ANNUAL REPORT & ACCOUNTS - · PDF fileANNUAL REPORT & ACCOUNTS ... Balance sheet Page 21 ... US Treasury 2.25% 15/11/2025 21,064 RBS Worldpay FRN 29/11/2019 Term B 11,212

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Henderson Fixed Interest Monthly Income Fund

for the year ended 1 March 2016

Henderson is an independent global asset manager, specialising in active investment. Named after its first client and founded in 1934, Henderson is a client-focused global business with over 1,000 employees worldwide and assets under management of £92.0bn† (31 December 2015). Its core areas of investment expertise are European equities, global equities, global fixed income, multi-asset and alternatives.

Whilst the global headquarters are based in London, Henderson offers clients access to all major markets around the globe. Henderson has offices located in Chicago, Boston, Milwaukee, Philadelphia, Edinburgh, Paris, Madrid, Zurich, Luxembourg, Amsterdam, Frankfurt, Milan, Singapore, Beijing, Hong Kong, Tokyo, Melbourne and Sydney. The main Asia/Pacific operations are conducted out of Sydney and Singapore and the US operations out of Chicago. Equity investment professionals are also located in Edinburgh, Singapore, Sydney, Melbourne and Milwaukee and additional fixed income investment professionals are located in Philadelphia and Melbourne. Distribution is conducted out of the majority of offices world-wide.

Clients are at the heart of everything Henderson does – named after the company’s first client, it reminds each employee every day to put the client first. With investment expertise across a broad range of asset classes, Henderson’s investment managers have unique perspectives and operate unconstrained by a house view. Underpinning the fund management process is a comprehensive risk-control framework ensuring that investment views are translated into portfolios managed in line with investors risk and return requirements.

Corporate strategyHenderson’s strategy focuses on growth and globalisation. The company aims to deliver a sustained period of organic growth, attracting net new client money ahead of industry growth, and supplementing this organic growth with value accretive acquisitions. By 2018, Henderson will have established a truly global footprint, infrastructure and mind-set.

AcquisitionsHenderson has a strong history of acquiring businesses which add value to the company over time. Henderson has seen financial benefits from New Star and Gartmore (acquired in 2009 and 2011 respectively) in cost synergies and improved profitability. In the last two years, client confidence in the newly integrated businesses manifested itself in increased flows, with over half of flows in the period coming from products or managers who joined Henderson as a result of these acquisitions.

In 2014, Henderson acquired Geneva Capital Management, the US growth equity manager. This marked an important strategic milestone in the development of the North American business, adding mid- and small-cap US high quality growth equities to Henderson’s international capabilities and extending the US institutional client base to an existing strong US retail presence.

In June 2015, Henderson sold its 40% holding in TIAA Henderson Real Estate (“TH Real Estate”), a joint venture formed in 2014 with the merger of Henderson and Teachers Insurance and Annuity Association – College Retirement Equities Fund’s (“TIAA-CREF”) European and Asian real estate businesses. The sale of the stake gave TH Real Estate the best opportunity to grow their business and rewarded Henderson and its shareholders for the significant contribution made before and after the creation of TH Real Estate.

Also in June 2015, Henderson took full ownership of 90 West Asset Management – the global natural resources equity business – acquiring the stake which Henderson did not already own. In November 2015, the acquisition of two further Australian-based fund management boutiques, Perennial Fixed Interest and Perennial Growth Management, completed. The acquisitions accelerate Henderson’s strategy to grow and globalise its business, extending Henderson’s offering to Australian clients, adding domestic investment management capabilities to Henderson’s globally focused offerings, and providing a broader platform for better growth in the Australian market.

What do we do?At Henderson Global Investors we do one thing and we do it really well – investment management. As a company, we are totally focused on this core activity and it underpins everything we do.

We do this by providing a range of investment products and services including:• Open ended funds – offshore funds, unit trusts, OEICs• Investment trusts• Individual Savings Accounts• Pension fund management• Management of portfolios for UK and international institutional clients

Please remember that past performance is not a guide to future performance. The value of an investment and the income 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.

† Source: Henderson Global Investors

Who are Henderson Global Investors?

Contents

Authorised Fund Manager’s report* Page 1

Authorised status* Page 1

Comparative tables Page 4

Ongoing charge figure Page 7

Risk & reward profile* Page 8

Portfolio statement* Page 9

Statement of Authorised Fund Manager’s responsibilities Page 17

Statement of the Trustee’s responsibilities and report of the Trustee to unitholders Page 17

Independent Auditors’ report to the unitholders Page 18

Financial statements

Statement of total return Page 20

Statement of change in net assets attributable to unitholders Page 20

Balance sheet Page 21

Directors’ statement Page 21

Notes to the financial statements Page 22

Direct transaction costs Page 41

Distribution tables Page 42

Further information Page 50

*These collectively comprise the Authorised Fund Manager’s Report.

Henderson Fixed Interest Monthly Income Fund 1

We are pleased to present the Annual Report and Accounts for Henderson Fixed Interest Monthly Income Fund for the year ended 1 March 2016.

Authorised statusThis Fund is an authorised unit trust scheme under section 243 of the Financial Services and Markets Act 2000. It is a UCITS scheme governed by Chapter 5 (Investment and Borrowing Powers) of the Collective Investment Schemes Sourcebook (COLL). The Scheme was established by a Trust Deed dated 28 March 1979. It was authorised by the Financial Conduct Authority (FCA) on 5 April 1979.

Authorised Fund Manager’s report as at 1 March 2016

Service Providers

Name Address Regulator

Authorised Fund Manager Henderson Investment Funds Limited

Member of The Investment Association (formerly Investment Management Association)

The Ultimate Holding company is Henderson Group plc.

Registered Office: 201 Bishopsgate, London EC2M 3AE. Registered in England No 2678531. Telephone - 020 7818 1818 Dealing - 0845 608 8703 Enquiries - 0800 832 832

Authorised and regulated by the Financial Conduct Authority

Directors of the Authorised Fund Manager

L Cairney (to 15.02.16)M Skinner (from 24.09.15)P WagstaffG KitchenC ChalonerH J de Sausmarez

Investment Manager Henderson Global Investors LimitedThe Ultimate Holding company is Henderson Group plc.

201 Bishopsgate, London EC2M 3AE


Unitholder Administrator International Financial Data Services (UK) Limited

IFDS House St Nicholas Lane Basildon Essex SS15 5FS


Trustee National Westminster Bank plc

135 Bishopsgate London EC2M 3UR

Regulated by the Prudential Regulation Authority and Financial Conduct Authority and authorised by the Prudential Regulation Authority

Independent Auditor PricewaterhouseCoopers LLP

141 Bothwell StreetGlasgowG2 7EQ

Institute of Chartered Accountants in England and Wales

Legal Adviser Eversheds LLP One Wood StreetLondonEC2V 7WS

The Law Society

2 Henderson Fixed Interest Monthly Income Fund

Authorised Fund Manager’s report (continued)

Investment Fund ManagersJohn Pattullo, Jenna Barnard and Nicholas Ware

Investment objective and policyTo achieve a high yield. The Fund will invest principally in fixed interest securities including preference shares. The Fund may also invest in securities acquired on the conversion of convertible securities held within the portfolio (or pursuant to schemes of reconstruction), derivatives and forward transactions, warrants, money-market instruments and deposits. Derivatives may be used for meeting the investment objective of the Fund and for efficient portfolio management.

Performance Summary1 Mar 15 - 1 Mar 14 - 1 Mar 13 - 1 Mar 12 - 1 Mar 11 -

1 Mar 16 1 Mar 15 1 Mar 14 1 Mar 13 1 Mar 12

% % % % %

Henderson Fixed Interest Monthly Income Fund (2.3) 6.4 7.3 12.7 (0.2)

IA £ Strategic Bond sector average (2.8) 6.3 3.7 10.2 5.4

Source: Morningstar, bid to bid and net of fees as at 12 noon valuation point, based on performance of income units.Figures in brackets are negative.Benchmark values are at close of business.

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.

Significant portfolio changes for the year ended 1 March 2016

Largest purchases £000 Largest sales/maturities £000

UK Treasury 2% 07/09/2025 55,820 UK Treasury 2% 07/09/2025 56,094

UK Treasury 2% 22/07/2020 26,260 UK Treasury 2% 22/07/2020 26,382

US Treasury 2.5% 15/02/2046 21,212 US Treasury 2.25% 15/11/2025 21,443

US Treasury 1.625% 15/02/2026 21,184 US Treasury 3% 15/11/2045 14,788

US Treasury 2.25% 15/11/2025 21,064 RBS Worldpay FRN 29/11/2019 Term B 11,212

US Treasury 3% 15/11/2045 14,375 AA 9.5% 31/07/2019 10,728

Unitymedia Hessen 3.75% 15/01/2027 11,195 Iron Mountain 6.75% 15/10/2018 9,908

AT&T 4.75% 15/05/2046 9,863 UK Treasury 4.25% 07/06/2032 9,366

UK Treasury 4.25% 07/06/2032 9,307 UK Treasury 4.25% 07/03/2036 9,323

Co-Operative Bank 6.875% 08/07/2020 9,174 Credit Suisse 7.5% Perpetual 8,103

Total purchases 509,393 Total sales/maturities 476,020


Authorised Fund Manager’s report (continued)

Investment reviewThe year under review was an anxious one for investors, who worried about the impact of slowing growth in emerging markets, with particular focus on China. There were also concerns regarding the US. The persistent lack of demand in the global economy continued to hamper progress. This culminated in a number of panic phases for credit (corporate bonds), emerging market currencies and global equity markets, most notably in the autumn of 2015 and mid-February of this year. Equities drifted lower as the effects of quantitative easing (QE; central bank liquidity measures) waned and earnings faltered. Countries vulnerable to commodity price movements and companies from emerging markets suffered the most given dramatic falls in the oil price. The knock-on effects in the developed world were also notable, most significantly in the energy and mining sectors. A number of diverging themes became more apparent in the bond markets during the autumn months, starting with the diverging monetary policies of the European Central Bank (ECB) and the US Federal Reserve (Fed). The ECB continued to lower interest rates and expand quantitative easing, thereby suppressing the value of the euro, while the most over-discussed US interest rate rise finally happened on 16 December. We are not convinced the US needed an interest rate rise, as monetary conditions had already tightened considerably, given the constant strength of the dollar and the significant widening on corporate bond financing levels since the summer of 2014. Another divergent theme was that of corporate behaviour. In the US there was a lot of unfriendly creditor behaviour, such as debt-financed merger and acquisition (M&A) activity, unlike that of their European equivalents.

Government bonds broadly benefited from the disinflationary impact of these developments. Bond markets initially priced in a US rate rise, then priced it out again in early 2016. Credit markets materially underperformed gilts, providing a mostly flat return. Gilts rallied very strongly over the year, especially in 2016. This risk-off scare was more focused on the profitability of the global banking sector given the advent of negative yields in Japan and flattening yield curves*. In the case of investment grade corporate bonds, spreads (the difference in the yield of corporate bonds over equivalent government bonds) widened as a result of a deluge of supply of new bonds to fund acquisitions and share buybacks (late cycle corporate behaviour). European high yield performed poorly, falling around 3.8%; this was a fairly gradual sell off compounded by the February slump. The US high yield market fared much worse as it was heavily associated with mining and energy (we did not have any positions in these sectors). The weakness in the oil and energy sectors was particularly pertinent as oil fell to lows not seen since before the 2008 financial crisis.

We feel we are in a late cycle stage in the US credit market, given the M&A activity and share buybacks that are being financed by bond issuance and some corporate malfeasance, evidenced by Volkswagen and Valeant Pharmaceuticals (neither of which we held). The banking cycle is ironically in a very different place, driven primarily by increasing regulation. In fact, banks tend to get the regulation they can afford. A number of new high profile chief executive officer appointments at major banks in recent months will lead to further capital raising and shrinkage of investment banking operations, most notably for Deutsche Bank, Barclays and Credit Suisse.

The fund fell -2.3%, outperforming the sector return of -2.8%. Legacy banking bonds (non-Basel III compliant securities, which are being phased out as they are not structured to absorb losses in a crisis) continued to be remarkably resilient and consistent performers, though faded a little towards the year’s end. We bought a few Swiss contingent convertible capital notes (cocos, issued under the new regime for regulatory capital purposes) as we were attracted to the country and its new banking culture. In addition, we had a bias to large-cap, non-cyclical industrial bonds, which stayed steady in a tough market. We sold some of our holdings in European high yield telecommunications and US healthcare bonds. We continued to add to holdings in US investment grade in large non-cyclical companies as we believe these now offer good value. Examples include AT&T, Altria, Reynolds and CVS. Stock selection was rewarding since the fund did not hold any energy or mining bonds. In contrast, negative contributors included investment grade bonds issued by insurers, where spread widening was considerable.

OutlookCredit markets currently yield significantly more than a year ago and we now find these markets much more interesting from a risk/reward perspective. However, we still believe there will be more opportune times than today to add risk. We remain patient, with hopefully some sensible perspective on where we are in the credit cycle. We continue to target a realistic and reliable monthly income stream for our investors without providing excessive capital volatility.

*A yield curve represents the relationship between interest rates on bonds of the same credit quality but with different maturities. A flattening yield curve can be a sign of concerns for the economic outlook.


Comparative tables as at 1 March 2016

Accumulation2016 2015 2014

(pence (pence (penceper unit) per unit) per unit)

Change in net assets per unitOpening net asset value per unit 25.68 24.09 22.51 Return before operating charges* (0.25) 1.94 1.91 Operating charges (0.36) (0.35) (0.33) Return after operating charges* (0.61) 1.59 1.58 Distributions on income units - - - Closing net asset value per unit 25.07 25.68 24.09 Retained distributions on accumulation units 1.12 1.15 1.18 * after direct transaction costs of: 0.00 0.00 0.00

PerformanceReturn after charges (2.38%) 6.60% 7.02%

Other informationClosing net asset value (£000s) 24,535 30,843 30,704 Closing number of units 97,857,488 120,111,200 127,478,717 Operating charges 1.41% 1.41% 1.43% Direct transaction costs 0.00% 0.00% 0.01%

PricesHighest unit price (pence) 27.39 27.07 25.50 Lowest unit price (pence) 24.90 24.31 22.31

Income2016 2015 2014


Change in net assets per unitOpening net asset value per unit 22.47 22.16 21.72 Return before operating charges* (0.27) 1.71 1.87 Operating charges (0.31) (0.31) (0.31) Return after operating charges* (0.58) 1.40 1.56 Distributions on income units (1.00) (1.09) (1.12) Closing net asset value per unit 20.89 22.47 22.16 Retained distributions on accumulation units - - - * after direct transaction costs of: 0.00 0.00 0.00


Other informationClosing net asset value (£000s) 389,679 593,865 644,454 Closing number of units 1,865,024,113 2,643,431,657 2,907,837,832 Operating charges 1.41% 1.41% 1.43% Direct transaction costs 0.00% 0.00% 0.01%



Comparative tables (continued)

Class I accumulation1

2016(pence

per unit)Change in net assets per unitOpening net asset value per unit 99.32 2

Return before operating charges* (0.43) Operating charges (0.68) Return after operating charges* (1.11) Distributions on income units - Closing net asset value per unit 98.21 Retained distributions on accumulation units 3.12 * after direct transaction costs of: 0.00

PerformanceReturn after charges (1.12%)

Other informationClosing net asset value (£000s) 24,376 Closing number of units 24,820,633 Operating charges 0.70% Direct transaction costs 0.00%

PricesHighest unit price (pence) 101.68 Lowest unit price (pence) 97.55

1 Class I accumulation launched 22 June 20152 Net asset value as at 22 June 2015

Class I income2016 2015 2014


Change in net assets per unitOpening net asset value per unit 108.33 106.16 103.42 Return before operating charges* (1.21) 8.17 8.87 Operating charges (0.74) (0.74) (0.73) Return after operating charges* (1.95) 7.43 8.14 Distributions on income units (4.92) (5.26) (5.40) Closing net asset value per unit 101.46 108.33 106.16 Retained distributions on accumulation units - - - * after direct transaction costs of: 0.00 0.00 0.01





Comparative tables (continued)

Class Z accumulation2016 2015 2014


Change in net assets per unitOpening net asset value per unit 130.76 121.27 111.47 Return before operating charges* (1.60) 9.53 9.83 Operating charges (0.04) (0.04) (0.03) Return after operating charges* (1.64) 9.49 9.80 Closing net asset value per unit 129.12 130.76 121.27 Retained distributions on accumulation units 6.14 6.22 6.05 * after direct transaction costs of: 0.00 0.00 0.01


Other informationClosing net asset value (£000s) 2 2 2 Closing number of units 1,500 1,500 1,500 Operating charges 0.03% 0.03% 0.03% Direct transaction costs 0.00% 0.00% 0.01%


Class Euro hedge income2016 2015 2014


Change in net assets per unitOpening net asset value per unit 234.42 263.29 272.14 Return before operating charges* 14.47 (10.12) 11.92 Operating charges (3.19) (3.55) (3.77) Return after operating charges* 11.28 (13.67) 8.15 Distributions on income units (12.88) (15.20) (17.00) Closing net asset value per unit 232.82 234.42 263.29 * after direct transaction costs of: 0.00 0.01 0.02

PerformanceReturn after charges 4.81% (5.19%) 2.99%


PricesHighest unit price (Euro cent) 343.16 344.22 341.87 Lowest unit price (Euro cent) 300.72 315.20 306.29

Performance returns are as at close of business and may differ from the performance summary.

Operating chargesOperating charges are expenses associated with the maintenance and administration of the fund on a day-to-day basis that are actually borne by the unit class.


Ongoing charge figure

The annualised ongoing charge figure (OCF) of the fund, calculated as the ratio of the total ongoing charges to the average net asset value for twelve months. Ongoing charges are all expenses deducted from the assets of the fund during the year, except for expenses that are explicitly excluded by regulation.

2016 2015

% %

Income and Accumulation 1.41 1.41

Class I 0.70 0.69

Class Z 0.03 0.03

Euro hedge income 1.39 1.39

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


Risk and reward profile

The fund currently has 6 unit classes in issue:– income, accumulation, I income, I accumulation, Z accumulation and Euro hedge income.

Income, accumulation, I income, Z accumulation and Euro hedge income have a risk and reward profile as follows:

Typically Lower potential

risk/reward

Typically Higher potential

risk/reward

Lower Risk Higher Risk

1 2 3 4 5 6 7

I accumulation has a risk and reward profile as follows:

Typically Lower potential

risk/reward

Typically Higher potential

risk/reward

Lower Risk Higher Risk

1 2 3 4 5 6 7

The synthetic risk and reward indicator (SRRI) is calculated based on historical volatility over a rolling 5 year period; it is reviewed monthly and updated if volatility has changed materially to cause a movement in the SRRI level. The SRRI is an indicator and may not accurately reflect future volatility and market conditions. The value of an investment in the fund can go up or down. When you sell your units, they may be worth less than you paid for them. The risk/reward rating above is based on medium-term volatility. In the future, the fund’s actual volatility could be higher or lower and its rated risk/reward level could change.

The lowest category does not mean risk free.

The fund’s risk level reflects the following:

• As a category, bonds are less volatile than shares• Fluctuations in exchange rates may cause the value of your investment to rise or fall

The rating does not reflect the possible effects of unusual market conditions or large unpredictable events which could amplify everyday risk and trigger other risks.

The risk rating has changed from 4 to 3 in the year on all unit classes except for Class I accumulation.

The SRRI conforms to the ESMA guidelines for the calculation of the SRRI.


Portfolio statement as at 1 March 2016

Holding Investment Market Percentagevalue of total£000 net assets

%Equities 2.09% (2015: 2.11%)

252,875 Avery Weightronics** - -

78,027 Avery Weightronics (Warrants)** - -

1,111,251 Chelys Preference Shares** - -

9,784 Eagle Geophysical~ - -

94,150 Nationwide Building Society Preference Shares 11,419 1.63

250,000 Provincia De Misiones Cemis** - -

191,000 RBS Capital Funding Trust V 5.90% Preference Shares 3,260 0.46

36,830 Tokheim~ - -

4,047 Treofan~ - -

19,861 Ventenlo Preference Shares~ - -

14,679 2.09

Bonds 95.92% (2015: 92.02%)

Asset Backed 1.63% (2015: 0.99%)

Iceland 0.00% (2015: 0.00%)

GBP 5,650,000 Singer & Friedlander 7.5% 13/11/2019~ - -

Luxembourg 0.00% (2015: 0.00%)

EUR 6,767,120 Hellas Telecom 8.5% Perpetual~ - -

United Kingdom 1.58% (2015: 0.91%)

GBP 3,469,277 Bakkavor Finance 2 8.25% 15/02/2018 3,531 0.50

GBP 3,083,340 Broadgate Financing FRN 05/01/2022 2,990 0.43

EUR 1,950,000 Cammell Laird 12% 15/10/2010~ - -

GBP 2,097,450 Mitchells and Butler 5.965% 15/12/2025 2,314 0.33

GBP 2,750,769 Tesco Property Finance 5.744% 13/04/2040 2,260 0.32

11,095 1.58

United States 0.05% (2015: 0.08%)

GBP 3,097,414 Lehman Brothers Holdings 7.875% 08/05/2018~ 354 0.05

Fixed Rate Bond 57.35% (2015: 55.84%)

Argentina 0.00% (2015: 0.00%)

USD 250,000 Provincia De Misiones Cemis 6% 01/08/2006** - -

France 1.48% (2015: 2.65%)

EUR 5,660,000 Ephios Bondco 6.25% 01/07/2022 4,500 0.64

EUR 7,268,000 Oberthur Technologies Holdings 9.25% 30/04/2020 5,869 0.84

10,369 1.48

Germany 3.92% (2015: 2.89%)

USD 5,000,000 Deutsche Telekom International Finance 4.875% 06/03/2042 3,727 0.53

USD 12,591,000 Dresdner Funding Trust 8.151% 30/06/2031 10,174 1.45

EUR 4,110,000 Trionista Topco 6.875% 30/04/2021 3,355 0.48


Portfolio statement (continued)


%EUR 1,990,000 Unitymedia Hessen 3.5% 15/01/2027 1,413 0.20

EUR 10,430,000 Unitymedia Hessen 3.75% 15/01/2027 6,992 1.00

EUR 1,250,000 Unitymedia Hessen 4% 15/01/2025 938 0.13

USD 1,250,000 Unitymedia Hessen 5% 15/01/2025 907 0.13

27,506 3.92

Ireland 1.60% (2015: 1.14%)

USD 4,165,000 Ardagh Packaging Finance Holdings USA 6% 30/06/2021 2,767 0.39

EUR 9,050,000 Ardagh Packaging Finance 9.25% 15/10/2020 7,323 1.04

USD 4,900,000 International Securities 9% Perpetual** - -

GBP 6,650,000 Lambay Capital Securities 6.25% Perpetual** - -

EUR 8,825,000 Waterford Wedgewood 9.875% Perpetual~ - -

USD 1,500,000 WPP Finance 4.75% 21/11/2021 1,166 0.17

11,256 1.60

Italy 0.00% (2015: 1.56%)

GBP 19,680,000 Parmalat Capital Finance 9.375% Perpetual~ - -

Jamaica 0.00% (2015: 0.23%)

Luxembourg 0.95% (2015: 3.01%)

EUR 4,000,000 SIG Combibloc 7.75% 15/02/2023 3,221 0.46

EUR 7,113,000 Teksid Aluminium Luxembourg 11.375% 15/07/2011~ - -

EUR 4,700,000 Telenet Finance VI 4.875% 15/07/2027 3,433 0.49

6,654 0.95

Netherlands 0.56% (2015:0.56%)

GBP 3,375,000 Rabobank Nederland 6.91% Perpetual 3,902 0.56

Norway 0.29% (2015: 1.09%)

EUR 2,572,000 Lock 7% 15/08/2021 2,011 0.29

Sweden 0.73% (2015: 0.00%)

EUR 6,226,000 Auris Luxembourg II 8% 15/01/2023 5,160 0.73

United Kingdom 23.49% (2015: 29.71%)

GBP 5,406,000 AA Bond 5.5% 31/07/2022 4,975 0.71

GBP 8,960,000 Arqiva Broadcast Finance 9.5% 31/03/2020 9,514 1.35

GBP 2,210,000 BAA Funding 6% 20/03/2020 2,476 0.35

GBP 2,736,000 BAA Funding 7.125% 14/02/2024 3,352 0.48

GBP 2,650,000 Barclays Bank 14% Perpetual 3,232 0.46

GBP 8,450,000 Brakes Capital 7.125% 15/12/2018 8,769 1.25

GBP 3,450,000 BUPA Finance 5% 25/04/2023 3,447 0.49

GBP 15,016,000 Cattles 6.875% Perpetual** 319 0.05

GBP 6,618,000 Cattles 7.125% 05/07/2017 141 0.02



%United Kingdom (continued)

GBP 1,078,000 City Site Estates 10.5% 31/03/2017** - -

GBP 6,715,000 CPUK Finance 7% 28/08/2020 6,799 0.97

GBP 6,710,000 Daily Mail & General Trust 5.75% 07/12/2018 7,258 1.03

GBP 700,000 Daily Mail & General Trust 6.375% 21/06/2027 804 0.11

GBP 13,575,000 Energis 9.5% 15/06/2009~ - -

GBP 1,764,000 Estates & General Investment 11.25% 31/12/2018~ - -

GBP 2,338,000 Eversholt Funding 5.831% 02/12/2020 2,673 0.38

GBP 1,696,000 Friends Life Holdings 12% 21/05/2021 2,186 0.31

GBP 2,803,000 Galaxy Bidco 6.375% 15/11/2020 2,719 0.39

GBP 7,579,000 Galaxy Finco 7.875% 15/11/2021 7,139 1.02

GBP 2,450,000 G4S 7.75% 13/05/2019 2,819 0.40

GBP 4,250,000 Imperial Tobacco Finance 4.875% 07/06/2032 4,583 0.65



GBP 750,000 Iron Mountain 6.125% 15/09/2022 741 0.11

GBP 5,151,000 ITV 6.125% 05/01/2017 5,312 0.76

GBP 5,965,000 Legal & General 5.5% 27/06/2064 4,934 0.70

GBP 4,900,000 PGH Capital 6.625% 18/12/2025 4,539 0.65

GBP 5,973,369 Polestar 12.5% 30/06/2011** - -

GBP 5,130,000 Prudential 5% 20/07/2055 4,200 0.60

GBP 1,480,000 RL Finance Bonds No3 6.125% 13/11/2028 1,435 0.20

USD 3,180,000 Royal Bank of Scotland 7.648% Perpetual 2,650 0.38

AUD 6,260,000 R&R Ice Cream 8.25% 15/05/2020 3,295 0.47

EUR 2,000,000 R&R Ice Cream 9.25% 15/05/2018 1,562 0.22

GBP 1,950,000 Scottish Widows 5.5% 16/06/2023 1,942 0.28

GBP 11,350,000 Scottish Widows 7% 16/06/2043 11,277 1.60

USD 10,679,000 Sky 3.75% 16/09/2024 7,530 1.07

GBP 2,800,000 Tesco 5.5% 13/01/2033 2,431 0.35

GBP 7,174,000 Thomas Cook 7.75% 22/06/2017 7,345 1.05

GBP 10,450,000 Tullet Prebon 7.04% 06/07/2016 10,475 1.48

GBP 6,698,000 Virgin Media Finance 7% 15/04/2023 6,757 0.96

GBP 9,894,000 Virgin Media Secured Finance 6.25% 28/03/2029 9,437 1.34

165,042 23.49

United States 24.33% (2015: 12.39%)

USD 530,000 ABC Rail Products 10.5% 15/01/2004** - -

USD 11,175,000 Altria 4.25% 09/08/2042 7,551 1.07

USD 2,115,000 Aramark 5.125% 15/01/2024 1,591 0.23

USD 16,400,000 AT&T 4.75% 15/05/2046 10,613 1.51

USD 2,161,000 Ball 4.375% 15/12/2020 1,634 0.23

EUR 2,780,000 Ball 4.375% 15/12/2023 2,236 0.32

USD 4,641,000 Ball 5% 15/03/2022 3,484 0.50

USD 4,730,000 CCO Capital 5.875% 01/05/2027 3,419 0.49

USD 5,000,000 CCO Safari II 4.908% 23/07/2025 3,673 0.52

USD 8,000,000 CCO Safari 6.484% 23/10/2045 5,975 0.85




%United States (continued)

USD 10,000,000 Comcast 4.6% 15/08/2045 7,509 1.07

USD 2,575,000 Constellation Brands 4.75% 01/12/2025 1,936 0.28

USD 6,422,000 CVS Health 3.875% 20/07/2025 4,888 0.70

USD 1,850,000 Drypers 10.25% Perpetual** - -

USD 500,000 Fruit of the Loom 8.875% Perpetual** - -

USD 4,950,000 H. J. Heinz 5.2% 15/07/2045 3,827 0.54

USD 3,754,000 HCA Holdings 5% 15/03/2024 2,771 0.39

USD 1,746,000 HCA Holdings 6.5% 15/02/2020 1,387 0.20

USD 2,722,000 IGT 6.5% 15/02/2025 1,755 0.25

USD 5,470,000 Iron Mountain 6% 15/08/2023 4,175 0.59

USD 3,375,000 J. M. Smucker 3.5% 15/03/2025 2,484 0.35

USD 4,950,000 Johnson & Johnson 3.7% 01/03/2046 3,512 0.50

EUR 2,050,000 Lehman Brothers Holdings 4.25% 26/09/2016~ - -

USD 10,550,000 McGraw Hill Financial 4% 15/06/2025 7,632 1.09

USD 2,310,000 Medtronic 4.625% 15/03/2045 1,754 0.25

USD 1,303,000 Philip Morris 4.25% 10/11/2044 951 0.14

USD 7,520,000 Post Holdings 6.75% 01/12/2021 5,726 0.81

USD 4,350,000 Regal Entertainment 5.75% 15/06/2023 3,109 0.44

USD 5,620,000 Reynolds American 5.85% 15/08 2045 4,678 0.67

USD 2,600,000 Sealed Air 5.25% 01/04/2023 1,952 0.28

USD 4,900,000 Servcorp International 5.375% 15/05/2024 3,766 0.54

USD 2,270,000 SiriusXM Radio 5.375% 15/04/2025 1,641 0.23

USD 5,100,000 SiriusXM Radio 6% 15/07/2024 3,879 0.55

USD 30,630,000 US Treasury 1.625% 15/02/2026 21,581 3.06

USD 30,630,000 US Treasury 2.5% 15/02/2046 21,082 3.00

USD 5,200,000 Verizon Communications 5.15% 2023 4,200 0.60

USD 9,750,000 Verizon Communications 6.55% 15/09/2043 8,447 1.20

USD 5,850,000 Walgreens Boots Alliance 3.8% 18/11/2024 4,209 0.60

USD 3,000,000 Walgreens Boots Alliance 4.8% 18/11/2044 1,940 0.28

GBP 1,400,000 Washington Mutual Bank 5.5% 10/06/2019~ - -

EUR 2,500,000 Winstar Communications 12.75% Perpetual~ - -

170,967 24.33

Floating Rate Note 1.34% (2015: 1.18%)

Netherlands 1.34% (2015: 1.08%)

EUR 11,300,000 TMF Holdings 9.875% 01/12/2019 9,387 1.34

United Kingdom 0.00% (2015: 0.10%)

Secured Loans 6.54% (2015: 6.44%)

France 1.26% (2015: 0.57%)

EUR 4,000,000 Numericable FRN 10/02/2023 Term B 2,994 0.43

EUR 1,000,000 Verallia FRN 22/07/2022 763 0.11

EUR 6,695,238 Verallia FRN 31/10/2022 Term B 5,122 0.72

8,879 1.26




%Germany 1.10% (2015: 0.75%)

EUR 4,323,529 Douglas FRN 13/08/2022 3,340 0.48

USD 4,835,521 Siemens Audiology FRN 17/01/2022 Term B4 3,413 0.48

EUR 1,300,191 Siemens Audiology FRN 17/01/2022 Term B5 1,000 0.14

7,753 1.10

Ireland 0.31% (2015: 0.29%)

EUR 2,880,114 Eircom FRN 06/05/2022 2,161 0.31

Netherlands 0.00% (2015: 0.10%)

Switzerland 0.25% (2015: 0.24%)

EUR 2,292,675 SIG Combibloc FRN 11/03/2022 1,745 0.25

United Kingdom 2.82% (2015: 3.66%)

USD 2,500,000 Formula One FRN 29/07/2022 1,558 0.22

GBP 7,000,000 Gala FRN 25/05/2018 Term C 6,964 0.99

GBP 2,467,850 RAC FRN 09/11/2022 2,468 0.35

GBP 939,842 RAC FRN 10/12/2021 927 0.13

GBP 7,636,751 RAC FRN 10/12/2021 Term A 7,530 1.07

GBP 402,192 RAC FRN 10/12/2021 Term B 397 0.06

19,844 2.82

United States 0.80% (2015: 0.83%)

GBP 676,596 Chesapeake/Multi Packaging FRN 30/09/2020 Term A 669 0.10

GBP 31,758 Chesapeake/Multi Packaging FRN 30/09/2020 Term B 31 -

GBP 3,140,000 Equinix FRN 06/01/2023 3,117 0.45

EUR 2,315,000 Keurig FRN 09/02/2023 1,775 0.25

5,592 0.80

Stepped Rate Bond 3.32% (2015: 1.68%)

United Kingdom 3.32% (2015: 1.68%)

GBP 8,510,000 Co-Operative Bank 6.875% 08/07/2020 8,957 1.27

GBP 4,898,000 Standard Life 6.546% Perpetual 4,978 0.71

GBP 9,000,000 Standard Life 6.75% Perpetual 9,413 1.34

23,348 3.32

Variable Rate Bond 25.07% (2015: 25.89%)

France 6.45% (2015: 6.81%)

GBP 3,910,000 AXA VAR Perpetual 3,636 0.52

GBP 2,480,000 AXA 5.625% 16/01/2054 2,215 0.32

GBP 6,229,000 AXA 6.6862% Perpetual 6,421 0.91

GBP 6,300,000 AXA 6.772% Perpetual 6,494 0.92

USD 13,900,000 BNP Paribas FRN Perpetual 10,697 1.52

USD 2,604,000 BNP Paribas 6.25% Perpetual 1,881 0.27

USD 2,646,000 BNP Paribas 6.5% Perpetual 1,901 0.27




%Variable Rate Bond (continued)

USD 9,852,000 Credit Agricole 7.375% Perpetual 7,077 1.01

EUR 4,480,000 Orange 5% Perpetual 3,371 0.48

GBP 1,645,000 Orange 5.75% Perpetual 1,590 0.23

45,283 6.45

Germany 0.47% (2015: 0.49%)

EUR 18,650,000 Pfleiderer 7.125% Perpetual** - -

GBP 3,300,000 Siemens Financieringsmaatschappij 6.125% 14/09/2066 3,324 0.47

3,324 0.47

Iceland 0.00% (2015: 0.00%)

EUR 1,700,000 Landsbanki Islands 4.652% Perpetual** - -

- -

Italy 1.87% (2015: 2.17%)

GBP 7,100,000 Assicurazioni Generali 6.269% 16/06/2026 6,184 0.88

GBP 7,060,000 Enel 6.625% 15/09/2076 6,971 0.99

13,155 1.87

Spain 1.09% (2015: 2.06%)

USD 10,914,000 BBVA International Preferred FRN Perpetual 7,653 1.09

Switzerland 1.52% (2015: 1.11%)

USD 2,320,000 Credit Suisse 6.25% Perpetual 1,500 0.21

GBP 7,000,000 ELM 6.3024% Perpetual 7,030 1.00

USD 3,000,000 UBS Preferred Funding Trust V 6.243% Perpetual 2,149 0.31

10,679 1.52

United Kingdom 12.21% (2015: 11.98%)

GBP 2,846,000 Aviva 5.9021% 27/07/2020 2,729 0.39

GBP 3,550,000 Aviva 6.875% 20/05/2058 3,549 0.51

USD 6,920,000 Barclays Bank 6.278% Perpetual 5,120 0.73

USD 5,875,000 Barclays Bank 6.86% Perpetual 4,860 0.69

GBP 4,633,000 BUPA Finance 6.125% Perpetual 4,751 0.68

GBP 1,610,000 Coventry Building Society 6.375% Perpetual 1,409 0.20

GBP 4,975,000 HBOS Capital Funding 6.461% Perpetual 4,979 0.71

GBP 7,575,000 HBOS Sterling Finance Jersey 7.881% Perpetual 9,317 1.32

GBP 8,506,000 HSBC Bank 5.844% Perpetual 8,645 1.23

GBP 6,900,000 Legal & General 6.385% Perpetual 6,893 0.98

GBP 1,595,000 Lloyds Bank 10.75% 16/12/2021 1,683 0.24

USD 13,512,000 Lloyds Banking 6.657% Perpetual 10,530 1.49

GBP 1,760,000 National Grid Finance 5.625% 18/06/2073 1,742 0.25

GBP 5,730,000 PGH Capital 5.75% 07/07/2021 5,916 0.84




%United Kingdom (continued)

GBP 4,200,000 Prudential 5.7% 19/12/2063 3,584 0.51

USD 4,326,000 RBS Capital Trust II FRN Perpetual 3,216 0.46

EUR 2,837,000 Rexam 6.75% 29/06/2067 2,194 0.31

USD 4,150,000 Royal Bank of Scotland 7.64% Perpetual 2,906 0.41

GBP 1,995,000 RSA Insurance VAR 10/10/2045 1,798 0.26

GBP 6,895,000 Scotia Holdings 8.5% Perpetual** - -

85,821 12.21

United States 1.46% (2015: 0.00%)

USD 2,000,000 American Express 6.8% 01/09/2066 1,424 0.20

USD 800,000 Crown Paper 11% Perpetual** - -

USD 12,750,000 Wachovia Capital Trust III 5.56975% Perpetual 8,818 1.26

10,242 1.46

Zero / Discount rate bond 0.67% (2015: 0.00%)

United Kingdom 0.67%

EUR 6,647,000 Royal Bank of Scotland 5.5% Perpetual 4,720 0.67

Derivatives (1.40%) (2015: 0.70%)

Swaps 0.02% (2015: 0.10%)

Credit Default Swaps 0.02% (2015: 0.10%)

400,000 CDS 1% 20/12/2016 Ladbrokes Receive EUR AQPF 1 -

1,150,000 CDS 5% 20/06/2017 Levi Strauss Receive USD AQMN 48 0.01

880,000 CDS 5% 20/12/2017 ConvaTec Healthcare Receive EUR AROV 52 0.01

511,389 CDS 5% 20/12/2017 ConvaTec Healthcare Receive EUR AROW 30 -

131 0.02

Forward Foreign Exchange Contracts (1.42%) (2015: 0.64%)

Buy EUR 1,353,313 : Sell GBP 1,054,333 March 2016 2 -

Buy EUR 224,725 : Sell GBP 173,791 March 2016 2 -

Buy EUR 252,515 : Sell GBP 196,527 March 2016 1 -

Buy EUR 977,639 : Sell GBP 773,931 March 2016 (11) -

Buy GBP 1,183,905 : Sell USD 1,649,620 March 2016 (1) -

Buy GBP 12,324,311 : Sell USD 17,584,235 March 2016 (305) (0.04)

Buy GBP 1,268,234 : Sell EUR 1,625,771 March 2016 (1) -


Buy GBP 14,846 : Sell USD 20,583 March 2016^ - -

Buy GBP 1,585,501 : Sell AUD 3,194,188 March 2016 (54) (0.01)

Buy GBP 1,608,412 : Sell AUD 3,259,933 March 2016 (65) (0.01)



Buy GBP 187,066,312 : Sell USD 271,260,935 March 2016 (7,766) (1.11)






%Forward Foreign Exchange Contracts (continued)



Buy GBP 2,984,288 : Sell EUR 3,830,762 March 2016 (5) -

Buy GBP 3,169,158 : Sell USD 4,393,713 March 2016 13 -


Buy GBP 356,210 : Sell USD 496,800 March 2016 (1) -

Buy GBP 3,630,501 : Sell USD 5,054,536 March 2016^ - -

Buy GBP 40,150 : Sell EUR 50,858 March 2016^ - -




Buy GBP 771,009 : Sell USD 1,087,530 March 2016 (10) -

Buy GBP 85,378,383 : Sell EUR 110,721,959 March 2016 (1,035) (0.15)

Buy USD 2,067,723 : Sell GBP 1,441,816 March 2016 43 0.01

Buy USD 5,054,536 : Sell GBP 3,630,741 March 2016^ - -

Buy USD 6,031,564 : Sell GBP 4,332,500 March 2016^ - -

(9,956) (1.42)

Forward Foreign Exchange Contracts (Hedged share classes) 0.00% (2015: 0.00%)

Buy EUR 1,501 : Sell GBP 1,170 March 2016^ - -



Buy EUR 21,490,930 : Sell GBP 16,774,316 March 2016 (5) -








(5) -

Investment assets including liabilities 678,751 96.61

Other net assets 23,831 3.39

Total net assets 702,582 100.00

~ Suspended, delisted or unquoted securities^ Due to rounding to nearest £1,000** Manually priced securities

Prior year comparative percentages have been reclassified for some sectors due to a new sector presentation basis implemented in these financial statements. The classification is based on the country of risk and a relevant industry classification standard.



Statement of Authorised Fund Manager’s responsibilities

The Financial Conduct Authority’s Collective Investment Schemes Sourcebook requires the Manager to prepare financial statements for each annual accounting period which give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the financial affairs of the fund and of its revenue for the year. In preparing the financial statements the Manager is required to:

• select suitable accounting policies and then apply them consistently;

• comply with the requirements of the Statement of Recommended Practice (SORP) for Authorised Funds issued by the Investment Management Association (IMA) in May 2014;

• follow generally accepted accounting principles and applicable accounting standards;

• keep proper accounting records which enable it to demonstrate that the financial statements, as prepared by Henderson Investment Funds Limited, comply with the above requirements;

• make judgements and estimates that are reasonable and prudent; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the fund will continue in operation for the foreseeable future.

The Authorised Fund Manager is responsible for the management of the fund in accordance with its Trust Deed, Prospectus and the Regulations. The Authorised Fund Manager is also responsible for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Statement of the Trustee’s responsibilities and report of the Trustee to the Unitholders of the Henderson Fixed Interest Monthly Income Fund (“the Fund”)

The Trustee is responsible for the safekeeping of all of the property of the Fund (other than tangible moveable property) which is entrusted to it and for the collection of income that rises from that property.

It is the duty of the Trustee to take reasonable care to ensure that the Fund is managed in accordance with the Financial Conduct Authority’s Collective Investment Schemes Sourcebook (“the Regulations”), the Fund’s Trust Deed and Prospectus in relation to the pricing of, and dealings in, units in the Fund; the application of income of the Fund, and the investment and borrowing powers of the Fund.

Having carried out such procedures as we consider necessary to discharge our responsibilities as Trustee of the Fund, it is our opinion, based on the information available to us and the explanations provided, that in all material respects, the Manager:

(i) has carried out the issue, sale, redemption and cancellation, and calculation of the price of the Fund’s units and the application of the Fund’s income in accordance with the Regulations, the Trust Deed and Prospectus, and

(ii) has observed the investment and borrowing powers and restrictions applicable to the Fund.

National Westminster Bank PlcLondon6 June 2016


Independent Auditors’ Report to the Unitholders of Henderson Fixed Interest Monthly Income Fund (‘the Fund’)

Our opinionIn our opinion, Henderson Fixed Interest Monthly Income Fund financial statements, (the “financial statements”):

• give a true and fair view of the financial position of the Fund as at 1 March 2016 and of the net revenue and the net capital losses of the scheme property of the fund for the year then ended; and

• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, the Statement of Recommended Practice for UK Authorised Funds, the Collective Investment Schemes sourcebook and the Trust Deed.

What we have auditedThe financial statements which are prepared by Henderson Investment Funds Limited (the ‘Authorised Fund Manager’) comprise:

• the balance sheet as at 1 March 2016;

• the statement of total return for the year then ended;

• the statement of change in net assets attributable to unitholders for the year then ended;

• the notes to the fund’s financial statements, which include a summary of significant accounting policies and other explanatory information; and

• the distribution tables

The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), the Statement of Recommended Practice ‘Financial Statements of UK Authorised Funds’ issued by the Investment Management Association (the “Statement of Recommended Practice for UK Authorised Funds”), the Collective Investment Schemes sourcebook and the Trust Deed.

In applying the financial reporting framework, the Authorised Fund Manager has made a number of subjective judgements, for example in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future events.

Opinions on matters prescribed by the Collective Investment Schemes sourcebookIn our opinion:

• we have obtained all the information and explanations we consider necessary for the purposes of the audit; and

• the information given in the Authorised Fund Manager’s Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Other matters on which we are required to report by exceptionPropriety of accounting records and information and explanations receivedUnder the Collective Investment Schemes sourcebook we are required to report to you if, in our opinion:

• proper accounting records have not been kept; or

• the financial statements are not in agreement with the accounting records and returns.

We have no exceptions to report arising from this responsibility.

Responsibilities for the financial statements and the auditOur responsibilities and those of the Authorised Fund ManagerAs explained more fully in the Statement of Authorised Fund Manager’s Responsibilities set out on page 17, the Authorised Fund Manager is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland) (“ISA’s (UK & Ireland)”). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the fund’s unitholders as a body in accordance with paragraph 4.5.12 of the Collective Investment Schemes sourcebook and for no other purpose.

We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.


Independent Auditors’ Report to the Unitholders of Henderson Fixed Interest Monthly Income Fund (‘the Fund’) (continued)

What an audit of financial statements involves We conducted our audit in accordance with ISA’s (UK & Ireland). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:

• whether the accounting policies are appropriate to the fund’s circumstances and have been consistently applied and adequately disclosed;

• the reasonableness of significant accounting estimates made by the Authorised Fund Manager; and

• the overall presentation of the financial statements.

We primarily focus our work in these areas by assessing the directors’ judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements.

We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.

In addition, we read all the financial and non-financial information in the Henderson Fixed Interest Monthly Income Fund Annual Report and Accounts (the “Annual Report”) to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit.

PricewaterhouseCoopers LLPChartered Accountants and Statutory AuditorsGlasgow6 June 2016

Notes:(a) The maintenance and integrity of the Henderson Global Investors’ website is the responsibility of the Authorised Fund Manager;

the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

(b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.


Statement of total return for the year ended 1 March 2016

2016 2015

Note £000 £000 £000 £000

Income

Net capital (losses) /gains 4 (40,127) 16,849

Revenue 5 40,265 44,386

Expenses 6 (8,817) (9,738)

Interest payable and similar charges 8 (1) -

Net revenue before taxation 31,447 34,648

Taxation 7 (43) -

Net revenue after taxation 31,404 34,648

Total return before distributions (8,723) 51,497

Distributions 9 (39,208) (43,284)

Change in net assets attributable to

unitholders from investment activities (47,931) 8,213

Statement of change in net assets attributable to unitholders for the year ended 1 March 2016

2016 2015

£000 £000 £000 £000

Opening net assets attributable to unitholders 710,053 714,497

Amounts receivable on issue of units 82,781 39,801

Amounts payable on cancellation of unit (43,724) (53,989)

39,057 (14,188)

Stamp duty reserve tax* - (4)

Change in unitholders’ funds from investment activities (47,931) 8,213

Retained distribution on accumulation units 1,330 1,439

Unclaimed distributions 73 96

Closing net assets attributable to unitholders 702,582 710,053

* Stamp Duty Reserve Tax (SDRT) Part 2 of Schedule 19 was abolished on 30 March 2014.


Balance sheet as at 1 March 2016

Restated

2016 2015Note £000 £000

Assets:

Investments 688,773 673,700

Current assets:

Debtors 10 26,992 18,578

Cash and bank balances 11 32,189 49,809

Total assets 747,954 742,087

Liabilities:

Investment liabilities 10,022 331

Creditors:

Bank overdrafts 7,001 7,392

Distribution payable 5,495 4,931

Other creditors 12 22,854 19,380

Total liabilities 45,372 32,034

Net assets attributable to unitholders 702,582 710,053

Directors’ statement

In accordance with the requirements of the Collective Investment Schemes sourcebook as issued and amended by the Financial Conduct Authority, we hereby certify the investment report and financial statements on behalf of the Directors of Henderson Investment Funds Limited.

Martin Skinner(Director)

Chris Chaloner(Director)

6 June 2016


Notes to the financial statements for the year ended 1 March 2016

1 Accounting Policies(a) Basis of accountingThe financial statements of Henderson Fixed Interest Monthly Income Fund (the ‘fund’) have been prepared on a going concern basis in accordance with Financial Reporting Standard 102 (‘FRS 102’), the Statement of Recommended Practice ‘Financial Statements of UK Authorised Funds’ issued by the IMA in May 2014 (the ‘SORP’), the Financial Conduct Authority’s Collective Investment Schemes Sourcebook (COLL) and the Trust Deed.

In applying United Kingdom Generally Accepted Accounting Practice (UK GAAP), and as a result of preparing the financial statements in compliance with FRS 102 for the first time, changes in the presentation of the accounts have been made. This has resulted in comparative figures for the previous accounting period being restated. However, the net total return and the net assets attributable to unitholders remain unchanged. The financial impact and detail of the restatement is presented within the Balance sheet and note 10 to the financial statements.

(b) Basis of valuation of investmentsThe valuation of listed investments has been at fair value, which is generally deemed to be bid market price, excluding any accrued interest in the case of debt securities, at close of business (24:00) on the last valuation day of the accounting period (1 March 2016) in accordance with the provisions of the scheme particulars.

Suspended, delisted, unquoted, written down and manually priced securities are valued by the Investment Manager taking into account, where appropriate, latest dealing prices, valuations from reliable sources, financial performance and other relevant factors.

Derivative assets and liabilities are valued at the fair value price to close out the contract at the balance sheet date, either using available market prices or an assessment of fair value based on counterparty valuations and appropriate pricing models.

(c) Revenue recognitionBank interest, interest on margin and revenue earned on derivatives and other securities are recognised on an accruals basis.

Dividends receivable from quoted equity and non-equity shares are credited to revenue, net of attributable tax credits, when the security is quoted ex-dividend. Dividends on unquoted stocks are credited to revenue when the dividend is announced.

Interest from debt securities has been accounted for on an effective yield basis. Effective yield is a calculation that reflects the amount of amortisation of any discount or premium on the purchase price over the remaining life of the security.

Overseas dividends are grossed up of any foreign tax suffered, the tax element being separately disclosed in the tax note.

Revenue derived from the gains/losses on hedged class forward currency contracts is allocated to both the capital and the revenue of the share class based upon the prior day capital/revenue split.

Special dividends are recognised as either revenue or capital depending on the nature and circumstances of the dividend receivable.

Stock lending revenue is accounted for on an accuals basis, net of bank and agent fees.

If any revenue receivable at the balance sheet date is not considered recoverable, a provision is made for the relevant amount.


Notes to the financial statements (continued)

1 Accounting Policies (continued)

(d) Treatment of expenses All expenses (with the exception of the annual management charge and expenses relating to purchases and sales of investments) are charged against revenue on an accruals basis.

Annual management chargeIn payment for carrying out its duties and responsibilities the Authorised Fund Manager is entitled to take an annual fee out of the fund’s property, calculated as a percentage of the relevant value of the property of each class of the fund. The annual management charge (AMC) is accrued on a daily basis by reference to the value of the property of each unit on the previous dealing day and the amount due for each month is payable on the last working day of the month and taken to capital.

General administration chargeAll fees with the exception of the annual management charge, trustee and safe custody fees, are charged by a single ad valorem charge, the general administration charge (GAC) which creates more efficiency around the charging process than more traditional methods. The GAC is calculated as a percentage of the fund property and the amount each unit in the fund will pay will depend on that unit’s proportionate interest in the fund property. The GAC accrues on a daily basis and is payable to the Manager by the fund monthly.

Allocation of revenue and expenses to unit classesWith the exception of the annual management charge and GAC which are directly attributable to individual unit classes, all revenue and expenses are allocated to unit classes pro rata to the value of the net assets of the relevant unit class on the day that the revenue or expenses is incurred.

For further details please refer to the prospectus.

(e) Treatment of derivatives In pursuing its investment objectives, the fund may hold a number of financial instruments.

Derivative transactions are accounted for on a trade date basis. Where such transactions are used to protect or enhance revenue, the revenue and expenses derived therefrom are included in ‘Revenue’ in the Statement of total return on an accruals basis. Where such transactions are used to protect or enhance capital, the gains and losses derived therefrom are included in ‘Net capital gains/(losses)’ in the Statement of total return.

Cash held at brokers as margin is reflected separately within cash and bank balances.

During the year the fund invested in the derivatives detailed below:

Forward currency contractsOpen forward currency contracts which are all covered are shown in the Portfolio statement at fair value and the net gains/(losses) are reflected in net capital gains/(losses) on investments.

Futures contractsOpen futures contracts are shown in the portfolio statement at fair value and the net gains/(losses) are reflected within Derivative contracts in net capital gains/(losses) on investments.

Credit default swapsOpen credit default swaps (CDS) are shown in the Portfolio statement at fair value and the net capital gains/(losses) are reflected within Derivative contracts in net capital gains/(losses) on investments. Premiums receivable or payable on CDSs are included in the revenue on an accruals basis.

(f) Foreign exchangeForeign currency transactions are translated into sterling at the exchange rate ruling at the date of the transaction. Assets and liabilities denominated in foreign currencies at the end of the accounting period are translated into sterling at the exchange rates prevailing at close of business on the last valuation day of the accounting year.

The base currency of the fund is Sterling. All units issued are Sterling, apart from the Euro hedge income class, which is denominated in Euro.


1 Accounting Policies (continued)

(f) Exchange rates (continued)

Hedged unit classEuro hedged income gross class is a hedged unit class. Hedged unit classes allow the Investment Manager to use currency hedging transactions to reduce the effect of fluctuations in the rate of exchange between the currency of units in those classes and Sterling which is the base currency of the fund.

Any benefits or losses of the hedging transaction should accrue to unitholders in that unit class only. Any unrealised gains or losses resulting from the hedged unit class may be allocated across all unit classes. The Manager will review the relevant hedging positions on a regular basis and, if considered appropriate, make adjustments to correct the allocations across unit classes. The currency transactions will not cause the Euro hedged class unit to be leveraged. The value of the unit class to be hedged will be made up of both capital and income elements and the Manager intends to hedge between 95-105% of the value of each hedged unit class. Adjustments to any hedge to keep within this target range will only be made when the required adjustment is material. As such the Euro hedged class units will not be completely protected from all currency fluctuations.

(g) TaxationThe fund pays an interest distribution and tax is withheld at the basic rate of tax (20%).

Provision is made for tax at the current rates on the excess of taxable revenue over allowable expenses, with relief for overseas taxation taken where appropriate.

UK dividend revenue is disclosed net of any related tax credit. Overseas dividends continue to be disclosed gross of any foreign tax suffered, the tax element being separately disclosed in the tax note.

Corporation tax is charged at 20% of the revenue liable to corporation tax less expenses.

Deferred tax is provided on all timing differences that have originated but not reversed at the balance sheet date other than those recorded as permanent differences. Deferred tax is provided at the average rate of tax expected to apply. Deferred tax assets and liabilities are not discounted to reflect the time value of money.

Deferred tax assets are only recognised to the extent it is regarded as more likely than not that there will be taxable profits against which the future reversal of underlying timing differences can be offset.

(h) Cash flow statementThe fund is not required to produce a cash flow statement as it meets the exemption criteria set out in the FRS102.7.IA.

(i) Dilution adjustmentThe ACD has the discretion to charge a dilution adjustment when there is a large volume of deals and, in accordance with the FCA regulations, to pay this amount into the fund. In particular the ACD reserves the right to make such an adjustment in the following circumstances;-

• On a fund experiencing large levels of net purchases (i.e. purchases less redemptions), relative to its size;

• On a fund experiencing large levels of net redemptions (i.e. redemptions less purchases), relative to its size;

• In any other case where the ACD is of the opinion that the interests of existing or continuing shareholders and potential investors require the imposition of a dilution adjustment.

The adjustment, where applied, is included within the dealing price available to shareholders and is disclosed separately in the financial statements.




2 Distribution policyThe distribution policy of the fund is to distribute/accumulate all available revenue, after deduction of expenses properly chargeable against revenue, subject to any of the AMC or other expense which may currently be transferred to capital.

For the purpose of determining the distribution all or part of the management charge may be borne by capital. The management charge has been deducted from capital for the purpose of determining the amount available for distribution. As noted in (c) above, the revenue from fixed interest securities is accounted for on an effective yield basis.

Revenue attributed to accumulation unitholders is retained at the end of each distribution period and represents a reinvestment of revenue.

The policy of the fund is to make annual (accounting date being 1 March) and interim distributions/accumulations (accounting date being 1 September and last calendar day of January, March, April, May, June, July, September, October, November and December) for all unit classes except for Euro hedge income. Euro hedge income makes annual (accounting date being 1 March) and quarterly distributions (accounting date being 1 June, 1 September and 1 December) to unitholders.

Gains and losses on investments and currencies, whether realised or unrealised, are taken to capital and are not available for distribution.

Marginal tax relief has been included when determining the amount available for distribution.

When the revenue from investments exceeds the expenses, a distribution will be made. Should expenses exceed revenue there will be no distribution and the shortfall will be transferred from capital at the year end.

All distributions unclaimed for a period of six years after having become due for payment shall be forfeited and shall revert back to the fund.

EqualisationEqualisation applies to the fund.

Equalisation applies only to units purchased during the distribution period (group 2 units). It is the average amount of revenue included in the purchase price of Group 2 units and is refunded to the holders of these units as a return of capital. Being capital it is not liable to income tax but must be deducted from the cost of the units for capital gains tax purposes.

3 Risk In pursuing its investment objective the fund holds a number of financial instruments. These financial instruments comprise securities and other investments, cash balances, debtors and creditors arising from the fund’s operations. The fund may also enter into derivative and forward transactions for the purposes of efficient portfolio management and in order to meet the investment objective of the fund.

The Authorised Fund Manager employs a risk management process that identifies the risks to which the fund might be exposed and how such risks are assessed, monitored and managed, ensuring compliance with relevant regulation. This enables it to monitor and measure at any time the risk of the portfolio positions including derivative instruments and their contribution to the overall risk profile of the fund.

In the normal course of the business, the fund’s activities expose it to various types of risk which are associated with the financial instruments and markets in which it invests. These financial risks: market risk (comprising currency risk, interest rate risk and other market price risk), credit risk and liquidity risk and the approach to the management of these risks, are set out below and remain unchanged from the previous accounting period. For a detailed explanation of these and further risks involved in investing in the fund, reference should be made to the Prospectus. Investors and prospective investors are recommended to discuss all potential risks with their own legal, tax and financial advisors.

The risk management policy and process for the fund is designed to satisfy the regulatory requirements for a UCITS; the associated regulatory technical standards and guidelines; and local regulations. The framework for risk controls and limits for the fund is documented within the Authorised Fund Manager’s Risk Management Policy and Process document, which outlines for each main risk category the controls and risk measures in place, including stress tests for assessing sensitivity to the most relevant risks. This risk framework includes setting of limits and monitoring against those limits.



3 Risk (continued)

The risk management systems to which the Henderson Risk, Compliance and Operations teams have access for independent monitoring and risk measurement purposes include:

• Charles River system’s Compliance module for investment restrictions monitoring;

• ArcLogics operational risk database;

• RiskMetrics, UBS Delta, Style Research, Finanalytica and Barra Aegis for market risk measurement; and

• Bloomberg for market data and price checking.

These are supplemented by an in-house development, the Henderson Derivatives Risk and Compliance database.

(a) Market riskMarket risk is the risk of loss resulting from fluctuations in the market value of positions in the fund attributable to changes in market variables such as interest rates, foreign exchange rates or an issuer’s credit worthiness.

The fund will invest principally in fixed interest securities including preference shares. The fund may also invest in securities acquired on the conversion of convertible securities held within the portfolio (or pursuant to schemes of reconstruction), derivatives and forward transactions, warrants, money-market instruments and deposits.

The investments of the fund are subject to normal market fluctuations, which are monitored by the Authorised Fund Manager in pursuance of the investment objective and policies as set out in the Prospectus. There can be no assurance that any appreciation in the value of investments will occur. There is no certainty that the investment objective of the fund will actually be achieved and no warranty or representation is given to this effect.

The fund may use derivatives and forward transactions for the purposes of efficient portfolio management and in order to meet its investment objective. As a result, the net asset value of the fund may at times be volatile, but it is not intended that the use of derivatives will alter the risk profile of the fund. Please refer to note 16 for further details.

Unlike income from an individual bond, the level of income from the fund is not fixed and may fluctuate. The fund will invest in high-yielding corporate bonds. The underlying investments of fixed interest and bond funds are subject to two types of risk, market (interest) risk and credit risk. The value of these bonds, and therefore the value of the units in the fund, will be impacted by fluctuations in interest rates and the perceived credit risk of an issuer. An increase in long-term interest rates is likely to reduce the unit price of the fund and vice versa. In addition, the unit price is likely to be reduced by the default or perceived increase in credit risk of an issuer of an underlying investment.

In general, the higher the rate of interest, the higher the perceived credit risk of the issuer. The fund will invest in sub-investment grade bonds. These bonds have a lower credit rating and carry a higher degree of risk of default on repayment. Further details on the nature of the fund’s investment in bonds and associated risks is set out in the prospectus.

Currency riskCurrency risk is the risk that the value of the fund’s investments will fluctuate as a result of changes in foreign currency exchange rates.

As a proportion of the net assets of the fund are denominated in currencies other than sterling, the balance sheet can be affected by movements in exchange rates. The Investment Fund Manager may seek to manage exposure to currency movements by using forward exchange contracts or by hedging the sterling value of investments that are priced in other currencies.

This is consistent with the exposure in the prior year.



3 Risk (continued)

(a) Market risk (continued)

Net currency monetary assets and liabilities consist of:

Investment Other Total

assets including net assets/ net assets/

investment (liabilities) (liabilities)

liabilities

£000 £000 £000

2016

Australian dollar (18) 78 60

Euro 15,417 (2,377) 13,040

UK sterling 657,898 31,597 689,495

US dollar 5,454 (5,467) (13)

Total 678,751 23,831 702,582

2015

Australian dollar (16) 41 25

Euro (8,311) 18,866 10,555

Swiss franc (230) 19 (211)

UK sterling 678,227 15,569 693,796

US dollar 3,699 2,189 5,888

Total 673,369 36,684 710,053

Interest rate riskInterest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Some securities such as bonds are directly impacted by interest rate movements but others are indirectly affected.

The fund invests in debt securities. The revenue of the fund may be affected by changes to the interest rates relevant to particular securities or as a result of the Investment Fund Manager being unable to secure similar returns on the expiry of contracts or sale of securities. The value of debt securities may be affected by interest rate movements or the expectation of such movements in the future. The fund can invest in interest rate swaps and credit default swaps to adjust the interest rate risk profile of the fund across the entire yield curve quickly and efficiently.

The exposure at the Balance sheet date of financial assets and liabilities to interest rate risk is shown by reference to:

• floating interest rates: when the interest rate is due to be re-set; and

• fixed interest rates; when the financial instrument is due for repayment. These dates are shown in the Portfolio statement.

The following table shows separately the value of the fund’s financial assets and liabilities at fixed interest rates, at variable rates and those that are non-interest bearing including instruments used to hedge against changes in interest rates:

Floating Rate Fixed Rate Non-interest Total

financial financial bearing

assets assets financial

assets

£000 £000 £000 £000

2016

Australian dollar - 3,295 - 3,295

Euro 21,869 65,573 17 87,459

UK sterling 111,908 219,998 48,001 379,907

US dollar 32,940 235,910 8,443 277,293

Total 166,717 524,776 56,461 747,954



3 Risk (continued)

Interest rate risk (continued)

£000 £000 £000 £000

2015

Australian dollar - 1,618 41 1,659

Euro 57,775 110,804 7,106 175,685

Swiss franc 714 3,529 11 4,254

UK sterling 177,136 200,032 26,033 403,201

US dollar 67,796 84,512 5,100 157,408

Total 303,421 400,495 38,291 742,207

Floating Rate Fixed Rate Non-interest Total

financial financial bearing

liabilities liabilities financial

liabilities

£000 £000 £000 £000

2016

Euro - - 5,108 5,108

UK sterling 7,001 - 23,408 30,409

US dollar - - 9,855 9,855

Total 7,001 - 38,371 45,372

£000 £000 £000 £000

2015

Euro - - 13,755 13,755

UK sterling 7,392 - 9,016 16,408

US dollar - - 1,991 1,991

Total 7,392 - 24,762 32,154

Other price riskOther price risk is the risk that the value of the fund’s investments will fluctuate as a result of changes in market prices caused by factors other than interest rate or foreign currency movement. The price risk arises mainly from uncertainty about future prices of financial instruments the fund might hold. It represents the potential loss the fund might suffer through holding market positions in the face of price movements. The fund’s investment portfolio is exposed to market price fluctuations, which are monitored by the Manager in pursuance of its investment objective and policy as set out in the Prospectus.

Bond yields (and, as a consequence bond prices) are determined mainly by market perception as to the appropriate level of yields given the economic background. Key determinants include economic growth prospects, inflation, the government’s fiscal position, short-term interest rates and international market comparisons.

Returns from bonds are fixed – at the time of purchase the fixed coupon payment is known as are the final redemption proceeds. This means that if a bond is held until its redemption date, the total return achieved is unaltered from its purchase date. However, over the life of a bond, the yield (and hence market price) at any given time will depend on the market environment at that time. Therefore, a bond sold before its redemption date is likely to have a different price to its purchase level and a profit or loss may be incurred.



3 Risk (continued)

Global exposureThe global exposure of the fund is calculated by using the value-at-risk approach by reference to its risk profile.

Value-at-Risk (“VaR”) is a mathematical-statistical concept and is commonly used as a standard measure of risk in the financial sector. The VaR approach is used, in general, for funds using derivative instruments or techniques within their investment strategies to generate additional leverage or market risk exposure.

The maximum potential loss that the fund could suffer in normal market conditions within a given time horizon and a certain degree of confidence is estimated. In these calculations all positions in the investment portfolio are taken into consideration including those undertaken for efficient portfolio management purposes. For the purpose of calculating global exposure by VaR either a relative VaR approach or absolute VaR approach can be used; the selection of relative or absolute VaR methodology is determined by the availability of a reference portfolio appropriate for a fund in meeting its investment objective. As there is no appropriate reference portfolio for the fund an absolute VaR is calculated on all of the investment portfolio’s positions. Absolute monthly VaR on the fund is not to exceed a regulatory maximum threshold of 20%.

VaR has been calculated using a Monte Carlo simulation approach. As a control mechanism, Monte Carlo results are compared to the parametric model for validation purposes within the daily monitoring process.

The following parameters are applied as a minimum: a one-tailed 99% confidence interval, a holding period equivalent to one month (20 business days), effective observation period (history) of risk factors of at least 1 year (250 business days), quarterly data set updates and daily calculation.

The actual VaR, limits and utilisation of those limits are summarised in the table below:

Global exposure Reference Actual VaR in year VaR Utilisation of VaR limit

calculation basis Portfolio Minimum Maximum Average Limit Minimum Maximum Average

2016 Absolute VaR n/a 1.36% 2.49% 1.87% 20% 6.81% 12.46% 9.34%

2015 Absolute VaR n/a 1.12% 3.59% 2.32% 20% 5.62% 17.93% 11.61%

LeverageThe level of leverage arising from the use of derivative instruments is disclosed in the table below as a percentage of the fund’s total Net Asset Value. The calculation is based on the sum of notional exposures of financial derivative instruments in the investment portfolio including those held for risk reduction purposes.

Please note this level of leverage is explicitly not an investment limit for the fund and will vary over time under differing market conditions to ensure that the fund meets its investment objective.

Minimum Maximum Average

2016 42.43% 174.04% 78.43%

Minimum Maximum Average

2015 45.47% 159.14% 62.87%



3 Risk (continued)

(b) Credit and counterparty riskCredit and counterparty risk is the risk of loss resulting from the fact that the counterparty to a transaction may default on its obligations prior to the settlement of the transactions cashflow.

In order to manager credit risk the fund is subject to investment limits for issuers of securities as outlined in the Prospectus. Issue credit ratings are evaluated periodically and an approved issuer list is maintained and monitored. In addition the fund may only buy and sell investments through brokers which have been approved by the Authorised Fund Manager as an acceptable counterparty and limits are set and monitored to cover the exposure to any individual broker. Changes in broker’s financial ratings are periodically reviewed by the Henderson Credit Risk Committee along with set limits and new counterparty approval.

The fund’s assets held with banks and with the Trustee are also exposed to credit risk. The banks used by the fund and the Manager are subject to regular reviews. Only counterparties that have been approved by Henderson’s Credit Risk Committee are used for derivatives transactions.

The fund will invest in what are considered riskier bonds (below investment grade). This brings the potential for increased risk of default and could affect both the revenue and the capital value of the fund. Further details can be found in the fund’s Portfolio statement.

Adherence to investment guidelines and to investment and borrowing powers set out in the Trust Deed, the Prospectus and in the Financial Conduct Authority’s Collective Investment Schemes Sourcebook mitigates the risk of excessive exposure to any particular type of security or issuer.

Credit ratings as at 1 March 2016#

Market Percentagevalue of total

Investment £000 net assets%

Above investment grade (AAA - BBB) 350,708 49.92Below investment grade (BB and below) 274,466 39.07Unrated 2,754 0.39

Total debt securities 627,928 89.38 Total secured loans 45,974 6.54Total derivatives (9,830) (1.40)Total equities 14,679 2.09

Investment assets including investment liabilities 678,751 96.61Other net assets 23,831 3.39Total net assets 702,582 100.00

Credit ratings as at 1 March 2015#

Market Percentagevalue of total

Investment £000 net assets%

Above investment grade (AAA - BBB) 166,875 23.50Below investment grade (BB and below) 362,527 51.06Unrated 123,971 17.46

Total debt securities 653,373 92.02Total derivatives 5,002 0.70Total equities 14,994 2.11

Investment assets including investment liabilities 673,369 94.83Net other assets 36,684 5.17Net assets 710,053 100.00

# Source: S&P


3 Risk (continued)

(c) Liquidity riskLiquidity risk is the risk that a position in the fund’s portfolio cannot be sold, liquidated or closed out at limited cost in an adequately short timeframe and that the ability of the fund to meet its settlement obligations is thereby compromised.

The fund is generally able to realise cash quickly to meet its liabilities. The main liquidity requirements of the fund include the redemption of any units that the unitholder wishes to sell. Temporary higher liquidity levels may also arise during the carrying out of a change in asset allocation policy, or following a large issue of units.

The Investment Fund Manager manages the fund’s cash position to ensure it can meet its liabilities. The fund manager receives daily reports of subscriptions and redemptions enabling the Investment Fund Manager to raise cash from the fund’s portfolio in order to meet redemption requests. In addition the Investment Fund Manager monitors the market liquidity of all securities, seeking to ensure the fund maintains sufficient liquidity to meet known and potential redemption activity. The fund’s cash balances are monitored daily by the Authorised Fund Manager and the administrator. Where investments cannot be realised in time to meet any potential liability, the fund may borrow up to 10% of the value of its property to ensure settlement.

Liquidity risk

On demand Within one year Over one year Over five yearsbut not more

than five years

2016 £000 £000 £000 £000Derivative financial liabilities - 10,022 - - Bank overdrafts 7,001 - - - Distribution payable on income units - 5,495 - - Other creditors - 22,854 - - Total 7,001 38,371 - -

On demand Within one year Over one year Over five years

but not morethan five years

2015 £000 £000 £000 £000Derivative financial liabilities - 331 - - Bank overdrafts 7,392 - - - Distribution payable on income units - 4,931 - - Other creditors - 19,380 - - Total 7,392 24,642 - -




4 Net capital (losses)/gainsNet capital (losses) / gains on investments during the year comprise:

2016 2015

£000 £000

Derivative contracts (506) 1,876

Forward currency contracts (25,008) 15,140

Forward currency contracts on hedged unit class 1,116 (1,323)

Non-derivative securities (14,560) 3,199

Other currency losses (1,155) (2,027)

Transaction costs (14) (16)

Net capital (losses)/gains (40,127) 16,849

5 Revenue2016 2015

£000 £000

Bank interest 78 17

Compensation on recalled loans 37 (66)

Derivative revenue 173 1,144

Hedge income on forward currency contracts (12) (21)

Interest on debt securities 38,807 42,806

Overseas dividends 186 38

Stock lending revenue 31 27

UK dividends 965 441

Total revenue 40,265 44,386

6 Expenses2016 2015£000 £000

Payable to the Authorised Fund Manager, associates of theAuthorised Fund Manager and agents of either of them:Annual Management charge 7,809 8,636 GAC* 881 968 8,690 9,604

Payable to the Trustee, associates of the Trusteeand agents of either of them:Trustee fee 81 86 Safe custody fees 46 48

127 134

Total expenses 8,817 9,738

Irrecoverable VAT is included in the above expenses where relevant.

*The current audit fee, which is levied through GAC, is £11,371 (2015: £7,980).



7 Taxation(a) Analysis of charge in the yearThe tax charge comprises:

2016 2015£000 £000

Overseas withholding tax 42 - Adjustment in respect to prior years 1 - Total current tax (note 7b) 43 -

(b) Factors affecting current tax charge for year

The tax assessed for the year is different from that calculated when the standard rate of corporation tax for authorised unit trusts of 20% is applied to the net revenue before taxation. The differences are explained below:

2016 2015£000 £000

Net revenue before taxation 31,447 34,648

Corporation tax at 20% (2015: 20%) 6,289 6,930

Effects of:Non-taxable overseas dividends ** - (8)Adjustment in respect to prior years 1 - Effect of irrecoverable overseas tax 34 - Utilisation of brought forward management expenses (6,088) (6,834)UK dividends* (193) (88)Current tax charge for the year (note 7a) 43 -

* As an authorised unit trust this item is not subject to corporation tax.** Overseas dividends are not subject to corporation tax from 1 July 2009 due to changes enacted in the Finance Act 2009.Unit trusts are exempt from tax on capital gains made in the UK. Therefore, any capital return is not included within the reconciliation above.

(c) Deferred tax

There is no provision required for deferred taxation at the Balance Sheet date (2015: £nil).

(d) Factors that may affect future tax charges

At the year end, after claiming relief against revenue taxable on receipt, there is a potential deferred tax asset of £10,886,184 (2015: £16,981,585) in relation to surplus management expenses. It is unlikely that the fund will generate sufficient taxable profits in the future to utilise these amounts and therefore no deferred tax asset has been recognised in the current or prior year.

Please note the movement in the potential tax asset identified in note (d) may not match the movement shown in utilisation of brought forward management expenses in note (b) due to filing adjustments.



8 Interest payable and similar chargesThe interest payable and similar charges comprise:

2016 2015£000 £000

Interest payable 1 -

Total interest payable and similar charges 1 -

9 DistributionsThe distributions take account of revenue received on the creation of units and revenue deducted on the cancellation of units, and comprise:

2016 2015£000 £000

Interim income 26,507 29,981 Interim accumulation 1,122 1,294 Final income 3,900 3,332 Final accumulation 208 145 Tax withheld on interest distributions 7,538 8,455 39,275 43,207

Amounts deducted on cancellation of units 259 219 Amounts received on issue of units (326) (142)

Total distributions 39,208 43,284

Net revenue after taxation 31,404 34,648 Equalisation on conversions (3) - Annual Management charge paid to capital 7,809 8,636 Undistributed revenue carried forward (2) -

Total distributions 39,208 43,284

Details of the distribution per unit are set out in the distribution table on pages 42 to 49.

10 Debtors2016 2015£000 £000

Accrued revenue 12,859 12,599 Amounts receivable for issue of units 1,652 1,088 Currency transactions awaiting settlement 1,268 92 Sales awaiting settlement 11,213 4,799

Total debtors 26,992 18,578



11 Cash and bank balances2016 2015£000 £000

Amounts held at futures clearing houses and brokers 291 661 Cash and bank balances 31,898 49,148

Total cash and bank balances 32,189 49,809

12 Other creditors Restated2016 2015

£000 £000

Accrued annual management charge 618 707

Accrued Trustee's fee 5 7

Accrued other expenses 75 90

Amounts payable for cancellation of units 580 1,225

Currency transactions awaiting settlement 1,268 92

Purchases awaiting settlement 20,308 17,259

Total other creditors 22,854 19,380

Income tax payable of £1,599,198 as at 1 March 2015 has been restated in accordance with the 2014 SORP and is included within Distributions payable on the Balance Sheet.

13 Contingent liabilities and commitmentsThere were no contingent liabilities or outstanding commitments at the current or prior year end.

14 Related party transactionsThe fund has early adopted the July 2015 amendment to section 33 of FRS102 which is applicable to accounting periods beginning on or after 1 January 2016 with earlier application permitted. Section 33 requires disclosure of the nature of any related party relationship as well as details of any transactions and outstanding balances carried out between the related party and the fund.

Henderson Investment Funds Limited as Authorised Fund Manager to the Fund is deemed to be a related party because it provides key management personnel services to the fund. All transactions and balances associated with the Authorised Fund Manager are disclosed within the ‘Statement of total return’, the ‘Statement of change in net assets attributable to unitholders’ and the ‘Balance sheet’ on pages 20 and 21 and notes 6,10 and 12 on pages 32 to 35 including all creations and cancellations where the Authorised Fund Manager acted as principal.

There were no material unitholders at the year end (2015: nil). 15 Unitholders’ fundsThe fund currently has 6 unit classes available; income and accumulation, Class I income, Class I accumulation, Class Z accumulation and Euro hedge income. The annual management charge on each unit class is as follows:


2016 2015Income and Accumulation 1.25% 1.25%Class I 0.60% 0.60%Class Z 0.00%* 0.00%*Euro hedge 1.25% 1.25% * Charges for managing Z class units are levied outside the fund and are agreed between the Manager and investors.

Unit reconciliation as at 1 March 2016

Accumulation Income I accumulation I income

units units units units

Opening number of units 120,111,200 2,643,431,657 - 67,151,286

Creations during the year 27,517,071 60,499,852 16,355,488 63,646,724

Cancellations during the year (11,673,769) (224,240,895) (99,451) (15,346,313)

Units converted during the year (38,097,014) (614,666,501) 8,564,596 127,903,012

Closing units in issue 97,857,488 1,865,024,113 24,820,633 243,354,709

Euro

Z accumulation hedge income

units units

Opening number of units 1,500 5,373,434

Creations during the year - 2,074,071

Cancellations during the year - (106,416)

Units converted during the year - -

Closing units in issue 1,500 7,341,089

The net asset value of the unit class, the net asset value per unit and the number of units in the unit class are given in the comparative table on pages 4-6. The distribution per unit class is given in the distribution table on pages 42 to 49. All unit classes have the same rights on winding up.




16 Financial derivativesThe fund has used financial derivatives for meeting the investment objectives and for efficient portfolio management.

The use of derivatives can create additional counterparty risks. Details of the Authorised Fund Manager’s policies for managing counterparty and other risks are set out in note 3 to the financial statements.

The types of derivatives held at the year-end were forward foreign currency contracts and credit default swaps. Details of individual contracts are shown in the portfolio statement on pages 15 and 16, and the total position by counterparty at the year-end is summarised below:

At 1 March 2016 the underlying exposure for each category of derivatives were as follows:

Credit default Forward

swaps foreign currency Total by Total

contracts counterparty collateral held

Counterparty £000 £000 £000 £000

BNP Paribas - 63 63 -

Credit Suisse 48 - 48 63

Deutche Bank 52 - 52 -

JP Morgan 1 - 1 31

Morgan Stanley 30 - 30 -

131 63 194 94

At 1 March 2015 the underlying exposure for each category of derivatives were as follows:

Credit default Forward

swaps foreign currency Total by Total

contracts counterparty collateral held

Counterparty £000 £000 £000 £000

Credit Suisse 549 - 549 758

Deutsche Bank 77 - 77 -

JP Morgan 1 132 133 -

Merrill Lynch 62 669 731 -

Morgan Stanley 45 - 45 28

Royal Bank of Scotland - 3798 3,798 -

734 4,599 5,333 786

At 1 March 2016, collateral had been pledged to the fund from counterparties consisting of EU government bonds having a market value of £93,530 (2015: £786,485).

Eligible collateral types are approved by the Investment Manager and may consist of cash, UK gilts, certificates of deposit, treasury bills, sovereign debt, eurosterling bonds and equities.


17 Stock lending The fund and the Investment Manager have entered into a securities lending programme with BNP Paribas acting as the Stock Lending Agent for the purposes of efficient portfolio management and in order to generate income.

Stock lending revenue is disclosed under ‘Revenue’ in the Statement of total return.

Eligible collateral types are approved by the Investment Manager and may consist of UK gilts, certificates of deposit, treasury bills,sovereign debt, eurosterling bonds and equities. The value of collateral required will range from 102.5% to 110.0% of the value ofthe securities on loan.

2016 Currency Total market Amount of Type of

value of collateral collateral

securities received

on loan

Counterparty £000 £000

Citigroup GBP 834 - Corporate Bond

Citigroup GBP - 930 Government Bond

Total 834 930

Credit Suisse GBP 2,801 2,908 Corporate Bond

Total 2,801 2,908

JP Morgan GBP 10,893 18,591 Corporate Bond

JP Morgan GBP 8,927 2,392 Government Bond

Total 19,820 20,983

Direct and

indirect

Gross income expenses Net income

Recipient Relationship Currency £000 £000 £000

BNP Paribas Securities GBP 37 6 31

Lending Agent




17 Stock lending (continued)

2015 Currency Total market Amount of Type of

value of collateral collateral

securities received

on loan

Counterparty £000 £000

Citigroup GBP 2,129 - Corporate Bond

Citigroup GBP - 2,187 Government Bond

Total 2,129 2,187

Credit Suisse GBP 971 - Corporate Bond

Credit Suisse GBP - 1,233 Government Bond

Total 971 1,233

JP Morgan GBP 660 681 Corporate Bond

Total 660 681

Direct and

indirect

Gross income expenses Net income

Recipient Relationship Currency £000 £000 £000

BNP Paribas Securities GBP 32 5 27

Lending Agent



18 Fair value disclosureFair value measurementThe fund has early adopted the March 2016 amendment to section 34 of FRS102 (Fair Value Hierarchy disclosures that simplify the preparation of financial instrument disclosure), which is applicable to accounting periods beginning on or after 1 January 2017 with earlier application permitted.

The intention of a fair value measurement is to estimate the price at which an asset or a liability could be exchanged in the market conditions prevailing at the measurement date. The measurement assumes the exchange is an orderly transaction (that is, it is not a forced transaction, involuntary liquidation or distress sale) between knowledgeable, willing participants on an independent basis.

The purpose of the fair value hierarchy is to prioritise the inputs that should be used to measure the fair value of assets and liabilities. The highest priority is given to quoted prices at which a transaction can be entered into and the lowest priority to unobservable inputs.

In accordance with FRS102 the fund classifies fair value measurement under the following levels :

Level 1The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date.

Level 2Inputs other than quoted prices included within level 1 that are observable (ie developed using market data) for the asset or liability, either directly or indirectly.

Level 3Inputs are unobservable (ie for which market data is unavailable) for the asset or liability.

Fair value hierarchy

Valuation technique 2016 2015

Assets Liabilities Assets Liabilities

£000 £000 £000 £000

Level 1 42,663 - - -

Level 2 645,791 10,022 673,250 331

Level 3 319 - 450 -

688,773 10,022 673,700 331

Where a price is unavailable or the price provided is not thought to be a fair reflection of the current market value of the asset, the Investment Manager, at its discretion, may permit some other method of valuation to be used if they consider that it better reflects value and is in accordance with good accounting practice. A Fair Value Pricing Committee (“FVPC”) of the Investment Manager is responsible for determining or approving unquoted prices. Where deemed necessary the FVPC will seek ratification of decisions from the Henderson Investment Performance and Risk Committee. The FVPC meets on a monthly basis and consists of representatives from various parts of the Investment Manager who act as an independent party, segregated from the fund management function, to review and approve fair value pricing decisions and pricing models on a regular basis.

The asset included within level 3 is a suspended bond which has been valued by the FVPC at their best estimate of its fair value. The pricing is based on a historical broker quote from 19 February 2016. No discount has been applied to broker quote price to determine its fair value.

19 Events after the Balance Sheet date There were no post balance sheet events which require additional disclosure within these financial statements.


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).


Distribution tables for the year ended 1 March 2016 (pence per unit)

Interim interest distribution (accounting date 31 March 2015, paid on 30 April 2015) Group 1: units purchased prior to 2 March 2015 Group 2: units purchased on or after 2 March 2015

Gross Income Net Equalisation Total TotalDistribution tax (20%) Distribution Distribution Distribution

per unit per unit per unit per unit30/04/2015 30/04/2014

AccumulationGroup 1 0.1115 0.0223 0.0892 - 0.0892 0.0892Group 2 0.0558 0.0112 0.0446 0.0446 0.0892 0.0892

IncomeGroup 1 0.1063 0.0213 0.0850 - 0.0850 0.0850Group 2 0.0335 0.0067 0.0268 0.0582 0.0850 0.0850

Class I incomeGroup 1 0.5150 0.1030 0.4120 - 0.4120 0.4120Group 2 0.2428 0.0486 0.1942 0.2178 0.4120 0.4120

Class Z accumulationGroup 1 0.5843 0.1169 0.4674 - 0.4674 0.4674Group 2 0.5843 0.1169 0.4674 - 0.4674 0.4674

Interim interest distribution (accounting date 30 April 2015, paid on 29 May 2015)Group 1: units purchased prior to 1 April 2015Group 2: units purchased on or after 1 April 2015








Distribution tables continued

Interim interest distribution (accounting date 31 May 2015, paid on 30 June 2015) Group 1: units purchased prior to 1 May 2015 Group 2: units purchased on or after 1 May 2015







Interim interest distribution (accounting date 31 May 2015, paid on 30 June 2015)Group 1: units purchased prior to 2 March 2015Group 2: units purchased on or after 2 March 2015



Euro hedge income (Euro cents per unit)Group 1 4.0340 - 4.0340 - 4.0340 4.8714Group 2 1.7936 - 1.7936 2.2404 4.0340 4.8714

Interim interest distribution (accounting date 30 June 2015, paid on 31 July 2015) Group 1: units purchased prior to 1 June 2015Group 2: units purchased on or after 1 June 2015





Class I accumulationGroup 1 0.2440 0.0488 0.1952 - 0.1952 n/aGroup 2 0.2440 0.0488 0.1952 - 0.1952 n/a





Interim interest distribution (accounting date 31 July 2015, paid on 28 August 2015) Group 1: units purchased prior to 1 July 2015 Group 2: units purchased on or after 1 July 2015



AccumulationGroup 1 0.1113 0.0223 0.0890 - 0.0890 0.0944Group 2 - - - 0.0890 0.0890 0.0944


Class I accumulationGroup 1 0.4830 0.0966 0.3864 - 0.3864 n/aGroup 2 0.1190 0.0238 0.0952 0.2912 0.3864 n/a



Interim interest distribution (accounting date 1 September 2015, paid on 30 September 2015) Group 1: units purchased prior to 1 August 2015Group 2: units purchased on or after 1 August 2015










Interim interest distribution (accounting date 1 September 2015, paid on 30 September 2015) Group 1: units purchased prior to 1 June 2015Group 2: units purchased on or after 1 June 2015




Interim interest distribution (accounting date 30 September 2015, paid on 31 October 2015) Group 1: units purchased prior to 2 September 2015Group 2: units purchased on or after 2 September 2015




IncomeGroup 1 0.1000 0.0200 0.0800 - 0.0800 0.0900Group 2 - - - 0.0800 0.0800 0.0900






Interim interest distribution (accounting date 30 November 2015, paid on 31 December 2015) Group 1: units purchased prior to 1 November 2015 Group 2: units purchased on or after 1 November 2015








Interim interest distribution (accounting date 31 October 2015, paid on 30 November 2015) Group 1: units purchased prior to 1 October 2015Group 2: units purchased on or after 1 October 2015










Interim interest distribution (accounting date 30 November 2015, paid on 31 December 2015)Group 1: units purchased prior to 2 September 2015Group 2: units purchased on or after 2 September 2015




Interim interest distribution (accounting date 31 December 2015, paid on 29 January 2016) Group 1: units purchased prior to 1 December 2015Group 2: units purchased on or after 1 December 2015






Class I incomeGroup 1 0.4881 0.0976 0.3905 - 0.3905 0.4362Group 2 - - - 0.3905 0.3905 0.4362




Interim interest distribution (accounting date 31 January 2016, paid on 29 February 2016) Group 1: units purchased prior to 1 January 2016 Group 2: units purchased on or after 1 January 2016






Class I incomeGroup 1 0.4881 0.0976 0.3905 - 0.3905 0.4362Group 2 - - - 0.3905 0.3905 0.4362


Final interest distribution (accounting date 1 March 2016, paid on 31 March 2016) Group 1: units purchased prior to 1 February 2016Group 2: units purchased on or after 1 February 2016









Final interest distribution (accounting date 1 March 2016, paid on 31 March 2016)Group 1: units purchased prior to 1 December 2015Group 2: units purchased on or after 1 December 2015






Unitholder enquiries

If you have any queries about your fund holding, either contact your professional adviser or telephone us on one of the numbers below:

For dealing enquiries including buying and selling units please telephone at local rate: 0845 608 8703

The following lines are also available:

Client Services: 0800 832 832

or you can contact us via e-mail at [email protected]

We may record telephone calls for our mutual protection and to improve customer service.

Further 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.

H022092/0316

Documents

ANNUAL REPORT & ACCOUNTS - · PDF fileANNUAL REPORT & ACCOUNTS ... Balance sheet Page 21 ... US Treasury 2.25% 15/11/2025 21,064 RBS Worldpay FRN 29/11/2019 Term B 11,212