Suits investors looking for long-term capital growth from well-known and interesting European brands. Many of the companies held in the portfolio are well known in the UK, such as Nestlé and Heineken, but are not always easy to invest in directly.

The company aims to achieve a superior total return from a portfolio of high quality European investments. Henderson EuroTrust plc invests predominantly in large and medium-sized companies which are perceived to be undervalued in view of their growth prospects or on account of significant changes in management or structure.

• Henderson EuroTrust plc was voted the best European Investment Trust by both Money Observer and Moneywise Investment Trust Awards 2009.
• A proven investment philosophy is consistently applied, comprised of a high-conviction portfolio of good quality European companies generally brought and held over the medium to long term. 
• This Trust has a highly experienced management team led by a manager who has led this Trust successfully for over 16 years. Please remember that past performance is not a guide to future performance.

• This portfolio may hold only 40-60 stocks. If one of these investments declines in value, this can reduce the portfolio's value more than if it held a larger number of investments.
• Investors need to be aware of exchange rates. Most of the investments in this portfolio are not made in Sterling, so exchange rates could affect the value of and income from your investment.
• If a fund is a specialist country-specific or geographic regional fund, the investment carries greater risk than a more internationally diversified portfolio. Full details of risks.

The first quarter’s buoyant markets were brought back down to earth in April as sovereign concerns and politics dominated their direction. Equities in Spain and Italy were Europe’s largest underperformers, while Portuguese and Greek equities suffered their second consecutive decline . April also marked the first negative monthly return for the S&P 500, Stoxx 600, DAX, and Nikkei in 2012. Fixed income markets were better, with US Treasuries and German Bunds posting their strongest month for the year. The Thomson Reuters/Jefferies CRB Index finished 0.8% lower, despite US dollar weakness.

While it is still early in the first quarter reporting season, there are a few discernable trends of note. European results are coming in better than expected, while the breadth of surprises is neutral. At the time of writing, market net earnings are 2% ahead of expectations (which rises to 13% excluding financials). That said, the breadth is less encouraging with as many companies missing as beating (the long-run average is a c.15% net beat). Revenues have been strong, but margins weak. The percentage of companies reporting a positive sales surprise is at its highest level since 2005 and sales are coming in 3% better than expected. However, earnings before interest and tax (EBIT) margins are down 20 basis points so far. Earnings revisions have stalled: both financial year (FY)1 and FY2 net earnings revisions have turned slightly negative.

The Trust continued to perform strongly in April. Reporting season has started encouragingly for the Trust with BIC, Sandvik, and Dassault all producing impressive numbers. Amadeus was also amongst the top performers as the company announced two important contracts in the US with Expedia and Southwest Airlines; the success of holdings such as this emphasises the importance of focusing on the underlying business rather than the company of domicile (in this case Spain). Nokia proved the biggest single disappointment in the portfolio as the business continued to deteriorate and the shares sold off aggressively; we exited this stock as well as our position in Banco Santander during the month. 

Tim Stevenson
April 2012