Annual Financial Report

RNS Number : 4654H

Henderson Smaller Cos Inv Tst PLC

04 August 2021

 

HENDERSON INVESTMENT FUNDS 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 2021

This announcement contains regulated information.

18^th consecutive year of dividend increase and outperforming again for the 16^th year in the last 18 years

KEY HIGHLIGHTS

The Henderson Smaller Companies Investment Trust plc has outperformed its benchmark by 4.4% (on a NAV total return basis) and is increasing its final dividend to 16.75p per share (2020: 16.50p), leading to a dividend increase for the year.

Neil Hermon, Fund Manager, said:

" The Company had an excellent year of performance, rising significantly in absolute terms and materially outperforming its benchmark. This marks the 16^th year of outperformance in the 18 years I have been managing the portfolio, and it is also the 18^th consecutive year of dividend increase."

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 for the year ended 31 May 2021
	1 year %	3 years %	5 years %	10 years %
NAV1	58.5	36.3	103.3	310.2
Share price2	69.3	43.4	135.6	399.8
Benchmark3	54.1	21.8	58.8	164.2
Average sector NAV4	49.4	25.8	77.1	205.4
Average sector share price5	59.7	28.9	83.6	241.1
FTSE All-Share Index	23.1	5.9	40.5	84.4

Performance	Year ended 31 May 2021	Year ended 31 May 2020
NAV per share at year end	1,329.1p	859.1p
Share price at year end	1,280.0p	777.0p
Discount at year end6	3.7%	9.6%
Gearing at year end	8.8%	11.0%
Dividend for the year	23.75p 7	23.50p
Revenue return per share	13.86p	16.73p
Dividend yield8	1.9%	3.0%
Total net assets	£993m	£642m
Ongoing charge excluding performance fee	0.39%	0.42%
Ongoing charge including performance fee	0.98%	0.42%

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

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

3 Numis Smaller Companies Index (excluding investment companies) total return

4 Average NAV total return of the AIC UK Smaller Companies sector

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 This represents an interim dividend of 7.00p and a proposed final dividend of 16.75p, subject to shareholder approval at the AGM

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

A glossary of terms and explanations of alternative performance measures are included in the Annual Report.

Sources: Morningstar Direct, Janus Henderson, Refinitiv Datastream

CHAIRMAN'S STATEMENT

I am very pleased to report that the optimism I expressed in my half-year report has proved to be well founded. The recovery in your Company's share price and net asset value continued through the second half of the year resulting in significant outperformance against our benchmark. This is the eighteenth consecutive year in which we have increased our total dividend. The vaccine rollout in the UK has proved to be swifter and more efficient than in most other countries and this has stimulated a fast recovery for UK smaller companies. Even more pleasing is the long-term performance track record of your Company. Since Neil Hermon was appointed as the lead Fund Manager, your Company has outperformed its benchmark in 16 of the past 18 years. Performance over the last ten years, during which I have had the honour of being your Chairman, has been particularly impressive. The annualised net asset value ("NAV") total return over that period has been 15.2%, outperforming the benchmark average by 5.0% per annum. The consistency of this outperformance reflects the quality of the investment style and approach of Neil Hermon and his team, Indriatti van Hien and Shivam Sedani.

Performance

Your Company performed very well in the year under review with a NAV total return of 58.5% outperforming our Numis Smaller Companies Index benchmark by 4.4%. This performance also compared favourably with the AIC UK Smaller Companies sector average which returned 49.4%. The share price total return was even better at 69.3%, reflecting a narrowing of the share price discount to NAV.

Revenue and dividend

The total revenue received from your Company's portfolio fell from £14.2m to £12.3m over the year as investee companies cut their dividends in response to the challenges of the pandemic. Your Board believes that as the UK economy continues to recover, the level of dividend income will return to previous levels.

Notwithstanding this lower level of income received, your Board proposes to continue its record of increasing the annual dividend each year in light of the improving outlook. Accordingly, your Board is pleased to recommend a final dividend of 16.75p per share (2020: 16.50p), which together with the interim dividend of 7.00p per share makes a total dividend for the year of 23.75p per share (2020: 23.50p), being an increase of 1.1%. This will be funded from a combination of current year revenue, the revenue reserve and a small amount from the capital reserve.

Discount

Your Company's share price discount to NAV fluctuated widely over the year with highs and lows of 0.6% and 16.4% respectively, averaging 8.0%. This compares favourably with the sector average of 14.2%. The Company ended the year at a 3.7% discount compared with 9.6% on 31 May 2020. Your Board continues to monitor the discount and will consider the merits of buying back shares as markets evolve, although we do not currently believe that share buy-backs represent the most effective way of generating long-term shareholder value. During the reporting year, no shares were bought back.

Performance fee

Your Company's management fee arrangements consist of a very low base fee of 0.35% and a performance fee arrangement which is subject to various restrictions, including a performance hurdle and the requirement for an improved absolute return and share price compared with the prior year. There is also a cap ensuring that investment management fees, including the performance fee, cannot exceed 0.9%. This year, the strong investment performance has resulted in a performance fee being paid. Full details are given in the Annual Report.

Board

As I explained in my half-year report, I shall be retiring as your Chairman at the conclusion of the 2021 AGM and will be succeeded by Penny Freer. Penny has spent over 25 years in investment banking, providing advice to management teams. She has extensive experience of leadership at board level and, having been on our Board since 2018, I have no doubt she will be an outstanding Chairman. Our succession planning continues, and this is reflected in the appointments to the Board of Kevin Carter and Michael Warren which I also reported in my half-year report.

Annual General Meeting ("AGM")

We are pleased to invite shareholders to attend the AGM in person at our registered office on Friday, 1 October 2021 at 11.30 am. We encourage shareholders to attend for the opportunity to meet the Board, see a presentation from your Fund Manager reviewing the year and looking forward to the year ahead, and to ask questions and debate with Neil and the Board. For any shareholders unable to travel, we will also be welcoming you to join by conferencing software Zoom. As is our normal practice, there will be live voting for those physically present at the AGM. Due to technological restrictions, we cannot offer live voting by Zoom, and we therefore request all shareholders, and particularly those who cannot attend physically, to submit their votes by proxy, ahead of the deadline of 29 September 2021, to ensure that their vote counts at the AGM.

Outlook

At the time of writing, the vaccination roll-out continues at pace and the data is suggesting that a full exit from lockdown measures should be possible this summer, which should accelerate further the sharp recovery in economic activity. Economic and sentiment indicators continue to be positive with corporate activity picking up, and UK smaller companies generally have performed well during the crisis. The UK Government has agreed a trade deal with Europe and is starting to agree trade deals with other countries which should prove beneficial for British trade and therefore UK smaller companies. Against this background, I see no reason why your Company cannot continue the success of the last ten years in the years ahead.

Jamie Cayzer-Colvin

Chairman

FUND MANAGER'S REPORT

Fund performance

The Company had an excellent year in performance terms, rising significantly in absolute terms and materially outperforming its benchmark. The share price rose by 69.3% and the net asset value by 58.5% on a total return basis. This compared with an increase of 54.1% (total return) by the Numis Smaller Companies Index (excluding investment companies). The outperformance came from a positive contribution from gearing partially offset by a small negative contribution from expenses and stock selection. This year marks the 16th year of outperformance of the benchmark in the 18 years in which I have managed the investment portfolio, and it is also the 18th consecutive year of dividend increase.

After another extraordinary year of navigating the challenges of running a business in a pandemic, we would like to offer our sincere thanks to the boards, management teams and their colleagues of our portfolio companies for all their hard work and resilience during this time. We have always kept an open dialogue with the management and boards of all our portfolio companies, and in many ways the pandemic increased the need for and ability to communicate as we worked to provide support for businesses. We invite you to read more about our company engagement in the ESG section in the Annual Report.

Market - year under review

The year under review was a volatile but ultimately extremely positive one for equity markets as Covid-19 headlines dominated news flow. Rising virus caseloads globally in the summer and the discovery of new highly contagious mutant strains of the virus in the winter resulted in a stop-start reopening of the UK economy. Corporate and consumer sentiment was dampened by the re-imposition of stricter measures at various points in the year including local and national lockdowns. Consequently, governments globally were forced to provide continued support to their economies, while corporates looked to issue more equity to withstand the disruption to trading caused by new lockdowns.

It was the news in November 2021 that three separate vaccine trials had passed the first efficacy and safety hurdles that marked a turning point in the world's fight against Covid-19. This caused animal spirits to return to boardrooms, living rooms and trading floors alike. Equity markets rallied sharply as investors regained the confidence to look through short-term trading conditions and put multiples on the future earnings of pandemic-stricken sectors such as travel, leisure and retail.

Politics briefly took centre stage at the turn of the year. After taking talks to the brink, the impasse was broken and the UK and EU finally agreed a trade deal, averting the much-feared "no-deal" Brexit scenario. Sterling strengthened materially as a result. Elsewhere, in the US, after a protracted vote count Joe Biden was proclaimed the winner of the presidential election and the Democrats took control of Congress and the Senate which raised hopes of further fiscal stimulus.

In the UK, the vaccination programme that started in December 2020 was a notable success both in terms of the speed of roll-out and evidence of high efficacy rates. This allowed the Government to set out a roadmap to the "irreversible" reopening of the economy, causing equity markets to rally further. Elsewhere, vaccination rates gained pace in the US and Israel whilst Europe initially lagged behind developed market peers. Vaccination progress in conjunction with the continued fiscal support from governments increased global growth and inflation expectations. Oil and commodity prices rose along with bond yields. Value stocks rallied at the expense of defensive and growth stocks as investors started to position themselves for reflation.

Smaller companies materially outperformed larger companies over the year. The Numis Smaller Companies Index (excluding investment companies) outperformed the FTSE All-Share Index for the first time since 2015-16.

Gearing

Gearing started the year at 11.0% and ended it at 8.8%. Debt facilities are a combination of £30 million 20-year unsecured loan notes at an interest rate of 3.33% and £85 million short-term bank borrowings. As markets rose, the use of gearing was a positive contributor to performance in the year. Gearing has made a significant positive contribution to investment performance over the 18 years I have managed the investment portfolio.

Attribution analysis

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

Principal contributors	12-month return %	Relative contribution %
Impax Asset Management	+197.7	+1.8
Centamin1	-31.3	+1.2
Codemasters	+95.3	+0.8
Future	+106.3	+0.8
Luceco	+229.2	+0.7

¹ Not owned by the Company

Impax Asset Management is an environmentally and socially responsible focused asset manager based in the UK. The company was formed in 1998 by the current CEO Ian Simm, and has several funds spanning public equities, bonds and private equity assets. Demand for these types of funds is growing as the sustainability agendas have become top priorities for governments, consumers and investors alike. Consequently, the business has seen continued rapid growth in assets under management, and we expect this to continue as the group's strong performance track record and distribution agreements should lead to further inflows.

Centamin is an Egyptian gold miner. The company reported reduced production output after a period of disruption. Furthermore, the shares de-rated as investor appetite for gold and other safe haven assets waned following the positive vaccine news and the sharp rebound in economic activity as economies began to recover from the effects of Covid-19. The Company did not own a position in this stock.

Codemasters is a video games developer. The company saw strong growth driven by its premier title, Formula One. The company was a major beneficiary of its customers being housebound during the early stages of Covid-19. The company also received a takeover offer from Electronic Arts at a substantial premium to the prevailing share price.

Future is a tech-enabled global platform for specialised media which targets consumers and business-to-business ("B2B") brands across Europe, America and Asia Pacific. The company creates specialised content to attract and grow high-value audiences. These audiences are then monetised through memberships and subscriptions, print and digital advertising, e-commerce sales and events. Future has both an organic and inorganic growth strategy. Management is focused on purchasing new brands and titles to leverage its scalable technology and drive digital growth using its revenue optimisation model. The company was a big beneficiary of its customers' overnight shift to consumer spending online and increasing allocation of corporate marketing budgets spent on digital marketing during the early stages of the pandemic.

Luceco is a manufacturer and distributor of electrical products. It has substantial UK market shares in portable power and wiring accessories. The company has benefited from increased RMI (repair, maintenance and improvement) demand driven by Covid-19, market share gains and materially improved margins driven by cost improvement. With a rapidly de-leveraging balance sheet, prospects look strong, driven by further revenue growth and the potential for value enhancing acquisitions.

Principal detractors	12-month return %	Relative contribution %
Clinigen	-1.6	-1.5
RWS Holdings	+0.2	-1.3
AO World 1	+200.9	-1.2
S4 Capital1	+117.4	-1.0
William Hill1	+102.3	-0.9

¹ Not owned by the Company

Clinigen is a global speciality pharmaceutical services business. Its core activity is providing comparator drugs and other services for clinical trials and providing market access for drugs that are difficult to obtain or yet to be licensed. It also has a speciality pharmaceutical division, which looks to acquire niche drugs from major pharmaceutical companies, where management thinks it can enhance performance through additional regulatory approval or increased targeted marketing. The company suffered from the impact of Covid-19 on its portfolio of oncology drugs, as diagnosis and treatment of cancer declined, and from delays to the clinical approval of a new treatment which uses one of Clinigen's major drugs.

RWS is a translation-services business with particular strengths in intellectual property, life sciences and technology. The company has demonstrated long-term sustainable growth through a combination of organic and acquisitive expansion which has generated substantial shareholder returns over the long term. During the period under review RWS acquired SDL, a translation-services competitor, which put technical pressure on the stock due to a large number of shares issued to fund the deal.

AO World is an online retailer of electrical products in the UK and Europe. Revenues grew substantially in the period under review as consumers refocused their expenditure towards the home and away from leisure and holiday spend. The company also took market share as physical retailers were forced to close for a significant part of the year due to Covid-19 restrictions. The Company did not own a position in this stock.

S4 Capital is a provider of digital marketing and advertising services. The company has enjoyed rapid growth from client wins and a series of acquisitions. The Company did not own a position in this stock.

William Hill is a licensed betting company. The company was taken over by Caesars Entertainment principally to boost its exposure to the nascent US gambling market. The Company did not own a position in this stock.

Portfolio activity

Trading activity in the portfolio was consistent with an average holding period of over 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.

During the year we have added a number of new positions to our portfolio. These include the following:

Auction Technology Group is an online marketplace and platform company that serves auctioneers and bidders in the industrial, commercial and antique auction markets. The company is benefitting from a transition from physical-only auctions to an online hybrid format, with this trend accelerating during the Covid-19 pandemic. With strong growth prospects from further online penetration and targeted complementary acquisitions, the outlook for the company is positive.

Bytes Technology is the eighth largest UK IT reseller with just 3% market share and lots of white space to penetrate. It specialises in software sales and therefore benefits from the recurring revenues arising from the SaaS (Software as a Service) models it sells. The company is benefitting from the structural growth in IT spending by both the private and public sector. The group's strategy is straightforward and is centred around selling more to existing customers and winning new customers.

Foresight Group is an alternatives asset manager specialising in infrastructure and regional private-equity investments. We invested in Foresight as it offered relatively cheap exposure to growing fund allocations towards alternative assets. The company is highly cash generative and intends to spend money on bolt-on M&A (mergers and acquisitions) alongside returning cash to shareholders.

Moonpig is an online card and gifting retailer operating in the UK and the Netherlands. The group has more than 60% market share of the online card market. It is a structural grower benefitting from the offline-to-online transition in card purchasing. Moonpig's negative working capital profile and capital-light business model mean cash generation is strong and returns are high. Management is using data analytics to increase customer stickiness and encourage the attachment of gift purchases to card purchases to augment top-line growth.

Pebble Group provides advertising services to global enterprises. The group primarily designs and supplies branded promotion products to large corporates for use in marketing campaigns. The company also offers a purchasing platform tool for smaller US businesses, which is recurring and highly profitable income. Pebble is demonstrating good growth as it wins new enterprise contracts and attracts customers on to its purchasing platform. We expect this positive momentum to continue as the group has a strong pipeline of new business opportunities.

Young & Co's is an owner and operator of premium unbranded pubs in the South of England. It has significant net asset value backing with 84% of its pubs either owned freehold or with long-term peppercorn rents. We took the opportunity to initiate a position when the company raised equity in June 2020 to bolster its balance sheet to withstand the impact of Covid-19. As the economy re-opens, Youngs should benefit from its favourable geographic exposure, a well-invested estate and a strong balance sheet which will enable it to acquire new sites.

To balance the additions to our portfolio, we have disposed of positions in companies which we felt were set for poor price performance. We sold our holding in Cineworld, a global cinema operator, after the shares recovered strongly from post-pandemic lows. The forced closure of its business throughout most of 2020 and early 2021 has left the balance sheet over-indebted. Additionally, moves from the film studios to shorten the exclusive period that movies are shown at cinemas, and the rise in premium video-on-demand leaves the shape of recovery in trading at Cineworld open to question. We also disposed of our holding in Tekmar, a provider of products to the offshore wind, oil and gas industries. We had become increasingly concerned by the outlook for earnings and the poor corporate governance in the company. We sold our positions in Safestore, a self-storage company, and Zotefoams, a speciality foams manufacturer, as strong recoveries in both companies' share prices left them fully valued. We also sold our position, in line with our stated policy, in Intermediate Capital, an alternative finance provider and asset manager, as it was elevated to the FTSE 100.

There was a heightened level of takeover activity in the portfolio, particularly in the latter part of our financial year. This was consistent with the wider mid and small-cap equity market aided by the removal of Brexit uncertainty and heightened levels of interest from private equity. A number of takeover bids were received: for AA, a roadside assistance and insurance group, from Towerbrook and Warburg Pincus; for Codemasters, a video games company, from Electronic Arts; for GoCo, a price comparison website, from Future; for John Laing, an infrastructure investor, from KKR; for SDL, a language services group, from RWS; for Spire Healthcare, a hospital operator, from Ramsay Health; for Urban & Civic, an urban regeneration business, from Wellcome Trust; and for Vectura, a medical device development company, from Carlyle.

 

Portfolio outlook

The following table shows the Company's top 10 stock positions and their active positions versus the Numis Smaller Companies Index (excluding investment companies) at 31 May 2021:

Top ten positions at 31 May 2021	Holding %	Index Weight %	Active Weight %
Impax Asset Management	3.1	-	3.1
Future	2.7	-	2.7
Bellway	2.6	-	2.6
Clinigen	2.1	-	2.1
RWS	2.1	-	2.1
Mitchells & Butlers	2.0	0.9	1.1
Team17	2.0	-	2.0
Gamma Communications	2.0	-	2.0
Oxford Instruments	1.9	0.8	1.1
Watches Of Switzerland	1.9	1.2	0.7

A brief description of the largest active positions (excluding Impax Asset Management, Future, Clinigen and RWS, which were covered earlier) follows:

Bellway is a national UK housebuilder. Before the pandemic, the UK new-housing market was robust due to low interest rates and government initiatives, particularly the "Help to Buy" scheme. Although the housing market slowed temporarily due to Covid-19, it has bounced back very strongly, helped by stamp duty relief and a desire by consumers to own larger properties as the working-from-home trend becomes more prevalent. Bellway is also benefitting from other structural factors, such as a benign land market due to the reduction in competitors from the previous cycle, the under-supply of housing in the UK and the capital discipline Bellway and its peers are displaying. Bellway is looking to exploit these conditions by expanding its national footprint, whilst maintaining a strong land-bank and balance sheet.

Mitchells & Butlers is a national pub and restaurant owner and operator. Although Covid-19 severely impacted the business, as operations were either closed or operating under severe restrictions, the company has come through this tough period intact and with a strong balance sheet, aided by an equity issue during the year. Prospects for recovery look strong as Covid-19 restrictions are eased and consumers will look to spend the substantial personal savings built up in the last year. Additionally, competition has diminished as the number of licensed operators has declined and in the short term the inability to travel abroad should boost 'staycation' spend in the UK.

Team17 is a developer and publisher of video games for PCs, consoles and mobile devices. The company focuses on the independent games market and selectively works with developers and third parties to launch new content on multiple platforms. The business listed in 2018 and has had a strong record of growth driven by well-received new releases, the monetisation of new content and improved profitability as the portfolio expands. With a balance sheet in a net cash position, the company is well placed to acquire complementary assets in the sector.

Gamma Communications provides voice, data, mobile and internet-based telecoms to small and medium-sized enterprises in the UK and Europe. The company is focused on selling cloud-based telephony solutions, a market which is rapidly growing as users switch to more flexible services. The company has been highly successful with this approach in the UK and has recently expanded through acquisitions in Germany, the Netherlands and Spain to replicate this strategy. We expect this positive growth to continue both organically and through further acquisitions in Europe.

Oxford Instruments is a manufacturer of advanced instrumentation equipment. The company benefits from servicing a number of high-growth industries such as semiconductors, quantum computing, life sciences and advanced materials. In addition, its 'Horizon' programme of business improvement is driving sales, profit and margin growth. With a very strong balance sheet and a positive outlook for its end-markets the company is well placed for the future.

Watches Of Switzerland is a leading retailer of luxury watches and jewellery in the UK and US. The group trades under the banner of four prestigious retail brands: Watches of Switzerland, Mappin & Webb, Goldsmiths and Mayors. The group has a 40% share of the UK luxury watch market and 9% share of the US luxury watch market. Over 50% of revenues are generated from the sale of Rolex watches. In addition to driving sales densities across existing stores through improved marketing and stock availability, management's growth strategy is centred around expansion in the US where the potential for market share gains is most apparent.

As at 31 May 2021, the portfolio was weighted by company size as follows:

	Weighting %
	31 May 2021	31 May 2020
FTSE 100	1.6	3.7
FTSE 250	63.0	61.2
FTSE Small Cap	13.4	15.3
FTSE AIM	30.8	30.8
Gearing	(8.8)	(11.0)

Market outlook

The Covid-19 outbreak dramatically changed expectations for global economic growth. The lockdown measures we have seen across the globe have had a profound effect on economic activity. Government actions to protect consumers and businesses from the worst impact of the shock softened the blow but ultimately can only be short term in nature given the scale of the bail-out required.

The virus will pass and the global economy is recovering. However, the shape and magnitude of the recovery are at this point uncertain, although confidence is rising that it will be pronounced and swift. The positive vaccine news announced in November 2020 and the subsequent successful vaccination programme have raised the very real possibility that life may return to some sort of 'normal' during 2021 with a consequent sharp recovery in economic activity.

One of the major concerns facing the equity market is the threat of higher inflation and the need for central banks to start tightening monetary policy. There is much debate as to whether current indications of inflation, led by commodities and logistics costs, are temporary or are of a more permanent nature with central bankers tending to lean towards the former view. A sustained pick-up in wage inflation would probably force monetary authorities to act more quickly, although at the time of writing there is no evidence of this.

Outside of Covid-19 there has been positive progress on key matters. The EU and the UK have finally agreed on a trade deal removing the threat of the damaging implications of a hard-deal Brexit. The US election outcome was closer than expected but a definitive resolution was reached. Hopefully a Biden presidency should see a more conciliatory and pragmatic approach to US foreign and trade policies.

In the corporate sector, conditions are intrinsically stronger than they were during the financial crisis of 2008-9. Balance sheets are, in particular, more robust. On the whole, so far, the UK corporate sector has performed well during the crisis and most companies are beating their initial post-Covid-19 earnings and cash expectations.

We are seeing a noticeable pick-up in corporate activity. The IPO market, after a quiet 2020, has exploded into life in recent months. Given the number of companies looking to float on public markets, it is important to remain disciplined when sifting through the multitude of new investment opportunities we have in front of us. Likewise, we are also seeing a significant increase in M&A activity as private equity, in particular, looks to exploit opportunities thrown up by Covid-19. We expect this upsurge to continue in the coming months as UK equity market valuations remain markedly depressed versus other developed markets.

In terms of valuations, the UK equity market is now trading in line with long-term averages if we apply pre-Covid-19 earnings. Corporate earnings were sharply down in 2020 although confidence in a sharp recovery in 2021 and beyond is rising.

Although uncertainty remains around short-term economic conditions, the virus will pass and we are seeing the green shoots of recovery. The movements in equity markets have thrown up some fantastic buying opportunities and we expect many listed companies to emerge stronger from the downturn. However, it is important to be selective, as any recovery will be uneven and strength of franchise, market positioning and balance sheet will determine the winners from the losers in a post-Covid-19 world.

In conclusion, the year under review has been an excellent one for the Company. Absolute performance was positive and the Company materially outperformed its benchmark. Our portfolio companies have performed robustly, are soundly financed and attractively valued. Additionally, the smaller companies market continues to throw up exciting growth opportunities in which the Company can invest. We remain confident in our ability to generate significant value from a consistent and disciplined investment approach.

Neil Hermon

Fund Manager

INVESTMENT PORTFOLIO  at 31 May 2021
Company	Principal activities	Valuation £'000	Portfolio %
Impax Asset Management1	Specialist fund manager	33,480	3.1
Future	Specialist media platform	29,657	2.7
Bellway	Housebuilder	28,624	2.6
Clinigen 1	Pharmaceuticals	22,485	2.1
RWS 1	Translation services	22,237	2.1
Mitchells & Butlers	Hospitality operator	21,511	2.0
Team17 1	Games software developer	21,087	2.0
Gamma Communications 1	Telecommunications services	21,085	2.0
Oxford Instruments	Advanced instrumentation equipment	21,011	1.9
Watches Of Switzerland	Luxury watch retailer	20,240	1.9
10 largest		241,417	22.4
GB Group 1	Data intelligence services	19,168	1.8
Learning Technologies 1	E-learning software	18,955	1.8
TI Fluid Systems	Automotive supplier	18,705	1.7
Synthomer	Speciality chemicals	18,373	1.7
OneSavings Bank	Buy-to-let mortgage provider	17,667	1.6
Paragon	Buy-to-let mortgage provider	17,482	1.6
Softcat	Software reseller	16,461	1.5
Dechra Pharmaceuticals	Veterinary pharmaceuticals	15,839	1.5
Renishaw	Precision measuring and calibration equipment	15,775	1.5
Balfour Beatty	International contractor	15,773	1.5
20 largest		415,615	38.6
Tyman	Building products	15,681	1.5
Savills	Property transactional consulting services	15,134	1.4
Sanne	Investment management services	14,976	1.4
Ultra Electronics	Defence and aerospace products	14,832	1.4
IntegraFin	B2B financial platform	14,552	1.3
Just Group	Enhanced annuity provider	14,410	1.3
Luceco	Electrical products	14,190	1.3
Computacenter	IT reseller	14,021	1.3
Vesuvius	Ceramic engineering	13,922	1.3
Ascential	Exhibition organiser and data services	12,775	1.2
30 largest		560,108	52.0
Volution	Ventilation products	12,163	1.1
Inspecs 1	Eyewear maker and designer	11,652	1.1
Crest Nicholson	Housebuilder	11,638	1.1
Bodycote	Engineering group	11,351	1.1
Brewin Dolphin	Wealth management	11,322	1.0
XP Power	Electrical power products	11,301	1.0
DFS	Furniture retailer	11,289	1.0
Liontrust Asset Management	Specialist fund manager	11,248	1.0
Victrex	Speciality chemicals	11,234	1.0
Avon Rubber	Defence products	10,836	1.0
40 largest		674,142	62.4
Alpha Financial Markets 1	Investment management consultancy	10,704	1.0
Countryside	Housebuilder	10,634	1.0
Chemring	Defence products	10,557	1.0
CLS	Real estate investment and services	10,374	1.0
Cairn Energy	Oil and gas exploration and production	10,081	0.9
Vitec	Broadcast and camera systems	9,824	0.9
Spectris	Electronic control and process instrumentation	9,315	0.9
Euromoney Institutional Investor	B2B information	9,082	0.8
Redde Northgate	Commercial vehicle hire	9,048	0.8
Foresight Group	Specialist fund manager	8,820	0.8
50 largest		772,581	71.5
Bytes Technology	Software reseller	8,650	0.8
Midwich 1	Audio-visual equipment distributor	8,625	0.8
Gym Group	Gym operator	8,418	0.8
Restore 1	Office service provider	7,831	0.7
Moonpig	Online card and gift retailer	7,712	0.7
St Modwen Properties	Property investment and development	7,686	0.7
Joules 1	Clothing retailer	7,562	0.7
Hollywood Bowl Group	Ten-pin bowling operator	7,374	0.7
Howden Joinery	Kitchen manufacturer and retailer	7,372	0.7
Hunting	Oil equipment and services	7,308	0.7
60 largest		851,119	78.8
Frontier Developments 1	Games software developer	7,068	0.7
Serco	Outsourcing services	7,009	0.6
Helical	Office property investor and developer	6,820	0.6
Next Fifteen Communications 1	PR and media services	6,552	0.6
Go-Ahead Group	Transport provider	6,381	0.6
Alliance Pharma 1	Pharmaceutical products	6,373	0.6
Hyve	Exhibition and conference organiser	6,115	0.6
Moneysupermarket.Com	Price comparison website	6,080	0.6
Tribal Group 1	Educational support services and software	6,064	0.6
Coats	Global threads manufacturer	6,057	0.6
70 largest		915,638	84.9
Genuit	Building products	5,966	0.6
SThree	Recruitment company	5,796	0.5
Smart Metering Systems 1	Energy smart meters	5,712	0.5
Safestyle 1	Window and door retailer	5,625	0.5
Eurocell	Building products	5,400	0.5
Wickes	DIY retailer	5,389	0.5
Aptitude Software	Software retailer	5,345	0.5
Alphawave IP	Semiconductor IP	5,287	0.5
Restaurant	Restaurant and pub operator	5,129	0.5
Headlam	Floor coverings distributor	5,106	0.5
80 largest		970,393	90.0
Rotork	Process control solutions	5,013	0.5
De La Rue	Currency and authentication products	4,869	0.5
Burford Capital 1	Litigation finance	4,828	0.4
Pagegroup	Recruitment company	4,822	0.4
Auction Technology	Online auction software provider	4,660	0.4
Serica Energy 1	Oil and gas exploration and production	4,641	0.4
Pebble Group 1	Promotion products and services	4,611	0.4
Vectura	Pharmaceutical products	4,464	0.4
Knights 1	Legal and professional services	4,334	0.4
Marshall Motor 1	Automotive retailer	4,266	0.4
90 largest		1,016,901	94.2
RM	Education software and services	4,200	0.4
Young & Co's share class A 1	Pub operator	4,088	0.4
Johnson Service 1	Textile rental and related services	3,949	0.4
Grainger	Residential property investor	3,924	0.4
Fisher (James) & Sons	Marine, oil and gas specialised services provider	3,914	0.4
AB Dynamics 1	Automotive testing and measurement products	3,794	0.4
Benchmark Holdings 1	Pharmaceuticals and biotechnology	3,748	0.3
Advanced Medical Solutions 1	Medical supplies manufacturer	3,699	0.3
Empiric	Student accommodation	3,697	0.3
Gooch & Housego 1	Optical components manufacturer	3,668	0.3
100 largest		1,055,582	97.8
Blancco Technology 1	Data erasure software	3,528	0.3
Gresham House 1	Specialist fund manager	3,267	0.3
Sherborne Investors (Guernsey) C	Investment company	3,190	0.3
Volex 1	Power products	3,166	0.3
Severfield	Industrial engineering	2,844	0.3
EMIS 1	Healthcare software	2,671	0.2
Young & Co's share class NV 1	Pub operator	2,667	0.2
Harbour Energy	Oil and gas exploration and production	2,055	0.2
Thruvision 1	Detection technology	1,388	0.1
Total Equity Investments		1,080,358	100.00

There were no convertible or fixed interest securities at 31 May 2021 (2020: 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 which relate to the activity of investing in the shares of smaller companies that are listed (or quoted) in the United Kingdom. The directors seek assurance that the risks are appropriately evaluated and that effective mitigating controls are in place. To support this process, the Audit and Risk Committee ("ARC") has drawn up a detailed risk matrix which identifies the substantial risks to which the Company is exposed and methods of mitigating against them as far as practicable. The Board regularly considers these. It does not consider the principal risks to have changed during the course of the reporting period and up to the date of the report. It does however now also treat as a risk the failure to identify in a timely fashion an emerging risk that develops rapidly into a significant risk. The directors have also categorised risks relating to material climate impacts as a new additional risk.

Throughout the year the Board has considered the impact of Covid-19 on the Company and concluded that the portfolio and investment approach are resilient, with the Fund Manager's long-standing philosophy that, over the long term, smaller companies are able to deliver superior returns than the broader market, driven by his fund management team's fundamental, qualitative analysis, engagement with management teams and strong valuation discipline.

The principal risks fall broadly under the following categories:

Risk	Controls and mitigation
Investment activity and strategy Poor long-term investment performance (significantly below agreed benchmark or market/industry average) Loss of the Fund Manager or management team Impact of political, environmental, health or other emergencies (e.g. Covid-19) on the Company's investments Approach to ESG matters Material climate-related impacts (both physical and transition risks)	The Board reviews investment strategy at each board meeting. An inappropriate investment strategy (for example, in terms of asset allocation or the level of gearing) may lead to underperformance against the Company's benchmark and the companies in its peer group; it may also result in the Company's shares trading at a wider discount to net asset value ("NAV") per share. The Board manages these risks by ensuring a diversification of investments and a regular review of the extent of borrowings. The Manager operates in accordance with investment limits and restrictions determined by the Board; these include limits on the extent to which borrowings may be used. The Board reviews its investment limits and restrictions regularly and the Manager confirms its compliance with them each month. The Manager provides the directors with management information, including performance data and reports and shareholder analysis. The Board monitors the implementation and results of the investment process with the Fund Manager, who attends all board meetings, and regularly reviews data that monitor portfolio risk factors. The performance of the Company relative to its benchmark and its peers and the discount/ premium to NAV per share are key performance indicators measured by the Board on a continual basis and are reported in the Annual Report. Although the Company invests entirely in securities that are quoted on recognised markets, share prices may move rapidly and it may not be possible to realise an investment at the Manager's assessment of its value. The companies in which investments are made may operate unsuccessfully, or fail entirely, such that shareholder value is lost. The Board obtains assurances from the Manager that the UK Smaller Companies team is suitably resourced, and the Fund Manager is appropriately remunerated and incentivised in this role. The Board also considers the succession plan for the fund management team on an annual basis.
Accounting, legal and regulatory Loss of investment trust status Brexit and other UK political risk Breach of company law or Listing Rules resulting in suspension	In order to qualify as an investment trust the Company must comply with s1158 Corporation Tax Act 2010 ("s1158"). A breach of s1158 could result in the Company losing investment trust status and, as a consequence, capital gains realised within the Company's portfolio would be subject to corporation tax. The s1158 criteria are monitored by the Manager and the results are reported to the directors at each board meeting. The Company must comply with the provisions of the Companies Act 2006 (the "Act") and, as the Company has a premium listing on the London Stock Exchange, the Company must comply with Listing, Prospectus and Disclosure Guidance and Transparency Rules of the FCA. The Board reviews the impact of Brexit and other fundamental political infrastructure change as an integral part of investment risks and will continue to assess the portfolio on this basis. A breach of the Act could result in the Company and/or the directors being fined or becoming the subject of criminal proceedings. A breach of the FCA Rules could result in the suspension of the Company's shares which would in turn lead to a breach of s1158. The Board relies on its corporate secretary and its professional advisers to ensure compliance with the Act and FCA Rules.
Operational Failure of, disruption to or inadequate service levels by key third-party service provider Cyber-crime leading to loss of confidential data Breach of internal controls Impact of political, environmental, health or other emergencies (e.g. Covid-19) on the Company's operations	Disruption to, or failure of, the Manager's accounting, dealing or payment systems or the custodian's records could prevent the accurate reporting and monitoring of the Company's financial position. The Manager has contracted some of its operational functions, principally those relating to trade processing, investment administration and accounting, to BNP Paribas Securities Services. Details of how the Board monitors the services provided by Janus Henderson and its other suppliers, and the key elements designed to provide effective internal control and risk management, such as review of service providers' assurance reports, are explained further in the Annual Report. Cybersecurity is closely monitored by the ARC as part of quarterly internal controls reports, and the ARC receives an annual presentation from Janus Henderson's Chief Information Security Officer. The Board monitors effectiveness and efficiency of service providers' processes through ongoing compliance and operational reporting. There were no disruptions to the services provided to the Company in the year under review.
Financial instruments and the management of risk	By its nature as an investment trust, the Company is exposed in varying degrees to market risk (comprising market price risk, currency risk and interest rate risk), liquidity risk and credit and counterparty risk. An analysis of these financial risks and the Company's policies for managing them are set out in note 15 in the Annual Report.

EMERGING RISKS

At each meeting, the Board considers emerging risks which it defines as potential trends, sudden events or changing risks which are characterised by a high degree of uncertainty in terms of occurrence probability and possible effects on the Company. Once emerging risks become sufficiently clear, they may be treated as specific risks and enter the Company's matrix of significant risks. During the year, the directors agreed that these would include any unexpected further consequences of the pandemic, such as the business equivalent of 'Long-Covid'. Inflation was noted as a further emerging risk and in effect an investment management consideration within the Fund Manager's remit of investment management activities.

The Board receives reporting on risks from the Manager and other service providers, in addition to any ad hoc reports on specialist topics from professional advisors. With the support of reports to the Board at its regular meetings, ad hoc reports as required, and directors' own experience and external insights gained from industry and shareholder events, the Board monitors effectively the changing risk landscape and potential threats to the Company. Moreover, the directors ensure that the culture of the Board supports and encourages constant horizon scanning and sharing of information and challenge to identify and manage risks.

VIABILITY STATEMENT

The Company is a long-term investor. The Board believes it is appropriate to assess the Company's viability over a five-year period in recognition of the Company's long-term horizon and what the Board believes to be investors' horizons, taking account of the Company's current position and the potential impact of the principal risks and uncertainties as documented in the Annual Report. The assessment has considered the impact of the likelihood of the principal risks and uncertainties facing the Company, in particular investment strategy and performance against benchmark, whether from asset allocation or the level of gearing, and market risk, in severe but plausible scenarios, and the effectiveness of any mitigating controls in place.

The Board took into account the liquidity of the portfolio and the borrowings in place when considering the viability of the Company over the next five years and its ability to meet liabilities as they fall due. This included consideration of the duration of the Company's loan and borrowing facilities and how a breach of any covenants could impact on the Company's NAV and share price. The Board does not expect there to be any significant change in the principal risks and adequacy of the mitigating controls in place, nor does the Board envisage any change in strategy or objective or any events that would prevent the Company from continuing to operate over that period - the Company's assets are liquid, its commitments are limited and the Company intends to continue to operate as an investment trust. Only a sustained financial crisis affecting the global economy could have an impact on this assessment. In coming to this conclusion, the Board has considered the aftermath of the Covid-19 pandemic and the UK's ongoing negotiations having left the European Union, and considers that they have highlighted the advantages of holding an investment trust. The Board does not believe that they will have a long-term impact on the viability of the Company and its ability to continue in operation, notwithstanding the short-term uncertainty they have caused in the markets.

Based on this assessment, the Board has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five years to 31 May 2026.

FUTURE DEVELOPMENTS

The future success of the Company is dependent 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's intention is that the Company will continue to pursue its stated investment objective and strategy as explained in the Annual Report. The Chairman's Statement and the Fund Manager's Report give commentary on the outlook for the Company. Other information on recommended dividends and financial risks is detailed in the Annual Report.

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 to them were in respect of remuneration, for which there were no outstanding amounts payable at the year end. The directors did not claim any expenses during the years to 31 May 2021 or 31 May 2020. Directors' shareholdings are disclosed in the Annual Report.

In respect of the Manager's service provision during the year, other than fees payable by the Company in the ordinary course of business and the facilitation of marketing activities with third parties, there were no material transactions with the Manager affecting the financial position of the Company. More details on transactions with the Manager, including amounts outstanding at the year end, are given in the Notes to the financial statements in the Annual Report.

STATEMENT UNDER DISCLOSURE GUIDANCE AND TRANSPARENCY RULE 4.1.12

Each director 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 of the Company; and

· the Annual Report includes 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.

For and on behalf of the Board

Alexandra Mackesy

Director

AUDITED STATEMENT OF COMPREHENSIVE INCOME

		Year ended 31 May 2021			Year ended 31 May 2020
Notes		Revenue return £'000	Capital return £'000	Total £'000	Revenue return £'000	Capital return £'000	Total £'000
2	Investment income	12,269	-	12,269	14,194	-	14,194
3	Other income	-	-	-	37	-	37
	Gains/(losses) on investments held at fair value through profit or loss	-	365,577	365,577	-	(66,571)	(66,571)
	Total income	12,269	365,577	377,846	14,231	(66,571)	(52,340)
	Expenses
4	Management fees	(749)	(6,284)	(7,033)	(731)	(1,706)	(2,437)
	Other expenses	(726)	-	(726)	(560)	-	(560)
	Profit/(loss) before finance costs and taxation	10,794	359,293	370,087	12,940	(68,277)	(55,337)
	Finance costs	(427)	(995)	(1,422)	(438)	(1,019)	(1,457)
	Profit/(loss) before taxation	10,367	358,298	368,665	12,502	(69,296)	(56,794)
	Taxation	(14)	-	(14)	(5)	-	(5)
	Profit/(loss) for the year and total comprehensive income	10,353	358,298	368,651	12,497	(69,296)	(56,799)
5	Earnings per ordinary share - basic and diluted	13.86p	479.64p	493.50p	16.73p	(92.76p)	(76.03p)

The total columns of this statement represent the Statement of Comprehensive Income, prepared in accordance with 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.

 

AUDITED STATEMENT OF CHANGES IN EQUITY

		Year ended 31 May 2021
		Retained earnings
Notes		Share capital £'000	Capital redemption reserve £'000	Capital reserves £'000	Revenue reserve £'000	Total equity £'000
	Total equity at 1 June 2020	18,676	26,745	577,009	19,366	641,796
	Total comprehensive income: Profit for the year	-	-	358,298	10,353	368,651
	Transactions with owners, recorded directly to equity:
6	Ordinary dividends paid	-	-	-	(17,549)	(17,549)
	Total equity at 31 May 2021	18,676	26,745	935,307	12,170	992,898
		Year ended 31 May 2020
		Retained earnings
Notes		Share capital £'000	Capital redemption reserve £'000	Capital reserves £'000	Revenue reserve £'000	Total equity £'000
	Total equity at 1 June 2019	18,676	26,745	646,305	24,419	716,145
	Total comprehensive income: (Loss)/profit for the year	-	-	(69,296)	12,497	(56,799)
	Transactions with owners, recorded directly to equity:
6	Ordinary dividends paid	-	-	-	(17,550)	(17,550)
	Total equity at 31 May 2020	18,676	26,745	577,009	19,366	641,796

 AUDITED BALANCE SHEET

Notes			At 31 May 2021 £'000	At 31 May 2020 £'000
	Non-current assets
	Investments held at fair value through profit or loss		1,080,358	712,330
	Current assets
	Receivables		4,987	3,120
	Tax recoverable		9	16
	Cash and cash equivalents		2,962	4,741
			7,958	7,877
	Total assets		1,088,316	720,207
	Current liabilities
	Payables		(5,726)	(3,481)
	Bank loans		(59,860)	(45,107)
			(65,586)	(48,588)
	Total assets less current liabilities		1,022,730	671,619
	Non-current liabilities
	Financial liabilities		(29,832)	(29,823)
	Net assets		992,898	641,796
	Equity attributable to equity shareholders
7	Share capital		18,676	18,676
	Capital redemption reserve		26,745	26,745
	Retained earnings:
	Capital reserves		935,307	577,009
	Revenue reserve		12,170	19,366
	Total equity		992,898	641,796
8	Net asset value per ordinary share		1,329.1p	859.1p

AUDITED STATEMENT OF CASH FLOWS

	Year ended
	31 May 2021 £'000	31 May 2020 £'000
Operating activities
Gain/(loss) before taxation	368,665	(56,794)
Add back interest payable	1,422	1,457
(Gains)/losses on investments held at fair value through profit or loss	(365,577)	66,571
Purchases of investments	(157,850)	(125,705)
Sales of investments	155,399	123,037
Decrease/(increase) in receivables	20	(26)
Increase in amounts due from brokers	(340)	(2,530)
(Increase)/decrease in accrued income	(1,546)	2,651
Increase/(decrease) in payables	4,743	(127)
Decrease in amounts due to brokers	(2,527)	(1,672)
Net cash inflow from operating activities before interest and taxation1	2,409	6,862
Interest paid	(1,392)	(1,463)
Net cash inflow from operating activities	1,017	5,399
Financing activities
Equity dividends paid	(17,549)	(17,550)
Drawdown of bank loans	14,753	16,020
Net cash outflow from financing activities	(2,796)	(1,530)
(Decrease)/increase in cash and cash equivalents	(1,779)	3,869
Cash and cash equivalents at the start of the year	4,741	872
Cash and cash equivalents at the end of the year	2,962	4,741

¹ In accordance with IAS 7.31, cash flow from dividends was £10,715,000 (2020: £16,852,000) and cash inflow from interest was £nil (2020: £4,000).

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 financial statements of the Company for the year ended 31 May 2021 have been prepared in accordance with 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 IFRS Interpretations Committee ("IFRS IC") that remain in effect, to the extent that IFRS have been adopted by the European Union. The financial statements have been prepared on a going concern basis and on the historical cost basis, except for the revaluation of certain financial instruments held at fair value through profit or loss. The principal accounting policies adopted are set out in the Annual Report and 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") in October 2019 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. 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. The directors have also considered the impact of Covid-19, including cash flow forecasting, a review of covenant compliance including the headroom above the most restrictive covenants and an assessment of the liquidity of the portfolio. They have concluded that they are able to meet their financial obligations, including the repayment of the bank loan, 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 in the Annual Report, the Board has determined that it is appropriate for the financial statements to be prepared on a going concern basis. The Company's shareholders are asked every three years to vote for the continuation of the Company. An ordinary resolution to this effect was put to the Annual General Meeting ("AGM") held on 4 October 2019 and passed by a substantial majority of the shareholders. The next continuation vote will take place at the AGM in 2022.
2	Investment income
		2021 £'000	2020 £'000
	Income from companies listed or quoted in the United Kingdom:
	Dividends	11,669	13,202
	Special dividends	351	651
	Property income distributions	249	341
	Total investment income	12,269	14,194
3	Other income
		2021 £'000	2020 £'000
	Bank and other interest	-	4
	Underwriting income (allocated to revenue)1	-	33
		-	37
	1 There was no income receivable from sub-underwriting commitments allocated to capital in the prior year.

4	Management and performance fees
		2021			2020
		Revenue return £'000	Capital return £'000	Total return £'000	Revenue return £'000		Capital return £'000		Total return £'000
	Management fee	749	1,747	2,496	731		1,706		2,437
	Performance fee	-	4,537	4,537	-		-		-
		749	6,284	7,033	731		1,706		2,437
	A summary of the management agreement is given in the Annual Report.
5	Earnings per ordinary share The earnings per ordinary share figure is based on the net gain for the year of £368,651,000 (2020: net loss of £56,799,000) and on 74,701,796 (2020: 74,701,796) 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.
						2021 £'000		2020 £'000
	Net revenue profit					10,353		12,497
	Net capital profit/(loss)					358,298		(69,296)
	Net total profit/(loss)					368,651		(56,799)
	Weighted average number of ordinary shares in issue during the year					74,701,796		74,701,796
						2021		2020
	Revenue earnings per ordinary share					13.86p		16.73p
	Capital earnings per ordinary share					479.64p		(92.76p)
	Total earnings per ordinary share					493.50p		(76.03p)

6	Ordinary dividends
		Record Date	Pay date	2021 £'000	2020 £'000
	Final dividend: 16.5p (2020: 16.5p) for the year ended 31 May 2020	28 August 2020	12 October 2020	12,326	12,326
	Interim dividend: 7.0p (2020: 7.0p) for the year ended 31 May 2021	12 February 2021	9 March 2021	5,229	5,229
	Unclaimed dividends over 12 years old			(6)	(5)
				17,549	17,550

	Subject to approval at the AGM, the proposed final dividend of 16.75p per ordinary share will be paid on 11 October 2021 to shareholders on the register of members at the close of business on 27 August 2021. The shares will be quoted ex-dividend on 26August 2021. The proposed final dividend for the year ended 31 May 2021 has not been included as a liability in these financial statements. Under IFRS, the final dividend is not recognised until approved by the shareholders. The total dividends payable in respect of the financial year which form the basis of the test under section 1158 Corporation Tax Act 2010 are set out below:
			2021 £'000	2020 £'000
	Revenue available for distribution by way of dividends for the year		10,353	12,497
	Interim dividend for the year ended 31 May 2021: 7.00p (2020: 7.00p) per ordinary share		(5,229)	(5,229)
	Final dividend for the year ended 31 May 2020: 16.50p (based on 74,701,796 shares in issue at 30 July 2020)		-	(12,326)
	Proposed final dividend for the year ended 31 May 2021: 16.75p (based on 74,701,796 shares in issue at 3 August 2021)		(12,513)	-
	Transfer from reserves		(7,389)1	(5,058)
	1 The residual will be transferred from the revenue reserve £7,046,000 (2020: £5,058,000) and from the capital reserve £343,000 (2020: £nil).
7	Share capital
			2021 £'000	2020 £'000
	Allotted, issued, authorised and fully paid:
	74,701,796 ordinary shares of 25p each (2020: 74,701,796)		18,676	18,676
	During the year the Company made no purchases of its own issued ordinary shares (2020: nil). Since 31 May 2021 the Company has not purchased any ordinary shares.
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 £992,898,000 (2020: £641,796,000) and on the 74,701,796 ordinary shares in issue at 31 May 2021 (2020: 74,701,796). 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:
		2021 £'000		2020 £'000
	Net assets attributable to the ordinary shares at 1 June	641,796		716,145
	Net gains/(losses) for the year	368,651		(56,799)
	Ordinary dividends paid in the year	(17,549)		(17,550)
	Net assets attributable to the ordinary shares at 31 May	992,898		641,796

9	2021 Financial information
	The figures and financial information for the year ended 31 May 2021 are compiled from an extract of the latest financial statements of the Company and do not constitute the statutory accounts for that year. Those financial statements include the report of the auditor which is unqualified and does not contain a statement under either section 498(2) or section 498(3) Companies Act 2006. They have not yet been delivered to the Registrar of Companies.
10	2020 Financial information
	The figures and financial information for the year ended 31 May 2020 are compiled from an extract of the published financial statements of the Company and do not constitute the statutory accounts for that year. Those financial statements have been delivered to the Registrar of Companies and included the report of the auditor which was unqualified and did not contain a statement under either section 498(2) or section 498(3) Companies Act 2006.
11	Annual Report
	The Annual Report for the year ended 31 May 2021 will be sent to shareholders in August 2021 and will be available on the Company's website: www.hendersonsmallercompanies.com. Copies will be available thereafter from the corporate secretary at the Company's registered office: 201 Bishopsgate, London EC2M 3AE.
12	Annual general meeting ("AGM") The Company's AGM will be held at 11.30 am on Friday, 1 October 2021. The Board invites shareholders to attend the meeting at the registered office at 201 Bishopsgate, London EC2M 3AE, or via Zoom webinar connection if preferable. The Fund Manager will present his review of the year and thoughts on the future and will be pleased to answer your questions, as will the Board. As is our normal practice, there will be live voting for those physically present at the AGM. Due to technological restrictions, we cannot currently offer voting by Zoom, and we therefore request all shareholders, particularly those who cannot attend physically, to submit their votes by proxy, ahead of the deadline of 29 September 2021. If you hold your shares in a nominee account, such as through a share dealing service or platform, you will need to contact your provider and ask them to submit the proxy votes on your behalf. If you are an institutional investor you may be able to appoint a proxy electronically via the Proxymity platform. For further information regarding Proxymity, please see www.proxymity.io. Any change to the format of the AGM will be notified to shareholders via a Regulatory Information Service announcement and the Company's website. Instructions on attending the meeting and details of resolutions to be put to the AGM are included in the Notice of AGM sent with 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].
	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.
	For further information please contact:
	Neil Hermon Fund Manager Janus Henderson Investors Telephone: [phone] James de Sausmarez Director and Head of Investment Trusts Janus Henderson Investors Telephone: [phone] Laura Thomas Investment Trust PR Manager Janus Henderson Investors Telephone: [phone]

 

END

 

 

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