Final Results

RNS Number : 8049E

Henderson Opportunities Trust PLC

12 February 2015

 



HENDERSON OPPORTUNITIES TRUST PLC

Annual Report for the year ended 31 October 2014

This announcement contains regulated information

Chairman's Comment

Overall, despite the turbulence in the year ended 31 October 2014, we have comfortably outperformed our benchmark as we have also done over 3 and 5 years.

George Burnett, Chairman

Performance Highlights

	Year ended 31 October 2014	Year ended 31 October 2013
Net asset value per ordinary share	903.7p	884.3p
Share price at the year end	869.5p	805.0p
Discount at the year end	3.8%	9.0%
Total return	30.2p	284.8p
Dividend for the year#	12.5p	10.5p
Net gearing at the year end	13.9%	14.2%

^#2014 total dividend is subject to approval of the final dividend at the AGM.

Total Return Performance (including dividends reinvested)

	1 year %	3 years %	5 years %
Share Price 1	9.3	131.9	161.8
Net asset value per ordinary share ('NAV') 2	3.4	87.4	121.8
AIC UK All Companies Sector (Peer Group) Average - net asset value 3	0.6	59.9	89.9
FTSE All-Share Index	1.0	36.2	61.0

¹ Source: Morningstar for the AIC

² Source: Morningstar for the AIC using cum income fair Value NAV for one and three years and capital NAV plus income reinvested for five years

³ Size weighted average (shareholders' funds)

HENDERSON OPPORTUNITIES TRUST PLC

Annual Report for the year ended 31 October 2014

Chairman's Statement

Review of Performance

Taken as a whole, the year ended 31 October 2014 was a relatively quiet one in performance terms. The Net Asset Value (NAV) total return (i.e. including dividends reinvested) rose 3.4%, while the FTSE All-Share Index, our benchmark, returned 1.0%. In the Annual Report we show the major stock contributors and detractors as well as how the largest 20 holdings performed. This apparent calm disguises the fact that, after a very strong first half, the latter part of the year saw a fall back in performance as the markets turned somewhat negative and retreated into conventional 'safe' stocks. An analysis of the underlying stocks in the portfolio shows that despite any fall in their share price, earnings growth continues to be strong.

Overall, despite the turbulence in the year ended 31 October 2014, we have comfortably outperformed our benchmark as we have done over 1, 3 and 5 years.

Earnings & Dividends

The revenue return for the year was 15.17p, which compares with 12.53p last year. The final dividend, subject to shareholder approval, will be 8.8p making 12.5p for the year compared to 10.5p last year, an increase of 19%. The final dividend will be payable on 31 March 2015 to shareholders on the Register of Members as at 20 February 2015, subject to shareholder approval at the AGM. The ex-dividend date will be 19 February 2015. The dividend cover of the underlying holdings has increased over the last few years which encourages us to believe that their dividend growth should now advance in line with profit growth. We in turn expect our dividend growth to continue to be satisfactory even if market conditions make it more difficult for the portfolio stocks to show as strong a profit growth as they have over the last few years.

Expenses

The ongoing charge excluding the performance fee, for 2014 was 1.02% of the daily average net assets over the year compared with 1.00% in 2013. If the performance fee is included it was 1.22%. The performance fee payable to Henderson was £149,000, which is 0.2% of average net assets. It is the first time since the fee arrangement was put in place in 2007 that a performance fee has been payable.

Continuation Vote 

On 29 April 2014 the continuation vote was passed by a large majority. The next one will be in 2017 in line with our three year cycle.

Alternative Investment Fund Managers Directive

In accordance with the Alternative Investment Fund Managers Directive ('AIFMD'), the Company has appointed Henderson Investment Funds Limited to act as its Alternative Investment Fund Manager. HSBC Bank plc has been appointed as the Company's Custodian and Depositary. Further details are contained in the Annual Report.

Subscription Shares 

35,670 subscription shares were converted into ordinary shares on 29 April 2014, under the terms of the 2007 subscription share agreement; this was the final share conversion opportunity. As a result there are now 8,000,858 ordinary shares in issue. A Trustee was appointed over the remaining subscription shares, which were repurchased for a nominal sum and cancelled.

Buy-Backs and Share Issuance

There were no buy-backs carried out during the year nor were any shares issued apart from those that related to the subscription shares.

HENDERSON OPPORTUNITIES TRUST PLC

Annual Report for the year ended 31 October 2014

Chairman's Statement continued

AGM

Our Annual General Meeting will be held at 2.30 pm on 26 March 2015 at the registered office, 201 Bishopsgate, London EC2M 3AE. The Notice of Meeting is set out in a separate circular that accompanies the Annual Report. The Directors will vote their own shareholdings in favour of all the resolutions to be put to the AGM and the Directors recommend that the shareholders support all the resolutions. In addition to the formal business of the meeting, the fund managers James Henderson and Colin Hughes will give a presentation, following which afternoon tea will be served.

Investment Strategy

The objective is to find and hold stocks that are good businesses 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 which offer the greatest potential for performance in the longer term. Whatever their size, we look for companies with strong growth prospects and diverse customer bases. I believe that a major contributor to the strong performance over the last five years has been the effectiveness of the Managers' stock picking and the fact that they spend a great deal of time researching and meeting with investee companies, which includes between 400 and 500 face to face meetings each year.

Gearing

The net gearing has been in the range of 10 to 15% of net assets throughout the year, ending at 13.9% on 31 October 2014. The intention is to remain with a reasonable level of gearing while there are good investment opportunities and valuations are undemanding. The make up of borrowings is shown in the Annual Report.

Outlook

The dramatic fall in the oil price in December should aid GDP growth both in the UK and globally. It will also help the industrial companies in the portfolio which are large energy users. It has caused substantial share price falls in the oil exploration companies in the portfolio but the exposure to oil companies is low. Therefore, overall, it should be a large benefit to the Company. We will retain a balanced and diversified portfolio of companies of varying sizes that we believe have a competitive uniqueness that will allow them to prosper over time regardless of politics and economic volatility. At the end of our first quarter to 31 January 2015, despite the fact that the NAV has moved up since the year end ahead of our benchmark, the share price has fallen back. The return of a large discount, reflecting a 'safer in large stocks' mentality, is disappointing but, if the Company continues to outperform and the strengths of the Company and its portfolio of stocks are articulated effectively to potential buyers, we believe that there is no reason why our shares cannot once again trade at a premium.

George Burnett

Chairman

12 February 2015

HENDERSON OPPORTUNITIES TRUST PLC

Annual Report for the year ended 31 October 2014

Fund Managers' Report

The Economy

The UK economy has surprised many commentators by its strength despite the faltering of continental European economic growth. Within the aggregate numbers there has been a great deal of diversity of performance making generalisations about the economic background for equities at best difficult and more probably irrelevant. This is why the focus of our efforts is on analysing companies. Our general expectation is that the economy will provide little help to companies with the consumer remaining constrained and government spending being tightly controlled. The uncertainty concerning the UK's continued membership of the EU hangs over many export orientated businesses. It is notable that the broad UK equity market has underperformed global markets over the year, reflecting a disappointing year for earnings growth, the strong performance of the US market and the commodity-heavy focus of the UK market. The major market event of recent months has been the fall in the oil price, the speed of which has been unsettling. However, for the consumer in Western economies, it has to be a positive development, as it is for energy consuming companies.

Market Review

The early part of the year saw the return of IPOs ('Initial Public Offerings') on the back of a modest return of investor confidence. They were varying in quality and the number of them soon sated the appetite of investors so that by the early summer they were not always getting away successfully. Alongside this, the political concerns and economic worries emanating from Europe made general investors somewhat risk averse. This expressed itself in the equity market, where the FTSE Small Cap Index underperformed the FTSE 100 and more economically cyclical companies lagged behind the lower risk but more highly rated ones.

Fund Performance

The company has had another good year with the Net Asset Value (NAV) returning a positive 3.4% and the share price rising by 9.3%, both on a total return basis while, our benchmark index, the FTSE All-Share Index, returned 1.0% on the same basis. The two halves of our financial year produced very different returns. In the first half, the six months to 30 April 2014, the NAV rose by 7.0% and the share price by 14.1% compared with a rise in the benchmark of 2.7%. As market sentiment cooled during the second six months to 31 October 2014, in particular towards smaller growth orientated companies, our positioning in that segment saw the NAV fall by 3.4% while the share price fell by 4.2% and our benchmark index fell only 1.6%. This reflected the relative safety of global FTSE100 companies while those at the top end of the FTSE250 Index also held up well. By comparison the FTSE Small Cap Index fell 6% and the FTSE AIM All-Share Index dropped by 11.9%. Despite this modest second half setback, for the five years from 31 October 2009 the NAV has risen by 121.8% and the share price by 161.8% both on a total return basis, compared to a rise in the benchmark by 61.0% in the five years to 31 October 2014.

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 alert 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 necessarily easily reconciled with the volatility of a stock market which is sensitive to changes in the external macroeconomic and political environment, alongside its own particular cycle of fads and fashions.

HENDERSON OPPORTUNITIES TRUST PLC

Annual Report for the year ended 31 October 2014

Fund Managers' Report, 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 meet with them a number of times during the course of a typical year. This will include formal results presentations as well as informal discussions and site visits where appropriate.

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

The number of holdings increased marginally over the year from 86 in 2013 to 89. In 2012 it was 77 and 82 in 2011. We said last year that given prevailing market conditions we felt that we were at our natural 'fighting weight' and this remains the case. This gives enough diversity to mitigate risk concentration but also enough weight to the winners to make a difference. Having moved up the market capitalisation scale over the last few years so that last year 41.7% of the portfolio was held in FTSE100 and FTSE250 Index stocks, we eased back slightly and finished the year with 38.5%. Our exposure to stocks with a market capitalisation over £1 billion is 28.8%. Although this is slightly reduced from last year's 32.8%, this comfortably exceeds our typical gearing levels of 10-15% during 2014. We therefore maintain sufficient flexibility in the most liquid part of the portfolio should we ever wish to de-gear the Company quickly, which enables us to react promptly to changing market conditions.

Portfolio Activity

During the year we have been active in 75 companies, starting new positions in 25 and selling out completely in 22. Our new investments included 11 IPOs of which we continue to hold 7 at the year end. Our top ten holdings represented 26.6% of the portfolio, virtually unchanged from last year's 26.3%. We have maintained a strong bias towards industrial and technology stocks, even though the strength of sterling against the US dollar was a significant headwind for reported earnings for these companies. This has recently started to ease. We have also added further to our portfolio of emerging pharmaceutical stocks. There have been four new entrants to the top ten positions this year. With the exception of 4D Pharma, these have been held in the portfolio for some time, reflecting our patient approach to running winners. The largest of our disposals was Hyder Consulting, the infrastructure consultancy, which received multiple takeover approaches after earlier in the year warning that it was suffering from contract delays in the important Australian market. Hyder was a top ten holding at the end of the last financial year. The first approach came from Arcadis, a Dutch peer, and was recommended by the Board of Directors so we sold in the market in order to re-invest quickly in other opportunities. We had not anticipated that a small Japanese competitor, Nippon Koei, would enter the fray. This resulted in three leapfrog bids, each Board recommended. This provided a salutary lesson that in sectors subject to global consolidation, one should not rush for the exit. In 2010, when the market was in turmoil, we bought Ashtead, the plant hire company, and since that time we have enjoyed a string of positive profit upgrades as the twin effects of the structural shift to rental and cyclical growth in the USA took the company all the way from a depressed small cap to the FTSE100. We have now sold out completely. There is nothing wrong with the company, but our view is that the valuation the stock market has placed on Ashtead now fully reflects the company's prospects and while we still expect profit upgrades Ashtead shares may be progressively de-rated.

 Kofax, a leading provider of smart process applications for business critical information, had undergone a gradual transformation, aided by strong cash generation, in moving from a legacy European orientated company to a leading edge document capture business with a key focus area of growth in the USA. This transformation, led by an executive management team based in California, also saw the company list its shares on the New York Stock

HENDERSON OPPORTUNITIES TRUST PLC

Annual Report for the year ended 31 October 2014

Fund Managers' Report, continued

Exchange in addition to its London listing. As a consequence the company has seen more demand from US investors and its shares have enjoyed a material re-rating towards the higher multiples typically enjoyed by technology businesses in the USA. The business is still quite volatile on a quarter by quarter basis and we have decided that the re-rating gave us an opportunity to sell at very favourable valuation levels.

AstraZeneca, the global pharmaceutical group, was among both our largest purchases and sales in the year. We bought AstraZeneca as we were impressed by management's efforts to rejuvenate top line growth by focusing on eight key therapeutic areas including Oncology.

They set about doing this by firstly shedding non-core projects but also by a series of licensing deals, many with smaller bio-technology companies, allowing them to leverage promising third party technology into a their global footprint. The US giant Pfizer liked what it saw so much that it made two takeover approaches but ultimately withdrew its bid in May. We sold our position prior to the bid being withdrawn as we felt that level much better reflected Astra's prospects.

Lastly in this section, Monitise is a world leader in mobile banking payments and solutions for a world which increasingly demands the capability of running one's life in a fully mobile environment. Monitise credentials in this space are strong with key relationships with the Visa, MasterCard, RBS and Telefonica, a global mobile operator. While we like the obvious growth attributes of this space, we became increasingly concerned that not only was the stock priced for perfect execution in what is still a very project based revenue line but also the space was evolving so rapidly that retaining those leading relationships would be a challenge. We therefore sold our position and subsequently many of our concerns have been confirmed.

Prominent among our major purchases was 4D Pharma. Not only was this our largest purchase in the year via an IPO and subsequent fund raising, it was also our most successful one (see the attribution analysis later in this report). 4D is a pharmaceutical development company focusing on a new class of therapeutics based on live bacteria. The market has focused on the huge potential in its field and it has performed very well.

 In a similar vein but already into revenue generation, we invested in Horizon Discovery another IPO which provides research and development services to the global pharmaceutical and biotechnology market. The company provides a series of toolboxes that help customers generate genetically defined cell lines which will help in the design of more personalized medicines. It is run by a young, enthusiastic but resolutely commercial management team. Following the IPO, and now equipped with a strong balance sheet, the company is well placed to acquire complementary technologies to broaden its portfolio.

We also invested in more traditional, established businesses, one such example being Rolls Royce, the aero engine manufacturer. We have long been fans of the very long order profile and support contracts that go with aero engines built to last twenty years and more. Until recently, Rolls Royce's valuation was very full, but earlier this year it came under pressure as falling defence expenditure finally hit home and questions were asked about how the company accounts for long term care programmes. We decided that this was a good entry point but have had an additional setback to expectations as the company rebased its civil aerospace margin outlook. We have been a bit early but are very confident that the inherent strengths of the company will deliver a better 2015.

Lastly, we again took a position in a classic industrial company, GKN, that saw a material de-rating of its shares earlier in the year. GKN, known predominantly as the world's leading supplier of automotive driveline systems, suffered from sterling's rapid appreciation against the US dollar, in common with many industrial peers. This led to a number of currency related downgrades to profit estimates while the underlying business was performing well. More recently, that currency headwind has turned into a modest tailwind, so assuming the

HENDERSON OPPORTUNITIES TRUST PLC

Annual Report for the year ended 31 October 2014

Fund Managers' Report, continued

global automotive market continues to grow, we should see GKN making progress in the year ahead.

Portfolio Attribution Analysis

The Attribution Analysis which is shown later in this report shows the top five contributors to, and bottom five detractors from, the Company's absolute performance in growth in the NAV and their contribution relative to our benchmark. Our top performing stock, 4D Pharma was also our largest new investment of the year as mentioned on the previous page.

The IPO was priced at 100p and the shares started trading in late February. The share price was initially strong but it only really made material progress after a subsequent further fund raising at 150p confirmed the continued progress of lead projects. We also supported that issue. As the shares continued to make good progress, we took profits along the way but retain a very meaningful position. As mentioned before, Ashtead has been a top contributor to performance not only this year but last year as well. The twin benefits of cyclical recovery and a structural shift to greater rental penetration has been reflected in good pricing and plant hire utilisation. This in turn has led to consistent earnings upgrades but we have taken our profit in what is a highly cyclical business. Velocys, the developer of gas to liquid technology, has seen a gradual broadening of its pipeline of opportunities. A number of projects approaching their final investment decision in 2015 indicate that the market has moved from 'if' to 'when' on this becoming a mainstream technology.  One small technology company that first entered the portfolio in 2012 had a very good 2014. Tracsis, a supplier of scheduling software and condition monitoring equipment to the railway industry, has come of age. After the hiatus caused by the delay in franchise awards to the UK train operator market, to which the company supplies consultancy services, 2014 saw a strong comeback. In addition, Network Rail started ordering condition monitoring equipment again under a new framework agreement and the company secured its first orders into North America, a market multiple times the size of the UK. They also appointed a very experienced chairman who currently has the same role at Ashtead. Lastly following the significant re-rating of Kofax after the listing on the New York Stock Exchange, we were pleased to bank our profits.

As ever not everything worked so well. We had great hopes at the start of the year for Digital Barriers, a developer of covert security products and high definition low latency video. It appeared that the growing pipeline was converting to commercial orders nicely but a series of contract delays, and more latterly the Ebola outbreak which impacted some West African clients, has dented credibility. We believe the management are actively addressing these issues and that the company will either deliver on its promise or a corporate solution will be forthcoming. One of our more recent stars and still a favourite, Retroscreen Virology, which provides bio-medical services, had a lack lustre year in share price terms although at the business level significant progress continued to be made. The shares peaked at 322p in August but finished the year at 260p. Latchways, who supply safety products for working at height, had a year to forget. Europe is a major market and suffered from weak underlying demand, while delays concerning utility feed-in tariffs impacted wind turbine demand. In North America, 3M, a key distributor, suffered internal dislocations, resulting in significantly reduced sales. The company has a very robust balance sheet so has maintained the dividend during this tough time. The sales team is being enlarged and upgraded to make the most of their sector leading product strategy. WANdisco, a big data play, had a tremendous 2013 but has given it all back in 2014 as proof of concepts have taken longer than expected to turn into firm contracts. Having taken good profits out of the stock at near to its highest levels, we have kept the rump as we feel this is another market in which patience will pay off.

HENDERSON OPPORTUNITIES TRUST PLC

Annual Report for the year ended 31 October 2014

Fund Managers' Report, continued

Indeed, they have recently announced a modest deal which went to contract award very quickly. Lastly, Aveva, a global leader in engineering design software for the power, oil & gas and marine markets, had a difficult year as customer projects, particularly in offshore Brazilian energy, stalled. Similarly, nascent developments like their leading edge AVEVA 3D product suite grew significantly but, as yet, do not have the scale to compensate fully for weaker oil & gas markets. With a cash rich balance sheet, this company is well equipped to weather this phase.

Outlook

The Eurozone area continues to suffer and, as the UK's largest trading partner, its prolonged weakness may restrain growth in the UK, which is otherwise performing well. While tax receipts have lagged expectations, fiscal restraint remains on the agenda, as the consumer attempts to pay down debt. While many investors are focusing on a very difficult to call election which is unlikely to deliver a majority single party government, we will remain focused on the fundamentals we look for in our companies; strong franchises, strong balance sheets and the potential for strong growth. The portfolio is therefore well placed to benefit from growing investor confidence.

James Henderson and Colin Hughes

Fund Managers

12 February 2015

HENDERSON OPPORTUNITIES TRUST PLC

Annual Report for the year ended 31 October 2014

Analysis by market capitalisation

	FTSE All-Share Index %	Portfolio 31 October 2014 %
Greater than £2bn	88.2	20.4
£1bn - £2bn	5.2	8.4
£500m - £1bn	3.5	11.4
£200m - £500m	2.2	24.3
£100m - £200m	0.8	21.1
£50m - £100m	0.1	8.8
Less than £50m	-	5.6
	--------	--------
	100.0	100.0
	======	======

Portfolio by Sector

	31 October 2014 %	31 October 2013 %
Industrials	25.9	31.8
Consumer Services	21.5	17.4
Financials	16.0	13.5
Health Care	10.3	7.5
Technology	10.2	11.8
Basic Materials	7.3	6.7
Oil & Gas	4.4	7.3
Consumer Goods	4.4	2.9
Telecommunications	-	1.1
	-------	-------
	100.0	100.0
	=====	=====

Portfolio by Index

	31 October 2014 %	31 October 2013 %
FTSE 100 Index	18.8	18.5
FTSE 250 Index	19.7	23.2
FTSE SmallCap Index	18.6	19.9
Other	6.9	4.3
FTSE Fledgling	1.5	1.1
FTSE AIM	34.5	33.0
	-------	-------
	100.0	100.0
	=====	=====

Source:  Henderson Global Investors Limited

HENDERSON OPPORTUNITIES TRUST PLC

Annual Report for the year ended 31 October 2014

Twenty Largest Holdings at 31 October 2014

Rank 2014	Rank 2013	Company		Valuation 2013 £'000	Purchases £'000	Sales £'000	Appreciation/ (depreciation) £'000	Valuation 2014 £'000
1	#	4D Pharma		-	1,400	(460)	2,554	3,494
2	1	Retroscreen Virology		2,830	547	(285)	(506)	2,586
3	9	HSBC		1,705	675	-	(142)	2,238
4	6	Ricardo		2,015	-	-	163	2,178
5	12	Velocys		1,620	-	(225)	651	2,046
6	5	Senior		2,234	-	-	(228)	2,006
7	15	Johnson Service Group		1,560	240	-	178	1,978
8	11	e2v technologies		1,667	-	-	186	1,853
9	3	XP Power		2,355	-	(379)	(202)	1,774
10	7	Vertu Motors		1,849	-	-	(92)	1,757
11	10	St Modwen Properties		1,673	-	-	49	1,722
12	#	IP Group		809	534	(79)	458	1,722
13	2	ITV		2,386	-	(896)	32	1,522
14	14	Tribal		1,594	-	-	(257)	1,337
15	#	Aviva		1,123	-	-	179	1,302
16	#	Assura		572	399	-	275	1,246
17	19	RWS		1,422	-	(191)	1	1,232
18	17	BHP Billiton		1,448	-	-	(240)	1,208
19	#	Advanced Computer Software		1,004	-	-	179	1,183
20	#	Tracsis		736	-	(152)	596	1,180
				----------	-----------	--------	---------	----------
				30,602	3,795	(2,667)	3,834	35,564
			======		======	=====	======	======

At 31 October 2014 these investments totalled £35,564,000 or 43.2% of the portfolio

# Not in the top 20 holdings last year

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 to relative performance	Share price return %	Relative contribution %	Top five detractors from relative performance	Share price return %	Relative contribution %
4D Pharma	230.0	2.8	Digital Barriers	(62.2)	(0.8)
Ashtead Group	40.9	0.8	Retroscreen Virology Group	(21.1)	(0.8)
Velocys	37.3	0.7	Latchways	(1.5)	(0.7)
Tracsis	84.1	0.7	WANdisco	(65.5)	(0.6)
Kofax	38.8	0.6	Aveva	(39.8)	(0.5)

HENDERSON OPPORTUNITIES TRUST PLC

Annual Report for the year ended 31 October 2014

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 Henderson'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

Henderson 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 Fund Managers, who attend all Board meetings, and reviews regularly data that monitors risk factors in respect of the portfolio. Henderson 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 Henderson 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 through regular meetings with the Fund Managers with measurement against performance indicators and by reviewing 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 the Annual Report.

Operational

Disruption to, or failure of, Henderson's accounting, dealing or payment systems or the Custodian's records could prevent the accurate reporting and monitoring of the Company's financial position. Henderson 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 Henderson 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 in the Annual Report.

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 Henderson 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

HENDERSON OPPORTUNITIES TRUST PLC

Annual Report for the year ended 31 October 2014

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. The Board reviews the level of gearing at each Board meeting.

Failure of Henderson

A failure of Henderson's business, whether or not as a result of regulatory failure, would result in Henderson being unable to meet their obligations and their duty of care to the Company. The Board meets regularly with representatives of Henderson and reviews internal control reports from Henderson on a quarterly basis.

Related Party Transactions

Other than the relationship between the Company and its Directors, the provision of services by Henderson is the only related party arrangement currently in place. Other than fees payable by the Company in the ordinary course of business and the provision of marketing services there have been no material transactions with this related party affecting the financial position or the performance of the Company during the year under review.

Statement of Directors' Responsibilities (under DTR 4.1.12)

Each of the Directors confirms that, to the best of his knowledge:

• the Company's financial statements, which have been prepared in accordance with UK Accounting Standards on a going concern basis, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and

• the Strategic Report and financial statements include 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.

Signed for and on behalf of the Board

George Burnett

Chairman

12 February 2015

HENDERSON OPPORTUNITIES TRUST PLC

Annual Report for the year ended 31 October 2014

Income Statement

for the year ended 31 October

	Year ended 31 October 2014			Year ended 31 October 2013
	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	-	1,869	1,869	-	21,966	21,966
Income from investments held at fair value through profit or loss (note 2)	1,697	-	1,697	1,477	-	1,477
Other interest receivable and other income (note 3)	18	-	18	20	-	20
	---------	----------	----------	---------	----------	----------
Gross revenue and capital gains	1,715	1,869	3,584	1,497	21,966	23,463
Management fee and performance fee (note 4)	(151)	(502)	(653)	(200)	(200)	(400)
Other administrative expenses	(282)	-	(282)	(220)	-	(220)
	-----------	----------	----------	-----------	----------	----------
Net return on ordinary activities before finance charges and taxation	1,282	1,367	2,649	1,077	21,766	22,843
Finance charges	(71)	(166)	(237)	(79)	(79)	(158)
	-----------	----------	----------	-----------	----------	----------
Net return on ordinary activities before taxation	1,211	1,201	2,412	998	21,687	22,685
Taxation	-	-	-	-	-	-
	-----------	----------	----------	-----------	----------	----------
Net return on ordinary activities after taxation	1,211	1,201	2,412	998	21,687	22,685
	----------	----------	----------	----------	----------	----------
Return per ordinary share -	15.17p	15.04p	30.21p	12.53p	272.27p	284.80p
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.

HENDERSON OPPORTUNITIES TRUST PLC

Annual Report for the year ended 31 October 2014

 Reconciliation of Movements in Shareholders' Funds

for the year ended 31 October 2014

Year ended 31 October 2014	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  2013	2,007	14,522	2,415	50,089	1,401	70,434
Dividends paid on the ordinary shares (note 8)	-	-	-	-	(869)	(869)
Net return on ordinary activities after taxation	-	-	-	1,201	1,211	2,412
Issue of ordinary shares following conversion of subscription shares	9	325	-	-	-	334
Costs in respect of shares issued	-	(9)	-	-	-	(9)
Expiry of subscription shares	(16)	-	16	-	-	-
	--------	----------	----------	----------	-----------	---------
At 31 October 2014	2,000	14,838	2,431	51,290	1,743	72,302
	=====	======	======	======	======	=====

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 (note 8)	-	-	-	-	(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
	=====	======	======	======	======	=====

* 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'.  

HENDERSON OPPORTUNITIES TRUST PLC

Annual Report for the year ended 31 October 2014

Balance Sheet

at 31 October

	2014 £'000	2013 £'000
Investments held at fair value through profit or loss
Listed at market value	49,740	52,902
Quoted on AIM at market value	32,579	27,528
	------------	------------
	82,319	80,430
	------------	------------
Current assets
Investment held at fair value through profit or loss	2	2
Debtors	806	216
Cash at bank and in hand	1,490	232
	------------	------------
	2,298	450
Creditors: amounts falling due within one year	(12,315)	(10,446)
	-----------	-----------
Net current liabilities	(10,017)	(9,996)
	-----------	-----------
Net assets	72,302	70,434
	=======	=======
Capital and reserves
Called up share capital (note 7)	2,000	2,007
Share premium account	14,838	14,522
Capital redemption reserve	2,431	2,415
Other capital reserves	51,290	50,089
Revenue reserve	1,743	1,401
	------------	------------
Total shareholders' funds	72,302	70,434
	=======	=======
Net asset value per ordinary share (basic and diluted)	903.7p	884.3p
	=======	=======

HENDERSON OPPORTUNITIES TRUST PLC

Annual Report for the year ended 31 October 2014

Cash Flow Statement

for the year ended 31 October 2014

	2014 £'000	2014 £'000	2013 £'000	2013 £'000
Net cash inflow from operating activities		908		907
Servicing of finance
Interest paid	(237)		(160)
	-----------		-----------
Net cash outflow from servicing of finance		(237)		(160)
Financial investment
Purchases of investments	(23,815)		(14,267)
Sales of investments	21,951		12,897
	-----------		-----------
Net cash outflow from financial investment		(1,864)		(1,370)
Equity dividends paid		(869)		(741)
		------------		------------
Net cash outflow before management of liquid resources and financing		(2,062)		(1,364)
Financing
Proceeds from issue of ordinary shares	334		-
Expenses paid in respect of ordinary share issue	(4)		-
Net drawdown of loans*	2,990		1,347
	-----------		-----------
Net cash inflow from financing		3,320		1,347
		-----------		-----------
Increase/(decrease) in cash		1,258		(17)
		======		======
Reconciliation of net cash flow to movement in net debt for the year ended 31 October
Increase/(decrease) in cash as above		1,258		(17)
Net cash inflow from increase in loans		(2,990)		(1,347)
		----------		-----------
Movement in net debt		(1,732)		(1,364)
Net debt at the start of the year		(8,613)		(7,249)
		----------		-----------
Net debt at the end of the year		(10,345)		(8,613)
		======		======

*Comparatives are restated to be shown on a net basis.

HENDERSON OPPORTUNITIES TRUST PLC

Annual Report for the year ended 31 October 2014

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 resolutions put to the Annual General Meetings in 2011 and in 2014 were duly passed. The next triennial continuation resolution will be put to the Annual General Meeting in 2017. 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 2013, the Company has allocated 70% of its management fees and finance charges to the capital return of the Income Statement with the remaining 30% being allocated to the revenue return (2013: 50% to capital return and 50% to 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. A performance fee of £149,000 was earned in the period, (2013: £ nil). 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.

HENDERSON OPPORTUNITIES TRUST PLC

Annual Report for the year ended 31 October 2014

Notes to the Financial Statements, continued

						2014 £'000	2013 £'000
2.	Income from investments held at fair value through profit or loss
	UK:
	Dividends from listed investments					1,173	1,134
	Dividends from AIM investments					321	218
						-------	-------
						1,494	1,352
	Non-UK:
	Dividends from listed investments					203	125
						-------	-------
						1,697	1,477
						====	====
						2014 £'000	2013 £'000
3.	Other interest receivable and other income
	Underwriting commission (allocated to revenue)*					18	20
						====	====
	*During the year the Company was not required to take up shares; no commission was taken to capital (2013: no shares taken up and commission taken to capital).
4.	Management and performance fee
		Revenue return 2014 £'000	Capital return 2014 £'000	Total 2014 £'000	Revenue return 2013 £'000	Capital return 2013 £'000	Total 2013 £'000
	Management fee 3	151	353	504	200	200	400
	Performance fee	-	149	149	-	-	-
		--------	----------	----------	----------	-----------	--------
		151	502	653	200	200	400
		--------	----------	----------	----------	-----------	--------

¹ The basis on which the management fee is calculated is set out in the strategic Report in the Annual Report.

² The allocation between revenue return and capital return is explained in note 1(c).  

³ The 2014 fee is net of £4,500 (2013: £nil) paid by Henderson on behalf of the Company in respect of audit fees

HENDERSON OPPORTUNITIES TRUST PLC

Annual Report for the year ended 31 October 2014

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 £2,412,000 (2013: £22,685,000) and on 7,983,365 ordinary shares (2013: 7,965,179) being the weighted average number of shares in issue during the year.
			2014 £'000		2013 £'000
	Revenue return		1,211		998
	Capital  return		1,201		21,687
			----------		----------
	Total  return		2,412		22,685
			----------		----------
	Weighted average number of ordinary shares		7,983,365		7,965,179
	Revenue return per ordinary share		15.17p		12.53p
	Capital  return per ordinary share		15.04p		272.27p
			-----------		-----------
	Total  return per ordinary share		30.21p		284.80p
			======		======
	The total return can be futher analysed as follows:
6.	Net asset value per ordinary share
	The net asset value per ordinary share at the year end was 903.7p (2013: 884.3p). The net asset value per ordinary share is based on the net assets attributable to the ordinary shares of £72,302,000 (2013: £70,434,000) and on the 8,000,858 ordinary shares in issue at 31 October 2014 (2013: 7,965,188). No subscription shares were in issue at 31 October 2014. There was no dilution of the net asset value per ordinary share in respect of the conversion rights attaching to the 1,639,652 subscription shares in issue on 31 October 2013. The movements during the year of the assets attributable to the ordinary shares were as follows:
		2014 £'000		2013 £'000
	Total net assets at 1 November	70,434		48,490
	Total net return	2,412		22,685
	Dividends paid in the year	(869)		(741)
	Shares issued (after costs)	325		-
		-----------		-----------
	Total net assets at 31 October	72,302		70,434
		======		======
7.	Called up share capital
		2014 £'000		2013 £'000
	Allotted, issued and fully paid:
	8,000,858 ordinary shares of 25p each (2013: 7,965,188)	2,000		1,991
	1,639,652 subscription shares of 1p each (2013 only)	-		16
		-----------		-----------
		2,000		2,007
		======		======
	There were 1,639,652 subscription shares of 1p each in issue at 31 October 2013. The subscription shares were issued, as a bonus issue to the ordinary shareholders, on 19 January 2007. During the year ended 31 October 2014, 35,670 of the Company's subscription shares were converted into ordinary shares (2013: 20). The remaining 1,603,982 subscription shares were subsequently cancelled.

HENDERSON OPPORTUNITIES TRUST PLC

Annual Report for the year ended 31 October 2014

Notes to the Financial Statements, continued

8.	Dividends
		2014 £'000	2013 £'000
	Amounts recognised as distributions to equity holders in the year:
	Final dividend for the year ended 31 October 2013 of 7.2p (2012: 6.0p)	573	478
	Interim dividend for the year ended 31 October 2014 of 3.7p (2013: 3.3p)	296	263
		-----------	-----------
		869	741
		======	======

		The final dividend of 7.2p per ordinary share in respect of the year ended 31 October 2013 was paid on 2 May 2014 to shareholders on the register of members at the close of business on 28 March 2014. The interim dividend of 3.7p per ordinary share in respect of the year ended 31 October 2014 was paid on 26 September 2014 to shareholders on the register of members at close of business on 22 August 2014. Subject to approval at the Annual General Meeting, the proposed final dividend of 8.8p per ordinary share will be paid on 31 March 2015 to shareholders on the register of members at the close of business on 20 February 2015. 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 2014		Year ended 31 October 2013
			£'000		£'000
	Revenue available for distribution by way of dividends for the year		1,211		998
	Interim dividend for the year ended 31 October 2014: 3.7p (2013:3.3p)		(296)		(263)
	Proposed final dividend for the year ended 31 October 2014: 8.80p (based on the 8,000,858 ordinary shares in issue at 12 February 2015 (2013: 7.2p on 7,965,168 shares)		(704)		(573)
			-----------		-----------
	Undistributed revenue for section 1158 purposes1		211		162
			=======		=======
	1 Undistributed revenue comprises 12.3% of income from investments of £1,715,000. (*2013: undistributed revenue comprised 10.8% of the income of £1,497,000).
9	2014 Annual Report
	The figures and financial information for the year ended 31 October 2014 are extracted from the Company's Annual Report for that period and do not constitute statutory accounts. The Company's Annual Report for the year to 31 October 2014 have been audited but have not yet been delivered to the Registrar of Companies. The Auditors' Report on the 2014 Annual Report 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.

HENDERSON OPPORTUNITIES TRUST PLC

Annual Report for the year ended 31 October 2014

Notes to the Financial Statements, continued

10.	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 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.
11.	Annual Report The Report and Financial Statements for the year ended 31 October 2014 will be posted to shareholders in mid to late February 2015 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 Thursday 26 March 2015 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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