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Henderson Smllr Cos (HSL)

  Print      Mail a friend       Annual reports

Monday 24 July, 2006

Henderson Smllr Cos

Final Results

Henderson Smaller Cos Inv Tst PLC
24 July 2006

                                                                    Page 1 of 18

24 July 2006


              THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC
       Unaudited Preliminary Group Results for the year ended 31 May 2006


KEY POINTS
     
•    Good performance*
     -    NAV total return 31%
     -    Benchmark total return 30%               
•    Proposed dividend increased by 17% to 1.35p per share
•    Confidence in the outlook for UK smaller companies and in the ability
     of the Trust to outperform

                                           *source:  Fundamental Data/Datastream


Extracts from the Chairman's Statement

I am pleased to report a year of good investment performance.  The net asset
value per share increased by 31%, on a total return basis.  By comparison our
benchmark index returned 30%.  This result is despite a disappointing first half
and the impact of the market correction that began shortly before our year end.
A principal contribution to performance is the disciplined and diligent approach
of our fund management team at Henderson, Neil Hermon and Theresa Wat.  In the
three and a half years since they took over the Trust's management, the net
asset value per share has increased by 188% on a total return basis.

In common with other UK companies that publish consolidated accounts, we adopted
IFRS last year.  This is our first annual report to reflect the new accounting
standards.  There are a number of changes but only two of the new requirements
have an effect on the net asset value per share.  First, our investments are now
described as 'held at fair value through profit or loss'.  As such they are
valued at bid (or selling) prices rather than at mid-market prices.  The effect
on the valuation of the portfolio is minimal, being a reduction in the opening
valuation of £169,000 (or 0.07%).  Second, dividends are no longer included in
the accounts as payable until they have been approved.  Accordingly, the
dividend payable in respect of the year ended 31 May 2005 is added back to the
assets at that date and shown as paid, in the new Statement of Changes in
Equity, in the year ended 31 May 2006.

In the annual report last year, I referred to the revision of our fee
arrangements with Henderson.  The new terms, which were effective for the whole
of the year under review, comprise principally a reduction in the rate at which
the annual management fee is calculated and the introduction of a performance
fee.  I am pleased to report that our results have generated a performance fee,
all of which is allocated to capital.


                                                                    Page 2 of 18


              THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC
       Unaudited Preliminary Group Results for the year ended 31 May 2006


Extracts from the Chairman's Statement, continued

The revenue account has strengthened.  Investment income has risen. The revenue
return per share rose by 27% to 1.83p.  We propose a single and final dividend
for the year of 1.35p per share, an increase of 17% on that paid last year.
During the year we bought back and cancelled one and a half million shares,
equivalent to about 1.5% of those in issue at 31 May 2005, at an average
discount (calculated by valuing the debenture stock at par) of just over 18%.

Paul Manduca retires from the Board at the conclusion of the Annual General
Meeting on 29 September 2006.  He has served the Company with great loyalty for
some 23 years, initially as Fund Manager and for the past 19 years as a
non-executive director.  We shall miss his enormous investment experience and
his particular expertise in investment trust matters.  We are delighted to
welcome Keith Percy to the Board.  He meets fully the qualities and skills that
we identified for the appointment and we look forward very much to working with
him.

The absolute returns achieved in the past year have exceeded expectations but
the recent market correction, together with a marked increase in volatility,
remind us that equity investment can at times be a rough ride.  However, we are
confident about the general outlook.  Company valuations are not unreasonable
and corporate activity continues to provide support to share prices.  As ever,
prudent stock selection remains the key to success and we remain confident of
our fund managers' proven abilities in this regard.


                                                                    Page 3 of 18


              THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC
       Unaudited Preliminary Group Results for the year ended 31 May 2006


Consolidated Income Statement
for the year ended 31 May 2006
                                                                         Year ended 31 May 2005
                                       Year ended 31 May 2006              Restated (note 5)
                                     Revenue    Capital                Revenue     Capital
                                      return     return      Total      return      return      Total
                                       £'000      £'000      £'000       £'000       £'000      £'000

Investment income                      5,743          -      5,743       5,320           -      5,320
Other income                             151          -        151         136           -        136
Gains on investments held at fair
value
                                           -     65,745     65,745           -      39,946     39,946
   through profit or loss
                                  ---------- ---------- ----------  ----------  ---------- ----------
Total income                           5,894     65,745     71,639       5,456      39,946     45,402
Expenses
Management and performance fees      (1,120)      (583)    (1,703)     (1,120)           -    (1,120)
Other expenses                         (377)          -      (377)       (319)           -      (319)
                                   --------- ---------- ---------- ----------- -----------  ---------
Profit before finance costs and
taxation                               4,397     65,162     69,559       4,017      39,946     43,963

Finance costs                        (2,554)          -    (2,554)     (2,454)           -    (2,454)
                                   ---------   --------   --------    --------   ---------  ---------
Profit before taxation                 1,843     65,162     67,005       1,563      39,946     41,509
Taxation                                   -          -          -           -           -          -
                                   ---------   --------   --------    --------   ---------  ---------
Profit for the year                    1,843     65,162     67,005       1,563      39,946     41,509
                                      ======     ======     ======      ======      ======      =====

Earnings per ordinary share (note      1.83p     64.62p     66.45p       1.44p      36.73p     38.17p
2)
                                      ======     ======     ======      ======      ======      =====


The total column of this statement represents the Group's Income Statement,
prepared in accordance with IFRS.

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

All items in the above statement derive from the continuing operations.

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 4 of 18


              THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC
       Unaudited Preliminary Group Results for the year ended 31 May 2006


Consolidated and Parent Company Statements of Changes in Equity
for the year ended 31 May 2006

                                                                   Consolidated
                                                              Year ended 31 May 2006
                                           Called up         Capital         Other
                                               share      redemption       capital     Revenue
                                             capital         reserve      reserves     reserve       Total
                                               £'000           £'000         £'000       £'000       £'000

Balance at 31 May 2005 (as restated)          25,414          20,002       167,325       5,330     218,071
Buy-backs of ordinary shares                   (367)             367       (2,962)           -     (2,962)
Profit for the year                                -               -        65,162       1,843      67,005
Ordinary dividend paid                             -               -             -     (1,161)     (1,161)
                                          ----------      ----------    ----------  ----------  ----------
Balance at 31 May 2006                        25,047          20,369       229,525       6,012     280,953
                                              ======          ======        ======       =====      ======

                                                                   Consolidated
                                                              Year ended 31 May 2005
                                           Called up         Capital         Other
                                               share      redemption       capital     Revenue
                                             capital         reserve      reserves     reserve       Total
                                               £'000           £'000         £'000       £'000       £'000

Balance at 31 May 2004 (as restated)          28,691          16,725       148,210       4,862     198,488
Buy-backs of ordinary shares                 (3,277)           3,277      (20,831)           -    (20,831)
Profit for the year                                -               -        39,946       1,563      41,509
Ordinary dividend paid                             -               -             -     (1,095)     (1,095)
                                          ----------      ----------    ----------  ----------  ----------
Balance at 31 May 2005                        25,414          20,002       167,325       5,330     218,071
                                              ======          ======        ======       =====      ======

                                                                     Company
                                                              Year ended 31 May 2006
                                           Called up         Capital         Other
                                               share      redemption       capital     Revenue
                                             capital         reserve      reserves     reserve       Total
                                               £'000           £'000         £'000       £'000       £'000

Balance at 31 May 2005 (as restated)          25,414          20,002       169,594       3,061     218,071
Buy-backs of ordinary shares                   (367)             367       (2,962)           -     (2,962)
Profit for the year                                -               -        65,160       1,845      67,005
Ordinary dividend paid                             -               -             -     (1,161)     (1,161)
                                          ----------      ----------    ----------  ----------  ----------
Balance at 31 May 2006                        25,047          20,369       231,792       3,745     280,953
                                              ======          ======        ======       =====      ======

                                                                     Company
                                                              Year ended 31 May 2005
                                           Called up         Capital         Other
                                               share      redemption       capital     Revenue
                                             capital         reserve      reserves     reserve       Total
                                               £'000           £'000         £'000       £'000       £'000

Balance at 31 May 2004 (as restated)          28,691          16,725       150,480       2,592     198,488
Buy-backs of ordinary shares                 (3,277)           3,277      (20,831)           -    (20,831)
Profit for the year                                -               -        39,945       1,564      41,509
Ordinary dividend paid                             -               -             -     (1,095)     (1,095)
                                          ----------      ----------    ----------  ----------  ----------
Balance at 31 May 2005                        25,414          20,002       169,594       3,061     218,071
                                              ======          ======        ======       =====      ======


                                                                    Page 5 of 18


              THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC
       Unaudited Preliminary Group Results for the year ended 31 May 2006

Consolidated and Parent Company Balance Sheets
at 31 May 2006
                                                              ConsolidatedRestated                    Company
                                                                                                     Restated
                                                                          (note 5)                   (note 5)
                                               Consolidated                             Company          
                                                       2006                   2005         2006          2005
                                                      £'000                  £'000        £'000         £'000
Non current assets
Investments held at fair value through
   profit or loss                                   317,663                245,058      319,930       247,327
                                                -----------            -----------  -----------   -----------
Current assets
Other receivables                                     2,266                  1,157        2,266         1,157
Cash and cash equivalents                               958                      -          958             -
                                                 ----------             ----------   ----------    ----------
                                                      3,224                  1,157        3,224         1,157
                                                 ----------             ----------   ----------    ----------

                                                 ----------             ----------    ---------    ----------
Total assets                                        320,887                246,215      323,154       248,484
                                                     ======                 ======       ======        ======

Current liabilities
Other payables                                        (925)                  (560)      (3,192)       (2,829)
Bank loans and overdrafts                          (19,000)                (7,575)     (19,000)       (7,575)
                                                 ----------             ----------   ----------    ----------
                                                   (19,925)                (8,135)     (22,192)      (10,404)
                                                 ----------             ----------   ----------    ----------

Total assets less current liabilities               300,962                238,080      300,962       238,080

Non current liabilities
Financial liabilities                              (20,009)               (20,009)     (20,009)      (20,009)
                                                 ----------             ----------   ----------    ----------
Net assets                                          280,953                218,071      280,953       218,071
                                                 ----------             ----------   ----------    ----------

Equity attributable to equity
shareholders

Called up share capital                              25,047                 25,414       25,047        25,414
Capital redemption reserve                           20,369                 20,002       20,369        20,002
Retained earnings
   Other capital reserves                           229,525                167,325      231,792       169,594
   Revenue reserve                                    6,012                  5,330        3,745         3,061
                                                 ----------            -----------  -----------    ----------
Total equity                                        280,953                218,071      280,953       218,071
                                                     ======                 ======       ======        ======

Net asset value per ordinary share  (note
4)                                                   280.4p                 214.5p       280.4p        214.5p
                                                     ======                 ======       ======        ======


                                                                    Page 6 of 18


              THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC
       Unaudited Preliminary Group Results for the year ended 31 May 2006

Consolidated and Parent Company Cash Flow Statements
for the year ended 31 May 2006

                                                                    Year ended                Year ended
                                                                   31 May 2006                31 May 2005
                                                             Consolidated      Company  Consolidated     Company
                                                                     £'000       £'000         £'000       £'000
Operating activities
Profit before taxation                                              67,005      67,005        41,509      41,509
Add back interest paid                                               2,557       2,557         3,503       3,503
Less: gains on investments held at fair value
    through profit or loss                                        (65,745)    (65,743)      (39,946)    (39,945)
Less: net (purchases)/sales of investments held
    at fair value though profit or loss                            (6,860)     (6,860)        21,363      21,363
(Increase)/decrease in other receivables                             (423)       (423)           265         265
Increase in amounts due from brokers                                 (690)       (690)           (2)         (2)
Increase/(decrease) in other payables                                  412         410         (918)       (919)
Decrease in amounts due to brokers                                    (47)        (47)         (894)       (894)
                                                                ----------   ---------     ---------   ---------
Net cash (outflow)/inflow from operating
activities before interest and taxation                            (3,791)     (3,791)        24,880      24,880

Interest paid                                                      (2,557)     (2,557)       (3,503)     (3,503)
Taxation on investment income                                          (7)         (7)           (3)         (3)
                                                                 ---------  ----------    ----------  ----------
Net cash (outflow)/inflow from operating activities                (6,355)     (6,355)        21,374      21,374
                                                                     =====       =====         =====       =====
Financing activities
Equity dividend paid                                               (1,150)     (1,150)       (1,106)     (1,106)
Buy-backs of ordinary shares                                       (2,962)     (2,962)      (20,831)    (20,831)
Drawn down/(repayment) of loans                                     11,786      11,786         (286)       (286)
                                                                 ---------    --------    ---------- -----------
Net cash from/(used in) financing                                    7,674       7,674      (22,223)    (22,223)
                                                                     =====       =====        ======      ======
Increase/(decrease) in cash and cash equivalents                     1,319       1,319         (849)       (849)
Cash and cash equivalents at the start of the year                   (361)       (361)           488         488
                                                                 ---------    --------     --------- -----------
Cash and cash equivalents at the end of the year                       958         958         (361)       (361)
                                                                     =====       =====        ======      ======


                                                                    Page 7 of 18


              THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC
       Unaudited Preliminary Group Results for the year ended 31 May 2006


Notes to the Accounts
     
1.   Accounting Policies
          
     (a)  Basis of preparation

          The consolidated financial information for the year ended 31 May 2006 
          has been prepared in accordance with International Financial Reporting 
          Standards ('IFRS'), and with those parts of the Companies Act 1985 
          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 accounts have been prepared on the historical cost basis, except 
          for the revaluation of certain financial instruments.  The principal 
          accounting policies adopted are set out below. Where presentational 
          guidance set out in the Statement of Recommended Practice ('the SORP') 
          for investment trusts issued by the Association of Investment Trust 
          Companies ('the AITC') in December 2005 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.

          These financial statements are presented in pounds sterling because 
          that is the currency of the primary economic environment in which the 
          Group operates and is therefore considered to be the functional currency.
          
1.   (b)  First time adoption of IFRS

          The date of transition to IFRS for the Group is 1 June 2004.  The IFRS 
          accounting policies set out herein have been applied retrospectively 
          to the opening balance sheet as at 1 June 2004 and all subsequent 
          periods. The disclosures required by First-time Adoption of 
          International Financial Reporting Standards ('IFRS 1') concerning the 
          transition from UK GAAP to IFRS are given in notes 5 and 6.
          
1.   (c)  Basis of consolidation

          The Group accounts consolidate the accounts of the Company and of its 
          wholly owned subsidiary undertaking, Henderson Smaller Companies 
          Finance Limited.  The inter-group balances are eliminated on 
          consolidation.


                                                                    Page 8 of 18



              THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC
       Unaudited Preliminary Group Results for the year ended 31 May 2006


Notes to the Accounts, continued

          
1.   (d)  Investments held at fair value through profit or loss

          All investments are designated upon initial recognition as held at 
          fair value through profit or loss. Assets are de-recognised at the 
          trade date of the disposal. Proceeds are measured at fair value, which 
          is regarded as the proceeds of sale less any transaction costs. The 
          fair value of the financial instruments is based on their quoted bid 
          price at the balance sheet date, without deduction for the estimated 
          future selling costs. Unquoted investments are valued by the directors
          using primary valuation techniques such as earnings, multiples, recent 
          transactions and net assets. Where fair value cannot reliably be 
          measured the investment will be carried at the previous reporting date 
          value unless there is evidence that the investment has since been 
          impaired, in which case the value will be reduced.

          Changes in the fair value of investments held at fair value through 
          profit and or loss and gains and losses on disposal are recognised in 
          the Income Statement as 'Gains or losses on investments held at fair 
          value through profit or loss'.  Also included within this caption are 
          transaction costs in relation to the purchase or sale of investments, 
          including the difference between the purchase price of an investment 
          and its bid price at the date of purchase.

          
1.   (e)  Presentation of Income Statement

          In order to better reflect the activities of an investment trust 
          company, and in accordance with guidance issued by the Association of 
          Investment Trust Companies ('AITC'), supplementary information which 
          analyses the Income Statement between items of a revenue and capital 
          nature has been presented alongside the Income Statement. In 
          accordance with the Company's status as a UK investment company under 
          section 266 of the Companies Act 1985, net capital returns may not be 
          distributed by way of dividend.  Additionally, the net revenue is the 
          measure the directors believe appropriate in assessing the Group's 
          compliance with certain requirements set out in section 842 of the 
          Income and Corporation Taxes Act 1988.

          
1.   (f)  Income

          Dividends receivable on equity shares are recognised as revenue for 
          the year on an ex-dividend basis. Special dividends are treated as 
          revenue return or as capital return, depending on the facts of each 
          individual case. Income from fixed interest debt securities is 
          recognised using the effective interest rate method. The trading 
          profits of the subsidiary undertaking, which represent realised gains 
          and losses on the sale of current asset investments, are dealt with in 
          the revenue column of the Income Statement as a revenue item. Bank 
          deposit interest is accounted for on an accruals basis. Underwriting 
          commission is recognised as it is earned.

                                                                    Page 9 of 18


              THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC
       Unaudited Preliminary Group Results for the year ended 31 May 2006


Notes to the Accounts, continued
     
          
1.   (g)  Expenses

          All expenses and interest payable are accounted for on an accruals 
          basis. All administration expenses, including the management fee and 
          interest payable, are charged to the revenue column of the Income 
          Statement.  Expenses which are incidental to the purchase or sale of 
          an investment are charged to the capital column of the Income 
          Statement and allocated to the other capital reserves.

          Purchase and sale transaction costs for the year ended 31 May 2006 
          were £328,000 and £98,000 respectively (2005: transaction costs of 
          purchase £250,000; transaction costs of sales £116,000).
          These comprise mainly stamp duty and commission.

          Any performance fee including related irrecoverable VAT, is allocated 
          wholly to capital, reflecting the fact that, although they are 
          calculated on a total return basis, they are expected to be
          attributable largely, if not wholly, to capital performance.
          
1.   (h)  Taxation

          The tax expense represents the sum of the tax currently payable and 
          deferred tax.

          The tax currently payable is based on the taxable profit for the 
          period.  Taxable profit differs from net profit as reported in the 
          Income Statement because it excludes items of income or expense that 
          are taxable or deductible in other years and it further excludes items 
          that are never taxable or deductible.  The Group's liability for 
          current tax is calculated using tax rates that were applicable at the 
          balance sheet date.

          In line with the recommendations of the SORP, the allocation method 
          used to calculate tax relief on expenses presented against capital 
          returns in the supplementary information in the Income Statement is 
          the 'marginal basis'. Under this basis, if taxable income is capable 
          of being offset entirely by expenses presented in the revenue return 
          column of the Income Statement, then no tax relief is transferred to 
          the capital return column.

          Deferred tax is the tax expected to be payable or recoverable on 
          differences between the carrying amounts of assets and liabilities in 
          the financial statements and the corresponding tax bases used in the 
          computation of taxable profit, and is accounted for using the balance 
          sheet liability method. Deferred tax liabilities are recognised for 
          all taxable temporary differences and deferred tax assets are 
          recognised to the extent that it is probable that taxable profits will 
          be available against which deductible temporary differences can be 
          utilised.  Investment trusts which have approval as such under section 
          842 of the Income and Corporation Taxes Act 1988 are not liable for
          taxation on capital gains.

          The carrying amount of deferred tax assets is reviewed at each balance 
          sheet date and reduced to the extent that it is no longer probable 
          that sufficient taxable profits will be available to allow all or part 
          of the asset to be recovered.


                                                                   Page 10 of 18

              THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC
       Unaudited Preliminary Group Results for the year ended 31 May 2006


Notes to the Accounts, continued

          Deferred tax is calculated at the tax rates that are expected to apply 
          in the period when the liability is settled or the asset is realised.  
          Deferred tax is charged or credited in the Income Statement, except 
          when it relates to items charged or credited directly to equity, in 
          which case the deferred tax is also dealt with in equity.

          
1.   (I)  Foreign currency

          For the purposes of the consolidated accounts, the results and 
          financial position of each entity is expressed in pounds sterling, 
          which is the functional currency of the Company and the presentational 
          currency of the Group.  Sterling is the functional currency because it 
          is the currency of the primary economic environment in which the Group 
          operates.

          Transactions recorded in overseas currencies during the year are 
          translated into sterling at the appropriate daily exchange rates. 
          Assets and liabilities denominated in overseas currencies at the
          balance sheet date are translated into sterling at the exchange rates 
          ruling at that date.

          
1.   (j)  Cash and cash equivalents

          Cash comprises cash in hand and demand deposits.  Cash equivalents are 
          short-term, highly liquid investments that are readily convertible to 
          known amounts of cash and that are subject to an insignificant risk of 
          changes in value.

          
1.   (k)  Bank borrowings

          Interest-bearing bank loans and overdrafts are recorded as the 
          proceeds received, net of direct issues costs. Finance charges, 
          including premiums payable on settlement or redemption and direct
          issue costs, are accounted for on an accruals basis in the Income 
          Statement using the effective interest rate method and are added to 
          the carrying amount of the instrument to the extent that they are not 
          settled in the period in which they arise.

     
2.   Earnings per ordinary share

     The earnings per ordinary share figure is based on the net gains for the 
     year of £67,005,000 (2005: £41,509,000) and on 100,827,720 (2005: 
     108,747,775) ordinary shares, being the weighted average number of ordinary 
     shares in issue during the year.

     The earnings 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 per ordinary 
     share are the same.


                                                                   Page 11 of 18


              THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC
       Unaudited Preliminary Group Results for the year ended 31 May 2006


Notes to the Accounts, continued

     
2.   Earnings per ordinary share, continued
                                                                                      31 May 2005
                                                                    31 May               Restated
                                                                      2006               (note 5)
                                                                     £'000                  £'000

         Net revenue gain                                            1,843                  1,563
         Net capital gain                                           65,162                 39,946
                                                                  --------               --------
         Net total gain                                             67,005                 41,509
                                                                     =====                  =====
         Weighed average number of
           ordinary shares in issue during
         the year                                              100,827,720            108,747,775

                                                                     pence                  pence
         Revenue earnings per ordinary
           share                                                      1.83                   1.44
         Capital earnings per ordinary
          share                                                      64.62                  36.73
                                                                 ---------               --------
         Total earnings per ordinary share                           66.45                  38.17
                                                                     =====                  =====

     
3.   Ordinary share capital

     At 31 May 2006 there were 100,186,282 ordinary shares in issue (2005: 
     101,656,282). During the year ended 31 May 2006 the Company bought 
     1,470,000 of its own issued ordinary shares in the market for cancellation
     (2005: 13,105,558).

4.   Net asset value per share

     The net asset value per ordinary share is based on the net assets 
     attributed to the ordinary shares of £280,953,000 (2005; £218,071,000 as 
     restated) and on the 100,186,282 ordinary shares in issue at 31 May
     2006 (2005; 101,656,282).



                                                                   Page 12 of 18


              THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC
       Unaudited Preliminary Group Results for the year ended 31 May 2006


Notes to the Accounts, continued

          
5.   (a)  Restatement of balances as at and for the year ended 31 May 2005

          As at 1 June 2005 the Company adopted International Financial 
          Reporting Standards.  In accordance with IFRS 1 (First-time Adoption 
          of International Financial Reporting Standards) the following is a
          reconciliation of the results as at and for the year ended 31 May 
          2005, previously reported under the applicable UK Accounting Standards 
          and the SORP, to the restated IFRS results.

                                                                           Consolidated
                                                        Previously reported Adjustments
                                                                     31 May                           Restated
                                                                       2005                     31 May 2005
                                              Note                    £'000           £'000              £'000

            Fixed assets
            Investments                       1                     245,227           (169)            245,058
            Current assets                                            1,157               -              1,157
            Current liabilities               2                     (9,304)           1,169            (8,135)
            Total assets less current                            ----------        --------         ----------
               liabilities                                          237,080           1,000            238,080
            Provision for liabilities and
            charges                           3                    (20,000)             (9)           (20,009)
            Investments                                          ----------        --------         ----------
                                                                    217,080             991            218,071
                                                                     ======           =====             ======


           Capital and reserves
           Called up share capital            3                         25,423              (9)           25,414
           Capital redemption reserve                                   20,002                -           20,002
           Capital reserve - realised         4                        123,221        (123,221)                -
           Capital reserve - unrealised/
              revaluation reserve             4                         44,273         (44,273)                -
           Other capital reserves             1, 4                           -          167,325          167,325
           Revenue reserve                    2                          4,161            1,169            5,330
                                                                    ----------        ---------       ----------
                                                                       217,080              991          218,071
                                                                        ======            =====           ======
           Net asset value per share                                   213.54p            0.98p          214.52p
                                                                        ======            =====           ======



                                                                   Page 13 of 18

                                                                                                   
              THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC
       Unaudited Preliminary Group Results for the year ended 31 May 2006


Notes to the Accounts, continued


Notes to the reconciliation
     
1.   Investments are classified as held at fair value through profit or loss 
     under IFRS and are carried at bid prices which total their fair value. They 
     were carried at mid prices previously. The aggregate difference, being a 
     revaluation downwards of £169,000, also decreases other capital reserves.
     
2.   No provision has been made for the final dividend on the ordinary shares 
     for the year ended 31 May 2005 of £1,169,000. Under IFRS, the final 
     dividend is not recognised until approved by the shareholders.
     
3.   Under IFRS the Company's preference stock is classified as debt.
     
4.   The 'capital reserve - realised' and the 'capital reserve - unrealised' are 
     now reclassified as 'other capital reserves'.

          
5.   (a)  Restatement of balances as at and for the year ended 31 May 2005, 
          continued

                                                                                  Company
                                                     Previously reported 31     Adjustments
                                                                   May 2005                  Restated 31 May
                                                                                                        2005
                                              Note                    £'000           £'000            £'000
            Investments                       1                     247,496           (169)          247,327
            Current assets                                            1,157               -            1,157
            Creditors: amounts falling
            due                               2
              within one year                                      (11,573)           1,169         (10,404)
                                                                 ----------       ---------       ----------

            Total assets less current                               237,080           1,000          238,080
              liabilities
            Creditors: amounts falling        3                    (20,000)             (9)         (20,009)
            due                                                  ----------       ---------      -----------
              after one year                                        217,080             991          218,071
                                                                     ======           =====           ======


           Capital and reserves
           Called up share capital            3                         25,423              (9)           25,414
           Capital redemption reserve                                   20,002                -           20,002
           Capital reserve - realised          4                       123,221        (123,221)                -
           Capital reserve - unrealised/
             revaluation reserve               4                        46,542         (46,542)                -
           Other capital reserves             1, 4                           -          169,594          169,594
           Revenue reserve                    2                          1,892            1,169            3,061
                                                                    ----------        ---------       ----------
                                                                       217,080              991          218,071
                                                                        ======            =====           ======

           Net asset value per share                                   213.54p            0.98p          214.52p
                                                                        ======            =====           ======


                                                                   Page 14 of 18



              THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

       Unaudited Preliminary Group Results for the year ended 31 May 2006



Notes to the Accounts, continued

Notes to the reconciliation
     
1.   Investments are classified as held at fair value through profit or loss 
     under IFRS and are carried at bid prices which total their fair value They 
     were carried at mid prices previously. The aggregate difference, being a 
     revaluation downwards of £169,000, also decreases other capital reserves.
     
2.   No provision has been made for the final dividend on the ordinary shares 
     for the year ended 31 May 2005 of £1,169,000. Under IFRS, the final 
     dividend is not recognised until approved by the shareholders.
     
3.   Under IFRS the Company's preference stock is classified as debt.
     
4.   The 'capital reserve - realised' and the 'capital reserve - unrealised' are 
     now reclassified as 'other capital reserves'.
          
5.   (b)  Reconciliation of the Statement of Total Return to the Income 
          Statement for the year ended 31 May 2005

          Under IFRS the Income Statement is the equivalent of the Statement of 
          Total Return as reported previously.


                                                                                                          EPS
                                                                                           2005        impact
                                                                        Note              £'000         pence
           Net return on ordinary activities after taxation
             Per Statement of Total Return                                               41,484             -
           Change from mid to bid basis at 31 May 2004                     1                194          0.18
           Change from mid to bid basis at 31 May 2005                     1              (169)        (0.16)
                                                                                      ---------       -------
           Net gain per Income Statement                                                 41,509          0.02
                                                                                          =====          ====


Notes to the reconciliation
     
1.   The portfolio valuations at 31 May 2004 and 31 May 2005 are valued at fair 
     value under IFRS.  These values are lower than the previous valuations by 
     £194,000 and £169,000 respectively.


                                                                   Page 15 of 18


              THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC
       Unaudited Preliminary Group Results for the year ended 31 May 2006


Notes to the Accounts, continued

          
5.   (c)  Reconciliation of the Cash Flow Statement for the year ended 31 May 
          2005

                                                                             (Audited)
                                                                            Previously      Effect    Adjusted
                                                                              reported          of  cash flows
                                                                            cash flows  transition   
                                                                                  2006     to IFRS        2005  
                                                                  Note           £'000       £'000       £'000
            Net cash inflow from operating
               activities                                              1         4,410      16,964      21,374
            Returns on investments and
              servicing of finance                                     1       (3,503)       3,503           -
            Taxation                                                                 -           -           -
            Net cash inflow from financial                                                       -           -
              investment                                                        20,467    (20,467)           -
            Equity dividends paid                                      2       (1,106)       1,106           -
                                                                             ---------   ---------    --------
            Net cash inflow before
              financing                                                2        20,268       1,106      21,374
            Financing                                                  2      (21,117)     (1,106)    (22,223)
                                                                             ---------    --------    --------
            Decrease in cash                                                     (849)           -       (849)
                                                                                ======       =====       =====


Notes to the reconciliation
     
1.   Servicing of finance, taxation and net cash inflow from financial 
     investment have now been analysed within operating activities.
     
2.   Equity dividends paid on equity shares are now analysed within financing.


     
6.   Restatement of opening balances as at 31 May 2004

     As at 1 June 2005 the Company adopted International Financial Reporting 
     Standards with a date of transition of 1 June 2004.  In accordance with 
     IFRS 1 the following is a reconciliation of the results as at and for the 
     year ended 31 May 2004, previously reported under the applicable UK 
     Accounting Standards and the SORP, to the restated IFRS results.


                                                                   Page 16 of 18



              THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

       Unaudited Preliminary Group Results for the year ended 31 May 2006



Notes to the Accounts, continued


                                                    Consolidated                               Company
                                       Previously                             Previously
                                      reported 31                               reported   Adjustments    Restated
                                              May    Adjustments    Restated      31 May
                                             2004                31 May 2004        2004               31 May 2004
                                            £'000          £'000       £'000       £'000         £'000       £'000
                               Note
    Fixed assets
    Investments                1          226,669          (194)     226,475     228,939         (194)     228,745
    Current assets                          1,894              -       1,894       1,894             -       1,894
    Current liabilities        2         (11,020)          1,148     (9,872)    (13,290)         1,148    (12,142)
                                       ----------     ----------  ----------  ----------    ----------  ----------
    Total assets less current
    liabilities                           217,543            954     218,497     217,543           954     218,497

    Provisions for liabilities
      and charges                        (20,000)            (9)    (20,009)    (20,000)           (9)    (20,009)
                                       ----------     ----------  ----------  ----------    ----------  ----------
                                          197,543            945     198,488     197,543           945     198,488
                                           ======         ======      ======      ======        ======      ======


    Capital and reserves

    Called up share capital    3           28,700           (9)      28,691      28,700           (9)      28,691
    Capital redemption reserve             16,725             -      16,725      16,725             -      16,725
    Capital reserve - realised 4          121,809     (121,809)           -     121,809     (121,809)           -
    Capital reserve -
    unrealised/
    revaluation reserve         4          26,595      (26,595)           -      28,865      (28,865)           -
     Other capital reserves    1, 4             -       148,210    148,210            -       150,480     150,480
    Revenue reserve            2            3,714         1,148       4,862       1,444         1,148       2,592
                                       ----------    ----------  ----------  ----------    ----------  ----------
                                          197,543           945     198,488     197,543           945     198,488
                                           ======        ======      ======      ======        ======      ======
    Net asset value per                   172.13p         0.83p     172.96p     172.13p         0.83p     172.96p
      ordinary share                   ----------      --------   ---------  ----------    ----------  ----------



                                                                   Page 17 of 18


              THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC
       Unaudited Preliminary Group Results for the year ended 31 May 2006

     
6.   Restatement of opening balances as at 31 May 2004, continued


     Notes to the reconciliation
          
     1.   Investments are classified as held at fair value under IFRS and are 
          carried at bid prices which total their fair value. Previously, under 
          UK GAAP, they were carried at mid prices.  The aggregate difference, 
          being a revaluation downwards of £194,000, also decreases other 
          capital reserves.
          
     2.   No provision has been made for the final dividend on the ordinary 
          shares for the year ended 31 May 2004 of £1,148,000. Under IFRS, the 
          final dividend is not recognised until approved by the shareholders.
          
     3.   Under IFRS the Company's preference stock is classified as debt.
          
     4.   The 'capital reserve - realised' and the 'capital reserve - 
          unrealised' are now reclassified as 'other capital reserves'.

     
7.   Dividend

     Subject to approval at the annual general meeting, the recommended final 
     dividend of 1.35p per ordinary share will be paid on 6 October 2006 to 
     shareholders on the register of members at the close of business on 1 
     September 2006.


8.   Basis of consolidation

     The Group accounts consolidate the accounts of the Company and of its 
     wholly owned subsidiary undertaking, Henderson Smaller Companies Finance 
     Limited.


9.   2006 accounts

     The preliminary figures for the year ended 31 May 2006, which do not 
     constitute statutory accounts, are an extract from the Group's draft 
     accounts for the year.  These accounts have not yet been delivered to the 
     Registrar of Companies, nor have the auditors yet reported on them.

     
10.  2005 accounts

     The figures and financial information for the year ended 31 May 2005 are an 
     extract of the latest published accounts 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 237(2) or 
     section 237(3) of the Companies Act 1985.


11.  Annual report and AGM

     The full annual report and accounts will be posted to shareholders in 
     August 2006 and copies will be available thereafter from the Secretary at 
     the Company's Registered Office, 4 Broadgate, London EC2M 2DA.

     The Annual General Meeting will be held on Friday 29 September 2006 at 
     2.00 pm.



                                                                   Page 18 of 18


              THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC
       Unaudited Preliminary Group Results for the year ended 31 May 2006



For further information please contact:

Neil Hermon
Fund Manager
The Henderson Smaller Companies Investment Trust plc
Telephone: 020 7818 4351

Theresa Wat
Deputy Fund Manager
The Henderson Smaller Companies Investment Trust plc
Telephone: 020 7818 4644

James de Sausmarez
Head of Investment Trusts
Henderson Global Investors
Telephone: 020 7818 3349

Sarah Gibbons-Cook
Investor Relations and PR Manager
Henderson Global Investors
Telephone: 020 7818 3198


                      This information is provided by RNS
            The company news service from the London Stock Exchange