HENDERSON EUROPEAN FOCUS TRUST PLC - Interim Management Statement

Date: 2012-01-27 11:00:51 | Category: Advertising & Marketing 

HENDERSON EUROPEAN FOCUS TRUST PLC

HENDERSON GLOBAL INVESTORS

27 January 2012 HENDERSON EUROPEAN FOCUS TRUST PLC Interim Management Statement Review of the period from 1 October 2011 to 31 December 2011 Portfolio Review:Over the quarter to 31 December 2011 the Company's net asset value per ordinary share, including revenue for the period, increased by 7.0% compared with an increase of 3.3% in the Company's benchmark, the FTSE World Europe ex UK Index on a total return basis in sterling terms.

Operating in a challenging investing environment, we find it crucial to maintain our focus on where we can make a difference. Thus, stepping away from trading screens and switching off "noiseflow" is crucial in helping us in our quest to identify value. Rarely has it been more important to take a step back and look at the worth of businesses, comparing that worth with the valuation as decided by the stockmarket. In so doing we can happily identify plenty of value in European equities. We have often said to our investors that you need bad macro to give you bargains. Well bad macro is here and the bargains are following.

This is precisely the approach we took in unearthing our biggest sector theme this year, pharmaceuticals. Here is a sector where the news flow has seemed relentlessly poor for many years. Here is a sector which has seen its Price Earnings Ratio fall over a decade and more, from the 20's to below 10. And here is an industry which has seen wholesale management change, in pursuit of business model change. During the Spring of 2011 we made the sector our single biggest portfolio overweight in anticipation of a significant rerating over the coming years.

The pharmaceutical decision characterises the importance of standing back from the thankless task of second guessing Europe's hapless politicians in order to capitalise on the opportunities that the current turmoil will undoubtedly yield. Indeed, we've never tired of reminding ourselves that the entry price you pay is crucial to your returns: a truism often forgotten under the twin imposters of greed and fear. As Europe convulses, our opportunity set is increasingly likely to be priced somewhere between cheap and fire sale. Cheap is already here and fire sale may well come. Meantime, we are able to invest in well financed, rock solid businesses sporting earnings multiples of 8-10 times and dividend yields of between 4% and 6%. Acknowledging that 8x may become 6x before we are through, we are happy to commit. Indeed, we are sure that in future years we will not be alone in thinking that 2011-2012 proved an excellent entry point for the longer term minded. Thus, names such as Reed Elsevier , Roche, Sanofi, and Total fit the bill.

Investment Outlook: We believe that we are in the end game of Europe's sovereign crisis. While we doubt that all current members of the currency zone will be members in a few years' time, we do sense that the promise, or hope, of fiscal union will open the door for the European Central Bank to play the role so coveted by financial markets. Indeed a glance at the ECB's balance sheet confirms that it doth protest too much: it is easing in large quantities. As we look ahead to 2012 we have grown in our conviction that our favoured sector for 2011 - pharmaceuticals - looks destined to continue its re-rating as the market slowly appreciates that there is growth in them there pills. Two contrarian resolutions are driving us: first, buy the West, sell the East and, second, sell certainty to buy uncertainty. At a time when investors have bought into the Asian "growth" story, western facing businesses have been left at bargain valuations. Similarly, at a time when investors have chased certainty at any price (fixed income), outstanding opportunities are now emerging in uncertainty (equities).

Material events and transactions

At a general meeting held on 25 November 2011 shareholders approved proposals, including a change to the investment objective and policy and to the Company's name. Full details were included in a circular to shareholders dated 4 November 2011 .

During the period the Company repurchased 636,200 ordinary shares to be held in treasury and cancelled 1,000,000 treasury shares. Since 31 December 2011 the Company purchased a further 117,562 ordinary shares to be held in treasury, with no further treasury shares cancelled.

An interim dividend, in lieu of final dividend, in respect of the year ended 30 September 2011 of 17.75p per ordinary share was paid on 30 December 2011 to shareholders on the register on 16 December 2011 .

The directors are not aware of any other significant events or transactions up to the date of this report which would have a material impact on the financial position of the Company.

PERFORMANCE AND FINANCIAL HIGHLIGHTS

Total Return Performance at 31 December 3 months 1 year 3 years 5 years 2011

Share Price 8.7% -15.7% 5.5% 2.3% Net Asset Value per ordinary share 7.0% -8.1% 13.8% 12.5% Benchmark Index: FTSE World Europe ex UK 3.3% -15.8% 8.1% -4.8% Index, total return in sterling terms

Source: AIC

Financial Position (in accordance with the AIC formula, ie excluding current financial year revenue items) At 31 December 201 At 30 September 20 1 11 Total assets (£'000) £109,684 £106,492 Net asset value per ordinary share (cum 600.50p 579.97p income) Net asset value per ordinary share (ex 600.18p 562.77p income) Ordinary share price mid-market price 514.00p 493.88p Discount 14.4% 12.2% Net Gearing 5.7% 2.5% THE PORTFOLIO (Distribution of total investments employed)

Top 10 Investments % of portfolio as 31 December 2011 Novartis 6.4 Sanofi-Aventis 6.3 Roche 6.1 Reed Elsevier 5.1 Total 5.0 Nestlé 4.0 EUX Euro Stoxx 4.0 Henkel 3.2 BIC 2.8 SAP 2.8 Sector Breakdown % at 31 December 2011 Healthcare 25.1 Consumer Goods 15.9 Industrials 14.7 Oil & Gas 12.1 Financials 11.3 Basic Materials 7.9 Consumer Services 7.8 Technology 4.0 Utilities 1.0 Cash and Fixed Interest 0.2 The Company seeks to maximise total return from a focused portfolio of listed Continental European Stocks. The portfolio is unconstrained by benchmark and contains between 50 to 60 holdings at any one time. The portfolio has a bias to larger capitalised companies but it is able to invest in the equity of mid and smaller capitalised companies. The exposure to smaller capitalised stocks is limited to 10% of net asset value. The Manager is Henderson Global Investors Limited. Further information on the Company, including an up to date NAV and share price information, can be found at www.hendersoneuropeanfocus.com.

Rodney Dennis Chairman * ENDS - For further information, please contact:

James de Sausmarez Sarah Gibbons-Cook Director, Head of Investment Trusts Investor Relations and PR Manager

Henderson Global Investors Henderson Global Investors Telephone: 020 7818 3349 Telephone: 020 7818 3198 2