Annual Financial Report

Henderson Eurotrust PLC

28 September 2023

 

JANUS HENDERSON FUND MANAGEMENT UK LIMITED

HENDERSON EUROTRUST PLC

LEGAL ENTITY IDENTIFIER:  213800DAFFNXRBWOEF12

28 September 2023

HENDERSON EUROTRUST PLC

Annual Financial Results for the year ended 31 July 2023

This announcement contains regulated information

Investment objective

Henderson EuroTrust plc ("the Company") aims to achieve a superior total return from a portfolio of European (excluding the UK) investments where the quality of the business is deemed to be high or significantly improving.

Performance highlights

Total return performance to 31 July 2023
	1 year %	3 years %	5 years %	10 years %
NAV1	16.7	23.0	44.6	157.9
Share price2	19.7	21.1	38.1	144.3
Benchmark3	16.1	36.7	39.2	124.3
Peer group NAV4	14.6	31.8	41.4	146.2

	Year ended 31 July 2023	Year ended 31 July 2022
NAV per share at year end	161.3p	142.1p
Share price at year end	139.5p	120.5p
Dividend for year5	3.8p	3.8p
Dividend yield6	2.7%	3.2%
Ongoing charge9	0.79%	0.75%
Gearing at year end (% of NAV)	£15.6m 4.6%	£7.3m (2.5%)
Number of investments at year end7	47	41
Discount at year end8	13.5%	15.2%
Net assets	£342.0m	£301.0m

1 Net asset value ("NAV") per ordinary share total return (including dividends reinvested)

2 Share price total return (including dividends reinvested)

3 FTSE World Europe (ex UK) Index

4 Association of Investment Companies ("AIC") Europe Sector (based on cumulative fair net asset value returns)

5 Including the 0.8p interim dividend paid on 28 April 2023 and the 3.0p final dividend which will be put to shareholders for approval at the Annual General Meeting ("AGM") on 15 November 2023

6 Based on the share price at the year end

7 Excluding the nil value position in OW Bunker (2022: excluding OW Bunker)

8 Calculated using the mid-market closing price

9 Calculated using the methodology prescribed by the AIC

Sources: Morningstar Direct, Janus Henderson

 

CHAIRMAN'S STATEMENT

Summary:

·    Over the year, the share price and the net asset value were ahead of the benchmark index and ahead of the AIC peer group

·     Stock selection has been the driver of the modest outperformance, an encouraging outcome given that growth stocks on the whole have lagged the market

·      We have increased the board size to five and our new director will be appointed Senior Independent Director following the conclusion of the 2023 AGM

The financial year to 31 July 2023 has seen a significant recovery in the share price and net asset value after the disappointment of the previous financial year. I am pleased to report that, over the year, the share price and net asset value were moderately ahead of the benchmark index and materially ahead of the AIC peer group. In the latest financial year, "value" stocks in Europe outperformed "growth" stocks by over 9 percentage points but individual stock selection in quite a difficult environment was strong enough to result in modest overall outperformance.

In the year to 31 July 2023, net asset value total return was 16.7%. This compared with a total return of 16.1% for the benchmark index (FTSE World Europe (ex UK)) and 14.6% for the AIC peer group. The discount to net asset value narrowed during the year, from 15.2% to 13.5%, and as a result, the share price total return for the Company was 19.7%. The share price at 31 July 2023 was 139.5p, only slightly below the all-time high of 140.5p.

Dividend

We have proposed a final dividend of 3.0p, which brings the total dividend for the year ended 31 July 2023 to 3.8p. Subject to shareholder approval the dividend will be paid on 22 November 2023 to shareholders on the register as at 20 October 2023. The shares will be quoted ex-dividend on 19 October 2023. The Company's dividend approach is broadly to pay out the level of actual income received. In the Chairman's Statement of October 2020, I explained that the Board committed to pay out the majority of the (then significant) revenue reserve over three to four years. The proposed final dividend of 3.0p for the year ended 31 July 2023 means that commitment to shareholders will be fulfilled and, once the dividend has been paid in November 2023, the revenue reserve will effectively be zero.

The Board has also decided that, as only a very small part of the Company's revenue is received in the first half of the financial year (for example, 0.3p per share was received for the six months ended 31 January 2023), going forward the Company will pay a final dividend only, and no interim dividend. This is in line with the Company's commitment that, once the revenue reserve had been paid out, dividends would broadly reflect the level of income received.

Board changes

During the year we implemented a number of key recommendations following an external Board evaluation exercise undertaken in June 2022. First, we expanded the Board from four to five directors, to broaden the diversity of skills and experience. Stephen White, who is a former European investment manager and experienced investment trust director, joined the Board with effect from 1 December 2022 and will seek election from shareholders at the AGM in November 2023.

Second, we are appointing a Senior Independent Director with effect from the AGM in November 2023. Subject to his election by shareholders, Stephen White will assume this role, thereby providing shareholders with an alternative point of contact to raise any concerns should they not wish to discuss these with me or the Chairman of the Audit and Risk Committee.

In my statement last year, I indicated my intention to retire from the Board at the AGM this year. However, the search for my successor has taken longer than anticipated; the Directors have therefore asked me to stay on until its completion. Consequently, I have agreed that I will retire from the Board, at the latest, at the AGM in November 2024 and an update on the recruitment process will be included in our half year results' announcement in March 2024.

Annual General Meeting

Our meeting will be held on Wednesday 15 November 2023 at 2.30pm at Janus Henderson Investors' offices at 201 Bishopsgate, London EC2M 3AE. I hope as many shareholders as possible will be able to attend to take the opportunity to meet the Board and to hear a presentation from the Fund Manager. However, if you are unable to attend in person, you can watch the meeting live by visiting www.janushenderson.com/trustslive. Full details are set out in the Notice which has been sent to shareholders with this report and are also available online at www.hendersoneurotrust.com.

Outlook

We are heartened by the absolute and relative performance of the Company over the last year. We believe that attitudes towards investing in European shares are becoming more positive; Europe is home to many strong global businesses on attractive valuations and also demonstrates an above average focus on sustainability. Inevitably, there will be headwinds at times but we remain committed to seeking out growth companies which have the ability to achieve consistent growth in the long run.  There is a wealth of such opportunities in this region.

Over the financial year the discount to net asset value at which our shares trade has ranged from approximately 11.4% to 18.7%, ending the year at 13.5% (2022: 15.2%). In the long run, strong absolute and relative performance is a necessary - but not sufficient - factor in reducing the discount. Therefore, we continue to consider all other factors which might contribute to the appeal of the Company to all types of shareholder, and retail investors in particular. As part of this process, I extend an invitation to any shareholders who have questions, whether specific or general, or who would welcome a more general discussion with me or the Senior Independent Director to get in touch via the Corporate Secretary ([e-mail]). I also direct current and potential shareholders to the wealth of materials on the Janus Henderson website (www.janushenderson.com) including short videos and articles by our portfolio manager Jamie Ross, and a video by Jamie on our year end results at www.hendersoneurotrust.com.

Nicola Ralston

Chairman

27 September 2023

FUND MANAGER'S REPORT

Summary:

·    I am pleased to report a positive year for performance, both in absolute terms (the value of your shares has increased), and in relative terms (our net asset value per share has increased by more than the index return).

·     This performance has been driven by the positive impact of our stock selection.

·     We have also found opportunity to increase our exposure to some of the highest quality companies in Europe.

Key messages

I am pleased to report a positive year for performance, both in absolute terms (the value of your shares has increased), and in relative terms (our net asset value per share has increased by more than the index return). This performance has been achieved in an environment where our style of investing (buying and owning high quality growing businesses) has been out of favour, but our stock picking has been strong enough to outweigh this.

What has driven our performance?

The best performing sectors in the financial year tended to be those of a cyclical, interest rate sensitive nature: consumer discretionary, financials, industrials and technology. The sectors that lagged tended to be less economically sensitive: consumer staples, health care, real estate and telecommunications. As has been usual for us, our sector allocations have had little bearing on our relative performance. Stock picking within each sector has been a much more important determinant of performance: we are 'stock pickers' not 'sector pickers'.

Our best performing positions were in three areas: financials, luxury goods companies and semi-conductor equipment businesses.

Within financials, we were particularly well-rewarded for our decision to maintain a large position in UniCredit even through the early days of the Russia-Ukraine conflict in 2022, when investors were concerned about UniCredit's Russian exposure. We felt that their exposure was small enough to be manageable, even in a worst-case scenario, and that the undervaluation of the company's shares was far too extreme for us to sell just at the time when higher inflation and interest rates were coming back into the system (typically a good thing for banks, at least initially). UniCredit shares have delivered a total return of more than 150% over the last twelve months and have benefitted from higher interest rates, strong control of the cost base, a benign environment for loan losses and strong capital returns to shareholders. Management have done an excellent job. Munich Re, a longstanding position for us, has been another financial that has performed well in this environment.

We have three luxury goods companies in the portfolio: Hermès and Moncler have been longstanding positions and LVMH was added more recently, in 2021. Luxury goods companies sell aspiration and desirability - intangible characteristics for which people are prepared to pay a high price. The best companies curate their brand allure with decades of consistent investment, avoid discounting and partner with well-known trend-setters. Within the sector, we have taken the approach of owning brands with the strongest and most longstanding cultural heritage. This approach has led us to owning Hermès, Moncler and LVMH; these are three of the more expensive companies in the sector, but we think it is worth paying up for brands of this quality. We were pleased to see our companies perform well in the period, in part due to short-term factors such as recovery in China after Covid restrictions were lifted, but our investment view takes a much longer-term perspective. We continue to see attractive growth prospects for these high margin and high return companies over the medium- to long-term.

The semiconductor industry encompasses businesses of highly variable quality. The industry is exposed to attractive structural growth drivers such as the growing ubiquity of semiconductor usage and powerful technological themes such as machine learning, artificial intelligence and the internet of things. However, not all companies have a sufficiently commanding market position to translate this growth potential into a high margin and high return business. The three semiconductor companies that we own share one key characteristic: they have consistently high market shares in their core technology. ASML has a 100% market share in high end lithography, ASM International has a commanding market share in a packaging technology called Atomic Layer Deposition, while Besi dominate the nascent area of Hybrid Bonding. Strong market shares in niche technologies drive high margins and return on capital for these companies. We have had a longstanding position in ASML and initiated a new position in ASM International during the year and Besi in June 2022, taking advantage of a period when investors seemed overly concerned about a potential short-term cyclical downswing in industry demand. These two positions rallied particularly strongly over the year.

Finally, Novo Nordisk is worthy of mention. Novo is our largest position and a long standing holding in the portfolio. Novo has recently launched an obesity drug in the US and this has attracted a huge amount of media attention. We have been following their progress in this therapeutic area for a number of years and it is pleasing to see the company finally able to bring an efficacious and well-tolerated product to market. We believe that the obesity franchise is extremely well positioned for growth and this reinforces our positive views on the company. We continue to own a large position in Novo even after the strong multi-year share price performance. 

Our underperformers have tended to be defensive in nature. When investors want to buy into improving economic sentiment, they tend to avoid steady, consistent, dependable companies such as Roche, Cellnex and Sartorius. We ignore these short-term swings in sentiment and continue to value the long-term compounding nature of these businesses. In addition to this issue of style, there were a small number of companies whose operational performance was not as impressive as we would wish. Allfunds, DSM Firmenich and Kion have each struggled this year.

Allfunds, a business that links up fund houses with fund distributors, is exposed to three major drivers of growth in assets under administration: the onboarding of new clients, inflows from existing clients and long-term growth in market levels. Over the past year or two, market volatility across multiple asset classes has impacted the latter two of these drivers whilst the onboarding of new clients, an area where they have more control, has remained resilient. We retain faith in the ability of this high market share, high margin business to generate significant growth over time, but a period of more benign markets would be welcome. DSM has struggled with a number of issues, some industry-wide and some stockspecific. On the former, there has been some post-Covid unwind with a number of US customers destocking their ingredients inventory. On the latter, DSM has suffered from weakness in vitamin pricing and have had to deal with disruption related to the Firmenich merger and senior management changes. We have maintained our positions in both Allfunds and DSM (now DSM Firmenich). Finally, Kion has suffered from cost overruns in its warehouse automation business as well as signs of slowing demand. We felt that our long-term thesis had been sufficiently challenged to sell out of our position in Kion.

	Average portfolio weight (%)			Attribution Analysis1
	Company	Index	Relative	Sector allocation effect	Stock selection effect	Total effect
Aerospace & Defence	5.7	2.2	-3.5	0.3	0.7	1.0
Alternative Energy	0.0	0.5	0.5	0.0	0.1	0.1
Automobiles and Parts	0.0	3.3	3.3	0.0	-0.5	-0.5
Banks	7.0	7.5	0.4	1.5	-0.4	1.1
Beverages	2.3	2.1	-0.2	0.0	-0.1	-0.1
Cash	-0.7	0.0	0.7	0.0	-0.1	-0.1
Chemicals	2.3	3.5	1.2	-0.1	0.0	-0.0
Construction & Materials	0.0	3.8	3.8	0.0	-0.1	-0.1
Consumer Services	0.7	0.2	-0.5	-0.1	-0.1	-0.1
Electricity	2.1	2.9	0.8	-1.0	0.1	-0.9
Electronic & Electrical Equipment	2.9	2.7	-0.2	-0.1	0.0	-0.1
Finance and Credit Services	1.5	0.0	-1.5	0.0	-0.7	-0.6
Food Producers	9.8	6.1	-3.8	-1.1	-0.8	-1.9
Gas, Water & Multiutilities	0.0	1.4	1.4	0.0	-0.1	-0.1
General Industrials	1.6	1.9	0.3	-0.5	-0.1	-0.6
Health Care Providers	0.0	0.3	0.3	0.0	-0.0	-0.0
Household Goods and Home Construction	0.0	0.4	0.4	0.0	0.0	0.0
Industrial Engineering	3.6	2.5	-1.1	0.4	-0.1	0.2
Industrial Materials	0.0	0.5	0.5	0.0	0.1	0.1
Industrial Metals & Mining	0.0	0.7	0.7	0.0	0.1	0.1
Industrial Support Services	0.4	1.7	1.4	-0.1	0.5	0.5
Industrial Transportation	0.0	2.6	2.6	0.0	-0.0	-0.0
Investment Banking and Brokerage Services	8.9	3.4	-5.6	0.2	-0.6	-0.3
Leisure Goods	0.0	0.1	0.1	0.0	0.0	0.0
Life Insurance	0.0	0.7	0.7	0.0	0.0	0.0
Media	1.9	1.0	-0.9	-0.2	0.0	-0.2
Medical Equipment and Services	1.7	3.1	1.4	0.1	0.3	0.4
Nonlife Insurance	3.2	5.1	1.9	1.2	0.0	1.2
Oil, Gas and Coal	5.3	4.1	-1.2	0.6	-0.2	0.3
Personal Care, Drug and Grocery Stores	3.2	1.3	-1.9	0.1	-0.1	-0.0
Personal Goods	9.5	7.0	-2.5	1.1	0.3	1.3
Pharmaceuticals & Biotechnology	15.4	13.0	-2.4	0.0	-0.3	-0.2
Precious Metals and Mining	0.0	0.0	0.0	0.0	-0.0	-0.0
Real Estate Investment and Services	0.0	0.7	0.7	0.0	0.4	0.4
Real Estate Investment Trusts	0.0	0.4	0.4	0.0	0.1	0.1
Retailers	0.0	0.7	0.7	0.0	-0.2	-0.2
Software & Computer Services	2.6	4.2	1.6	0.6	0.0	0.6
Technology Hardware & Equipment	5.8	4.6	-1.2	0.8	0.3	1.1
Telecommunications Equipment	0.0	0.6	0.6	0.0	0.3	0.3
Telecommunications Service Providers	3.3	2.8	-0.5	-0.5	-0.1	-0.6
Tobacco	0.0	0.1	0.1	0.0	-0.0	-0.0
Travel and Leisure	0.0	0.6	0.6	0.0	-0.1	-0.1
Total1	100.0	100.0	0.0	3.1	-1.2	1.9

1 Total may not sum to the value shown due to rounding differences

Source: Factset

What changes have we made?

We have now had three years of value outperforming growth and quality. Notwithstanding the fact that we managed to outperform marginally over the last year, this style environment has been tough for us. Our inclination throughout the period has been to increase our exposure to high quality companies at a time when they have been out of favour. Each of our purchases and sales over the past twelve months can be seen as moving us in this direction. I will illustrate this with two of our new positions highlighting why we think these are high quality businesses with very attractive long-term prospects.

In March, we initiated a new position in Alcon, the Swiss listed manufacturer of ophthalmic equipment and contact lenses. Over the long term, the industry has experienced healthy growth of 4-5% per annum. Alcon, after years of underinvestment under Novartis ownership, is playing catch up. They have been growing faster than the overall market and expect to continue to do so. Margin potential since the spin-out from Novartis has been clear but the delivery has been slower than hoped for. Recently, however, margin progress has started to come through and the outlook for further margin gains is strong. Finally, on valuation, in MedTech, investors tend to pay for durable growth, i.e. organic revenue growth and the sector trades on around 25 times forward price to earnings. Alcon has usually traded at a 0-10% premium, but when we bought our position, it traded at a small discount. Over the next few years, revenue growth should be faster than the sector (6% versus 4%) and so should earnings per share growth (greater than 15% versus 11%) if they achieve margin progress as guided. We thus see Alcon as a superior growth business capable of margin improvement and a valuation rerating over time.

In May, we bought a position in the Swiss testing company SGS. We have long liked the characteristics of the testing sector. The companies provide a cheap, but essential function to a number of businesses across a wide range of end markets. Often their work is mandated by regulation. The industry is fragmented but is increasingly being consolidated by the large, listed companies, with smaller players disadvantaged in a world where customers want broad, global services. This means that the large companies can consistently acquire the smaller ones at inexpensive valuations, taking advantage of inherent scale benefits to create shareholder value over the medium term. We also believe that increasingly stringent environmental testing regulation is resulting in a boost to testing intensity and this should bring higher growth rates for SGS and their peers especially in the consumer goods-facing part of the business. SGS are the global leader in consumer testing and are in the strongest position to benefit.

Our most notable sales during the period were Enel, CNH International and Kion (a utility company, a tractor company and a forklift truck company respectively).

Largest New Investments			Largest Divestments
Company name	Position size at year end (% of the portfolio)		Company name	Position size at start of year (% of the portfolio)
SGS	2.62		Koninklijke KPN	3.05
ASM International	2.25		Kion	2.00
Alcon	1.91		CNH Industrial	1.87
BNP Paribas	1.85		Enel	1.29
Heineken	1.71
Schneider Electric	1.66
Euronext	1.52
Brenntag	0.95
Industrie De Nora	0.81
Zealand Pharma	0.61

Our medium term outlook

I am pleased that we have managed to outperform modestly in yet another year of value outperformance. We have used the last few years to increase our exposure to growth and quality and I am confident that our companies are well-placed to deliver strong growth, attractive margins and robust return on capital.

Classification of holdings as at 31 July 2023

	Compounders1 Average	Improvers2 Average	Company Average	Index Average
Market Capitalisation (£m)	112,902	43,178	94,024	81,677
Price/book (x)	3.6	1.4	2.6	2.0
Trailing 12 month dividend yield (%)	2.2	2.6	2.3	3.0
Trailing 12 month price/earnings (x)	24.8	13.4	20.2	14.6
Forward 2024 price/earnings (x)	17.5	12.9	16.0	12.9
Historical 3-year earnings per share growth per annum (%)	11.5	16.3	12.8	23.9
Forecast next 12 months earnings per share growth (%)	12.7	8.4	11.5	9.4
Return on equity (%)	27.4	5.7	21.5	19.6
Operating margin (%)	25.1	13.5	22.0	18.3
Long term debt to capital (%)	31.0	33.9	31.8	33.1
Number of securities	32	15	47	577
Weight (%)3	76.6	28.4

Fundamentals are based on weighted averages at the stock level, excluding net cash/borrowing

1 Compounders - high-return businesses

2 Improvers - companies whose return profile should materially improve over time

3 The weight percentages of Compounders and Improvers are shown including net cash/borrowing

Net cash/(borrowing) was -5.1% at 31 July 2023

OW Bunker, a nil value position, is not included in the analysis

Source: Factset/Fundamentals in Sterling and Janus Henderson

Top ten contributors to and bottom detractors from relative performance

Data illustrating the top ten contributors to relative performance is set out below:

	%
UniCredit	2.82
Munich Re.	1.54
Hermès	0.81
ASM International	0.77
Safran	0.70
Besi	0.57
Metso	0.48
Novo Nordisk	0.37
Moncler	0.37
Alcon	0.36

Data illustrating the bottom ten detractors from relative performance is set out below:

	%
Partners Group	-0.31
Sartorius	-0.40
Siemens	-0.41
DSM Firmenich	-0.41
Roche	-0.49
Kion	-0.61
Allfunds	-0.65
Cellnex	-0.86
EDP Renovaveis	-0.95
Koninklijke DSM (prior to the merger with Firmenich)	-1.60

Jamie Ross

Fund Manager

27 September 2023

PRINCIPAL RISKS AND UNCERTAINTIES

Managing our risks

The Board, with the assistance of the Manager, has carried out a robust assessment of the principal risks and uncertainties facing the Company, including those that would threaten its business model, future performance, solvency and liquidity.

With the assistance of the Manager, the Board has drawn up a risk register facing the Company and has put in place a schedule of investment limits and restrictions, appropriate to the Company's Investment Objective and Policy, in order to mitigate these risks as far as practicable. The Board monitors the Manager, other suppliers and the internal and external environments in which the Company operates to identify new and emerging risks. The Board's policy on risk management has not materially changed from last year. The principal risks which have been identified and the steps taken by the Board to mitigate these are as follows:

Risk	Mitigation
Investment activity and performance An inappropriate investment strategy (for example, in terms of stock or sector attribution or the level of gearing) may result in underperformance against the Company's benchmark index and the companies in its peer group.	The Board monitors investment performance at each Board meeting and regularly reviews the extent of its borrowings. The Board receives monthly updates from the Fund Manager.
Portfolio and market Although the Company invests almost entirely in securities that are quoted on recognised markets, share prices may move rapidly. The companies in which investments are made may operate unsuccessfully, or fail entirely. Significant economic, political or environmental changes in Europe and globally may impact investment returns. A fall in the market value of the Company's portfolio would have an adverse effect on shareholders' funds.	The Board reviews the portfolio at each meeting, regularly considers relevant political, economic and environmental changes and mitigates risk through diversification of investments in the portfolio.
Regulatory A breach of Section 1158 could lead to a loss of investment trust status, resulting in capital gains realised within the portfolio being subject to corporation tax. A breach of the FCA's Listing Rules could result in suspension of the Company's shares, while a breach of the Companies Act 2006 could lead to criminal proceedings, or financial or reputational damage.	The Manager is contracted to provide investment, company secretarial, administration and accounting services through qualified professionals. The Board receives internal controls reports produced by Janus Henderson on a quarterly basis, which confirm regulatory compliance.
Operational and cyber Disruption to, or failure of, the Manager's accounting, dealing or payment systems or the Custodian's records could prevent the accurate reporting and monitoring of the Company's financial position. The Company is also exposed to the operational risk that one or more of its service providers may not provide the required level of service. The Company may also be exposed to the risk of cyber attack on its service providers.	The Board monitors the services provided by the Manager and its other suppliers and receives reports on the key elements in place to provide effective internal control. During the year the Board received reports on the Manager's approach to information security and cyber attack defence. The Board considers the loss of the Fund Manager as a risk but this is mitigated by the experience of the Equities team at Janus Henderson.
ESG The Company is an Article 8 company under SFDR. Decisions on ESG matters can be subjective and criteria may change as knowledge, technology and science evolves. There is a risk that an investment, assessed as appropriate at a point in time, subsequently does not meet ESG criteria, and exposes the Company to reputational risk.	For those companies with a MSCI Laggard rating, the Board requires the Manager to formally explain the rationale for the potential improvement of the MSCI risk rating to a minimum of 'medium' within three years. See the Annual Report for more detail. The Company's ESG criteria are considered to be sufficiently clear and measurable. These criteria and the Company's adherence to them are monitored and reviewed on a regular basis. Should the Board or the Manager consider it appropriate to review or alter the criteria, this would be considered on a case by case basis against known factors prevailing at the time.

Details of how the Board monitors the services provided by Janus Henderson and its other suppliers, and the key elements designed to provide effective internal control, are explained further in the internal controls section of the Corporate Governance report of the 2023 Annual Report. Further details of the Company's exposure to market risk (including market price risk, currency risk and interest rate risk), liquidity risk and credit and counterparty risk and how they are managed are contained in the Notes to the Financial Statements within the Annual Report.

VIABILITY STATEMENT AND GOING CONCERN

The Company is a long-term investor. The Board believes it is appropriate to assess the Company's viability over a five year period in recognition of the Company's long-term horizon and what the Board believes to be investors' horizons, taking account of the Company's current position and the potential impact of the principal risks and uncertainties as documented in the Strategic Report within the Annual Report.

The Directors do not expect there to be any significant change in the current principal risks and adequacy of the mitigating controls in place. In addition, the Directors do not envisage any change in strategy or objectives or any events that would prevent the Company from continuing to operate over that period, as the Company's assets are liquid, its commitments are limited and the Company intends to continue to operate as an investment trust. In coming to this conclusion, the Board has considered the potential impact of the principal risks and uncertainties facing the Company, in particular the impact of the rise in inflation, COVID-19, the risks arising from the wider ramifications of the conflict between Russia and Ukraine, investment strategy and performance against the benchmark (whether from stock or sector attribution or the level of gearing) and market risk, materialising in severe but plausible scenarios, and the effectiveness of any mitigating controls in place.

The Directors took into account the liquidity of the portfolio and the borrowings in place when considering the viability of the Company over the next five years and its ability to meet liabilities as they fall due. This included consideration of the duration of the Company's borrowing facilities and how a breach of any covenants could impact on the Company's net asset value and share price. Based on this assessment, the Board has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five year period.

The Directors consider it appropriate to adopt the going concern basis of accounting in preparing the Financial Statements (see note 1(b) for further details).

BORROWINGS

During the year under review, the Company had in place an unsecured loan facility of £25 million (2022: £25 million) which allowed it to borrow as and when appropriate. The maximum amount drawn down in the year under review was £17.7 million (2022: £12.8 million), with borrowing costs for the year totalling £217,000 (2022: £84,000). £8.6 million of the facility was in use at the year end (2022: £12.6 million). Actual gearing at 31 July 2023 was 4.6% (2022: 2.5%) of NAV. Since the year end the Company has put in place an unsecured loan facility of €30 million to replace the previous facility. The Board has delegated responsibility for day to day gearing levels to the Fund Manager. The Fund Manager expects to maintain some level of gearing in most conditions and the normal level of gearing is expected to be between 2% and 6% of NAV, but at times it may be above or below these levels. The Fund Manager does not use gearing in an attempt to time prospective market moves. Instead, the Company's gearing will increase when the Fund Manager sees attractive, stock specific, opportunities to deploy capital and will reduce gearing when the Fund Manager is a net seller of existing positions, again for stock specific reasons.

RELATED PARTY TRANSACTIONS

The Company's transactions with related parties in the year were with its Directors and the Manager. There have been no material transactions between the Company and its Directors during the year and the only amounts paid to them were in respect of expenses and remuneration for which there were no outstanding amounts payable at the year end. Directors' shareholdings are disclosed in the 2023 Annual Report.

In relation to the provision of services by the Manager, other than fees payable by the Company in the ordinary course of business and the facilitation of marketing activities with third parties, there have been 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 Notes to the Financial Statements within the Annual Report.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

In accordance with Disclosure Guidance and Transparency Rule 4.1.12, each of the Directors confirms that, to the best of his or her knowledge:

(a)	the Company's Financial Statements, which have been prepared in accordance with UK Accounting Standards, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and
(b)	the Annual Report and Financial Statements include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

The Directors consider that the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.

On behalf of the Board

Nicola Ralston

Chairman

27 September 2023

TWENTY LARGEST HOLDINGS AS AT 31 JULY 2023

	Company		Country	Sector	Market Value 2023 £'000	Percentage of Portfolio 2023
1	Novo Nordisk		Denmark	Pharmaceuticals and Biotechnology	20,336	5.69
2	Nestlé		Switzerland	Food Producer	17,817	4.99
3	TotalEnergies		France	Oil, Gas and Coal	17,261	4.83
4	Roche		Switzerland	Pharmaceuticals and Biotechnology	15,766	4.41
5	Sanofi		France	Pharmaceuticals and Biotechnology	14,465	4.05
6	ASML		Netherlands	Technology Hardware and Equipment	13,009	3.64
7	Hermès		France	Luxury Goods	12,403	3.47
8	LVMH Moët Hennessy Louis Vuitton		France	Personal Goods	12,156	3.40
9	Safran		France	Aerospace and Defence	10,072	2.82
10	SAP		Germany	Software and Computer Services	9,968	2.79
Top 10					143,253	40.09
11	DSM Firmenich	Switzerland		Food Producer	9,860	2.76
12	Cellnex	Spain		Mobile Telecommunications	9,762	2.73
13	Airbus	France		Aerospace and Defence	9,642	2.70
14	SGS	Switzerland		Industrial Support Services	9,353	2.62
15	Partners Group	Switzerland		Private Equity Asset Manager	9,028	2.53
16	Beiersdorf	Germany		Personal Care, Drug and Grocery Store	8,650	2.42
17	Munich Re.	Germany		Insurance	8,441	2.36
18	Deutsche Börse	Germany		Financial Services	8,400	2.35
19	ASM International	Netherlands		Technology Hardware and Equipment	8,033	2.25
20	UniCredit	Italy		Banks	7,913	2.21
Top 20					232,335	65.02

Market capitalisation (excluding cash) of the portfolio by weight at 31 July 2023

Market cap	% Portfolio weight	% Benchmark weight
>€20bn	74.9	73.7
€10bn - €20bn	8.2	12.0
€5bn - €10bn	11.5	9.7
€1bn - €5bn	4.7	4.4
€0bn - €1bn	0.7	0.2

Performance drivers over the year ended 31 July 2023

	%
Benchmark Return	16.1
Sector Allocation1	(2.0)
Stock Selection	3.1
Currency Movements (relative to index)	0.9
Effect of Cash and Gearing	(0.1)
Effect of Ongoing Charge	(0.8)
Residual (due to timing and rounding)	(0.5)
NAV Total Return	16.7

¹ Sector allocation is the effect of asset allocation, less the effects of gearing, share buy-backs / issues and currency.

Source: Morningstar Direct, Janus Henderson

AUDITED INCOME STATEMENT

	Year ended 31 July 2023			Year ended 31 July 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 (note 2)	-	43,816	43,816	-	(54,923)	(54,923)
Investment income (note 3)	8,877	-	8,877	9,298	-	9,298
Other income	71	-	71	1	-	1
	---------	----------	---------	---------	----------	---------
Gross revenue and capital Gains/(losses)	8,948	43,816	52,764	9,299	(54,923)	(45,624)
Management fee	(407)	(1,628)	(2,035)	(410)	(1,642)	(2,052)
Other administrative expenses	(553)	-	(553)	(553)	-	(553)
	---------	----------	---------	---------	----------	---------
Net return/(loss) before finance costs and taxation	7,988	42,188	50,176	8,336	(56,565)	(48,229)
Finance costs	(43)	(174)	(217)	(17)	(67)	(84)
	---------	----------	---------	---------	----------	---------
Net return/(loss)before taxation	7,945	42,014	49,959	8,319	(56,632)	(48,313)
Taxation on net return	(1,120)	-	(1,120)	(69)	(11)	(80)
	---------	----------	---------	---------	----------	---------
Net return/(loss)after taxation	6,825	42,014	48,839	8,250	(56,643)	(48,393)
	=====	=====	=====	=====	=====	=====
Return/(loss) per ordinary share (basic and diluted) (note 4)	3.22p	19.83p	23.05p	3.89p	(26.73p)	(22.84p)
	=====	=====	=====	=====	=====	=====

The total return column of this statement represents the Income Statement of the Company.

All revenue and capital items in the above statement derive from continuing operations. 

The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the AIC. 

The Company had no recognised gains or losses other than those disclosed in the Income Statement.

AUDITED STATEMENT OF CHANGES IN EQUITY

Year ended 31 July 2023	Called up share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Capital reserves £'000	Revenue reserve £'000	Total shareholders' funds £'000
At 1 August 2022	1,060	41,032	263	251,065	7,590	301,010
Net return after taxation	-	-	-	42,014	6,825	48,839
Final dividend paid in respect of the year ended 31 July 2022 (paid 23 November 2022)	-	-	-	-	(6,356)	(6,356)
Interim dividend paid in respect of the year ended 31 July 2023 (paid 28 April 2023)	-	-	-	-	(1,695)	(1,695)
	----------	-----------	----------	-----------	----------	------------
At 31 July 2023	1,060	41,032	263	293,079	6,364	341,798
	======	======	======	=======	======	=======

Year ended 31 July 2022	Called up share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Capital reserves £'000	Revenue reserve £'000	Total shareholders' funds £'000
At 1 August 2021	1,060	41,032	263	307,722	4,633	354,710
Net (loss)/return after taxation	-	-	-	(56,643)	8,250	(48,393)
Costs relating to sub-division of shares	-	-	-	(14)	-	(14)
Final dividend paid in respect of the year ended 31 July 2021 (paid 24 November 2021)	-	-	-	-	(3,602)	(3,602)
Interim dividend paid in respect of the year ended 31 July 2022 (paid 22 April 2022)	-	-	-	-	(1,695)	(1,695)
Refund of unclaimed dividends over 12 years old	-	-	-	-	4	4
	----------	-----------	----------	-----------	----------	------------
At 31 July 2022	1,060	41,032	263	251,065	7,590	301,010
	======	======	======	=======	======	=======

AUDITED STATEMENT OF FINANCIAL POSITION

	As at 31 July 2023 £'000	As at 31 July 2022 £'000
Fixed assets Fixed asset investments held at fair value through profit or loss
Listed at market value - overseas	357,406	308,398
	----------	----------
Current assets
Debtors	3,445	6,192
Cash at bank and in hand	2,687	2,482
	----------	----------
	6,132	8,674
Creditors: amounts falling due within one year	(21,740)	(16,062)
	----------	----------
Net current liabilities	(15,608)	(7,388)
	----------	----------
Total assets less current liabilities	341,798	301,010
	----------	----------
Net assets	341,798	301,010
	======	======
Capital and reserves
Called up share capital	1,060	1,060
Share premium account	41,032	41,032
Capital redemption reserve	263	263
Capital reserves	293,079	251,065
Revenue reserve	6,364	7,590
	-----------	-----------
Total shareholders' funds	341,798	301,010
	======	======
Net asset value per ordinary share (basic and diluted)	161.3p	142.1p
	======	======

 

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 201 Bishopsgate, London EC2M 3AE. 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') issued in July 2022 by the Association of Investment Companies. The principal accounting policies applied in the presentation of these Financial Statements are set out below. These policies have been consistently applied to all the years presented. There have been no significant changes to the accounting policies compared to those set out in the Company's Annual Report for the year ended 31 July 2022. As an investment company the Company has the option, which it has taken, not to present a cash flow statement. A cash flow statement is not required when an investment company meets all the following conditions: substantially all of the entity's investments are highly liquid, substantially all of the entity's investments are carried at market value, and the entity provides a statement of changes in equity. The Directors have assessed that the Company meets all of these conditions. The Financial Statements have been prepared under the historical cost basis except for the measurement at fair value of investments. In applying FRS 102, financial instruments have been accounted for in accordance with Section 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 on occasion 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 or estimates 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 within the next financial year.
(b)	Going concern The assets of the Company consist of securities that are primarily readily realisable and, accordingly, the Directors believe that the Company has adequate resources to continue in operational existence for at least 12 months from the date of approval of the Financial Statements. Having assessed these factors and the principal risks, as well as considering the impact of the rise in inflation, COVID-19 and the risks arising from the wider ramifications of the conflict between Russia and Ukraine, the Directors consider it appropriate to adopt the going concern basis of accounting in preparing the Financial Statements.

2.	Gains/(losses)on investments held at fair value through profit or loss
		2023 £'000		2022 £'000
	Gains on sale of investments based on historical cost	10,558		4,271
	Less: Revaluation gains recognised in previous years	(591)		(32,176)
		------------		------------
	Gains/(losses)on investments sold in the year based on carrying value at previous statement of financial position date	9,967		(27,905)
		------------		------------
	Revaluation of investments held at 31 July	34,001		(27,108)
	Exchange (losses)/gains1	(152)		90
		----------		----------
		43,816		(54,923)
		======		======
	1 Includes exchange losses of £34,000 (2022: £20,000) on bank loans
3.	Investment income	2023 £'000		2022 £'000
	Overseas dividend income	8,877		9,298
		----------		----------
		8,877		9,298
		=====		=====
4.	Return/(loss) per ordinary share (basic and diluted)
	The total return per ordinary share is based on the net gain attributable to the ordinary shares of £48,839,000 (2022: loss £48,393,000) and on 211,855,410 ordinary shares (2022: 211,855,410), being the weighted average number of shares in issue during the year. The total return can be further analysed as follows:
		2023 £'000		2022 £'000
	Revenue return	6,825		8,250
	Capital return/(loss)	42,014		(56,643)
		----------		----------
	Total return/(loss)	48,839		(48,393)
		======		======
	Weighted average number of ordinary shares	211,855,410		211,855,410
		2023 Pence		2022 Pence
	Revenue return per ordinary share	3.22		3.89
	Capital return/(loss) per ordinary share	19.83		(26.73)
		----------		----------
	Total return/(loss) per ordinary share	23.05		(22.84)
		======		======
	The Company has no securities in issue that could dilute the return per ordinary share. Therefore the basic and diluted return per ordinary share are the same.

5.	Dividends on ordinary shares
		Register date			Payment date		2023 £'000		2022 £'000
	Final dividend (1.7p) for the year ended 31 July 2021	22 October 2021			24 November 2021		-		3,602
	Interim dividend (0.8p) for the year ended 31 July 2022	8 April 2022			22 April 2022		-		1,695
	Final dividend (3.0p) for the year ended 31 July 2022	21 October 2022			23 November 2022		6,356		-
	Interim dividend (0.8p) for the year ended 31 July 2023	11 April 2023			28 April 2023		1,695		-
	Refund of unclaimed dividends over 12 years old						-		(4)
							-----------		----------
							8,051		5,293
							=======		=======
	The proposed final dividend of 3.0p per share for the year ended 31 July 2023 is subject to approval by shareholders at the AGM and has not been included as a liability in these Financial Statements. The final dividend will be paid on 22 November 2023 to shareholders on the register of members at the close of business on 20 October 2023. The shares will be quoted ex-dividend on 19 October 2023. All dividends have been paid or will be paid out of revenue profits and revenue reserves. The total dividends payable in respect of the financial year which form the basis of Section 1158 of the Corporation Tax Act 2010 are set out below:
							2023 £'000		2022 £'000
	Revenue available for distribution by way of dividend for the year						6,825		8,250
	Interim dividend of 0.8p (2022: 0.8p) paid 28 April 2023 (2022: 22 April 2022)						(1,695)		(1,695)
	Proposed final dividend for the year ended 31 July 2023 of 3.0p (2022: 3.0p) (based on 211,855,410 ordinary shares in issue at 27 September 2023 (2022: 211,855,410))						(6,356)		(6,356)
							-----------		----------
	Transfer (from)/to revenue reserve1						(1,226)		199
							=======		=======
	1 There is no undistributed revenue in the current year (2022: £199,000 of undistributed revenue).
6.	Net asset value per ordinary share (basic and diluted)
	The net asset value per ordinary share of 161.3p (2022: 142.1p) is based on the net assets attributable to ordinary shares of £341,798,000 (2022: £301,010,000) and 211,855,410 (2022: 211,855,410) ordinary shares in issue at the year end. There were also 200,000 shares held in Treasury at the year end (2022: 200,000). The movements during the year of the assets attributable to the ordinary shares were as follows:
							2023 £'000		2023 £'000
	Net assets attributable to the ordinary shares at start of year						301,010		354,710
	Net return/(loss) after taxation						48,839		(48,393)
	Costs relating to sub-division of shares						-		(14)
	Dividends paid on ordinary shares in the year						(8,051)		(5,297)
	Refund of unclaimed dividends over 12 years old						-		4
							-----------		----------
	Total net assets attributable to the ordinary shares at 31 July						341,798		301,010
							=======		=======
7.	Called up share capital
				Number of shares entitled to dividend		Total number of shares		Nominal value of shares £'000
	Allotted and issued ordinary shares of 0.5p each at 31 July 2022			211,855,410		212,055,410		1,060
				-----------------		----------------		----------
	At 31 July 2023			211,855,410		212,055,410		1,060
				==========		==========		=====
	During the year the Company issued no shares (2022: none). During the year the Company repurchased no shares (2022: none). Shares held in treasury (2023: 200,000; 2022: 200,000) are not entitled to receive a dividend. There is a single class of ordinary share. Reserves that can be distributed as a dividend are detailed in the Annual Report. Since 31 July 2023, no shares have been repurchased or issued.
8.	2023 financial information
	The figures and financial information for the year ended 31 July 2023 are extracted from the Company's Annual Financial Statements for that period and do not constitute statutory financial statements for that period. The Company's Annual Financial Statements for the year ended 31 July 2023 have been audited but have not yet been delivered to the Registrar of Companies. The Independent Auditor's Report on the 2023 Financial Statements was unqualified, did not include a reference to any matter to which the Auditors drew attention without qualifying the report, and did not contain any statements under sections 498(2) and 498(3) of the Companies Act 2006.
9.	2022 financial information
	The figures and financial information for the year ended 31 July 2022 are extracted from the Company's Annual Financial Statements for that period and do not constitute statutory financial statements for that period. The Company's Annual Financial Statements for the year ended 31 July 2022 have been audited and delivered to the Registrar of Companies. The Independent Auditor's Report on the 2022 Financial Statements was unqualified, did not include a reference to any matter to which the Auditors drew attention without qualifying the report, and did not contain any statements under sections 498(2) and 498(3) of the Companies Act 2006.
10.	Annual Report and Annual General Meeting
	The Annual Report for the year ended 31 July 2023 will be posted to shareholders in October 2023 and copies will be available from the Corporate Secretary at the Company's Registered Office, 201 Bishopsgate, London EC2M 3AE. The Company's Annual General Meeting ('AGM' or 'Meeting') is currently scheduled to take place at the registered office at 2.30pm on Wednesday 15 November 2023. The Notice of the AGM will be posted to shareholders with the Annual Report and will be available on the Company's website.
11.	Website This document, and the Annual Report for the year ended 31 July 2023, will be available on the following website: www.hendersoneurotrust.com.

For further information please contact:
Jamie Ross Fund Manager Henderson EuroTrust plc Telephone: [phone]		Dan Howe Head of Investment Trusts Janus Henderson Investors Telephone: [phone]
Harriet Hall Investment Trust PR Manager Janus Henderson Investors Tel: [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) is incorporated into, or forms part of, this announcement.

 

END