Interim Results

Henderson Eurotrust PLC 26 March 2008 26 March 2008 HENDERSON EUROTRUST PLC Unaudited Results for the half year ended 31 January 2008 Financial Highlights (Unaudited) (Unaudited) (Audited) Half year Half year Year ended ended ended 31 January 31 January 31 July 2007 2008 2007 in pence in pence in pence % Change % Change Net asset value per ordinary share 522.6 528.7 -1.2 552.6 -5.4 Revenue return per ordinary share 2.9 0.3 - 6.1 - Dividends per ordinary share 3.0 2.0 - 6.0 - Interim Management Report (incorporating Chairman's Statement) I have pleasure in presenting my first report as Chairman of Henderson EuroTrust plc, covering the period from the end of July 2007 to end January 2008. Writing in September of 2007, my predecessor Stanislas Yassukovich drew your attention to the higher degree of uncertainty in financial markets at that time, and especially the concerns over the quality of lending in the United States. As investors will be aware, market turbulence - confined at first to one asset class in one country - spread rapidly into other regions and other asset classes. It brought to an end a relatively long period of rising company valuations and low volatility. The net asset value per share of the Company in the six months to 31 January fell from 552.6 pence to 522.6 pence, a drop of 5.4%. During that period our benchmark index, the FTSE World Europe (ex UK) Index has fallen by 4.5%. Taking into account dividends paid by the Company, the total return per share, using net asset value, has been minus 5.1%. Investors are primarily interested in the market price of their shares as well as in their net asset value. As often happens in weak markets, discounts on investment trusts have widened. The discount to NAV on our shares has been volatile, but with a tendency to increase. The Board has powers, renewed at the last Annual General Meeting, to intervene in the market and purchase shares. The Company made a purchase of 35,000 shares in the market during the period under review, and a subsequent purchase of 35,000 shares since 31 January 2008. These shares are held in treasury. We shall continue to monitor carefully the market in the Company's shares, and will intervene under the powers granted as and when the Board sees fit. Performance Tim Stevenson, the Company's Portfolio Manager since it was formed in 1992, writes about his strategy in the Investment Review. I want to comment however on Tim's relative performance in the last year or so. Shareholders will be aware from information provided each year in the Annual Report that almost 70% of our benchmark index is accounted for by giant corporations with market capitalisations of more than £15 billion. By contrast, your Company had only 30% of its portfolio invested in that category. The Board wholeheartedly supports the Portfolio Manager's strategy; the very large companies that dominate the index are likely to be widely followed by the analyst community, and as a result it will be more difficult to find mis-pricings. By contrast the smaller and middle-market segment, representing only 30% of the index, will contain more examples of growth companies selling at anomalous valuations. This is where Tim concentrates his research. - MORE - Page 2 of 9 HENDERSON EUROTRUST PLC Unaudited Results for the half year ended 31 January 2008 Shares in larger companies also tend however to be more liquid investments, and from time to time, these will be strongly preferred by the average investor; smaller and mid-cap investments will then underperform the broad index. These are such times. Our Portfolio Manager has a good long-term record; although he has been buffeted by the draining of liquidity in late 2007 and early 2008, we see these periods as aberrations, and when more normal conditions return, we are sure that his stock-picking abilities will return to the fore. VAT We referred in our last Annual Report to the legal case between JPMorgan Fleming Claverhouse and HMRC regarding Value Added Tax on management services provided to investment companies. We now have confirmation by HMRC that, in the light of the European Court of Justice decision, fund management services supplied to your Company are VAT exempt. To the extent that recovery is certain, the Company is required by the accounting rules to recognise the amount in the Income Statement and Balance Sheet. This has been done by including the amount that the Company anticipates receiving repayment in due course. This amount is currently estimated at £899,000. This is split pro rata between the capital and revenue accounts, and has given rise to an increase of 0.5 pence per share in the revenue account, and an increase of 2.2 pence per share in the capital account. Changes to the Board At the conclusion of our Annual General Meeting in November 2007, Stanislas Yassukovich stepped down as Chairman and retired from the Board. Mr Yassukovich had been the Company's Chairman since it was founded in 1992. On behalf of the shareholders and fellow board members, I want to thank him for the wise counsel and guidance he brought to the affairs of the Company over many years, and to offer him our best wishes for the future. At the same time, Patrick Stevenson retired from the Board. He had been unwell for some months, and it is with great sadness that I inform you that Patrick passed away some weeks later. Patrick made a major contribution to the Board's affairs as a Director, frequently challenging our assumptions, and - it often turned out - correctly so. We offer our condolences to his family. I welcome to the Board two new members with complementary skills and experience. Joop Feilzer brings wide knowledge of investing in Continental Europe, and John Cornish brings his deep understanding of the ever-more complex legal and accounting issues surrounding investment companies. John has been appointed Chairman of the Audit Committee. Related Party Transactions During the first six months of the current financial year, no transactions with related parties have taken place which have materially affected the financial position or performance of the Company during the period. Details of related party transactions are contained in the last annual report and accounts. Outlook including principal risks and uncertainties for the six months to 31 July 2008 Interest rates in the European (excluding UK) area have not yet been cut, in marked contrast to rapid cuts in the United States. With evidence of high inflation currently out-weighing evidence of economic slowdown, it is not yet clear when rates will be cut, and this has served to keep the Euro at a high level, giving some small advantage to the sterling value of our holdings, but acting at times as a headwind for European exporters. Our Portfolio Manager expects European economies to slow as the year progresses, and has positioned the portfolio accordingly. It would seem that the current market turmoil may continue for a while longer, due to the uncertainty surrounding the extent to which the heavily indebted economies of the US and UK (in particular) will respond to the stimulus of lower interest rates, as well as continuing confusion over banks and insurance companies. There should however be plenty of opportunity for our Portfolio Manager to find investments in - MORE - Page 3 of 9 HENDERSON EUROTRUST PLC Unaudited Results for the half year ended 31 January 2008 European (excluding UK) companies which can continue to make progress in what has become a more difficult environment. The long term trends towards greater shareholder value and more dynamic management amongst European companies remain intact. Mark Tapley Chairman 26 March 2008 For further information please contact: Tim Stevenson Portfolio Manager Henderson EuroTrust plc Telephone: 020 7818 4342 James de Sausmarez Head of Investment Trusts Henderson Global Investors Telephone: 020 7818 3349 Sarah Gibbons-Cook Investor Relations and PR Manager Henderson Global Investors Telephone: 020 7818 3198 - MORE - Page 4 of 9 HENDERSON EUROTRUST PLC Unaudited Results for the half year ended 31 January 2008 Income Statement for the half year ended 31 January 2008 (Unaudited) (Unaudited) (Audited) Half year ended Half year ended Year ended 31 January 2008 31 January 2007 31 July 2007 Revenue Capital Revenue Capital Revenue Capital Return Return Total Return Return Total Return Return Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 (Losses)/gains from investments held at fair value through profit or loss - (7,022) (7,022) - 15,337 15,337 - 19,751 19,751 Income from investments held at fair value through profit or loss 486 - 486 288 - 288 2,356 - 2,356 Other interest receivable and similar income 169 - 169 47 - 47 139 - 139 -------- -------- -------- -------- -------- -------- -------- -------- -------- Gross revenue and Capital (losses)/gains 655 (7,022) (6,367) 335 15,337 15,672 2,495 19,751 22,246 Management and performance fees (90) (362) (452) (110) (449) (559) (216) (866) (1,082) Write back of VAT (note 5) 165 734 899 - - - - - - Other administrative expenses (87) - (87) (98) - (98) (220) - (220) -------- -------- -------- -------- -------- -------- -------- -------- -------- Net return on ordinary activities before finance costs and taxation 643 (6,650) (6,007) 127 14,888 15,015 2,059 18,885 20,944 Finance costs - - - - (2) (2) (2) (6) (8) -------- -------- -------- -------- -------- -------- -------- -------- -------- Net return on ordinary activities before taxation 643 (6,650) (6,007) 127 14,886 15,013 2,057 18,879 20,936 Taxation on net return on ordinary 40 (109) (69) (41) - (41) (553) 255 (298) activities -------- -------- -------- -------- -------- -------- -------- -------- -------- Net return on ordinary activities after taxation 683 (6,759) (6,076) 86 14,886 14,972 1,504 19,134 20,638 ===== ===== ===== ===== ===== ===== ===== ====== ===== Return per ordinary share (note 2) 2.9p (29.0p) (26.1p) 0.3p 58.0p 58.3p 6.1p 77.2p 83.3p ===== ===== ===== ===== ===== ===== ===== ====== ===== The total columns of this statement represent the income statements of the Company. All revenue and capital returns in the above statement derive from continuing operations. No operations were acquired or discontinued during the half year ended 31 January 2008. The Company has no recognised gains or losses other than those recognised in the Income Statement. - MORE - Page 5 of 9 HENDERSON EUROTRUST PLC Unaudited Results for the half year ended 31 January 2008 Reconciliation of Movements in Shareholders' Funds for the half year ended 31 January 2008 Called up Share Capital Other share premium redemption capital Revenue capital account reserve reserves reserve Total For the half year ended 31 January 2008 £'000 £'000 £'000 £'000 £'000 £'000 As at 31 July 2007 1,283 33,814 - 91,928 1,737 128,762 Net return on ordinary activities after taxation - - - (6,759) 683 (6,076) Repurchase of ordinary shares held in treasury - - - (164) - (164) Cancellation of ordinary shares held in treasury (120) - 120 - - - Final dividend for 2007 declared and paid - - - - (932) (932) -------- -------- -------- -------- --------- --------- As at 31 January 2008 1,163 33,814 120 85,005 1,488 121,590 ===== ===== ===== ===== ===== ===== Called up Share Capital Other share premium redemption capital Revenue capital account reserve reserves reserve Total For the half year ended 31 January 2007 £'000 £'000 £'000 £'000 £'000 £'000 As at 31 July 2006 1,283 33,814 - 84,944 1,597 121,638 Net return on ordinary activities after taxation - - - 14,886 86 14,972 Final dividend for 2006 declared and paid - - - - (898) (898) ---------- ---------- ---------- ---------- ---------- ---------- As at 31 January 2007 1,283 33,814 - 99,830 785 135,712 ====== ====== ====== ====== ====== ====== Called up Share Capital Other share premium redemption capital Revenue capital account reserve reserves reserve Total For the year ended 31 July 2007 £'000 £'000 £'000 £'000 £'000 £'000 As at 31 July 2006 1,283 33,814 - 84,944 1,597 121,638 Net return on ordinary activities after taxation - - - 19,134 1,504 20,638 Final dividend for 2006 declared and paid - - - - (898) (898) Interim dividend for 2007 declared and paid - - - - (466) (466) Repurchase of ordinary shares held in treasury - - - (12,150) - (12,150) ---------- ---------- ---------- ---------- ---------- ---------- As at 31 July 2007 1,283 33,814 - 91,928 1,737 128,762 ====== ====== ====== ====== ====== ====== - MORE - Page 6 of 9 HENDERSON EUROTRUST PLC Unaudited Results for the half year ended 31 January 2008 Balance Sheet as at 31 January 2008 (Unaudited) (Unaudited) (Audited) 31 January 31 January 31 July 2008 2007 2007 £'000 £'000 £'000 Fixed asset investments held at fair value through profit or loss 114,517 136,950 122,865 ---------- ---------- ---------- Current assets Debtors 2,803 335 2,414 Cash at bank and short term deposits 4,611 1,019 5,625 ---------- --------- ---------- 7,414 1,354 8,039 Creditors: amounts falling due within one year (341) (2,592) (2,142) ---------- ---------- ---------- Net current assets/(liabilities) 7,073 (1,238) 5,897 ----------- ---------- ---------- Total net assets 121,590 135,712 128,762 ======= ======= ======= Capital and reserves Ordinary called up share capital 1,163 1,283 1,283 Share premium account 33,814 33,814 33,814 Capital redemption reserve 120 - - Capital reserves: Realised 70,543 59,545 61,997 Unrealised 14,462 40,285 29,931 Revenue reserve 1,488 785 1,737 ----------- ----------- ----------- Total shareholders' funds 121,590 135,712 128,762 ======= ======= ======= Net asset value per ordinary share (note 3) 522.6p 528.7p 552.6p ======= ======= ======= - MORE - Page 7 of 9 HENDERSON EUROTRUST PLC Unaudited Results for the half year ended 31 January 2008 Cash Flow Statement for the half year ended 31 January 2008 (Unaudited) (Unaudited) (Audited) Half year ended Half year ended Year ended 31 January 2008 31 January 2007 31 July 2007 £'000 £'000 £'000 Net cash inflow/(outflow) from operating 215 (1,114) (11) activities Servicing of finance - (2) (8) Total tax (paid)/recovered (80) 120 155 Net cash (outflow)/inflow from financial (380) (2,235) 16,040 investment Equity dividends paid (932) (898) (1,364) ---------- ---------- ----------- Net cash inflow/(outflow) before financing (1,177) (4,129) 14,812 Net cash inflow/(outflow) from financing (165) 2,129 (12,150) ----------- ----------- ----------- (Decrease)/increase in cash (1,342) (2,000) 2,662 ======= ======= ======= Reconciliation of operating revenue to net cash (outflow)/inflow from operating activities Net return before finance costs and taxation (6,007) 15,015 20,944 Capital loss/(return) before finance costs and 6,650 (14,888) (18,885) taxation (Increase)/decrease in prepayments and accrued (124) 7 (76) income Increase/(decrease) in creditors and accruals 127 (746) (722) Expenses charged to capital (362) (449) (866) Tax on unfranked investment income deducted at source (69) (53) (406) ----------- ----------- ----------- Net cash (outflow)/inflow from operating 215 (1,114) (11) activities ======= ======= ======= Reconciliation of net cash flow to movements in net funds/debt (Decrease )/Increase in cash as above (1,342) (2,000) 2,662 Cash inflow from increase in debt - (2,129) - Exchange movements 328 (106) (162) ----------- ----------- ----------- Movement in net (debt)/funds (1,014) (4,235) 2,500 Net cash at 1 August 5,625 3,125 3,125 ----------- ----------- ----------- Net funds/(debt) at end of the period 4,611 (1,110) 5,625 ======= ======= ======= Represented by: Cash at bank 4,611 1,019 5,625 Short term bank loans - (2,129) - ----------- ----------- ----------- 4,611 (1,110) 5,625 ======= ======= ======= - MORE - Page 8 of 9 HENDERSON EUROTRUST PLC Unaudited Results for the half year ended 31 January 2008 Notes 1. Accounting policies The accounts have been prepared under the historical cost convention, modified to include the revaluation of investments and in accordance with applicable Accounting Standards and with the Revised Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' ('SORP') dated December 2005. All of the Company's operations are of a continuing nature. 2. Return per ordinary share Return per ordinary share is based on the net loss attributable to the ordinary shares of £6,076,000 loss (half year ended 31 January 2007: £14,972,000 profit; year ended 31 July 2007: £20,638,000 profit) and on the 23,294,693 weighted average number of shares (half year ended 31 January 2007: 25,667,005; year ended 31 July 2007: 24,768,609). Revenue return per ordinary share is based on the net revenue return attributable to the ordinary shares of £683,000 (half year ended 31 January 2007: £86,000; year ended 31 July 2007: £1,504,000) and on the 23,294,693 weighted average number of shares (half year ended 31 January 2007: 25,667,005; year ended 31 July 2007: 24,768,609). Capital return per ordinary share is based on net capital losses attributable to the ordinary shares of £6,759,000 (half year ended 31 January 2007: £14,886,000 profit; year ended 31 July 2007: £19,134,000 profit) and on the 23,294,693; weighted average number of shares (half year ended 31 January 2007: 25,667,005; year ended 31 July 2007: 24,768,609). 3. Net asset value per ordinary share Net asset value per ordinary share is based on the 23,268,063 (half year ended 31 January 2007: 25,667,005; year ended 31 July 2007: 23,303,063) ordinary shares in issue. During the period ended 31 January 2008 35,000 (half year ended 31 January 2007: nil; year ended 31 July 2007: 2,363,942) ordinary shares were repurchased at a total cost of £164,000 (half year ended 31 January 2007: nil; year ended 31 July 2007 £12,150,000) and held in treasury. Since the period end there has been a further 35,000 ordinary shares repurchased at a total cost of £156,000. During the period the Company cancelled 2,363,942 shares held in treasury. 4. Management and performance fees Management and performance fees are charged in accordance with the terms of the management agreement. Performance fees are provided for, based on the out-performance of the Company against the FTSE World Europe (ex UK) Index. For the half year ended 31 January 2008, there was no performance fee provision (half year ended 31 January 2007: £nil and year ended 31 July 2007: £nil). 5. VAT on management fees In 2004 the Association of Investment Companies ('AIC'), together with JPMorgan Fleming Claverhouse Investment Trust plc, launched a case against HM Revenue & Customs ('HMRC') to challenge whether Value Added Tax ('VAT') should be charged on fees paid for management services provided to investment trust companies. On 28 June 2007 the European Court of Justice delivered its judgment on the case in favour of the AIC. Since then, HMRC has accepted that the provision of investment management services to investment trust companies is VAT exempt and has acknowledged its liability to pay claims in respect of VAT borne by investment companies. The manager (Henderson Global Investors Limited) will now be able to reclaim from HMRC the amount of VAT charged to the Company in respect of investment management services from 1 October 2000 to 30 June 2007, to the extent that such VAT was paid by the manager to HMRC. VAT has not been applied to investment management fees invoiced since June 2007. Accordingly, VAT borne by the Company on investment management fees invoiced in the period from 1 October 2000 to 30 June 2007 has been written back, in accordance with an agreement reached between the manager and the Company. An amount of £899,000 has been recognised representing the repayment the Company anticipates receiving in due course. The write back has been allocated between revenue return and capital return according to the allocation of the amounts originally paid. The Company may be able to recover further amounts of the VAT charged on investment management fees back to 1990, in particular in respect of the period from 1 January 1990 to 4 December 1996 (following the decision of the House of Lords in the Fleming/Conde Nast case). However, the Board considers that currently there are too many uncertainties for any reasonable estimate to be calculated of the amounts potentially recoverable for that period. The Company will receive from the manager any interest paid by HMRC on the amounts eventually recovered. - MORE - Page 9 of 9 HENDERSON EUROTRUST PLC Unaudited Results for the half year ended 31 January 2008 6. Interim dividend An interim dividend of 3.0p per share will be paid on 2 May 2008 to shareholders on the Register of Members on 4 April 2008. The Company's shares will be quoted ex-dividend on 2 April 2008. 7. Comparative information The figures and financial information for the year ended 31 July 2007 are an extract based on the latest published accounts and do not constitute statutory accounts for that year. Those accounts have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under either section 237(2) or 237(3) of the Companies Act 1985. The half year report ended 31 January 2008 has been neither audited nor reviewed by the auditors. 8. Half year report The half year report will be posted to shareholders in April and will be available from the Registered Office at 4 Broadgate, London EC2M 2DA thereafter. Directors' Responsibility Statement The Directors confirm that, to the best of their knowledge: (a) the condensed set of financial statements has been prepared in accordance with the Accounting Standards Board's statement 'Half-Yearly Financial Reports'; (b) the interim management report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and (c) the interim management report includes a fair review of the information required by the Disclosure and Transparency Rule 4.2.8R (disclosure of related party transactions and changes therein). For and on behalf of the Board Mark Tapley Chairman 26 March 2008 - ENDS - This information is provided by RNS The company news service from the London Stock Exchange

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