Henderson
European
Focus
Trust plc
Annual Report 2023
Proof 6g: 15/12/23
JHI9218/2023Henderson European Focus Trust plc – Annual Report 2023
Henderson European Focus Trust plc
Registered as an investment company in England and Wales with registration number 427958
Registered office: 201 Bishopsgate, London EC2M 3AE
SEDOL/ISIN number: Ordinary Shares: BLSNGB0/GB00BLSNGB01
London Stock Exchange (TIDM) Code: HEFT
Global Intermediary Identification Number (GIIN): THMNPN.99999.SL.826
Legal Entity Identifier (LEI): 213800GS89AL1DK3IN50
Telephone: 0800 832 832
Email: support@janushenderson.com
www.hendersoneuropeanfocus.com
To receive your annual reports
in electronic format,
scan the QR code and register
your preference with EQ
JHI9218/2023Designed and typeset by 2112 Communications, London. Printed by Paragon, London.
This report is printed on Revive silk 100% recycled, contains 100% recycled waste and
ismanufactured at a mill certified with ISO 14001 environmental management standard.
The pulp used in this product is bleached using an Elemental Chlorine Free process (ECF).
Front cover image: La Défense, Paris
Strategic Report
Performance Highlights 2-3
Portfolio Information 4
Historical Information 5
Chair’s Statement 6-9
Fund Managers’ Report 10-13
Our Investment DNA 14-15
Investment Portfolio 16
Top Ten Holdings 17-18
Business Model 19-32
Governance
Board of Directors 34
Corporate Governance Report 35-39
Audit and Risk Committee Report 40-44
Management Engagement Committee Report 45
Nominations Committee Report 46-48
Directors’ Remuneration Report 49-52
Directors’ Report 53-54
Statement of Directors’ Responsibilities 55
Financial Statements
Independent Auditor’s Report to the Members 57-63
Financial Statements 64-67
Notes to the Financial Statements 68-82
Notice of Annual General
Meeting (“AGM”)
Notice of AGM 84-85
Explanation of resolutions 86-88
Notes to the Notice of AGM 88-89
Additional Information
Glossary 91
Alternative Performance Measures 92-93
General Shareholder Information 94
Corporate Information 95
Keeping in touch
We know how important it is to receive up-to-date information about the Company.
Visitour website at www.hendersoneuropeanfocus.com
Register for updates, insights and factsheets about the Company:
Register here to watch this year’s Annual General Meeting by webinar:
The Board also welcomes you in person to the AGM. Please see more details about the
AGM, attending in person or by webinar, in the Chair’s Statement.
Please send your general enquiries about the Company to the Company Secretary at:
itsecretariat@janushenderson.com.
Warning to shareholders
Many companies are aware that their shareholders have received unsolicited phone calls or correspondence concerning
investment matters. These are typically from overseas based ‘brokers’ who target UK shareholders offering to sell them what
often turn out to beworthless or high-risk shares in US or UK investments. They can be persistent and extremely persuasive.
Shareholders are therefore advised to be wary of any unsolicited advice, offers to buy shares at a discount or offers of free
company reports. Please note that it is unlikely that either the Company or the Company’s registrar, Equiniti, would make
unsolicited telephone calls to shareholders. Any such calls would relate only to official documentation already circulated to
shareholders and never in respect of investment ‘advice’. Ifyou arein any doubt about the veracity ofan unsolicited phone
call, please call the Corporate Secretary at the number provided on page 95. You can also check the FCA Warning List at
#BeScamSmart.
Corporate Information
Registered office
201 Bishopsgate
London EC2M 3AE
Service providers
Alternative investment fund manager (“AIFM”)
Janus Henderson Fund Management UK Limited
201 Bishopsgate
London EC2M 3AE
Support@janushenderson.com
Corporate secretary
Janus Henderson Secretarial Services UK Limited
201 Bishopsgate
London EC2M 3AE
Telephone: 020 7818 1818
ITSecretariat@Janushenderson.com
Depositary and custodian
HSBC Bank Plc
8 Canada Square
London E14 5HQ
Corporate broker
Winterflood Securities Limited
The Atrium Building
Cannon Bridge House, 25 Dowgate Hill
London EC4R 2GA
Registrar
Equiniti Limited (“EQ”)
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Telephone: +44 (0)371 384 2457
Lines are open 8.30 am to 5.30 pm UK time,
MondaytoFriday.
There is a range of shareholder information online.
You can check your holding and find practical help
on transferring shares or updating your details at
www.shareview.co.uk.
Independent auditor
Ernst & Young LLP
25 Churchill Place
London E14 5EY
Financial calendar
Annual results announced December 2023
Ex-dividend date 4 January 2024
Dividend record date 5 January 2024
Annual General Meeting 25 January 2024
Final dividend payable 5 February 2024
Half-year results announced May 2024
Interim dividend payable June 2024
Information sources
For more information about the Company, visit the website
atwww.hendersoneuropeanfocus.com. This includes
factsheets, interviews and current information on
theCompany and up-to-date share price and net asset
valueinformation.
To receive regular insights on investment trusts from the
Manager, visit: https://www.janushenderson.com/en-gb/
investor/subscriptions/
Follow Janus Henderson Investment Trusts on
LinkedIn: – JanusHenderson Investment Trusts, UK.
Investing
Shares can be purchased in the market via a stockbroker
orthrough share dealing platforms. They can also be held
through share plans, ISAs or pensions, and links to various
providers are included on the website.
Potential investors are reminded that the value of investments
and the income from them may go down as well as up and
investors maynot get back the full amount invested. Tax
benefits may varyas a result of statutory changes and their
value will depend onindividual circumstances.
Henderson European Focus Trust plc Annual Report 2023
95
Henderson European Focus Trust plc Annual Report 2023
Strategic
Report
Photo: UPM Kymmene, Finnish-owned UPM pulp mill in Uruguay
Objective
The Company seeks to
maximise total return
(acombination of income and
capital growth) from a portfolio
ofstocks listed in Europe.
1
Year to 30 September
Total return performance over one year
1
1 year
%
Company net asset value (“NAV”) per ordinary share
FTSE World Europe (ex UK) Index in sterling terms
Company share price using mid-market closing prices
To
tal returns include dividends reinvested and exclude any costs of reinvestment
0
5
10
15
20
25
30
24.1
20.5
27.7
Discount at year end
1, 2
0
3
6
9
12
15
2023
14.0
11.9
2022
%
Net assets at year end
0
50
100
150
200
250
300
350
400
2023
314.4
2022
379.0
£ millions
Discount over one year
1,2,3
-16
-15
-14
-13
-12
-11
-10
-9
-8
Company AIC Europe sector average
May
23
Jun
23
Jul
23
Aug
23
Apr
23
Mar
23
Feb
23
Jan
23
Dec
22
Nov
22
Oct
22
Sep
23
Sep
22
%
Performance versus benchmark over one year
1,4
NAV Benchmark Share price
100
105
110
115
120
125
130
135
May
23
Jun
23
Jul
23
Aug
23
Apr
23
Mar
23
Feb
23
Jan
23
%
Dec
22
Nov
22
Oct
22
Sep
23
Sep
22
Performance Highlights
1 Alternative performance measure, explained on pages 92-93
2 Calculated using mid-market closing price(s)
3 Graph shows the Company’s share price discount per ordinary share as at each month end compared to the AIC Europe sector average of seven companies over
the year to 30September 2023, including the Company
4 Graph shows the Company’s NAV total return per ordinary share and share price total return compared to the total return of the benchmark (FTSE World Europe (ex
UK) Index ) over the year to 30 September 2023 (rebased to 100)
Sources: Morningstar Direct, Janus Henderson, LSEG Datastream
5 years
3 years
10 years
7 years
%
0
50
100
150
200
32
28
34
46
44
37
81
79
71
163
144
118
Total return performance over multiple years
1
Henderson European Focus Trust plc Annual Report 2023
2
Year to 30 September
Performance Highlights
NAV per ordinary share at year end
1
2023
178.1p
2022
147.7p
Dividend for year
2
2023
4.35p
2022 2022 Special
4.35p 0.50p
Ongoing charge for year
4
2023
0.80%
2022
0.77%
Share price at year end
2023
157.0p
2022
127.0p
Dividend yield
3, 4
2023
2.8%
2022
3.4%
Net gearing at year end
4
2023
(3.8)%
2022
1.9%
1 NAV is calculated with debt at par value
2 Comprising an interim dividend of 1.30p paid in June 2023 and a recommended final dividend of 3.05p due for payment on 5 February 2024
3 Based on the dividends paid or recommended for the year and the share price at the year end, being the interim of 1.30p and final dividend of 3.05p
4 Alternative performance measure, explained on pages 92-93
Sources: Janus Henderson
A glossary of terms and alternative performance measures is included on pages 91-93
Average number of investments in the year
2023 2022
41 45
Henderson European Focus Trust plc Annual Report 2023
3
Sector exposure at 30 September
2023
%
2022
%
Industrials 26.7 18.4
Basic Materials 14.1 11.5
Consumer Discretionary 12.0 11.1
Health Care 11.6 14.7
Energy 8.9 14.7
Technology 8.9 4.4
Consumer Staples 6.5 11.6
Financials 6.2 10.9
UK Government Bonds 5.1 –
Utilities – 2.7
Sector overweights/underweights at
30 September 2023
1
-16
-12
-8
-4
0
4
8
12
Consumer Staples
Technology
Real Estate
Industrials
Health Care
Consumer
Discretionary
Basic
Materials
T
elecommunications
Energy
Utilities
Financials
%
-1.3
0.1
-3.1
-2.2
-5.1
9.3
-11.5
-4.1
4.3
9.5
-1.0
Currency exposure at 30 September
2023
%
2022
%
Euro 74.7 66.8
Sterling 6.8 10.3
Danish Krone 6.0 6.4
Swedish Krona 3.5 2.0
Swiss Franc 3.3 11.9
Norwegian Krone 2.9 2.6
US Dollar 2.8 –
Net gearing levels in the year to 30 September 2023
2
-6
-4
-2
0
2
4
6
8
SepAugJulJunMayAprMarFebJanDecNovOct
%
0.9
7.1
7.2
6.4
6.8
7.4
6.6
0.4
1.9
-3.8
7.3
-2.9
Geographic exposure at 30 September
2023
%
2022
%
France 30.5 27.8
Germany 16.8 13.7
Netherlands 11.2 10.5
Finland 8.4 8.1
United Kingdom 6.8 10.3
Belgium 6.2 1.9
Denmark 6.0 6.5
Switzerland 5.0 11.8
Sweden 3.4 2.0
Norway 2.9 2.6
Italy 1.4 1.3
Spain 1.4 2.2
Portugal – 1.3
Country overweights/underweights at
30 September 2023
1
-18
-15
-12
-9
-6
-3
0
3
6
9
%
France
Finland
Belgium
UK
Norway
Netherlands
Czech Republic
Denmark
Hungary
Portugal
Austria
Greece
Poland
Spain
Italy
Sweden
Germany
Turkey
Ireland
Switzerland
7.4
6.2
-0.1
-0.2 -0.2
-0.4 -0.4
-0.5 -0.5
-0.6
-1.2
-2.7
-3.9
-4.1
-14.4
4.2
3.0
1.7
1.3
0.3
Key performance influences over the year to
30September
3
2023
%
2022
%
Return of the portfolio of investments
from sector allocation (ex cash) (1.9) 0.1
from stock selection (ex cash) 5.5 1.4
from currency effect 0.6 (1.2)
Impact of gearing (net) 0.2 0.1
Impact of share buybacks 0.0 0.1
Impact of expenses (0.8) (0.8)
NAV return relative to the benchmark 3.6 (0.3)
Portfolio Information
1 Relative to the FTSE World Europe (ex UK) Index at 30 September 2023, andexcluding cash and government bonds
2 Net gearing at each month end. See definition in alternative performance measures on pages 92-93
3 Relative to the FTSE World Europe (ex UK) Index for the year
Sources: Janus Henderson and Factset
Henderson European Focus Trust plc Annual Report 2023
4
Historical Information
1 NAV per ordinary share with dividends reinvested and excluding reinvestment costs
2 FTSE World Europe (ex UK) Index in Sterling terms
3 Share price using mid-market closing prices
4 Simple average NAV for the AIC Europe sector which currently comprises seven investment trusts
5 Investment Association Europe ex-UK sector for open-ended investment companies (“OEICs”), which comprised 143 funds at the year end
6 Using the ongoing charge methodology prescribed by the Association of Investment Companies
7 Excludes the special dividend of 1.40p per ordinary share paid in respect of the year ended 30 September 2017
8 Excludes the special dividend of 0.50p per ordinary share in respect of the year ended 30 September 2022
*Comparative figure for the years to 2021 have been restated due to the subdivision of each ordinary share of 50p into ten ordinary shares of 5p each on 7 February 2022
Sources: Janus Henderson, Morningstar Direct, LSEG Datastream
Total return performance to 30 September 2023
1 year
%
3 years
%
5 years
%
7 years
%
10 years
%
Company NAV
1
24.1 32.2 46.1 81.1 162.5
Benchmark
2
20.5 28.3 36.9 71.4 117.8
Company share price
3
27.7 34.5 43.9 78.9 143.7
AIC Europe sector NAV
4
19.5 19.7 34.7 74.9 137.5
IA OEIC Europe ex-UK sector average
5
19.0 22.3 29.0 60.4 105.5
Total return performance over 10 years to 30 September 2023 (rebased to 100)
NAV
1
Sep
2013
Sep
2014
Sep
2015
Sep
2016
Sep
2021
Sep
2020
Sep
2019
Sep
2018
Sep
2017
100
125
150
175
200
225
250
275
300
Share price
3
Benchmark
2
Sep
2023
Sep
2022
Financial information
At 30
September
Net assets
£’000
NAV*
p
Mid-market
price per
ordinary
share*
p
Profit/(loss)
for year
£’000
Revenue
return per
share*
p
Capital
return per
share*
p
Total
return per
share*
p
Dividend*
p
Expenses
6
%
2014 170,988 95.7 96.20 21,010 2.21 9.84 12.05 2.35 0.88
2015 194,914 98.2 98.78 7,459 2.36 1.64 3.99 2.47 0.89
2016 237,551 115.3 104.55 40,186 2.69 16.91 19.59 2.64 0.90
2017 292,398 137.1 138.90 50,559 3.38 20.96 24.34 2.95
7
0.87
2018 293,790 136.7 124.00 5,822 3.16 (0.45) 2.71 3.10 0.84
2019 299,010 139.1 124.50 11,906 2.68 2.86 5.54 3.13 0.84
2020 308,166 144.1 126.00 17,330 2.41 5.65 8.07 3.13 0.82
2021 370,736 173.4 159.00 69,182 3.31 29.05 32.36 3.31 0.80
2022 314,419 147.7 127.00 (47,428) 5.11 (27.32) (22.21) 4.35
8
0.77
2023 378,997 178.1 157.00 75,293 4.32 31.07 35.39
4.35
0.80
5
Henderson European Focus Trust plc Annual Report 2023
“
For active stockpickers, when markets
are volatile and uncertainty increases,
opportunities arise and good
investment returns can accrue...
”
Photo: Holcim, King’s Cross redevelopment project using Holcim’s ductal
UHPC panels to renovate gas holders into residential housing
6
Chair of the Board, Vicky Hastings,
reporting on the year to 30 September 2023
Chair’s
Statement
Chair’s Statement
Geopolitical risk has dominated the past financial year and
withthe recent appalling events unfolding in the Middle East
this looks likely to continue. In economic terms, the jury is still
out as to whether we are headed for a hard landing or not
across the region, but it certainly seems that market
participants have come round to our Fund Managers’ way of
thinking that ‘higher for longer’ prevails. Asgovernments and
corporates look to security of supply, whether for energy or for
product lines, the inherent capital redeployment will be
inflationary. Hence with inflation looking stickier than many
envisaged, especially in the US, the question now is how these
elevated interest rates will impact in the US, the world’s largest
economy, and what the implications will be for Europe, facing a
slowdown of its own.
The Fund Managers’ Report explains how they consider this
macro backdrop when assessing our investee companies, as
well as potential investments, alongside some generational
shifts underway, particularly in the role of technology. Much
has been written about the advance of artificial intelligence
(“AI”) this year but when you look at the numbers around
whatit could mean, both in terms of implications for some
companies’ revenues as well as the investment required to
make it happen, you start to get a feel for how it will impact
every area of our lives.
Our Fund Managers have been talking for some time now of
investing in ‘Global Champions that just happen to be based
in Europe’. Many of our investments fall into this category
rather than simply being domestic plays, and are leaders
inindustries as diverse as semiconductors, healthcare,
aerospace, luxury consumer goods, and electrical components,
as well as aiding the transition to ‘greener’, more sustainable
products in building materials and energy supply.
With this challenging backdrop, I am pleased to report
continuednet asset value (“NAV”) outperformance of both
benchmark and peers after the extremely strong appreciation
we saw inthe first half of the financial year. It was gratifying
forTom O’Hara and John Bennett to be voted winners of the
European Equity (Active) category at the AJ Bell Investor
Awards in September 2023, particularly as these awards
arevoted onbyAJ Bell customers, some of whom are
ourinvestors.
Performance
1
The Company’s NAV total return per share was 24.1% (2022:
-13.1%), significantly outperforming the Company’s benchmark
index, which returned 20.5% (2022: -12.8%) for the year to
30September 2023. The share price total return was 27.7%
(2022: -18.3%), as the discount at which the shares traded
relative to NAV narrowed over the year.
The Company’s long-term track record is excellent, with NAV
and share price total return outperforming the benchmark
over one, three, five, seven and ten years. Our results
compare favourably with our competitors, be they in the
investment trust or the Investment Association OEIC (open-
ended funds) sector. The average NAV total return of the AIC
Europe investment company sector (comprising seven
companies) was 19.5% in the year under review, and the OEIC
Europe ex-UK sector average (comprising 143 funds) was
19.0% for the same period.
Dividends
The Board is pleased to recommend a final dividend for the
year of 3.05p per share which, subject to shareholder
approval at the Annual General Meeting (“AGM”), will be
paidon 5 February 2024 to shareholders on the register at
5January 2024. When added to the interim payment in June
2023 of 1.30p, this brings the full-year dividend to 4.35p per
share, which is the same total dividend as the 2022 full-year
distribution of 4.35p per share, excluding the special dividend
(2022: interim at 1.20p and final at 3.15p).
Income from investments declined by around 10% in the year
under review compared with the year to 30 September 2022,
primarily as a result of lower exposure to higher-dividend-
yielding stocks in sectors such as energy. The Company has
apolicy of paying progressive dividends, and we would
include the maintenance of dividend levels in tougher times
asconsistent with this approach. We are fortunate to have
built up revenue reserves in previous years which we can
draw on where necessary and, with the recommendation
ofthis final dividend, propose to use a very small amount
ofthese. It is worth noting that whilst income is an important
component, total return remains our primary focus.
With the year-end share price at 157p (2022: 127p), the yield of
the aggregate dividends paid and proposed for the year is 2.8%.
Share rating
Discounts have been wider throughout the investment
company sector this year than at any point since the Global
Financial Crisis (2007-08), with the average (ex 3i Group)
reaching a low of 19% in October and now currently trading
at15.5%. There has been an inevitable knock-on to the
European sector, including our Company, hence frustratingly
our shares have made only a little progress relative to NAV
from when we last reported to you in March. Our discount
toNAV ended the year at 11.9%, a small but noteworthy
improvement from the end of the previous year
(30September2022: 14.0%), given this backdrop.
1 See the glossary and alternative performance measures on pages 91-93 for explanations of terms
Henderson European Focus Trust plc Annual Report 2023
7
Chair’s Statement (continued)
During the year, the Company bought back 145,000 shares
(2022: 912,658) to be held in treasury, at an aggregate cost
of£183,000, representing 0.01% of the issued capital of the
Company at the start of the year. This small amount of
repurchase is only marginally enhancing to NAV, but the
willingness to buy back signals that the Board is prepared to
be active in the market should the discount widen excessively,
whilst being mindful not to shrink assets needlessly. In our
view, share repurchase and issuance remain useful structural
tools in the closed-ended sector, both in helping manage the
supply and demand for shares and pricing, and as
deployment of capital. Ultimately we believe it is investment
performance, investor sentiment and demand for a company’s
shares that principally determine rating.
Capital structure and use of debt
The Company issued long-term structural debt (25 and
30-year) by way of private placement loan notes in January
2022. With a weighted average interest rate of 1.57%, it was
fortuitously timed and gives us welcome flexibility.
Fully utilised, the debt provided gearing of some 8% (at the
time it was taken on) but it is of sufficiently low-interest cost
that, should the Fund Managers want to move to cash and
take out the leverage, they can without suffering from a cash
drag from the cost of debt. The Fund Managers’ Report
explains in more detail how they have done just this and have
managed the level of gearing over the course of the year from
a high of nearly 11%in March to a current net cash level of
4%, taking into account the short-dated gilts as cash
equivalents rather than investments.
Fund management changes
A significant piece of news to report, not least since many will
have been shareholders in the Company for a long time, is
that John Bennett intends to retire next year, leaving behind
anexcellent performance record, a strong team and long-
standing investment philosophy to continue looking after the
JanusHenderson European funds, including the Company.
John became the Fund Manager in November 2010.
Sincethen, shareholders have enjoyed significant NAV
outperformance ofthe benchmark, with an annualised
totalshareholder return of 10.6% per annum.
The Board extends their heartfelt thanks to John for his
tremendous stewardship of the Company and the orderly
wayin which he is handing over the leadership reins to his
well-established colleagues, including Tom O Hara, his
Co-Manager. We wish him all the very best.
Board changes
Following Eliza Dungworth’s retirement in May 2023, and
inline with our long-term succession plan, we have now
returned to a Board of five members through the appointment
of Melanie Blake who joined on 3 July 2023. With over
20years’ experience in the financial services industry, Melanie
brings deep insight and expertise across risk, compliance
andgovernance, a valuable addition to the Board following
Eliza’s departure.
Our Senior Independent Director, Robin Archibald, has
succeeded Eliza as Audit and Risk Committee Chair, and
Stephen Macklow-Smith has taken on the role of the Board’s
marketing representative. We consider that we have a
well-balanced and experienced Board, succession planning
firmly in our sights, as well as governance guidelines on Board
constitution, which we meet in every respect. Please refer to
page 48 for a fuller disclosure on Board constitution.
Governance, shareholder engagement
and AGM
We are pleased to invite shareholders to attend the AGM in
person at our registered office on Thursday, 25 January 2024
at 11.30 am and join us afterwards for refreshments. This is
anopportunity to meet the Fund Managers and our Board.
Wehope that an earlier time than in previous years may suit
some shareholders better. Shareholders who prefer to join
virtually may do sovia Zoom. There will be live voting only for
those physically present at the AGM and we would encourage
all shareholders to have their say and vote their shares on all
resolutions put forward. All the resolutions are recommended
and supported by your directors. Shareholders holding their
shares through investor platforms are also encouraged to
attend, and to vote, ahead of the proxy voting deadline of
Tuesday 23January 2024 through their nominee platforms.
Do be aware that the deadlines for voting through platforms
may be earlier than our proxy votingdeadline.
In addition to the routine business to be considered at this
year’s AGM, the Company is also proposing resolutions to its
shareholders to cancel the amounts standing to the credit of
the share premium account and the capital redemption
reserve and which, subject to confirmation by the Court, will
be credited to a new special distributable reserve. Cancelling
such reserves is a routine procedure that is undertaken by
investment trusts and was last carried out by the Company in
July 2007. The cancellation of these reserves (as explained in
more detail on pages 87-88) to create distributable reserves is
an administrative matter which will provide the Board with
flexibility to use such distributable reserves should it wish to
do so for shareholder distributions in the future.
Please see pages 83-89 for the AGM Notice and more
information on joining and voting.
If you have questions for either the Board or the Fund
Management team in advance of the AGM – or indeed at any
time of the year – please get in touch (contact details on page 95).
Do visit our website at www.hendersoneuropeanfocus.com
which has regular updates, and subscribe for regular
information using the sign-up function. In particular, I would
highlight the video on the website of Tom O’Hara discussing
these results and performance during the year.
Henderson European Focus Trust plc Annual Report 2023
8
Chair’s Statement (continued)
Outlook
With US bond yields not far off the levels last seen in the
Global Financial Crisis, geopolitical risks that have continued
to rise and the very real threat of recessionary forces, it is not
a surprise that your Fund Managers are erring on the side of
caution and, for the first time that I can remember, investing
inUK gilts (albeit for the very short term) to de-gear the
Company. However, for active stockpickers (as opposed to
index huggers or passive funds), when markets get volatile
and uncertainty increases, opportunities arise and good
investment returns can accrue forthe medium to longer term.
Indeed, this is the environment we now face and which your
Fund Managers areembracing. Meetings with the underlying
company management teams continue and, for some, the
future is verybright. Your Board remains confident in your
Fund Managers’ ability to uncover these opportunities and
forthe Company to continue to prove a good long-term
investment for its shareholders.
Vicky Hastings
Chair of the Board
12 December 2023
Henderson European Focus Trust plc Annual Report 2023
9
Fund
Managers’
Report
Fund Managers
Tom O’Hara John Bennett
Co-Fund Manager Co-Fund Manager
John is Director of European Equities at
Janus Henderson, and portfolio manager
on the Janus Henderson Continental
European and Pan-European long-only
and long/short strategies. Johnhas held
these roles since 2011 whenhis previous
company, Gartmore, was acquired by
Henderson. Prior to Gartmore, he served
as fund manager at Global Asset
Management for 17 years. During this time,
he managed their flagship European
long-only and European equity long/short
hedge funds. Before this, he was a fund
manager at Ivory & Sime.
Tom is a Portfolio Manager at Janus
Henderson, a position he has held since
2020. He is a portfolio manager on the
Janus Henderson Continental European
and Pan-European long-only strategies.
Before joining JanusHenderson as a
research analyst in 2018, Tom was an
equity research analyst specialising in
metals and mining with Exane BNP
Paribas from 2016. He held similar mining
and steel sector positions with Redburn,
Citigroup Global Markets and Metal
Bulletin Research between 2008 and
2016. He began his career in 2006 in the
treasury department of Northern Rock plc.
“
Europe’s big, beautiful,
global champions
offer a compelling
opportunity set
”
10
Photo: Shell, Offshore Deepwater Platform, Gulf of Mexico
Hard-landing? Soft-landing? No landing? Peak interest rates?
These questions have dominated market discourse during the
financial year. The obvious truth is that neither we nor anyone
else can be certain if, when, or how deep any contraction
might be. Moreover, whilst we have started to see some
cracks in the hitherto resilient US consumer demand –
causing weakness in share prices spanning clothing, luxury
goods, spirits and other discretionary goods – economic
activity has generally surprised positively. Accordingly, the
market has had to regularly recalibrate its view of the likely
duration of high inflation levels and correspondingly elevated
interest rates (‘elevated’, that is, relative to only recent history).
Much of the market commentary still calls for a hard-landing,
followed by an inevitable central bank capitulation to lower
rates. This cannot be eliminated as a risk, especially if the
speed of rate hikes causes an accident somehow, somewhere
in the financial system (the UK Gilt tantrum of late 2022 and
the mini-banking crisis of early 2023 serve as cautionary
reminders that something can lurk out of sight). But it is
always worth considering the motive of those making such
aforecast; many participants wish for a hard-landing, having
made a lucrative career out of zero interest rates (think
fixed-income managers, or equity investors with growth,
technology or ESG mandates). They would understandably
wish for those good times to return. If it must come via a
painful economic contraction, then so be it.
It is also worth taking a step back from the never-ending cycle
of macro-monetary noise emanating from media outlets such
as Bloomberg, which are of course incentivised to make you
as insecure, as reactive and as trigger happy as possible in
financial markets; you need live pricing, you need access to
research and datasets and you need live analysis of the latest
earth-shattering event, be it a CPI print, a non-farm payrolls
figure or the latest utterance of ‘Fedspeak’ by a central bank
official at a random conference. This is the edge you need to
make money. No serious investor could possibly operate
without it – or so they would have you think.
A new capex supercycle –
de-globalisation and artificial
intelligencewill define geopolitics
There is a lot to constantly distract an investor from more
meaningful developments. When we as a team debate the
outlook for inflation and the corresponding cost of capital,
wetry to take a longer-term view of changes across society
and their potential impact on economic activity. In this
respect, political discourse – and increasingly policy action
– suggests something different and powerful is going on
underneath the near-term focused chatter. Yes, central banks
are raising rates and reversing that great ‘innovation’ of the
financial crisis – quantitative easing (“QE”) – in order to rein in
inflation by cooling economic activity. But many governments,
not least that of the United States, are making their job much
harder. Economic hardship does not go down well with
voters. De-globalisation and pro-labour populism are strong
mandates for those who command the national coffers.
TheUS is running an historically high budget deficit of 7%,
asvarious stimulus packages – collectively known as
‘Bidenomics’ – splurge over $1 trillion on highways, rail and
other infrastructure, while providing generous incentives for
corporates to deploy their capital into the ‘onshoring’ of
critical supply chains in everything from semiconductors to
electric vehicles and energy security. This is more than the
USgovernment mobilised in response to the Global Financial
Crisis. Not even the profligate Europeans are engaging in such
fiscal largesse; France and Italy are ‘only’ running budget
deficits of around 5%. The OECD is averaging over 4%. We
have never seen the likes of this government activity during
peacetime (although it may be optimistic to describe the
current geopolitical backdrop as such).
These trends don’t appear to be fads, just as zero-interest
ratepolicy (“ZIRP”) and QE were not short-lived phenomena.
There are currently 35,000 trade protectionist measures in
place globally, up from only 9,000 a decade ago, according
toGlobal Trade Alert. Supply chains must adjust to new
constraints, often through capital redeployment. Many of our
investee companies are either seeing evidence of this in their
order books and/or utilising their own strong balance sheets
to invest. Construction spend on manufacturing facilities in the
US has already reached almost 0.6% of GDP, a level not seen
since before the World Trade Organisation was established
inthe early 1990s. Furthermore, a record 67% of Americans
have a favourable view of trade unions, suggesting that
‘America First’ is a policy objective likely to be pursued,
regardless of who secures the White House in 2024. In turn,
other major economic blocs such as Europe feel obliged to
follow with their own measures. One of the strands of our
investment ‘DNA’ (for which we have introduced a dedicated
section this year) is ‘Believe in Cycles’. We believe that we are
at an inflection point in the long-cycle politics of globalisation,
with corresponding long-duration implications for capital
expenditure, wages, inflation and interest rates. Capital
investment cycles tend to be long term in nature, for the
simple reason that building stuff takes time. This affords many
of our exposed investee companies a good degree of visibility
under all but the most extreme scenarios for near-term
economic momentum. Hard-landing or not, there will probably
be ‘shovels going into the ground’.
Aside from industrial policy objectives, it is worth considering
the strength of private sector capital deployment, as it
highlights a key segment of the opportunities we are pursuing
in European equities. It is well known that Europe does not
possess the ‘Big Tech’ superstars. But, importantly, it does
possess many of the enablers, or ‘picks and shovels’, that
willbe necessary as this exclusive club embarks on an
unprecedented period of capital intensity. In 2019 the
combined capital expenditure of Microsoft, Google, Meta
(formerly Facebook), Amazon and Apple was around $70bn.
In 2024 it will reach around $190bn, up by $35bn on 2023.
The magnitude of this should not be understated; it equates
Fund Managers’ Report
Henderson European Focus Trust plc Annual Report 2023
11
to almost 20% of the ‘Bidenomics’ bazooka: a sizeable spend
even when set against an historic stimulus package in the
largest economy on Earth. Moreover, it will be repeated each
year for the foreseeable future, so that cumulatively it is likely
to eclipse the fiscal programme.
To repeat: this is the capex outlook for only five companies.
Dominant though they are, there is also a long tail of large,
cash-generative, well-financed companies across the globe
which are investing into a critical juncture in both geopolitics
and technological progress. This will create change.
Europe’s globally dominant ‘picks
andshovels’
The pursuit of the vast AI and cloud computing opportunity is
both fixed asset and energy intensive for the titans of tech.
Microsoft, which is lifting capex as a percentage of sales from
11% in 2019 to 19% in 2024, plans to build an additional 120
or so data centres, filled with leading AI-ready
semiconductors. Most of those chips will be bought from US
stock market darling, Nvidia, which does not produce its own
chips, but outsources it to manufacturing specialists like
Taiwan Semiconductor (“TSMC”). TSMC in turn must procure
the latest manufacturing equipment for its ‘fabs’ (factories) to
fulfil Nvidia’s requirements. Enter Europe’s ‘Global Champions’
in semiconductor capital equipment – ASML, ASM
International and BE Semiconductor – which provide the
‘picks and shovels’ to enable the production of ever more
complex chips.Atlas Copco, another portfolio company,
supplies vacuum technology to this highly demanding
manufacturingenvironment.
Digging a little deeper, we find that European ‘Global
Champions’ abound all along the ‘capex supercycle’ supply
chain.
Data centres and semiconductor factories, which are resource
intensive, require robust foundations and supporting water,
energy and telecommunications infrastructure. Irish-
headquartered but US-heavy construction materials business,
CRH, has already flagged healthy orderbooks as shovels go
into the ground for these facilities (CRH is also arguably the
number one beneficiary of all the highway investments being
made in the US, acting as a one-stop-shop for state
departments of transport).
The average data centre has the same energy requirement as
80,000 households, meaning Microsoft’s plan alone will add
the equivalent power demand of a city of over 10 million
people. Energy efficiency is therefore critical to operating
costs; Siemens and Schneider Electric supply the
infrastructure management hardware and software to
optimise these hungry facilities (they also happen to be global
leaders in industrial automation, another secular growth
category as supply chains are ‘on-shored’ in the years ahead).
‘Big is beautiful’ continued
We have written about our belief that a return to zero interest
rates is unlikely. Accordingly, one must be sensitive to
valuation when selecting stocks. Thankfully, the desire to not
overpay has always been part of our DNA and has, at times,
been to our detriment, notably during peak-ZIRP. However,
the real economy implications of this shift will take time to
bear out. This will present opportunities to stockpickers.
Aseconomic rationality returns from a lengthy absence,
thethreat of disruption – from lavishly funded, unprofitable
startups – will recede. The powerful, well-funded incumbents
across many industries are likely to become yet more powerful
in the era ahead of us.
Regular readers will be familiar with our ‘Big is beautiful’
mantra for this new investment paradigm. We used Anheuser-
Busch InBev – the world’s biggest brewer – as an example
ofthis theme atwork in the portfolio. More recently we
purchased German software company SAP, which
commands a high global market share in the boring but
business-critical world of Enterprise Resource Planning
(“ERP”). We had avoided this company for a long time owing
to poor governance and poor capital discipline. It sells the
software that forms the operating backbone of mid to large
companies: supply chain, logistics, payroll and finance – all
fundamental functions of the modern corporate. Many of
these companies are in the process of transitioning their ERP
systems from ‘on premises’ to the ‘cloud’ (another reason for
all that data centre capex). Thisprocess has proven a lucrative
opportunity for SAP to ‘cross-sell’ additional applications such
as HR services, travel and expenses management and, soon,
new AI-augmented tools. We see strong prospects for well
over 10% annual earnings growth in the coming years, driven
by this transition.
The end of the free money era is likely to make SAP’s clients
– who are eager to be digitally optimised and AI-ready – more
reluctant to bear the risk of changing their ERP supplier
through such a complex and critical project, while also
reducing the likelihood of astartup competitor to SAP given
the vast amounts of funding – and patience – that would be
required to erode the incumbent’s economic moat. Of course,
being ‘big’ alone does not bestow a divine right to success
upon a company. There must be a value proposition to
customers. SAP possesses the scale and the resources
(andanet-cash balance sheet) to invest in developing the
applications its corporate customers require in the era of
cloud-hosted, AI-augmented ERP. Helpfully, once the client
has transitioned their system to thecloud, new innovations can
be more easily adopted via download, practically overnight.
We hope these provide some good examples of our
investment thinking in what many would consider challenging
times and times of change, with the spectre of geopolitical
risk hanging over world markets, just after Covid and
compounded by recent events in the Middle East.
Fund Managers’ Report (continued)
Henderson European Focus Trust plc Annual Report 2023
12
Performance
The NAV of the Company increased by 24.1% during the
financial year, 3.6% ahead of the 20.5% benchmark return.
Major contributors included our semiconductor capital
equipment stocks BE Semiconductor and ASM International,
along with long-term holding Holcim and diabetes and obesity
‘category killer’ Novo Nordisk, which has now become
Europe’s largest company by market capitalisation.
Detractors included insurer ASR Nederland, which became
mired in a potential historic mis-selling scandal, oil major Shell,
which we sold in June and recycled into TotalEnergies and
AkerBP (though have recently reintroduced) and Finnish pulp
and paper manufacturer UPM Kymmene.
It is worth noting the somewhat distorting effect of the period
of measurement. The September end of financial year 2022
coincided, almost to the day, with the European market
trough, following which we saw a sustained rally in almost
everything through to spring 2023, with the previous laggards
outperforming. Two of our bigger detractors – Shell and UPM
– were less due to investments gone wrong (both stocks
actually gained during financial year 2023), but courtesy of
large position sizes that lagged the rapid recovery in the
benchmark during 2023. It provides a good example of why
we always encourage performance to be judged on at least
threeyears. Even good investments can have a ‘bad’ 12
months measured against a benchmark. UPM remains our
largest overweight position, while we also retain a sizeable
overweight exposure to oil and gas, which we view as
strategically critical given the geopolitical backdrop. Energy
also provides us with a useful tool in protecting our
shareholders’ capital against the inflationary effects of what
will probably be more frequent commodity spikes. Oil and
semiconductors, both held in size, offer a true economic
barbell for the multipolar world.
Activity
It is useful to begin with an explanation of our year-end net
gearing levels (or lack thereof). We ended the financial year
with a net cash position of 4%. This means that not only was
the available structural gearing (equivalent to over 7% of NAV)
undeployed, but we also held additional cash. Part of this was
a result of selling activity late in the financial year. We took
some profits in semiconductor stocks during late August/early
September, while also starting to reduce our holding in Hugo
Boss and fully exiting shortly after the year end, as wefeel
thebrand turnaround story is now relatively well appreciated
and the stock will be more sensitive to general consumer
sentiment. We also sold the last of our banks in early
September as we think the near-term tailwinds from net-
interest margin expansion have peaked and the long-term
threat of greater regulatory scrutiny and government
constraint has only intensified. In the era of increased statism,
not only do we think it wise to gain exposure to the many
quality ‘enablers’ we have listed, but it is equally important to
avoid the ‘donors.’ Banks will continue to be a source of funds
for hungry governments, likely via recurring ‘one-off’ taxes on
profits. On a related note, we own no utility companies on a
similar basis; profits mandated by the government are never
wholly reliable profits. They are likely tobe even less so in the
years ahead. As a sector it also benefitted from an abundance
of cheap debt to fund projects. Not anymore.
Our net-cash position therefore was partially temporary.
Atthetime of writing we have returned to a neutral position,
with thegearing undeployed. We feel no urgency to wade into
the market; we are near-term cautious on market direction
given the rapid rise in interest rates (during the writing of this
commentary the US 10-year treasury yield touched 5% for the
first time since 2007), nor do we feel any stocks or sectors
have reached the ‘valuation margin of safety’ threshold that
warranted full deployment of the gearing in September 2022.
We will be patient and we can afford to be; the interest rate
payable on our loan notes is 1.57%, locked infor 25 and
30years across two tranches. We can earn 2.75% by
depositing the cash in the bank. More interestingly (and
another indication of the challenge to banks) we can earn
5%in short-dated UK gilts. At the time of writing, we have
approximately 5% of NAV – around two-thirds of the value
ofthe loan notes – deployed into these ‘cash equivalent’
sovereign debt instruments. They are ‘cash equivalent’ as
they are held to maturity (early 2024) and therefore both
interest and capital value are determined. Weare enjoying
‘positive carry’ and will therefore bide our time for more
attractive equity opportunities.
Outlook
We have illustrated why we believe Europe’s ‘makers’ and
‘doers’ will stand to benefit – and are benefitting already –
from the profound growth in both publicly funded capital
expenditure and the utilisation of enormous reserves of ‘dry
powder’ sat on corporate balance sheets. This may, in part,
explain the absence of the much-feared hard-landing, at least
so far. But, even if it does not prevent a painful economic
downturn, it serves as a reminder that economies are not
binary, but always nuanced. There will always be attractive
opportunities for businesses to pursue. There will always be
areas of economic resilience. Thus, where there is nuance,
there is opportunity for stockpickers. Whatever the
macroeconomic backdrop, we want to be invested in the right
companies, which are competing in the right places and –
critically – at the right share price. Europe’s big, beautiful,
global champions offer a compelling opportunity set.
Tom O’Hara and John Bennett
Fund Managers
12 December 2023
Fund Managers’ Report (continued)
Henderson European Focus Trust plc Annual Report 2023
13
Our Investment DNA
1
Follow the cash
5
Give yourself time
(clients willing)
6
Be ready to be wrong
2
Avoid excessive
leverage
3
Believe in change
4
Believe in cycles
As we wrote in our 2020 Annual Report, we have always maintained that a portfolio of stocks should reflect the
‘investment DNA’ of its Fund Managers. We apply this philosophy to the Company.
The key strands of this investment DNA include the following:
Strands
1
and
2
Strands one and two are, probably,
our most vital. A focus on cash-
generative businesses, combined
with ample, but not excessive,
balance sheet leverage, has, over
time, served us and our investors
well. It is a focus that makes us
wary of businesses and industries
hobbled by overcapacity, weak
balance sheets or poor cash
conversion, such as airlines,
banks,retail and the hospitality
andleisure sectors.
In a nutshell, we prefer our investee
companies to self-fund their growth.
Strand
3
This is vitally important in the context
of the ESG challenge. There is no
shortage of rating agencies and
consultants prepared to ‘rank’
companies based upon their ESG
credentials. This, in our opinion, has
two major flaws:
1. If something ‘scores highly’ it is
more likely to be fully valued.
2. A ‘spot’ approach to investing
risks ignoring that things can
change.
If we combine the two points above,
we allow ourselves the freedom, the
openness and flexibility of mind to
identify companies which might not
be today’s highest achievers,
according to, often subjective, ESG
scorecards. What is important is that
these companies are embracing the
era of sustainability, and often at an
underappreciated pace. In other
words, by believing in change, we
can identify a delta: a rate of change.
This strand has always informed our
thinking. Wehave typically applied it
to the financial metrics of a company
and will continue to do so. Today,
with equal rigour, we apply the same
strand to how companies approach
the challenges and opportunities
presented by the age of sustainability.
By combining our preference for
self-funded growth with the ‘change’
candidates, we believe we optimise
the opportunity to apply sustainable
investing, without the pitfalls of
falling for concept stocks or
overvalued situations.
Believe in change
Henderson European Focus Trust plc Annual Report 2023
14
This is not an exhaustive list. Crucially, as indicated by
strand six, it is not tantamount to a religion. As a team,
we often say: “investing must never be a religion”. This is
merely a health (and wealth) warning to self: in investing,
itis crucial not to box oneself in, never to become so
wedded to a position that it ‘must work’. Those who know
us will know this is why we resolutely refuse to become
ardent, inflexible ‘style’ managers.
Strand
4
Our sense of risk starts with the
fundamental risk inherent in a
business. Assuming management
of the business is both honest and
competent, the key risks then
become the market position,
cyclicality and, crucially, financial
indebtedness of the company.
Itthen behoves us not to overpay.
Such factors can be considered
ascomponents of DNAstrands
one to four.
Our commentaries in recent years
have discussed the inflection
points we believe have been
passed, in, for example, the energy
sector and, more broadly, in the
price of money. This is consistent
with our belief in cycles.
Strand
5
When asked to offer an outlook,
fund managers often feel the
pressure to translate it into some
form of forecast: of market level or
direction and, madly (as well as
maddeningly), over a short period,
such as one year. It’s at this point
that the fund manager should send
a memo to self. Itshould read:
there are two types of forecaster:
one who doesn’t know and one
who doesn’t know that they don’t
know. In other words forecasting is
a mug’s game. Whenwe think in
terms of outlook, we tend to think
of what could challenge, disrupt or
derail the prevailing investment
consensus.
Strand
6
We do not concentrate a portfolio
in ‘things that must work’ – we
are ready to be wrong. Likewise,
when something challenges our
investment thesis on a specific
stock, we don’t ‘dig in’ and allow
‘thesis creep’. This doesn’t mean
selling a stock when it has a ‘bad
quarter’ relative to sell-side or
hedge fund investor expectations.
But if something has changed
in the longer-term prospects for
the business, on which our initial
investment was predicated, should
we still own it?
Believe in
cycles
Be ready to be
wrong
Give yourself time
(clients willing)
Henderson European Focus Trust plc Annual Report 2023
15
Investment Portfolio as at 30 September 2023
Ranking
2023
Ranking
2022 Company Sector Country of listing
Valuation 2023
£’000
Percentage of
portfolio
1 3 UPM–Kymmene Forestry and Paper Finland 24,022 6.25
2 2 Novo Nordisk Pharmaceuticals and Biotechnology Denmark 23,175 6.03
3 –
UK Government Bond
0.125% 31/01/24
Government Bonds United Kingdom 19,682
5.12
4 6 TotalEnergies Oil, Gas and Coal France 16,572 4.31
5 24 Saint–Gobain Construction and Materials France 15,636 4.07
6 30 Safran Aerospace and Defence France 13,692 3.56
7 11 Airbus Aerospace and Defence France 13,389 3.49
8 8 LVMH Moët Hennessy
Louis Vuitton
Personal Goods France 13,154
3.43
9 4 Holcim Construction and Materials Switzerland 12,684 3.30
10 18 Schneider Electric Electronic and Electrical Equipment France 11,724 3.05
10 largest 163,730 42.61
11 27 Aker BP Oil, Gas and Coal Norway 11,088 2.89
12 14 Linde Chemicals Germany 10,860 2.82
13 – Adidas Personal Goods Germany 10,628 2.77
14 29 Arkema Chemicals France 9,658 2.51
15 23 Solvay Chemicals Belgium 9,522 2.48
16 16 Danone Food Producers France 9,314 2.42
17 – SAP Software and Computer Services Germany 9,196 2.39
18 25 L’O r é a l Personal Goods France 8,575 2.23
19 – Siemens General Industrials Germany 8,528 2.22
20 5 ASR Nederland Non–life Insurance Netherlands 8,173 2.13
20 largest 259,272 67.47
21 –
Euronext Investment Banking and Brokerage
Services
Netherlands 8,147
2.12
22 28 Metso Industrial Engineering Finland 8,146 2.12
23 – Koninklijke Ahold Delhaize Personal Care, Drug and Grocery Stores Netherlands 7,953 2.07
24 – Anheuser-Busch InBev Beverages Belgium 7,716 2.01
25 15 Deutsche Boerse Investment Banking and Brokerage
Services
Germany 7,662
2.00
26 20 Hugo Boss Personal Goods Germany 7,109 1.85
27 22 Atlas Copco Industrial Engineering Sweden 6,694 1.74
28 32 BE Semiconductor Technology Hardware and Equipment Netherlands 6,577 1.71
29 1 Shell Oil, Gas and Coal United Kingdom 6,564 1.71
30 34 Universal Music Media Netherlands 6,533 1.70
30 largest 332,373 86.50
31 – Sandvik Industrial Engineering Sweden 6,508 1.70
32 – UCB Pharmaceuticals and Biotechnology Belgium 6,382 1.66
33 45 STMicroelectronics Technology Hardware and Equipment Switzerland 6,273 1.63
34 – Infineon Technology Hardware and Equipment Germany 6,222 1.62
35 41 ASM International Technology Hardware and Equipment Netherlands 5,806 1.51
36 37 Interpump Industrial Engineering Italy 5,501 1.43
37 43 Grifols Pharmaceuticals and Biotechnology Spain 5,274 1.37
38 17 Essilor Luxottica Medical Equipment and Services France 5,235 1.36
39 38 Siemens Healthineers Medical Equipment and Services Germany 4,675 1.22
Total listed investments at fair value 384,249 100.00
16
Henderson European Focus Trust plc Annual Report 2023
Top Ten Holdings
1. UPM-Kymmene
Percentage of portfolio: 6.25%
Sector: Forestry and Paper
Fund Managers’ view: UPM-Kymmene is a leading producer
of wood-based products. It has an excellent management
team with a strong record of value-creating capital allocation.
With a balance sheet in net cash, UPM is in a phase of
transformational organic growth in the areas of pulp, biofuel
from wood, and replacing oil-based PET plastic with wood-
based material. Including all indirect effects, UPM is committed
to reducing its carbon emissions by at least 65% by 2030.
Based simply on its direct emissions, the company is already
carbon negative, given its significant forestry assets.
2. Novo Nordisk
Percentage of portfolio: 6.03%
Sector: Pharmaceuticals and Biotechnology
Fund Managers’ view: A specialist pharmaceutical company
focusedon diabetes and obesity with a historical bias to
insulin products. The focus has been shifting to the GLP-1
area, where Novo provides injectable and oral products that
control blood sugar level, body weight and other health
issues. Market structure (duopoly in GLP-1, high levels of
demand growth) may drive sustainable return on investment
capital, with obesity treatment alsorepresenting a compelling
growth opportunity.
3. TotalEnergies
Percentage of portfolio: 4.31%
Sector: Oil, Gas and Coal
Fund Managers’ view: TotalEnergies explores for, produces,
refines, transports and markets oil and natural gas.
Thecompany also operates a chemical division, along with
gasoline filling stations in Europe and Africa. The company
isinvesting in renewables and low-carbon businesses to
diversify its cash flow, and is targeting 35GW of renewables
capacity by 2025 (one of the most aggressive targets in the
broader renewables peer group).
4. Saint Gobain
Percentage of portfolio: 4.07%
Sector: Construction and Materials
Fund Managers’ view: Saint-Gobain is a diversified light-side
materials manufacturer and distributor. It is among global
market leaders in flat glass, insulation, gypsum, pipes,
ceramics, refractories and abrasives, with leading regional
roles in American building materials and European builders
merchanting. The company trades on a valuation discount
topeers, is in the midst of a restructuring programme and
should see increased demand for its insulation products as
building efficiency moves up the political agenda.
5. Safran
Percentage of portfolio: 3.56%
Sector: Aerospace and Defence
Fund Managers’ view: Safran is a global aerospace, defence
and security group. It manufactures and services engines,
supplies mechanical and electrical systems for civil and
military aircraft, and is a leader in biometric and detection
systems. The company is benefiting from air travel returning
toits pre-pandemic activity levels and growth trend.
6. Airbus
Percentage of portfolio: 3.49%
Sector: Aerospace and Defence
Fund Managers’ view: Airbus is a leading commercial
aircraft manufacturer. Airbus is well positioned in the large
commercial aircraft market with a strong portfolio. Domestic
markets are recovering from the Covid-19 pandemic and
international travel routes remain depressed but are catching
up. Underlying demand for new aircraft remains healthy, in
particular in the narrowbody sector, and production rates are
rising again. Airbus’s dominant position with the A320 will
likely drive long-term growth and cash generation.
Note: The third largest investment in the portfolio is a short-dated UK Government Bond 0.125% 31/01/24, which is invested as a cash equivalent, as shown on page 16.
Henderson European Focus Trust plc Annual Report 2023
17
Top Ten Holdings (continued)
7. LVMH Moët Hennessy Louis Vuitton
Percentage of portfolio: 3.43%
Sector: Personal Goods
Fund Managers’ view: LVMH is the world leader in luxury
goods. Leather Goods & Fashion (Louis Vuitton in particular,
but also Fendi and Loro Piana) and Wines & Spirits (Hennessy
cognac, Moët & Chandon, Veuve Clicquot) are the group’s
most important divisions. LVMH continues to demonstrate
superior execution on its largest brands, as well as its ability
to turn around new assets brought into the group.
9. Schneider Electric
Percentage of portfolio: 3.05%
Sector: Electronic and Electrical Equipment
Fund Managers’ view: Schneider is the world’s leading
electrical power distribution and automation provider.
Thecompany has a dominant market position and is seeing
growth driven by increased electrification and structural
tailwinds across its end markets.
10. AkerBP
Percentage of portfolio: 2.89%
Sector: Oil, Gas and Coal
Fund Managers’ view: AkerBP is a Norway-based
exploration and production company. AkerBP has a high
quality relatively low-cost portfolio and a strong balance
sheet. The introduction of the 2030 net-zero target during
thetrusts financial year has also been a positive.
8. Holcim
Percentage of portfolio: 3.30%
Sector: Construction and Materials
Fund Managers’ view: Holcim is a world leader in
theproduction of building materials. At first glance a ‘dirty’
business, Holcim is in the throes of demonstrating to investors
and the wider community that it isa genuine champion of
sustainability within the building materials industry. On its way
to becoming a net-zero company, Holcim offers global
solutions such as ECOPact, enabling carbon-neutral
construction. Additionally, with its circular business model, the
company is a global leader in repurposing waste asa source
of energy and raw materials through products like Susteno,
the world’s most circular cement.
Henderson European Focus Trust plc Annual Report 2023
18
Purpose and values
The Company’s purpose is to provide shareholders with
long-term growth through investing in a portfolio of stocks
listed in Europe and to make this form of investment widely
accessible to investors large and small. We do this by
following a disciplined process of investment and by
controlling costs and using borrowings toenhance returns.
As a Board of directors, we follow high standards of
governance, with aculture based on openness, mutual
respect, integrity, constructive challenge and trust, as
described further on page31. The Board seeks always to act
in the best interests of shareholders, making the most
effective use possible of the diversity of skills and experience
of its members. This culture of openness and constructive
challenge extends to the Board’s interaction with the
Manager, being the Company’s most important service
provider. The Board expects the Manager and all other
service providers to hold values which align with the high
standards promoted by the Board.
Strategy
The Company fulfills its purpose by doing business as an
investment trust, and maintains a premium listing on the
London Stock Exchange. Investment trusts are collective
investment vehicles constituted as closed-ended public
limited companies. The Company is governed by a board of
independent non-executive directors and the management
ofthe Company’s investments is delegated to the Manager.
The Company’s day-to-day functions, including administrative,
financial and share registration services, are carried out by
duly appointed third-party service providers.
The framework of delegation provides the Company with a
cost-effective mechanism for delivering operations whilst
allowing the Company to benefit from the capital gains
treatment afforded to investment trusts, which are approved
under section 1158/59 of the Corporation Tax Act 2010 (as
amended). The closed-ended nature of the Company permits
the Fund Managers to hold a longer-term view on investments
and remain fully invested while taking advantage of any illiquidity
in normal and volatile market conditions, as redemptions do
not arise in the way they would for an open-ended vehicle.
The Company is subject to the Listing Rules, Prospectus
Rules and Disclosure Guidance andTransparency Rules of
the Financial Conduct Authority (“FCA”).
Investment objective
The Company seeks to maximise total return (a combination
of income and capital growth) from a portfolio of stocks listed
in Europe.
Investment policy
Asset allocation
The portfolio is predominantly invested in stocks listed in
Continental Europe and has a bias to larger capitalised
companies but may, within limits, be invested in the stocks
ofmid and smaller capitalised companies or in companies
listed elsewhere, including UK, providing Continental
European exposure.
Stock selection is not constrained by the benchmark and the
stock weighting in the portfolio may be materially higher or
lower than the weighting of any index used for performance
comparisons, including in respect of geographical allocation.
Actual weightings of stocks held in the Company’s portfolio
are based upon the Manager’s views of total return prospects.
The portfolio is not constructed with a yield target.
Diversification
The portfolio contains between 35 to 45 stocks with a
maximum single stock weighting of 10% of net asset value
(“NAV”) of the portfolio at the time of investment. Stocks
weighted at 5% of the portfolio or more are not expected to
exceed 50% of NAV in aggregate. The typical minimum stock
weight is 1% of NAV.
Continental European listed stocks will consist of not less
than80% of NAV at the time of investment, with the remaining
exposure being in stocks listed elsewhere with exposure to
Continental European economies. The exposure to smaller
capitalised stocks at the time of investment is limited to 10%
of NAV. (Smaller capitalised companies are considered to be
those with a market capitalisation of less than €1 billion.)
Derivatives
The Company may use financial instruments, known as
derivatives, for the purpose of investment and for efficient
portfolio management for up to 10% of NAV at the time of
entering into the contract.
Gearing
The Company can borrow with the aim of achieving a return
that is greater than the cost of the borrowing. The Company
can borrow up to 20% of net assets at the time the borrowing
is assumed.
Investment strategy
Stock selection
The Fund Managers use rigorous research to identify high quality,
attractively valued companies with strong balance sheet and cash
flow potential. Free cash flow yields are an important valuation
metric, rather than price/earnings ratios. The benchmark is the
FTSE World Europe (ex UK) Index in Sterling terms.
Business Model
Henderson European Focus Trust plc Annual Report 2023
19
Business Model (continued)
The Company does not invest more than 15% of its total assets
in other listed closed-ended investment funds. Accordingly,
the Company’s shares are an eligible investment under LR
15.2.5 (R) for other listed closed-ended investment funds.
Company engagement
The Janus Henderson European Equities team’s experience
inthe European market has created a deep knowledge base.
Management analysis is further supplemented by a body
ofincreasingly sophisticated data related to environmental, social
and governance (“ESG”) factors, broker research andcompany
meetings. The European Equities team works closely with the
in-house Governance and Responsible Investment team to
screen portfolios for ESG issues and toidentify broader themes
for discussion in making and holding investments.
The Fund Managers believe that if they were to invest in
companies they judged to be systemically low scoring or
failing businesses from an ESG perspective, this would
detract from investment performance as well. They consider
there to be a clear link between good corporate governance
– in each of the E, S and G – and the cost of capital applied
by global investors.
Their approach is built upon fundamental stockpicking
blended with sector themes. This allows them to isolate
investment decisions from market noise; however, the
resulting approach can be contrarian, and can lead to
investing in change. ESG factors can play a role in identifying
these trends in corporate change and sector development.
It is during the in-depth research stage of the investment
process where the Fund Managers will make an assessment
on ESG considerations for each stock or sector. Their analysis
tends to focus on the rate of change rather than existing
scores. They want to gain a good understanding of what
procedures and initiatives the company is putting in place to
improve their ESG practices. This research is often far
ranging, including topics such as board composition and staff
remuneration as well as carbon targets and green financing.
Whilst headline ratings from external providers can be a useful
starting point, the Fund Managers caution investors from
giving them too much significance. They are often backward
looking and external providers face huge difficulties in aligning
subjective topics contained within the ESG arena with a
scoring system used to compare stocks. This has resulted in
a high level of dispersion in ratings depending on the agency.
These are just a few of the reasons why the FundManagers
choose to focus on the delta as well as the absolute when
itcomes to ESG integration in stock selection. Further
informationon the Company’s ESG approach is available at
www.hendersoneuropeanfocus.com.
ESG integration in practice: the importance of
transition
Case Study: Big oil and gas
The necessity of big oil in the transition to
netzero
It is a simple fact that society cannot go cold turkey on
hydrocarbons, as much as the more extreme ends of the green
lobby would like to believe. While we understand the sentiment
behind ‘Stop Oil’, any attempt to do this must happen in an
orderly fashion that takes society with it. Such a journey will
take time. The oil & gas industry has in place the infrastructure,
technology, cash flow and ability to fund new investment,
which makes the industry essential for change to happen.
Big oil sets ambitious climate targets
In recent years big oil has aggressively pivoted to align corporate
strategy to a net zero world, setting increasingly ambitious
emissions targets; yet as recently as 2019, none of the three
largest European oil majors had set a 2030 emissions target.
We should note, however, that these targets are not set in
stone. Rather, they are likely to shift as the realities of achieving
an ‘orderly’ transition sets in. This was most recently the case
in February 2023 when BP moderated its climate targets to
meet immediate energy requirements in response to limited
supply from Russia. It would not surprise us to see other oil
majors scale up and down the intensity of their climate targets
as required. Disclosure and consistency (different base years
for example) will also remain a challenge for comparing
ambitions. Regardless, the direction for oil companies is clear.
Environmental targets for oil and gas companies tend to
come in two forms:
●
absolute carbon emissions targets (in MtCO2e) using
Scope 1, 2 &/or 3; and
●
carbon intensity targets of products (in gCO2e/MJ) which
considers the company’s absolute carbon emissions emitted
per MJ of energy provided from its defined products.
Scope 1 emissions are generated directly through a
company’s own operations. For oil firms, the main ways to
reduce these emissions involve reducing flaring (capturing
excess gas rather than burning it or simply managing the oil
Henderson European Focus Trust plc Annual Report 2023
20
Business Model (continued)
field more efficiently) and exiting from carbon-intensive
projects. Scope 2 emissions include those indirectly produced
from power consumption. In this case, many oil companies
are using electricity provided from low carbon sources, fuel
switching, recycling heat and increasing energy efficiency.
Focusing on emissions reduction from the companies’ own
operations is usually considered the easiest win and it is
therefore in these first two scopes that we have seen the
most aggressive targets. By 2030, Shell and BP have targeted a
50% reduction in scope 1 and 2 emissions, and TotalEnergies a
40% reduction. However, while these emission reductions
should be material by 2030, they are somewhat limited and
comprise a relatively small portion of overall emissions – chart 1.
Scope 3 emissions are those associated with the
consumption of products sold. These represent the vast
majority of ‘well to wheel’ emissions and are those where a
longer transition is required. By their nature, scope 3 reduction
targets are more difficult to control and therefore make up a
much smaller portion of overall reduction targets.
Chart 1: Scope 3 emissions versus scope 1 and 2 for
bigoil
0
20
40
60
80
100
Shell
Total emissions by scope (%)
BP TotalEnergies
Scope 1 & 2
Scope 3
Source: MSCI, Janus Henderson, as at 30 December 2022*
As is the case for many sectors, the method to calculate
scope 3 emissions is not consistent across the oil & gas
industry. Regardless of the exact methodology, we know
that scope 3 represents a significant portion of emissions
and is therefore key to long-term decarbonisation.
The driver of scope 3 emission reductions lies in the
company’s sales and production mix. The main ways for oil
companies to reduce scope 3 emissions include:
●
shifting production from oil to gas (liquified natural gas
releases approximately 20-25% less emissions than
traditional fossil fuels)
●
expanding downstream integration in gas (with production
refining, retail marketing and power supplied from gas)
●
increasing sales of biofuels and carbon capture
●
natural sinks to reduce net emissions
●
replacing fossil fuel sales with renewables
Renewables roll out
The scale and commitment of energy companies to
increase solar and wind in their production mix often gets
overlooked due to its low base versus traditional fuels.
However, in absolute terms the shifts are far more dramatic.
In 2022, Shell, TotalEnergies and BP had a combined
low-carbon capital expenditure (capex) in the region of
$9billion, and these numbers are set to grow, with targets
of 20-50% capex by 2025/2030. This expenditure translates
to the oil majors having some of the largest renewable energy
growth plans in Europe. Chart 2 shows big oil growth plans
compared to the incumbent developers, utilities.
Chart 2: European players have big growth plans
020406
08
0
ENI
RWE
Engie
Shell
EDF
EDP
Iberdrola
Orsted
BP
Total
Enel
Gigawatt ("GW") capacity target added 2022-2030 estimates
Source: MSCI, Janus Henderson, Exane BNP Research, Credit Suisse
Research, as at 30 December 2022*. Orange bars indicate oil company; black
bars indicate utilities company
In addition, these companies have become disciplined
when it comes to exploring/extracting for new oil projects
which will see the percentage of renewables increase in the
mix even further. To supplement this renewable-led
electrification of our energy supply, we are also seeing
companies with large retail networks committing to
charging-point roll-outs – Shell targets 2.5 million by 2030,
aiding the demand side of the equation as well as the
supply side.
Solutions for hard-to-abate sectors
While electrification is often touted as the main solution to
reduce dependence on hydrocarbons, the energy density of
electricity is far less than hydrocarbons which could prove
troublesome in some instances. Currently, the battery size
required for a plane to reach take-off speed would hinder the
ability to take off at all. Other hard-to-abate sectors alongside
aviation include steel, shipping, cement and similar chemical
processes. The solutions, some of which are noted below,
also look likely to heavily involve the oil majors.
* References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not
be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.
Henderson European Focus Trust plc Annual Report 2023
21
●
Carbon Capture, Utilisation and Storage (CCUS) involves
the capture of CO
2
from large point sources that release
emissions – such as power generation, oil wells or industrial
facilities – and has been used by energy companies for
many years to reduce their own emissions. CCUS can also
capture CO
2
directly from the atmosphere. If not utilised
on-site, captured CO
2
is compressed and transported to be
used in a range of applications or injected into deep
geological formations which trap the CO
2
for permanent
storage. Until recently, this process was considered a cost of
doing business. Many oil majors are now looking to increase
their CCUS capabilities to start selling the service externally
by charging per tonne of CO
2
captured for external carbon
emitters. Given their history in this area, oil companies are
uniquely positioned for this opportunity.
●
Biofuels are created using an organic material
(‘feedstock’), typically blended with traditional diesel/
aviation fuel. While these fuels still release emissions on
combustion, they are considered sustainable because of
the carbon captured during the growth of the organic
material. Although biofuels might not be the ultimate
solution, they could certainly be part of the transition,
especially as the primary feedstocks (sugar-starch crops
and oils from rapeseed or palm oil) can put the process at
odds with food security. Other feedstocks being explored
include agricultural waste (cow manure) and sea algae.
Both European pulp and paper company UPM and Neste
have been pioneering technology in this area, but it is also
a significant element of the oil majors’ transition strategies.
●
Hydrogen could be considered the ultimate solution.
Green hydrogen (produced using purely renewable
energy and electrolysis) has no emissions at point of use
and can be stored for long periods and transported large
distances compared to electricity. The main problem is
that much of the existing property, plant, equipment and
devices for hydrogen production are currently running on
fossil fuels and will need to be completely replaced.
Again, oil companies’ experience in the operation of
upstream and midstream infrastructure necessary to
deliver a gas to market will be vital in this transition.
For us, how these processes can interact in tandem is where
the scale of the oil majors shows their benefit. Through their
trading businesses, oil firms could be a one-stop shop for a
company’s energy needs – working with them to reach the
best combination to meet their specific energy needs.
Conclusion
The complexity of the carbon chain in society means that
the transition to lower carbon solutions cannot happen
overnight. The good news is that the technology is either
ready (the cost of wind and solar is competitive with
traditional fuels) or fast approaching (hydrogen and
biofuels). Oil majors are committing huge amounts of
capital to aide this shift, thus far in a way that largely aligns
all stakeholders. Ultimately, these companies are fast
moving from being major oil companies to integrated
energy companies with whom the energy transition is
totally reliant. We prefer those names that exhibit firm
capital discipline whilst showing a strong commitment to
atransformational shift within their businesses.
Business Model (continued)
Management
The Company qualifies as an ‘alternative investment fund’ in
accordance with the Alternative Investment Fund Managers
Directive (“AIFMD”). The Board has appointed Janus Henderson
Fund Management UK Limited (“JHFM”) to act as its alternative
investment fund manager (“AIFM”). JHFM delegates investment
management services to Janus Henderson Investors UK
Limited in accordance with an agreement effective from
22July 2014. The management agreement with JHFM is
reviewed annually and can be terminated on six months’ notice.
Both entities areauthorised and regulated by the FCA and are
part of the Janus Henderson group of companies. References
to ‘JanusHenderson’ or the ‘Manager’ refer to the services
provided to the Company by the Manager’s group.
The Fund Management team is led by Tom O’Hara and
JohnBennett. The Fund Managers’ combined holding in the
Company at the year endcomprised 4,071,565 shares.
Ongoing charge and fees
The management agreement provides for the payment of a
composite management fee. The fee is charged at 0.65% per
annum of net assets up to £300 million, and 0.55% of net
assets above £300 million. Any holdings in funds managed by
Janus Henderson, of which there were none in the year, are
excluded from the calculation of the management fee. There
is no performance fee. For a further breakdown, see notes 5
and 6 on page 71.
The higher ongoing charge ratio at 0.80% (2022: 0.77%) is
partially dueto timing of the management fee calculation, as
NAV was higher at quarter ends when the fee was calculated
than it wasover the average for the year, which is the basis for
the calculation of the ongoing charges ratio. The management
fee is charged basedon quarter-end net assets while the
ongoing charge iscalculated on the basis of the average daily
net assets. Theother half of the increase was predominantly
due to returning to a full complement of Board members
andan engagement exercise with underlying shareholders.
This took the form of letters to shareholders on platforms via
as793 exercise (see page 30) and an increase in marketing
costs. Further information on the ongoing cost ratio and
expenses ison page 93. As a key performance indicator, the
ongoing charge isa measure of cost and competitiveness.
The Board scrutinises all costs borne by the Company, and
compares the ongoing charge ratio to that of its peers in the
AICEurope sector, against which it is competitive.
Henderson European Focus Trust plc Annual Report 2023
22
Business Model (continued)
Borrowings
The Company has borrowings of EUR 35 million through privately placed loan notes as well as access to a multi-currency
overdraft facility with HSBC Bank plc which allows borrowings up to the lesser of £30 million and 10% of custody assets. Atthe
year end, no borrowings were drawn under the HSBC overdraft facility (2022:zero). TheCompany may use leverage to increase
returns for shareholders, which provides a significant advantage over otherinvestment fund structures. The Board has
delegated responsibility to the Fund Managers for deciding on the currency mix of the borrowings. The Company may ‘de-gear’
its investment exposure by investing part of the portfolio in cash or cash equivalents if it is thought appropriate to do so.
Measuring performance
To measure the success of the Company in meeting its objective and to evaluate the performance of the Manager, the directors
consider the following key performance indicators (“KPIs”). The charts, tables and data on pages 2 to 5 show how the Company
has performed against these KPIs, and a glossary of terms and alternative performance measures is on pages 91 to 93.
Performance
measurement
Whilst the portfolio is not constrained by the benchmark, the Board measures performance of NAV total
return and share price total return against the FTSE World Europe (ex UK) Index (inSterling) and against
both the AIC and Investment Association OEIC Europe sectors as its peer groups. The portfolio is not
constructed with ayield target.
Discount or
premium of share
price to NAV
pershare
This is the level of discount or premium at which the ordinary shares trade relative to the NAV per share.
The Board has a pragmatic approach to both allotting shares and to share buybacks and keeps its policy
under review. The Board’s objective is to support an orderly market in the Company’s shares in a manner
that is beneficial to the long-term interests of shareholders.
Ongoing charge The costs of running the Company calculated using the AIC ongoing charge methodology, including fees
payable to the Manager.
Managing our risks
The Board, with the assistance of the Manager, has carried
out a robust assessment of the principal risks facing the
Company, including those which would threaten its
business model, future performance, solvency, liquidity
initsshares and reputation. The assessment includes
consideration of economic and political risks, most of which
are outside the Board’s direct control. The Board has drawn
up a detailed matrix of risks facing the Company, together
with a strategic heat map charting the top ten risks, which
ithas distilled into six categories of principal risks, as
shownon pages 24 and 25. To assist in mitigating the
decision-taking risksas far as practicable, it has put in
place a schedule of investment limits and restrictions,
appropriate tothe Company’s investment objective and
policy, which itreviewsat each board meeting.
The Board considers closely changes to the risk profile of the
Company, arising from both internal and external triggers, and
examines emerging risks as part of its regular review of the
Company’s risk profile. The Board defines emerging risks as
potential trends, sudden events or changing risks which are
characterised by a high degree of uncertainty in terms of
occurrence probability and possible effects on the Company.
Once the emerging risks become sufficiently clear, they may
be treated as specific risks and enter the Company’s matrix of
risks. The conflict in the Middle East is considered an
emerging risk with implications for greater instability in markets
and pressure on oil prices, with inflationary pressures and
impact on political uncertainty affecting much wider parts of
the global economy, not ignoring the human tragedy of warring
conflict when it arises, wherever it arises.
The impacts of geopolitical tensions continue to affect the
investment landscape, and specific issues such as continuing
inflation and significantly increased interest rates during the year
have to be factored into investment risks and opportunities.
The Board receives regular and detailed reporting on specific
and emerging risks from the Manager and other service
providers. In addition, the Board receives reports on specialist
topics from professional advisers, including lawyers and tax
agents. These reports, as well as the directors’ own
experience, enable effective monitoring of the risk landscape
and changes to it. The Board encourages a culture of
anticipating and scanning for direct and indirect market events
and constructive challenge to identify and manage risk, where
it can, including external risks which need a rapid response.
The Board has concluded that the portfolio, investment
approach and operational requirements of the Company
have, to date, proven resilient and the investment approach
remains unchanged.
Henderson European Focus Trust plc Annual Report 2023
23
Business Model (continued)
Principal risks
The Company’s principal risks and mitigating steps are as follows:
Risk Controls and mitigation
Market
The Company’s absolute performance in
terms of net asset value total return and
share price total return is dependent on the
performance of the investee companies
and markets in which the Company invests.
Performance is also impacted by currency
and interest rate movements, as well as by
political and economic events.
Investment risk is spread by holding a diversified portfolio of investee
companies, typically with strong balance sheets and good growth prospects.
The Company does not currently embark on any currency or market movement
hedging strategies, though it has the ability to do so.
The Company’s investment strategy is reviewed formally by the Board at least
annually, and takes into account shareholder views, developments in the
marketplace and how the structure of the Company is positioned to meet them.
Investment performance
The relative performance of the Company
against its benchmark and European open
and closed-ended peers depends
principally on asset allocation and stock
selection, which, in turn, require investment
skills. In exercising these skills, the
Manager is responsible for adhering to the
investment policy and investment guideline
restrictions set by the Board and amended
from time to time.
The Board is responsible for ensuring that the investment policy is met. The
day-to-day management of the Company’s assets is delegated to the Manager
under investment guidelines, with close monitoring of the guidelines.
The Board meets the Manager on a regular basis and keeps investment
performance, in terms of both capital and income returns, under close review.
The Management Engagement Committee reviews the Manager’s performance
annually. Although the Company is not invested against any income criteria, the
net income of the Company and the revenue reserves are monitored against
dividend pay-outs and anticipated future net income.
Investment performance is monitored over the short, medium and longer term
against the Company’s benchmark and against a wider peer group of open
and closed-ended investment vehicles investing in listed European equities.
The Board also reviews the performance attribution analysis against
benchmark in detail, to understand the main drivers of performance in
reporting periods. The Fund Managers keep the global political and economic
picture under review as part of the investment process and provide the Board
with frequent updates to enable the directors to monitor and manage risks of
geopolitical disruption and global economic risks. Climate risk is assessed
within the individual stock selection process and is reported within quarterly
Fund Manager board reports.
Business strategy and market rating
A number of factors, including the setting
of an appropriate investment proposition,
changing investor demand or investment
performance may lead to an increase or
decrease in demand for and/or supply of
the Company’s shares and will impact
how the shares are priced in relation to
the Company’s underlying net asset value
per share.
The Board monitors the Company’s ordinary share price relative to net asset
value per share and reviews changes in shareholdings in the Company to
understand short or longer-term trends in demand for and supply of the shares.
The Company is able, when appropriate, to issue or to buy back shares in
order to help maintain an orderly secondary market in the Company’s shares,
but not against any prescribed discount or premium levels, other than avoiding
dilution to existing shareholders’ interests through share issuance at a discount.
The Board also monitors the rating of the Company’s shares against other
closed-ended investment companies in the sector.
The Company is ‘evergreen’ and does not have a liquidity event, such as
periodic tenders or continuation votes. The liquidity of the portfolio is monitored
and is considered sufficient for the purposes of a closed-ended fund, including
where the Company buys back its own shares.
Henderson European Focus Trust plc Annual Report 2023
24
Business Model (continued)
Risk Controls and mitigation
Gearing
The Fund Managers have authority to use
gearing in line with the Company’s
investment policy. In the event of a
significant or prolonged fall in equity
markets any gearing in place would
exacerbate the effect of the falling market
on the Company’s net asset value and,
consequently, its share price. Gearing
would have the opposite effect in the event
of a significant or prolonged rise in equity
markets in which the Company is invested.
The Company’s investment policy sets a limit on borrowing of 20% of net
assets at the time the borrowing is assumed, and the Board monitors the level
of gearing at each meeting.
The Manager makes active use of the Company’s gearing with close oversight
of borrowings and cash management from the Board when gearing is
extended or contracted in relation to different market conditions and as applied
to different investment and disinvestment opportunities.
Operational
The Company is reliant on third-party
service providers for all its operational
activities, including reliance on Janus
Henderson as investment manager,
corporate secretary and administrator to
the Company.
The Company depends on the diligence,
skill and judgement of the Manager’s
investment team. Continuity of service of
the team and individuals in the team could
impact the future success of the Company.
Failure of third parties’ operational or internal
control systems could prevent the accurate
reporting or monitoring of the Company’s
financial position. Janus Henderson
subcontracts some of the operational
functions (principally those relating to trade
processing, investment administration and
accounting) to BNP Paribas.
Failure of controls could also impact the
Company meeting its regulatory obligations.
The Management Engagement Committee reviews each service provider at
least annually, and, in conjunction with the Audit and Risk Committee,
considers reports on internal controls, including any reported breaches,
throughout the year, from all the service providers. This reporting covers such
matters as business resilience and cyber security risk as well as matters that
are subject to review as part of the annual audit of the Company.
Janus Henderson has a strong European Equities team, which supports the
Fund Managers in the management of the Company’s portfolio. Constructive
challenge, succession and continuity planning are key elements of the
management of the team and are reported closely to the Board with
consultation on any major changes.
The Board reviews the internal control structure and reporting for the Company
from all agents and meets with their representatives throughout the year to
make enquiry on the systems and controls. The Board considers climate risk in
respect of operational capability in its review meetings with service providers.
Regulatory and reporting
The Company operates in a highly
regulated environment which could inter
alia affect the listing of the Company’s
shares and the Company’s tax status, as
well as how the Company conducts its
affairs in the market more generally.
The Company has strict reporting
requirements that need to be adhered to
both internally and externally to the market.
The Board is apprised regularly of impending regulatory and reporting changes
and monitors closely, through its various agents, the Company’s adherence to
existing requirements, including maintaining investment trust and listed
company status.
The Board is also kept apprised of corporate governance developments and,
as far as practicable, adheres to corporate governance guidelines that are
applicable to an investment company.
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 on pages 40 to 44. Note 15 contains further details on the
Company’s exposure to market risk (including market price risk, currency risk and interest rate risk), liquidity risk, credit risk and
how they are managed.
Henderson European Focus Trust plc Annual Report 2023
25
Business Model (continued)
The Company’s viability
The AIC Code of Corporate Governance includes a
requirement for the Board to assess the future prospects for
the Company, and to report on that assessment within the
Annual Report. The Board considers that certain characteristics
of the Company’s business model and strategy are relevant to
this assessment:
●
the Board aims to ensure that the Company seeks to
deliver long-term performance;
●
the Company’s investment objective, strategy and policy,
which are subject to regular Board monitoring, mean that
the Company is invested mainly in readily realisable, listed
securities and that the level of borrowings is restricted;
and
●
the Company is a closed-ended investment company and
therefore does not suffer from the liquidity issues arising
from unexpected redemptions.
Also relevant were a number of aspects of the Company’s
operational agreements:
●
the Company retains title to all assets held by the
custodian under the terms of formal agreements with the
custodian and depositary;
●
revenue and expenditure forecasts are reviewed by the
directors at each board meeting; and
●
cash is held with approved banks.
In addition, the directors have carried out a robust
assessment of the principal risks and uncertainties which
could threaten the Company’s business model, including
future performance, liquidity and solvency, and climate
change, and considered emerging risks that could have a
future impact on the Company. The Board takes into account
the liquidity of the portfolio, short-term and structural gearing,
the income stream from the portfolio, and the Company’s
ability to meet its liabilities as they fall due. This includes
consideration of how the forecast income stream, expenditure
and levels of reserves could impact the Company’s ability to
pay dividends to shareholders over that period. Detailed
income and expense forecasts are madeover a shorter time
frame. However, the nature of the Company’s business means
that such forecasts are equally valid to be considered over the
longer five-year period as a means of assessing whether the
Company can continue inoperation.
The directors assess viability over five-year rolling periods,
taking account of foreseeable severe but plausible scenarios.
This includes consideration of the duration ofthe Company’s
loan and borrowing facilities and how a breach of any
covenants could impact the Company’s NAV and share price.
The Board has assessed the risks associated with the various
geopolitical, economic and health crises in recent years and
has concluded that these events have not affected the
long-term viability of the Company, and its ability tocontinue
in operation, notwithstanding any short-term uncertainty they
have caused in the markets.
In common with investment companies generally, the viability
statement does not take into account corporate events which
might be initiated by the Company or to which the Company
might be subject, and where the Company’s circumstances
might be dramatically changed. An investment company has
relatively liquid assets, compared to industrial or commercial
companies, and can, therefore, be subject to major and
unexpected strategic change. No such event or change
affecting the Company’s viability is known or currently in
contemplation by the Company. The directors believe that a
rolling five-year period best balances the Company’s long-
term objective, its financial flexibility and scope with the
difficulty in forecasting economic conditions affecting the
Company and its shareholders.
Based on their assessment, and in the context of the
Company’s business model, strategy and operational
arrangements set out on the previous pages, the directors
have a reasonable expectation that the Company will be able
to continue in operation and meet its liabilities as they fall due
over the five-year period to September 2028.
Promoting the Company’s success
Section 172 statement
The directors act to promote the success of the Company for
the benefit of its shareholders as a whole. In so doing, they
have regard to the matters set out in s172(1) Companies Act
2006 (“CA06”). This includes likely consequences of their
decisions in the longer term and how they have taken wider
stakeholders’ needs into account. The Board’s strategy is
facilitated by engaging with a wide range of stakeholders
through direct meetings, research and presentations and
through service providers’ interactions within the investment
and financial services community.
As an investment company with no employees, our key
stakeholders are our shareholders and investors, service
providers (in particular our Manager), investee companies,
lenders, the AIC, London Stock Exchange and regulatory
bodies. Understanding stakeholders, their interests and views,
enables the Company to fulfil its purpose and enables the
directors to promote the success of the Company for the
benefit of shareholders as a whole, with constant awareness
of other stakeholders and their interests.
Henderson European Focus Trust plc Annual Report 2023
26
Business Model (continued)
The Board has adopted a map to support identification and understanding of our stakeholders and helps determine the
appropriate level and form of interaction with them.
Set out below are examples of the ways in which the Board and the Company have interacted with key stakeholders in the year
under review, in line with s172 CA06.
Stakeholders Engagement Outcome
Shareholders The Board communicates with shareholders
through the annual and half-yearly reports,
factsheets and monthly commentary, quarterly
ESG reports, press releases, videos recorded
by the Fund Managers and articles, all made
available on the Company’s website. The
Company also publishes regulatory
announcements which are linked through its
website. The directors meet with shareholders
at the AGM which provides a forum for face-to-
face debate with the Board and Fund Managers
with in person and online access to view the
AGM.
The Board addresses shareholder
correspondence and reviews voting
patternsat general meetings. The Chair
meetswith shareholders at their request,
andalways welcomes conversations.
The Fund Manager discusses the
Company’sresults and performance
duringtheyear in a video available at
www.hendersoneuropeanfocus.com
andisaregular contributor to investor
andbroker forums.
The Board undertook an ‘outreach’ programme
to make direct contact as far as possible with
the Company’s many indirect shareholders
holding shares through platforms, so they can
be as well informed as possible about the
Company’s position and prospects, and can
communicate their views directly to the
Company. We sent letters to 2,854 underlying
shareholders, resulting in a good increase in
website registrations for regular updates and
AGM attendance. The Board continues to
promote direct sign-up for information from
underlying shareholders and encourages them
to vote on Company business at the AGM.
Clear communication of strategy and the
Company’s performance against its objective
helps shareholders make informed decisions
about their investments, based on information
on short, medium and longer-term aspects of
the Company and its performance. This should
also help support a consistent rating in the
secondary market for the Company’s shares.
Close interaction with shareholders enables the
Board to operate the Company aligned with
shareholders’ interests as a whole and for the
Company’s long-term success.
Investee
companies
Henderson European
Focus Trust plc
(the "Company")
Fund
management
group
Communities
and the
environment
Other service
providers
Shareholders
(institutional
and retail)
Lenders
Legislators,
regulators,
stock
exchange,
AIC
Potential
investors
Henderson European Focus Trust plc Annual Report 2023
27
Business Model (continued)
Stakeholders Engagement Outcome
Fund management group
(JanusHenderson,
providing investment
management,
administration and
secretarial services
aswell as expertise in
sales and marketing)
The Board regularly reviews performance
against the investment objective, policy and
guidelines, and receives presentations from the
Fund Managers and other representatives of
the Manager at each board meeting to exercise
effective oversight of the portfolio, performance
and strategic objectives. The Manager’s
performance in all respects is reviewed formally
by the Management Engagement Committee
(“MEC”) each year.
The directors work closely with Janus Henderson
outside scheduled board meetings on matters
relating to portfolio management, administration
and governance oversight, including
relationships with third parties and engagement
with other stakeholders. They meet to develop
strategy, including a sales and marketing plan
to promote the Company with the aim of raising
its profile which in turn helps raise its rating.
The Company is well managed and receives
appropriate and timely advice and guidance for
a competitive cost.
The directors monitor succession planning
within Janus Henderson for all key positions
supporting the Company. At the MEC meeting
in 2023, the directors assessed the Manager’s
performance and service to the Board, with a
focus on the forthcoming retirement of John
Bennett, Co-Fund Manager, and its potential
impact on the management of the Company’s
portfolio.
After thorough consideration and review of the
ongoing management of the Company, with
Tom O’ Hara maintaining his lead responsibility
for the portfolio, the directors were satisfied
with the continued resource being applied to
ahighly successful investment process,
supported by a well-regarded European
Equities team.
The Manager’s portfolio activities and the
impact of the Fund Managers’ decisions are
setout in the Fund Managers’ Report on pages
10 to 13.
Other service providers,
including:
●
BNP Paribas as
accountant and
administrator
(outsourced by the
Manager)
●
HSBC Bank plc as
custodian and
depositary
●
Equiniti Limited as
registrar
●
Winterflood
Securities Limited as
broker
●
Kepler Partners LLP
as independent
research provider
●
Grant Thornton LLP
as tax advisor for
legacy ‘Fokus Bank’
withholding tax
reclaims
Representatives of all the main service provider
functions present regularly to the Board. The
Company contracts directly with certain
service providers for custodian, depositary and
registrar services, and indirectly with BNP
Paribas for fund administration and accounting
services. The Manager maintains the day-to-
day relationship with all service providers.
TheBoard and Manager work with the broker,
including their research and sales teams to
provide access to the market and liquidity in
the Company’s shares.
The Board invites representatives of the broker,
research provider and the Manager’s marketing
and sales teams, to provide regular updates on
shareholders and is provided with analyses of
shareholder movements.
All of the service providers are subject to an
annual performance review at the MEC.
The Company is an attractive investment and
there is liquidity in its shares. It is supported
byexperienced and capable third parties for
allthe services required to be a well-
functioning Company.
Henderson European Focus Trust plc Annual Report 2023
28
Business Model (continued)
Stakeholders Engagement Outcome
Investee companies The Board sets the investment objective, with
shareholder approval, and discusses stock
selection, asset allocation, performance and
prospects pertaining to investee companies,
including strategy, current trading and ESG issues,
with the Fund Managers at each board meeting.
The Manager has a dedicated Corporate
Governance and Responsible Investment Team
which supports the Fund Managers in the
investment process, and engages with investee
companies on behalf of the Company to
exercise good stewardship practices on matters
including ESG and voting at company meetings.
The Fund Managers have conducted meetings
with all portfolio companies’ management
teams in the past year to enable them to
interrogate current trading and prospects for
their businesses and engage over any issues.
Inthis way the Company is a responsible and
engaged investor.
Lenders
●
Loan noteholder
●
HSBC Bank
The Company maintains borrowings at low
rates through the use of loan notes and an
overdraft facility with HSBC to enhance returns.
The Company confirms compliance with the
loan covenants of both its short-term and
long-term gearing facilities on a monthly basis.
Janus Henderson provides the Board with
regular financial covenant compliance validation
and financial reports. The Company maintains
agood relationship with its lenders.
The Board monitors borrowing, and through its
financial reporting to stakeholders, provides
validation of compliance with lending limits. The
Company holds loan notes at a blended rate of
1.57%, as the directors believe this financing
provides very attractively priced, long-term
capital for the benefit of shareholders (see
page23 for more details).
Communities and the
environment
The Board mandates the Manager, supported
by its governance function, to engage with
investee companies, when and where
appropriate, on ESG matters in line with good
stewardship practices, and with an approach
agreed with the Board. The Board is also
conscious of the importance of providing an
investment product which meets the needs of
its investors, including retail investors.
The Board is conscious of the need to take
appropriate account of broader ESG concerns
and for the Company to act as a good
corporate citizen. An investment approach that
meets the needs of investors provides a service
valuable to the communities in which the
Company operates.
See the ESG engagement section on pages
20to 22 for more details.
Potential investors The Board and Manager liaise to engage with
the wider investor community through various
forums to understand their requirements in
addition to those of the current shareholders.
The material made available to current
shareholders, as set out at the top of this table
on page 27, is also publicly available for the
benefit of potential investors.
By understanding the Company’s activities,
performance, risks and prospects, potential
investors will be able to make informed
decisions about their investments.
Legislators, regulators,
stock exchanges,
Association of
Investment Companies
(“AIC”)
Where required, the Board, or its agents on
behalf of the Company, consult or seek
clearance from the appropriate regulatory
authority.
The Company is a member of the AIC, as
representative body for investment companies.
The AIC supports members by providing
guidance on issues specific to investment
companies, including on accounting and
company law matters, and running events for
directors and company secretaries of its
member companies. The directors also
participate in AIC consultations on key industry
topics that may affect the Company and AIC
work programmes.
The Company conducts its business as
agoodand active corporate citizen.
The AIC’s support to members assists the
Board in its discussions and decision
making,and helps disseminate information
about the Company more widely, e.g.
forthcoming investment company AGMs:
www.theaic.co.uk/upcoming-meetings
During the year, the Board worked with the
Manager and registrar to participate in the
Government’s Digitisation Taskforce
consultation, giving the Company a voice in
theregulatory environment.
Henderson European Focus Trust plc Annual Report 2023
29
Business Model (continued)
Board decision making
The Board aims to act in the best interests of shareholders as a whole and to have regard to other s172 factors which have a
broader impact on stakeholders and the wider community. The Board takes into consideration the Company’s purpose,
investment objective and investment policy as well as the interests of the Company’s stakeholders when discussing matters and
making decisions. In addition to regular, detailed discussions about the Company’s investment portfolio, strategy and market
performance, the following are examples of the key discussions held and decisions made by the Board during the financial year
ended 30 September 2023:
●
The directors held specific discussions about the deteriorating macroeconomic and geopolitical environment, notably
the ongoing conflict in Ukraine, continuing tensions between the US, Europe and China and the related disruption to global
supply chains, and the broader impact of the cost-of-living crisis in the UK. Since the year end, the Board has been
monitoring the new conflict in the Middle East and its impact on the Company’s interests.
●
Following a detailed recruitment process with specific skills and experience being sought from a diverse and wide list of
potential candidates which was conducted with the assistance of an experienced independent external search consultancy,
Melanie Blake joined the Board on 3 July 2023. Mel is a chartered accountant, with expertise in risk and compliance roles, all
of which will be valuable to the Company’s continued progress and the mix of competencies and experience on the Board.
●
Ensuring the Company’s directors, suppliers and culture remain appropriate. During the year, the Board reviewed its
own effectiveness, including that of its committees, using an external evaluator, Lintstock Ltd. The external review was as
objective and in depth as practical and an important means of obtaining objective evidence on the operations of the Board
and its committees. As part of the wider effectiveness review process, the directors received updates on the staff working for
the Company among the various service providers, and any changes in suppliers’ culture, mission, values and purpose, and
changes in governance structures. The results of the review are described on page 47. The Board encourages and supports
an open and diverse culture, with its own collegiate, competent and committed approach to oversight reflected in what it
expects from those working with the Company and how they support the Company’s activities.
●
Annual dividends paid are an important part of Board decision taking, both for the current year and looking ahead, with
income forecasting and revenue reserves to provide for sustainability of dividends paid. The directors assessed the quantum
of the dividends proposed at interim and final stages and the strength of the Company’s income generation. On the basis of
the Fund Managers’ expectations for income generation from the current portfolio structure, the Board proposes the use of
asmall amount of reserves to maintain the total dividend level for the current year.
●
At each board meeting, the directors discussed the Fund Managers’ approach to investing responsibly, including their
analysis of the impact that the portfolio companies’ approach to ESG matters has on the wider community. A case study on
the role of oil companies in the transition to net zero is on pages 20 to 22.
●
The Board agreed resolutions to be put to shareholders at the AGM in 2024 including the remuneration policy vote, which
arises at least every three years, and the nominations required for each director to either be elected or re-elected based on
their contribution to the Board and the operations of the Company. The Board has also been engaged in an exercise, under
s793 Companies Act 2006, aimed at increasing engagement with the Company, particularly from private investors who make
up a significant proportion of the share register, many of whom are invested through investor platforms.
●
The Board arranged for the Company’s half-year and annual results to be prepared, and approved these for release to the
market and to shareholders. By presenting the financial results to shareholders in the Half-Year Update and Annual Report as
well as the market announcements, and making them available on the website to other stakeholders, the Company enabled
shareholders and potential investors to make informed decisions about their investment in the Company.
●
The Audit and Risk Committee conducted an audit tender, as incumbent statutory auditor Ernst & Young LLP (“EY”) reached
its tenth year in office during the year under review. Following a rigorous tender process, EY was selected to continue in
office, in line with legislation and good governance practice. See pages 41 to 42 for more information.
●
The Board remains aware of the challenges for investing and the specific challenges of investing using a closed-ended
structure, where the rating of the shares can have a material impact on value, as can the liquidity in the shares more
generally. Consequently, the Board continues to explore ways that might be in the best interests of shareholders to
help liquidity, with share buy-back being only one of those means, and how the marketplace for closed-ended funds
develops in general with competitive costs and liquidity being to the forefront of developments.
Henderson European Focus Trust plc Annual Report 2023
30
Business Model (continued)
Culture and diversity
As explained on page 26, the directors’ overarching duty is
topromote the success of the Company for the benefit of
investors, with consideration of other stakeholders’ interests.
The directors promote mutual respect combined with
constructive challenge, informed enquiry and a strong focus
on shareholder interests. Integrity, fairness and diligence are
defining characteristics of the Board’s culture. All directors
seek to properly discharge their responsibilities and meet
shareholder expectations in an open, transparent manner with
the commitment of time and effort as required. The Company
has policies and procedures in place to assist with
maintaining a culture of good governance including those
relating to directors’ conflicts of interest, dealings in the
Company’s shares, bribery and tax evasion. At the date of this
report, the Board comprises five directors, of whom three are
male and two are female.
The Board welcomes diversity and considers the culture of
the Manager and other service providers through regular
reporting and presentations to ensure cultural alignment.
TheBoard appreciates that the Manager fosters and
maintains an environment that values the unique talents
andcontributions of individuals, and strives to cultivate
andpractise inclusiveness for the long-term success of
thebusiness and for the benefit of its employees, investors
andshareholders.
Engagement and stewardship
Stewardship is a fundamental part of the Manager’s
long-term, active approach to investment management.
Strong ownership practices, including engagement with
management and boards, can help protect and enhance
long-term shareholder value. Janus Henderson is a signatory
to the UK Stewardship Code and is a founding member of
theUN Principles of Responsible Investment (“UN PRI”).
Additionally, Janus Henderson is a supporter of broader ESG
initiatives such as the Access to Medicine Index, which aims
to improve availability of healthcare in developed and
emerging markets, and Climate Action 100+, an investor-led
initiative to engage with heavily emitting companies to reduce
their greenhouse gas emissions. Pages 20 to 22 outline the
Fund Managers’ approach to ESG matters.
Voting and the Stewardship Code
The Board believes that voting at general meetings is an
important aspect of corporate stewardship and a means of
signalling shareholder views on board policy, practices and
performance. Responsibility for voting the rights attached to
the shares held in the Company’s portfolio has been delegated
to the Manager, who actively votes at shareholder meetings
and engages with companies as part of the voting process.
The decision on how to vote is guided by the best interests
ofinvestors and based on an in-depth understanding of the
respective companies’ operations. Voting decisions are made
in keeping with the provisions of the Manager’s ESG Investment
Policy and is publicly available at www.janushenderson.com.
To retain oversight of the process, the directors receive
reporting at each board meeting on how the Manager has
voted the shares held in the Company’s portfolio. The directors
review the Manager’s ESG Investment Policy, Stewardship
Policy, Proxy Voting Policy and Procedures at least annually.
Voting record
In the period under review, the shares in the Company’s
portfolio were voted in respect of 96% of meetings (43 of 45).
The level of governance in leading global companies is
generally of a high standard in terms of best practice, which
meant support for the resolutions proposed by management
was often warranted. However, in respect of 8% of resolutions
at general meetings of the Company’s investees during the
year, support was not warranted and, following discussion
between the Fund Managers and JanusHenderson’s
governance team, the resolutions were not supported.
Theseresolutions related inter alia to the remuneration
andre-election of directors, concerns about leadership,
overboarding, inappropriate practice around meeting
governance, issuance of securities and inappropriate
ESGtargets.
Voting record
69% of meetings where all
resolutions were voted in favour
31% of meetings with at least
one vote against or withheld
In terms of resolutions not supported, these covered two
primary areas: compensation and director-related.
Compensation 34%
Director-related 34%
Other business* 11%
Capitalisation 11%
Constitutional changes 4%
Strategic transactions 4%
Environmental 2%
Source: Janus Henderson using Institutional Shareholder Services (“ISS”)
categories
Note: Some meetings had more than one vote against management.
* The Manager routinely votes against proposals labelled ‘other business’.
Several European companies put forward proposals labelled ‘other business’
which is a request to allow the board and shareholders to raise other issues
and discuss them at the meeting. It is often a routine request, however as it
could potentially lead to subsequent approval of items without prior disclosure
to minority shareholders, we routinely vote against these items.
Henderson European Focus Trust plc Annual Report 2023
31
Business Model (continued)
The environment
As part of their fundamental assessment of an investee
company’s prospects, the Fund Managers engage with
management on environmental matters as a matter of course.
The companies themselves now report directly on their
emissions (scope 1 and scope 2) and increasingly on the
emissions of those who use their products (scope 3). Fund
Managers engage with investee companies on environmental
matters where they arise, and the companies themselves
report directly on their own emissions. As an investment
company with all its activities outsourced to third parties,
theCompany’s own direct environmental impact is minimal,
occurring through the investments it makes. TheCompany
has no greenhouse gas emissions to report from its
operations, nor does it have responsibility for any other
emissions-producing sources.
1
For the same reasons,
theCompany considers itself to be a low energy user under
the Streamlined Energy & Carbon Reporting (“SECR”)
regulations and therefore is not required to disclose energy
and carbon information.
Our Manager recognises the importance of managing its
operational activities in a sustainable way and minimising
anyadverse impact on the environment. In 2021,
JanusHenderson reached its three-year target to reduce its
carbon footprint by 15% per full-time employee (“FTE”) from
2018 levels. In 2022, using guidance from the Science Based
Target Initiative, it set ambitious new five-year reduction targets:
●
reduction target of 29.4% in Scope 1 (fuel) and Scope 2
(electricity) emissions;
●
reduction target of 17.5% in Scope 3 (business travel,
freight, paper, water, waste, etc.) emissions; and
●
reduction target of 17.5% on water and waste
consumption by FTE.
In addition to this, Janus Henderson has maintained a
CarbonNeutral
®
certification since 2007 and offsets all its
operational Scope 1, Scope 2 and Scope 3 emissions each
year. Through this process, Janus Henderson has invested in
a variety of offset projects around the world, delivering
financial support to essential renewable energy, forestry and
resource conservation projects that support reductions in
greenhouse gas emissions. All projects Janus Henderson
supports have been classified as ‘additional’ by an
independent third party, meaning that they would not happen
without the sale of carbon credits.
Janus Henderson discloses its carbon emissions annually
through regulatory and voluntary reporting frameworks,
including SECR and CDP, as well as in its Annual Report
andin its Impact Report.
Business ethics
As the Company’s operations are delegated to third-party
service providers, the Board seeks assurances from its
service providers, at least annually, that they comply with the
provisions of the UK Modern Slavery Act 2015 and maintain
adequate safeguards in keeping with the provisions of the
Bribery Act 2010, Criminal Finances Act 2017, and the
sanctions element of the Economic Crime (Transparency
andEnforcement) Act 2022. The Company has received
assurances from its main suppliers that they maintain a
zero-tolerance policy towards the provision of illegal services.
Approval
The Strategic Report has been approved by the Board.
On behalf of the Board
Vicky Hastings
Chair of the Board
12 December 2023
1 Under the Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013
Henderson European Focus Trust plc Annual Report 2023
32
Governance
33
Photo: Siemens, cybersecurity with circuitry
Victoria (Vicky) Hastings
Position: Chair of the Board
Date of appointment: 1 September 2018 (appointed as Chair on
25September 2020)
Experience and contribution: Vicky has over 35 years’ experience
in the investment management industry in both executive and
non-executive roles. She is an experienced finance professional and
board director, who brings a deep understanding of investment
process and oversight, corporate governance and investment
company expertise to the Board. Over the last 20 years Vicky has
served on a number of investment company boards, most recently
Edinburgh Investment Trust plc and Impax Environmental Markets
plc, as well as JPMorgan Asset Management UK Limited and
JPMorgan Asset Management International Limited. In her executive
career, Vicky was a European equity fund manager and held
investment leadership roles at Merrill Lynch Investment Managers
and JO Hambro Capital Management.
Other current appointments: Vicky is a non-executive director
ofAlliance Trust PLC and will be concluding her term as a trustee of
Moorfields Eye Charity at the end of 2023.
Robin Archibald
Position: Senior Independent Director (“SID”) and Audit and Risk
Committee Chairman
Date of appointment: 1 March 2016 (Senior Independent Director from
10February 2021, Audit and Risk Committee Chairman from 1June 2023)
Experience and contribution: Robin brings in-depth knowledge,
specialist expertise and extensive senior-level experience in all areas
ofthe UK closed-ended funds sector. Robin’s executive career spanned
over 30 years as a corporate financier and chartered accountant, and
now over ten years as a non-executive director on seven investment
companies. Robin was Head of the Corporate Team at Winterflood
Investment Trusts until 2014 and has worked for other advisory firms
including Samuel Montagu, SG Warburg Securities and NatWest
Markets. Robin retired from chairing Albion Technology & General VCT
PLC and from being SID and audit chairman of Ediston Property
Investment Company plc earlier in 2023.
Other current appointments: Robin is SID and audit committee
chairman of Capital Gearing Trust P.l.c. and of Shires Income PLC,
and a non-executive director of AEW UK REIT plc, all of which are
investment companies.
Board of Directors
The directors appointed to the Board at the date of this Annual Report are:
Marco Maria Bianconi
Position: Director
Date of appointment: 1 June 2022
Experience and contribution: Marco brings
awealth of asset management and corporate
leadership expertise, having been portfolio
manager at Fidelity International Ltd. and having
served as a non-executive on the boards of banks
(Banca Antonveneta), industrial companies, a
public utility (ACEA) and a wide range of financial
services firms. As an Italian national, Marco
contributes a European perspective.
Other current appointments: Marco is Group
Chief M&A and Investor Relations Officer at
Cementir Holding N.V. a dutch multinational
listed in Milan. Marco is a non-executive director
of Cimentas and Cimbeton, both of which are
subsidiaries of Cementir Holding and form part
of Marco’s executive role, and is audit
committee chairman at Gabelli Merger Plus+
Trust Plc.
Stephen Macklow-Smith
Position: Director
Date of appointment: 9 July 2021
Experience and contribution: With over
30 years’ experience in the asset
management industry, and as a former
investment trust fund manager, Stephen
brings extensive investment knowledge,
expertise and experience in European
equity markets. He was a portfolio
manager responsible for core Europe
portfolios with JPMorgan for 24 years, and
held various senior positions, including as
managing director and strategist in the
Equity Behavioural Finance Team.
Stephen was previously head of the
European team at HSBC Asset
Management. Prior to this, he was a fund
manager of European pension fund assets
at Henderson from 1986 to 1991.
Other current appointments: Stephen
isa trustee of the John Fisher Network
charity.
Melanie Blake
Position: Director
Date of appointment: 3 July 2023
Experience and contribution: Melanie
isa chartered accountant and risk and
compliance professional with over
20years’ experience in the asset
management industry. Melanie brings a
deep understanding of governance, risk,
compliance and financial reporting to
Board deliberations. Melanie audited
asset management companies and
investment funds at KPMG in Cape
Town,before moving to KPMG in
London,where she advised the asset
management sector on financial
reporting, risk and compliance matters
fornine years. Melanie worked in senior
risk and compliance roles with Barclays
Wealth and Investment Management
andmost recently, Aberforth Partners.
Other current appointments: Melanie is
a trustee of the Hemat Gryffe Women’s
Aidcharity.
Henderson European Focus Trust plc Annual Report 2023
34
Corporate Governance Report
Chair’s statement on corporate
governance
Your Board is pleased to report below on the Board’s
approach to the governance of your Company. As a Board,
we believe that good governance creates value and we are
committed tohigh standards of corporate governance,
business ethics and transparency.
Compliance with corporate
governancecodes
By virtue of its premium listing on the London Stock
Exchange, the Board is required to report on how the
principles of the UK Corporate Governance Code (the “UK
Code”) have been applied. Being an investment company, a
number of the provisions of the UK Code are not applicable
asthe Company has no executive directors or internal
operations. The Board has therefore considered the principles
and recommendations of the AIC Code, being the 2019 Code
of Corporate Governance published by the Association of
Investment Companies, of which the Company is a member.
The AIC Code addresses the principles set out in the UK
Code as well as additional principles and recommendations
on issues that are of specific relevance to investment
companies. The Financial Reporting Council (“FRC”) has
endorsed the AIC Code and confirmed that, by following it,
theboards of investment companies should fully meet their
obligations under the UK Code and paragraph 9.8.6 of the
Listing Rules. The AIC Code and the UK Code can be found
on the respective organisations’ websites: www.theaic.co.uk
and www.frc.org.uk. The AIC Code includes an explanation
ofhow it adapts the principles and provisions set out in the
UKCode to make them relevant for investment companies.
Statement of compliance
The Board confirms that the Company has applied the
principles and adhered to the provisions of the AIC Code
throughout the year under review and to the date of this
report. The Company has no chief executive or other
executive directors and therefore has no need to consider the
remuneration of executive directors. In addition, the Company
does not have any internal operations and therefore does
notmaintain an internal audit function, though the Audit
andRisk Committee considers the need for such a function
atleast annually.
A separate remuneration committee has not been established
as the Board consists of only five non-executive directors and
the Company has no employees. The Board has expanded
the remit of the Nominations Committee to include review of
remuneration (see the Nominations Committee Report on
pages 46 to 48). The Board Chair does not act as Chair of the
Nominations Committee when it considers matters relating to
the performance, succession or remuneration of theChair.
The Board
The Board comprises five non-executive directors, whose
biographies are included on page 34. These details
demonstrate the breadth of investment, financial, commercial
and professional experience relevant to their position as
directors. Together as a Board they have overall responsibility
for the Company’s affairs and for promoting the long-term
success of the Company. All directors in office at the date
ofthis report served throughout the year, other than Melanie
Blake who joined on 3 July 2023.
The Board meets formally at least six times a year, with
additional board or committee meetings arranged when
required. The directors have regular contact with the Fund
Managers, representatives of the corporate secretary and
other employees of the Manager between formal meetings.
The Board has a formal schedule of matters specifically
reserved for its decision, which includes setting strategy and
providing oversight of performance against agreed measures.
All matters that are not delegated to the Manager under the
management agreement are reserved for the Board’s
decision. It approves any changes to the structure and capital
arrangements for the Company, has oversight of financial
reporting and assesses the effectiveness of the internal
control framework. The Board approves annual and half-year
results, communications with shareholders, the appointment
of new directors, oversees corporate governance matters and,
is responsible for determining the remuneration of directors.
The Board has three principal committees: the Audit and Risk
Committee, the Management Engagement Committee and
the Nominations Committee, as set out in the governance
structure chart on page 36. The Board keeps its schedule
ofmatters reserved and terms of reference for each
committee under regular review, and these are available at
www.hendersoneuropeanfocus.com. Reports on the
activities undertaken by each committee during the reporting
period are set out on pages 40 to 48.
Henderson European Focus Trust plc Annual Report 2023
35
Corporate Governance Report (continued)
Governance structure
Audit and Risk Committee
(“ARC”)
Chair:
Robin Archibald
Purpose: Ensures the integrity
of financial reporting, evaluates
the effectiveness of systems of
internal control and risk
management, and oversees the
relationship with external
auditors
Nominations Committee
(“NC”)
Chair:
Vicky Hastings
Purpose: Ensures the Board
has a balance of skills,
experience and diversity,
oversees effectiveness reviews
of the Board and its
committees, reviews directors’
fees and maintains an effective
framework for succession
planning, with a
formalapproach to the
appointment of directors
Management Engagement
Committee (“MEC”)
Chair:
Vicky Hastings
Purpose: Ensures that the
performance of the Manager
and other service providers
meets expectations and their
terms of engagement remain
appropriate
Board of Directors
Comprises independent non-executive directors
Chair: Vicky Hastings
Senior Independent Director: Robin Archibald
Third-party service providers appointed by the Board
HSBC Bank plc
Custodian and
depositary
Ernst & Young
LLP
Auditor
Equiniti Limited
Registrar
Winterflood
Securities
Limited
Corporate broker
Kepler Partners
LLP
Third-party
research provider
Janus Henderson Investors
Fund Management: European Equities team with Tom O’Hara and John Bennett
as the Company’s appointed Fund Managers
Sales, Marketing, Administration
Corporate Secretary: Janus Henderson Secretarial Services UK Limited
Alternative Investment Fund Manager: Janus Henderson Fund Management UK Limited
Henderson European Focus Trust plc Annual Report 2023
36
Corporate Governance Report (continued)
Leadership and division of responsibilities
Role Primary responsibilities
Shareholders/
investors
●
Approving material changes to the Company’s investment policy
●
Making decisions regarding changes to the Company’s constitution
●
Electing and re-electing directors to the Board, or removing them from office if deemed appropriate
●
Determining the overall limit for directors’ remuneration
Board
●
Responsible for providing leadership of the Company’s affairs
●
Setting the Company’s investment objective, policy and strategy
●
Establishing a robust internal control framework enabling effective risk management
●
Appointing and monitoring the performance of service providers within the parameters of the control
framework
●
Setting the Company’s culture and values
●
Ensuring that obligations to shareholders and other stakeholders are understood and met
●
All directors are non-executive and independent of the Manager
●
No directors are linked via any other directorships
Chair
●
Leading and managing Board business and ensuring the timely flow of information from service providers
to the Board
●
Providing effective leadership of the Board including setting its agenda and determining its governance
framework, culture and values, with the support of other directors and the corporate secretary
●
Leading the Board’s relationship and engagement with shareholders and other stakeholders
●
Managing the relationship with the Manager
●
As Chair, Vicky Hastings was independent on appointment in accordance with the AIC Code criteria and
has no relationships that may create a conflict between her interests and those of shareholders
Committee
Chairs
●
The leadership and governance of their Committee
●
Maintaining the relationships with specialist service providers delivering services within the remit of their
Committee
●
Reporting on the activities of their Committee to the Board
●
Seeking approval from the Board for the responsibilities set out in their respective terms of reference
Senior
Independent
Director
●
Fulfilling the role of sounding board for the Chair and intermediary for the other directors as necessary
●
Leading the effectiveness review of the Chair
●
Acting as a channel of communication for shareholders in the event that contact through the Chair
isinappropriate
Independent
non-executive
directors
●
Providing constructive and effective challenge, especially to the decisions of the Manager
●
Scrutinising and holding to account the performance of:
– the Fund Managers in meeting the investment objective
– Janus Henderson in the promotion of the Company and day-to-day smooth operations of the
Company’s business
●
Providing strategic guidance and offering specialist advice
Manager (AIFM)
●
Promoting the Company’s investment proposition to professional and retail investors
●
Making the necessary reporting to the FCA regarding the Company’s status as an AIF
●
Providing accounting, company secretarial and administrative services to the Company ensuring
compliance with the applicable statutory and regulatory provisions
●
Coordinating the delivery of services provided by the Company’s other third-party service providers
Fund Managers
●
Selecting the stocks held within the portfolio
●
Diversification and risk management through stock selection and size of investment
●
Determining the volume and timing of acquisitions and disposals
●
Determining the frequency and level of gearing within the overall limits set by the Board
Henderson European Focus Trust plc Annual Report 2023
37
Corporate Governance Report (continued)
Operation of the Board
Each board meeting follows a formal agenda, which includes
a review of the Company’s investment performance, financial
position, compliance with the investment parameters, a
reviewof shareholder movements along with any sales and
marketing activities undertaken and any other relevant
business matters in order to ensure that control is maintained
over the Company’s affairs. Employees of the Manager attend
relevant sections of board meetings enabling the directors to
discuss the affairs of the Company and to probe further on
any matters ofconcern. The Board receives and considers
regular reports from the Manager and ad hoc reports and
information from other parties as required.
The Board has engaged third-party service providers to
deliver the operations of the Company. Janus Henderson has
been appointed to provide investment management services,
and also provides the day-to-day accounting, company
secretarial, administrative, sales and marketing activities.
TheCompany has appointed a depositary, HSBC Bank plc,
which in turn appoints the custodian responsible for the safe
custody of the Company’s assets. The Company has
appointed a registrar, Equiniti Limited, to maintain the register
of members and assist shareholders with queries in respect
oftheir holdings. Each of these principal contracts was
entered into after full and proper consideration by the Board
of the quality and cost of the services offered, including the
control systems in operation in so far as they relate to the
affairs of the Company. The Board and its committees
maintain oversight of the third-party service providers through
regular and ad hoc reporting. The Board meets annually with
representatives of service providers to discuss amongst other
matters performance, service levels, their value for money,
information security and business resilience.
The Manager ensures that all directors receive, in a timely
manner, relevant management, regulatory and financial
information, to allow them to discharge their responsibilities and
enable smooth functioning of the Board and its committees.
The Board has direct access to the advice and services of
thenominated chartered secretary, Johana Woodruff FCG,
who represents the Corporate Secretary JanusHenderson
Secretarial Services UK Limited, a subsidiary of Janus
Henderson with its own reporting lines and audited internal
controls. There are processes and controls in place toensure
that there is a clear distinction between the two entities,
particularly when dealing with anyconflicts or issues between
the Company and JanusHenderson.
The Corporate Secretary is responsible to the Board for
ensuring compliance with Board and committee procedures
and applicable rules and regulations. The proceedings at all
board and committee meetings are fully minuted, with any
director’s concerns recorded in the minutes. The Board has
the power to appoint or remove the Secretary in accordance
with the terms of the management agreement.
Any correspondence from shareholders addressed to the
Chair or to the Company received by JanusHenderson is
forwarded to the Chair in line with the established
procedures in place, and is submitted to the next board
meeting as appropriate.
The Board, the Fund Managers and the Corporate Secretary
operate in a supportive, co-operative and open environment.
Arrangements with directors
Appointment, tenure and retirement
The Board may appoint directors at any time. Any director
soappointed stands for election by shareholders at thenext
annual general meeting in accordance with theprovisions of
the Company’s articles of association (the“Articles”).
The Board considers a potential candidate’s other
commitments on appointment and then annually through the
performance evaluation process to ensure that directors have
sufficient time to commit to the Company. A schedule of
directors’ other commitments is reviewed at each board
meeting and directors are required to seek the Chair’s
approval prior to accepting further appointments. The Chair
seeks the Senior Independent Director’s approval before
accepting further appointments.
The directors, including the Chair of the Board, are generally
expected to serve for no more than nine years, other than
inexceptional circumstances, subject to a satisfactory Board
effectiveness review. This ensures the regular refreshment
ofthe Board and its committees and forms an integral part
ofthe Board’s succession planning. All directors stand for
re-election by shareholders annually in keeping with the
provisions of the AIC Code. The Articles permit shareholders
to remove a director before the end of their term by passing
an ordinary resolution at a general meeting. An appointment
may be terminated by either party giving written notice without
compensation payable.
Independence
The independence of the directors is determined by reference
to the AIC Code and is reviewed by the Board at least
annually. The Board considers each director’s external
commitments, as well as their tenure of service and any
connections they may have with the Manager. Following
completion of the annual Board effectiveness review and
assessment by the Nominations Committee, the Board
hasconcluded that all directors continue tobe independent
incharacter and judgement.
Induction and ongoing training
Newly appointed directors are offered an induction
programme bespoke to their role which covers the legal and
regulatory framework for investment companies and the
operations of the Manager, including the compliance and risk
management frameworks, accounting, sales and marketing,
and other administrative services.
Henderson European Focus Trust plc Annual Report 2023
38
Corporate Governance Report (continued)
Directors are provided with information on the Company’s
policies, regulatory and statutory requirements affecting the
Company, as well as changes to the directors’ responsibilities
as they arise. Directors are encouraged to attend bespoke
training for investment trust directors provided by the
Manager, as well as external training and industry seminars.
Relevant external training may be undertaken at the expense
of the Company.
In addition, the Chair is able to attend meetings of all the
chairs of the investment trust companies managed by
JanusHenderson which provide a forum to discuss industry
matters which would then be reported back to the Board.
TheCompany has a procedure for directors to take
independent professional advice in the furtherance of their
duties at the expense of the Company.
Directors’ insurance and indemnification
Directors’ and officers’ liability insurance cover is in place
which indemnifies the directors against certain liabilities
whencarrying out their duties. The Company’s Articles
provide for an indemnity in respect of costs which directors
may incur relating to the defence of any proceedings brought
against them arising from their position as directors, where
they are acquitted or judgment is given in their favour. The
Company has granted an indemnity to each director to the
extent permitted by law regarding their potential liabilities as
directors of the Company.
Directors’ conflicts of interest
The Articles permit the Board to consider and, if it sees fit,
toauthorise situations where a director has an interest that
conflicts, or may possibly conflict, with the interests of the
Company (“situational conflicts”). The Board has a formal
system in place for directors to declare situational conflicts for
authorisation by those directors who have no interest in the
matter being considered. In deciding whether toauthorise
asituational conflict, the non-conflicted directors must act
honestly and in good faith with a view to the best interests of
the Company. The directors may impose limits or conditions
when giving the authorisation, or subsequently, ifthey think
this is appropriate. Any conflicts are recorded in the minutes
and reviewed at each board meeting.
Board attendance
The table below sets out the number of scheduled board and
committee meetings held during the year under review and
attended by each director. Each director attended every
boardand committee meeting to which they were entitled
throughout the year.
Number of meetings
Board ARC NC MEC
Vicky Hastings
1
6 3 3 1
Robin Archibald 6 3 3 1
Stephen Macklow-Smith 6 3 3 1
Marco Bianconi 6 3 3 1
Melanie Blake
2
2 1 1 1
1 Though not a member, Vicky Hastings attended each of the meetings of the
Audit and Risk Committee during the year by invitation
2 Appointed as director on 3 July 2023
All directors in office in January 2023 attended the Annual
General Meeting. Outside the formal meetings identified
above, the Board or committees had regular interaction over
the year on various corporate activities, and met additionally
to undertake business such as the approval of the Company’s
results and dividends, Fund Manager succession planning, to
agree marketing activities and the appointment of Melanie
Blake as director.
Audit, risk and internal control
The Board has overall responsibility for the Company’s system
of internal control and for reviewing its effectiveness, as set
out in the chart on page 43.
The Board has reviewed the effectiveness of the Company’s
system of internal controls for the year ended 30 September
2023. During the course of its review the Board did not
identify and was not advised of any failings or weaknesses
that were determined as significant. The Audit and Risk
Committee supports the Board in the continuous monitoring
of the internal controls and risk management framework.
Itsconsiderations in this respect, including why the Company
does not have its own internal audit function, are set out on
pages 43 and 44.
The depositary has confirmed that it has not discharged
liability in relation to any of the Company’s assets, and that,
inall material respects, the Company has been managed in
accordance with the FCA’s Investment Funds Sourcebook,
the Company’s articles of association and as required by the
Alternative Investment Fund Managers Directive.
Henderson European Focus Trust plc Annual Report 2023
39
Audit and Risk Committee Report
Role and responsibilities
The Audit and Risk Committee (the “Committee”) is
responsible for ensuring the integrity of the Company’s
financial reporting, the appropriateness of service providers’
systems of internal control and risk management, and the
effectiveness and objectivity of the external auditor. The
Committee oversees the relationship with the external auditor,
recommending the terms of their appointment or
theirremoval.
The Committee Chair formally reports to the Board after
eachAudit and Risk Committee meeting, and makes
recommendations for approval where relevant. The
Committee’s responsibilities are set out in formal terms
ofreference, available on the website, which are reviewed
ateach meeting.
Membership
The members of the Committee are Robin Archibald, Stephen
Macklow-Smith, Marco Bianconi and Melanie Blake. Vicky
Hastings as Chair of the Board attends the Committee’s
meetings by invitation only, in accordance with the AIC Code.
The Committee is chaired by Robin Archibald, who is a
chartered accountant and corporate financier by profession.
The Committee as a whole has competence relevant to the
sector in which the Company operates and to the Company
as an investment trust.
Meetings
The Committee met formally four times during the year under
review: in advance of publication of the annual and the
half-year results, to focus on its broader risk and internal
control responsibilities, and conducting an audit tender for
theCompany’s financial year ending 30 September 2024.
The Company’s auditor is invited to attend meetings as
appropriate. Representatives of the Manager attend at least
on an annual basis, including the Financial Reporting Manager
and representatives of the Operational Risk, Internal Audit and
Business Resilience functions and the Chief Information
Security Officer.
The Committee Chairman also meets with the audit firm as
part of the audit planning process and to keep the audit firm
up to date with corporate developments, as well as being
informed of any accounting or reporting changes envisaged.
Committee effectiveness review
The activities of the Committee were considered as part of the
external Board effectiveness review, with the conclusion that
the Committee continues to be effective in its operation.
Activities during the year
In discharging its duties over the course of the year, the
Committee considered:
Annual and half-year reports
●
accounting policies and the quality and effectiveness of
the accounting records and management information
maintained on behalf of the Company;
●
half-year and annual results and the Annual Report.
Thisincluded disclosures on internal controls, risk
management, viability, going concern and related parties,
and consideration of whether the report was fair, balanced
and understandable and provided the information necessary
for the Company’s shareholders to assess the Company’s
position and performance, business model and strategy;
●
appropriate level of dividend to be paid by the Company,
including sufficiency of revenue reserves, for
recommendation to the Board;
●
appropriateness of the allocation of the management fee
and finance costs between revenue and capital;
●
the Company’s taxation affairs, including withholding tax
recoverability and the Committee Chairman’s meeting with
the Manager’s Fund Tax team on taxation matters;
●
management fee calculations; and
●
clarity and appropriateness of the presentation of debt and
value of the Company’s loan notes in the Company’s financial
statements and daily net asset value announcements.
Internal controls and risk management
●
internal controls and the resilience of operations at
JanusHenderson (“JHI”), BNP Paribas as administrator,
HSBC Bank as depositary and custodian and Equiniti
asregistrar;
●
JHI’s policies and activities regarding information security
and business resilience, meeting with representatives of
JHI’s Internal Audit, Information Security, Business
Resilience and Operational Risk departments;
●
key risks, risk management systems and the Company’s
risk map as modified to reflect changes to the risk
environment;
●
the Company’s Anti-Bribery Policy, approach to tax
evasion, and confirmations from service providers that
they have appropriate procedures in these respects;
●
any need for an internal audit function;
●
the Manager’s and other key service providers’
whistleblowing policies for staff to raise concerns about
possible improprieties, in confidence; and
●
annual confirmation from the Company’s depositary.
The Chairman of the Audit and
Risk Committee,
RobinArchibald, reports to
shareholders on the year to
30September 2023.
Henderson European Focus Trust plc Annual Report 2023
40
Independent auditor
●
appointment of the auditor, their performance, resource
applied to the audit, remuneration and tenure
ofappointment, their independence, objectivity and
effectiveness, and the reporting of the external auditor;
●
audit plan, including the principal areas of focus;
●
nature and scope of the external audit and its findings;
●
requirements for an audit tender and the process to be
undertaken; and
●
reviewing potential audit firms and their audit tender
presentations.
Audit appointment and tender
Regulation requires the Company to rotate audit firms after a
period of ten years, which may be extended to a maximum of
20 years where audit tenders are carried out or where more
than one audit firm is appointed to carry out the audit. Ernst &
Young LLP (“EY”) was appointed as the Company’s auditor in
July 2014 following the previous formal tender process, prior
to which Grant Thornton UK LLP had been in office as auditor.
The auditor is required to rotate partners every five years.
Theyear under review is the fifth and final year in which Mike
Gaylor acted as Audit Partner.
As indicated in last year’s report, the Committee carried out
atender for audit services was carried out during the year
under review. Four audit firms were invited totender, including
two ‘Big Four’ firms and two ‘Challenger’ firms. Proposals
were received from three firms. The Committee considered
each of the tender submissions in detail and received
presentations from all three firms. They found all proposals
and presentations to be of high quality. TheCommittee
discussed the FRC’s most recent audit quality inspection
reports with each firm as part of the process. Eachfirm’s and
proposed audit team’s experience as auditors of investment
trusts were reviewed and their fees compared.
Following conclusion of the audit tender process, the
Committee recommended to the Board the reappointment of
EY as external auditor on the basis of continuity, knowledge
ofthe Company and its sector and cost effectiveness, whilst
taking into account objectivity and independence of approach.
Aresolution to that effect is included in the Notice of AGM
onpage 84. Subject to shareholder approval, EY will carry out
the statutory audit for the financial year ending 30 September
2024 at an audit fee of £54,500 plus VAT, reflective of current
market rates for the audit of an investment trust.
Auditor’s independence
The Committee monitors the auditor’s independence through
three aspects of its work:
●
approval of a policy regulating the non-audit services that
may be provided by the auditor to the Company;
●
assessing the appropriateness of the fees paid to the
auditor for their work; and
●
reviewing the information and assurances provided by
theauditor on their compliance with the relevant ethical
standards.
For the year ended 30 September 2023, EY confirmed that all
its partners and staff involved with the audit were independent
of any links to the Company, and that these individuals
complied with their ethics and independence policies and
procedures, which are fully consistent with the FRC’s ethical
standards. Having considered these assurances and EY’s
performance and behaviour during the audit process, the
Committee is satisfied that auditor independence and
objectivity are safeguarded.
Policy on non-audit services
The Committee regularly reviews its policy for the provision of
non-audit services by the auditor. The policy sets out that the
Company’s auditor will only be considered for non-audit work
where allowed by current regulations and where it would not
affect the auditor’s independence and objectivity. In addition,
the provision of any non-audit services by the auditor is not
permitted to exceed 70% of the average annual statutory
audit fee for the three consecutive financial years preceding
the financial year to which the cap applies. Such services
require approval in advance by the Committee, or Committee
Chair, following due consideration of the proposed services.
No non-audit services were provided in the year under review
or in the previous year.
Audit fees
The fees payable to EY for audit services during the year were
£52,000 (2022:£45,000) plus VAT.
Audit and Risk Committee Report (continued)
Henderson European Focus Trust plc Annual Report 2023
41
Audit and Risk Committee Report (continued)
Audit for the year ended 30 September 2023
The following significant issues were considered by the Committee:
Significant issue How the issue was addressed
Valuation and ownership of
the Company’s investments
There is a risk that assets are incorrectly valued or ownership of assets is not secured.
Actively traded investments are valued using stock exchange prices provided by third-
party pricing providers and the portfolio valuation is reviewed at each meeting of the
Board. Ownership of listed investments is verified by BNP Paribas via reconciliation to
thecustodian’s records and the Board receives quarterly reports from the depositary.
Recognition of income Income received is accounted for in line with the Company’s accounting policies (as set
out on page 69). The Committee considered the treatment of the special dividends
received during the course of the year and foreign withholding tax recoverability.
Compliance with s1158 Corporation
Tax Act 2010
The Committee reviews the Manager’s procedures for ensuring compliance with relevant
regulations so the Company maintains its investment trust status, and regularly seeks
confirmation of compliance with the relevant regulations.
Maintaining internal controls The Committee carries out the annual assessment of the effectiveness of the Company’s
internal control and risk management systems by reviewing the framework and summary
of the reporting received from its service providers throughout the financial year. All
assurance reports were unqualified by their service auditors.
Viability and going concern The Committee scrutinised assumptions around the viability and going concern
statements respectively, as set out on pages 26 and 68, especially factors behind
pandemic disruption, macro inflation and geopolitical disruption, to satisfy itself of the
Company’s resilience over the five-year timeframe.
In the year under review, EY challenged both the Manager’s
and the Board’s judgements and exercised professional
scepticism. The audit team required detailed evidence of all
metrics, numbers and disclosures made in the Annual Report
to support a robust assessment and evaluation of its financial
information. As an example, the Manager provided the
Committee and auditor with an analysis of special dividends
and the rationale for whether these should be treated as
income or capital. The auditor’s review included challenge to
the Manager to provide additional justification or background
to the dividends before confirming whether they concurred
with the proposed treatment.
As an investment trust investing in listed equities,
management has limited areas of judgement. Areas where
theCommittee would challenge the Manager include the
likelihood of recoverability of withholding tax in other
European jurisdictions, and stress testing of the revenue
forecast to support the dividend payment policy and the
assumptions included in making the viability statement.
TheCommittee did not consider it necessary to request the
auditors to look at any specific areas in relation to the audit
forthe year ended 30 September 2023.
The Committee is satisfied that the Annual Report for the year
ended 30 September 2023, taken as a whole, is fair, balanced
and understandable and provides the information necessary
for shareholders to assess the Company’s position and
performance, business model and strategy.
Effectiveness of the external audit
The Committee’s process for evaluating the effectiveness of
the external audit comprises two components: scrutiny of the
FRC’s latest Audit Quality Inspection Report and a post-audit
assessment led by the Committee Chair.
The auditor attended two meetings of the Committee in the
year to present their audit plan and present the findings from
their annual audit. The Committee Chairman also met with the
audit partner to review the audit results prior to these being
presented to the Committee. The auditor presented and
discussed the findings of the latest Audit Quality Inspection
Report to the Committee and reported on the progress made
by the firm in addressing the areas identified for improvement
in the prior year’s report.
The Committee Chairman invited views from the directors,
Fund Managers and other members of the Manager’s staff to
support the Committee’s assessment of the robustness of the
audit, level of challenge offered by the audit team, quality of
the audit team, timeliness of delivering the tasks required for
the audit and reporting to the Committee. The Committee
also met privately with the audit partner to discuss how the
audit operated from his perspective.
Overall, the Committee considers that the audit quality for the
year ended 30 September 2023 has been high and that the
Manager and EY have worked together effectively. Following
completion of the assessment, the Committee remained
satisfied with the effectiveness of the audit provided by EY
which was an important factor in retaining EY as audit firm
following the audit tender process.
Henderson European Focus Trust plc Annual Report 2023
42
Internal control and risk management
The Board has overall responsibility for the Company’s system
of internal control and for reviewing its effectiveness. The
Committee supports the Board in the continuous monitoring
of the internal control and risk management framework.
The Board has established an ongoing process for identifying,
evaluating and managing the principal and new or emerging
risks faced by the Company, as set out on pages 23 to 25.
Theprocess accords with the FRC’s guidance on Risk
Management, Internal Control and Related Business and
Financial Reporting published in September 2014.
The system was in operation throughout the period and up to
the date of this report and is designed to mitigate the specific
risks faced by the Company, taking account of the nature of
the Company’s reliance on its service providers and their
internal controls. The system therefore manages rather than
eliminates the risk of failure to achieve the Company’s
business objectives and provides reasonable, but not
absolute assurance against material misstatement or loss.
The key components of the internal control framework include:
●
clearly defined investment criteria which specify levels of
authority and exposure limits. The Board reviews reports
on compliance with the criteria at each meeting;
●
regular reporting which allows the Board to assess the
Company’s financial position. The management accounts
and forecasts are reviewed by the Board at each meeting;
Audit and Risk Committee Report (continued)
System of Internal Controls
How the system of
internal control
operates
The Board delegates
contractually to third-party
service providers for all
the Company’s
operational requirements.
It maintains oversight of
these providers
throughout the year by
receiving regular reporting
on their activities. All are
considered key
stakeholders.
The Management
Engagement Committee
formally evaluates the
performance and service
delivery of all service
providers annually.
The Audit and Risk
Committee evaluates
theperformance of the
auditor on completion of
each auditcycle, and
monitors the effectiveness
of the control environment
of the Manager, Equiniti,
HSBC and BNP Paribas
on an annual basis
through review of their
annual assurance reports,
supplemented by the view
of the Manager’s
Operational Risk team.
Janus
Henderson
(Investment
management,
company
secretarial, sales,
marketing,
PR and
administration)
Reporting
• Investment
performance
update (at each
meeting)
• Compliance
with investment
limits and
restrictions
(monthly)
• Internal
controls report
(quarterly)
• Effectiveness of
control
environment
(annually)
HSBC
(Depositary and
custodian)
Reporting
• Depositary
report
(quarterly)
• Presentation
from the
depositary and
custodian
(annually)
• Effectiveness of
control
environment
(annually)
BNP Paribas
(Administration and
accounting
services engaged
by the Manager)
Reporting
• Balance sheet
• Liquidity and
gearing
• Revenue
forecasts
• Portfolio
valuation
• Portfolio
transactions
• Effectiveness
ofcontrol
environment
(annually)
Equiniti Limited
(Registrar)
Reporting
• Voting and
scrutineer
reports pre- and
post-shareholder
meetings
• Shareholder
correspondence
• Operational
service updates
• Effectiveness
ofcontrol
environment
(annually)
Board of Directors
(comprises independent, non-executive directors)
Ernst & Young LLP
(Statutory auditor)
Henderson European Focus Trust plc Annual Report 2023
43
Audit and Risk Committee Report (continued)
●
contractual agreements with the Manager and other
service providers. The Management Engagement
Committee reviews performance levels and adherence to
relevant provisions of the agreements on aregular basis
through reports received and conducts aformal evaluation
of the overall level of service provided atleast annually;
●
review of controls at the Manager and other third-party
service providers, complementing the review of their
performance and contracts by the Management
Engagement Committee, as set out on page 45.
TheBoard receives quarterly reporting from the Manager
and depositary and reviews annual assurance reports
onthe effectiveness of the control environments at the
Company’s key service providers; and
●
review of additional reporting provided by:
– the Manager’s Operational Risk team on the control
environment in operation at the Manager and their view
of the control environments in place at the third-party
service providers used by the Company; and
– the Manager’s Internal Audit team on areas of
operation which are relevant to the Company.
The Committee has reviewed the Company’s system of
internal controls for the year ended 30 September 2023.
Following its review, it determined and reported to the Board
that it had not identified any failings or weaknesses relating to
the Company that were determined as significant.
Internal audit function
Systems are in operation to safeguard the Company’s assets
and shareholders’ investments, to maintain proper accounting
records and to ensure that financial information used within
the business, or published, is reliable. Being an investment
company with no employees, all executive activities are
delegated to service providers, principally among them, the
Manager, Janus Henderson. The Board places reliance on the
Company’s framework of internal control and the Committee’s
view on reporting received from specific second and third line
of defence teams at the Manager.
The Manager’s Operational Risk team supports the
Committee in considering the independently audited reports
on the effectiveness of internal controls in place at the
Company’s service providers. The Manager’s Internal Audit
department provides regular reporting to the Board on
operations at the Manager and presents at least annually to
the Committee. The Board has therefore concluded that it is
not necessary at the present time for the Company to have its
own internal audit function.
Robin Archibald
Chairman of the Audit and Risk Committee
12 December 2023
Henderson European Focus Trust plc Annual Report 2023
44
Management Engagement Committee Report
Role and responsibilities
The Management Engagement Committee (“MEC”) is responsible
for reviewing the management agreement and monitoring the
performance of the Manager in respect of the investment,
company secretarial, financial reporting, administration, sales,
marketing and support services it provides and how that impacts
on the performance of the Company. The MEC is also responsible
for evaluating the overall performance of third-party service
providers engaged by the Company, particularly in relation to
tasks required of them during the year and for ongoing services.
The MEC’s purpose is to ensure the services and fees paid to
the Manager and other service providers are consistent with
the successful delivery of the Company’s long-term strategy
and that each service provider’s continuing appointment is in
the best interests of the Company.
The MEC reports to the Board and its responsibilities are set
out in formal terms of reference which are reviewed at least
annually and amended as appropriate.
Membership
All directors are members of the MEC, which is chaired by
the Chair of the Board.
Meetings
The MEC met formally once during the year.
Activities during the year
In discharging its duties over the course of the year, the
MECconsidered:
●
the investment performance of the Company over the
short, medium and longer term, taking account of the
benchmark and performance of competitors in the AIC
and Investment Association OEIC peer groups, the
Company’s share price total return, NAV total return,
dividend growth, dividend yield and discount versus the
peer group and wider universe of European funds;
●
risk and attribution analysis to contribute to assessment
ofthe Manager’s performance, and the skill of the Fund
Managers, in managing the portfolio;
●
the quality of the company secretarial service and
independence of the corporate secretary from the Manager in
providing services to the Board, noting the processes and
procedures in place to separate functions within the Manager;
●
the quality of other services provided by the Manager,
including shareholder relations, promotional activities and
fund accounting;
●
the quality and experience of the team involved in managing
all aspects of the Company’s business, including sub-
contracted administration and reporting services and internal
controls over the functioning of the Manager’s business;
●
total fees and costs incurred by the Company were
compared with the fee structures of its competitors in
theAIC peer group, other Janus Henderson-managed
investment companies as well as open-ended funds
investing in Europe managed by Janus Henderson as
abenchmarking exercise;
●
the key clauses of the management agreement, how the
Manager had fulfilled these and whether they continued
tobe appropriate. The MEC’s review of the terms of the
agreement covers the services rendered under the
agreement, level and structure of fees payable, length of
notice period and best practice provisions generally; and
●
the performance and fees of the Company’s other
third-party service providers, including the brokers,
depositary, custodian, registrar, research provider and
lawyers and any instructions for ad hoc work required
by the Company from external professional agents.
The performance of certain service providers is also reviewed
as part of normal Board business, given the nature of the
service and Board reporting they provide. No new service
providers were engaged to provide advice to the Company
during the period.
During the year, close attention was given to succession
planning for the portfolio management team and how
JohnBennett’s impending retirement was handled and
communicated, toprovide confidence over the continuity
ofthe investment process and the sustainability ofthe
investment performance delivered by the portfolio
management team.
Continued appointment of the Manager
The Board considers the arrangements for the provision of
investment management and other services to the Company
on an ongoing basis. Following completion of the annual
review and on the MEC’s recommendation, it is the Board’s
opinion that the continuing appointment of the Manager and
other service providers on the existing terms is in the interests
of the Company and its shareholders as a whole.
MEC effectiveness review
The activities of the MEC were considered as part of the
Board effectiveness review, with the conclusion that the MEC
continues to be effective in its operation.
Vicky Hastings
Chair of the Management Engagement Committee
12 December 2023
Henderson European Focus Trust plc Annual Report 2023
45
Role and responsibilities
The Nominations Committee (“NC”) is responsible for
reviewing Board succession planning and tenure policy, the
effectiveness of the Board as a whole (and its committees)
and the appointment of new directors through an established
recruitment procedure. The NC is responsible for nominating
directors for election or re-election at the AGM each year.
The NC is also responsible for reviewing Board remuneration,
which includes the costs and expenses associated with the
Board, reporting of Board remuneration and policy and future
directors’ fees.
Membership
The NC is chaired by the Chair of the Board, except when the
Chair’s effectiveness, successor or fees are being considered.
All directors are members of the NC.
Meetings
The NC meets at least annually, with further meetings
scheduled when required. In the year under review the NC
held additional meetings for the purpose of succession
planning and implementation of recruitment activities.
Activities during the year
In discharging its duties over the course of the year, the NC
considered and made recommendations for approval by the
Board as appropriate:
●
composition of the Board and each of its committees,
taking account of the contribution of the skills, experience
and knowledge of each director to the success of the
Company, and using the Board’s skills matrix as a guide to
collective competencies and experiences on the Board;
●
directors’ and the Chair’s tenure policy, giving
consideration as to whether the Board retained a sufficient
balance of tenure and rotation without losing the collective
experience of the Company and its activities;
●
independence of the directors, taking account of the
directors’ other commitments, in line with the guidelines
established by the AIC Code;
●
time commitment required of the directors, in the context
of their other business commitments and appointments,
and whether this had been sufficient over the course of
the year to meet the time commitments required of the
Company;
●
reviewing directors’ remuneration policy in the
remuneration report and considering directors’ fees for
thefinancial year ahead;
●
succession planning for appointments to the Board;
●
the criteria for future Board appointments and the
methods of recruitment, selection and appointment;
●
the specific recruitment and appointment of a candidate
for the role of non-executive director, led by the Chair;
●
review of the formal diversity policy with the aim of
increasing ethnic diversity on the Board; and
●
the effectiveness and contribution of the directors standing
for election and re-election at the forthcoming AGM.
Succession planning and diversity policy
When considering tenure policy and succession, theNC bears
in mind the balance of skills, knowledge, experience, gender
and diversity of the Board. The aim is toproduce a non-
executive board with the competence and engagement to
oversee the Company’s investment objective and operations,
whilst compliant with various governance guidelines. Individual
performance and the contribution of each director remain an
integral element ofthe Company’s approach.
The NC also reviews and recommends to the Board the
directors seeking re-election. Re-election is not automatic and
will follow a process of evaluation of each director’s
performance and consideration of the director’s
independence, as well as the mix of skills and experience
ofthe current Board members. As part of this process, the
NC considers the time commitment of the directors, including
other business commitments and appointments and diversity
of gender, social and ethnic backgrounds, cognitive and
personal strengths and experience. See page 48 for more
details on the Board’s commitment to diversity.
When considering new appointments, the NC will consider
diversity generally, taking into account gender, social and ethnic
backgrounds, cognitive and personal strengths and experience.
The major role changes during the year, considered by the NC,
as explained in the Chair’s Statement on page 8, were Eliza
Dungworth’s retirement, the appointment of Melanie Blake as a
new non-executive director, Robin Archibald’s appointment as
Audit and Risk Committee Chair, and Stephen Macklow-Smith
taking on the role of the Board’s marketing representative.
These were accomplished in an orderly way, resulting in a
competent Board with the requisite skills to fulfil its duties.
Appointment of director
In line with the Board’s succession plan to seek a replacement
director, given Eliza’s retirement from the Board in May 2023, a
formal job description was drawn up to ensure that the search
for a new director took place under clearly defined criteria. The
recruitment search focused on accounting/financial reporting
skills and risk/compliance expertise, as well as potential to help
in the development of the Company’s overall strategy. It was
also a priority that the Company’s ethnic diversity composition
be broadened with the right candidate, in accordance with the
Board’s diversity policy.
Nominations Committee Report
Henderson European Focus Trust plc Annual Report 2023
46
Nominations Committee Report (continued)
Trust Associates was chosen as external recruitment agent
after a tender process for executive search firms. They drew
up a long list of candidates with diverse characteristics
which was used to identify specific candidates who were
interviewed by the Board and Fund Managers. Impressed
by the quality of candidates interviewed, the Committee
determined that Melanie Blake, whose biography is set out
on page 34, be recommended to the Board for approval.
The NC found that Melanie’s addition would meet the
objective and subjective criteria set by the NC and
governance requirements, and would contribute to a
well-functioning and diversified Board.
The services provided by Trust Associates were for the sole
purpose of recruiting the eventual appointee. Trust Associates
has not provided any other services to the Company and has
no connection with any of the directors.
Board effectiveness review
The Company engaged Lintstock to conduct an external review
of Board performance. Lintstock is an advisory firm that
specialises in Board reviews and had no pre-existing
connections with the Company. The first stage of the exercise
involved Lintstock engaging with the Chair and the Corporate
Secretary to set the context for the review, and to tailor the
scope of the review. All Board members completed an online
survey addressing the performance of the Board, its
committees and the Chair, as well as their own contributions
and performance.
The questions asked by Lintstock covered investment
activities, Board oversight and dynamics, committee
effectiveness and individual director performance. For
example, they included: how the Board assesses the Fund
Manager’s performance and that of other service providers;
what it considers to be the main risks and how it mitigates
them; and how effective it considers investor relations and
marketing activities.
Lintstock presented its reports to the NC and discussed the
key findings, which were positive. Lintstock also provided a
comparison with the Lintstock Governance Index, which
helped to place the performance of the Board into context,
with over 60 other similar reviews that Lintstock had
conducted recently for UK investment companies. Following
the review, the Board considered opportunities to increase
effectiveness. The key priorities identified for the coming year,
which the Board has adopted, were:
●
Board succession and transition, being particularly mindful
of the Audit and Risk Committee Chair transition; and
●
share performance and rating with further investigation
into improving marketing effectiveness.
The effectiveness review did not identify any causes for
concern and helped to confirm areas which the Board was
already prioritising.
External commitments
Marco Bianconi has an executive role at Cementir Holding NV,
a building materials manufacturer. This role also includes
associated external appointments and Marco holds another
investment company directorship. Following careful
consideration of Marco’s interests and appointments as
anemployee of Cementir, and being conscious of the
reducedobligations and time commitment required as an
investment company director, the NC firmly believes that
Marco has sufficient time available and has demonstrated
clear commitment and expertise for his role as director of
theCompany.
The same exercise was carried out in respect of the time
available of the other non-executive directors to the Company,
and no concerns were identified for any of our directors.
NC recommendations to the Board
On the basis of the NC’s recommendations, the Board
concluded that:
●
each director makes a significant contribution to the affairs
of the Company and brings different qualities to the Board;
●
the Chair displays effective, inclusive leadership and
strong stakeholder engagement;
●
the Board has an effective devolved committee structure
and the committees continue to support the Board
efficiently in fulfilling its duties;
●
the bespoke investment trust director training sessions
provided by the Manager were helpful and valued;
●
no director is ‘overboarded’ under the FRC’s guidelines or in
any practical way, and each director continues to dedicate
the time required to fulfil their duties to the Company
effectively, including for any non-standard activities;
●
the Board’s size and composition remain appropriate for
the Company and the Board retains a good balance of
skills and business experience, as set out on page 34;
●
the Board continues to operate effectively; and
●
each director merited nomination for election or re-election
by shareholders as appropriate and was duly
recommended for shareholder election/re-election at the
forthcoming AGM.
Henderson European Focus Trust plc Annual Report 2023
47
Nominations Committee Report (continued)
Board diversity at 30 September 2023
The Board meets the relevant FCA diversity targets on gender
and ethnicity: 40% of individuals on the Board are women and
one Board member is from a non-white minority ethnic
background. The Board will aim to ensure it comprises
individuals with diverse and complementary thought, skills
and experience to meet the Company’s objectives. The
directors confirm that, in all the activities of the Board and its
committees, there will be no discrimination on the grounds of
gender, race, ethnicity, religion, sexual orientation, age,
physical ability or socio-economic background. In accordance
with Listing Rule 9.8.6R (9), (10) and (11), and using the AIC’s
definitions, the Board provides the following information about
its diversity:
Gender identity and sex
Number of
directors
Percentage
of the
Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
Men 3 60% Not applicable
– see note*
Women 2 40%
Not specified/
prefer not to say 0 0%
Ethnic background
Number of
directors
Percentage
of the
Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
White British or other
White (including
minority white
groups) 4 80%
Not applicable
– see note*
Mixed/Multiple Ethnic
Groups 1 20%
Note:
*This column is not applicable as the Company is externally managed and does
not have executive management functions, specifically the roles of CEO and CFO.
The Board considers that chairing the Board, its permanent committees and
the role of senior independent director are all senior positions in an investment
company context. Accordingly, the Chair of the Board and of the Nominations
and Management Engagement Committees is a woman. The Audit and Risk
Committee Chairman and Senior Independent Director is a man. These positions
are currently held by individuals who consider themselves ‘White British or Other
White (including minority white groups)’
The information included in the above tables has been
obtained through questionnaires completed by the individual
directors. The categories for ethnic groups which are not
represented on the Board are not included in the ethnic
background table. No changes have occurred between
30September 2023 up to the date of approval of this Report
which could affect the Company’s ability to meet the targets
in LR 9.8.6R (9)(a).
NC effectiveness review
The activities of the NC were considered as part of the Board
effectiveness review, with the conclusion that the NC
continues to be effective in its operation.
Vicky Hastings
Chair of the Nominations Committee
12 December 2023
Henderson European Focus Trust plc Annual Report 2023
48
Directors’ Remuneration Report
Remuneration
The Remuneration Policy (the “Policy”) sets out the principles
applied in the remuneration of the Company’s directors.
Shareholders last approved the Remuneration Policy at the
January 2021 AGM and will be asked to approve the Policy
again at the January 2024 AGM, being a triennial vote. No
changes to the Policy are proposed, and the Board may
amend the level of remuneration paid to individual directors
only within the parameters of the Policy.
In determining the Remuneration Policy, the Board takes into
account all factors which it deems necessary including
relevant legal and regulatory requirements, the provisions and
recommendations of the AIC Code of Corporate Governance.
The Board’s approach is that fees payable to the directors
should:
●
reflect the time spent by them on the Company’s affairs;
●
reflect the responsibilities borne by them as directors;
●
be sufficient to promote the long-term success of the
Company and comparable to the remuneration paid by
other investment trusts of a similar size with a similar
capital structure and investment objective; and
●
not exceed the current aggregate remuneration limit
of£250,000 per annum.
Remuneration policy
Directors are remunerated in the form of fees which are
payable quarterly in arrears. No director is eligible to receive
bonuses, pension benefits, share options or other benefits
and no long-term incentive schemes are in place. The directors
may be reimbursed for all reasonable and properly documented
expenses incurred in the performance of their duties and may
be eligible to receive additional remuneration, in specific
circumstances, for services which go beyond the ordinary
duties of a non-executive director. The level of remuneration
paid to each director is reviewed annually, particularly in terms
of whether the Policy supports the Company’s long-term
sustainable success, though such review will not necessarily
result in a change to the rates. The review incorporates
analysis of up-to-date information about remuneration in other
companies of comparable scale and complexity, in order to
avoid and manage conflicts of interest in determining fee
levels and reflects the actual responsibilities and roles borne
by directors.
Shareholders’ views
Any feedback from shareholders on the fees paid to directors
would be taken into account by the Board when reviewing
remuneration policy and levels.
Letters of appointment
All directors are appointed under a letter of appointment,
which is an engagement for services and not a contract for
employment. The appointment may be terminated at any time
by written notice, with no compensation payable. The
Company has no executive directors or employees.
Recruitment principles
All directors, including any new appointments to the Board,
arepaid at the same rate. The Chair of the Board, Senior
Independent Director and the Chair of the Audit and Risk
Committee are paid a higher fee in recognition of their additional
responsibilities. When the roles of Senior Independent
Director and Chair of the Audit and Risk Committee are
carried out by the same individual, remuneration is paid
accordingly to reflect the duties of both roles.
The Chair of the Board, the Senior Independent Director and
Audit and Risk Committee Chair do not participate in
decisions to determine their own remuneration.
Report on implementation
The Directors’ Remuneration Report (the “Report”) is
prepared in accordance with Schedule 8 of The Large and
Medium-sized Companies and Groups (Accounts and
Reports) Regulations 2008 as amended (the “Regulations”).
An ordinary resolution to approve the Report will be put to
shareholders at the January 2024 AGM.
Annual Statement from the Chair
As the Company has no employees and the Board
comprisesentirely non-executive directors, the Board has not
established a separate remuneration committee. Directors’
remuneration is determined by the Board as a whole within
the parameters of the Policy approved by shareholders.
TheNominations Committee reviews directors’ fees and
makes recommendations to the Board for its decision as to
the appropriate level of fees.
During the year the directors reviewed the fees paid by other
investment companies in the AIC Europe sector (the
Company’s peer group), fees paid to similar-sized investment
companies and those paid by other investment trusts
managed by Janus Henderson. The directors also took into
consideration the time commitment required of the role which
has grown substantially in recent years, predominantly as a
result of regulation and good governance practice. Following
careful consideration, the Board agreed an increase in
directors’ fees as set out in the table below.
Role
From 1 October
2023
£
At 30 September
2023
£
At 30 September
2022
£
Chair
43,000 40,000 38,000
Chair of Audit and
Risk Committee
(“ARC”)
– 33,500 32,000
Senior Independent
Director (“SID”)
– 30,500 29,500
Combined ARC
andSID*
39,000 36,000 –
Director
30,000 28,000 27,000
*The combined role of SID and ARC Chair was created on 1 June 2023 when
Robin Archibald became both SID and ARC Chair. To reflect the duties of both
roles, Robin receives the additional fee increments for both roles. Until Eliza
Dungworth’s retirement on 31 May 2023, the role of SID was filled by Robin and
the role of ARC Chair was filled by Eliza
Henderson European Focus Trust plc Annual Report 2023
49
Directors’ Remuneration Report (continued)
Directors’ remuneration (audited)
The remuneration paid to the directors who served during the years ended 30 September 2023 and 30 September 2022 is
asfollows:
Year ended
30 September
2023
Total salary
and fees
£
Year ended
30 September
2022
Total salary
and fees
£
Year ended
30 September
2023
Taxable benefits†
£
Year ended
30 September
2022
Taxable benefits†
£
Year ended
30 September
2023
Total
£
Year ended
30 September
2022
Total
£
Vicky Hastings
1
40,000 38,000 – – 40,000 38,000
Robin Archibald
2
30,167 29,500 1,165 589 31,332 30,089
Stephen Macklow-Smith 28,000 27,000 – – 28,000 27,000
Marco Bianconi
3
28,000 9,000 6,813 1,130 34,813 10,130
Melanie Blake
4
7,000 – 370 – 7,370 –
Eliza Dungworth
5
22,333 32,000 1,731 – 24,064 32,000
Total 155,500 135,500 10,079 1,719 165,579 137,219
Notes:
The table above omits other columns set out in the relevant regulations because no payments of other types such as performance-related pay, vesting performance-
related pay and pension-related benefits were made
1 Chair and highest paid director
2 Senior Independent Director and Chair of the Audit and Risk Committee – combined role since 1 June 2023
3 Appointed director 1 June 2022
4 Appointed director 3 July 2023
5 Retired from the Board 31 May 2023
†
Reimbursement of travel expenses to attend board business. The expenses are reimbursed through payroll and in certain circumstances are subject to personal
taxation and national insurance which are ‘grossed up’. No other remuneration or compensation was paid or payable by the Company during the year to any of the
current or former directors or third parties specified by any of them.
The Board believes that both the individual remuneration and
the aggregate fee levels take account of the needs of a very
engaged non-executive board of experienced practitioners
inthe sector. There have been no other major decisions on
directors’ remuneration or any other changes to the
remuneration paid to each individual director in the year under
review. There will be no significant change in the way that the
remuneration policy will be implemented in the course of the
new financial year.
Directors’ interests in shares (audited)
Ordinary shares of 5p each
30 September
2023
(or date of
resignation,
if earlier)
1 October
2022
Vicky Hastings 75,000 75,000
Robin Archibald 26,030 26,030
Stephen Macklow-Smith 3,947 3,832
Marco Bianconi 3,000 –
Melanie Blake
1
3,058 n/a
Eliza Dungworth
2
4,800 4,800
1 Appointed on 3 July 2023
2 Resigned on 31 May 2023
The interests of the directors in the shares of the Company
atthe beginning and end of the financial year are shown in
thetable. There have been no changes to any of the current
directors’ holdings since the year end in the period up to the
date of this report. Directors are not required to hold shares
ofthe Company by way of qualification to serve on the Board.
Henderson European Focus Trust plc Annual Report 2023
50
Directors’ Remuneration Report (continued)
Performance
The graph compares the share price total return of the
Company’s shares over the ten-year period ended
30September 2023 with the return from the FTSE World
Europe (ex UK) Index on the same basis in Sterling terms,
assuming the investment of £100 on 30 September 2013 and
reinvestment of all dividends and income (excluding dealing
expenses). During the 10-year period the net assets of the
Company increased from £145.8 million to £379.0 million, and
dividends increased from 2.13p per share (with the subdivision
of shares in February 2022 taken into account) to 4.35p per
share, if approved by shareholders for the year ended
30September 2023. The annualised share price total return
for the 10-year period is 9.3%.
Annual change in directors’ remuneration
The table below sets out the annual percentage change in fees over the previous four years for each director who served for at
least two complete financial years.
Director
Year to
30 September 2023
1
%
Year to
30 September 2022
%
Year to
30 September 2021
%
Year to
30 September 2020
%
Vicky Hastings 5.3 No change 46.6
2
3.7
Robin Archibald 2.3
3
2.9
4
14.6
4
No change
Stephen Macklow-Smith
5
3.7 n/a n/a n/a
Marco Bianconi
5
n/a n/a n/a n/a
Melanie Blake
5
n/a n/a n/a n/a
Eliza Dungworth
6
n/a No change 10.3
6
No change
1 The increase in the year to 2023 reflects the increase in fees for all directors from 1 October 2022
2 Reflects Vicky Hasting’s appointment as Chair of the Board on 25 September 2020 and increase in fees for all directors from 1 October 2020
3 Reflects Robin Archibald’s appointment as combined Senior Independent Director and Audit and Risk Committee Chairman on 1 June 2023
4 The increase in the years to 2021 and 2023 reflects Robin’s appointment as Senior Independent Director on 10 February 2021 and increase in fees for all directors
from 1 October 2020
5 Appointed director respectively: 9 July 2021 (Stephen Macklow-Smith), 1 June 2022 (Marco Bianconi), 3 July 2023 (Melanie Blake)
6 Resigned as director 31 May 2023. The increase in the year to 2021 reflects the increase in fees for all directors from 1 October 2020
Relative importance of spend on pay
In order to show the relative importance of spend on pay, the table below sets out the total level of remuneration compared to
the distributions to shareholders by way of dividends. There were no other significant distributions, payments or other uses of
theCompany’s profit or cash flow deemed to assist in the understanding of the relative importance of spend on pay.
Year to
30 September
2023
£
Year to
30 September
2022
£
Change
£
Change
%
Total remuneration 165,579 137,219 28,360 20.7
Dividends paid 10,532,022 7,565,000 2,967,022 39.2
Note: Total remuneration will fluctuate due to the number of directors in office in any one year
Share price total return Benchmark
2017 20212020201920182016201520142013
50
100
150
200
250
300
350
400
450
£
100
125
150
175
200
225
250
275
20232022
Sources: Morningstar Direct and LSEG Datastream
Henderson European Focus Trust plc Annual Report 2023
51
Directors’ Remuneration Report (continued)
Statement of voting at annual general meeting
At the Company’s annual general meeting held on 26 January 2023, shareholders approved the Directors’ Remuneration
Reportin respect of the year ended 30 September 2022. Shareholders last approved the Remuneration Policy at the AGM
on28January 2021. The following votes were received on the two resolutions, both of which were held on a poll:
Resolution
For (including
discretionary)
% of votes
(excluding
votes withheld) Against
% of votes
(excluding
votes withheld) Withheld
Remuneration policy 10,820,415 99.94 6,141 0.06 8,496
Remuneration report 111,548,110 99.86 159,828 0.14 42,930
Note: The voting figures for the last remuneration policy vote in 2021 do not reflect the subsequent subdivision of each ordinary share of 50p into ten ordinary shares of
5p each on 7 February 2022
On behalf of the Board
Vicky Hastings
Chair
12 December 2023
Henderson European Focus Trust plc Annual Report 2023
52
The directors present their report and the audited financial
statements of the Company for the year ended 30 September
2023. The Company is a public limited company registered
and domiciled in England & Wales with company number
427958. It was active throughout the year.
The Investment Portfolio on page 16, Corporate Governance
Report and each committee’s report on pages 33 to 48,
Statement of Directors’ Responsibilities on page 55 and the
additional information on pages 91 onwards form part of the
Directors’ Report.
Share capital
As at 30 September 2023, and at the date of this report, the
Company’s paid-up share capital comprises 216,389,910
ordinary shares of 5p each, of which 3,621,788 shares were
held in treasury. Holders of the Company’s shares are entitled
to one vote for every share. Shares in treasury do not carry
voting rights.
The directors seek annual authority from the shareholders to
allot new shares, to disapply pre-emption rights of existing
shareholders and to buy back shares for cancellation or to be
held in Treasury. At the AGM held on 26 January 2023,
shareholders authorised the directors to allot up to 21,276,812
new shares. Shareholders further authorised directors to
repurchase up to 31,893,941 shares where the Company’s
shares trade at a discount to net asset value. The authority
toallot and repurchase shares will expire at the earlier of 15
months from the date of the passing of the resolution and
thenext AGM. During the year to 30 September 2023, the
Company repurchased 145,000 shares to hold in treasury at
atotal cost including expenses of £183,000, constituting 0.1%
of issued share capital. Shares are not bought back unless
the result is an increase in net asset value per share.
The Company’s articles of association permit the Company to
purchase its own shares and to fund such purchases from its
accumulated realised capital reserves. There are no
restrictions concerning the transfer of securities in the
Company, no special rights with regard to control attached to
securities, no restrictions on voting, no agreements between
holders of securities regarding their transfer known to the
Company and no agreement to which the Company is party
that affects its control following a takeover bid. Where they
exist, the revenue profits of the Company (including
accumulated revenue reserves) are available for distribution by
way of dividends to the holders of the shares. Upon a winding
up, after meeting the liabilities of the Company, the surplus
assets would be distributed to the shareholders pro rata to
their holding of shares.
Holdings in the Company’s shares
Declarations of interests in the voting rights of the Company
as at 30 September 2023 in accordance with the Disclosure
Guidance and Transparency Rules were as follows:
% of voting rights
1607 Capital Partners LLC 12.5
Rathbones Group 9.1*
City of London Investment Management 8.5
Allspring Global Investments 7.1
* Investec and Rathbones merged with effect from September 2023
Holdings by private individuals and indirect shareholders
through platforms, which together form above 5% in size:
% of voting rights
Hargreaves Lansdown, stockbrokers 6.5
Interactive Investor 6.1
Related-party transactions
The Company’s transactions with related parties in the year
were with the directors and the Manager. There were no
material transactions between the Company and its directors
during the year other than amounts paid to them in respect
ofremuneration and expenses, for which there were no
outstanding amounts payable at the year end. Directors’
shareholdings in the Company are disclosed on page 50.
Inrespect of the provision of services by Janus Henderson,
other than fees payable by the Company in the ordinary
course of business and the facilitation of marketing activities
with third parties, there were no material transactions with
theManager 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 note 23 on page 81.
Other information and future
developments
The directors and their appointments are listed on page 34.
Information on directors’ insurance and indemnification is given
on page 39. Each director in office at the date of approval of this
report confirms that to the best of their knowledge and belief,
there is no information relevant to the preparation of the Annual
Report of which the Company’s auditor is unaware and that they
have taken all the steps a director might reasonably be expected
to have taken to be aware of relevant audit information and to
establish that the Company’s auditor is aware of that information.
Listing Rule 9.8.4 requires the Company to include certain
information in a single identifiable section of the Annual Report
or a cross-reference table indicating where the information is
set out. There are no disclosures to be made in this regard.
Information is detailed in the Strategic Report regarding the
Directors’ Report
Henderson European Focus Trust plc Annual Report 2023
53
recommended final dividend, future developments, financial
risks and instruments. The Company’s environmental
statements are set out in the Strategic Report on pages
20to22 and pages 31 to 32. There are no post-balance sheet
events toreport.
Annual general meeting (“AGM”)
Shareholders are invited to attend our AGM on Thursday,
25January 2024 at 11.30 am at 201 Bishopsgate, London
EC2M 3AE. If shareholders prefer to attend virtually, we
welcome you to join by conferencing software Zoom.
Attending either in person or by Zoom will allow you to
watch a presentation from your Fund Managers and ask
questions. To join the AGM by videoconference, please
visitwww.janushenderson.com/trustslive to register.
Voting will be carried out on a poll among those physically
present at the meeting. We are not able to offer live voting
byZoom, so we encourage all shareholders, particularly those
who are not able to attend in person, to submit their votes
viaproxy, ahead of the deadline of 11.30 am on Tuesday,
23January 2024. Voting on a poll gives all shareholders
theopportunity to participate in the decision-making of
theCompany and have their votes recorded in proportion
tothe number of shares they own. The results of the poll
willbepublished on the Company’s website later in the day.
TheBoard is keen to have as high a voting participation
aspossible, including from private investors.
Investors holding shares through share dealing platforms,
such as Hargreaves Lansdown, Halifax Share Dealing and
Interactive Investor, may find this link, which outlines how you
can vote your shares, useful: www.theaic.co.uk/how-to-
vote-your-shares.
If you are an institutional investor, you may be able to
appoint a proxy electronically via the Proxymity platform.
For further information regarding Proxymity, please go to
www.proxymity.io. Your proxy must be lodged by 11.30 am
on Tuesday, 23January 2024 to be valid.
The Notice of AGM is on pages 83 to 89, together with an
explanation of each resolution. If shareholders would like to
submit any questions in advance of the AGM, you are
welcome to send these to the corporate secretary at
itsecretariat@janushenderson.com.
Reappointment of auditor
Ernst & Young LLP has indicated willingness to continue in
office as auditor to the Company, and resolutions 10 and 11
proposing their reappointment and authorising the directors to
determine their remuneration for the ensuing year will be put
to shareholders at the AGM. Further information about the
audit tender and their reappointment can be found in the
Audit and Risk Committee Report on pages 40 to 44.
Voting recommendation
Your Board considers that the resolutions to be proposed
atthe AGM are in the best interests of the shareholders as
awhole. The Board therefore recommends that shareholders
vote in favour of each resolution, as the directors intend to
doin respect of their own beneficial holdings.
This Directors’ Report has been approved by the Board.
By order of the Board
Janus Henderson Secretarial Services UK Limited
Corporate Secretary
12 December 2023
Directors’ Report (continued)
Henderson European Focus Trust plc Annual Report 2023
54
The directors are responsible for preparing the Annual Report
andthe financial statements inaccordance with applicable
law andregulations.
Company law requires the directors to prepare financial
statements for each financial year. The directors have
prepared the financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards comprising FRS 102, the
financial reporting standard applicable in the United Kingdom
and Republic of Ireland and applicable law). Under company
law the directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of
the state of affairs of the Company and of the profit or loss of
the Company for that year.
In preparing these financial statements, the directors are
required to:
●
select suitable accounting policies and then apply them
consistently;
●
make judgements and accounting estimates that are
reasonable and prudent;
●
state whether applicable UK accounting standards have
been followed, subject to any material departures
disclosed and explained in the financial statements; and
●
prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Company will continue in business.
The directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
theCompany’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
and enable them to ensure that the financial statements and
Directors’ Remuneration Report comply with the Companies
Act 2006. They are also responsible for safeguarding the
assets of the Company andhence for taking reasonable steps
for the prevention anddetection of fraud and other
irregularities.
The directors consider that the Annual Report, taken as a
whole,isfair, balanced and understandable and provides the
information necessary for shareholders to assess the Company’s
position and performance, business model and strategy.
Statement under DTR 4.1.12
Each director, as listed on page 34, confirms that, to the best
of their knowledge:
●
the financial statements, which have been prepared in
accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting
Standards comprising FRS 102 and applicable law) give a
true and fair view of the assets, liabilities, financial position
and return of the Company; and
●
the Strategic Report includes a fair review of the
development and performance of the business and the
position of the Company, together with a description of
theprincipal risks and uncertainties that it faces.
On behalf of the Board
Vicky Hastings
Chair of the Board
12 December 2023
Statement of Directors’ Responsibilities
Henderson European Focus Trust plc Annual Report 2023
55
56
Photo: Airbus, H160 helicopter maintenance
Financial
Statements
Opinion
We have audited the financial statements of Henderson European Focus Trust plc (‘the Company’) for the year ended
30September 2023 which comprise the Income Statement, Statement of Changes in Equity, Statement of Financial Position
andCash Flow Statement and the related notes 1 to 24, including a summary of significant accounting policies. The financial
reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards
including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (United Kingdom Generally
Accepted Accounting Practice).
In our opinion, the financial statements:
●
give a true and fair view of the Company’s affairs as at 30 September 2023 and of its profit for the year then ended;
●
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
●
have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Ourresponsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide
abasis for our opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our
other ethical responsibilities in accordance with these requirements.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Company and we remain independent
of the Company in conducting the audit.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the Company’s ability to
continue to adopt the going concern basis of accounting included the following procedures:
●
We confirmed our understanding of the Company’s going concern assessment process and engaged with the directors and
the Company Secretary to determine if all key factors that we have become aware of during our audit were considered in
their assessment.
●
We inspected the directors’ assessment of going concern, including the revenue forecast. In preparing the revenue forecast,
the Company has concluded that it is able to continue to meet its ongoing costs as they fall due.
●
We have reviewed the factors and assumptions, including the impact of the current economic environment, as applied to
therevenue forecast and the liquidity assessment of the investments. We considered the appropriateness of the methods
used to calculate the revenue forecast and the liquidity assessment and determined, through testing of the methodology
andcalculations, that the methods, inputs and assumptions utilised were appropriate to be able to make an assessment
ofthe Company.
●
We assessed the risk of breaching the debt covenants applicable to the Company’s debt arrangements as a result of a
reduction in the value of the Company’s investment portfolio. We calculated the Company’s compliance with debt covenants
and performed reverse stress testing in order to identify what factors would lead to the Company breaching those covenants.
●
We considered of the mitigating factors included in the revenue forecasts and covenant calculations that are within the
control of the Company. We reviewed the Company’s assessment of the liquidity of investments held and evaluated the
Company’s ability to sell those investments in order to cover working capital requirements should revenue decline
significantly.
●
We reviewed the Company’s going concern disclosures included in the annual report in order to assess that the disclosures
were appropriate and in conformity with the reporting standards.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Company’s ability to continue as a going concern for a period of at
least twelve months from the date the financial statements were authorised for issue.
Independent Auditor’s Report to the Members
ofHenderson European Focus Trust plc
57
Henderson European Focus Trust plc Annual Report 2023
In relation to the Company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing material
to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors have
considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections
of this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the
Company’s ability to continue as a going concern.
Overview of our audit approach
Key audit matters
●
Risk of incomplete or inaccurate revenue recognition, including
classification of special dividends as revenue or capital items in the
Income Statement.
●
Risk of incorrect valuation or ownership of the investment portfolio.
Materiality
●
Overall materiality of £3.79m which represents 1% of net assets.
An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit
scope for the Company. This enables us to form an opinion on the financial statements. We take into account size, risk profile,
the organisation of the Company and effectiveness of controls, the potential impact of climate change and changes in the
business environment when assessing the level of work to be performed.
Climate change
Stakeholders are increasingly interested in how climate change will impact the Company. The Company has determined that
themost significant future impacts from climate change on its operations will be from how climate change could affect the
Company’s investments and overall investment process. This is explained on page 24 in the principal risks and uncertainties.
This disclosure forms part of the “Other information,” rather than the audited financial statements. Our procedures on these
unaudited disclosures therefore consisted solely of considering whether they are materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit or otherwise appear to be materially misstated, in line with
ourresponsibilities on “Other information”.
Our audit effort in considering climate change was focused on the adequacy of the Company’s disclosures in the financial
statements as set out in Note 1a and conclusion that there was no further impact of climate change to be taken into account
asthe investments are valued based on market pricing as required by United Kingdom Generally Accepted Accounting Practice.
We also challenged the Directors’ considerations of climate change in their assessment of viability and associated disclosures.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit
of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.
Independent Auditor’s Report to the Members
ofHenderson European Focus Trust plc
(continued)
58
Henderson European Focus Trust plc Annual Report 2023
Independent Auditor’s Report to the Members
ofHenderson European Focus Trust plc
(continued)
Risk Our response to the risk
Key observations communicated to the
Audit and Risk Committee
Incomplete or inaccurate revenue
recognition, including the classification of
special dividends as revenue or capital
items in the Income Statement (as
described on page 42 in the Report of the
Audit and Risk Committee and as per the
accounting policy set out on page 69).
The total revenue for the year to 30September
2023 was £11.43m (2022: £12.55m), consisting
primarily of dividend income from listed equity
investments.
The investment income receivable by the
Company during the year directly affects the
Company’s revenue return. There is therefore
a risk of incomplete or inaccurate recognition
of revenue through the failure to recognise
proper income entitlements or to apply an
appropriate accounting treatment.
In addition to the above, the directors may be
required to exercise judgment in determining
whether income receivable in the form of
special dividends should be classified as
‘revenue’ or ‘capital’ in the Income Statement.
We have performed the following
procedures:
We obtained an understanding of the
processes and controls surrounding revenue
recognition, including the classification of
special dividends, by performing walkthrough
procedures.
For 100% of dividends received and accrued,
we recalculated the income by multiplying the
investment holdings at the ex-dividend date,
traced from the accounting records, by the
dividend per share, which was agreed to an
independent data vendor. We also agreed a
sample of dividends received and accrued to
bank statements.
Where dividends were received or accrued in
foreign currency, we translated the amount
into the reporting currency of the Company
using exchange rates sourced from an
independence data vendor.
For all dividends accrued, we reviewed the
investee company announcements to assess
whether the dividend entitlements arose prior
to 30 September 2023.
To test completeness of recorded income,
weverified that expected dividends for each
investee company held during the year had
been recorded as income with reference to
investee company announcements obtained
from an independent data vendor.
For all investments held during the year, we
reviewed the type of dividends paid with
reference to an external data vendor to identify
those which were special. Based on the work
performed, we identified two special dividends
received during the year, both classified as
revenue. One was above our testing threshold
and we assessed the appropriateness of
management’s classification as revenue by
reviewing the underlying rationale for the
distribution.
The results of our procedures
identified no material
misstatement in relation to
incomplete or inaccurate
revenue recognition, including
incorrect classification
ofspecial dividends as revenue
or capital items inthe Income
Statement.
59
Henderson European Focus Trust plc Annual Report 2023
Independent Auditor’s Report to the Members
ofHenderson European Focus Trust plc
(continued)
Risk Our response to the risk
Key observations communicated to the
Audit and Risk Committee
Incorrect valuation or ownership of the
investment portfolio (as described on page
42 in the Report of the Audit and Risk
Committee and as per the accounting policy
set out on page 68).
The valuation of the investment portfolio at
30September 2023 was £384.25m
(2022:£320.29m) consisting of listed
investments.
The fair value of investments is determined
byreference to stock exchange quoted market
bid prices at the close of business on the
reporting date.
The valuation of the assets held in the
investment portfolio is the primary driver of the
Company’s net asset value and total return.
Incorrect investment pricing, or a failure to
maintain proper legal title of the assets held by
the Company could have a significant impact
on the portfolio valuation and the return
generated for shareholders.
We have performed the following
procedures:
We obtained an understanding of the
processes and controls surrounding
investment valuation and legal title of listed
investments by performing walkthrough
procedures.
For all investments in the portfolio, we
compared the market prices and exchange
rates applied to an independent pricing vendor
and recalculated the investment valuations as
at the year-end.
For all investments in the portfolio, we obtained
the market prices from an independent pricing
vendor for five business days pre and post the
year end date and calculated the day-on-day
movements to identify any stale prices. We
verified that the listed prices are valid fair
values through review of trading activity.
We compared the Company’s investment
holdings at 30 September 2023 to an
independent confirmation received directly
from the Company’s Custodian and
Depositary.
The results of our procedures
identified nomaterial
misstatement inrelation to the
risk of incorrect valuation or
ownership of the investment
portfolio.
There have been no changes to the areas of audit focus raised in the above risk table from the prior year.
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on
the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence
the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and
extent of our audit procedures.
We determined materiality for the Company to be £3.79m (2022: £3.14m), which is 1% (2022: 1%) of net assets. We believe that
net assets provides us provide us with a materiality aligned to the key measure of the Company’s performance.
During the course of our audit, we reassessed initial materiality and found no reason to alter the basis of calculation at year end.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low
level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Company’s overall control environment, our
judgement was that performance materiality was 75% (2022: 75%) of our planning materiality, namely £2.84m (2022: £2.36m).
Given the importance of the distinction between revenue and capital for investment trusts, we have also applied a separate
testing threshold for the revenue column of the Income Statement of £0.50m (2022: £0.57m) being 5% (2022: 5%) of the revenue
profit before taxation.
60
Henderson European Focus Trust plc Annual Report 2023
Independent Auditor’s Report to the Members
ofHenderson European Focus Trust plc
(continued)
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit and Risk Committee that we would report to them all uncorrected audit differences in excess of
£0.19m (2022: £0.16m), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view,
warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light
ofother relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report set out on pages other than the financial
statements and our auditor’s report thereon. The directors are responsible for the other information contained within the
annualreport.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated
in this report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be
materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we
have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
●
the information given in the strategic report and the directors’ report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
●
the strategic report and directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit,
wehave not identified material misstatements in the strategic report or directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report
to you if, in our opinion:
●
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches
not visited by us; or
●
the financial statements and the part of the directors’ remuneration report to be audited are not in agreement with the
accounting records and returns; or
●
certain disclosures of directors’ remuneration specified by law are not made; or
●
we have not received all the information and explanations we require for our audit.
61
Henderson European Focus Trust plc Annual Report 2023
Independent Auditor’s Report to the Members
ofHenderson European Focus Trust plc
(continued)
Corporate Governance Statement
We have reviewed the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate
Governance Statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code
specified for our review by the Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit:
●
Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material
uncertainties identified set out on page 55;
●
Directors’ explanation as to its assessment of the Company’s prospects, the period this assessment covers and why the
period is appropriate, set out on page 26;
●
Directors’ statement on whether it has a reasonable expectation that the Company will be able to continue in operation and
meet its liabilities, set out on page 26;
●
Directors’ statement on fair, balanced and understandable set out on 42 and 55;
●
Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 26;
●
The section of the annual report that describes the review of effectiveness of risk management and internal control systems
set out on page 39; and
●
The section describing the work of the Audit and Risk Committee set out on pages 40 and 41.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 55, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as
the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
isa high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
inthe aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
Explanation as to what extent the audit was considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with
ourresponsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement
dueto fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by,
forexample, forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable
ofdetecting irregularities, including fraud is detailed below.
62
Henderson European Focus Trust plc Annual Report 2023
However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of
the Company and management.
●
We obtained an understanding of the legal and regulatory frameworks that are applicable to the Company and determined
that the most significant are United Kingdom Generally Accepted Accounting Practice, the Companies Act 2006, the Listing
Rules, UK Corporate Governance Code, the Associate of Investment Companies’ Code and Statement of Recommended
Practice, section 1158 of the Corporation Tax Act 2010 and the Companies (Miscellaneous Reporting) Regulations 2018.
●
We understood how the Company is complying with those frameworks through discussions with the Audit and Risk
Committee and the Company Secretary and review of Board minutes and the Company’s documented policies and
procedures.
●
We assessed the susceptibility of the Company’s financial statements to material misstatement, including how fraud might
occur by considering the key risks impacting the financial statements. We identified a fraud risk with respect to the
incomplete or inaccurate revenue recognition through the incorrect classification of special dividends in the Income
Statement. Further discussion of our approach is set out in the section on key audit matters above.
●
Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations.
Our procedures involved review of the reporting to the directors with respect to the application of the documented policies
and procedures and review of the financial statements to ensure compliance with the reporting requirements of the
Company.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Other matters we are required to address
●
Following the recommendation from the Audit and Risk Committee, we were appointed by the Company on 25 July 2014 to
audit the financial statements for the year ending 30 September 2014 and subsequent financial periods.
The period of total uninterrupted engagement including previous renewals and reappointments is 10 years, covering the years
ending 30 September 2014 to 30 September 2023.
●
The audit opinion is consistent with the additional report to the Audit and Risk Committee.
Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or
for the opinions we have formed.
Mike Gaylor (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
12 December 2023
Independent Auditor’s Report to the Members
ofHenderson European Focus Trust plc
(continued)
63
Henderson European Focus Trust plc Annual Report 2023
Income Statement
Year ended 30 September 2023 Year ended 30 September 2022
Notes
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
2
Gains/(losses) on investments held
at fair value through profit or loss – 68,293 68,293 – (55,148) (55,148)
Exchange losses on
currencytransactions – (5) (5) – (1,142) (1,142)
3 Income from investments 11,206 – 11,206 12,529 – 12,529
4 Other income 224 – 224 25 – 25
Gross revenue and capital
gains/(losses) 11,430 68,288 79,718 12,554 (56,290) (43,736)
5 Management fee (587) (1,762) (2,349) (548) (1,642) (2,190)
6 Other fees and expenses (639) – (639) (561) – (561)
Net return before finance costs
and taxation 10,204 66,526 76,730 11,445 (57,932) (46,487)
7 Finance costs (129) (385) (514) 38 (272) (234)
Net return before taxation 10,075 66,141 76,216 11,483 (58,204) (46,721)
8 Taxation on net return (887) (36) (923) (570) (137) (707)
Net return after taxation 9,188 66,105 75,293 10,913 (58,341) (47,428)
9 Return per ordinary share 4.32p 31.07p 35.39p 5.11p (27.32p) (22.21p)
The total columns of this statement represents the Income Statement of the Company. The revenue return and capital return
columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.
Allrevenue 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.
The notes on pages 68 to 82 form part of these financial statements
64
Henderson European Focus Trust plc Annual Report 2023
Statement of Changes in Equity
Notes Year ended 30 September 2023
Called-up
share
capital
£’000
Share
premium
account
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
Other
reserves
£’000
Total
£’000
At 30 September 2022 10,819 41,995 151,154 13,840 96,611 314,419
Net return after taxation – – 66,105 9,188 – 75,293
Buyback of ordinary shares
fortreasury – – (183) – – (183)
10 Ordinary dividends paid – – – (10,532) – (10,532)
At 30 September 2023 10,819 41,995 217,076 12,496 96,611 378,997
Notes Year ended 30 September 2022
Called-up
share
capital
£’000
Share
premium
account
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
Other
reserves
£’000
Total
£’000
At 30 September 2021 10,819 41,995 210,819 10,492 96,611 370,736
Net return after taxation – – (58,341) 10,913 – (47,428)
Buyback of ordinary shares
fortreasury – – (1,324) – – (1,324)
10 Ordinary dividends paid – – – (7,565) – (7,565)
At 30 September 2022 10,819 41,995 151,154 13,840 96,611 314,419
The notes on pages 68 to 82 form part of these financial statements
65
Henderson European Focus Trust plc Annual Report 2023
Statement of Financial Position
Notes
At 30 September
2023
£’000
At 30 September
2022
£’000
Fixed assets
11 Investments held at fair value through profit or loss 384,249 320,289
Current assets
12 Debtors 11,745 7,355
Cash at bank 15,857 21,272
27,602 28,627
13 Creditors: amounts falling due within one year (2,655) (3,949)
Net current assets 24,947 24,678
Total assets less current liabilities 409,196 344,967
14 Creditors: amounts falling due after one year (30,199) (30,548)
Net assets 378,997 314,419
Capital and reserves
16 Called-up share capital 10,819 10,819
17 Share premium account 41,995 41,995
18 Capital reserve 217,076 151,154
19 Revenue reserve 12,496 13,840
20 Other reserves 96,611 96,611
Shareholders’ funds 378,997 314,419
21 Net asset value per ordinary share 178.13p 147.67p
These financial statements were approved and authorised for issue by the Board of Directors on 12 December 2023 and were
signed on its behalf by:
Vicky Hastings
Chair of the Board
The notes on pages 68 to 82 form part of these financial statements
66
Henderson European Focus Trust plc Annual Report 2023
Cash Flow Statement
Year ended
30 September
2023
£’000
Year ended
30 September
2022
£’000
Cash flows from operating activities
Net return/(loss) before taxation 76,216 (46,721)
Add back: finance costs 514 234
(Gains)/losses on investments held at fair value through profit or loss (68,293) 55,148
Losses on foreign exchange 5 1,142
Taxation paid (1,389) (780)
Increase in debtors (163) (87)
Increase/(decrease) in creditors 1,099 (144)
Net cash inflow from operating activities
1
7,989 8,792
Cash flows from investing activities
Sales of investments held at fair value through profit or loss 288,351 277,186
Purchases of investments held at fair value through profit or loss (290,172) (273,147)
Net cash (outflow)/inflow from investing activities (1,821) 4,039
Cash flows from financing activities
Buyback of ordinary shares for treasury (183) (1,324)
Equity dividends paid (10,532) (7,565)
Repayment of bank overdraft – (10,558)
Issue of unsecured loan notes – 29,275
Costs relating to issue of unsecured loan notes – (173)
Interest paid (863) (271)
Net cash (outflow)/inflow from financing activities (11,578) 9,384
Net (decrease)/increase in cash at bank (5,410) 22,215
Cash at bank at beginning of period 21,272 199
Losses on foreign exchange (5) (1,142)
Cash at bank at end of period 15,857 21,272
Comprising:
Cash at bank 15,857 21,272
1 Cash inflow from dividends was £9,394,000 (2022: £11,266,000) and cash inflow from interest was £213,000 (2022: £25,000)
The notes on pages 68 to 82 form part of these financial statements
67
Henderson European Focus Trust plc Annual Report 2023
Notes to the Financial Statements
1 Accounting policies
(a) Basis of preparation
The Company is a registered investment company as defined in section 833 of the Companies Act 2006 and is
incorporated in the United Kingdom. It operates in the United Kingdom and is registered at the address on page 95.
The financial statements have been prepared in accordance with the Companies Act 2006, FRS 102 – The Financial
Reporting Standard applicable in the UK and Republic of Ireland and with the Statement of Recommended Practice:
Financial Statements of Investment Trust Companies and Venture Capital Trusts (the “SORP”) amended in July 2022 by the
Association of Investment Companies.
The principal accounting policies applied in the presentation of these financial statements are set out below. These policies
have been consistently applied to all the years presented.
The financial statements have been prepared under the historical cost basis except for the measurement of investments at
fair value. In applying FRS102, financial instruments have been accounted for in accordance with section 11 and 12 of the
Standard. All the Company’s operations are of a continuing nature.
The preparation of the Company’s financial statements requires the directors to make judgements, estimates and
assumptions that affect the reported amounts in the primary financial statements and the accompanying disclosures.
These assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount
ofassets or liabilities affected in the current and future periods, depending on circumstance.
The directors do not believe that any accounting judgements have been applied to this set of financial statements that have
a significant risk of causing a material adjustment to the carrying amount of assets and liabilities. Nor do they believe that
there are any estimates that have a significant risk of causing a material adjustment to the carrying amount of assets and
liabilities within the next financial year. In line with UK GAAP, the fair values of investments are used, whereby quoted prices
are usedto value the investments in active markets and thereby reflect participants’ views of climate change risk.
(b) Going concern
The assets of the Company consist of securities that are readily realisable and, accordingly, the directors believe that the
Company has adequate resources to continue in operational existence for at least twelve months from the date of approval
of these financial statements. In coming to this conclusion, the directors have considered the nature of the portfolio, being
that the securities held are readily realisable, the strength of its distributable reserves, and the ongoing costs of the
Company. The directors have also reviewed the revenue forecast and size of the Company’s long-term debt and stress-
tested its financial covenants.
As part of their usual assessment of risks facing the Company, the directors have further considered the global economic
and geopolitical environment including the repercussions of the Covid-19 pandemic, the ongoing war in Ukraine and
conflict in the Middle East, the impact of these on supply chains and the possible impact of climate change risk on the
value of the portfolio. The directors have concluded that the Company is able to meet its financial obligations, including the
interest payments for its loan notes, as they fall due for a period of at least twelve months from the date of this report.
(c) Investments held at fair value through profit or loss
Investment purchases are accounted for and initially recognised at the trade date of the acquisition. All investments are
measured upon initial recognition as held at fair value through profit or loss. Sales of investments are accounted for at the
trade date of the disposal. Proceeds are measured at fair value, which are regarded as the proceeds of sale less any
transaction costs. The fair value of the investments is based on their quoted bid price at the Statement of Financial Position
date, without deduction of the estimated future selling costs.
Changes in the fair value of investments held at fair value through profit or loss and gains and losses on disposal are
recognised in the Income Statement as gains or losses from investments held at fair value through profit or loss.
Alsoincluded in this caption are transaction costs incurred on the purchase and disposal of assets. All purchases and
sales areaccounted for on a trade date basis.
(d) Foreign currency
The results and financial position of the Company are expressed in pounds Sterling, which is the functional and
presentational currency of the Company. Sterling is the functional currency of the primary economic environment in which
the Company operates.
Transactions recorded in overseas currencies during the year are translated into Sterling at the appropriate daily exchange rates.
Monetary assets and liabilities and equity investments held at fair value through profit or loss which are denominated in foreign
currencies at the Statement of Financial Position date are translated into Sterling at the exchange rates ruling at that date.
Any gains or losses on translation of foreign currency balances, whether realised or unrealised, are taken to the capital or
to the revenue return of the Income Statement depending on whether the gain or loss is of a capital or revenue nature.
68
Henderson European Focus Trust plc Annual Report 2023
Notes to the Financial Statements (continued)
1 Accounting policies (continued)
(e) Income
Dividends receivable from equity shares are taken to the revenue return on an ex-dividend basis except where, in the opinion of
directors, the dividend is capital in nature in which case it is taken to the capital return. The ordinary element of scrip dividends
received in lieu of cash dividends is recognised as revenue. Any enhancement above the cash dividend is treated as capital.
Bank interest is accounted for on an accruals basis.
(f) Management and administrative expenses and finance costs
All expenses and finance costs are accounted for on an accruals basis. The annual management fee and borrowing
interest charges are allocated 75% to capital and 25% to revenue in line with the Board’s expected long-term split of
returns in the form of capital and income profits respectively. All the other administrative expenses are charged to the
revenue return of the Income Statement.
(g) Taxation
The tax expense represents the sum of the tax currently payable and deferred tax. Primarily this relates to overseas
irrecoverable withholding tax.
The tax currently payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the
Income Statement because it excludes items of income or expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using the
applicable rate of corporation tax for the accounting period.
In line with the recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented
against capital returns in the supplementary information in the Income Statement is the ‘marginal basis’. Under this basis,
iftaxable income is capable of being offset entirely by expenses presented in the revenue return column of the Income
Statement, then no tax relief is transferred to the capital return column.
Deferred taxation is provided on all timing differences that have originated but not reversed by the Statement of Financial
Position date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there
will be suitable profits from which the future reversal of timing differences can be deducted. Any liability to deferred tax is
provided at the tax rates expected to apply based on laws that have been enacted or substantially enacted at the Statement
of Financial Position date. Deferred tax assets and liabilities are not discounted to reflect the time value of money.
(h) Borrowings
Interest-bearing bank loans, overdrafts and unsecured loan notes are recorded initially at fair value, being the proceeds
received, less direct issue costs. They are subsequently remeasured at amortised cost. Amortised cost is calculated by
taking into account any costs that are an integral part of the effective interest rate. Such costs, including interest payable,
premiums on settlement or redemption and direct issue costs, are accounted for on an accruals basis in the Income
Statement using the effective interest rate method.
(i) Dividends payable to shareholders
Dividends payable to shareholders are recognised in the financial statements when they are paid, or in the case of final
dividends, when they are approved by shareholders. Dividends are dealt with in the Statement of Changes in Equity.
(j) Issue and repurchase of ordinary shares and associated costs
The proceeds from issuing ordinary shares less issue costs are taken to equity and the costs of repurchasing ordinary
shares, including related stamp duty and transaction costs, are taken directly to equity and reported through the Statement
of Changes in Equity, with the cost of repurchase being charged to a capital distributable reserve. Share issues and
repurchase transactions are accounted for on a trade-date basis. The nominal value of ordinary share capital repurchased
and cancelled is transferred out of called-up share capital and into the capital redemption reserve, in accordance with
section 733 of the Companies Act 2006. Where shares are repurchased and held in treasury, the transfer to the capital
redemption reserve is made if and when such shared are subsequently cancelled.
(k) Capital and reserves
Called-up share capital represents the nominal value of ordinary shares issued.
The share premium account represents the excess received (subsequent to 11 July 2007) where treasury shares are sold
for more than the Company paid to purchase the shares placed in treasury and the excess over the nominal value for new
ordinary shares issued, less the costs of issue.
The capital reserves are split into two components, the capital reserve arising on investments sold and the capital reserve
arising on investments held. The following analyses what is accounted for in each of these components.
69
Henderson European Focus Trust plc Annual Report 2023
Notes to the Financial Statements (continued)
1 Accounting policies (continued)
(k) Capital and reserves (continued)
Capital reserve arising on investments sold
The following are accounted for in this reserve:
●
gains and losses on the disposals of investments;
●
other capital charges and credits charged to this account in accordance with the above policies;
●
realised foreign exchange differences of a capital nature; and
●
cost of repurchasing ordinary share capital.
Capital reserve arising on investments held
The following are accounted for in this reserve:
●
increases and decreases in the valuation of investments held at the year end; and
●
unrealised foreign exchange differences of a capital nature.
The revenue reserve represents accumulated revenue profits retained by the Company that have not been distributed to
shareholders as a dividend.
Other reserves comprise the following reserves:
●
The special distributable reserve was created on 11 July 2007 following the cancellation of the share premium
accountand the capital redemption reserve and is available to fund market purchases and the subsequent cancellation
of own shares.
●
The merger reserve represents the premium over the nominal value of ordinary shares issued in March 1997 in
connection with the acquisition of The German Investment Trust plc.
●
The capital redemption reserve represents the nominal value of ordinary shares that have been repurchased and
cancelled.
(l) Distributable reserves
The Company’s special distributable reserve, capital reserve arising on investments sold and revenue reserve may be
distributed by way of dividend or used for share buy backs.
2 Gains/(losses) on investments held at fair value through profit or loss
2023
£’000
2022
£’000
Gains/(losses) on the sale of investments based on historical cost 22,854 (2,064)
Revaluation gains/(losses) recognised in previous years 16,663 (29,841)
Gains/(losses) on investments sold in the year based on carrying value at previous
Statement of Financial Position date 39,517 (31,905)
Revaluation gains/(losses) on investments held at 30 September 28,776 (23,243)
Gains/(losses) on investments held at fair value through profit or loss 68,293 (55,148)
3 Income from investments
2023
£’000
2022
£’000
Listed investments:
Overseas dividends 10,143 12,181
UK dividends 969 348
UK fixed-interest income 94 –
11,206 12,529
70
Henderson European Focus Trust plc Annual Report 2023
Notes to the Financial Statements (continued)
4 Other income
2023
£’000
2022
£’000
Deposit interest 224 25
5 Management fee
2023 2022
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Management fee 587 1,762 2,349 548 1,642 2,190
A description of the basis for calculating the management fee is given in the Business Model on page 22. Management
fees are allocated 25% to revenue and 75% to capital in the Income Statement.
6 Other fees and expenses
2023
£’000
2022
£’000
Revenue:
Directors’ fees and taxable benefits (see Directors’ Remuneration Report on page 50) 166 137
Directors’ and officers’ liability insurance 14 12
Marketing expenses recharged by Janus Henderson 84 64
Custody charges 67 69
Legal and professional fees 67 63
Fees payable to the Company’s auditor – for audit services 52 45
Depositary charges 40 32
Registrar’s fees 38 49
Printing and postage 30 9
Listing fees 29 32
AIC subscriptions 21 21
Other expenses 31 28
639 561
7 Finance costs
2023 2022
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
On bank overdrafts payable within one year 8 24 32 12 35 47
On unsecured loan notes – after 5 years
1
121 361 482 79 237 316
Interest payable to HMRC due to refund of French
withholding tax – – – (129) – (129)
129 385 514 (38) 272 234
1 Includes amortisation of issue costs and may therefore vary from year to year
Interest payable is allocated 25% to revenue and 75% to capital in the Income Statement. Interest rates on the bank
overdraft facility are set at the time drawings are made based on the bank’s base rate, plus a margin of 1.25% per annum.
In January 2022, the trust issued EUR35,000,000 of unsecured loan notes, with interest payable on EUR25,000,000 at
1.53% and interest payable on EUR10,000,000 at 1.66%.
During the year to 30 September 2017 the Company received a refund of French withholding tax relating to tax suffered
in2007 and 2008. A provision was made for potential corporation tax payable and interest payment thereon to HMRC.
Asexplained further in note 8, the settlement of other tax claims led to this provision no longer being required. Theinterest
payable and corporation tax provision were therefore removed in the prior year.
71
Henderson European Focus Trust plc Annual Report 2023
Notes to the Financial Statements (continued)
8 Taxation
(a) Analysis of charge for the year
Year ended 30 September 2023 Year ended 30 September 2022
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Corporation tax prior-year adjustment – – – (584) – (584)
Overseas tax suffered 887 36 923 1,154 137 1,291
Total taxation for the year 887 36 923 570 137 707
(b) Factors affecting the tax charge for the year
Year ended 30 September 2023 Year ended 30 September 2022
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Revenue
return
£’000
Capital
return
£’000
Total
return
£’000
Return before taxation 10,075 66,141 76,216 11,483 (58,204) (46,721)
Corporation tax at effective rate of 22.0% (2022: 19.0%) 2,217 14,551 16,768 2,182 (11,059) (8,877)
Effects of:
Non-taxable capital (profits)/losses – (15,023) (15,023) – 10,695 10,695
Non-taxable overseas income (2,445) – (2,445) (2,375) – (2,375)
Expenses not deductible for tax purposes – – – 1 – 1
Tax effect of expensed double-taxation relief – – – (5) – (5)
Corporation tax prior-year adjustment – – – (584) – (584)
Current-year expenses not utilised 228 472 700 197 364 561
Overseas tax 887 36 923 1,154 137 1,291
887 36 923 570 137 707
The UK corporation tax rate is an effective rate of 22.0% (2022: 19.0%). The tax charge for the year is lower than the
corporation tax rate.
In the prior year, the Company filed a claim with HMRC, on the basis of the principles set out in the Franked Investment
Income Group Litigation Order (“FII/GLO”) claim, for corporation tax unduly paid in respect of periods prior to 1 July 2009.
The claim was filed on the basis that the relevant UK tax legislation was in breach of EU law for these periods.
Additionally a claim was successfully settled with HMRC and the provision for corporation tax previously provided and the
associated interest thereon (relating to the refund of French withholding tax received in 2017) was removed and this was
accounted for in the year ended 30 September 2022.
The total of the claim and the write-back of tax previously accrued for is £584,000 and reflected in the 2022 tax charge.
No provision for deferred tax has been made in the current or prior accounting year. At the period end, after offset against
income taxable on receipt, there is a potential deferred tax asset of £8,389,000 (2022: £7,597,000) in relation to surplus
management expenses. It is unlikely that the Company will generate sufficient taxable profits in the future to utilise these
amounts and therefore no deferred tax asset has been recognised.
72
Henderson European Focus Trust plc Annual Report 2023
Notes to the Financial Statements (continued)
9 Return per ordinary share
The return per ordinary share is based on the net return attributable to the ordinary shares of £75,293,000 (2022: net
lossof £47,428,000) and on 212,776,067 ordinary shares (2022: 213,530,236) being the weighted average number of
ordinary shares in issue during the year excluding shares held in treasury. The return per ordinary share can be further
analysed between revenue and capital as below.
2023
£’000
2022
£’000
Net revenue return 9,188 10,913
Net capital return/(loss) 66,105 (58,341)
Net total return/(loss) 75,293 (47,428)
Weighted average number of ordinary shares in issue during the year 212,776,067 213,530,236
Revenue return per ordinary share 4.32p 5.11p
Capital return per ordinary share 31.07p (27.32p)
Total return per ordinary share 35.39p (22.21p)
The Company does not have any dilutive securities and therefore the basic and diluted returns per share are the same.
10 Dividends paid and payable on the ordinary shares
Dividends on ordinary shares Record date Payment date
2023
£’000
2022
£’000
Final dividend (2.35p
1
) for the year ended
30September 2021 7 January 2022 4 February 2022 – 5,019
Interim dividend (1.20p) for the year ended
30 September 2022 6 June 2022 27 June 2022 – 2,563
Final dividend (3.15p) for the year ended
30September 2022 6 January 2023 6 February 2023 6,702 –
Special dividend (0.50p) for the year ended
30 September 2022 6 January 2023 6 February 2023 1,064 –
Interim dividend (1.30p) for the year ended
30 September 2023 2 June 2023 27 June 2023 2,766 –
Unclaimed dividends over 12 years old – (17)
10,532 7,565
1 Figures have been restated due to the subdivision of each ordinary share of 50p into ten ordinary shares of 5p each on 7 February 2022
The final dividend for the year ended 30 September 2023 has not been included as a liability in these financial statements.
The total dividend payable in respect of the financial year, which forms the basis of the retention test under section 1158 of
Corporation Tax Act, is set out below.
2023
£’000
2022
£’000
Revenue available for distribution by way of dividend for the year 9,188 10,913
Interim dividend (1.30p) for the year ended 30 September 2023
(based on 212,768,122 ordinary shares in issue at 2 June 2023) (2,766) –
Final dividend (3.05p) for the year ended 30 September 2023
(based on 212,768,122 ordinary shares in issue at 8 December 2023) (6,489) –
Interim dividend (1.20p) for the year ended 30 September 2022
(based on 213,565,480 ordinary shares in issue at 6 June 2022) – (2,563)
Final dividend (3.15p) for the year ended 30 September 2022
(based on 212,768,122 ordinary shares in issue at 6 January 2023) – (6,702)
Special dividend (0.50p) for the year ended 30 September 2022
(based on 212,768,122 ordinary shares in issue at 6 January 2023) – (1,064)
Undistributed revenue for section 1158 purposes (67) 584
All dividends have been paid or will be paid out of revenue profits or revenue reserves.
73
Henderson European Focus Trust plc Annual Report 2023
Notes to the Financial Statements (continued)
11 Investments held at fair value through profit or loss
2023
£’000
2022
£’000
Valuation at 1 October 320,289 382,205
Investment holding gains at 30 September (3,786) (56,871)
Cost at 1 October 316,503 325,334
Additions at cost 287,856 273,392
Disposals at cost (269,335) (282,223)
Cost at 30 September 335,024 316,503
Investment holding gains at 30 September 49,225 3,786
Valuation at 30 September 384,249 320,289
The Company received £292,189,000 (2022: £280,160,000) from investments sold in the year. The book cost of these
investments when they were purchased were £269,335,000 (2022: £282,223,000). These investments have been revalued
over time and until they were sold any unrealised gains/losses were included in the fair value of investments.
The Company’s investments are registered in the name of nominees of, and held to the order of, HSBC Bank plc, as
custodian to the Company. There were no contingent liabilities in respect of the investments held at the year end.
Purchase transaction costs for the year ended 30 September 2023 were £325,000 (2022: £439,000). These comprise
mainly stamp duty and commission. Sale transaction costs for the year ended 30 September 2023 were £114,000
(2022:£103,000).
12 Debtors
2023
£’000
2022
£’000
Amounts receivable within one year:
Investments sold awaiting settlement 7,587 3,748
Accrued income 175 196
Prepaid expenses 51 6
Overseas withholding tax recoverable 3,534 3,071
Other receivables 398 334
11,745 7,355
Overseas withholding tax recoverable, may be recovered in more than one year due to the claim and recovery process in
place with overseas tax authorities. As this recovery is expected within the normal course of repayment for those
jurisdictions, these balances are classified as current assets.
13 Creditors: amounts falling due within one year
2023
£’000
2022
£’000
Amounts payable within one year:
Investments purchased awaiting settlement 269 2,663
Accrued expenses 2,305 1,206
Interest on loan notes 81 80
2,655 3,949
The Company has an uncommitted, secured multi-currency overdraft facility equal to the lesser of £30,000,000 and
10%of custody assets with HSBC Bank plc. Interest is charged at the bank’s fluctuating base rate, plus a margin of
1.25%per annum. Borrowings are repayable on demand.
74
Henderson European Focus Trust plc Annual Report 2023
Notes to the Financial Statements (continued)
14 Creditors: amounts falling due after more than one year
2023
£’000
2022
£’000
Borrowings: Loan notes (unsecured)
1.53% unsecured loan notes 2047 (Euro) 21,572 21,820
1.66% unsecured loan notes 2052 (Euro) 8,627 8,728
30,199 30,548
The EUR 25,000,000 1.53% unsecured loan notes 2047 were issued on 31 January 2022 and are redeemable at par on
31January 2047. They are shown on the balance sheet on the effective interest basis. The unsecured loan notes were
issued net of costs totalling £124,000.
The EUR 10,000,000 1.66% unsecured loan notes 2052 were issued on 31 January 2022 and are redeemable at par on
31January 2052. They are shown on the balance sheet on the effective interest basis. The unsecured loan notes were
issued net of costs totalling £50,000.
The issue costs on both series of loan notes will be amortised over the life of the notes.
15 Financial risk management policies and procedures
As an investment trust, the Company invests in equities and other investments for the long term so as to secure its
investment objective and policy as stated on page 19. In pursuing its investment objective and policy, the Company is
exposed to a variety of financial risks that could result in either a reduction in the Company’s net assets or a reduction
inthe profits available for distribution by way of dividends.
These financial risks, being market risk (comprising market price risk, currency risk and interest rate risk), credit risk,
liquidity risk and gearing, and the directors’ approach to the management of these risks, are set out below and have not
changed from the previous accounting period. The Board and Janus Henderson coordinate the Company’s risk
management and there are various risk management systems in place.
The Board determines the objectives, policies and processes for managing risks, and these are set out below under the
relevant risk category. The policies for the management of risk have not changed from the previous accounting period.
15.1 Market risk
The fair value of a financial instrument held by the Company may fluctuate due to changes in market prices. This market
risk comprises market price risk (see note 15.1.1), currency risk (see note 15.1.2) and interest rate risk (see note 15.1.3).
TheBoard reviews and agrees policies for managing these risks. The Manager assesses the exposure to market risk when
making each investment decision and monitors the overall level of market risk on the whole of the investment portfolio on
an ongoing basis.
15.1.1 Market price risk
The Company is an investment company and as such its performance is dependant on the valuation of its investments.
Consequently, market price risk is the most significant risk to which the Company is exposed. The Company’s investment
objective and policy require it to invest mainly in listed Continental Europe.
At 30 September 2023 the fair value of the Company’s assets exposed to market price risk was £384,249,000
(2022:£320,289,000). The fair value of the investments in the portfolio is normally their quoted bid price. The market
priceof investee companies’ shares is subject to their performance, supply and demand for the shares and investor
sentiment regarding the companies, their industry sectors and the countries in which they operate.
The Company invests in a diversified portfolio of investments. In accordance with the Company’s investment objective and
policy the portfolio contains between 35 and 45 stocks, with a maximum single stock weighting of 10% of the net asset
value (“NAV”) of the portfolio at the time of investment. Stocks weighted at 5% of the portfolio or more are not expected
toexceed 50% of NAV in aggregate. The typical minimum stock weight is 1% of NAV at the time of investment. The largest
individual stock at the year end represented 6.3% (2022: 5.6%) of the value of the portfolio. The Company may use
derivative instruments (such as futures and options) for the purpose of efficient portfolio management up to 10% of net
assets. Asat30 September 2023 the Company had no exposure to such instruments.
The level of risk relative to the benchmark is increased by over or underweighting industry sectors and, to a lesser extent,
country exposures and stock exposures relative to the benchmark, which tends to concentrate risk in those over and
underweighted areas. Likewise, adding structural debt adds market price risk to the extent that Fund Managers take full
advantage of that debt to have a net geared portfolio.
75
Henderson European Focus Trust plc Annual Report 2023
Notes to the Financial Statements (continued)
15 Financial risk management policies and procedures (continued)
15.1.1 Market price risk (continued)
To illustrate the Company’s sensitivity to market prices, a 10% change to the market value (in Sterling terms) of the equity
portfolio at 30 September 2023 would generate a corresponding increase or decrease in the NAV per ordinary share of
10.1% or £38.4 million (2022: 10.2% or £32.0 million).
15.1.2 Currency risk
The majority of the Company’s assets are denominated in currencies other than Sterling so the Company’s total return and
Statement of Financial Position can be significantly affected by currency fluctuations. No hedging of the currency exposure
is currently undertaken. Revenue received in currencies other than Sterling is converted into Sterling on, or shortly after, the
date of receipt. Whilst the Board and the Fund Manager monitor geographical and currency exposure it is not a key
determinant of investment decisions. At the year end 89.4% (2022: 83.0%) of the Company’s net assets were denominated
in currencies other than Sterling, the largest proportion being Euro, at 70.4% (2022: 57.2%) of net assets.
The table below shows, by currency, the split of the Company’s non-Sterling monetary assets and investments at the
yearend:
2023
£’000
2022
£’000
Monetary assets
Cash and short-term receivables:
Norwegian Krone 81 2,717
Euro 10,254 2,411
Swiss Franc 822 835
Swedish Krona – 740
Danish Krone 280 279
US Dollar 9 45
Monetary liabilities
Bank overdraft and short-term payables:
Euro (350) (892)
Swiss Franc – (1,851)
Long-term payables:
Euro (30,199) (30,548)
Non-monetary assets
Non-current asset investments held at fair value:
Euro 286,994 208,859
Swiss Franc 12,684 36,410
Danish Krone 23,175 20,724
Swedish Krona 13,202 12,979
Norwegian Krone 11,087 8,339
US Dollar 10,860 –
Total 338,899 261,047
The level of assets exposed to currency risk increased by approximately 29.8% during the year, primarily as a result of the
Company’s increase in assets. The relative levels of exposure to currencies at the beginning and end of the year were
broadly representative of levels through the period.
As can be seen from the table above the most significant currency exposures are to the Euro and Danish Krone.
The following table illustrates the Company’s sensitivity to movements in exchange rates relative to Sterling. The sensitivity
analysis is based on the Company’s non-Sterling monetary assets and investments held at the Statement of Financial
Position date and assumes a 10% appreciation or depreciation of Sterling against each of the currencies to which the
Company is exposed, with all other variables held constant. If Sterling depreciated against the currencies shown, the net
assets and revenue would have increased by these amounts. If Sterling appreciated against the currencies shown, the net
assets and revenue would have decreased by these amounts.
76
Henderson European Focus Trust plc Annual Report 2023
Notes to the Financial Statements (continued)
15 Financial risk management policies and procedures (continued)
15.1.2 Currency risk (continued)
2023 2022
Net assets
£’000
Revenue
£’000
Net assets
£’000
Revenue
£’000
Euro 24,245 860 16,348 815
Danish Krona 2,132 25 – –
Swiss Francs 1,228 45 3,218 136
Other currencies 2,217 88 4,166 144
29,822 1,018 23,732 1,095
The effect on capital return would be materially the same as the effect on net assets.
It should be noted that a number of investee companies derive a proportion of their profits from markets subject to
currencies other than that in which their shares are denominated, so changes in the relevant currency exchange rates
relative to each other are also likely to have an indirect impact. The above illustration is based on exposures at the year end.
Exposures may be subject to change during the year as a result of investment decisions.
15.1.3 Interest rate risk
The Company finances part of its activities through the use of a secured uncommitted multi-currency overdraft facility
provided by HSBC Bank plc equal to the lesser of £30,000,000 and 10% of net assets. Interest rates are set at the time
drawings are made based on the bank’s base rate, plus a margin of 1.25% per annum. During the year, there was nothing
drawn under the facility (2022: maximum drawn £12,251,000) and the weighted average interest rate for the period was
nil(2022: 1.41%). No hedging of the interest rate is undertaken. At 30 September 2023 there were drawings of £nil
outstanding, of which £nil were in foreign currencies (2022: £nil of which £nil was in foreign currencies). Interest is paid on
the cash and short-term deposits. Overdraft drawings and deposits are rarely fixed for periods of more than one week.
To illustrate the potential sensitivity to changes in interest rates, if £30 million was drawn from the uncommitted multi-
currency overdraft facility (based on the maximum overdraft limit set by the Board), a change of 1.0% in the rate of interest
charged would, over the course of a year, amount to £300,000 (ignoring any exchange rate movements), less than 0.1% of
year end net assets.
In January 2022, the Company issued EUR 35,000,000 of unsecured loan notes, with interest payable on EUR 25,000,000
at 1.53% and interest payable on EUR 10,000,000 at 1.66%. As the interest rates are fixed, there is no sensitivity to
changes in rates.
15.2 Credit risk
Credit risk is the Company’s exposure to financial loss from failure of a counterparty to deliver securities or cash for
acquisitions or disposals of investments or to repay deposits, or the failure of the Company’s custodian. The Company
manages credit risk by using brokers from a database of approved financial institutions who have undergone rigorous due
diligence tests by the Manager’s risk management team and by dealing through Janus Henderson with banks authorised
by the Financial Conduct Authority.
At 30 September 2023, the maximum exposure to credit risk was as follows:
2023
£’000
2022
£’000
Cash at bank 15,857 21,272
Debtors (see note 12) 11,745 7,355
The Company is exposed to credit risk through its cash position. Bankruptcy or insolvency of banks may cause the
Company’s rights with respect to cash held by banks to be delayed or limited. The Company’s cash balances are held by
its custodian, HSBC Bank Plc. The directors believe the counterparty is of high credit quality and, therefore, the Company
has minimal exposure to credit risk. Exposure to debtors is primarily exposure to outstanding trades and overseas
withholding tax recoverable.
All of the above financial assets are current, their fair values are considered to be the same as the values shown and the
likelihood of default is considered to be low.
77
Henderson European Focus Trust plc Annual Report 2023
Notes to the Financial Statements (continued)
15 Financial risk management policies and procedures (continued)
15.3 Liquidity risk
Liquidity risk is the possibility of the Company failing to realise sufficient assets to meet its financial obligations. The Company
minimises this risk by having a bias to larger capitalised companies, by investing in listed companies and byensuring that
ithas adequate cash and credit facilities in place to meet its obligations. Exposure to debtors is primarily exposure to
outstanding trades and overseas withholding tax recoverable. Deposits are rarely fixed for terms in excess of one week and
are limited to 10% of net assets with any one bank or institution. Cash requirements are monitored on aregular basis by
the Manager.
At 30 September 2023, the value of financial liabilities was £2,655,000 and long-term liabilities of £30,199,000
(2022:£3,949,000 and £30,548,000).
The table below analyses the Company’s contractual liabilities.
2023 2022
Within one
year
£’000
Between one
and five years
£’000
More than
five years
£’000
Within one
year
£’000
Between one
and five years
£’000
More than
five years
£’000
Unsecured loan notes
1
476 1,904 39,644 471 1,886 39,989
Other creditors and accruals 2,655 – – 3,949 – –
3,131 1,904 39,644 4,420 1,886 39,989
1 The above figures show interest payable over the remaining term of the secured notes. The figures in the ‘more than 5 years’ column also include the capital
to be repaid. Details of repayment are set out in note 14
The year-end amounts are not representative of the exposure to interest rates either during the year just ended nor for the
year ahead, since the level of borrowings and/or cash held will be affected by the strategy being followed in response to
theBoard’s and Fund Managers’ perception of market prospects and the investment opportunities available at any
particular time.
15.4 Fair value hierarchy
The table below analyses fair value measurements for investments held at fair value through profit or loss. These fair value
measurements are categorised into different levels in the fair value hierarchy based on the valuation techniques used and
are defined as follows under FRS 102:
●
Level 1 – the unadjusted quoted price in an active market for identical assets or liabilities that the entity can access
atthe measurement date.
●
Level 2 – inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market
data) for the asset or liability, either directly or indirectly.
●
Level 3 – inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability.
2023
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Financial assets at fair value through profit or loss:
Quoted equities 364,567 – – 364,567
Short-dated government bonds 19,682 – – 19,682
Total 384,249 – – 384,249
2022
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Financial assets at fair value through profit or loss:
Quoted equities 320,289 – – 320,289
Total 320,289 – – 320,289
The fair value of the Company’s investments in quoted equities and short-dated government bonds has been determined
by reference to their quoted bid prices at the reporting date. Quoted equities and short-dated government bonds included
in Level 1 are actively traded on recognised stock exchanges. Short-term balances are excluded as their carrying value at
the reporting date approximates their fair value.
78
Henderson European Focus Trust plc Annual Report 2023
Notes to the Financial Statements (continued)
15 Financial risk management policies and procedures (continued)
15.4 Fair value hierarchy (continued)
In order to comply with fairvalue accounting disclosures only, the fair value of the unsecured loan notes has been
estimated to be £17,508,000 (2022: £20,774,000) and is categorised as Level 3 in the fair value hierarchy as described
below. However, for the purpose of the daily NAV announcements, the unsecured loan notes are valued at par in the NAV
because they are not traded and the directors expect them to be held to maturity and, accordingly, the directors have
assessed that this is the most appropriate value to be applied for this purpose.
The estimate of the fair value of each unsecured loan note is calculated by aggregating the discounted value of future cash
flows, being the contractual interest payments and the repayment of capital at maturity as each note falls due. The discount
rate used for each note is based on the yield of the reference instrument that was used in the pricing of the loan notes
plusthe same credit spread applied at the issue. The net assets including the loan notes at fair value would have been
£391,688,000 at 30 September 2023 (compared to £378,997,000 with the loan notes at par value), equivalent to a NAV
perordinary share of 184.09p (compared to 178.13p with loan notes at par value).
In the event that the Company decided to pay back the loan notes earlier than the maturity date, the loan note agreements
include certain clauses that may require additional payments to be made. These clauses are primarily to protect the lender
from any losses suffered from early repayment. Such ‘make-whole amounts’ are based on any excess of the discounted
value of the remaining scheduled payments over the life of the loan notes above the value of the principal. The make-whole
amount cannot be less than zero. The directors have assessed that the likelihood of early repayment is considered to be
highly unlikely to occur.
15.5 Capital management policies and procedures
The Company’s capital management objectives are to ensure that it will be able to continue as a going concern and to
maximise the revenue and capital return to its equity shareholders. This is achieved through an appropriate balance of
equity capital and debt.
The Company’s total capital at 30 September 2023 was £378,997,000 (2022: £314,419,000) comprising equity share
capital of £10,819,000 (2022: £10,819,000) and reserves of £368,178,000 (2022: £303,600,000). Details of distributable
reserves are set out on page 70.
The Board, with the assistance of Janus Henderson, monitors and reviews the broad structure of the Company’s capital on
an ongoing basis. This review includes:
●
the planned level of gearing, which takes into account the Fund Managers’ view on the market;
●
the need to buy back equity shares, either for cancellation or to hold in treasury, which takes account of the difference
between the NAV per share and the share price (i.e. the level of share price discount or premium) as well as the
discount of the peer group and the level of the equity market;
●
the need for new issues of equity shares, including sales from treasury; and
●
the extent to which revenue in excess of that which is required to be distributed should be retained.
The Company is subject to several externally imposed capital requirements:
●
borrowings under the overdraft facility are not to exceed the lesser of £30 million and 10% of custody assets;
●
as a public company, the Company has a minimum share capital of £50,000;
●
in order to be able to pay dividends out of profits available for distribution by way of dividends, the Company has to be
able to meet the capital restriction tests imposed on investment companies by company law; and
●
in terms of the secured notes include financial covenants in relation to the level of borrowings.
The Company has complied with these requirements.
The Company’s objectives, policies and procedures for managing capital are unchanged from last year. See the Chair’s
Statement on page 8 and Notice of AGM on page 83 to 89 for an explanation of the proposed cancellation of the share
premium account and capital redemption reserve, subject to shareholder approval at the AGM on 25 January 2024.
79
Henderson European Focus Trust plc Annual Report 2023
Notes to the Financial Statements (continued)
16 Called-up share capital
Number of
shares entitled
to dividend
Shares held
intreasury
Total number
of shares
Nominal value
of shares
£’000
At 30 September 2022 212,913,122 3,476,788 216,389,910 10,819
Buyback into treasury of 145,000 shares (145,000) 145,000 – –
At 30 September 2023 212,768,122 3,621,788 216,389,910 10,819
Number of
shares entitled to
dividend
Shares held
intreasury
Total number of
shares
Nominal value
of shares
£’000
At 30 September 2021 21,382,578 256,413 21,638,991 10,819
Buyback in to treasury of 26,030 shares (26,030) 26,030 – –
21,356,548 282,443 21,638,991 10,819
Issue of new ordinary shares following 10 for 1 stock split 192,208,932 2,541,987 194,750,919 –
Buyback into treasury of 652,358 shares (652,358) 652,358 – –
At 30 September 2022 212,913,122 3,476,788 216,389,910 10,819
During the year to 30 September 2023, the Company repurchased 145,000 (2022: 26,030 prior to the 10 for 1 share split
and652,358 following the 10 for 1 share split). Ordinary shares at a cost of £183,000 including expenses (2022: £1,324,000).
The ordinary shares held in treasury have no voting rights and are not entitled to dividends.
17 Share premium account
2023
£’000
2022
£’000
Balance brought forward 41,995 41,995
Balance at 30 September 41,995 41,995
18 Capital reserve
2023 2022
Capital
reserve
arising on
investments
sold
1
£’000
Capital
reserve
arising on
investments
held
£’000
Capital
reserves
total
£’000
Capital
reserve
arising on
investments
sold
1
£’000
Capital
reserve
arising on
investments
held
£’000
Capital
reserves
total
£’000
Balance brought forward 147,454 3,700 151,154 154,035 56,784 210,819
Transfer on disposal of investments (16,663) 16,663 – 29,841 (29,841) –
Movement in fair value of investments 39,517 28,776 68,293 (31,905) (23,243) (55,148)
Exchange losses on currency
transactions (5) – (5) (1,142) – (1,142)
Management fee allocated to capital (1,762) – (1,762) (1,642) – (1,642)
Interest payable allocated to capital (385) – (385) (272) – (272)
Buyback of ordinary shares for
treasury (183) – (183) (1,324) – (1,324)
Irrecoverable withholding tax deducted
at source (36) – (36) (137) – (137)
Balance at 30 September 167,937 49,139 217,076 147,454 3,700 151,154
1 Reserve available for distribution as a dividend or share buyback
80
Henderson European Focus Trust plc Annual Report 2023
19 Revenue reserve
1
2023
£’000
2022
£’000
Balance brought forward 13,840 10,492
Net revenue return for the year after tax 9,188 10,913
Dividends paid (note 10) (10,532) (7,565)
Balance at 30 September 12,496 13,840
1 Reserve available for distribution as a dividend or share buyback
20 Other reserves
2023 2022
Special
distribut able
reserve
1
£’000
Merger
reserve
£’000
Capital
redemption
reserve
£’000
Total
£’000
Special
distributable
reserve
1
£’000
Merger
reserve
£’000
Capital
redemption
reserve
£’000
Total
£’000
Balance at 30 September 25,846 61,344 9,421 96,611 25,846 61,344 9,421 96,611
1 Reserves available for distribution as a dividend or share buyback
See the Chair’s Statement on page 8 and Notice of AGM on pages 83 to 89 for an explanation of the proposed cancellation of the share premium account and
capital redemption reserve and reclassified as distributable reserves, subject to shareholder approval at the AGM on 25 January 2024.
21 Net asset value per ordinary share
The NAV per ordinary share is based on the net assets attributable to the ordinary shares of £378,997,000
(2022:£314,419,000) and on 212,768,122 (2022: 212,913,122) shares in issue on 30 September 2023, excluding
treasuryshares.
The movements during the year of the assets attributable to the ordinary shares were as follows:
2023
£’000
2022
£’000
Total net assets at start of year 314,419 370,736
Net return for the year after tax 75,293 (47,428)
Buyback of ordinary shares for treasury (183) (1,324)
Dividends paid on ordinary shares (10,532) (7,565)
Net assets attributable to the ordinary shares at 30 September 378,997 314,419
22 Capital commitments and contingent liabilities
There were no capital commitments or contingent liabilities as at 30 September 2023 (2022: nil).
23 Transactions with the Manager and related parties
Under the terms of an agreement effective from 22 July 2014 the Company has appointed wholly owned subsidiaries
ofJanus Henderson Group plc (“Janus Henderson”) to provide investment management, accounting, secretarial and
administrative services. Janus Henderson has contracted with BNP Paribas to provide accounting and administration
services.
The management fee is charged at 0.65% per annum of net assets up to £300 million, and 0.55% of net assets above
£300million. Any holdings in funds managed by Janus Henderson, of which there were none in the year, are excluded from
the calculation of the management fee. The management fees payable to Janus Henderson under the agreement in respect
of the year ended 30 September 2023 were £2,349,000 (2022: £2,190,000). The amount outstanding at 30 September
2023 was £1,189,000 payable to Janus Henderson (2022: £1,028,000).
In addition to the above services, Janus Henderson facilitates marketing activities with third parties which are recharged to
the Company. Total amounts paid to Janus Henderson in respect of sales and marketing for the period ended
30September 2023 amounted to £84,000 (2022: £64,000).
Details of fees paid to directors are included in the Directors’ Remuneration Report on page 50 and in note 6 on page 71.
Notes to the Financial Statements (continued)
81
Henderson European Focus Trust plc Annual Report 2023
24 Changes in financial liabilities
The following table shows the movements during the period of net debt in the statement of financial position:
At
1 October
2022
£’000
Non-cash changes
At
30September
2023
£’000
Cash flows
£’000
Amortisation
of issue costs
£’000
Foreign exchange
movement
£’000
Financing activities
Unsecured loan notes (30,548) – (5) 354 (30,199)
Closing liabilities from financing activities (30,548) – (5) 354 (30,199)
At
1 October
2021
£’000
Non-cash changes
At
30September
2022
£’000
Cash flows
£’000
Amortisation of
issue costs
£’000
Foreign exchange
movement
£’000
Financing activities
Bank overdraft (10,558) 10,558 – – –
Unsecured loan notes – (29,102) (4) (1,442) (30,548)
Closing liabilities from financing activities (10,558) (18,544) (4) (1,442) (30,548)
Notes to the Financial Statements (continued)
82
Henderson European Focus Trust plc Annual Report 2023
Notice of Annual
General Meeting
Photo: Saint-Gobain, France’s first low-energy-consuming Multi-Comfort House,
producing more energy than it consumes through materials from 15 Saint-Gobain
brands. © Saint-Gobain –Saint-Gobain Multi-Comfort House (2011, Beaucouzé,
France) – Arch. ARCHIfact – Ph. Thierry Mercier
83
Notice is hereby given that the Annual General Meeting
(“AGM”) of Henderson European Focus Trust plc will be
heldat 11.30 am on Thursday, 25 January 2024 at
201Bishopsgate, London EC2M 3AE for the purpose
ofconsidering and, if thought fit, passing the following
resolutions, which will be proposed, in the case of
resolutions 1 to 12, as ordinary resolutions, and in the
caseof resolutions 13 to 17, as special resolutions.
Ordinary resolutions
1. To receive the Annual Report and the audited financial
statements for the year ended 30 September 2023.
2. To approve the Directors’ Remuneration Report for the
year ended 30 September 2023.
3. To approve the Directors’ Remuneration Policy.
4. To approve a final dividend of 3.05p per ordinary share.
5. To elect Melanie Blake as a director of the Company.
6. To re-elect Victoria (Vicky) Hastings as a director of the
Company.
7. To re-elect Robin Archibald as a director of the Company.
8. To re-elect Stephen Macklow-Smith as a director of the
Company.
9. To re-elect Marco Maria Bianconi as a director of the
Company.
10. To re-appoint Ernst & Young LLP as the statutory auditor
of the Company.
11. To authorise the directors to determine the statutory
auditor’s remuneration.
12. THAT in substitution for all existing authorities, the
directors be generally and unconditionally authorised
pursuant to section 551 of the Companies Act 2006 (the
“Act”) to exercise all the powers of the Company to allot
ordinary shares of 5p each in the capital of the Company
(“ordinary shares”) and to grant rights to subscribe for, or
to convert any security into, ordinary shares up to an
aggregate nominal amount of £1,063,840 (or such other
amount representing 10% of the issued share capital
(excluding treasury shares) as at the date of the passing of
this resolution) for a period expiring (unless previously
renewed, varied or revoked by the Company in general
meeting) on the earlier of the date falling 15 months after
the passing of this resolution and the conclusion of the
AGM of the Company in 2025, save that the directors may
make an offer or agreement which would or might require
ordinary shares to be allotted or rights to be granted after
expiry of this authority and the directors may allot ordinary
shares and grant rights in pursuance of that offer or
agreement as if the authority conferred hereby had not
expired.
Special resolutions
13. THAT in substitution for all existing authorities and, subject
to the passing of resolution 12, the directors be
empowered pursuant to sections 570 and 573 of the
Companies Act 2006 (the “Act”) to allot ordinary shares or
make offers or agreements to allot ordinary shares (within
the meaning of section 560 of the Act) for cash, and to sell
ordinary shares which are held by the Company in
treasury, as if section 561(1) of the Act did not apply to any
such allotments or sale. This power shall be limited to the
allotment or sale of ordinary shares:
(a) whether by way of a rights issue, open offer or
otherwise to ordinary shareholders on the Register of
Members at such record date(s) as the directors may
determine where the ordinary shares respectively
attributable to the interests of all ordinary shareholders
are proportionate (or as nearly as may be) to the
respective numbers of ordinary shares held by them
(or are otherwise allotted in accordance with the rights
attaching to such ordinary shares) subject in either
case to such exclusions or other arrangements as the
directors may deem necessary or expedient in relation
to treasury shares, fractional entitlements or local or
practical problems under the laws of, or the
requirements of, any regulatory body or any stock
exchange in any territory or otherwise howsoever;
(b) up to a maximum aggregate nominal value of
£1,063,840 (or such other amount representing 10% of
the Company’s issued ordinary share capital (excluding
treasury shares) as at the date of the passing of this
resolution); and
(c) at a price not less than the net asset value per ordinary
share as at the latest practicable date before such
allotment of ordinary shares as determined by the
directors in their reasonable discretion;
and shall expire at the earlier of the date falling 15 months
after the passing of this resolution and the conclusion of the
AGM of the Company in 2025 unless previously renewed,
varied or revoked by the Company in general meeting, save
that the directors may before such expiry make an offer or
agreement which would or might require ordinary shares to be
allotted or sold after such expiry and the directors may allot or
sell ordinary shares in pursuance of such an offer or
agreement as if the power conferred hereby had not expired.
14. THAT in substitution for all existing authorities, the
Company be generally and unconditionally authorised in
accordance with section 701 of the Companies Act 2006
(the “Act”) to make market purchases (within the meaning
of section 693(4) of the Act) of ordinary shares on such
terms and in such manner as the directors may from time
to time determine, provided that:
Notice of Annual General Meeting
Henderson European Focus Trust plc Annual Report 2023
84
(a) the maximum aggregate number of ordinary shares
authorised to be purchased is 14.99% of the
Company’s issued ordinary share capital at the date
ofthe resolution (equivalent to 31,893,941 ordinary
shares (excluding treasury shares) as at 8 December
2023 being the latest practicable date prior to
publication of this Notice);
(b) the maximum price (exclusive of expenses) which may
be paid for an ordinary share shall not exceed the
higher of:
(i) 105% of the average of the middle market
quotations for an ordinary share as taken from the
London Stock Exchange Daily Official List for the
five business days immediately preceding the date
of purchase; and
(ii) the higher of the price of the last independent trade
and the highest current independent bid on the
London Stock Exchange when the purchase is
carried out;
(c) the minimum price (exclusive of expenses) which may
be paid for an ordinary share shall be 5 pence, being
the nominal value per share;
(d) the authority hereby conferred shall expire at the earlier
of the date falling 15 months after the date of the
passing of this resolution and the conclusion of the
AGM of the Company in 2025, unless such authority
isrenewed before that expiry;
(e) the Company may make a contract to purchase
ordinary shares under the authority hereby conferred
which will or may be executed wholly or partly after the
expiration of such authority, and may make a purchase
of ordinary shares pursuant to any such contract; and
(f) any ordinary shares so purchased shall be cancelled,
or in accordance with the provisions of the Act, if the
directors so determine, be held, sold, transferred or
otherwise dealt with as treasury shares.
15. THAT a general meeting other than an AGM may be
calledon not less than 14 clear days’ notice, such
authority to expire on conclusion of the AGM of the
Company in2025.
16. THAT, subject to the sanction of the High Court, the
amount standing to the credit of the share premium
account of the Company, at the date an order is made
confirming such cancellation by the Court, be and hereby
is cancelled, and the amount by which the share capital is
so reduced be credited to a reserve of the Company.
17. THAT, subject to the sanction of the High Court, the
amount standing to the credit of the capital redemption
reserve of the Company, at the date an order is made
confirming such cancellation by the Court, be and hereby
is cancelled, and the amount by which the share capital
isso reduced be credited to a reserve of the Company.
By order of the Board
Janus Henderson Secretarial Services UK Limited
Corporate Secretary
12 December 2023
Registered office:
201 Bishopsgate, London EC2M 3AE
Notice of Annual General Meeting (continued)
MOORGATE
BISHOPSGATE
PRIMROSE ST.
WORSH IP STREE T
201 Bishopsgate
London EC2M 3AE
LIVERPOOL
STREET
STATION
APPOLD ST.
SUN STREET
BROADGATE
CIRCLE
FINSBURY PAVE.
EARL ST.
WORSHIP STREET
ROPEM AKER STRE ET
LIVERPOOL ST
LONDON WALL
WILSON ST.
BISHOPSGATE
GREAT EASTERN ST.
COMMERCIAL ST.
SHOREDITCH
HOUNDSDITCH
AL DGATE
MIDDLESEX
STREET
CHISWELL STREET
SOUTH PLACE
ELDON ST.
FINSBU RY
CIRCUS
CITY ROAD
FINS BURY SQ.
FINSBURY SQ.
CLIF TON ST.
SPITALFIELDS
MARKET
FOLGATE ST.
NORTON
MIDDLESEX ST.
BRUSHFIELD ST REE T
APPOLD ST.
The AGM will be held at 201 Bishopsgate,
LondonEC2M3AE. It is a few minutes’ walk from
Liverpool Street Station and from Moorgate Station.
AGM venue
Henderson European Focus Trust plc Annual Report 2023
85
Explanation of resolutions
The information set out below is an explanation of the
business to be considered at the 2024 Annual General
Meeting (“AGM”). You are welcome to join the AGM in person
or by conferencing software Zoom. If you wish to join by
Zoom, please visit www.janushenderson.com/trustslive
toregister.
Resolutions 1 to 12 are proposed as ordinary resolutions.
This means that for each of those resolutions to be passed,
more than half of the votes cast must be in favour of the
resolution. Resolutions 13 to 17 are proposed as special
resolutions. This means that for each of those resolutions
to be passed, at least three quarters of the votes cast must
be in favour of the resolution.
Resolution 1: Annual Report and audited
financialstatements
The directors must present the audited financial statements,
Strategic Report, Directors’ Report and the Independent
Auditor’s Report for the previous financial period to
shareholders at the AGM. Shareholders will have the
opportunity to ask questions and at the end of the discussion,
shareholders will be invited to receive the Annual Report and
audited financial statements.
Resolutions 2 and 3: Approval of the Directors’
Remuneration Report and Remuneration Policy
Shareholders are asked to approve the Remuneration Report
and Remuneration Policy (see page 49 which describes the
Remuneration Policy). The vote on the Remuneration Report is
advisory and does not affect the remuneration payable to any
individual director, though the Board welcomes feedback from
shareholders and will incorporate this into future remuneration
discussions. In accordance with legislation on remuneration,
shareholders are asked to approve the Company’s
Remuneration Policy every three years. Shareholders last
approved the Remuneration Policy at the AGM in 2020, and
there have been no changes to the policy since that date. The
vote on this resolution is binding.
Resolution 4: Final Dividend
The directors propose a final dividend of 3.05p per ordinary
share. The payment of a final dividend is subject to the
approval of shareholders, although the scope to pay a
lesseramount would be restricted by the Company’s status
as an investment trust. If approved, the dividend will be paid
on 5February 2024 to shareholders on the register on
5January 2024. The shares will be quoted ex-dividend on
4January 2024.
Resolutions 5 to 9: Election and re-election
ofdirectors
As is governance best practice, directors are expected to
stand for re-election by shareholders annually. During the
year, the Nominations Committee reviewed the performance,
contribution and commitment of the members of the Board
and concluded that each director standing for election and
re-election brought extensive, current and relevant business
experience that allows them to contribute effectively to the
stewardship of the Company, in terms of both performance
and time commitment.
The biographies of each director, including their skills,
experience and qualifications relevant for the sustainable
success of the Company are set out on page 34. All
directorsstanding for re-election held office throughout the
year under review. Melanie Blake is standing for election for
the first time by shareholders, having taken office as a director
on 3 July 2023.
Resolutions 10 and 11: Statutory auditor
Shareholders are required to re-appoint an auditor at each
general meeting at which accounts are presented. Resolution
10 proposes the re-appointment of Ernst & Young LLP as the
Company’s auditor. The Board is pleased to ask shareholders
to re-appoint Ernst & Young LLP as the Company’s auditor for
what would be their eleventh year in office. Resolution 11
gives the directors authority to determine the remuneration of
the auditor. See page 41 for an explanation of the audit tender
carried out in the year.
Resolutions 12 and 13: Authority to issue new
shares and disapply pre-emption rights
If the directors wish to re-issue ordinary shares from treasury
for cash, company law requires these shares be offered first
to existing shareholders in proportion to their current holdings
(known as ‘pre-emptive’ rights). At the 2023 AGM, the
directors were granted authority either to issue from treasury
or to allot up to 21,276,812 ordinary shares on a non-pre-
emptive basis. No shares have been issued under this
authority, which will expire at the forthcoming AGM.
Resolutions 12 and 13 seek to renew the directors’ authority
either to issue from treasury or to allot shares with a nominal
value of up to £1,063,840 (or such other amount being 10% of
the issued share capital (excluding shares held in treasury) as at
the date of the passing of this resolution) on a non-pre-emptive
basis. The directors intend to use the authority to issue ordinary
shares only if they believe it to be advantageous to the
Company’s existing shareholders to do so. In particular, shares,
whether new shares or shares held in treasury, will never be
allotted or sold other than at a premium to the net asset value
per ordinary share. If renewed, the authority will expire at the
earlier of the date falling 15 months after the passing of this
resolution and the conclusion of the AGM in 2025.
Resolution 14: Repurchase of the Company’s
ordinary shares
This resolution seeks authority for the Company to make
market purchases of its own ordinary shares for cancellation
or to be held in treasury, and is proposed as a special
resolution. We have not made use of this authority since the
January 2023 AGM.
Notice of Annual General Meeting (continued)
Henderson European Focus Trust plc Annual Report 2023
86
If the resolution is passed, it will allow the Company to
purchase up to 31,893,941 of its ordinary shares, representing
14.99% of the Company’s issued ordinary share capital as at
8December 2023. The directors believe that the ability of the
Company to purchase its own ordinary shares in the market
will potentially benefit all shareholders of the Company, giving
the Company more flexibility to manage any discount and to
help balance supply and demand. The purchase of shares at
adiscount to the underlying net asset value (“NAV”) would
enhance the NAV per share of the remaining shares. The
Company will only sell shares from treasury at prices greater
than the prevailing NAV per share at the date of issue.
The resolution specifies the minimum and maximum prices
which may be paid for any ordinary shares purchased under
this authority. The authority will expire on the earlier of 15
months after the passing of this resolution and the Company’s
AGM that will be held in 2025.
The directors will only exercise the authority to purchase
ordinary shares where they consider that such purchases will
be in the best interests of shareholders generally and consider
the effect will be to increase NAV per share.
Resolution 15: Notice of general meetings
The Board believes that it is in the best interests of
shareholders of the Company to have the ability to call
meetings on 14 clear days’ notice should a matter require
urgency. Under the Companies (Shareholders’ Rights)
Regulations 2009, companies are only able to opt for a notice
period of 14 days in respect of general meetings other than
AGMs if authorised annually by shareholders, and if
shareholders have the opportunity to vote at such a meeting
by electronic means. The Board will therefore, as last year,
propose a resolution at the AGM to approve the reduction in
the minimum notice period from 21 clear days to 14 clear days
for all general meetings other than AGMs. The directors do not
intend to use the authority unless immediate action is required.
Resolutions 16 and 17: Cancellation of statutory
share capital reserves
Resolution 16 is a special resolution to cancel the entire
amount standing to the credit of the Company’s share
premium account (“Share Premium Account”). Resolution 17 is
a special resolution to cancel the entire amount standing to the
credit of the capital redemption reserve (“Capital Redemption
Reserve”) of the Company. The cancellation of the Share
Premium Account and the Capital Redemption Reserve are
proposed to be completed together by means of a Court-
approved capital reduction as described below (the “Capital
Reduction”) subject to the passing of Resolutions 16 and 17.
Background to the Capital Reduction
The Share Premium Account represents the excess received
(subsequent to 11 July 2007) where treasury shares are sold
for more than the Company paid to purchase the shares
placed in treasury and the excess over the nominal value for
new ordinary shares issued, less the costs of issue. The
Capital Redemption Reserve represents the nominal value
ofordinary shares that have been repurchased and cancelled
by the Company. The reserves represented by the Share
Premium Account and the Capital Redemption Reserve can
only be used for very limited applications and cannot, for
example, be used to pay dividends or apply against future
buybacks. By cancelling the amounts standing to the credit of
these reserves through the Capital Reduction the Company
will increase its distributable reserves which can be used for
the future payment of dividends to shareholders or to carry
outshare buybacks should it be desirable to do so.
On completion of the Capital Reduction, the Company’s entire
Share Premium Account and Capital Redemption Reserve will
be cancelled and, subject to the Court being satisfied with the
Company’s approach to creditors as outlined below, an
equivalent amount will be added to the Company’s
distributable reserves.
The completion of the Capital Reduction will not affect the
rights attaching to the ordinary shares and will not result in any
change to the number of ordinary shares in issue. Neitherwill
the Capital Reduction involve a return of capital to
shareholders nor any reduction in the Company’s net assets.
Procedure for completing the Capital Reduction
Under the Act, the Capital Reduction is conditional upon (a)
thesanction of the special resolutions of shareholders, (b) the
confirmation of the Court, (c) the registration of the Court’s
order confirming the Capital Reduction (the “Court Order”)
and(d) the Capital Reduction not otherwise being unlawful.
In considering the Company’s application for the Court Order,
the Court will need to be satisfied that the interests of any
creditors (including contingent creditors) of the Company,
whose debts remain outstanding on the date on which the
Court Order is registered, are not prejudiced by the Capital
Reduction. The Directors intend to take such steps to satisfy
the Court in this regards as they consider appropriate.
The Company intends that an application will be made for the
Court to approve the Capital Reduction as soon as reasonably
practicable after the Annual General Meeting, provided that
Resolutions 16 and 17 are, in each case, passed as special
resolutions.
Provided that the Capital Reduction is approved by shareholders
and the Court, and subject to any direction given by the Court
in confirming the Capital Reduction and/or the terms of any
undertaking given by the Company in relation tothe reserve
which arises, the amounts standing to the creditof the Share
Premium Account and the Capital Redemption Reserve so
cancelled will be credited to a new special distributable
reserve of the Company. The distributable reserves so created
would then be available to be applied, inaccordance with Part
23 of the Act, towards the future payment of dividends and for
the purposes of future share buybacks.
Notice of Annual General Meeting (continued)
Henderson European Focus Trust plc Annual Report 2023
87
Notice of Annual General Meeting (continued)
If the special resolutions to approve the Capital Reduction are
not passed by the requisite majority of shareholders at the
AGM or Court approval is not obtained, the Capital Reduction
will not proceed. The Directors also retain the right not to
proceed with the Capital Reduction, at their sole discretion, in
circumstances where they consider that to do so would be
inappropriate or inadvisable or no longer in the best interests
of shareholders, including where any unforeseen event arises
or in circumstances where the Court imposes conditions on
the confirmation of the Capital Reduction that are not
satisfactory to the Company. In these circumstance the
distributable reserves intended to be created by the Capital
Reduction will not be available for use by the Company for the
purposes described above.
Notes to the Notice of AGM
1. Voting record date
Only shareholders registered in the register of members of the
Company at close of business on Tuesday, 23 January 2024
(the “voting record date”) shall be entitled to vote at the AGM in
respect of the number of voting rights registered in their name
at that time. Changes to entries on the register of members
after that time shall be disregarded in determining the rights of
any person to attend, speak and vote at the AGM.
If the AGM is adjourned for no more than 48 hours after the
original time, the same voting record date will also apply for
the purpose of determining the entitlement of members to
attend, speak and vote (and for the purpose of determining
the number of votes they may cast) at the adjourned meeting.
If the AGM is adjourned for more than 48 hours then the
voting record date will be close of business on the day which
is two days (excluding non-working days) before the day of the
adjourned meeting or, if the Company gives notice of the
adjourned meeting, at any time specified in that notice.
In the case of joint holders of a voting right, the vote of the
senior who tenders a vote shall be accepted to the exclusion
ofthe votes of the other joint holders and, for this purpose,
seniority shall be determined by the order in which the names
stand in the register of members in respect of the joint holding.
2. Right to attend and vote
Holders of ordinary shares are entitled to attend and vote at
the AGM or at any adjournment(s) thereof. On a poll vote,
each ordinary shareholder has one vote for each share held.
On a vote on a show of hands, each ordinary shareholder or
proxy has one vote.
If a proxy is appointed by more than one member and all such
members have instructed the proxy to vote in the same way,
the proxy will only be entitled on a show of hands to vote ‘for’
or ‘against’ as applicable. If a proxy is appointed by more than
one member, but such members have given different voting
instructions, the proxy may on a show of hands vote both ‘for’
and ‘against’ in order to reflect the different voting instructions.
On a poll all or any of the voting rights of the members may be
exercised by one or more duly appointed proxies. However,
where a member appoints more than one proxy, section
285(4) of the Companies Act 2006 (the “Act”) does not
authorise the exercise by the proxies taken together of more
extensive voting rights than could be exercised by the
member in person.
3. Voting by corporate representation
Corporate representatives are entitled to attend and vote on
behalf of the corporate member in accordance with section
323 of the Act. Shareholders are invited to send their letters of
corporate representation in advance of the AGM to
itsecretariat@janushenderson.com.
4. Votes withheld
Avote withheld on any resolution is not a vote in law. This
means that the vote will not be counted in the votes cast
‘for’ or ‘against’ the respective resolution.
5. Right to appoint proxies
Pursuant to section 324 of the Act, a member entitled to
attend and vote at the AGM may appoint more than one
proxy, provided that each proxy is appointed to exercise the
rights attached to different shares held by him or her. A proxy
need not be a member of the Company. A form of proxy is
enclosed. The completion of the form of proxy or any CREST
proxy instruction (described below) will not preclude a
shareholder from attending and voting in person at the
meeting.
6. Nominated persons
The right to appoint a proxy does not apply to persons
whose ordinary shares are held on their behalf by another
person and who have been nominated to receive
communications from the Company in accordance with
section 146 of the Companies Act 2006 (“Nominated
Persons”). Nominated Persons may have a right under an
agreement with the member who holds the ordinary shares
on their behalf to be appointed (or to have someone else
appointed) as a proxy. Alternatively, if Nominated Persons do
not have such a right, or do not wish to exercise it, they may
have a right under such an agreement to give instructions to
the person holding the ordinary shares as to the exercise of
voting rights. Any statement of the rights of shareholders in
relation to the appointment of proxies does not apply to
Nominated Personsas these rights can only be exercised
byshareholders of the Company.
7. Receipt and termination of proxies
A form of proxy is enclosed and to be valid must be lodged with
the Company’s registrar, Computershare, before 11.30 am on
Tuesday, 23 January 2024.
You may appoint a proxy (or proxies) electronically to exercise
all or any of your rights to attend, to speak and to vote on your
behalf at the meeting through the website of our registrar, EQ
at www.shareview.co.uk. You will need your voting reference
numbers (the voting ID, Task ID and shareholder reference
number shown on your form of proxy). If you have registered
for a Shareview portfolio, please log onto your portfolio using
Henderson European Focus Trust plc Annual Report 2023
88
Notice of Annual General Meeting (continued)
your usual user ID and password. Once logged in simply click
“View” on the “My Investments” page, click on the link to vote
then follow the on-screen instructions.
A member may terminate a proxy’s authority at any time
before the commencement of the AGM. Termination must be
provided in writing and submitted to the Company’s registrar.
In accordance with the Company’s articles of association, in
determining the time for delivery of proxies, no account shall
be taken of any part of a day that is not a working day.
8. Electronic receipt of proxies
To appoint your proxy or give an instruction to a proxy
(whether previously appointed or otherwise) via the CREST
system, CREST messages must be received by the
Company’s agent (ID number RA19) no later than 11.30 am on
Tuesday, 23 January 2024. For this purpose, the time of
receipt will be taken to be the time (as determined by the
timestamp generated by the CREST system) from which the
issuer’s agent is able to retrieve the message. The Company
may treat as invalid a proxy appointment sent by CREST in
the circumstances set out in Regulation 35(5)(a) of the
Uncertified Securities Regulations 2001. Instructions on how
to vote through CREST can be found at www.euroclear.com.
9. Proxymity
If you are an institutional investor you may also be able to
appoint a proxy electronically via the Proxymity platform, a
process which has been agreed by the Company and
approved by the Registrar. For further information regarding
Proxymity, please go to www.proxymity.io. Your proxy must
be lodged by 11.30 am on Tuesday, 23 January 2024 to be
considered valid. Before you can appoint a proxy via this
process you will need to have agreed to Proxymity’s
associated terms and conditions. It is important that you read
these carefully as you will be bound by them and they will
govern the electronic appointment of your proxy.
10. Communication with the Company
Members may not use any electronic address provided either
in the Notice of AGM or any related documents to
communicate with the Company for any purpose other than
those expressly stated.
11. Questions at the AGM
Section 319A of the Act requires the directors to answer any
question raised at the AGM which relates to the business of
the AGM, though no answer need be given:
(a) if to do so would interfere unduly with the preparation of
the AGM or involve disclosure of confidential information;
(b) if the answer has already been given on the Company’s
website; or
(c) if it is undesirable in the best interests of the Company or
the good order of the AGM that the question be answered.
Shareholders are welcome to ask questions in advance
ofthe AGM by contacting the corporate secretary at
itsecretariat@janushenderson.com.
12. Members’ statement of audit concerns
Members satisfying the thresholds in s527 of the Act can
oblige the Company to publish a statement on its website
setting out any matter relating to:
(a) the audit of the Company’s accounts (including the
auditor’s report and the conduct of the audit) that are
tobe laid before the AGM; or
(b) any circumstances connected with an auditor of the
Company ceasing to hold office since the last AGM, that
the members propose to raise at the AGM.
The Company cannot require the members requesting the
publication to pay its expenses. Any statement placed on the
website must also be sent to the Company’s auditor no later
than the time at which it makes its statement available on the
website. The business which may be dealt with at the AGM
includes any statement that the Company has been required
to publish on its website.
13. Total voting rights
As at 8 December 2023 (being the last practicable date prior
to the publication of this Notice) the Company’s issued share
capital consisted of 216,389,910 ordinary shares. The total
number of voting rights on that date was 212,768,122
(3,621,788 shares being held in treasury). Each share carries
one vote, other than those held in treasury.
14. Documents available for inspection
The directors’ letters of appointment may be inspected
attheregistered office of the Company, 201 Bishopsgate,
London EC2M 3AE, during normal business hours on any
business day and will be available at the AGM from
15minutes prior to its commencement until its conclusion.
Nodirector has a contract of service with the Company.
15. Website
The Company’s Annual Report, which contains this Notice of
AGM, is available at www.hendersoneuropeanfocus.com,
together with these explanatory notes.
Henderson European Focus Trust plc Annual Report 2023
89
90
Additional Information
90
Photo: Safran commercial aeronautics
Alternative Investment Fund Managers
Directive (“AIFMD”)
The AIFMD classifies certain investment vehicles, including
investment companies, as alternative investment funds (“AIFs”)
and requires them to appoint an alternative investment fund
manager (“AIFM”) and depositary to manage and oversee the
operations of the investment vehicle. The Board retains
responsibility for strategy, operations and compliance. The
directors retain afiduciary duty to shareholders.
Association of Investment Companies
The Company is a member of the AIC which is the trade body
for investment companies and represents the industry on
matters which impact the regulation of such entities.
TheCompany is a constituent of the AIC Europe sector.
Benchmark
An index against which performance is compared. For the
Company this is the FTSE World Europe (ex UK) Index on
atotal return basis in Sterling terms.
Continental Europe
For the purpose of the Company’s investment policy, this is
defined as every country in Europe except the UK, the
Channel Islands and the Isle of Man.
Custodian
The custodian is responsible for ensuring the safe custody of the
Company’s assets and that all transactions in the underlying
holdings are transacted in an accurate and timely manner.
Depositary
As an AIF, the Company is required to appoint a depositary
which has responsibility for overseeing the operations of
theCompany including safekeeping, cash monitoring and
verification of ownership and valuation of the underlying
holdings and is responsible for the appointment of a
custodian. The depositary is strictly liable for the loss of any
investments or other assets in its custody unless it has notified
that it has discharged its liability in certain markets.
Dividend dates
When declared or recommended, each dividend will have
three key dates applied to it. The payment date is the date on
which shareholders will receive their dividend, either by BACS
transfer or by receipt of a dividend cheque. The record date
applied to the dividend is used as a cut-off for the Company’s
registrars to know which shareholders should be paid a
dividend. Only shareholders on the Register of Members at
theclose of business on the record date will receive the
dividend. Theex-dividend date is the business day before the
record date and isthe date on which the Company’s net asset
value per ordinary share will be disclosed ex-dividend.
Environmental, social and governance
Matters relating to environmental, social and governance
(“ESG”) activities, which are increasingly factored into the
analysis of how corporate entities, including investment
companies, conduct their activities.
Gearing
Gearing reflects the amount of borrowings that the Company
has invested and indicates the extra amount by which net
assets, or shareholders’ funds, would move if the value of
acompany’s investments were to rise or fall. This can be
positive and would indicate the extent to which net assets are
geared; nil gearing shows a company is ungeared. Negative
gearing would indicate that a company is not fully invested
and is holding net cash as described below. There are several
methods of calculating gearing, such as:
Gross gearing
This reflects the amount of gross borrowings (bank overdraft
and loan notes) used by a Company and takes no account of
any cash balances, as a percentage of net assets.
Net gearing
Net gearing represents the excess amount above
shareholders’ funds of total investments (less short-dated
government bonds which are classified as cash equivalents
for this purpose), expressed as a percentage of the
shareholders’ funds. If the amount calculated is negative, this
is a ‘net cash’ position and there is no gearing. For further
details please see the Alternative Performance Measures
onpage 92.
Investment trusts/investment companies
Investment trusts are public limited companies, listed on
theLondon Stock Exchange, which provide shareholders
witha professionally managed portfolio of investments.
Investment trusts are exempt fromtax on the capital gains
arising on their investments subject tomeeting certain criteria.
Income, net of expenses and tax, issubstantially distributed
to shareholders. Investment trusts are alsoknown as
investment companies, although the tax legislation retains
thereference to investment trusts.
Liquidity
In the context of the liquidity of shares in the stock market,
this refers to the availability of buyers and sellers in the market
for the share in question. Where the market in a particular
share is described as liquid, that share will be in demand and
holders wishing to sell their shares should find ready buyers.
Conversely, where the market in ashare is illiquid, the difficulty
of finding a buyer or seller will tend todepress or increase
theprice that might be negotiated for a sale or purchase.
Investment companies can use allotment or buyback powers
to assist market liquidity in their shares.
Market capitalisation (“market cap”)
The market value of a company, calculated by multiplying the
mid-market price per share by the number of shares in issue.
Treasury shares
Shares repurchased by the Company, but not cancelled, and
available for re-issue under the appropriate circumstances.
Glossary
Henderson European Focus Trust plc Annual Report 2023
91
The Company uses the following alternative performance measures (“APMs”) throughout the Annual Report, Financial
Statements and Notes to the Financial Statements. The APMs are reconciled to the financial statements through the narrative
below. The Board believes that each of the APMs, which are typically used within the investment trust sector, provide additional
useful information to shareholders to help assess the Company’s performance against its peer group.
Capital return per share
The capital return per share is the capital profit/(loss) for the year (see Income Statement) divided by the weighted average
number of ordinary shares in issue during the year (see note 9 on page 73).
Discount or premium
The amount by which the market price per share of an investment trust is either higher (premium) or lower (discount) than the
NAV per share, expressed as a percentage of the NAV per share.
30 September
2023
30 September
2022
Net asset value per share (pence) (A) 178.13 147.67
Price per share (pence) (B) 157.00 127.00
(Discount) or premium (C=(B-A)/A) (%) (C) (11.9) (14.0)
Net gearing
Net gearing reflects the Company’s borrowings as a percentage of net assets as defined on page 91.
2023 2022
Investments at fair value through profit or loss (page 66) (£’000) (A) 384,249 320,289
Less:
Investment in short-dated government bonds (£’000) (B) 19,682 –
Net investment portfolio (£’000) (C= A-B) (C) 364,567 320,289
Net assets (see page 66) (£’000) (D) 378,997 314,419
Gearing (E = ((C/D)-1 (%) (E) (3.8) 1.9
Net asset value (“NAV”) per ordinary share
The value of the Company’s assets less any liabilities for which the Company is responsible, divided by the number of ordinary
shares in issue, excluding shares held in treasury (see note 16) and calculated with debt at par. The aggregate NAV is also
referred to as shareholders’ funds in the Statement of Financial Position. The NAV per ordinary share is published daily and
the year end NAV can be found on page 3 and further information is available on page 81 in note 21 within the Notes to the
Financial Statements.
The basis of preparation of the Statement of Financial Position on page 66 is to recognise the value of the debt liability as the
nominal amount that will be repaid at maturity (or NAV with debt at par). For the EUR 35 million of unsecured loan notes, this
recognises a liability of EUR 35 million. However, we also provide an estimate of the NAV with debt at fair value in the interim
andyear-end financial statements to provide further information to shareholders. This NAV with debt at fair value estimates the
current value of the debt liability rather than the amount to be repaid at maturity. Further detail of the valuation method is set out
in note 15.4 on pages 78 and 79.
Alternative Performance Measures
92
Henderson European Focus Trust plc Annual Report 2023
Alternative Performance Measures (continued)
Ongoing charge
The ongoing charge ratio has been calculated in accordance with the guidance issued by the AIC as the total investment
management fee and administrative expenses and expressed as a percentage of the average net asset values throughout the year.
2023
£’000
2022
£’000
Management fee (Note 5) 2,349 2,190
Other administrative expenses (note 6) 639 561
Less: non-recurring expenses (31) (33)
Ongoing charges 2,957 2,718
Average net assets
1
371,700 354,575
Ongoing charges ratio (%) 0.80 0.77
1 Calculated using the average daily net asset value at par
The ongoing costs provided in the Company’s key information document (“KID”) is calculated in line with the PRIIPs regulations.
Theongoing costs in the KID include finance costs.
Revenue return per share
The revenue earnings per share is the revenue return for the year (see Income Statement) divided by the weighted average number
of ordinary shares in issue during the year (page 73).
Total return performance
The total return performance on the NAV or share price taking into account both the rise and/or fall of NAV/share prices and
dividends paid to shareholders. Any dividends received by a shareholder are assumed to have been reinvested in either
additional shares (for share price total return) or the Company’s assets (for NAV total return). Dividends paid and payable are set
out in note 10 on page 73.
NAV per share Share price
NAV per share/Share price per share at 30 September 2022 (pence) 147.67 127.00
NAV per share/Share price per share at 30 September 2023 (pence) 178.13 157.00
Change in the year (%) 20.6 23.6
Impact of dividends reinvested (%) 2.9 3.3
Total return for the year (%) 24.1 27.1
The returns in the table above are calculated on a geometric rather than an arithmetic basis and therefore do not give an
arithmetictotal.
Yield
The yield is the annual dividend expressed as a percentage of the year-end share price.
30 September
2023
30 September
2022
Annual dividend excluding special dividend (pence) (A) 4.35 4.35
Share price (pence) (B) 157.0 127.0
Yield (C=A/B) (%) (C) 2.8 3.4
93
Henderson European Focus Trust plc Annual Report 2023
General Shareholder Information
AIFMD Disclosures
In accordance with the AIFMD, information about the
Company’s leverage, the remuneration and remuneration
policy of Janus Henderson Investment Fund Management UK
Limited, as the Company’s alternative investment fund
manager (“AIFM”), are available to investors. Thesedisclosures
are provided in the AIFMD disclosure document, which can
befound at www.hendersoneuropeanfocus.com.
BACS
Dividends can be paid via BACS, and mandate forms for
thispurpose are available from the registrar. Alternatively,
shareholders can write tothe registrar Equiniti (“EQ”) at the
address on page95 to givetheir instructions, which must
include the bank account details towhich payments are
tobemade.
Common Reporting Standard and FATCA
Tax legislation under the OECD’s Common Reporting
Standard for Automatic Exchange of Financial Account
Information requires theCompany to provide personal
information to HMRC on certaininvestors who purchase
shares in investment trusts. Thisinformation is provided
annually to the local tax authority of non-UK-based
certificated shareholders and corporate entities.
The Foreign Account Tax Compliance Act (“FATCA”) is a
United States law which requires investment trusts to monitor
the trading volume and frequency of their securities to assess
whether they have financial accounts for US persons. The
Company makes an annual assessment to determine if the
shares represent financial accounts and would report any
USaccounts to HMRC.
Equality Act 2010
This Annual Report and other documents issued by the
Company are available from the corporate secretary and can
be provided in alternative formats, including Braille or larger
type, as appropriate. For deaf and speech-impaired
customers, we welcome calls via Relay UK. Please see
www.relayuk.bt.com for more information. Alternatively, if
you prefer togo through a ‘typetalk’ operator (provided by the
Royal National Institute forDeaf People), dial 18001 followed
by thenumber you wishto dial.
GDPR
A privacy statement can be found at www.janushenderson.com.
ISA
The Company intends to continue to manage its affairs in
order to qualify as an eligible investment for holdings through
a stocks and shares ISA.
Non-mainstream pooled investments
(“NMPI”)status
The Company currently conducts its affairs so that its ordinary
shares of 5p each can be recommended by independent
financial advisors to ordinary retail investors in accordance
with the Financial Conduct Authority’s rules about non-
mainstream investment products and intends to do so for the
foreseeable future. The shares are excluded from the FCA’s
restrictions which apply to non-mainstream investment
products because they are shares in an investment trust.
Packaged Retail and Insurance-based
Investment Products Regulation (“PRIIPs”)/
Key Information Document (“KID”)
PRIIPs requires the Manager, asthe PRIIPs manufacturer, to
prepare a KID in respect of the Company. ThisKID must be
made available bythe Manager to retail investors prior to them
making any investment decision and isavailable on the
Company’s website. The Company is not responsible for the
information contained in the KID. Procedures for calculating
the risks, costs and potential returns are prescribed by law
and will indicate different cost numbers from those provided
in theCompany’s financial statements. The figures in the KID
may not reflect the expected returns forthe Company and
anticipated performance returns cannot be guaranteed.
Performance/share price publication
The Company’s NAV is published daily. Details of the
Company’s share price and NAV per share can be found on
the website www.hendersoneuropeanfocus.com, on the
London Stock Exchange Daily Official List, in the Financial
Times and on Trustnet.
Taxonomy Regulation
Regulation (EU) 2020/852 (“Taxonomy Regulation”)
establishes the basis for the EU taxonomy. The EU taxonomy
is a classification system, establishing a list of environmentally
sustainable economic activities to provide companies,
investors and policymakers with appropriate definitions for
which economic activities can be considered environmentally
sustainable. In accordance with the Taxonomy Regulation,
theCompany states that the investments underlying this
financial product do not take into account the EU criteria for
environmentally sustainable economic activities.
Henderson European Focus Trust plc Annual Report 2023
94
Strategic Report
Performance Highlights 2-3
Portfolio Information 4
Historical Information 5
Chair’s Statement 6-9
Fund Managers’ Report 10-13
Our Investment DNA 14-15
Investment Portfolio 16
Top Ten Holdings 17-18
Business Model 19-32
Governance
Board of Directors 34
Corporate Governance Report 35-39
Audit and Risk Committee Report 40-44
Management Engagement Committee Report 45
Nominations Committee Report 46-48
Directors’ Remuneration Report 49-52
Directors’ Report 53-54
Statement of Directors’ Responsibilities 55
Financial Statements
Independent Auditor’s Report to the Members 57-63
Financial Statements 64-67
Notes to the Financial Statements 68-82
Notice of Annual General
Meeting (“AGM”)
Notice of AGM 84-85
Explanation of resolutions 86-88
Notes to the Notice of AGM 88-89
Additional Information
Glossary 91
Alternative Performance Measures 92-93
General Shareholder Information 94
Corporate Information 95
Keeping in touch
We know how important it is to receive up-to-date information about the Company.
Visitour website at www.hendersoneuropeanfocus.com
Register for updates, insights and factsheets about the Company:
Register here to watch this year’s Annual General Meeting by webinar:
The Board also welcomes you in person to the AGM. Please see more details about the
AGM, attending in person or by webinar, in the Chair’s Statement.
Please send your general enquiries about the Company to the Company Secretary at:
itsecretariat@janushenderson.com.
Warning to shareholders
Many companies are aware that their shareholders have received unsolicited phone calls or correspondence concerning
investment matters. These are typically from overseas based ‘brokers’ who target UK shareholders offering to sell them what
often turn out to beworthless or high-risk shares in US or UK investments. They can be persistent and extremely persuasive.
Shareholders are therefore advised to be wary of any unsolicited advice, offers to buy shares at a discount or offers of free
company reports. Please note that it is unlikely that either the Company or the Company’s registrar, Equiniti, would make
unsolicited telephone calls to shareholders. Any such calls would relate only to official documentation already circulated to
shareholders and never in respect of investment ‘advice’. Ifyou arein any doubt about the veracity ofan unsolicited phone
call, please call the Corporate Secretary at the number provided on page 95. You can also check the FCA Warning List at
#BeScamSmart.
Corporate Information
Registered office
201 Bishopsgate
London EC2M 3AE
Service providers
Alternative investment fund manager (“AIFM”)
Janus Henderson Fund Management UK Limited
201 Bishopsgate
London EC2M 3AE
Support@janushenderson.com
Corporate secretary
Janus Henderson Secretarial Services UK Limited
201 Bishopsgate
London EC2M 3AE
Telephone: 020 7818 1818
ITSecretariat@Janushenderson.com
Depositary and custodian
HSBC Bank Plc
8 Canada Square
London E14 5HQ
Corporate broker
Winterflood Securities Limited
The Atrium Building
Cannon Bridge House, 25 Dowgate Hill
London EC4R 2GA
Registrar
Equiniti Limited (“EQ”)
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Telephone: +44 (0)371 384 2457
Lines are open 8.30 am to 5.30 pm UK time,
MondaytoFriday.
There is a range of shareholder information online.
You can check your holding and find practical help
on transferring shares or updating your details at
www.shareview.co.uk.
Independent auditor
Ernst & Young LLP
25 Churchill Place
London E14 5EY
Financial calendar
Annual results announced December 2023
Ex-dividend date 4 January 2024
Dividend record date 5 January 2024
Annual General Meeting 25 January 2024
Final dividend payable 5 February 2024
Half-year results announced May 2024
Interim dividend payable June 2024
Information sources
For more information about the Company, visit the website
atwww.hendersoneuropeanfocus.com. This includes
factsheets, interviews and current information on
theCompany and up-to-date share price and net asset
valueinformation.
To receive regular insights on investment trusts from the
Manager, visit: https://www.janushenderson.com/en-gb/
investor/subscriptions/
Follow Janus Henderson Investment Trusts on
LinkedIn: – JanusHenderson Investment Trusts, UK.
Investing
Shares can be purchased in the market via a stockbroker
orthrough share dealing platforms. They can also be held
through share plans, ISAs or pensions, and links to various
providers are included on the website.
Potential investors are reminded that the value of investments
and the income from them may go down as well as up and
investors maynot get back the full amount invested. Tax
benefits may varyas a result of statutory changes and their
value will depend onindividual circumstances.
Henderson European Focus Trust plc Annual Report 2023
95
Henderson European Focus Trust plc Annual Report 2023
Henderson
European
Focus
Trust plc
Annual Report 2023
Proof 6g: 15/12/23
JHI9218/2023Henderson European Focus Trust plc – Annual Report 2023
Henderson European Focus Trust plc
Registered as an investment company in England and Wales with registration number 427958
Registered office: 201 Bishopsgate, London EC2M 3AE
SEDOL/ISIN number: Ordinary Shares: BLSNGB0/GB00BLSNGB01
London Stock Exchange (TIDM) Code: HEFT
Global Intermediary Identification Number (GIIN): THMNPN.99999.SL.826
Legal Entity Identifier (LEI): 213800GS89AL1DK3IN50
Telephone: 0800 832 832
Email: support@janushenderson.com
www.hendersoneuropeanfocus.com
To receive your annual reports
in electronic format,
scan the QR code and register
your preference with EQ
JHI9218/2023Designed and typeset by 2112 Communications, London. Printed by Paragon, London.
This report is printed on Revive silk 100% recycled, contains 100% recycled waste and
ismanufactured at a mill certified with ISO 14001 environmental management standard.
The pulp used in this product is bleached using an Elemental Chlorine Free process (ECF).
Front cover image: La Défense, Paris