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.

The New Year has started on a very positive note for equity markets around the world. Why? The economic outlook has not really improved dramatically but, for the moment at least, the bad news is no worse than expected and good news, particularly around the growth of the US economy and political willingness to deliver a solution to the Eurozone crisis, has brought some welcome relief. In addition comments from the US Federal Reserve that interest rates would stay very low until at least 2014, and Chinese manufacturing data which showed a move back into positive territory, added to the feeling of optimism. This has resulted in most equity markets rising as defensive shares have been sold and higher risk cyclical or growth shares have been bought. In a flash the market has effectively gone from “risk off” to “risk on”.

In January we opened new positions in London Mining, an emerging iron ore producer based in Sierra Leone, Aveva Group, a global leader in 3D design for the energy and power generation markets and Premier Oil, a mid tier internationally diversified explorer with a growing production profile and an active drilling programme. We also raised our position in British Aerospace where we feel recent weakness due to defence budget cuts is overdone. We have sold a small amount of IP Group to part fund the above and have also rationalised a number of holdings where we felt future returns no longer justified retention.

The net asset value rose by 6.5%, the FTSE100 Index rose by 2.1%, while small caps rose by 8.0% (all including income). This divergence of performance shows how small companies are considered as riskier investments and benefit at times when confidence returns.

Gearing remained virtually unchanged on the month as investments made were offset by the rise in share prices.

James Henderson
January 2012