Final Results

Henderson Opportunities Trust PLC 28 January 2008 HENDERSON OPPORTUNITIES TRUST PLC HENDERSON GLOBAL INVESTORS 28 JANUARY 2008 HENDERSON OPPORTUNITIES TRUST PLC Unaudited Preliminary Results for the year ended 31 October 2007 Highlights: • Performance hurt by the market's flight to liquidity • Portfolio Manager ready to take up investment opportunities when value appears • Dividend of 6p per ordinary share The Board believes that the strategy of investing in a concentrated portfolio of predominantly UK companies, unconstrained by market capitalisation, allows the Portfolio Manager to buy the shares of large, medium and small companies by taking up the best opportunities available to him. The lesson of this year has been that, at times when good opportunities cannot be found across the breadth of the market, we should not hesitate to hold larger cash balances. After the recent falls there are real opportunities to invest at attractive levels. George Burnett, Chairman For further information, please contact: George Burnett James de Sausmarez Chairman Head of Investment Trusts Henderson Opportunities Trust plc Henderson Global Investors Telephone: 020 7818 4469 Telephone: 020 7818 3349 James Henderson or Sarah Gibbons-Cook Portfolio Manager Investor Relations and PR Manager Henderson Opportunities Trust plc Henderson Global Investors Telephone: 020 7818 4370 Telephone: 020 7818 3198 Page 2 of 11 HENDERSON OPPORTUNITIES TRUST PLC Unaudited Preliminary Results for the year ended 31 October 2007 Review of the year The net asset value total return per ordinary share was 7.0% for the Company's year ended 31 October 2007. The equivalent return from the FTSE All-Share Index, which since 19 January 2007 has been the Company's benchmark, was 13.6%. For the period from 19 January 2007 to 31 October 2007, the net asset value total return per ordinary share was (2.6)% and the total return of the FTSE All-Share Index was 10.0%. These results are disappointing and reflect the poor share price performance of small companies, which have made up a substantial part of the portfolio. Since the Company's year end the market generally has declined, with sharp falls in the week immediately prior to the publishing of this report. The share prices of smaller companies have suffered in particular from the priority that investors have decided to give to seeking liquidity. The net asset value per ordinary share as at 24 January 2008 was 564.1p, a fall since the Company's year end of 26%. The Company's results are being reported later than usual to enable the position in respect of VAT on management fees to be established more clearly. Background Following the Extraordinary General Meeting on 19 January 2007, James Henderson became the Company's Portfolio Manager at Henderson with a brief to invest in the UK stockmarket on an unconstrained basis across the full range of market capitalisations. The Circular to shareholders of December 2006 stressed the focus that the Portfolio Manager would place on companies undervalued by the market. James Henderson saw particular attraction in the valuations given to many smaller companies but could find little value in bigger companies in 2007. Therefore he has kept with many of the companies that were held at 19 January 2007, believing them to be good long term investments. In the event, therefore, the early changes to the portfolio were to pay down the borrowings by reducing the number of holdings and to introduce a few companies with larger market capitalisations. For a short time the gearing was eliminated entirely but with hindsight too little was done. When the turmoil in the financial markets set in, many investors sold down holdings in smaller companies indiscriminately in their rush to move into liquid assets. The effects of this have hit the portfolio hard. The decision in January 2007 to change the strategy by moving to an unconstrained UK benchmark was the correct one and the modest reduction in smaller company holdings since then has been beneficial. However, recognition of the lack of opportunities generally in bigger companies should have led us to a marked reduction in the exposure to equities and a willingness to hold cash. The belief remains that overall the companies held offer good value and will prove to be robust business franchises that will prosper in the longer term. Share capital Following the EGM in January 2007, a bonus issue of subscription shares was made to the ordinary shareholders on a one for five basis. The number of ordinary shares in issue has remained unchanged as none has been bought back. The discount, taking account of the value attributed to the subscription shares, narrowed earlier in 2007. In the current volatile market the discount at which the ordinary shares trade has widened but the Board is determined to see it reduced and is seeking to renew the buy-back authorities for both classes of shares at the Annual General Meeting. Refund of VAT on management fees HM Revenue & Customs has now accepted the judgement of the European Court of Justice, made in response to the test case initiated by the Association of Investment Companies (the 'AIC'). As a Page 3 of 11 HENDERSON OPPORTUNITIES TRUST PLC Unaudited Preliminary Results for the year ended 31 October 2007 result, investment management fees paid by investment trust companies are now exempt from VAT and in due course we shall receive, via Henderson Global Investors, refunds of some of the VAT borne in past years and up to June 2007. To the extent that recovery is certain, we are required by the accounting rules to recognise the amount in the Income Statement and Balance Sheet. This we have done by including the amount that we are certain of receiving in respect of prior years as a negative cost, allocated between capital and revenue in the proportions in which it was originally expensed. Including the VAT borne on management fees in the year under review, we expect to receive in due course at least £348,000. Eventually the Company may recover more of the VAT borne in past years but there are currently many uncertainties and the timetable to conclusion of this issue will be a long one. Note 3 to the accounts explains the position in more detail. Dividends and earnings The revenue return per ordinary share for the year was 7.08p, of which some 2.9p is attributable to the refund of VAT in respect of prior years. The Income Statement includes two exceptional items that will not recur: the benefit of the refund of VAT and the costs of the proposals that we put to the EGM in January. Without either item the revenue return per share would have been just over 8p, well ahead of the figure for 2006. The revenue account has benefited from the fact that a greater proportion of our investments now pay a dividend. We expect investment income to grow further, assisted by the addition to the portfolio of larger companies that typically have secure and higher dividend yields. We are able to pay a dividend from the revenue earnings of the year, our first dividend payment for ten years. Accordingly, the Board proposes a final dividend of 6.00p per ordinary share which, subject to approval at the Annual General Meeting, will be paid on Wednesday 26 March 2008 to shareholders registered on Friday 29 February 2008. Although we expect the dividend to grow over time, the amount payable may vary from year to year. In any event, our focus will remain on total return. The future The current volatile financial markets have experienced a severe sell off, albeit after four years of strongly rising share prices. The share prices of smaller companies have been hit particularly hard. However, some of the falls will in time prove to be irrational as share prices have been hit without regard for the prospects of individual companies. The policy of moving to an unconstrained benchmark should allow us to capture the benefits of small company investing without being wedded to it. James Henderson believes that the current portfolio comprises fundamentally sound companies that represent good value but he will continue to remain alert to opportunities across the UK market. Recently he has been adding top quality housebuilders and large property companies to the portfolio. These have been bought at substantial discounts to their reported asset values. These purchases have resulted in our moving the gearing up again, to 14% as at 24 January 2008. The Board believes that the strategy of investing in a concentrated portfolio of predominantly UK companies, unconstrained by market capitalisation, allows the Portfolio Manager to buy the shares of large, medium and small companies by taking up the best opportunities available to him. The lesson of this year has been that, at times when good opportunities cannot be found across the breadth of the market, we should not hesitate to hold larger cash balances. After the recent falls there are real opportunities to invest at attractive levels. If or when the attractive opportunities are sufficient, we shall expect to increase the gearing towards our limit of 25% of net assets. Page 4 of 11 HENDERSON OPPORTUNITIES TRUST PLC Unaudited Preliminary Results for the year ended 31 October 2007 Income Statement for the year ended 31 October 2007 Year ended 31 October 2007 Year ended 31 October 2006 (unaudited) (audited) Revenue Capital Revenue Capital Return Return Total Return Return Total £'000 £'000 £'000 £'000 £'000 £'000 Gains from investments held at fair value through profit or loss - 3,997 3,997 - 15,916 15,916 Income from investments held at fair value through profit or loss (note 2) 979 - 979 961 - 961 Other interest receivable and similar income 12 - 12 17 - 17 --------- ---------- ----------- ---------- ---------- ---------- Gross revenue and capital gains 991 3,997 4,988 978 15,916 16,894 Management fee (90) (360) (450) (141) (566) (707) Write-back of prior years' VAT (note 3) 237 61 298 - - - Other administrative expenses (502) - (502) (217) - (217) ----------- ---------- ----------- --------- ---------- ---------- Net return on ordinary activities before finance charges and taxation 636 3,698 4,334 620 15,350 15,970 Finance charges (55) (219) (274) (60) (240) (300) ----------- ---------- ----------- ---------- ---------- ---------- Net return on ordinary activities before taxation 581 3,479 4,060 560 15,110 15,670 Taxation on net return on ordinary activities - - - - - - ----------- ---------- ----------- ----------- ---------- ---------- Net return on ordinary activities after taxation 581 3,479 4,060 560 15,110 15,670 ---------- ---------- ----------- ----------- ------------ ----------- Return per ordinary share (note 4) 7.08p 42.38p 49.46p 5.29p 142.74p 148.03p ======= ======= ======= ======= ======= ======= The total columns of this statement represent 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. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year. The Company had no recognised gains and losses other than those disclosed in the Income Statement and the Reconciliation of Movements in Shareholders' Funds. Page 5 of 11 HENDERSON OPPORTUNITIES TRUST PLC Unaudited Preliminary Results for the year ended 31 October 2007 Reconciliation of Movements in Shareholders' Funds for the year ended 31 October 2007 Called up Share Capital share premium redemption Capital Revenue capital account reserve reserves reserve Total £'000 £'000 £'000 £'000 £'000 £'000 Year ended 31 October 2007 At 31 October 2006 2,052 16,479 2,354 39,296 (1,958) 58,223 Issue of subscription shares 16 (16) - - - - Cancellation of revenue deficit - (1,958) - - 1,958 - Net return on ordinary activities after taxation - - - 3,479 581 4,060 -------- ---------- ---------- ---------- ----------- ----------- At 31 October 2007 2,068 14,505 2,354 42,775 581 62,283 ===== ====== ====== ====== ====== ====== Called up Share Capital share premium redemption Capital Revenue capital account reserve reserves reserve Total £'000 £'000 £'000 £'000 £'000 £'000 Year ended 31 October 2006 At 31 October 2005 3,041 16,479 1,365 42,473 (2,518) 60,840 Adjustment to bid valuation - - - (209) - (209) Net return on ordinary activities after taxation - - - 15,110 560 15,670 Purchases of own shares for cancellation (763) - 763 (18,078) - (18,078) Cancellation of treasury shares (226) - 226 - - - --------- ---------- ----------- ---------- ---------- ---------- At 31 October 2006 2,052 16,479 2,354 39,296 (1,958) 58,223 ===== ====== ====== ====== ====== ====== Page 6 of 11 HENDERSON OPPORTUNITIES TRUST PLC Unaudited Preliminary Results for the year ended 31 October 2007 Balance Sheet at 31 October 2007 2007 2006 £'000 £'000 Investments held at fair value through profit or loss Listed investments at market value: United Kingdom 41,092 35,796 ------------ ----------- 41,092 35,796 AIM investments at market value 26,100 31,091 Overseas quoted cash fund 733 128 Unquoted investments at directors' valuation - 36 ------------ ----------- 67,925 67,051 ------------ ----------- Current assets Debtors 487 1,110 Cash at bank - 6 ------------ ----------- 487 1,116 Creditors: amounts falling due within one year (6,129) (9,944) ----------- ----------- Net current liabilities (5,642) (8,828) ------------ ----------- Total net assets 62,283 58,223 ======= ======= Capital and reserves Called up share capital 2,068 2,052 Share premium account 14,505 16,479 Capital redemption reserve 2,354 2,354 Capital reserve - realised 29,781 25,191 Capital reserve - unrealised 12,994 14,105 Revenue reserve 581 (1,958) ------------ ----------- Equity shareholders' funds 62,283 58,223 ======= ======= Net asset value per ordinary share (note 5) 758.78p 709.32p ======= ======= Page 7 of 11 HENDERSON OPPORTUNITIES TRUST PLC Unaudited Preliminary Results for the year ended 31 October 2007 Cash Flow Statement for the year ended 31 October 2007 2007 2007 2006 2006 £'000 £'000 £'000 £'000 Net cash outflow from operating activities (218) (121) Servicing of finance Interest paid (277) (294) ----------- ----------- Net cash outflow from servicing of finance (277) (294) Taxation Tax recovered - 7 ----------- ----------- Net tax recovered - 7 Financial investment Purchases of investments (37,149) (25,131) Sales of investments 41,267 38,078 ----------- ----------- Net cash inflow from financial investment 4,118 12,947 ------------ ------------ Net cash inflow before financing 3,623 12,539 Financing (Repayment)/drawdown of short term loans (2,189) 4,100 Purchases of own shares (1,484) (16,594) ----------- ----------- Net cash outflow from financing (3,673) (12,494) ----------- ----------- (Decrease)/increase in cash (50) 45 ====== ====== Reconciliation of net cash flow to movement in net debt (Decrease)/increase in cash as above (50) 45 Net cash outflow/(inflow) from decrease/(increase) in loans 2,189 (4,100) ---------- ---------- Movements relating to cash flows 2,139 (4,055) Exchange movements - (1) ---------- ----------- Movement in net debt 2,139 (4,056) Net debt at the start of the year (8,094) (4,038) ---------- ----------- Net debt at the end of the year (5,955) (8,094) ====== ====== Page 8 of 11 HENDERSON OPPORTUNITIES TRUST PLC Unaudited Preliminary Results for the year ended 31 October 2007 Notes to the Accounts: 1. Accounting policies - basis of accounting The accounts are prepared on a going concern basis and on the historical cost basis of accounting, modified to include the revaluation of fixed asset investments, and in accordance with the Companies Act 1985, Accounting Standards applicable in the United Kingdom and the Revised Statement of Recommended Practice Financial Statements of Investment Trust Companies dated December 2005 (the ' Revised SORP'). 2007 2006 2. Income from investments held at fair value through profit or loss £'000 £'000 Franked: Dividends from listed investments 609 698 Special dividends 36 - Dividends from AIM investments 262 185 Special dividends from AIM investments - 63 ------- ------- 907 946 ------- ------- Unfranked: Dividends from listed investments 33 6 Interest from unquoted investments 31 9 Property income dividends 8 - ------- ------- 72 15 ------- ------- 979 961 ==== ==== 3. VAT on management fees In 2004 the Association of Investment Companies (the 'AIC'), together with JPMorgan Claverhouse Investment Trust plc, launched a case against HM Revenue & Customs ('HMRC') to challenge whether Value Added Tax ('VAT') should have been charged on fees paid for management services provided to investment trust companies. On 28 June 2007 the European Court of Justice delivered its judgement on the case in favour of the AIC. Since then HMRC has accepted that the provision of investment management services to investment trust companies is VAT exempt and has acknowledged its liability to pay claims in respect of VAT borne by investment companies. The Manager (Henderson Global Investors Limited) will now be able to reclaim from HMRC the amount of VAT charged to the Company in respect of investment management services from 1 October 2000 to 30 June 2007, to the extent that such VAT was paid by the Manager to HMRC. VAT has not been applied to investment management fees invoiced in respect of periods since June 2007. Accordingly, some of the VAT borne by the Company on investment management fees invoiced in the period from 1 October 2000 to 30 June 2007 has been written back, in accordance with a standstill agreement reached between the Manager and the Company. The Board is satisfied that an amount of £348,000 is certain to be recovered but considers that there are currently too many uncertainties to allow any reasonable estimate of the further amounts potentially recoverable to be calculated. Of the amount of £348,000 that has been recognised, £298,000 relates to the period from 1 October 2000 to 31 October 2006. The write-back has been allocated between revenue return and capital return according to the allocation of the amounts originally paid. The Company will receive from the Manager any interest paid by HMRC on the amounts eventually recovered. Page 9 of 11 HENDERSON OPPORTUNITIES TRUST PLC Unaudited Preliminary Results for the year ended 31 October 2007 Notes to the Accounts continued The Company may be able to recover further amounts of the VAT charged on investment management fees in the years from 1990 to 2007 inclusive. For this purpose the years 1990 to 2007 fall into four distinct periods. The Company may be able to reclaim VAT paid in respect of the period from 1 January 1990 to 4 December 1996, following the recent judgement of the House of Lords in a case concerning the time limits applicable to VAT claims. There may also be some possibility of recovering VAT paid in the period from then to 30 September 2000. In respect of the period from 1 October 2000 to 31 December 2003, the Manager has undertaken to reclaim the VAT paid to it by the Company, to the extent that this was paid by the Manager to HMRC, and repay the money it receives to the Company. In the opinion of the Board, the Company is certain of receiving this amount to the extent that it has been borne by the Company. Accordingly, an amount of £81,000 has been recognised in respect of this period. In respect of the period from 1 January 2004 to 30 June 2007, the Manager has undertaken to reclaim the VAT paid to it by the Company, to the extent that this was paid by the Manager to HMRC, and repay the money it receives to the Company. The Manager has undertaken also to repay to the Company the balance of the VAT paid to it by the Company in respect of this period. In the opinion of the Board, the Company is certain of receiving these amounts to the extent that they have been borne by the Company. Accordingly, an amount of £267,000 has been recognised in respect of this period. 4. Return per ordinary share The total return per ordinary share is based on the net return attributable to the ordinary shares of £4,060,000 (2006: £15,670,000) and on 8,208,293 ordinary shares (2006: 10,585,584) being the weighted average number of shares in issue during the year. The total return can be further analysed as follows: 2007 2006 £'000 £'000 Revenue return 581 560 Capital return 3,479 15,110 ---------- ---------- Total return 4,060 15,670 ====== ====== Weighted average number of ordinary shares 8,208,293 10,585,584 Revenue return per ordinary share 7.08p 5.29p Capital return per ordinary share 42.38p 142.74p ----------- ----------- Total return per ordinary share 49.46p 148.03p ====== ====== The Company has in issue 1,641,547 subscription shares which are convertible into ordinary shares at a conversion price of 936p per share in any of the years 2009 to 2014 inclusive. The subscription shares were issued on 19 January 2007. There was no dilution of the return per ordinary share in respect of the conversion rights attaching to the subscription shares (year ended 31 October 2006: no dilution). Page 10 of 11 HENDERSON OPPORTUNITIES TRUST PLC Unaudited Preliminary Results for the year ended 31 October 2007 Notes to the Accounts continued 5. Net asset value per ordinary share The net asset value per ordinary share is based on the net assets attributable to the ordinary shares of £62,283,000 (2006: £58,223,000) and on the 8,208,293 ordinary shares in issue at 31 October 2007 (2006: 8,208,293). There was no dilution of the net asset value per ordinary share in respect of the conversion rights attaching to the subscription shares (31 October 2006: no dilution). 6. Issued share capital There were 8,208,293 ordinary shares of 25p each in issue at 31 October 2007 (31 October 2006: 8,208,293). There were 1,641,547 subscription shares of 1p each in issue at 31 October 2007 (31 October 2006: none). No shares were bought back during the year (2006: 3,052,121 ordinary shares). 7. Dividends No amounts have been recognised as distributions to equity holders in the year. Subject to approval at the annual general meeting, the proposed final dividend of 6.00p per ordinary share will be paid on 26 March 2008 to shareholders on the register of members at the close of business on 29 February 2008. The ex-dividend date will be 27 February 2008. No provision has been made for the final dividend in these accounts. Under the current Financial Reporting Standards, the final dividend is not recognised until approved by the shareholders. Previously dividends were recognised in respect of the period to which they related. The total dividends payable in respect of the financial year, which form the basis of the test under section 842 of the Income and Corporation Taxes Act 1988, are set out below: Year ended 31 October 2007 £'000 Revenue available for distribution by way of dividends for the year 581 Proposed final dividend for the year ended 31 October 2007: 6.00p (based on the 8,208,293 ordinary shares in issue at 25 January 2008) (492) ------- Undistributed revenue for section 842 purposes* 89 ==== *Undistributed revenue comprises 9.1% of the income from investments of £979,000 (see note 2). 8. 2007 Accounts The preliminary figures for the year ended 31 October 2007, which do not constitute statutory accounts, are an extract from the Company's draft accounts for the year. These accounts have not yet been delivered to the Registrar of Companies, nor have the auditors yet reported on them. 9. 2006 Accounts The figures and financial information for the year ended 31 October 2006 are an extract from the latest published accounts of the Company and do not constitute the statutory accounts for that year. Those accounts have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under either section 237(2) or section 237(3) of the Companies Act 1985. Page 11 of 11 HENDERSON OPPORTUNITIES TRUST PLC Unaudited Preliminary Results for the year ended 31 October 2007 Notes to the Accounts continued 10. Annual Report The annual report and accounts are expected to be posted to shareholders in February and copies will be available thereafter from the Secretary at the Company's Registered Office, 4 Broadgate, London EC2M 2DA. 11. Annual General Meeting The Annual General Meeting will be held on Wednesday 19 March 2008 at 2.30 pm. This information is provided by RNS The company news service from the London Stock Exchange

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