Results for the half-year ended 31 March 2025

JANUS HENDERSON FUND MANAGEMENT UK LIMITED

LEGAL ENTITY IDENITIFIER: 213800GS89AL1DK3IN50

HENDERSON EUROPEAN TRUST PLC (the "Company")

Unaudited results for the half-year ended 31 March 2025

Henderson European Trust plc (the "Company") hereby submits its half-year results for the six months ended 31 March 2025, as required by the FCA's Disclosure Guidance and Transparency Rule 4.2.

Investment objective

The Company aims to maximise total return from a portfolio of stocks predominantly listed in Europe (excluding the UK).

Performance summary

Total return performance to 31 March

Financial highlights

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

2 FTSE World Europe (ex UK) Index on a total return basis in sterling terms

3 Share price total return (with dividends reinvested) using mid-market closing price

4 Average for the Association of Investment Companies ("AIC") Europe sector of six companies

5 Investment Association ("IA") open-ended investment company ("OEIC") Europe ex UK Equity sector average NAV, comprising 130 OEICs at 31 March 2025

6 Net gearing, as defined in the alternative performance measures in the Annual Report for the year ended 30 September 2024

Sources: Morningstar Direct, LSEG Datastream and Janus Henderson

INTERIM MANAGEMENT STATEMENT

CHAIR'S STATEMENT

Departure of co-portfolio managers, board review of options and proposed combination with Fidelity European Trust PLC ("FEV")

I am frustrated to write that this year has seen further change for shareholders in Henderson European Trust ("HET") prompted by the unexpected resignation of our Co-Fund Managers, Tom O'Hara and Jamie Ross. Following our announcement of this news on 3 February 2025 we provided shareholders with a further update on 13 May 2025 culminating with the announcement on 19 June 2025 that the Board had concluded its review for the strategic direction of the Company and would be recommending a proposed combination with FEV. Throughout this period the portfolio has been managed by Robert Schramm-Fuchs and Nick Sheridan on an interim basis, maintaining its investment objective - to seek to maximise total return from a portfolio of stocks predominantly listed in Europe (excluding the UK).

Given the material impact to the Company of this change, the Board, via its broker and corporate advisor, Deutsche Numis, solicited shareholder views which clearly called for a comprehensive review. To aid the Board with this review of the Company's options, we engaged Deutsche Numis to provide advice and manage the process along with WTW, the investment consultant, to provide analysis, perspective and opinion on the investment component.

Once these reports had been compiled, reviewed and discussed over a period of weeks the situation that emerged saw the Board receiving a range of proposals from (i) staying with our incumbent manager, JHI, under new investment leadership (ii) existing investment companies looking to consolidate and (iii) other investment management firms proposing to manage the Company.

After a comprehensive RFP and pitch process and further discussions with potential candidates, the Board has now concluded that a combination with FEV provides a highly compelling and the best long-term option for shareholders. The benefits to shareholders include a 'best in class' investment team, scale benefits both in terms of enhanced liquidity and forecast lower ongoing costs ratio, expected reduced volatility of the share price relative to NAV as a result of the new enhanced discount management policy, all at zero cost to the shareholder given the 12-month fee waiver on transferring assets, as well as the option for a cash exit alternative of up to 33.3%. Full details of this proposed combination, including all the benefits to shareholders can be found here.

Shareholders should look out for documentation on the proposed combination which we expect to send out by the end of August. This documentation will set out the Board's recommendation to vote in favour of the proposed combination, the dates of the shareholder meeting and how shareholders can vote. 

Performance

Investment performance for the six months to 31 March 2025 was disappointing but we were far from alone in finding the gyrations difficult. As we wrote last December, "fears associated with a sustained outbreak of 'tariff wars' are higher than in many a year", and how true that prophecy has proved. Much of our underperformance came in March, as leaks from the White House stoked market fears and in particular prompted earnings and valuation reappraisals (downward) for some of the more growth and consumer-oriented companies in which we were overweight. After a strong multi year period for returns it is probably inevitable we had a weaker period with NAV total return of -0.2%, underperforming the Company's benchmark index total return of 3.5%, and a share price total return of -0.3% as the discount widened marginally.

I don't want to dwell on too short a time period - the long-term track record remains strong, with NAV and share price total return outperforming the benchmark over three, five, seven and ten years. For once, our competitors in the open-ended IA Europe ex-UK sector experienced better performance (+1.2% unit price total return), while our results compare favourably with our competitors in the investment trust sector: the average NAV total return of the AIC Europe sector (comprising six companies) was -2.7% in this period, reflecting the growth-style biases of many of our competitors.

Dividends

On 19 May 2025 the Board declared an interim dividend for the year of 1.40p per share which was paid on 27 June 2025 to shareholders on the register at 30 May 2025. Following the conclusion of our review and the recommended combination with FEV, the Board anticipates making a pre-liquidation distribution to HET's shareholders in respect of income accrued from the end of March 2025, subject to the passing of the required resolutions at the forthcoming general meetings. This will be detailed in the documentation due to be published by the end of August 2025.

Share rating and discount management policy

Our discount to NAV at the end of the six months was 9.4%, and the average discount over the 6 months was 10.2%.

When we announced the Fund Manager changes on 3 February 2025, the Board also committed to maintain a single-digit discount (under normal market conditions). We recognised that the uncertainty over future management arrangements might weigh on the shares which seemed wholly at odds with our aim of mitigating shareholders' exposure to volatility in the share price discount to NAV. 20,036,988 shares were bought back during the six months ended 31 March 2025 representing 5.5% of share capital (and held in treasury) and since the period end, and as at 26 June 2025, a further 332,122 shares have been bought back, representing 0.1% of share capital.

Board changes

As reported in our 2024 Annual Report, Robin Archibald retired from the Board following the AGM on 29 January 2025, and Melanie Blake took over as Audit and Risk Committee Chair on the same day.

Outlook

Clearly the return of President Trump and his "MAGA" policies - including huge uncertainty over tariffs - is rapidly accelerating the trends that had started to emerge even before COVID: a move away from the hyper-globalisation and 'off shoring' that we had seen over the previous three decades, towards protectionism and prioritisation of domestic policies. Coupled with the increase in hostilities in both Ukraine and the Middle East, geopolitical risks have not been higher for generations. At this time, however - as our Fund Managers highlight - there is encouraging change afoot among European governments with - belated - acknowledgement that regulation in the region has become stultifying. Meanwhile, we have always said that investing in European companies is not the same as investing in European economies and, amongst our portfolio of companies, we have global leaders operating in sectors experiencing double digit growth: inter alia, data centres, electrification, industrial automation and digitalisation. From world leading luxury brands to drug delivery systems, European companies continue to offer robust returns for their shareholders and yet even today remain valued at a discount to their US counterparts. 

In the weeks ahead of the shareholder meeting to approve our combination with FEV, the Board notes the professionalism and rigour of the team at Janus Henderson Investors, and thanks them for their ongoing support of the Company.

Vicky Hastings

Chair of the Board

Fund Managers' Report

We were appointed as Interim Fund Managers of the Company on 3 February 2025 following the departure of Tom O'Hara and Jamie Ross from Janus Henderson Investors. Our report below covers the full six-month period.

The Company registered a NAV total return of -0.2% in the six months to 31 March 2025, in comparison with the benchmark, the FTSE World Europe (ex UK) Index, which achieved a return of +3.5%. This short-term relative underperformance is disappointing, and we discuss this in greater detail below. However, the relative outperformance of European equities against other developed equity markets such as those in the US and Japan, as well as emerging markets, provides a silver lining.

We have historically recognised the attractiveness of high-quality European companies that are trading at favourable valuations relative to other regions. This differential reduced over the course of the half year. This recent shift has been influenced by several factors: 1) President Trump's trade policy, which initially seems more detrimental to domestic US growth than to its trading partners, 2) fiscal reforms in Germany that could rejuvenate Europe's sluggish GDP growth, and 3) relaxed borrowing conditions facilitated by subdued inflation in Europe, allowing the European Central Bank (ECB) to continue reducing interest rates, and 4) raised prospects of a ceasefire in Ukraine, which would diminish energy costs for European businesses and generally improve risk sentiment. The former two factors, in particular, represent significant shifts with both immediate and enduring implications for global equity markets and the stocks within your trust portfolio, which we will discuss in more detail below.

Performance

The majority of the relative underperformance for the period occurred in March 2025 as market participants became increasingly apprehensive of what the Trump tariffs might hold in store and individual stock moves were significant. HET's portfolio had enough of a growth tilt that it suffered in a period when growth stocks significantly lagged value stocks. 

Novo Nordisk was the most notable single stock detractor. This Danish pharmaceutical company, known for its diabetes treatments and more recently, its weight loss drug Ozempic, saw its shares decline due to supply issues in the US, disappointing trial results for its new weight loss drug, CagriSema, and heightened competition. While we continue to recognise the substantial market potential and broader health benefits of its weight loss treatment, we reduced our holding from 6.4% at the beginning of the period to 2.7% at the end, acknowledging the near-term growth risks. Overweight positions in semiconductor stocks like ASM International and ASML also hurt performance, affected by geopolitical tensions and uncertainties in the artificial intelligence supply chain, spurred by the release of the low-cost, Chinese-developed AI model, DeepSeek. Although this release has shocked the markets, we believe it will ultimately drive greater demand for AI (the so-called Jevons paradox), supporting capital expenditure linked to these stocks, and we remain invested in them.

On the positive side, the largest sector contribution came from financials. When we took over management, we significantly increased exposure by initiating new holdings in four European financial stocks, including two banks: BBVA and Erste Group. Over the last two decades EU banks have been consistent underperformers, but they now present a more compelling investment proposition. After adequately rebuilding their balance sheets post-financial crisis, these banks are poised to enhance shareholder returns through dividends and buybacks. Moreover, ongoing consolidation in Spain, and more recently Italy, is reducing competition and allowing for more rational loan pricing. Despite these improvements, their valuations still reflect a bleaker fundamental outlook.

Our holding in SAP also performed well. The German software giant released strong results that reassured the market of robust demand for its cloud-based enterprise resource planning (ERP) software, which helps integrate AI into corporate processes.

Activity

During this period, 12 new holdings were added to the portfolio and 16 divested. Beyond the banking sector, the Company's exposure to the IT sector has slightly reduced. This followed the Chinese AI company, Deepseek's, well-received release of its latest model which we believe will likely act as a limiting factor on the valuation ascribed to some of the AI capex beneficiary stocks, particularly in the technology sector. 

Notable additions included Amundi, an asset management firm offering a range of financial instruments and investment solutions. We appreciate its broad product pipeline, scalable business model, and capital optionality. We also initiated a position in Publicis, a French advertising agency. The successful integration of acquisitions Epsilon and Sapient, in digital advertising and data, has provided Publicis with a competitive edge that has translated into consistent superior growth compared to its peers. We do not believe that this advantage is fully reflected in its valuation. Additionally, we added Ahold Delhaize, a food retailer and wholesaler in the US and Netherlands. We also opened a position in Sandoz. Sandoz is a global leader in generic and biosimilar medicines, which are off-patent drugs. The company was separated from Novartis in October 2023. 

Finally, we reduced our exposure to 'falling rate beneficiaries' due to the less certain rate outlook spurred by US tariffs and persistent US inflation. This led to a reduction in holdings such as National Grid & British Land, and a complete sale of Cellnex Telecom. Other activities involved reducing holdings in Alcon, ABInbev, and Daimler Trucks to decrease the trust's exposure to cyclical US revenues.

Net gearing averaged 3.8% over the period, a near full deployment of the long-term loan notes placed by HEFT in January 2022 at a very favourable average interest rate of 1.57%. Towards period end, gearing was reduced in response to the greater uncertainty and volatility brought about by the current geopolitical upheaval.

The big picture - A re-ordering of global trade by the US administration

Much has been discussed regarding the tariffs introduced by the Trump administration on what has been termed 'Liberation Day'. Although this announcement was made just after the close of the Trust's interim period, its significance warrants discussion in this report. We are likely witnessing a stark decoupling of the US economy from China and its sphere of influence, including countries like Vietnam which serve as indirect conduits for Chinese exports.

Implications for Europe

In the upcoming months, EU Trade Ministers and the Eurogroup are expected to commence trade negotiations with the US, wherein they will need to decide their strategic alignment vis-à-vis the US and China. Europe has found itself disadvantaged under the previous trade frameworks, running a substantial annual trade deficit with China that has increased significantly, even turning former export leader Germany into a net importer from China over the last four years. Rapid deindustrialisation has occurred, with the transfer of manufacturing bases and intellectual property advantages to China, which continues to subsidise its industries heavily.

While some suggest that the EU could retaliate against US tariffs, we deem this unlikely to happen in any significant way due to the limited fiscal leeway across European nations, except perhaps Germany. Moreover, Europe should focus on diminishing its dependencies and ties with China rather than increasing them. Unprepared for a potential influx of Chinese goods initially destined for the US market, Europe faces a strategic decision: aligning closer with the US might entail losing some trade battles but aligning with China could risk losing a larger economic war. The direct exposure of the European stock market to the 20% tariffs is manageable, concentrated within a few industries such as consumer discretionary sectors and freight, where the Trust's exposure is very selective.

A trade agreement with the US might form part of a broader Mar-a-Lago Accord over the next six months. This accord could address numerous outstanding issues including defence spending and the security framework under US leadership, with a commitment to maintaining the US Dollar as the sole reserve currency. This could represent a significant reordering of global economics, comparable to historical agreements like the Bretton Woods, the Treaty of Versailles, or the Plaza & Louvre Accords, outlined by Secretary Bessent in 2024. The objective is clear: to establish a new commonwealth of trade, defence, and prosperity as a counterbalance to China and its sphere of influence.

A more competitive and higher growth Europe

It is now widely acknowledged that Europe has spent many years prioritising incorrectly, becoming the world leader in bureaucracy and regulation without adequate focus on maintaining competitiveness. This trajectory needed to shift, with the US tariffs acting as a catalyst for EU-wide deregulation. Although not as radical as the changes seen in the US, the shift is nonetheless significant. European Commission President Von der Leyen, re-elected in July 2024, has committed her second term to rapid deregulation, presenting the first of two Omnibus packages in February 2025. These packages aim to streamline sustainability reporting, simplify due diligence for responsible business practices, and strengthen the carbon border tax mechanism, collectively aiming to reduce administrative burdens significantly by the end of her mandate in 2029.

In addition, the new German government has announced a €1 trillion infrastructure and defence package, effectively releasing the country's self-imposed fiscal debt break. This has the potential to lift economic growth materially with it approximately equating to 22% of GDP deployed over the next ten years. We are also hopeful of more to come from the new German government, with reforms to the labour market and pensions on their agenda, although the parliamentary arithmetic in Germany may see these watered down.

Where to invest in this world?

As outlined, our positive view on European stocks is certainly not without risks, but we believe the upside prospects outweigh the downside risks. And those views extend to different sectors and industries in the region. We favour European banks, which seem very undervalued relative to the wider European market, US banks and their own (chequered) history. We currently own eight financial stocks equating to 24% of the portfolio. We also see value in certain more cyclical (economically sensitive) stocks, for example those benefiting from the wider electrification thematic, or those positioned to participate in any upside from Germany's planned infrastructure investments. These include stocks such as Schneider Electric and Siemens AG, each with business units exposed to structural growth sectors, such as data centres, electrification, industrial automation and digitalisation.

Moreover, our portfolio is bolstered by global leaders with robust business models, making them perennial components of our investment strategy. These include Compass Group, one of the foremost contract-catering companies globally; LVMH in the luxury goods sector, which, despite potential vulnerability to trade tariffs, presents a valuation and growth outlook that fully accounts for such factors; Roche, a leader in cancer therapies; and SAP in the software industry.

As always, we see active stock selection as key to positioning favourably for the improved sentiment towards European equities.

Robert Schramm-Fuchs and Nick Sheridan

Interim Fund Managers

INVESTMENT PORTFOLIO at 31 March 2025

COUNTRY OF LISTING (as a percentage of the portfolio excluding cash)

SECTOR EXPOSURE (as a percentage of the portfolio excluding cash)

Principal Risks and Uncertainties

The principal risks and uncertainties associated with the Company's business can be divided into the following main areas:

· Market

· Investment performance

· Business strategy and market rating

· Gearing

· Operational

· Regulatory and reporting

Information on these risks and how they are managed is given in the Annual Report for the year ended 30 September 2024. In the view of the Board, these principal risks and uncertainties at the year end are as applicable to the remaining six months of the financial year (whilst also acknowledging the going concern and material uncertainty statement below) as they were to the six months under review.

GOING CONCERN AND MATERIAL UNCERTAINTY

The Board announced a proposed combination of the assets of the Company with the assets of FEV subject to shareholder approval, through a tax efficient scheme of reconstruction under s110 Insolvency Act 1986 (the "Proposals"). More detail can be found above in the Chair's Statement and in the separate RNS announcement dated 19 June 2025.

The Board believes that the Proposals are in the best interests of shareholders as a whole and recommends that shareholders vote in favour of the resolutions required to effect the Proposals. The Proposals will be effected by way of a scheme of reconstruction and winding up of the Company under s110 Insolvency Act 1986, and the associated transfer of the Company's assets to FEV in exchange for the issue of new shares in FEV under the recommended scheme. This would result in the voluntary liquidation of the Company. Due to the requirement for the Proposals to receive approval from the shareholders of both the Company and FEV, there remains material uncertainty as to the future of the Company.

However, should the Proposals not receive the necessary shareholder approvals or any of the other conditions to the Proposals not be satisfied, the Board believes that the Company would remain a going concern. Accordingly, the Board has prepared the financial statements in this report for the half year ended 31 March 2025 on a going concern basis.

Related-Party Transactions

The Company's transactions with related parties in the period under review were with the directors and the Manager, Janus Henderson. There have been no material transactions between the Company and its directors during the period other than amounts paid to them in respect of remuneration and expenses, for which there were no outstanding amounts payable at the period end.

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 period under review.

Statement of Directors' Responsibilities

The directors (as listed in note 14) confirm that, to the best of their knowledge:

a) the condensed financial statements for the half-year ended 31 March 2025 have been prepared in accordance with FRS 104 Interim Financial Reporting, and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;

b) the Interim Management Report and condensed financial statements include a fair review of the information required by Disclosure Guidance 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 Guidance and Transparency Rule 4.2.8R (disclosure of related-party transactions and changes therein).

On behalf of the Board

Vicky Hastings

Chair of the Board

CONDENSED INCOME STATEMENT

The total columns of this statement represent the Income Statement of the Company prepared in accordance with FRS 104.

The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. 

All revenue and capital items in the above statement derive from continuing operations. The Company had no recognised gains or losses other than those disclosed in the Income Statement and the Statement of Changes in Equity.

The accompanying notes are an integral part of the condensed financial statements.

The accompanying notes are an integral part of the condensed financial statements.

CONDENSED Statement of Financial Position

The accompanying notes are an integral part of the condensed financial statements.

CONDENSED cash flow statement

The accompanying notes are an integral part of the condensed financial statements

.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS