Annual results and final dividend

Henderson European Focus Trust PLC

13 December 2023

 

JANUS HENDERSON FUND MANAGEMENT UK LIMITED

HENDERSON EUROPEAN FOCUS TRUST PLC

LEGAL ENTITY IDENTIFIER: 213800GS89AL1DK3IN50

HENDERSON EUROPEAN FOCUS TRUST PLC

Annual Financial Report for the year ended 30 September 2023

This announcement constitutes regulated information.

INVESTMENT OBJECTIVE

The Company seeks to maximise total return (a combination of income and capital growth) from a portfolio of stocks listed in Europe.

PERFORMANCE HIGHLIGHTS

§ Net asset value¹ per share total return rose by 24.1% (2022: -13.1%), ahead of benchmark² by 3.6% (2022: -0.3)

§ Share price total return³ was 27.7% (2022: -18.3%)

§ NAV total return outperformed peer group averages: AIC Europe sector⁴ was 19.5% and IA OEIC Europe ex-UK sector⁵ was 19.0%

§ Maintained full-year dividend of 4.35p, with proposed final dividend of 3.05p per share and interim of 1.30p per share (2022 total dividend: 4.35p)

§ NAV and share price outperformance of the benchmark index over 1, 3, 5, 7 and 10 years

Cumulative total return performance for the year to 30 September 2023

	1 Yr	3 Yrs	5 Yrs	7 Yrs	10 Yrs
NAV[1]	24.1	32.2	46.1	81.1	162.5
Benchmark[2]	20.5	28.3	36.9	71.4	117.8
Share price[3]	27.7	34.5	43.9	78.9	143.7
AIC Europe sector NAV[4]	19.5	19.7	34.7	74.9	137.5
IA OEIC Europe ex-UK sector average[5]	19.0	22.3	29.0	60.4	105.5

Financial highlights

	At 30 September 2023	At 30 September 2022
Shareholders' funds
Net assets attributable to ordinary shareholders (£'000)	378,997	314,419
NAV per ordinary share	178.1p	147.7p
Mid-market price per ordinary share	157.0p	127.0p
	Year ended 30 September 2023	Year ended 30 September 2022
Total return to equity shareholders
Net revenue return (£'000)	9,188	10,913
Net capital/(loss) return (£'000)	66,105	(58,341)
	-----------	-----------
Net total return/(loss) (£'000)	75,293	(47,428)
	======	======
Total return per ordinary share
Revenue return	4.32p	5.11p
Capital return	31.07p	(27.32p)
	-----------	-----------
Total return	35.39p	(22.21p)
	======	======
Ongoing charge for year	0.80%	0.77%

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[1]Net asset value ("NAV") per ordinary share (including dividends reinvested and excluding costs of reinvestment) and calculated with debt at par

[2] FTSE World Europe (ex UK) index in sterling terms

[3] Share price using mid-market closing prices

[4] Simple average NAV for the AIC Europe sector which currently comprises seven investment trusts

[5] Investment Association Europe ex UK sector for open-ended investment companies ("OEICs"), which comprised 143 funds at the year end

Sources: Morningstar Direct, Janus Henderson, Refinitiv Datastream

CHAIR'S STATEMENT

Geopolitical risk has dominated the past financial year and with the recent appalling events in the Middle East this looks likely to continue. In economic terms, the jury is still out as to whether we are headed for a hard landing or not across the region, but it certainly seems that market participants have come round to our Fund Managers' way of thinking that 'higher for longer' prevails. As governments and corporates look to security of supply, whether for energy or for product lines, the inherent capital redeployment will be inflationary. Hence with inflation looking stickier than many envisaged, especially in the US, the question now is how these elevated interest rates will impact in the US, the world's largest economy and what the implications will be for Europe, facing a slowdown of its own.

The Fund Managers' Report explains how they consider this macro backdrop when assessing our investee companies, as well as potential investments, alongside some generational shifts underway particularly in the role of technology. Much has been written about the advance of artificial intelligence ("AI") this year but when you look at the numbers around what it could mean, both in terms of implications for some companies' revenues as well as the investment required to make it happen, you start to get a feel for how it will impact every area of our lives.

Our Fund Managers have been talking for some time now of investing in 'Global Champions that just happen to be based in Europe'. Many of our investments fall into this category rather than simply being domestic plays, and are leaders in industries as diverse as semi-conductors, healthcare, aerospace, luxury consumer goods, and electrical components, as well as aiding the transition to 'greener', more sustainable products in building materials and energy supply.

With this challenging backdrop, I am pleased to report continued net asset value ("NAV") outperformance of both benchmark and peers after the extremely strong appreciation we saw in the first half of the financial year. It was gratifying for Tom O'Hara and John Bennett to be voted winners of the European Equity (Active) category at the AJ Bell Investor Awards in September 2023, particularly as these awards are voted on by AJ Bell customers, some of whom are our investors.

Performance

The Company's NAV total return per share was 24.1% (2022: -13.1%), significantly outperforming the Company's benchmark index, which returned 20.5% (2022: -12.8%) for the year to 30 September 2023. The share price total return was 27.7% (2022: -18.3%), as the discount at which the shares traded relative to NAV narrowed over the year.

The Company's long-term track record is excellent, with NAV and share price total return outperforming the benchmark over one, three, five, seven and ten years. Our results compare favourably with our competitors, be they in the investment trust or the Investment Association OEIC (open-ended funds) sector. The average NAV total return of the AIC Europe investment company sector (comprising seven companies) was 19.5% in the year under review, and the OEIC Europe ex-UK sector average (comprising 143 funds) was 19.0% for the same period.

Dividends

The Board is pleased to recommend a final dividend for the year of 3.05p per share which, subject to shareholder approval at the Annual General Meeting ("AGM"), will be paid on 5 February 2024 to shareholders on the register at 5 January 2024. When added to the interim payment in June 2023 of 1.30p, this brings the full-year dividend to 4.35p per share, which is the same total dividend as the 2022 full-year distribution of 4.35p per share, excluding the special dividend (2022: interim at 1.20p and final at 3.15p).

Income from investments declined by around 10% in the year under review compared with the year to 30 September 2022, primarily as a result of lower exposure to higher-dividend-yielding stocks in sectors such as energy. The Company has a policy of paying progressive dividends, and we would include the maintenance of dividend levels in tougher times as consistent with this approach.  We are fortunate to have built up revenue reserves in previous years which we can draw on where necessary and, with the recommendation of this final dividend, propose to use a very small amount of these. It is worth noting that whilst income is an important component, total return remains our primary focus.

With the year-end share price at 157p (2022: 127p), the yield of the aggregate dividends paid and proposed for the year is 2.8%.

Share rating

Discounts have been wider throughout the investment company sector this year than at any point since the Global Financial Crisis (2007-08), with the average (ex 3i Group) reaching a low of 19% in October and now currently trading at 15.5%. There has been an inevitable knock-on to the European sector, including our Company, hence frustratingly our shares have made only a little progress relative to NAV from when we last reported to you in March. Our discount to NAV ended the year at 11.9%, a small but noteworthy improvement from the end of the previous year (30 September 2022: 14.0%) given this backdrop.

During the year, the Company bought back 145,000 shares (2022: 912,658) to be held in treasury, at an aggregate cost of £183,000, representing 0.01% of the issued capital of the Company at the start of the year. This small amount of repurchase is only marginally enhancing to NAV, but the willingness to buy back signals that the Board is prepared to be active in the market should the discount widen excessively, whilst being mindful not to shrink assets needlessly. In our view, share repurchase and issuance remain useful structural tools in the closed-ended sector, both in helping manage the supply and demand for shares and pricing, and as deployment of capital. Ultimately, we believe it is investment performance, investor sentiment and demand for a company's shares that principally determine rating.

Capital structure and use of debt

The Company issued long-term structural debt (25 and 30-year) by way of private placement loan notes in January 2022. With a weighted average interest rate of 1.57% it was fortuitously timed and gives us welcome flexibility.

Fully utilised, the debt provided gearing of some 8% (at the time it was taken on) but it is of sufficiently low-interest cost that, should the Fund Managers want to move to cash and take out the leverage, they can without suffering from a cash drag from the cost of debt. The Fund Managers' Report explains in more detail how they have done just this and have managed the level of gearing over the course of the year from a high of nearly 11% in March to a current net cash level of 4%, taking into account the short-dated gilts as cash equivalents rather than investments.

Fund management changes

A significant piece of news to report, not least since many will have been shareholders in the Company for a long time, is that John Bennett intends to retire next year, leaving behind an excellent performance record, a strong team and long-standing investment philosophy to continue looking after the Janus Henderson European funds, including the Company. John became the Fund Manager in November 2010. Since then, shareholders have enjoyed significant NAV outperformance of the benchmark, with an annualised total shareholder return of 10.6% per annum.

The Board extends their heartfelt thanks to John for his tremendous stewardship of the Company and the orderly way in which he is handing over the leadership reins to his well-established colleagues, including Tom O Hara, his Co-Manager. We wish him all the very best.

Board changes

Following Eliza Dungworth's retirement in May 2023, and in line with our long-term succession plan, we have now returned to a Board of five members through the appointment of Melanie Blake who joined on 3 July 2023. With over 20 years' experience in the financial services industry, Melanie brings deep insight and expertise across risk, compliance and governance, a valuable addition to the Board following Eliza's departure.

Our Senior Independent Director, Robin Archibald, has succeeded Eliza as Audit and Risk Committee Chair, and Stephen Macklow-Smith has taken on the role of the Board's marketing representative. We consider that we have a well-balanced and experienced Board, succession planning firmly in our sights, as well as governance guidelines on Board constitution, which we meet in every respect. Please refer to the Annual Report for a fuller disclosure on Board constitution.

Governance, shareholder engagement and AGM

We are pleased to invite shareholders to attend the AGM in person at our registered office on Thursday, 25 January 2024 at 11.30 am and join us afterwards for refreshments. This is an opportunity to meet the Fund Managers and our Board. We hope that an earlier time may suit some shareholders better. Shareholders who prefer to join virtually may do so via Zoom. There will be live voting only for those physically present at the AGM and we would encourage all shareholders to have their say and vote their shares on all resolutions put forward. All the resolutions are recommended and supported by your directors. Shareholders holding their shares through investor platforms are also encouraged to attend, and to vote, ahead of the proxy voting deadline of Tuesday 23 January 2024 through their nominee platforms. Do be aware that the deadlines for voting through platforms may be earlier than our proxy voting deadline.

In addition to the routine business to be considered at this year's AGM, the Company is also proposing resolutions to its shareholders to cancel the amounts standing to the credit of the share premium account and the capital redemption reserve and which, subject to confirmation by the Court, will be credited to a new special distributable reserve. Cancelling such reserves is a routine procedure that is undertaken by investment trusts and was last carried out by the Company in July 2007. The cancellation of these reserves (as explained in more detail in the Annual Report) to create distributable reserves is an administrative matter which will provide the Board with flexibility to use such distributable reserves should it wish to do so for shareholder distributions in the future.

Please see the Annual Report for the AGM Notice and more information on joining and voting.

If you have questions for either the Board or the Fund Management team in advance of the AGM - or indeed at any time of the year - please get in touch. Do visit our website at www.hendersoneuropeanfocus.com which has regular updates, and subscribe for regular information using the sign-up function. In particular, I would highlight the video on the website of Tom O'Hara discussing these results and performance during the year.

Outlook

With US bond yields not far off the levels last seen in the Global Financial Crisis, geopolitical risks that have continued to rise and the very real threat of recessionary forces, it is not a surprise that your Fund Managers are erring on the side of caution and, for the first time that I can remember, investing in UK gilts (albeit for the very short term) to de-gear the Company. However, for active stockpickers (as opposed to index huggers or passive funds), when markets get volatile and uncertainty increases, opportunities arise and good investment returns can accrue for the medium to longer term. Indeed, this is the environment we now face and which your Fund Managers are embracing. Meetings with the underlying company management teams continue and, for some, the future is very bright. Your Board remains confident in your Fund Managers' ability to uncover these opportunities and for the Company to continue to prove a good long-term investment for its shareholders.

Vicky Hastings

Chair of the Board

FUND MANAGERS' REPORT

Hard-landing? Soft-landing? No landing? Peak interest rates?

These questions have dominated market discourse during the financial year. The obvious truth is that neither we nor anyone else can be certain if, when, or how deep any contraction might be. Moreover, whilst we have started to see some cracks in the hitherto resilient US consumer demand - causing weakness in share prices spanning clothing, luxury goods, spirits and other discretionary goods - economic activity has generally surprised positively. Accordingly, the market has had to regularly recalibrate its view of the likely duration of high inflation levels and correspondingly elevated interest rates ("elevated", that is, relative to only recent history).

Much of the market commentary still calls for a hard-landing, followed by an inevitable central bank capitulation to lower rates. This cannot be eliminated as a risk, especially if the speed of rate hikes causes an accident somehow, somewhere in the financial system (the UK Gilt tantrum of late 2022 and the mini-banking crisis of early 2023 serve as cautionary reminders that something can lurk out of sight). But it is always worth considering the motive of those making such a forecast; many participants wish for a hard-landing, having made a lucrative career out of zero interest rates (think fixed income managers, or equity investors with growth, technology or ESG mandates). They would understandably wish for those good times to return. If it must come via a painful economic contraction, then so be it.

It is also worth taking a step back from the never-ending cycle of macro-monetary noise emanating from media outlets such as Bloomberg, which are of course incentivised to make you as insecure, as reactive and as trigger happy as possible in financial markets; you need live pricing, you need access to research and datasets and you need live analysis of the latest earth-shattering event, be it a CPI print, a non-farm payrolls figure or the latest utterance of 'Fedspeak' by a central bank official at a random conference. This is the edge you need to make money. No serious investor could possibly operate without it - or so they would have you think.

A new capex supercycle - de-globalisation and artificial intelligence will define geopolitics

There is a lot to constantly distract an investor from more meaningful developments. When we as a team debate the outlook for inflation and the corresponding cost of capital, we try to take a longer-term view of changes across society and their potential impact on economic activity. In this respect, political discourse - and increasingly policy action - suggests something different and powerful is going on underneath the near-term focused chatter. Yes, central banks are raising rates and reversing that great "innovation" of the financial crisis - quantitative easing ("QE") - in order to rein in inflation by cooling economic activity. But many governments, not least that of the United States, are making their job much harder. Economic hardship does not go down well with voters. De-globalisation and pro-labour populism are strong mandates for those who command the national coffers. The US is running an historically high budget deficit of 7%, as various stimulus packages - collectively known as 'Bidenomics' - splurge over $1trillion on highways, rail and other infrastructure, while providing generous incentives for corporates to deploy their capital into the 'onshoring' of critical supply chains in everything from semiconductors to electric vehicles and energy security. This is more than the US government mobilised in response to the Global Financial Crisis. Not even the profligate Europeans are engaging in such fiscal largesse; France and Italy are 'only' running budget deficits of around 5%. The OECD is averaging over 4%. We have never seen the likes of this government activity during peacetime (although it may be optimistic to describe the current geopolitical backdrop as such).

These trends don't appear to be fads, just as zero interest rate policy ("ZIRP") and QE were not short-lived phenomena. There are currently 35,000 trade protectionist measures in place globally, up from only 9,000 a decade ago, according to Global Trade Alert. Supply chains must adjust to new constraints, often through capital redeployment. Many of our investee companies are either seeing evidence of this in their order books and/or utilising their own strong balance sheets to invest. Construction spend on manufacturing facilities in the US has already reached almost 0.6% of GDP, a level not seen since before the World Trade Organisation was established in the early 1990s. Furthermore, a record 67% of Americans have a favourable view of trade unions, suggesting that 'America First' is a policy objective likely to be pursued, regardless of who secures the White House in 2024. In turn, other major economic blocs such as Europe feel obliged to follow with their own measures. One of the strands of our investment 'DNA' (for which we have introduced a dedicated section this year) is 'Believe in Cycles'. We believe that we are at an inflection point in the long-cycle politics of globalisation, with corresponding long-duration implications for capital expenditure, wages, inflation and interest rates. Capital investment cycles tend to be long term in nature, for the simple reason that building stuff takes time. This affords many of our exposed investee companies a good degree of visibility under all but the most extreme scenarios for near-term economic momentum. Hard-landing or not, there will probably be 'shovels going into the ground'.

Aside from industrial policy objectives, it is worth considering the strength of private sector capital deployment, as it highlights a key segment of the opportunities we are pursuing in European equities. It is well known that Europe does not possess the 'Big Tech' superstars. But, importantly, it does possess many of the enablers, or 'picks and shovels', that will be necessary as this exclusive club embarks on an unprecedented period of capital intensity. In 2019 the combined capital expenditure of Microsoft, Google, Meta (formerly Facebook), Amazon and Apple was around $70bn. In 2024 it will reach around $190bn, up by $35bn on 2023. The magnitude of this should not be understated; it equates to almost 20% of the "Bidenomics" bazooka: a sizeable spend even when set against an historic stimulus package in the largest economy on Earth. Moreover, it will be repeated each year for the foreseeable future, so that cumulatively it is likely to eclipse the fiscal programme.

To repeat: this is the capex outlook for only five companies. Dominant though they are, there is also a long tail of large, cash generative, well-financed companies across the globe which are investing into a critical juncture in both geopolitics and technological progress. This will create change.

Europe's globally dominant 'picks and shovels'

The pursuit of the vast AI and cloud computing opportunity is both fixed-asset and energy intensive for the titans of tech. Microsoft, which is lifting capex as a percentage of sales from 11% in 2019 to 19% in 2024, plans to build an additional 120 or so data centres, filled with leading AI-ready semiconductors. Most of those chips will be bought from US stock market darling, Nvidia, which does not produce its own chips, but outsources it to manufacturing specialists like Taiwan Semiconductor ("TSMC"). TSMC in turn must procure the latest manufacturing equipment for its 'fabs' (factories) to fulfil Nvidia's requirements. Enter Europe's 'Global Champions' in semiconductor capital equipment - ASML, ASM International and BE Semiconductor - which provide the 'picks and shovels' to enable the production of ever more complex chips. Atlas Copco, another portfolio company, supplies vacuum technology to this highly demanding manufacturing environment.

Digging a little deeper, we find that European 'Global Champions' abound all along the 'capex supercycle' supply chain.

Data centres and semiconductor factories, which are resource-intensive, require robust foundations and supporting water, energy and telecommunications infrastructure. Irish-headquartered but US-heavy construction materials business, CRH, has already flagged healthy orderbooks as shovels go into the ground for these facilities (CRH is also arguably the number one beneficiary of all the highway investments being made in the US, acting as a one-stop-shop for state departments of transport).

The average data centre has the same energy requirement as 80,000 households, meaning Microsoft's plan alone will add the equivalent power demand of a city of over 10 million people. Energy efficiency is therefore critical to operating costs; Siemens and Schneider Electric supply the infrastructure management hardware and software to optimise these hungry facilities (they also happen to be global leaders in industrial automation, another secular growth category as supply chains are 'on-shored' in the years ahead).

'Big is beautiful' continued

We have written about our belief that a return to zero interest rates is unlikely. Accordingly, one must be sensitive to valuation when selecting stocks. Thankfully, the desire to not overpay has always been part of our DNA and has, at times, been to our detriment, notably during peak-ZIRP. However, the real economy implications of this shift will take time to bear out. This will present opportunities to stockpickers. As economic rationality returns from a lengthy absence, the threat of disruption - from lavishly-funded, unprofitable startups - will recede. The powerful, well-funded incumbents across many industries are likely to become yet more powerful in the era ahead of us.

Regular readers will be familiar with our 'Big is beautiful' mantra for this new investment paradigm. We used Anheuser-Busch InBev - the world's biggest brewer - as an example of this theme at work in the portfolio. More recently we purchased German software company SAP, which commands a high global market share in the boring but business critical world of Enterprise Resource Planning ("ERP"). We had avoided this company for a long time owing to poor governance and poor capital discipline. It sells the software that forms the operating backbone of mid to large companies: supply chain, logistics, payroll and finance - all fundamental functions of the modern corporate. Many of these companies are in the process of transitioning their ERP systems from 'on premise' to the 'cloud' (another reason for all that data centre capex). This process has proven a lucrative opportunity for SAP to 'cross-sell' additional applications such as HR services, travel and expenses management and, soon, new AI-augmented tools. We see strong prospects for well over 10% annual earnings growth in the coming years, driven by this transition.

The end of the free money era is likely to make SAP's clients - who are eager to be digitally optimised and AI-ready - more reluctant to bear the risk of changing their ERP supplier through such a complex and critical project, while also reducing the likelihood of a startup competitor to SAP given the vast amounts of funding - and patience - that would be required to erode the incumbent's economic moat. Of course, being 'big' alone does not bestow a divine right to success upon a company. There must be a value proposition to customers. SAP possesses the scale and the resources (and a net cash balance sheet) to invest in developing the applications its corporate customers require in the era of cloud-hosted, AI-augmented ERP. Helpfully, once the client has transitioned their system to the cloud, new innovations can be more easily adopted via download, practically overnight.

We hope these provide some good examples of our investment thinking in what many would consider challenging times and times of change, with the spectre of geopolitical risk hanging over world markets, just after Covid and compounded by recent events in the Middle East.

Performance

The NAV of the Company increased by 24.1% during the financial year, 3.6% ahead of the 20.5% benchmark return. Major contributors included our semiconductor capital equipment stocks BE Semiconductor and ASM International, along with long-term holding Holcim and diabetes and obesity 'category killer' Novo Nordisk, which has now become Europe's largest company by market capitalisation.

Detractors included insurer ASR Nederland, which became mired in a potential historic mis-selling scandal, oil major Shell, which we sold in June and recycled into TotalEnergies and AkerBP (though have recently reintroduced) and Finnish pulp and paper manufacturer UPM Kymmene.

It is worth noting the somewhat distorting effect of the period of measurement. The September end of financial year 2022 coincided, almost to the day, with the European market trough, following which we saw a sustained rally in almost everything through to spring 2023, with the previous laggards outperforming. Two of our bigger detractors - Shell and UPM - were less due to investments gone wrong (both stocks actually gained during financial year 2023), but courtesy of large position sizes that lagged the rapid recovery in the benchmark during 2023. It provides a good example of why we always encourage performance to be judged on at least three years. Even good investments can have a "bad" 12 months measured against a benchmark. UPM remains our largest overweight position, while we also retain a sizeable overweight exposure to oil and gas, which we view as strategically critical given the geopolitical backdrop. Energy also provides us with a useful tool in protecting our shareholders' capital against the inflationary effects of what will probably be more frequent commodity spikes. Oil and semiconductors, both held in size, offer a true economic barbell for the multipolar world.

Activity

It is useful to begin with an explanation of our year end net gearing levels (or lack thereof). We ended the financial year with a net cash position of 4%. This means that not only was the available structural gearing (equivalent to over 7% of NAV) undeployed, but we also held additional cash. Part of this was a result of selling activity late in the financial year. We took some profits in semiconductor stocks during late August/early September, while also starting to reduce our holding in Hugo Boss and fully exiting shortly after the year end, as we feel the brand turnaround story is now relatively well-appreciated and the stock will be more sensitive to general consumer sentiment. We also sold the last of our banks in early September as we think the near-term tailwinds from net interest margin expansion have peaked and the long-term threat of greater regulatory scrutiny and government constraint has only intensified. In the era of increased statism, not only do we think it wise to gain exposure to the many quality 'enablers' we have listed, but it is equally important to avoid the 'donors.' Banks will continue to be a source of funds for hungry governments, likely via recurring 'one-off' taxes on profits.

On a related note, we own no utility companies on a similar basis; profits mandated by the government are never wholly reliable profits. They are likely to be even less so in the years ahead. As a sector it also benefitted from an abundance of cheap debt to fund projects. Not anymore.

Our net-cash position therefore was partially temporary. At the time of writing we have returned to a neutral position, with the gearing undeployed. We feel no urgency to wade into the market; we are near-term cautious on market direction given the rapid rise in interest rates (during the writing of this commentary the US 10-year treasury yield touched 5% for the first time since 2007), nor do we feel any stocks or sectors have reached the 'valuation margin of safety' threshold that warranted full deployment of the gearing in September 2022. We will be patient and we can afford to be; the interest rate payable on our loan notes is 1.57%, locked in for 25 and 30 years across two tranches. We can earn 2.75% by depositing the cash in the bank. More interestingly (and another indication of the challenge to banks) we can earn 5% in short-dated UK gilts. At the time of writing, we have approximately 5% of NAV - around two-thirds of the value of the loan notes - deployed into these 'cash equivalent' sovereign debt instruments. They are 'cash equivalent' as they are held to maturity (early 2024) and therefore both interest and capital value are determined. We are enjoying 'positive carry' and will therefore bide our time for more attractive equity opportunities.

Outlook

We have illustrated why we believe Europe's 'makers' and 'doers' will stand to benefit - and are benefitting already - from the profound growth in both publicly funded capital expenditure and the utilisation of enormous reserves of 'dry powder' sat on corporate balance sheets. This may, in part, explain the absence of the much-feared hard-landing, at least so far. But, even if it does not prevent a painful economic downturn, it serves as a reminder that economies are not binary, but always nuanced. There will always be attractive opportunities for businesses to pursue. There will always be areas of economic resilience. Thus, where there is nuance, there is opportunity for stockpickers. Whatever the macroeconomic backdrop, we want to be invested in the right companies, which are competing in the right places and - critically - at the right share price. Europe's big, beautiful, global champions offer a compelling opportunity set.

Tom O'Hara and John Bennett

Fund Managers

PRINCIPAL RISKS

The Board, with the assistance of the Manager, has carried out a robust assessment of the principal risks facing the Company, including those which would threaten its business model, future performance, solvency, liquidity in its shares and reputation. The assessment includes consideration of economic and political risks, most of which are outside the Board's direct control. The Board has drawn up a detailed matrix of risks facing the Company, together with a strategic heat map charting the top ten risks, which it has distilled into six categories of principal risks, as shown in the Annual Report. To assist in mitigating the decision-taking risks as far as practicable, it has put in place a schedule of investment limits and restrictions, appropriate to the Company's investment objective and policy, which it reviews at each board meeting.

The Company's principal risks and mitigating steps are as follows:

Risk	Risk Controls and mitigation
Market The Company's absolute performance in terms of net asset value total return and share price total return is dependent on the performance of the investee companies and markets in which the Company invests. Performance is also impacted by currency and interest rate movements, as well as by political and economic events.	Investment risk is spread by holding a diversified portfolio of investee companies, typically with strong balance sheets and good growth prospects. The Company does not currently embark on any currency or market movement hedging strategies, though it has the ability to do so. The Company's investment strategy is reviewed formally by the Board at least annually, and takes into account shareholder views, developments in the marketplace and how the structure of the Company is positioned to meet them.
Investment performance The relative performance of the Company against its benchmark and European open and closed-ended peers depends principally on asset allocation and stock selection, which, in turn, require investment skills. In exercising these skills, the Manager is responsible for adhering to the investment policy and investment guideline restrictions set by the Board and amended from time to time.	The Board is responsible for ensuring that the investment policy is met. The day-to-day management of the Company's assets is delegated to the Manager under investment guidelines, with close monitoring of the guidelines. The Board meets the Manager on a regular basis and keeps investment performance, in terms of both capital and income returns, under close review. The Management Engagement Committee reviews the Manager's performance annually. Although the Company is not invested against any income criteria, the net income of the Company and the revenue reserves are monitored against dividend pay-outs and anticipated future net income. Investment performance is monitored over the short, medium and longer term against the Company's benchmark and against a wider peer group of open and closed-ended investment vehicles investing in listed European equities. The Board also reviews the performance attribution analysis against benchmark in detail, to understand the main drivers of performance in reporting periods. The Fund Managers keep the global political and economic picture under review as part of the investment process and provide the Board with frequent updates to enable the directors to monitor and manage risks of geopolitical disruption and global economic risks. Climate risk is assessed within the individual stock selection process and is reported within quarterly Fund Manager board reports.
Business strategy and market rating A number of factors, including the setting of an appropriate investment proposition, changing investor demand or investment performance may lead to an increase or decrease in demand for and/or supply of the Company's shares and will impact how the shares are priced in relation to the Company's underlying net asset value per share.	The Board monitors the Company's ordinary share price relative to net asset value per share and reviews changes in shareholdings in the Company to understand short or longer-term trends in demand for and supply of the shares. The Company is able, when appropriate, to issue or to buy back shares in order to help maintain an orderly secondary market in the Company's shares, but not against any prescribed discount or premium levels, other than avoiding dilution to existing shareholders' interests through share issuance at a discount. The Board also monitors the rating of the Company's shares against other closed-ended investment companies in the sector. The Company is 'evergreen' and does not have a liquidity event, such as periodic tenders or continuation votes. The liquidity of the portfolio is monitored and is considered sufficient for the purposes of a closed-ended fund, including where the Company buys back its own shares.
Gearing The Fund Managers have authority to use gearing in line with the Company's investment policy. In the event of a significant or prolonged fall in equity markets any gearing in place would exacerbate the effect of the falling market on the Company's net asset value and, consequently, its share price. Gearing would have the opposite effect in the event of a significant or prolonged rise in equity markets in which the Company is invested.	The Company's investment policy sets a limit on borrowing of 20% of net assets at the time the borrowing is assumed, and the Board monitors the level of gearing at each meeting. The Manager makes active use of the Company's gearing with close oversight of borrowings and cash management from the Board when gearing is extended or contracted in relation to different market conditions and as applied to different investment and disinvestment opportunities.
Operational The Company is reliant on third-party service providers for all its operational activities, including reliance on Janus Henderson as investment manager, corporate secretary and administrator to the Company. The Company depends on the diligence, skill and judgement of the Manager's investment team. Continuity of service of the team and individuals in the team could impact the future success of the Company. Failure of third parties' operational or internal control systems could prevent the accurate reporting or monitoring of the Company's financial position. Janus Henderson subcontracts some of the operational functions (principally those relating to trade processing, investment administration and accounting) to BNP Paribas. Failure of controls could also impact the Company meeting its regulatory obligations.	The Management Engagement Committee reviews each service provider at least annually, and, in conjunction with the Audit and Risk Committee, considers reports on internal controls, including any reported breaches, throughout the year, from all the service providers. This reporting covers such matters as business resilience and cyber security risk as well as matters that are subject to review as part of the annual audit of the Company. Janus Henderson has a strong European Equities team, which supports the Fund Managers in the management of the Company's portfolio. Constructive challenge, succession and continuity planning are key elements of the management of the team and are reported closely to the Board with consultation on any major changes. The Board reviews the internal control structure and reporting for the Company from all agents and meets with their representatives throughout the year to make enquiry on the systems and controls. The Board considers climate risk in respect of operational capability in its review meetings with service providers.
Regulatory and reporting The Company operates in a highly regulated environment which could inter alia affect the listing of the Company's shares and the Company's tax status, as well as how the Company conducts its affairs in the market more generally. The Company has strict reporting requirements that need to be adhered to both internally and externally to the market.	The Board is apprised regularly of impending regulatory and reporting changes and monitors closely, through its various agents, the Company's adherence to existing requirements, including maintaining investment trust and listed company status. The Board is also kept apprised of corporate governance developments and, as far as practicable, adheres to corporate governance guidelines that are applicable to an investment company.

THE COMPANY'S VIABILITY

The AIC Code of Corporate Governance includes a requirement for the Board to assess the future prospects for the Company, and to report on that assessment within the Annual Report. The Board considers that certain characteristics of the Company's business model and strategy are relevant to this assessment:

§ the Board aims to ensure that the Company seeks to deliver long-term performance;

§ the Company's investment objective, strategy and policy, which are subject to regular Board monitoring, mean that the Company is invested mainly in readily realisable, listed securities and that the level of borrowings is restricted; and

§ the Company is a closed-ended investment company and therefore does not suffer from the liquidity issues arising from unexpected redemptions.

Also relevant were certain aspects of the Company's operational agreements:

§ the Company retains title to all assets held by the custodian under the terms of formal agreements with the custodian and depositary;

§ revenue and expenditure forecasts are reviewed by the directors at each board meeting; and

§ cash is held with approved banks.

In addition, the directors carried out a robust assessment of the principal risks and uncertainties which could threaten the Company's business model, including future performance, liquidity and solvency, climate change, and considered emerging risks that could have a future impact on the Company. The Board takes into account the liquidity of the portfolio, short-term and structural gearing, the income stream from the portfolio, and the Company's ability to meet its liabilities as they fall due. This includes consideration of how the forecast income stream, expenditure and levels of reserves could impact the Company's ability to pay dividends to shareholders over that period. Detailed income and expense forecasts are made over a shorter time frame. However, the nature of the Company's business means that such forecasts are equally valid to be considered over the longer five-year period as a means of assessing whether the Company can continue in operation.

The directors assess viability over five-year rolling periods, taking account of foreseeable severe but plausible scenarios. 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. The Board has assessed the risks associated with the various geopolitical, economic and health crises in recent years and has concluded that these events have not affected the long-term viability of the Company, and its ability to continue in operation, notwithstanding any short-term uncertainty they have caused in the markets.

In common with investment companies generally, the viability statement does not take into account corporate events which might be initiated by the Company or to which the Company might be subject, and where the Company's circumstances might be dramatically changed. An investment company has relatively liquid assets, compared to industrial or commercial companies, and can, therefore, be subject to major and unexpected strategic change. No such event or change affecting the Company's viability is known or currently in contemplation by the Company. The directors believe that a rolling five-year period best balances the Company's long-term objective, its financial flexibility and scope with the difficulty in forecasting economic conditions affecting the Company and its shareholders.

Based on their assessment, and in the context of the Company's business model, strategy and operational arrangements set out in the Annual Report, 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 five-year period to September 2028.

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 during the year other than amounts paid to them in respect of remuneration and expenses, for which there were no outstanding amounts payable at the year end. Directors' shareholdings in the Company are disclosed in the Annual Report.

In respect of the provision of services by Janus Henderson, 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 during the year under review. More details on transactions with the Manager, including amounts outstanding at the year end, are given in the Annual Report.

STATEMENT OF DIRECTORS' RESPONSIBILITIES UNDER DTR 4.1.12

Each director, as listed below, confirms that, to the best of their knowledge:

§ the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards comprising FRS 102 and applicable law) give a true and fair view of the assets, liabilities, financial position and return of the Company; and

§ the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

On behalf of the Board

Vicky Hastings

Chair of the Board

PORTFOLIO INFORMATION

Top 10 investments at 30 September 2023

Company	Sector	Country of listing	Valuation £'000		Percentage of portfolio
UPM-Kymmene	Forestry and Paper	Finland	24,022		6.25
Novo Nordisk	Pharmaceuticals and Biotechnology	Denmark	23,175		6.03
UK Government Bond 0.125% 31/01/24	Government Bonds	United Kingdom	19,682		5.12
TotalEnergies	Oil, Gas and Coal	France	16,572		4.31
Saint-Gobain	Construction and Materials	France	15,636		4.07
Safran	Aerospace and Defence	France	13,692		3.56
Airbus	Aerospace and Defence	France	13,389		3.49
LVMH Moët Hennessy Louis Vuitton	Personal Goods	France	13,154		3.43
Holcim	Construction and Materials	Switzerland	12,684		3.30
Schneider Electric	Electronic and Electrical Equipment	France	11,724		3.05
			------------		---------
Total (10 largest)			163,730		42.61
			=======		=====
Sector exposure at 30 September				2023 %		2022 %
Industrials				26.7		18.4
Basic Materials				14.1		11.5
Consumer Discretionary				12.0		11.1
Health Care				11.6		14.7
Energy				8.9		14.7
Technology				8.9		4.4
Consumer Staples				6.5		11.6
Financials				6.2		10.9
Government Bonds				5.1		-
Utilities				-		2.7

Geographic exposure at 30 September	2023 %	2022 %
France	30.5	27.8
Germany	16.8	13.7
Netherlands	11.2	10.5
Finland	8.4	8.1
United Kingdom	6.8	10.3
Belgium	6.2	1.9
Denmark	6.0	6.5
Switzerland	5.0	11.8
Sweden	3.4	2.0
Norway	2.9	2.6
Italy	1.4	1.3
Spain	1.4	2.2
Portugal	-	1.3

 INCOME STATEMENT

	Year ended 30 September 2023			Year ended 30 September 2022
	Revenue return £'000	Capital return £'000	Total return £'000	Revenue return £'000	Capital return £'000	Total return £'000
Gains/(losses) on investments held at fair value through profit or loss	-	68,293	68,293	-	(55,148)	(55,148)
Exchange losses on currency transactions	-	(5)	(5)	-	(1,142)	(1,142)
Income from investments (note 2)	11,206	-	11,206	12,529	-	12,529
Other income	224	-	224	25	-	25
	----------	----------	----------	----------	----------	----------
Gross revenue and capital gains/(losses)	11,430	68,288	79,718	12,554	(56,290)	(43,736)
Management fee (note 6)	(587)	(1,762)	(2,349)	(548)	(1,642)	(2,190)
Other fees and expenses	(639)	-	(639)	(561)	-	(561)
	----------	----------	----------	----------	----------	----------
Net return before finance costs and taxation	10,204	66,526	76,730	11,445	(57,932)	(46,487)
Finance costs	(129)	(385)	(514)	38	(272)	(234)
	----------	----------	----------	----------	----------	----------
Net return before taxation	10,075	66,141	76,216	11,483	(58,204)	(46,721)
Taxation on net return (note 7)	(887)	(36)	(923)	(570)	(137)	(707)
	----------	----------	----------	----------	----------	----------
Net return after taxation	9,188	66,105	75,293	10,913	(58,341)	(47,428)
	======	======	======	======	======	======
Return per ordinary share (note 8)	4.32p	31.07p	35.39p	5.11p	(27.32p)	(22.21p)
	======	======	======	======	======	======

The total columns of this statement represents the Income Statement of the Company. 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. The Company had no recognised gains or losses other than those disclosed in the Income Statement.

STATEMENT OF CHANGES IN EQUITY

Year ended 30 September 2023	Called-up share capital £'000	Share premium account £'000	Capital reserve £'000	Revenue reserve £'000	Other reserves  £'000	Total £'000
At 30 September 2022	10,819	41,995	151,154	13,840	96,611	314,419
Net return after taxation	-	-	66,105	9,188	-	75,293
Buyback of ordinary shares for treasury	-	-	(183)	-	-	(183)
Ordinary dividends paid (note 4)	-	-	-	(10,532)	-	(10,532)
	----------	----------	----------	----------	----------	----------
At 30 September 2023	10,819	41,995	217,076	12,496	96,611	378,997
	======	======	======	======	======	======
Year ended 30 September 2022	Called-up share capital £'000	Share premium account £'000	Capital reserve £'000	Revenue reserve £'000	Other reserves  £'000	Total £'000
At 30 September 2021	10,819	41,995	210,819	10,492	96,611	370,736
Net return after taxation	-	-	(58,341)	10,913	-	(47,428)
Buyback of ordinary shares for treasury	-	-	(1,324)	-	-	(1,324)
Ordinary dividends paid (note 4)	-	-	-	(7,565)	-	(7,565)
	----------	----------	----------	----------	----------	----------
At 30 September 2022	10,819	41,995	151,154	13,840	96,611	314,419
	======	======	======	======	======	======

STATEMENT OF FINANCIAL POSITION

	At 30 September 2023 £'000	At 30 September 2022 £'000
Fixed assets
Investments held at fair value through profit or loss	384,249	320,289
	-------------	-------------
Current assets
Debtors	11,745	7,355
Cash at bank	15,857	21,272
	-------------	-------------
	27,602	28,627
Creditors: amounts falling due within one year	(2,655)	(3,949)
	-------------	-------------
Net current assets	24,947	24,678
	-------------	-------------
Total assets less current liabilities	409,196	344,967
Creditors: amounts falling due after one year	(30,199)	(30,548)
	-------------	-------------
Net assets	378,997	314,419
	========	========
Capital and reserves
Called-up share capital	10,819	10,819
Share premium account	41,995	41,995
Capital reserve	217,076	151,154
Revenue reserve	12,496	13,840
Other reserves	96,611	96,611
	-------------	-------------
Shareholders' funds	378,997	314,419
	========	========
Net asset value per ordinary share (note 9)	178.13p	147.67p
	========	========

CASH FLOW STATEMENT

	Year ended 30 September 2023 £'000	Year ended 30 September 2022 £'000
Cash flows from operating activities
Net return/(loss) before taxation	76,216	(46,721)
Add back: finance costs	514	234
(Gains)/losses on investments held at fair value through profit or loss	(68,293)	55,148
Losses on foreign exchange	5	1,142
Taxation paid	(1,389)	(780)
Increase in debtors	(163)	(87)
Increase/(decrease) in creditors	1,099	(144)
	-------------	-------------
Net cash inflow from operating activities*	7,989	8,792
	-------------	-------------
Cash flows from investing activities
Sales of investments held at fair value through profit or loss	288,351	277,186
Purchases of investments held at fair value through profit or loss	(290,172)	(273,147)
	-------------	-------------
Net cash (outflow)/inflow from investing activities	(1,821)	4,039
	-------------	-------------
Cash flows from financing activities
Buyback of ordinary shares for treasury	(183)	(1,324)
Equity dividends paid	(10,532)	(7,565)
Repayment of bank overdraft	-	(10,558)
Issue of unsecured loan notes	-	29,275
Costs relating to issue of unsecured loan notes	-	(173)
Interest paid	(863)	(271)
	-------------	-------------
Net cash (outflow)/inflow from financing activities	(11,578)	9,384
	-------------	-------------
Net (decrease)/increase in cash at bank	(5,410)	22,215
Cash at bank at beginning of period	21,272	199
Losses on foreign exchange	(5)	(1,142)
	-------------	-------------
Cash at bank at end of period	15,857	21,272
	-------------	-------------
Comprising:
Cash at bank	15,857	21,272
	========	========

* Cash inflow from dividends was £9,394,000 (2022: £11,266,000) and cash inflow from interest was £213,000 (2022: £25,000)

NOTES TO THE FINANCIAL STATEMENTS

1.	Accounting policies
	a) Basis of preparation
	The Company is a registered investment company as defined in section 833 of the Companies Act 2006 and is incorporated in the United Kingdom. It operates in the United Kingdom and is registered at the address below. The financial statements have been prepared in accordance with the Companies Act 2006, FRS 102 - The Financial Reporting Standard applicable in the UK and Republic of Ireland and with the Statement of Recommended Practice: Financial Statements of Investment Trust Companies and Venture Capital Trusts (the "SORP") amended in July 2022 by the Association of Investment Companies. The principal accounting policies applied in the presentation of these financial statements are set out in the Annual Report. These policies have been consistently applied to all the years presented. The accounts have been prepared under the historical cost basis except for the measurement of investments at fair value. In applying FRS102, financial instruments have been accounted for in accordance with sections 11 and 12 of the Standard. All of the Company's operations are of a continuing nature. The preparation of the Company's financial statements requires the directors to make judgements, estimates and assumptions that affect the reported amounts in the primary financial statements and the accompanying disclosures. These assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in the current and future periods, depending on circumstance. The directors do not believe that any accounting judgements have been applied to this set of financial statements that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities. Nor do they believe that there are any estimates that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year. In line with UK GAAP, the fair values of investments are used, whereby quoted prices are used to value the investments in active markets and thereby reflect participants' views of climate change risk.
	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 these financial statements. In coming to this conclusion, the directors have considered the nature of the portfolio, being that the securities held are readily realisable, the strength of its distributable reserves, and the ongoing costs of the Company. The directors have also reviewed the revenue forecast and size of the Company's long-term debt and stress-tested its financial covenants. As part of their usual assessment of risks facing the Company, the directors have further considered the global economic and geopolitical environment including the repercussions of the Covid-19 pandemic, the ongoing war in Ukraine and conflict in the Middle East, the impact of these on supply chains and the possible impact of climate change risk on the value of the portfolio. The directors have concluded that the Company is able to meet its financial obligations, including the interest payments for its loan notes, as they fall due for a period of at least twelve months from the date of this report.
2.	Income from investments
				2023 £'000		2022 £'000
	Listed investments:
	Overseas dividends			10,143		12,181
	UK dividends			969		348
	UK fixed-income interest			94		-
				---------		---------
				11,206		12,529
				=====		=====
3.	Dividend
	The Board recommends a final dividend of 3.05p per share (2022: 3.15p). When added to the interim payment of 1.30p (2022: 1.20p), this will bring the full-year dividend to 4.35p per share. Subject to approval at the AGM on 25 January 2024, the final dividend will be payable on 5 February 2024 to shareholders on the register at 5 January 2024.The shares will be quoted ex-dividend on 4 January 2024.
4.	Dividends paid and payable on ordinary shares
	Dividends on ordinary shares		Record date			Payment date		2023 £'000		2022 £'000
	Final dividend (2.35p*) for the year ended 30 September 2021		7 January 2022			4 February 2022		-		5,019
	Interim dividend (1.20p) for the year ended 30 September 2022		6 June 2022			27 June 2022		-		2,563
	Final dividend (3.15p) for the year ended 30 September 2022		6 January 2023			6 February 2023		6,702		-
	Special dividend (0.50p) for the year ended 30 September 2022		6 January 2023			6 February 2023		1,064		-
	Interim dividend (1.30p) for the year ended 30 September 2023		2 June 2023			27 June 2023		2,766		-
	Unclaimed dividends over 12 years old							-		(17)
								----------		-----------
								10,532		7,565
								======		======
	* Figures have been restated due to the subdivision of each ordinary share of 50p into ten ordinary shares of 5p each on 7 February 2022 The final dividend for the year ended 30 September 2023 has not been included as a liability in these financial statements. The total dividend payable in respect of the financial year, which forms the basis of the retention test under Section 1158 of the Corporation Tax Act, is set out below.
								2023 £'000			2022 £'000
	Revenue available for distribution by way of dividend for the year							9,188			10,913
	Interim dividend (1.30p) for the year ended 30 September 2023 (based on 212,768,122 ordinary shares in issue at 2 June 2023)							(2,766)			-
	Final dividend (3.05p) for the year ended 30 September 2023 (based on 212,768,122 ordinary shares in issue at 8 December 2023)							(6,489)			-
	Interim dividend (1.20p) for the year ended 30 September 2022 (based on 213,565,480 ordinary shares in issue at 6 June 2022)							-			(2,563)
	Final dividend (3.15p) for the year ended 30 September 2022 (based on 212,768,122 ordinary shares in issue at 6 January 2023)							-			(6,702)
	Special dividend (0.50p) for the year ended 30 September 2022 (based on 212,768,122 ordinary shares in issue at 6 January 2023)							-			(1,064)
								------------			-------------
	Undistributed revenue for section 1158 purposes							(67)			584
								=======			=======
	All dividends have been paid or will be paid out of revenue profits or revenue reserves.
5.	Called-up share capital
		Number of shares entitled to dividend			Shares held in treasury		Total number of shares		Nominal value of shares £'000
	At 30 September 2022	212,913,122			3,476,788		216,389,910		10,819
	Buy back into treasury of 145,000 shares	(145,000)			145,000		-		-
		-----------------			--------------		------------------		-----------
	At 30 September 2023	212,768,122			3,621,788		216,389,910		10,819
		==========			========		==========		======
	At 30 September 2021	21,382,578			256,413		21,638,991		10,819
	Buy back into treasury of 26,030 shares	(26,030)			26,030		-		-
		----------------			------------		-----------------		-----------
		21,356,548			282,443		21,638,991		10,819
		----------------			------------		-----------------		-----------
	Issue of new ordinary shares following 10 for 1 stock split	192,208,932			2,541,987		194,750,919		-
	Buy back into treasury of 652,358 shares	(652,358)			652,358		-		-
		-----------------			--------------		-----------------		-----------
	At 30 September 2022	212,913,122			3,476,788		216,389,910		10,819
		===========			=========		===========		=======

6.	Management fee
		Year ended 30 September 2023			Year ended 30 September 2022
		Revenue £'000	Capital  £'000	Total £'000	Revenue  £'000	Capital  £'000		Total £'000
	Management fee	587	1,762	2,349	548	1,642		2,190
		======	======	======	======	======		======
	A description of the basis for calculating the management fee is given in the Annual Report. Management fees are allocated 25% to revenue and 75% to capital in the Income Statement.
7.	Taxation
(a)	Analysis of charge for the year
		Year ended 30 September 2023			Year ended 30 September 2022
		Revenue return £'000	Capital return £'000	Total return £'000	Revenue return £'000	Capital return £'000		Revenue return  £'000
	Corporation tax prior year adjustment	-	-	-	(584)	-		(584)
	Overseas tax suffered	887	36	923	1,154	137		1,291
		----------	----------	----------	----------	----------		----------
	Total taxation for the year	887	36	923	570	137		707
		======	======	======	======	======		======
b)	Factors affecting the tax charge for the year
		Year ended 30 September 2023			Year ended 30 September 2022
		Revenue return £'000	Capital return £'000	Total return £'000	Revenue return £'000	Capital return £'000		Total return £'000
	Return before taxation	10,075	66,141	76,216	11,483	(58,204)		(46,721)
		----------	----------	----------	----------	----------		----------
	Corporation tax at an effective rate of 22.0% (2022:19.0%)	2,217	14,551	16,768	2,182	(11,059)		(8,877)
	Effects of:
	Non-taxable capital (profits)/losses	-	(15,023)	(15,023)	-	10,695		10,695
	Non-taxable overseas income	(2,445)	-	(2,445)	(2,375)	-		(2,375)
	Expenses not deductible for tax purposes	-	-	-	1	-		1
	Tax effect of expensed double-taxation relief	-	-	-	(5)	-		(5)
	Corporation tax prior-year adjustment	-	-	-	(584)	-		(584)
	Current-year expenses not utilised	228	472	700	197	364		561
	Overseas tax	887	36	923	1,154	137		1,291
		----------	----------	----------	----------	----------		----------
		887	36	923	570	137		707
		======	======	======	======	======		======
	The UK corporation tax is an effective rate of 22.0% (2022: 19.0%). The tax charge for the year is lower than the corporation tax rate. In the prior year, the Company filed a claim with HMRC, on the basis of the principles set out in the Franked Investment Income Group Litigation Order ("FII/GLO") claim, for corporation tax unduly paid in respect of periods prior to 1 July 2009. The claim was filed on the basis that the relevant UK tax legislation was in breach of EU law for these periods. Additionally, the claim was successfully settled with HMRC and the provision for corporation tax previously provided and the associated interest thereon (relating to the refund of French withholding tax received in 2017) was removed and this was accounted for in year ended 30 September 2022. The total of the claim and the write-back of tax previously accrued for is £584,000 and reflected in the 2022 tax charge. No provision for deferred tax has been made in the current or prior accounting year. At the period end, after offset against income taxable on receipt, there is a potential deferred tax asset of £8,389,000 (2022: £7,597,000) in relation to surplus management expenses. It is unlikely that the Company will generate sufficient taxable profits in the future to utilise these amounts and therefore no deferred tax asset has been recognised.
8.	Return per ordinary share
	The return per ordinary share is based on the net return attributable to the ordinary shares of £75,293,000 (2022: net loss of £47,428,000) and on 212,776,067 ordinary shares (2022: 213,530,236) being the weighted average number of ordinary shares in issue during the year excluding shares held in treasury. The return per ordinary share can be further analysed between revenue and capital as below.
						2023 £'000		2022 £'000
	Net revenue return					9,188		10,913
	Net capital return/(loss)					66,105		(58,341)
						------------		------------
	Net total return/(loss)					75,293		(47,428)
						=======		=======
	Weighted average number of ordinary shares in issue during the year					212,776,067		213,530,236
	Revenue return per ordinary share					4.32p		5.11p
	Capital return per ordinary share					31.07p		(27.32p)
						----------		------------
	Total return per ordinary share					35.39p		(22.21p)
						======		=======
	The Company does not have any dilutive securities and therefore the basic and diluted returns per share are the same.
9.	Net asset value ("NAV") per share
	The NAV per ordinary share is based on the net assets attributable to the ordinary shares of £378,997,000 (2022: £314,419,000) and on 212,768,122 (2022: 212,913,122) shares in issue on 30 September 2023, excluding treasury shares. The movements during the year of the assets attributable to the ordinary shares were as follows:
							2023 £'000		2022 £'000
	Total net assets at start of year						314,419		370,736
	Net return for the year after tax						75,293		(47,428)
	Buyback of ordinary shares for treasury						(183)		(1,324)
	Dividends paid on ordinary shares						(10,532)		(7,565)
							-----------		-----------
	Net assets attributable to the ordinary shares at 30 September						378,997		314,419
							======		======
10.	2023 financial information The figures and financial information for 2023 are extracted from the Annual Report for that period and do not constitute statutory accounts. The Company's Annual Report for the year ended 30 September 2023 has been audited but has not yet been delivered to the Registrar of Companies. The Independent Auditor's Report on the 2023 Annual Report is unqualified, does not include a reference to any matter to which the auditor draws attention without qualifying the report, and does not contain any statements under s498 Companies Act 2006 (the "Act").

11.	2022 financial information The figures and financial information for 2022 are extracted from the published Annual Report for the year ended 30 September 2022 and do not constitute statutory accounts for that year. The 2022 Annual Report has been delivered to the Registrar of Companies and includes an unqualified Independent Auditor's Report, does not include a reference to any matter to which the auditor draws attention without qualifying the report, and does not contain a statement under s498 of the Act.
12.	Annual Report 2023 The Annual Report for the year ended 30 September 2023 will be posted to shareholders in December 2023 and will be available at www.hendersoneuropeanfocus.com and in hard-copy format from the registered office at 201 Bishopsgate, London, EC2M 3AE.
13.	General information
	Company status Henderson European Focus Trust plc is registered in England and Wales (company number 00427958), has its registered office at 201 Bishopsgate, London EC2M 3AE and is listed on the main market of the London Stock Exchange.  SEDOL/ISIN: Ordinary shares: BLSNGB0/GB00BLSNGB01 London Stock Exchange ("TIDM") Code: HEFT Global Intermediary Identification Number ("GIIN"): THMNPN.99999.SL.826 Legal Entity Identifier ("LEI") number: 213800GS89AL1DK3IN50
	Directors and secretary The directors of the Company are Vicky Hastings (Chair), Robin Archibald (Senior Independent Director and Chairman of the Audit and Risk Committee), Stephen Macklow-Smith, Marco Maria Bianconi and Melanie Blake. The Corporate Secretary is Janus Henderson Secretarial Services UK Limited. Website Details of the Company's share price and net asset value, together with general information about the Company, monthly factsheets, insights, announcements, reports and details of general meetings can be found at www.hendersoneuropeanfocus.com.
	For further information, please contact:
	Vicky Hastings Chair of the Board Henderson European Focus Trust plc Telephone: [phone]	Dan Howe Head of Investment Trusts Janus Henderson Investors Telephone: [phone]
	Tom O'Hara Fund Manager Janus Henderson Investors Telephone: [phone]	Harriet Hall Investment Trust PR Manager Janus Henderson Investors Telephone: [phone]
	Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) are incorporated into, or form part of, this announcement.

 

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