REPORT

For the six months ended 31 December 2015 INTERIM SHORT

Henderson UK Smaller Companies Fund Henderson UK Smaller Companies Fund Short Report For the six months ended 31 December 2015

Investment Fund Manager • The fund focuses on a single country. Neil Hermon • Fluctuations in exchange rates may cause the value of your investment to rise or fall. Investment objective and policy The rating does not reflect the possible effects of To aim to provide capital growth by investing unusual market conditions or large unpredictable primarily in United Kingdom Smaller Companies. events. Under normal market conditions the following risks may apply: Risk and reward profile Counterparty risk The fund could lose money The fund currently has 3 types of share class if a counterparty with which it transacts becomes in issue; A accumulation, I accumulation and Z unwilling or unable to meet its obligations to the accumulation. fund. Each share class has the same risk and reward Derivatives risk Using derivatives can involve profile which is as follows: a higher level of risk. A small movement in the price of an underlying investment may result in a disproportionately large movement in the price of Typically Lower potential Typically Higher potential the derivate instrument. risk/reward risk/reward Focus risk The fund’s value may fall where it has concentrated exposure to an issuer or type of security that is heavily affected by an adverse event. Lower Risk Higher Risk Liquidity risk Certain securities could become 1 2 3 4 5 6 7 hard to value or sell at a desired time and price. Management risk Investment management The Synthetic Risk and Reward Indicator (SRRI) techniques that have worked well in normal market is calculated based on historical volatility over a conditions could prove ineffective or detrimental at rolling 5 year period, it is reviewed monthly and other times. updated if volatility has changed materially to The full list of the fund’s risks are contained in the cause a movement in the SRRI level. The SRRI is “Risk Warnings” section of the fund’s prospectus. an indicator and may not accurately reflect future volatility and market conditions. The risk rating has changed from 6 to 5 for all share classes in the period. The value of an investment in the fund can go up or down. When you sell your shares they may be worth The SRRI conforms to the ESMA guidelines for the less than you paid for them. calculation of the SRRI. The risk/reward rating above is based on medium- Investment review term volatility. In the future, the fund’s actual volatility could be higher or lower and its rated risk/reward The FTSE-All Share Total Return index declined over level could change. the period, decreasing by 2.0%. Global economic conditions were mixed, with modest growth in The lowest category does not mean risk free. the US and the UK offset by persistently tough The fund’s risk level reflects the following: conditions in Europe, and slowing growth in China and other emerging markets. Monetary conditions • As a category shares are, in general, more volatile remained benign as quantitative easing was than either bonds or money market instruments. introduced by the European Central Bank, inflation

2 Henderson UK Smaller Companies Fund remained subdued and the prospect of a rise in UK To finance these purchases, we disposed of our interest rates was pushed further into the future. position in Chime Communications, the sports Global geopolitical concerns remained heightened, marketing and advertising business, after the given the continuing conflict in Ukraine, increased company received a recommended offer from a Western military intervention in Syria and Iraq, and private equity firm. We also disposed of our position violence in other Middle Eastern ‘failed states’. in HellermannTyton after the company received an Commodity prices stayed under significant pressure, agreed bid from Delphi Automotive. Elsewhere, we with oil and many metal prices hitting new multi-year disposed of our position in Countrywide, the estate lows. agent, as transaction activity in the housing market stalled and fee pressure increased. Smaller companies outperformed larger companies over the period, with the Numis Smaller Companies The period under review was a difficult one for ex Investment Companies index falling 1.0%. equity markets. The outlook remains challenging, with mixed economic performance across the The fund outperformed the benchmark over globe. The recent rise in US interest rates has made the period, rising by 0.9%. Positive contributors it clear to investors that loose global monetary to performance included , a national conditions will, at some stage, reverse. However, the housebuilder, which rose 22.0% as the company ‘normalisation’ of monetary policy will be slow and delivered a strong increase in profitability and gave measured. On a more positive note, the collapse of a confident message regarding its growth outlook. oil prices should provide a boost to global growth, Paysafe, a payment processor, rose 58.7% as the although certain oil producing economies are seeing company made a beneficial strategic acquisition and a negative impact on their economic performance. moved to the full list of the London Stock Exchange. In terms of valuations, the equity market has gone Negative contributors included Tribal, the education from being cheap to more fairly rated and is now administration software provider, which fell 85.7% as more in line with long term averages. In order for the the company issued a negative trading update and market to progress, we need to see earnings growth announced that it would require additional equity accelerate, a situation which failed to occur in 2015 financing. Northgate, a commercial vehicle hire as the wider corporate sector saw minimal earnings company, declined 29.3% as sales growth in the growth, which partly reflected sterling’s relative UK disappointed after disruption in the firm’s sales strength but also weak commodity prices. force. Balance sheets are strong and dividends are Notable additions to our portfolio included RPC growing. Mergers and acquisitions (M&A) activity in Group, the plastic packaging business. The company 2015 has picked up from depressed levels, and our is delivering strong growth, driven by significant holdings have seen a number of bids. If corporate benefits from its acquisition activity. We also bought confidence improves, then M&A should increase, a position in software company ; its healthy especially as little or no return can currently be growth prospects are attributable to the digitisation generated from cash and the cost of debt is trend in government departments. We also initiated historically low. This is a trend that will help smaller a position in Ibstock, the manufacturer of bricks and companies in particular, as M&A activity tends to concrete products. The company’s growth is driven focus on this area. by the rise in housing output and strong pricing dynamics. We also bought a position in software company , which looks set to benefit from the organic expansion of its operations.

Henderson UK Smaller Companies Fund 3 Performance summary Six One Five Since Cumulative performance months year years launch 30 Jun 15- 31 Dec 14- 31 Dec 10- 31 Jan 83- 31 Dec 15 31 Dec 15 31 Dec 15 31 Dec 15 % % % % Henderson UK Smaller Companies Fund 0.9 15.0 97.4 2,281.8 Numis Smaller Companies (ex Investment Trusts) Index (1.0) 10.6 75.5 -*

Discrete performance 31 Dec 14- 31 Dec 13- 31 Dec 12- 31 Dec 11- 31 Dec 10- 31 Dec 15 31 Dec 14 31 Dec 13 31 Dec 12 31 Dec 11 % % % % % Henderson UK Smaller Companies Fund 15.0 0.8 38.4 34.2 (8.2)

Source: Morningstar, bid to bid and net of fees, as at valuation point, based on performance of Class A accumulation. Benchmark values are as at close of business. Figures in brackets are negative. * Benchmark return is not quoted as the fund inception date is earlier than the benchmark inception date.

Please remember that past performance is not a guide to future performance. The value of an investment and the revenue from it can fall as well as rise as a result of market and currency fluctuations and you may not get back the amount originally invested.

Fund facts Accounting dates Payment dates 31 December, 30 June 31 August Ongoing charge figure 31/12/15 30/06/15 % % Class A 1.70 1.70 Class I 0.84 0.84 Class Z 0.06 0.06

The ongoing charge figure (OCF) of the fund is calculated as the ratio of the total ongoing charges to the average net asset value for twelve months.

The OCF is calculated in accordance with guidelines issued by the European Securities and Markets Authority (ESMA).

4 Henderson UK Smaller Companies Fund Summary of fund performance Net asset value* Net asset value* Net asset value 31/12/15 30/06/15 % change Share class p p Class A accumulation 587.77 583.80 0.68

Class I accumulation 674.33 666.89 1.12

Class Z accumulation 456.58 449.78 1.51

* The net asset value is calculated as at close of business on the last business day of the accounting period. The investments are valued at fair value which is generally deemed to be the bid market price.

Performance record

Net revenue Highest price Lowest price Calendar year (pence per share) (pence per share) (pence per share)

Class A accumulation 2011 2.10 326.90 250.70 2012 3.18 367.60 273.50 2013 2.57 507.80 375.60 2014 2.89 536.60 453.90 2015 3.85 603.80+ 504.80+ Class I accumulation 2011 5.33 360.50 277.10 2012 7.90 410.90 302.90 2013 4.58 572.60 419.90 2014 6.51 606.10 515.40 2015 7.97 689.20+ 574.40+ Class Z accumulation 2011 4.97 235.80 181.50 2012 6.72 271.70 198.80 2013 6.88 381.70 277.80 2014 8.27 404.61 345.70 2015 9.88 464.60+ 386.00+

+ to 31 December

Henderson UK Smaller Companies Fund 5 Major holdings Major holdings as at 31/12/15 % as at 30/06/15 % Bellway 3.74 Bellway 3.30 E2V Technologies 2.62 E2V Technologies 3.04 Howden Joinery 2.19 Howden Joinery 2.26 Informa 2.10 Paragon 2.12 NMC Health 2.09 Interserve 2.06 Atkins (WS) 2.01 Atkins (WS) 1.93 Intermediate Capital 1.96 NMC Health 1.87 Paragon 1.85 1.84 Interserve 1.83 Playtech 1.82 Victrex 1.82 Informa 1.82

Asset allocation Asset allocation as at 31/12/15 % as at 30/06/15 % Industrials 35.19 Industrials 33.86 Financials 18.05 Financials 20.13 Consumer Services 16.11 Consumer Services 16.91 Health Care 8.18 Health Care 7.82 Technology 8.16 Technology 7.13 Consumer Goods 6.73 Consumer Goods 5.77 Basic Materials 3.19 Basic Materials 2.79 Oil & Gas 1.71 Oil & Gas 2.25 Telecommunications 0.58 Other net assets 3.34 Other net assets 2.10 Total net assets 100.00 Total net assets 100.00

Past performance is not a guide to future performance

6 Henderson UK Smaller Companies Fund Report and accounts Risk warning This document is a short report of the Henderson Please remember that past performance is not UK Smaller Companies Fund for the six months a guide to future performance. The value of an ended 31 December 2015. investment and the revenue from it can fall as well as rise as a result of market and currency Copies of the annual and half yearly long form fluctuations and you may not get back the amount report and financial statements of this fund are originally invested. available on our website www.henderson.com or contact client services on the telephone number provided. Other information The information in this report is designed to enable you to make an informed judgement on the activities of the fund during the period it covers and the results of those activities at the end of the period.

Issued by: Depositary Henderson Investment Funds Limited National Westminster Bank Plc Registered office: 135 Bishopsgate 201 Bishopsgate, London EC2M 3UR London EC2M 3AE Member of The Investment Association and authorised and regulated Auditor by the Financial Conduct Authority. PricewaterhouseCoopers LLP Registered in England No 2678531 141 Bothwell Street Glasgow Shareholder Administrator G2 7EQ International Financial Data Services (UK) Limited IFDS House St. Nicholas Lane Basildon SS15 5FS

Henderson UK Smaller Companies Fund 7 Contact us Client Services 0800 832 832 Head Office address: www.henderson.com 201 Bishopsgate, London EC2M 3AE

Changes of address - regulatory requirements FCA regulation requires us to send this report mailing to the address held on file on the accounting date of 31 December 2015. If you have confirmed a change of address with us since that date we will ensure all future correspondence will be sent to your new address.

Online valuations You can value your Henderson UK Smaller Companies Fund at any time by logging on to www.henderson.com. Select ‘Personal Investor’ and then access ‘Valuations’ from the Tools Menu. Simply select the fund you hold and enter the appropriate number of shares.

Any questions? Further information about the activities and performance of the fund for this and previous periods can be obtained from the Investment Manager. If you have any questions please call our Client Services Team on 0800 832 832 or email [email protected].­­­

Important Information Henderson Global Investors is the name under which Henderson Global Investors Limited (reg. no. 906355), Henderson Fund Management Limited (reg. no. 2607112), Henderson Investment Funds Limited (reg. no. 2678531), Henderson Investment Management Limited (reg. no. 1795354), AlphaGen Capital Limited (reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), Gartmore Investment Limited (reg. no. 1508030), (each incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3AE) are authorised and regulated by the Financial Conduct Authority to provide investment products and services. Telephone calls may be recorded and monitored. Ref: 34V Unless otherwise stated, all data is sourced by Henderson Global Investors. H020742/0116