Contact detailsGeneral enquiries 0800 832 832

Henderson Global Investors, PO Box 9023, Chelmsford CM99 2WB

Turning sustainability into investment returnsSummer 2015

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Big voices on climate change

The critical UN Conference on Climate Change in Paris takes place towards the end of this year. Ahead of this, it is not surprising to see prominent figures calling for action on tackling climate change. Bill Gates announced in June that he is planning to double his personal investment into green technologies to $2bn over the next five years and likened renewable investment to the Apollo space project.

Bill Gates’s intervention came shortly after Pope Francis’s ‘Encyclical letter on care for our common home’. In the letter, the Vatican encourages consideration and respect for the planet we share to guide human development. In a similar vein, experts at University College London claimed that “climate change is a medical emergency” and that by tackling climate change we can improve human health. For example, cycling to work reduces obesity, while burning less coal reduces respiratory diseases.

Less welcome was the UK government’s announcement in the summer budget that renewable electricity generation would no longer be exempt from the Climate Change Levy. Within the Henderson SRI funds our current exposure to renewable energy companies is limited. Instead, our focus has been on efficiency, such as companies that help to cut energy usage. You can read more online in Hamish Chamberlayne’s article at HGi.co/be23

In good company

Companies are quickly realising the financial value of good environmental, social and governance practices. Much of this has focused on the costs of failing to adhere to good standards, as demonstrated by the heavy fines levied on banks for currency fixing and mis-selling, or for example, the hit to Tesco’s share price after it admitted to accounting manipulation. Less well publicised is the positive aspect of reputation. Reputation Dividend, the brand research consultancy, estimates that 27.4% of the market capitalisation of UK companies is due to reputation. This means reputation is worth some £620 billion to UK companies.

Value of reputation

27.4%

Some 27.4% or £620 billion out of £2.24 trn of market capitalisation of UK companies in the FTSE 350 is due to reputation. Source: Reputation Dividend, Jan 2015.

Holding executives to accountNick Anderson, investment manager for the Henderson Global SRI funds, discusses the future of financial reporting in his latest online article. He notes that good financial reporting works in parallel with good corporate management. Read more by following this link HGi.co/bfO4

A look at developments affecting the ethical and environmental debate, investment conditions in the first half of 2015, and the performance of Henderson’s sustainable and responsible investment (SRI) funds.

SRI news update

Initiatives and engagement

We continue to promote good corporate governance and the pursuit of better environmental and ethical standards through active engagement with companies. In a meeting with Microsoft, the technology giant, we discussed the company’s approach to managing carbon emissions. The company has some interesting initiatives, including setting an internal carbon price to promote reductions in carbon emissions by each business unit. We met with Visa, the payments company, to discuss data security and privacy issues, enquiring how easy it is for customers to opt out of having their data used for commercial purposes.

We are also involved in a United Nations Principles for Responsible Investment (UNPRI)-led collaborative engagement group project on sustainable water management. The diagram opposite illustrates how precious little of earth’s water is easily-accessible surface fresh water. As part of this project, the group has written letters to companies in high impact sectors such as consumer goods, seeking meetings to discuss company policies and practices.

Distribution of global water Global water Freshwater

Source: UNPRI, USGS, July 2014

“ Renewables should be like the Apollo project – the government should put tens of billions of dollars into R&D” Bill Gates, co-founder of Microsoft

2.5%Freshwater

1.2%Surface freshwater

97.5%Oceans

68.7%Glaciers & ice caps

30.1%Groundwater

Stock examples in this document are included for illustrative purposes only and are not recommendations to buy or sell.

Global

In the first half of 2015, the Henderson Global Care Growth Fund rose 3.6%, compared with a rise of 2.1% in the MSCI World Total Return Index and a rise of 2.7% in the Investment Association (IA) Global Sector. The Henderson Institutional Global Care Managed Fund returned 3.4%, outperforming the 3.1% rise in the IA Mixed Investment 40-85% Shares sector average; the equity portion of the fund produced strong returns, with the fixed income portion producing a mildly positive performance. 2015 has been a tougher environment for bonds generally given uncertainty about the timing of US interest rate rises and signs that inflation is picking up.

The Sustainable Transport and Efficiency themes produced some of the strongest returns: with Delphi Automotive (powertrain technologies), and Acuity brands (light-emitting diodes) putting in particularly good performances as investors continued to recognise the strong growth drivers behind their technologies. In the Environmental Services theme, UK-based recycled packaging manufacturer DS Smith was one of the top performers after reporting a strong set of full-year results and the proposed acquisition of Spanish company Grupo Lantero’s corrugated products business.

Within the Quality of Life theme, Canadian ethical textiles manufacturer Gildan Activewear continued its recent strong performance, underpinned by 16% sales growth in the first quarter of 2015. Elsewhere, solid corporate earnings results for Sumitomo Mitsui Financial Group (Japanese bank) and AIA Group (Asian life insurance group) in the Social Property and Finance theme also added to the funds’ returns. A tailwind to both funds’ relative performance versus their sectors was their low carbon exposure, as energy stocks continued to perform poorly into 2015.

UK

The Henderson Global Care UK Income Fund rose 6.8%, outperforming the 3.0% return of the FTSE All-Share Total Return Index and ahead of the 6.0% return of the IA All Companies Sector average.

The fund’s holdings in house builders Berkeley Group and Bellway were beneficial to performance following the Conservative Party’s surprise majority victory at the UK General Election. The housing market should be supported by the continuation of the ‘Help to Buy’ scheme. Elsewhere, the fund’s media holdings Informa and ITV were also positive to returns after both companies reported strong corporate results.

The fund’s relative performance against its benchmark was also aided by the absence of holdings in the mining sector and not owning oil & gas major Royal Dutch Shell.

During the period, the fund increased its holdings in Vodafone, National Grid, Severn Trent, and property groups Hammerson, Primary Health Properties and Land Securities. These positions were funded by exiting Synergy Healthcare and Interserve, and reductions to HSBC and Rexam.

Outlook

In the short term, there are some troubling issues around the world affecting investor sentiment. These include worries about a Greek exit from the eurozone, the timing and scale of US interest rate rises, and whether a stock market ‘bubble’ might be bursting in China.

That said, our funds are focused on the long-term drivers of investment returns, and through this we aim to ride out these short-term market fluctuations. Our funds offer exposure to improved productivity and social cohesion through innovative companies that play a role in addressing the sustainability issues facing the global economy. For us, sustainability and long-term value are natural bedfellows. This is why we focus on profitable companies that are generating steady cash flows, with a smaller part of our portfolio invested in early stage companies at the forefront of social and environmental change.

Source for all fund performance to 30 June 2015: © Morningstar. All rights reserved. A Class Shares, nav-nav, UK sterling, net income reinvested. Source for index performance: Thomson Reuters Datastream, 6 months to 30 June 2015, total return, in UK sterling.

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 and you may not get back the amount originally invested. Nothing in this document should be construed as advice.

Fund reviews for the first half of 2015

Market overviewThe six-month period was characterised by change, with equity market performances diverging across regions. European stocks were supported by the European Central Bank (ECB) announcing that it was widening its quantitative easing (asset purchase) programme, while US equity returns and returns from bonds were dampened by speculation about when the Federal Reserve might begin to raise interest rates. UK equity markets worried about the prospect of a hung parliament/minority government, only to be surprised by an outright Conservative win, while anti-austerity party Syriza’s election win in Greece paved the way for a clash with its international creditors over new bailout funding.

DS Smith paper recycling

Contact detailsGeneral enquiries 0800 832 832

Henderson Global Investors, PO Box 9023, Chelmsford CM99 2WB

Henderson Global Care Growth Fund

Discrete year performance

A% change

01/07/2014 to 30/06/2015 13.0

01/07/2013 to 30/06/2014 13.4

01/07/2012 to 30/06/2013 26.6

01/07/2011 to 30/06/2012 -12.3

01/07/2010 to 30/06/2011 15.7

Source: at 30 June 2015 © 2015 Morningstar. All Rights Reserved, nav-nav, UK sterling, net income reinvested. Discrete performance data may change due to final dividend information being received after quarter end. Performance relates to A class shares.

Henderson Institutional Global Care Managed Fund

Discrete year performance

A% change

01/07/2014 to 30/06/2015 10.9

01/07/2013 to 30/06/2014 12.1

01/07/2012 to 30/06/2013 19.4

01/07/2011 to 30/06/2012 -4.3

01/07/2010 to 30/06/2011 16.6

Source: at 30 June 2015 © 2015 Morningstar. All Rights Reserved, nav-nav, UK sterling, net income reinvested. Discrete performance data may change due to final dividend information being received after quarter end. Performance relates to A class shares.

Henderson Global Care UK Income Fund

Discrete year performance

A% change

01/07/2014 to 30/06/2015 13.6

01/07/2013 to 30/06/2014 15.9

01/07/2012 to 30/06/2013 25.6

01/07/2011 to 30/06/2012 -1.4

01/07/2010 to 30/06/2011 26.2

Source: at 30 June 2015 © 2015 Morningstar. All Rights Reserved, nav-nav, UK sterling, net income reinvested. Discrete performance data may change due to final dividend information being received after quarter end. Performance relates to A class shares.

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 and you may not get back the amount originally invested.

Important informationPlease read all scheme documents before investing. Before entering into an investment agreement in respect of an investment referred to in this document, you should consult your own professional and/or investment adviser. 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 and you may not get back the amount originally invested. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change. If you invest through a third party provider you are advised to consult them directly as charges, performance and terms and conditions may differ materially. Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment. Any investment application will be made solely on the basis of the information contained in the Prospectus (including all relevant covering documents), which will contain investment restrictions. This document is intended as a summary only and potential investors must read the prospectus, and where relevant, the key investor information document before investing. Issued in the UK by Henderson Global Investors. 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), Henderson Alternative Investment Advisor 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. H017316/0715

Performance