Hend.euro. Regulatory News (HNE)

HENDERSON INVESTMENT FUNDS LIMITED

HENDERSON EUROTRUST PLC

LEGAL ENTITY IDENTIFIER: 213800DAFFNXRBWOEF12

5 October 2021

HENDERSON EUROTRUST PLC

Annual Financial Results for the year ended 31 July 2021

This announcement contains regulated information

Investment objective

Henderson EuroTrust plc ("the Company") aims to achieve a superior total return from a portfolio of high quality European (excluding the UK) investments.

Performance highlights

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

2 Share price total return (including dividends reinvested) 

3 FTSE World Europe (ex UK) Index

4 AIC Europe Sector

5 Including the 8.0p interim dividend paid on 23 April 2021 and the 17.0p final dividend which will be put to shareholders for approval at the Annual General Meeting ("AGM") on 17 November 2021

6 Based on the share price at the year end

7 Excluding the nil value position in OW Bunker (2020: excluding OW Bunker and Cellnex Rights Issue)

8 Calculated using the mid-market closing price

Sources: Morningstar Direct, Janus Henderson, Refinitiv Datastream

CHAIRMAN'S STATEMENT

Performance

The year to 31 July 2021 was an exceptionally strong one in terms of absolute return, with a share price total return of 25.8% and Net Asset Value ("NAV") total return of 22.3%. Despite the adverse impact of COVID-19, equity markets have benefited from an expectation of economic recovery, fuelled by significant support from continued low interest rates and direct government spending.

In relative terms, 2021 has been only the second year in which performance has fallen behind the FTSE World Europe (ex UK) Index (our benchmark) in over a decade. After outperforming this benchmark by almost 13 percentage points in the previous financial year, 2021 performance was over 4 percentage points behind the benchmark on a NAV total return basis, while the share price total return was 0.8% behind the benchmark return of 26.6%.

The Fund Manager's report covers this year's performance in more detail.

Dividend

We have proposed a final dividend of 17.0p, which brings the total dividend for the year to 25.0p. This means the dividend for the year will be unchanged from the total dividend for the year to 31 July 2020. In my Chairman's statement for 2020 I explained that we intended to use the dividend reserve to smooth the impact of switching to a policy of paying out substantially all of the dividend income generated by the Company in the financial year. As last year, in order to pay the dividend for 2021, we will be using £1.8m (based on the current issued share capital) of our remaining dividend reserve.

Shareholders will be aware that in 2020 we took the difficult decision to cut the dividend, due to the sharp decline in dividend receipts, and the focus on total return as opposed to income specifically. Notwithstanding the strong share price performance of our holdings in the latest financial year, net revenue for the latest financial year was in fact lower than in the previous year (£3.5m for the year ended 31 July 2021, versus £4.7m for the year ended 31 July 2020). This is due partly to a restriction on dividends to be paid by the companies within the portfolio and the benchmark in general, by banks in particular, but also to the focus of the Fund Manager on total return, with no specific or implicit income target. As the Company's focus is on growth, and not income, we continue to believe that paying income out of capital, although a permitted approach for investment companies, is not an appropriate strategy for the Company.

Discount to NAV

The discount (gap) between the NAV of the Company and the share price narrowed from 11.4% to 8.9% in the year to 31 July 2021. In the previous year, to 31 July 2020, the discount widened despite exceptional relative performance, whilst in the latest financial year, the discount has narrowed despite underperformance. In the long run, NAV performance far outweighs any changes to the discount from year to year. In the near term, however, our opinion is that demand from the retail sector, and not short-term performance, is the key determinant of the discount for an investment company with a highly liquid portfolio such as EuroTrust. Having reconsidered the issue again in the last financial year, we find that formal discount control mechanisms can have perverse effects, encouraging short-term holding periods and reducing liquidity in the Company's shares, and are therefore not an attractive proposition.

To an extent the ownership of investment trusts is moving full circle. For decades, investment trusts offered a cost-effective diversified portfolio to the small investor. By the end of the twentieth century, however, large institutions had built large stakes in many investment trusts. These stakes were then gradually reduced and often sold altogether, with the fast-expanding wealth management sector typically becoming the largest shareholders, particularly in mainstream equity trusts such as ours. Now, the original appeal of the structure is again proving attractive to the unadvised individual investor who wishes to hold for the long-term and does not need to trade in large size. We are keen to ensure that retail investors have every opportunity to hear about our investment approach, and in this we are well-supported by the Fund Manager, whose knowledge and passion come across strongly whether in print, in person or online. Shareholders can find many short comments and presentations by Jamie Ross online at www.hendersoneurotrust.com, providing insight into European markets and the portfolio.

One possible barrier to the retail investor is the "heavy" share price, a function of the excellent performance over many years. Many small investors prefer to allocate a specific sum of money to purchase shares splitting the assets of the Company into a larger number of shares would make this approach easier to implement. Improved liquidity in the Company's shares benefits all shareholders and we have decided to seek approval from shareholders to effect a sub-division of each existing ordinary share; details are below in the Share split section.

ESG and investing sustainably

The Board believes that effective stewardship and integration of environmental, social and governance ("ESG") factors into the Company's investment process are important elements in delivering our Investment Objective. In recognition of the growing interest of investors, both institutional and retail, in such matters, we have included a separate section in this year's Annual Report which details our approach to ESG matters. This includes our current ESG policy (also available on the AIC website) and our plans to seek to convert to "Article 8" under the Sustainable Financial Disclosure Regulations ("SFDR") also referred to as "Light Green" which supports our ESG policy further.

The Board has spent a great deal of time considering how to articulate and formalise the Company's approach to sustainable investment more clearly. In my Chairman's statement last year, I explained that, as a Company committed to investing in "Growth, Quality and Consistency", there is an inherent bias towards sustainability within the investment approach taken by the Company; and that, due to the risk of greenwashing and the inconsistencies between different ranking frameworks, we relied on the Fund Manager's proprietary investment process and Ranking Framework to monitor sustainability.

However, this is a rapidly evolving area and, with the Fund Manager, we have come to the conclusion that adding a more formal element to the process and putting in place certain exclusions adds clarity and robustness to our commitment to incorporate ESG factors and sustainability considerations into the investment process.

Approval will be sought from shareholders to make changes to the Company's Investment Policy as a result of the plans referred to above to seek to convert to Article 8 (Light Green) under the SFDR. More detail on the proposed changes can be found in the Annual Report.

Active management

Over the last financial year, the number of stocks in the portfolio reduced from a range of 40 to 60 stocks to a range of 35 to 55 stocks. At the year end there were 40 holdings (excluding the nil value position in OW Bunker). As an actively managed portfolio, the Fund Manager, supported by the Board, is of the opinion that a minimum of 35 stocks allows for ample diversification whilst ensuring that the portfolio has sufficient capacity to outperform a passively managed fund with the same benchmark.

Whilst it was disappointing to see some underperformance relative to the benchmark in the year to 31 July 2021, this was perhaps not surprising given the extent of the outperformance in the previous year. Switchbacks in market sentiment as perceptions of the economic and market outlook changed have been sharp, although sometimes short-lived. Changes to the portfolio slightly reduced risk during the latest financial year, but active share remains high and the largest driver of performance continues to be stock specific factors as opposed to style, country or sector. We expect this to continue to be the case.

Annual General Meeting

Last year, along with taking precautionary action in amending the Company's Articles of Association ("Articles") to allow a combination of virtual and physical shareholder meetings to be held in the future, the Board committed to holding physical meetings when restrictions were not in place and these could be held safely. We are pleased to be able to confirm that the Company's AGM is currently scheduled to take place at 2.30pm on Wednesday 17 November 2021 at the offices of Janus Henderson Investors, at 201 Bishopsgate, London EC2M 3AE.

The Company's AGM will be broadcast live on the internet. If you are unable to attend in person, you can watch the meeting by visiting www.janushenderson.com/trustslive.

Please note, however, due to the coronavirus pandemic it may be necessary to change the venue and/or the date of the AGM, subject to the advice of the public health authorities and the UK government closer to the time. Any changes as to the venue and/or date and time of this year's AGM would be made available on a dedicated section of the Company's website at www.hendersoneurotrust.com and additionally an announcement would be released to the Stock Exchange.

Share split

At the AGM approval from shareholders will be sought to effect a sub-division of each existing ordinary share. The price of the Company's existing ordinary shares of 5p each has almost trebled over the last 10 years. To assist monthly savers and those who reinvest their dividends or are looking to invest smaller amounts, the Directors believe that it is appropriate to propose the sub-division of each existing ordinary share of 5p each into 10 new ordinary shares of 0.5p each. The Directors believe that the sub-division may also improve the liquidity in and marketability of the Company's shares, which would benefit all shareholders. Further details of the proposed sub-division, which your Directors believe is in the best interests of shareholders as a whole, can be found in the notice convening this year's AGM. A copy of the AGM notice accompanies this report and can also be found on the Company's website.

Outlook

The total return on European equity markets between 31 March 2020 and the Company's year end on 31 July 2021 was almost 50%, the Company's share price rose by more than 57% over the same period. Further gains have been seen since then despite increasing concerns over supply chain difficulties and staff shortages and consequent concerns about inflation. Other factors, such as the changes in regulatory policy in China had both direct and indirect effects on many European companies, many of which are global in their reach.

It would not be surprising to see much more muted returns in the near term given this backdrop, particularly if the European Central Bank reduces its monetary stimulus. However, equity investing is best undertaken as a long game in which reversals are to be expected from time to time. Climate change is potentially a reason to call this into question, which is all the more reason for seeking to invest in a sustainable manner, hard though it can be to identify exactly how this can best be done. Shareholders should expect that our focus on investing sustainably will only increase.

We seek to make the Company more accessible to the retail investor which is, we believe, the best way to narrow the discount between the share price and Net Asset Value and, in the long term, to grow the number of shares in the Company. To the extent that we are successful, such an approach will benefit all shareholders in the Company, via lower costs and improved liquidity in the Company's shares.

Nicola Ralston

Chairman

5 October 2021

FUND MANAGER'S REPORT

After solid outperformance for a number of years and an especially strong period during the COVID-19 pandemic, this year has seen disappointing relative performance although strong absolute performance from both the NAV and the Company's share price. Over the year as a whole, against an index gain of 26.6%, the Company's NAV rose 22.3% and the share price advanced by 25.8%. I have retained a high degree of focus on investment process discipline and have found a number of new and exciting opportunities in which to invest capital. This has also been a year in which I, along with the Board's support, have increased focus on ESG analysis as a pillar of the investment process.

Performance attribution

It is worth pointing out that the relative underperformance all came in the second half of the year, i.e. after we had seen positive efficacy data from the Pfizer vaccine (and vaccines from other companies) and during a period of time when investors were buying companies that they deemed to be "reopening beneficiaries". There are a few factors, mostly stock-specific, that serve to explain the Company's investment performance during this period.

First, the gaming industry has had a torrid time in recent months; this is an area in which we had significant exposure. At the start of 2021, we had a 4.8% position in Prosus (which is exposed to gaming via Tencent), 3.6% in Embracer and 1.6% in Stillfront. Prosus has been hit by the ongoing regulatory clampdown in China which has impacted the shares of its largest portfolio company Tencent. In addition, all three gaming companies are suffering from the perception that they were significant beneficiaries of COVID-19 restrictions and so should have a tougher year in 2021. I have taken action here and reduced our Prosus position from 4.8% to around 2.7% prior to the recent regulatory headlines and have since taken it down further to 1.5%. I think that Prosus and Tencent are both deeply undervalued, but there is a lack of clarity on Chinese regulation and this has made me less willing to have a large exposure to the company. A few months ago, I also reduced our weighting in Embracer from a position of approximately 3% to 1.5% to reflect uncertainty over near-term numbers and the potential indirect impact from tighter Chinese regulatory scrutiny. These trades have limited the impact that our prior position in gaming would have had on performance.

Second, positions in Grifols and Brockhaus have materially underperformed, both for stock specific reasons. Grifols collects blood, fractionates it and sells the plasma proteins which are extracted via this process. The collection of blood requires people to be willing and able to leave their home and walk into a collection centre. Over the course of the COVID-19 pandemic, with restrictions on movement and social interaction, plasma collection was materially impacted and this has had a knock-on impact on Grifols' ability to meet demand. I see this as being a transient issue and I have retained a position. Brockhaus is a German holding company focused on buying fast growing, high margin German "Mittelstand" companies and owning them for the long term. At the moment, Brockhaus has two portfolio companies and is in the process of adding a third. Of the two existing holding companies, Palas is involved in the high-precision measurement of the smallest air particles and IHSE is a global technology leader in the area of KVM (keyboard, video, mouse) solutions used in mission-critical applications such as air traffic control and hospitals. The third company which they are in the process of acquiring is a business-to-business bike leasing platform in Germany (similar to "Bike 2 Work" from a UK context). I like the economics of all three businesses, but over the past year or so, IHSE has been significantly impacted by the ongoing travel restrictions. As with Grifols, I see this as a transient issue.

Third, and more macro-related rather than stock-specific, European equity markets have been very strong, led largely by cyclical businesses; we have only limited cyclical exposure and this has been a drag on performance. Historically, the Company has fared less well in environments of strong cyclical recovery due to a longstanding bias towards higher quality businesses with defensive earnings streams; and this again has been the case over the last 12 months. I had shifted the portfolio towards some more cyclical businesses in October/November 2020, which I will describe in more detail below, but this was not enough to completely protect the portfolio from underperformance in the months that followed. Another way to look at this is that during the year to 31 July 2020, a very successful year for performance, we had benefitted from owning a significant number of "COVID-beneficiaries" and by not owning many "COVID-losers", whilst during the last twelve months, the opposite has been true.

There are many cyclical companies in the index, a majority of which I would be unlikely to own due to my concerns over weak structural features of their business models. A number of these companies have staged extreme recoveries and not owning these companies has been detrimental to performance. A lack of exposure towards areas such as mining, steel, chemicals and capital goods adversely impacted performance relative to the index.

The areas of the portfolio that have performed strongly have largely been those that have cyclical sensitivity. This includes positions such as Hermès, Moncler and Partners Group; companies that we would describe as "quality cyclicals", and also includes companies such as CNH Industrial and Dialog Semiconductor; companies that we see as lower quality cyclicals but capable of significant improvement.

1 Estimates are based on a daily buy and hold approach, gross of all fees and costs. Attribution displayed is a two factor Brinson attribution with effects quoted in the base currency of the Company

Source: Bloomberg

Portfolio activity

During the first half of the period, I implemented a material change in positioning towards some more cyclical companies and away from some businesses that had been beneficiaries of the COVID-19 pandemic and had become too expensive. The major period of change was October and November 2020 where I initiated new positions in Faurecia, CNH Industrial, IAG and Dialog Semiconductor. This was a significant shift in portfolio exposure and one that has contributed positively to performance in the months that followed. In fact, CNH Industrial and Dialog Semiconductor have been amongst our most successful positions over the past 12 months. For CNH Industrial, an Italian tractor and truck business, the investment thesis was based around the anticipation of a powerful cyclical recovery in end user demand driven by strong soft commodity prices and by an inevitable replacement cycle for farm equipment. If anything, the recovery has been even stronger than I had expected and this has resulted in a very strong earnings upgrade cycle and a re-rating of the shares. For Dialog Semiconductor, a German company who specialises in integrated controllers used in power management, the investment thesis was based around a strong Apple-led product cycle and the positive impact that this would have on the company's margins. The company was bid for in February 2021, bringing material benefit to the Company's investment performance in that period. Looking back, none of these changes felt comfortable, but they were all driven by sound and thorough analysis; it is very pleasing to see the positive impact that they had upon performance.

Since that period of change, I have still found a small number of interesting new investment ideas; these include Allfunds, Adidas, Beiersdorf and Danone. These companies have varying degrees of cyclicality, but all four are linked by my perception that they are either good companies today, with high and sustainable return on invested capital, or companies which can become good companies, with these attractive characteristics, over time.

Allfunds is a business-to-business platform that links fund houses and fund distributors. The business has its origins within Santander's private bank and was founded in 2000 by the current CEO Juan Alcaraz. Predominantly, this is a platform business with classic platform economics. Having started with €2 billion of Assets-under-Administration (AuA) in 2000, they ended 2020 with €1.2 trillion in AuA. The model works by charging the fund houses a percentage of AuA whilst operating a "buy-free model" from the point of view of the fund distributors. In addition to platform revenues, which currently make up over 90% of total revenues, Allfunds also provides value-added services via a product called Connect. I find the economics of the business extremely attractive and the company should also benefit from structural end market growth over a multi-year time frame.

Adidas is one of the world's largest sportwear companies, present in 160 countries globally. The dynamics of the sportwear market are attractive, with strong growth driven by increasing sporting participation, the increased use of sportswear for day-to-day activities and by several other demographic factors. Adidas is well positioned to benefit given its strong brand heritage and marketing scale. In addition, sporting goods are increasingly bought online and this is proving to be a tailwind to the largest players. As consumers move online, sportwear brands can increase the proportion of their sales that come through their own direct-to-consumer (DTC) websites which is a fast growing channel, with high gross margins. The combination of the above factors has the potential to see the company grow fast and with expanding margins and return on invested capital over the long term.

Beiersdorf is a family-controlled German consumer goods company; their most well-known brand is Nivea, a skin-care focused brand. I see the company as having underperformed for a number of years driven by a lack of focus in marketing and a failure to take advantage of the powerful trend of premiumisation that has so benefitted their closest peers L'Oreal and Estee Lauder. With a new management team in place and a low starting valuation when compared to peers, I see strong multi-year catch-up potential. It is rare that a consumer brand the size of Nivea earns as low a profit margin as it does currently; successful execution of a turnaround of Nivea could bring significant benefit to the share price over time.

The investment case for Danone, the French consumer goods company, bears many similarities with Beiersdorf. The company has been poorly managed, has underperformed its nearest peers, carries a low equity multiple and is going through a process of management change. In many ways, Danone reminds me of Nestlé back in 2016/2017. Back then, we bought a position when Mark Schneider joined from Fresenius; we were excited by the potential for business improvement and I am similarly excited by the prospects for Danone today. The new Danone CEO, Antoine De Saint-Affrique, joins from Barry Callebaut where he has been widely accredited with a material improvement in growth and return on invested capital. I am hopeful that he can "repeat the trick" at the helm of Danone.

Looking back over the period as a whole it is interesting to see how our exposure to "Compounders" and "Improvers" has varied as the year has gone on. Our exposure to "Improvers" clearly increased during the October/November 2020 period and this is explained by the trading activity that I described above. Since this point, you will notice that our exposure to "Compounders" has crept back up as I have taken profit in a number of more cyclical areas, whilst recycling capital into a number of high-quality business, again, as described above. In general, I would expect the portfolio to be biased towards "Compounders" over time.

The table below shows the portfolio split at the point of each month-end through the year and the table shows the split of the portfolio at year end together with the characteristics of both categories of investment.

Classification of holdings as at 31 July 2021

Source: Factset/Fundamentals in Sterling.

Fundamentals are based on weighted averages at the stock level, excluding cash/gearing.

1 The weight of percentages of Compounders and Improvers are shown including cash/gearing.

OW Bunker is not included in the analysis.

ESG analysis and disclosure

Throughout its long history, the Company has been focused on delivering the best possible total return to shareholders. This remains the case. In addition, our longstanding bias to high quality businesses, or those companies capable of improving materially over time, has tended to go hand-in-hand with a preference for companies with a commitment to ESG concerns. Over time, more of our analysis has focused on the area of ESG, especially as company-level disclosure has improved and shareholders have expressed increasing interest in the topic. Earlier this year, in a published document on the AIC website (https://www.theaic.co.uk/companydata/0P00008ZNI/esg), we laid out our increasing commitments in this area. We will continue to move towards a more sustainability-biased portfolio and we will look at how we can increase our disclosure levels so that you, as shareholders, can better judge the ESG credentials of the companies that we invest in and the overall portfolio itself.

Outlook

European equity markets have performed exceptionally well since the depths of the COVID-19 crisis. This has created an environment where cyclical companies have fared very well and our investment performance has suffered. I remain confident in my investment process and foresee a market where performance is likely to be a little more balanced; in many cyclical sectors and companies, a strong recovery seems to be at least adequately priced in. I look forward to the next twelve months with confidence and will strive to identify the best investments, maintaining a focus on high quality companies ("Compounders") and those capable of significant improvement ("Improvers").

Top ten contributors to and bottom detractors from absolute performance

Data illustrating the top ten contributors to absolute performance is set out below:

Data illustrating the bottom ten detractors from absolute performance is set out below:

Jamie Ross

Fund Manager

5 October 2021

PRINCIPAL RISKS AND UNCERTAINTIES

Managing our risks

The Board, with the assistance of the Manager, has carried out a robust assessment of the principal risks and uncertainties facing the Company, including those that would threaten its business model, future performance, solvency and liquidity.

With the assistance of the Manager, the Board has drawn up a risk register facing the Company and has put in place a schedule of investment limits and restrictions, appropriate to the Company's Investment Objective and Policy, in order to mitigate these risks as far as practicable. The Board monitors the Manager, other suppliers and the internal and external environments in which the Company operates to identify new and emerging risks. The Board's policy on risk management has not materially changed from last year, although it acknowledges that the inherent likelihood of the occurrence of poor investment performance and failure of the Manager or other key suppliers to manage financial or administrative controls (due to the increased possibility of cyberattacks or issues with bandwidth as many employees worked from home) was increased due to the COVID-19 pandemic. The Board has been receiving weekly updates from the Fund Manager since the start of the pandemic, which has enabled the Directors to monitor and manage the related risks. COVID-19 continues to affect the value of the Company's investments due to the disruption of supply chains and demand for products and services, increased costs and cash flow problems, and changed legal and regulatory requirements. The principal risks which have been identified and the steps taken by the Board to mitigate these are as follows:

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 in the internal controls section of the Corporate Governance report of the 2021 Annual Report. Further details of the Company's exposure to market risk (including market price risk, currency risk and interest rate risk), liquidity risk and credit and counterparty risk and how they are managed are contained in the Notes to the Financial Statements within the Annual Report.

VIABILITY STATEMENT AND GOING CONCERN

The Company is a long term investor. The Board believes it is appropriate to assess the Company's viability over a five year period in recognition of the Company's long term horizon and what the Board believes to be investors' horizons, taking account of the Company's current position and the potential impact of the principal risks and uncertainties as documented in the Strategic Report within the Annual Report.

The assessment has considered the potential impact of the principal risks and uncertainties facing the Company, in particular investment strategy and performance against benchmark (whether from asset allocation or the level of gearing) and market risk, materialising in severe but plausible scenarios, and the effectiveness of any mitigating controls in place.

The Directors took into account the liquidity of the portfolio and the borrowings in place when considering the viability of the Company over the next five years and its ability to meet liabilities as they fall due. This included consideration of the duration of the Company's borrowing facilities and how a breach of any covenants could impact on the Company's net asset value and share price.

The Directors do not expect there to be any significant change in the current principal risks and adequacy of the mitigating controls in place. Also the Directors do not envisage any change in strategy or objectives or any events that would prevent the Company from continuing to operate over that period, as the Company's assets are liquid, its commitments are limited and the Company intends to continue to operate as an investment trust. In coming to this conclusion, the Board has considered the impact of COVID-19 and the UK's continuing relationship with the European Union subsequent to the end of the transition period following its departure from the European Union. The Board does not believe that these factors will have a long-term impact on the viability of the Company and its ability to continue in operation, notwithstanding the short-term uncertainty they have caused in financial markets.

Based on this assessment, the Board has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five year period.

The Directors consider it appropriate to adopt the going concern basis of accounting in preparing the Financial Statements (see below for further details).

BORROWINGS

The Company has in place an unsecured loan facility of £25 million (2020: £25 million) which allows it to borrow as and when appropriate. The maximum amount drawn down in the year under review was £17.3 million (2020: £27.1 million), with borrowing costs for the year totalling £103,000 (2020: £128,000). None of the facility was in use at the year end (2020: £13.5 million). Actual gearing at 31 July 2021 was 0.0% (2020: 3.2%) of NAV. The Board has delegated responsibility for day to day gearing levels to the Fund Manager. The Fund Manager expects to maintain some level of gearing in most conditions and the normal level of gearing is expected to be between 2% and 6% of NAV, but at times it may be above or below these levels. The Fund Manager does not use gearing in an attempt to time prospective market moves. Instead, the Company's gearing will increase when the Fund Manager sees attractive, stock specific, opportunities to deploy capital and will reduce gearing when the Fund Manager is a net seller of existing positions, again for stock specific reasons. The Company was in a net cash position for the last four months of the financial year; this was because the Fund Manager saw a limited opportunity for a set of new potential investments at this point.

RELATED PARTY TRANSACTIONS

The Company's transactions with related parties in the year were with its Directors and the Manager. There have been no material transactions between the Company and its Directors during the year and the only amounts paid to them were in respect of expenses and remuneration for which there were no outstanding amounts payable at the year end. Directors' shareholdings are disclosed in the 2021 Annual Report.

In relation to the provision of services by the Manager, other than fees payable by the Company in the ordinary course of business and the facilitation of marketing activities with third parties, there have been no material transactions with the Manager affecting the financial position of the Company during the year under review. More details on transactions with the Manager, including amounts outstanding at the year end, are given in the Notes to the Financial Statements within the Annual Report.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

In accordance with Disclosure Guidance and Transparency Rule 4.1.12, each of the Directors confirms that, to the best of his or her knowledge:

The Directors consider that the Annual Report, 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.

For and on behalf of the Board

Nicola Ralston

Chairman

5 October 2021

TWENTY LARGEST HOLDINGS AS AT 31 JULY 2021

Market capitalisation of the portfolio by weight at 31 July 2021

Performance drivers over the year ended 31 July 2021

Source: Morningstar Direct, Janus Henderson

AUDITED INCOME STATEMENT

The total return column of this statement represents the Income Statement of the Company.

All revenue and capital items in the above statement derive from continuing operations.

The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the AIC.

The Company had no recognised gains or losses other than those disclosed in the Income Statement.

AUDITED STATEMENT OF CHANGES IN EQUITY

AUDITED STATEMENT OF FINANCIAL POSITION

NOTES TO THE FINANCIAL STATEMENTS

For further information please contact:

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.