Interim Management Statement

RNS Number : 5913S

Henderson Financial Opps Ltd

14 September 2010

 



HENDERSON FINANCIAL OPPORTUNITIES LIMITED

HENDERSON GLOBAL INVESTORS

HENDERSON FINANCIAL OPPORTUNITIES LIMITED

Interim Management Statement

Review of the period from 1 June 2010 to 31 August 2010

This Interim Management Statement has been prepared solely to provide additional information to Shareholders as a body to meet the relevant requirements of the UK Listing Authority's Disclosure and Transparency Rules, and should not be relied upon by any other party or for any other purpose.

This Interim Management Statement may contain forward-looking statements that:   

·    have been made by the Directors in good faith based on the information available to them up to the time of their approval of this Statement; and

·    should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying such forward-looking statements.

This Interim Management Statement relates to the quarter from 1 June 2010 to 31 August 2010 and contains information that covers that period, unless otherwise stated.

Material events and transactions

The report for the half-year ended 31 May 2010 was published on 15 July 2010.

On 13 September 2010 the Board announced that it intended to put proposals to Shareholders to wind up the Company.

Portfolio Review:

The summer months have been particularly volatile for investing in the Financials sector. The sector specific issues, which we highlighted in our last report in July, such as regulation and sovereign credit risk saw some incrementally positive news flow over this period as the release of the European Banks stress tests and a watered-down version of the Basel III regulatory framework for financials were the catalysts needed to provide a more solid longer term investment case. However, the rallies were short lived as top down macro economic concerns drove the markets lower.  Investor sentiment focused on the fear of growth slowdown and a potential "double dip" scenario. This was most evident in the US10-year yields moving below 3% and the significant flattening of the yield curve. The most important point however is that there were signs of stress in all geographical regions, namely the US remains under pressure from weak labour/housing readings, China on concerns of the overheating property/construction sectors and Europe's need for significant fiscal tightening stemming from growing concerns about sovereign risk and the fragility of the banking sector.

The summer interim reporting season unfortunately failed to provide a positive catalyst to earnings forecast upgrades as the lack of any signs of demand for credit in the developed world outweighed more positive trends on loan loss provisioning for the banks. In emerging markets, however, while the financials are not immune from a global slowdown, the stronger growth outlook, better deposit funding position and capitalisation helped them to outperform their developed market peers. There were positive signs however for certain sub-sectors within financials, the UK insurance sector was supported more recently on M&A news, in particular RSA bidding for Aviva's general insurance business.

The Company outperformed the benchmark over the last three months due to the higher weighting in emerging markets, especially banks in South East Asia and Russia, and more defensive holdings in the developed world, in particularly Canada and developed Asia. Performance was also enhanced during this period by taking an opportunity during the depths of Sovereign uncertainty in May and June to invest in some high quality banks in continental Europe and the UK. These companies such as Banco Santander, which saw a 35% increase in its share price from early June to the end of July, have solid fundamentals, through a diversified funding base and geographic business mix, and were trading on very attractive valuation multiples. Poor performance was seen especially in the pure advisory boutiques in the US such as Evercore, on the back of further regulatory oversight and difficult capital markets business flows recently.

Financials globally offer compelling value for long term investments; however, while the macro economic outlook remains unusually uncertain a more defensive positioning continues to be a more prudent strategy.

Gearing: 

The Company has a prime broker facility with Credit Suisse Securities (Europe) Limited. Following the passing of the resolutions at the Extraordinary General Meeting held on 14 September 2009 the Company has an objective of reducing and then, as policy, maintaining the level of gearing no higher than 30 per cent. as a proportion of net assets.

Dividends: 

The Directors declared a third interim dividend on 13 September 2010 of 0.75p per share which will be paid on 22 October 2010.

Discount: 

The discount increased from 14.34% as at 31 May 2010 to 17.07% as at 31 August 2010.

PERFORMANCE AND FINANCIAL HIGHLIGHTS

Performance at 31 August 2010	3 months	1 year	3 years	5 years
Share Price	-2.99	-4.41	-54.39	-37.80
Net Asset Value per ordinary share	2.16	-5.18	-48.84	-31.43
MSCI World Financials Index	-5.16	-2.51	-29.87	-15.47

Sources:  AIC Services Limited and Datastream

Financial Position	At 31 August 2010	At 31 May 2010
Net assets (£'000)	14,944	14,912
Net asset value per ordinary share (including current period revenue)	39.19p	39.11p
Ordinary share price (mid-market price)	32.50p	33.50p
Discount	17.07%	14.34%
Gearing (total assets/net assets)	1.23	1.37
Equity Gearing	91.15	112.16

THE PORTFOLIO

Top 10 Investments		% of net assets at 31 August 2010	% of net assets at 31 May 2010
Banque Cantonale Vaudoise		5.87	4.53
ICBC Asia		4.06	2.54
Personal Group Holding		3.52	3.71
Toronto-Dominion		3.21	2.64
New York Community Bancorp		2.92	2.11
SVG Capital conv bonds 30/05/16		2.77	2.37
Jardine Strategic		2.62	0.73
HSBC		2.44	1.66
Investec Finance 7.75%		2.17	1.90
F&C Finance Asset Management 9%		2.10	1.88

Geographic Breakdown	% of portfolio at 31 August 2010	% of portfolio at 31 May 2010
United Kingdom	32.36	33.47
Switzerland	11.89	11.19
USA	11.70	19.47
Hong Kong	6.92	4.03
Singapore	5.90	1.96
Canada	5.81	5.87
Brazil	5.31	2.31
Malaysia	3.87	1.83
France	2.99	3.16
Norway	2.87	3.77

Sector Breakdown	% of portfolio at 31 August 2010	% of portfolio at 31 May 2010
Banks	44.3	42.9
Non-Life Insurance	16.4	14.2
Life Insurance	1.7	4.9
Investment Companies	1.2	1.4
General Financial	11.4	15.7
Real Estate	4.6	2.9
Fixed Income	20.3	17.9

Investment Objective

The investment objective of the Company is to maximise total return from a global portfolio of investments in financial companies whilst recognising the importance of dividend income to shareholders.

The Company will seek to achieve its investment objective by investing predominantly in equity, debt or other securities of listed financial companies.

The Manager is Henderson Global Investors Limited.   Further information on the Company, including an up to date net asset value and share price information, can be found at www.henderson.com/financialopportunities.

For further information, please contact:

Emily Adderson

Portfolio Manager

Henderson Global Investors Limited

Telephone: [phone]

James de Sausmarez

Head of Investment Trusts

Henderson Global Investors Limited

Telephone: [phone]

Sarah Gibbons-Cook

Investor Relations and PR Manager

Henderson Global Investors Limited

Telephone: [phone]

David Benda

Director Corporate Broking

Numis Securities Limited

Telephone [phone]

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