Suits investors prepared to take a relatively higher risk in the volatility of their investment to receive potentially higher rewards. It seeks to provide long-term capital growth from UK companies. Income is of secondary importance.

Henderson Opportunities Trust plc aims for a higher-than-average rate of capital growth over the medium-to-long term, from a portfolio of recovery and 'special opportunities' stocks mainly in the UK.

• The Fund Manager has the freedom to invest across the whole UK market so he is not constrained by sector or size.
• The manager adopts a contrarian investment style seeking investment opportunities that are either unrecognised by the market, from under researched smaller companies or where he is able to move early into a growth situation.
• The Trust invests in opportunities across the spectrum of UK companies with holdings in the FTSE 100, Mid Cap, Smaller Companies, AIM and Fledgling indices.

• Some of the investments in this portfolio are in smaller companies shares. They may be more difficult to buy and sell and their share price may fluctuate more than that of larger companies.
• If a fund is a specialist country-specific or geographic regional fund, the investment carries greater risk than a more internationally diversified portfolio. Full details of risks.

December brought to a close a difficult and troubling year for investors on a global basis. The only major equity market to show growth was the biggest of all, the US, which as measured by the Dow Jones Index rose by 5.5% in the year although the more broadly-based S&P Composite Index was flat over the same period. Being flat on the year was still surprisingly good when compared to major eurozone markets and leading emerging markets, which saw falls ranging from 17% to 25%. In the UK, large, liquid and defensive stocks performed best and this was reflected in the FTSE 100 Index falling 5.5% whereas small caps fell nearly 18% and AIM fell by 25%. These falls were not driven by over valuation of equities but by fears about eurozone sovereign debt and banks’ liquidity leading in turn to fears about a double dip recession and hence a negative impact on corporate profits.

Markets did rally towards the end of the year with the FTSE 100 rising by just over 1%, but the FTSE 250 Index fell by 2%, on low volumes as trading unwound towards the year end. The Trust’s net asset value was virtually unchanged on the month.

Within the portfolio the most significant trading in December took place in the shares of the Trust itself rather than in the underlying investments. We bought back 100,000 shares, about 1% of the outstanding equity, at an average discount of nearly 28% to net asset value, thus enhancing returns for all remaining shareholders. Gearing rose modestly to 14.9% mostly as a result of the share buy backs referred to above.

James Henderson
December 2011