Annual Financial Report

Henderson Smaller Cos Inv Tst PLC

30 July 2026

 

JANUS HENDERSON FUND MANAGEMENT UK LIMITED

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

LEGAL ENTITY IDENTIFIER: 213800NE2NCQ67M2M998

THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 31 MAY 2026

The Henderson Smaller Companies Investment Trust plc (the "Company" or "HSL") announces its financial results for the year ended 31 May 2026.

Highlights

• Net Asset Value ("NAV") total return of +11.8% compared with +12.3% for the Deutsche Numis Smaller Companies Index (excluding investment companies) total return (the "Benchmark"). Share price total return of +12.6%;
• Total dividend increased to 29.0 pence per ordinary share (2025: 28.0p), a year-on-year increase of 3.6%, extending the Company's record of annual dividend growth to 23 consecutive years and reaffirming the Company's status as an AIC Dividend Hero;
• Ongoing charge of 0.53% for the year, materially lower than the Company's peer group's average of 0.99%; and
• Appointment of Cassie Herlihy as Deputy Fund Manager in November 2025, supporting Indri van Hien, who leads the fund management team.

Penny Freer, Chair of the Company commented:

"The Company delivered strong positive absolute returns and outperformed most of its sector peers."

"The Fund Managers have refined the investment process to strengthen stock selection, while preserving the

Company's core philosophy of investing in growth at the right price."

Indri van Hien commented:

"Investors are facing a generationally attractive entry point in UK small-caps where valuations remain attractive and sit well below long-term averages."

"The underlying performance of our portfolio companies has been robust, and we continue to see upgraded forecast sales and earnings growth in aggregate."

The Company's Annual Report and Financial Statements for the year ended 31 May 2026 (the "Annual Report") is being published in hard copy format and an electronic copy will shortly be available to view and download from the Company's website: www.hendersonsmallercompanies.com.

For further information please contact:

Indri van Hien Cassie Herlihy Fund Managers Janus Henderson Investors Telephone: [phone]	Dan Howe Head of Investment Trusts Janus Henderson Investors Telephone: [phone]
Harriet Hall PR Director, Investment Trusts Janus Henderson Investors Telephone: [phone]

INVESTMENT OBJECTIVE

The Company aims to maximise shareholders' total returns (capital and income) by investing in smaller companies that are quoted in the United Kingdom.

PERFORMANCE

Total return performance to 31 May 2026
	1 year %	3 years %	5 years %	10 years %
NAV1	11.8	21.4	-13.9	75.1
Benchmark2	12.3	39.3	17.9	87.2
Average sector NAV3	10.1	26.0	10.9	89.2
Share price4	12.6	29.0	-17.1	95.4
AIC sector share price5	13.1	26.5	9.6	93.2

Performance	Year ended 31 May 2026	Year ended 31 May 2025
NAV per share at year end	1,004.8p	926.2p
Share price at year end	917.0p	841.0p
Discount at year end6	8.7%	9.2%
Gearing at year end	10.0%	10.2%
Dividend for the year7	29.0p	28.0p
Revenue return per ordinary share	26.11p	27.89p
Dividend yield8	3.2%	3.3%
Total net assets	£559m	£634m
Ongoing charge9	0.53%	0.45%

1    Net asset value ("NAV") per ordinary share total return with income reinvested

2    Deutsche Numis Smaller Companies Index (excluding investment companies) total return

3    Average NAV total return of the Association of Investment Companies ("AIC") UK Smaller Companies sector

4    Share price total return using mid-market closing price with income reinvested

5    Average share price total return of the AIC UK Smaller Companies sector

6    Calculated using the NAV and mid-market share price at year end

7    The figure for 2026 represents an interim dividend of 7.5p and a proposed final dividend of 21.5p, subject to shareholder approval

8    Based on the ordinary dividends paid and payable for the year and the mid-market share price at year end

9    No performance fee is included in this calculation as no performance fee was paid in 2026 or 2025

A glossary of terms and explanations of alternative performance measures are included in the Annual Report. Sources: Morningstar Direct, Janus Henderson, LSEG Datastream.

CHAIR'S STATEMENT

Dear Shareholder,

Performance

The year under review was marked by political upheaval in the UK and conflict overseas, unsettling expectations for interest rate cuts and broader easing in global financial conditions. Against this challenging backdrop, the Company delivered strong positive absolute returns and outperformed most of its sector peers.

The Company's net asset value ("NAV") per ordinary share total return rose by 11.8% and the share price total return rose by 12.6% in the year to 31 May 2026. This compared with a rise of 12.3% in the Deutsche Numis Smaller Companies Index (excluding investment companies) (the "benchmark") and a rise of 10.1% in the AIC UK Smaller Companies sector average NAV total return. The Company therefore marginally underperformed its benchmark by 0.5% over the year, while outperforming the peer group sector average by 1.7%. A detailed review of portfolio performance, including the principal contributors to, and detractors from, returns, is set out in the Fund Managers' Report.

Since the year end to 27 July 2026 the Company's NAV per ordinary share total return rose by 3.2% and the share price total return rose by 3.6%. This compares with a rise of 4.2% for the benchmark and a rise of 1.6% in the AIC UK Smaller Companies sector average NAV total return.

This marks the first year in which Indri van Hien has led the fund management team for the Company. Following a protracted period of underperformance, the Fund Managers have refined the investment process to strengthen stock selection, while preserving the Company's core philosophy of investing in growth at the right price. These refinements are now embedded, and the Board has monitored their implementation, the team's selling discipline and the consistency of the investment approach throughout the year.

Although elevated bond yields have continued to weigh on funds with a growth bias, the Board is encouraged by the marked improvement in stock selection, alongside the benefits of gearing and NAV accretion from share buybacks. The Board will continue to monitor progress closely. Further detail on performance and the outlook for markets can be found in the Fund Managers' Report within this Annual Report.

Dividend and earnings

Total revenue from the Company's portfolio declined from £23.1m to £18.5m, while earnings per share ("EPS") fell from 27.9p to 26.1p. The decline in total revenue was driven primarily by the Company's ongoing share buyback programme and also reflected, to a lesser extent, changes in portfolio composition and the continued preference among many UK companies for share buybacks over dividend growth or special dividends. The movement in EPS is also impacted by the accounting treatment of EPS, which is based on the weighted average number of shares in issue during the year rather than the period-end share count.

The Board is pleased to recommend an increased final dividend of 21.5p per share, which, together with the interim dividend of 7.5p paid in March 2026, takes the total dividend for the year to 29.0p per share - a 3.6% increase on the 28.0p paid in 2025. Subject to shareholder approval at the AGM, the final dividend will be paid on 23 October 2026 to shareholders on the register at 2 October 2026, with the shares quoted ex-dividend on

1 October 2026.

EPS is calculated using the weighted average number of shares in issue during the year, while the dividend is paid on the smaller number of shares actually in issue at the record date as a result of the share buyback programme. The recommended distribution is therefore supported by current year earnings together with a modest contribution from the Company's substantial revenue reserves.

This will be the 23rd consecutive year of growth in the annual dividend, reaffirming the Company's status as an AIC Dividend Hero.

Ongoing charge ratio

For the year ended 31 May 2026, the ongoing charge increased to 0.53% (2025: 0.45%).  Much of this increase was due to the 16% decline in our average net assets, but it also reflected the 42% increase in 'other expenses' due mainly to an increase in marketing spend. The Board is committed to marketing the Company and raising the Company's profile, but this inevitably had a short-term impact on the ongoing charge for the year. Notwithstanding our ongoing charge remains materially lower than the peer group's average of 0.99%.

Share rating and buybacks

The Company's share price discount to NAV fluctuated during the year between 7.4% and 11.5%, averaging 9.2% and closing the year at 8.7%. The share price moved from 841.0p at the start of the year to 917.0p at 31 May 2026, with the share price total return of 12.6% modestly ahead of the NAV per share total return of 11.8%, reflecting a small narrowing of the discount over the year. The Company's discount remained consistently narrower than the weighted peer group average throughout the year.

The Board kept the discount under active review and instructed buybacks when it considered these to be in the best interests of shareholders as a whole and where shares could be acquired at a meaningful discount to NAV, thereby enhancing NAV per share for remaining shareholders. Market conditions for UK smaller companies and for the investment trust sector remained difficult, and discounts across the sector continued to reflect weak investor demand for UK small-cap equities.

The Company bought back 12,899,062 shares during the year, representing 18.8% of issued share capital (excluding Treasury shares). These buybacks enhanced NAV by 1.7%.

In light of the elevated rate of repurchase, the Board convened a general meeting on 4 March 2026, at which shareholders approved the renewal of the authority to repurchase up to 14.99% of issued share capital. The Board's view remains that buybacks are an important tool for managing the discount, but that they cannot, on their own, address the underlying drivers of investor demand. Sustained re-rating will depend on improved investment performance, renewed confidence in UK equities, a recovery in flows into the smaller companies asset class, and an effective marketing programme.

Capital structure

Following authority granted by shareholders at the 2025 AGM, the Board completed the buyback and cancellation of the legacy preference stock during the year. The Company's capital comprised 74,385,131 ordinary shares of 25p each at the year end (of which 18,796,219 were held in Treasury). Further information can be found in the annual report.

Fund management changes

Neil Hermon retired from asset management in September 2025 after 23 years as the Company's Fund Manager. The Board thanks Neil for the long-term value he created for shareholders. Indri van Hien, who had served as Co-Manager since January 2025, and previously Deputy Fund Manager since 2016, assumed sole responsibility as Fund Manager. She has continued and refined the long-standing investment philosophy. Working with the Board, the Manager recruited Cassie Herlihy as Deputy Fund Manager, with effect from November 2025.

Board succession planning

Victoria Sant retired from the Board at the conclusion of the 2025 AGM, as reported last year. The Board now comprises five directors, all of whom are independent of the Manager. The Nomination Committee keeps the Board's composition, balance of skills, experience, independence and diversity under regular review, together with succession planning for both directors and the chairs of the Board and its committees. Further information is set out in the Nomination Committee Report within the annual report.

Articles of association

At the AGM in October 2026, shareholders will be asked to approve, by special resolution, the adoption of new articles of association. The existing articles have not been comprehensively refreshed for some years and, following a review by the Company's legal advisers and consideration by the Board, the opportunity has been taken to align them with current market practice for UK-listed closed-ended investment companies. The principal changes modernise the articles by permitting fully virtual general meetings (in addition to physical and hybrid meetings), making electronic dividend payments the default, and updating the untraced shareholder provisions in line with the UK Dormant Assets Scheme while preserving the rights of long-lost shareholders to reclaim their money. The opportunity has also been taken to remove provisions that are no longer relevant to a closed-ended investment trust, including references to directors' pensions and gratuities, and to reduce the maximum permitted size of the Board from 15 to 10.

The new articles also entrench the Company's status as an investment trust (so that any formal move away from that status would itself require shareholder approval by special resolution), introduce a backstop mechanism to ensure continuity in the event that retiring directors are not re-elected at an annual general meeting, require proposed Directors to disclose certain information about themselves to shareholders before a vote is held on their election and include a new power enabling the Company to obtain information needed to comply with US securities laws and other regulatory requirements. More information on the changes to the Articles can be found in the explanation of AGM resolutions within the annual report.

Annual General Meeting

We are pleased to invite shareholders to attend the AGM in person at our registered office at 11.30 am on Tuesday, 6 October 2026. The AGM is an important opportunity for shareholders to meet the Board and members of the fund management team, including the Fund Manager, Indri van Hien and the Deputy Fund Manager, Cassie Herlihy. The fund management team will present on the year under review and the outlook for UK smaller companies. Shareholders unable to join in person will be able to attend by videoconference. Further details can be found in the Notice of AGM in the annual report.

Outlook

The outlook for financial markets remains complex. Geopolitical tensions, most notably in the Middle East, continue to cloud the inflation and interest rate outlook, while the disruptive potential of artificial intelligence is prompting investors to reassess the durability of business models across a range of sectors. In the UK, the Government faces the difficult task of restoring growth while maintaining fiscal discipline; the recent change in Prime Minister is likely to prolong fiscal uncertainty, delaying important policy choices and further undermining confidence among businesses and consumers. Together, this reinforces the growing emphasis on portfolio diversification our Fund Managers are so focused on.

In navigating these challenging conditions, the Company's portfolio retains a clear quality bias and holds companies with robust business models that are able to forge their own paths. These companies are soundly financed and are being run by management teams whose incentives are aligned with our own. The attractive valuations in this part of the market are well-documented. These claims are increasingly being recognised by continued in-bound merger and acquisition ("M&A") activity and ongoing share buyback programmes being sanctioned by boards.

Over the long term, the Company seeks to capture the well-established small-cap premium: that is, the long-term outperformance of small caps over large caps driven by factors such as higher growth prospects in this under-researched part of the market. While the small-cap factor has proved elusive in the UK over the past decade, we continue to see high-quality businesses whose valuations have been depressed by broader market weakness rather than company-specific concerns. There is opportunity in this, but to unlock this the market needs to see an alleviation of the acute technical pressure this part of the market has suffered from in terms of asset outflows. Clarity over the political situation in the UK is an important step. Smaller companies may underperform larger companies in periods of economic dislocation as investors flock to larger and more liquid asset classes, but history suggests that they rebound most strongly after such periods.

Global investors remain heavily exposed to the US, with relatively modest allocations to markets outside US equities when compared with the composition of the MSCI All Country World Index. While much market commentary remains focused on elevated US valuations, we are reminded of the compelling opportunities available in UK smaller companies, which offer both diversification and long-term growth potential. A broadening of market returns is long overdue, and the Company's asset class would be a clear beneficiary of such a shift. We believe UK smaller companies continue to offer exciting opportunities for long-term investors, and remain confident in the ability of our Fund Managers to apply their consistent and disciplined investment approach to generate significant long-term value.

Penny Freer

Chair of the Board

29 July 2026

FUND MANAGERS' REPORT

Fund performance

The Company delivered positive returns during the period under review. The share price rose by 12.6% and the NAV by 11.8% on a total return basis. This compared with an increase of 12.3% in the Company's benchmark total return. The marginal underperformance came from a combination of negative contribution from investment performance and expenses offset by a positive contribution from gearing and ongoing share buybacks. Stock selection was a positive contributor in the period, while our growth style was a headwind and contributed to relative investment performance being negative overall. From a macro perspective geopolitical escalation between the US, Israel and Iran interrupted the disinflation narrative and rate-cut expectations, triggering a rotation back towards value stocks and away from growth stocks. At a micro level the underlying performance of our portfolio companies has been robust, and we continue to see upgraded forecast sales and earnings growth in aggregate. Despite it being a mixed year for performance, the long-term record of the Company remains strong, materially outperforming its benchmark during the tenure of the strategy dating back to 2002.

Performance attribution

	Year ended 31 May
	2026 %	2025 %
NAV total return	11.8	-5.1
Benchmark total return	12.3	5.0
Relative performance	-0.5	-10.1
Comprising:
Investment performance without gearing	-2.3	-9.3
Gearing impact on investment performance	-0.3	-1.0
Gearing decision	0.9	-0.1
Expenses	-0.5	-0.5
Buybacks	1.7	0.7

Source Janus Henderson.  See the glossary of terms in the Annual Report.

Market - year under review

Despite continued market volatility, UK equity markets delivered positive returns in the year under review. Markets were buoyed by a marked easing in global trade tensions following the reciprocal tariffs announced by the US on "Liberation Day". While base rates were cut further to 3.75% in both the US and the UK, hopes of a steady rate-cutting cycle were repeatedly challenged by domestic and international political developments; by the period end, markets were questioning whether rates might need to rise again.

In the UK, policy missteps and political drama weighed on sentiment. Intense speculation ahead of a later-than- usual Autumn Statement, alongside political manoeuvring against the Prime Minister following heavy local election losses, heightened near-term fiscal uncertainty and further eroded domestic business and consumer confidence. Both of these cohorts are now increasingly braced for a more left-leaning government. This unfolded against a backdrop of tepid GDP growth for much of the year, before a modest rebound of 0.6% in the first quarter of 2026. Annual inflation eased from 3.6% in June 2025 to 2.8% in April 2026, remaining above the Bank of England's 2% target, even as the labour market softened and unemployment rose to a near five-year high by the end of 2025.

Geopolitical uncertainty persisted, most notably through US and Israeli strikes on Iran and the resulting disruption to shipping through the Strait of Hormuz, through which around 20% of global oil exports pass. Brent crude prices, which had been steadily declining prior to the conflict, rose above $100 per barrel, reigniting concerns that higher energy costs would feed into broader inflation and delay further monetary easing.

Finally, the rapid evolution of artificial intelligence ("AI") became a defining market narrative, prompting both enthusiasm and reassessment. While AI's long-term potential to reshape productivity and unlock new revenue streams remains widely recognised, the pace of innovation sparked debate over winners and losers, particularly within the software sector, where valuations compressed sharply during the period. Other sectors, from business services and outsourcing to media and certain areas of professional services, also faced scrutiny given their exposure to potential automation. The result was heightened dispersion, as markets recalibrated expectations, balancing AI's transformative promise against the near-term disruption it may impose across a broad range of industries.

In this environment, and extending a trend which has overshadowed the performance of UK smaller companies

in recent years, small caps underperformed their larger counterparts. The Deutsche Numis Smaller Companies ex Investment Companies Index rose 12.3%, compared with a 21.6% gain in the FTSE All-Share Index, as ongoing macroeconomic uncertainty disproportionately impacted the more cyclically sensitive segments of the market. This marks the eighth year of underperformance for UK small caps versus large caps over the past decade, a notable departure from the well-documented long-term outperformance of smaller companies.

Gearing

Gearing started the year at 10.2% and ended at 10.0%. Debt facilities are a combination of £30 million 20-year unsecured loan notes at an interest rate of 3.33% issued in 2016, £20 million 30-year unsecured loan notes at 2.77% issued in February 2022, and £70 million short-term bank borrowings.

As the Company's NAV rose during the period under review, the use of gearing was a positive contributor to performance in the year. The ability to enhance returns through gearing, a distinctive feature of investment trusts, has made a significant positive contribution to performance during the Fund Manager's tenure.

Attribution analysis

The following tables show the top five contributors to, and the top five detractors from, the Company's relative performance.

Principal contributors

	12-month return %	Relative contribution %
Balfour Beatty	+62.2	+1.4
Renishaw	+110.5	+1.1
Oxford Instruments	+85.2	+1.0
Computacenter	+75.3	+0.9
Vistry Group1	-55.7	+0.8

1 Not owned by the Company

Balfour Beatty is an international contractor and infrastructure investor. It operates three main verticals: construction services in the UK, US and Hong Kong; support services including the maintenance of infrastructure assets such as road, rail, energy and utilities in the UK; and owning a portfolio of infrastructure investments including military housing in the US and schools, hospitals and student accommodation in the UK. The shares have performed strongly following continued positive momentum in order book growth driven by UK power generation projects and US buildings. New orders have bolstered cash generation and enabled further cash returns to shareholders through both the regular dividend and share buybacks. New CEO Philip Hoare launched his new "evolve, energise and explore" strategy suggesting that going forward sharper focus will be given to existing and new growth markets.

Renishaw is a UK-based engineering technology group that designs and manufactures high-precision measurement and manufacturing systems. Its products include machine-tool probes, co-ordinate measuring machine systems, encoders, calibration equipment, spectroscopy instruments and metal additive manufacturing systems, which help customers make complex components more accurately, efficiently and reliably across sectors including semiconductors, electronics, aerospace, healthcare and industrial

automation. Improved demand across several key end-markets, particularly semiconductor and electronics manufacturing equipment and aerospace and defence, led the company to provide multiple upgrades to revenue and profit guidance over the year. The shares were further supported by confidence in the margin recovery opportunity, with management targeting a 20% operating margin over time, underpinned by cost actions, operational gearing and growth in higher-value product areas.

Oxford Instruments is a global provider of scientific technology tools, software and expertise to academic and commercial customers, with leading positions in markets such as materials analysis, semiconductors, healthcare and life sciences. Its products help customers image, analyse and manipulate materials at very small scales, supporting research and high-technology manufacturing in areas such as compound semiconductors, advanced materials and life sciences. The shares performed strongly as investors became more confident in the recovery of orders and the group's exposure to structural growth markets, particularly within Advanced Technologies, where order intake grew by nearly 30% on an organic constant-currency basis, supported by compound semiconductor demand and increasing traction with commercial manufacturing customers. The company also benefitted from cost actions, an improving margin outlook and capital returns.

Computacenter is a technology and services provider which helps large corporate and public-sector customers source, build and manage their IT infrastructure, ranging from workplace devices to complex datacentre and cloud-related projects. The shares performed strongly following materially better trading momentum, with revenue growth led by Technology Sourcing and strong Professional Services demand, particularly in North America and the UK where demand was supported by hyperscaler customers, AI-related projects and data-centre investment. The shares saw a strong re-rating as valuation multiples began to reflect the company's crucial role in enabling IT infrastructure for AI applications.

Vistry Group is a UK housebuilder focused on delivering mixed-tenure homes, with a particular emphasis on partnership housing for housing associations, local authorities and private rented sector partners, alongside homes sold on the open market. The shares performed poorly in the period following management change and repeated concerns around profit delivery, cash generation and the balance sheet, with investors unsettled by the need to use greater incentives and discounts to sustain open-market sales. Sentiment deteriorated further after Vistry paused its share buyback to prioritise debt reduction. The Company did not own a position in this stock.

Principal detractors

	12-month return %	Relative contribution %
Bellway	-27.2	-1.3
Ceres Power Holdings1	+1,060.5	-0.9
Hochschild Mining1	+87.7	-0.7
Burford Capital2	-63.1	-0.7
Helios Towers1	+95.8	-0.7

¹Not owned by the Company

² Position sold during the year

Bellway is a national UK housebuilder. The company has a robust long-term track record of controlled expansion, and solid operational and financial performance whilst maintaining a strong balance sheet. Just as demand-side conditions for housebuilders were beginning to improve, the conflict in the Middle East put pressure on consumer confidence, and pushed oil prices, bond yields and borrowing costs higher. This is likely to weigh on near-term profitability across the sector and the shares moved sharply to reflect this. We believe the business remains well placed to benefit from any recovery on account of its well-invested land bank. Furthermore, the government's ambitious housebuilding targets which seek to address the structural undersupply of homes in the UK should provide tailwinds for the sector as planning reforms are enacted. Valuation support is provided by the discount to NAV at which the shares currently trade.

Ceres Power Holdings develops clean-energy technology in the form of solid oxide fuel cells and electrolysers for power and hydrogen applications. The shares were supported by tangible commercial progress: first, royalties were generated from Doosan and secondly, important manufacturing licences and factory investment agreements were signed with large commercial partners. The Company did not own a position in this stock.

Hochschild Mining is a precious metals miner focused on the exploration, mining, processing and sale of silver and gold in the Americas. The shares were supported by a powerful combination of higher gold and silver prices. The Company did not own a position in this stock.

Burford Capital is a specialist financial services company focused on litigation finance, providing capital to companies and law firms to fund legal claims in return for a share of any successful outcome, alongside activities such as asset recovery and legal risk management. During the period, the US Court of Appeals for the Second Circuit reversed the ~$16bn judgment made against Argentina in relation to the nationalisation of energy company YPF, eliminating what had been Burford's single largest asset and major source of expected future profits. We have since exited the position on the view that the decision would trigger a material balance sheet write down, leaving the company over-leveraged and with a reduced capacity for new investment.

Helios Towers owns and operates telecom tower infrastructure across Africa and the Middle East, leasing space on its towers to mobile operators. The shares were supported by strong tenancy-led growth and sharply improving cash flow. The group outperformed its tenancy additions targets and upgraded growth expectations for the year ahead. The Company did not own a position in this stock.

Portfolio activity

Trading activity in the portfolio was consistent with an average holding period between four and five years. Our approach is to consider our investments as long term in nature and to avoid unnecessary turnover. The focus has been on adding stocks to the portfolio that have good growth prospects, sound financial characteristics and strong management, at a valuation level that does not reflect these strengths. Likewise, we have been employing strong sell disciplines to cut out stocks that fail to meet these criteria.

Acquisitions

During the year we have added a number of new positions to our portfolio. These include, but are not limited to, the following:

CVS Group is a leading UK-based veterinary services provider, operating companion animal, referral, farm animal and equine practices across the UK and Australia. Our investment gives us exposure to a structurally growing market underpinned by the trend of 'pet humanisation', with a near-term inflection point driven by the ageing of the post-COVID pet cohort, the largest single wave of new pet ownership in a generation. Veterinary spend follows a U-shaped curve, with higher spend in a pet's early years and a meaningful step-up as animals reach middle age, requiring more frequent and complex clinical intervention, a threshold this cohort will reach over the next couple of years. We initiated the position at a compelling entry point after the CMA market investigation led to a derating of the shares to a meaningful discount versus precedent sector transactions. With the CMA review now concluded with workable remedies, the release of pent-up capital deployment in the UK alongside the buy-and-build opportunity in Australia should act as medium-term catalysts.

Elixirr is a founder-led challenger consultancy that delivers transformation, data and AI implementation projects for blue-chip clients across multiple geographies and end markets. Its lean, partner-led model underpins sector-leading margins, sustained by project-based pricing and an equity-incentive structure that ensures alignment and supports retention. Our investment gives us exposure to sustainably double-digit organic revenue growth, complemented by a disciplined M&A strategy that has successfully diversified both end market and geographical exposure. We see a significant expansion opportunity across an existing client base where share of wallet remains low. Our view is that AI acts as a structural tailwind rather than a threat, with the firm well positioned to benefit from clients' inevitable focus on AI implementations. The shares were acquired at a meaningful discount to precedent transactions offering a compelling entry point into a high-quality compounder.

Greencore is a specialist convenience food manufacturer, supplying sandwiches, salads, sushi and ready meals to the UK's major retailers. The recent transformational acquisition of Bakkavor establishes Greencore as the clear category leader in chilled prepared foods, unlocking significant operational synergies, procurement leverage and automation benefits. Structural tailwinds support sustained growth: ongoing product innovation, range extension, increased share of wallet with existing customers, and premiumisation, as consumers increasingly favour eating at home over dining out driving higher product volumes over time. The combined group benefits from sustainable and differentiated cost economics, scale advantages that sub-scale peers cannot easily replicate, and an improving returns profile as integration benefits are realised. Our investment provides exposure to a category leader operating in growing food segments, underpinned by an experienced management team with a proven track record of delivering against strategic and financial targets.

Mitie Group is a UK service business providing facilities management, transformation and compliance services to a wide range of organisations across the public and private sectors. Following a period of challenging operating conditions during the COVID-19 pandemic, the company has transformed from a low-margin outsourcer into a higher-quality compounder, driven by disciplined contract bidding activity, technology-led investments and focus on higher profit activities, with successful improvement in group margins over time. Our investment in Mitie Group also provides exposure to strong industry tailwinds with corporates spending on facility transformation to prioritise sustainability, fire safety, security and environmental compliance as regulations tighten. The recent acquisition of Marlowe adds to these dynamics and should deliver an improved technical service provider to large corporates. In our view, the improving returns profile and growth of the business are not yet reflected in the current valuation of the company.

Rosebank is an industrial holding company that acquires underperforming businesses, improves them operationally over a targeted three-to-five-year period and then exits, returning capital to shareholders. The management team is well-known and experienced, with a proven track record of acquiring business and creating value through operational improvement. We initiated our position through an oversubscribed equity placing to fund the acquisition of two US-based industrial businesses from a private equity seller. Value creation is underpinned by balance sheet recapitalisation, operational self-help and well-defined cost out programmes targeting meaningful margin expansion. Topline growth expectations are undemanding, with near-term earnings drivers centred on margin improvement and deleveraging, areas firmly within management's control. The entry valuation is reasonable, and we see upside from multiple arbitrage at exit as margins expand alongside a mix shift towards higher-quality end markets.

Saga is a UK specialist provider of products and services for people aged over 50, operating across travel, cruise, insurance broking and related services. The group's proposition is built around a trusted consumer brand, deep customer insight and tailored products for an older demographic, with strength in ocean and river cruising, holidays and insurance distribution. The business has undergone a multi-year transformation to simplify its business and puts its balance sheet on a stable footing. Saga's unique product offering should enable it to gain market share, while favourable industry dynamics support stronger pricing. Given the business's high fixed-cost base, this should translate into meaningful profit growth. We believe the valuation today is not fully reflecting the earnings growth potential and scope for capital returns as the business moves from being over levered to being under levered.

SSP Group is a leading global operator of food and beverage outlets in travel locations, including airports, railway stations and other transport hubs. It operates in 38 countries, with around 49,000 employees and approximately 3,000 outlets worldwide. Our investment provides exposure to the long-term growth in global travel, serving customers in captive and high-footfall locations where food and drink options are often limited. While the business has faced challenges in the wake of COVID, we see opportunity in improving European profitability, being more focussed on capital allocation and exposing value through the partial divestment of its high-growth Indian business.

Disposals

To balance the additions to our portfolio, we exited lower conviction positions where the investment case had deteriorated, or where valuations had become stretched after the thesis successfully played out. In a number of cases, we saw limited upside and weaker prospective returns and chose instead to recycle capital into higher conviction opportunities. These disposals include but are not limited to: our positions in Eurocell, a manufacturer and distributor of PVC windows, doors and other building products, and Genuit, a provider of sustainable water, climate and ventilation management products for the built environment. Both sales reduced our exposure to big-ticket UK housing-related demand at a time when consumer confidence was weakening and bond yields were rising.

We also sold our holdings in Future, a specialist media platform operating websites, magazines and newsletters: MONY Group, a technology-led price comparison platform; and PageGroup, a global specialist recruitment consultancy. Despite their lowly valuations, we believed each business faced structural challenges from AI, which could disrupt customer acquisition, content discovery, pricing power or recruitment workflows over time.

We disposed of our positions in Domino's Pizza Group, the UK and Ireland master franchisee for Domino's, and Trainline, a digital rail ticketing platform operating in the UK and Europe, as we believed profits would remain under pressure from government policy. For Domino's, this related to increased labour cost pressure from changes to workers' rights and employment costs; for Trainline, the risk was continued pressure from rail fare freezes and wider rail market intervention.

We took profits in Cohort, a defence technology group, and Keller, a global specialist geotechnical contractor, following strong share price performance. We also sold positions in Essentra, a manufacturer and distributor of industrial components; in Impax Asset Management, a specialist sustainable investment manager; in ME Group, an operator of self-service photobooths and laundry machines; and in Telecom Plus, owner of multiservice utility provider Utility Warehouse. In each case, we believed valuations did not adequately reflect the negative earnings momentum these companies were likely to face.

Takeover activity

Takeover activity in the portfolio persisted during the year as trade buyers and private equity alike continued to exploit the attractive valuations in the UK small and mid-cap space. Takeover bids were received for: Empiric Student Property, a real estate investment company focused on student accommodation, from Unite Group; JTC, a business services company, from Permira; Just Group, a pension risk transfer specialist, from Brookfield; and Kitwave, a food distributor, from One Equity Partners.

Top ten positions

The following table shows the Company's top ten stock positions and their active weight versus the benchmark:

Top ten positions at 31 May 2026	Portfolio %	Index weight %	Active weight %
Oxford Instruments	3.4	1.0	2.4
Balfour Beatty	3.4	-	3.4
Paragon Banking	3.0	0.8	2.2
OSB Group	2.7	1.0	1.7
Vesuvius	2.4	0.6	1.8
Computacenter	2.4	-	2.4
Renishaw	2.4	-	2.4
SigmaRoc	2.3	-	2.3
Bellway	2.1	-	2.1
Mitchells & Butlers	2.1	0.8	1.3

A brief description of the largest positions (excluding Balfour Beatty, Bellway, Computacenter, Oxford Instruments and Renishaw which were covered earlier) follows:

Paragon Banking is a speciality lender with a primary focus on providing buy-to-let mortgages to professional landlords. The company enjoys a strong capital position, enabling it to grow dividends whilst simultaneously buying back its own stock. Regulations on complex underwriting and the sophistication of its underwriting capability have allowed Paragon to grow market share from non-bank lenders which have suffered in the rising rate environment. As base rates fall and business and consumer confidence improves, commercial loans and mortgages should become more affordable which should increase lending volumes. Paragon should also benefit from government driven deregulation of the financial services sector which could potentially lower capital requirements, increase the scope for capital returns to shareholders and boost lending volumes.

OSB Group is a speciality lender with a primary focus on providing buy-to-let mortgages to professional landlords. Regulations on complex underwriting and the sophistication of its underwriting capability have allowed OSB to grow market share. After a difficult period for the company as base rates increased, stoking fiercer competition for flow, which drove both asset and deposit spreads down, net interest margin expectations have now been set at a more realistic level. The shares trade at an attractive discount to tangible book value and in our view, do not reflect the mid-teens return on tangible equity guidance set by management. The company retains a strong capital position allowing it to return significant cash to shareholders through share buybacks and growing dividends. Like Paragon Banking, OSB should similarly benefit from deregulation in the financial services sector.

Vesuvius is a materials technology company. The company provides steel flow control, foundry technologies, advanced refractories and metal processing products and services to customers around the world. The business has gone through significant rationalisation over recent years removing excess capacity and improving returns on capital and margins. The company has demonstrated robust pricing power during the recent inflationary period, validating its leading market position and high value add of its products. The geographical spread of the business makes it well-positioned to benefit from increased steel production outside of China. A trend which should be boosted by US tariffs and the implementation of quotas on steel imports in Europe. In the meantime, shareholders are being paid to wait as strong cash generation has allowed the company to continue to pay a healthy dividend to shareholders.

SigmaRoc is a building materials company operating in the UK and Europe. The business has expanded rapidly over the past year following its transformative acquisition of CRH's European lime and limestone operations which made the company a market leader in five European countries (Norway, Sweden, Finland, UK and Ireland) and put it in the number two position in another three countries (Germany, Poland and the Czech Republic). Lime and limestone are used in a broad range of industries including construction, steel, chemical, environmental and agricultural which provides good end-market diversification for the company. At a macro level the company is well placed to benefit from end market revival following German debt brake reforms. In the meantime, investors should benefit from self-help and continued synergy extraction from recent acquisition and shareholder friendly capital allocation policies.

Mitchells & Butlers is a national owner and operator of pubs in the UK. Its major brands include All Bar One, Browns, Harvester, Toby Carvery, O'Neill's, Miller & Carter, Nicholson and Ember Inns. The vast majority of its pubs are owned freehold, meaning it has substantial asset value backing. The company has consistently outperformed peers in terms of like-for-like revenue growth on account of its well-invested estate, diversified brand portfolio and consistency of customer service. Whilst cost inflation remains acute, management has reliably managed to mitigate these headwinds through its 'ignite' efficiency programmes. The company is steadily repaying its securitised debt, enabling a transfer of value from debt to equity, a trend which will now be accelerated as its pension deficit is cleared. The shares trade at a substantial discount to recent industry transaction multiples and its NAV.

Portfolio weightings

As at 31 May 2026, the portfolio was weighted by company size as follows:

	Weighting %
	31 May 2026	31 May 2025
FTSE 100	0.0	0.0
FTSE 250	88.7	84.5
FTSE Small Cap	11.2	9.8
FTSE AIM	10.1	15.9
Gearing	(10.0)	(10.2)

Market outlook

Geopolitics remain challenging with ongoing conflicts in the Middle East and Ukraine yet to reach stable resolutions and heightened tensions between China and the US persisting. Sticky inflation which remains above target in both the US and UK is likely to be further exacerbated by the oil and gas supply shock stemming from the US and Israel's war with Iran. Damage to Middle Eastern energy infrastructure and the continued closure of the Strait of Hormuz, through which around 20% of global oil exports pass, have heightened energy price risks. Together, these factors sustain uncertainty over the path of interest rates, leaving central banks with the challenging task of containing second-round inflation effects and elevated inflation expectations amid softening labour markets globally.

In our view, the conflict in the Middle East has delayed, rather than derailed, the disinflationary narrative. The current energy price shock is materially less severe than that experienced following the outbreak of war in Ukraine, which drove inflation to ~11%, while wage inflation is also now considerably more benign. Moreover, with policy rates still restrictive across major economies, central banks retain scope to support demand should economic conditions deteriorate.

At home, the Prime Minister might have changed but the issues the UK economy faces remain the same and the new Government faces the unenviable challenge of reviving economic growth while walking a fiscal tightrope. Energy policy and welfare reform need to be addressed to reduce the UK gilt yield premia, unlock funds for growth and ultimately attract capital flows back into the UK.  Burnham's challenge will be to overcome the internal divisions in the party which have made fiscal policy choices harder and obstructed efforts to place growth at the centre of policy agendas. We see near-term fiscal uncertainty which risks further erosion of business confidence in the short-term.

Away from politics, investors continue to grapple with the AI mega theme. We are certain that AI will change the way economies operate, but markets have been quick to punish perceived "AI losers" and, in some cases, overzealous in rewarding the perceived winners. While we can offer no definitive answers at this stage, we would reassure shareholders that we are re-examining the franchises and business models of our portfolio companies through this new lens. Characteristics once prized by investors, such as recurring revenues, now require fresh scrutiny, as we assess whether AI could automate the underlying processes, weaken pricing power or reshape established revenue models.

Corporates and consumers are dealing with elevated uncertainty, which has precipitated a deterioration in sentiment indicators. This has had the effect of increasing savings rates and deterring corporate investment. For now, underlying trading amongst our portfolio companies has proved to be robust and we take comfort in this and the strong balance sheets of both corporates and consumers, noting that they are intrinsically healthier than they were ahead of the Global Financial Crisis in 2008- 2009. Markets are forward looking, so we ask ourselves if the backdrop for these two cohorts will get worse from here? We assume the next budget will come with tax rises, but if this comes with a credible growth agenda this could materially improve sentiment. That possibility, in our view, is not currently reflected in consensus.

After a lost decade in UK smaller companies, starting with uncertainty about the EU referendum vote, we see good reasons why fortunes could change, and history will show that small caps perform best after periods of economic dislocation. Investors are facing a generationally attractive entry point in UK small-caps where valuations remain attractive and sit well below long-term averages while earnings forecasts are beginning to stabilise after a sharp adjustment in economic activity following the step change in higher interest rates seen in the last three years. Valuations also remain markedly depressed versus other developed markets, even on a sector-adjusted basis. The persistent in-bound M&A activity that the market, and our own portfolio is experiencing suggests that many market players are already taking notice. Despite this, the pervasive outflows of capital from this part of the market is stifling a sustained re-rating of the asset class. A return of investor confidence could create a positive flywheel of stronger performance, renewed interest, greater liquidity and, ultimately, a healthier pipeline of new listings. Political and fiscal stability in the UK could prove an important catalyst.

Markets seldom give investors an easy ride, and we have become accustomed to managing shareholders' capital through a polycrisis. We think there is good reason to believe that interest rates will continue to fall, or more importantly why markets might reprice the risk of them going higher from here. But importantly, the portfolio is not counting on it. We have confidence that our longstanding investment process will yield a portfolio which is diversified by design but deliberate in its construction with good exposure to everything from industrial companies benefitting from re-stocking cycles and the significant capex budgets from US hyperscalers to UK domestic cyclicals trading on trough multiples on trough earnings. We think our investment process centred around investing in cash generative growth businesses run by experienced management teams has built a portfolio which is both well-positioned to withstand the current challenging economic conditions and participate in the upswing as it occurs. We remain confident in our ability to create long-term value through a consistent, rigorous investment process that has delivered so powerfully over time.

Indri van Hien and Cassie Herlihy

Fund Managers

29 July 2026

Portfolio holdings at 31 May 2026

Ranking				Valuation
2026	2025	Company	Principal activities	2026 £'000	2025 £'000	Portfolio %
1	12	Oxford Instruments	Advanced instrumentation equipment	20,896	12,598	3.40
2	2	Balfour Beatty	International contractor	20,617	23,311	3.36
3	1	Paragon Banking	Buy-to-let mortgage provider	18,583	26,077	3.02
4	7	OSB Group	Buy-to-let mortgage provider	16,527	16,531	2.69
5	8	Vesuvius	Ceramic engineering	14,889	14,230	2.42
6	24	Computacenter	IT reseller	14,882	8,806	2.42
7	46	Renishaw	Precision measuring & calibration equipment	14,464	6,501	2.35
8	9	SigmaRoc1	Aggregates supplier	14,190	13,878	2.31
9	3	Bellway	Housebuilder	13,141	22,919	2.14
10	4	Mitchells & Butlers	Hospitality operator	12,701	20,264	2.07
11	11	Chemring	Defence products & services	12,682	13,649	2.06
12	6	Volution	Producer of ventilation products	12,506	16,568	2.04
13	10	Serco	Outsourcing services	12,195	13,850	1.98
14	20	Rathbones	Private client wealth manager	12,123	9,559	1.97
15	14	IntegraFin	Investment platform	11,748	12,036	1.91
16	42	Serica Energy1	Oil and gas exploration & production	11,616	7,124	1.89
17	62	Hill & Smith	Fabricated metal products	11,534	4,477	1.88
18	17	Morgan Sindall	Diversified building contractor	11,277	10,749	1.84
19	48	Clarkson	Shipping services	11,216	6,410	1.83
20	34	Bodycote	Engineering group	10,839	7,723	1.76
21	43	AJ Bell	Investment platform	10,787	6,995	1.76
22	16	Softcat	Software reseller	10,295	11,039	1.68
23	59	Genus	Animal genetics products & services	10,014	5,196	1.63
24	65	XP Power	Electrical power products	9,976	4,244	1.62
25	56	Bridgepoint	Private equity fund manager	9,867	5,579	1.61
26	38	Watches of Switzerland	Luxury watch retailer	9,588	7,606	1.56
27	26	Everplay1	Games software developer	9,462	8,648	1.54
28	44	Luceco	Electrical products	8,970	6,873	1.46
29	-	CVS Group	Veterinary practices	8,775	-	1.43
30	-	Mitie Group	Industrial support services	8,697	-	1.41
31	29	ZIGUP	Commercial vehicle hire	8,307	8,131	1.35
32	32	Avon Technologies	Defence products	8,121	7,858	1.32
33	66	Trustpilot	Consumer review platform	7,934	4,203	1.29
34	85	Oxford Biomedica	Gene & cell therapy	7,077	2,765	1.15
35	28	Workspace	Real estate investment & services	7,012	8,340	1.14
36	-	SSP Group	Operator of food & beverage outlets	6,718	-	1.09
37	-	Rosebank	Industrials holding company	6,428	-	1.05
38	31	Savills	Property transactional consulting services	5,949	7,976	0.97
39	33	Hollywood Bowl	10 pin bowling operator	5,927	7,736	0.96
40	82	Spire Healthcare	Private healthcare services	5,818	3,122	0.95
41	27	Moonpig	Online card & gift retailer	5,710	8,370	0.93
42	35	Harworth	Urban regeneration & property investment	5,645	7,702	0.92
43	57	Foresight	Specialist fund manager	5,540	5,330	0.90
44	75	Raspberry Pi	Computer board manufacturer	5,528	3,521	0.90
45	-	Elementis	Chemicals	5,519	-	0.90
46	83	Next 151	PR & media services	5,482	3,072	0.89
47	64	Bloomsbury Publishing	Consumer & academic publisher	5,412	4,316	0.88
48	-	Elixirr	Consulting services	5,249	-	0.85
49	53	Auction Technology	Online auction software provider	5,179	5,929	0.84
50	21	Wickes	DIY retailer	5,108	9,086	0.83
51	55	Hunting	Oil equipment & services	5,018	5,761	0.82
52	80	4imprint	Promotional products & services	5,014	3,224	0.82
53	15	Gamma Communications	Telecommunications	4,967	11,997	0.81
54	41	Currys	Electronics retailer	4,960	7,175	0.81
55	-	Greencore	Food producers	4,955	-	0.81
56	73	Capricorn Energy	Oil and gas exploration & production	4,818	3,833	0.78
57	69	RM	Educational software & services	4,677	4,001	0.76
58	50	DFS	Furniture retailer	4,669	6,198	0.76
59	-	Saga	Travel & leisure	4,643	-	0.76
60	49	Alfa Financial Software	Leasing software	4,409	6,336	0.72
61	37	Baltic Classifieds	Online classifieds platform	4,319	7,653	0.70
62	58	XPS Pensions	Pensions consultancy	4,306	5,254	0.70
63	52	Wilmington	B2B information provider	4,245	6,135	0.69
64	76	Advanced Medical Solutions1	Medical supplies manufacturer	4,212	3,491	0.68
65	-	ActiveOps1	Software & computer services	3,827	-	0.62
66	22	GB Group	Data intelligence services	3,674	8,871	0.60
67	18	QinetiQ	Defence services	3,439	9,955	0.56
68	40	Victrex	Speciality chemicals	3,411	7,204	0.55
69	-	Chesnara	Life insurance	3,004	-	0.49
70	68	GlobalData	B2B information provider	2,847	4,061	0.46
71	-	Tatton Asset Management1	Fund Management	2,753	-	0.45
72	89	Young & Co's share class NV	Pub operator	2,710	2,548	0.44
73	-	Travis Perkins	Retailers	2,690	-	0.44
74	74	Harbour Energy	Oil and gas exploration & production	2,623	3,738	0.43
75	78	Helical	Office property investor & developer	2,593	3,471	0.42
76	72	FRP Advisory1	Investment advisory services	2,462	3,838	0.40
77	81	SThree	Recruitment company	2,461	3,128	0.40
78	45	Crest Nicholson	Housebuilder	2,432	6,824	0.40
79	84	Young & Co's share class A	Pub operator	2,373	2,916	0.39
80	88	Niox1	Medical supplies manufacturer	2,195	2,564	0.36
81	-	NCC Group	Cybersecurity services	2,014	-	0.33
82	70	Pinewood Technologies	Automotive software & services	1,587	3,942	0.26
83	63	Stelrad	Radiator manufacturer	1,410	4,404	0.23
		Total equity investments		614,437		100.00

There were no convertible or fixed interest securities at 31 May 2026 (2025: None).

1           Quoted on the Alternative Investment Market

PRINCIPAL RISKS AND UNCERTAINTIES

The Board, with the assistance of the Manager, has carried out a robust assessment of the principal and emerging risks facing the Company, including their nature, potential impact, mitigating controls and the reporting received by the Board and its Committees.

The Audit and Risk Committee maintains a detailed risk matrix, which is reviewed at each meeting and subject to a more detailed annual review. The Committee uses the risk matrix, heat maps and the results of an exercise by individual directors to review the Company's risk profile and identify any changes in the significance of principal and emerging risks.

During the year, the Board continued to review the Company's risk management and internal control framework and began formalising the mapping of existing key controls to the material controls reporting requirements under Provision 34 of the 2024 AIC Code. The enhanced Provision 34 reporting requirements will apply to the Company for the financial year ending 31 May 2027.

In assessing the Company's principal and emerging risks, the Board considered heightened geopolitical and macroeconomic uncertainties, including market volatility, the continuing war in Ukraine, conflict and instability in the Middle East, disruption to global trade and supply chains, tariff and protectionism risks, persistent inflationary pressures, changes in interest rates and financing conditions, developments in artificial intelligence, and the outlook for the UK economy. The Board considered the potential impact of these factors on investor sentiment, corporate earnings, valuations, liquidity, the Company's borrowings, discount management and operational resilience.

While short-term economic and market uncertainty remain, the Board concluded that the Company's portfolio and the Manager's investment approach remained appropriate in light of the principal and emerging risks identified. In reaching this conclusion, the Board considered the Fund Managers' long-standing investment philosophy, which is based on fundamental, qualitative analysis, engagement with management teams and valuation discipline, and the view that smaller companies can deliver attractive returns over the long term.

The principal risks fall broadly under the following categories:

Risk	Key controls and mitigation	Board/Committee monitoring and assurance	Change in perceived risk during the year
Investment activity and strategy Poor investment processes and performance, inappropriate asset allocation, ineffective use of gearing or failure to maintain an investment proposition attractive to shareholders could affect NAV performance, share price performance, the discount to NAV and shareholder demand.	The Board receives reports on investment performance, portfolio construction, gearing, attribution analysis, ESG considerations, discount management and shareholder feedback at each board meeting. The Manager operates within investment limits and restrictions set by the Board, and compliance with investment limits is reported regularly to the Board. The Board reviews the continuing appropriateness of the Company's investment objective, policy and strategy.	At each meeting, the Board reviews investment performance, attribution, portfolio exposure, gearing, investment limits, shareholder analysis, broker feedback and marketing reports. The Board held some ad hoc meetings during the year to discuss macro political and economic events and the potential impact on the Company's performance.	Increase. While short-term investment performance improved during the period under review, the Board increased its rating of this risk during the year, due to continued lack of shareholder demand for UK smaller companies, increased market volatility and geopolitical uncertainties. The Board continues to monitor investment performance and the discount to NAV closely.
Loss of key fund management personnel or inadequate resourcing could affect investment decision-making, continuity of portfolio management and shareholder confidence.	The Board receives regular reports from the Manager on fund management resourcing, succession planning and team structure. The Management Engagement Committee reviews the Manager's performance and resources annually.	Annual Management Engagement Committee review of the Manager and its succession planning for key roles. Several ad hoc meetings were held during the year to monitor fund manager recruitment and succession planning.	Decrease. The Board reduced its rating of this risk during the year, following the successful transition of fund management responsibilities and the recruitment of an additional fund manager, following the retirement of Neil Hermon.
Legal and regulatory Loss of investment trust status, breach of company law, breach of UK Listing Rules, DTR or other applicable regulation could result in tax consequences, regulatory sanction, suspension of listing, reputational damage or additional costs.	The Manager monitors compliance with s1158 of the Corporation Tax Act 2010 and reports to the Board. The Company Secretary and professional advisers support the Board in monitoring compliance with company law, UK Listing Rules, DTR and other applicable legal and regulatory requirements.	Board and Committee reviews of regulatory updates, compliance reporting, s1158 reporting, Company Secretary reporting and professional advice where required.	No change. The Board's assessment of the rating of this risk remains unchanged on the previous year.
Operational Failure of a key service provider, a cyber incident, business continuity failure, control failure or service level deterioration could affect portfolio administration, financial reporting, dealing, payments, shareholders records, regulatory reporting or the Company's reputation.	The Company has no employees and so delegates its principal operational functions to the Manager and specialist service providers. The Board and its Committees review service provider performance, internal control reports, business continuity arrangements, cyber security reporting and operational updates.	Audit and Risk Committee review of internal control reporting and assurance reports. The Committee also monitors cyber security through internal controls reporting and periodic updates from the Manager. Management Engagement Committee review of service provider performance, contractual arrangements and service levels.	No change. The Board's assessment of the rating of this risk remains unchanged on the previous year.
Financial instruments and the management of risk Market price movements, interest rate changes, liquidity constraints, currency exposure or counterparty failure could affect NAV, revenues, gearing, covenant compliance and the Company's ability to meet liabilities as they fall due.	The Board monitors gearing, liquidity, cash balances, borrowing facilities, covenant compliance and portfolio liquidity. The Company's policies for management of market risk, liquidity risk, credit risk and counterparty risk are set out in note 15 of the financial statements within the annual report.	Board review of gearing, liquidity, borrowing facilities and covenant compliance. Audit and Risk Committee review of financial reporting and audit findings.	No change. The Board's assessment of the rating of this risk remains unchanged on the previous year.

EMERGING RISKS

At each meeting, the Board considers emerging risks, which it defines as potential trends, sudden events or changing risks characterised by a high degree of uncertainty as to their likelihood, timing and potential impact on the Company. Where an emerging risk becomes sufficiently clear or significant, it is incorporated into the Company's risk matrix and considered alongside the principal risks.

Emerging risks are identified through reporting from the Manager, the Company Secretary and other service providers, together with regulatory, market and governance updates, professional advice and the directors' own experience and external engagement. The Fund Managers also report on emerging risks which may affect portfolio companies or the wider UK smaller companies market.

During the year, the Board considered emerging risks, including geopolitical uncertainty, artificial intelligence, cyber security, regulatory change, service provider resilience and UK economic and political conditions. The Board concluded that these matters were appropriately addressed within the existing principal risks and did not identify any new emerging risk requiring separate disclosure.

VIABILITY STATEMENT

When considering the viability of the Company, the Board has assessed the Company's prospects over a five year period to 31 May 2031, which it considers appropriate given the Company's long-term investment horizon, the liquidity of its portfolio, and alignment with the Board's strategic planning cycle and typical investor timeframes. The Board's assessment took into account the Company's current financial position and investment strategy, the liquidity and diversity of its assets, and the stable borrowing arrangements in place (including the duration and financial covenants of its loan facility). The scheduled continuation vote at the 2028 AGM within the five-year horizon was also considered. The Board notes the strong shareholder support of 95% of votes cast for the last continuation vote in 2025 and, for the purpose of this assessment, has assumed continued shareholder approval in 2028.

In making this robust assessment, the Board evaluated how the Company's principal risks and uncertainties, as detailed above, could affect its longer-term viability. The review encompassed risks relating to investment performance and market volatility, the impact of gearing and liquidity constraints, regulatory compliance issues, and operational resilience, including reliance on service providers and financial reporting controls. The Board modelled severe but plausible scenarios, such as a sharp fall in portfolio value and investment income, using multi-year cash flow projections and sensitivity analysis to test whether the Company could continue to meet its liabilities, including debt covenants and dividend payments, under stressed conditions. Under these worst-case conditions, the Company's assets remained sufficiently liquid and projected cash flows provided ample headroom above borrowing covenants, comfortably covering the Company's limited liabilities and planned dividends.

The Board also considered broader uncertainties, such as geopolitical and macroeconomic instability, persistent inflation, higher interest rates and UK market volatility, and concluded that these remain within the scope of the Company's existing principal risks and did not identify any new risk factors. The Board takes comfort that the Company's resilience is supported by its liquid, diversified assets, modest fixed costs, and established risk controls, and it does not foresee any need to alter the Company's strategy or risk management framework in ways that would affect its long-term viability.

Accordingly, based on this thorough assessment and the comfort gained from the stress testing, the directors have a reasonable expectation that the Company can continue in operation and meet its liabilities as they fall due over the five year period to 31 May 2031.

The Directors have also concluded that the Company has adequate resources to continue in operational existence for at least 12 months from the date of approval of these financial statements and it is therefore appropriate to prepare these financial statements on a going concern basis. More information can be found in Note 1 of the financial statements within the annual report.

FUTURE DEVELOPMENTS

The future success of the Company will depend primarily on the performance of its investment portfolio, which will, to a significant degree, reflect the performance of the stock market and the skill of the Manager. While the Company invests in companies that are listed (or quoted) in the United Kingdom, the underlying businesses of those companies are affected by external factors, many of an international nature. The Board intends to continue to pursue the Company's investment objective and strategy as described above.

The Chair's Statement and the Fund Managers' Report above gives commentary on the outlook for the Company. As discussed in the Chair's Statement, the Board recommends a final dividend of 21.5 pence per ordinary share for the year ended 31 May 2026 for approval at the AGM.

RELATED-PARTY TRANSACTIONS

The Company's transactions with related parties in the year were with the directors and the Manager. There were no material transactions between the Company and its directors, and the only amounts paid relate to fees paid for their remuneration. Remuneration is paid quarterly in arrears and amounts for April and May 2026 were therefore accrued as at the year end. There were no other outstanding amounts payable at the year end. Directors' shareholdings are listed in the annual report.

In respect of the Manager's services provision during the year, other than fees payable by the Company in the ordinary course of business and the facilitation of marketing activities with third parties, there were no material transactions with the Manager affecting the financial position of the Company. More details on transactions with the Manager, including amounts outstanding at the year end, can be found in the annual report.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

Each director who is listed in the Annual Report confirms that, to the best of his or her knowledge:

·	the financial statements, which have been prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 on a going concern basis, give a true and fair view of the assets, liabilities, financial position and profit/loss of the Company; and
·	the Strategic Report and financial statements include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

On behalf of the Board

Penny Freer

Chair of the Board

29 July 2026

STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 May

		Year ended 31 May 2026			Year ended 31 May 2025
Notes		Revenue return £'000	Capital return £'000	Total £'000	Revenue return £'000	Capital return £'000	Total £'000
2	Investment income	18,362	-	18,362	22,912	-	22,912
3	Other income	124	-	124	168	-	168
	Gains/(losses) on investments held at fair value through profit or loss	-	41,411	41,411	-	(61,211)	(61,211)
	Currency losses	-	-	-	-	(3)	(3)
	Total income/(loss)	18,486	41,411	59,897	23,080	(61,214)	(38,134)
	Expenses:
4	Management fees	(600)	(1,399)	(1,999)	(719)	(1,677)	(2,396)
	Other expenses	(1,084)	-	(1,084)	(761)	-	(761)
	Profit/(loss) before finance costs and taxation	16,802	40,012	56,814	21,600	(62,891)	(41,291)
	Finance costs	(950)	(2,217)	(3,167)	(1,110)	(2,591)	(3,701)
	Profit/(loss) before taxation	15,852	37,795	53,647	20,490	(65,482)	(44,992)
	Taxation	-	-	-	(2)	-	(2)
	Profit/(loss) for the year and total comprehensive income	15,852	37,795	53,647	20,488	(65,482)	(44,994)
5	Earnings/(loss) per ordinary share - basic and diluted	26.11p	62.26p	88.37p	27.89p	(89.13p)	(61.24p)

The total columns of this statement represent the Statement of Comprehensive Income, prepared in accordance with UK- adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006.

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

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year.

The profit attributable to shareholders for the year disclosed above represents the Company's total comprehensive income. The Company does not have any other comprehensive income.

STATEMENT OF CHANGES IN EQUITY

For the year ended 31 May
		Retained earnings
Notes	Year ended 31 May 2026	Share capital £'000	Capital redemption reserve £'000	Capital reserves £'000	Revenue reserve £'000	Total equity £'000
	Total equity at 1 June 2025	18,597	26,824	568,767	20,136	634,324
	Total comprehensive income: Profit for the year	-	-	37,795	15,852	53,647
	Buyback of shares to Treasury	-	-	(111,952)	-	(111,952)
	Transactions with owners, recorded directly to equity:
6	Ordinary dividends paid	-	-	-	(17,439)	(17,439)
	Total equity at 31 May 2026	18,597	26,824	494,610	18,549	558,580
		Retained earnings
Notes	Year ended 31 May 2025	Share capital £'000	Capital redemption reserve £'000	Capital reserves £'000	Revenue reserve £'000	Total equity £'000
	Total equity at 1 June 2024	18,627	26,794	682,267	19,652	747,340
	Total comprehensive income: (Loss)/profit for the year	-	-	(65,482)	20,488	(44,994)
	Buyback of shares for cancellation	(30)	30	(1,057)	-	(1,057)
	Buyback of shares to Treasury	-	-	(46,961)	-	(46,961)
	Transactions with owners, recorded directly to equity:
6	Ordinary dividends paid	-	-	-	(20,004)	(20,004)
	Total equity at 31 May 2025	18,597	26,824	568,767	20,136	634,324

BALANCE SHEET

Notes		At 31 May 2026 £'000	At 31 May 2025 £'000
	Non-current assets
	Investments held at fair value through profit or loss	614,437	698,722
	Current assets
	Receivables	3,604	6,183
	Cash and cash equivalents	8,013	1,181
		11,617	7,364
	Total assets	626,054	706,086
	Current liabilities
	Payables	(2,671)	(1,834)
	Bank loans	(15,000)	(20,133)
		(17,671)	(21,967)
	Total assets less current liabilities	608,383	684,119
	Non-current liabilities
	Financial liabilities	(49,803)	(49,795)
	Net assets	558,580	634,324
	Equity attributable to equity shareholders
7	Share capital	18,597	18,597
	Capital redemption reserve	26,824	26,824
	Retained earnings:
	Capital reserve	494,610	568,767
	Revenue reserve	18,549	20,136
	Total equity	558,580	634,324
8	Net asset value per ordinary share	1,004.8p	926.2p

STATEMENT OF CASH FLOWS

		Year ended
Notes		31 May 2026 £'000	31 May 2025 £'000
	Operating activities
	Profit/(loss) before taxation	53,647	(44,992)
	Add back interest payable	3,167	3,701
	(Profit)/loss on investments held at fair value through profit or loss	(41,411)	61,211
	Losses on foreign currency	-	3
	Purchases of investments	(122,787)	(115,189)
	Sales of investments	248,483	188,624
	Increase in receivables	(132)	(10)
	Decrease/(increase) in amounts due from brokers	1,780	(2,542)
	Decrease in accrued income	931	8,132
	(Decrease)/increase in payables	(309)	64
	Increase in amounts due to brokers	1,214	26
	Net cash inflow from operating activities before interest and taxation1	144,583	99,028
	Interest paid	(3,152)	(3,859)
	Net cash inflow from operating activities	141,431	95,169
	Financing activities
	Buyback of ordinary shares	(112,027)	(47,619)
6	Equity dividends paid	(17,439)	(20,004)
	Repayment of bank loans	(5,133)	(35,611)
	Net cash outflow from financing activities	(134,599)	(103,234)
	Increase/(decrease) in cash and cash equivalents	6,832	(8,065)
	Currency losses	-	(3)
	Cash and cash equivalents at the start of the year	1,181	9,249
	Cash and cash equivalents at the end of the year	8,013	1,181

¹ In accordance with IAS 7.31 cash inflow from dividends was £19,289,000 (2025: £22,228,000), and cash inflow from interest was £129,000 (2025: £171,000)                                      

NOTES TO THE FINANCIAL STATEMENTS

1		Accounting policies: Basis of preparation The Henderson Smaller Companies Investment Trust plc (the "Company") is a company incorporated and domiciled in the United Kingdom under the Companies Act 2006 (the "Act"). The Company is a single reporting entity and there is no ultimate controlling party. The financial statements of the Company for the year ended 31 May 2026 have been prepared in accordance with UK-adopted International Accounting Standards ("IAS") in conformity with the requirements of the Act. These comprise standards and interpretations approved by the IAS Board ("IASB"), together with interpretations of the IAS and Standing Interpretations Committee approved by the International Financial Reporting Standards ("IFRS") that remain in effect, to the extent that IFRS have been adopted by United Kingdom.                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 held at fair value through profit or loss. The principal accounting policies adopted are set out below. These policies have been applied consistently throughout the year. 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") 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.        Going concern The assets of the Company consist of securities that are readily realisable and, accordingly, the directors believe that the Company has adequate resources to continue in operational existence for at least twelve months from the date of approval of the financial statements. In coming to this conclusion, the directors have also considered the continued macroeconomic and geopolitical uncertainty, the nature of the Company's covenants, the strength of the Company's distributable reserves and the liquidity of the portfolio.       The directors have concluded that the Company is able to meet its financial obligations, including the repayment of the bank loans and borrowings, as they fall due for a period of at least twelve months from the date of issuance. Having assessed these factors the principal risks and other matters discussed in connection with the Viability Statement set out in the annual report, the directors confirm that the financial statements have been prepared on a going concern basis.                                                                                  The Company's shareholders are asked every three years to vote for the continuation of the Company. The last continuation vote took place at the Annual General Meeting ("AGM") held on 7 October 2025 and passed with 95% of votes cast in favour of continuation. The next continuation vote will take place at the AGM in 2028.
2		Investment income
		Income from companies listed or quoted in the United Kingdom:											2026 £'000				2025 £'000
		Dividends											17,283				21,587
		Special dividends											580				687
		Property income distributions											499				638
		Total investment income											18,362				22,912
3		Other income
													2026 £'000				2025 £'000
		Bank and other interest											124				168
													124				168
4		Management fees
				2026						2025
				Revenue return £'000		Capital return £'000		Total return £'000		Revenue return £'000					Capital return £'000				Total return £'000
		Management fee		600		1,399		1,999		719					1,677				2,396
				600		1,399		1,999		719					1,677				2,396
		A summary of the fee agreements in the management agreement is given in the annual report.
5		Earnings/(loss) per ordinary share The earnings per ordinary share figure is based on the net profit for the year of £53,647,000 (2025: net loss of £44,994,000) and on 60,708,172 (2025: 73,469,728) 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:
											2026 £'000					2025 £'000
		Net revenue profit									15,852					20,488
		Net capital profit/(loss)									37,795					(65,482)
		Net total profit/(loss)									53,647					(44,994)
		Weighted average number of ordinary shares in issue during the year									60,708,172					73,469,728
											2026					2025
		Revenue earnings per ordinary share									26.11p					27.89p
		Capital earnings/(losses) per ordinary share									62.26p					(89.13p)
		Total earnings/(loss) per ordinary share									88.37p					(61.24p)
		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.
6		Dividends on ordinary shares
					Record Date			Pay Date				2026 £'000							2025 £'000
		Final dividend of 20.5p (2025: 19.5p) for the year ended 31 May 2025			29 August 2025			13 October 2025				13,159							14,505
		Interim dividend of 7.5p (2025: 7.5p) for the year ended 31 May 2026			13 March 2026			27 March 2026				4,280							5,507
		Unclaimed dividends										-							(8)
												17,439							20,004
		Subject to approval at the AGM, the proposed final dividend of 21.5p per ordinary share will be paid on 23 October 2026 to shareholders on the register of members at the close of business on 2 October 2026. The shares will be quoted ex-dividend on 1 October 2026.                                         The proposed final dividend for the year ended 31 May 2026 has not been included as a liability in these financial statements. Under IFRS, the final dividend is not recognised until approved by shareholders.
		The total dividends payable in respect of the financial year which form the basis of the test under s1158 of the Corporation Tax Act 2010 are set out below:
															2026 £'000			2025 £'000
		Revenue available for distribution by way of dividends for the year													15,852			20,488
		Interim dividend for the year ended 31 May 2026 of 7.5p (2025: 7.5p) per ordinary share													(4,280)			(5,507)
		Final dividend for the year ended 31 May 2025 of 20.5p per ordinary share													-			(13,159)
		Proposed final dividend for the year ended 31 May 2026 of 21.5p (based on 54,510,363 shares in issue at 27 July 2026)													11,720			-
		Transfer (from) / to reserves													(148)			1,822
7	Share capital		2026						2025
			Number of Shares entitled to dividend		Total Number of Shares		Nominal value of shares £'000		Number of Shares entitled to dividend						Total Number of Shares					Nominal value of shares £'000
	Ordinary shares of 25p each
	At start of year		68,487,974		68,487,974		17,122		74,505,131						74,505,131					18,627
	Buyback of shares for cancellation		-		-		-		(120,000)						(120,000)					(30)
	Buyback of shares to Treasury		(12,899,062)		(12,899,062)		(3,225)		(5,897,157)						(5,897,157)					(1,475)
	Closing balance at 31 May		55,588,912		55,588,912		13,897		68,487,974						68,487,974					17,122
	Treasury shares
	At start of year		-		5,897,157		1,475		-						-					-
	Buyback of shares to Treasury		-		12,899,062		3,225		-						5,897,157					1,475
	Closing balance at 31 May		-		18,796,219		4,700		-						5,897,157					1,475
	Total		55,588,912		74,385,131		18,597		68,487,974						74,385,131					18,597
	During the year, the Company purchased 12,899,062 of its own issued ordinary shares to be held in Treasury, at a cost of £111,952,000 (2025: the Company purchased 120,000 of its own issued ordinary shares for cancellation and 5,897,157 to be held in Treasury, at a total cost of £48,018,000). Since 31 May 2026 and up to 27 July 2026, being the latest practicable date prior to the publication of this report, 1,078,549 shares have been bought back at a cost of £9,817,000. The holders of ordinary shares are entitled to all the capital growth in the Company and all the income from the Company that is resolved by the directors to be distributed. Each holder of ordinary shares present at a general meeting has one vote on a show of hands and on a poll every member present in person or by proxy has one vote for each ordinary share held.
8	Net asset value ("NAV") per ordinary share
	The NAV per ordinary share is based on the net assets attributable to the ordinary shares of £558,580,000 (2025: £634,324,000) and on the 55,588,912 ordinary shares in issue (excluding Treasury shares) at 31 May 2026 (2025: 68,487,974). The Company has no securities in issue that could dilute the NAV per ordinary share.                   The movement during the year of the net assets attributable to the ordinary shares was as follows:
														2026 £'000					2025 £'000
	Net assets attributable to ordinary shares at 1 June													634,324					747,340
	Buyback of shares to Treasury													(111,952)					(46,961)
	Buyback of shares for cancellation													-					(1,057)
	Net gains/(losses) for the year													53,647					(44,994)
	Ordinary dividends paid in the year													(17,439)					(20,004)
	Net assets attributable to ordinary shares at 31 May													558,580					634,324
9	2026 Financial information
	The figures and financial information for the year ended 31 May 2026 are extracted from the Company's annual financial statements for that period and do not constitute statutory accounts. The Company's annual financial statements for the year to 31 May 2026 have been audited but have not yet been delivered to the Registrar of Companies. The Independent Auditor's Report on the 2026 annual financial statements is unqualified, does not include a reference to any matter to which the auditor drew attention without qualifying the report, and does not contain any statements under s498(2) or s498(3) of the Companies Act 2006.
10	2025 Financial information
	The figures and financial information for the year ended 31 May 2025 are compiled from an extract of the published financial statements for that year and do not constitute statutory accounts. Those financial statements have been delivered to the Registrar of Companies, include the unqualified Independent Auditor's Report on the 2025 annual financial statements, do not include a reference to any matter to which the auditors drew attention without qualifying the report, and do not contain any statements under s498(2) or s498(3) of the Companies Act 2006.
11	Annual Report
	The Annual Report for the year ended 31 May 2026 includes the Notice of Annual General Meeting and will be sent to shareholders in August 2026. Thereafter hard copies will be available from the corporate secretary at the Company's registered office: 201 Bishopsgate, London EC2M 3AE. The Annual Report is available at www.hendersonsmallercompanies.com
12	Annual General Meeting ("AGM") The Company's AGM will be held at 11.30am on Tuesday, 6 October 2026. The Board invites shareholders to attend the meeting at the Company's registered office at 201 Bishopsgate, London EC2M 3AE, or via videoconference if preferable. Only shareholders present in person or by proxy will be able to participate in the vote. The Fund Manager will present her review of the year and thoughts on the future and will be pleased to answer your questions, as will the Board. Instructions on attending the meeting in person or virtually, and details of resolutions to be put to the AGM, are included in the Notice of AGM in the Annual Report and are available at www.hendersonsmallercompanies.com. If shareholders would like to submit any questions in advance of the AGM, they are welcome to send these to the corporate secretary at [e-mail].
13	General Information Company Status The Henderson Smaller Companies Investment Trust plc is a UK domiciled investment trust company. ISIN number/SEDOL Ordinary Shares: GB0009065060/0906506 London Stock Exchange (TIDM) Code: HSL Global Intermediary Identification Number (GIIN): WZD8S7.99999.SL.826 Legal Entity Identifier (LEI): 213800NE2NCQ67M2M998 Registered Office 201 Bishopsgate, London EC2M 3AE Directors and Secretary The directors of the Company are Penny Freer (Chair of the Board), Kevin Carter (Senior Independent Director), Alexandra Mackesy (Audit and Risk Committee Chair), Michael Warren and Yen Mei Lim. The Corporate Secretary is Janus Henderson Secretarial Services UK Limited. Website Details of the Company's share price and net asset value, together with general information about the Company, monthly factsheets, insights, announcements, reports and details of general meetings can be found at www.hendersonsmallercompanies.com.
	For further information, please contact: Cassie Herlihy Indri van Hien Fund Managers Janus Henderson Investors Telephone: [phone] Dan Howe Head of Investment Trusts Janus Henderson Investors Telephone: [phone] Harriet Hall PR Director, Investment Trusts Janus Henderson Investors Telephone: [phone] Janus Henderson Secretarial Services UK Limited Corporate Secretary Telephone: [phone]

ENDS

The Annual Report, including the Notice of Annual General Meeting and together with the form of proxy, will shortly be uploaded to the Financial Conduct Authority's National Storage Mechanism and will be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) are incorporated into, or form part of, this announcement.

 

END