Final Results

RNS Number : 2407B

Henderson Opportunities Trust PLC

28 February 2014

 



Page 1 of 21

HENDERSON OPPORTUNITIES TRUST PLC

Annual Financial Report for the year ended 31 October 2013

This announcement contains regulated information

Chairman's comment

It has been an outstanding year with the NAV total return rising 47.1% while the FTSE All-Share index, our benchmark returned 22.8%. The consistently excellent performance over six months, one, three and five years has been recognised in a substantial reduction in the discount, resulting in a 68.4% increase in the share price.

I am pleased to report that the strong performance has continued into the new financial year.

Financial Highlights

	Year ended 31 October 2013	Year ended 31 October 2012	Change %
Net asset value per ordinary share	884.3p	608.8p	+45.3
Ordinary share price	805.0p	477.9p	+68.4
Subscription share price	1.3p	2.6p	-50.0
Discount	9.0%	21.5%
Return per ordinary share	284.80p	113.71p	N/A
Revenue return per ordinary share	12.53p	10.92p	+14.7
Dividends per ordinary share in respect of the year#	10.5p	9.0p	+16.7
Gearing	14.5%	16.2%	N/A

^#2013 total dividend is subject to approval of the final dividend at the AGM.

Performance

	6 months %	1 year %	3 years %	5 years %
Net asset value per share total return	21.2	47.1	72.8	212.3
FTSE All-Share Index total return	7.7	22.8	35.6	96.7
Ordinary share price total return	38.8	71.0	97.3	286.2

Total return assumes net dividends are reinvested and excludes transaction costs.

Source:  Morningstar for the AIC, using cum income NAV.

Page 2 of 21

HENDERSON OPPORTUNITIES TRUST PLC

Annual Financial Report for the year ended 31 October 2013

Chairman's Statement

Review of performance

It has been an outstanding year with the Net Asset Value (NAV) total return (i.e. including income) rising 47.1%, while the FTSE All-Share, our benchmark, returned 22.8%. On page 10 we show the major stock contributors and detractors and how the twenty largest stocks performed. The Portfolio Managers' estimate of the overall performance attribution is shown in the table below.

	Year ended 31 October 2013 %
Net asset value per share total return	47.1
Less: Benchmark total return	22.8
	------
Relative performance	24.3
	------
Accounted for by:
Stock selection	22.4
Gearing	2.9
Share buy-backs	-
Expenses	-1.0
	-------
	24.3
	====
Source: Henderson Global Investors Limited

As the table demonstrates, maintaining our gearing level in a range of 10-15% has enhanced the total return.

While there has been a general rerating of investment trusts over the period as investor confidence has slowly returned, the significant narrowing from 21.5% to 9.0% in the discount to net asset value at which your Company's shares have been traded is also a recognition of its continued outperformance against its benchmark. The combined result was an increase in the share price of 68.4% in the year to 31 October 2013. In a recently published table, of all Investment Trusts in the country focusing on the UK market, Henderson Opportunities Trust was the best performing. I would draw your attention also to the Financial Highlights on page 1 table which demonstrates the Trust's consistently excellent performance over six months, one, three and five years.

Buyback of Shares

We have largely eschewed in recent times the buy back of the Company's share and so there were no buybacks in the period. While we will seek the right to do so as usual at the forthcoming Annual General Meeting in order to maintain maximum flexibility to act in shareholders' best interests, the Board believes it is a continuation of the levels of performance achieved over the last five years which will be the best means of attaining a low discount or indeed a premium.

Page 3 of 21

HENDERSON OPPORTUNITIES TRUST PLC

Annual Financial Report for the year ended 31 October 2013

Earnings and Dividends

The revenue return for the year was 12.53p, which compares with 10.92p last year. The final dividend, subject to shareholder approval, will be 7.2p making 10.5p for the year (9.0p last year), an increase of 16.7%. Many of the holdings in the portfolio are growing their dividends as they become more confident about their operating performance. Dividend cover is at historically high levels, cash generation is strong and corporate debt is low. Therefore although the dividend yield of the Company is relatively low, the dividends should continue to grow in a strong sustainable manner.

Expenses

The Ongoing Charge (previously Total Expense Ratio) for 2013 was 1.00% of the daily average net assets over the year compared with 1.12% in 2012.

Continuation Vote

The triennial continuation vote for the Company will be put to the Annual General Meeting on 29 April 2014. From the last continuation vote on 17 March 2011 to 25 February 2014, the Company's NAV has risen by 66.1%* and its share price by 88.1%*, compared with a 37.3%* rise in the FTSE All-Share Index. Your Directors believe that our investment strategy will continue to provide worthwhile returns.

Going Concern

The assets of the Company consist almost entirely of listed investments. Although in practice it might not be possible to realise the entire portfolio quickly at fair value the Company has adequate financial resources to maintain operations in future. Accordingly, we have prepared the financial statements on a going concern basis.

Change in Accounting Policy

Since the year end the Board has agreed a change to the Company's accounting policy and, with effect from 1 November 2013, all investment management fees and finance costs will be charged 70% to the capital return and 30% to the revenue return, based on the Board's expected long-term split of total returns Any performance fee will be charged wholly to capital.

Subscription Shares

The Board would like to remind subscription shareholders that this year is the final conversion opportunity. In summary, subscription shareholders can exercise their right to convert at a price of 936p in the 30 days prior to the Annual General Meeting on 29 April 2014. Full details will be sent to subscription shareholders with the Report and Financial Statements and will also be available on the Company's website.

AGM

Our Annual General Meeting will be held at 2.30pm on 29 April 2014 at the registered office, 201 Bishopsgate, London EC2M 3AE. The Notice of Meeting is set out in the separate circular to shareholders that accompanies the Report and Financial Statements and the Directors recommend that the shareholders support all the resolutions. The Directors will vote their own shareholdings in favour of all the resolutions to be put at the AGM. In addition to the formal business, James Henderson and Colin Hughes will give a presentation following which afternoon tea will be served.

Regulatory

The Board has noted that the Alternative Investment Fund Managers Directive has been written into UK legislation with effect from 22 July 2013. There is a transition period within which the Company must comply with the provisions of this Directive, which include either acting as an Alternative Investment Fund Manager (AIFM) or appointing an external party to be the AIFM and

Page 4 of 21

HENDERSON OPPORTUNITIES TRUST PLC

Annual Financial Report for the year ended 31 October 2013

Chairman's Statement, continued

appointing a depositary, by 22 July 2014. The Board has agreed in principle that its Manager will be appointed as AIFM and will take the necessary actions to ensure that all documentation and processes to enable the Company to comply with these regulations are in place within the transition period.

Investment Strategy

The objective is to find and hold stocks that are good business franchises with attractive valuations and sound prospects capable of delivering substantial growth over time. These companies will be found across the market capitalisation range but there will usually be a focus on smaller companies when there is the largest of potential in this area. Whatever their size, we look for companies with strong growth prospects and diverse customer bases.

Gearing

As has been previously noted, gearing has been held in the 10 to 15% range throughout the year, ending at 14.5% on 31 October 2013. While interest rates remain at historically low levels and stock valuations, though higher than before, remain at reasonable levels, the intention is to maintain a sensible level of short term borrowings relative to the potential levels of capital growth.

Outlook

I am pleased to report that the strong outperformance against our benchmark has continued into the new financial year. From 1 November 2013 to 25 February 2014, against an increase in the FTSE All-Share Index of 3.2%*, your Company's NAV total return increased by 8.9%* and its share price by 15.7%*. This has led to the virtual elimination of the discount.

The recent behaviour of the FTSE All-Share Index at a time when the forecasted growth of the UK economy is being increased is a reminder that there is still volatility in the markets. At the same time, it offers an opportunity to invest further in a range of good quality companies of differing size at attractive prices, a policy that has stood us in good stead over the last five years.

George Burnett

Chairman

*Source: Datastream

Page 5 of 21

HENDERSON OPPORTUNITIES TRUST PLC

Annual Financial Report for the year ended 31 October 2013

Portfolio Managers' Review

The Economy

The overall economic backdrop has gradually improved over the course of the year but this has only become really apparent in the latter half. The UK has improved, particularly in the housing market and private sector job creation. Indeed the UK is now the fastest growing major developed economy.

Real earnings in the UK, which have been falling since 2008, may be on the turn, and should help to sustain the recovery in consumer confidence. The UK has also, according to the Confederation for British Industry, seen manufacturing output climb to an eighteen year high while export orders, driven by the motor manufacturers, were at a 22 month high. UK inflation appears under control at close to 2% and growth in GDP for 2014 is forecast to accelerate to more than 2%. Interest rates will rise when unemployment falls further but this should be seen as part of the UK economy returning to a more normal monetary policy.

Market Review

Share prices made good headway with the FTSE100 index rising by 22% from mid November 2012, which represented the low point in the year under review, to a peak on 22 May 2013. This peak coincided with the first bout of market nerves around the reduction, or tapering as it has become known, of liquidity pumped into the financial system by the Central Banks, in particular the US Federal Reserve. This can be seen as the start of a sustained process of tapering and, thereafter, monetary tightening. In the meantime the early tentative signs of growth became progressively easier to see as the year wore on and investor confidence grew. This growing confidence has been reflected in the second half of the year by, for instance, the FTSE AIM index rising by 18% from the lows of June to the end of October while the FTSE100 has struggled to break through the May highs. This growing investor appetite for risk has also seen an increase in the number of IPOs (Initial Public Offerings), the most high profile case being that of Royal Mail. So whilst the stock market had a good year it remains attractively valued against historical levels.

Fund Performance

The Company has had another good year with the Net Asset Value (NAV) returning 47.1% and the share price rising by 71.0%, on a total return basis. By comparison our benchmark index, the FTSE All Share Index returned 22.8%. These returns are all stated inclusive of income. Last year we stated that if in the year ahead we produced further outperformance against our benchmark then we would eradicate the underperformance suffered in 2008 and show a positive five year return relative to the benchmark. We are pleased to say that this has been achieved. For the five years from 31 October 2008 the NAV has risen by 212.3% and the share price by 286.2% while the FTSE All-Share Index rose by 96.7%. If we measure the returns from the bottom of the market during the credit crisis, then the NAV has risen by 307.5%, the benchmark by 137.5% and the share price by 401.8% since 3 March 2009.

Investment Approach

As long term investors, we spend a considerable amount of time researching and meeting companies in whom we may or may not invest on your behalf. This long term approach is reflected in a holding period of typically between three to five years; however, we do remain alive to shorter term opportunities. These are more likely to arise when stock market investors' confidence levels are high. Our typical holding period not only reflects our approach but also an appreciation that the cycle for any business to grow and mature is not easily reconciled with the volatility of a stock market which can be subject to fads and fashions.

Page 6 of 21

HENDERSON OPPORTUNITIES TRUST PLC

Annual Financial Report for the year ended 31 October 2013

Portfolio Managers' Review, continued

The portfolio is a mixture of large, medium and small companies. We employ a number of valuation techniques but are not slavishly reliant upon any one methodology in arriving at our portfolio selections. We enjoy building relationships with the senior executive teams of our portfolio companies and will often meet with them several times a year. This may involve one or more site visits. Over the course of the last three years, your fund managers have had in excess of 1,250 face-to-face meetings and company visits.

At the end of the financial year the number of holdings had increased to 86 from 77 last year and 82 the year before. For the current market conditions, this is our natural 'fighting' weight giving enough diversity on the one hand but on the other enough weight to the winners to make a difference. Over the last few years we have gently moved up the market capitalisation scale and at the year end 41.7% by value was held in FTSE100 and FTSE250 index stocks as against 31.9% two years ago. As a consequence, 32.8% of the portfolio is held in companies with market capitalisations over £1 billion. So whilst we have maintained the bulk of the portfolio in under researched areas of the stock market where we can add most value, we have ensured that our gearing level (10-15% range over the last year) is easily covered by the most liquid part of the portfolio. This provides your managers with the flexibility to react promptly to changing market conditions.

Portfolio Activity

During the year we have been active in 58 companies selling out completely in 11 cases and starting new investments in 18. This included 5 IPOs only 2 of which we continue to hold at the year end. Our top ten holdings last year represented 26.2% of the portfolio and there had been virtually no change in that level by the end of this year. The portfolio has maintained a strong bias towards industrial and technology stocks but we have raised our exposure to FTSE100 listed international mining and oil and gas names following their significant underperformance over the last two years. There have been five new entrants to the top ten positions this year but they have all been in the portfolio for some time which reflects our patient approach to running winners.

Among our disposals, Zetar is a chocolate confectionary and snacks producer in which we had been invested for a number of years. A persistently low valuation had limited the company's ability to grow by acquisition. It was acquired early in the financial year by a private German group in a recommended cash takeover. This was a surprisingly quiet year for mergers and acquisitions given strong company balance sheets and the improving economic outlook.

We also sold out of Interserve, the FTSE250 index support services and construction group, where we believed that the bulk of the improved business profile was reflected in the share price. The shares have continued to perform since we sold; we should have been more patient. Later in the year we sold another long standing holding, Easyjet. We first acquired shares in this company around the time of the appointment of Carolyn McCall as the new Chief Executive and again we believe that the bulk of the transformation of the business into a much admired FTSE100 company is complete. We also sold out of Avanti Communications, the satellite broadband service provider, where the continual slippage in the ramp up of revenues caused concern and placed extra strains on the company's finances. In addition to these outright sales we have prudently maintained risk controls by selling down a portion of our holding in Retroscreen Virology, the biomedical services company, which started and closed the year as our largest holding. We realised well over one million pounds in profits to be recycled into new ideas. Retroscreen was an IPO from 2012 as was WANdisco, a small UK software tools developer, to whose prospects the market has warmed. Again, we have crystallised some of our initial investment whilst retaining a core holding.

Page 7 of 21

HENDERSON OPPORTUNITIES TRUST PLC

Annual Financial Report for the year ended 31 October 2013

Portfolio Managers' Review, continued

A striking feature of this year has been the increase in the number of IPOs. New issues have been thin on the ground in recent years but the latter part of our 2013 year has seen many more. The most high profile issue, Royal Mail, was either a roaring success or a debacle depending upon your point of view. For our part we bought, and sold, at levels that added value for our shareholders as we also did with Foxton's, the London based estate agency. We have retained two IPO's from the year; Conviviality Retail, a convenience store retailer, and Keyword Studios, a video gaming language services provider. We believe both businesses have considerable scope for growth over the coming years.

Our most significant purchase in the year was BHP Billiton, the international resources group with major operations in iron ore, coal and aluminium. We started investing in the latter half of our year as we believe that the major cultural changes underway focusing on capital discipline and positive returns have laid the foundations for a return to sustained profitable growth without the risk of break-neck expansion. This has only been possible as the various executives among the leading resource businesses have been replaced over the last twenty four months. We have also begun to invest in Rio Tinto for similar reasons. Another out of favour investor area has been oil and gas; not just the small high risk explorers but also the majors. We have mentioned BP in the past and we know it remains troubled by the aftermath of the Macondo disaster but things are changing. Similarly, Royal Dutch Shell has also been shunned by investors and we have started a position here as well. It is unlikely we will ever own an 'index' weight in stocks such as these unless we believe there is an opportunity to add significant value. Other new investments included Advanced Computer Software, the business and healthcare IT solutions provider, run by the energetic Vin Murria, where we supported a share placing to make an accretive acquisition, and Monitise, which provides the backbone technology for mobile applications in the international banking market with customers such as Royal Bank of Scotland and Visa. We also invested in Entertainment One, a leading international film, television and children's character licensing and distribution business which has gained critical scale following the acquisition last year of Alliance Films. At the smaller end of the market capitalisation scale we bought into 1spatial, who are tackling the task of providing tools for organisations such as Ordnance Survey GB and the US Census Bureau to manipulate and add value to the vast amounts of data they collect and use.

Portfolio Attribution Analysis

The table on page 10 shows the top five and bottom five contributors to the Company's absolute performance in growth in the NAV and their contribution relative to our benchmark.

Among the stocks which had a positive impact, Retroscreen Virology not only continued to deliver revenue ahead of expectations but also managed to double its operational footprint without losing focus. Additional funds for expansion have been raised from existing and new shareholders and it is now well placed to exploit future market opportunities. ITV has enjoyed a strong year operationally as the twin benefits of cost discipline and an improving advertising market have produced both rising profits and cash-flow. Ashtead, the plant hire business with 90% of the business focused on the US market, has continued to see both market share gains and cyclical recovery so producing a series of earnings upgrades. Senior, the aerospace components manufacturer, has put in a solid performance as the run rate of production at Boeing and Airbus continues to grow. WANdisco, is a small UK software company that is providing tools for distributed software development and the high availability requirements of enterprises seeking to meet the challenges of today's "big data" environment.

Page 8 of 21

HENDERSON OPPORTUNITIES TRUST PLC

Annual Financial Report for the year ended 31 October 2013

Portfolio Managers' Review, continued

Not everything has worked as well as these. SDL, a leader in language translation software and services, had a poor year as revenue growth failed to materialise and margins fell while belated investment into the structure of the business was made. We remain optimistic that management changes and renewed focus will start to produce better results soon. Kenmare Resources, the heavy mineral sands miner with a world class deposit in Mozambique, suffered operational shortfalls in production into a weak pricing environment. This led to additional equity being raised so that the company could achieve its production potential and take advantage of the better pricing environment which should progressively emerge in 2014. Anglo American, the South African based miner has been beset by many problems common to other global miners including a change of executive leadership, strikes and material write-downs of project values. Nevertheless the right decisions are being made and we have modestly raised our position. IQE, a global leader in compound semiconductors, had a difficult year as the predicted growth rates in high end smartphones declined before any of its future development projects matured sufficiently to take up the slack. Faroe Petroleum, the UK and Norwegian North Sea oil explorer, had a poor year with the drill bit and found no new material oil fields. It also had to revise down its production outlook. In a sector already out of favour with investors, this hurt the share price but the company remains self-funded and the 2014 exploration programme remains significant for a company of its size.

Outlook

Interest rates will rise in due course and the pace of the economy's growth may not accelerate further over the next couple of years but UK companies in aggregate have low levels of debt. They are in good shape to weather moderate economic storms. We are focused on excellent, strong companies that we believe will grow in most economic conditions through providing competitive products and services. With valuations still appealing and company profits set to grow, we remain optimistic about the future.

James Henderson and Colin Hughes

Page 9 of 21

HENDERSON OPPORTUNITIES TRUST PLC

Annual Financial Report for the year ended 31 October 2013

Analysis by market index (by value)

	FTSE All-Share Index  31 October 2013 %	Portfolio 31 October 2013 %	Portfolio 31 October 2012 %
FTSE 100 Index	83.1	18.5	13.4
FTSE 250 Index	14.3	23.2	29.2
FTSE SmallCap Index	2.6	19.9	17.9
	-------	-------	-------
FTSE All-Share Index	100.0	61.6	60.5
FTSE Fledgling Index	-	1.1	1.1
FTSE AIM All-Share Index	-	33.0	29.7
other Official List	-	2.5	5.6
other AIM	-	1.8	3.1
	-------	-------	-------
	100.0	100.0	100.0
	=====	=====	=====

Source:  Henderson Global Investors Limited

Analysis by market capitalisation

	FTSE All-Share Index %	Portfolio 31 Ocotber 2013 %	Portfolio 31 October 2012 %
Greater than £2bn	91.2	21.5	15.7
£1bn - £2bn	4.8	11.3	9.3
£500m - £1bn	2.7	10.0	10.9
£200m - £500m	1.0	30.0	20.8
£100m - £200m	0.2	16.0	19.8
£50m - £100m	0.1	7.6	17.1
Less than £50m	-	3.6	6.4
	--------	--------	--------
	100.0	100.0	100.0
	======	======	======

Source: Henderson Global Investors Limited

Page 10 of 21

HENDERSON OPPORTUNITIES TRUST PLC

Annual Financial Report for the year ended 31 October 2013

Portfolio Managers' Review, continued

Twenty Largest Holdings at 31 October 2013

Rank (2013)	Rank (2012)	Company	Valuation 2012 £'000	Purchases £'000	Sales £'000	Appreciation £'000	Valuation 2013 £'000
1	1	Retroscreen Virology	1,989	-	(1,843)	2,684	2,830
2	13	ITV	1,082	-	-	1,304	2,386
3	4	XP Power	1,467	-	-	888	2,355
4	3	Hyder Consulting	1,629	-	-	621	2,250
5	2	Senior	1,849	-	(547)	932	2,234
6	-	Ricardo	910	357	-	748	2,015
7	17	Vertu Motors	1,053	249	(120)	667	1,849
8	5	Ashtead	1,399	-	(581)	983	1,801
9	9	HSBC	1,218	369	-	118	1,705
10	16	St Modwen Properties	1,057	-	(160)	776	1,673
11	6	e2v technologies	1,346	-	-	321	1,667
12	11	Velocys	1,170	-	(180)	630	1,620
13	19	Jupiter Fund Management	1,047	-	-	548	1,595
14	-	Tribal	662	211	-	721	1,594
15	20	Johnson Service	1,028	-	-	532	1,560
16	14	Latchways	1,080	100	-	307	1,487
17	-	BHP Billiton	-	1,398	-	50	1,448
18	-	Clinigen	576	-	-	851	1,427
19	15	RWS	1,074	-	-	348	1,422
20	10	Majestic Wine	1,185	-	-	175	1,360
			----------	-----------	--------	---------	----------
			22,821	2,684	(3,431)	14,204	36,278
			======	======	=====	======	======

At 31 October 2013 these investments totalled £36,278,000 or 45.1% of the portfolio

Attribution Analysis

The table below shows the top five active contributors to and the bottom five detractors from the Company's performance.

Top five contributors	Share price return %	Absolute contribution %	Contribution relative to benchmark %	Top five detractors	Share price return %	Absolute contribution %	Contribution relative to benchmark %
Retroscreen Virology	+171.7	+5.0	+4.5	SDL	-50.6	-1.1	-1.4
ITV	+132.5	+2.5	+2.2	Kenmare Resources	-55.8	-0.7	-0.8
Ashtead	+78.6	+1.9	+1.6	Anglo American	-19.3	-0.5	-0.7
Senior	+56.5	+1.8	+1.3	IQE	-21.1	-0.4	-0.6
WANdisco	+212.1	+1.7	+1.6	Faroe Petroleum	-18.8	-0.4	-0.6

Source: Henderson Global Investors Limited

Page 11 of 21

HENDERSON OPPORTUNITIES TRUST PLC

Annual Financial Report for the year ended 31 October 2013

Principal Risks and Uncertainties

The principal risks and uncertainties facing the Company relate to investing in the shares of companies that are quoted in the United Kingdom, including small companies. Although the Company invests almost entirely in securities that are quoted on recognised markets, share prices may move rapidly, whether upwards or downwards, and it may not be possible to realise an investment at the Manager's assessment of its value. Falls in the value of the Company's investments can be caused by unexpected external events. The companies in which investments are made may operate unsuccessfully, or fail entirely, such that shareholder value is lost. The Company is also exposed to the operational risk that one or more of its contractors or sub-contractors may not provide the required level of service. The Board considers regularly the principal risks facing the Company in order to mitigate them as far as practicable.

The Board has drawn up a risk map which identifies the cardinal risks to which the Company is exposed. These principal risks fall broadly under the following categories:

Investment activity and strategy

The Manager provides the Directors with management information, including performance data and reports and shareholder analyses on a monthly basis. The Board monitors the implementation and results of the investment process with the Portfolio Managers, who attend all Board meetings, and reviews regularly data that monitors risk factors in respect of the portfolio. The Manager operates in accordance with investment limits and restrictions determined by the Board; these include limits on the extent to which borrowings may be used. The Board reviews its investment limits and restrictions regularly and the Manager confirms its compliance with them each month. The Board reviews investment strategy at each Board meeting. An inappropriate investment strategy (for example, in terms of asset allocation, stock selection, failure to anticipate external shocks or the level of gearing) may lead to a reduction in NAV, underperformance against the Company's benchmark index and the Company's peer group; it may also result in the Company's shares trading on a wider discount to NAV. The Board seeks to manage these risks by ensuring a diversification of investments, regular meetings with the Portfolio Managers with measurement against performance indicators and review of the extent of borrowings.

Financial instruments and the management of risk

By its nature as an investment trust, the Company is exposed in varying degrees to market risk, interest rate risk, liquidity risk, currency risk and credit and counterparty risk. Market risk arises from uncertainty about the future prices of the Company's investments. An analysis of these financial risks and the Company's policies for managing them are set out in note 15 of the Report and Financial Statements.

Operational

Disruption to, or failure of, the Manager's accounting, dealing or payment systems or the Custodian's records could prevent the accurate reporting and monitoring of the Company's financial position. The Manager has contracted some of its operational functions, principally those relating to trade processing, investment administration and accounting, to BNP Paribas Securities Services. Details of how the Board monitors the services provided by the Manager and its other suppliers, and the key elements designed to provide effective internal control, are explained further in the internal control section of the Corporate Governance Statement of the Report and Financial Statements.

Page 12 of 21

HENDERSON OPPORTUNITIES TRUST PLC

Annual Financial Report for the year ended 31 October 2013

Accounting, legal and regulatory

In order to qualify as an investment trust the Company must comply with section 1158 of the Corporation Tax Act 2010 ('section 1158'). A breach of section 1158 could result in the Company losing investment trust status and, as a consequence, capital gains realised within the Company's portfolio would be subject to Corporation Tax. The section 1158 criteria are monitored by the Manager and the results are reported to the Directors at each Board meeting. The Company must comply with the provisions of the Companies Act 2006 ('the Act') and, as the Company's shares are listed for trading on the London Stock Exchange, the Company must comply with the UK Listing Authority's Listing Rules and Disclosure Rules ('UKLA Rules'). A breach of the Act could result in the Company and/or the Directors being fined or becoming the subject of criminal proceedings. Breach of the UKLA Rules could result in the suspension of the Company's shares which would in turn lead to a breach of section 1158. The Board relies on its corporate company secretary and its professional advisers to ensure compliance with the Act and the UKLA Rules.

Gearing

The ability to borrow money for investment purposes is a key advantage of the investment trust structure. A failure to maintain a bank facility would prevent the Company from gearing.

Failure of the Manager

A failure of the Manager's business, whether or not as a result of regulatory failure, would result in the Manager being unable to meet their obligations and their duty of care to the Company.

Statement of Directors' Responsibilities (under DTR 4.1.12)

Each of the Directors confirm that, to the best of their knowledge:

● the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), give a true and fair view of the assets, liabilities, financial position and profit of the Company; and

● the Report of the Directors contained in the Annual Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

For and on behalf of the Board

George Burnett

Chairman

Page 13 of 21

HENDERSON OPPORTUNITIES TRUST PLC

Annual Financial Report for the year ended 31 October 2013

Audited Income Statement

for the year ended 31 October 2013

	Year ended 31 October 2013			Year ended 31 October 2012
	Revenue return £'000	Capital return £'000	Total £'000	Revenue return £'000	Capital return £'000	Total £'000
Gains from investments held at fair value through profit or loss	-	21,966	21,966	-	8,443	8,443
Income from investments held at fair value through profit or loss (note 2)	1,477	-	1,477	1,301	-	1,301
Other interest receivable and other income (note 3)	20	-	20	21	-	21
	---------	----------	----------	----------	----------	----------
Gross revenue and capital gains	1,497	21,966	23,463	1,322	8,443	9,765
Management fee (note 4)	(200)	(200)	(400)	(150)	(150)	(300)
Other administrative expenses	(220)	-	(220)	(207)	-	(207)
	-----------	----------	----------	---------	----------	----------
Net return on ordinary activities before finance charges and taxation	1,077	21,766	22,843	965	8,293	9,258
Finance charges	(79)	(79)	(158)	(94)	(94)	(188)
	-----------	----------	----------	----------	----------	----------
Net return on ordinary activities before taxation	998	21,687	22,685	871	8,199	9,070
Taxation	-	-	-	-	-	-
	-----------	----------	----------	-----------	----------	----------
Net return on ordinary activities after taxation	998	21,687	22,685	871	8,199	9,070
	----------	----------	----------	-----------	------------	-----------
Return per ordinary share -	12.53p	272.27p	284.80p	10.92p	102.79p	113.71p
basic and  diluted (note 5)	======	=======	======	=======	======	=======

The total columns of this statement represent the Profit and Loss Account 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.  No operations were acquired or discontinued during the year.  The Company had no recognised gains or losses other than those disclosed in the Income Statement. There is no material difference between the return on ordinary activities before taxation and the return for the financial year stated above and their historical cost equivalents.

                                                                                                                                    Page 14 of 21

HENDERSON OPPORTUNITIES TRUST PLC

Annual Financial Report for the year ended 31 October 2013

Audited Reconciliation of Movements in Shareholders' Funds

for the year ended 31 October 2013

Year ended 31 October 2013	Called up share capital £'000	Share premium account* £'000	Capital redemption reserve* £'000	Other capital reserves* £'000	Revenue Reserve* £'000	Total £'000
At 1 November  2012	2,007	14,522	2,415	28,402	1,144	48,490
Dividends paid on the ordinary shares	-	-	-	-	(741)	(741)
Net return on ordinary activities after taxation	-	-	-	21,687	998	22,685
	--------	----------	----------	----------	-----------	---------
At 31 October 2013	2,007	14,522	2,415	50,089	1,401	70,434
	=====	======	======	======	======	=====

Year ended 31 October 2012	Called up share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
At 1 November  2011	2,032	14,522	2,390	20,554	910	40,408
Dividends paid on the ordinary shares	-	-	-	-	(637)	(637)
Net return on ordinary activities    after taxation	-	-	-	8,199	871	9,070
Share buy-backs	(25)	-	25	(351)	-	(351)
	--------	----------	----------	----------	-----------	---------
At 31 October 2012	2,007	14,522	2,415	28,402	1,144	48,490
	=====	======	======	======	======	=====

* Distributions can be made from the 'revenue reserve' and from realised gains in 'other capital reserves'. Distributions cannot be made from the 'share premium account' or the 'capital redemption reserve'.  

Page 15 of 21

HENDERSON OPPORTUNITIES TRUST PLC

Annual Financial Report for the year ended 31 October 2013

Audited Balance Sheet

at 31 October 2013

	2013 £'000	2012 £'000
Investments held at fair value through profit or loss
Listed at market value	52,902	36,947
Quoted on AIM at market value	27,528	19,070
	------------	-----------
	80,430	56,017
	------------	-----------
Current assets
Investment held at fair value through profit or loss	2	2
Debtors	216	315
Cash at bank and in hand	232	249
	------------	-----------
	450	566
Creditors: amounts falling due within one year	(10,446)	(8,093)
	-----------	-----------
Net current liabilities	(9,996)	(7,527)
	-----------	-----------
Total assets less current liabilities	70,434	48,490
	=======	=======
Capital and reserves
Called up share capital (note 7)	2,007	2,007
Share premium account	14,522	14,522
Capital redemption reserve	2,415	2,415
Other capital reserves	50,089	28,402
Revenue reserve	1,401	1,144
	------------	-----------
Total shareholders' funds	70,434	48,490
	=======	=======
Net asset value per ordinary share (basic and diluted) (note 6)	884.3p	608.8p
	=======	=======

Page 16 of 21

HENDERSON OPPORTUNITIES TRUST PLC

Annual Financial Report for the year ended 31 October 2013

Audited Cash Flow Statement

for the year ended 31 October 2013

	2013 £'000	2013 £'000	2012 £'000	2012 £'000
Net cash inflow from operating activities		907		819
Servicing of finance
Interest paid	(160)		(192)
	-----------		-----------
Net cash outflow from servicing of finance		(160)		(192)
Financial investment
Purchases of investments	(14,267)		(11,442)
Sales of investments	12,897		11,293
	-----------		-----------
Net cash outflow from financial investment		(1,370)		(149)
Equity dividends paid		(741)		(637)
		------------		------------
Net cash outflow before management of liquid resources and financing		(1,364)		(159)
Management of liquid resources
Additions to money market funds	-		(1,680)
Withdrawals from money market funds	-		1,859
	-----------		-----------
Net cash inflow from management    of liquid resources		-		179
Financing
Drawdown of short term loans	35,663		79,969
Repayment of short term loans	(34,316)		(79,569)
Repurchase of ordinary shares	-		(351)
	-----------		-----------
Net cash inflow from financing		1,347		49
		-----------		-----------
(Decrease)/Increase in cash		(17)		69
		======		======
Reconciliation of net cash flow to movement in net debt
(Decrease)/increase  in cash as above		(17)		69
Net cash inflow from movement in liquid resources		-		(179)
Net cash inflow from increase in loans		(1,347)		(400)
		----------		----------
Movements relating to cash flows		(1,364)		(510)
		----------		-----------
Movement in net debt		(1,364)		(510)
Net debt at the start of the year		(7,249)		(6,739)
		----------		-----------
Net debt at the end of the year		(8,613)		(7,249)
		======		======

Page 17 of 21

HENDERSON OPPORTUNITIES TRUST PLC

Annual Financial Report for the year ended 31 October 2013

Notes to the Financial Statements

1.	Accounting policies
	(a) Basis of accounting The financial statements have been prepared on a going concern basis and under the historical cost basis of accounting, modified to include the revaluation of investments at fair value through profit or loss. The financial statements have been prepared in accordance with applicable accounting standards in the United Kingdom and with those parts of the Companies Act 2006 applicable to companies reporting under the standards and with the Statement of Recommended Practice ('SORP') for investment trusts issued by the Association of Investment Companies ('the AIC') in January 2009. The Company's accounting policies are consistent with the prior year.
	(b) Going concern The Company's Articles of Association require that at the Annual General Meeting of the Company held in 2008, and every third year thereafter, an ordinary resolution be put to approve the continuation of the Company. The resolution put to the Annual General Meeting in 2011 was duly passed. The next triennial continuation resolution will be put to the Annual General Meeting in April 2014. The Board have no reason to believe this resolution will not be passed. The assets of the Company consist almost entirely of securities that are listed (or quoted on AIM) and, accordingly, the Directors believe that the Company has adequate resources to continue in existence for the foreseeable future. For these reasons the Board has decided that it is appropriate for the financial statements to be prepared on a going concern basis.
	(c) Management fees, administrative expenses and finance charges All expenses and finance charges are accounted for on an accruals basis. The Board has determined that the capital return should reflect the indirect costs of earning capital returns. Since 1 November 2008, the Company has allocated 50% of its management fees and finance charges to the capital return of the Income Statement with the remaining 50% being allocated to the revenue return. The management fee is calculated quarterly in arrears, as 0.60% per annum of the net chargeable assets, with assets in excess of £100 million charged at 0.50% per annum. No performance fee was earned or payable in the period, nor in the comparative period. Any performance fees payable are allocated 100% to the capital return. All other administrative expenses are charged to the revenue return of the Income Statement. Expenses which are incidental to the purchase or sale of an investment are recognised immediately in the capital return of the Income Statement, and are included within the gains/losses from investments held at fair value through profit or loss.

Page 18 of 21

HENDERSON OPPORTUNITIES TRUST PLC

Annual Financial Report for the year ended 31 October 2013

Notes to the Financial Statements, continued

						2013 £'000	2012 £'000
2.	Income from investments held at fair value through profit or loss
	Franked:
	Dividends from listed investments					1,134	976
	Dividends from AIM investments					218	200
						-------	-------
						1,352	1,176
	Unfranked:
	Dividends from listed investments					125	125
						-------	-------
						1,477	1,301
						====	====
						2013 £'000	2012 £'000
3.	Other interest receivable and other income
	Underwriting commission (allocated to revenue)*					20	21
						====	====
	*During the year the Company was not required to take up shares; no commission was taken to capital (2012: no shares taken up and commission taken to capital).
		Revenue return 2013 £'000	Capital return 2013 £'000	Total 2013 £'000	Revenue return 2012 £'000	Capital return 2012 £'000	Total 2012 £'000
4.	Management fee
	Management fee	200	200	400	150	150	300
		====	====	====	====	====	====

Page 19 of 21

HENDERSON OPPORTUNITIES TRUST PLC

Annual Financial Report for the year ended 31 October 2013

Notes to the Financial Statements, continued

5.	Return per ordinary share
	The total return per ordinary share is based on the total return attributable to the ordinary shares of £22,685,000 (2012: £9,070,000) and on 7,965,179 ordinary shares (2012: 7,976,314) being weighted average number of shares in issue during the year.
			2013 £'000		2012 £'000
	Revenue return		998		871
	Capital  return		21,687		8,199
			----------		----------
	Total  return		22,685		9,070
			----------		----------
	Weighted average number of ordinary shares		7,965,179		7,976,314
	Revenue return per ordinary share		12.53p		10.92p
	Capital  return per ordinary share		272.27p		102.79p
			-----------		-----------
	Total  return per ordinary share		284.80p		113.71p
			======		======
6.	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 £70,434,000 (2012: £48,490,000) and on the 7,965,188 ordinary shares in issue at 31 October 2013 (2012: 7,965,168). 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 2012: no dilution). The movements during the year of the assets attributable to the ordinary shares were as follows:
		2013 £'000		2012 £'000
	Total net assets at 1 November	48,490		40,408
	Total net return	22,685		9,070
	Dividends paid in the year	(741)		(637)
	Share buy-backs	-		(351)
		-----------		-----------
	Total net assets at 31 October	70,434		48,490
		======		======
7.	Called up share capital
		2013 £'000		2012 £'000
	Allotted, issued and fully paid:
	7,965,188 ordinary shares of 25p each (2012: 7,965,168)	1,991		1,991
	1,639,652 subsription shares of 1p each (2012: 1,639,672)	16		16
		-----------		-----------
		2,007		2,007
		======		======
	There were 1,639,652 subscription shares of 1p each in issue at 31 October 2013 (31 October 2012: 1,639,672). The subscription shares were issued, as a bonus issue to the ordinary shareholders, on 19 January 2007. During the year ended 31 October 2013, 20 of the Company's subscription shares were converted into ordinary shares (2012: none). Subscription shareholders have an opportunity to convert their subscription shares into ordinary shares, at the conversion price of 936p per share, in each of the years 2009 to 2014 inclusive.

Page 20 of 21

HENDERSON OPPORTUNITIES TRUST PLC

Annual Financial Report for the year ended 31 October 2013

Notes to the Financial Statements, continued

8.	Dividends
		2013 £'000		2012 £'000
	Amounts recognised as distributions to equity holders in the year:
	Final dividend for the year ended 31 October 2012 of 6.00p (2011: 5.00p)	478		398
	Interim dividend for the year ended 31 October 2013 of 3.30p (2012: 3.00p)	263		239
		-----------		-----------
		741		637
		======		======
	The final dividend of 6.00p per ordinary share in respect of the year ended 31 October 2012 was paid on 28 March 2013 to shareholders on the register of members at the close of business on 22 February 2013. The interim dividend of 3.30p per ordinary share in respect of the year ended 31 October 2013 was paid on 23 September 2013 to shareholders on the register of members at close of business on 23 August 2013. Subject to approval at the Annual General Meeting, the proposed final dividend of 7.2p per ordinary share will be paid on 2 May 2014 to shareholders on the register of members at the close of business on 28 March 2014. The total dividends payable in respect of the financial year, which form the basis of the test under section 1158 of the Corporation Tax Act 2010, are set out below:
			Year ended 31 October 2013
	Revenue available for distribution by way of dividends for the year		998
	Interim dividend for the year ended 31 October 2013: 3.30p		(263)
	Proposed final dividend for the year ended 31 October 2013: 7.20p (based on the 7,965,188 ordinary shares in issue at 25 February 2014)		(573)
			-----------
	Undistributed revenue for section 1158 purposes*		162
			=======
	*Undistributed revenue comprises 11.0% of the income from investments of £1,477,000. (*2012: undistributed revenue comprised 11.8% of the income from investments of £1,301,000).
9.	2013 Report and Financial Statements
	The figures and financial information for the year ended 31 October 2013 are extracted from the Company's annual financial statements for that period and do not constitute statutory accounts. The Company's annual financial statements for the year to 31 October 2013 have been audited but have not yet been delivered to the Registrar of Companies. The Auditors' Report on the 2013 annual financial statements was unqualified, did not include a reference to any matter to which the Auditors drew attention without qualifying the report, and did not contain any statements under section 498 of the Companies Act 2006.
10.	2012 Report and Financial Statements           The figures and financial information for the year ended 31 October 2012 are extracted from the Company's annual financial statements for that period and do not constitute statutory accounts.  The Company's annual financial statements for the year to 31 October 2012 have been delivered to the Registrar of Companies. The Auditors' report on the 2012 annual financial statements was unqualified, did not include a reference to any matter to which the auditors drew attention without qualifying the report, and did not contain any statements under section 498 of the Companies Act 2006.

   Page 21 of 21

HENDERSON OPPORTUNITIES TRUST PLC

Annual Financial Report for the year ended 31 October 2013

Notes to the Financial Statements, continued

11.	Annual Report The Report and Financial Statements for the year ended 31 October 2013 will be posted to shareholders in mid March 2014 and will be available on the Company's website (www.hendersonopportunitiestrust.com) or in hard copy format from the Company's Registered Office, 201 Bishopsgate, London EC2M 3AE.
12.	Annual General Meeting The Annual General Meeting will be held on Tuesday 29 April 2014 at 2.30pm at 201 Bishopsgate, London EC2M 3AE.

ENDS

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.

For further information, please contact:

George Burnett Chairman Henderson Opportunities Trust plc Telephone:  [phone]		James de Sausmarez Head of Investment Trusts Henderson Global Investors Telephone: [phone]
James Henderson Portfolio Manager Henderson Opportunities Trust plc Telephone: [phone]	or	Sarah Gibbons-Cook Investor Relations and PR Manager Henderson Global Investors Telephone: [phone]

 

END

 

 

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