Last checked at 
28 Jan 2022 13:44
HENDERSON INVESTMENT FUNDS LIMITED
HENDERSON OPPORTUNITIES TRUST PLC
LEGAL ENTITY INDENTIFIER (LEI): 2138005D884NPGHFQS77
28 January 2022
HENDERSON OPPORTUNITIES TRUST PLC
Annual Financial Report for the year ended 31 October 2021
This announcement contains regulated information
Investment Objective
The Company aims to achieve capital growth in excess of the FTSE All-Share Index from a portfolio of UK investments.
PERFORMANCE HIGHLIGHTS
Total Return Performance to 31 October 2021
| 1 year % | 3 years % | 5 years % | 10 years % |
NAV¹ | 58.4 | 47.3 | 80.2 | 285.7 |
Share price² | 59.5 | 51.0 | 89.0 | 332.5 |
Benchmark³ | 35.4 | 17.6 | 31.4 | 106.9 |
Peer group NAV4 | 43.8 | 36.7 | 66.8 | 202.5 |
| Year ended 31 October 2021 | Year ended 31 October 2020 |
NAV per share at year end5 | 1,626.9p | 1,046.3p |
Share price at year end | 1,382.5p | 885.0p |
Total return per share5 | 607.5p | (83.6p) |
Net assets | £128.5m | £82.6m |
Discount at year end5, 6 | 15.0% | 15.4% |
Ongoing charge (excluding performance fee)5 | 0.87% | 0.88% |
Ongoing charge (including performance fee) 5, 7 | 1.85% | 0.88% |
Dividend for year8 | 27.5p | 27.0p |
1 Net Asset Value ("NAV") per ordinary share total return (including dividends reinvested)
2 Share price total return (including dividends reinvested)
3 FTSE All-Share Index
4 AIC UK All Companies average
5 Alternative performance measure
6 Calculated based on the NAV per share and share price at year end
7 No performance fee was payable in the year ended 31 October 2020
8 This represents three interim dividends of 6.5p each and a proposed final dividend of 8.0p which will be put to shareholders for approval at the Annual General Meeting on 10 March 2022. See the Chaiman's statement for more detail. The dividend yield5 for the year ended 31 October 2021 was 2.0% (2020: 3.1%) based on the share price at the year end
Sources: Morningstar Direct, Janus Henderson, Refinitiv Datastream
A glossary of terms and alternative performance measures can be found in the Annual Report
CHAIRMAN'S STATEMENT
Performance review
After a fall in net asset value in the previous financial year during the peak of the pandemic, we are pleased to be reporting on a strong year of absolute and relative performance, with the Company's portfolio returning 58.4% during the year compared with the benchmark's return of 35.4%. Despite the challenges of the ongoing pandemic, throughout the year our Fund Managers have continued to manage the Company's capital in a calm and considered manner retaining their focus on long-term investee company fundamentals and analysis. On behalf of the Board, I would like to thank them for their successful efforts on behalf of the Company. The following table illustrates the Company's outperformance record over the last 10 years.
| 1 year (%) | 3 years (%) | 5 years (%) | 10 years (%) |
NAV Total Return | 58.4 | 47.3 | 80.2 | 285.7 |
Share Price Total Return | 59.5 | 51.0 | 89.0 | 332.5 |
FTSE All-Share Total Return | 35.4 | 17.6 | 31.4 | 106.9 |
This performance is due to the Company's deliberately diverse portfolio and breadth of UK companies held, not to any particular theme. Some of these investee companies are addressing relatively nascent but fast-growing end markets, such as the need to de-carbonise the global economy. Others are seeking to grow market share in already established end markets by bringing a different approach. However, all of them have strong management teams and many have been identified by the Fund Managers as potential next generation leaders in the UK in their particular sector areas. It is this blend of different companies held within the portfolio that has allowed the Company to outperform over the long term.
Income review
We are also pleased to report a healthy income recovery this year, with revenue return per share rising to 24.7p compared to 12.8p last year. This has not quite reached the 29.9p generated in the 2019 financial year as some companies in the portfolio (particularly in the 'recovery' classification) are yet to restore dividends. These companies operate in areas such as hospitality or aerospace that remain highly impacted by the pandemic. In last year's Annual Report we stated that we would be prepared to use the revenue reserve of the Company to support the Company's dividend distributions until the dividend income from the portfolio was fully recovered. We see no reason to change course and we are therefore announcing a modest increase to the final dividend, taking it to 8.0p per share (relative to a 7.5p final dividend in the previous financial year). This will mean a full year dividend of 27.5p, as compared to the 27.0p paid last year and will involve utilising £217,000 from the Company's revenue reserve. Subject to shareholder approval, the dividend will be paid on 25 March 2022 to shareholders on the register as at 18 February 2022.
Fees and expenses
The ongoing charge for the year was 1.85%. This was higher than the 0.88% charge in the previous financial year and reflects the performance fee paid. As a reminder, there is a limit on the total management and performance fee in any one year of 1.5% of the average net assets (calculated quarterly) during the year, and no performance fee will be paid if either the share price or net asset value is lower than their value at the preceding financial year end. Ongoing charges include all fees and expenses (not just management and performance fees) and can therefore be higher than any cap applied to management and performance fees alone. The Board continues to monitor fees and other costs.
The discount level and share buybacks
Although it was encouraging to see the discount narrow substantially during the year to 0.1%, the shares finished the year at a 15.0% discount to the cum income NAV, approximately in line with the discount at the previous year end. The persistent (albeit fluctuating) discount is a source of concern and focus for the Board and the Fund Managers given the Company's strong long and short-term performance and it is difficult to pinpoint exactly why this performance is not influencing the share price more positively. At the same time, the Board is very conscious of an ongoing transition in the Company's share register with some wealth managers gradually selling their positions and more individuals buying and holding their shares on trading platforms. This is an issue many investment trusts are facing, and the resulting challenge for boards and fund managers is how they increase awareness of their companies and find a way of communicating more effectively with the individuals investing through platforms who now own, or may wish to buy, their shares. We have very recently appointed a specialist communications agency to help us progress this.
There were no share issuances or shares bought back during the financial year. It remains the Board's position that buybacks will primarily be undertaken with the aim of enhancing the NAV for shareholders rather than maintaining the discount at any specific level.
Gearing
Gearing ended the year at 13.2% of net assets, modestly lower than the 13.6% at the previous financial year end. This very modest fall in gearing came about despite the Fund Managers being net investors of approximately £4.7m during the year as the rise in the Company's net asset value outpaced net investment. The gearing level remains broadly in line with the Company's long term average and reflects the fact that the Fund Managers are continuing to find a broad range of attractive valuation opportunities in the UK market.
Changes to the Investment Objective and Investment Policy
We are seeking permission from shareholders to make amendments to the Investment Objective and Investment Policy of the Company at the Annual General Meeting ("AGM"). The principal amendment will allow flexibility for the Company to invest up to 10% of its gross asset value in companies outside of the UK. This proposed change should not be seen as indicating any alteration to the Company's investment strategy or process. The change is designed to address issues arising from corporate actions (such as spin-outs from existing holdings) that could result in the Company holding shares in an overseas entity. Rather than making the Company a forced seller in these circumstances, we want to ensure that the Fund Managers have the flexibility to retain any holding if they consider this to be in the best interests of shareholders. Other amendments are designed to provide some flexibility in the number of individual investments held and to make the current investment policy clearer and are considered to be immaterial in their nature.
ESG
The Board understands the increasing importance of environmental, social and governance ("ESG") concerns to investors. While the Company does not automatically exclude sectors or particular companies based on specific ESG metrics, ESG factors are incorporated into the Fund Managers' investment decision making process. In general, the Fund Managers prefer to rely on company engagement and dialogue rather than metrics alone which, particularly in the smaller company area, can sometimes be subjective. More information on the Fund Managers' approach to ESG can be found in the Annual Report.
The Board
Chris Hills will be stepping down from the Board at the conclusion of the March 2022 AGM having been a Director since June 2010. During his time on the Board Chris has contributed a wealth of industry experience and his calm inputs to Board discussions, particularly at times of great upheaval such as during the pandemic, have always been hugely valuable. The Board extends its thanks and best wishes for the future to Chris.
In August we appointed Harry Morgan to the Board. Harry has highly relevant experience of both investment trusts (as a current non-executive director of Mid Wynd International Investment Trust plc) and of the wealth management industry having previously been a director of investment management and head of key clients in Scotland for Tilney.
AGM
Last year, along with taking precautionary action by amending the Company's Articles of Association to allow a combination of virtual and physical shareholder meetings to be held in the future, the Board committed to holding physical meetings when restrictions were not in place and these could be held safely.
The Company's AGM is currently scheduled to take place at 2.30 pm on Thursday 10 March 2022 at 201 Bishopsgate, London EC2M 3AE (the offices of Janus Henderson Investors). For shareholders unable to travel and attend in person, the meeting will also be broadcast live on the internet at www.janushenderson.com/trustslive.
Whilst we hope to be able to hold the AGM as a physical meeting, please note that it may be necessary to change the arrangements for the AGM depending on the advice of the public health authorities and the UK government closer to the time. If any such changes are required, these will be detailed on the Company's website at www.hendersonopportunitiestrust.com and additionally an announcement will be released to the Stock Exchange.
The AGM will include a presentation by our Fund Managers, James Henderson and Laura Foll. If shareholders would like to submit any questions in advance of the AGM, they are welcome to send these to the Corporate Secretary at itsecretariat@janushenderson.com.
Outlook
While it now appears inevitable that interest rates will rise further, it seems likely that they will remain low if looked at in the context of the last fifty years. The Board believes that investing in companies that provide excellent goods or services to their customers should work as a good hedge against inflation as these companies can increase their prices to prevent margins being eroded by input cost increases.Given the fast rate of change in the economy the Fund Managers' focus also needs to be on companies that are capable of adapting. Both the size of the Company and its highly flexible mandate allow the Fund Managers to pursue the best opportunities across the breadth of the UK market and to take the measures required to enable the Company to invest in the next generation of successful companies. For all of these reasons, the Board remains positive about the outlook for the Company.
Wendy Colquhoun
Chairman
28 January 2022
FUND MANAGERS' REPORT
Investment backdrop
The COVID-19 vaccination programme and the re-opening of much of the economy had a beneficial impact on the portfolio. After the three 'lockdowns' there have been labour shortages and supply problems and this led to inflationary pressures picking up. However, well positioned companies that have good management teams were able to respond by putting their own prices up and therefore protecting their margins. These margins were also enhanced by companies focusing hard on their costs during the pandemic which meant they were leaner coming out of it.
The virus accelerated trends that were already in place before it. The move to online retailing away from traditional stores is a notable and obvious example. The desire to create a better, more sustainable environment has also gained greater impetus. Some of the stocks in the portfolio benefited, for example, companies working to provide alternatives to fossil fuels have received greater investor support as they make progress in their product development. Some of the best contributors to portfolio performance this year came from this area. However, it was not only young companies that performed well. Some more established businesses came back with renewed vigour after the pandemic. Certain of the banks and large retailers are examples. The portfolio retained a reasonable level of gearing throughout the year in order to take advantage of this breadth of opportunities.
Portfolio review
The portfolio is divided into the classifications below. These classifications are not meant to be prescriptive and are, to a degree, subjective, with companies having the potential to move between classifications over time. For example, as a company matures it may progress from an early stage company, to growth small cap, to a 'compounder'. The aim of the classifications alongside the indicative ranges is to ensure the portfolio remains diverse, as different classifications will perform differently depending on the economic backdrop.
Classification | Total (gross assets) 1 % | Indicative portfolio range % | Largest three holdings |
Large cap (£1b+) These stocks are usually familiar to all investors. They are ballast for the portfolio and often generators of income as individual companies. We believe they remain capable of long-term earnings growth.
| 21 (+6) | 10-30 | Barclays, NatWest, HSBC |
Growth small cap These are companies that in our view can be substantially larger businesses in time. They have strong management capability and they operate in fast growing end markets or are disruptors within more established markets.
| 20 (-7) | 20-40 | Next Fifteen Communications, Boku, Tracsis |
Recovery Some of these companies, for example those exposed to the aerospace industry, have fallen into the recovery classification as a result of the pandemic. However, as the global economy recovers, earnings should be able to grow from current suppressed levels.
| 11 (+5) | 0-30 | Marks & Spencer, Rolls-Royce, Redcentric |
Natural resources These are companies that will benefit from rising commodity prices. The majority of this classification are smaller companies (outside of the FTSE 100) that are less well understood and where, in our view, we can add more value by paying close attention.
| 11 (+3) | 5-15 | Serica Energy, Anglo American, Rio Tinto |
Early stage companies/university spin-outs These are companies that could serve large end markets with potentially disruptive technologies, however they are at an early stage of their life cycle and whether the technology becomes fully commercialised remains, to a degree, binary. They should perform largely independently of the broader economic cycle.
| 13 (-4) | 0-20 | AFC Energy, Ceres Power, Surface Transforms |
Small & mid cap compounders These are good quality, long-term holdings with experienced management teams. Over time we expect them to steadily grow sales and earnings.
| 24 (-3) | 20-40 | Springfield Properties, Vertu Motors, SigmaRoc |
1 The number in brackets is the change in percentage compared to the previous financial year end. The special situations classification, used in 2020, has been incorporated into the recovery classification.
The most significant changes in the portfolio from a classifications perspective since the previous financial year end are the increases in weight in large cap and recovery companies, and the reduction in growth small cap companies.
In the large cap and recovery companies classifications, we increased the weight significantly in banks (see more detail in the portfolio activity section) and added new holdings in BT Group and Tesco. While these are more established companies than much of the portfolio, in all cases there needs to be a clear total return opportunity and the positions need to bring a different exposure to the portfolio. For example, BT, as a result of its significant investment in fibre to the home, has a potential route to sustainable earnings growth as that capital investment generates a future return.
Within the recovery allocation, new positions included contractor Kier Group and retailer Marks & Spencer. What we are looking for within the recovery classification is companies which have under-appreciated potential to either return to historic strengths or apply their strengths to new end markets. For example, Kier, under a new leadership team and with a much improved balance sheet, is returning to its historic focus on disciplined local contracting. Other companies within this classification are seeking to diversify into new end markets, for example STV is aiming to transition much of its advertising revenue to online, and International Personal Finance is taking lessons from a long history of door-to-door lending and applying these to its digital lending business.
Within growth small cap, the reduction in weight came about partially due to underperformance of some holdings (such as Blue Prism) and partially due to sales in the area, including full sales of Learning Technologies, AVEVA and Keystone Law and reductions in positions such as Boku. In recent years this area of the portfolio has performed well and in many cases shares have materially re-rated. This has led us to reduce or exit some holdings on valuation grounds, without finding the same quantum of attractive opportunities to replace them and therefore the weight has come down gradually over time.
Portfolio activity
During the year we were net investors, investing £35.5m in aggregate and selling £30.8m. While we were net investors, the rise in net asset value outpaced net investment and as a result gearing ended the year modestly lower at 13.2%, relative to 13.6% at the end of last year. The gearing level for the Company is driven by valuation opportunities across the breadth of the UK market, rather than our view of the macroeconomic backdrop. The current low to mid-teens gearing level for the Company demonstrates that we are continuing to find a broad spread of attractive opportunities.
It was an active year for the portfolio in which there were 20 new purchases, five of which we invested in at the point of IPO (Oxford Nanopore Technology, Glantus, Auction Technology Group (which has since been sold), Orcadian Energy and Dianomi) and others at the point where they were raising additional capital (for example Revolution Bars). Offsetting these new purchases were 17 full portfolio sales, three of which (Scapa, Horizon Discovery and Bacanora Lithium) were driven by takeover offers and two of which (Jackson Financial and Thungela Resources) were driven by sales of small spin-outs from portfolio holdings. The portfolio finished the year with 92 holdings (2020: 87), not including those written down to zero.
Purchases
The largest new purchase during the year was Barclays, which was initially purchased in November 2020 and ended the year as the Company's largest holding. While Barclays was a new purchase for the portfolio, we also added to the Company's existing positions in several other banks. This broad addition to the banks was driven by both valuation, with all still trading at a discount to historic averages, and macroeconomic considerations, with all having the potential to benefit from the economic recovery and (at some stage) the potential for higher interest rates.
Another area that was added to steadily during the course of the year was natural resources, with several new positions established including Orcadian Energy and Jubilee Metals, as well as additions to existing holdings such as Jersey Oil & Gas, Jadestone Energy and Anglo American. Smaller natural resource companies continue to be an area where we are finding attractive valuation opportunities. These companies are run by experienced management teams with material pre-production or producing assets, often acquired from large companies at low valuations as part of disposal programmes. An example of this which has been held in the portfolio since 2013 is Serica Energy, which was one of the best performers this financial year (see separate attribution section below). This was bought as a small company (below £50m market capitalisation) and as a small (approximately 0.5%) holding. It remained a small position until late 2017, when it acquired stakes in material North Sea assets from BP. It has gone on to be one of the largest gas producers in the UK and one of the largest positions in the portfolio. It is this type of less well known but entrepreneurial smaller natural resource company that we are seeking to identify.
Data illustrating the Serica Energy share price since first purchase (pence) chart in the Annual Report is set out below:
Date | Share price in pence |
12 November 2013 | 17.38 |
28 November 2014 | 6.63 |
30 November 2015 | 8.85 |
30 November 2016 | 13.50 |
30 November 2017 | 66.75 |
30 November 2018 | 131.00 |
29 November 2019 | 124.00 |
30 November 2020 | 113.00 |
29 October 2021 | 206.00 |
Source: Bloomberg at 31 October 2021
Sales
A number of the largest sales during the year were in the alternative energy area, with material reductions to the position in Ceres Power and a full sale of the position in EQTEC. Ceres Power had been the largest contributor to performance in the previous financial year, and while we continue to think that the quality of their partnerships (for example with Bosch) suggests they could be among the future leaders within fuel cells, the valuation has moved materially from the point of purchase and for portfolio balance reasons the holding was reduced.
Another material reduction during the year was building materials company SigmaRoc. This was originally purchased for the portfolio in December 2017. It is a 'buy and build' model, with the company acquiring heavy building materials companies with strong incumbent market positions. Following good performance (and further additions) it has become one of the Company's largest holdings. In the summer of 2021, it announced the acquisition of a Nordic company called Nordkalk. This was by far its largest acquisition to date, moving the company from a sub £100m market cap company at the point at which its shares were purchased by the Company to a company with a market cap of over £500m. While we saw the strategic logic, a deal of this size always comes with a degree of integration risk and for this reason, as well as portfolio balance considerations, we reduced the holding.
Data illustrating the SigmaRoc share price since first purchase (pence) chart in the Annual Report is set out below:
Date | Share price in pence |
13 December 2017 | 42.25 |
28 June 2018 | 40.50 |
31 December 2018 | 39.20 |
28 June 2019 | 45.50 |
31 December 2019 | 49.50 |
30 June 2020 | 44.00 |
31 December 2020 | 63.00 |
30 June 2021 | 94.50 |
29 October 2021 | 95.00 |
Source: Bloomberg at 31 October 2021
Attribution
Top 10 absolute contributors to return during the financial year:
Company name | Share price total return (%) | Contribution to NAV (%) | Classification |
Ceres Power | 77.5 | 3.5 | Early stage company |
SigmaRoc | 111.6 | 3.3 | Compounder |
Next Fifteen Communications | 180.0 | 2.9 | Growth small cap |
AFC Energy | 247.7 | 2.5 | Early stage company |
Serica Energy | 103.3 | 2.4 | Natural resources |
EQTEC | 228.3 | 2.2 | Early stage company |
Springfield Properties | 58.8 | 1.9 | Compounder |
Zoo Digital | 129.2 | 1.9 | Growth small cap |
Vertu Motors | 108.9 | 1.9 | Compounder |
Tracsis | 78.6 | 1.8 | Growth small cap |
While there is little commonality of end markets among the top ten best performers, were there to be a theme it is that they all have experienced, ambitious management teams combined with the potential to be much larger businesses in time. This could be because the end markets themselves are at an early stage and could become much larger (this would be the case for Ceres Power and AFC Energy, which produce fuel cells) or because they are challenging traditional business models and seeking to grow market share, whether organically or inorganically. This would be the case for Zoo Digital, which is challenging traditional dubbing studios with its cloud-based model, and Vertu Motors, which continues to acquire other motor dealerships and integrate them into its platform.
Top 10 absolute detractors from return during the financial year:
Company name | Share price total return (%) | Contribution to NAV (%) | Classification |
LoopUp | -61.9 | -1.8 | Growth small cap |
Blue Prism | -26.9 | -0.9 | Growth small cap |
SIMEC Atlantis Energy | -92.0 | -0.8 | Early stage company |
Reabold Resources | -67.7 | -0.6 | Natural resources |
Sensyne Health | -35.8 | -0.5 | Early stage company |
4D Pharma | -43.7 | -0.4 | Early stage company |
AVEVA | -6.3 | -0.1 | Large cap |
Oxford BioDynamics | -39.3 | -0.1 | Early stage company |
Glantus | -12.3 | -0.1 | Growth small cap |
Redcentic | 0.5 | -0.1 | Recovery |
The most material detractor from performance was LoopUp, having in the previous financial year been among the best performers as its conference call software saw uptake increase materially during the peak of the pandemic. The position was sold in December 2020 following a disappointing trading update in which it was clear that the competitive environment had materially changed with Microsoft taking market share. Given the scale of this competitor we decided that the risk was that there would be further disappointments and exited the holding. Another detractor during the year was robotic process automation software provider Blue Prism, which did not achieve the revenue growth it set out to at the beginning of the year. This was partially pandemic driven as potential customers were (understandably) reluctant to make material automation decisions at a time when a substantial portion of staff were working from home. In recent months its board has recommended a takeover approach from private equity.
Income
2021 saw a strong recovery in dividend payments as company earnings recovered from the peak of the pandemic. As a result, the Company earnings per share rose to 24.7p, relative to 12.8p the previous year (and 29.9p in the 2019 financial year to provide pre-pandemic context). The rise in earnings per share was also helped by the net investment during the year and by stock lending which contributed £267,000 during the financial year relative to £163,000 in the previous year.
Outlook
We invest across the UK market in companies of all sizes. This allows us a greater set of opportunities. Large company investors have little exposure to dynamic technology stocks, while small cap investors will have little exposure to the banking sector, where substantial value can be found. We have the flexibility within this Company to invest in both areas. Some of the large companies we hold are reinventing themselves. They are adapting to a much changed economy, while the smaller companies are utilising their ability to be nimble.
It is an exciting time to be investing in the UK. Rapid changes within the economy are creating real opportunities for those companies with the ability to grasp them. For instance, the alternative energy companies have extraordinary potential if they have the technology that will help the world move away from fossil fuel, while the step up in infrastructure spend within the UK is creating opportunities for more traditional construction based businesses. The portfolio is a blend of very different businesses. Diversity of businesses and end markets together give us the opportunity to invest in the next generation of successful companies. We remain positive about the opportunities for the portfolio and intend to maintain a reasonable level of gearing.
James Henderson and Laura Foll
Fund Managers
28 January 2022
MANAGING OUR RISKS
The Board, with the assistance of the Manager, has carried out a robust assessment of the principal risks and uncertainties facing the Company, including those that would threaten its business model, future performance, solvency, liquidity and reputation. The principal risks and uncertainties facing the Company relate to investing in the shares of companies that are listed in the United Kingdom, including small companies. Although the Company invests almost entirely in securities that are listed 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 monitors the Manager, its other service providers and the internal and external environments in which the Company operates to identify new and emerging risks. The Board's policy on risk management has not materially changed from last year. The inherent likelihood of the occurrence of poor investment performance, failure or serious difficulties of one of the Company's third-party service providers, the loss of bank borrowing facilities and failure of the Manager to manage financial or administrative controls due to the increased possibility of cyberattacks or issues with bandwidth as many employees worked from home, continued to be increased due to the COVID-19 pandemic.
The Board has received regular updates from the Fund Managers during the pandemic. These have enabled the Directors to monitor and manage risks related to the pandemic. COVID-19 continues to affect the value of the Company's investments due to the disruption of supply chains and demand for products and services, increased costs and cash flow problems, and changed legal and regulatory requirements. The Board notes that the Fund Managers' investment process remains unchanged by the COVID-19 pandemic and they continue to focus on long-term company fundamentals and detailed analysis of current and future investments.
The Board has drawn up a risk map which identifies the substantial risks to which the Company is exposed. The Board has also put in place a schedule of investment limits and restrictions, appropriate to the Company's Investment Objective and Investment Policy. These principal risks fall broadly under the following categories:
Risk | Controls and mitigation
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Investment activity and strategy 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 and the Company's peer group; it may also result in the Company's shares trading on a wider discount to NAV. | The Manager provides the Directors with management information including performance data reports and portfolio 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. 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.
The Board seeks to manage these risks by ensuring a diversification of investments. The Board has regular meetings with the Fund Managers to review performance and the extent of borrowings.
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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, including liquidity and gearing (which were shown as separate principal risks in the 2020 Annual Report), and the Company's policies for managing them are set out in the Annual Report. |
Operational and cyber Disruption to, or failure of, the Manager's accounting, dealing or payment systems or the Custodian or the Depositary's records could prevent the accurate reporting and monitoring of the Company's financial position. The Company is also exposed to the operational risk that one or more of its services providers may not provide the required level of service. The Company may also be exposed to the risk of cyber-attack on its service providers. | The Manager has contracted some of its operational functions, principally those relating to trade processing, investment administration, accounting and cash management, to BNP Paribas Securities Services.
The risk of failure of the Manager to manage financial or administrative controls due to the increased possibility of cyber-attacks or issues with bandwidth as many employees worked from home was increased due to the COVID-19 pandemic. The Directors report that, despite the COVID-19 pandemic, there has been no change to the level of service provided by the Manager or the Company's other third-party suppliers and the pandemic served to highlight the resilience and high quality of the services provided.
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Accounting, legal and regulatory A breach of Section 1158/9 of the Corporation Tax Act 2010 could lead to a loss of investment trust status, resulting in capital gains realised within the portfolio being subject to corporation tax. A breach of the FCA's Listing Rules could result in suspension of the Company's shares, while a breach of the Companies Act 2006 could lead to criminal proceedings, or financial or reputational damage.
| The Manager is contracted to provide investment, company secretarial, administration and accounting services through qualified professionals. The Board receives internal controls reports produced by Janus Henderson on a quarterly basis, which confirm regulatory compliance. |
Failure of Janus Henderson A failure of the Manager's business, whether or not as a result of regulatory failure, cyber risk or other failure could result in the Manager being unable to meet its obligations and its duty of care to the Company. | The Board meets regularly with representatives of the Manager's Investment Management, Risk, Compliance, Internal Audit and Investment Trust teams and reviews internal control reports from the Manager on a quarterly basis. The failure of the Manager would not necessarily lead to a loss of the Company's assets, however, this risk is mitigated by the Company's ability to change its investment manager if necessary, subject to the terms of its management agreement.
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Details of how the Board monitors the services provided by Janus Henderson and its other suppliers, and the key elements designed to provide effective internal control, are explained further in the internal controls section of the Corporate Governance report in the Annual Report. Further details of the Company's exposure to market risk (including market price risk, currency risk and interest rate risk), liquidity risk and credit and counterparty risk and how they are managed are contained in the Annual Report.
Emerging risks
In addition to the principal risks facing the Company, the Board also regularly considers potential emerging risks, which are defined as potential trends, sudden events or changing risks which are characterised by a high degree of uncertainty in terms of the probability of them happening and the possible effects on the Company. Should an emerging risk become sufficiently clear, it may be moved to a significant risk.
The Board has identified the following as potential emerging risks:
Demographic change
Ageing population, increasing financial inequality and new trends in social attitudes.
Technological change
Artificial intelligence, sector disruption, changes to existing job roles, ethical oversight of technological change, autonomous vehicles, electrification and healthcare impact.
Environmental sustainability
Climate change, decarbonisation, extreme bad weather events, increasing legislation/political action, resource scarcity and reputational consequences.
Political change
Tax risk (including impact on dividends paid by the Company to shareholders) and impact on performance.
The Company's emerging risks are macro-economic and political in nature and over which the Company has no control. The Board monitors these emerging risks and, if specific action relating to the investments, or the Company's marketing approach were to arise, the Board would take appropriate action.
BORROWINGS
The Company has an unsecured loan facility in place which allows it to borrow as and when appropriate. £30m (2020: £20m) is available under the facility. Net gearing is limited by the Board to 25% of net assets. The maximum amount drawn down in the period under review was £19.8m (2020: £14.1m), with borrowing costs for the year totalling £150,000 (2020: £131,000). £18.4m (2020: £14.1m) of the facility was in use at the year end. Net gearing at 31 October 2021 was 13.2% (2020: 13.6%) of net asset value.
VIABILITY STATEMENT AND GOING CONCERN
The Company is a long-term investor. The Board believes it is appropriate to assess the Company's viability over a five year period in recognition of its long-term horizon and what the Board believes to be investors' horizons, taking account of the Company's current position and the potential impact of the principal risks and uncertainties as documented above.
The assessment considered the impact and likelihood of the principal risks and uncertainties facing the Company. Key areas of focus were investment strategy and performance against benchmark, including a consideration of the risks around asset allocation, stock selection and gearing. Market risk was also assessed in terms of the impact of severe but plausible scenarios and the effectiveness of the mitigating controls in place.
The Directors took into account the liquidity of the portfolio and the borrowings in place when considering the viability of the Company over the next five years and its ability to meet liabilities as they fall due. This included consideration of the duration of the Company's borrowing facilities and how a breach of any covenants could impact the Company's net asset value and share price.
The Directors do not expect there to be any significant change to the principal risks and adequacy of the mitigating controls in place. Large cap stocks are held as ballast for the portfolio against liquidity, and the percentage of the portfolio holding of these stocks generally exceeds the gearing percentage. The Board actively monitors investment performance and even with the significant falls in the NAV at the height of the pandemic (which exceeded 25% in March 2020), liquidity requirements and covenant restrictions were all met. The Board is therefore confident that significant market collapses would not impact the Company's viability. Also, the Directors do not envisage any change in strategy or objectives or any events that would prevent the Company from continuing to operate over that period as the majority of the Company's assets are liquid, its commitments are limited and the Company intends to continue to operate as an investment trust. In coming to this conclusion, the Board has considered the impact of COVID-19. The Company's revenue stream was severely impacted in the 2020 financial year by widespread dividend cuts in the UK market as a result of the COVID-19 pandemic. The Board believes that income will recover to historic income levels within a two to three year period and the Company has sufficient distributable reserves to meet any dividend distributions until dividend income fully recovers. The Board does not believe that these factors will have a long-term impact on the viability of the Company and its ability to continue in operation, notwithstanding the short-term uncertainty they have caused in the markets.
The Directors recognise that there is a continuation vote that is due to take place at the AGM in March 2023. The Directors currently believe that the Company will continue to exist for the foreseeable future, and at least for the period of assessment.
Based on this assessment, the Board has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five year period.
The Directors consider it appropriate to adopt the going concern basis of accounting in preparing the Financial Statements (see below).
RELATED PARTY TRANSACTIONS
The Company's transactions with related parties in the year were with its Directors and the Manager. There have been no material transactions between the Company and its Directors during the year and the only amounts paid to them were in respect of expenses and remuneration for which there were no outstanding amounts payable at the year end. Directors' shareholdings are disclosed in the Annual Report.
In relation to the provision of services by the Manager, other than fees payable by the Company in the ordinary course of business and the facilitation of marketing activities with third parties, there have been no material transactions with the Manager affecting the financial position of the Company during the year under review. More details on transactions with the Manager, including amounts outstanding at the year end, are given in the Notes to the Financial Statements in the Annual Report.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
In accordance with Disclosure Guidance and Transparency Rule 4.1.12, each of the Directors, who are listed in note 13, confirms that, to the best of his or her 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.
|
On behalf of the Board
Wendy Colquhoun
Chairman
28 January 2022
Twenty Largest Holdings at 31 October 2021
The stocks in the portfolio are a diverse mix of businesses operating in a wide range of end markets.
Ranking 2021 (2020) |
Company | % of portfolio |
Approximate market capitalisation | Valuation 2020 £'000 |
Purchases £'000 | Sales £'000 | Appreciation/ (depreciation) £'000 | Valuation 2021 £'000 |
1 * | Barclays | 3.4 | £34b | - | 3,673 | - | 1,282 | 4,955 |
2 (6) | Serica Energy¹ | 3.1 | £554m | 2,510 | 334 | (937) | 2,728 | 4,635 |
3 (8) | Springfield Properties¹ | 2.9 | £153m | 2,445 | 391 | (166) | 1,556 | 4,226 |
4 (12) | Next Fifteen Communications¹ | 2.7 | £1.1b | 2,007 | - | (1,137) | 3,111 | 3,981 |
5 (17) | Vertu Motors¹ | 2.7 | £224m | 1,766 | 359 | (271) | 2,114 | 3,968 |
6 * | NatWest | 2.4 | £25.2b | 683 | 1,662 | - | 1,193 | 3,538 |
7 (3) | Boku¹ | 2.4 | £560m | 3,079 | - | (1,140) | 1,551 | 3,490 |
8 (10) | Tracsis¹ | 2.3 | £270m | 2,168 | - | (540) | 1,785 | 3,413 |
9 (5) | SigmaRoc¹ | 2.1 | £606m | 2,618 | 128 | (2,677) | 2,986 | 3,055 |
10 (1) | Blue Prism¹ | 2.0 | £1.1b | 4,081 | - | - | (1,100) | 2,981 |
11 * | HSBC | 1.9 | £90.1b | 1,073 | 1,337 | - | 374 | 2,784 |
12 (7) | RWS Holdings¹ | 1.9 | £2.4b | 2,458 | - | - | 275 | 2,733 |
13 * | Anglo American | 1.8 | £34.5b | 860 | 1,308 | - | 545 | 2,713 |
14 * | Lloyds Banking | 1.8 | £35.7b | 336 | 1,548 | - | 728 | 2,612 |
15 * | AFC Energy¹ | 1.7 | £443m | 626 | 253 | (23) | 1,651 | 2,507 |
16 (2) | Ceres Power¹ | 1.7 | £2.4b | 3,685 | - | (3,679) | 2,482 | 2,488 |
17 * | Zoo Digital¹ | 1.6 | £111m | 1,412 | - | (872) | 1,848 | 2,388 |
18 * | IQGeo¹ | 1.6 | £76m | 1,079 | 160 | - | 1,108 | 2,347 |
19 (14) | Surface Transforms¹ | 1.6 | £114m | 1,875 | 266 | (157) | 346 | 2,330 |
20 (9) | Rio Tinto | 1.5 | £75.3b | 2,179 | - | - | 101 | 2,280 |
At 31 October 2021 these investments totalled £63,424,000 or 43.1% of the portfolio.
* Not in the top 20 largest holdings last year
1 Quoted on the Alternative Investment Market ("AIM")
Portfolio by sector
As a percentage of the investment portfolio excluding cash
| 31 October 2021 % | 31 October 2020 % |
Basic Materials | 5.4 | 5.8 |
Consumer Discretionary | 17.3 | 12.1 |
Consumer Staples | 1.0 | 0.0 |
Energy | 11.5 | 11.9 |
Financials | 21.1 | 13.4 |
Health Care | 4.1 | 5.2 |
Industrials | 22.1 | 24.9 |
Real Estate | 1.0 | 2.3 |
Technology | 13.7 | 22.4 |
Telecommunications | 1.8 | 0.9 |
Utilities | 1.0 | 1.1 |
| 100.0 | 100.0 |
Portfolio by index
As a percentage of the investment portfolio excluding cash
| 31 October 2021 % | 31 October 2020 % |
FTSE 100 | 21.8 | 15.6 |
FTSE 250 | 11.1 | 11.9 |
FTSE SmallCap | 6.7 | 6.4 |
FTSE AIM | 55.5 | 63.5 |
Other1 | 4.9 | 2.6 |
| 100.0 | 100.0 |
1Other also includes AIM investments outside the FTSE AIM Index and shares listed on the main market which are not included in the FTSE All-Share Index
Market capitalisation of the portfolio at 31 October 2021
| Portfolio Weight % | Benchmark Weight % |
Greater than £2b | 31.5 | 89.5 |
£1b - £2b | 12.3 | 5.4 |
£500m - £1b | 9.1 | 3.1 |
£200m - £500m | 21.6 | 1.7 |
£100m - £200m | 13.2 | 0.3 |
£50m - £100m | 6.3 | 0.0 |
Less than £50m | 5.7 | 0.0 |
Other | 0.3 | 0.0 |
| 100.0 | 100.0 |
A glossary of terms can be found in the Annual Report
Sources: Morningstar Direct, Janus Henderson, Refinitiv Datastream
AUDITED INCOME STATEMENT
|
| Year ended 31 October 2021 | Year ended 31 October 2020 | ||||
Notes |
| Revenue return £'000 | Capital return £'000 |
Total return £'000 | Revenue return £'000 | Capital return £'000 |
Total return £'000 |
|
|
|
|
|
|
|
|
2 | Gains/(losses) on investments held at fair value through profit or loss | - | 47,667 | 47,667 | - | (7,215) | (7,215) |
| Gain on foreign exchange | - | 1 | 1 | - | - | - |
3 | Income from investments held at fair value through profit or loss | 2,317 | 108 | 2,425 | 1,329 | - | 1,329 |
4 | Other interest receivable and other income | 268 | - | 268 | 166 | - | 166 |
|
|
|
|
|
|
|
|
|
| --------- | ---------- | ---------- | --------- | ---------- | ---------- |
Gross revenue and capital gains/(losses) | 2,585 | 47,776 | 50,361 | 1,495 | (7,215) | (5,720) | |
|
|
|
|
|
|
|
|
5 | Management and performance fees | (203) | (1,642) | (1,845) | (130) | (305) | (435) |
| Other administrative expenses | (379) | - | (379) | (312) | - | (312) |
|
| --------- | ---------- | ---------- | --------- | ---------- | ---------- |
| Net return/(loss) before finance costs and taxation | 2,003 | 46,134 | 48,137 | 1,053 | (7,520) | (6,467) |
|
Finance costs | (45) | (105) | (150) | (40) | (91) | (131) |
|
| ----------- | ---------- | ---------- | ----------- | ---------- | ---------- |
| Net return/(loss) before taxation | 1,958 | 46,029 | 47,987 | 1,013 | (7,611) | (6,598) |
|
Taxation | (4) | - | (4) | (3) | - | (3) |
|
| ----------- | ---------- | ---------- | ----------- | ---------- | ---------- |
| Net return/(loss) after taxation | 1,954 | 46,029 | 47,983 | 1,010 | (7,611) | (6,601) |
|
| ====== | ====== | ====== | ====== | ====== | ====== |
6 | Net return per ordinary share - |
|
|
|
|
|
|
| basic and diluted | 24.74p | 582.77p | 607.51p | 12.78p | (96.36p) | (83.58p) |
|
| ====== | ======= | ====== | ====== | ======= | ====== |
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. All revenue and capital items in the above statement derive from continuing operations. The Company had no recognised gains or losses other than those disclosed in the Income Statement.
AUDITED STATEMENT OF CHANGES IN EQUITY
Year ended 31 October 2021 |
Called up share capital £'000 |
Share premium account £'000 |
Capital redemption reserve £'000 |
Other capital reserves £'000 |
Revenue reserve £'000 |
Total shareholders' funds £'000 |
|
|
|
|
|
|
|
At 1 November 2020 | 2,000 | 14,838 | 2,431 | 61,467 | 1,907 | 82,643 |
Ordinary dividends paid | - | - | - | - | (2,131) | (2,131) |
Refund of unclaimed dividends over 12 years old | - | - | - | - | 2 | 2 |
Net return after taxation | - | - | - | 46,029 | 1,954 | 47,983 |
| -------- | ---------- | ---------- | ---------- | ----------- | --------- |
At 31 October 2021 | 2,000 | 14,838 | 2,431 | 107,496 | 1,732 | 128,497 |
| ===== | ====== | ====== | ====== | ====== | ===== |
Year ended 31 October 2020 |
Called up share capital £'000 |
Share premium account £'000 |
Capital redemption reserve £'000 |
Other capital reserves £'000 |
Revenue reserve £'000 |
Total shareholders' funds £'000 |
|
|
|
|
|
|
|
At 1 November 2019 | 2,000 | 14,838 | 2,431 | 69,105 | 3,424 | 91,798 |
Ordinary dividends paid | - | - | - | - | (2,527) | (2,527) |
Net (loss)/return after taxation | - | - | - | (7,611) | 1,010 | (6,601) |
Purchase of 2,813 ordinary shares to be held in treasury | - | - | - | (27) | - | (27) |
| -------- | ---------- | ---------- | ---------- | ----------- | --------- |
At 31 October 2020 | 2,000 | 14,838 | 2,431 | 61,467 | 1,907 | 82,643 |
| ===== | ====== | ====== | ====== | ====== | ===== |
AUDITED STATEMENT OF FINANCIAL POSITION
| 31 October 2021 £'000 | 31 October 2020 £'000 |
Fixed assets |
|
|
Investments held at fair value through profit or loss |
|
|
Listed at market value | 65,075 | 33,606 |
Quoted on AIM at market value | 81,536 | 60,746 |
Unlisted at market value | 493 | 407 |
| ------------ | ------------ |
| 147,104 | 94,759 |
| ------------ | ------------ |
|
|
|
Current assets |
|
|
Investment held at fair value through profit or loss | 2 | 2 |
Debtors | 90 | 66 |
Cash at bank and in hand | 1,360 | 2,882 |
| ------------ | ------------ |
| 1,452 | 2,950 |
|
|
|
Creditors: amounts falling due within one year | (20,059) | (15,066) |
| ----------- | ----------- |
Net current liabilities | (18,607) | (12,116) |
| ----------- | ----------- |
Total assets less current liabilities | 128,497 | 82,643 |
| ----------- | ----------- |
Net assets | 128,497 | 82,643 |
| ======= | ======= |
|
|
|
Capital and reserves |
|
|
Called up share capital | 2,000 | 2,000 |
Share premium account | 14,838 | 14,838 |
Capital redemption reserve | 2,431 | 2,431 |
Other capital reserves | 107,496 | 61,467 |
Revenue reserve | 1,732 | 1,907 |
| ------------ | ------------ |
Total shareholders' funds | 128,497 | 82,643 |
| ======= | ======= |
|
|
|
Net asset value per ordinary share - basic and diluted | 1,626.9p | 1,046.3p |
| ======= | ======= |
AUDITED STATEMENT OF CASH FLOWS
| Year ended 31 October 2021 | Year ended 31 October 2020 |
| £'000 | £'000 |
Cash flows from operating activities |
|
|
Net return/(loss) before taxation | 47,987 | (6,598) |
Add: finance costs | 150 | 131 |
(Less)/add: (gains)/losses on investments held at fair value through profit or loss | (47,667) | 7,215 |
Add: gains on foreign exchange | 1 | - |
Withholding tax on dividends deducted at source | - | (5) |
(Increase)/decrease in other debtors | (28) | 167 |
Increase/(decrease) in creditors | 1,295 | (27) |
| ---------- | ---------- |
Net cash inflow from operating activities | 1,738 | 883 |
| ---------- | ---------- |
Cash flows from investing activities |
|
|
Purchase of investments | (36,086) | (12,719) |
Sale of investments | 30,812 | 14,938 |
| ------------ | ------------ |
Net cash (outflow)/inflow from investing activities | (5,274) | 2,219 |
| ------------ | ------------ |
Cash flows from financing activities |
|
|
Equity dividends paid | (2,129) | (2,527) |
Net loans drawn down | 4,263 | 1,501 |
Buyback of ordinary shares | - | (27) |
Interest paid | (120) | (138) |
| ----------- | ----------- |
Net cash inflow/(outflow) from financing activities | 2,014 | (1,191) |
| ----------- | ----------- |
Net (decrease)/increase in cash and cash equivalents | (1,522) | 1,911 |
|
|
|
Cash and cash equivalents at start of year | 2,882 | 971 |
| ---------- | ---------- |
Cash and cash equivalents at end of year | 1,360 | 2,882 |
| ====== | ====== |
Comprising: |
|
|
Cash at bank | 1,360 | 2,882 |
| ====== | ====== |
|
|
|
NOTES TO THE FINANCIAL STATEMENTS
1. | Accounting policies | |||
| (a) Basis of accounting The Company is a registered investment company as defined in Section 833 of the Companies Act 2006 and is incorporated in the United Kingdom. It operates in the United Kingdom and is registered at 201 Bishopsgate, London EC2M 3AE.
The Financial Statements have been prepared in accordance with the Companies Act 2006, FRS 102 - The Financial Reporting Standard applicable in the UK and Republic of Ireland and with the Statement of Recommended Practice: Financial Statements of Investment Trust Companies and Venture Capital Trusts (the "SORP") issued in October 2019.
The principal accounting policies applied in the presentation of these Financial Statements are set out in the Annual Report. These policies have been consistently applied to all the years presented.
The Financial Statements have been prepared under the historical cost basis except for the measurement of fair value of investments. In applying FRS 102, financial instruments have been accounted for in accordance with Section 11 and 12 of the standard. All of the Company's operations are of a continuing nature. | |||
|
| |||
| (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 AGM in 2020 was duly passed. The next triennial continuation resolution will be put to the Annual General Meeting in 2023. The assets of the Company consist almost entirely of securities that are listed (or quoted on AIM) and are readily realisable. The net current liabilities are primarily due to borrowings under the loan facility, and the Company's portfolio is sufficiently liquid to meet the net current liabilities in the unlikely event that the loan needed to be fully repaid. The securities lending programme entered into by the Company is supported by indemnification and therefore does not impact the liquidity of the portfolio or the Company's going concern. Accordingly, the Directors believe that the Company has adequate resources to continue in operational existence for at least twelve months from the date of approval of the financial statements. Having assessed these factors and the principal risks, as well as considering the impact of COVID-19 on the Company, the Directors considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements. | |||
|
| |||
2. | Gains/(losses) on investments held at fair value through profit or loss | 2021 £'000 | 2020 £'000 |
|
|
|
|
|
|
| Gains on the sale of investments based on historical cost1 | 11,553 | 5,303 |
|
| Revaluation losses recognised in previous years | (1,075) | 5,315 |
|
|
| ---------- | ---------- |
|
| Gains on investments sold in the year based on carrying value at previous Statement of Financial Position date | 10,478 | 10,618 |
|
| Revaluation gains/(losses) on investments held at 31 October | 37,189 | (17,833) |
|
|
| ---------- | ---------- |
|
|
| 47,667 | (7,215) |
|
|
| ====== | ====== |
|
1 Also includes special capital dividends of £149,000 (2020: £110,000)
3. | Income from investments held at fair value through profit or loss | 2021 £'000 | 2020 £'000 | ||||||
|
|
|
| ||||||
| UK: |
|
| ||||||
| Dividends from listed investments | 1,737 | 876 | ||||||
| Dividends from AIM investments | 518 | 348 | ||||||
|
| ------- | ------- | ||||||
|
| 2,255 | 1,224 | ||||||
|
| ------- | ------- | ||||||
| Non-UK: |
|
| ||||||
| Dividends from listed investments | 62 | 101 | ||||||
| Dividends from AIM investments | - | 4 | ||||||
|
| ------- | ------- | ||||||
|
| 62 | 105 | ||||||
|
| ------- | ------- | ||||||
|
| 2,317 | 1,329 | ||||||
|
| ==== | ==== | ||||||
|
|
|
| ||||||
4.
| Other interest receivable and other income
| 2021 £'000 | 2020 £'000 | ||||||
|
|
|
| ||||||
| Deposit interest | - | 1 | ||||||
| Stock lending commission | 267 | 163 | ||||||
| Underwriting commission (allocated to revenue) | 1 | 2 | ||||||
|
| ------- | ------- | ||||||
|
| 268 | 166 | ||||||
|
| ==== | ==== | ||||||
|
| ||||||||
| At 31 October 2021, the total value of securities on loan by the Company for stock lending purposes was £14,011,000 (2020: £16,590,000). The maximum aggregate value of securities on loan at any one time during the year ended 31 October 2021 was £27,450,000 (2020: £20,075,000). The Company's agent holds collateral at 31 October 2021 with the value of £14,789,000 (2020: £17,545,000) in respect of securities on loan, the value of which is reviewed on a daily basis and comprises CREST Delivery By Value ("DBVs") and Government Bonds with a market value of 106% (2020: 106%) of the market value of any securities on loan.
During the year the Company was not required to take up shares in respect of underwriting commission; no commission was taken to capital (2020: same). | ||||||||
|
| ||||||||
5. | Management and performance fee |
|
|
|
| ||||
| 2021 | 2020 | |||||||
|
| Revenue return £'000 | Capital return £'000 |
Total return £'000 | Revenue return £'000 | Capital return £'000 |
Total return £'000 | ||
| Management fee | 203 | 474 | 677 | 130 | 305 | 435 | ||
| Performance fee | - | 1,168 | 1,168 | - | - | - | ||
|
| -------- | --------- | --------- | -------- | --------- | --------- | ||
|
| 203 | 1,642 | 1,845 | 130 | 305 | 435 | ||
|
| ===== | ===== | ===== | ===== | ===== | ===== | ||
|
|
|
|
|
|
|
| ||
| The basis on which the management fee is calculated is set out in the Strategic Report contained in the Annual Report. The performance fee is accrued as a liability throughout the year whenever the criteria for a performance fee to be payable are met. The performance fee crystallises and becomes payable at the Company's year end. The allocation between revenue return and capital return is explained in the Notes to the Financial Statements within the Annual Report. | ||||||||
6. | Net return/(loss) per ordinary share - basic and diluted | ||
| The total return per ordinary share is based on the total return attributable to the ordinary shares of £47,983,000 (2020: total loss of £6,601,000) and on 7,898,375 ordinary shares (2020: 7,898,521) being the weighted average number of shares in issue during the year.
The return/(loss) per ordinary share can be further analysed as follows: | ||
|
| 2021 £'000 | 2020 £'000 |
|
|
|
|
| Revenue return | 1,954 | 1,010 |
| Capital return/(loss) | 46,029 | (7,611) |
|
| ----------- | ----------- |
| Total return/(loss) | 47,983 | (6,601) |
|
| ====== | ====== |
|
Weighted average number of ordinary shares | 7,898,375 | 7,898,521 |
|
| ====== | ====== |
|
|
|
|
|
| 2021 | 2020 |
|
|
|
|
| Revenue return per ordinary share | 24.74p | 12.78p |
| Capital return/(loss) per ordinary share | 582.77p | (96.36p) |
|
| ----------- | ----------- |
| Total return/(loss) per ordinary share - basic and diluted | 607.51p | (83.58p) |
|
| ====== | ====== |
|
| ||
7. | Net asset value per ordinary share - basic and diluted | ||
| The net asset value per ordinary share at the year end was 1,626.9p (2020: 1,046.3p). The net asset value per ordinary share is based on the net assets attributable to the ordinary shares of £128,497,000 (2020: £82,643,000) and on the 7,898,375 ordinary shares in issue at 31 October 2021 (2020: 7,898,375). There are no dilutive securities so the basic and diluted net asset value per ordinary share are the same.
The movements during the year of the assets attributable to the ordinary shares were as follows:
| ||
|
| 2021 £'000
| 2020 £'000
|
| Total net assets at 1 November | 82,643 | 91,798 |
| Total net return/(loss) | 47,983 | (6,601) |
| Dividends paid in the year | (2,129) | (2,527) |
| Buyback of shares | - | (27) |
|
| ----------- | ----------- |
| Total net assets at 31 October | 128,497 | 82,643 |
|
| ====== | ====== |
|
| ||
8. | Called up share capital | 2021 £'000 | 2020 £'000 |
|
|
|
|
| Allotted and issued ordinary shares of 25p each 7,898,375 |
|
|
| (2020: 7,898,375) | 1,974 | 1,974 |
| Ordinary shares of 25p each held in treasury 102,483 (2020: 102,483) | 26 | 26 |
|
| ---------- | ---------- |
|
| 2,000 | 2,000 |
|
| ====== | ====== |
|
During the year ended 31 October 2021 no ordinary shares of 25p each were issued or repurchased by the Company (2020: 2,813 shares were repurchased, and placed in treasury, at a cost of £27,000). Shares held in treasury do not carry a right to receive dividends.
| ||
9. | Ordinary dividends paid
| Record date | Payment date | 2021 £'000 | 2020 £'000 |
|
|
|
|
|
|
| Amounts recognised as distributions to equity holders in the year: |
|
|
|
|
| Final dividend for the year ended 31 October 2019 of 19.0p | 21 February 2020 | 27 March 2020 | - | 1,501 |
| First Interim dividend for the year ended 31 October 2020 of 6.5p | 22 May 2020 | 26 June 2020 | - | 513 |
| Second Interim dividend for the year ended 31 October 2020 of 6.5p | 21 August 2020 | 25 September 2020 | - | 513 |
| Third Interim dividend for the year ended 31 October 2020 of 6.5p | 20 November 2020 | 18 December 2020 | 513 | - |
| Final Interim dividend for the year ended 31 October 2020 of 7.5p | 19 February 2021 | 26 March 2021 | 592 | - |
| First Interim dividend for the year ended 31 October 2021 of 6.5p | 21 May 2021 | 25 June 2021 | 513 | - |
| Second Interim dividend for the year ended 31 October 2021 of 6.5p | 20 August 2021 | 24 September 2021 | 513 | - |
| Unclaimed dividends |
|
| (2) | - |
|
|
|
| --------- | --------- |
|
|
|
| 2,129 | 2,527 |
|
|
|
| ===== | ===== |
| The Board decided to pay quarterly dividends from the beginning of the 2020 financial year, to make dividends as predictable for shareholders as possible.
The Board declared a third interim dividend of 6.5p per ordinary share, paid on 17 December 2021 to shareholders on the register of the Company at the close of business on 19 November 2021. The ex-dividend date was 18 November 2021. Based on the number of ordinary shares in issue on 31 October 2021, the cost of this dividend was £513,000.
Subject to approval at the Annual General Meeting, the proposed final dividend of 8.0p per ordinary share will be paid on 25 March 2022 to shareholders on the register of members at the close of business on 18 February 2022. The shares will be quoted ex-dividend on 17 February 2022.
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 2021 | Year ended 31 October 2020 |
|
| £'000
| £'000
|
| Revenue available for distribution by way of dividends for the year | 1,954 | 1,010 |
| First interim dividend for the year ended 31 October 2021: 6.5p (2020: 6.5p) | (513) | (513) |
| Second interim dividend for the year ended 31 October 2021: 6.5p (2020: 6.5p) | (513) | (513) |
| Third interim dividend for the year ended 31 October 2021: 6.5p (2020: 6.5p) | (513) | (513) |
| Proposed final dividend for the year ended 31 October 2021: 8.0p (based on the 7,898,375 ordinary shares in issue at 28 January 2022) (2020: 7.5p on 7,898,375 ordinary shares) | (632) | (592) |
|
| ----------- | ----------- |
| Transferred from revenue reserve1 | (217) | (1,121) |
|
| ======= | ======= |
|
All dividends have been paid or will be paid out of revenue profit and the revenue reserve.
1 There is no undistributed revenue in the current year (2020: no undistributed revenue) | ||
10. | 2021 Financial Information |
| The figures and financial information for the year ended 31 October 2021 are extracted from the Company's Annual Financial Statements for that period and do not constitute statutory financial statements for that period. The Company's Annual Financial Statements for the year ended 31 October 2021 have been audited but have not yet been delivered to the Registrar of Companies. The Independent Auditor's Report on the 2021 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 Sections 498(2) and 498(3) of the Companies Act 2006. |
11. | 2020 Financial Information The figures and financial information for the year ended 31 October 2020 are extracted from the Company's Annual Financial Statements for that period and do not constitute statutory financial statements for that period. The Company's Annual Financial Statements for the year ended 31 October 2020 have been audited and delivered to the Registrar of Companies. The Independent Auditor's Report on the 2020 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 Sections 498(2) and 498(3) of the Companies Act 2006. |
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|
12. | Annual Report and Annual General Meeting The Annual Report for the year ended 31 October 2021 will be posted to shareholders in February 2022 and will be available on the Company's website www.hendersonopportunitiestrust.com or from the Corporate Secretary at the Company's Registered Office, 201 Bishopsgate, London EC2M 3AE.
The Annual General Meeting will be held on Thursday 10 March 2022 at 2.30pm at 201 Bishopsgate, London, EC2M 3AE. The Notice of the Annual General Meeting will be posted to shareholders with the Annual Report and will be available on the Company's website. |
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13. | General Information |
| Company Status: Henderson Opportunities Trust plc is registered in England and Wales (No. 01940906), has its registered office at 201 Bishopsgate, London EC2M 3AE and is listed on the London Stock Exchange.
SEDOL/ISIN: 0853657/GB0008536574 London Stock Exchange (TIDM) Code: HOT Global Intermediary Identification Number (GIIN): LVAHJH.99999.SL.826 Legal Entity Identifier (LEI): 2138005D884NPGHFQS77
Directors and Corporate Secretary: The Directors of the Company are Wendy Colquhoun (Chairman), Frances Daley (Audit and Risk Committee Chairman), Davina Curling, Chris Hills and Harry Morgan. The Corporate Secretary is Henderson Secretarial Services Limited, represented by Melanie Stoner (Fellow of the Chartered Governance Institute).
Website: Details of the Company's share price and net asset value, together with general information about the Company, monthly factsheets and data, copies of announcements, reports and details of general meetings can be found at www.hendersonopportunitiestrust.com. |
For further information, please contact:
James Henderson Fund Manager Henderson Opportunities Trust plc Telephone: 020 7818 4370
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| Laura Foll Fund Manager Henderson Opportunities Trust plc Telephone: 020 7818 6364
|
Harriet Hall Investment Trust PR Manager Janus Henderson Investors Telephone: 020 7818 2919 |
| James de Sausmarez Director and Head of Investment Trusts Janus Henderson Investors Telephone: 020 7818 3349 |
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.