7th Dec 2011 14:54
HENDERSON EUROPEAN FOCUS TRUST PLC (formerly Gartmore European Investment Trust p.l.c.) Annual Financial Report for the year ended 30 September 2011
This announcement constitutes regulated information.
Henderson European Focus Trust plc ("the Company") announces results for the year ended 30 September 2011
Investment objective
The Company seeks to maximise total return from a focused portfolio of listed Continental European stocks.
Financial Highlights 30 September 30 September Change 2011 2010 % Shareholders' funds Net assets (£'000) 103,913 144,945 -28.3(1) Net asset value ("NAV") per ordinary 580.0p 645.9p -10.2share Share price
Market capitalisation of ordinary shares in issue, with full voting 88,488 131,397 -32.7rights (£'000) Middle market price 493.88p 585.50p -15.6
Average discount to NAV per share over 9.1% 5.3%
the year Benchmark Index FTSE World Europe ex UK Index in 305.3 366.6
-16.7
sterling terms (capital only)(2)
Gearing Actual gearing 2.5% 6.3%
Maximum gearing authorised by the 15.0% 15.0%
Board
Dividend per ordinary share 17.75p 16.50p
Total expense ratio 0.8%(4) 1.1% (1)The Company's net assets were reduced during the year by £28,020,000utilised in the repurchase of 4,524,820 ordinary shares to be held in treasury.In broad terms, this reduction mainly reflects difference between the decreaseof 28.3% in net assets and the decrease of 10.2% in net asset value perordinary share for the year to 30 September 2011.
(2) With effect from 1 October 2011 the total return Index is used as the Company's Benchmark
(3) With effect from 25 November 2011 the maximum gearing limit has been increased to 20.0%.
(4) The Company's total expense ratio has decreased in the year ended 30 September 2011, mainly as a result of the management fee being waived for three months.
Sources: Henderson Global Investors Limited, Datastream
For further information contact:
James de Sausmarez Sarah Gibbons-Cook Director of Investment Trusts Investor Relations and PR Manager
Henderson Global Investors Limited Henderson Global Investors Limited
Tel: 020 7818 3349 Tel: 020 7818 3198 Neither the contents of the Company's website nor the contents of any websiteaccessible from hyperlinks on the Company's website (or any other website) isincorporated into, or forms part of, this announcement.
Chairman's Statement
Performance
Over the year to 30 September 2011, the net asset value ("NAV") per ordinaryshare (including undistributed revenue) fell by 10.2% and the FTSE World Europeex UK Index in sterling terms (capital only) ("the Benchmark Index") declinedby 16.7%. Over the same period, the middle market price of the Company'sordinary shares fell by 15.6%, from 585.50p to 493.88p. Over the five-year andten-year periods to 30 September 2011, the NAV per ordinary share, in capitalterms, increased by 3.0% and 71.6% respectively, compared with a decrease of17.1% and an increase of 22.9% in the Benchmark Index over each of theserespective time periods.
Revenue and dividend
The revenue return for the year to 30 September 2011 was 18.29p per ordinary share, compared with 15.69p for the previous year.
The Board has declared an interim dividend, in lieu of a final, of 17.75p perordinary share, an increase of 7.6% on the previous year. The dividend will bepaid on 30 December 2011 to shareholders on the register on 16 December 2011.
Management Company
Following the acquisition of Gartmore Group Limited by Henderson Group plc inApril 2011, the management, administration and company secretarial servicesprovided by Gartmore Investment Limited are now undertaken by Henderson GlobalInvestors Limited and its subsidiaries. The day-to-day management of theCompany's portfolio continues to be undertaken by John Bennett.
Change of investment policy
In accordance with proposals put to shareholders at a general meeting on 25 November 2011, as detailed in a circular to shareholders dated 4 November 2011, the Company's investment policy, performance fee arrangements and Benchmark Index have all been amended.
Change of name
As noted in the circular sent to shareholders in relation to the change ofinvestment policy, in order to align the Company's name with that of the newmanagement company and to reflect the change in investment policy, the name ofthe Company was changed from Gartmore European Investment Trust p.l.c. toHenderson European Focus Trust plc on 25 November 2011.
Discount management policy
Despite the Company's sound long-term investment performance, the welldocumented concerns over sovereign debt and speculation surrounding the futureof the eurozone left European equities distinctly out of favour for much of thefinancial year. This resulted in the Company having to purchase a significantnumber of ordinary shares in the early part of the financial year, consistentwith our approach to managing the discount. As a consequence, it was necessaryto seek shareholder approval to renew the Company's buy-back authority at ageneral meeting of the Company on 1 December 2010 and at the annual generalmeeting on 28 January 2011.During the year to 30 September 2011, the Company repurchased 4,524,820ordinary shares (20.1% of the shares in issue at the beginning of the reportingperiod), to be held in treasury, at a cost of £28.0 million. Over the year, theordinary shares traded at a daily average discount of 9.1%, compared with aEuropean investment trust sector average of 11.1%. Since 30 September 2011 theCompany has bought back a further 555,995 ordinary shares. At 5 December 2011the share price discount was 13.5%.As reported in my letter to shareholders dated 4 November 2011 setting out thedetails of a proposed change in investment policy, the policy on sharebuy-backs had been more relaxed over recent periods to aiming to maintain thediscount below 10%, as the Company was finding itself the focus of short-termtraders because of its discount protection policy being significantly tighterthan other members of its peer group. The Board is pleased that the changes tothe Company's investment policy were approved and recognises that the moreconviction based portfolio requires a less prescriptive discount managementpolicy as liquidity in the portfolio will be reduced.In adopting a more flexible share buy-back policy, the Board recognises thatthe aim over the longer term should be to provide a reasonably strong andconsistent rating for the Company's shares, ideally better than the averagerating of the Company's peer group. However, day-to-day fluctuations andabnormal market conditions will inevitably impact on the practical applicationof buy-back policy in highly volatile markets.The Board and Manager will, however, endeavour to provide additional secondarymarket liquidity by continuing to use share buy-backs even with the morefocused approach to portfolio construction and more concentrated holdings ofstocks.
Annual general meeting ("AGM")
At the AGM on 27 January 2012, the Directors will again be seeking to renew theauthorities previously granted to allot and to buy-back shares for cancellationor to be held in treasury. The passing of these resolutions will continue toprovide your Board with flexibility to add shareholder value should theopportunity arise. Shareholders are also being asked to renew the authority tocall general meetings at short notice. Further details are provided in aseparate letter to shareholders which includes the notice of AGM. I hope youwill give these resolutions your full consideration and support.
Outlook
The crisis engulfing the Eurozone has only intensified in the year under review. The outlook for the current financial year is again clouded by uncertainty, with some European economies facing major headwinds to growth for some time to come. Indeed, while the immediate headlines are focused upon
Europe, the difficulties are not unique to the so called Old Continent. One need only cast an eye across the Atlantic to identify equal if not greater challenges in the shape of too much debt and too little growth.
It is clear, then, that in a deleveraging era, the world economy looks set tostruggle to generate the kind of growth rates many have grown accustomed to.Sluggish growth rates are the norm in a post-crisis, deleveraging world.Thankfully, while politicians remain in some denial of this fact, Europeanequity markets have gone a very long way to discounting a new, low growth era.
It seems easy to forget that the entry price at which an investor commits to a situation is a key determinant between success and failure. At a time when European equities have already fallen to levels discounting recession it is worth reminding ourselves that our Manager remains committed to
a proven, disciplined investment process in the quest to add value forshareholders. Thus, we consider that the Company is well placed to capitaliseupon the many bottom up opportunities so often presented amidst such apparenttop down gloom.Rodney DennisChairman7 December 2011
Principal Risks and Uncertainties
The Board's policy on risk management has not changed from last year. TheDirectors have put in place processes to identify and manage significant risksto the Company, including internal controls to minimise operational risks. TheBoard, in conjunction with the Audit Committee, regularly review the system ofinternal controls. These include controls to safeguard the Company's assets andshareholders' investments. The Board has identified its key risks as follows:
• Market risk
The Company's performance is dependent on the performance of the companies andmarkets in which it invests and will also be affected by the strength ofcurrencies in the regions in which it invests relative to sterling. Investmentrisk is spread by holding a diversified portfolio of companies with strongbalance sheets and above average growth prospects. A significant proportion ofthe holdings in the Company's portfolio may not be represented in the BenchmarkIndex.• Gearing
The Manager has authority to use gearing up to a maximum of 20% of the Company's net assets. In the event of a significant or prolonged fall in equity markets gearing would exacerbate the effect of the falling market on the Company's NAV and, consequently, it share price.
• Other financial risks
The Company minimises the risk of a counterparty failing to deliver securitiesor cash by dealing through organisations that have undergone rigorous duediligence by the Manager. The Company holds its liquid funds, which are mostlydenominated in euro, almost entirely in interest bearing bank accounts in theUK or on short-term deposit. This, together with a portfolio which comprisesmainly investments in large and medium-sized companies listed on major equitymarkets, mitigates the Company's exposure to liquidity risk. The majority ofthe Company's assets and liabilities are denominated in currencies other thansterling. No hedging of the currency exposure is currently undertaken.Consequently, exchange rate fluctuations have the potential to reduce orenhance returns for sterling based investors.
The Board receives regular reports on the Company's compliance with Section 1158 of the Corporation Tax Act 2010, the UKLA Listing Rules and other regulations.
Statement under DTR 4.1.12
Each of the Directors confirms that, to the best of their knowledge:
â— the financial statements, which have been prepared in accordance with UnitedKingdom Generally Accepted Accounting Practice (United Kingdom AccountingStandards and applicable law) on a going concern basis, give a true and fairview of the assets, liabilities, financial position and profit or loss of theCompany; andâ— the annual report includes a fair review of the development and performanceof the business and the position of the Company, together with a description ofthe principal risks and uncertainties that it faces, and details on relatedparty transactions.
For and on behalf of the Board of Directors
Rodney DennisChairman, 7 December 2011Top 10 investmentsAs at 30 September 2011Company Sector Country of Valuation Percentage listing £000 of listed investments Roche Pharmaceuticals & Switzerland 7,055 7.2 biotechnology Novartis Pharmaceuticals & Switzerland 6,544 6.6 biotechnology Nestl© Food producers Switzerland 5,210 5.3 SAP Software and computer Germany 4,396 4.4 services
Sanofi-Aventis Pharmaceuticals & France 3,494 3.5 biotechnology Reed Elsevier Media Netherlands 3,328 3.4 Total Oil & gas producers France 3,200 3.2 Getinge Health care equipment & Sweden 3,034 3.1 services Elekta Health care equipment & Sweden 2,955 3.0 services
Novo Nordisk Pharmaceuticals & Denmark 2,449 2.5 biotechnology ---------- ---------- 41,665 42.2 ====== ======Country analysisAs at 30 September 2011Switzerland 22.6% France 21.8% Germany 20.2% Scandinavia 13.6% Netherlands 8.9% Net current assets 4.7% Spain 3.3% Italy 2.5% Ireland 1.4% Belgium 1.0% ---------- 100.0% ======Income Statement
for the year ended 30 September 2011
Year ended Year ended 30 September 2011 30 September 2010 Revenue Capital Total Revenue Capital Total return return £'000 return return £'000 £'000 £'000 £'000 £'000 Losses on investments - (10,518) (10,518) - (5,139) (5,139)held at fair value through profit or loss Losses on derivative - (1,832) (1,832) - - -instruments Exchange gain on - 10 10 - 884 884currency transactions Income from 4,549 - 4,549 5,263 - 5,263investments Other income 8 - 8 2 - 2 Fair value adjustment - - - - (30) (30)of subsidiary ---------- ---------- ---------- ---------- ---------- ---------- Gross revenue and 4,557 (12,340) (7,783) 5,265 (4,285) 980capital gains/(losses) Management fee (181) (545) (726) (301) (904) (1,205) Other fees and (334) (317) (651) (421) (124) (545)expenses ---------- ---------- ---------- ---------- ---------- ---------- Net return on ordinary 4,042 (13,202) (9,160) 4,543 (5,313) (770)activities before finance charges and taxation Finance charges (20) (59) (79) (40) (118) (158) ---------- ---------- ---------- ---------- ---------- ---------- Net return on ordinary 4,022 (13,261) (9,239) 4,503 (5,431) (928)activities before taxation Taxation on net return (511) - (511) (597) (59) (656)on ordinary activities ---------- ---------- ---------- ---------- ---------- ---------- Net return on ordinary 3,511 (13,261) (9,750) 3,906 (5,490) (1,584)activities after taxation ====== ====== ====== ====== ====== ====== Return per ordinary 18.29p (69.09)p (50.80)p 15.69p (22.06)p (6.37)pshare ====== ====== ====== ====== ====== ======The total columns of this statement represent the Income Statement of theCompany. The revenue return and capital return columns are supplementary tothis and are prepared under guidance published by the Association of InvestmentCompanies. All revenue and capital items in the above statement derive fromcontinuing operations. No operations were acquired or discontinued during theyear. The Company had no recognised gains or losses other than those disclosedin the Income Statement.
Reconciliation of Movements in Shareholders' Funds
for the year ended 30 September 2011
Year ended 30 Called up Special Merger Capital Capital Revenue TotalSeptember 2011 share distributable reserve redemption reserve reserve capital reserve £'000 reserve £'000 £'000 £'000 £'000 £'000 £'000 As at 30 September 12,352 53,001 61,344 6,171 1,596 10,481 144,9452010 Net return on - - - - (13,261) (9,750)ordinary activities 3,511 after taxation Ordinary dividend - - - - - (3,262) (3,262)paid Buy-backs of - (28,020) - - - - (28,020)ordinary shares and held in treasury Cancellation of (2,500) - - 2,500 - - -ordinary shares from treasury ---------- ---------- ---------- ----------
---------- ---------- ----------
At 30 September 9,852 24,981 61,344 8,671 (11,665) 10,730 103,9132011 ====== ====== ====== ====== ====== ====== ====== Year ended 30 Called up Special Merger Capital Capital Revenue TotalSeptember 2010 share distributable reserve redemption reserve reserve capital reserve £'000 £'000 £'000 reserve £'000 £'000 £'000 £'000 As at 30 September 14,852 53,001 61,344 3,671 33,618 10,280 176,7662009 Net return on - - - - (5,490) 3,906 (1,584)ordinary activities after taxation Ordinary dividend - - - - - (3,705) (3,705)paid Buy-backs of - - - - (26,532) - (26,532)ordinary shares and held in treasury Cancellation of (2,500) - - 2,500 - - -ordinary shares from treasury ---------- ---------- ---------- ----------
---------- ---------- ----------
At 30 September 12,352 53,001 61,344 6,171 1,596 10,481 144,9452010 ====== ====== ====== ====== ====== ====== ====== Balance Sheetat 30 September 2011 2011 2010 £'000 £'000 Fixed assets Investments held at fair value through profit or loss 99,031 152,783 ---------- ---------- Current assets Debtors 6,873 5,609
Cash at bank and short-term deposits 6,766
501 ---------- ---------- 13,639 6,110 Creditors: amounts falling due within one year (8,757) (13,948) ---------- ---------- Net current assets/ (liabilities) 4,882 (7,838) ---------- ---------- Net Assets 103,913 144,945 ====== ====== Capital and reserves Called up share capital 9,852 12,352 Special distributable reserve 24,981 53,001 Merger reserve 61,344 61,344 Capital redemption reserve 8,671 6,171 Capital reserve (11,665) 1,596 Revenue reserve 10,730 10,481 ---------- ---------- Shareholders' funds 103,913 144,945 ====== ====== Net asset value per ordinary share 580.0p 645.9p ====== ======Cash Flow Statement
for the year ended 30 September 2011
2011 2011 2010 2010 £'000 £'000 £'000 £'000
Net cash inflow from operating 4,292
1,484activities Servicing of finance Interest paid (82) (155) ---------- ----------
Net cash outflow from servicing of (82)
(155)finance Taxation Tax recovered - 183 ---------- ---------- Net tax recovered - 183 Financial investment Purchases of investments (261,452) (148,777) Sales of investments 303,018 176,939
Losses on index future contracts (1,832) -
---------- ----------
Net cash inflow from financial 39,734
28,162investment Equity dividend paid (3,262) (3,705)
Decrease in short term deposits 33
14 ---------- ----------
Net cash inflow before financing 40,715
25,983activities Financing
Shares repurchased and held in (27,896) (25,225)
treasury Loans repaid (9,097) (2,327) ---------- ---------- (36,993) (27,552) ---------- ---------- Increase/(decrease) in cash 3,722 (1,569) ====== ======
Reconciliation of net cash flow to
movement in net debt Increase/(decrease) in cash as above 3,722
(1,569)
Decrease in short-term deposits (33)
(14) Decrease in borrowings 9,097 2,327 Exchange movements 10 884 ---------- ---------- Movement in net debt 12,796 1,628 Net debt at 1 October (8,609) (10,237) ---------- ---------- Net cash/(debt) at 30 September 4,187 (8,609) ====== ======Notes1. Accounting policies (a) Basis of preparation The financial statements for the year ended 30 September 2011 have been prepared on a going concern basis and under the historical cost basis of accounting,modified to includethe revaluation of investments at fair value. The financial statements have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice and with the Statement of Recommended Practice for investment trusts issued by the Association of Investment Companies in January 2009. All of the Company's operations are of a continuing nature. The Company's accounting policies are consistent with the prior year. The accounting policies applied for the year ended 30 September 2011 are unchanged from the previous year. 2.Dividend
The Board has declared an interim dividend, in lieu of a final dividend, of 17.75p per ordinary share which will be paid on 30 December 2011 to shareholders on the register on 16 December 2011.
3.Income from investments 2011 2010 £'000 £'000 Listed investments: Overseas dividends 4,424 5,146 Stock dividends 125 117 ---------- ---------- 4,549 5,263 ====== ====== 4. Management and Income 2011 Total Income 2010 Total performance fees £'000 Capital £'000 £'000 Capital £'000 £'000 £'000 Management fee 181 545 726 301 904 1,205 ====== ====== ====== ====== ====== ======
In the year under review, the Manager received a management fee of 0.75%
per annum on the value of the Company's total assets, less current liabilities other than borrowings for the purpose of investment,
calculated monthly in arrears. In determining the total assets on which
the management fee was calculated, the value of any securities held by the Company in collective investment schemes managed by the Manager were excluded. An additional management fee, based on performance, of up to 0.5% per annum would have been payable if the Manager met certain targets for the year. The performance fee would have been charged when the NAV at the end of the Company's financial year was higher than it was at the start and
the NAV percentage increase over the year was greater than the percentage
increase in the Benchmark Index. The performance levels were as follows: • 0.15% fee for the first 1.5% of outperformance; • 0.1% fee for outperformance between 1.5% and 2.0%; • 0.25% fee for outperformance between 2.0% and 2.25%; • The maximum performance fee was capped at 0.5% per annum. No performance fee is payable for the year ended 30 September 2011 (2010: £nil). With effect from 1 October 2011 the management fee and performance fee arrangements have been amended, full details of which are contained in the annual report and financial statements for the year ended 30 September 2011. Management fees are allocated 25% to revenue and 75% to capital. The performance fee (when payable) is allocated 100% to capital. Year ended 30 September 2011 Year ended 30 September 2010 5. Taxation Revenue Capital Total Revenue Capital Total return return return return £'000 £'000 £'000 £'000 £'000 £'000 a) Analysis of charge for the year: Corporation tax - - - 63 59 122 Less: double - - - (122) - (122) taxation relief Overseas tax 521 - 521 659 - 659 suffered Overseas tax credits (10) - (10) (3) - (3) ---------- ---------- ---------- ---------- ---------- ---------- Total taxation for 511 - 511 597 59 656 the year ====== ====== ====== ====== ====== ====== Year ended 30 September 2011 Year ended 30 September 2010 . b) Factors affecting Revenue Capital Total Revenue Capital Total tax charge for the return return year return return £'000 £'000 £'000 £'000 £'000 £'000 Return on ordinary 4,022 (13,261) (9,239) 4,503 (5,431) (928) activities before taxation ---------- ---------- ---------- ---------- ---------- ---------- Corporation tax at 563 (1,856) (1,293) 1,261 (1,521) (260) 28% Corporation tax at 523 (1,724) (1,201) - - - 26% Effects of: Non-taxable income (1,228) - (1,228) (1,195) - (1,195) Expenses not 3 86 89 6 35 41 deductible for tax purposes Current year 139 163 302 - - - expenses not utilised Overseas tax 521 - 521 659 - 659 Overseas tax credits (10) - (10) (3) - (3) Double tax relief - - - (122) - (122) claim Non-deductible - 3,331 3,331 - 1,553 1,553 capital losses Marginal relief on - - - (9) (8) corporation tax (17) ---------- ---------- ---------- ---------- ---------- ---------- 511 - 511 597 59 656 ====== ====== ====== ====== ====== ======
Investment trusts are exempt from corporation tax on capital gains provided
that the Company obtains agreement from HM Revenue and Customs in respect of
each accounting year that the tests under Section 1158 of the Corporation Tax Act 2010 have been met. Due to the Company's status as an investment trust and the intention to
continue meeting the conditions required to obtain approval in the foreseeable
future, the Company has not provided deferred tax on any capital gains or losses arising on the revaluation or disposal of investments.
The Company has not recognised a deferred tax asset totalling £291,000 (2010: £
nil) arising as a result of having unutilised management expenses and
unutilised non-trade loan relationship deficits. These expenses will only be
utilised if the Company has profits chargeable to corporation tax in the
future. 6. Return per ordinary share
The return per ordinary share is based on the negative net return
attributable to the ordinary shares of £9,750,000 (2010: £1,584,000) and
on 19,193,454 ordinary shares (2010: 24,891,714), being the weighted average number of ordinary shares in issue during the year.
7. Net asset value per ordinary share
The net asset value per ordinary share is based on the net assets
attributable to the ordinary shares of £103,913,000 (2010: £144,945,000)
and on 17,917,040 (2010: 22,441,860) shares in issue on 30 September 2011, excluding treasury shares. 8. Related party transactions Gartmore Investment Limited ("Gartmore") was the Manager and Secretary of the Company until 15 July 2011 and was regarded as a related party. On 15 July 2011 the services provided by Gartmore were novated to Henderson Global Investors Limited ("Henderson") and its subsidiaries and so Henderson is now regarded as a related party. During the year £ 554,000 was payable to Gartmore and £172,000 was payable to Henderson for the provision of services to the Company (2010: £1,205,000 was
payable to Gartmore for comparable services). At the balance sheet date,
management fees totalling £134,000 were accrued to be paid to Henderson
(2010: £177,000 accrued to be paid to Gartmore). On 25 November 2011 a new management agreement between the Company and Henderson became effective.
The compensation payable to key management personnel comprised £82,000
(2010: £82,000) paid by the Company to the Directors in respect of services to the Company. The Company has no employees. 9. Going concern Having considered the Company's investment objective, the nature and liquidity of the Company's investment portfolio and income and
expenditure projections, the Directors believe it is appropriate for the
Company to continue to prepare its accounts on a going concern basis.
The assets of the Company consist almost entirely of securities that are
readily realisable and the value of the Company's assets is greater than
its liabilities. Accordingly, the Company has adequate financial resources to continue in operational existence for the foreseeable future.
10. 2011 financial information
The figures and financial information for 2011 are extracted from the annual financial statements for that period and do not constitute the
statutory accounts. The Company's annual financial statements for the year
ended 30 September 2011 have been audited but have not yet been delivered
to the Registrar of Companies. The auditor's report on the 2011 annual 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 Section 498 of the Companies Act 2006 ("the Act"). 11. 2010 Financial Information The figures and financial information for 2010 are extracted from the published annual report and financial statements for the year ended 30
September 2010 and do not constitute the statutory accounts for that year.
The 2010 annual report and financial statements have been delivered to the
Registrar of Companies and included the Independent Auditor's Report which
was unqualified and did not contain a statement under Section 498 of the Act. 12. Annual report and financial statements Copies of the annual report and financial statements will be posted to shareholders in December 2011 and will be available on the Company's website www.hendersoneuropeanfocus.com or in hard copy format from the Registered Office, 201 Bishopsgate, London EC2M 3AE. 13. Annual general meeting The Company's annual general meeting will be held on Friday 27 January 2012 at 2.30 p.m. at 201 Bishopsgate, London EC2M 3AE.
XLONRelated Shares:
HEFT.LHGG.L