THE HENDERSON SMALLER COMPANIES INVESTMENT TRUST PLC

ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 31 MAY 2017

This announcement contains regulated information

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.

1 Net Asset Value per ordinary share total return with income reinvested for 1, 3 and 5 years and capital NAV plus income for 10 years

2 Share price total return using mid-market closing price

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

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

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

6 Calculated using published daily NAVs with debt at par including current year revenue

7 This represents an interim dividend of 5.0p and a proposed final dividend of 13.0p.

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

Sources: Morningstar Funddata, Morningstar Direct, Janus Henderson, Datastream

CHAIRMAN'S STATEMENT

Performance

I am delighted to report that your Company has had an excellent year. The share price has risen by 32.7%, and the net assets by 28.7%, outperforming our benchmark, the Numis Smaller Companies Index (excluding investment companies), by 4.8% on a total return basis.

This means that our Fund Manager, Neil Hermon, and his team have outperformed our benchmark over one, three, five and ten years. Over the ten years to 31 May 2017, our net asset value total return is 170.5%, versus a total return from the benchmark of 124.3%. This is an impressive compound annual return to shareholders of 10.5% and is continuing testimony to the skills of Neil and his team, proving that thoughtful stock-picking can genuinely add value.

I would, as always, like to thank all the Henderson staff and my Board for their efforts throughout the year on behalf of shareholders.

Revenue and Dividend

The revenue return per share has increased to 19.6p, compared with 15.9p for the previous year. The Board is proposing a final dividend for the year of 13.0p per share, making a total dividend for the year of 18.0p (2016: 15.0p), as an interim dividend of 5.0p was paid in March. This marks a 20% increase on the previous financial year and is our 14th consecutive year of dividend growth. The final dividend is, of course, subject to shareholder approval at the Annual General Meeting to be held in October.

Gearing

In February 2017 the Company's £40 million bank facility with National Australia Bank expired. This was replaced with a £40 million facility with Scotiabank which has subsequently been increased to £60 million. This, combined with the £30 million unsecured loan notes from May 2016, provides total borrowing facilities of £90 million which the Fund Manager can utilise within gearing parameters set by the Board.

Ongoing Charge

The Board regularly reviews the Ongoing Charge and monitors the expenses incurred by the Company. For the year ended 31 May 2017 the Ongoing Charge was 0.43%, which compares to a charge of 0.44% for the year ended 31 May 2016, when excluding the performance fee. The charge including the performance fee was 1.01% for the year ended 31 May 2017, there was no performance fee payable last year. Further details of the Ongoing Charge are contained in the Annual Report.

Discount and Share Buy-backs

During the year, the AIC UK Smaller Companies sector as a whole traded at an average discount of 13.8% to NAV, with highs and lows of 16.5% and 9.7% respectively. At the year end, the Company's shares traded at a discount of 13.3%. The Company's discount ranged from 19.1% to 11.4%, with the average discount over the year being 15.7%.

The Board continues to monitor the discount and will consider the merits of buying back shares as markets evolve, though we do not currently believe that share buy-backs represent the most effective way of generating long term shareholder value. During the reporting year, no shares were bought back in the Company.

Outlook

Last year was dominated by two important votes; the Brexit referendum and the US Presidential elections. The outcomes of these events were a surprise to many people, not least the world's equity markets, and have been a major influence on their movements since. I said last year that uncertainty would remain until investors felt confident that the way forward for the UK was resolved. Given these conditions it seems unlikely that interest rates will rise significantly anytime soon and therefore sterling is likely to remain weak. As in previous years, our view remains that this is the time to stick to what we do best, and we remain confident that skilled active investing founded on the basic fundamentals of investing in quality growth at the right price will win through in these uncertain times. This has always been Neil's style and one that he will continue to adopt.

Annual General Meeting

The Annual General Meeting of the Company will be held at 11.30am on Thursday 5 October 2017 at the Registered Office, 201 Bishopsgate, London EC2M 3AE. We would encourage as many shareholders as possible to attend for the opportunity to meet the Board and to watch a presentation from Neil Hermon reviewing the year and looking forward to the year ahead.

The Company's AGM will be broadcast live on the internet. If you are unable to attend in person, you can watch the meeting as it happens by visiting www.janushenderson.com/trustslive.

Manager

As noted in my statement at the half year, Henderson Group plc merged with Janus Capital Group, Inc. on 30 May 2017. This will not lead to any change in personnel responsible for the day to day management of your Company.

Jamie Cayzer-Colvin

Chairman

FUND MANAGER'S REPORT

Market - year in review

The year under review was a very positive one for equity markets. It encompassed a period of significant political upheaval with the surprise wins for Brexit at the EU Referendum in June and the election of President Trump in November. That equity markets made such good progress is somewhat of a surprise but has been helped in the UK by the significant devaluation of sterling helping, in particular, large international earners.

Global economic conditions have been improving, albeit modestly, with stronger growth around the world. Monetary conditions remained benign with supportive monetary policies from developed world central banks. Global geo-political concerns remained heightened with significant conflict in the Middle East causing an international migrant crisis. Commodity prices rebounded with robust Chinese economic growth and production cutbacks aiding a recovery in oil and metal prices.

The fundamentals of the corporate sector remained robust. Companies continued to grow their dividends whilst balance sheets remained strong. UK corporate earnings saw stronger growth, helped by improving economic conditions and the weakness of sterling increasing the value of overseas earnings for UK companies.

Smaller companies marginally underperformed larger companies over the year. This is the only year that the Numis Smaller Companies Index (excluding investment companies) has underperformed the FTSE All-Share Index in the last nine years.

Fund Performance

The Company had an excellent year in performance terms - rising strongly in absolute terms and outperforming its benchmark. The net asset value rose 28.7%, on a total return basis. This compared to a rise of 23.9% (total return) from the Numis Smaller Companies Index (excluding investment companies). The outperformance came from a combination of underlying positive portfolio performance and a positive contribution from gearing in the Company. We have now outperformed the benchmark in 13 of the past 14 years.

Gearing

Gearing started the year at 9.1% and ended it at 9.2%. In the previous year the Company had redeemed the £20 million 10.5% 2016 debenture and replaced it with £30 million 20-year unsecured loan notes at an interest rate of 3.33%. This facility was provided by MetLife, one of the largest life insurance companies in the world. The replacement of the debenture with the new loan notes is now saving the Company a significant amount annually in interest while providing committed long term debt at a low interest rate. The remainder of the Company's debt is provided by short term bank borrowings. The controlled use of gearing was a positive contributor to performance in the year as markets rose and has been a significant positive over the 14 years I have managed the investment portfolio.

Attribution Analysis

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

NMC Health is a Middle Eastern based healthcare operation. Its main facilities are in the United Arab Emirates, particularly Dubai and Abu Dhabi. NMC has grown strongly since its IPO in 2012 through the building of new facilities and acquisitions. This growth is set to continue, particularly given the positive structural opportunities in the UAE, driven by an underprovision of state provided healthcare, the continued roll-out of mandatory health insurance and positive demographics. The acquisition strategy has supplemented the organic strategy by diversifying the business by geography and medical discipline. Even after a strong share price performance in the last year the shares still look good value considering the strong earnings growth forecast.

Melrose Industries is a diversified engineering group whose raison d'être is to buy underperforming businesses, improve them and then sell the assets on. Essentially it is deploying a private equity model in the public markets. The company has had significant success in the past with its acquisitions of Dynacast, McKechnie, FKI and Elster, all of which have been sold for significant profit on cost. The management team are highly rated due to their demonstrable track record of making money for shareholders. In late 2016 Melrose acquired Nortek, a US based provider of building products. Initial indications are that the improvements to Nortek margins and return on capital employed are ahead of plan, which has propelled the share price higher. With plans to make further enhancing acquisitions we continue to be firm supporters of the Melrose story.

Renishaw designs, develops and manufactures high technology precision measuring and calibration equipment. The business is a global leader in its field with strong patent protection. The company invests heavily in research and development to maintain its market leading technological position. Over the medium term the organic growth delivered has been one of the strongest in the capital goods sector. It has expanded its operations by diversifying into healthcare and additive manufacturing markets, both of which offer long term attractive growth. In the short term the company is enjoying the recovery in industrial capital expenditure, new investment in the smartphone production chain and, as a major exporter, the competitive benefits of a weaker pound. Renishaw, with a very strong balance sheet and a well invested production base, is superbly positioned for the long term.

e2v Technologies manufactures high technology electronic components. Although e2v is a company with significant technology and high margins, it has historically struggled to deliver consistent growth. This led to an undervaluation of the business. The appointment of a new chairman and CEO led to a re-focusing of the business with cost taken out, a new customer-focused approach and de-cluttering of the organisation's processes. After initial positive results from this new approach, the company received an agreed bid from Teledyne Technologies, a US company, at a significant premium.

Clinigen is a global speciality pharmaceutical services business. Its core activity is providing comparator drugs and other services for clinical trials and providing market access for drugs that are difficult to obtain or yet to be licensed. It also has a speciality pharmaceutical division which looks to acquire niche drugs from major pharmaceutical companies, where management think they can enhance performance through additional regulatory approval or increased targeted marketing. The company has seen strong growth since its IPO in 2012 and this is likely to continue given the strength of the management team and the positive structural growth of its end markets.

Evraz is a Russian steel producer. The Company had no holding in Evraz. After a prolonged period of weakness, commodity markets rebounded in 2016 with robust Chinese economic growth and production cutbacks aiding a recovery in oil and metal prices. Consequently the mining sector performed extremely well, after significant underperformance in 2015. The Company has typically had an underweight position in this sector due to the volatile nature of commodity prices, the high leverage these companies usually employ, their position as price takers with little influence over the value of their output and their poor corporate governance.

Vedanta Resources is an Indian diversified oil and metals group. The Company had no holding in Vedanta. The comments made about Evraz also apply to Vedanta Resources.

Essentra is a diversified industrial group involved in the manufacture and distribution of industrial components, cigarette filter production and healthcare packaging. The company had an extremely difficult year as poor integration of acquisitions in the packaging division and delayed and cancelled orders in filters led to a sharp fall in profitability. The CEO was removed and the company sold its Porous Technologies division to reduce debt. After falling significantly, the shares have made a good recovery since the appointment of a well respected new management team. We sold our position towards the year-end as we believe the recent rally in the share price already discounts a significant recovery in profits.

Kaz Minerals is a Kazakhstan based producer of copper. The Company had no holding in Kaz Minerals. The comments made about Evraz also apply to Kaz Minerals.

Electrocomponents distributes electronic components and maintenance products. The Company had no holding in Electrocomponents. The company has performed well, growing profits substantially through a combination of improving end market demand and margin enhancement from rationalisation and cost control.

Portfolio Activity

Trading activity in the portfolio was consistent with an average holding period of 5 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.

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

Avon Rubber is a specialised product supplier into the defence and dairy markets. The company has a very strong position in its core markets, with both offering attractive growth and acquisition opportunities. In protection and defence, the group has a strong global position in the provision of masks and respirators. The

increased focus on homeland security and improving defence spend provide a strong backdrop. In dairy, after a period of weakness, rising milk prices are helping farmers' profitability. This is leading to increased spend on capital items such as manufacturing liners and tubing and electro-mechanical milking components. With a balance sheet in a net cash position, the company is well placed to acquire complementary assets.

Burford Capital is a provider of investment capital and risk solutions for the litigation industry. The company has an integrated business model as it takes both on-balance-sheet risk and derives fee revenues from its fund management business. Litigation is a nascent and growing market where returns are fundamentally uncorrelated to the stock market or business cycle. Burford is the largest player in this market globally. This investment provides us with exposure to structural growth in demand for litigation financing which has been driven by the practical solution it provides to the unfavourable accounting treatment of litigation on corporates and the temporary nature of equity in law firms. Management run a conservative balance sheet which provides optionality given the historically strong track record of generating high returns.

Coats is a global manufacturer of industrial thread. Its products are supplied principally to the clothing and footwear industries. The business was once part of the conglomerate Guinness Peat but multiple divestments by the new management team have focused the business. Operationally the company has been transformed by rationalising production facilities, improving customer service and improving financial returns. The company also inherited significant pension liabilities from its once parent, Guinness Peat, but a recent settlement with the trustees has provided clarity on future payments required. With certainty over its financial position, the strong balance sheet will permit value enhancing acquisitions in the specialist thread area.

Ricardo is an engineering consultant and manufacturer that principally operates in the UK, US and Germany. The company's main expertise is the design of engines for the high performance vehicle and motorsport markets although the group has started to diversify, through strategic M&A, into consulting for the rail, energy

and defence sectors. Ricardo has proven over the years that it is able to organically grow revenues and earnings on a consistent basis, which is testimony to the impressive management team. As Ricardo continues to diversify into new strategic areas, it should become a more versatile and resilient consulting firm.

SIG is a building products distributor with particular focus on insulation, roofing and interiors. The business's principal activities are in the UK, France and Germany. The company has struggled over recent years with anaemic European building markets and competitive pressure in the UK. Management did not cope successfully with these challenges and, even though there were numerous strategic initiatives to improve profitability, the business continued to underperform. This led to a refresh of the executive team with a highly impressive new CEO, Meinie Oldersma, and FD appointed. Their prior experience is highly relevant to SIG and the opportunity to improve financial returns at SIG is significant. If management can achieve their ambitions we believe there is substantial share price upside.

Smart Metering Systems ("SMS") is a UK accredited meter asset manager and provider of energy management services operating nationwide. SMS owns and operates energy meters and provides gas and electricity suppliers with all essential services relating to that meter in return for a rental yield. The company is a dominant player in its field, with only 30 accredited meter managers in the UK, and less than 50% of these companies having nationwide coverage. Returns are attractive as the company generates a rental yield of around 13% on meter assets which are funded through debt costing only 1.5% over Libor. Revenues are recurring, long duration in nature and index linked, which provides inflation protection. Whilst headline leverage looks high, termination costs provide security as energy suppliers are required to pay 1.5 times the outstanding debt on the meter asset should they decide to replace it. An investment in SMS provides us with exposure to at least 5 years of regulatory mandated growth as the Government perseveres with the roll-out of domestic smart meters.

In addition to the companies mentioned above, we invested in a number of initial public offerings (IPOs) in the year. These included Alfa Financial Software, a leading provider of software to the asset leasing industry, Hollywood Bowl, a ten-pin bowling centre operator, Luceco, a manufacturer and distributor of electrical products, UP Global Sourcing, a developer and sourcer of a number of home related brands and Xafinity, a pensions consultant.

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 Carpetright, the floorcovering retailer, where the company has suffered from increased competition and a weaker housing market. We also disposed of our holding in LSL Property Services, the estate agent, due to increased competition from new online entrants and tough trading as housing transactions fell. Other companies we sold due to a belief that they were structurally challenged or suffering from poor operational performance included Dairy Crest, the dairy products group; Laird, the electronic component network infrastructure, wireless connectivity, displays and industrial controls group; Senior, the aerospace and industrial products group; and Motorpoint, the retailer of second hand cars.

We benefited from a level of takeover activity in the year. Three portfolio companies received agreed bids. All the bidders were either foreign corporates or private equity groups. This reflects the open nature of the UK market, the strength of global corporate balance sheets and the low cost of debt. Within our portfolio, takeover bids were received for Atkins (WS), an international engineering consultant, from SNC-Lavalin; e2v Technologies, a manufacturer of high technology electronic components, from Teledyne Technologies; and Exova, a materials testing group, from private equity.

Portfolio Outlook

The following table shows the Company's top 10 stock positions and their active position versus the Numis Smaller Companies Index (excluding investment companies) at the end of May 2017.

A brief description of the largest active positions (excluding NMC Health, Melrose Industries, Clinigen and Renishaw, which are covered earlier) follows:

Bellway is a national UK housebuilder. The UK housing market has seen an impressive recovery in the recent past, due to improving consumer confidence, low interest rates and Government initiatives, particularly Help to Buy. Margins, volumes and profits have been rising strongly. Bellway is looking to exploit these conditions by expanding its national footprint, whilst maintaining a strong land-bank and balance sheet. The outlook for the sector is aided by a benign land market as the number of competitors has reduced from the previous cycle, the structural under-supply of housing in the UK and the capital discipline Bellway and its peers are displaying.

Paragon is principally a provider of buy-to-let mortgages. The company has changed its structure in the last few years by obtaining a banking licence, growing its lending in asset-backed, car finance and specialist residential markets and diversifying its funding sources into the retail market. The company enjoys a very strong capital position, enabling it to pay higher dividends whilst buying back some of its own stock. The introduction of new regulations on complex underwriting should help the specialist lenders like Paragon grow market share, and at a modest premium to asset value, we believe Paragon is good value.

Intermediate Capital is an alternative finance provider and asset manager. It is a leading provider of mezzanine finance to LBO markets. It also owns a highly successful mezzanine, property lending and credit fund management operation. Its portfolio of investments are performing well but the primary growth engine of the business is the fund management operation where it is having real success in growing assets due to the strength of its performance, the quality of the team and underlying demand for its product in an income-hungry world. The management have also boosted the company's return on equity by returning substantial surplus capital.

Atkins (WS) is an international engineering consultant, with operations principally in the UK, US, Middle East and Asia. A new management team has been restructuring the company with low-margin activities sold and operations rationalised. With this restructuring mostly completed, the company is starting to see growth in profitability and future prospects look strong, particularly as infrastructure spending comes back into focus in developed economies. The company also enjoys a cash-rich balance sheet and is looking to deploy this on acquisitions that will augment organic growth. Towards the year-end, Atkins was subject to an agreed bid from SNC Lavalin at a significant premium.

Playtech is one of the world's largest gaming and sports betting software suppliers. The company provides white-label software for online and mobile; casino, poker, bingo, sports betting and live dealer games; and has most recently made acquisitions in the spreadbetting market. Playtech benefits from operating in an industry with high barriers to entry and strong supplier power (platform migrations are very risky for online B2C businesses). This, together with long-term contracts (five to seven years and increasing) and relatively low levels of competition, makes the company well placed to benefit from global growth in online gaming. We expect returns from Playtech to be driven by continued strong earnings momentum and a growing dividend. However, we believe the greatest returns should be made from a market re-rating, driven primarily by an increase in the proportion of regulated earnings and more credit given for its high, sustainable and cash-backed margins.

Victrex is a manufacturer of a speciality thermoplastic PEEK. It is the world leader in its field with a dominant market share. Victrex has shown consistent long-term growth as demand for PEEK has grown as customers look to replace metals with lighter plastics with similar thermal properties. Although demand for PEEK is subject to the vagaries of the economic cycle, longer term its use will continue to increase. Additionally Victrex has developed a very successful medical business with PEEK used particularly in spinal and arthroscopy operations, which are growing independent of the economic cycle. Victrex has recently expanded capacity as there are significant opportunities for growth in the medical, oil and gas, aerospace and smartphone markets and in the longer term, we believe the company will return to its strong growth path.

Market Outlook

The recent UK General Election represented a political gamble that has spectacularly failed for the Conservative Party. Pre-election expectation of a significantly increased majority in the House of Commons have now transformed into a hung Parliament and a minority Government supported by a 'confidence and supply' arrangement with the Democratic Unionist Party. The frailties and complexities of such an arrangement combined with the narrow majority it provides means it is highly unlikely that the current Government will last its full term and indeed there is a reasonable chance that we will have another election in the short to medium term. At the same time, the UK Government is entering into Brexit negotiations with the EU. There is clearly a range of outcomes from these negotiations but what deal the UK will end up with is, at this point, unclear. One potential positive from the recent election is a more conciliatory stance from the UK in these negotiations and a softer Brexit as an outcome.

This political uncertainty will probably make UK consumers cautious. At the same time they are facing the pressure of more expensive imported goods. This has already squeezed consumers' net disposable income as wage inflation fails to match price inflation.

Outside the UK, economic conditions remain mixed, but on balance things seem to be getting better, particularly in the US and Europe. The recent rises in US interest rates have flagged to investors that loose global monetary conditions will at some stage reverse. However the 'normalisation' of monetary policy will probably be a slow and measured process.

In the corporate sector, conditions are intrinsically stronger than they were during the financial crisis of 2008-9. Balance sheets are more robust and dividends are growing. In addition, a large proportion of UK corporate earnings comes from overseas, even among smaller companies, and will be boosted by the devaluation of sterling.

In terms of valuations, the equity market is roughly in line with long term averages. M&A remains a supportive feature for the smaller companies area. If corporate confidence improves, M&A will increase, especially as little or no return can currently be generated from cash and the cost of debt is historically low.

In conclusion, the year under review has been a very good one for the Company. Absolute and relative performance was very strong and our portfolio companies have, overall, performed robustly. Our investments are generally trading well, soundly financed and attractively valued. Additionally, the smaller company market continues to throw up exciting growth opportunities in which the Company can invest. We remain confident in our ability to generate significant value from a consistent and disciplined investment approach.

Neil Hermon

Fund Manager

INVESTMENT PORTFOLIO at 31 May 2017