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.

Risk sentiment continued to improve in January with most sovereign yields declining and equity markets posting positive returns. The uptake of the European Central Bank’s Long-Term Refinancing Operation (LTRO) scheme reassured markets that we would not see a European bank fail as a result of a liquidity squeeze. The recognition from some politicians that austerity must be combined with growth also served to improve the mood.

The fund has enjoyed a good start to the year despite the strong performance of the materials and financials sectors (two areas where we are underweight). The addition of ING in December and two trading positions in January, Unicredit and Santander, lowered our underweight in financials to -2.5%. This significantly contributed to performance. Our holdings in Axa, Barclays and Prudential also rallied strongly. We saw a number of our cyclical stocks, which tended to be weak last year, perform well. This included BMW, Schneider Electric, and Adecco. Activity also included the additions of Vivendi, the media conglomerate, which is trading at an attractive valuation and G4S. Intergraded services company G4S has good organic growth, should receive a boost from the London Olympics and the company’s failed ISS bid presented an attractive entry point.

The positive start to the year has been encouraging. The market move has been broad (with even winners from last year rising – e.g. Fresenius), which makes us feel that it is well underpinned. We are also beginning to see some investors reduce their underweight to Europe at the expense of bonds or cash. The last three months have served to remind people that Europe isn’t uninvestable and although challenges remain, the progress made by Europe’s leaders (especially the ECB under Draghi) adds to the potential for a better 2012.

Tim Stevenson
January 2012