | 5.0 | | **Relative performance** | **-0.5** | **-10.1** | | Comprising: | | | | Investment performance without gearing | -2.3 | -9.3 | | Gearing impact on investment performance | -0.3 | -1.0 | | Gearing decision | 0.9 | -0.1 | | Expenses | -0.5 | -0.5 | | Buybacks | 1.7 | 0.7 | Source Janus Henderson ## Value of £100 invested in 2003 ![img-18.jpeg](img-18.jpeg) Source: LSEG, 1 June 2003 to 30 June 2026 (assuming dividends are reinvested) 12 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 --- Strategic Report Governance Financial Statements Additional Information AGM Notice ## Fund Managers' Report continued ### Market – year under review Despite continued market volatility, UK equity markets delivered positive returns in the year under review. Markets were buoyed by a marked easing in global trade tensions following the reciprocal tariffs announced by the US on 'Liberation Day'. While base rates were cut further to 3.75% in both the US and the UK, hopes of a steady rate-cutting cycle were repeatedly challenged by domestic and international political developments; by the period end, markets were questioning whether rates might need to rise again. In the UK, policy missteps and political drama weighed on sentiment. Intense speculation ahead of a later-than-usual Autumn Statement, alongside political manoeuvring against the Prime Minister following heavy local election losses, heightened near-term fiscal uncertainty and further eroded domestic business and consumer confidence. Both of these cohorts are now increasingly braced for a more left-leaning government. This unfolded against a backdrop of tepid GDP growth for much of the year, before a modest rebound of 0.6% in the first quarter of 2026. Annual inflation eased from 3.6% in June 2025 to 2.8% in April 2026, remaining above the Bank of England's 2% target, even as the labour market softened and unemployment rose to a near five-year high by the end of 2025. Geopolitical uncertainty persisted, most notably through US and Israeli strikes on Iran and the resulting disruption to shipping through the Strait of Hormuz, through which around 20% of global oil exports pass. Brent crude prices, which had been steadily declining prior to the conflict, rose above $100 per barrel, reigniting concerns that higher energy costs would feed into broader inflation and delay further monetary easing. Finally, the rapid evolution of artificial intelligence ('AI') became a defining market narrative, prompting both enthusiasm and reassessment. While AI's long-term potential to reshape productivity and unlock new revenue streams remains widely recognised, the pace of innovation sparked debate over winners and losers, particularly within the software sector, where valuations compressed sharply during the period. Other sectors, from business services and outsourcing to media and certain areas of professional services, also faced scrutiny given their exposure to potential automation. The result was heightened dispersion, as markets recalibrated expectations, balancing AI's transformative promise against the near-term disruption it may impose across a broad range of industries. In this environment, and extending a trend which has overshadowed the performance of UK smaller companies in recent years, small caps underperformed their larger counterparts. The Deutsche Numis Smaller Companies ex Investment Companies Index rose 12.3%, compared with a 21.6% gain in the FTSE All-Share Index, as ongoing macroeconomic uncertainty disproportionately impacted the more cyclically sensitive segments of the market. This marks the eighth year of underperformance for UK small caps versus large caps over the past decade, a notable departure from the well-documented long-term outperformance of smaller companies. ### Value of £100 invested in 1955 ![img-19.jpeg](img-19.jpeg) Source: LSEG, 31 December 1955 to 31 December 2025 (assuming dividends are reinvested) ### Gearing Gearing started the year at 10.2% and ended at 10.0%. Debt facilities are a combination of £30 million 20-year unsecured loan notes at an interest rate of 3.33% issued in 2016, £20 million 30-year unsecured loan notes at 2.77% issued in February 2022, and £70 million short-term bank borrowings. As the Company's NAV rose during the period under review, the use of gearing was a positive contributor to performance in the year. The ability to enhance returns through gearing, a distinctive feature of investment trusts, has made a significant positive contribution to performance during the Fund Manager's tenure. ### Attribution analysis The following tables show the top five contributors to, and the top five detractors from, the Company's relative performance. #### Principal contributors | | 12 month return % | Relative contribution % | | --- | --- | --- | | Balfour Beatty | +62.2 | +1.4 | | Renishaw | +110.5 | +1.1 | | Oxford Instruments | +85.2 | +1.0 | | Computacenter | +75.3 | +0.9 | | Vistry Group^{1} | -55.7 | +0.8 | $^{1}$ Not owned by the Company **Balfour Beatty** is an international contractor and infrastructure investor. It operates three main verticals: construction services in the UK, US and Hong Kong; support services including the maintenance of The Henderson Smaller Companies Investment Trust plc Annual Report 2026 13 --- ## Fund Managers' Report continued infrastructure assets such as road, rail, energy and utilities in the UK; and owning a portfolio of infrastructure investments including military housing in the US and schools, hospitals and student accommodation in the UK. The shares have performed strongly following continued positive momentum in order book growth driven by UK power generation projects and US buildings. New orders have bolstered cash generation and enabled further cash returns to shareholders through both the regular dividend and share buybacks. New CEO Philip Hoare launched his new 'evolve, energise and explore' strategy suggesting that going forward sharper focus will be given to existing and new growth markets. **Renishaw** is a UK-based engineering technology group that designs and manufactures high-precision measurement and manufacturing systems. Its products include machine-tool probes, co-ordinate measuring machine systems, encoders, calibration equipment, spectroscopy instruments and metal additive manufacturing systems, which help customers make complex components more accurately, efficiently and reliably across sectors including semiconductors, electronics, aerospace, healthcare and industrial automation. Improved demand across several key end-markets, particularly semiconductor and electronics manufacturing equipment and aerospace and defence, led the company to provide multiple upgrades to revenue and profit guidance over the year. The shares were further supported by confidence in the margin recovery opportunity, with management targeting a 20% operating margin over time, underpinned by cost actions, operational gearing and growth in higher-value product areas. **Oxford Instruments** is a global provider of scientific technology tools, software and expertise to academic and commercial customers, with leading positions in markets such as materials analysis, semiconductors, healthcare and life sciences. Its products help customers image, analyse and manipulate materials at very small scales, supporting research and high-technology manufacturing in areas such as compound semiconductors, advanced materials and life sciences. The shares performed strongly as investors became more confident in the recovery of orders and the group's exposure to structural growth markets, particularly within Advanced Technologies, where order intake grew by nearly 30% on an organic constant-currency basis, supported by compound semiconductor demand and increasing traction with commercial manufacturing customers. The company also benefitted from cost actions, an improving margin outlook and capital returns. **Computacenter** is a technology and services provider which helps large corporate and public-sector customers source, build and manage their IT infrastructure, ranging from workplace devices to complex datacentre and cloud-related projects. The shares performed strongly following materially better trading momentum, with revenue growth led by Technology Sourcing and strong Professional Services demand, particularly in North America and the UK where demand was supported by hyperscaler customers, AI-related projects and data-centre investment. The shares saw a strong re-rating as valuation multiples began to reflect the company's crucial role in enabling IT infrastructure for AI applications. **Vistry Group** is a UK housebuilder focused on delivering mixed-tenure homes, with a particular emphasis on partnership housing for housing associations, local authorities and private rented sector partners, alongside homes sold on the open market. The shares performed poorly in the period following management change and repeated concerns around profit delivery, cash generation and the balance sheet, with investors unsettled by the need to use greater incentives and discounts to sustain open-market sales. Sentiment deteriorated further after Vistry paused its share buyback to prioritise debt reduction. The Company did not own a position in this stock. ### Principal detractors | | 12 month return % | Relative contribution % | | --- | --- | --- | | Bellway | -27.2 | -1.3 | | Ceres Power Holdings^{1} | +1,060.5 | -0.9 | | Hochschild Mining^{1} | +87.7 | -0.7 | | Burford Capital^{2} | -63.1 | -0.7 | | Helios Towers^{1} | +95.8 | -0.7 | 1 Not owned by the Company 2 Position sold during the year **Bellway** is a national UK housebuilder. The company has a robust long-term track record of controlled expansion, and solid operational and financial performance whilst maintaining a strong balance sheet. Just as demand-side conditions for housebuilders were beginning to improve, the conflict in the Middle East put pressure on consumer confidence, and pushed oil prices, bond yields and borrowing costs higher. This is likely to weigh on near-term profitability across the sector and the shares moved sharply to reflect this. We believe the business remains well placed to benefit from any recovery on account of its well-invested land bank. Furthermore, the government's ambitious housebuilding targets which seek to address the structural undersupply of homes in the UK should provide tailwinds for the sector as planning reforms are enacted. Valuation support is provided by the discount to NAV at which the shares currently trade. **Ceres Power Holdings** develops clean-energy technology in the form of solid oxide fuel cells and electrolysers for power and hydrogen applications. The shares were supported by tangible commercial progress: first, royalties were generated from Doosan and secondly, important manufacturing licences and factory investment agreements were signed with large commercial partners. The Company did not own a position in this stock. 14 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 --- Strategic^{}[] Report Governance Financial^{}[] Statements Additional^{}[] Information AGM Notice ## Fund Managers' Report continued **Hochschild Mining** is a precious metals miner focused on the exploration, mining, processing and sale of silver and gold in the Americas. The shares were supported by a powerful combination of higher gold and silver prices. The Company did not own a position in this stock. **Burford Capital** is a specialist financial services company focused on litigation finance, providing capital to companies and law firms to fund legal claims in return for a share of any successful outcome, alongside activities such as asset recovery and legal risk management. During the period, the US Court of Appeals for the Second Circuit reversed the -$16bn judgment made against Argentina in relation to the nationalisation of energy company YPF, eliminating what had been Burford's single largest asset and major source of expected future profits. We have since exited the position on the view that the decision would trigger a material balance sheet write down, leaving the company over-leveraged and with a reduced capacity for new investment. **Helios Towers** owns and operates telecom tower infrastructure across Africa and the Middle East, leasing space on its towers to mobile operators. The shares were supported by strong tenancy-led growth and sharply improving cash flow. The group outperformed its tenancy additions targets and upgraded growth expectations for the year ahead. The Company did not own a position in this stock. ### Portfolio activity Trading activity in the portfolio was consistent with an average holding period between four and five years. Our approach is to consider our investments as long term in nature and to avoid unnecessary turnover. The focus has been on adding stocks to the portfolio that have good growth prospects, sound financial characteristics and strong management, at a valuation level that does not reflect these strengths. Likewise, we have been employing strong sell disciplines to cut out stocks that fail to meet these criteria. ### Acquisitions During the year we have added a number of new positions to our portfolio. These include, but are not limited to, the following: **CVS Group** is a leading UK-based veterinary services provider, operating companion animal, referral, farm animal and equine practices across the UK and Australia. Our investment gives us exposure to a structurally growing market underpinned by the trend of 'pet humanisation', with a near-term inflection point driven by the ageing of the post-COVID pet cohort, the largest single wave of new pet ownership in a generation. Veterinary spend follows a U-shaped curve, with higher spend in a pet's early years and a meaningful step-up as animals reach middle age, requiring more frequent and complex clinical intervention, a threshold this cohort will reach over the next couple of years. We initiated the position at a compelling entry point after the CMA market investigation led to a de- de-rating of the shares to a meaningful discount versus precedent sector transactions. With the CMA review now concluded with workable remedies, the release of pent-up capital deployment in the UK alongside the buy-and-build opportunity in Australia should act as medium-term catalysts. **Elixir** is a founder-led challenger consultancy that delivers transformation, data and AI implementation projects for blue-chip clients across multiple geographies and end markets. Its lean, partner-led model underpins sector-leading margins, sustained by project-based pricing and an equity-incentive structure that ensures alignment and supports retention. Our investment gives us exposure to sustainably double-digit organic revenue growth, complemented by a disciplined M&A strategy that has successfully diversified both end market and geographical exposure. We see a significant expansion opportunity across an existing client base where share of wallet remains low. Our view is that AI acts as a structural tailwind rather than a threat, with the firm well positioned to benefit from clients' inevitable focus on AI implementations. The shares were acquired at a meaningful discount to precedent transactions offering a compelling entry point into a high-quality compounder. **Greencore** is a specialist convenience food manufacturer, supplying sandwiches, salads, sushi and ready meals to the UK's major retailers. The recent transformational acquisition of Bakkavor establishes Greencore as the clear category leader in chilled prepared foods, unlocking significant operational synergies, procurement leverage and automation benefits. Structural tailwinds support sustained growth: ongoing product innovation, range extension, increased share of wallet with existing customers, and premiumisation, as consumers increasingly favour eating at home over dining out driving higher product volumes over time. The combined group benefits from sustainable and differentiated cost economics, scale advantages that sub-scale peers cannot easily replicate, and an improving returns profile as integration benefits are realised. Our investment provides exposure to a category leader operating in growing food segments, underpinned by an experienced management team with a proven track record of delivering against strategic and financial targets. **Mitie Group** is a UK service business providing facilities management, transformation and compliance services to a wide range of organisations across the public and private sectors. Following a period of challenging operating conditions during the COVID-19 pandemic, the company has transformed from a low-margin outsourcer into a higher-quality compounder, driven by disciplined contract bidding activity, technology-led investments and focus on higher profit activities, with successful improvement in group margins over time. Our investment in Mitie Group also provides exposure to strong industry tailwinds with corporates spending on facility transformation to prioritise sustainability, fire safety, The Henderson Smaller Companies Investment Trust plc Annual Report 2026 15 --- ## Fund Managers' Report continued security and environmental compliance as regulations tighten. The recent acquisition of Marlowe adds to these dynamics and should deliver an improved technical service provider to large corporates. In our view, the improving returns profile and growth of the business are not yet reflected in the current valuation of the company. **Rosebank** is an industrial holding company that acquires underperforming businesses, improves them operationally over a targeted three-to-five-year period and then exits, returning capital to shareholders. The management team is well-known and experienced, with a proven track record of acquiring business and creating value through operational improvement. We initiated our position through an oversubscribed equity placing to fund the acquisition of two US-based industrial businesses from a private equity seller. Value creation is underpinned by balance sheet recapitalisation, operational self-help and well-defined cost out programmes targeting meaningful margin expansion. Topline growth expectations are undemanding, with near-term earnings drivers centred on margin improvement and deleveraging, areas firmly within management's control. The entry valuation is reasonable, and we see upside from multiple arbitrage at exit as margins expand alongside a mix shift towards higher-quality end markets. **Saga** is a UK specialist provider of products and services for people aged over 50, operating across travel, cruise, insurance broking and related services. The group's proposition is built around a trusted consumer brand, deep customer insight and tailored products for an older demographic, with strength in ocean and river cruising, holidays and insurance distribution. The business has undergone a multi-year transformation to simplify its business and puts its balance sheet on a stable footing. Saga's unique product offering should enable it to gain market share, while favourable industry dynamics support stronger pricing. Given the business's high fixed-cost base, this should translate into meaningful profit growth. We believe the valuation today is not fully reflecting the earnings growth potential and scope for capital returns as the business moves from being over levered to being under levered. **SSP Group** is a leading global operator of food and beverage outlets in travel locations, including airports, railway stations and other transport hubs. It operates in 38 countries, with around 49,000 employees and approximately 3,000 outlets worldwide. Our investment provides exposure to the long-term growth in global travel, serving customers in captive and high-footfall locations where food and drink options are often limited. While the business has faced challenges in the wake of COVID, we see opportunity in improving European profitability, being more focussed on capital allocation and exposing value through the partial divestment of its high-growth Indian business. ## Disposals To balance the additions to our portfolio, we exited lower conviction positions where the investment case had deteriorated, or where valuations had become stretched after the thesis successfully played out. In a number of cases, we saw limited upside and weaker prospective returns and chose instead to recycle capital into higher conviction opportunities. These disposals include but are not limited to: our positions in **Eurocell**, a manufacturer and distributor of PVC windows, doors and other building products, and **Genuit**, a provider of sustainable water, climate and ventilation management products for the built environment. Both sales reduced our exposure to big-ticket UK housing-related demand at a time when consumer confidence was weakening and bond yields were rising. We also sold our holdings in **Future**, a specialist media platform operating websites, magazines and newsletters; **MONY Group**, a technology-led price comparison platform; and **PageGroup**, a global specialist recruitment consultancy. Despite their lowly valuations, we believed each business faced structural challenges from AI, which could disrupt customer acquisition, content discovery, pricing power or recruitment workflows over time. We disposed of our positions in **Domino's Pizza Group**, the UK and Ireland master franchisee for Domino's, and **Trainline**, a digital rail ticketing platform operating in the UK and Europe, as we believed profits would remain under pressure from government policy. For Domino's, this related to increased labour cost pressure from changes to workers' rights and employment costs; for **Trainline**, the risk was continued pressure from rail fare freezes and wider rail market intervention. We took profits in **Cohort**, a defence technology group, and **Keller**, a global specialist geotechnical contractor, following strong share price performance. We also sold positions in **Essentra**, a manufacturer and distributor of industrial components; in **Impax Asset Management**, a specialist sustainable investment manager; in **ME Group**, an operator of self-service photobooths and laundry machines; and in **Telecom Plus**, owner of multiservice utility provider Utility Warehouse. In each case, we believed valuations did not adequately reflect the negative earnings momentum these companies were likely to face. ## Takeover activity Takeover activity in the portfolio persisted during the year as trade buyers and private equity alike continued to exploit the attractive valuations in the UK small and mid-cap space. Takeover bids were received for: **Empiric Student Property**, a real estate investment company focused on student accommodation, from Unite Group; **JTC**, a business services company, from Permira; **Just Group**, a pension risk transfer specialist, from Brookfield; and **Kitwave**, a food distributor, from One Equity Partners. 16 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 --- Strategic^{}[] Report Governance Financial^{}[] Statements Additional^{}[] Information AGM Notice ## Fund Managers' Report continued ### Top ten positions The following table shows the Company's top ten stock positions and their active weight versus the benchmark: | Top ten positions at 31 May 2026 | Portfolio % | Index weight % | Active weight % | | --- | --- | --- | --- | | Oxford Instruments | 3.4 | 1.0 | 2.4 | | Balfour Beatty | 3.4 | – | 3.4 | | Paragon Banking | 3.0 | 0.8 | 2.2 | | OSB Group | 2.7 | 1.0 | 1.7 | | Vesuvius | 2.4 | 0.6 | 1.8 | | Computacenter | 2.4 | – | 2.4 | | Renishaw | 2.4 | – | 2.4 | | SigmaRoc | 2.3 | – | 2.3 | | Bellway | 2.1 | – | 2.1 | | Mitchells & Butlers | 2.1 | 0.8 | 1.3 | A brief description of the largest positions (excluding Balfour Beatty, Bellway, Computacenter, Oxford Instruments and Renishaw which were covered earlier) follows: **Paragon Banking** is a speciality lender with a primary focus on providing buy-to-let mortgages to professional landlords. The company enjoys a strong capital position, enabling it to grow dividends whilst simultaneously buying back its own stock. Regulations on complex underwriting and the sophistication of its underwriting capability have allowed Paragon to grow market share from non-bank lenders which have suffered in the rising rate environment. As base rates fall and business and consumer confidence improves, commercial loans and mortgages should become more affordable which should increase lending volumes. Paragon should also benefit from government driven deregulation of the financial services sector which could potentially lower capital requirements, increase the scope for capital returns to shareholders and boost lending volumes. **OSB Group** is a speciality lender with a primary focus on providing buy-to-let mortgages to professional landlords. Regulations on complex underwriting and the sophistication of its underwriting capability have allowed OSB to grow market share. After a difficult period for the company as base rates increased, stoking fiercer competition for flow, which drove both asset and deposit spreads down, net interest margin expectations have now been set at a more realistic level. The shares trade at an attractive discount to tangible book value and in our view, do not reflect the mid-teens return on tangible equity guidance set by management. The company retains a strong capital position allowing it to return significant cash to shareholders through share buybacks and growing dividends. Like Paragon Banking, OSB should similarly benefit from deregulation in the financial services sector. **Vesuvius** is a materials technology company. The company provides steel flow control, foundry technologies, advanced refractories and metal processing products and services to customers around the world. The business has gone through significant rationalisation over recent years removing excess capacity and improving returns on capital and margins. The company has demonstrated robust pricing power during the recent inflationary period, validating its leading market position and high value add of its products. The geographical spread of the business makes it well-positioned to benefit from increased steel production outside of China. A trend which should be boosted by US tariffs and the implementation of quotas on steel imports in Europe. In the meantime, shareholders are being paid to wait as strong cash generation has allowed the company to continue to pay a healthy dividend to shareholders. **SigmaRoc** is a building materials company operating in the UK and Europe. The business has expanded rapidly over the past year following its transformative acquisition of CRH's European lime and limestone operations which made the company a market leader in five European countries (Norway, Sweden, Finland, UK and Ireland) and put it in the number two position in another three countries (Germany, Poland and the Czech Republic). Lime and limestone are used in a broad range of industries including construction, steel, chemical, environmental and agricultural which provides good end-market diversification for the company. At a macro level the company is well placed to benefit from end-market revival following German debt brake reforms. In the meantime, investors should benefit from self-help and continued synergy extraction from recent acquisition and shareholder friendly capital allocation policies. **Mitchells & Butlers** is a national owner and operator of pubs in the UK. Its major brands include All Bar One, Browns, Harvester, Toby Carvery, O'Neill's, Miller & Carter, Nicholson and Ember Inns. The vast majority of its pubs are owned freehold, meaning it has substantial asset value backing. The company has consistently outperformed peers in terms of like-for-like revenue growth on account of its well-invested estate, diversified brand portfolio and consistency of customer service. Whilst cost inflation remains acute, management has reliably managed to mitigate these headwinds through its 'ignite' efficiency programmes. The company is steadily repaying its securitised debt, enabling a transfer of value from debt to equity, a trend which will now be accelerated as its pension deficit is cleared. The shares trade at a substantial discount to recent industry transaction multiples and its NAV. ### Portfolio weightings As at 31 May 2026, the portfolio was weighted by company size as follows: | | Weighting % | | | --- | --- | --- | | | 31 May 2026 | 31 May 2025 | | FTSE 100 | 0.0 | 0.0 | | FTSE 250 | 88.7 | 84.5 | | FTSE Small Cap | 11.2 | 9.8 | | FTSE AIM | 10.1 | 15.9 | | Gearing | (10.0) | (10.2) | The Henderson Smaller Companies Investment Trust plc Annual Report 2026 17 --- Fund Managers' Report continued ## Market outlook Geopolitics remain challenging with ongoing conflicts in the Middle East and Ukraine yet to reach stable resolutions and heightened tensions between China and the US persisting. Sticky inflation which remains above target in both the US and UK is likely to be further exacerbated by the oil and gas supply shock stemming from the US and Israel's war with Iran. Damage to Middle Eastern energy infrastructure and the continued closure of the Strait of Hormuz, through which around 20% of global oil exports pass, have heightened energy price risks. Together, these factors sustain uncertainty over the path of interest rates, leaving central banks with the challenging task of containing second-round inflation effects and elevated inflation expectations amid softening labour markets globally. In our view, the conflict in the Middle East has delayed, rather than derailed, the disinflationary narrative. The current energy price shock is materially less severe than that experienced following the outbreak of war in Ukraine, which drove inflation to ~11%, while wage inflation is also now considerably more benign. Moreover, with policy rates still restrictive across major economies, central banks retain scope to support demand should economic conditions deteriorate. At home, the Prime Minister might have changed but the issues the UK economy faces remain the same and the new Government faces the unenviable challenge of reviving economic growth while walking a fiscal tightrope. Energy policy and welfare reform need to be addressed to reduce the UK gilt yield premia, unlock funds for growth and ultimately attract capital flows back into the UK. Burnham's challenge will be to overcome the internal divisions in the party which have made fiscal policy choices harder and obstructed efforts to place growth at the centre of policy agendas. We see near-term fiscal uncertainty which risks further erosion of business confidence in the short-term. Away from politics, investors continue to grapple with the AI mega theme. We are certain that AI will change the way economies operate, but markets have been quick to punish perceived 'AI losers' and, in some cases, overzealous in rewarding the perceived winners. While we can offer no definitive answers at this stage, we would reassure shareholders that we are re-examining the franchises and business models of our portfolio companies through this new lens. Characteristics once prized by investors, such as recurring revenues, now require fresh scrutiny, as we assess whether AI could automate the underlying processes, weaken pricing power or reshape established revenue models. Corporates and consumers are dealing with elevated uncertainty, which has precipitated a deterioration in sentiment indicators. This has had the effect of increasing savings rates and deterring corporate investment. For now, underlying trading amongst our portfolio companies has proved to be robust and we take comfort in this and the strong balance sheets of both corporates and consumers, noting that they are intrinsically healthier than they were ahead of the Global Financial Crisis in 2008-2009. Markets are forward looking, so we ask ourselves if the backdrop for these two cohorts will get worse from here? We assume the next budget will come with tax rises, but if this comes with a credible growth agenda this could materially improve sentiment. That possibility, in our view, is not currently reflected in consensus. After a lost decade in UK smaller companies, starting with uncertainty about the EU referendum vote, we see good reasons why fortunes could change, and history will show that small caps perform best after periods of economic dislocation. Investors are facing a generationally attractive entry point in UK small-caps where valuations remain attractive and sit well below long-term averages while earnings forecasts are beginning to stabilise after a sharp adjustment in economic activity following the step change in higher interest rates seen in the last three years. Valuations also remain markedly depressed versus other developed markets, even on a sector-adjusted basis. The persistent in-bound M&A activity that the market, and our own portfolio is experiencing suggests that many market players are already taking notice. Despite this, the pervasive outflows of capital from this part of the market is stifling a sustained re-rating of the asset class. A return of investor confidence could create a positive flywheel of stronger performance, renewed interest, greater liquidity and, ultimately, a healthier pipeline of new listings. Political and fiscal stability in the UK could prove an important catalyst. Markets seldom give investors an easy ride, and we have become accustomed to managing shareholders' capital through a polycrisis. We think there is good reason to believe that interest rates will continue to fall, or more importantly why markets might reprice the risk of them going higher from here. But importantly, the portfolio is not counting on it. We have confidence that our long-standing investment process will yield a portfolio which is diversified by design but deliberate in its construction with good exposure to everything from industrial companies benefiting from re-stocking cycles and the significant capex budgets from US hyperscalers to UK domestic cyclicals trading on trough multiples on trough earnings. We think our investment process centred around investing in cash generative growth businesses run by experienced management teams has built a portfolio which is both well-positioned to withstand the current challenging economic conditions and participate in the upswing as it occurs. We remain confident in our ability to create long-term value through a consistent, rigorous investment process that has delivered so powerfully over time. **Indri van Hien and Cassie Herlihy** Fund Managers 29 July 2026 18 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 --- Strategic Report Governance Financial Statements Additional Information AGM Notice # Portfolio snapshot ## Subsector breakdown ### Analysis of total equity investments by subsector at 31 May ![img-20.jpeg](img-20.jpeg) | Equities | Portfolio 2026 % | Portfolio 2025 % | | --- | --- | --- | | ● Electronic and Electrical Equipment | 9.9 | 4.3 | | ● Construction and Materials | 9.8 | 12.3 | | ● Software and Computer Services | 9.4 | 12.4 | | ● Investment Banking and Brokerage Services | 9.3 | 8.5 | | ● Travel and Leisure | 5.7 | 6.4 | | ● Industrial Support Services | 5.5 | 4.9 | | ● Aerospace and Defence | 3.9 | 4.9 | | ● Oil, Gas and Coal | 3.9 | 2.9 | | ● Retailers | 3.8 | 5.0 | | ● Industrial Metals and Mining | 3.6 | 1.7 | | ● Media | 3.3 | 3.2 | | ● Industrial Transportation | 3.2 | 2.1 | | ● Banks | 3.0 | – | | ● Pharmaceuticals and Biotechnology | 2.8 | 1.4 | | ● Finance and Credit Services | 2.7 | 6.1 | | ● Household Goods and Home Construction | 2.5 | 4.3 | | Equities | Portfolio 2026 % | Portfolio 2025 % | | --- | --- | --- | | ● Industrial Engineering | 2.4 | 2.6 | | ● Health Care Providers | 2.4 | 0.4 | | ● Real Estate Investment and Services | 1.9 | 2.6 | | ● Real Estate Investment Trusts | 1.6 | 2.3 | | ● Personal Goods | 1.6 | 1.1 | | ● Leisure Goods | 1.5 | 1.7 | | ● Chemicals | 1.5 | 1.0 | | ● Medical Equipment and Services | 1.0 | 0.9 | | ● Technology, Hardware and Equipment | 0.9 | 0.5 | | ● Telecommunications Service Providers | 0.8 | 3.0 | | ● Food Producers | 0.8 | – | | ● Consumer Services | 0.8 | 0.6 | | ● Life Insurance | 0.5 | 2.4 | | ● Personal Care, Drug and Grocery Stores | – | 0.5 | See page 72 which shows total investments held at fair value in the Balance Sheet. As at 31 May 2026 and 31 May 2025, the Company had no holdings in the following sectors: Closed-ended investments and General Industrials. Sources: Factset, Janus Henderson The Henderson Smaller Companies Investment Trust plc Annual Report 2026 19 --- # Portfolio holdings As at 31 May 2026 | Ranking | | | | Valuation | | | | --- | --- | --- | --- | --- | --- | --- | | 2026 | 2025 | Company | Principal activities | 2026 £'000 | 2025 £'000 | Portfolio % | | 1 | 12 | Oxford Instruments | Advanced instrumentation equipment | 20,896 | 12,598 | 3.40 | | 2 | 2 | Balfour Beatty | International contractor | 20,617 | 23,311 | 3.36 | | 3 | 1 | Paragon Banking | Buy-to-let mortgage provider | 18,583 | 26,077 | 3.02 | | 4 | 7 | OSB Group | Buy-to-let mortgage provider | 16,527 | 16,531 | 2.69 | | 5 | 8 | Vesuvius | Ceramic engineering | 14,889 | 14,230 | 2.42 | | 6 | 24 | Computacenter | IT reseller | 14,882 | 8,806 | 2.42 | | 7 | 46 | Renishaw | Precision measuring & calibration equipment | 14,464 | 6,501 | 2.35 | | 8 | 9 | SigmaRoc^{1} | Aggregates supplier | 14,190 | 13,878 | 2.31 | | 9 | 3 | Bellway | Housebuilder | 13,141 | 22,919 | 2.14 | | 10 | 4 | Mitchells & Butlers | Hospitality operator | 12,701 | 20,264 | 2.07 | | 11 | 11 | Chemring | Defence products & services | 12,682 | 13,649 | 2.06 | | 12 | 6 | Volution | Producer of ventilation products | 12,506 | 16,568 | 2.04 | | 13 | 10 | Serco | Outsourcing services | 12,195 | 13,850 | 1.98 | | 14 | 20 | Rathbones | Private client wealth manager | 12,123 | 9,559 | 1.97 | | 15 | 14 | IntegraFin | Investment platform | 11,748 | 12,036 | 1.91 | | 16 | 42 | Serica Energy^{1} | Oil and gas exploration & production | 11,616 | 7,124 | 1.89 | | 17 | 62 | Hill & Smith | Fabricated metal products | 11,534 | 4,477 | 1.88 | | 18 | 17 | Morgan Sindall | Diversified building contractor | 11,277 | 10,749 | 1.84 | | 19 | 48 | Clarkson | Shipping services | 11,216 | 6,410 | 1.83 | | 20 | 34 | Bodycote | Engineering group | 10,839 | 7,723 | 1.76 | | 21 | 43 | AJ Bell | Investment platform | 10,787 | 6,995 | 1.76 | | 22 | 16 | Softcat | Software reseller | 10,295 | 11,039 | 1.68 | | 23 | 59 | Genus | Animal genetics products & services | 10,014 | 5,196 | 1.63 | | 24 | 65 | XP Power | Electrical power products | 9,976 | 4,244 | 1.62 | | 25 | 56 | Bridgepoint | Private equity fund manager | 9,867 | 5,579 | 1.61 | | 26 | 38 | Watches of Switzerland | Luxury watch retailer | 9,588 | 7,606 | 1.56 | | 27 | 26 | Everplay^{1} | Games software developer | 9,462 | 8,648 | 1.54 | | 28 | 44 | Luceco | Electrical products | 8,970 | 6,873 | 1.46 | | 29 | – | CVS Group | Veterinary practices | 8,775 | – | 1.43 | | 30 | – | Mitie Group | Industrial support services | 8,697 | – | 1.41 | | 31 | 29 | ZIGUP | Commercial vehicle hire | 8,307 | 8,131 | 1.35 | | 32 | 32 | Avon Technologies | Defence products | 8,121 | 7,858 | 1.32 | | 33 | 66 | Trustpilot | Consumer review platform | 7,934 | 4,203 | 1.29 | | 34 | 85 | Oxford Biomedica | Gene & cell therapy | 7,077 | 2,765 | 1.15 | | 35 | 28 | Workspace | Real estate investment & services | 7,012 | 8,340 | 1.14 | | 36 | – | SSP Group | Operator of food & beverage outlets | 6,718 | – | 1.09 | | 37 | – | Rosebank | Industrials holding company | 6,428 | – | 1.05 | | 38 | 31 | Savills | Property transactional consulting services | 5,949 | 7,976 | 0.97 | | 39 | 33 | Hollywood Bowl | 10 pin bowling operator | 5,927 | 7,736 | 0.96 | | 40 | 82 | Spire Healthcare | Private healthcare services | 5,818 | 3,122 | 0.95 | | 41 | 27 | Moonpig | Online card & gift retailer | 5,710 | 8,370 | 0.93 | | 42 | 35 | Harworth | Urban regeneration & property investment | 5,645 | 7,702 | 0.92 | | 43 | 57 | Foresight | Specialist fund manager | 5,540 | 5,330 | 0.90 | | 44 | 75 | Raspberry Pi | Computer board manufacturer | 5,528 | 3,521 | 0.90 | | 45 | – | Elementis | Chemicals | 5,519 | – | 0.90 | | 46 | 83 | Next 15^{1} | PR & media services | 5,482 | 3,072 | 0.89 | | 47 | 64 | Bloomsbury Publishing | Consumer & academic publisher | 5,412 | 4,316 | 0.88 | | 48 | – | Elixir | Consulting services | 5,249 | – | 0.85 | 1 Quoted on the Alternative Investment Market More information on the basis of the valuation can be found in the Notes to the Financial Statements on page 75 20 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 --- Strategic Report Governance Financial Statements Additional Information AGM Notice ## Portfolio holdings continued | Ranking | | | | Valuation | | | | --- | --- | --- | --- | --- | --- | --- | | 2026 | 2025 | Company | Principal activities | 2026 £'000 | 2025 £'000 | Portfolio % | | 49 | 53 | Auction Technology | Online auction software provider | 5,179 | 5,929 | 0.84 | | 50 | 21 | Wickes | DIY retailer | 5,108 | 9,086 | 0.83 | | 51 | 55 | Hunting | Oil equipment & services | 5,018 | 5,761 | 0.82 | | 52 | 80 | 4imprint | Promotional products & services | 5,014 | 3,224 | 0.82 | | 53 | 15 | Gamma Communications | Telecommunications | 4,967 | 11,997 | 0.81 | | 54 | 41 | Currys | Electronics retailer | 4,960 | 7,175 | 0.81 | | 55 | – | Greencore | Food producers | 4,955 | – | 0.81 | | 56 | 73 | Capricorn Energy | Oil and gas exploration & production | 4,818 | 3,833 | 0.78 | | 57 | 69 | RM | Educational software & services | 4,677 | 4,001 | 0.76 | | 58 | 50 | DFS | Furniture retailer | 4,669 | 6,198 | 0.76 | | 59 | – | Saga | Travel & leisure | 4,643 | – | 0.76 | | 60 | 49 | Alfa Financial Software | Leasing software | 4,409 | 6,336 | 0.72 | | 61 | 37 | Baltic Classifieds | Online classifieds platform | 4,319 | 7,653 | 0.70 | | 62 | 58 | XPS Pensions | Pensions consultancy | 4,306 | 5,254 | 0.70 | | 63 | 52 | Wilmington | B2B information provider | 4,245 | 6,135 | 0.69 | | 64 | 76 | Advanced Medical Solutions^{1} | Medical supplies manufacturer | 4,212 | 3,491 | 0.68 | | 65 | – | ActiveOps^{1} | Software & computer services | 3,827 | – | 0.62 | | 66 | 22 | GB Group | Data intelligence services | 3,674 | 8,871 | 0.60 | | 67 | 18 | QinetiQ | Defence services | 3,439 | 9,955 | 0.56 | | 68 | 40 | Victrex | Speciality chemicals | 3,411 | 7,204 | 0.55 | | 69 | – | Chesnara | Life insurance | 3,004 | – | 0.49 | | 70 | 68 | GlobalData | B2B information provider | 2,847 | 4,061 | 0.46 | | 71 | – | Tatton Asset Management^{1} | Fund Management | 2,753 | – | 0.45 | | 72 | 89 | Young & Co's share class NV | Pub operator | 2,710 | 2,548 | 0.44 | | 73 | – | Travis Perkins | Retailers | 2,690 | – | 0.44 | | 74 | 74 | Harbour Energy | Oil and gas exploration & production | 2,623 | 3,738 | 0.43 | | 75 | 78 | Helical | Office property investor & developer | 2,593 | 3,471 | 0.42 | | 76 | 72 | FRP Advisory^{1} | Investment advisory services | 2,462 | 3,838 | 0.40 | | 77 | 81 | SThree | Recruitment company | 2,461 | 3,128 | 0.40 | | 78 | 45 | Crest Nicholson | Housebuilder | 2,432 | 6,824 | 0.40 | | 79 | 84 | Young & Co's share class A | Pub operator | 2,373 | 2,916 | 0.39 | | 80 | 88 | Niox^{1} | Medical supplies manufacturer | 2,195 | 2,564 | 0.36 | | 81 | – | NCC Group | Cybersecurity services | 2,014 | – | 0.33 | | 82 | 70 | Pinewood Technologies | Automotive software & services | 1,587 | 3,942 | 0.26 | | 83 | 63 | Stelrad | Radiator manufacturer | 1,410 | 4,404 | 0.23 | | **Total equity investments** | | | | **614,437** | | **100.00** | There were no convertible or fixed interest securities at 31 May 2026 (2025: None). $^{1}$ Quoted on the Alternative Investment Market More information on the basis of the valuation can be found in the Notes to the Financial Statements on page 75 For details of the movements in the investment portfolio during the year, please refer to Note 10 on page 81 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 21 --- Case studies # Renishaw # Proportion of portfolio 2.4% (as at 31 May 2026) # What does it do? Renishaw is a global engineering technology group which designs and manufactures high-precision measurement, motion control and manufacturing systems used by customers across industries including transport, electronics, healthcare and advanced manufacturing. The business was founded in 1973 by Sir David McMurtry and John Deer, and gained a full listing on the London Stock Exchange in 1984. # Investment case Renishaw is a rare UK engineering champion, supplying highly precise measurement and manufacturing technology that helps customers make complex products more accurately, efficiently and reliably. Its probes, sensors, encoders, calibration systems, spectroscopy instruments and metal 3D-printing technology are used across advanced manufacturing markets including semiconductors, electronics, aerospace, healthcare and industrial automation. We invested because Renishaw combines leading-edge technology, strong intellectual property and attractive long-term growth drivers, including factory automation, smart manufacturing, reshoring and AI-enabled production. Many of its established product lines hold number one or number two market positions, providing strong competitive foundations, while newer areas such as industrial automation, software and additive manufacturing offer further growth potential. The company also benefits from a robust net cash balance sheet, giving it the resilience to keep investing through more challenging economic periods. Renishaw has consistently reinvested heavily in research and development, typically spending a mid-teens percentage of sales, which supports its long-term innovation-led model. We also see meaningful scope for margin improvement, driven by cost actions, operational gearing and growth in higher-value product lines. Historically, Renishaw was a tightly held, founder-led business; following the passing of co-founder Sir David McMurtry and recent changes to the governance structure and management team, we believe there is an opportunity to modernise the operating model, improve manufacturing efficiency and bring Renishaw's technology to previously underserved areas of the market. If executed well, this should support stronger growth, higher returns and improved shareholder outcomes over time. ![img-21.jpeg](img-21.jpeg) 22 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 --- Strategic^{}[] Report Governance Financial^{}[] Statements Additional^{}[] Information AGM Notice # Case studies continued ![img-22.jpeg](img-22.jpeg) ## Hill & Smith ### Proportion of portfolio 1.9% (as at 31 May 2026) #### What does it do? Hill & Smith is an international infrastructure products and services group operating through three core divisions: US Engineered Solutions, Galvanising Services, and UK & India Engineered Solutions. Founded in 1824 and listed on the London Stock Exchange in 1969, the business has evolved through multiple strategic phases to become a geographically diversified industrial group. Today, its operations are primarily concentrated in the United States, the United Kingdom and India. #### Investment case Hill & Smith is an attractive long-term investment and a high-quality compounder. The business consistently generates strong returns on invested capital, enabling reinvestment at high rates to deliver sustained growth. This is supported by exposure to resilient infrastructure markets and a disciplined approach to capital allocation. Acquisitions are central to the strategy, with management demonstrating a strong track record of acquiring niche, complementary businesses at sensible valuations. These deals have enhanced both revenue growth and margins, as seen in the recent purchase of Freeberg Industrial Fabrication at a valuation below the Group's multiple. This ongoing compounding of earnings underpins long-term equity value creation. The Group operates a decentralised structure, with subsidiaries led by local management teams. This combines entrepreneurial agility with the financial strength of a larger organisation and works well in local, service-oriented markets. The US galvanising division illustrates this model effectively, providing protective steel coatings for infrastructure. It is a high-margin, cash-generative business with repeat demand, strong pricing power and responsive local decision-making that supports customer retention. The US now drives the majority of profits, accounting for around 79%, and continues to show strong momentum. Growth is underpinned by structural tailwinds, including investment in data centres, energy, transport and broader infrastructure renewal. Significant government support, such as the Infrastructure Investment and Jobs Act, is directing substantial funding into these markets, providing long-term visibility of demand. Overall, this combination of disciplined capital allocation, decentralised execution and favourable end-markets positions the Group well to sustain attractive long-term compounding. ![img-23.jpeg](img-23.jpeg) The Henderson Smaller Companies Investment Trust plc Annual Report 2026 23 --- # Business model ## Investment objective **Total Return** The Company aims to maximise shareholders' total returns (capital and income) by investing in smaller companies that are quoted in the United Kingdom. ## Purpose The Company's purpose is to provide shareholders with long-term growth through investing in UK smaller companies in a form of investment accessible to investors, both large and small. The Company appoints experienced Fund Managers to achieve this through a disciplined process of investing in a diversified portfolio of quoted companies which benefit from sustainable growth trends. The Company seeks to control costs and may use borrowings with the aim of enhancing long-term shareholder returns. ## Investment policy Smaller companies are defined as any company outside the FTSE 100 Index. Once a portfolio company enters the FTSE 100 Index, the Fund Managers have, in normal circumstances, six months to sell the position. Investments may include shares, securities and related financial instruments, including derivatives. The following investment ranges apply: - Equities: 80% – 100% of total gross assets - Fixed income and cash: 0% – 20% The Company maintains a diversified portfolio and cannot: - Invest more than 5% of its total gross assets in any one holding; or - Hold more than 10% of an investee company's equity, in each case measured at the time of investment (or additional investment). The Board may give approval to the Manager to exceed these limits to as far as 10% and 20% respectively but only in exceptional circumstances. It is the stated investment policy of the Company to invest no more than 15% of its gross assets in other listed investment companies (including listed investment trusts). ## Derivatives The Company may use financial instruments known as derivatives for the purpose of efficient portfolio management. ## Gearing Net gearing (defined as all borrowings less cash balances and investments in cash funds) is limited by the Board to a maximum of 30% of shareholders' funds. ## How the Company creates value The Company operates as a closed-ended investment trust, providing shareholders with access to an actively managed portfolio of UK smaller companies through a listed vehicle. This structure allows shareholders to gain diversified exposure to the asset class through a single investment and enables the Fund Managers to take a long-term view without needing to manage investor inflows or redemptions. 24 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 --- Strategic^{}[] Report Governance Financial^{}[] Statements Additional^{}[] Information AGM Notice ## Business model continued The Company's business model is based on four principal elements: ### Active investment in UK smaller companies The Fund Managers use research-led stock selection to identify high-quality smaller companies with strong growth potential. The Company's benchmark is the Deutsche Numis Smaller Companies Index (excluding investment companies), whose returns the Fund Managers aim to outperform. The Manager is not a passive or indexed investor. The portfolio is constructed selectively and differs meaningfully from the benchmark, reflecting the Fund Managers' assessment of the prospects for individual companies. The portfolio's active share at 31 May 2026 was 66.0% (63.3% at 31 May 2025). ### Diversification and risk control The Company's investment policy and Board-approved investment limits are designed to ensure that the portfolio remains diversified and that investment risk is managed appropriately. The Board monitors compliance with the Company's investment restrictions, including limits on portfolio concentration, investment in other listed investment companies and gearing. ### Closed-ended structure and gearing As an investment trust, the Company's closed-ended nature is central to its business model. It allows the Fund Managers to maintain a long-term investment approach and remain invested during both normal and volatile market conditions. The structure also enables the Company to use gearing where the Board and Manager consider it appropriate, with the aim of enhancing long-term shareholder returns. Full details of the Company's borrowings are on page 84. ### Independent oversight and delegated operations The Company has no employees, premises or operations. The Board delegates investment management, administration, accounting, company secretarial and other functions to specialist service providers, while retaining responsibility for strategy, governance, risk oversight and the monitoring of service provider performance. This enables the Company to operate efficiently. ### Structure and governance Founded in 1887, the Company operates as an investment trust under s1158 of the Corporation Tax Act 2010 and is exempt from corporation tax on capital gains. The Company is a public company limited by shares, governed by its articles of association and accountable to its shareholders. The Company's shares trade on the main market of the London Stock Exchange. The Company is included in the FTSE 250 and is classified within the closed-ended investment funds category. It is subject to applicable FCA requirements, including the UK Listing Rules and the Disclosure Guidance and Transparency Rules ('DTR'), and is a member of the Association of Investment Companies ('AIC'). The Board comprises solely independent non-executive directors. It sets the Company's strategy, monitors performance, oversees risk and challenges the Manager and other service providers on behalf of shareholders. The directors are independent of the Manager and other service providers. ### Management and service providers Janus Henderson Fund Management UK Limited acts as the Company's alternative investment fund manager and delegates investment management services to Janus Henderson Investors UK Limited. References in this report to 'Janus Henderson', 'JHI' or the 'Manager' refer to the services provided to the Company by the Janus Henderson Investors group of companies. The fund management team is responsible for day-to-day investment decisions and implementation of the investment strategy within the parameters set by the Board. The team is led by Indri van Hien, who has been Fund Manager since January 2025, having previously been Deputy Fund Manager since 2016. In November 2025, Cassie Herlihy joined Janus Henderson and was appointed as Deputy Fund Manager. Janus Henderson and its subsidiaries provide accounting, sales, marketing and general administrative services. Some administration and accounting services are carried out, on behalf of the Manager, by BNP Paribas. Janus Henderson Secretarial Services UK Limited acts as corporate secretary. ### Alignment, costs and oversight The Board reviews the management arrangements annually through its Management Engagement Committee. The management agreement can be terminated on six months' notice. The management fee is charged at 0.35% of net assets per annum. A performance fee may also be payable when the Company outperforms its benchmark, subject to the conditions, safeguards and limits set out on page 92. No performance fee is payable for the year ended 31 May 2026. The fund management team receives a proportion of any performance fee paid by the Company to the Manager and a proportion of that amount is deferred into shares in the Company. All members of the fund management team have shareholdings in the Company. The Henderson Smaller Companies Investment Trust plc Annual Report 2026 25 --- ## Business model continued | Category of cost | 2026 £'000 | 2026 % of average net assets^{1} | 2025 £'000 | 2025 % of average net assets^{1} | | --- | --- | --- | --- | --- | | Management fee^{2} | 1,999 | 0.34 | 2,396 | 0.35 | | Performance fee | – | – | – | – | | **Total** | **1,999** | **0.34** | **2,396** | **0.35** | 1 Calculated as a percentage of average monthly net assets, which is the basis on which the management and performance fee cap is calculated 2 The percentage in this table is calculated on the average of the month-end net assets, which is the basis on which the cap is assessed. The actual management fee is calculated and charged quarterly in advance on the net assets at the end of the previous quarter See page 92 in the Glossary for further details regarding calculation of the fee structure. The Board monitors the Company's ongoing charges and the value provided by the Manager and other service providers. The Board believes that the ongoing charge of 0.53% during the year represented good value for money for shareholders. Further details of the fee arrangements and ongoing charges are set out on page 92 and the Chair's Statement on page 9. The FCA published final rules for the new Consumer Composite Investments regime in December 2025. The new regime, which will apply fully from 8 June 2027, will introduce updated requirements for the presentation of costs and charges information for closed-ended funds. The Company will review its cost disclosures in light of the new rules as part of its implementation planning. ## Culture, values and business ethics The Board promotes a culture of openness, constructive challenge, diversity, adaptability and integrity. These principles inform the Board's own operation and its oversight of the Manager and other service providers. The Board seeks to make effective use of the diversity of skills, characteristics and experience of its members. At the financial year end and at the date of this Report, the Board was composed of five directors, three of whom are female and two male. The Company has no executive senior managers and no employees, as all day-to-day operations are externally managed. Further details of the directors' biographies, board composition and diversity disclosures are set out on pages 40, 41 and 53. The Board seeks annual assurances from its key service providers in relation to modern slavery, anti-bribery and corruption, criminal finances and sanctions compliance. Further details about this due diligence exercise are set out in the Audit and Risk Committee Report on page 50. Given the Company's externally managed structure and absence of employees, its direct exposure to employee, social, community and human rights matters is limited; where relevant, these matters are considered through the Board's oversight of service providers and the Manager's stewardship of investee companies. The Board believes that the Company's closed-ended investment trust structure, active management approach, disciplined risk controls and independent oversight support the delivery of long-term shareholder returns from investment in UK smaller companies. 26 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 --- Strategic Report Governance Financial Statements Additional Information AGM Notice ## Principal risks and uncertainties The Board, with the assistance of the Manager, has carried out a robust assessment of the principal and emerging risks facing the Company, including their nature, potential impact, mitigating controls and the reporting received by the Board and its Committees. The Audit and Risk Committee maintains a detailed risk matrix, which is reviewed at each meeting and subject to a more detailed annual review. The Committee uses the risk matrix, heat maps and the results of an exercise by individual directors to review the Company's risk profile and identify any changes in the significance of principal and emerging risks. During the year, the Board continued to review the Company's risk management and internal control framework and began formalising the mapping of existing key controls to the material controls reporting requirements under Provision 34 of the 2024 AIC Code. The enhanced Provision 34 reporting requirements will apply to the Company for the financial year ending 31 May 2027. In assessing the Company's principal and emerging risks, the Board considered heightened geopolitical and macroeconomic uncertainties, including market volatility, the continuing war in Ukraine, conflict and instability in the Middle East, disruption to global trade and supply chains, tariff and protectionism risks, persistent inflationary pressures, changes in interest rates and financing conditions, developments in artificial intelligence, and the outlook for the UK economy. The Board considered the potential impact of these factors on investor sentiment, corporate earnings, valuations, liquidity, the Company's borrowings, discount management and operational resilience. While short-term economic and market uncertainty remain, the Board concluded that the Company's portfolio and the Manager's investment approach remained appropriate in light of the principal and emerging risks identified. In reaching this conclusion, the Board considered the Fund Managers' long-standing investment philosophy, which is based on fundamental, qualitative analysis, engagement with management teams and valuation discipline, and the view that smaller companies can deliver attractive returns over the long term. The principal risks fall broadly under the following categories: | Risk | Key controls and mitigation | Board/Committee monitoring and assurance | Change in perceived risk during the year | | --- | --- | --- | --- | | **Investment activity and strategy** | | | | | Poor investment processes and performance, inappropriate asset allocation, ineffective use of gearing or failure to maintain an investment proposition attractive to shareholders could affect NAV performance, share price performance, the discount to NAV and shareholder demand. | The Board receives reports on investment performance, portfolio construction, gearing, attribution analysis, ESG considerations, discount management and shareholder feedback at each board meeting. The Manager operates within investment limits and restrictions set by the Board, and compliance with investment limits is reported regularly to the Board. The Board reviews the continuing appropriateness of the Company's investment objective, policy and strategy. | At each meeting, the Board reviews investment performance, attribution, portfolio exposure, gearing, investment limits, shareholder analysis, broker feedback and marketing reports. The Board held some ad hoc meetings during the year to discuss macro political and economic events and the potential impact on the Company's performance. | ↑ While short-term investment performance improved during the period under review, the Board increased its rating of this risk during the year, due to continued lack of shareholder demand for UK smaller companies, increased market volatility and geopolitical uncertainties. The Board continues to monitor investment performance and the discount to NAV closely. | | Loss of key fund management personnel or inadequate resourcing could affect investment decision-making, continuity of portfolio management and shareholder confidence. | The Board receives regular reports from the Manager on fund management resourcing, succession planning and team structure. The Management Engagement Committee reviews the Manager's performance and resources annually. | Annual Management Engagement Committee review of the Manager and its succession planning for key roles. Several ad hoc meetings were held during the year to monitor fund manager recruitment and succession planning. | ↓ The Board reduced its rating of this risk during the year, following the successful transition of fund management responsibilities and the recruitment of an additional fund manager, following the retirement of Neil Hermon. | Increase No change Decrease The Henderson Smaller Companies Investment Trust plc Annual Report 2026 27 --- ## Principal risks and uncertainties continued | Risk | Key controls and mitigation | Board/Committee monitoring and assurance | Change in perceived risk during the year | | --- | --- | --- | --- | | **Legal and regulatory** | | | | | Loss of investment trust status, breach of company law, breach of UK Listing Rules, DTR or other applicable regulation could result in tax consequences, regulatory sanction, suspension of listing, reputational damage or additional costs. | The Manager monitors compliance with s1158 of the Corporation Tax Act 2010 and reports to the Board. The Company Secretary and professional advisers support the Board in monitoring compliance with company law, UK Listing Rules, DTR and other applicable legal and regulatory requirements. | Board and Committee reviews of regulatory updates, compliance reporting, s1158 reporting, Company Secretary reporting and professional advice where required. | ↔ The Board's assessment of the rating of this risk remains unchanged on the previous year. | | **Operational** | | | | | Failure of a key service provider, a cyber incident, business continuity failure, control failure or service-level deterioration could affect portfolio administration, financial reporting, dealing, payments, shareholders records, regulatory reporting or the Company's reputation. | The Company has no employees and so delegates its principal operational functions to the Manager and specialist service providers. The Board and its Committees review service provider performance, internal control reports, business continuity arrangements, cyber security reporting and operational updates. | Audit and Risk Committee review of internal control reporting and assurance reports. The Committee also monitors cyber security through internal controls reporting and periodic updates from the Manager. Management Engagement Committee review of service provider performance, contractual arrangements and service levels. | ↔ The Board's assessment of the rating of this risk remains unchanged on the previous year. | | **Financial instruments and the management of risk** | | | | | Market price movements, interest rate changes, liquidity constraints, currency exposure or counterparty failure could affect NAV, revenues, gearing, covenant compliance and the Company's ability to meet liabilities as they fall due. | The Board monitors gearing, liquidity, cash balances, borrowing facilities, covenant compliance and portfolio liquidity. The Company's policies for management of market risk, liquidity risk, credit risk and counterparty risk are set out in note 15 to the financial statements. | Board review of gearing, liquidity, borrowing facilities and covenant compliance. Audit and Risk Committee review of financial reporting and audit findings. | ↔ The Board's assessment of the rating of this risk remains unchanged on the previous year. | Increase No change Decrease ## Emerging risks At each meeting, the Board considers emerging risks, which it defines as potential trends, sudden events or changing risks characterised by a high degree of uncertainty as to their likelihood, timing and potential impact on the Company. Where an emerging risk becomes sufficiently clear or significant, it is incorporated into the Company's risk matrix and considered alongside the principal risks. Emerging risks are identified through reporting from the Manager, the Company Secretary and other service providers, together with regulatory, market and governance updates, professional advice and the directors' own experience and external engagement. The Fund Managers also report on emerging risks which may affect portfolio companies or the wider UK smaller companies market. During the year, the Board considered emerging risks, including geopolitical uncertainty, artificial intelligence, cyber security, regulatory change, service provider resilience and UK economic and political conditions. The Board concluded that these matters were appropriately addressed within the existing principal risks and did not identify any new emerging risk requiring separate disclosure. 28 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 --- Strategic Report Governance Financial Statements Additional Information AGM Notice # Measuring the Company's performance The directors use key performance indicators ('KPIs') to measure the success of the Company in meeting its objective and to evaluate the performance of the Manager. The focus of the Board is on the longer term, but when reviewing the performance of the Manager each year, the Board uses the KPIs set out below. The charts and data on pages 6-7 and 96 give more insight into how the Company has performed against these KPIs. They are also explained in the glossary and alternative performance measures on pages 91-94. ## KPI ### Performance against benchmark See p.6 ## Action The Board compares the Company's NAV total return and share price total return with the Deutsche Numis Smaller Companies Index (excluding investment companies). During the year under review, the Company's NAV underperformed the benchmark by 0.5% on a total return basis and the share price outperformed the benchmark by 0.3% on a total return basis. ### NAV and share price total return against benchmark ![img-24.jpeg](img-24.jpeg) ### Performance against peer group See p.6 The Board reviews the Company's NAV total return and share price total return against the AIC UK Smaller Companies sector average. During the year under review, the Company's NAV outperformed the peer group average by 1.7% on a total return basis and the share price underperformed the peer group average by 0.5% on a total return basis. ### NAV and share price total return against peer group average ![img-25.jpeg](img-25.jpeg) The Henderson Smaller Companies Investment Trust plc Annual Report 2026 29 --- Measuring the Company's performance continued # KPI # Discount/premium to NAV See p.93 # Action The Board monitors the discount or premium to NAV at which the Company's shares trade and reviews this against the AIC UK Smaller Companies sector average. The Board also considers investor relations, marketing activity, shareholder feedback and the use of share buybacks where these are expected to enhance shareholder value. During the year, the Company bought back 12,899,062 shares, representing 18.8% of issued share capital (excluding Treasury shares), enhancing NAV positively by 1.7%. The discount ranged from 11.5% to 7.4%, averaged 9.2% during the year, and closed the year at 8.7%. Discount against AIC sector weighted average ![img-26.jpeg](img-26.jpeg) # Ongoing charge ratio ("OCR") See p.93 The Board monitors the Company's ongoing charge, calculated in accordance with the AIC methodology, as a measure of cost efficiency and compares it with the peer group. During the year under review, the ongoing charge was 0.53% (2025: 0.45%), compared with the peer group's average of 0.99%. See Chair's Statement on page 9. ![img-27.jpeg](img-27.jpeg) Source: Association of Investment Companies 30 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 --- Strategic Report Governance Financial Statements Additional Information AGM Notice ## Section 172 Statement The directors act collectively to promote the success of the Company for the benefit of shareholders as a whole, having regard to the factors in s172(1) of the Companies Act 2006. As an externally managed investment company with no employees, the Company's key stakeholders are its shareholders, potential investors, the Manager, other service providers, investee companies, lenders, regulators and industry bodies. The Board engages with stakeholders directly and through the Manager, the corporate broker and other service providers. The Board considers stakeholder interests when setting strategy, monitoring performance, overseeing risk, reviewing service provider arrangements and making principal decisions. The Board invites shareholders and other stakeholders to contact it directly. Shareholders are welcome to write to the Chair or Senior Independent Director at the registered office (see page 105), or by email to itsecretariat@janushenderson.com with any feedback, queries or concerns. The Board reviews all shareholder correspondence addressed to it. The Board is pleased to invite shareholders to attend the AGM and Fund Managers' presentation for the year ended 31 May 2026. More details are on page 61, and in the AGM Notice on page 98 onwards. ### Stakeholder map The Board has adopted a map to support the directors in identifying and understanding stakeholders and how best to engage and interact with each: ![img-28.jpeg](img-28.jpeg) The Henderson Smaller Companies Investment Trust plc Annual Report 2026 31 --- Section 172 Statement continued ## The Company’s relationships with its stakeholders | Stakeholder | Why they matter | How the Board engaged | Outcome during the year | | --- | --- | --- | --- | | **Shareholders and potential investors** | Shareholders provide the Company’s capital and are the primary beneficiaries of the Board’s duty to promote the success of the Company. Potential investors are important to the liquidity and long-term demand for the Company’s shares. | The Board engaged with shareholders through the AGM, shareholder correspondence, meetings with larger shareholders, the Company’s website, investor presentations, regular reporting and feedback from the Manager, corporate broker and sales team. | The Board considered shareholder feedback, discount management, liquidity in the Company’s shares, marketing activity and the successful outcome of the continuation vote. As a result, the Board continued to make improvements and enhancements to existing processes, as can be seen in the Board decision-making summary on page 33. | | **Manager (Janus Henderson Investors)** | The Manager is responsible for portfolio management and provides or arranges for administrative, operational and governance services for the Company. | The Board engaged with the Manager through regular Board reporting, portfolio reviews, performance attribution, ESG and stewardship reporting, risk and compliance updates and the annual Management Engagement Committee review. | The Board reviewed fund management succession, the appointment of additional portfolio management resource and enhanced performance reporting following a period of underperformance. The Board has also invested in an enhanced marketing programme, described further on page 33. | | **Other service providers** | The Company relies on specialist service providers, including the depository, custodian, registrar, corporate broker, lenders, legal advisers, auditor and administrator. | The Board and its Committees reviewed service quality, fees, internal controls, business continuity, cyber security and contractual arrangements. | The Management Engagement Committee formally reviewed service provider performance and appointments during the year, as set out on pages 55. | | **Investee companies** | The Company’s exposure to investee companies is managed by the Fund Managers in accordance with the investment objective and policy. | The Board reviewed portfolio composition, stock selection, engagement activity and voting reports. The Manager engaged with investee companies on strategy, performance, governance and ESG matters. | The Board monitored how engagement with investee companies informed the Manager’s investment decisions, stewardship activity and voting decisions during the year. See the ESG Report on pages 34–37 for more details. | | **Regulators and industry bodies** | Legal, regulatory and governance developments affect the Company’s reporting obligations, governance framework and wider operating environment as a listed investment company. | The Board monitored developments through reporting from the Company Secretary, the Manager, advisers and industry bodies. | The Board considered developments relevant to investment companies, corporate governance, regulatory reporting and the wider investment trust sector. The Board submitted responses to the FCA on industry initiatives during the year. | 32 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 --- Strategic^{}[] Report Governance Financial^{}[] Statements Additional^{}[] Information AGM Notice ## Board decision making In addition to routine matters, including approval of the half-year results, annual results, dividends, the AGM and regular portfolio and performance reviews, the Board made the following principal decisions during the year. | Principal decision | Factors considered | Outcome | | --- | --- | --- | | **Fund management succession** | The Board considered continuity of portfolio management, the Manager's resourcing, succession planning, shareholder confidence and the long-term interests of the Company. | The Board approved the appointment of Cassie Herlihy as Deputy Fund Manager and monitored the orderly transition following Neil Hermon's retirement. | | **Investment performance and reporting** | The Board considered the period of underperformance, the need for clearer attribution analysis and the importance of greater transparency over the fund management team's investment process, team structure, decision-making and review of disappointing stock outcomes. | The Board received enhanced reporting from the fund management team, including more detailed attribution analysis, individual stock reviews and clearer explanations about how the team makes investment decisions, monitors portfolio holdings and reviews any stocks which are underperforming. | | **Borrowing arrangements** | The Board considered the Company's investment strategy, expected use of gearing, covenant requirements, cost, flexibility and lender terms. | The Board renewed the £70 million revolving credit facility with BNP Paribas, London Branch, following a review of indicative terms from potential lenders. | | **Capital structure** | The Board considered the balance sheet structure, shareholder interests, administrative simplicity and the Company's Articles of Association. | The Board bought back and cancelled the remaining preference stock. | | **Discount management and shareholder engagement** | The Board considered the discount to NAV, liquidity in the Company's shares, shareholder feedback and the authority granted by shareholders. | The Board continued the share buyback programme, including convening two additional general meetings during the year to obtain shareholder approval for this purpose, and reviewed marketing, investor relations and broker feedback. | | **Enhanced retail marketing programme** | The Board worked with the Manager on an enhanced 2026 marketing and media plan focused on retail investor engagement, considering proposed activity levels, third-party research support, expected benefits, budget oversight, KPIs and channel mix. | The Board approved the enhanced programme, subject to oversight of costs, KPIs and channel effectiveness. It considered that the programme would support the Company's long-term interests by improving market awareness, broadening retail investor engagement and supporting demand for the Company's shares. | | **Governance framework** | The Board considered the 2024 AIC Corporate Governance Code, the forthcoming material controls reporting requirements and the need to keep Board and Committee documentation current. | The Board updated elements of its governance framework and continued preparatory work for the enhanced Provision 34 reporting requirements. In addition, the Board reviewed the Articles of Association and is proposing some updates to be approved by shareholders at the forthcoming AGM (see the Explanation of AGM resolutions on pages 101-102 for more details). | The Henderson Smaller Companies Investment Trust plc Annual Report 2026 33 --- # ESG Report The Board believes that engaged, long-term ownership can be a force for positive change. It therefore supports the Fund Managers' responsible approach to environmental, social and governance ("ESG") matters, including the integration of ESG considerations into investment decisions by the fund management team (the "Team"), company engagement and voting at investee company shareholder meetings. As one of the largest investors in listed UK small and mid-cap companies, the Fund Managers recognise the meaningful influence they can have on the conduct of portfolio companies and their responsibility to exercise that influence. ## Defining ESG ### Environment Environmental factors include climate change, energy efficiency, resource depletion, water and waste management. ### Social Social factors include employee and community relations, diversity, quality of life, enhancements in knowledge and advances in supportive technology for improved sustainability. ### Governance Governance factors include mitigating risks such as bribery and corruption, questioning board diversity, executive pay, accounting standards and shareholder rights, and positively influencing corporate behaviour. ## Investment approach and ESG engagement The Team uses a combination of bottom-up and top-down analysis to find companies with undervalued long-term growth potential. ESG issues are identified as part of the Team's established '4Ms' process, which assesses portfolio companies' models, management, money and momentum. A key part of the Team's philosophy is the sustainability of business models. The Team believes that, over time, the most successful management teams are likely to be those with strong ESG and sustainability characteristics, a long-term focus, a good record of shareholder alignment and a clear understanding of relevant industry themes. This conviction and long-term focus are reflected in the Company's average holding period of over five years. Sustainability themes regularly inform capital allocation decisions. Companies providing goods and services which address issues such as the transition to net zero, ageing populations, urbanisation and the savings gap have been attractive from a growth perspective. The Team is also mindful of the risks associated with ESG-themed investing, including policy instability, uncertainty around customer adoption and technological obsolescence. The Team believes that ESG factors affect all parts of an investment case, often implicitly rather than explicitly. The effectiveness of a company's governance structure and its impact on the environment and society are as important as more traditional indicators of quality, such as cash flow and returns on invested capital. A company's ESG characteristics also influence how it is valued. These factors affect the valuation multiples that the market is willing to apply to a company's earnings, or the cost of capital used to discount its cash flows. The Fund Managers believe that companies with strong ESG and sustainability characteristics may warrant a valuation premium over time. ## Engagement with portfolio companies The Team's combined experience in the UK market has created a deep knowledge base. Its analysis is supplemented by increasingly sophisticated ESG-related data, broker research and company meetings. The Team recognises that individual ESG data points are not always material to company performance or directly comparable between peers. However, management's overall attention to material ESG and sustainability issues can be a useful indicator of quality, long-term-oriented leadership and the ability to deliver enduring success. The general level of governance at UK listed companies is high by reference to best practice principles. The Team uses this market feature to support its corporate governance and company research. As active managers in the UK market, the Team is committed to good stewardship and attends approximately 300 company meetings each year. These meetings are used to challenge strategy and hold management to account where issues have arisen. In addition to engaging with company management, the Team will often engage with the boards of portfolio companies where it believes concerns should be escalated. If the Team does not consider that shareholder concerns are being addressed through engagement, it will consider disinvesting. The Team works closely with JHI's in-house Responsible Investment and Governance ("RI") team, which provides specialist ESG resource. The RI team screens portfolios for major ESG issues and highlights important ESG engagement topics ahead of company meetings. The RI team and Fund Managers also coordinate a pipeline of proactive engagement with companies on a range of ESG themes. In the year to 31 May 2026, they undertook direct ESG engagements with 27 companies. - **environmental** issues at 4 of the meetings; - **social** issues at 8 of the meetings; and - **governance** issues at 25 of the meetings. 34 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 --- Strategic^{}[] Report Governance Financial^{}[] Statements Additional^{}[] Information AGM Notice # Management Engagement Committee Report The Chair of the Management Engagement Committee (the 'Committee'), Penny Freer, reports to shareholders on the Committee's activities to 31 May 2026. ## Membership All directors are members of the Committee. The Committee is chaired by the Chair of the Board, who was independent of the Manager on appointment. ## Meetings The Committee met formally once during the year. The directors also met privately, without representatives of the Manager present, before agreeing their recommendations to the Board. ## Role and responsibilities The Committee reviews the performance of the Manager and the terms of the management agreement at least annually, and considers whether the Manager's continued appointment remains in the interests of shareholders as a whole. The review covers investment performance, portfolio risk, use of gearing, the quality and stability of the teams supporting the Company, the Manager's culture and governance arrangements, shareholder engagement, sales and marketing support, company secretarial and financial reporting services, and the competitiveness of the fee arrangements. The Committee also reviews the performance and terms of appointment of the Company's principal third-party service providers, including the depository and custodian, fund administrator and accountant, registrar and corporate broker. The Committee reports to the Board and operates under formal terms of reference. During the year, the Committee reviewed revised terms of reference and recommended them to the Board for approval. The changes updated and clarified the Committee's responsibilities, including its role in reviewing the Manager, overseeing key service providers, considering stewardship matters and reporting its recommendations to the Board. ## Committee effectiveness The Committee's effectiveness was considered as part of the externally facilitated Board performance review (see page 52 for more details). The review concluded that the Committee continued to operate effectively. ## Activities during the year The Committee completed its annual review of the Manager and the Company's principal service providers. The Manager review was informed by the externally facilitated review undertaken by Lintstock, supporting analysis provided to directors and discussions with the Manager. The Committee considered the Company's investment performance against the benchmark and peer group, the investment process, attribution, portfolio risk, gearing, shareholder perception, sales and marketing activity, stewardship and responsible investment approach, the resources supporting the Company and the management and performance fee arrangements. The Committee recognised that the Company's medium-term investment performance remained below the benchmark over a number of periods. It also noted the recent improvement in performance, the refinements made to the investment process and portfolio construction, and the work undertaken to strengthen the fund management team following the portfolio manager transition. The Committee agreed that maintaining the recovery in performance, embedding the enhanced fund management team and continuing to improve shareholder communication should remain priorities. The Committee also considered the wider support provided by the Manager during the year, including shareholder engagement, marketing activity, preparation for the continuation vote, communications strategy planning, capital structure work and governance updates for the 2024 AIC Code. The Committee reviewed the performance of the Company's principal service providers and concluded that service levels were satisfactory overall. The Committee identified certain areas for continued minor monitoring and improvement. ## Continued appointment of the Manager and other service providers Following its annual review, the Committee concluded that the Manager continued to provide the investment capability, resources, operational support and shareholder engagement required by the Company. The Committee recommended to the Board that the continued appointment of Janus Henderson Fund Management UK Limited as Manager, on the existing terms, remained in the best interests of shareholders as a whole. After careful consideration, the Committee also recommended the continued appointment of the Company's other principal service providers on the existing terms. The Board approved these recommendations. ### Penny Freer Chair of the Management Engagement Committee 29 July 2026 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 55 --- # Directors' Remuneration Report ## Report on implementation This Directors' Remuneration Report has been prepared in accordance with the Companies Act 2006 and Schedule 8 of The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended), including the changes introduced by The Companies (Directors' Remuneration and Audit) (Amendment) Regulations 2025. It also meets the relevant requirements of the UK Listing Rules and DTR 7:2.0R. The Report comprises two sections: (1) the Directors' Remuneration Policy, which will be subject to a binding shareholder vote at the 2026 AGM; and (2) the Annual Report on Remuneration, which will be subject to an advisory shareholder vote at the 2026 AGM. The Company is an externally managed investment trust with no executive directors, chief executive officer or employees. All directors are non-executive and receive fixed fees, with reimbursement of reasonable expenses where applicable. Accordingly, disclosures relating to executive and employee remuneration, variable pay, pensions, share options and long-term incentives are not applicable and have not been included. Taxable expenses paid to directors during the year are shown in the audited remuneration table on page 57. The Company's auditor is required to report on certain information contained in this report. Where information has been audited, this is indicated where appropriate. ## Annual statement from the Chair This statement summarises the principal decisions on directors' remuneration during the year, the context for those decisions and the proposed implementation of the Directors' Remuneration Policy for the year ending 31 May 2027. As the Company is externally managed and all directors are non-executive, the Board has not established a separate remuneration committee. During the year, the Nomination Committee reviewed directors' fees by reference to comparable investment companies, relevant peer group data, inflation and the responsibilities and time commitment expected of directors of listed investment companies. The Committee also considered the Board's workload, including the oversight required in relation to investment performance, shareholder engagement, the continuation vote, succession planning and wider developments affecting the investment trust sector. Following that review, the Board agreed the revised fee levels set out below with effect from 1 June 2026. The Board also introduced an additional fee of £2,500 for the Senior Independent Director with effect from 1 June 2025. This reflected the additional responsibilities and time commitment of that role. Shareholders will be asked at the 2026 Annual General Meeting to approve an increase in the aggregate annual limit on ordinary directors' fees contained in the Company's Articles of Association to £300,000 per annum, from the current limit of £250,000 per annum, agreed by shareholders in 2020. The proposed increase is intended to provide appropriate headroom for future fee reviews, Board succession and any temporary overlap in appointments as part of orderly Board refreshment. It does not indicate any immediate intention to increase directors' fees beyond the levels disclosed in this report. There were no other changes to the structure of directors' remuneration during the year, and no discretion was exercised in relation to directors' remuneration. As required every three years, the Directors' Remuneration Policy (last approved at the 2023 AGM) will be put to a binding vote at the 2026 AGM. | Role | From 1 June 2026 £ | At 31 May 2026 £ | At 31 May 2025 £ | | --- | --- | --- | --- | | Chair of the Board | 49,000 | **46,700** | 44,500 | | Chair of the Audit and Risk Committee | 39,500 | **37,775** | 36,000 | | Senior Independent Director | 36,000 | **34,500** | n/a | | Non-Executive Director | 33,500 | **32,000** | 30,500 | ## Directors' Remuneration Policy Shareholders last approved the Remuneration Policy at the 2023 Annual General Meeting, being a triennial vote. An ordinary resolution to approve the Policy will be proposed at the 2026 Annual General Meeting. The Board may amend the level of remuneration paid to individual directors within the parameters of the Remuneration Policy. In determining the Remuneration Policy, the Board takes into account all factors which it deems necessary, including relevant legal and regulatory requirements and the provisions and recommendations of the AIC Code of Corporate Governance. The objective of the Remuneration Policy is to attract, retain and motivate non-executive directors of the quality required to govern the Company successfully without paying more than is necessary, having regard to views of shareholders and other stakeholders. The Board obtains up-to-date information about remuneration in other companies of comparable scale and complexity to avoid and manage conflicts of interest in determining remuneration levels. The directors review the appropriateness and relevance of the Remuneration Policy at least annually, with a focus on supporting the Company's long-term sustainable success. Individual directors do not participate in discussions relating to their own remuneration. Directors are remunerated in the form of fees, payable quarterly in arrears. The Company's Articles of Association limit the fees payable to the directors in aggregate to £250,000 per annum. Shareholders will be asked at the 2026 Annual General Meeting to approve an increase in this limit to £300,000 per annum. Subject to the 56 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 --- Strategic Report Governance Financial Statements Additional Information AGM Notice ## Directors' Remuneration Report continued overall limit, the Company's policy is that the fees payable to the directors should reflect the time spent by the Board on the Company's affairs and the responsibilities borne by the directors, and should be sufficient to promote the long-term success of the Company. The policy is to review fee rates annually, although this will not necessarily result in any change to the rates. Directors are authorised to claim reasonable expenses from the Company in relation to the performance of their duties. No director has a service contract with the Company. Directors' appointments may be terminated at any time in writing with no compensation payable. There are no set notice periods and no fixed duration. No director is eligible to receive bonuses, pension benefits, share options or other benefits and no long-term incentive schemes are in place. ## Directors' remuneration (audited) The remuneration paid to the directors who served during the years ended 31 May 2026 and 31 May 2025 were as follows: | Director | 2026 Total fees £ | 2026 taxable benefits £ | 2026 Total fees and benefits £ | 2025 Total fees and benefits £ | | --- | --- | --- | --- | --- | | Penny Freer^{1} | 46,700 | 176 | 46,876 | 44,500 | | Alexandra Mackesy^{2} | 37,775 | – | 37,775 | 36,000 | | Kevin Carter^{3} | 34,500 | – | 34,500 | 30,500 | | Michael Warren | 32,000 | 163 | 32,163 | 30,500 | | Yen Mei Lim | 32,000 | – | 32,000 | 30,500 | | Victoria Sant^{4} | 11,276 | – | 11,276 | 30,500 | | **Total** | **194,251** | **339** | **194,590** | **202,500** | Notes: The table above omits other columns set out in the relevant regulations because no payments of other types were made, such as performance-related pay, vesting performance-related pay and pension-related benefits 1 Chair of the Board and highest paid director in the year to 31 May 2026 2 Chair of the Audit and Risk Committee 3 Senior Independent Director 4 Retired on 7 October 2025 Expenses were incurred on accommodation to attend the Board dinner and meeting on 12 November 2025. The expenses were reimbursed through payroll and subject to personal taxation and national insurance ## Directors' interests in shares (audited) The interests of the directors in the ordinary shares of the Company at the beginning and end of the financial year are shown in the table below. | | Ordinary shares of 25p | | | --- | --- | --- | | | 31 May 2026 | 1 June 2025 | | Penny Freer | 4,400 | 4,400 | | Alexandra Mackesy | 8,200 | 2,200 | | Kevin Carter | 15,000 | 15,000 | | Michael Warren | 8,000 | 8,000 | | Yen Mei Lim | 2,000 | 2,000 | | Victoria Sant* | n/a | 1,670 | *Retired on 7 October 2025 There were no changes to the directors' interests in the period from 1 June 2026 to the date of this report. There is no share qualification requirement under the Articles of Association. However, the Board expects each director to hold shares in the Company and to retain them while they remain on the Board. ## Recruitment principles All directors, including those newly appointed, are paid at the same rate, apart from the Chair of the Board, Chair of the Audit and Risk Committee and Senior Independent Director who are paid a higher fee in recognition of their additional responsibilities. ## Views of shareholders Any views expressed by shareholders on the fees paid to directors would be taken into consideration by the Board, when reviewing levels of remuneration. ## Spend on pay As the Company has no employees, no employee pay comparison has been included. Total fees paid to directors are shown in the 'Directors' remuneration' table above. Distributions to shareholders are set out in note 9 on page 80; in the year to 31 May 2026, total dividends paid amounted to £17.4m. The amount returned to shareholders via share buybacks is set out in notes 16 and 17 on page 87. The Henderson Smaller Companies Investment Trust plc Annual Report 2026 57 --- ## Directors' Remuneration Report continued ### Performance The graph below compares the Company's share price total return over the ten-year period ended 31 May 2026 with the benchmark return over the same period. #### Total performance return for 10 years to 31 May 2026 ![img-29.jpeg](img-29.jpeg) The Board considers this comparison relevant because the Company's investment objective is to maximise shareholders' total returns, both capital and income, through investment in smaller companies which are quoted in the United Kingdom. ### Statement of voting at AGM Shareholders will be asked to approve this Directors' Remuneration Report at the 2026 AGM. At the 2025 AGM, approximately 98.5% of votes were cast in favour of the Directors' Remuneration Report. Shareholders will also be asked to approve the Directors' Remuneration Policy at the 2026 AGM. This was last voted on at the 2023 AGM, when approximately 99.5% of votes were cast in favour of the Policy. The following poll votes were received: | Resolution | For (including discretionary) | % votes | Against | % votes | Withheld | | --- | --- | --- | --- | --- | --- | | Directors' Remuneration Policy, approved at the 2023 AGM | 23,215,998 | 99.5 | 106,236 | 0.5 | 79,823 | | Directors' Remuneration Report for the year ended 31 May 2025, approved at the 2025 AGM | 23,848,090 | 98.5 | 371,460 | 1.5 | 59,147 | Votes withheld are not votes in law and are not counted in the calculation of votes for or against a resolution. On behalf of the Board **Penny Freer** Chair of the Board 29 July 2026 58 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 --- Strategic^{}[] Report Governance Financial^{}[] Statements Additional^{}[] Information AGM Notice ## Directors' Report The directors present the Annual Report and Accounts of the Company for the year ended 31 May 2026. The Company (registered and domiciled in England & Wales with registration number 00025526) was active throughout the year under review and was not dormant. Throughout the year, the Company's principal activity was as a closed-ended investment trust, focusing on investment in smaller UK-listed companies with the aim of delivering long-term shareholder returns. The Investment Portfolio on pages 20–21, Corporate Governance Report on pages 43–48, Audit and Risk Committee Report, Nomination Committee Report and Management Engagement Committee Report on pages 49–55, Statement of Directors' Responsibilities on page 62, explanations of AGM resolutions on pages 100–102 and the glossary, alternative performance measures and general shareholder on pages 91–95 and corporate information on page 105, all form part of the Directors' Report. ### Directors The directors of the Company who held office during the year and up to the date of this Report are set out on pages 40–41, together with their biographies, contributions to the Board and their appointments. Page 47 describes the directors' insurance and indemnification arrangements. The directors' interests in the Company's shares are shown on page 57. In line with the AIC Code and UK corporate governance best practice, all directors will retire at the forthcoming AGM and offer themselves for annual re-election. ### Share capital The Company's share capital comprises: #### Ordinary shares of 25p nominal value each ('shares') Each share carries one vote on a poll. During the year ended 31 May 2026, the Company purchased 12,899,062 shares, representing 18.8% of the issued share capital (excluding shares held in Treasury) at the end of the year, for cancellation or to be held in Treasury. The aggregate consideration paid, excluding expenses, was £111,395,000 and the nominal value of the shares purchased was £3,225,000. At 31 May 2026, the Company held 18,796,219 shares in Treasury. The total number of shares in issue, excluding Treasury shares, was 55,588,912, representing the Company's total voting rights at that date. Since 31 May 2026 and up to 27 July 2026, being the latest practicable date prior to publication of this Report, the Company bought back 1,078,549 additional ordinary shares at a total cost of £9,768,000 (including expenses and excluding stamp duty). No shares were allotted during the year or to the date of this Report. As at 27 July 2026, the total number of ordinary shares in issue was 74,385,131, with 19,874,768 held in Treasury, giving total voting rights of 54,510,363. There are no restrictions on the transfer of the Company's shares or voting rights, no shares which carry specific rights with regard to the control of the Company and no agreement to which the Company is party that would affect its control following a takeover bid. To the extent that they exist, the revenue profits of the Company (including accumulated revenue and capital reserves) are available for distribution by way of dividends to the holders of the shares. Upon a winding-up, after meeting the liabilities of the Company, the surplus assets would be distributed to the shareholders pro rata to their shareholdings. #### Preference stock units of £1 each ('preference shares') At 31 May 2025, the number of preference shares in issue was 4,257, representing approximately 0.02% of the Company's aggregate nominal share capital and approximately £4,000 in aggregate nominal value. As at 31 May 2026, there were no preference shares in issue. In 1999, the Company bought back and cancelled the majority of its preference shares. A small number remained in issue where the relevant shareholders could not be contacted. During the year, the Company completed the acquisition and cancellation of those remaining preference shares in accordance with the provisions of its Articles of Association relating to untraced shareholders. The cancellation of the remaining preference shares, their removal from the Official List and the cancellation of their admission to trading on the London Stock Exchange's Main Market, took effect on 27 May 2026. #### Shareholder authorities The Company renewed its share buyback authority at a general meeting held on 1 July 2025, as only 5.6% of issued share capital remained within the 2024 AGM share buyback authority. At the annual general meeting ('AGM') held on 7 October 2025, the directors were granted authority to buy back up to 9,389,123 shares (being 14.99% of issued ordinary share capital (excluding shares held in Treasury) on that date). The Company further renewed its share buyback authority at a general meeting held on 4 March 2026, as only 6.9% of issued share capital remained within the 2025 AGM share buyback authority. At this general meeting, the directors were granted authority to buy back up to 8,626,814 shares (being 14.99% of issued ordinary share capital (excluding shares held in Treasury) at 3 March 2026). As at 27 July 2026, there remain 5,586,709 shares available within the buyback authority granted at the 4 March 2026 general meeting. This authority will expire at the conclusion of the 2026 AGM. The directors intend to renew this authority, subject to shareholder approval. Shareholder approval to renew the Company's share buyback authority will be sought at the 2026 AGM, as explained in the Notice of AGM on pages 99. Shares are not bought back unless the result is an increase in net asset value per share. The Henderson Smaller Companies Investment Trust plc Annual Report 2026 59 --- ## Directors' Report continued ### Holdings in the Company's shares Declarations of interests in the voting rights of the Company as at 31 May 2026 in accordance with the FCA's Disclosure Guidance and Transparency Rules were as follows: | Shareholder | % voting rights | | --- | --- | | Saba Capital | 12.0 | | Evelyn Partners | 5.8 | | West Yorkshire Pension Fund | 4.7 | The Company was notified on 24 June 2026, that Saba Capital had a 13.1% interest in the Company. No other changes have been notified in the period 1 June 2026 to 27 July 2026. Additionally, holdings of the Company's shares on execution-only stockbroking platforms at 31 May 2026 were as follows: | Platform nominee | % voting rights | | --- | --- | | Interactive Investor | 12.9 | | Hargreaves Lansdown | 9.3 | | HSDL | 4.2 | | AJ Bell | 3.0 | | Barclays Smart Investor | 2.0 | ### Disclosure of information to the auditor Each director who is a member of the Board at the date of approval of this Report confirms that, to the best of his or her knowledge and belief, there is no information relevant to the preparation of the Annual Report of which the Company's auditor is unaware, and he or she has taken all the steps a director might reasonably be expected to have taken to be aware of relevant audit information and to establish that the Company's auditor is aware of that information. ### Related-party transactions The Company's transactions with related parties in the year were with the directors and the Manager. There were no material transactions between the Company and its directors, and the only amounts paid relate to fees paid for their remuneration. Remuneration is paid quarterly in arrears and amounts for April and May 2026 were therefore accrued as at the year end. There were no other outstanding amounts payable at the year end. Directors' shareholdings are listed on page 57. In respect of the Manager's services provision during the year, other than fees payable by the Company in the ordinary course of business and the facilitation of marketing activities with third parties, there were no material transactions with the Manager affecting the financial position of the Company. More details on transactions with the Manager, including amounts outstanding at the year end, are on page 88. ### Independent auditor The auditor Forvis Mazars LLP has indicated willingness to continue in office. Resolutions 11 and 12 are being submitted to the 2026 AGM to propose Forvis Mazars LLP's reappointment and authorise the Audit and Risk Committee to determine their remuneration for the coming year. ### Financial instruments The Company's financial risk management objectives and policies, including its exposure to market price, liquidity and credit risks, and the use of financial instruments, are set out in the Investment Policy on page 24 and in note 15 to the financial statements. ### Future developments The future success of the Company will depend primarily on the performance of its investment portfolio, which will, to a significant degree, reflect the performance of the stock market and the skill of the Manager. While the Company invests in companies that are listed (or quoted) in the United Kingdom, the underlying businesses of those companies are affected by external factors, many of an international nature. The Board intends to continue to pursue the Company's investment objective and strategy as described on page 24. The Chair's Statement and the Fund Managers' Report from pages 8-18 give commentary on the outlook for the Company. As discussed on page 9, the Board recommends a final dividend of 21.5 pence per ordinary share for the year ended 31 May 2026 for approval at the AGM. ### Other information The applicable UK Listing Rule disclosures, including the additional annual financial report requirements for closed-ended investment funds, are included in this Annual Report. The statement explaining how the Company has invested its assets with a view to spreading investment risk is set out on page 25; the Board's statement on the continuing appointment of the Manager is set out in the Management Engagement Committee Report on page 55; details of the investment management arrangements are set out on page 25; the full investment policy is set out on page 24; and the portfolio analysis is set out on pages 20-21. The directors confirm that there are no additional disclosures required under UKLR 6.6.4R. Further detail on stakeholder engagement and s172 considerations is set out on pages 31-32. The Company has no branches. It made no political or charitable donations and incurred no political expenditure during the year (2025: nil). The Company's environmental statements, and the Manager's approach to stewardship, including voting and engagement on environmental, social and governance matters, are described on pages 34-37. The Company has no employees and, accordingly, statutory disclosures on employee engagement and policies for disabled employees are not applicable. 60 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 --- Strategic^{}[] Report Governance Financial^{}[] Statements Additional^{}[] Information AGM Notice ## Directors' Report continued ### Annual general meeting ('AGM') The Board is pleased to invite shareholders to attend the AGM in person at 11.30 am on Tuesday, 6 October 2026 at the Company's registered office. The Board encourages shareholders to attend for the opportunity to meet the directors, the Fund Manager, Indri van Hien, and the other members of the UK Smaller Companies team, including Cassie Herlihy. Ms van Hien will give a presentation about the year under review and her outlook for the year ahead. Shareholders are invited to consider the resolutions set out in the Notice of AGM on pages 98-104, which includes an explanation of each resolution. In addition to the routine business of the AGM, shareholders will be asked to approve the adoption of updated Articles of Association, the Directors' Remuneration Policy, which is due for triennial approval, and an increase to the aggregate annual cap on directors' fees. Shareholders may attend the AGM in person or view the meeting through the online platform. Shareholders joining electronically will be able to watch the meeting and submit questions, but electronic participation will not constitute formal attendance for quorum or voting purposes and shareholders will not be able to vote live through the platform. Shareholders who do not intend to attend in person are therefore encouraged to submit proxy votes in advance of the meeting. Details of how to attend, appoint a proxy and vote are set out in the Notice of AGM. A video in which the Fund Manager discusses the Company's results and performance during the year will be available from 30 July 2026 at www.hendersonsmallercompanies.com. Shareholders who have questions for the Board or the Fund Manager in advance of the AGM are invited to contact the Secretary at itsecretariat@janushenderson.com. ### Voting recommendation The Board considers that the resolutions to be proposed at the AGM are in the best interests of shareholders as a whole. The Board therefore recommends that shareholders vote in favour of each resolution, as the directors intend to do in respect of their own beneficial holdings. This Directors' Report was approved by the Board on 29 July 2026 and signed on its behalf by: By order of the Board **Janus Henderson Secretarial Services UK Limited** Corporate Secretary 29 July 2026 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 61 --- # Statement of Directors' Responsibilities The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. The directors have prepared the Company's financial statements in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006. Under company law, the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that year. In preparing these financial statements, the directors are required to: - select suitable accounting policies and then apply them consistently; - make judgements and accounting estimates that are reasonable and prudent; - state whether applicable International Accounting Standards in conformity with the requirements of the Companies Act 2006 have been followed, subject to any material departures disclosed and explained in the financial statements; - prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business; and - prepare a directors' report, a strategic report and a directors' remuneration report which comply with the requirements of the Companies Act 2006. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006. 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. The directors consider that the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy. ## Statement under DTR 4.1.12 Each director, who is listed on pages 40-41, confirms that, to the best of his or her knowledge: - the financial statements, which have been prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 on a going concern basis, give a true and fair view of the assets, liabilities, financial position and profit/loss of the Company; and - the Strategic Report and financial statements include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces. On behalf of the Board **Penny Freer** Chair of the Board 29 July 2026 62 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 --- ![img-30.jpeg](img-30.jpeg) # Financial Statements ## In this section - 64 Independent Auditors' Report to the members - 70 Statement of Comprehensive Income - 71 Statement of Changes in Equity - 72 Balance Sheet - 73 Statement of Cash Flows - 74 Notes to the Financial Statements Photo: Balfour Beatty The Henderson Smaller Companies Investment Trust plc Annual Report 2020 63 --- # Independent auditor's report to the members of The Henderson Smaller Companies Investment Trust plc ## Opinion We have audited the financial statements of The Henderson Smaller Companies Investment Trust plc (the "Company") for the year ended 31 May 2026 which comprise the Statement of Comprehensive Income, Statement of Changes in Equity, Balance Sheet, Statement of Cash Flows and notes to the financial statements on pages 70-89, including material accounting policy information. The financial reporting framework that has been applied in their preparation is applicable law and UK-adopted international accounting standards. In our opinion, the financial statements: - give a true and fair view of the state of the Company's affairs as at 31 May 2026 and of the Company's profit for the year then ended; - have been properly prepared in accordance with UK-adopted international accounting standards; and - have been prepared in accordance with the requirements of the Companies Act 2006. ## Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK))) and applicable law. Our responsibilities under those standards are further described in the "Auditor's responsibilities for the audit of the financial statements" section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities and public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. ## Conclusions relating to going concern In auditing the financial statements, we have concluded that the Directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our audit procedures to evaluate the directors' assessment of the Company's ability to continue to adopt the going concern basis of accounting included but were not limited to: - undertaking an initial assessment at the planning stage of the audit to identify events or conditions that may cast significant doubt on the Company's ability to continue as a going concern; - making enquiries of the Directors to understand the period of assessment that they considered, being at least 12 months from the date of approval of the annual report and financial statements, assessing and challenging the appropriateness of the Directors' key assumptions in their income and expense projections and implication of those when assessing severe but plausible scenarios; - assessing the Company's ability to continue to operate within its financial covenants and the liquidity of the portfolio through reviewing Management's assessment of how quickly the portfolio could be liquidated if required; - assessing the Company's performance to date using the key performance indicators being net asset value against benchmark and peer group, share price total return against benchmark and peer group, discount to net asset value and ongoing charge listed on pages 29 and 30 in the annual report; and - evaluating the appropriateness of the Directors' disclosures in the financial statements on going concern and viability statement. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. In relation to the Company's reporting on how it has met its obligations under the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the Directors' statement in the financial statements about whether the Director's considered it appropriate to adopt the going concern basis of accounting. 64 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 --- Strategic Report Governance Financial Statements Additional Information AGM Notice ## Independent Auditor's Report continued ### Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We summarise below the key audit matters in forming our opinion above, together with an overview of the principal audit procedures performed to address each matter and our key observations arising from those procedures. These matters, together with our findings, were communicated to those charged with governance through our Audit Completion Report. #### Key Audit Matter ##### Valuation and existence of the investment portfolio (as described on page 50 in the Report of the Audit and Risk Committee and as per the accounting policy set out on page 75). Investments held as of 31 May 2026 were valued at £614.44m (2025: £698.72m). The investment portfolio comprises of solely level one investments. Investments make up 110.0% of the net asset value of the Company as of 31 May 2026 (110.2% of the net asset value as of 31 May 2025) these are only level one and considered to be the key driver of the performance of the Company. The investments are made up of quoted investments that are classified upon initial recognition as held at fair value through profit or loss and are measured initially and subsequently at fair value which is based on their quoted bid prices at the close of business on the year-end date. There is a risk that investments recorded might not exist or might not be owned by the Company. Although the investments are valued at quoted bid prices, there is a risk that errors in valuation can have a significant impact on the numbers presented. We therefore identified valuation and existence of investments as a key audit matter as it had the greatest effect on our overall audit strategy and allocation of resources. The key audit matter in the table above is consistent with the matter we disclosed in our 2025 independent auditor's report. ### Our application of materiality and an overview of the scope of our audit The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and on the financial statements as a whole. Based on our professional judgment, we determined materiality for the financial statements as a whole as follows: #### How our scope addressed this matter Our audit procedures included, but were not limited to: - understanding Management's process to record and value investments through discussions with Management and examination of control reports from the third-party service organisation; - for all investments in the portfolio, agreeing investment holdings to an independent custodian confirmation and an independent depositary confirmation in order to obtain comfort over existence; - for all investments in the portfolio, comparing to market prices independently obtained from a source vendor and recalculating the investment valuations as at the year-end; and - for all investments in the portfolio, assessing the frequency of trading to identify any prices that have not changed and testing whether the listed price is a valid fair value to ensure appropriateness of fair value classification. #### Our observations We have no matters to communicate with regards to the valuation and existence of the investment portfolio held at 31 May 2026. The Henderson Smaller Companies Investment Trust plc Annual Report 2026 65 --- ## Independent Auditor's Report continued ### Materiality | **Overall materiality** | £5.59m (2025: £6.34m) | | --- | --- | | **How we determined it** | 1% of net assets (2025: 1% of net assets) | | **Rationale for benchmark applied** | Net assets have been identified as the principal benchmark within the financial statements as they are considered to be the main focus of the shareholders. Whilst valuation processes for these investments are not considered to be complex, there is a risk that errors in valuation could cause a material misstatement. 1% has been chosen as it is a generally accepted auditing practice for investment trust audits and the Company is a public interest entity. | | **Performance materiality** | Performance materiality is set to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements in the financial statements exceeds materiality for the financial statements as a whole. On the basis of our risk assessments and together with our assessment of the overall control environment, we determined 70% (2025: 70%) of overall materiality, amounting to £3.91m (2025: £4.44m). We also determined a specific materiality for the revenue column of the Statement of Comprehensive Income at £0.8m (2025: £1.02m), being 5% (2025: 5%) of revenue profit before tax. | | **Reporting threshold** | We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above £0.17m (2025: £0.19m) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons. | As part of designing our audit, we assessed the risk of material misstatement in the financial statements, whether due to fraud or error, and then designed and performed audit procedures responsive to those risks. In particular, we looked at where the directors made subjective judgments, such as assumptions on significant accounting estimates. We tailored the scope of our audit to ensure that we performed sufficient work to be able to give an opinion on the financial statements as a whole. We used the outputs of our risk assessment, our understanding of the Company, their environment, controls, and critical business processes, to consider qualitative factors to ensure that we obtained sufficient coverage across all financial statement line items. ### Other information The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The Directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 66 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 --- Strategic Report Governance Financial Statements Additional Information AGM Notice # Independent Auditor's Report continued # Opinions on other matters prescribed by the Companies Act 2006 In our opinion, the part of the Directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. In our opinion, based on the work undertaken in the course of the audit: - the information given in the strategic report and the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements and those reports have been prepared in accordance with applicable legal requirements; - the information about internal control and risk management systems in relation to financial reporting processes and about share capital structures, given in compliance with rules 7.2.5 and 7.2.6 in the Disclosure Guidance and Transparency Rules sourcebook made by the Financial Conduct Authority (the FCA Rules), is consistent with the financial statements and has been prepared in accordance with applicable legal requirements; and - information about the Company's corporate governance code and practices and about its administrative, management and supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the FCA Rules. # Matters on which we are required to report by exception In light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the: - strategic report or the directors' report; or - information about internal control and risk management systems in relation to financial reporting processes and about share capital structures, given in compliance with rules 7.2.5 and 7.2.6 of the FCA Rules. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: - adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or - the Company financial statements and the part of the Directors' remuneration report to be audited are not in agreement with the accounting records and returns; or - certain disclosures of Directors' remuneration specified by law are not made; or - we have not received all the information and explanations we require for our audit; or - a corporate governance statement has not been prepared by the Company. # Corporate governance statement The UK Listing Rules require us to review the Directors' statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to how the Company meets its obligations under the provisions of the UK Corporate Governance Statement specified for our review. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit: - Directors' statement with regards the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified, set out on page 62; - Directors' explanation as to its assessment of the entity's prospects, the period this assessment covers and why the period is appropriate, set out on page 38; - Directors' statement on fair, balanced and understandable, set out on page 62; - Board's confirmation that it has carried out a robust assessment of the emerging and principal risks, set out on page 27; - The section of the annual report that describes the review of effectiveness of risk management and internal control systems, set out on page 47; and; - The section describing the work of the Audit and Risk Committee, set out on pages 49-50. # Responsibilities of directors As explained more fully in the Directors' responsibilities statement set out on page 62, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. The Henderson Smaller Companies Investment Trust plc Annual Report 2026 67 --- Independent Auditor's Report continued ## Auditor's responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. Based on our understanding of the Company and its industry, we considered that non-compliance with the following laws and regulations might have a material effect on the financial statements: UK-adopted international accounting standards, the Companies Act 2006, the UK Listing Rules, UK Corporate Governance Code, the Association of Investment Companies' Code and Statement of Recommended Practice, Section 1158 of the Corporation Tax Act 2010 and The Companies (Miscellaneous Reporting) Regulations 2018. To help us identify instances of non-compliance with these laws and regulations, and in identifying and assessing the risks of material misstatement in respect to non-compliance, our procedures included, but were not limited to: - Gaining an understanding of the legal and regulatory framework applicable to the Company, the industry in which it operates, and the structure of the Company, and considering the risk of acts by the Company which were contrary to the applicable laws and regulations, including fraud; - Inquiring of the Directors, management and, where appropriate, those charged with governance, as to whether the Company is in compliance with laws and regulations, and discussing their policies and procedures regarding compliance with laws and regulations; - Reviewing minutes of Directors' meetings in the year and up until the authorisation of financial statements; and - Discussing amongst the engagement team the laws and regulations listed above, and remaining alert to any indications of non-compliance. We also considered those laws and regulations that have a direct effect on the preparation of the financial statements, such as the Statement of Recommended Practice issued by the Association of Investment Companies, the Companies Act 2006 and UK tax legislation. In addition, we evaluated the Directors' and Management's incentives and opportunities for fraudulent manipulation of the financial statements, including the risk of management override of controls, and determined that the principal risks related to posting manual journal entries to manipulate financial performance, management bias through judgments and assumptions in significant accounting estimates, particularly in relation to special dividends, revenue recognition (which we pinpointed to the accuracy and completeness assertions), and significant one-off or unusual transactions. Our procedures in relation to fraud included but were not limited to: - Making enquiries of the Directors and management on whether they had knowledge of any actual, suspected or alleged fraud; - Gaining an understanding of the internal controls established to mitigate risks related to fraud; - Discussing amongst the engagement team the risks of fraud; - Addressing the risks of fraud through management override of controls by performing journal entry testing; and - Reviewing the accounting estimates in relation to special dividends for evidence of management bias and performing procedures to respond to the fraud risk in revenue recognition. The primary responsibility for the prevention and detection of irregularities, including fraud, rests with both those charged with governance and management. As with any audit, there remained a risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal controls. The risks of material misstatement that had the greatest effect on our audit are discussed in the 'Key audit matters' section of this report. A further description of our responsibilities is available on the Financial Reporting Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report. 68 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 --- Strategic^{}[] Report Governance Financial^{}[] Statements Additional^{}[] Information AGM Notice ## Independent Auditor's Report continued ### Other matters which we are required to address Following the recommendation of the Audit and Risk Committee, we were appointed on 1 September 2021 to audit the financial statements for the year ending 31 May 2022. The period of total uninterrupted engagement is five years, covering the years ending 31 May 2022 to 31 May 2026. The non-audit services prohibited by the FRC's Ethical Standard were not provided to the Company and we remain independent of the Company in conducting our audit. Our audit opinion is consistent with our additional report to the Audit and Risk Committee. ### Use of the audit report This report is made solely to the company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body for our audit work, for this report, or for the opinions we have formed. As required by the Financial Conduct Authority Disclosure Guidance and Transparency Rules, these financial statements will form part of the electronic reporting format prepared annual financial report filed on the National Storage Mechanism of the Financial Conduct Authority. This auditor's report provides no assurance over whether the annual financial report will be prepared using the correct electronic reporting format. **Nargis Shaheen Yunis** (Senior Statutory Auditor) for and on behalf of Forvis Mazars LLP Chartered Accountants and Statutory Auditor 30 Old Bailey London EC4M 7AU 29 July 2026 The Henderson Smaller Companies Investment Trust plc Annual Report 2026 69