The Henderson
Smaller Companies
Investment
Trust plc
JHI9226/24
The Henderson Smaller Companies Investment Trust plc
Registered as an investment company in England and Wales
Registration number: 00025526
Registered office: 201 Bishopsgate, London EC2M 3AE
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
Telephone: 0800 832 832
Email: support@janushenderson.com
www.hendersonsmallercompanies.com
JHI9226/24Designed and typeset by 2112 Communications, London Printed by Paragon, London.
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The Henderson Smaller Companies Investment Trust plc – Annual Report 2024
Annual Report 2024
Strategic Report
Performance 2-3
Portfolio Information 4
Chair’s Statement 5-7
Fund Manager’s Report 8-13
Investment Portfolio 14-16
Historical Performance 17
Business Model 18-19
Section 172 Statement 20-23
KPIs 23
Board Decision Making 24
Managing Risks 25-26
Viability, Fees and Costs 26-27
Environmental, Social and Governance
(“ESG”) Matters 28-31
Governance
Corporate Governance Report 32-41
Board of Directors 33-34
Audit and Risk Committee Report 42-44
Management Engagement Committee Report 45
Nomination Committee Report 46-47
Directors’ Remuneration Report 48-50
Report of the Directors 51-52
Statement of Directors’ Responsibilities 53
Financial Statements
Independent Auditor’s Report
to the Members 55-61
Financial Statements 62-65
Notes to the Financial Statements 66-81
Additional Information
Glossary 83-84
Alternative Performance Measures 85-86
General Shareholder Information 87-88
Corporate Information 89
Notice of Annual General
Meeting (“AGM”)
Notice of AGM 90-92
Explanation of AGM resolutions 93-94
Notes explaining AGM processes 94-96
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
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.
Keeping in touch
We know how important it is to receive up-to-date information about the Company.
Visitour website at www.hendersonsmallercompanies.com
Register for updates, insights and factsheets about the Company:
Register here to watch this year’s Annual General Meeting by webinar:
The Board also welcomes you in person to the AGM. Please see more details about the
AGM and attending in person or by webinar, in the Chair’s Statement.
Please send your general enquiries about the Company to the Company Secretary at:
itsecretariat@janushenderson.com.
Strategic
Report
Photo: SigmaRoc
1
Total return performance to 31 May 2024
1
NAV
2
Share price
3
Benchmark
4
80
85
90
95
100
105
110
115
120
Jan
24
Feb
24
Mar
24
Apr
24
May
24
Dec
23
Nov
23
Oct
23
Sep
23
Aug
23
Jul
23
Jun
23
May
23
Total return performance for the year ended
31 May 2024
0
4
8
12
16
20
Share
price
3
Average
sector
NAV
5
Benchmark
4
15.1
17.3
14.1
18.2
Average
sector
share price
6
14.5
NAV
2
%
Discount data to 31 May 2024
Company AIC sector average
-18
-16
-14
-12
-10
-8
-6
-4
-2
0
Jan
24
Feb
24
Mar
24
Apr
24
Dec
23
Nov
23
Oct
23
Sep
23
Aug
23
Jul
23
Jun
23
May
24
May
23
%
Dividends for years ended 31 May
0
5
10
15
20
25
30
pence
Final Interim
2022 2024
7
20232020 202120192015 2016 2017 2018
Total return performance for the period ended 31 May 2024
1 year
%
3 years
%
5 years
%
10 years
%
NAV
2
14.5 -18.8 18.2 97.7
Benchmark
4
18.2 0.0 29.7 72.6
Average sector NAV
5
14.1 -1.7 28.0 88.6
Share price
3
17.3 -24.6 18.8 109.1
AIC sector share price
6
15.1 -2.5 30.6 97.3
FTSE All-Share Index 15.4 25.5 37.3 77.6
Performance
1 Net asset value (“NAV”) total return per ordinary share and share price total return compared to the total return of the benchmark over the year to 31 May 2024
rebased to 100
2 NAV per ordinary share total return with income reinvested
3 Share price total return using mid-market closing price with income reinvested
4 Deutsche Numis Smaller Companies Index (excluding investment companies) total return
5 Average NAV total return of the Association of Investment Companies (“AIC”) UK Smaller Companies sector
6 Average share price total return of the AIC UK Smaller Companies sector
7 The 2024 final dividend of 19.5p per share is subject to shareholder approval
A glossary of terms and explanations of alternative performance measures are included on pages 83-86
Sources: Morningstar Direct, Janus Henderson, LSEG Datastream
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
2
Year to 31 May
Performance (continued)
NAV per share at year end
2024 2023
1,003.1p 904.1p
Discount at year end
1
2024 2023
11.5% 13.2%
Dividend for year
2024 2023
27.0p
2
26.0p
Dividend yield
3
2024 2023
3.0% 3.3%
Ongoing charge
4
2024 2023
0.45% 0.44%
Share price at year end
2024 2023
888.0p 785.0p
Gearing at year end
2024 2023
11.5% 12.6%
Revenue return per share
2024 2023
29.85p 29.38p
Total net assets
2024 2023
£747m £675m
1 Calculated using the NAV and mid-market share price at year end
2 This represents an interim dividend of 7.5p and a proposed final dividend of 19.5p. See page 6 for more details
3 Based on the ordinary dividends paid and payable for the year and the mid-market share price at year end
4 No performance fee was payable in 2024 or 2023
A glossary of terms and explanations of alternative performance measures are included on pages 83-86, including calculation of the AIC and Key Information Document
(“KID”) ongoing chargemethodologies
Sources: Morningstar Direct, Janus Henderson, LSEG Datastream
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
3
As at 31 May 2024, the Company had no holdings in the following sectors: Closed end investments and General Industrials
Sources: Factset, Janus Henderson
Performance attribution
Year ended 31 May
2024
%
2023
%
NAV total return 14.5 -13.8
Benchmark total return 18.2 -6.5
Relative performance -3.7 -7.3
Comprising:
Stock selection without gearing -4.5 -5.4
Gearing impact on stock selection -0.6 -0.6
Gearing decision 1.9 -0.9
Expenses -0.5 -0.4
See the glossary of terms on page 83 for an explanation of the ‘gearing impact on stock selection’ and ‘gearing decision’
Ten largest investments at 31 May 2024
Ranking
2024
Ranking
2023 Company Principal activities
Valuation
2024
£’000
Portfolio
%
1 6 Paragon Banking Buy-to-let mortgage provider 27,198 3.3
2 8 Mitchells & Butlers Hospitality operator 25,487 3.1
3 3 Bellway Housebuilder 25,039 3.0
4 1 Oxford Instruments Advanced instrumentation equipment 22,330 2.7
5 4 Balfour Beatty International contractor 21,541 2.6
6 20 Future Specialist internet, website and magazine company 21,200 2.5
7 5 OSB Group Buy-to-let mortgage provider 20,416 2.4
8 7 Vesuvius Ceramic engineering 19,520 2.3
9 16 Gamma Communications
1
Telecommunications 15,972 1.9
10 21 IntegraFin B2B financial platform 14,918 1.8
213,621 25.6
1 Quoted on the Alternative Investment Market
Refer to the Fund Manager’s Report on pages 8-13 for descriptions of stocks and reasons for ownership or disposal.
Analysis of the portfolio by sector at 31 May
Portfolio Information
0
2
4
6
8
10
12
14
16
Sector %
2024 2023
Software and computer services
Electronic and electrical equipment
Investment banking and brokerage services
Construction and materials
Industrial support services
Finance and credit services
Travel and leisure
Household goods and home construction
Industrial engineering
Real estate investment and services
Retailers
Oil gas and coal
Media
Aerospace and defence
Real estate investment trusts
Leisure goods
Chemicals
Telecommunications service providers
Life insurance
Industrial transportation
Industrial metals and mining
Personal goods
Pharmaceuticals and biotechnology
Closed-end investments
Consumer services
Telecommunications equipment
Medical equipment and services
General industrials
Health care providers
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
4
Penny Freer
Chair of the Board
“
The year under review showed
an improved performance with
strong absolute gains... This will
be our 21st year of consecutive
growth in the annual dividend.
”
Photo: Oxford Instruments, TeslatronPT
Chair’s
Statement
5
Chair’s Statement
Dear Shareholder
Performance
The year under review showed an improved performance with
strong absolute gains. The Company’s net asset value (“NAV”)
rose 14.5% and the share price increased 17.3% in the year to
31 May 2024, on a total return basis. This compared with the
AIC UK Smaller Companies sector’s average NAV and share
price total return which rose 14.1% and 15.1%, respectively.
The financial year saw a marked difference of performance
ineach half: after falling 7.7% in the first six months, the
Company’s net asset value total return rebounded strongly in
the second half, climbing 24.0%. Despite this strong absolute
performance, the Company underperformed its benchmark,
the Deutsche Numis Smaller Companies Index (excluding
investment companies), by 3.7%. Thismainly reflected some
company-specific issues that temporarily impacted a number
of our larger holdings. TheFund Manager’s Report (pages
8-13) provides a detailedreviewof the year.
The UK market experienced a volatile twelve months, with
smaller companies outperforming large-cap stocks as
sentiment around the economy improved, aided by the peak
in interest rates at the end of 2023 coupled with falling
inflation. Corporate performance has been generally robust
and smaller companies have benefitted from the increased
M&A interest which the undervalued UK market has attracted.
We were pleased to see the strong recovery in the second
half of the financial year and are optimistic that the portfolio is
well positioned to benefit from a continued recovery. Over the
longer term, your Company’s NAV total return remains well
ahead of the benchmark index; your Company outperformed
the benchmark by 25.1% over the ten years to 31 May 2024.
Dividend and earnings
Total revenue from your Company’s portfolio rose from
£24.4m to £24.8m and earnings per share rose from 29.4p to
29.9p, with the majority of our portfolio companies taking
advantage of their healthy financial performance to increase
dividend payments.
The Board is pleased to recommend an increased final dividend
of 19.5p per share which, subject to shareholder approval at the
Annual General Meeting, will be paid on 7October 2024 to
shareholders on the register at 30 August 2024. When added
tothe interim dividend of 7.5p, this brings the total dividend for
the year to 27.0p per share, a 3.8% increase on 2023’s total
dividend of 26.0p per share. Thisdividend will be fully funded
from current year revenues. As an ‘AIC Dividend Hero’, this will
be our 21stconsecutive year ofgrowth in the annual dividend.
Share rating
Despite the improved investment performance, your Company’s
share price discount to NAV fluctuated during the year
between 8.7% and 15.4%, averaging 12.9% and closing the
year at 11.5%. The share price over the year rose from 785.0p
to 888.0p, reflecting a narrowing of the discount to NAV.
Share buybacks
The Company bought back 196,665 shares for cancellation in
the year under review. This reflects our view that the unusually
wide discount to the NAV at which the Company’s share price
trades presents an attractive opportunity to enhance
shareholder value. The buybacks are within the authority
granted at the last AGM which allows for the purchase of a
maximum of 14.99% of share capital. The shares bought back
represent 0.3% of the total number of shares in issue at the
start of the year.
Gearing
During the year, the Board renewed its revolving credit facility
with BNP Paribas for a further 12 months at a lower level of
£70m (2023: £85m), following an assessment of the Company’s
gearing requirements over the coming year. Combined with
long-term structural debt of £50m loan notes, this takes your
Company’s total borrowing capacity to £120m (2023: £135m).
The Fund Manager reports on his use of gearing during the
year under review in the following pages.
Stewardship
The Company continues its stewardship activities, and we
report in detail on pages 28-31 on our fund management
team’s active engagement during the year with portfolio
companies on a range of topics, including management
ofhazardous material by building companies and
decarbonisation by house builders.
Annual General Meeting (“AGM”)
We are pleased to invite shareholders to attend the AGM in
person at our registered office on Wednesday, 2 October
2024, at 11.30 am. We encourage shareholders to attend
forthe opportunity to meet the Board, the Fund Manager
NeilHermon and Deputy Fund Manager Indriatti van Hien.
Neil and Indriatti will give a presentation on the year under
review and their outlook for the year ahead. Shareholders
unable tojoin in person will be able to join the meeting
byvideoconference.
We encourage all shareholders to submit their votes on the
resolutions, all of which come with the Board’s endorsement,
ahead of the deadline of Monday, 30 September 2024, to
ensure that their vote counts at the AGM, as there will be live
voting only for those physically present at the AGM. Please
see the AGM Notice on pages 90-96 of this Annual Report
for more information on joining and voting.
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
6
Chair’s Statement (continued)
The Fund Manager discusses these results and performance
during the year in a video available from 9.00amon the
dateof release of the year-end announcement at
www.hendersonsmallercompanies.com. If you have
anyquestions for the Board or the Fund Manager
in advance of the AGM, please contact us at
itsecretariat@janushenderson.com.
Outlook
It has been an improved year and we are pleased with the
momentum seen in the second half of the period.
Dissatisfaction with the Conservative Party led to a landslide
win and large majority for the Labour Party in the July 2024
election. We now expect a period of greater stability. Recent
positive statements on business and growth from the new
Labour government give us optimism for an improvement
inlevels of investment into the UK stock market.
The significant falls in inflation have led to expectations of
interest rate cuts. The exact timing is uncertain, but the
prospect of improved economic conditions should support
equity markets which are trading below long-term averages
and where the discount of smaller companies to their larger
counterparts is at an historic high, with many declaring
dividend increases and share buybacks funded from strong
balance sheets.
We are pleased to note that signs of interest in the UK market
have been growing, with an improvement in the pace of
merger and acquisition (“M&A”) activity over the past year.
Wewere also encouraged by the successful initial public
offering (“IPO”) of Raspberry Pi which highlights the
possibilities for the UK to be home to growth businesses in
exciting sectors. We hope this trend continues as the Financial
Conduct Authority (“FCA”) reforms the UK listing framework
and creates a more attractive proposition.
Your portfolio companies are generally reporting robust
performances, which are not reflected in current depressed
valuations, and they are taking advantage of strong balance
sheets to declare attractive dividend payments. The outlook
for 2024-2025 looks brighter, as the expectation of rate
reductions increases.
Smaller companies continue to offer exciting opportunities.
We remain confident in the ability of our Fund Managers to
draw on their consistent and disciplined investment approach
to generate significant long-term value.
Penny Freer
Chair of the Board
31 July 2024
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
7
Fund Manager’s
Report
Photo: Keller
Neil Hermon
Fund Manager
“
...Although uncertainty remains
around short-term economic
conditions, we think that the
portfolio is well positioned
toparticipate in the upswing
asitoccurs.
”
8
Fund performance
The Company had a mixed year in performance terms, rising in
absolute terms but underperforming its benchmark. The share
price rose by 17.3% and the net asset value by 14.5% on a
total return basis. This compared with an increase of 18.2% in
the Company’s benchmark total return, the Deutsche Numis
Smaller Companies Index (excluding investment companies).
The underperformance came from a combination of negative
contributions from stock selection and expenses offset by a
positive contribution from gearing. Negative contribution from
stock selection was a function of the underperformance of
growth companies as they de-rated in valuation terms due to
market concerns about the impact of rising interest rates and
higher bond yields. In addition, company-specific issues
impacted a number of our larger holdings. We believe these
issues are temporary or more than fully reflected in the
underlying share price and expect these companies to recover
over time. The year saw a marked difference in our semi-
annual performance with NAV (total return) falling 7.7% in the
first half of the financial year and a strong recovery in the
second half when NAV (total return) rose 24.0%. Despite it
being a poor relative year for performance, the long-term
record of the Company remains strong, outperforming its
benchmark in 16 of the last 21 years.
Market – year under review
The year under review was a volatile but ultimately positive
onefor UK equity markets. The key driver of market returns
remained monetary policy. Central banks across the world, led
by the Federal Reserve, European Central Bank and Bank of
England, continued to increase base rates in the first half of our
financial year. The messaging on the future path of base rates
fluctuated between hawkish and dovish which caused
meaningful moves in sovereign bond yields in both directions.
However, the markets experienced a watershed moment in
thelast quarter of 2023 as developed-market central banks
signalled that base rates had peaked and that their focus was
now shifting to when to make the first cut. This supported
equity markets, particularly in the second half of our
financialyear.
Inflation continued to fall over the year under review and is
now much closer to official targets. This has been driven
principally by falling goods prices, whilst services and wage
inflation has remained stubbornly high. These factors are
causing central banks to debate when and how fast to bring
interest rates down and shifting expectations of the timing
andspeed of rate reduction to the right.
Global economic conditions remained mixed. In the UK
economic growth has flatlined, following the technical
recession in the second half of 2023. Notwithstanding that,
corporate profit performance has remained generally robust.
In addition, there has been a heightened level of inward M&A
activity, particularly from private equity and foreign corporates,
highlighting the undervaluation of the UK equity market. Oil
prices rose, on account of the conflict in the Middle East and
sterling saw gentle appreciation against the US dollar.
Smaller companies outperformed larger companies over the
year driven by the prospect of interest rate cuts and potentially
improving economic conditions. Additional support came
from the M&A activity referred to above, which principally
occurred in the small and mid-cap space.
Gearing
Gearing started the year at 12.6% and ended at 11.5%. 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 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
21years I have managed the investment portfolio.
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
%
Paragon Banking +67.4 +0.7
Close Brothers
1
-44.1 +0.6
Playtech
1
-20.4 +0.5
Aston Martin Lagonda
1
-20.6 +0.5
Pets at Home
1
-18.0 +0.5
1 Not owned by the Company
Paragon Banking is a speciality lender with a primary focus
on providing buy-to-let mortgages to professional landlords.
The company enjoys a very strong capital position, enabling it
to pay higher dividends whilst buying back some of 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 this rising rate environment. As interest rates
have risen Paragon has been able to grow its net interest
margin leading to strong earnings growth.
Close Brothers is a specialist financial services company
involved in lending, asset management services and
securities market making. The company was hit by an FCA
review into the historic provision of loans in the auto finance
market which could require Close to make substantial
provisions to cover customer redress. The Company did
notown a position in this stock.
Playtech develops software platforms and content for the
online, mobile and land-based gaming industry. Although
operational performance has been solid, the company has
been hit with a legal dispute with its Mexican joint venture
partner leading to the non-payment of fees to Playtech.
TheCompany did not own a position in this stock.
Aston Martin Lagonda is a manufacturer of luxury
automobiles. Operational weakness, high leverage and
Fund Manager’s Report
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
9
arequirement to bolster the balance sheet by share issuance
impacted the share price over the period under review.
TheCompany did not own a position in this stock.
Pets at Home is a leading UK retailer of pet products and
provider of veterinary services. As the Covid-induced boom in
pet ownership has subsided, growth in its retail business has
slowed, compounded by a problematic move into a new
distribution centre which has caused stock availability issues.
Additionally, sentiment around the veterinary business has
been impacted by a Competition and Markets Authority
enquiry into the wider industry. TheCompany did not own a
position in this stock.
Principal detractors
12 month
return
%
Relative
contribution
%
Impax Asset Management -35.4 -1.6
Tea m17 -20.6 -0.8
Carnival
1
+67.6 -0.7
Oxford Instruments -8.7 -0.6
Learning Technologies -13.2 -0.5
1 Not owned by the Company
Impax Asset Management is an environmentally and socially
responsible focused asset manager based in the UK. The
company has delivered impressive earnings growth over the last
five years from a combination of asset inflows and positive market
performance. The last 12 months have been more challenging,
primarily due to higher interest rates and the derating of growth
companies that it typically invests in. The business has also
experienced mild outflows. This combination of outflows and
challenging investment performance has put pressure on
company profitability. Nevertheless, the strength of the brand
and long-term track record provides us with confidence about
the growth opportunities at the company over the medium term.
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 group has a strong long-term
performance record driven by new releases and monetisation
of the backlog of portfolio games. More recent trading has
been challenging with profitability impacted by a poor release
schedule and higher than expected costs. Looking ahead, this
business has several levers to return to its historical earnings
growth and we remain confident on its medium-term outlook.
Carnival is a global provider of cruise ship holidays. Strong
demand from consumers, particularly in the US, plus lower
fuel costs saw profitability expand which drove strong share
price performance. The Company did not own a position in
this stock.
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 has
driven sales, profit and margin growth. The company has a very
strong balance sheet and, given a positive long-term outlook for
its end markets, it is well placed for the long term. In the short
term some end-market weakness, particularly in
semiconductors, more stringent licence controls on exports to
China and some supply chain issues have led to slower growth
and share price underperformance.
Learning Technologies is a provider of software and
services to the learning and human resource development
market. Lower demand for its services, caused by constrained
corporate spending due to global economic weakness, has
seen growth at the company slow and profit forecasts missed.
These issues are cyclical rather than structural and the
company should return to growth once economic conditions
improve.
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.
Acquisitions
During the year we have added a number of new positions to
our portfolio. These include the following:
Bloomsbury is a publisher of children’s, adults’ and academic
book titles. The group was originally founded by Nigel
Newton, the current CEO, as an independent, medium-sized
and high-quality publisher of authors with high potential. In
this regard, the group is most famous for its identification and
publication of the Harry Potter series by J.K. Rowling and
more recently, the works of Sarah J. Maas. With exciting new
content from authors expected in the future, the group has a
strong growth profile over the medium term.
hVIVO is a clinical research organisation specialising in human
challenge trials for infectious and respiratory disease
products. These trials involve exposing volunteers to
characterised pathogens and offer pharmaceutical and
biotech companies a relatively cheap and effective way to
undertake accelerated drug development. The company has
operations in the UK, Ireland, France and the Netherlands.
The barriers to entry in this niche industry are high as the
proprietary datasets about viral loads can only be built
through experience. The business is focused on both organic
growth, through the development of ancillary services, and
inorganic growth. The company is experiencing robust
contract and order book momentum and has good visibility
on near-term growth. Cash generation is strong and working
capital requirements are negative in periods of order book
growth. Management has set ambitious medium-term
revenue and margin targets and our investment gives us
exposure to structural growth in this niche market.
Fund Manager’s Report (continued)
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
10
Keller is a leading provider of ground engineering services to
the construction industry. It has a global presence with
operations in 37 countries. However, its key territory is the US
where it makes 80% of its profits and has a leading market
position. A new management team has transformed the
bidding disciplines and controls around contracts which has
materially improved financial performance. Increased
profitability has translated into strong cash generation which
has de-levered the balance sheet. This should allow more
optionality over M&A activity and/or capital returns to
shareholders. With demand in its key US market likely to
remain robust and recovery potential in its European and
Australasian operations, prospects remain strong.
Morgan Sindall is a diversified construction services group
with operations in office fit-out, construction, infrastructure,
social housing maintenance, affordable housing and urban
regeneration. The company, led by CEO and founder John
Morgan, has an exceptional track record of steady
dependable growth, over-delivery of expectations and strong
cash generation. Recent investment in its affordable housing
division looks well timed as the new Labour Government
prioritises increased housing production.
Telecom Plus is a multi-service provider of utilities, insurance
and cash-back cards to over 1 million customers in the UK
under its Utility Warehouse Brand. The company’s unique
route to market, a partner referral model, and differentiated
product offering, bundled services, has historically led to low
customer churn. Its multi-service offering gives the company a
structural cost advantage versus competing single-product
utility providers. Our investment thesis is centred on the belief
that growth rates should accelerate following the market
andregulatory changes which were instigated by the energy
crisis in 2022 and which have reduced competition in this
market. The business is capital light and has a shareholder-
friendly approach to capital returns.
XPS Pensions is an insurance consultancy business. Given
regulatory change and increased activity in the pension
buy-out market, demand for their services is likely to remain
strong, driving superior earnings growth in the medium term.
Additionally, the balance sheet has de-levered significantly,
allowing more substantial returns to shareholders. The sector
has seen significant consolidation in recent years and it would
be unsurprising to see XPS involved in any further activity
either as an acquiror or acquiree.
Disposals
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 Halfords, a cycle and
automotive parts retailer. Operational performance has been
disappointing and acquisitions in the automotive servicing area
have not lived up to expectations. With continued unfavourable
weather and weakness in consumer spending, we believe
trading conditions remain difficult. We also disposed ofour
holding in Headlam, a floor coverings distributor. Weakness in
the housing market is impacting demand and the company
has seen profitability collapse and cash flow deteriorate. With
new competition and a long recovery ahead, the outlook looks
challenged. We sold our position in Restore Group, a box
storage and diversified business services group. Although the
company has appointed new management and has taken
action to improve underperforming parts of the business, we
are concerned that the group faces structural pressures as
demand for paper-based services falls in a digital world. We
also sold our position, in line with our stated policy, in Howden
Joinery, a kitchen manufacturer and retailer, as it was
promoted to the FTSE 100 Index.
Takeover activity
There was a decent level of takeover activity in the portfolio.
Thiswas consistent with the wider mid and small-cap equity
markets aided by continued levels of interest from private equity.
A number of takeover bids were received for: Blancco
Technology, a provider of data erasure software, from Francisco
Partners; Ergomed, a clinical research outsourcer, from Permira;
Gresham House, a specialist alternative asset manager, from
Searchlight Capital Partners; Restaurant Group, a UK based
restaurant and pub group, from Apollo; Smart Metering
Systems, an owner of smart meter devices and battery assets,
from KKR; Spirent Communications, a telecoms software and
services provider, from Keysight Technologies; and Tyman, a
building materials group, from Quanex.
Top ten positions
The following table shows the Company’s top ten stock
positions and their active weight versus the Deutsche Numis
Smaller Companies Index (excluding investment companies):
Top ten positions
at 31May 2024
Portfolio
%
Index
weight
%
Active
weight
%
Paragon Banking 3.3 1.1 2.2
Mitchells and Butlers 3.1 1.2 1.9
Bellway 3.0 – 3.0
Oxford Instruments 2.7 1.0 1.7
Balfour Beatty 2.6 – 2.6
Future 2.5 0.8 1.7
OSB 2.5 – 2.5
Vesuvius 2.3 0.9 1.4
Gamma Communications 1.9 – 1.9
IntegraFin 1.8 0.8 1.0
A brief description of the largest positions (excluding
Paragon Banking and Oxford Instruments which were
covered earlier) follows:
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.
Aftera difficult trading period impacted by lockdowns and
restricted trading during Covid and then pressures from
significant inflation in energy, food prices and labour costs,
theoutlook is looking brighter especially as consumer
demand remains strong and cost pressures have eased.
Fund Manager’s Report (continued)
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
11
Fund Manager’s Report (continued)
Thecompany is steadily repaying its securitised debt,
enabling a transfer of value from debt to equity. Additionally,
with its pension deficit now cleared, cash flow is improving,
allowing an accelerated reduction in net debt.
Bellway is a national UK housebuilder. The company has an
excellent long-term track record of controlled expansion, solid
operational and financial performance whilst maintaining a
strong balance sheet. Recent weakness in the housing
market, caused by the economic downturn and rising interest
rates has put short-term profitability under pressure as house
prices soften and volumes contract. However, the business
remains well placed to benefit from any recovery. Additionally,
valuation support is provided by the discount to net asset
value at which the shares currently trade.
Balfour Beatty is an international contractor and
infrastructure investor. Management has transformed the
business over the last few years, driving margins higher
across all operational activities in the UK, US and Hong Kong
whilst maintaining the significant value of the infrastructure
investment portfolio. Significantly improved cash flow has
allowed the business to accelerate returns to shareholders
through ongoing share buybacks and increased dividends.
Given likely increased infrastructure investment in its key
markets, the company looks well placed to continue to deliver
growth in earnings, cash flow and returns to investors.
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. In addition to these
verticals, the business owns Go.Compare, a price comparison
website which operates in the UK. Following ayear of earnings
downgrades and management change, thecompany has
renewed its focus on organic growth and portfolio optimisation.
Management is reinvesting in the business to drive top line
growth and the board has been proactive about actively
looking for options to accelerate value creation. This in
conjunction with a stabilisation in audience numbers has driven
a re-rating of the shares during the period under review.
Despite their strong run, the shares look undervalued on a
sum-of-the-parts basis and, notwithstanding potential structural
pressures driven by artificial intelligence (“AI”), we have renewed
confidence that the stock will continue to perform when the
consumer technology cycle turns or the board realises value
through the sale of one or more of its operating divisions.
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 and, with landlord demand remaining robust,
the business is poised to see further growth. The company
has built a very strong capital position, and this is allowing
ittoreturn significant cash to shareholders through share
buybacks and increased dividends.
Vesuvius is a materials technology company. The company
offers 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.
Thecompany has demonstrated excellent pricing power during
the recent inflationary period, validating its leading market
position and high value add of its products. Although the steel
industry is seeing the impact of global economic weakness, the
business is well positioned to enjoy strong growth once markets
recover especially as margins have clearscope tostrengthen.
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
onselling cloud-based telephony solutions, a market which
israpidly 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,
into Germany, the Netherlands and Spain to replicate this
strategy. Overall, Gamma is operating in a market with good
long-term growth opportunities and is in a strong position
towin with its customer and technology-focused approach.
IntegraFin operates an investment platform business in the
UK. This platform is designed for independent financial advisers
and their clients to hold and manage their investment products
in a cost efficient and easy to use format. Thehigh-quality
customer service and attractive fee rates act asdifferentiators
against competition and as a result, the business has seen
impressive growth in assets on the platform since the group’s
inception in 2000. With the company requiring little capital to
grow, IntegraFin is a high-returns business which should be
able to consistently return cash to shareholders.
Portfolio weightings
As at 31 May 2024, the portfolio was weighted by company
size as follows:
Weighting %
31 May 2024 31 May 2023
FTSE 100 0.0 0.0
FTSE 250 77.7 70.2
FTSE Small Cap 12.6 14.3
FTSE AIM 21.2 28.1
Gearing (11.5) (12.6)
Market outlook
Whilst global inflation has fallen significantly over the last year,
it remains above official targets. Hence central banks, led by
the US Federal Reserve, have retained their generally hawkish
stance. However, it is clear we have reached the end of the
monetary policy tightening cycle and the next movement in
rates will be downwards. What is not clear is the timing of
when rates start to fall and the speed of their descent. So far
in 2024, economic data, particularly services and wage
inflation and labour market activity, have surprised negatively,
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
12
pushing expectations of interest rate cuts further into the
future. In the meantime, the delayed transmission mechanism
of rising interest rates and their impact means that economic
conditions are likely to remain challenging in the short term.
Notwithstanding this, the prospect of a monetary easing cycle
is likely to support global equity markets and allow valuation
multiples to expand.
Geopolitics remain challenging, with the ongoing conflicts in
Ukraine and the Middle East and heightened tensions
between China and the US. The longer-term economic
implications of this are material. There is an urgent need to
reduce European dependence on Russian oil and gas
supplies and a requirement to decrease China’s influence on
the global supply chain through investment in nearshoring
capability. In addition, domestic politics are likely to be an area
of volatility. Up to half the global population is going to the
polls in 2024 with key elections in the UK, USA, France, India,
Mexico, South Korea and the EU. In the UK, a surprise early
election has resulted in the expected Labour landslide win,
mostly due to dissatisfaction with the incumbent Conservative
Government rather than enthusiasm for the Labour Party. The
strong majority should allow for a stable government, and one
that is less reliant on the fringes of their party. We see this
result as a clearing event for the market and expect the
political premium associated with the UK to reduce over time.
We welcome Labour’s commitment to ‘boost investment’ and
in particular their pledge to ‘increase investment from pension
funds in UK markets.’ Any incremental flow into the UK could
breathe life into a generally under-owned and, more
importantly, undervalued UK equity market.
In the corporate sector we are encouraged by the fact that
conditions are intrinsically stronger than they were during the
Global Financial Crisis of 2008-2009. In particular, balance
sheets are more robust. Dividends have recovered strongly
post-pandemic and we are seeing an increasing number of
companies buying back their own stock.
The IPO market has been exceptionally quiet as equity market
confidence has diminished. There are some signs that this is
likely to improve in the short to medium term, with the recent
successful float of Raspberry Pi providing evidence that the
UK equity market remains open for attractive, growing
businesses. M&A activity has remained robust as acquirors,
particularly private equity, look to exploit opportunities thrown
up by the recent equity market falls. Weexpect this to
continue in the coming months as UK equitymarket
valuations remain markedly depressed versus other
developed markets.
In terms of valuations, the equity market is trading below
long-term averages. In addition, smaller companies are
trading at a historically high discount to their larger
counterparts. A sharp rebound in corporate earnings following
the pandemic-induced shock in 2020 has now faded. Weak
economic activity led to subdued corporate earnings growth
in 2023 compounded by rising interest costs and a higher
corporate tax burden. The outlook for 2024 looks more
favourable as cost pressures ease and demand remains
generally robust.
Although uncertainty remains around short-term economic
conditions, we think that the portfolio is both well positioned
to withstand current challenging economic conditions and
participate in the upswing as it occurs. The movements in
equity markets have thrown up some fantastic buying
opportunities. However, it is important to be selective as the
strength of franchise, market positioning and balance sheets
will likely determine the winners from the losers.
In conclusion, the year under review has been a mixed one for
the Company. Absolute performance was positive although the
Company underperformed its benchmark. The operating
performance of our portfolio companies, however, has been
robust. The companies are soundly financed and attractively
valued. Additionally, the smaller companies market continues to
offer 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
31 July 2024
Fund Manager’s Report (continued)
The fund management team have shareholdings in the Company which align their interests to those of shareholders.
Fund Management Team
Neil Hermon
Fund Manager
Over 30 years experience
Joined Janus Henderson 2002
Indriatti van Hien
Deputy Fund Manager
13 years experience
Joined Janus Henderson 2011
Shivam Sedani
Associate Portfolio Manager
7 years experience
Joined Janus Henderson 2017
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
13
1 Quoted on the Alternative Investment Market
Company Principal activities
Valuation
£’000
Portfolio
%
Paragon Banking Buy-to-let mortgage provider 27,198 3.26
Mitchells & Butlers Hospitality operator 25,487 3.06
Bellway Housebuilder 25,039 3.00
Oxford Instruments Advanced instrumentation equipment 22,330 2.68
Balfour Beatty International contractor 21,541 2.59
Future Specialist internet, website and magazine company 21,200 2.54
OSB Group Buy-to-let mortgage provider 20,416 2.45
Vesuvius Ceramic engineering 19,520 2.34
Gamma Communications
1
Telecommunications 15,972 1.92
IntegraFin B2B financial platform 14,918 1.79
10 largest 213,621 25.63
Computacenter IT reseller 14,482 1.74
Impax Asset Management
1
ESG-focused investment manager 14,322 1.72
Chemring Technology products and services 13,896 1.67
Just Group Enhanced annuity provider 13,623 1.63
GB Group
1
Data intelligence services 13,087 1.57
Volution Producer of ventilation products 12,651 1.52
Serco Outsourcing services 12,446 1.49
Renishaw Precision measuring and calibration equipment 12,385 1.49
Ascential Exhibition organiser 12,235 1.47
Bodycote Engineering group 12,064 1.45
20 largest 344,812 41.38
Genuit Building products 11,713 1.41
Tyman Building products 11,632 1.40
Softcat Software reseller 11,620 1.39
Pagegroup Recruitment company 11,440 1.37
Savills Property transactional consulting services 11,400 1.37
Foresight Specialist fund manager 11,376 1.37
Tea m17
1
Games software developer 11,284 1.35
Next Fifteen Communications
1
PR and media services 10,957 1.31
Qinetiq Defence services 10,840 1.30
Workspace Real estate investment and services 10,700 1.28
30 largest 457,774 54.93
Learning Technologies
1
Learning services and software 10,655 1.28
Bytes Technology Software reseller 10,626 1.28
Victrex Speciality chemicals 10,609 1.27
Spectris Electronic control and process instrumentation 10,131 1.22
Crest Nicholson Housebuilder 9,988 1.20
Redde Northgate Commercial vehicle hire 9,838 1.18
Watches of Switzerland Luxury watch retailer 9,830 1.18
Hunting Oil equipment and services 9,695 1.16
Hollywood Bowl Ten pin bowling operator 9,570 1.15
MONY Price comparison website 9,442 1.13
40 largest 558,158 66.98
Investment Portfolio at 31 May 2024
14
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
Investment Portfolio at 31 May 2024 (continued)
Company Principal activities
Valuation
£’000
Portfolio
%
SigmaRoc
1
Aggregates supplier 9,141 1.10
Alpha Financial Markets
1
Investment management consultancy 9,000 1.08
Rathbones Private client wealth manager 8,726 1.05
Trainline Online ticket retailer 8,597 1.03
Midwich
1
Audio-visual equipment distributor 8,417 1.01
Luceco Electrical products 8,307 1.00
XP Power Electrical power products 7,980 0.96
Serica Energy
1
Oil & gas exploration and production 7,923 0.95
Morgan Advanced Materials Engineering group 7,339 0.88
Burford Capital
1
Litigation finance 7,267 0.87
50 largest 640,855 76.91
Clarkson Shipping services 7,193 0.86
Harbour Energy Oil and gas exploration and production 6,930 0.83
Keller Ground engineering 6,826 0.82
Synthomer Speciality chemicals 6,718 0.81
Wickes DIY retailer 6,622 0.79
Harworth Urban regeneration and property investment 6,364 0.76
RWS Holdings
1
Patent translation services 5,822 0.70
Avon Protection Defence products 5,799 0.70
SThree Recruitment company 5,784 0.69
Wilmington B2B information provider 5,738 0.69
60 largest 704,651 84.56
JTC Fund administrator 5,400 0.65
Auction Technology Online auction software provider 5,272 0.63
Morgan Sindall Diversified building contractor 5,222 0.63
Moonpig Online card and gift retailer 5,049 0.61
Videndum Broadcast and camera systems 5,031 0.60
GlobalData
1
B2B information provider 5,005 0.60
AB Dynamics
1
Automotive testing and measurement products 4,927 0.59
DFS Furniture retailer 4,600 0.55
Liontrust Asset Management Specialist fund management 4,349 0.52
Telecom Plus Provider of consumer services 4,287 0.51
70 largest 753,793 90.45
Bloomsbury Publishing Consumer and academic publisher 4,227 0.51
Bridgepoint Private equity fund manager 4,111 0.49
Stelrad Radiator manufacturer 4,060 0.49
Empiric Student accommodation 3,847 0.46
RM Education software and services 3,816 0.46
XPS Pensions Pensions consultancy 3,795 0.46
Helical Office property investor and developer 3,472 0.42
Essentra Industrial distributor 3,337 0.40
CLS Real estate investment and services 3,077 0.37
ME Group Vending equipment 2,925 0.35
80 largest 790,460 94.86
1 Quoted on the Alternative Investment Market
15
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
Company Principal activities
Valuation
£’000
Portfolio
%
Advanced Medical Solutions
1
Medical supplies manufacturer 2,875 0.34
Benchmark Holdings
1
Aquaculture services 2,873 0.34
Grainger Residential property investor 2,869 0.34
Young & Co’s share class A
1
Pub operator 2,778 0.33
Severfield Structural steel products 2,736 0.33
Pebble
1
Promotional products and services 2,666 0.32
YouGov
1
Market research and data services 2,579 0.31
Domino’s Pizza Franchise operator of pizza outlets 2,493 0.30
Young & Co’s share class NV
1
Pub operator 2,464 0.30
Eurocell Building products 2,318 0.28
90 largest 817,111 98.05
Pulsar
1
Marketing services software provider 2,238 0.27
Capricorn Energy Oil and gas exploration and production 2,021 0.24
Alliance Pharma
1
Pharmaceutical products 1,979 0.24
Alfa Financial Software Leasing software 1,978 0.24
Tribal
1
Educational support services and software 1,964 0.24
Hill & Smith Fabricated metal products 1,578 0.19
Spirent Communications Telecom testing services 1,536 0.18
Thruvision
1
Detection technology 1,125 0.13
hVIVO
1
Clinical trial services 1,113 0.13
Oxford Biomedica Gene and cell therapy 725 0.09
100 largest 833,368 100.00
Total equity investments 833,368 100.00
There were no convertible or fixed interest securities at 31 May 2024 (2023: None).
Investment Portfolio at 31 May 2024 (continued)
1 Quoted on the Alternative Investment Market
At
31 May
Net
assets
£’000
NAV
with debt
at par
p
NAV
with debt
at market
value
p
Mid-
market
price per
ordinary
share
p
Discount
with debt
at par
%
Discount
with debt
at market
value
%
Profit/(loss)
for year
£’000
Revenue
return
p
Capital
return
p
Total
return
p
Dividends
p
Ongoing
charges
excl perf
fee
%
Ongoing
charges
incl perf
fee
%
2015 563,321 754.1 752.1 686.0 (9.0) (8.8) 95,631 15.04 112.98 128.02 13.50 0.46 0.88
2016
1
546,080 731.0 731.0 616.5 (15.7) (15.6) (6,783) 15.92 (25.00) (9.08) 15.00 0.44 0.44
2017 688,460 921.6 921.6 799.0 (13.3) (13.3) 154,332 19.57 187.03 206.60 18.00 0.43 1.01
2018 782,068 1,046.9 1,046.9 966.0 (7.7) (7.7) 107,801 22.79 121.52 144.31 21.00 0.42 0.99
2019 716,145 958.7 958.7 858.0 (10.5) (10.5) (49,862) 23.59 (90.34) (66.75) 23.00 0.42 0.42
2020 641,796 85 9.1 8 59.1 777.0 (9.6) (9.6) (56,799) 16.73 (92.76) (76.03) 23.50 0.42 0.42
2021 992,898 1,329.1 1,329.1 1,280.0 (3.7) (3.7) 368,651 13.86 479.64 493.50 23.75 0.39 0.98
2022 802,599 1,074.4 1,074.4 917.5 (14.6) (14.6) (172,565) 24.57 (255.58) (231.01) 24.00 0.42 0.42
2023 675,387 904.1 904.1 785.0 (13.2) (13.2) (109,287) 29.38 (175.68) (146.30) 26.00 0.44 0.44
2024 747,340 1,003.1 1,003.1 888.0 (11.5) (11.5) 93,345 29.85 95.14 124.99 27.00 0.45 0.45
1 Since the redemption of the Debenture Stock on 31 May 2016, the Company’s NAV and discount with debt at par or market value are identical because there is no
difference in the values of the remaining debt liabilities
A glossary of terms and explanations of alternative performance measures are included on pages 83-86
Sources: Morningstar Direct, Janus Henderson, LSEG Datastream
Historical Record
16
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
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 Deutsche Numis Smaller Companies Index (excluding investment companies) total return
4 Average AIC UK Smaller Companies sector NAV total return
Sources: Morningstar Direct, Janus Henderson, LSEG Datastream
Total return performance over the 10 years to 31 May 2024
NAV
1
Share price
2
Benchmark
3
May
22
May
14
May
15
May
16
May
17
May
18
May
21
May
20
May
19
(Rebased to 100)
May
24
May
23
0
50
100
150
200
250
300
350
Historical dividend growth by calendar year
Annual income (without reinvestment) an investor would have received on an initial £1,000 investment in the Company compared
with the FTSE All-Share Index on a calendar-year basis.
Company FTSE All-Share Index
£
2021 202320222020201920182005 2006 2007 2008 2009 20172016201520142013201220112010
0
50
100
150
200
250
See page 16 for further historical data.
Historical Performance
17
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
Our purpose
Our purpose is to provide shareholders with long-term growth
through investing in UK smaller companies and making this
form of investment accessible to investors, both large and
small. We do this by following a disciplined process of
investment in a diversified portfolio of quoted companies
which benefit from sustainable growth trends, and by
controlling costs and using borrowings to enhance returns.
Our culture and values
Throughout our long history we have achieved our investment
objective supported by investment capability and values
characterised by openness, challenge, diversity, adaptation
and integrity. This openness and constructive challenge
extends to our interaction with our service providers. We
expect all the Company’s service providers to uphold the
same values as the Board, and particularly the Manager,
whois responsible for the management of the Company’s
portfolio. Given the long-term nature of our investment
proposition, these factors remain core elements of our culture
and continue to influence our long-term strategy.
Our strategy
We fulfil our purpose by operating as an investment company,
enabling us to delegate operational matters to specialised
service providers. As a board of independent non-executive
directors (the “Board”), we retain oversight of the Company’s
operations and monitor and challenge our service providers.
The framework of delegation provides the Company with a
cost-effective mechanism for delivering operations whilst
allowing us to benefit from capital gains treatment afforded to
investment trusts under the Corporation Tax Act 2010. The
closed-ended nature of the Company permits the Fund
Manager to hold a long-term view on investments and remain
fully invested while taking advantage of illiquidity in normal and
volatile market conditions, as redemptions do not arise. The
Company may use leverage to increase returns for
shareholders, which provides it with a significant advantage
over other investment fund structures.
Status
The Company is registered as a public limited company,
founded in 1887, and is an investment company as defined in
section 833 Companies Act 2006 (the “Act”). The Company
operates as an investment trust in accordance with section
1158 Corporation Tax Act 2010 (“s1158”) as amended and has
obtained approval from HMRC for its status. The Company is
liable to corporation tax on its net revenue profits but is
exempt from corporation tax on capital gains if it has
complied at all times with s1158, and is not a ‘close company’
as defined under the Act. The directors believe that the
Company has conducted its affairs in compliance with s1158
since approval was granted and intends to continue to do so.
The Board is accountable to shareholders, who have the
ability to remove a director from office where they deem it to
be in the best interests of the Company. The Company is
governed by its articles of association, amendments to which
must be approved by shareholders through a special
resolution. The Company is listed on the Main Market of the
London Stock Exchange and is subject to the Listing Rules,
Prospectus Rules and Disclosure Guidance and Transparency
Rules published by the Financial Conduct Authority (“FCA”).
The Company is a member of the Association of Investment
Companies (“AIC”).
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.
Investment policy
Smaller companies are defined as any company outside the
FTSE 100 Index. Once a portfolio company enters the FTSE
100 Index, the Fund Manager has, in normal circumstances,
six months to sell the position.
Investments may include shares, securities and related
financial instruments, including derivatives. The following
investment ranges apply:
●
Equities: 80% – 100% of total gross assets
●
Fixed Income and Cash: 0% – 20%
The Company maintains a diversified portfolio and cannot:
●
Invest more than 5% of its total gross assets in any one
holding; or
●
Hold more than 10% of an investee company’s equity,
in each case measured at the time of investment (or additional
investment). The Board may give approval to the Manager to
exceed these limits to as far as 10% and 20% respectively but
only in exceptional circumstances.
It is the stated investment policy of the Company to invest no
more than 15% of its gross assets in other listed investment
companies (including listed investment trusts).
Derivatives
The Company may use financial instruments known as
derivatives for the purpose of efficient portfolio management.
Gearing
Net gearing (defined as all borrowings less cash balances and
investments in cash funds) is limited by the Board to a
maximum of 30% of shareholders’ funds.
Business model
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
18
Business model (continued)
Management
The Company qualifies as an ‘alternative investment fund’ in
accordance with the Alternative Investment Fund Managers
Directive (“AIFMD”).
The Company’s affairs are overseen by a non-executive Board
which at 31 May 2024 comprised six directors: four women
and two men. Their biographies are set out on pages 33-34
and details of gender and ethnic representation are on page
47. The Board’s diversity policy is set out on pages 46-47.
We, as a Board, appointed Janus Henderson Fund
Management UK Limited (“JHFM”) to act as its alternative
investment fund manager (“AIFM”). JHFM delegates
investment management services to Janus Henderson
Investors UK Limited (“JHIUK”) in accordance with an
agreement effective from July 2014 and most recently revised
on 18 July 2024 to reflect current regulation and industry
standards, with no changes to terms affecting the relationship
with the Manager. The management agreement with JHFM
isreviewed annually bythe Management Engagement
Committee (see page 45), and can be terminated with six
months’ notice. Both JHFM and JHIUK are authorised and
regulated by the FCA and are partof the Janus Henderson
Investors group of companies. References to ‘Janus
Henderson’, ‘JHI’, or the ‘Manager’ referto the services
provided to the Company by JanusHenderson Investors.
The fund management team is led by Neil Hermon, who was
appointed as the Company’s Fund Manager with effect from
November 2002. Neil’s team receives a proportion of any
performance fee paid by the Company to the Manager and
aproportion of that is deferred into shares in the Company.
Indriatti van Hien was appointed Deputy Fund Manager with
effect from June 2016. Neil and Indriatti have shareholdings
in the Company.
The Company does not have employees, premises or
operations. Janus Henderson and its subsidiaries provide
accounting, company secretarial, sales, marketing and general
administrative services. Some of the administration and
accounting services are carried out, on behalf of the Manager,
by BNP Paribas. Janus Henderson Secretarial Services UK
Limited acts as corporate secretary.
Business ethics
As the Company’s operations are delegated to service
providers, the Board seeks assurances, at least annually,
fromits service providers that they comply with the provisions
of the UK Modern Slavery Act 2015 and maintain adequate
safeguards in keeping with the provisions of the Bribery Act
2010, Criminal Finances Act 2017, and sanctions element of
the Economic Crime (Transparency and Enforcement) Act
2022. The Company has received assurances from its main
suppliers that they maintain a zero-tolerance policy towards
the provision of illegal services.
Investment selection
The Fund Manager uses rigorous research to identify high-
quality smaller companies with strong growth potential.
Thebenchmark is the Deutsche Numis Smaller Companies
Index (excluding investment companies)
1
. Generally, new
investments are made in constituents of the benchmark
indexbut they may continue to be held when the underlying
companies grow out of the smaller companies sector.
OurFund Manager’s investment approach is selective,
aimingto deliver higher returns than our equity benchmark.
The Manager is not a passive or indexed investor. Reflecting
this, our portfolio’s active share at 31 May 2024 was 67.7%
(71.5% at 31 May 2023).
Borrowings
The Company has access to borrowings up to £120 million
(2023: £135 million), comprising £50 million unsecured loan
notes and a £70 million committed bank facility with BNP
Paribas, London Branch. In addition, the Company has a
small amount of preference stock in issue (see page 51 for
more details).
Interaction with stakeholders
We, as directors, acting collectively as the Board, act to
promote the success of the Company for the benefit of our
shareholders as a whole. In so doing, we have regard to the
matters set out in s172(1) of the Act. This includes the likely
consequences of our decisions in the longer term, taking
wider stakeholders’ needs into account. The Board’s strategy
is facilitated by engaging with a wide range of stakeholders
through virtual and physical meetings, research and
presentations and through our service providers’ interactions
within the investment community andbeyond.
As an investment company with no employees, our key
stakeholders are our shareholders, service providers and
investee companies. Understanding stakeholders, their
interests and views enables the Company to fulfil its purpose
and the directors to promote the success of the Company
forthe benefit of shareholders as a whole, with constant
awareness of other stakeholders and their interests.
Stakeholder map
As a Board, we have adopted a map to support us in
identifying and understanding our stakeholders and fostering
the appropriate level and form of interaction with them.
Manager
Other service
providers and
auditor
Charities,
communities,
environment
Association
of Investment
Companies
Lenders
Potential
investors
Investee
companies
The Henderson
Smaller
Companies
Investment Trust
plc
Shareholders
1 See glossary on page 83 for further details
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
19
Promoting the success of the Company
Section 172 statement
The Chair and all the directors invite shareholders and other stakeholders to make contact with them directly. Shareholders
are welcome to write to the Chair or Senior Independent Director at the registered office (see page 89), or by email to
itsecretariat@janushenderson.com with any feedback, queries or concerns. The Board reviews all shareholder
correspondence addressed to it.
The Board is pleased to invite shareholders to attend the AGM and Fund Manager’s presentation for the year ended 31 May 2024.
More details are on pages 6-7, and in the AGM Notice on pages 90-96.
Set out below are examples of the ways in which we, as your Board, and the Company have interacted with our key stakeholders
in the year under review, in line with s172 of the Act.
Stakeholders Engagement Outcome
Shareholders Key mechanisms of engagement included:
●
encouraging investors to attend and vote
atannual general meetings (“AGMs”).
Shareholders have the opportunity to
address questions to all directors, the Fund
Manager and the company secretary;
●
the Company’s website, which hosts
annual and half-year reports, daily NAV per
share information, monthly factsheets,
press releases, key information documents,
videos recorded by the Fund Manager,
proxy voting results, and other information
on governance and decision making;
●
use of social media channels (see page 89);
●
providing regular market commentary;
●
investor meetings with directors in
attendance, one-to-one investor meetings
with the Fund Manager, presentations to
investors and analysts following the
publication of annual results, and a
programme of events to foster
understanding and good relations with
wealth managers and underlying investors;
●
a shareholder tracing and engagement
programme continued during the year,
whose purpose is to locate and reunite
shareholders with their unclaimed or ‘lost’
entitlements to shares and dividends;
●
promoting the Company through marketing
and public relations initiatives, as we believe
that the Company provides a credible
investment choice for all types of investors.
Shareholders make informed decisions about
their investments. Clear communication of our
strategy and the Company’s performance
against our objective can help the share price
trade at a narrower discount to its NAV which
benefits shareholders.
Close interaction with shareholders enables
the Board to run the Company in line with
shareholders’ interests as a whole and for the
Company’s long-term success.
Our shareholder tracing and engagement
programme has already had good results,
reuniting several shareholders with their assets,
which they may not previously have been aware
of or have not been able to claim.
During the year, the Fund Manager met many
investors, attended several meetings of
professional investors and held discussions
with wealth managers. Feedback from all
meetings between the Fund Manager and
shareholders was shared directly with the
Chair and with the full Board. The directors
also received updates from the broker and JHI
sales team containing feedback from
shareholders. Investors gave positive feedback
in respect of the Fund Manager, the good long-
term track record, clear investment strategy,
articulation of investment activity and low fee.
Potential investors The Board and Manager liaise to engage with
the wider investor community through various
forums to understand their requirements in
addition to those of current shareholders.
Thematerial made available to current
shareholders, as set out above, is also publicly
available for the benefit of potential investors.
By understanding the Company’s activities,
performance, risks and prospects, potential
investors will also be able to make informed
decisions about their investments.
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
20
Promoting the success of the Company (continued)
Stakeholders Engagement Outcome
Janus Henderson as fund
management group and
AIFM
Activities include:
●
Fund management
●
Sales and marketing
●
Company secretarial
●
Financial reporting
●
Internal controls
functions
●
Internal audit
●
Investment accounting
and administration
(outsourced by
JanusHenderson
toBNP Paribas)
We, as your Board of directors, set and
oversee parameters for the Manager’s
activities, including asset allocation, gearing,
stock and sector selection as well as risk
management. The Board holds our Manager to
account in managing the Company’s assets.
The Board regularly reviews performance against
investment objective, policy and guidelines, and
receives presentations from the Fund Manager
and other representatives of the Manager at each
board meeting to exercise effective oversight of
portfolio, performance and strategic objectives.
The Manager’s performance in all respects is
reviewed formally by the Management
Engagement Committee (“MEC”) each year
(seeMEC Report on page 45).
The directors work closely with the fund
management group outside scheduled board
meetings on matters relating to portfolio
management, administration and governance
oversight, including stakeholder engagement and
relationships with third parties. The Board also
meets with key staff outside board meetings to
develop strategy, including plans to promote the
Company with the aim of raising its profile.
Recognising that sustainability is fundamental
to achieving long-term success, the Board has
continued to work closely with the Manager
toachieve the Company’s investment objective
inan effective, responsible and sustainable way
in the interests of shareholders, future investors
and society at large. We support the Manager’s
approach, which focuses on engagement with
investee companies on ESG issues and
empowers each investment team to define
theESG considerations pertinent to their own
investment approach, as set out on pages
28-31. Wecontinue to be supportive of the fund
management team’s regular engagement with
investee companies on specific topics, with
examples given on page 29. We review at each
board meeting all the votes on portfolio
companies’ resolutions cast since the previous
meeting and how they align with the Manager’s
ESG investment principles.
The Board encourages and supports the
Manager in attracting and retaining talent,
sothat the Company has the resources to
implement its strategy and manage third-party
relationships successfully.
The Board monitors the Manager’s culture,
values and aspirations each year to ensure that
these remain aligned with the Board’s own
culture and values, as part of the overall
assessment of the service provided.
The portfolio activities undertaken by our
Manager and the impact of decisions are set out
in the Fund Manager’s Report on pages 8-13.
Our close relationship enables both the
Manager and directors to explore and
understand performance and what may be
expected in the future.
The Board monitors investment management
costs, keeps them competitive and ensures
the Manager is paid in accordance with the
management agreement.
The Board monitors succession planning
within Janus Henderson for all key positions
supporting the Company.
The Board is proud of the diversity in the fund
management team. It takes an interest in the
diversity initiatives in place at its service
providers and encourages the Manager’s
diversity training and initiatives to improve any
imbalances. These include Janus Henderson’s
gender and ethnicity pay gap analysis, trainee,
apprenticeship and internship programmes,
such as Greenwood Project, Investment 2020
and #100 Black Interns. TheBoard monitors
the culture at JanusHenderson and
appreciates that the Manager fosters and
maintains an environment that values the
unique talents andcontributions ofindividuals,
and strives to cultivate and practise
inclusiveness for the long-term success of the
business and for the benefit ofits employees,
investors and shareholders.
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
21
Stakeholders Engagement Outcome
Third-party service
providers, including:
●
Depositary and
custodian
●
Fund accountant
andadministrator
(outsourced by the
Manager)
●
Registrar
●
Corporate broker
●
Recruitment agent
●
Legal counsel
Representatives of all the main service provider
functions present regularly to the Board.
TheCompany contracts directly for depositary
and registrar services, and indirectly for fund
administration and accounting services.
The Board and Manager work with the broker,
including its research and sales teams, to
provide access to the market and liquidity in
theCompany’s shares. The Board invites
representatives of the broker to provide regular
analysis of shareholder movements and voting
patterns at shareholder meetings, industry
changes and contact with investors.
At the MEC meeting held in April 2024, the
directors reviewed the contractual terms, fees
and performance of all the Company’s service
providers (see MEC Report on page 45). The
key service providers gave updates on any
material changes in organisational structure/
ownership and information regarding staff
turnover and other cultural/leadership matters.
The Board relies on the Manager to provide
reports on suppliers’ performance at each
meeting of the MEC, while the directors remain
responsible for assessing each supplier’s
internal controls and risk management systems,
ESG matters, information security and business
continuity plans. This is achieved through the
assessment of suppliers’ assurance reports
(see page 40) and feedback from the Manager
to identify any issues or concerns.
The Company is supported by experienced
and capable third parties for all the services
required to be a well-functioning company.
The liquidity of the Company’s shares benefits
shareholders and potential investors as they
can buy and sell shares in a timely, efficient
and cost-effective way.
Monitoring and ensuring these third parties
undertake their roles diligently and correctly is
necessary for the Company’s success.
This regular interaction provides an
environment where topics, issues and
business development needs can be dealt with
efficiently and collegiately. The Board is then
able to ensure that service levels and fees
remain in the best interests of shareholders.
During the year, the Board decided not to
renew its contract with Edison Investment
Research Limited as third-party research
provider, on the basis that the content did
notgenerate sufficient value for shareholders
at the presenttime.
Investee companies as
listed on pages 14 to 16
The Board sets the investment objective and
discusses stock selection, asset allocation,
and engagement with investee companies with
the Fund Manager at each board meeting.
The Manager engages with the investee
companies on behalf of the Company to
exercise good stewardship practices. The
Manager has a dedicated Governance and
Stewardship Team which supports the Fund
Manager in the investment process.
The fund management team has conducted
face-to-face and/or virtual meetings with all
our portfolio companies’ management teams
in the past year to enable them to understand
current trading and business prospects, and
ensure that the ESG investment principles and
approach are understood. TheManager is a
responsible investor.
Promoting the success of the Company (continued)
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
22
Stakeholders Engagement Outcome
Lenders
●
BNP Paribas,
LondonBranch (since
8 February 2023)
●
Loan noteholders
The Company employs gearing to enhance
shareholder returns and confirms compliance
with the loan covenants of both its short-
termand long-term gearing facilities on a
monthlybasis.
Janus Henderson provides the Board with
regular financial covenant compliance
validation and financial reporting.
The Company maintains long-term borrowings
at low rates through the use of loan notes and
a revolving credit facility.
During the year, the Board held a competitive
tender for provision of a £70 million revolving
credit facility (“RCF”), as its one-year contract
with BNP Paribas was due to expire in
February 2024. The Board reviewed proposals
from several potential lenders. BNPParibas,
London Branch, provided the most competitive
terms for a one-year RCF and consequently
was renewed for a further year.
The Company maintains a good relationship with
its lenders and is well positioned to raise financing
to operate effectively as an investment trust.
Our strategic gearing (11.5% at 31 May 2024)
positions us well to continue to enhance
long-term returns over many years to come.
Auditor The auditor attends at least two audit and risk
committee (“ARC”) meetings each year and
maintains regular contact with the corporate
secretary, the Manager and the ARC Chair
between meetings.
Through close engagement, the directors ensure
that the auditor in office is committed to the
investment trust audit market and provides the
best quality service for an appropriate fee level.
Shareholders, potential investors and wider
stakeholders place reliance on the Company’s
audited annual report and financial statements.
The Association of
Investment Companies
(“AIC”)
The Company is a member of the AIC which is
an organisation that looks after the interests of
investment trusts.
The Board chooses to report under the AIC
Code of Corporate Governance as this better
reflects the unique aspects of an investment trust
in the context of good corporate governance.
Measuring success: Performance measurement and key performance indicators
To measure the success of the Company in meeting its objective and to evaluate the performance of the Manager, the directors
take into account the following key performance indicators (“KPIs”). A glossary of terms and alternative performance measures
isincluded on pages 83-86.
KPI Action
Performance measured against
the benchmark
At every meeting, the Board reviews and compares the performance of the portfolio
as well as the net asset value (“NAV”) and share price for the Company against the
performance of the Company’s benchmark (see the total return performance charts
and table on page 2, the performance attribution table on page 4 and the ten-year
total return performance chart on page 17).
Performance against the Company’s
peer group
The Board considers the Company’s performance against the AIC’s UK Smaller
Companies sector, which represents the Company’s peer group (see the total return
performance charts, total return table and the discount data chart on page 2, and the
ten-year total return performance chart on page 17).
Discount/premium to NAV The Board monitors the discount to NAV at which the Company’s shares trade and
reviews the average discount for the AIC sector at each meeting. The Board considers
whether to use share buybacks to enhance shareholder value. Shares are only bought
back at a price below the prevailing NAV, thereby increasing the NAV for the remaining
shareholders. The Company publishes a NAV per share figure on a daily basis through
the official newswire of the London Stock Exchange. This figure is calculated in
accordance with the AIC formula (see the discount data chart on page 2, the discount
data on page 3 and the Historical Record table on page 16).
Ongoing charge The Board monitors the costs of running the Company calculated using the AIC
methodology for the ongoing charge (see the ongoing charge data on page 3, the
Historical Record on page 16 and the ongoing charge calculation on page 85).
Promoting the success of the Company (continued)
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
23
Board decision making
The Board is always mindful of acting in the best interests of shareholders as a whole and to have regard to other s172 factors.
The Board takes into consideration the Company’s purpose, investment objective and investment policy as well as the interests
of the Company’s stakeholders when discussing matters and making decisions. In addition to regular, detailed discussions about
the Company’s investment portfolio, strategy and market performance, the following are examples of the key discussions held
and decisions made by the Board during the financial year ended 31 May 2024:
●
The directors held specific discussions about the deteriorating macroeconomic and geopolitical environment, notably
the ongoing conflict in Ukraine and in the Middle East, continuing tensions between the US, Europe and China and the
related disruption to global supply chains, the broader impact of the cost-of-living crisis and a new government in the UK and
the changing appetite among bank lenders. TheBoard examined the implications of these heightened risks for our
investment portfolio and the Company’s balance sheetand cash flows.
●
The Board reviewed the Company’s structural debt and borrowing position. Taking into consideration the long-term
advantages of gearing for an investment trust and the Fund Manager’s investment strategy over the longer term, the Board
approved the renewal of a one-year loan facility agreement with BNP Paribas, London Branch, after considering multiple
indicative quotes from potential lenders, to take advantage of the most competitive rates and terms on offer. The facility was
renewed in the lower amount of £70m rather than the previous year’s £85m level to reflect the Fund Manager’s expected use
of gearing in the following 12 months.
●
During the year, the Board decided to undertake share repurchases for the first time in 13 years, following extensive
discussions about the potential benefits to shareholders and disadvantages. It was agreed that, while the small amounts
to be repurchased may be only marginally enhancing to NAV, the buybacks should act as a sign that the Board is willing
to be active in the market whilst not shrinking assets needlessly. In the Board’s view, share repurchase (and issuance) are
vital structural tools in the closed-ended sector, both in helping manage the supply and demand for shares and pricing,
and as deployment of capital.
●
Reviewing and approving a significant retail marketing proposal to promote the Company to a wider audience through paid
advertising and a clear messaging framework. With an enhanced website, a stronger promotional effort should increase
awareness and understanding of the Company with all its stakeholders.
●
The directors carefully assessed the size of the dividend and the strength of the Company’s balance sheet. They
agreed that, subject to shareholder approval, the final dividend should be increased without using capital reserves. This will
benefit shareholders and align their interests with those of the Fund Manager.
●
At each board meeting, the directors discussed the Fund Manager’s approach to investing responsibly, including his
analysis of the impact that the portfolio companies’ approach to environmental, social and governance matters has on the
wider community. Case studies on engagement with portfolio companies are on page 29.
●
The Board agreed resolutions to be put to shareholders at the AGM in 2024.
●
The Board arranged for the Company’s half-year and annual results to be prepared, and approved these for release to
the market and to shareholders. By presenting the financial results to shareholders in the Half-Year Update and Annual
Report as well as the market announcements, and making them available on the website to other stakeholders, the Company
enabled shareholders and potential investors to make informed decisions about their investment in the Company.
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
24
Managing risks
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, their possible outcomes considered, and that
effective mitigating controls are in place. To support this process, the Audit and Risk Committee (“ARC”) maintains 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 ARC considers the Company’s principal and emerging risks at each meeting, with a thorough review at least
once per year, using heat maps derived from the detailed risk matrix. Every year each director undertakes an individual
assessment of each risk. The individual ratings are collated and reviewed at a meeting, which triggers fresh critical debate.
TheBoard regularly considers these and does not consider the principal risks to have changed during the course of the
reporting period and up to the date of this report.
Throughout the year the Board has considered the impact of macroeconomic events with a global impact and heightened
market volatility, including the ongoing ramifications of the Russia/Ukraine war and conflict in the Middle East. The Board has
hadregard to theimpact of mitigation measures on manufacturing supply lines and on heightened uncertainty in the business
environment. TheBoard has also considered the wider consequences of economic uncertainty, disruption to markets and
society through artificial intelligence (“AI”), the UK General Election, thecost-of-living crisis inthe UK, and the UK banks’ appetite
for lending to the corporate sector.
While uncertainty remains around short-term economic conditions, the Board has concluded that the Company’s portfolio and
the Manager’s investment approach should prove resilient. The Fund Manager’s long-standing philosophy is 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 Trend 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. pandemics,
war and a changing
macroeconomic environment) on
the Company’s investments
Unmanaged ESG activities and
material climate-related (physical
and transition) impacts within
portfolio companies
Market appetite – investment
objective and/or policy not
appropriate in the current market
or not sought by investors
resulting in a wide discount
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
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 bythe Board; these
include limits on the extent to which borrowings may be used. TheBoard 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, and regularlyreviews data that monitor portfolio risk factors.
The Fund Manager reports to each board meeting on his close oversight of the
portfolio, andmore frequently in the event of acrisis. Performance is monitored by
JHI’s internal teams, any of which would escalate directly to the Board in the event
ofmatters of concern. At each meeting, the Board reviews the Fund Manager’s ESG
engagement with portfolio companies and their governance structures, ESG risks
reports, and votes cast against management. The Board also reviews JHI’s ESG-
related marketing activity specific to the Company.
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
theBoard on a continual basis and are reported on pages 2 to 4.
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.
See page 20 for a description of the engagement with shareholders and potential
investors undertaken by the Board and Manager to keep the market informed about
Company developments.
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
25
Managing risks (continued)
Risk Trend Controls and mitigation
Legal and regulatory
Loss of investment trust status
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 listing in the closed-ended investment funds category of the FCA’s UK Listing Rules and
trades on the main market of the London Stock Exchange, the Company must comply with
the UK Listing, Prospectus and Disclosure Guidance and Transparency Rules of the FCA.
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 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 FCARules.
Operational
Failure of, disruption to or
inadequate service levels by key
third-party service providers
Cyber crime leading to loss of
confidential data
Breach of internal controls
Impact of political, environmental,
health or other emergencies
(e.g.pandemics, war and a
changing macroeconomic
environment) on the Company’s
operations and those of its
service providers
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. Details of how the Board monitors the services provided by
JanusHenderson 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 on pages 39-41.
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 on pages 75-78.
Emerging risks
At each meeting, the Board considers emerging risks which
itdefines 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 emerging risks
would include:
●
major general elections globally during the year;
●
possible global conflict owing to escalated violence in the
Middle East;
●
high levels of government debt, leading to increased
government spending on interest costs; and
●
a further decline in voting by retail shareholders who own
their shares via platforms. This is a risk common to the
investment company sector. The Board considers that it is
taking all reasonable actions possible at this time to
mitigate the risk through its increased focus on promotion
to retail shareholders.
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. The Board
monitors effectively the changing risk landscape and potential
threats to the Company with the support of regular reports and
ad hoc reports as required, the directors’ own experience and
external insights gained from industry and shareholder events.
Viability statement and continuation vote
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 Strategic 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
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
26
Company over the next five years and the Company’s 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 the
Company’s NAV and share price, recognising the current
strength of the covenants, liquidity of the portfolio and capital
reserves available. The Board used a five-year cash-flow
forecast and sensitivity analysis to support its deliberations.
The Board considers revenue and expense forecasts at
eachmeeting, with additional focus at the time of reviewing
half-year and year-end results. At the same time the Board
discusses the impact on the Company of decreases in
revenue and the impact that would have on revenue and
capital reserves available to pay dividends.
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 the next five years; the Company’s
assets are liquid, its commitments are limited and the Company
intends to continue to operate as an investment trust. In coming
to this conclusion, the Board has considered rigorously the
continued macroeconomic and geopolitical uncertainty
following Russia’s invasion of Ukraine, heightened tensions
between the US and China, conflict in the Middle East, the
current cost-of-living crisis and the new government in the UK.
The Board considers that these events have highlighted the
advantages of holding an investment trust.
The Board does not believe that these factors will have a
long-term impact on the viability of the Company and its ability
to continue in operation, notwithstanding the short-term
uncertainty these events have caused in the markets and
specific shorter-term issues, such as supply chain disruption,
inflation and labour shortages.
The continuation vote at the 2022 AGM was passed with the
support of 99.2% of votes cast and the Board expects
shareholders to support continuation at the 2025 and 2028
AGMs whichare within the viability assessment period.
Based on their assessment, the directors have 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 2029.
Fee arrangements with the Manager
Management fee
The management agreement provides for the payment of a
composite management fee. The fee is charged at 0.35% of
net assets per annum, payable quarterly in advance at a rate
of0.0875% based on net assets at the end of the previous
quarter. Any holdings in funds managed by Janus Henderson,
of which there were none, would be excluded from calculation
of the management fee.
Performance fee
The management agreement also provides for payment of a
performance fee, calculated as 15% of any outperformance of
the benchmark index, on a total return basis, over the
Company’s accounting year using net assets at the financial year
end, compared with net assets at the beginning of the period.
This is subject to a limit on the total management fee and
performance fee payable in any one year of 0.9% of the average
value of the monthly net assets of the Company during the year.
There is a further cap to the effect that any enhancement to NAV
resulting from share buybacks in excess of 5% of the opening
issued share capital is excluded from the calculation of the
performance fee for the year. No performance fee is payable if on
the last day of the Company’s accounting year the Company’s
share price is lower than the share price as at the preceding year
end. If on the last day of the Company’s accounting year the NAV
per share, calculated in accordance with the Company’s
accounting policies, net of costs (including any performance fee),
is equal to or lower than the NAV per share as at the preceding
year end, the performance fee payable will be restricted to such
amount, if any, as will result in the NAV per share being higher
than the NAV per share at the preceding year end.
No performance fee is payable for the year ended 31 May
2024 (2023: nil).
Any underperformance relative to the benchmark, or any
unrewarded outperformance (for example as a result of the
cap), will be carried forward and set against any
outperformance or underperformance respectively in
subsequent years. It can only offset underperformance so
that underperformance does not prevent a fee from being
earned in a future period and will never earn a fee itself.
Forthe year ended 31 May 2024, no unrewarded
outperformance is carried forward, although an adjustment
has been made to the carried-forward amount for
underperformance in the year.
Category of cost
2024
£’000
2024
% of
average
net
assets
1
2023
£’000
2023
% of
average
net
assets
1
Management fee
2
2,263 0.35 2,367 0.34
Performance fee – – – –
Total 2,263 0.35 2,367 0.34
1 Calculated as a percentage of average monthly net assets, which is the basis
on which the management and performance fee cap is calculated
2 This percentage is calculated on the average of the month-end net assets,
which is the basis on which the cap is assessed. The actual management fee
is calculated and charged quarterly in advance on the net assets at the end
of the previous quarter
Ongoing charge
The Board believes that the ongoing charge of 0.45% during
the year (2023: 0.44%) represented good value for money for
shareholders. The ongoing charge calculation is explained
onpage 84. Abreakdown of the main cost headings in
monetary terms and as a percentage of average daily
netassets is on page 85. The cost ratio used in the
KeyInformation Document, which is based on a different
calculation, is also described in theglossary on page 84.
Viability, fees and costs
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
27
The Board believes in the power of engaged, long-term ownership
as a force for positive change. The Board therefore supports the
Fund Manager’s responsible approach to environmental, social
and corporate governance (“ESG”) matters, the way it is
incorporated into investment decisions by the UK Smaller
Companies fund management team (the “Team”), their company
engagement, and voting at investee companies’ shareholder
meetings. As one of the largest investors in listed UK small and
mid-cap companies, we recognise the meaningful impact we can
have on the way ourportfolio companies conduct their business
and understand it is our duty to exercise this influence.
Defining ESG
●
Environmental factors include climate change, energy
efficiency, resource depletion, water and waste management.
●
Social factors include employee and community relations,
diversity, quality of life, enhancements in knowledge and
advances in supportive technology for improved sustainability.
●
Governance factors include mitigating risks such as
bribery and corruption, questioning board diversity,
executive pay, accounting standards and shareholder
rights, and positively influencing corporate behaviour.
Investment approach and ESG
engagement
The Team uses a combination of bottom-up and top-down
approaches to find companies that have undervalued long-
term growth potential. ESG issues are identified as part of the
Team’s well-established “4Ms” process to analyse portfolio
companies’ models, management, money and momentum.
A key part of the philosophy is focused on the sustainability
ofbusiness models. The Team’s core belief is that the most
successful management teams over time will be those which
score well on ESG and sustainability factors, have a long-term
focus, a good track record of shareholder alignment and an
understanding of industry themes. The conviction and focus
on the long term are reflected in the Company’s average
holding period of over five years.
Sustainability themes regularly inform capital allocation
decisions. Companies offering goods and services which
address issues such as the transition to net zero, ageing
populations, urbanisation and the savings gap have all been
attractive propositions from a growth perspective. The Team
is also cognisant of the risks accompanying ESG-themed
investing: policy instability, uncertainty around customer
adoption and technological obsolescence.
The Team believes that ESG factors impact all parts of an
investment case often implicitly, not explicitly. The effectiveness
of a company’s governance structure and the impact a
company has on the environment and society are just as
important as more traditional indicators of quality such as
cash flow or returns on invested capital.
A company’s ESG characteristics directly impact how it is
valued. All these factors influence the valuation multiples the
market is willing to attribute to a company’s earnings or the
cost of capital used to discount its cash flows. The Fund
Manager’s core belief is that companies that score well on
ESG and sustainability factors warrant a premium over time.
Company engagement
The Team’s combined experience in the UK market has
created a deep knowledge base. The Team’s analysis is
further supplemented by a body of increasingly sophisticated
ESG-related data, broker research and company meetings.
The Team is wary of the fact that individual ESG data points
are not always material to company performance or even
comparable between peers. However, the Team is conscious
that management’s overall attention to a collection of
impactful ESG or sustainability issues can be interpreted as
aleading indicator of quality, long-term oriented leadership
and so impacts the ability to deliver enduring success.
The general level of governance at listed companies in the UK
is of a very high standard in terms of best practice principles.
The Team makes strong use of this market feature to augment
traditional corporate governance and company research.
Asactive managers in the UK marketplace, the Team is
committed to the principles of good stewardship and attends
approximately 300 company meetings per year. These
opportunities are used to challenge strategy and hold
management to account where issues have occurred.
In addition to engaging with company management, the Team
will often engage with the boards of portfolio companies where
they believe concerns need to be escalated. If the Team does
not feel that shareholder concerns are being addressed when
engaging with a company, they will consider disinvesting.
The Team collaborates closely with JHI’s in-house Governance
and Stewardship (“G&S”) team, as a specialist resource on ESG
issues. The G&S team screens portfolios for major ESG issues
and highlights important ESG engagement topics ahead of
company meetings. In addition, the G&S team and Fund
Manager work together to coordinate a pipeline of proactive
engagement with companies on a range of ESG themes.
In the year to 31 May 2024 the Team undertook 339 company
meetings of which 118 involved ESG interactions or
engagements. During these exchanges, the Team raised:
●
environmental issues at 54 of the meetings;
●
social issues at 37 of the meetings; and
●
governance issues at 62 of the meetings.
Engagement over the year
The Team carried out thematic engagement during the year
to31 May 2024 with companies in the portfolio on ESG
topics. These themes included the management of hazardous
materials by building products companies, decarbonization
efforts by house builders, the gender pay gap and specific
company engagement looking to improve the corporate
governance standards in certain portfolio positions. Some
examples of our engagement are set out on page 29. The
Team continues to engage with investee companies to
monitor progress.
ESG matters
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
28
ESG matters (continued)
Engagement on circular economy
Reason for engagement: In recent years,
building materials industries have faced
increasing scrutiny and potential financial risks
associated with the use of hazardous chemicals
in their products and manufacturing processes. As
regulations and litigation related to these substances
continue to evolve, it is crucial for companies in this sector
to proactively manage and mitigate the risks stemming from
hazardous chemicals.
Objective of engagement: To discuss the use
ofhazardous chemicals within their product
portfolio and the actions these companies have
taken to mitigate the risks associated with them.
Our engagement on this theme involved discussions with
aproducer of PVC piping materials, a producer of ventilation
products and a producer of plastic piping systems, all
companies that are currently owned in the portfolio.
Scope and process: Written exchanges were
undertaken between the Team and the
appropriate ESG lead at each of the three
companies. Topics focused on progress
madewith assessing, monitoring and reducing their use
ofhazardous materials.
Outcome: All three companies were found to
have complied with existing regulation around
hazardous chemicals and had plans to increase
the use of recycled or alternative materials in their
production process.
We were encouraged by the producer of PVC piping
materials’ proactive approach to phasing out certain
hazardous additives, such as cadmium and lead-based
stabilizers, and its pursuit of the development of sustainable
additives and alternatives to use in manufacturing.
Our engagement with the producer of ventilation products
and airducts led us to conclude that, despite producing
minimal hazardous waste in its production process, it
hadbeen prioritizing the use of recycled materials in its
manufacturing processes for several years. It has set agoal
of achieving 90% use of recycled plastic in its manufacturing
process by 2025, and in 2023, approximately 76% of plastic
used was recycled, which is industry leading.
We found that the producer of plastic piping systems had
voluntarily commissioned a screen for Substances of Very
High Concern in recycled PVC and had asked suppliers for
a declaration against REACH regulations for recycled
polymers. Like the producer of ventilation products, the
company also had ambitious targets and plans to increase
circularity in its products and business activities, with a goal
to achieve over 60% of plastics used across the Group to be
recycled by the end of 2025.
We will continue to monitor and engage with these
companies in the future.
Engagement on decarbonisation efforts by UK housebuilders
Reason for engagement: We wanted to
understand how prepared our portfolio
companies were for the UK Future Homes
Standards regulation which is coming intoforce
in 2025.
Objective of engagement: To understand
thecosts and challenges associated with
meeting the UK Future Homes Standard 2025
regulation and to determine the demand and
premiums customers are willing to pay for more
energy-efficient homes.
Scope and process: The Team collaborated
with JHI’s in-house Governance and Stewardship
team and met with two UK housebuilders to
discuss these topics.
Outcomes: The first housebuilder provided
insights into the difficulties of meeting future
regulations and consumer demand during the
cost-of-living crisis. In particular, the company
was anticipating challenges relating to the availability of
labour and maintenance of heat source air pumps and
raised the issue that housebuilders may struggle to pass
onthe costs associated with meeting the required
standards to consumers, as demand for energy-efficient
features is currently low.
It was clear from our meeting with the second housebuilder
that the company was an industry laggard when it came to
innovation and reporting on decarbonisation efforts; for
instance, the company was yet to implement timber frame
targets to reduce carbon emissions in the value chain,
something we have since encouraged it to do.
Both companies flagged that delays in policy changes
andconfusion over nutrient neutrality legislation had
impacted the industry’s expectations around the pace
ofchange. Nevertheless, we expect both companies to
make reasonable progress towards building sustainable
homes inthe future and we aim to monitor progress on
these developments.
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
29
Voting
The Board believes that voting at general meetings is an
integral part of exercising responsible corporate stewardship
and provides an effective means of signalling shareholder
views on board policy, practices and performance. As a
Board, we have chosen to delegate voting responsibility to
theManager for the rights attached to the shares held in
theCompany’s portfolio. The Manager votes actively at
shareholder meetings and engages with companies as part
ofthe votingprocess.
The decision on how to vote is guided by the best interests
ofinvestors and based on an in-depth understanding of the
respective companies’ operations. Voting decisions are
madein keeping with the provisions of the Manager’s
ESGInvestment Policy which is publicly available at
www.janushenderson.com. To retain oversight of the
process, the directors receive reporting at each board meeting
on how the Manager has voted the shares held in the
Company’s portfolio. The directors review the Manager’s ESG
Investment Policy, Stewardship Policy, Proxy Voting Policy and
Procedures at least annually.
The Fund Manager has a strong focus on good governance
practice and an active approach to voting. Where appropriate,
the Manager will vote against resolutions at general meetings.
In most cases this is done following engagement or
consultation with the company prior to general meetings.
During the year to 31 May 2024, the key issues which the Fund
Manager voted against concerned director remuneration,
overboarding, diversity and independence. In total, the Company
voted at 122 shareholder meetings during the year to 31 May
2024, being 99.2% of portfolio companies’ general meetings.
At10 of these meetings (8.2%), the Company placed a vote
against management. In order to influence decision making
atboard level where appropriate, the Team participates in
consultations with various members of the boards of our portfolio
companies ahead of or after contentious AGM resolutions.
The Company voted against 18 resolutions in total, being 1.1%
of all resolutions voted on during the year. The Company did
not abstain or withhold voting on any resolutions.
Voting record
8% of meetings voted
with one or more votes
cast against management
92% of meetings
voted with no votes cast
against management
In terms of resolutions not supported, these covered two
primary areas: compensation and director-related.
Compensation 44%
Director-related 50%
Strategic transactions 6%
Source: Janus Henderson using Institutional Shareholder Services (“ISS”)
categories
Note: Some meetings had more than one vote against management
Stewardship
Stewardship is an integral and natural part of JHI’s
long-term, active approach to investment management.
Strong ownership practices, such as management
engagement and proxy voting, can help protect and
enhance long-term shareholder value. JHI supports
stewardship codes and broader initiatives around the
world, including being a founder signatory of the UN
Principles for Responsible Investment, and is a signatory
ofthe FRC’s Stewardship Code. The intensive research
byfund managers and analysts involves conducting
thousands of interviews with senior executives and chairs
of companies throughout the world each year. These
teams develop long-term relationships with the
management of firms in which they invest. Should
concerns arise over a firm’s practices orperformance,
theyseek to leverage these constructive relationships
byengaging with company management orexpressing
their views through voting on management orshareholder
proposals. Escalation of the engagement activities
depends on a company’s individual circumstances.
The environment
The UK Smaller Companies team engages with portfolio
companies on environmental matters where they arise. As an
investment trust, the Company’s own direct environmental
impact is minimal. The Company has no greenhouse gas
emissions to report from its operations, nor does it have
responsibility for any other emissions-producing sources under
the Companies Act 2006 (Strategic Report and Directors’
Reports) Regulations 2013. The Company’s indirect impact
occurs through its investments and the Fund Manager monitors
the carbon footprint of the portfolio as a measure of its carbon
intensity. For these reasons, the Board considers that the
Company is a low-energy user under the Streamlined Energy
&Carbon Reporting regulations (“SECR”) and is therefore not
required to disclose energy and carbon information.
ESG matters (continued)
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
30
Our Manager recognises the importance of managing its
operational activities in a sustainable way and minimising any
adverse impact on the environment. In 2021, JHI reached its
three-year target to reduce its carbon footprint by 15% per
full-time employee (“FTE”) from 2018 levels. In 2022, using
guidance from the Science-Based Target Initiative, JHI set
ambitious new five-year reduction targets versus a 2019
baseline and per full-time employee:
●
reduction target of 29.4% in Scope 1 (fuel) and Scope 2
(electricity) emissions;
●
reduction target of 17.5% in Scope 3 (business travel,
freight, paper, water, waste) emissions; and
●
reduction target of 17.5% on water and waste consumption
by FTEs.
In addition to this, JHI has maintained a CarbonNetural
®
certification since 2007 and offsets all its operational Scope 1,
Scope 2 and Scope 3 operational emissions each year.
Through this process, JHI has invested in a variety of offset
projects around the world, delivering financial support to
essential renewable energy, forestry and resource
conservation projects that support reductions in greenhouse
gas emissions. All projects JHI supports have been classified
as ‘additional’ by an independent third party, meaning they
would not happen without the sale of carbon credits.
JHI discloses its carbon emissions annually through
regulatory and voluntary reporting frameworks, including
SECR and the Carbon Disclosure Project (“CDP”), as well as
in its 2023 Annual Report and 2023 Responsibility Report,
which provide more information.
JHI produces product-level Task Force on Climate-Related
Financial Disclosures (“TCFD”) reports. These reports include
an overview of the climate-related governance, strategy, risk
management, and metrics and targets of JHI and its portfolios.
Product-level metrics include absolute carbon emissions,
carbon footprint, weighted average carbon intensity, implied
temperature rise and climate scenario analysis (Climate Value
at Risk). JHI’s TCFD Report specific to the Company is
available at www.hendersonsmallercompanies.com.
Penny Freer
Chair of the Board
31 July 2024
ESG matters (continued)
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
31
Photo: All Board members at a meeting. Also in attendance are Neil Hermon (Fund Manager),
Indriatti van Hien (Deputy Fund Manager) and Johana Woodruff (chartered secretary
and nominated representative of the corporatesecretary).
Governance
32
Penny Freer
Position: Chair of the Board
(from1October 2021)
Date of appointment: 14 September 2018
Experience and contribution: Penny is an
experienced board director who brings
in-depth investment expertise and
leadership skills to the Board. In particular,
she has many years of experience of UK
smaller companies, both as a director and
as an investment banker advising
companies in this sector.
Other appointments: Penny is chair of AP
Ventures LLP. She holds non-executive
board positions at Weir Group plc and
Empresaria Group plc,the latter of which
she ischair.
From 2000 to 2004 Penny led Robert W
Baird’s UK equities division; prior to this
shespent eight years at Credit Lyonnais
Securities where she headed the small and
mid-cap equities business. Penny was
previously a non-executive director of
Advanced Medical Solutions Group plc and
non-executive chair of Crown Place VCT PLC.
Alexandra Mackesy
Position: Chair of the Audit and Risk
Committee (from 4 October 2019)
Date of appointment: 14 September 2018
Experience and contribution: Alexandra
brings a specialist governance perspective
and particular experience of global smaller
companies to the Board. She has a strong
financial and risk management background.
Alexandra has 19 years’ experience as a
non-executive director, audit chair and
senior independent director of UK-listed
investment trusts.
Other appointments: Alexandra is
non-executive chair of JPMorgan China
Growth & Income Investment Trust plc and
non-executive director of Murray International
Trust PLC. In addition, Alexandra works as a
consultant at Board Level Partners providing
external board evaluation services, and as
advisory member of the investment
committee of Oriel College, Oxford. In her
charity activity, Alexandra is trustee of the
Longborough Festival Opera.
During her executive career in the investment
industry, Alexandra worked in senior equity
research roles with Credit Suisse, JPMorgan
and SG Warburg in Asia.
Kevin Carter
Position: Senior Independent Director
(from1 October 2022)
Date of appointment: 1 May 2021
Experience and contribution: Kevin brings
wide experience of investment management
and leadership skills to the Board, both as
afund manager and managing director of
investment firms. Having been a non-
executive chair of Murray International Trust
plc and JPMorgan American Investment
Trust plc, and director of Lowland
Investment Company plc, Kevin is an
experienced investment trust director. Kevin
is a CFA charter holder and has a doctorate
in mathematical statistics with a research
subject in financial economics.
Other appointments: Kevin is a non-
executive director of Aspect Capital Limited
and Newton Investment Management
Limited.
During his executive career, Kevin led the
European investment practice of Watson
Wyatt Limited and was chief executive
officer of Old Mutual Asset Managers.
Kevinwas previously a trustee director of
theBBC Pension Scheme and chair of its
investment committee.
Corporate Governance Report
Board of Directors
The directors appointed to the Board at the date of this Annual Report are set out below:
All the directors are independent and non-executive. All directors are members of the Management Engagement Committee
and the Nomination Committee, both of which are chaired by Penny Freer. The Audit and Risk Committee is chaired by
Alexandra Mackesy, the other members of which are Kevin Carter, Yen Mei Lim, Victoria Sant and MichaelWarren.
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
33
Corporate Governance Report (continued)
Yen Mei Lim
Position: Director
Date of appointment: 3 April 2023
Experience and contribution: Mei is a
chartered accountant and qualified lawyer.
With over 20 years’ experience in the
financial services industry, Mei brings a deep
understanding of corporate finance, M&A,
strategy, transformational change and
business development to Board
deliberations. She has an ESG-focused
approach, particularly around diversity
andinclusion.
Other appointments: Mei is Chief Financial
Officer and Head of Corporate Development
at Anthemis, a venture capital investor with
an embedded finance and impact
investment focus. Prior to joining Anthemis,
Mei was a managing director at Barclays,
working there for over a decade in a variety
of different areas, notably corporate
development, strategy, principal investments
and finance. Mei’s earlier career spans
investment banking atMacquarie Bank in
M&A for financial institutions, Ernst & Young
LLP (“EY”) in transaction advisory support
and Goldman Sachs as an associate, having
qualified as achartered accountant with EY
in 2004.
Victoria Sant
Position: Director
Date of appointment: 23September 2016
Experience and contribution: Victoria
brings a wide governance and stakeholder
perspective to the Board withher in-depth
ESG/SRI knowledge and experience,
particularly through her roles atthe Investor
Forum and an endowment asset owner.
Other appointments: Victoria is managing
director of the Investor Forum, a not-for-profit
organisation facilitating engagement
between institutional investors and UK-listed
companies on long-term strategic and
governance issues. Victoria is chair of the
investment committee of Crop Trust, a
member of the investment committee of
theNational Trust endowment, and a
member of the advisory board of
OwnershipCapital B.V., which is a Dutch
equity manager focused on active
ownership and ESG integration.
Prior to this, Victoria was an investment
manager at the Wellcome Trust, where
shewas responsible for the outsourced
long-only equity portion of the £18bn
investment portfolio, and a trustee director
of the pension scheme.
Michael Warren
Position: Director
Date of appointment: 1 March 2021
Experience and contribution: Michael
brings a combination of investment,
operational and CEO-level management
experience, with expertise in managing
money, people and organisations.
Aparticular management specialism is
Michael’s experience of leading sales and
marketing divisions.
Other appointments: Michael is a non-
executive director of Fidelity Asian Values
PLC and a non-executive director of
Carrington Wealth Management, Rathbone
Asset Management Limited and EdenTree
Investment Management Limited.
During his executive career, Michael held
several senior management and investment
roles. He was an investment director of
Thames River Capital, a board member and
the managing director of the sales and
marketing divisions of HSBC Investments
UK Ltd, managing director and head of retail
for DWS, the UK mutual fund business of
Deutsche Asset Management, and director
and global equity portfolio manager of
Baring Asset Management. Michael was
previously an advisor to Gresham House
Asset Management.
Board of Directors (continued)
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
34
Corporate Governance Report (continued)
Governance structure
Audit and Risk
Committee
Chair:
Alexandra Mackesy
Purpose: Ensures the integrity of
financial reporting, evaluates the
effectiveness of the systems of
internal control and risk
management, and oversees the
relationship with the external auditors
Nomination
Committee
Chair:
Penny Freer
Purpose: Ensures the Board has a
balance of skills, experience and
diversity, oversees performance
reviews of the Board and its
committees, considers directors’
fees and maintains an effective
framework for succession planning,
with a formalapproach to the
appointment of directors
Management Engagement
Committee
Chair:
Penny Freer
Purpose: Ensures the performance
of service providers meets
expectations and their terms of
engagement remain appropriate
Contractually engages third-party service providers
Janus Henderson
Fund Management: UK Smaller Companies equities team, with Neil Hermon and Indriatti van Hien asthe Company’s
Fund Manager and Deputy Fund Manager and Shivam Sedani as Associate Portfolio Manager
Sales, Marketing, Administration
Corporate Secretary: Janus Henderson Secretarial Services UK Limited
Alternative Investment Fund Manager: Janus Henderson Fund Management UK Limited
Board of Directors
Comprises independent non-executive directors
Chair: Penny Freer
The terms of reference for each of the committees of the Board are kept under regular review and are available at
www.hendersonsmallercompanies.com or via the corporate secretary.
(see page 45 for the Management Engagement
Committee Report)
(see pages 42 to 44 for the Audit and
RiskCommitteeReport)
(see pages 46 to 47 for the Nomination
Committee Report)
Deutsche
Numis
Corporate broker
Computershare
Investor
Servicesplc
Registrar
HSBC Bank plc
Custodian and
depositary
Forvis Mazars
LLP
Auditor
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
35
Corporate Governance Report (continued)
Chair’s Statement on corporate
governance
Your Board is pleased to report on our approach to the
governance of your Company and how the principles of the
applicable codes have been applied during the year. As a
Board, we believe that good governance creates value and
weare committed to high standards of corporate governance,
business ethics and transparency.
Compliance with corporate
governancecodes
By virtue of the Company’s listing on the London Stock
Exchange, the Board is required to report on how the
principles of the 2018 UK Corporate Governance Code (the
“UK Code”) have been applied. The 2019 AIC Code of
Corporate Governance (the “AIC Code”) addresses the
principles and provisions of the UK Code as well as additional
provisions of specific relevance to investment companies,
andhas been endorsed by the Financial Reporting Council.
This enables investment company boards to report against
the AIC Code and still meet their obligations under the UK
Code and associated disclosure requirements under
paragraph 6.6.6 of the UK Listing Rules. The Board has
chosen to report under the AIC Code, as it considers
reporting against the AIC Code provides more relevant
information to the Company’s shareholders about its
governance arrangements.
The AIC Code and the UK Code can be found on the
respective organisations’ websites: www.theaic.co.uk
andwww.frc.org.uk.
Statement of compliance
The Board confirms that the Company has applied the
principles and adhered to the provisions of the AIC Code
intheyear under review and up to the date of this report.
The Company has no chief executive or other executive
directors and therefore has no need to consider the
remuneration of executive directors. A separate remuneration
committee has not been established, as the Board comprises
only non-executive directors and the Company has no
employees. The remit ofthe Nomination Committee includes
responsibility for non-executive directors’ remuneration. The
Board Chair does not act as Nomination Committee Chair
when that committee considers matters relating to her
performance, succession orremuneration.
In addition, the Company does not have any internal
operations and therefore does not maintain an internal audit
function, though the Audit and Risk Committee considers the
need for such a function at least annually.
Governance overview
The Board has three principal committees: Audit and Risk
Committee, Management Engagement Committee and
Nomination Committee, as set out in the governance structure
chart on page 35. Committee membership is noted on page 33.
The Board has engaged third-party service providers to
deliver the operations of the Company. Management of the
investment portfolio has been delegated contractually to
Janus Henderson, which also provides the day-to-day
accounting, company secretarial, administrative, sales and
marketing activities. The Company has appointed a
depositary, which in turn appoints the custodian which is
responsible for the safe custody of the Company’s assets.
The Company has appointed a registrar to maintain the
register of members and assist shareholders with queries
about their holdings.
The Company entered into each of these principal contracts
after full and proper consideration of the quality and cost of
theservices offered, including the operation of the service
providers’ control systems in relation to the affairs ofthe
Company. The Board and its committees maintain oversight
ofthird-party service providers through regular andad hoc
reporting and ongoing monitoring by the Manager. TheBoard
meets annually with representatives from the depositary and
custodian to discuss, amongst other matters, performance,
service levels, their value for money, information security and
business continuity plans.
The Board meets formally at least six times a year, with
additional board or committee meetings arranged when
required. The directors have regular contact with the Fund
Manager, the corporate secretary and other employees of
theManager between meetings.
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
36
Corporate Governance Report (continued)
Leadership, roles and division of responsibilities
Role Primary responsibilities
Board
●
Responsible for providing leadership of the Company’s affairs
●
Setting the Company’s investment objective, policy and strategy
●
Establishing a robust internal control framework enabling effective risk management
●
Appointing and monitoring the performance of service providers within the parameters of the control
framework
●
Setting the Company’s culture and values
●
Ensuring that obligations to shareholders and other stakeholders are understood and met
●
No directors are linked via any other directorships
Chair
●
Leading and managing Board business and ensuring the timely flow of information from service providers
to the Board
●
Providing effective leadership of the Board, including setting its agenda and determining its governance
framework, culture and values, with the support of other directors and the corporate secretary
●
Leading the Board’s relationship and engagement with shareholders and other stakeholders
●
Managing the relationship with the Manager
Committee
Chairs
●
The leadership and governance of their Committee
●
Maintaining the relationships with specialist service providers delivering services within the remit of their
Committee
●
Reporting on the activities of their Committee to the Board
●
Seeking approval from the Board for the responsibilities set out in their respective terms of reference
Senior
Independent
Director (“SID”)
●
Fulfilling the role of sounding board for the Chair and intermediary for the other directors as necessary
●
Leading the effectiveness review of the Chair
●
Acting as a channel of communication for shareholders in the event that contact through the Chair
isinappropriate
Independent
non-executive
directors
●
Providing constructive and effective challenge, especially to the decisions of the Manager
●
Scrutinising and holding to account the performance of:
●
– the Fund Manager in meeting the investment objective
●
– Janus Henderson in the promotion of the Company and day-to-day smooth operations of the
Company’s business
●
Providing strategic guidance and offering specialist advice
Company
Secretary
●
Responsible to the Board for compliance with Board and committee procedures, rules and regulations
●
Minuting board and committee meetings, with any director’s concerns recorded in the minutes
●
Board has the power to appoint or remove the secretary in accordance with the terms of the
management agreement
Manager (AIFM)
●
Promoting the Company’s investment proposition to professional and retail investors
●
Making the necessary reporting to the FCA regarding the Company’s status as an AIF
●
Providing accounting, company secretarial and administrative services to the Company ensuring
compliance with the applicable statutory and regulatory provisions
●
Coordinating the delivery of services provided by the Company’s other third-party service providers
Fund Manager
●
Selecting the stocks held within the portfolio
●
Diversification and risk management through stock selection and size of investment
●
Determining the volume and timing of acquisitions and disposals
●
Determining the frequency and level of gearing within the overall limits set by the Board
Shareholders
●
Approving material changes to the Company’s investment policy
●
Approving the final dividend
●
Making decisions on changes to the Company’s constitution
●
Electing and re-electing directors to the Board, or removing them from office if deemed appropriate
●
Determining the overall limit for directors’ remuneration
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
37
Corporate Governance Report (continued)
Operation of the Board
The Board has a formal schedule of matters reserved for its
decision, available at www.hendersonsmallercompanies.com,
which includes setting strategy and providing oversight of
performance against agreed measures. All matters that are not
delegated to the Manager under the management agreement
are reserved for the Board. The Board approves any changes
to thegovernance structure, capital arrangements, board/
committee composition, oversees financial reporting and
assesses theeffectiveness of the internal control framework.
Each board meeting follows a formal agenda, set by the Chair
in conjunction with the company secretary, and includes a
review of the Company’s investment performance, financial
position, compliance with investment parameters and the
investment objective, a review of shareholder movements,
along with any sales and marketing activities and any other
relevant business matters, to ensure that control is maintained
over the Company’s affairs.
The Manager ensures that all directors receive, in a timely
manner, all relevant management, regulatory and financial
information to allow them to discharge their responsibilities
and enable smooth functioning of the Board and its
committees. Representatives of the Manager attend relevant
parts of board meetings to enable the directors to probe
further on matters of interest or concern.
The Chair is invited to meetings of all the chairs of the investment
trust companies managed by JHI, which provide aforum to
discuss industry matters, and then reports back to the Board.
Afundamental consideration in the Board’s decision-making is
its awareness of the interests of shareholders and other key
stakeholders, as explained on page 24.
Correspondence from shareholders addressed to the Chair or
the Company received by JHI is forwarded to theChair in line
with audited procedures in place, and issubmitted to the next
board meeting as appropriate. Anyurgent or important
correspondence would be circulated promptly at the request
of the Chair.
Corporate secretary
The Board has direct access to the advice and services ofthe
nominated chartered secretary, who has been appointed by
the corporate secretary Janus Henderson Secretarial Services
UK Limited, a subsidiary of JHI with its own reporting lines
and audited internal controls. There are processes and
controls in place to ensure that there is a clear distinction
between the two entities, particularly when dealing with any
conflicts or issues between the Company and JHI.
Directors’ appointment and tenure
Appointment and retirement
The Board may appoint directors at any time during the
year.Any director so appointed will stand for election by
shareholders at the following annual general meeting in
accordance with the provisions of the Company’s articles of
association. Each director receives a letter of appointment
that sets out, amongst other matters, what is expected
ofthem in terms of time commitment.
The Board considers a potential candidate’s other
commitments on appointment and then annually through the
performance evaluation process to ensure that directors have
sufficient time to commit to the Company. A schedule of
directors’ other commitments is reviewed at each board
meeting and directors are required to seek the Chair’s approval
prior to accepting further appointments. The Chair seeks the
SID’s approval before accepting further appointments.
The Company’s articles of association permit shareholders
toremove a director before the end of his or her term by
passing a special resolution at a general meeting. An
appointment may be terminated by either party giving
writtennotice without compensation payable.
Tenure
Directors are generally expected to serve two terms of three
years, which may be extended to a third term at the discretion
of the Board and subject to satisfactory performance evaluation
and re-election by shareholders each year. This ensures the
regular refreshment of the Board and its committees, and
forms an integral part of succession planning.
Given the entirely non-executive nature of the Board and the
fact that the Chair may not be appointed as such at the time
of their initial appointment as a director, the Chair’s tenure
may be longer where this is considered by the Board to be in
the best interests of the Company.
The appointment of all directors is subject to satisfactory
performance evaluation and annual re-election by
shareholders. The directors are cognisant of the benefits
ofregularly refreshing Board membership and seek to do
sowhile retaining a balance of knowledge of the Company
and the key relationship with the Fund Manager.
Following the Nomination Committee’s review of the
contribution and performance of each director (see pages
46-47), the continuing appointment of all directors was agreed
for resolution by shareholders at the AGM.
Professional development
An induction process is in place for new appointees and all
directors are encouraged to attend relevant internal and external
training courses and seminars throughout the year, including
bespoke investment trust director development sessions
provided by JHI. Ongoing individual training requirements are
considered as part of the annual evaluation process led by the
Chair of the Board.
Directors’ independence
All directors have a wide range of other interests and are not
dependent financially on the Company. At the Nomination
Committee meeting in April 2024, the directors reviewed their
independence and confirmed that they all remained wholly
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
38
Corporate Governance Report (continued)
independent of the Manager. In line with provision 13 ofthe AIC
Code, the directors agreed that Penny Freer as Chair was
independent on her appointment to the Board in 2018 and
continues to be independent, having no relationships thatmay
create a conflict between her interests and those ofshareholders.
The role and contribution of any longer serving director (over
six years in tenure) are subject to particularly rigorous review.
The Board has concurred with the Nomination Committee’s
assessment that Victoria Sant as a longer serving director is
independent incharacter and judgement, and that her
individual skills, broad business experience and high degree
of knowledge and understanding of the Company are of great
benefit toshareholders.
There were no contracts subsisting during or at the end of
the year in which a director of the Company is or was
materially interested and which is or was significant in
relation to the Company’s business. No director has a service
contract with the Company and there are no agreements
between the Company and its directors concerning
compensation for lossof office.
The Board has adopted a procedure for directors to take
independent professional advice in the furtherance of their
duties at the expense of the Company.
Directors’ conflicts of interest
The Company’s articles of association permit the Board to
consider and, if it sees fit, authorise situations where a
director has an interest that conflicts, or may possibly
conflict, with the interests of the Company (“situational
conflicts”). The Board has a formal system in place for
directors to declare situational conflicts to be considered
for authorisation by those directors who have no interest in
the matter being considered. In deciding whether to
authorise a situational conflict, the non-conflicted directors
must act honestly and in good faith with a view to the best
interests of the Company and they may impose limits or
conditions when giving the authorisation, or subsequently,
if they think this is appropriate. Any situational conflicts
considered, and any authorisations given, are recorded in
the relevant meeting’s minutes and the register of interests.
Board attendance
The following table sets out the number of scheduled board
and committee meetings held during the year under review
and thenumber of meetings attended by each director.
Alldirectors attended the AGM on 5 October 2023. Each
director attended every board and committee meeting
towhich they were entitled throughout the year. Outside
theformal meetings in the table, the Board or committees
had regular interaction on various corporate activities, such
as to receive a special investment performance update from
the Fund Manager, and met additionally to undertake
business such as the approval of the Company’s results,
dividends, marketing matters and consideration of the share
buybacks process.
Board ARC MEC NC
Number of meetings
Penny Freer 6 3 1 1
Alexandra Mackesy 6 3 1 1
Victoria Sant 6 3 1 1
Kevin Carter 6 3 1 1
Michael Warren 6 3 1 1
Yen Mei Lim 6 3 1 1
Notes:
ARC: Audit and Risk Committee
MEC: Management Engagement Committee
NC: Nomination Committee
Directors’ insurance and indemnification
Directors’ and officers’ liability insurance cover was in place
throughout the financial year and remains in place at the date of
this report. The Company’s articles of association provide, subject
to UK legislation, an indemnity for directors in respect of costs they
may incur relating to defence of any proceedings brought against
them arising from their positions as directors, in which they are
acquitted or judgment is given in their favour by the Court. No
indemnity was given during the year or to the date of this report.
Internal control and risk management
The Board has overall responsibility for the Company’s system
of internal control and risk management, and for reviewing
itseffectiveness, as set out in the following chart ‘System of
Internal Controls’. The Audit and Risk Committee supports the
Board in the continuous monitoring of theCompany’s internal
controls and risk management framework, which includes
those of its key service providers. Its considerations in this
respect are set out on pages 42-44.
The Board has established an ongoing process for identifying,
evaluating and managing the principal risks faced by the
Company (see pages 25-26), aligning with the FRC’s
Guidance on Risk Management, Internal Control and Related
Business and Financial Reporting. Thesystem was in
operation throughout the year under review and up to the date
of this report and is designed to meet the specific risks faced
by the Company. It takes account of the nature of the
Company’s reliance on its service providers and their internal
controls environments. The system therefore manages rather
than eliminates the risk of failure to achieve the Company’s
business objectives and provides reasonable, but not
absolute, assurance against material misstatement or loss.
The key components of the internal control framework include:
●
clearly defined investment criteria which specify levels of
authority and exposure limits. The Board reviews reports
on compliance with the criteria at each meeting;
●
regular reporting that allows the Board to assess the
Company’s financial position. The management accounts
and forecasts are reviewed by the Board at each meeting;
●
the contractual agreements with the Manager and other
service providers. The Board reviews performance levels
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
39
and adherence to relevant provisions of the agreements
on a regular basis. The Management Engagement
Committee conducts a formal evaluation of the overall
level of service from third-party providers at least annually
(see page 45);
●
the review of controls (including financial, operational and
compliance) at the Manager and other third-party service
providers. The Board receives quarterly reporting from the
Manager and depositary, reviews annual assurance
reports on the effectiveness of the control environments at
the Company’s key service providers; and
●
review of additional reporting provided by:
– the Manager’s Risk team on the control environment in
operation at the Manager and their view of the control
environments of the key third-party service providers
used by the Company; and
– the Manager’s Internal Audit team on areas of
operation which are relevant to the Company.
The Board has carried out a review of the effectiveness of the
Company’s system of internal controls for the year ended
31May 2024. During the course of its review the Board did
not identify and was not advised of any failings or weaknesses
relating to the Company’s portfolio that have been determined
as material.
Corporate Governance Report (continued)
System of internal controls
Board of directors
(six non-executive directors)
Janus
Henderson
(“JHI” or the
“Manager”)
(Investment
management,
company
secretarial, sales,
marketing,
financial reporting
and
administration)
Reporting
• Investment
performance
update at each
meeting
• Investment
limits and
restrictions
(monthly)
• Internal
controls report
(quarterly)
• Effectiveness of
control
environment
(annually)
BNP Paribas
(“BNP”)
(Accounting and
administration
services engaged
by the Manager)
Reporting
• Balance sheet
• Liquidity and
gearing
• Income forecasts
• Portfolio
valuation
• Portfolio
transactions
• Portfolio
attribution
• Effectiveness of
control
environment
(annually)
Computershare
Investor
Services PLC
(“Computershare”)
(Registrar)
Reporting
• Voting and
scrutineer
reports pre- and
post-shareholder
meetings
• Shareholder
correspondence
• Operational
service updates
• Effectiveness of
control
environment
(annually)
Forvis Mazars LLP
(Statutory auditor)
How the system of
internal control
operates
The Board delegates
contractually to service
providers all the
Company’s operational
requirements. It maintains
oversight of these
providers throughout the
year by receiving regular
reporting on their activities.
All are considered key
stakeholders.
The MEC formally
evaluates theperformance
and service delivery of all
service providers atleast
annually.
The ARC evaluates
theperformance of the
statutory auditor on
completion of each
auditcycle, and monitors
the effectiveness of the
control environment of the
Manager, Computershare,
HSBC Securities Services
and BNP each year
through review of their
annual assurance reports,
supplemented by the
viewof the Manager’s
Operational Riskteam.
HSBC
Bank plc
(“HSBC”)
(Depositary/
Custodian)
Reporting
• Depositary’s
report
(quarterly)
• Presentation
from the
depositary and
custodian
(annually)
• Effectiveness
ofcontrol
environment
ofHSBC
Securities
Services
(annually)
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
40
Corporate Governance Report (continued)
Internal audit function
Systems are in operation to safeguard the Company’s assets
and shareholders’ investments, maintain proper accounting
records and ensure that financial information used within the
business, or published, is reliable. Being an investment trust,
with no employees and all executive activities delegated
tothird-party service providers, the Board relies on the
Company’s framework of internal control and the ARC’s
viewson reporting received from specific teams, particularly
atthe Manager.
As noted above, the Manager’s Operational Risk Team
supports the ARC in considering the independently audited
reports on the effectiveness of internal controls in place at the
third-party service providers. The Manager’s Internal Audit
team provides regular reporting to the Board on the
operations at the Manager and presents to the ARC at least
annually. The Board has therefore concluded that it is not
necessary at the present time for the Company to have its
own internal audit function.
By order of the Board
For and on behalf of
Janus Henderson Secretarial Services UK Limited
Corporate Secretary
31 July 2024
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
41
I am pleased to present my formal report to shareholders as
Chair of the Audit and Risk Committee (the “Committee”) for
the year ended 31 May 2024.
Role and responsibilities
The primary responsibilities of the Committee are to ensure
the integrity of the Company’s financial reporting, the
appropriateness of internal controls and risk management
systems at the Manager and the Company’s other service
providers, and to make recommendations to the Board on
approvals and any changes needed. The Committee also
oversees the relationship with the external auditor, and
through a mandate directly from the shareholders, determines
the auditor’s appointment and fees. The Committee formally
reports to the Board after each meeting and its responsibilities
are set out in terms of reference which are reviewed at each
meeting and available on the Company’s website.
Membership and meetings
The members of the Audit and Risk Committee during the
year were myself as Chair, Kevin Carter, Victoria Sant, Michael
Warren and Yen Mei Lim. Mei is a chartered accountant, and
the Board considers that other members of the Committee,
including myself, have recent and relevant financial experience
from their senior management roles elsewhere. Penny Freer
attends the Committee’s meetings by invitation only.
The Committee met three times in the year under review with
the following focal points:
●
to review the Annual Report and final dividend;
●
to review the half-year results and interim dividend; and
●
to focus on its broader responsibilities overseeing internal
controls.
The Company’s external auditor, the Fund Manager, Deputy
Fund Manager and the Manager’s Financial Reporting Senior
Manager for investment trusts are invited to attend meetings
of the Committee on a regular basis. Otherrepresentatives of
the Manager (including Heads of Operational Risk, Internal
Audit, Business Resilience and theChief Information Security
Officer) are also invited to attend meetings onanannual basis,
and more frequently as helpful to theCommittee.
Activities during the year
In the year under review the Committee assessed the
following matters:
●
appropriateness of the Company’s accounting policies
and the quality and effectiveness of the accounting
records and management information maintained on
behalf of the Company, relying on meetings with and
reports from JHI;
●
half-year results and the Annual Report. This includes
whether the Annual Report is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Company’s position and
performance, business model and strategy, and includes a
detailed assessment of the Viability Statement;
●
dividends to be paid by the Company for recommendation
to the Board;
●
internal controls in place at JHI, BNP, HSBC Securities
Services and Computershare;
●
JHI’s policies and activities in relation to information
security and business resilience, meeting with
representatives of JHI’s internal audit, information
securityand risk departments;
●
key and emerging risks, risk management systems and
the Company’s risk register and strategic heat map.
TheCommittee uses its strategic ‘heat map’ of key risks
tobetter analyse risks holistically, collating each director’s
individual rating for each risk each year and analysing
reasons for any divergence in detail;
●
policies and procedures across all service providers to
prevent tax evasion, money laundering and the financing
of terrorism, as well as to ensure business continuity,
information security, cybersecurity protection and strong
internal controls;
●
nature and scope of the external audit and its findings;
●
any need for an internal audit function;
●
reappointment of the auditor, its performance, remuneration
and tenure of appointment, its independence, objectivity,
effectiveness and qualityofreporting;
●
audit plan, including the principal areas of focus;
●
JHI’s and other key service providers’ whistleblowing
policies for their staff to raise concerns in confidence
about possible improprieties, including in relation to the
Company;
●
revision of the Committee’s terms of reference to ensure
incorporation of the requirements of the FRC’s ‘Audit
Committees and the External Audit: Minimum Standard’ in
the Committee’s activities;
●
annual confirmation from the Company’s depositary; and
●
liquidity analysis of cross-holdings across the Manager’s
funds.
Audit and Risk Committee Report
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
42
Annual Report for the year ended 31 May 2024
The Committee considered the following significant matters in respect of the Annual Report for the year ended 31May2024:
Significant issue How the issue was addressed
Valuation and ownership of the
Company’s investments
The directors have appointed the Manager to perform the valuation of the assets of
the Company in accordance with its responsibilities under the AIFMD rules. As
required, the Manager has adopted a written valuation policy, which may be modified
from time to time. Actively traded investments are valued using stock exchange prices
provided by third-party pricing vendors. Ownership of listed investments is verified by
reconciliation to the custodian’s records.
Correct calculation of the
performance fee
The performance fee calculation is prepared by BNP and reviewed in depth by the
Manager and by the Committee, all with reference to the management agreement,
verifying that no performance fee is due for the year.
Compliance with section 1158
Corporation Tax Act 2010
The Committee regularly considers the controls in place to ensure that the regulations
for ensuring investment trust status are observed at all times, receiving supporting
documentation from the Manager and BNP.
Maintaining internal controls The Committee receives regular reports on internal controls from JHI, BNP,
Computershare and HSBC Securities Services and its delegates and has access
tothe relevant personnel of JHI who have a responsibility for risk management and
internal audit. The assurance report for one of the Company’s service providers was
qualified by the respective service auditor. The Committee thoroughly reviewed the
instances giving rise to the qualification and received confirmation that the exceptions
identified had no impact on the Company.
Recognition of dividend income Income received is accounted for in line with the Company’s accounting policies
(asset out on page 67), and is reviewed by the Committee at each meeting.
Special dividends may be required to be allocated between revenue and capital,
and the Committee reviews the rationale provided by the Manager and approves
the treatment.
Viability The Committee scrutinised assumptions around the viability statement set out on
pages 26-27, especially factors behind macroeconomic and geopolitical
uncertainties, the UK’s cost-of-living crisis and economic uncertainties, tosatisfy
itself of the Company’s resilience over the five-year time frame.
Going concern The Committee scrutinised assumptions around the going concern statement set out
on page 66 and the Company’s ability to continue in operational existence for at least
twelve months from the date of approval of the financial statements, concluding that
the Company’s financial statements should be produced on a going concern basis.
Appointment, review and tenure of the
external auditor
Regulations in force require the Company to rotate audit firms
after a period of ten years, which may be extended where
audit tenders are carried out or where more than one audit
firm is appointed to carry out the audit. The Committee last
carried out an audit tender process in 2021 and appointed
Mazars LLP (now ‘Forvis Mazars LLP’) as external auditor
starting from the year ended 31 May 2022. The auditor is
required to rotate partners every five years, and this is the
third year the current audit partner has been in place.
The Company complies with the requirements of The
Statutory Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitive Tender
Processes and Audit Committee Responsibilities) Order 2014.
This order relates to the frequency and governance of tenders
for the appointment of the external auditors and setting policy
on the provision of non-audit services.
Policy on non-audit services
The Committee keeps under regular review its policy on the
provision of non-audit services by the auditor. The policy sets
out that the Company’s auditor will only be considered for
non-audit work where this is not prohibited by regulations
andwhere it does not appear to affect the independence and
objectivity of the auditor. Any provision of non-audit services
by the auditor is not permitted to exceed 70% of the average
annual statutory audit fee for the three consecutive financial
periods preceding the financial period to which the cap
applies. Such services would require approval in advance
bythe Committee or the Committee Chair.
No fees were paid or payable to the auditor for non-audit
services in the year under review or since their appointment.
Audit and Risk Committee Report (continued)
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
43
Audit and Risk Committee Report (continued)
Independence of the external auditor
The Committee monitors the auditor’s independence and
objectivity through three aspects of its work:
●
approval of the non-audit services policy;
●
assessing the appropriateness of the fees paid to the
auditor for their work; and
●
by reviewing the information and assurances provided by
the auditor on their compliance with the relevant ethical
standards.
For the year ended 31 May 2024, Forvis Mazars confirmed
that all partners and staff involved with the audit were
independent ofany links to the Company, and that these
individuals had complied with their ethics and independence
policies and procedures which are consistent with the FRC’s
Ethical Standards. Forvis Mazars has confirmed to the
Committee its policy on independence, which stipulates that
its partners and staff involved with the Company’s audit are
not permitted to have any direct or material indirect interest in
the Company. Adherence to this policy of independence is
reaffirmed each year in writing by each staff member involved
in the Company’s audit.
This being Forvis Mazars’ third year in office as the
Company’s auditor and the fact that the firm does not provide
any non-audit services to the Company, the Committee is
satisfied that auditor independence and objectivity are
safeguarded.
Effectiveness of the external audit
The Committee evaluated the effectiveness of the external
audit, assessing the auditor’s performance during the year
together with a post-audit assessment, led by the Committee
Chair. Consideration was also given to the findings of the
FRC’s audit quality inspection report, which monitors audit
quality across the major audit firms in the UK. Forvis Mazars
presented and discussed the findings of the latest audit
quality inspection report and reported on the progress made
by the firm in addressing the areas identified for improvement
in the prior year’s report.
The Committee discussed the service provided by Forvis
Mazars with JHI’s Financial Reporting Senior Manager for
investment trusts and the company secretary, who have the
most hands-on involvement in the audit each year. The
Committee also reviewed and assessed the robustness of the
audit, level of challenge offered by the audit team, the quality
of the audit team and timeliness of delivering the tasks
required for the audit and reporting for the Committee,
benchmarking Forvis Mazars’ performance against their
recent experience with other firms gained through their other
commitments. The Committee also met privately with the
Audit Partner to discuss how the audit operated from Forvis
Mazars’ perspective.
The Committee considers that the audit quality for the year
ended 31 May 2024 has been high and that the Manager
andForvis Mazars have worked together effectively to
enhance reporting to shareholders. Having completed
theassessment, the Committee is satisfied with the
effectiveness of Forvis Mazars’ audit and recommended to the
Board its continuing appointment. Forvis Mazars has indicated
its willingness to continue in office and so the Board is
proposing resolutions for the 2024 AGM reappointing the firm
as auditor to the Company and authorising the Committee to
determine their remuneration.
Alexandra Mackesy
Chair of the Audit and Risk Committee
31 July 2024
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
44
Management Engagement Committee Report
Role and responsibilities
The primary role of the Management Engagement Committee
(“MEC”) is to review the management agreement and monitor
the performance of the Manager for the investment, company
secretarial, financial reporting, administration, sales,
marketingand support services that it provides under that
agreement. Its review of the terms of the agreement includes
the level and structure of fees payable, the length of notice
period and best practice provisions generally.
The MEC is also responsible for formally evaluating the overall
performance of other third-party service providers engaged
by the Company and for considering whether their continuing
appointment is in theinterests of the Company and its
long-term sustainable success.
Membership and meetings
All directors are members of the MEC and the Chair of the
Board is the MEC Chair. The MEC met once during theyear.
Activities during the year
In discharging its duties over the course of the period, the
MEC undertook an internal review of the performance ofthe
Manager, following its external Manager review convened in
the previous financial year by Lintstock Ltd. All directors
answered an online questionnaire and discussed the results
indetail at the MEC meeting in April 2024. The directors also
reviewed the performance of other third-party services
providers. Thefollowing key items were considered during
thereviewprocess:
●
the investment performance of the Company, taking
account of the benchmark and performance of
competitors in the closed-ended sector, the share price,
level of premium/discount and gearing;
●
the management of the portfolio’s risk profile and the use
of gearing;
●
the fee structures of the Company’s competitors in the
AICpeer group and other Janus Henderson-managed
investment companies;
●
the quality and experience of the teams involved in
managing the Company’s business and a review of
thestability of the management group and its business
priorities;
●
the key clauses of the management agreement, the
principal clauses of which are set out on page 27, how the
Manager had fulfilled them and whether they continued to
be appropriate. The Committee agreed that the fees paid
to the Manager were aligned with the Company’s purpose,
values and successful delivery of its long-term strategy;
●
the culture, values, senior management and any
organisational changes of the key service providers and
particularly of the Manager;
●
the performance and fees of the Company’s other service
providers, including the Company’s corporate broker
(Deutsche Numis), depositary and custodian (HSBC) and
registrar (Computershare);
●
the Company’s service providers in their roles as
stakeholders and whether there was an appropriate level
ofengagement with them;
●
the benefits to the Company and to shareholders of
entering into a new marketing strategy for more effective
promotion of the Company to retail shareholders;
●
closer liaison with senior management at JHI to
understand and gain assurance regarding changes
insenior management; and
●
any points of conflict which may arise between the
serviceproviders.
Continued appointment of the Manager
and other service providers
The findings of the annual effectiveness review of the Manager
and other service providers were positive overall. The exercise
identified some priorities for the Manager to consider over
thecoming year around monitoring implementation of the
newmarketing strategy formore effective promotion ofthe
Company to retail shareholders. Following completion of
thereview, the MEC recommended tothe Board that the
continued appointment of the Manager on the terms agreed
was in the best interests of theCompany’s shareholders as
awhole and its long-term sustainable success. The MEC
alsorecommended the continuation oftheother third-party
service providers’ appointments. TheBoard subsequently
approved the MEC’srecommendations.
Penny Freer
Chair of the Management Engagement Committee
31 July 2024
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
45
Report of the Nomination Committee
Role and responsibilities
The Nomination Committee (“NC”) is responsible for
reviewingBoard succession planning, tenure and diversity
policies, directors’ fees, the effectiveness of the Board and its
committees, and the appointment of new directors through
aformal procedure.
Membership and meetings
All directors are members of the NC. The Chair of the Board
is the NC Chair but does not chair meetings when the NC is
dealing with the Chair’s fees, performance or successor.
The NC met once during the year under review.
Activities during the year
In discharging its duties, the NC monitored and reviewed
thefollowing matters, and made recommendations to the
Board on:
●
the structure and size of the Board and its composition,
particularly in terms of succession planning, the
experience and skills of the individual directors and
diversity across the Board as a whole;
●
the directors’ and the Chair’s tenure policy and
remuneration level;
●
effectiveness of the Board, its committees, the Chair and
each individual director, following an internal evaluation
and review of the results; and
●
reappointment of directors standing for re-election at the
annual general meeting.
Board effectiveness review
It is the Board’s policy to have an external effectiveness review
every three years. In the previous financial year, Lintstock Ltd
conducted an external review of the Board, its committees,
individual directors and the Chair. Its key findings were
positive overall but it highlighted some opportunities to
increase effectiveness. Priorities identified by the review
included further developing the Company’s marketing plan,
providing continued support and challenge to the Fund
Manager and ensuring the successful induction of the new
director. In the year under review, the Board undertook
aninternal effectiveness review.
All Board members completed an online survey addressing
the performance of the Board and its committees, the
leadership and effectiveness of the Chair and the contribution,
time commitment and independence of each individual
director. The Chair held private discussions with each director,
enabling themto expand on the key findings from the survey
stage, and to raise any further issues they wished to discuss.
The Senior Independent Director conducted the review of the
Chair, gathering feedback from all directors and subsequently
meeting with the Chair to discuss the results.
As well as addressing core aspects of Board and committee
performance, the exercise had a particular focus on the
following areas:
●
progress in implementing the opportunities to increase
effectiveness identified in the previous external review;
●
the role of the Board in supporting the Company in a
difficult market, including the level of support and
challenge provided to the Fund Manager and his team;
●
the understanding of investor views and mechanisms for
differentiating and marketing the Company;
●
the Board’s engagement and communication with Janus
Henderson and other third-party service providers,
including the quality of support they provide;
●
the evolution of the flow of information through regular
Board papers and other ad-hoc updates.
The Board reviewed and discussed the results at the April
2024 NC meeting, which were positive overall. No areas of
material weakness or concern were identified and the NC
concluded that the Board remained fit for purpose and
worked in a harmonious, effective and collegiate manner.
Agood range of skills was represented on the Board and
aclear understanding of the risks facing the Company.
As a result of the review, the Board considered
opportunitiesto increase effectiveness. Priorities identified
by the review included further developing the Company’s
marketing plan, and providing continued support and
challenge to the Fund Manager.
Board composition and diversity policy
All Board appointments are subject to a formal, rigorous and
transparent procedure. The Committee considers the
Company’s leadership needs regularly and seeks to ensure that
any Board vacancies are filled by the most qualified candidates
based on objective criteria and merit and in the context of the
specific skills, knowledge and experience needed to lead the
Company effectively and achieve its investment objective.
Review of the individual performance and contribution of each
director remains an integral element of theCompany’s approach.
When considering succession planning and tenure, the NC
bears in mind the balance of skills, knowledge, experience,
gender, background and diversity on the Board, the
achievement of the Company’s investment objective and
compliance with the Company’s articles of association and
the AIC Code of Corporate Governance. The NC also
considers diversity of gender, social and ethnic backgrounds,
cognitive and personal strengths and experience as part of
the annual performance review. The directors believe that
diversity is important to ensure that the Company can draw
on a broad range of backgrounds, skills, knowledge,
experience and perspectives to achieve effective stewardship
of the Company.
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
46
Report of the Nomination Committee (continued)
The directors confirm that, in all the NC’s activities, there will
be no discrimination on the grounds of gender, race, ethnicity,
religion, sexual orientation, age, physical ability or socio-
economic background.
Board diversity at 31 May 2024
The Board meets the relevant FCA diversity targets, and
FTSE Women Leaders and Parker Review recommendations
on gender and ethnicity: 67% of individuals on the Board are
women and one Board member is from a non-white minority
ethnic background. The Board aims to ensure it comprises
individuals with diverse and complementary thought, skills
and experience to meet the Company’s objectives.
Inaccordance with UK Listing Rule 6 Annex 1R (1) and (2),
and using the AIC’s definitions, the Board provides the
following information about its diversity:
Gender identity and sex
Number of
directors
Percentage
of the Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
Men 2 33%
Not applicable*
Women 4 67%
Total 6 100% n/a
Ethnic background
Number of
directors
Percentage
of the Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
White British or other
White (including minority
white groups) 5 83%
Not applicable*
Other ethnic group,
including Arab 1 17%
Total 6 100% n/a
* This column is not applicable as the Company is externally managed and
does not have executive management functions, specifically the roles of
CEO and CFO. The Board considers that chairing the Board, its permanent
committees and the role of senior independent director are all senior positions
in an investment company context. Accordingly, the Chair of the Board, the
Nomination and Management Engagement Committees, and the Chair of the
Audit and Risk Committee are both women. The Senior Independent Director
is a man. These positions are currently held by individuals who consider
themselves ‘White British or Other White (including minority white groups)’
The information included in the above tables has been
obtained through questionnaires completed by the individual
directors. The categories for ethnic groups which are not
represented on the Board are not included in the ethnic
background table. No changes have occurred between
31May 2024 up to the date of approval of this Report which
could affect the Company’s ability to meet the targets in UK
Listing Rule 6.6.6R(9)(a).
Election and re-election of directors
The NC reviews and recommends to the Board the directors
seeking election and re-election. Recommendation is not
automatic and will follow a process of evaluation of each
director’s performance, consideration of the respective
director’s independence, external commitments, and the mix
of skills and experience of the current Board members. Any
director serving for longer than six years is subject to
particularly rigorous assessment of theircontribution.
The NC considered the Chair’s external appointments. Penny
Freer is a non-executive chair of one other listed company and
chair of a private venture capital fund. Following careful
consideration of her interests and appointments, and being
conscious of the reduced obligations and time commitment
required as an investment company director compared with
those of a director of operating companies, the NC concluded
that the Chair has sufficient time available. Moreover, Penny
has demonstrated clear commitment to all aspects of her role
asChair.
Following completion of its reviews, the NC concluded that
the Board, its committees, the individual directors and the
Chair have continued to operate effectively and each director
remains independent. Taking into account the FRC’s guidance
on board effectiveness, the NC agreed that each director has
sufficient time to dedicate to their respective roles. The NC
accordingly recommended to the Board that it shouldsupport
the re-election of Penny Freer, Kevin Carter, Alexandra
Mackesy, Mei Lim, Victoria Sant and Michael Warren at the
2024 AGM.
Penny Freer
Chair of the Nomination Committee
31 July 2024
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
47
Directors’ Remuneration Report
Report on implementation
This report is submitted in accordance with Schedule 8 of The
Large and Medium-sized Companies and Groups (Accounts
and Reports) Regulations 2008 as amended (the
“Regulations”). This report also meets the relevant
requirements of the Companies Act 2006 (the “Act”) and the
Listing Rules of the FCA and describes how the Board has
applied the principles relating to directors’ remuneration. The
Company’s auditor is required to report on certain information
contained within this report; where information set out below
has been audited it is indicated as such.
All directors are non-executive and the Company has no chief
executive officer or employees; as such some reporting
requirements contained in the Regulations are not applicable
and have not been reported on. The directors believe that all
relevant information is disclosed within this report in an
appropriate format. While the directors review annually the fees
paid to the directors of comparable investment trust
companies, the Board has not been provided with advice or
services by any person in respect of its consideration of the
directors’ remuneration.
Remuneration policy
Shareholders last approved the Remuneration Policy at the
2023 Annual General Meeting, being a triennial vote. The
Board may amend the level of remuneration paid to individual
directors within the parameters of the Remuneration Policy.
Indetermining the Remuneration Policy, the Board takes into
account all factors which it deems necessary, including
relevant legal and regulatory requirements and the provisions
and recommendations of the AIC Code of Corporate
Governance.
The objective of the Remuneration Policy is to attract, retain
and motivate non-executive directors of the quality required to
govern the Company successfully without paying more than is
necessary, having regard to views of shareholders and other
stakeholders. The Board obtains up-to-date information about
remuneration in other companies of comparable scale and
complexity to avoid and manage conflicts of interest in
determining remuneration levels. The directors review the
appropriateness and relevance of the Remuneration Policy at
least annually, with a focus on supporting the Company’s
long-term sustainable success. Individual directors do not
participate in discussions relating to their own remuneration.
Directors are remunerated in the form of fees, payable
quarterly in arrears. The Company’s articles of association limit
the fees payable to the directors in aggregate to £250,000 per
annum. Subject to the overall limit, the Company’s policy is
that the fees payable to the directors should reflect the time
spent by the Board on the Company’s affairs and the
responsibilities borne by the directors, and should be sufficient
to promote the long-term success of the Company.
The policy is to review fee rates annually, although this will not
necessarily result in any change to the rates. Directors are
authorised to claim reasonable expenses from the Company in
relation to the performance of their duties. No director has a
service contract with the Company. Directors’ appointments
may be terminated at any time in writing with no compensation
payable. There are no set notice periods and no fixed duration.
Nodirector is eligible to receive bonuses, pension benefits,
share options or other benefits and no long-term incentive
schemes are in place.
Recruitment principles
All directors, including those newly appointed, are paid at the
same rate, apart from the Chair of the Board and the Chair of
the Audit and Risk Committee who are paid a higher fee in
recognition of their additional responsibilities.
Views of shareholders
Any views expressed by shareholders on the fees being paid
to directors would be taken into consideration by the Board,
when reviewing levels of remuneration.
Annual statement from the Chair
Directors’ remuneration is determined by the Board as
awhole within the parameters of the Remuneration Policy
approved by shareholders, following review and
recommendations on an annual basis by the Nomination
Committee as to the appropriate level of fees. All directors are
members of the Nomination Committee. As the Company has
no employees and the Board comprises entirely non-
executive directors, the Board has not established a separate
remuneration committee.
During the year, the directors reviewed fee levels, covering a
review of fees in the investment trust industry as a whole and
in the AIC UK smaller companies sector, taking into account
the impact of inflation. The Board believes that both the
individual remuneration and the aggregate fee levels take
account of the needs of a very engaged non-executive Board
of experienced practitioners in the sector with increasing legal
and regulatory responsibilities. Following careful consideration,
the Board agreed an increase in directors’ fees as set out in
the table below:
Role
From
1 June 2024
£
At
31 May 2024
£
At
31 May 2023
£
Chair of the Board
44,500 43,000 41,500
Chair of the Audit
and Risk Committee
36,000 34,500 33,200
Director
30,500 29,500 28,500
There have been no other major decisions on directors’
remuneration or any other changes to the remuneration
paid to each individual director in the year underreview.
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
48
Directors’ interests in shares (audited)
The interests of the directors in the ordinary shares of the
Company at the beginning and end of the financial year are
shown in the table below.
Ordinary shares of 25p
31 May 2024 1 June 2023
Penny Freer 4,400 2,400
Kevin Carter 15,000 10,500
Alexandra Mackesy 2,200 2,200
Victoria Sant 1,670 1,670
Michael Warren 8,000 5,000
Yen Mei Lim 2,000 0
There have been no changes to the directors’ interests in the
period from 1 June 2024 to the date of this report. No director
has an interest in the preference stock of the Company.
Under the Company’s articles of association, no director is
required to hold shares in the Company by way of qualification.
However, to reflect the governance standards expected in
investee companies, the Board requests each director to
invest in the Company’s shares and to retain those shares for
as long as they remain on the Board. The overarching aim is
for each director’s holding to equate to 25% of their fees
earned by the end of their projected nine-year tenure.
Directors’ remuneration (audited)
The remuneration paid to the directors who served during the
years ended 31 May 2024 and 31 May 2023 was as follows:
Year
ended
31May
2024
Total fees
£
Year
ended
31May
2023
Total fees
£
Year
ended
31May
2024
Taxable
benefits
£
Year
ended
31May
2024
Total
fees and
benefits
£
Penny Freer
1
43,000 41,500 0 43,000
Alexandra
Mackesy
2
34,500 33,200 209
4
34,709
Kevin Carter 29,500 28,500 0 29,500
Victoria Sant 29,500 28,500 0 29,500
Michael Warren 29,500 28,500 0 29,500
David Lamb
3
n/a 9,558 n/a n/a
Yen Mei Lim 29,500 4,750
5
0 29,500
Total 195,500 174,508 209 195,709
Notes:
The table omits other columns set out in the relevant regulations because no
payments of other types were made, such as performance-related pay, vesting
performance-related pay and pension-related benefits
1 Chair of the Board and highest paid director in the year to 31 May 2024
2 Chair of the Audit and Risk Committee
3 Retired from the Board on 30 September 2022
4 Mrs Mackesy incurred additional accommodation expenses in order to attend
the 2023 AGM due to rail strikes. The expenses were reimbursed through
payroll and subject to personal taxation and national insurance
5 Appointed as director on 3 April 2023
No other expenses or taxable benefits were paid to any
director in the years to 31 May 2024 and 31 May 2023. No
remuneration or compensation was paid or payable by the
Company during the period to any of the current or former
directors or third parties specified by them other than as set
out in the table. Increases reflect changes of Board roles,
including appointments and retirements during the period
under review. The incremental increases to fee levels over
time are explained in the next table.
Spend on pay
As the Company has no employees, the directors do not
consider it relevant to present a table comparing remuneration
paid to employees with distributions to shareholders. The total
fees paid to directors are shown in the ‘Directors’ remuneration’
table. Distributions to shareholders are set out in note 9 on
page 72; in the year to 31 May 2024, total dividends paid
amounted to £19.8 million.
Annual percentage change
The table below sets out the annual percentage change in
directors’ fees over the previous four years in respect of those
directors who served for a minimum of two full years since the
financial year beginning 1 June 2020.
Year to
31May
2024
%
Year to
31May
2023
%
Year to
31May
2022
%
Year to
31May
2021
%
Penny Freer
1
3.6 15.7 49.4 0
Alexandra Mackesy
2
3.9 3.8 14.3 5.1
Kevin Carter
3
3.5 3.6 n/a n/a
Michael Warren
3
3.5 3.6 n/a n/a
Victoria Sant
4
3.5 3.6 14.6 0
Yen Mei Lim
5
n/a n/a n/a n/a
David Lamb
6
n/a n/a 14.6 0
1 The increases reflect both changes in directors’ fees and Penny’s succession
as Chair in the year to 31 May 2022
2 The increases reflect Alexandra’s appointment as Chair of the Audit and Risk
Committee during the year ended 31 May 2020 and changes in directors’ fees
3 Appointed in the year to 31 May 2022, so first full year is to 31 May 2023
4 Reflecting annual increases in directors’ fees
5 Appointed during the year to 31 May 2023
6 David Lamb retired from the Board on 30 September 2022
Directors’ Remuneration Report (continued)
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
49
Performance
The graph below compares the mid-market price of the Company’s ordinary shares over the ten-year period ended 31May 2024
with the benchmark return over the same period.
20192018201720162015 20202014
Company’s share price total return, assuming the investment of £100 on 31 May 2014 and the reinvestment of all dividends (excluding dealing expenses)
(Source: Morningstar Direct)
Benchmark total return, assuming the notional investment of £100 on 31 May 2014 and the reinvestment of all income (excluding dealing expenses)
(Source: LSEG Datastream). The Company's benchmark is the Deutsche Numis Smaller Companies Index (excluding investment companies)
50
100
150
200
250
300
£
2021 202420232022
Statement of voting at AGM
At the Company’s AGM on 5 October 2023, shareholders approved the remuneration report for the year ended 31 May 2023
and the directors’ remuneration policy. The following poll votes were received on these two resolutions:
Resolution
For (including
discretionary) % votes Against % votes
1
Withheld
Remuneration policy 23,215,998 99.5 106,236 0.5 79,823
Remuneration report 23,223,290 99.6 102,825 0.4 77,733
1 Excluding votes withheld
On behalf of the Board
Penny Freer
Chair of the Board
31 July 2024
Directors’ Remuneration Report (continued)
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
50
The directors present the audited financial statements of The
Henderson Smaller Companies Investment Trust plc (the
“Company”) and their report for the year ended 31 May 2024.
The Company (registered and domiciled in England & Wales
with registration number 00025526) was active throughout the
year under review and was not dormant.
The Investment Portfolio on pages 14 to 16, Corporate
Governance Report on pages 32 to 41, Audit and Risk
Committee Report, Management Engagement Committee
Report and Nomination Committee Report on pages 42 to 47,
Statement of Directors’ Responsibilities on page 53, the
explanations of AGM resolutions on pages 93 to 94 and
theglossary, alternative performance measures and general
shareholder and corporate information on pages 83 to 89,
allform part of the Report ofthe Directors.
Directors
The directors and their appointments are listed on pages 33
and 34. Information on directors’ insurance and indemnification
is given on page 39.
Share capital
The Company’s share capital comprises:
Ordinary shares of 25p nominal value each (“shares”)
Thevoting rights of the shares on a poll are one vote for each
share held. At 31 May 2024, the number of ordinary shares in
issue, and thus the number of voting rights, was 74,505,131
(2023: 74,701,796). During the year, the Company repurchased
and cancelled 196,665 ordinary shares at a total cost of
£1,598,000 (including expenses and excluding stamp duty). The
total number of shares bought back constituted 0.26% of issued
share capital. At the year end, no shares were held in treasury.
Since 31 May 2024 and at the date of this report, the Company
bought back and cancelled 120,000 ordinary shares at a total
cost of £1,051,000 (including expenses and excluding stamp
duty). In the period from 1 June 2023 to 29 July 2024, being
the latest practicable date prior to publication of this Annual
Report, the Company did not issue any shares. As at 29 July
2024, the total numberof ordinary shares and voting rights in
the Company were 74,385,131.
There are no restrictions on the transfer of the Company’s
shares or voting rights, no shares which carry specific rights
with regard to the control of the Company and no agreement
to which the Company is party that would affect its control
following a takeover bid. To the extent that they exist, the
revenue profits of the Company (including accumulated
revenue and capital reserves) are available for distribution by
way of dividends to the holders of the shares. Upon a
winding-up, after meeting the liabilities of the Company, the
surplus assets would be distributed to the shareholders pro
rata to their shareholdings.
Preference stock units of £1 each (“preference stock units”)
Preference stockholders have no rights to attend and vote at
general meetings (except where the dividend is six months in
arrears or on a resolution to wind up the Company). At 31 May
2024 and 31 May 2023 there were 4,257 preference stock units
in issue. This represents 0.02% of the Company’s share capital.
Further details are in Note 14 of the financial statements.
The directors seek annual authority from the shareholders
toallotnew shares, to disapply pre-emption rights of existing
shareholders and to buy back shares for cancellation or to beheld
in treasury. The Company’s articles of association permit the
Company to purchase its own shares and to fund such purchases
from its accumulated realised capital reserves. No preference
stock units were issued orbought back during the year.
At the annual general meeting (“AGM”) held on 5 October
2023, the directors were granted authority to buy back
11,197,799 shares (being 14.99% of issued ordinary share
capital). As at 29 July 2024, there remains 10,881,134 shares
available within the buyback authority granted in 2023. This
authority will expire at the conclusion of the 2024 AGM. The
directors intend to renew this authority subject to shareholder
approval. Shares are not bought back unless the result is an
increase in net asset value per share.
Holdings in the Company’s shares
Declarations of interests in the voting rights of the Company
as at 31 May 2024 in accordance with the Disclosure
Guidance and Transparency Rules were as follows:
Shareholder % voting rights
Evelyn Partners 8.3
Allspring Global Investments 3.7
Lazard Asset Management LLC 2.8
West Yorkshire Pension Fund 4.1
Royal London Asset Management 2.4
Additionally, holdings of the Company’s shares on execution-
only stockbroking platforms at 31 May 2024 were as follows:
Platform nominee % voting rights
Interactive Investor 11.7
Hargreaves Lansdown 10.7
Donations
The Board supports a number of UK-focused charities, all
ofwhich are personally selected on an annual basis by the
directors. These charities span a variety of different causes
including food poverty, literacy and education for children
excluded from school. In respect of the year under review,
theCompany will make charitable donations totalling £6,000
(2023: £6,000).
Disclosure of information to the auditor
Each director who is a member of the Board at the date of
approval of this Report confirms that, to the best of his or her
knowledge and belief, there is no information relevant to the
preparation of the Annual Report of which the Company’s
auditor is unaware, and he or she has taken all the steps a
director might reasonably be expected to have taken to be
Report of the Directors
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
51
Report of the Directors (continued)
aware of relevant audit information and to establish that the
Company’s auditor is aware of that information.
Related-party transactions
The Company’s transactions with related parties in the year were
with the directors and the Manager. There were no material
transactions between the Company and its directors, and the
only amounts paid to them were in respect of remuneration and
expenses. Remuneration is paid quarterly in arrears and
amounts for April and May 2024 were therefore accrued as at the
year end. There were no other outstanding amounts payable at
the year end. Directors’ shareholdings are listed on page 49.
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 on page 80.
Independent auditor
The auditor Forvis Mazars LLP has indicated willingness to
continue in office. Resolutions 10 and 11 are being submitted
to the 2024 AGM to propose Forvis Mazars’ reappointment
and authorise the Audit and Risk Committee to determine
their remuneration for the coming year.
Financial Instruments
The Company’s policy on the use of financial instruments
isset out in the Investment Policy on page 18.
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 on page 18.
The Chair’s Statement and the Fund Manager’s Report from
pages 5-13 give commentary on the outlook for the Company.
Other information on recommended dividends and financial
risks is detailed on pages 3 and 6 in the Strategic Report and
in notes 9and 15 to the financial statements.
Other information
Listing Rule 9.8.4 requires the Company to include certain
information in a single identifiable section of the Annual Report
or a cross-reference table indicating where the information is
set out. The directors confirm that there are no disclosures
tobe made in this regard. The Company’s environmental
statements are set out in the Strategic Report on pages 28-31.
ThisReport of theDirectors has beenapproved by theBoard.
Post-balance sheet event
Since the year end, the Board has entered into a revised
management agreement with Janus Henderson Fund
Management UK Limited as Manager effective from 18 July
2024. The updates reflect current regulation and industry
standards since the previous agreement was implemented
inJuly 2014. There were no changes to terms affecting
therelationship with the Manager.
Annual general meeting (“AGM”)
We are pleased to invite you to attend our AGM on
Wednesday, 2 October 2024 at 11.30 am at 201 Bishopsgate,
London EC2M 3AE. If you prefer to attend virtually, we also
welcome you to join by conferencing software Zoom.
Attending either in person or by Zoom will allow you to watch
a presentation from your Fund Manager Neil Hermon, and
Deputy Fund Manager Indriatti van Hien, andask questions.
As is our normal practice, there will be live voting for those
physically present at the AGM. We cannot offer live voting
by Zoom, and so we request all shareholders, and
particularly those who cannot attend physically, to submit
their votes by proxy, ahead of the deadline of 11.30 am on
Monday, 30 September 2024, to ensure that your vote
counts at the AGM. 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. For further
instructions on proxy voting please refer to pages 94-96.
To join the AGM by conferencing software Zoom, please visit
www.janushenderson.com/hsl-agm to register.
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 go to
www.proxymity.io. Your proxy must be lodged by
11.30am on Monday, 30 September 2024 to be valid.
The Notice of AGM can be found on pages 90-96, together
with an explanation of each resolution. If shareholders would
like to submit any questions in advance of the AGM, you are
welcome to send these to the corporate secretary at
itsecretariat@janushenderson.com.
Voting recommendation
Your Board considers that the resolutions to be proposed
atthe AGM are in the best interests of shareholders as
awhole. The Board therefore recommends that shareholders
vote in favour of each resolution, as the directors intend to
doin respect of their own beneficial holdings.
By order of the Board
Janus Henderson Secretarial Services UK Limited
Corporate Secretary
31 July 2024
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
52
Directors’ responsibilities
The directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable
law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. The directors have
prepared the Company’s financial statements in accordance
with International Accounting Standards in conformity with the
requirements of the Companies Act 2006. Under company
law, the directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of
the state of affairs of the Company and ofthe profit or loss
ofthe Company for that year. In preparing these financial
statements, the directors are required to:
●
select suitable accounting policies and then apply them
consistently;
●
make judgements and accounting estimates that are
reasonable and prudent;
●
state whether applicable International Accounting
Standards in conformity with the requirements of the
Companies Act 2006 have been followed, subject to any
material departures disclosed and explained in the
financial statements;
●
prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Company will continue in business; and
●
prepare a directors’ report, a strategic report and a
directors’ remuneration report which comply with the
requirements of the Companies Act 2006.
The directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
theCompany’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
and enable them to ensure that the financial statements and
the Directors’ Remuneration Report comply with the
Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud
and other irregularities.
The directors consider that the Annual Report, taken as a
whole, is fair, balanced and understandable and provides
theinformation necessary for shareholders to assess the
Company’s position and performance, business model
andstrategy.
Statement under DTR 4.1.12
Each director, who is listed on pages 33 and 34, 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
adescription of the principal risks and uncertainties that
itfaces.
On behalf of the Board
Penny Freer
Chair of the Board
31 July 2024
Statement of Directors’ Responsibilities
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
53
Financial
Statements
Photo: Chemring
54
Opinion
We have audited the financial statements of The Henderson Smaller Companies Investment Trust plc (the ‘Company’) for the
year ended 31 May 2024 which comprise the Statement of Comprehensive Income, Statement of Changes in Equity, Balance
Sheet, Statement of Cash Flows and notes to the financial statements on pages 62 to 81, including material accounting
policyinformation.
The financial reporting framework that has been applied in their preparation is applicable law and UK-adopted international
accounting standards.
In our opinion, the financial statements:
●
give a true and fair view of the state of the Company’s affairs as at 31 May 2024 and of the Company’s profit for the year
thenended;
●
have been properly prepared in accordance with UK-adopted international accounting standards; and
●
have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Ourresponsibilities under those standards are further described in the “Auditor’s responsibilities for the audit of the financial
statements” section of our report. We are independent of the Company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities and
public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Our audit procedures to evaluate the directors’ assessment of the Company’s ability to continue to adopt the going concern
basis of accounting included but were not limited to:
●
undertaking an initial assessment at the planning stage of the audit to identify events or conditions that may cast significant
doubt on the Company’s ability to continue as a going concern;
●
making enquiries of the directors to understand the period of assessment that they considered, assessing and challenging
the appropriateness of the directors’ key assumptions in their income and expense projections and implication of those when
assessing severe but plausible scenarios;
●
assessing the Company’s ability to continue to operate within its financial covenants and the liquidity of the portfolio through
reviewing Management’s assessment of how quickly the portfolio could be liquidated if required;
●
assessing the Company’s performance to date; and
●
evaluating the appropriateness of the directors’ disclosures in the financial statements on going concern and viability
statement including the consideration of when the next continuation vote is.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Company’s ability to continue as a going concern for a period of
atleast twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections
of this report.
In relation to Company’s reporting on how it has applied the Association of Investment Companies Code of Corporate
Governance (“AIC Code”), we have nothing material to add or draw attention to in relation to the directors’ statement in the
financial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting.
Independent Auditor’s Report to the Members
ofThe Henderson Smaller Companies
Investment Trust plc
55
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the
audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
We summarise below the key audit matters in forming our opinion above, together with an overview of the principal audit
procedures performed to address each matter and our key observations arising from those procedures.
These matters, together with our findings, were communicated to those charged with governance through our Audit
CompletionReport.
Key Audit Matter How our scope addressed this matter
Accuracy and completeness of revenue recognition
through incorrect classification of special dividends
(as described on page 43 in the Report of the Audit and
Risk Committee and as per the accounting policy set
out on page 67).
According to the Statement of Recommended Practice
issued by the Association of Investment Companies (‘AIC
SORP’), recognition of revenue relies upon dividend
notifications to be received from the investment portfolio.
Depending on the reason behind the payment, dividends
recognised are either revenue or capital in nature;
therefore the directors are required to exercise judgement
in determining whether the special dividends should be
classified as revenue or capital. In the year ended 31 May
2024, the Company recognised income from
investments in the Statement of Comprehensive Income
of £24.66m (2023:£24.30m), of which £0.60m (2023:
£1.18m) relates to special dividends taken to the Revenue
return. The Company also received special dividends of
£9.94m (2023: £4.76m) which were taken to the Capital
return of the Statement of Comprehensive Income.
In order to maintain investment trust status, the
Company is required to distribute at least 85% of its
income for the accounting period. The revenue column
of the Statement of Comprehensive Income is the main
driver of this minimum dividend calculation.
There is a risk that an incorrect classification could result
in understated income which could put the Company’s
investment trust status at risk. There is also a risk that
an incorrect classification could result in overstated
income to increase the dividends paid to shareholders.
We therefore assess the risk of fraud in revenue
recognition as being principally in relation to accuracy
and completeness of revenue recognition through
incorrect classification of the special dividends as
revenue or capital items in the Statement of
Comprehensive Income.
Our audit procedures included, but were not limited to:
●
understanding Management’s process on revenue recognition
and allocation of special dividends through discussions with
Management, examination of control reports from third-party
service organisation and performing a walkthrough to evaluate
the design and effectiveness of controls;
●
for all special dividends recognised in the year, agreeing each
dividend to an independent source, checking the point of
recognition, testing the allocation of dividend income between
revenue and capital (by assessing the reason for the dividend
distributions and the consistency of the classification with the
underlying nature of the payments) and tracing to bank
statements;
●
for all investments, checking all dividend announcements
declared by those securities in the year to an independent
source and agreeing the recognition of such dividends to the
income report and capital report;
●
testing special dividends announced one month either side ofthe
year end covering the period after which announced dividends
should be received to ensure dividends should be recorded in
the correct period; and
●
to address the risk of management override, testing all journal
entries and other adjustments made in the preparation of the
financial statements relating to special dividends.
Our observations
We have no matters to communicate with respect to the procedures
in response to the accuracy and completeness of revenue
recognition through incorrect classification of special dividends.
Independent Auditor’s Report to the Members
ofThe Henderson Smaller Companies
Investment Trust plc
(continued)
56
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
Valuation and existence of the investment portfolio
(as described on page 43 in the Report of the Audit and
Risk Committee and as per the accounting policy set
out on page 67).
Investments held as of 31 May 2024 were valued at
£833.37m as at 31 May 2024 (2023: £760.16m).
Theinvestment portfolio comprises of solely level
oneinvestments.
Investments make up 111.5% of the net asset value of
the Company as of 31 May 2024 (112.6% of the net
asset value as of 31 May 2023) and are considered to
be the key driver of the performance of the Company.
The investments are made up of quoted investments
that are classified upon initial recognition as held at fair
value through profit or loss and are measured initially
and subsequently at fair value which is based on their
quoted bid prices at the close of business on the
year-end date. There is a risk that investments recorded
might not exist or might not be owned by the Company.
Although the investments are valued at quoted bid
prices, there is a risk that errors in valuation can have
asignificant impact on the numbers presented.
We therefore identified valuation and existence of
investments as a key audit matter as it had the greatest
effect on our overall audit strategy and allocation
ofresources.
Our audit procedures included, but were not limited to:
●
understanding Management’s process to record and
valueinvestments through discussions with Management
andexamination of control reports from the third-party
serviceorganisation;
●
for all investments in the portfolio, agreeing investment holdings
to an independent custodian confirmation and an independent
depositary confirmation in order to obtain comfort over existence;
●
for all investments in the portfolio, comparing to market prices
independently obtained from a source vendor and recalculating
the investment valuations as at the year-end; and
●
for all investments in the portfolio, assessing the frequency of
trading to identify any prices that have not changed and testing
whether the listed price is a valid fair value to ensure
appropriateness of fair value classification.
Our observations
We have no matters to communicate with regards to the valuation
and existence of the investment portfolio held at 31 May 2024.
Independent Auditor’s Report to the Members
ofThe Henderson Smaller Companies
Investment Trust plc
(continued)
57
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
Our application of materiality and an overview of the scope of our audit
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent
of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and on the financial statements as a whole. Based on our professional judgement, we
determined materiality for the financial statements as a whole as follows:
Materiality
Overall materiality £7.47m (2023: £6.75m).
How we determined it 1% of net assets (2023: 1% of net assets).
Rationale for benchmark applied Net assets have been identified as the principal benchmark within
the financial statements as they are considered to be the main focus
of the shareholders.
Whilst valuation processes for these investments are not considered
to be complex, there is a risk that errors in valuation could cause a
material misstatement. 1% has been chosen as it is a generally
accepted auditing practice for investment trust audits and the
Company is a public interest entity.
Performance materiality Performance materiality is set to reduce to an appropriately low level
the probability that the aggregate of uncorrected and undetected
misstatements in the financial statements exceeds materiality for
thefinancial statements as a whole.
On the basis of our risk assessments and together with our
assessment of the overall control environment, we determined
70%(2023: 70%) of overall materiality, amounting to £5.23m
(2023:£4.73m).
We also determined a specific materiality for the revenue column of
the Statement of Comprehensive Income at £1.11m (2023: £1.10m),
being 5% (2023: £5%) of revenue profit before tax.
Reporting threshold We agreed with the Audit and Risk Committee that we would report
to them misstatements identified during our audit above £0.22m
(2023: £0.20m) as well as misstatements below that amount that, in
our view, warranted reporting for qualitative reasons.
As part of designing our audit, we assessed the risk of material misstatement in the financial statements, whether due to fraud
orerror, and then designed and performed audit procedures responsive to those risks. In particular, we looked at where the
directors made subjective judgements, such as assumptions on significant accounting estimates.
We tailored the scope of our audit to ensure that we performed sufficient work to be able to give an opinion on the financial
statements as a whole. We used the outputs of our risk assessment, our understanding of the Company, their environment,
controls, and critical business processes, to consider qualitative factors to ensure that we obtained sufficient coverage across
allfinancial statement line items.
Other information
The other information comprises the information included in the annual report other than the financial statements and our
auditor’s report thereon. The directors are responsible for the other information. Our opinion on the financial statements does
notcover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form
ofassurance conclusion thereon.
Independent Auditor’s Report to the Members
ofThe Henderson Smaller Companies
Investment Trust plc
(continued)
58
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the course of audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether
this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the Directors’ Remuneration report to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
●
the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements
are prepared is consistent with the financial statements and those reports have been prepared in accordance with applicable
legal requirements;
●
the information about internal control and risk management systems in relation to financial reporting processes and about
share capital structures, given in compliance with rules 7.2.5 and 7.2.6 in the Disclosure Guidance and Transparency Rules
sourcebook made by the Financial Conduct Authority (the FCA Rules), is consistent with the financial statements and has
been prepared in accordance with applicable legal requirements; and
●
information about the Company’s corporate governance code and practices and about its administrative, management and
supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the FCA Rules.
Matters on which we are required to report by exception
In light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have
not identified material misstatements in the:
●
strategic report or the directors’ report; or
●
information about internal control and risk management systems in relation to financial reporting processes and about share
capital structures, given in compliance with rules 7.2.5 and 7.2.6 of the FCA Rules.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report
to you if, in our opinion:
●
adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received
from branches not visited by us; or
●
the Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns; or
●
certain disclosures of directors’ remuneration specified by law are not made; or
●
we have not received all the information and explanations we require for our audit; or
●
a corporate governance statement has not been prepared by the Company.
Corporate governance statement
The Listing Rules require us to review the directors’ statement in relation to going concern, longer-term viability and that part of
the Corporate Governance Statement relating to the Company’s compliance with the provisions of the AIC Code Statement
specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit:
●
Directors’ statement with regards the appropriateness of adopting the going concern basis of accounting and any material
uncertainties identified, set out on page 53;
●
Directors’ explanation as to its assessment of the entity’s prospects, the period this assessment covers and why the period is
appropriate, set out on page 26-27;
●
Directors’ statement on fair, balanced and understandable, set out on page 53;
Independent Auditor’s Report to the Members
ofThe Henderson Smaller Companies
Investment Trust plc
(continued)
59
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
●
Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks, set out on page 26;
●
The section of the annual report that describes the review of effectiveness of risk management and internal control systems,
set out on page 39-40; and;
●
The section describing the work of the Audit and Risk Committee, set out on page 42-44.
Responsibilities of Directors
As explained more fully in the directors’ responsibilities statement set out on page 53, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as
the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
thedirectors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
isa high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
inthe aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with
ourresponsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud.
Based on our understanding of the Company and its industry, we considered that non-compliance with the following laws
andregulations might have a material effect on the financial statements: UK-adopted international accounting standards, the
Companies Act 2006, the Listing Rules, UK Corporate Governance Code, the Association of Investment Companies’ Code and
Statement of Recommended Practice, Section 1158 of the Corporation Tax Act 2010 and The Companies (Miscellaneous
Reporting) Regulations 2018.
To help us identify instances of non-compliance with these laws and regulations, and in identifying and assessing the risks of
material misstatement in respect to non-compliance, our procedures included, but were not limited to:
●
Gaining an understanding of the legal and regulatory framework applicable to the Company, the industry in which it operates,
and the structure of the Company, and considering the risk of acts by the Company which were contrary to the applicable
laws and regulations, including fraud;
●
Inquiring of the directors, management and, where appropriate, those charged with governance, as to whether the Company
is in compliance with laws and regulations, and discussing their policies and procedures regarding compliance with laws
andregulations;
●
Reviewing minutes of directors’ meetings in the year; and
●
Discussing amongst the engagement team the laws and regulations listed above, and remaining alert to any indications of
non-compliance.
We also considered those laws and regulations that have a direct effect on the preparation of the financial statements, such as
the Statement of Recommended Practice issued by the Association of Investment Companies, the Companies Act 2006 and UK
tax legislation.
In addition, we evaluated the directors’ and Management’s incentives and opportunities for fraudulent manipulation of the
financial statements, including the risk of management override of controls, and determined that the principal risks related to
posting manual journal entries to manipulate financial performance, management bias through judgements and assumptions in
significant accounting estimates, particularly in relation to special dividends, revenue recognition (which we pinpointed to the
accuracy and completeness assertions), and significant one-off or unusual transactions.
Independent Auditor’s Report to the Members
ofThe Henderson Smaller Companies
Investment Trust plc
(continued)
60
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
Our procedures in relation to fraud included but were not limited to:
●
Making enquiries of the directors and management on whether they had knowledge of any actual, suspected or alleged fraud;
●
Gaining an understanding of the internal controls established to mitigate risks related to fraud;
●
Discussing amongst the engagement team the risks of fraud;
●
Addressing the risks of fraud through management override of controls by performing journal entry testing; and
●
Reviewing the accounting estimates in relation to special dividends for evidence of management bias and performing
procedures to respond to the fraud risk in revenue recognition.
The primary responsibility for the prevention and detection of irregularities, including fraud, rests with both those charged with
governance and management. As with any audit, there remained a risk of non-detection of irregularities, as these may involve
collusion, forgery, intentional omissions, misrepresentations or the override of internal controls.
The risks of material misstatement that had the greatest effect on our audit are discussed in the “Key audit matters” section of
this report.
A further description of our responsibilities is available on the Financial Reporting Council’s website at www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditor’s report.
Other matters which we are required to address
Following the recommendation of the Audit & Risk Committee, we were appointed on 1 September 2021 to audit the financial
statements for the year ending 31 May 2022. The period of total uninterrupted engagement is three years, covering the years
ending 31 May 2022 to 31 May 2024.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Company and we remain independent
of the Company in conducting our audit.
Our audit opinion is consistent with our additional report to the audit committee.
Use of the audit report
This report is made solely to the Company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body for our audit work, for this report, or for
the opinions we have formed.
As required by the Financial Conduct Authority Disclosure Guidance and Transparency Rules, these financial statements will
form part of the electronic reporting format prepared annual financial report filed on the National Storage Mechanism of the
Financial Conduct Authority. This auditor’s report provides no assurance over whether the annual financial report has been
prepared using the correct electronic reporting format.
Nargis Shaheen Yunis (Senior Statutory Auditor)
for and on behalf of Forvis Mazars LLP
Chartered Accountants and Statutory Auditor
30 Old Bailey
London
EC4M 7AU
31 July 2024
Independent Auditor’s Report to the Members
ofThe Henderson Smaller Companies
Investment Trust plc
(continued)
61
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
Year ended 31 May 2024 Year ended 31 May 2023
Notes
Revenue
return
£’000
Capital
return
£’000
Total
£’000
Revenue
return
£’000
Capital
return
£’000
Total
£’000
2 Investment income 24,656 – 24,656 24,295 – 24,295
3 Other income 190 – 190 95 – 95
10 Gains/(losses) on investments held
at fair value through profit or loss – 75,521 75,521 – (127,252) (127,252)
Total income/(loss) 24,846 75,521 100,367 24,390 (127,252) (102,862)
Expenses
4 Management fees (679) (1,584) (2,263) (710) (1,657) (2,367)
5 Other expenses (647) – (647) (731) – (731)
Profit/(loss) before finance costs
and taxation 23,520 73,937 97,457 22,949 (128,909) (105,960)
6 Finance costs (1,235) (2,882) (4,117) (997) (2,325) (3,322)
Profit/(loss) before taxation 22,285 71,055 93,340 21,952 (131,234) (109,282)
7 Ta xation 5 – 5 (5) – (5)
Profit/(loss) for the year and
total comprehensive income 22,290 71,055 93,345 21,947 (131,234) (109,287)
8 Earnings/(loss) per ordinary share
– basic and diluted 29.85p 95.14p 124.99p 29.38p (175.68p) (146.30p)
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 Ordinary shareholders for the year disclosed above represents the Company’s total Comprehensive
Income. The Company does not have any other Comprehensive Income.
Statement of Comprehensive Income
The notes on pages 66 to 81 form part of these financial statements
62
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
Retained earnings
Notes Year ended 31 May 2024
Share
capital
£’000
Capital
redemption
reserve
£’000
Capital
reserves
£’000
Revenue
reserve
£’000
Total
equity
£’000
Total equity at 1 June 2023 18,676 26,745 612,810 17,156 675,387
Total comprehensive income:
Profit for the year – – 71,055 22,290 93,345
Transactions with owners, recorded directly to equity:
Buyback of shares for cancellation (49) 49 (1,598) – (1,598)
9 Ordinary dividends paid – – – (19,794) (19,794)
Total equity at 31 May 2024 18,627 26,794 682,267 19,652 747,340
Retained earnings
Notes Year ended 31 May 2023
Share
capital
£’000
Capital
redemption
reserve
£’000
Capital
reserves
£’000
Revenue
reserve
£’000
Total
equity
£’000
Total equity at 1 June 2022 18,676 26,745 744,044 13,134 802,599
Total comprehensive income:
(Loss)/profit for the year – – (131,234) 21,947 (109,287)
Transactions with owners, recorded directly to equity:
9 Ordinary dividends paid – – – (17,925) (17,925)
Total equity at 31 May 2023 18,676 26,745 612,810 17,156 675,387
Statement of Changes in Equity
The notes on pages 66 to 81 form part of these financial statements
63
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
Notes
At 31 May
2024
£’000
At 31 May
2023
£’000
Non current assets
10 Investments held at fair value through profit or loss 833,368 760,156
Current assets
12 Receivables 11,763 3,187
Cash and cash equivalents 9,249 13,338
21,012 16,525
Total assets 854,380 776,681
Current liabilities
13 Payables (1,514) (851)
15 i) Bank loans (55,744) (50,672)
(57,258) (51,523)
Total assets less current liabilities 797,122 725,158
Non-current liabilities
14 Financial liabilities (49,782) (49,771)
Net assets 747,340 675,387
Equity attributable to equity shareholders
16 Share capital 18,627 18,676
17 Capital redemption reserve 26,794 26,745
Retained earnings:
17 Capital reserve 682,267 612,810
18 Revenue reserve 19,652 17,156
Total equity 747,340 675,387
19 Net asset value per ordinary share 1,003.1p 904.1p
These financial statements on pages 62 to 81 were approved and authorised for issue by the Board of Directors on 31 July 2024
and were signed on its behalf by:
Penny Freer
Chair of the Board
Balance Sheet
The notes on pages 66 to 81 form part of these financial statements
64
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
For the year ended
Notes
31 May
2024
£’000
31 May
2023
£’000
Operating activities
Profit/(loss) before taxation 93,340 (109,282)
Add back interest payable 4,117 3,322
10 (Profit)/loss on investments held at fair value through profit or loss (75,521) 127,252
10 Purchases of investments (89,274) (109,395)
10 Sales of investments 91,583 114,384
Decrease/(increase) in receivables 36 (38)
12 Decrease in amounts due from brokers 506 1,394
Increase in accrued income (9,113) (316)
Decrease in payables (54) (66)
13 Increase/(decrease) in amounts due to brokers 579 (2,081)
Net cash inflow from operating activities before interest and taxation
1
16,199 25,174
Interest paid (3,968) (3,303)
Net cash inflow from operating activities 12,231 21,871
Financing activities
9 Buyback of ordinary shares (1,598) –
Equity dividends paid (19,794) (17,928)
Drawdown of bank loans 5,072 404
Net cash outflow from financing activities (16,320) (17,524)
(Decrease)/increase in cash and cash equivalents (4,089) 4,347
Cash and cash equivalents at the start of the year 13,338 8,991
Cash and cash equivalents at the end of the year 9,249 13,338
1 In accordance with IAS 7.31 cash inflow from dividends was £24,346,000 (2023: £24,000,000) cash inflow from interest was £198,000 (2023 £74,000)
Statement of Cash Flows
The notes on pages 66 to 81 form part of these financial statements
65
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
1 Accounting policies
a) 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 31May 2024 have been prepared
in accordance with UK-adopted International Accounting Standards in conformity with the requirements of the Act.
Thesecomprise standards and interpretations approved by the International Accounting Standards Board (“IASB”),
together with interpretations of the International Accounting Standards and Standing Interpretations Committee approved
by the IFRS Interpretations Committee (“IFRS IC”) that remain in effect, to the extent that IFRS have been adopted by the
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.
Accounting standards
i) The following new and amended standards are relevant and applicable to the Company and have been adopted.
Therehas been no impact on the financial statements as a result of these new and amended standards.
Amendments to International Accounting Standards in conformity with the requirements of the Act issued and
effectivefor the current year end:
Standards
Effective for annual periods
beginning on or after
IAS 1 Amendments Disclosure of Accounting Policies 1 January 2023
IAS 8 Amendments Definition of Accounting Estimates 1 January 2023
IAS 12 Amendments Deferred Tax and OECD Pilar 2 Taxes 1 January 2023
IAS 12 Amendments Deferred Tax related to Assets and Liabilities arising
from a Single Transaction
1 January 2023
ii) Relevant new standards and amendments issued but not effective for the current financial year and not early adopted
by the Company:
Standards
Effective for annual periods
beginning on or after
IAS 1 Amendments Classification of Liabilities as current or non-current 1 January 2024
IAS 1 Amendments Non-current Liabilities with Covenants 1 January 2024
IFRS 18 Presentation and Disclosure in Financial Statements 1 January 2027
It is expected that these new standards and amendments will have no impact on the financial statements. In respect of
IFRS 18 the impact of this has yet to be determined.
b) 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 following Russia’s invasion of Ukraine, heightened tensions between the US and China, conflict
in the Middle East, the current cost-of-living crisis, a new government in the UK, the nature of the Company’s covenants,
the strength of the Company’s distributable reserves and 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
on pages 26 to 27, 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.
Anordinary resolution to this effect was put to the Annual General Meeting (“AGM”) held on 30 September 2022 and
passed by a substantial majority of the shareholders. The next continuation vote will take place at the AGM in 2025.
Notes to the Financial Statements
66
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
1 Accounting policies (continued)
c) Investments held at fair value through profit or loss
All investments are classified upon initial recognition as held at fair value through profit or loss, and are measured initially
and subsequently at fair value. Investment transactions are accounted for on a trade date basis. Assets are de-recognised
at the trade date of the disposal. Proceeds are measured at fair value, which is regarded as the proceeds of sale less any
transaction costs. The fair value of the financial instruments is based on their quoted bid price or the last traded price
depending on the convention of the exchange on which the investment is quoted at the balance sheet date, without
deduction of the estimated future selling costs. There were no unquoted investments during the current year or prior year.
Changes in the fair value of investments held at fair value through profit or loss and gains and losses on disposal are
recognised in the Statement of Comprehensive Income as “Losses/gains on investments held at fair value though profit or
loss”. Also included within this caption are transaction costs in relation to the purchase or sale of investments, including the
difference between the purchase price of an investment and its bid price at the date of purchase.
d) Presentation of the Statement of Comprehensive Income
In order to better reflect the activities of an investment trust company, and in accordance with guidance issued by the AIC,
supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and
capital nature has been presented alongside the Statement of Comprehensive Income. In accordance with the Company’s
status as a UK investment company under section 833 of the Companies Act 2006, net capital returns are no longer
prohibited to be distributed by way of dividend where authority is given within the Company’s articles of association.
Additionally, the net revenue is the measure the directors believe appropriate in assessing the Company’s compliance with
certain requirements set out in section 1158 of the Corporation Tax Act 2010.
e) Income
Dividends receivable on equity shares are recognised as revenue for the year on an ex-dividend basis. Special dividends
represent dividends paid by the investee companies that are additional to the normal or expected dividend cycle for that
company. Special dividends are treated as revenue return or capital return, depending on the facts and circumstances of
each individual case. Dividends which have clearly arisen out of the investee company’s reconstruction or reorganisation
are usually considered to be capital in nature and allocated to capital return. Other special dividends will usually be
considered as revenue in nature unless evidence suggests otherwise. Interest is recognised on an accruals basis.
Income distributions from UK Real Estate Investment Trusts (“UK REITs”) will be split into two parts: a Property Income
Distribution (“PID”) made up of rental revenue; and a non-PID element, consisting of non-rental revenue. The PID element is
subject to corporation tax as schedule A revenue, while the non-PID element will be treated as franked revenue.
f) Expenses
All expenses are accounted for on an accruals basis. The Board has determined that the capital return should reflect the
indirect costs of earning capital returns. Consequently, since 1 June 2013 the Company has allocated 70% of its
management fees and finance costs to the capital return of the Statement of Comprehensive Income with the remaining
30% being allocated to the revenue return. All other administrative expenses are charged to the revenue return of the
Statement of Comprehensive Income.
Any performance fees are charged wholly to the capital return. Expenses which are incidental to the purchase or sale of an
investment are recognised immediately in the capital return of the Statement of Comprehensive Income, and are included
within the gains or losses on investments held at fair value through profit or loss.
g) Taxation
The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on
the taxable profit for the period. Taxable profit differs from net profit as reported in the Statement of Comprehensive
Income because it excludes items of income or expense that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that
were applicable at the balance sheet date.
The tax effect of different items of expenditure is allocated between the capital and the revenue using the Company’s
effective rate of tax for the year. In line with the recommendations of the SORP, the allocation method used to calculate tax
relief on expenses presented against capital returns in the supplementary information in the Statement of Comprehensive
Income is the ‘marginal basis’. Under this basis, if taxable income is capable of being offset entirely by expenses presented
in the revenue return column of the Statement of Comprehensive Income, then no tax relief is transferred to the capital
return column.
Notes to the Financial Statements (continued)
67
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
1 Accounting policies (continued)
g) Taxation (continued)
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets
andliabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is
accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available
against which deductible temporary differences can be utilised. Investment trusts which have approval as such under
section 1158 of the Corporation Tax Act 2010 are not liable for taxation on capital gains.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no
longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset
isrealised. Deferred tax is charged or credited in the Statement of Comprehensive Income, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
h) Foreign currency
For the purposes of the financial statements, the results and financials position are expressed in pound sterling, which is
the functional currency and presentational currency of the Company. Sterling is the functional currency because it is the
currency of the primary economic environment in which the Company operates.
Transactions recorded in overseas currencies during the year are translated into sterling at the appropriate daily exchange
rates. Monetary assets and liabilities and investments held at fair value through profit or loss which are denominated in
overseas currencies at the balance sheet date are translated into sterling at the exchange rates ruling at that date. Gains or
losses arising on the retranslation of investments held at fair value through profit or loss are included within the ‘Gains/
(losses) on investments held at fair value through profit or loss’.
i) Cash and cash equivalents
Cash comprises cash in hand and on demand deposits. Cash equivalents are short-term, highly liquid investments that
arereadily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value.
j) Borrowings
Interest-bearing bank loans, overdrafts, unsecured loan notes and Preference Stock are recorded initially at fair value,
being the proceeds received, net of direct issue costs. They are subsequently measured at amortised cost. Finance costs,
including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis in
the Statement of Comprehensive Income using the effective interest rate method and are added to the carrying amount of
the instrument to the extent that they are not settled in the period in which they arise.
The Preference Stock has been classified as a liability as it represents a contractual obligation on behalf of the Company
todeliver to the stockholders a fixed and determinable amount at the date of redemption.
k) Operating segments
The directors consider that the Company has one operating segment, being the activity of investing in shares and securities
primarily for capital appreciation in accordance with the Company’s published investment objective. TheCompany operates
within the United Kingdom.
l) Dividends payable to shareholders
Dividends payable to shareholders are recognised in the financial statements when they are paid or, in the case of final
dividends, when they are approved by shareholders. Dividends are recorded in the Statement of Changes in Equity.
Notes to the Financial Statements (continued)
68
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
1 Accounting policies (continued)
m) Capital and reserves
Capital reserve arising on investments sold
The following are accounted for in this reserve:
●
gains and losses on the disposals of investments;
●
expenses and finance costs allocated to capital net of tax relief;
●
realised foreign exchange differences of a capital nature; and
●
costs of repurchasing ordinary share capital.
Capital reserve arising on revaluation of investments held
The following are accounted for in this reserve:
●
increases and decreases in the valuation of investments held at the year end; and
●
unrealised foreign exchange differences of a capital nature.
Revenue reserve
The revenue reserve represents accumulated revenue profits retained by the Company that have not currently been
distributed to shareholders as a dividend.
Capital redemption reserve
The capital redemption reserve represents the nominal value of ordinary shares repurchased and cancelled.
n) Distributable reserves
The Company’s capital reserve arising on investments sold (i.e. realised capital profits) and revenue reserve may be
distributed by way of a dividend.
o) Share capital
Ordinary shares are classified as equity. Mandatorily redeemable Preference Stock is classified as a liability. Incremental costs
directly attributable to the issue of new ordinary shares are shown in equity as a deduction, net of tax, from the proceeds.
Where the Company purchases its own equity share capital (treasury shares), the consideration paid, including any directly
attributable incremental costs is deducted from equity attributable to the Company’s equity holders until the shares are
cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received, net of any
directly attributable incremental transaction costs, is included in equity attributable to the Company’s equity holders.
Share capital represents the nominal value of ordinary shares issued.
p) Key estimates and assumptions
Estimates and assumptions used in preparing the financial statements are reviewed on an ongoing basis and are based on
historical experience and various other factors that are believed to be reasonable under the circumstances. The results of
these estimates and assumptions form the basis of making judgements about carrying values of assets and liabilities that
are not readily apparent from other sources.
There are no estimates and assumptions that may cause material adjustment to the carrying value of assets and liabilities.
The decision to allocate special dividends as income or capital is a judgment, and further details are provided in note 1e).
The decision to include Purchases and Sales of investments within Operating activities in the Cash Flow Statement is
considered appropriate because these are core activities of the Company’s operations. Given the nature of the Company
as an investment trust, this is not deemed to be significant judgment in the context of the financial statements as a whole.
There are no significant judgements made in the preparation of these financial statements.
2 Investment income
2024
£’000
2023
£’000
Income from companies listed or quoted in the United Kingdom:
Dividends 23,182 22,553
Special dividends 602 1,177
Property income distributions 872 565
Total investment income 24,656 24,295
Notes to the Financial Statements (continued)
69
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
3 Other income
2024
£’000
2023
£’000
Bank and other interest 190 95
190 95
4 Management fees
2024 2023
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Management fee 679 1,584 2,263 710 1,657 2,367
679 1,584 2,263 710 1,657 2,367
A summary of the fee arrangements in the management agreement is given on page 27.
5 Other expenses
2024
£’000
2023
£’000
Directors’ fees (see the Directors’ Remuneration Report on pages 48 to 50) 195 175
Auditors’ remuneration for the audit of the Company and the financial statements 54 47
Other professional fees 88 128
FCA and London Stock Exchange fees 60 72
Registration costs 25 25
Annual and half-year reports and shareholder circulars: printing and distribution 22 15
Insurances 14 9
AIC subscriptions 22 21
Custody and other bank charges 36 38
Charitable donations 6 6
Depositary charges 46 47
Other expenses payable to the management company
1
54 144
Other expenses 25 4
647 731
1 Other expenses payable to management company (“Janus Henderson”) relate to marketing activities as described in Note 21
All transactions with directors are disclosed in the Directors’ Remuneration Report and are related-party transactions. All the
above expenses include VAT where VAT is applied to them. There were no non-audit services in the period (2023: nil).
Notes to the Financial Statements (continued)
70
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
6 Finance costs
2024 2023
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Bank overdraft and loan interest 765 1,787 2,552 527 1,230 1,757
Interest on unsecured loan notes
1
470 1,095 1,565 470 1,095 1,565
Total 1,235 2,882 4,117 997 2,325 3,322
1 Includes amortisation of direct issue costs and will therefore vary from year to year
7 Taxation
a) Analysis of charge for the year
2024 2023
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Overseas tax suffered (5) – (5) 5 – 5
Current and total tax (credit)/charge for the year (5) – (5) 5 – 5
b) Factors affecting the tax (credit)/charge for the year
UK corporation tax is charged at 25% (2023: effective rate of 20%). Approved investment trusts are exempt from
corporation tax on chargeable gains made by the investment trust.
2024 2023
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Profit/(loss) before taxation 22,285 71,055 93,340 21,952 (131,234) (109,282)
Corporation tax at 25.00% (2023: 20.00% ) 5,571 17,764 23,335 4,390 (26,247) (21,857)
Effects of:
Non-taxable UK dividends (5,761) – (5,761) (4,517) – (4,517)
Non-taxable overseas dividends (185) – (185) (229) – (229)
Expenses not deductible for tax purposes 2 – 2 1 – 1
Excess management expenses and loan deficits 229 779 1,008 281 625 906
Overseas withholding tax (5) – (5) 5 – 5
Non-taxable capital items – (18,880) (18,880) – 25,450 25,450
Corporate interest restrictions 144 337 481 74 172 246
Current and total tax (credit)/charge for the year (5) – (5) 5 – 5
c) Provision for deferred taxation
No provision has been made for deferred tax on income.
Due to the Company’s status as an investment trust, and the intention to continue meeting the conditions required to
maintain approval of such status in the foreseeable future, the Company has not provided for deferred tax on capital gains
or losses arising on the revaluation or disposal of investments.
d) Factors that may affect future tax charges
The Company has not recognised a deferred tax asset of £29,935,000 (2023: £28,929,000) arising as a result of having
unutilised management expenses and deficits on loan relationships of £119,741,000 (2023: £115,710,000). These expenses
will only be utilised if the tax treatment of the Company’s income and chargeable gains changes or if the Company’s
investment profile changes. There is no expiry date for these deferred tax assets and no expectation for these to be utilised.
Notes to the Financial Statements (continued)
71
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
8 Earnings/(loss) per ordinary share
The earnings per ordinary share figure is based on the net profit for the year of £93,345,000 (2023: net loss of
£109,287,000) and on 74,684,351 (2023: 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:
2024
£’000
2023
£’000
Net revenue profit 22,290 21,947
Net capital profit/(loss) 71,055 (131,234)
Net total profit/(loss) 93,345 (109,287)
Weighted average number of ordinary shares in issue during the year 74,684,351 74,701,796
2024 2023
Revenue earnings per ordinary share 29.85p 29.38p
Capital earnings/(loss) per ordinary share 95.14p (175.68p)
Total earnings/(loss) per ordinary share 124.99p (146.30p)
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.
9 Ordinary dividends
Record Date Pay Date
2024
£’000
2023
£’000
Final dividend 19.0p (2023: 17.00p)
for the year ended 31 May 2023
25 August 2023
9 October 2023 14,193 12,699
Interim dividend of 7.50p (2023: 7.00p)
forthe year ended 31 May 2024
9 February 2024
5 March 2024 5,603 5,229
Unclaimed dividends (2) (3)
19,794 17,925
Subject to approval at the AGM, the proposed final dividend of 19.5p per ordinary share will be paid on 7 October 2024
toshareholders on the register of members at the close of business on 30 August 2024. The shares will be quoted
ex-dividend on 29 August 2024.
The proposed final dividend for the year ended 31 May 2024 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 section 1158 of the
Corporation Tax Act 2010 are set out below:
2024
£’000
2023
£’000
Revenue available for distribution by way of dividends for the year 22,290 21,947
Interim dividend for the year ended 31 May 2024 of 7.5p (2023: 7.0p) per ordinary share (5,603) (5,229)
Final dividend for the year ended 31 May 2023 of 19.0p (based on the 74,701,796 shares
inissue at 1 August 2023) – (14,193)
Proposed final dividend for the year ended 31 May 2024 19.5p (based on 74,385,131 shares
inissue at 29 July 2024) (14,505) –
Transfer to reserves 2,182 2,525
Notes to the Financial Statements (continued)
72
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
10 Investments held at fair value through profit or loss
2024
£’000
2023
£’000
Cost at start of year 689,380 697,987
Investment holding gains at start of year 70,776 194,410
Valuation at start of year 760,156 892,397
Movements in the year:
Acquisitions at cost 89,274 109,395
Disposals at cost (86,716) (118,002)
Movement in investment holding gains/(losses) 70,654 (123,634)
Valuation at year end 833,368 760,156
Cost at end of the year 691,938 689,380
Investment holding gains 141,430 70,776
Valuation at year end 833,368 760,156
The Company received £91,583,000 (2023: £114,384,000) from investments sold in the year. The book cost of these
investments when they were purchased were £86,716,000 (2023: £118,002,000). These investments have been revalued
over time and until they were sold, any unrealised gains/losses were included in the fair value of the investments.
Purchase and sale transaction costs for the year ended 31 May 2024 were £371,000 and £37,000 respectively
(2023:transaction costs of purchases £479,000; transaction costs of sales £53,000). These comprise mainly stamp
dutyand commission.
Analysis of investments at fair value
2024
£’000
2023
£’000
Equity investments:
Listed on London Stock Exchange 674,935 571,505
Listed on Alternative Investment Market (“AIM”) 158,433 188,651
833,368 760,156
All the investments are listed in the United Kingdom. The above categories are based on information obtained from the
Stock Exchange Daily Official list.
Total capital gains/(losses) from investments
2024
£’000
2023
£’000
Gains/(losses) on the sale of investments based on historical cost 4,867 (3,618)
Revaluation losses recognised in previous years 207 2,917
Gains/(losses) on investments sold in the year based on the carrying value at
theprevious balance sheet date 5,074 (701)
Net movement in investment holding 70,447 (126,551)
Gains/(losses) on investments held at fair value through profit or loss 75,521 (127,252)
All capital gains/(losses) are from investments that are listed (or quoted on AIM) in the United Kingdom.
Notes to the Financial Statements (continued)
73
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
11 Substantial interests
The Company held interests of 3% or more of any class of share capital in two investee companies (2023: three investee
companies). These investments are not considered by the directors to be significant in the context ofthese financial
statements.
Valuation
£’000
% of
voting rights
RM 3,816 4.9
Thruvision 1,125 4.7
12 Receivables
2024
£’000
2023
£’000
Securities sold for future settlement – 506
Prepayments and accrued income 11,763 2,681
11,763 3,187
13 Payables
2024
£’000
2023
£’000
Securities purchased for future settlement 579 –
Management fee 372 392
Accruals and deferred income 563 459
1,514 851
14 Financial liabilities
2024
£’000
2023
£’000
Unsecured Loan Notes:
3.33% Unsecured Loan Notes 2036 (redeemable at par on 23 May 2036) 29,856 29,846
2.77% Unsecured Loan Notes 2052 (redeemable at par on 2 February 2052) 19,922 19,921
Preference Stock:
4,257 Preference Stock units of £1 each (2023: 4,257) 4 4
49,782 49,771
The Preference Stock units carry the right to receive a non-cumulative dividend at a final rate of 0.001% payable on 1 June
each year. On a winding-up of the Company, preference stockholders are entitled to repayment of the capital paid up
thereon. The Preference Stock does not entitle the holder to attend or vote at any general meeting of the Company except
where the dividend is six months in arrears or on a resolution to liquidate the Company.
On 23 May 2016, the Company issued £30,000,000 (nominal) 3.33% unsecured loan notes, net of issue costs totalling
£213,000. The issue costs will be amortised over the life of the notes. The loan notes do not carry voting rights and the
3.33% interest rate would be cumulative if unpaid in any period.
On 2 February 2022, the Company issued £20,000,000 (nominal) 2.77% unsecured loan notes, net of direct issue costs
totalling £82,000. The direct issue costs will be amortised over the life of the notes. The loan notes do not carry voting
rights and the 2.77% interest rate would be cumulative if unpaid in any period.
Notes to the Financial Statements (continued)
74
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
15 Risk management policies and procedures
The directors manage investment risk principally through setting an investment policy, approved by shareholders, which
incorporates risk parameters (see pages 25-26), by contracting management of the Company’s investments to an
investment manager (Janus Henderson) under a contract which incorporates appropriate duties and restrictions and by
monitoring performance in relation to these. The Board’s relationship with Janus Henderson is discussed in the Strategic
Report on pages (pages 21 and 27). Internal control and the Board’s approach to risk management is also on pages
39-40. There have been no material changes to the management or nature of the Company’s investment risks from
theprior year.
The main risks arising from the Company’s pursuit of its investment objective are market risk, credit risk and liquidity risk.
The effects of these can also be increased by gearing.
The Board and Janus Henderson coordinate the Company’s risk management and there are various risk management
systems in place as detailed below:
●
Straight-through processing via a deal order and management system (“OMS”) is utilised for listed securities.
●
Portfolio modelling and investment management functions (including order-raising, dealing and trade execution) are
performed using one of, or a combination of, the following third-party software applications: Charles River
Development, OMS and/or Imagine.
●
Fund pricing and accounting services are outsourced to a third-party administrator (currently BNP Paribas) which
utilises Hiportfolio software.
●
The IT tools to which the Janus Henderson risk, compliance and operations teams have access for independent
monitoring and risk measurement purposes include:
– Charles River Compliance module for investment restrictions monitoring;
– SAI Global Bwise operational risk database;
– RiskMetrics, UBS Delta, Style Research, Cognity and Barra for market risk measurement;
– Bloomberg for market data and price-checking; and
– Hiportfolio for portfolio holdings and valuations.
a) Market risk
The fair value of a financial instrument held by the Company may fluctuate due to changes in market prices. This market
risk comprises market price risk (see note 15b)), currency risk (see note 15 c)) and interest rate risk (see note 15 d)).
TheBoard reviews and agrees policies for managing these risks. Janus Henderson assesses the exposure to market risk
when making each investment decision and monitors the overall level of market risk on the whole of the investment
portfolio on an ongoing basis.
b) Market price risk
Market price risk (i.e. changes in market prices other than those arising from interest rate risk or currency risk) may affect
the fair value of the investments. The Company’s investments are susceptible to market price risk arising from uncertainties
about the future prices of the investments.
Management of the risk
The Board manages the risks inherent in the investment portfolio by ensuring full and timely access to relevant information
from Janus Henderson. The Board regularly reviews investment performance. The Board monitors Janus Henderson’s
compliance with the Company’s objectives and is directly responsible for investment strategy.
The Company’s exposure to changes in market prices at 31 May 2024 on its equity investments was £833,368,000
(2023:£760,156,000).
Concentration of exposure to market price risk
An analysis of the Company’s investments is shown on pages 14-16 and a sector analysis is set out on page 4.
At31May2024 all the investments were in companies listed or quoted on the London Stock Exchange, most of them
being companies established in and operating from the United Kingdom. Accordingly, there is a concentration of exposure
to the UK, although it is recognised that an investment’s country of domicile or of listing does not necessarily equate to its
exposure tothe economic conditions in that country.
Notes to the Financial Statements (continued)
75
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
15 Risk management policies and procedures (continued)
b) Market price risk (continued)
Market price risk sensitivity
The sensitivity of (a) the return after taxation for the year and (b) the Company’s net assets to an increase or decrease of
25% in the fair values of the Company’s investments at each balance sheet date is given below. This level of change is
considered to be reasonably possible, based on observation of current market conditions.
The impact of a 25% increase in the value of the investments on the revenue return as at 31 May 2024 is a decrease of
£219,000 (2023: £199,000) and on the capital return is an increase of £207,832,000 (2023: £189,573,000). Accordingly,
thetotal impact on shareholders’ funds is an increase of £207,613,000 (2023: £189,374,000).
The impact of a 25% decrease in the value of the investments on the revenue return as at 31 May 2024 is a increase of
£219,000 (2023: £199,000) and on the capital return is a decrease of £207,832,000 (2023: £189,573,000). Accordingly, the
total impact on shareholders’ funds is a decrease of £207,613,000 (2023: £189,374,000).
c) Currency risk
The Company is not itself materially exposed to currency risk, although some of the investments will be in companies that
have operations that involve currency risk.
As at 31 May 2024, the Company did not hold any non-sterling denominated investments (2023: nil).
d) Interest rate risk
Interest rate movements may affect:
●
the level of income receivable from cash at bank and on deposit; and
●
the interest payable on the Company’s short-term borrowings.
Interest rate changes may also have an impact on the market value of the Company’s equity investments. In particular, the
effect of the interest rate changes on the earnings of companies held within the portfolio may have a significant impact on
the valuations of those companies.
Management of risk
The possible effects on the fair value of the investments that could arise as a result of changes in interest rates are taken
into account when making investment and borrowing decisions. The Company rarely holds significant cash balances but
finances part of its investment activity through borrowings at levels approved and monitored by the Board. At31 May 2024
the Company had committed bank borrowing facilities for a total of £55.7 million (2023: £50.7 million); borrowings are
drawn down for short periods at rates of interest that are determined by reference to the market rates applicable at the time
of borrowing.
Interest rate exposure
The Company’s financial liabilities at 31 May 2024 that give exposure to fixed interest rate risk are set out in note 14.
Theexposure to floating interest rates can be found on the Balance Sheet (cash and cash equivalents and bank loans).
These amounts are not necessarily representative of the exposure to interest rates during the year, as the level of exposure
changes as investments are made, borrowings are drawn down or repaid, and the mix of borrowings subject to floating or
to fixed interest rate changes.
Interest rate sensitivity
The Company is not materially exposed to changes in interest rates. As at 31 May 2024 the Company’s one-year revolving
loan facility provided by BNP Paribas, London branch and effective from 8 February 2024, allowed borrowings to a
maximum of £70 million, the interest rate exposure is based on a margin of 0.90% plus SONIA (Sterling Overnight Index
Average). Thebank loan at 31 May 2024 was £55,744,000 (2023: £50,672,000) and if interest rates changed by 100 basis
points (upor down) this would decrease or increase shareholder funds by approximately £557,000 (2023: £507,000). The
interest payable on the Company’s £30 million issue of unsecured loan notes is fixed at 3.33% and on the £20 million issue
of unsecured loan notes is fixed at 2.77%.
Notes to the Financial Statements (continued)
76
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
15 Risk management policies and procedures (continued)
e) Liquidity risk
This is the risk that the Company will encounter difficulty in meeting obligations associated with its financial liabilities.
Management of risk
Liquidity risk is not significant as the majority of the Company’s assets are investments in quoted equity securities that are
readily realisable. The Company has borrowed £30 million by its issue in 2016 of 3.33% unsecured loan notes 2036 and
afurther £20 million by its issue in 2022 of 2.77% unsecured loan notes 2052. The Company is able to draw short-term
borrowings of up to £70 million from its committed borrowing facility with BNP Paribas, London branch. There were
borrowings of £55.7 million drawn down under the facility at 31 May 2024 (2023: £50.7 million).
Accordingly, the Company has access to borrowings of up to £120 million: the £50 million of fixed debt represented by the
issue of unsecured loan notes and a committed bank facility of £70 million.
The Board gives guidance to the Manager as to the maximum amount of the Company’s resources that should be invested
in any one company. The policy is that the Company should remain fully invested in normal market conditions and that
short-term borrowings should be used to fund short-term cash requirements.
Liquidity risk exposure
The remaining contractual maturities of the financial liabilities at 31 May 2024, based on the earliest date on which payment
could be required, was as follows:
2024 2023
Due within
1year
£’000
Due between
1 and 5 years
£’000
Due more
than 5 years
£’000
Due within
1year
£’000
Due between
1 and 5 years
£’000
Due more
than 5 years
£’000
Preference Stock
1
– – – – – –
Unsecured loan notes 2036
2
999 3,996 36,971 999 3,996 37,970
Unsecured loan notes 2052
2
554 2,216 32,563 554 2,216 33,117
Bank loans and interest 56,123 – – 51,073 – –
Payables 531 – – 587 – –
58,207 6,212 69,534 53,213 6,212 71,087
1 See also note 14. The Company has in issue Preference Stock without a set redemption date with a total par value of £4,000 (2023: £4,000) which has a
negligible ongoing finance cost
2 The amounts due include unsecured loan note interest
f) Credit risk
The failure of the counterparty to discharge its obligations under a transaction could result in the Company suffering a loss.
Management of risk
The risk is not significant, and is managed as follows:
●
investment transactions are carried out with a large number of brokers, whose credit standard is reviewed regularly
byJanus Henderson, and limits are set on the amount that may be due from any one broker; and
●
cash at bank is held only with reputable banks with high quality external credit ratings.
None of the Company’s financial assets are past their due date and the adoption of the expected credit loss model for
impairment under IFRS 9 has not had a material impact on the Company.
In summary, the maximum exposure to credit risk at 31 May 2024 was to cash and cash equivalents of £9,249,000
(2023:£13,338,000), and to receivables of £11,763,000 (2023: £3,187,000) (see note 12).
Notes to the Financial Statements (continued)
77
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
15 Risk management policies and procedures (continued)
g) Fair values of financial assets and financial liabilities
The investments are held at fair value through profit or loss. All the net current liabilities are held in the Balance Sheet at a
reasonable approximation of fair value. At 31 May 2024 the fair value of the Preference Stock was £4,000 (2023: £4,000).
The fair value of the Preference Stock is estimated using the prices quoted on the exchange on which the investment
trades. The Preference Stock is carried in the Balance Sheet at par.
The unsecured loan notes are carried in the Balance Sheet at par less the issue costs which are amortised over the life of
the notes. In order to comply with fair value accounting disclosures only, the fair value of the unsecured loan notes has
been estimated to be £35,823,000 (2023: £36,068,000) and is categorised as Level 3 in the fair value hierarchy as
described below. However, for the purpose of the daily NAV announcements, the unsecured loan notes are valued at par
inthe fair value NAV because they are not traded and the directors have assessed that par value is the most appropriate
value to be applied for this purpose.
The fair value of the unsecured loan notes is calculated using a discount rate which reflects the yield of a UK Gilt of similar
maturity plus a suitable credit spread.
h) Fair value hierarchy disclosures
The table below sets out fair value measurements using the IFRS 13 fair value hierarchy.
Categorisation within the hierarchy has been determined on the basis of the lowest level of input that is significant to the fair
value measurement of the relevant asset, as follows:
Level 1: valued using quoted prices in active markets for identical assets.
Level 2: valued by reference to valuation techniques using observable inputs other than quoted prices.
Level 3: valued by reference to valuation techniques using inputs that are not based on observable market data.
The valuation techniques used by the Company are explained in note 1(c).
Fair value hierarchy – 2024
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Equity investments 833,368 – – 833,368
833,368 – – 833,368
Fair value hierarchy – 2023
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Equity investments 760,156 – – 760,156
760,156 – – 760,156
There have been no transfers during the year between any of the levels.
i) Capital management policies and procedures
The Company’s capital management objectives are:
●
to ensure that it will be able to continue as a going concern; and
●
to secure long-term capital growth for the shareholders by investment in quoted securities in the UK.
This is to be achieved through an appropriate balance of equity capital and gearing. The Company’s policy is that its
borrowings must not exceed 30% of the shareholders’ funds.
The Company’s total capital at 31 May 2024 was £853,088,000 (2023: £776,063,000) comprising £55,744,000
(2023:£50,672,000) of unsecured bank loans, £50,000,000 (2023: £50,000,000) of unsecured loan notes, £4,000
(2023:£4,000) of Preference Stock and £747,340,000 (2023: £675,387,000) of equity share capital and reserves.
The Company has a £70 million revolving credit facility with BNP Paribas, London branch. The Company had drawn down
£55,744,000 under these facilities as at 31 May 2024 (2023: £50,672,000). The Company was fully compliant with the terms
of the facilities, as they existed, for the period 1 June 2023 to the date of this Annual Report.
Notes to the Financial Statements (continued)
78
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
16 Share capital
Shares
entitled to
dividend
Total
shares
in issue
Nominal
value
in issue
Issued ordinary shares of 25p each
At 1 June 2023 74,701,796 74,701,796 18,676
Buyback during the year (196,665) (196,665) (49)
At 31 May 2024 74,505,131 74,505,131 18,627
During the year the Company purchased 196,665 of its own issued ordinary shares (2023: nil) at a cost of £1,598,000
(2023: £nil). Since the year end, 120,000 shares have been bought back for cancellation at a cost of £1,051,000.
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.
17 Capital redemption reserve and capital reserves
2024
Capital
redemption reserve
£’000
Capital reserve
arising on revaluation
of investments held
£’000
Capital reserve
arising on
investments sold
£’000
Capital
reserves
£’000
At 1 June 2023 26,745 70,776 542,034 612,810
Buyback of shares for cancellation 49 – (1,598) (1,598)
Transfer on disposal of investments
(seenote 10) – 207 (207) –
Net capital gains for the year – 70,447 5,074 75,521
Expenses charged to capital – – (4,466) (4,466)
At 31 May 2024 26,794 141,430 540,837 682,267
2023
Capital
redemption reserve
£’000
Capital reserve
arising on revaluation
of investments held
£’000
Capital reserve
arising on
investments sold
£’000
Capital
reserves
£’000
At 1 June 2022 26,745 194,410 549,634 744,044
Transfer on disposal of investments
(seenote 10) – 2,917 (2,917) –
Net capital losses for the year – (126,551) (701) (127,252)
Expenses charged to capital – – (3,982) (3,982)
At 31 May 2023 26,745 70,776 542,034 612,810
The capital reserve arising on investments sold (i.e. realised capital profits) may be distributed by way of a dividend.
18 Revenue reserve
2024
£’000
2023
£’000
At start of year 17,156 13,134
Ordinary dividend paid (19,794) (17,925)
Revenue profit for the year 22,290 21,947
At 31 May 19,652 17,156
Notes to the Financial Statements (continued)
79
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
19 Net asset value (“NAV”) per ordinary share
The NAV per ordinary share is based on the net assets attributable to the ordinary shares of £747,340,000 (2023: £675,387,000)
and on the 74,505,131 ordinary shares in issue at 31 May 2024 (2023: 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:
2024
£’000
2023
£’000
Net assets attributable to ordinary shares at 1 June 675,387 802,599
Buyback of shares for cancellation (1,598) –
Net gains/(losses) for the year 93,345 (109,287)
Ordinary dividends paid in the year (19,794) (17,925)
Net assets attributable to ordinary shares at 31 May 747,340 675,387
20 Capital commitments and contingent liabilities
Capital commitments
There were no capital commitments as at 31 May 2024 (2023: £nil).
Contingent liabilities
There were no contingent liabilities in respect of sub-underwriting commitments as at 31 May 2024 (2023: nil).
21 Transactions with the Manager and related parties
Under the terms of an agreement effective from July 2014 and most recently revised on 18 July 2024, with no changes
toterms affecting the relationship with the Manager, the Company appointed Janus Henderson as Manager to provide
investment management, accounting, administrative and secretarial services. The Manager has contracted with BNP
Paribas to provide accounting and administration services.
Details of the management fee arrangements for these services are given in the Strategic Report on page 27. The fees
paidor payable under this agreement to the Manager in respect of the year ended 31 May 2024 were £2,263,000
(2023:£2,367,000) (see note 4). The amount outstanding at 31 May 2024 was £372,000 payable to Janus Henderson
(2023:£392,000).
No performance fee is payable to Janus Henderson in respect of the year ended 31 May 2024 (2023: £nil).
In addition to the above services, the Manager facilitates marketing activities with third parties which are recharged to
theCompany. Total amounts paid to the Manager in respect of marketing for the year ended 31 May 2024 amounted to
£54,000 (2023: £144,000).
Directors’ interests in the ordinary shares of the Company and fees paid to the directors are considered to be transactions
with related parties. Details are shown in the Directors’ Remuneration Report and in note 5. At 31 May 2024, an amount of
£33,000 (2023: £31,000) had been accrued in respect to April and May 2024 directors’ fees and is included with accruals
in note 13. This was paid in the June 2024 quarterly payroll, as directors are remunerated in the form of fees, payable
quarterly in arrears.
Notes to the Financial Statements (continued)
80
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
22 Changes in financial liabilities
The following table shows the movements during the year in financial liabilities in the Balance Sheet:
Notes
At
1 June 2023
£’000
Cash flows
£’000
Amortisation
ofissue costs
£’000
At
31 May 2024
£’000
Financing activities
Bank loans (50,672) (5,072) – (55,744)
14 Financial liabilities (49,771) – (12) (49,783)
(100,443) (5,072) (12) (105,527)
Non-financing activities
Cash and cash equivalents 13,338 (4,089) – 9,249
13,338 (4,089) – 9,249
Total (87,105) (9,161) (12) (96,278)
Notes
At
1 June 2022
£’000
Cash flows
£’000
Amortisation
ofissue costs
£’000
At
31 May 2023
£’000
Financing activities
Bank loans (50,268) (404) – (50,672)
14 Financial liabilities (49,760) – (11) (49,771)
(100,028) (404) (11) (100,443)
Non-financing activities
Cash and cash equivalents 8,991 4,347 – 13,338
8,991 4,347 – 13,338
Total (91,037) 3,943 (11) (87,105)
Notes to the Financial Statements (continued)
81
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
Photo: Stonehouse, Mitchells & Butler
Additional
Information
82
Glossary
Alternative Investment Fund Managers
Directive (“AIFMD”)
The AIFMD classifies certain investment vehicles, including
investment companies, as alternative investment funds (“AIFs”)
and requires them to appoint an alternative investment fund
manager (“AIFM”) and depositary to manage and oversee the
operations of the investment vehicle. The Board retains
responsibility for strategy, operations and compliance and the
directors retain a fiduciary duty to shareholders.
Association of Investment Companies
(“AIC”)
The Company is a member of the AIC, which is the trade
bodyfor investment companies and represents the industry
inmatters which impact the regulation of such entities.
TheCompany is a constituent of the AIC’s UK Smaller
Companies sector.
Benchmark
An index against which performance is compared. For the
Company this is the Deutsche Numis Smaller Companies
Index (excluding investment companies), which changed
itsname from ‘Numis Smaller Companies Index (excluding
investment companies)” with effect from 2 January 2024.
Custodian
The custodian is responsible for ensuring the safe custody of
the Company’s assets and that all transactions in the underlying
holdings are transacted in an accurate and timely manner.
Depositary
As an AIF, the Company is required to appoint a depositary
who has responsibility for overseeing the operations of the
Company, including safekeeping, cash monitoring and
verification of ownership and valuation of the underlying
holdings, and is responsible for the appointment of a
custodian. The depositary is strictly liable for the loss of any
investments or other assets in its custody unless it has
notifiedthat it has discharged its liability in certain markets.
No such notification has been made. The Company’s
depositary has confirmed that, in all material respects, the
Company has been managed in accordance with the FCA’s
Investment Funds Sourcebook, the Company’s articles of
association and as required by the AIFMD.
Dividend dates
When declared or announced, each dividend will have three
key dates applied to it. The payment date is the date on which
shareholders will receive their dividend, either by BACS
transfer or by receipt of a dividend cheque. The record date
applied to the dividend is used as a cut-off for the Company’s
registrar to know which shareholders should be paid a
dividend. Only shareholders on the register of members at the
close of business on the record date will receive the dividend.
The ex-dividend date is the business day before the record
date and is the date upon which the Company’s net asset
value and share price will be disclosed ex-dividend.
Gearing
Gearing is the borrowing of money to buy assets in the
expectation that the return on investments bought will
exceed the interest cost of the borrowing. The net gearing
percentage reflects the amount of borrowings (e.g. bank
loans and loan notes) the Company has used to invest in the
market. It is calculated by taking the difference between
total investments (see note 10) and equity shareholders’
funds (see Balance Sheet), dividing this by the equity
shareholders’ funds and multiplying by 100. The Company
can also use synthetic gearing through derivatives.
Gearing impact on stock selection and
gearing decision
When the Company has a geared portfolio, the impact of
‘stock selection’ compared to the benchmark is amplified as
aconsequence of being geared. Without gearing, portfolio
performance would have been higher and the residual of the
impact is allocated to the ‘decision’ to be geared. Splitting the
impact in this way can be helpful to show the effect of debt on
portfolio performance and disaggregating this from the impact
of the decision to gear.
The performance attribution on page 4 shows the impact of
gearing on performance. This is split between ‘gearing impact
on stock selection’, being a comparison of the performance of
the ungeared investments within the Company’s portfolio
compared to the index where the effects are not amplified,
andthe residual which is the impact of the ‘gearing decision’.
Investment trusts
Investment trusts are public limited companies, listed on the
London Stock Exchange, which provide shareholders with a
professionally managed portfolio of investments. Investment
trusts are exempt from tax on the capital gains arising on
theirinvestments subject to meeting certain criteria.
Income, net of expenses and tax, is substantially distributed
to shareholders. Investment trusts are also known as
investment companies, although the tax legislation retains
the reference to investment trusts.
Liquidity
In the context of the liquidity of shares in the stock market,
this refers to the availability of buyers in the market for the
share in question. Where the market in a particular share is
described as ‘liquid’, that share will be in demand and holders
wishing to sell their shares should find ready buyers.
Conversely, where the market in a share is ‘illiquid’, the
difficulty of finding a buyer will tend to depress the price
thatmight be negotiated for a sale.
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
83
Glossary (continued)
Management fee
This is a fee charged by a management company for
managing a portfolio, normally based on a percentage of the
assets under management. The Company’s management fee
is charged at 0.35% per annum (0.0875% per quarter) of net
assets calculated on the last day of each calendar quarter and
is paid to Janus Henderson each calendar quarter in advance.
Ongoing charge
The ongoing charge reflects those expenses of a type which
arelikely to recur in the foreseeable future, whether charged
tocapital or revenue, and which relate to the operation of the
Company as a collective fund, excluding the costs of acquisition
or disposal of investments, financing costs and gains or losses
arising on investments. The ongoing charge is based on the
premise that actual costs incurred in the year (see notes 4
and5) are the best estimate of future costs, excluding any
performance fees, in accordance with the AIC methodology.
The ongoing charge is the annualised charge expressed as
apercentage of the average aggregate NAV in the period
(seepage 85). Management fees and other administrative
expenses are included in the calculation, such as directors’
fees and the auditor’s fees, and the figure therefore exceeds
the rate of the management fee paid to Janus Henderson.
Thecap of 0.90% relates only to management fees and
performance fees under the Company’s management
agreement, and excludes any other expenses. Total expenses
for periods where a performance fee is payable can therefore
be greater than 0.90%. The AIC’s ongoing charge
methodology differs from the PRIIPs methodology for ongoing
costs which are disclosed in the Key Investor Document (“KID”).
The Company’s latest available KID was published with an
effective date of 29 December 2023. The KID sets out portfolio
transaction costs of 0.11%, other ongoing costs of 0.91% and
performance fees of 0.12%. These are calculated under the
prescribed methodologies for calculating costs disclosed in the
KID. The KID is reissued periodically and the costs disclosed in
the KID may be revised at a subsequent reissue date.
Performance fee
This is a fee paid on top of the management fee if an
investment company’s performance during the financial year
meets certain conditions. Under the terms of its management
agreement, if the Company has outperformed, it will pay
Janus Henderson a performance fee totalling 15% of any
outperformance of the benchmark index, on a total return
basis, over the financial year, subject to meeting other criteria.
There is also a cap on any performance fee paid in any one
year, notably that total management and performance fees
combined may not exceed 0.9% of average net assets in the
year. Average net assets for this purpose are calculated as the
average of net assets at each month end during the financial
year under review. No performance fee is payable if either the
share price total return or NAV per share total return has
decreased during the year. Further details on the performance
fee are set out on page 27.
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
84
The Company uses the following alternative performance measures (“APMs”) throughout the Annual Report, financial
statementsand notes to the financial statements. The APMs are reconciled to the financial statements through the narrative
below. The Board believes that each of the APMs, which are typically used within the investment trust sector, provide additional
useful information to shareholders to help assess the Company’s performance against its peer group.
Capital return per share
The capital return per share is the capital profit for the year (see Statement of Comprehensive Income) divided by the weighted
average number of ordinary shares in issue during the year (see note 8).
Discount or premium
The amount by which the market price per share of an investment trust is either higher (premium) or lower (discount) than the
NAV per ordinary share, expressed as a percentage of the NAV per ordinary share.
NAV
pence
Share price
pence
Premium/
(discount)
to NAV
At 31 May 2023 904.1 785.0 (13.2%)
At 31 May 2024 1,003.1 888.0 (11.5%)
Gearing/(net cash)
Gearing represents the excess amount above shareholders’ funds of total investments, expressed as a percentage of the
shareholders’ funds. If the amount calculated is negative, this is a ‘net cash’ position and not gearing.
2024 2023
Investments held at fair value through profit or loss (£’000) (page 73) (A) 833,368 760,156
Net assets (£’000) (page 64) (B) 747,340 675,387
Gearing (C = (A/B) -1) (%) (C) 11.5% 12.6%
Net asset value (“NAV”) per ordinary share
The value of the Company’s assets (i.e. investments held at fair value through profit or loss (see note 10) and cash held (see
Balance Sheet)) less any liabilities (i.e. financial liabilities (see note 13)) for which the Company is responsible divided by the
number of ordinary shares in issue (see note 16). The aggregate NAV is also referred to as total equity, in the Balance Sheet.
The NAV per ordinary share is published daily and the year end NAV can be found on page 3 and further information is available
in note 19 within the notes to the financial statements.
Ongoing charge
The ongoing charge has been calculated in accordance with the guidance issued by the AIC as the total investment management
fees and administrative expenses expressed as a percentage of the average NAV throughout the year.
2024
£’000
2023
£’000
Management fees (note 4) 2,263 2,367
Other administrative expenses (note 5) 647 731
Less: non-recurring expenses (4) (42)
Ongoing charges 2,906 3,056
Average net assets
1
649,983 701,958
Ongoing charges ratio (excluding performance fee) 0.45% 0.44%
1 Calculated using the average daily NAV (with debt at fair value)
The ongoing costs provided in the Company’s Key Investor Document (‘KID’) is calculated in line with the PRIIPs regulations. This
calculation includes finance costs and look-through to costs incurred by other investment trusts and funds in which the Company
invests. The non-recurring expenses include certain professional and legal fees. See the Glossary for the cost ratio from the KID
on page 84.
Alternative Performance Measures
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
85
Revenue return per share
The revenue return per share is the revenue return for the year (see Statement of Comprehensive Income) divided by the
weighted average number of ordinary shares in issue during the year (see note 8).
Total return
The return on the share price or NAV taking into account both the rise and fall of NAV or share prices and dividends paid
toshareholders. Any dividends received by a shareholder are assumed to have been reinvested in either additional shares
(forshare price total return) or the Company’s assets (for NAV total return). Dividends paid and payable are set out in note 9.
NAV per share at 31 May 2023 and 31 May 2022 (p) 904.1 1074.4
NAV per share at 31 May 2024 and 31 May 2023 (p) 1,003.1 904.1
2024 2023
Change in the year (%) 11.0 (15.9)
Impact of dividends reinvested (%) 3.2 2.5
NAV total return for the year (%) 14.5 (13.8)
Share price per share at 31 May 2023 and 31 May 2022 (p) 785.0 917.5
Share price per share at 31 May 2024 and 31 May 2023 (p) 888.0 785.0
2024 2023
Change in the year (%) 13.1 (14.4)
Impact of dividends reinvested (%) 3.7 2.9
Share price total return for the year (%) 17.3 (12.0)
Yield
The yield is the annual dividend expressed as a percentage of the year-end share price.
31 May 2024 31 May 2023
Annual dividend (p) (A) 27.0 26.0
Share price (p) (B) 888.0 785.0
Yield (C=A/B) (%) (C) 3.0 3.3
Warning to shareholders
Many companies are aware that their shareholders have received unsolicited phone calls or correspondence concerning
investment matters. These are typically from overseas-based ‘brokers’ who target UK shareholders offering to sell them
what often turn out to be worthless or high-risk shares in US or UK investments. They can be very persistent and extremely
persuasive. Shareholders are therefore advised to be wary of any unsolicited advice, offers to buy shares at a discount or
offers of free company reports.
It is unlikely that either the Company or the Company’s registrar would make unsolicited telephone calls to shareholders.
Any such calls would relate only to official documentation already circulated to shareholders and never in respect of
investment ‘advice’.
If you are in any doubt about the veracity of an unsolicited phone call about the Company, please call the corporate
secretary on 020 7818 1818.
Alternative Performance Measures (continued)
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
86
General Shareholder Information
Alternative Investment Fund Manager’s
Directive (“AIFMD”) disclosures and
remuneration
In accordance with the AIFMD, information about the
Company’s leverage and remuneration of Janus Henderson
Fund Management UK Limited, as the Company’s alternative
investment fund manager (“AIFM”), isrequired to be made
available to investors. These disclosures,including those on
the AIFM’s remuneration policy, are contained in a separate
document entitled AIFMDDisclosure which can be found at
www.hendersonsmallercompanies.com.
BACS
Dividends can be paid to shareholders by means of BACS
(Bankers’ Automated Clearing Services). Mandate forms for
this purpose are available from the registrar, Computershare
Investor Services plc. Alternatively, shareholders can write to
the registrar at the address on page 89 to give their
instructions, including the bank account name, account
number and sort code to which payments are to bemade.
Common Reporting Standard (“CRS”)
Under tax legislation, the Company must provide personal
information to HMRC on certain investors who purchase
shares in investment trusts. This information is given annually
to the local tax authority of the tax residencies of non-UK
based certificated shareholders and corporate entities.
Equality Act 2010
This report and other documents issued by the Company are
available from the corporate secretary. If needed, copies can
be made available in a variety of formats, including larger type.
A ‘typetalk’ operator, provided by the Royal National Institute
for Deaf People, is available to support speech and hearing-
impaired people to make telephone calls. Please dial 18001
followed by the number you wish to dial.
Environmental, social and governance
(“ESG”)
Matters relating to environmental, social and governance
activities which are increasingly factored into the analysis
ofhow corporate entities, including investment companies,
conduct their activities.
Foreign Account Tax Compliance
(“FATCA”)
FATCA is a United States federal law which enforces the
requirement for United States persons (including those living
outside the US) to file reports each year on their non-US
financial accounts. Each year investment trusts monitor their
trading volumes to assess whether they have financial
accounts. The Company makes an annual assessment to
determine if the shares represent financial accounts and,
where they do, reports USaccounts to HMRC.
General Data Protection Regulation
(“GDPR”)
A privacy statement can be found at www.janushenderson.com.
Individual Savings Account (“ISA”)
The Company intends to continue to manage its affairs in
order to qualify as an eligible investment for a stocks and
shares ISA.
Non-mainstream pooled investments
(“NMPI”) status
The Company conducts its affairs so that its ordinary shares
of 25p each can be recommended by independent financial
advisors (“IFAs”) to ordinary retail investors in accordance with
the Financial Conduct Authority’s (“FCA”) rules regarding
non-mainstream investment products and intends to continue
to do so forthe foreseeable future. The shares are excluded
from the FCA’s restrictions which apply to non-mainstream
investment products because they are shares in an
investment trust.
Packaged Retail and Insurance-based
Investment Products Regulation
(“PRIIPs”)/Key Information Document
(“KID”)
Investors should be aware that PRIIPs requires the Manager,
as the PRIIPs manufacturer, to prepare a KID for the
Company. This KID must be made available by the Manager
to retail investors prior to them making any investment
decision and is available on the Company’s website. The
Company is not responsible for the information contained in
the KID and investors should note that the procedures for
calculating the risks, costs and potential returns are
prescribed by legislation. The figures in the KID may not
reflect the expected returns for the Company and anticipated
performance returns cannot be guaranteed. See the glossary
on page 84 for the cost ratio used in the KID.
Performance details/share price
information
The Company’s NAV is published daily. Details of the
Company’s share price and NAV per sharecanbe found
atwww.hendersonsmallercompanies.com and in the
London Stock Exchange Daily Official List.
The market price of the Company’s ordinary shares is also
published daily in the Daily Telegraph and on Trustnet.
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
87
General Shareholder Information (continued)
Shareholder details
Shareholders who hold their shares in certificated form can
check their shareholding with the registrar, Computershare
Investor Services plc, via www.investorcentre.co.uk. To
gainaccess to your details onthe Computershare site, you
will need the holder reference number shown on your
sharecertificate.
Taxonomy Regulation
Regulation (EU) 2020/852 establishes the basis for the
EUtaxonomy. The EU taxonomy is a classification system,
establishing a list of environmentally sustainable economic
activities to provide companies, investors and policymakers
with appropriate definitions for which economic activities can
be considered environmentally sustainable. In accordance
with the Taxonomy Regulation, the Company confirms that
theinvestments underlying this financial product do not take
into account the EU criteria for environmentally sustainable
economic activities.
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
88
Corporate Information
History
The Company was incorporated under the Companies Acts
1862 to 1886 on 16 December 1887 with the name The
Trustees, Executors and Securities Insurance Corporation,
Limited. The name was changed in August 1917 to The
Trustees Corporation Limited, in April 1982 to TR Trustees
Corporation PLC, in October 1990 to TR Smaller Companies
Investment Trust PLC and in September 1997 to The
Henderson Smaller Companies Investment Trust plc.
Registered office
201 Bishopsgate
London EC2M 3AE
Service providers
Alternative Investment Fund Manager
Janus Henderson Fund Management UK Limited
201 Bishopsgate
London EC2M 3AE
Corporate Secretary
Janus Henderson Secretarial Services UK Limited
201 Bishopsgate
London EC2M 3AE
Telephone: 020 7818 1818
Email: itsecretariat@janushenderson.com
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Telephone: 0370 707 1057
Email: web.queries@computershare.co.uk
Investors with share certificates (i.e. not those in
ashareplanor ISA) can check their holdings at
www.investorcentre.co.uk
Depositary and Custodian
HSBC Bank plc
8 Canada Square
London E14 5HQ
Broker
Deutsche Numis
Numis Securities Limited
45 Gresham Street
London EC2V 7BF
Independent Auditor
Forvis Mazars LLP
30 Old Bailey
London
EC4M 7AU
Financial calendar
Annual results 1 August 2024
Ex-dividend date 29 August 2024
Dividend record date 30 August 2024
Annual general meeting 2 October 2024
Final dividend payable 7 October 2024
Half-year results January 2025
Interim dividend payable March 2025
Information sources
For more information about the Company, visit the website at
www.hendersonsmallercompanies.com. This includes
factsheets, interviews, current information on the Company
and up-to-date share price and net asset value details.
To receive regular insights on The Henderson Smaller
Companies Investment Trust plc, visit the website and click the
‘Subscribe’ tab: www.hendersonsmallercompanies.com
Follow Janus Henderson Investment Trusts, UK
onLinkedIn
Investing
Shares can be purchased in the market via a stockbroker or
through share dealing platforms. They can also be held
through share plans, ISAs or pensions and links to various
providers are included on our website.
Potential investors are reminded that the value of investments
and the income from them may go down as well as up and
investors may not receive the full amount invested. Tax
benefits may vary as a result of statutory changes and their
value will depend on individual circumstances.
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
89
Notice of Annual
General Meeting
Photo: Regency Manor,
Wynyard, Teesside, Bellway
90
Notice is hereby given that the Annual General Meeting
(“AGM”) of TheHenderson Smaller Companies Investment
Trust plc willbe held at the offices of Janus Henderson Investors
at 201Bishopsgate, London EC2M 3AE on Wednesday,
2October 2024 at 11.30 am for the purpose of considering
and, ifthought fit, passing the following resolutions:
Ordinary resolutions
1 To receive the Annual Report and the audited financial
statements for the year ended 31 May 2024.
2 To approve the Directors’ Remuneration Report for the
year ended 31 May 2024.
3 To approve a final dividend of 19.5p per ordinary share.
4 To re-appoint Penny Freer as a director of the Company.
5 To re-appoint Kevin Carter as a director of the Company.
6 To re-appoint Alexandra Mackesy as a director of the
Company.
7 To re-appoint Yen Mei Lim as a director of the Company.
8 To re-appoint Victoria Sant as a director of the Company.
9 To re-appoint Michael Warren as a director of the
Company.
10 To re-appoint Forvis Mazars LLP as the statutory auditor
of the Company.
11 To authorise the Audit and Risk Committee to determine
the statutory auditor’s remuneration.
12 THAT in substitution for all existing authorities, the directors
be generally and unconditionally authorised in accordance
with section 551 of the Companies Act 2006 (the “Act”) to
exercise all powers of the Company to allot relevant
securities (within the meaning of section 551 of the Act) up
to an aggregate nominal amount of £1,859,628 (or such
other amount as shall be equivalent to 10% of the
Company’s issued ordinary share capital, excluding
treasury shares, at the date of the passing of this
resolution) for a period expiring (unless previously renewed,
varied or revoked by the Company in general meeting) at
the conclusion of the next AGM of the Company after the
passing of this resolution save that the Company may
before such expiry make an offer or agreement which
would or might require relevant securities to be allotted
after such expiry and the directors may allot relevant
securities in pursuance of such an offer or agreement as if
the authority conferred hereby had not expired.
Special resolutions
13 THAT in substitution for all existing authorities and subject
to resolution 12 being passed, the directors be
empowered pursuant to section 570 and section 573 of
the Act to allot equity securities (within the meaning of
section 560 of the Act), and/or where such allotment
constitutes an allotment of equity securities by virtue of
section 560 of the Act, for cash pursuant to the authority
conferred by resolution 12, as if section 561 of the Act did
not apply to any such allotment and to sell relevant shares
(within the meaning of section 560 of the Act) held by the
Company immediately before the sale as treasury shares
(as defined in section 724 of the Act) for cash as if section
561 of the Act did not apply to any such sale.
This power shall be limited to:
(a) the allotment or sale of equity securities, whether by
way of a rights issue, open offer or otherwise in favour
of ordinary shareholders on the register of members at
such record date as the directors may determine,
where the equity securities respectively attributable to
the interests of all ordinary shareholders are
proportionate (or as nearly as may be) to the respective
numbers of ordinary shares held by them (or are
otherwise allotted in accordance with the rights
attaching to such equity securities), subject to such
exclusions or other arrangements as the directors may
deem necessary or expedient in relation to fractional
entitlements or local or practical problems arising
under the laws of, or the requirements of any
regulatory body or stock exchange in any territory or
otherwise howsoever;
(b) the allotment or sale (otherwise than pursuant to
subparagraph (a) above) of equity securities up to an
aggregate nominal value of £1,859,628 (or such other
amount as shall be equivalent to 10% of the issued
ordinary share capital, excluding treasury shares, at
the date of the passing of the resolution); and
(c) to the allotment or sale of equity securities at a price of
no less than the net asset value per share;
and shall expire at the earlier of the date falling 15 months
after the passing of this resolution or the conclusion of the
next AGM of the Company after the passing of this resolution,
save that the Company may before such expiry make an offer
or agreement which would or might require equity securities
to be allotted or sold after such expiry and the directors may
allot equity securities in pursuance of such an offer or
agreement as if the power conferred hereby had not expired.
14 THAT in substitution for existing authorities, the Company
be generally and unconditionally authorised in
accordance with section 694 of the Act to purchase
(within the meaning of section 693 of the Act) the
preference stock units of £1 each in the capital of the
Company (prior to 1May 1999, the 4½ per cent
cumulative preference stock units of £1 each in the capital
of the Company) (the “Preference Stock”) pursuant to
contracts arising from acceptance of the offer to
purchase Preference Stock made by the Company on
theterms described in the circular to holders of ordinary
shares and Preference Stock dated 24 February 1999,
such authority to expire at the conclusion of the next
AGMof the Company or, if sooner, 15 months from the
date of the passing of this resolution.
Notice of Annual General Meeting
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
91
15 THAT in substitution for existing authorities, the Company
be generally and unconditionally authorised in accordance
with section 701 of the Act to make market purchases
(within the meaning of section 693 of the Act) of ordinary
shares in issue of 25p each, excluding treasury shares, in
the capital of the Company (“ordinary shares”), on such
terms and in such manner as the directors may from time
to time determine, provided that:
(a) the maximum number of ordinary shares that may be
purchased shall be 14.99% of the Company’s issued
ordinary share capital (equivalent to 11,150,331 shares
at the date of this Notice) at the date of the passing of
this resolution;
(b) the minimum price (exclusive of expenses) which may
be paid for an ordinary share is 25p, being the nominal
value per share;
(c) the maximum price (exclusive of expenses) which may
be paid for an ordinary share shall not exceed the
higher of:
(i) 105% of the average of the middle market
quotations for the shares as taken from the London
Stock Exchange Daily Official List for the five
business days preceding the date of purchase; and
(ii) the higher of the last independent bid and the
highest current independent bid on the London
Stock Exchange;
(d) the authority hereby conferred will expire on the earlier
of the conclusion of the next AGM of the Company
after the passing of this resolution or 15 months from
the date of the passing of this resolution, unless such
authority is renewed prior to such time;
(e) the Company may make a contract to purchase
ordinary shares under the authority hereby conferred
prior to the expiry of such authority which will or may
be executed wholly or partly after the expiration of
such authority and may make a purchase of ordinary
shares pursuant to such contract; and
(f) any shares so purchased shall be cancelled or, in
accordance with the provisions of the Act, if the
directors so determine, be held, sold, transferred or
otherwise dealt with as treasury shares.
16 THAT a general meeting other than an AGM may be
calledon not less than 14 clear days’ notice, such
authority to expire at the conclusion of the AGM of the
Company in 2025.
By order of the Board
Janus Henderson Secretarial Services UK Limited
Corporate Secretary
31 July 2024
Registered office:
201 Bishopsgate, London EC2M 3AE
Annual General Meeting venue
Notice of Annual General Meeting (continued)
MOORGATE
BISHOPSGATE
PRIM ROSE ST.
WORSH IP ST REET
201 Bishopsgate
London EC2M 3AE
LIVERPOOL
STREET
STATION
APPO LD ST.
SUN STREET
BROADGATE
CIRCLE
FINS BURY PAVE .
EARL ST.
WORSHIP STREET
ROPEM AKER S TREE T
LIVERPOO L ST
LONDON WALL
WILSON ST.
BISHOPSGATE
GREAT EASTERN ST.
COMMERCIAL ST.
SHOREDITCH
HOUNDSDITCH
AL DGATE
MIDDLESEX
STREET
CHISWELL STREE T
SOUTH PLACE
ELDON ST.
FINSBU RY
CIRCUS
CITY ROAD
FINS BURY SQ.
FINS BURY SQ.
CLIF TON ST.
SPITALFIELDS
MARKET
FOLGATE ST.
NORTON
MIDDLESEX ST.
BRUS HFIELD ST REET
APPO LD ST.
The 2024 AGM will be held at 201 Bishopsgate,
London EC2M 3AE. It is a few minutes’ walk from
Liverpool Street Station and from Moorgate Station.
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
92
Explanation of AGM resolutions
The information set out below is an explanation of the
business to be considered at the 2024 Annual General
Meeting (the “AGM”). You are welcome to join the AGM
inperson or by conferencing software Zoom. If you
wishtojoinby videoconference, please visit
www.janushenderson.com/hsl-agm toregister.
Resolutions 1 to 12 are proposed as ordinary resolutions.
This means that for each of those resolutions to be passed,
more than half of the votes cast must be in favour of the
resolution. Resolutions 13 to 16 are proposed as special
resolutions. This means that for each of those resolutions to
be passed, at least three quarters of the votes cast must be
in favour of the resolution.
Resolution 1: Annual Report and audited
financial statements
The directors are required to lay before the AGM the annual
report and audited financial statements of the Company for
the financial year ended 31 May 2024 (the “Annual Report”).
Shareholders will be given an opportunity at the AGM to ask
questions and will be invited to receive the Annual Report.
Resolution 2: Approval of the Directors’
Remuneration Report
Shareholders are asked to approve the Directors’
Remuneration Report for the year ended 31 May 2024
(seepages 48 to 50 of the Annual Report). The vote on the
Remuneration Report is advisory and does not affect the
remuneration payable to any individual director, though the
Board will take feedback from shareholders and incorporate
this into any future remuneration discussions.
Resolution 3: Final Dividend
The directors propose a final dividend of 19.5p per ordinary
share. The payment of a final dividend is subject to the approval
of shareholders, although the scope to pay a lesser amount
would be restricted by the Company’s status as an investment
trust. If approved, the dividend will be paid on 7 October 2024
to shareholders on the register on 30 August 2024. The shares
will be quoted ex-dividend on 29 August 2024.
Resolutions 4 to 9: Re-appointment of directors
Under the AIC Code of Corporate Governance, as
endorsed by the Financial Reporting Council, directors are
expected to stand for re-appointment by shareholders
annually. At its meeting in April 2024, the Nomination
Committee reviewed the performance, contribution and
commitment of the members of the Board and concluded
that each director standing for appointment and re-
appointment brought extensive, current and relevant
business experience that allows them to contribute
effectively to the leadership of theCompany, in terms
ofboth performance and time commitment.
The biographies of each director, including their skills,
experience and qualifications relevant for the sustainable
success of the Company are set out on pages 33 and 34
ofthe Annual Report. Alldirectors standing for re-appointment
by shareholders held office throughout the yearunder review.
Resolutions 10 and 11: Statutory auditor
In accordance with sections 489 and 492 of the Companies
Act 2006 (the “Act”), shareholders are required to approve
the appointment of the Company’s auditor each year and
give directors the authority to determine the auditor’s
remuneration. Resolution 10 relates to their appointment and
resolution 11 relates to the determination of Forvis Mazars
LLP’s remuneration. In accordance with sections 489 and
492 ofthe Act, shareholders are required to approve the
appointment of the Company’s auditor each year and give
authority to the directors to determine their remuneration.
The Board is pleased to ask shareholders to re-appoint
Forvis Mazars LLP as the Company’s auditor for what would
be their fourth year in office.
Resolutions 12 and 13: Authority to issue new
shares and disapply pre-emption rights
At the 2023 AGM the directors were granted authority to allot
a limited number of new ordinary shares. No shares have
been allotted under this authority, which will expire at the
forthcoming AGM. The directors are seeking the power to
allot new ordinary shares for cash on a non pre-emptive
basis. Renewal of the resolutions, if passed, will give the
directors authority to allot ordinary shares for cash on a non
pre-emptive basis up to an aggregate nominal amount of
£1,859,628 (or such other amount as shall be equivalent to
10% of the issued ordinary share capital at the date of the
passing of the resolution). The directors intend to use the
authority to issue ordinary shares only if and when they
believe it to be advantageous to the Company’s existing
shareholders to do so. In particular, shares, whether new
ordinary shares or ordinary shares held in treasury, will never
be allotted or sold other than at a premium to the net asset
value per ordinary share. The authority will lapse unless
renewed at the earlier of 15 months from the passing of this
resolution or the conclusion of the next AGM of the Company.
Resolution 14: Preference Stock
In a circular to shareholders and preference stockholders
dated 24 February 1999, the Company proposed to offer to
purchase for cancellation all the Company’s outstanding
preference stock at £1 per unit, being the par value of the
preference stock units. At an extraordinary general meeting
of the Company held on 22 March 1999, these proposals,
together with the related changes to the articles of
association, were approved. At 31 May 2024, 4,257
preference stock units of £1 each were still in issue. It is
intended that the offer will remain open until such time as all
the preference stock has been acquired. This resolution
renews for a further year the Company’s powers to purchase
Notice of Annual General Meeting (continued)
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
93
for cancellation the outstanding preference stock. This
authority will expire at the conclusion of the next AGM of
theCompany or if sooner, 15 months from the date of the
passing of this resolution.
Resolution 15: Repurchase of the Company’s
ordinary shares
At the 2023 AGM, the directors were granted authority to
repurchase 11,197,799 ordinary shares for cancellation or to
be held in treasury. A total of 316,665 shares were bought
back under this authority as at the date of this Notice. The
Company’s articles of association permit the Company to
purchase its own shares and to fund such purchases from
its accumulated realised capital reserves. The Board
considers that the Company should continue to have
authority to buy back its own ordinary shares to be held in
treasury or for cancellation. Resolution 15 authorises the
Company to make market purchases for cancellation of up
to 14.99% of the ordinary shares in issue at the date of the
AGM (equivalent to 11,150,331 ordinary shares with a
nominal value of £2,787,583 if there is no change in the
issued ordinary share capital between now and the AGM).
Under the Listing Rules of the Financial Conduct Authority,
this is the maximum percentage of its equity share capital
that a company may purchase through the market pursuant
to such authority. The directors believe that buying back the
Company’s own shares in the market, at appropriate times
and prices, is in the best interests of shareholders generally.
The Company will make purchases within guidelines set from
time to time by the Board and if or when market conditions
are suitable, with the aim of maximising the benefit to the
remaining shareholders.
The directors will not use this authority unless to do so would
result in an increase in the net asset value per ordinary share.
The minimum price (exclusive of expenses) which may be
paid for an ordinary share is 25p, being the nominal value per
share. The authority will expire at the earlier of the date falling
15 months after the passing of this resolution or the
conclusion of the next AGM of the Company.
Resolution 16: Notice of General Meetings
The Act and the Company’s articles of association provide
that all general meetings other than AGMs can be convened
on 14 days’ notice. However, one of the requirements of the
Shareholder Rights Directive is that all general meetings must
be held on 21 clear days’ notice, unless shareholders agree
to a shorter notice period. The Board is of the view that it is in
the Company’s interests to have a shorter notice period
which complies with the provisions of the Act, and the
Company’s articles allow all general meetings (other than an
AGM) to be called on 14 clear days’ notice. The passing of
Resolution 16 would constitute shareholders’ agreement for
the purposes of the Shareholder Rights Directive (for which
agreement is required annually) and would therefore preserve
the Company’s ability to call general meetings other than an
AGM on 14 clear days’ notice. The Board would utilise this
authority to provide flexibility only when merited and would
not use it as a matter of routine. The Board intends to seek
arenewal of such authority at subsequent AGMs.
Notes to the Notice of Annual General
Meeting (the “AGM”)
1. Voting record date
Only those shareholders registered in the register of members
of the Company at close of business on Monday, 30September
2024 (the “voting record date”) shall be entitled to vote at the
AGM in respect of the number of voting rights registered in
their name at that time. Changes to entries on the register
ofmembers after that time shall be disregarded in
determiningthe rights of any person to attend, speak
andvoteat the AGM.
If the AGM is adjourned for no more than 48 hours after the
original time, the same voting record date will also apply for
the purpose of determining the entitlement of members to
attend, speak and vote (and for the purpose of determining
the number of votes they may cast) at the adjourned meeting.
If the AGM is adjourned for more than 48 hours then the
voting record date will be close of business on the day which
is two days (excluding non-working days) before the day of the
adjourned meeting or, if the Company gives notice of the
adjourned meeting, at any time specified in that notice. In the
case of joint holders of a voting right, the vote of the senior
who tenders a vote shall be accepted to the exclusion of the
votes of the other joint holders and, for this purpose, seniority
shall be determined by the order in which the names stand in
the register of members in respect of the joint holding.
2. Right to attend and vote
Holders of ordinary shares are entitled to attend and vote at
the AGM or at any adjournment(s) thereof. On a poll vote,
each ordinary shareholder has one vote for each share held.
On a vote on a show of hands, each ordinary shareholder or
proxy has one vote.
If a proxy is appointed by more than one member and all such
members have instructed the proxy to vote in the same way,
the proxy will only be entitled on a show of hands to vote ‘for’
or ‘against’ as applicable. If a proxy is appointed by more than
one member, but such members have given different voting
instructions, the proxy may on a show of hands vote both ‘for’
and ‘against’ in order to reflect the different voting instructions.
On a poll all or any of the voting rights of the members may be
exercised by one or more duly appointed proxies. However,
where a member appoints more than one proxy, section
285(4) of the Companies Act 2006 (the “Act”) does not
authorise the exercise by the proxies taken together of more
extensive voting rights than could be exercised by the
member in person.
Corporate representatives are entitled to attend and vote on
behalf of the corporate member in accordance with section
Notice of Annual General Meeting (continued)
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
94
Notice of Annual General Meeting (continued)
323 of the Act. Shareholders are invited to send their letters
ofcorporate representation in advance of the AGM to
itsecretariat@janushenderson.com.
This Notice is available to holders of preference stock for
information only. Preference stockholders are not entitled to
attend or vote at the AGM.
3. Right to appoint proxies
Pursuant to section 324 of the Act, a member entitled to
attend and vote at the AGM may appoint more than one
proxy, provided that each proxy is appointed to exercise the
rights attached to shares held by him or her. A proxy need not
be a member of the Company. A form of proxy is enclosed.
The completion of the form of proxy or any CREST proxy
instruction will not preclude a shareholder from attending.
Persons nominated to receive information rights have been
sent this Notice of AGM and are hereby informed, in
accordance with section 149(2) of the Act, that they may have
the right under an agreement with the registered member by
whom they are nominated to be appointed, or to have
someone else appointed, as a proxy for this AGM. If they have
no such right or do not wish to exercise it, they may have a
right under such an agreement to give instructions to the
member as to the exercise of voting rights. Nominated
persons should contact the registered member by whom they
were nominated in respect of these arrangements. The
statement of rights of shareholders for the appointment of
proxies does not apply to nominated persons.
If you are an institutional investor you may also be able to
appoint a proxy electronically via the Proxymity platform,
aprocess which has been agreed by the Company and
approved by the Registrar. For further information regarding
Proxymity, please go to www.proxymity.io. Your proxy must
be lodged by 11.30 am on Monday, 30 September 2024 to be
considered valid.
Before you can appoint a proxy via this process you will need
to have agreed to Proxymity’s associated terms and
conditions. It is important that you read these carefully as you
will be bound by them and they will govern the electronic
appointment of your proxy.
4. Receipt and termination of proxies
To be valid, the enclosed Form of Proxy must be received by
the Company’s Registrar (Computershare Investor Services
PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY)
before 11.30 am on Monday, 30 September 2024 (or, in the
case of an adjournment, no later than 48 hours before the
time fixed for the holding of the adjourned meeting).
As an alternative to completing and returning the printed Form
of Proxy, you may submit your proxy electronically by
accessing www.investorcentre.co.uk/eproxy. For security
purposes, you will be asked to enter the control number,
yourshareholder reference number (“SRN”) and personal
identification number (“PIN”) to validate the submission of your
proxy online. The control number and members’ individual
SRN and PIN numbers are shown on the Form of Proxy.
A member may terminate a proxy’s authority at any time before
the commencement of the Meeting. Termination must be
provided in writing and submitted to the Company’s Registrar.
In accordance with the Company’s Articles of Association,
indetermining the deadline for receipt of proxies, no account
shall be taken of any part of a day that is not a working day.
5. Electronic receipt of proxies
CREST members who wish to appoint a proxy or proxies by
following the CREST electronic proxy appointment service
may do so for the AGM and any adjournment(s) thereof by
using the procedures described in the CREST manual,
whichis available to download from the Euroclear website
www.euroclear.com. CREST personal members orother
CREST sponsored members, and those CREST members
who have appointed a voting service provider(s), should refer
to their CREST sponsor or voting service provider(s), who will
be able to take the appropriate action ontheir behalf.
In order for a proxy appointment made by means of CREST to
be valid, the appropriate CREST message (a “CREST Proxy
Instruction”) must be properly authenticated in accordance
with Euroclear UK & Ireland Limited’s specifications and must
contain the information required for such instructions, as
described in the CREST manual. The message must be
transmitted so as to be received by the issuer’s agent (ID
3RA50) by the latest time for receipt of proxy appointments
specified in note 4 above. For this purpose, the time of receipt
will be taken to be the time (as determined by the timestamp
applied to the message by the CREST applications host) from
which the issuer’s agent is able to retrieve the message by
enquiry to CREST in the manner prescribed by CREST. After
this time, any change of instructions to proxies appointed
through CREST should be communicated to the appointee
through other means.
CREST members and, where applicable, their CREST
sponsors or voting service provider(s) should note that
Euroclear UK & Ireland Limited does not make available
special procedures in CREST for any particular messages.
Normal system timings and limitations will therefore apply in
relation to the input of CREST Proxy Instructions. It is the
responsibility of the CREST member concerned to take (or,
ifthe CREST member is a CREST personal member or
sponsored member or has appointed a voting service
provider(s), to procure that his CREST sponsor or voting
service provider(s) take(s)) such action as shall be necessary
to ensure that a message is transmitted by means of the
CREST system by any particular time. In this connection,
CREST sponsors or voting service providers are referred, in
particular, to those sections of the CREST manual concerning
practical limitations of the CREST system and timings.
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
95
The Company may treat as invalid a CREST Proxy Instruction
in the circumstances set out in Regulation 35(5) of the
Uncertificated Securities Regulations 2001.
6. Communication with the Company
Members may not use any electronic address provided either
in the Notice or in any related documents (including the form
of proxy) to communicate with the Company for any purpose
other than those expressly stated.
7. Questions at the AGM
Section 319A of the Act requires the directors to answer any
question raised at the AGM which relates to the business of
the AGM, although no answer need be given:
(a) if to do so would interfere unduly with the preparation of
the AGM or involve disclosure of confidential information;
(b) if the answer has already been given on the Company’s
website; or
(c) if it is undesirable in the best interests of the Company or
the good order of the AGM that the question be answered.
8. Members’ statement of audit concerns
Members satisfying the thresholds in section 527 of the Act
can require the Company to publish a statement on its
website setting out any matter relating to:
(a) the audit of the Company’s accounts (including the
Auditor’s Report and the conduct of the audit) that are to
be laid before the AGM; or
(b) any circumstances connected with an auditor of the
Company ceasing to hold office since the last AGM, that
the members propose to raise at the AGM.
The Company cannot require the members requesting the
publication to pay its expenses. Any statement placed on the
website must also be sent to the Company’s auditor no later
than the time at which it makes its statement available on the
website. The business which may be dealt with at the AGM
includes any statement that the Company has been required
to publish on its website.
9. Total voting rights
As at 29 July 2024 (being the last practicable date prior to
thepublication of this Notice) the Company’s issued ordinary
share capital consisted of 74,385,131 ordinary shares of 25p
each, carrying one vote each.
10. Documents available for inspection
The directors’ letters of appointment may be inspected at
theregistered office of the Company, 201 Bishopsgate,
London EC2M 3AE during normal business hours on any
day(Saturdays, Sundays and public holidays excepted) and
will be available at the AGM from 15 minutes prior to its
commencement until its conclusion. No director has a
contract of service with the Company. If shareholders unable
to attend the AGM physically wish to inspect the directors’
letters of appointment, please contact the corporate
secretary at itsecretariat@janushenderson.com.
11. Members’ power to circulate resolutions
Under section 338 and section 338A of the Act, members
meeting the threshold requirements in those sections have the
right to require the Company to:
(i) give, to members of the Company entitled to receive
notice of the meeting, notice of a resolution which may
properly be moved and is intended to be moved at the
meeting; and/or
(ii) include in the business to be dealt with at the meeting any
matter (other than a proposed resolution) which may be
properly included in the business. A resolution may
properly be moved or a matter may properly be included
in the business unless (a) (in the case of a resolution only)
it would, if passed, be ineffective (whether by reason of
inconsistency with any enactment or the Company’s
constitution or otherwise), (b) it is defamatory of any
person, or (c) it isfrivolous or vexatious.
Such a request must: identify the resolution of which notice is
to be given or the matter to be included in the business; be
signed by the person or persons making it; state the full
name(s) and address of the person making it; provide
evidence of the number of shares held; be received by the
Company not later than six clear weeks before the meeting;
and (in the case of a matter to be included in the business
only) be accompanied by a statement setting out the grounds
for the request.
The request may be made in hard copy to the Corporate
Secretary, The Henderson Smaller Companies Investment
Trust plc at 201 Bishopsgate, London EC2M 3AE or in
electronic form to itsecretariat@janushenderson.com.
12. Website
The Company’s Annual Report which contains this Notice of
Meeting is available at www.hendersonsmallercompanies.com,
together with these explanatory notes.
Notice of Annual General Meeting (continued)
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
96
Strategic Report
Performance 2-3
Portfolio Information 4
Chair’s Statement 5-7
Fund Manager’s Report 8-13
Investment Portfolio 14-16
Historical Performance 17
Business Model 18-19
Section 172 Statement 20-23
KPIs 23
Board Decision Making 24
Managing Risks 25-26
Viability, Fees and Costs 26-27
Environmental, Social and Governance
(“ESG”) Matters 28-31
Governance
Corporate Governance Report 32-41
Board of Directors 33-34
Audit and Risk Committee Report 42-44
Management Engagement Committee Report 45
Nomination Committee Report 46-47
Directors’ Remuneration Report 48-50
Report of the Directors 51-52
Statement of Directors’ Responsibilities 53
Financial Statements
Independent Auditor’s Report
to the Members 55-61
Financial Statements 62-65
Notes to the Financial Statements 66-81
Additional Information
Glossary 83-84
Alternative Performance Measures 85-86
General Shareholder Information 87-88
Corporate Information 89
Notice of Annual General
Meeting (“AGM”)
Notice of AGM 90-92
Explanation of AGM resolutions 93-94
Notes explaining AGM processes 94-96
The Henderson Smaller Companies Investment Trust plc Annual Report 2024
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.
Keeping in touch
We know how important it is to receive up-to-date information about the Company.
Visitour website at www.hendersonsmallercompanies.com
Register for updates, insights and factsheets about the Company:
Register here to watch this year’s Annual General Meeting by webinar:
The Board also welcomes you in person to the AGM. Please see more details about the
AGM and attending in person or by webinar, in the Chair’s Statement.
Please send your general enquiries about the Company to the Company Secretary at:
itsecretariat@janushenderson.com.
The Henderson
Smaller Companies
Investment
Trust plc
JHI9226/24
The Henderson Smaller Companies Investment Trust plc
Registered as an investment company in England and Wales
Registration number: 00025526
Registered office: 201 Bishopsgate, London EC2M 3AE
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
Telephone: 0800 832 832
Email: support@janushenderson.com
www.hendersonsmallercompanies.com
JHI9226/24Designed and typeset by 2112 Communications, London Printed by Paragon, London.
This report is printed on Revive silk 100% recycled, contains 100% recycled waste and
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The Henderson Smaller Companies Investment Trust plc – Annual Report 2024
Annual Report 2024