Final Results

RNS Number : 4704Q

Henderson Smaller Cos Inv Tst PLC

04 August 2010

 



Page 1 of 22

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 May 2010

4 August 2010

This announcement contains regulated information

MANAGEMENT REPORT

Financial Highlights

	31 May 2010	31 May  2009
Total net assets	£208 million	£156 million
Net asset value per ordinary share	277.1p	202.1p
Net asset value per ordinary share on an alternative basis*	269.7p	196.9p
Market price per ordinary share	216.0p	167.0p
Total return per ordinary share	79.3p	(115.4)p
Revenue return per ordinary share	4.6p	6.3p
	======	======
Dividend per ordinary share	3.6p	3.0p
Special dividend per ordinary share	-	2.6p
	----------	----------
Total dividend per ordinary share	3.6p	5.6p
	======	======
Gearing†	9.5%	11.4%

*Calculated by deducting from the net assets the debt at its market value. 

†Defined here as the total market value of the Group's investments less shareholders' funds as a percentage of shareholders' funds.

Chairman's Statement

Our performance in the year ended 31 May 2010 was strong, a welcome recovery from the previous year. On a total return basis our net asset value per share rose 40.1%, against 29.6% for the benchmark index. This degree of outperformance has continued since the year end. The greatest contributor to these results has been strong stock selection, not least a recovery in the market ratings of companies that our fund manager, Neil Hermon, identified as sound long-term investments. Such are the rewards of diligent research and conviction, although we still have some ground to make up to re-establish our five-year record. Other positive factors included our gearing, where our short-term borrowing facility has been used to good effect as a supplement to our fixed borrowings of £20 million. A full attribution analysis is given on page 3 below.

Revenue and dividend

The revenue return per share was 4.6p, compared with 6.3p for the previous year when there was a substantial VAT refund. Leaving this refund aside, the underlying revenue return per share grew to 4.2p this year from 3.9p in 2009. The investment income on a per share basis fell marginally but the income from sub-underwriting has been buoyant. We expect to see resumed dividend growth from many of our investments to the benefit of the results in future years. We propose a final dividend for the year of 3.6p per share (2009: 3.0p). This is subject to shareholder approval at the Annual General Meeting in September.

Share buy-backs

During the year we bought back 2.5 million shares, equivalent to about 3% of those in issue at 31 May 2009, at an average discount (calculated by valuing the debenture stock at par) of about 21%. Most of these shares were bought back at the start of our financial year. The Board continues to monitor the discount closely. It has been encouraging to note a growing interest in the shares from new investors.

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THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 May 2010

MANAGEMENT REPORT continued

Outlook

The stock market has moved ahead strongly over the past year, albeit subject to a high degree of volatility as sentiment about the vigour of the recovery fluctuates. Nevertheless, valuations are reasonable and companies' profitability, cash flows and balance sheets are generally in good order, in marked contrast to the public finances of much of the world. On balance we are positive about the medium term outlook for equities.

Continuation

Our shareholders are asked every three years to vote for the continuation of the Company and a resolution to this effect will be put to the Annual General Meeting in September. Henderson Smaller Companies Investment Trust has shown again that active investment management, well-executed within the transparent structure of an investment trust company, can offer investors an attractive means of adding value to their portfolio. We are therefore recommending shareholders to vote for the Company to continue.

Board composition

Sally Davis will retire as a director at the conclusion of the Annual General Meeting in September. She has served on the Board for nine years, for the last seven as Chairman of the Audit Committee. We are very grateful to her and we shall miss her insightful contributions, reflecting her experience as a senior executive at BT Group plc.

I am delighted to welcome Beatrice Hollond, who was appointed to the Board on 23 July 2010 and will stand for election at the Annual General Meeting. She has a wide experience of investment matters and will succeed Sally Davis as Chairman of the Audit Committee. She brings another independent and enquiring mind to the Board.

Articles of Association

We propose to adopt revised Articles of Association and a resolution to this effect will be put to the Annual General Meeting in September. The revised Articles, summarised in the separate circular to shareholders, incorporate the changes required to bring the Company's constitution fully into line with the latest UK company law.

Performance Attribution

		Year ended 31 May 2010
Net asset value per share total return		40.1
Benchmark total return		29.6
		--------
Relative performance		10.5
		--------
Made up:
Stock selection		7.5
Gearing		2.8
Share buy-backs		0.6
Expenses		(0.6)
Write-back of VAT and related interest		0.2
		---------
		10.5
		---------

Notes:

1.         The benchmark is the Hoare Govett Smaller Companies Index (excluding investment companies).

2.         Source: Henderson Global Investors Limited. The table sets out the Manager's understanding of the movement, relative to the benchmark, between the net asset value per share at 31 May 2009 (202.1p) and the net asset value per share at 31 May 2010 (277.1p).

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Annual Financial Report for the year ended 31 May 2010

MANAGEMENT REPORT continued

Fund Manager's Review

Analysis of the portfolio by sector	31 May 2010 %		31 May 2009 %
Support Services	20.0		19.5
Electronic & Electrical Equipment	9.7		7.8
Media	8.0		6.6
Software & Computer Services	7.5		8.0
Financial Services	6.7		5.5
Real Estate	5.5		5.8
Aerospace & Defence	5.3		4.2
Chemicals	4.9		3.4
Industrial Engineering	4.7		3.7
General Retailers	3.9		3.4
Oil & Gas Producers	3.7		4.7
Household Goods & Home Construction	3.6		5.7
Construction & Materials	3.4		5.4
Travel & Leisure	3.1		4.8
Technology Hardware & Equipment	3.1		2.3
Health Care Equipment & Services	2.1		3.3
Oil Equipment, Services & Distribution	1.4		1.5
Industrial Metals & Mining	1.4		1.9
Mining	1.4		0.8
Pharmaceuticals & Biotechnology	0.6		0.5
Life Insurance	0.0		0.7
Industrial Transportation	0.0		0.5
	-------		-------
	100.0		100.0
	-------		-------

Market - year in review

The year has been one of stabilisation and recovery for both equity markets and the global economy. Signs that the global economy was no longer declining led to a very sharp rally in equity markets from depressed levels. Investors' appetite for risk assets increased as confidence grew that the worst was behind us. Smaller companies outperformed significantly in the early part of this rally since by composition smaller companies are more economically sensitive than larger companies. Additionally, smaller companies were trading at a significant valuation gap to larger companies. After the initial rally equity markets have continued to move higher, albeit at a slower pace and with periods of modest declines. The economic statistics have proved generally positive and reflect a global economy that is gradually recovering. Corporate earnings have proved remarkably robust, aided by swift management action to cut costs. However, markets have remained volatile in the face of macro headwinds.

Fund performance

The Trust had a good year in performance terms - rising in absolute terms and significantly out-performing on a relative basis. The net asset value rose 40.1%, on a total return basis. This compares to a gain of 29.6% (total return) from the Hoare Govett Smaller Companies Index (excluding investment companies) and 20.9% (total return) from the FTSE SmallCap Index (excluding investment companies). The outperformance came from a combination of underlying positive portfolio performance and gearing in the Trust. Share buy-backs were an additional small positive to performance. The year under review is the sixth year of outperformance of our benchmark, the Hoare Govett Smaller Companies Index (excluding investment companies), in the last seven years.  See also the table on page 3.

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Annual Financial Report for the year ended 31 May 2010

MANAGEMENT REPORT continued 

Attribution analysis

The tables below show the top five contributors to, and the bottom five detractors from, the Trust's relative performance.

Principal contributors

Top five contributors to relative performance	12 month return %	Relative contribution %
Informa	+61.7	1.0
WSP	+70.8	0.9
Senior	+240.2	0.7
Victrex	+93.2	0.7
Domino Printing Sciences	+87.0	0.7

Informa is a leading business to business information group. Its activities include the provision of academic journals, books, data services, trade exhibitions, conferences and training services. It is also the largest holding in the Trust's portfolio. The company produced a very resilient profit performance in 2009, helped by aggressive cost cutting. Additionally, the balance sheet has been strengthened and the company is set for a return to growth in coming years. Given its low valuation, we believe the share price is set for further gains.

WSP is an international engineering consultant, principally in the built environment. Although market conditions were tough, profits have held up well as the company has adjusted its cost base to match revenues. 2010 is likely to be a trough year for earnings and the company will benefit in future years from its international diversification (70% of revenues are from outside the UK) and we believe the shares have significant further potential to re-rate from these levels.

Senior manufactures specialist engineering products for the automotive, industrial and aerospace industries. Impressive cost reduction and cash generation during the downturn meant the company was well placed to benefit from the upswing in its markets during the latter part of 2009 and early 2010. With commercial aerospace markets continuing to recover and Senior supplying key growth programmes, the future looks bright for the business.

Victrex is a speciality chemicals company. Its principal product is PEEK, a high performance thermoplastic. Demand for PEEK, which is used in a broad range of manufacturing industries, suffered badly in the industrial recession of late 2008 and early 2009. However, demand has recovered strongly and its medical implant business, Invibio, has continued to see robust growth. The weakness of sterling has been an additional benefit with Victrex being a major exporter. Rising demand for PEEK and Invibio's strong prospects means the company is set for further strong growth.

Domino Printing Sciences is a manufacturer of industrial printing equipment. It is one of the leaders in its global market and a major exporter. As with many other UK companies, management responded quickly and aggressively to the downturn and took significant costs out of the business. As demand recovered profits have seen a sharp recovery. Combined with a strong balance sheet, a well respected management team and a strong new product pipeline, we believe the shares will continue to outperform.

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THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 May 2010

MANAGEMENT REPORT continued

Principal detractors

Top five detractors from relative performance	12 month return %	Relative contribution %
Balfour Beatty	-10.7	-0.8
New World Resources*	+147.7	-0.6
Mouchel	-25.4	-0.5
Southern Cross Healthcare	-66.5	-0.5
Arriva*	+79.1	-0.4
*Included in the benchmark index but not owned by the Trust.

Balfour Beatty is an international engineering and contracting business. It has undergone a strategic shift in the last few years, with expansion into the US and into higher value consulting work, mostly through acquisition. The share price performed poorly in the last year due to concern over UK public sector spending cutbacks. We acknowledge these fears have substance but believe the international diversification of the group, the strong balance sheet, conservative accounting and excellent management team mean the company is well placed for more difficult markets. Additionally, the valuation of the company looks extremely low, especially considering the value of its investment portfolio and net cash balance.

The core business of New World Resources is coal mining and coke production. As the global economy recovered the price of its products increased and the profitability of the business recovered sharply. The Trust had no holding in this company and the rapid rise in its share price cost us relative performance

Mouchel is a professional support service company providing highways management, local authority outsourcing and water consultancy services. This year has been a traumatic one for Mouchel. Profitability has been under pressure from a lack of new contract wins, difficult trading conditions in public sector consulting and bad debt issues in the Middle East.

The company did continued receive a bid from VT Group but before this was completed VT was acquired by Babcock.  We think the valuation of Mouchel looks very attractive at these depressed levels and the company is vulnerable to corporate activity.

Southern Cross operates nursing homes. The industry has experienced difficult trading conditions as local authority spending constraints have put both fee rates and occupancy under pressure. Given the high operational gearing inherent in Southern Cross's leased model, profitability has decreased. The outlook for the industry remains under a cloud but the valuation now placed on the business looks ridiculously low and any positive change in sentiment could see the share price rise significantly.

Arriva provides transportation services throughout Europe with its operations including bus, train and commuter coach services. Although profitability is under pressure, the share price rose sharply after Deutsche Bahn made an agreed offer for the company at a significant premium. The Trust had no holding in this company.

Portfolio activity

Trading activity in the portfolio was consistent with an average holding period of five years. Our approach is to consider the 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.

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Annual Financial Report for the year ended 31 May 2010

MANAGEMENT REPORT continued

A feature of the year was the large amount of equity issuance by UK corporates. The lack of bank finance and the need to reduce borrowings in a difficult economic environment meant the stock market was called upon to re-finance stretched corporate balance sheets. Many of these fund-raisings were done at significant discounts, providing attractive entry points. In the year we participated in equity offerings from Capital and Regional, the retail property investor, e2v technologies, the tubes and sensor manufacturer, Intermediate Capital, the mezzanine finance provider, and Laird, the electronics group.

In the year we have added a number of new positions to our portfolio. We increased our exposure to the resources sector. We targeted companies which own a world class asset, have a strong management team and a near term plan to get to commercial production. Acquisitions in this area included Avocet Mining, which owns a large gold deposit in Burkina Faso, Kalahari Minerals, which ownsa significant stake in a uranium project in Namibia, and Kenmare Resources, which has a titanium dioxide deposit in Mozambique. We also increased our position in the consultant engineer sector with the acquisition of positions in Hyder Consulting and Scott Wilson. We feel this area is undervalued by the market and will recover quickly into an economic recovery. The position in Scott Wilson has already paid off handsomely, with competing takeover offers from two American companies pushing the share price up over 250% in June 2010.

Other new additions to our portfolio included:

John Menzies - a newspaper and magazine distribution business as well as a leading provider of ground and baggage handling services to the aviation industry. The news distribution business is mature but stable and generates significant cash. The aviation services business is operating in a growth market as well as seeing rapid recovery from the difficulties of 2009. The company has exceeded market forecasts repeatedly throughout the last year but is still trading on a very low valuation.

Spirent Communications - the group specialises in telecommunication testing systems. Spirent is a market leader, has high margins, strong cash generation and balance sheet and operates in a growth market. The explosion of data services and the number of smart phones is putting pressure on telecom networks and Spirent is well placed to benefit from these trends.

To balance the additions to our portfolio we have disposed of positions in companies which we felt were set for poor price performance. In particular, sales were made where we felt the share price had become over-valued and did not reflect the company's prospects. These included Big Yellow, the self storage company, Morgan Sindall, the UK construction company, and Savills, the property agent. We also disposed of our holding in Ricardo, the automotive consultant, where we believe profitability will remain under pressure as its end customers, the automotive manufacturers, continue to struggle. We also disposed of our holding in Talvivaara Mining, the Finnish nickel producer, as its relatively innovative production process continued to see teething problems.

IPO (initial public offering) and takeover activity was relatively quiet but did see a pick up from almost non-existent levels in the previous year. In the portfolio takeover bids were received for Care UK, the nursing home and domiciliary care business, from Bridgepoint, Just Retirement, the enhanced annuity company, from Primera, Powerleague, the 5-a-side football centre company, from Patron Capital and Venture Production, the North Sea oil and gas business from Centrica. Deals announced but not yet completed at the year end are the takeovers of VT Group by Babcock, Chloride by Emerson and BSS Group by Travis Perkins.

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Annual Financial Report for the year ended 31 May 2010

MANAGEMENT REPORT continued

We participated in three IPOs in the year. These were:

CPP - the credit card and protection group which has an excellent long term growth record and strong international growth prospects.

Digital Barriers - a shell company looking to acquire assets in the digital security market. The attraction of the company is the management team, who previously built Detica into a £400 million plus business with an excellent growth record before it was acquired by BAE Systems.

LXB Properties - a company formed to take advantage of distressed valuations in the retail warehouse property sector.  Again, the attraction was the strong management team who had previously had great success at Grantchester.

Portfolio outlook

The following table shows the Trust's key stock positions versus the Hoare Govett Smaller Companies Index (excluding investment companies) at the end of May 2010.

Top ten active positions at 31 May 2010	Active Weight %	Holding %	Index Weight %
Informa	3.8	3.8	0.0
WSP	3.2	3.4	0.2
Carillion	2.0	2.0	0.0
Victrex	1.9	2.6	0.7
Domino Printing Sciences	1.9	2.2	0.3
Spectris	1.7	2.4	0.7
Bellway	1.7	2.3	0.6
WS Atkins	1.5	2.0	0.5
Balfour Beatty	1.5	1.5	0.0
Intermediate Capital	1.4	2.2	0.8

Brief descriptions of Informa, WSP, Victrex, Domino Printing Sciences and Balfour Beatty have been included earlier. A brief description of the remaining largest active positions follows:

Carillion is a diversified construction and support services group with its major operations in the UK, Middle East and Canada. The company has undergone a very successful transformation over the last five years with rapid growth in its outsourcing activities and a staged reduction in its UK construction activities to a point where they only account for 10% of group profits. The increasing trend to outsource services by both the public and private sectors leaves Carillion well placed for future growth.

Spectris manufactures, designs and markets products for the electronic control and process instrumentation sectors. The company has a number of subsidiaries which tend to be market leaders in global market niches. Cash generation is strong, management are well respected and the balance sheet is strong. Recovering industrial markets mean profit growth is forecast to be strong.

Bellway is a leading UK housebuilder. Although the outlook for the housing market is more uncertain, the long term prognosis is strong with a structural undersupply of new housing in the UK.

The company is well managed, has a robust balance sheet, a long and secure land bank and good regional diversification. Trading at a large discount to net assets, the shares look attractive on a long term basis.

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THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 May 2010

MANAGEMENT REPORT continued 

WS Atkins is an engineering consultancy business. It is the largest operator in the UK and is number one in most of its markets. The company is well placed to benefit from the growing power needs and environmental issues prevalent in the UK. The company has significant net cash and is looking to diversify internationally. Any acquisition would be significantly earnings enhancing.

Intermediate Capital is a leading provider of mezzanine finance to LBO markets. It also owns a highly successful mezzanine and credit fund management operation. After a difficult 2009 when the company required an equity issue to refinance its balance sheet, prospects look much brighter. Its portfolio of investments is performing well, the company is looking to grow its loan book and the fund management business has an ambition to double in five years. The valuation looks very appealing, trading at a large discount to net assets.

Market outlook

As referred to in the opening segment of the review, the last year has been one of stabilisation and recovery for both equity markets and the global economy. In 2010 though, markets have been more volatile. Although economic statistics have been supportive, there are significant concerns over the state of public finances in peripheral Europe and the viability of the euro. Additionally, there are fears about over-heating in the Chinese property market and the impact on the economy of the powerhouse of world economic growth.

The UK economy has made a modest recovery from recession. However, the need to rein in public spending and reduce the massive public sector deficit will necessitate large cuts in government spending. This will dampen economic recovery and lead to problems for public sector focused businesses. The strength of the UK consumer and housing market will be tested in this environment.

Even so, there are plenty of reasons to be positive about equity markets. Valuations are low by historic standards and compare well to other asset classes. Corporate profitability has proved remarkably robust and earnings look set to see reasonable growth in the coming year. M&A activity is seeing a noticeable pick-up, with foreign corporates prominent in attempting to pick up cheap UK assets. With a weak currency, liberal markets and low valuations, UK assets are attractive to overseas companies. This is a trend which will help smaller companies in particular as M&A activity tends to be focused in this area.

In conclusion, the year under review has been a good one for the equity market and even more so for the Trust. Performance was strong and our portfolio companies, in general, have weathered the downturn in good order. Our investments are generally trading well, are soundly financed and attractively valued. Additionally the small cap market continues to throw up exciting growth opportunities in which the Trust can invest.

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THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 May 2010

MANAGEMENT REPORT continued 

            Investment Portfolio

            as at 31 May 2010

Company	Main activity	Valuation as at 31 May 2010 £'000		% of portfolio
Informa	business to business information	8,694		3.83
WSP	engineering consultancy	7,820		3.44
Victrex	specialty chemicals	5,905		2.60
Spectris	electronic control and process instrumentation	5,343		2.35
Croda	specialty chemicals	5,143		2.26
Bellway	house building	5,125		2.25
Intermediate Capital	mezzanine finance	4,942		2.17
Domino Printing Sciences	industrial printing equipment	4,900		2.16
Carillion	international contractor and outsourcer	4,589		2.02
WS Atkins	engineering consultancy	4,502		1.98
10 largest		56,963		25.06
Melrose	diversified engineering	3,873		1.70
Rotork	process control solutions	3,833		1.69
Chemring	defence products	3,804		1.67
VT Group	defence outsourcer	3,562		1.57
Premier Oil	oil & gas	3,498		1.54
Interserve	international contractor	3,460		1.52
Balfour Beatty	international contractor	3,420		1.51
Grainger	residential property investor	3,380		1.49
BSS Group	builders merchant	3,234		1.42
Senior	aerospace and automotive products	3,210		1.41
20 largest		92,237		40.58
Ultra Electronics	specialised defence contractor	3,142		1.38
e2v technologies	electronic components	3,107		1.37
Paragon	buy to let mortgage provider	3,056		1.34
Restaurant Group	restaurants	3,004		1.32
Fidessa	financial software	2,896		1.27
Charter	engineering	2,884		1.27
LSL Property Services	estate agent and surveyor	2,685		1.18
Euromoney Institutional Investor	business to business information	2,675		1.18
CSR	semi conductors	2,673		1.18
Northgate	commercial vehicle hire	2,664		1.17
30 Largest		121,023		53.24
Laird	electronic products	2,516		1.11
Chloride	engineering power solutions	2,507		1.10
Bluebay Asset Management	credit asset manager	2,487		1.10
Aveva Group	design software	2,346		1.03
Synergy Healthcare	healthcare support services	2,304		1.01
Halfords	retailer of automotive parts	2,258		0.99
Shaftesbury	West End property investor	2,243		0.99
Phoenix	IT services	2,185		0.96
John Menzies	news distributor and aviation services	2,152		0.95
Oxford Instruments	advanced instrumentation equipment	2,072		0.91
40 largest		144,093		63.39

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Annual Financial Report for the year ended 31 May 2010

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Company	Main Activity	Valuation as at 31 May 2010 £'000		% of portfolio
Spirent Communications	telecoms testing	2,060		0.91
Chime Communications	public relations and media services	1,995		0.88
Greene King	pub operator	1,983		0.87
Capital & Regional	retail property investor	1,905		0.84
GlobeOp Financial Services	hedge fund administrator	1,896		0.83
International Ferro Metals	ferrochrome products	1,871		0.82
Costain	contractor	1,855		0.81
SIG	builders merchant	1,838		0.81
*RWS	patent translation services	1,828		0.80
Eaga	carbon services	1,814		0.80
50 largest		163,138		71.76
Keller	ground engineering	1,806		0.80
Meggit	aerospace products	1,803		0.79
Mouchel	support services	1,800		0.79
ITE Group	exhibition organizer	1,708		0.75
*Rockhopper Exploration	oil & gas explorer	1,703		0.75
Renishaw	precision measuring and calibration equipment	1,604		0.71
NCC Group	IT security	1,587		0.70
Aberdeen Asset Management	fund manager	1,579		0.70
Babcock International	defence outsourcer	1,577		0.69
Debenhams	department stores	1,567		0.69
60 largest		179,872		79.13
RM	education software	1,496		0.66
Dunelm	homewares retailer	1,444		0.63
Persimmon	UK housebuilder	1,428		0.63
Anite	telecom software	1,395		0.61
Psion	hand held electronic products	1,377		0.61
CPP Group	credit card and identity protector insurance	1,326		0.58
*Kentz	oil & gas contractor	1,304		0.57
Hyder Consulting	engineering consultancy	1,209		0.53
*Shed Media	television programming	1,195		0.53
*Valiant Petroleum	oil & gas explorer	1,175		0.52
70 largest		193,221		85.00
Telecity Group	internet infrastructure	1,149		0.50
Chrysalis	music royalties	1,133		0.50
*Playtech	internet gaming software	1,115		0.49
Ted Baker	clothing retailer	1,059		0.47
*Majestic Wine	wine warehouse	1,026		0.45
Kofax	electronic capture software	1,020		0.45
Rathbone Brothers	private client assert management	996		0.44
Hochschild Mining	silver miner	988		0.43
*Caretech Holdings	residential care services	967		0.43
*Digital Barriers	digital security	958		0.42
80 largest		203,632		89.58

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Annual Financial Report for the year ended 31 May 2010

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Company	Main activity	Valuation as at 31 May 2010 £'000		% of portfolio
*Abcam	internet retailer of antibodies	950		0.42
Intec Telecom Systems	telecom billing software	948		0.42
Wellstream Holdings	flexible pipes for oil & gas	948		0.42
Taylor Wimpey	house builder	933		0.41
John Wood	oil & gas services	918		0.40
Pace	set top box provider	909		0.40
*Xcite Energy	oil & gas explorer	875		0.39
Speedy Hire	tool hire	870		0.38
*LXB Retail Properties	retail property investor	869		0.38
Hansteen	industrial property investor	864		0.38
90 largest		212,716		93.58
*Goals Soccer Centres	five-a-side soccer centres	847		0.37
Gem Diamonds	diamond producer	814		0.36
Headlam	floor covering distributor	795		0.35
*London Mining	iron ore mining	789		0.35
Heritage Oil	oil & gas explorer	784		0.34
Consort Medial	healthcare products	776		0.34
*Avocet Mining	gold mining	762		0.33
*CVS Group	veterinary retailer	740		0.33
*Next Fifteen Communications	PR and media services	715		0.31
Scott Wilson	engineering consultancy	680		0.30
100 largest		220,418		96.96
Norcros	shower and tile manufacturer	677		0.30
Southern Cross Healthcare	nursing homes	652		0.29
Kenmare Resources	titanium dioxide mining	635		0.28
*Kalahari Minerals	uranium mining	599		0.26
*The Clapham House Group	restaurants	570		0.25
Minerva	property developer	564		0.25
Tribal	health and education support services	559		0.25
*Carluccio's	restaurants	550		0.24
Topps Tiles	tile retailer	520		0.23
*Desire Petroleum	oil & gas explorer	400		0.17
110 largest		226,144		99.48
*Numis Corporation	I nvestment bank	361		0.16
JJB Sports	sports retailer	347		0.15
*Proximagen	biotechnology	322		0.14
*Critical Information	shell company	149		0.07
TOTAL		227,323		100.00
		======		=====

There were no convertible or fixed interest securities at either 31 May 2010 or 31 May 2009.

*quoted on the Alternative Investment Market

Page 12 of 22

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 May 2010

MANAGEMENT REPORT continued 

Principal Risks and Uncertainties

The principal risks and uncertainties facing the Company relate to the activity of investing in the shares of smaller companies that are listed (or quoted) in the United Kingdom.  Although the Company invests almost entirely in securities that are quoted on recognised markets, share prices may move rapidly and it may not be possible to realise an investment at the Manager's assessment of its value.  The companies in which investments are made may operate unsuccessfully, or fail entirely, such that shareholder value is lost.  The Company is also exposed to the operational risk that one or more of its suppliers may not provide the required level of service. The Board considers regularly the principal risks facing the Company in order to mitigate them as far as practicable.

With the assistance of the Manager the Board has drawn up a risk matrix which identifies the key risks to the Company. These key risks fall broadly under the following categories:

Investment Activity and Strategy

An inappropriate investment strategy (for example, in terms of asset allocation or the level of gearing) may lead to underperformance against the Company's benchmark index and the companies in its peer group; it may also result in the Company's shares trading on a wider discount to the net asset value per share.  The Board manages these risks by ensuring a diversification of investments and a regular review of the extent of borrowings.  The Manager operates in accordance with investment limits and restrictions determined by the Board; these include limits on the extent to which borrowings may be used.  The Board reviews its investment limits and restrictions regularly and the Manager confirms its compliance with them each month.  The Manager provides the directors with management information, including performance data and reports and shareholder analyses. 

The Board monitors the implementation and results of the investment process with the Fund Manager, who attends all board meetings, and reviews regularly data that monitors risk factors in respect of the portfolio.  The Board reviews investment strategy at each Board meeting.

Portfolio and Market

Market risk arises from uncertainty about the future prices of the Company's investments.

Accounting, Legal and Regulatory

In order to qualify as an investment trust the Company must comply with section 1158 of the Corporation Tax Act 2010 (formerly section 842 of the Income and Corporation Taxes Act 1988) ("section 1158"). A breach of section 1158 could result in the Company losing investment trust status and, as a consequence, capital gains realised within the Company's portfolio would be subject to Corporation Tax. The section 1158 criteria are monitored by the Manager and the results are reported to the directors at each Board meeting.

The Company must comply with the provisions of the Companies Act 2006 ("the Companies Act"), and, as the Company's shares are listed for trading on the London Stock Exchange, the Company must comply with the UK Listing Authority's Listing Rules and Disclosure and Transparency Rules ("UKLA Rules"). A breach of the Companies Act could result in the Company and/or the directors being fined or becoming the subject of criminal proceedings. Breach of the UKLA Rules could result in the suspension of the Company's shares which would in turn lead to a breach of section 1158. The Board relies on its company secretary and its professional advisers to ensure compliance with the Companies Act and UKLA Rules.

Operational

Disruption to, or failure of, the Manager's accounting, dealing or payment systems or the Custodian's records could prevent the accurate reporting and monitoring of the Company's financial position. The Manager has contracted some of its operational functions, principally those relating to trade processing, investment administration and accounting, to BNP Paribas Securities Services.

Page 13 of 22

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 May 2010

MANAGEMENT REPORT continued

Financial Instruments and the Management of Risk

By its nature as an investment trust, the Company is exposed in varying degrees to market risk (comprising market price risk, currency risk and interest rate risk), liquidity risk and credit and counterparty risk.

Going Concern

The Company's shareholders are asked every three years to vote for the continuation of the Company and an ordinary resolution to this effect will be put to the Annual General Meeting to be held on 24 September 2010. The directors are recommending the Company's shareholders to vote in favour of this resolution. The assets of the Company consist almost entirely of securities that are listed (or quoted on AIM) and, accordingly, the directors believe that the Company has adequate financial resources to continue in operational existence for the foreseeable future. For these reasons, the Board has decided that it is appropriate for the financial statements to be prepared on a going concern basis. In reviewing the position as at the date of this report, the Board has considered the guidance on this matter issued by the Financial Reporting Council.

Future Developments

The future success of the Company is dependent primarily on the performance of its investments, which will to a significant degree reflect the performance of the stock market. Although the Company invests in companies that are listed or quoted in the United Kingdom, the underlying businesses of those companies are affected by various economic factors, many of an international nature. The Board's intention is that the Company will continue to pursue its investment objective in accordance with its investment policy. Further comment on the outlook for the Company is given in the Chairman's Statement and in the Fund Manager's Review.

Related Party Transactions

Investment management, accounting, administrative and company secretarial services are provided to the Company by Henderson Group plc and its subsidiaries ("Henderson") and by BNP Paribas Securities Services.  The Board has appointed JPMorgan Chase Bank, N.A. as the Company's custodian.  During the year there have not been any material transactions with these related parties affecting the financial position or performance of the Company.

Statement of Directors' Responsibilities (under DTR 4.1.12)

Each of the directors confirm that to the best of their knowledge:

•  the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

• the management report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

For and on behalf of the Board

J D Fishburn

Chairman

3 August 2010

Page 14 of 22

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 May 2010

Consolidated Statement of Comprehensive Income (audited)

   for the year ended 31 May 2010

	Year ended 31 May 2010			Year ended 31 May 2009
	Revenue return	Capital return	Total	Revenue return	Capital return	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Investment income (note 2)	5,961	-	5,961	6,271	-	6,271
Other income (note 3)	627	-	627	947	-	947
Gains/(losses) on investments held   at fair value through profit or loss	-	56,091	56,091	-	(95,301)	(95,301)
	----------	----------	----------	----------	----------	----------
Total income/(loss)	6,588	56,091	62,679	7,218	(95,301)	(88,083)
Expenses
Management and performance fees   (note 4)	(679)	-	(679)	(687)	-	(687)
Write-back of VAT (note 4)	44	-	44	1,150	-	1,150
Other expenses	(373)	-	(373)	(360)	-	(360)
	---------	----------	---------	---------	----------	---------
Profit/(loss) before finance costs  and taxation	5,580	56,091	61,671	7,321	(95,301)	(87,980)
Finance costs	(2,129)	-	(2,129)	(2,376)	-	(2,376)
	---------	---------	----------	---------	---------	----------
Profit/(loss) before taxation	3,451	56,091	59,542	4,945	(95,301)	(90,356)
Taxation	(2)	-	(2)	(9)	-	(9)
	---------	----------	----------	---------	----------	----------
Profit/(loss) for the year and   total comprehensive income	3,449	56,091	59,540	4,936	(95,301)	(90,365)
	======	======	======	======	======	======
Earnings/(loss) per ordinary share   (note 5)	4.59p	74.70p	79.29p	6.30p	(121.71)p	(115.41)p
	======	=======	=======	======	=======	======

The total column of this statement represents the Group's Statement of Comprehensive Income, prepared in accordance with IFRS as adopted by European Union.

The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.

The Group does not have any Other Comprehensive Income and hence the net profit/(loss), as disclosed above, is the same as the Group's Total Comprehensive Income. All items in the above statement derive from continuing operations.

The net profit for the year of the Company was £59,540,000 (2009: loss of £90,365,000).

All income is attributable to the equity holders of The Henderson Smaller Companies Investment Trust plc, the parent  company. There are no minority interests.

Page 15 of 22

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 May 2010

Consolidated and Parent Company Statements of Changes in Equity (audited)

for the year ended 31 May 2010

	Consolidated Year ended 31 May 2010
	Called up share capital £'000	Capital  redemption reserve  £'000		Capital reserves £'000	Revenue reserve £'000	Total £'000
Total equity at 31 May 2009	19,343	26,078		99,930	10,998	156,349
Total comprehensive income:
Profit for the year	-	-		56,091	3,449	59,540
Transactions with owners, recorded   directly to equity:
Ordinary dividends paid (note 6)	-	-		-	(4,205)	(4,205)
Buy-backs of ordinary shares	(616)	616		(4,151)	-	(4,151)
	----------	----------		----------	----------	----------
Total equity at 31 May 2010	18,727	26,694		151,870	10,242	207,533
	======	======		======	======	======
	Consolidated Year ended 31 May 2009
	Called up share capital £'000	Capital  redemption reserve  £'000		Capital reserves £'000	Revenue  reserve £'000	Total £'000
Total equity at 31 May 2008	20,113	25,303		200,986	9,069	255,471
Total comprehensive income:
(Loss)/profit for the year	-	-		(95,301)	4,936	(90,365)
Transactions with owners, recorded   directly to equity:
Ordinary dividends paid (note 6)	-	-		-	(3,007)	(3,007)
Buy-backs of ordinary shares	(770)	770		(5,750)	-	(5,750)
Buy-back of preference stock (in 2008)	-	5		(5)	-	-
	----------	----------		----------	----------	----------
Total equity at 31 May 2009	19,343	26,078		99,930	10,998	156,349
	======	======		======	======	======
	Company Year ended 31 May 2010
	Called up share capital £'000	Capital  redemption reserve  £'000	Capital reserves £'000		Revenue reserve £'000	Total £'000
Total equity at 31 May 2009	19,343	26,078	102,194		8,734	156,349
Total comprehensive income:
Profit for the year	-	-	56,090		3,450	59,540
Transactions with owners, recorded   directly to equity:
Ordinary dividends paid (note 6)	-	-	-		(4,205)	(4,205)
Buy-backs of ordinary shares	(616)	616	(4,151)		-	(4,151)
	----------	----------	----------		----------	----------
Total equity at 31 May 2010	18,727	26,694	154,133		7,979	207,533
	======	======	======		======	======
	Company Year ended 31 May 2009
	Called up share capital £'000	Capital  redemption reserve  £'000		Capital reserves £'000	Revenue reserve £'000	Total £'000
Total equity at 31 May 2008	20,113	25,303		203,251	6,804	255,471
Total comprehensive income:
(Loss)/profit for the year	-	-		(95,302)	4,937	(90,365)
Transactions with owners, recorded   directly to equity:
Ordinary dividends paid (note 6)	-	-		-	(3,007)	(3,007)
Buy-backs of ordinary shares	(770)	770		(5,750)	-	(5,750)
Buy-back of preference stock (in 2008)	-	5		(5)	-	-
	----------	----------		----------	----------	----------
Total equity at 31 May 2009	19,343	26,078		102,194	8,734	156,349
	======	======		======	======	======

Page 16 of 22

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 May 2010

Consolidated and Parent Company Balance Sheets (audited)

at 31 May 2010

	Consolidated 2010 £'000	Consolidated 2009 £'000	Company 2010 £'000	Company 2009 £'000
Non current assets
Investments held at fair value through      profit or loss	227,323	174,232	229,586	176,496
	----------	----------	----------	----------
Current assets
Other receivables	1,431	2,854	1,431	2,854
Cash and cash equivalents	1,097	234	1,097	234
	----------	----------	---------	---------
	2,528	3,088	2,528	3,088
	----------	----------	---------	---------
Total assets	229,851	177,320	232,114	179,584
	----------	----------	----------	----------
Current liabilities
Other payables	(311)	(967)	(2,574)	(3,231)
Bank loans	(2,003)	-	(2,003)	-
	--------	--------	---------	---------
	(2,314)	(967)	(4,577)	(3,231)
	--------	--------	---------	---------
Total assets less current liabilities	227,537	176,353	227,537	176,353
Non current liabilities
Financial liabilities	(20,004)	(20,004)	(20,004)	(20,004)
	----------	----------	----------	----------
Net assets	207,533	156,349	207,533	156,349
	======	======	======	======
Equity attributable to equity    shareholders
Called up share capital (note 7)	18,727	19,343	18,727	19,343
Capital redemption reserve	26,694	26,078	26,694	26,078
Retained earnings
Capital reserves	151,870	99,930	154,133	102,194
Revenue reserve	10,242	10,998	7,979	8,734
	----------	----------	-----------	-----------
Total equity	207,533	156,349	207,533	156,349
	======	======	======	======
Net asset value per ordinary share (note 8)	277.1p	202.1p	277.1p	202.1p
	=====	=====	=====	======

Page 17 of 22

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 May 2010

Consolidated and Parent Company Cash Flow Statements (audited)

for the year ended 31 May 2010

	Year ended 31 May 2010		Year ended 31 May 2009
	Consolidated £'000	Company £'000	Consolidated £'000	Company £'000
Operating activities
Profit/(loss) before taxation	59,542	59,542	(90,356)	(90,356)
Add: interest payable	2,129	2,129	2,376	2,376
Less: (gains)/losses on investments held at fair   value through profit or loss	(56,091)	(56,090)	95,301	95,302
Add: net sales of investments held at fair value   through profit or loss	3,000	3,000	17,286	17,286
Decrease in other receivables	846	846	893	893
Increase in amounts due from brokers	(51)	(51)	(443)	(443)
Decrease in accrued income	622	622	-	-
Increase/(decrease) in other payables	112	111	(106)	(107)
Decrease in amounts due to brokers	(773)	(773)	(727)	(727)
Taxation on investment income	4	4	(23)	(23)
	---------	---------	---------	---------
Net cash inflow from operating activities   before interest and taxation	9,340	9,340	24,201	24,201
Interest paid	(2,124)	(2,124)	(2,382)	(2,382)
	---------	----------	---------	----------
Net cash inflow from operating activities	7,216	7,216	21,819	21,819
	---------	----------	---------	----------
Financing activities
Equity dividend paid	(4,205)	(4,205)	(3,007)	(3,007)
Buy-backs of ordinary shares	(4,151)	(4,151)	(5,750)	(5,750)
Drawdown/(repayment) of bank loans	2,003	2,003	(13,500)	(13,500)
	----------	----------	----------	----------
Net cash outflow from financing	(6,353)	(6,353)	(22,257)	(22,257)
	----------	----------	----------	----------
Increase/(decrease) in cash and cash equivalents	863	863	(438)	(438)
Cash and cash equivalents at the start of the year	234	234	672	672
	---------	--------	---------	--------
Cash and cash equivalents at the end of the year	1,097	1,097	234	234
	=====	=====	=====	=====

Page 18 of 22

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 May 2010

Notes to the Financial Statements

1.	Accounting Policies
	(a)	Basis of preparation The consolidated and parent company financial statements for the year ended 31 May 2010 have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. These comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), together with interpretations of the International Accounting Standards and Standing Interpretations Committee approved by the International Accounting Standards Committee ("IASC") that remain in effect, to the extent that IFRS have been adopted by the European Union. The financial statements have been prepared on a going concern basis and on the historical cost basis, except for the revaluation of certain financial instruments. Where presentational guidance set out in the Statement of Recommended Practice ("the SORP") for investment trusts issued by the Association of Investment Companies ("the AIC") in January 2009 is consistent with the requirements of IFRS, the directors have sought to prepare the financial statements on a basis consistent with the recommendations of the SORP.
	(b)	Basis of consolidation The Group financial statements consolidate the financial statements of the Company and of its sole wholly owned subsidiary undertaking, Henderson Smaller Companies Finance Limited. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. The inter-group balances and transactions are eliminated on consolidation. The investment in the subsidiary is recognised at fair value in the financial statements of the Company.
2.	Investment Income		2010	2009
			£'000	£'000
	Franked income from companies listed or quoted in the United Kingdom:
	Dividends		5,761	5,736
	Special dividends		122	39
	Unfranked income from companies listed or quoted in the United Kingdom:
	Dividends		44	365
	Property income distributions		34	108
	Stock dividends		-	23
			--------	--------
	Total investment income		5,961	6,271
			=====	=====
	All investment income for the Group is from UK investments.

3.	Other income	2010	2009
		£'000	£'000
	Bank interest	4	22
	Interest on the refund of VAT	236	749
	Underwriting commission (allocated to revenue)*	387	176
		-------	-------
		627	947
		-------	--------
	* A further £4,000 (2009: £13,000) of income in respect of shares taken up has been allocated to capital.

Page 19 of 22

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 May 2010

Notes to the Financial Statements continued

4.	Management and performance fees
		2010 Revenue return £'000	2010 Capital return £'000	2010 Total £'000	2009 Revenue return £'000	2009 Capital return £'000	2009 Total £'000
	Management fee	679	-	679	687	-	687
	Write-back of VAT	(44)	-	(44)	(1,150)	-	(1,150)
		---------	--------	--------	---------	--------	--------
		635	-	635	(463)	-	(463)
		=====	=====	=====	=====	=====	=====

	No performance fee was payable in respect of the year (2009: none).
	VAT on management fees In 2004 the Association of Investment Companies (the "AIC"), together with JPMorgan Claverhouse Investment Trust plc, launched a case against HM Revenue & Customs ("HMRC") to challenge whether Value Added Tax ("VAT") should have been charged on fees paid for management services provided to investment trust companies. On 28 June 2007 the European Court of Justice delivered its judgement on the case in favour of the AIC. Since then HMRC has accepted that the provision of investment management services to investment trust companies is VAT exempt and has acknowledged its liability to pay claims in respect of VAT borne by investment companies in respect of much, but not all, of the period from 1 January 1990 to the point in 2007 from which VAT ceased to be applied to investment management fees. Accordingly, the Manager (Henderson Global Investors Limited) has been able, on behalf of the Company, to reclaim from HMRC the VAT borne, together with simple interest thereon.
	An aggregate amount of £2,055,000, in respect of the VAT on investment management fees borne by the Company in  the period from October 2000 to September 2007, was written back in the years ended 31 May 2008 and 2009, in accordance with an agreement reached between the Manager and the Company. An aggregate amount of £844,000, in respect of the period from 1 January 1990 to 4 December 1996, was written back in the year ended 31 May 2009 and a further £44,000 has been recognised in the year ended 31 May 2010. These amounts have been received in full by the Company. The write-backs of VAT have been allocated between revenue return and capital return according to the allocation of the amounts originally paid. The £44,000 recognised in the year has been allocated wholly to the revenue return (year ended 31 May 2009: £1,150,000).

	The Company has also received from the Manager the interest paid by HMRC on the amounts of VAT recovered.  Interest of £749,000 was recognised in the year ended 31 May 2009 and a further £236,000 has been recognised in the year ended 31 May 2010. These amounts are included in other income.
	There remain outstanding claims relating to the period 1996 to 2000 and claims for compound interest from 1990 onwards. No amounts have been recognised in respect of these claims as it is uncertain whether any further amounts will be recovered.

Page 20 of 22

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 May 2010

Notes to the Financial Statements continued

5.		Earnings/(loss) per ordinary share The earnings/(loss) per ordinary share figure is based on the net gains for the year of £59,540,000 (2009: losses of £90,365,000) and on 75,089,586 (2009: 78,298,336) ordinary shares, being the weighted average number of ordinary shares in issue during the year. The earnings/(loss) per ordinary share figure detailed above can be further analysed between revenue and capital, as below. The Company has no securities in issue that could dilute the return per ordinary share.  Therefore the basic and diluted earnings/(loss) per ordinary share are the same.
			2010	2009
			£'000	£'000
		Net revenue profit	3,449	4,936
		Net capital earnings/(losses)	56,091	(95,301)
			----------	----------
		Net total earnings/(losses)	59,540	(90,365)
			======	======
		Weighed average number of ordinary shares   in issue during the year	75,089,586	78,298,336
			========	========
			Pence	Pence
		Revenue earnings per ordinary share	4.59	6.30
		Capital earnings/(losses) per ordinary share	74.70	(121.71)
			----------	-----------
		Total earning/(losses) per ordinary share	79.29	(115.41)
			======	======
6.		Dividends	2010 £'000	2009 £'000
		Amounts recognised as distributions to equity holders in the year:
		Final dividend for the year ended 31 May 2009 of 3.00p
		(2008: 2.20p per ordinary share)	2,252	1,741
		Special dividend for the year ended 31 May 2009 of 2.60p
		(2008: 1.60p per ordinary share)	1,953	1,266
			-------	-------
			4,205	3,007
			====	====
		The final dividend of 3.00p per ordinary share and the special dividend of 2.60p per ordinary share in respect of the year ended 31 May 2009 were paid on 9 October 2009 to shareholders on the register of members at the close of business on 11 September 2009. The dividends paid amounted to £4,205,000 in total. Subject to approval at the Annual General Meeting, the proposed final dividend of 3.60p per ordinary share will be paid on 8 October 2010 to shareholders on the register of members at the close of business on 17 September 2010.

Page 21 of 22

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 May 2010

Dividends continued The proposed final dividend for the year ended 31 May 2010 has not been included as a liability in these financial statements. Under IFRS the final dividend is not recognised until approved by the shareholders.  The total dividends payable in respect of the financial year which form the basis of the test under section 1158 of the Corporation Tax Act 2010 (formerly section 842 of the Income and Corporation Taxes Act 1988) are set out below:

			2010 £'000
	Revenue available for distribution by way of dividends for the year		3,449
	Proposed final dividend for the year ended 31 May 2010: 3.60p   (based on the 74,906,796 shares in issue at 3 August 2010)		(2,697)
			---------
	Undistributed revenue for section 1158 purposes*		752
			=====
	*Undistributed revenue comprises 12.6% of the income from investments of £5,961,000 (note 2).
7.	Called up share capital	2010 £'000	2009 £'000
	Authorised:
	188,000,000 ordinary shares of 25p each (2009: 188,000,000)	47,000	47,000
		=====	=====
	Allotted, issued and fully paid:
	74,906,796 ordinary shares of 25p each (2009: 77,370,296)	18,727	19,343
		=====	=====
	During the year the Company made market purchases for cancellation of 2,463,500 of its own issued ordinary shares (2009: 3,078,734) at a total cost of £4,151,000 (2009: £5,750,000). No shares have been bought back since 31 May 2010.

8.

Net asset value per ordinary share (Group and Company) The net asset value per ordinary share is based on the net assets attributable to the ordinary shares of £207,533,000 (2009: £156,349,000) and on the 74,906,796 ordinary shares in issue at 31 May 2010 (2009: 77,370,296). An alternative net asset value per ordinary share can be calculated by deducting from the total assets less current liabilities of the Group the preference stock and the debenture stock at their market (or fair) values rather than at their par (or book) values. The net asset value per ordinary share at 31 May 2010 calculated on this basis was 269.7p (2009: 196.9p). The Company has no securities in issue that could dilute the net asset value per ordinary share. The movement during the year of the net assets attributable to the ordinary shares was as follows:

		£'000
	Net assets attributable to the ordinary shares at 1 June 2009	156,349
	Net profit for the year	59,540
	Ordinary dividend paid in the year	(4,205)
	Repurchase of 2,463,500 ordinary shares	(4,151)
		----------
	Net assets attributable to the ordinary shares at 31 May 2010	207,533
		======

Page 22 of 22

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

Annual Financial Report for the year ended 31 May 2010

Notes to the Financial Statements continued

9.	2010 financial statements This condensed set of financial statements for the year ended 31 May 2010 does not constitute the statutory accounts for that period.  It is extracted from the Group's financial statements for the year, which have been audited but which have not yet been delivered to the Registrar of Companies.
10.	2009 financial statements The figures and financial information for the year ended 31 May 2009 are an extract of the published financial statements and do not constitute the statutory accounts for that year.  Those accounts have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.
11.	Annual Report and AGM The full Report and Financial Statements for the year ended 31 May 2010 will be posted to shareholders in the second half of August 2010 and copies will be available thereafter from the Secretary at the Company's Registered Office, 201 Bishopsgate, London EC2M 3AE. The Annual General Meeting will be held on Friday 24 September 2010 at 11.30 am.
12.	Website This document, and the Report and Financial Statements for the year ended 31 May 2010, will be available on the following website: www.hendersonsmallercompanies.com.

For further information please contact:

Neil Hermon

Fund Manager

The Henderson Smaller Companies Investment Trust plc                           

Telephone: [phone]

James de Sausmarez

Head of Investment Trusts

Henderson Global Investors

Telephone: [phone]

Sarah Gibbons-Cook

Investor Relations and PR Manager

Henderson Global Investors

Telephone: [phone]

- ENDS -

 

END

 

 

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