Q:  What is the history of the Henderson International Opportunities Fund? A : Henderson Global Investors, established in 1934, is a wholly owned subsidiary of Henderson Group plc. The company is an independent global asset management firm providing institutional, retail and high net-worth clients a broad range of asset classes, including equities, fixed income, property, private equity and hedge funds. Headquartered in London, Henderson has $119.5 billion in assets under management as of mid-year 2011, with approximately 1,070 employees located in 16 countries across Europe, the US and Asia. On August 31, 2001, Henderson Global Funds launched its first three funds for US investors - the International Opportunities Fund, the European Focus Fund and the Global Technology Fund. Henderson has subsequently launched a number of additional funds in an effort to bring our global expertise to US investors. I joined Henderson in 1985 and since then I have been investing globally in various funds. Q:  Would you briefly describe your business in the United States? A : We have been involved in the US market for 30 plus years. In 1991, we had a joint venture with a New York-based company called J. & W. Seligman & Co. The venture, known as Seligman Henderson Co., was designed to provide the firm with a more global reach than it had achieved on its own. The core part of the strategy when we came to the US was to bring the best set of ideas from our best portfolio managers to the US marketplace in an all-weather fund, a fund that would seek to perform reasonably well in all conditions. Q:  Do you have any core beliefs that make up your investment philosophy? A : Our belief is that expertise in a specific area should be utilized to its fullest capacity. Q:  What is your investment strategy? A : The Henderson International Opportunities Fund utilizes a fundamental, bottom-up approach to stock selection. Our belief is that the combination of bottom-up selection and fundamental research ultimately drives returns. We picked five of our top portfolio managers who were covering specific international markets and assigned two of those five managers to select stocks for Europe, one for Japan and one for Asia, excluding Japan, respectively, and one to be responsible for the technology sector. Next, we picked five teams to create five sleeves within the portfolio to ensure that we got our best ideas and we limited the number of holdings for which each manager would be responsible. Thus, one of our managers in Europe had a few thousand companies he could pick from, but ultimately he can put only ten companies in his portfolio sleeve. The same holds true for Japan, Asia, and technology with 10 companies for investing in each region or sector. Each manager can invest in no more than 15 companies, so we typically get a number of 60 stocks in the portfolio. As a whole, we do not have one overriding investment style in place. Each portfolio manager has his own approach. Within Europe, we have two contrasting managers in terms of style, one is a growth manager, and the other is a manager pursuing growth-at-a-reasonable-price. I would say the emphasis is on reasonable price, probably a little bit more tilted toward the value side. In Japan, we lean towards a value philosophy and, in Asia, ex-Japan as well as technology, we tend to be on the growth side. Consequently, we have a mixture of growth and value managers within the team. Although our core strength is investing in international markets excluding the U.S, we do have one or two U.S. stocks in the portfolio. Our guiding principle is to be a broad-based international fund with a smattering of emerging markets. Q:  How do you carry out your research? A : Our overall approach is fundamental and more subjective. We believe in visiting companies and having them come see us. We try to find reasonable growth, and using a European context that is about 12% to 15% in earnings growth. Also, we strive to find companies that we know well. In this way, we feel confident even when companies go through a bad patch and for some reason or other a stock starts underperforming. For us, that is an opportunity to get into a good company. Our process is primarily subjective and qualitative rather than quantitative. We do not focus on any particular metrics, but we generally consider stocks that are out of favor, as we try to find a catalyst for a change, either in the marketplace, management, or investors’ attitudes. The manager focusing on growth-with-a-reasonable price puts emphasis a bit more on the reasonable price. At the same time, he tends to be contrarian and slightly opportunistic. He often looks for companies that are very much out of favor. In Japan, the manager is more qualitative and tilted a bit more to the value side. He visits a lot of companies and tends to make forecasts up to two to three year earnings, utilizing a variety of measures that will ultimately help determine the fair value of a particular stock. This process will be based on looking at beyond just the immediate one year, taking into account what the appropriate metrics should be in terms of earnings and what sort of profits a company is likely to make. Then, those projections are compared against the rest of the sector for the purpose of assigning the fair value on any one stock. In that case it is relatively easy to get to 10 names because we will typically choose only those with the highest differential between their current price and fair value. In Asia, Japan and the UK, our approach applies a little more balance between top-down and bottom-up analysis. Q:  Would you elaborate on your asset allocation process? A : My role is to allocate capital among the five sleeves. The managers have the ultimate responsibility for picking specific stocks. Since I do not differentiate between countries within Europe, when I decide to allocate, my starting point would be how much I want to hold in Europe. The secondary decision is how much to allocate between growth and growth-at-a-reasonable-price. As far as Japan is concerned, I may consider a combination of valuation and price-to-earnings multiples. I do not focus on price-to-book ratios but tend to have a strong faith in reversion to mean. At the beginning of this year the allocation of the fund was overweight developed markets.  At that time we believe Chinese monetary policy and inflation would continue to be an on-going problem.  Over the summer months, we made a small allocation shift by moving some assets from the two European sub-portfolios for the benefit of the Asian sub-portfolio bringing the weighting back up.  The move was made on the back of a early downward trend in Chinese inflation which should lead to the end of the tightening cycle.  Also, we are finding more compelling growth opportunities in Asia and the emerging markets and seek to exploit those with new assets. To sum up, the five managers are responsible for the 10 or 15 stocks that they have in the portfolio. I may debate and play devil’s advocate with them from time to time, but, ultimately, they pick the stocks. Q:  Do you focus on any macroeconomic events for your capital allocation? A : Absolutely. What is happening from a macro point of view is quite important. That said, I also look at other factors like valuation and relative price-to-earnings multiples. We pore over the monetary tightening or easing type of factors and reversion to mean. If one market relative to its history seems to have performed exceptionally well or badly, to me that is typically a signal that I should think about either selling or buying. Q:  How do you build your portfolio? A : The fund is a broadly diversified portfolio of 55 to 60 common stocks with the top 10 holdings accounting for approximately 20% to 35% of the assets. The sector exposure is limited to 20% at the fund level. The regional allocation will change based on macroeconomic outlook, but it has been generally in the 50% to 60% range in Europe, 15% to 25% in Japan, 10% to 18% in Asia, ex-Japan, and 4% to 8% in global technology stocks with a cash level between zero and 10%. Our benchmark is the MSCI EAFE Index. Q:  What is your approach to investing in technology stocks? A : The technology sleeve has ranged probably between 4% and 9% of the Fund over the last five years. We generally approach technology from a price-to-earnings multiple and long-term growth perspective. The other four portfolio managers may also have a technology allocation in their stock lists. Within the technology sleeve we are thematic investors. For now, we prefer investing in Internet retailing or search-based companies. For example, we have had a strong position in Internet retailers such as China-based Baidu.com, Inc. and Tencent, Inc. We have owned Apple Inc. for five years and it has worked very well for us. We maintain a significant exposure to Internet-related stocks and are prepared to take quite big risks in the technology sector because it is a small part of the overall fund. Q:  What risks do you focus on and how do you manage them? A : There are a couple of risk issues that we primarily focus on; diversity across regions, sectors and also investment styles protect us from market volatility. We are not exposed to any one specific individual manager and we are very mindful of liquidity and make sure we have enough cash. Overall, we have spread the risks reasonably around and so we are not hugely exposed to any one specific stock, sector or region. In addition, we are a global manager and we operate in several currency zones, but we still do not take bets on any currency. As for risk control, we have a limit of 3% on any one individual stock. If it exceeds 3%, we will trim that back. The second point is that we have a maximum threshold of 20% in any one sector. Q:  Do you have any risk controls to keep the impact of global crises in check? A : Part of the risk team approach is that our managers could use a scenario analysis, by using historical data, in terms of how a portfolio would perform in a critical event, but that may or may not work. This is something that cannot be measured. Presently, we are somewhere overweight in the growth of the emerging markets. Yet, that does not necessarily mean investing in emerging markets and being subject to risks in those markets. It may well translate into investing in those auto makers that have exposure to the emerging markets, or in consumer product makers like Procter & Gamble.